<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 333-09933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SUPERIOR TELECOM INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3357 58-2248978
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
1790 BROADWAY
NEW YORK, NEW YORK 10019
(212) 757-3333
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STEWART H. WAHRSAGER, ESQ.
1790 BROADWAY
NEW YORK, NEW YORK 10019
(212) 757-3333
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
RONALD R. PAPA, Esq. MELVIN EPSTEIN, Esq.
Proskauer Rose Goetz & Mendelsohn LLP Stroock & Stroock & Lavan
1585 Broadway 7 Hanover Square
New York, New York 10036-8299 New York, New York 10004-2696
(212) 969-3000 (212) 806-5400
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT.
--------------------------
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, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / / _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
PROSPECTUS
6,000,000 SHARES
[LOGO]
COMMON STOCK
------------------
All of the shares of Common Stock, $.01 par value per share ("Common
Stock"), of Superior TeleCom Inc. (the "Company") offered hereby (this
"Offering") are being sold by the Company.
Prior to this Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial offering price will be between
$15.00 and $17.00 per share. For information relating to the determination of
the initial public offering price, see "Underwriting."
The Company expects to use the net proceeds of this Offering to complete the
Reorganization and to reduce the amount outstanding under the Company's Bank
Credit Facility (each as defined in "Prospectus Summary"). See "Use of
Proceeds."
The Common Stock has been authorized for listing, subject to notice of
issuance, on the New York Stock Exchange under the symbol "SUT."
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS," COMMENCING ON
PAGE 8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS PROCEEDS TO
TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share...................... $ $ $
Total (3)...................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $700,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 900,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting" and "Use of Proceeds."
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters, and subject to various prior
conditions, including the right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made against payment
therefor at the offices of Furman Selz LLC in New York, New York on or about
, 1996.
FURMAN SELZ
OPPENHEIMER & CO., INC.
BT SECURITIES CORPORATION
----------------
The date of this Prospectus is , 1996
<PAGE>
[The inside front cover page contains a diagram of the telecommunications
infrastructure, including the connections between and among telephone company
central offices, remote digital switches and private residences.]
[INSERT DIAGRAM]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (AND
RELATED NOTES THERETO) INCLUDED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY MEANS
SUPERIOR TELECOM INC. AND THE SUBSIDIARIES THAT IT WILL OWN AS A RESULT OF THE
REORGANIZATION (AS DEFINED BELOW) AND, UNLESS THE CONTEXT OTHERWISE REQUIRES,
SUCH SUBSIDIARIES ARE INCLUDED IN THE DESCRIPTION OF THE COMPANY. SEE "THE
COMPANY -- THE REORGANIZATION AND RELATED TRANSACTIONS." UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE COMPLETION OF THE
REORGANIZATION AND RELATED TRANSACTIONS AND THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION IS NOT EXERCISED. ALL REFERENCES HEREIN TO FISCAL 1994,
FISCAL 1995 AND FISCAL 1996 MEAN THE YEARS ENDED MAY 1, APRIL 30 AND APRIL 28 OF
SUCH YEARS, RESPECTIVELY.
THE COMPANY
The Company is a leading manufacturer of copper wire and cable products for
the local loop segment of the telecommunications network in the United States
(based on 1995 data). The local loop is the segment of the telecommunications
network that connects the customer's premises to the nearest telephone company
switch or central office. Copper wire and cable is the most widely used medium
for transmission in the local loop, which comprises approximately 160 million
residential and business access lines in the United States. The Company also
develops and manufactures data communications and other electronic equipment,
including multiplexers, for defense, government and commercial applications. As
a result of acquisitions, as well as internal growth through expansion of its
customer relationships and introductions of new products, the Company's net
sales increased from $164.5 million in fiscal 1995 to $410.4 million in fiscal
1996, and operating income increased from $9.6 million to $31.8 million over the
same period. The Company believes it is well-positioned to take advantage of the
rapid changes in the telecommunications industry as the demand for voice, data
and video services over the local loop increases dramatically and new
technologies and products are developed to enable the local loop to satisfy that
demand.
TELECOMMUNICATIONS WIRE AND CABLE. The Company conducts its copper
telecommunications wire and cable products business through its subsidiary,
Superior Telecommunications Inc. ("Superior"). Superior manufactures a wide
variety of copper telecommunications wire and cable products, ranging in size
from a single twisted pair wire to a 4,200 pair cable, including hybrid cable
products such as coaxial/copper wire and fiber optic/copper wire combinations.
These products, referred to as distribution wire and cable, are variously
configured for aerial and underground use in the local loop. The Company also
has developed high speed data communication copper wire products, including
unshielded twisted pair ("UTP") wire for on-premise applications, such as in
computer networks. The Company's products are sold primarily to the regional
Bell operating companies ("RBOCs") and the two major independent telephone
companies under multi-year supply arrangements. Superior's net sales for the
twelve months ended July 28, 1996 constituted 93.8% of the Company 's net sales
for such period.
The Company has led a recent consolidation in the copper telecommunications
wire and cable industry by acquiring the U.S. and Canadian copper
telecommunications wire and cable business of Alcatel NA in May 1995 and
substantially all of the machinery, equipment and inventory of the Vancouver,
B.C. copper telecommunications wire and cable business of BICC Phillips, Inc. in
November 1995. Through these acquisitions, the Company increased its annual
production capacity from 28 billion conductor feet ("bcf") in one plant to an
aggregate of 92 bcf in four geographically diverse plants. The Company believes
that it has successfully integrated its acquired businesses, particularly by
implementing improved production techniques at each of its plants and reducing
the cost structure of its operations.
Due to further industry-wide consolidation, total industry capacity has been
reduced, the number of manufacturers has declined and the size of those
remaining has increased. As a result, the Company has become a key supplier of
copper wire and cable to six of the seven RBOCs and the two major independent
telephone companies and believes that it will continue to be able to compete
effectively as its major customers consolidate their vendor base in order to
stabilize their sources of supply and ensure timely
3
<PAGE>
delivery of quality products on a consistent basis. In addition, the industry
consolidation, increased demand for copper telecommunications wire and cable and
the resulting changes in the nature of customer relationships have led to a
recent improvement in the pricing environment for the Company's products.
The Company believes that copper will continue to be the transmission medium
of choice in the local loop and that demand for access to the local loop will
continue to increase for the following reasons:
-INSTALLED BASE. The installed base of copper wire and cable in the local
loop represents an investment of over $150 billion that must be maintained
by the RBOCs and other local telephone companies. Although other media,
such as fiber optic cable, are used for trunk lines between central
offices, substantially all local loop lines continue to be copper-based.
Local loop lines are continually maintained and replaced, providing a
steady demand for copper wire and cable.
-LOWER INSTALLATION COSTS AND EASE OF REPAIR. The Company believes that in
the local loop, copper has significantly lower installation costs and is
easier to repair than other media primarily because it does not require an
additional power source and other electronics. Installation of fiber optic
cable is both capital and labor intensive and deployment of fiber optic
cable generally has been limited to trunk and feeder lines and wide area
loop configurations. Therefore, the Company believes that new installations
in the local loop will continue to be copper-based.
-TECHNOLOGICAL ADVANCES. Copper dominance in the local loop continues to be
supported by technological advances that expand the use and bandwidth of
the installed local loop copper network. These advances include integrated
services digital networks ("ISDN"), and digital subscriber line ("DSL")
technologies, including high-bit-rate digital subscriber line ("HDSL") and
asymmetric digital subscriber line ("ADSL"). These technologies permit
telecommunication carriers, private network owners and end-user consumers
to employ the copper wire and cable infrastructure for high speed and
bandwidth-intensive applications.
-DEMAND FOR NEW SERVICES. Technological advances, regulatory developments
and increased competition have accelerated the demand for and introduction
of new bandwidth-intensive telecommunications services. These services
include integrated voice and data, broadcast and conference quality video,
Internet and on-line data services access, high speed LAN to LAN
connectivity, collaborative network processing and other specialized,
bandwidth-intensive applications.
-DEMAND FOR MULTIPLE RESIDENTIAL ACCESS LINES. An increasing number of U.S.
households are installing additional access lines for multiple telephone
lines, facsimile machines, access to the Internet, home offices and other
purposes. Additional access lines increase the demand for copper
telecommunications wire and cable in the local loop.
DATA COMMUNICATIONS AND ELECTRONICS. The Company, through its subsidiary
DNE Systems, Inc. ("DNE"), designs and fabricates data communications equipment,
integrated access devices and other electronic products. DNE is a supplier to
the U.S. defense industry of data and voice multiplexers used in tactical secure
military applications. Multiplexers are integrated access devices that combine
several information carrying channels into one line, thereby permitting
simultaneous multiple voice and data communications over a single line. DNE also
produces military avionic products, including switches, dimmers, relays and
other electrical controllers, various sensors and refueling amplifiers. DNE has
reduced its dependence on the defense market in recent years, primarily through
the development of contract subsystem manufacturing services for commercial and
(non-defense) governmental customers. DNE's net sales for the twelve months
ended July 28, 1996 constituted 6.2% of the Company's net sales for such period.
BUSINESS STRATEGY. The Company's strategy is to (i) respond to the current
and changing requirements of its customers' communications networks and expand
its business in the local loop by continuing to develop, manufacture and sell a
full line of copper telecommunications wire and cable products; (ii) expand its
product lines to include transmission media such as data communications cable,
including UTP products, and hybrid wire products, including coaxial/copper wire
and fiber optic/copper wire combinations; (iii) take
4
<PAGE>
advantage of strategic acquisition opportunities in data communications cable,
the local loop and its other markets; and (iv) expand its international business
through increased export sales and the establishment of joint ventures or
similar arrangements.
THE REORGANIZATION. On October 2, 1996, The Alpine Group, Inc. ("Alpine"),
which then owned all of the outstanding capital stock of the Company, Superior
and DNE, caused Superior and DNE to declare dividends on their common stock in
an aggregate amount of $117.1 million. Superior also issued to Alpine 20,000
shares of its 6% Cumulative Preferred Stock ("Superior Preferred Stock"). Alpine
then contributed to the Company all of the issued and outstanding common stock
of Superior and DNE (together with the foregoing transactions, the
"Reorganization"). See "The Company -- The Reorganization and Related
Transactions."
In connection with the Reorganization, the Company entered into a five-year
revolving credit facility (the "Bank Credit Facility") under which it borrowed
$154.7 million to repay the net amount of the intercompany debt owed to Alpine
and to pay to Alpine a portion of the dividends declared as part of the
Reorganization. The net proceeds of this Offering will be used to pay the
remainder of the declared dividends and to reduce the amount outstanding under
the Bank Credit Facility. See "The Company -- The Reorganization and Related
Transactions -- Bank Credit Facility" and "Use of Proceeds."
Upon completion of this Offering, Alpine will own 50.1% of the outstanding
capital stock of the Company (approximately 46.6% if the Underwriters'
over-allotment option is exercised in full). If the over-allotment option
granted to the Underwriters by the Company is exercised, Alpine intends to
restore its ownership of the outstanding Common Stock to 50.1% by contributing
to the capital of the Company a portion of Superior Preferred Stock in exchange
for shares of Common Stock. The amount of Superior Preferred Stock to be
contributed by Alpine will be that number of shares having an aggregate
liquidation value equal to the aggregate price paid by the Company (including
brokers' commissions) for shares of Common Stock to be transferred by the
Company to Alpine. The Company intends to acquire such shares of Common Stock
through open market purchases or otherwise using only net proceeds of the
exercise of the over-allotment option. The Company will use any balance of those
net proceeds to reduce outstanding debt under the Bank Credit Facility. See "Use
of Proceeds," "Principal Stockholders" and "Certain Transactions and
Relationships." See "Principal Stockholders" and "Certain Transactions and
Relationships."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby (1)............. 6,000,000 (1)
Common Stock to be outstanding after this
Offering................................... 12,024,048 (1)(2)
Use of proceeds............................. The net proceeds of this Offering will be used
to pay the unpaid portion of the dividends
declared in connection with the
Reorganization and to reduce the amount
outstanding under the Bank Credit Facility.
See "Use of Proceeds."
New York Stock Exchange Symbol.............. SUT
</TABLE>
- ------------------------
(1) Excludes up to 900,000 shares that may be sold pursuant to the Underwriters'
over-allotment option.
(2) Excludes 1,250,000 shares of Common Stock issuable pursuant to options that
may be granted pursuant to the Company's 1996 Stock Option Plan and 250,000
shares issuable pursuant to the Company's Employee Stock Purchase Plan. See
"Management -- Executive Compensation -- Compensation Under Plans."
5
<PAGE>
SUMMARY FINANCIAL DATA
The financial data of the Company set forth below have been derived from the
combined financial statements of Superior and DNE (which have been reorganized
as the Company). The combined financial data for the fiscal years ended 1994,
1995 and 1996, are derived from the combined financial statements of the Company
that have been audited by Arthur Andersen LLP, as indicated in their report
included elsewhere in this Prospectus. The unaudited combined financial data for
the three months ended July 29, 1995 and July 28, 1996 are derived from
unaudited combined financial statements included elsewhere in this Prospectus.
The financial data are provided on (i) an historical basis for fiscal 1994, 1995
and 1996 and for the three months ended July 29, 1995 and July 28, 1996; and
(ii) a pro forma basis for the fiscal year ended April 28, 1996 and for the
three months ended July 28, 1996 after giving effect to the following
transactions as if they had occurred as of May 1, 1995: (1) the Alcatel
acquisition, (2) the Reorganization and related transactions and (3) this
Offering. The unaudited pro forma financial information is provided for
comparative purposes only and does not purport to be indicative of the results
that actually would have been obtained if the events set forth had been effected
on the dates indicated or of those results that may be obtained in the future.
The historical results presented below reflect the operations of Superior since
its acquisition by Alpine in November 1993 and the operations of the Alcatel
Business (as defined below in "The Company -- Background") since its acquisition
by Alpine in May 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
-------------------------------------------------- -----------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------------------------- ----------- ---------------------- -----------
APRIL 30, APRIL 28, APRIL 28, JULY 29, JULY 28, JULY 28,
MAY 1, 1994 1995 1996 1996 1995 1996 1996
----------- ----------- ----------- ----------- ----------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................. $ 68,510 $ 164,485 $ 410,413 $ 417,934 $ 99,324 $ 123,824 $ 123,824
Cost of goods sold.................... 56,250 142,114 362,854 369,780 89,821 105,447 105,447
----------- ----------- ----------- ----------- ----------- --------- -----------
Gross profit........................ 12,260 22,371 47,559 48,154 9,503 18,377 18,377
Selling, general and administrative
expense.............................. 8,884 11,632 14,223 16,256 3,299 3,888 4,388
Amortization of goodwill.............. 2,186 1,124 1,556 1,570 374 432 432
----------- ----------- ----------- ----------- ----------- --------- -----------
Operating income.................... 1,190 9,615 31,780 30,328 5,830 14,057 13,557
Interest expense, net................. (1,742) (3,700) (17,006) (10,931) (3,733) (4,258) (2,728)
Preferred stock dividends of
subsidiary (1)....................... -- -- -- (1,200) -- -- (300)
Other income (expense), net........... (61) 231 55 55 28 (53) (53)
----------- ----------- ----------- ----------- ----------- --------- -----------
Income (loss) from continuing
operations before income taxes..... (613) 6,146 14,829 18,252 2,125 9,746 10,476
Provision for income taxes............ (521) (2,240) (6,722) (7,781) (451) (3,778) (4,310)
----------- ----------- ----------- ----------- ----------- --------- -----------
Income (loss) from continuing
operations......................... (1,134) 3,906 8,107 10,471 1,674 5,968 6,166
(Loss) from discontinued operations... (287) (176) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- --------- -----------
Income (loss) before extraordinary
item............................... (1,421) 3,730 8,107 10,471 1,674 5,968 6,166
Extraordinary (loss) on early
extinguishment of debt (2)........... -- -- (2,645) -- (2,811) -- --
----------- ----------- ----------- ----------- ----------- --------- -----------
Net income (loss)................... $ (1,421) $ 3,730 $ 5,462 $ 10,471 (1,137) $ 5,968 $ 6,166
----------- ----------- ----------- ----------- ----------- --------- -----------
----------- ----------- ----------- ----------- ----------- --------- -----------
Per share of common stock (3):
Income from continuing operations...............................
$ 0.67 $ 0.87 $ 0.14 $ 0.50 $ 0.51
Extraordinary (loss) on early extinguishment of debt (2)........
(0.22 ) -- (0.23 ) -- --
----------- ----------- ----------- --------- -----------
Net income (loss).............................................
$ 0.45 $ 0.87 $ (0.09 ) $ 0.50 $ 0.51
----------- ----------- ----------- --------- -----------
----------- ----------- ----------- --------- -----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
-------------------------------------------------- -----------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------------------------- ----------- ---------------------- -----------
APRIL 30, APRIL 28, APRIL 28, JULY 29, JULY 28, JULY 28,
MAY 1, 1994 1995 1996 1996 1995 1996 1996
----------- ----------- ----------- ----------- ----------- --------- -----------
(IN THOUSANDS)
OTHER DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA (4)............................ $ 5,525 $ 14,201 $ 40,231 $ 38,869 $ 7,793 $ 16,308 $ 15,808
Depreciation and amortization (5)..... 4,335 4,586 8,451 8,541 1,963 2,251 2,251
Capital expenditures.................. 1,560 1,782 4,339 4,339 1,204 1,511 1,511
Cash flows from operating
activities........................... 1,999 7,444 27,238 29,602 22,930 12,292 12,490
Cash flows from investing
activities........................... (5,243) (1,739) (111,776) (111,776) (93,178) (1,595) (1,595)
Cash flows from financing
activities........................... 2,367 (6,109) 84,616 85,096 70,500 (11,146) (10,606)
</TABLE>
<TABLE>
<CAPTION>
AT JULY 28, 1996
----------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 54,609 $ 55,149
Total assets.......................................................................... 232,360 236,000
Total debt (6)........................................................................ 114,753 131,839
Total stockholders' equity............................................................ 57,432 23,986
</TABLE>
- ------------------------
(1) Represents dividends on Superior Preferred Stock issued to Alpine as part of
the Reorganization and related transactions.
(2) Relates to the early extinguishment of $140.0 million principal amount of
debt incurred by Superior in connection with the Alcatel acquisition, during
the first quarter of fiscal 1996 and to the early extinguishment of a $2.5
million subordinated note issued to DNE's former parent during the second
quarter of fiscal 1996. The debt was substantially replaced by promissory
notes payable to Alpine.
(3) Based upon 12,024,048 shares outstanding subsequent to this Offering.
(4) EBITDA represents operating income plus depreciation and amortization, and
provision for non-cash compensation expense (primarily stock options and
restricted stock grants). EBITDA is presented because the Company believes
such information is a widely accepted finanical indicator of the Company's
ability to generate cash and to service debt. However, although the Company
has measured EBITDA consistently between periods presented, EBITDA as a
measure of liquidity is not governed by generally accepted accounting
principles ("GAAP"), and, as such, may not be comparable to other similarly
titled measures of other companies. The Company believes that EBITDA, while
providing useful information, should not be considered in isolation or as an
alternative to either (i) operating income determined in accordance with
GAAP as an indicator of operating performance or (ii) cash flows from
operating activities determined in accordance with GAAP as a measure of
liquidity.
(5) Includes $76,000 in fiscal 1994 for a non-cash compensation expense.
(6) Actual amount includes $102.9 million of intercompany debt owed to Alpine at
July 28, 1996.
7
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO OTHER
INFORMATION IN THIS PROSPECTUS, THE FOLLOWING CAUTIONARY STATEMENTS AND FACTORS.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
The telecommunications wire and cable business is dependent on the RBOCs and
other major independent telephone holding companies. For the twelve months ended
July 28, 1996, six RBOCs and the two major independent telephone companies
accounted for 82.9% of the Company's net sales. Five of these customers, Bell
South Corporation, North Supply Corporation (Sprint), GTE Corporation, SBC
Corporation and NYNEX Corporation accounted for 19.1%, 16.0%, 15.3%, 12.7% and
12.1%, respectively, of the Company's net sales for that period. As a result of
announced industry consolidations, it is expected that the number of RBOCs will
be reduced from seven to five. Continued consolidation among the RBOCs could
alter these customers' purchasing patterns and affect the pricing in the copper
telecommunications wire and cable business. Adverse conditions affecting the
industries in which the Company's customers are engaged, or the loss of any of
its significant customers, could materially adversely affect the Company's
results of operations and financial condition.
RAPID TECHNOLOGICAL CHANGE
The commercial development of fiber optics has had and is expected to
continue to have an effect on the Company's copper telecommunications wire and
cable business. Fiber optic technology has had a major impact on certain
components of the telecommunications network where its utilization is
cost-effective, particularly in trunk lines and the long distance network. To a
lesser degree, fiber optic cable has been deployed in certain high-density
feeder applications between telephone central offices or remote locations and
major distribution points, which has further reduced the total market for
products manufactured by the Company. In the local loop portion of the
telecommunications network, however, copper wire has remained the most widely
used medium for transmission. Telephone companies are evaluating (and in
isolated cases installing on a test basis) alternative technologies, including
coaxial and fiber optic cable for providing video entertainment or other new
services. The Company believes, however, that the great majority of businesses
and homes in America will continue to be connected with the telecommunications
infrastructure via a copper-based local loop. Nevertheless, because the
telecommunications industry is undergoing rapid and intense technological
change, it is not possible at this time to predict the impact that these
developments may have on the total demand for copper wire in the local loop. A
relatively small decline in the level of purchases of copper telecommunications
wire and cable by the RBOCs and other telephone companies could have a
disproportionately adverse effect on the copper telecommunications wire and
cable industry, including the Company.
Wireless technologies such as microwave, satellite and cellular transmission
have had, and will continue to have, an impact on the market for copper
telecommunications wire and cable products. In addition, there can be no
assurance that other, newly-developed technologies will not have an adverse
impact on the market for copper telecommunications wire and cable products.
COMPETITION
The Company operates in industries that are highly competitive. In the
telecommunications wire and cable business, the Company has three major domestic
competitors: Cable Systems International, Inc.; General Cable Corporation, a
subsidiary of Wassall, plc; and Essex Group Incorporated, a subsidiary of
BCP/Essex Holding, Inc. The Company and other telecommunications wire and cable
producers increasingly compete on the basis of service and quality, as well as
price. There can be no assurance that the Company will be able to compete
successfully or that such competition will not have a material adverse effect on
the Company's business or financial results.
8
<PAGE>
RAW MATERIALS
The principal raw materials used by Superior in the manufacture of its wire
and cable products are copper, aluminum, bronze and plastics such as
polyethylene and polyvinyl chloride. These raw materials are available from
several sources and Superior has not experienced any shortages of these raw
materials in the recent past. These raw materials are subject to price
fluctuations. The price of copper has been subject to considerable volatility
over the past several years. While fluctuations in the price of copper directly
affect the per unit prices of Superior's products, this volatility has not had,
nor is it expected to have, a material impact on Superior's profitability due to
Superior's contractual arrangements with its principal customers that provide
for the pass-through of changes in copper costs. Nevertheless, sharp increases
in the price of copper may temporarily reduce demand if telephone companies
decide to defer their purchases of copper telecommunications wire and cable
products until copper prices decline. The resulting decrease in Superior's sales
would adversely affect the Company's results of operations during the relevant
period.
CHANGING REGULATORY FRAMEWORK
The U.S. Congress recently enacted the Telecommunications Reform Act of
1996, which mandated fundamental changes in the regulation of the
telecommunications industry. It is not possible at this time to predict the
impact that this legislation and the regulations implementing it may have on the
total demand for copper wire in the local loop.
CONTROL BY ALPINE
Upon completion of this Offering, Alpine will own 50.1% of the outstanding
Common Stock of the Company (approximately 46.6% if the Underwriters'
over-allotment option is exercised in full). If the over-allotment option
granted to the Underwriters by the Company is exercised, Alpine intends to
engage in open-market purchases of Common Stock to restore its ownership of the
outstanding Common Stock to 50.1%. See "Use of Proceeds." Accordingly, Alpine
will have the ability to elect all of the members of the Company's Board of
Directors and approve other actions requiring approval by a majority of
stockholders, including certain fundamental corporate transactions such as a
merger or sale of all or substantially all of the assets of the Company, and
otherwise control the management and affairs of the Company. However, Alpine has
advised the Company that it will use its best efforts to ensure that, following
completion of this Offering, a majority of the members of the Company's Board of
Directors will not be affiliates of Alpine. Alpine is a publicly-held
diversified industrial holding company. In addition to the businesses operated
by the Company, Alpine is engaged through another subsidiary, in the manufacture
and sale of specialty refractory products. Alpine's Chairman and Chief Executive
Officer, Steven S. Elbaum, is also the Chairman and Chief Executive Officer of
the Company.
Alpine has pledged its shares of Common Stock as collateral for the benefit
of holders of certain indebtedness of Alpine. So long as Alpine holds a
controlling interest in the Company, if Alpine were to default on such
indebtedness and the pledge were to be foreclosed, control of the Company would
change, which change of control would constitute an event of default under the
Bank Credit Facility. Action by the Bank Credit Facility lenders as a result of
such an event of default could have a material adverse effect on the Company.
POTENTIAL CONFLICTS TO WHICH CERTAIN DIRECTORS AND OFFICERS MAY BE SUBJECT
Upon completion of this Offering certain of the Company's directors and
officers, including the Chief Executive Officer and Chief Financial Officer,
will also be directors and/or officers of Alpine and may be subject to various
conflicts of interest in connection with, for example, the negotiation of
agreements between the two companies for the provision of services and the
performance by the two companies under their existing agreements. Each of these
persons will devote such time to the business and affairs of the Company as is
appropriate under the circumstances. Each such person, however, has other duties
and responsibilities with Alpine that may conflict with the time which might
otherwise be devoted to his duties with the Company. See "Management" and
"Certain Transactions and Relationships."
9
<PAGE>
INTERCORPORATE RELATIONSHIPS WITH ALPINE
The Company may be subject to various conflicts of interest arising out of
the relationship between it and Alpine. The Audit Committee of the Company's
Board of Directors (the "Audit Committee"), which will be comprised solely of
directors who are not affiliated with Alpine, will be responsible for the review
and approval of all future agreements between the Company and its subsidiaries
and Alpine, including amendments to a transitional services agreement between
Alpine and the Company (the "Services Agreement"). The Audit Committee will also
establish policies to ensure that the Company's purchase of services from Alpine
are commercially reasonable. See "Certain Transactions and Relationships."
Pursuant to the Services Agreement, Alpine provides, through April 30, 1998,
certain services to the Company, including, among other things, assistance with
public company reporting, certain financial reporting functions, legal
compliance, banking, risk management and operational and strategic matters. The
terms upon which these services will be provided to and by the Company and the
compensation therefor were not determined in arms' length negotiations. The
Services Agreement provides for the payment by the Company to Alpine of $0.9
million per year plus reimbursement of any third party expenses incurred by
Alpine. The Company believes that $0.9 million represents a reasonable estimate
of the cost of obtaining the services described above. See "Certain Transactions
and Relationships -- Services Agreement."
Superior and DNE are currently included in the consolidated group of
domestic corporations of which Alpine is the common parent for federal income
tax and certain other purposes. Upon consummation of this Offering, the Company
will cease to be included in the consolidated group for federal income tax
purposes of which Alpine is the common parent. Alpine has agreed to indemnify
the Company for any consolidated federal income tax liability (and certain state
and local tax liabilities), including any amounts determined to be due as a
result of redeterminations of the tax liability of Alpine arising from an audit
or otherwise, and certain other liabilities of Alpine or any of its
subsidiaries, that the Company is actually required to pay but only to the
extent, if any, that such liability exceeds the amount of such liability
attributable to Superior, DNE or the Company. See "Certain Transactions and
Relationships." The value of this indemnity is dependent upon the financial
condition of Alpine. Neither the Company nor any of its affiliates is aware of
any potential federal income tax liability of the Company or its subsidiaries
(other than the Company's own tax liability) for which the Company would be
liable.
SUBSTANTIAL LEVERAGE
The Company has incurred substantial indebtedness to finance the
Reorganization and related transactions. In the ordinary course of business, the
Company will incur additional indebtedness to fund working capital requirements.
At July 28, 1996, after giving effect to this Offering, the Reorganization and
related transactions, the Company's consolidated debt would have been $131.8
million, Superior Preferred Stock, at liquidation value, would have been $20.0
million, its stockholders' equity would have been $24.0 million (with its net
tangible book value being ($24.0) million) and its ratio of debt plus Superior
Preferred Stock to stockholders' equity would have been 6.3 to 1.0. See
"Capitalization." However, based on pro forma results for the twelve months
ended July 28, 1996, the ratio of EBITDA to interest expense plus dividends on
the Superior Preferred Stock would have been 3.9 to 1.0. The Company believes
that, based upon current levels of operations, it will be able to meet its debt
service obligations. However, if the Company's business operations were to
deteriorate substantially, there can be no assurance that the Company would be
able to do so.
ENVIRONMENTAL MATTERS
The Company's operations are subject to numerous federal, state and local
laws and regulations relating to the storage, handling, emission, transportation
and discharge of hazardous materials and waste products. In the ordinary course
of its business, the Company uses solvents and similar hazardous materials in
its manufacturing operations in compliance with those laws and regulations. The
Company does not believe that the impact of these laws, regulations and uses has
had or will have a material effect on the Company's results of operations and
financial condition. See "Business -- Environmental Matters."
10
<PAGE>
DIVIDEND POLICY
Following the consummation of this Offering, the Company intends to retain
any future earnings for use in its businesses and therefore does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future. In
addition, the terms of the Bank Credit Facility provide certain limitations and
restrictions on the declaration and payment of dividends. See "Dividend Policy."
POTENTIAL EFFECTS OF ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that may discourage or prevent certain types of transactions involving an actual
or potential change in control of the Company, including transactions in which
the stockholders might otherwise receive a premium for their shares over then
current market prices, and may limit the ability of the stockholders to approve
transactions that they may deem to be in their best interests. In addition, the
Board of Directors has the authority to fix the rights and preferences of shares
of the Company's Preferred Stock and to issue such shares, which may have the
effect of delaying or preventing a change in control of the Company, without
action by the Company's stockholders. These factors may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of the Common Stock and the voting and other
rights of the holders of Common Stock.
DILUTION
Investors in this Offering will incur an immediate and substantial dilution
in net tangible book value per share of Common Stock from the initial offering
price upon completion of the Reorganization and related transactions. Dilution
is a reduction in book value of a purchaser's investment measured by the
difference between the purchase price and the net tangible book value per share
of Common Stock after this Offering. See "Dilution."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no public market for the Common Stock prior to this Offering,
and there can be no assurance that a significant public market for the Common
Stock will develop or will continue after this Offering. The initial public
offering price for the Common Stock will be determined by negotiations between
the Company and Furman Selz LLC, Oppenheimer & Co., Inc., and BT Securities
Corporation, as representatives of the Underwriters (the "Representatives").
There can be no assurance that the market price of the Common Stock will not
decline below the initial public offering price. The Company believes factors
such as announcements of new products or technological innovations by the
Company or third parties, as well as variations in the Company's results of
operations, market conditions, analysts' estimates and the stock market may
cause the market price of the Common Stock to fluctuate significantly. In
addition, future sales of Common Stock by Alpine following the completion of the
Reorganization and related transactions and the expiration of an agreed 180-day
lock-up period could have an adverse effect on the market price of the Common
Stock. See "Shares Eligible for Future Sale" and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, 12,024,048 shares of Common Stock will be
outstanding. The shares of Common Stock sold in this Offering will be freely
tradeable by persons other than "affiliates" of the Company, without restriction
under the Securities Act of 1933, as amended (the "Securities Act"). The
remaining shares of Common Stock outstanding will be "restricted securities"
(the "Restricted Shares") within the meaning of Rule 144 ("Rule 144")
promulgated under the Securities Act and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144. The Securities and
Exchange Commission (the "Commission") has proposed to amend the holding period
required by Rule 144 to permit sales of restricted securities after one year
rather than the current two years (and two years rather than three years for
"non-affiliates" who desire to trade free of other Rule 144 restrictions). If
such proposed amendment were enacted, the Restricted Shares held by Alpine would
become freely tradeable (subject to any applicable contractual restrictions) at
earlier dates. Such shares will also be subject to the 180-day lock-up agreement
with the
11
<PAGE>
Underwriters. All of the Restricted Shares will be held by Alpine upon
completion of this Offering. Alpine has no current intention of seeking an early
release from the provisions of the lock-up agreement. See "Shares Eligible for
Future Sale."
THE CAUTIONARY STATEMENTS SET FORTH ABOVE AND ELSEWHERE IN THIS PROSPECTUS
SHOULD BE READ AS ACCOMPANYING FORWARD-LOOKING STATEMENTS INCLUDED UNDER "USE OF
PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND ELSEWHERE HEREIN. THE RISKS DESCRIBED IN SUCH
STATEMENTS COULD CAUSE THE COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OR INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
12
<PAGE>
THE COMPANY
GENERAL
The Company was incorporated in Delaware in July 1996. The Company's
principal offices are located at 1790 Broadway, New York, New York 10019 and its
telephone number is (212) 757-3333.
BACKGROUND
Superior, which has been in operation since 1954, was acquired by Alpine in
November 1993 as a result of a merger between Alpine and Superior's corporate
parent. In May 1995, Superior increased its presence in the North American
telecommunications industry by acquiring the U.S. and Canadian copper wire and
cable business (the "Alcatel Business") of Alcatel NA Cable Systems, Inc. and
Alcatel Canada Wire, Inc. (collectively, "Alcatel NA"). In December 1995,
Superior acquired substantially all of the machinery, equipment and inventory of
the Vancouver, B.C. telecommunications wire and cable business of BICC Phillips,
Inc. (the "BICC Transaction"). DNE, which has been in operation since 1951, was
acquired by Alpine in February 1992.
THE REORGANIZATION AND RELATED TRANSACTIONS
THE REORGANIZATION. As part of the Reorganization, Alpine caused Superior
and DNE to declare dividends on their common stock in an aggregate amount of
$117.1 million. Superior also issued to Alpine 20,000 shares of Superior
Preferred Stock, which has the terms described below. Alpine then contributed to
the Company all of the issued and outstanding common stock of Superior and DNE.
Concurrently with the foregoing, the Company entered into the Bank Credit
Facility under which it borrowed $154.7 million to repay the net amount of the
intercompany debt owed to Alpine (which was $87.9 million), and to pay to Alpine
$63.8 million of the declared dividends. The net proceeds of this Offering will
be used to pay the remainder of the declared dividends and to reduce the amount
outstanding under the Bank Credit Facility. See "Use of Proceeds."
Each share of the Superior Preferred Stock has a liquidation value of $1,000
except that under certain defaults under the Bank Credit Facility, such
liquidation value will be reduced to zero until all obligations under the Bank
Credit Facility are paid or discharged. Each share of the Superior Preferred
Stock bears an annual dividend of $60.00, payable quarterly, and ranks senior as
to dividends to Superior's common stock except that, so long as any amounts
remain outstanding under the Bank Credit Facility, Superior may declare and pay
dividends or make other distributions on its common stock. The Superior
Preferred Stock has no voting rights, other than those provided by law, except
that the approval of the holders of the majority of such stock is required for
(i) any authorization, creation, or issuance of any shares of any other class or
series of capital stock of Superior ranking senior to or on parity with the
Superior Preferred Stock or (ii) certain amendments to Superior's charter.
The Superior Preferred Stock is redeemable, in whole or in part, at its
liquidation value at Superior's option at any time, at the holder's option in
certain amounts during each of the sixth through ninth years after its issuance
and at any time thereafter (except that, if there are any obligations of the
Company outstanding under the Bank Credit Facility, then a holder may not redeem
any Superior Preferred Stock during such period until such obligations are paid
or discharged).
If the over-allotment option granted to the Underwriters by the Company is
exercised, Alpine intends to restore its ownership of the outstanding Common
Stock to 50.1% by contributing to the capital of the Company a portion of
Superior Preferred Stock in exchange for shares of Common Stock or by a
substantially equivalent transaction. The amount of Superior Preferred Stock to
be contributed by Alpine will be that number of shares having an aggregate
liquidation value equal to the aggregate price paid by the Company (including
brokers' commissions) for shares of Common Stock to be transferred by the
Company to Alpine. The Company intends to acquire such shares of Common Stock
through open market purchases
13
<PAGE>
or otherwise using only net proceeds of the exercise of the over-allotment
option. The Company will use any balance of those net proceeds to reduce
outstanding debt under the Bank Credit Facility. See "Use of Proceeds,"
"Principal Stockholders" and "Certain Transactions and Relationships."
THE BANK CREDIT FACILITY. Under the Bank Credit Facility, up to $175.0
million is available. Obligations under the Bank Credit Facility are guaranteed
by each of the Company's direct and indirect domestic subsidiaries. The loans
under the Bank Credit Facility are secured by all the common stock of each
direct and indirect subsidiary of the Company (but only 65% of the common stock
of Superior's Canadian subsidiary), and all other property, equipment, inventory
and accounts receivable of each such subsidiary. The Bank Credit Facility
contains customary performance and financial covenants.
Concurrently with the completion of this Offering, the total amount
available under the Bank Credit Facility will be reduced to $150.0 million. The
Company is required to reduce the total commitments under the Bank Credit
Facility by $25.0 million on each of the third and fourth anniversaries of the
closing of the Bank Credit Facility. The Bank Credit Facility has a five-year
term. Interest is payable quarterly based upon the prime rate plus 0.5% or the
Eurodollar rate plus 1.5%; the variable components of these rates are subject to
periodic adjustment after the first anniversary of the closing of the facility
based on the Company's debt to EBITDA ratio on a trailing twelve month basis.
The effective rate of interest is expected to be initially approximately 7.5%.
14
<PAGE>
USE OF PROCEEDS
The net proceeds of this Offering (after deducting the underwriting
discounts and commissions and estimated expenses of this Offering payable by the
Company) are estimated to be approximately $88.6 million ($102.0 million if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $16.00 per share. All such net proceeds will be applied by the
Company as follows:
(1) $53.3 million in payment to Alpine of the balance of the
dividends declared by Superior and DNE in connection with the
Reorganization; and
(2) the balance to reduce the amount outstanding under the Bank
Credit Facility and for working capital purposes.
If the Underwriters' over-allotment option is exercised in part or in full,
the Company will use the net proceeds thereof to (i) reduce outstanding debt
under the Bank Credit Facility and (ii) to purchase the shares of Common Stock
to be delivered to Alpine in exchange for shares of Superior Preferred Stock (or
effect a substantially equivalent transaction) to enable Alpine to restore its
ownership of Common Stock to 50.1%. See "The Company--The Reorganization and
Related Transactions."
The initial borrowings under the Bank Credit Facility, which were
approximately $154.7 million, were used to: (i) repay to Alpine the net amount
of outstanding intercompany debt (which was $87.9 million); (ii) pay to Alpine
approximately $63.8 million of the dividends previously declared; and (iii) pay
all expenses of the financing. The intercompany debt being repaid consists of
indebtedness evidenced by promissory notes payable by Superior, DNE and
Superior's subsidiary to Alpine or arising under revolving credit facilities
between Superior and DNE on the one hand and Alpine on the other. The interest
rates payable on such indebtedness ranged from 8% to 14% and the maturity of
such indebtedness ranged from current to 2003. See "Certain Transactions and
Relationships -- Intercompany Debt."
Interest on amounts outstanding under the Bank Credit Facility are payable
quarterly based upon the prime rate plus 0.5% or the Eurodollar rate plus 1.5%.
The variable components of these rates are subject to periodic adjustment, after
the first anniversary of the closing of the facility, based on the Company's
debt to EBITDA ratio on a trailing twelve month basis. The effective rate of
interest is initially expected to be approximately 7.5%. The Bank Credit
Facility has a five-year term. The Company is required to reduce the total
commitments under the Bank Credit Facility by $25.0 million on each of the third
and fourth anniversaries of the closing of the facility.
DIVIDEND POLICY
The Company is newly-formed and has not paid dividends on the Common Stock.
Following the completion of this Offering, the Company intends to retain any
future earnings for use in its businesses and therefore does not anticipate
paying any dividends on the Common Stock in the foreseeable future. In addition,
the Bank Credit Facility contains restrictions on the declaration and payment of
dividends by the Company.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Superior and DNE as of
July 28, 1996 on an actual basis and of the Company on a pro forma basis, as
adjusted to reflect: (i) the completion of the Reorganization and related
transactions; (ii) the sale by the Company of the 6,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price per share of
$16.00, and the application of the net proceeds therefrom as described under
"Use of Proceeds;" and (iii) initial borrowings under the Bank Credit Facility.
<TABLE>
<CAPTION>
JULY 28, 1996
-----------------------
ACTUAL PRO FORMA
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Due to Alpine and affiliate............................................................... $ 102,914 $ --
Bank Credit Facility...................................................................... -- 120,000
Other..................................................................................... 11,839 11,839
---------- -----------
Total debt.............................................................................. 114,753 131,839
---------- -----------
Preferred stock of subsidiary (1)......................................................... -- 20,000
---------- -----------
Stockholders' equity:
Common Stock, Superior, $0.01 par value per share, 10,000 shares authorized, 1,000 shares
issued................................................................................... -- --
Common Stock, DNE, $1.00 par value per share, 100,000 shares authorized, 750 shares
issued................................................................................... 1 --
Common Stock, $0.01 par value per share, 25,000,000 shares authorized, 12,024,048 shares
issued (2)............................................................................... -- 121
Additional paid-in capital................................................................ 42,254 23,865
Retained earnings (3)..................................................................... 15,177 --
---------- -----------
Total stockholders' equity.............................................................. 57,432 23,986
---------- -----------
Total capitalization.................................................................. $ 172,185 $ 175,825
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Represents 20,000 shares of Superior Preferred Stock.
(2) Excludes 900,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(3) Includes a cumulative translation adjustment of ($406,000).
16
<PAGE>
DILUTION
The net tangible book value of the Company at July 28, 1996 prior to giving
effect to the Reorganization and this Offering was $60,240 or $0.01 per share of
Common Stock based upon 6,024,048 shares issued. The net tangible book value of
the Company at July 28, 1996, after giving effect to the Reorganization
(excluding the dividends declared by Superior and DNE), was $(10.5) million, or
approximately $(1.73) per share. Net tangible book value per share is determined
by dividing the net tangible book value of the Company (tangible assets less all
liabilities) by the total number of outstanding shares of Common Stock. New
investors purchasing shares in the Offering will realize an immediate dilution
of $17.99 per share. The following table illustrates this per share dilution to
new investors:
<TABLE>
<CAPTION>
Assumed initial public offering price per share (1)......................... $ 16.00
<S> <C> <C>
Net tangible book value per share after the Reorganization but before the
dividend and this Offering............................................... (1.73)
Decrease per share attributable to the dividends and the sale of Common
Stock offered hereby (2)................................................. (0.26)
---------
Pro forma net tangible book value per share after this Offering............. (1.99)
Dilution per share to new investors (3)..................................... $ 17.99
</TABLE>
The following table summarizes as of July 28, 1996 the differences between
the number of shares of Common Stock purchased from the Company, the total
consideration paid, and the average price per share paid by the existing
stockholder and by the purchasers of Common Stock in the Offering at an assumed
initial public offering price of $16.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ --------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholder (4)........................... 6,024,048 50.1% $ 42,255,000 30.6% $ 7.01
New investors...................................... 6,000,000 49.9% 96,000,000 69.4% $ 16.00
------------ --------- -------------- ---------
Total...................................... 12,024,048 100% $ 138,255,000 100%
------------ --------- -------------- ---------
------------ --------- -------------- ---------
</TABLE>
- ------------------------
(1) Before deduction of underwriting discount and estimated offering expenses
payable by the Company.
(2) After deduction of underwriting discount and estimated offering expenses
payable by the Company.
(3) Dilution is determined by subtracting the per share pro forma net tangible
book value of the Common Stock after this Offering from the assumed initial
public offering price per share. In the event the Underwriters'
over-allotment option is exercised in full, the dilution in net tangible
book value per share to new investors would be approximately $16.81.
(4) Does not include 635,000 shares of Common Stock that will be issuable upon
the exercise of stock options that will be granted concurrently with or
immediately following the completion of this Offering, with exercise prices
equal to the initial public offering price per share pursuant to the
Company's 1996 Stock Option Plan. See "Management -- Executive Compensation
-- Compensation Under Plans."
17
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
For financial statement presentation purposes, the historical financial
statements of the Company are based upon the combined historical financial
statements of Superior and DNE (which have been reorganized as the Company).
The following unaudited pro forma condensed combined financial statements of
the Company give effect to the acquisition of the Alcatel Business, the
Reorganization and related transactions and this Offering as if such
transactions had occurred as of May 1, 1995. The unaudited pro forma financial
information is provided for comparative purposes only and does not purport to be
indicative of the results that actually would have been obtained if the events
set forth above had been effected on the dates indicated or of those results
that may be obtained in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 28, 1996
<TABLE>
<CAPTION>
REORGANIZATION
AND OFFERING PRO FORMA
ACTUAL ADJUSTMENTS COMBINED
---------- --------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales............................................................... $ 123,824 $ 123,824
Cost of goods sold...................................................... 105,447 105,447
---------- -----------
Gross profit.......................................................... 18,377 18,377
Selling, general and administrative expense............................. 3,888 $ 500(a) 4,388
Amortization of goodwill................................................ 432 -- 432
---------- ------ -----------
Operating income...................................................... 14,057 (500) 13,557
Interest expense, net................................................... (4,258) 1,530(b) (2,728)
Preferred stock dividends of subsidiary................................. -- (300)(c) (300)
Other income (expense), net............................................. (53) -- (53)
---------- ------ -----------
Income before taxes................................................... 9,746 730 10,476
Provision for income taxes.............................................. (3,778) (532)(d) (4,310)
---------- ------ -----------
Net income............................................................ $ 5,968 $ 198 $ 6,166
---------- -----------
---------- ------ -----------
------
Per share of common stock (based upon 12,024,048 shares outstanding):
Net income ........................................................... $ 0.50 $ 0.51
---------- -----------
---------- -----------
</TABLE>
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED APRIL 28, 1996 (THE COMPANY) AND
THE ELEVEN-DAY PERIOD ENDED MAY 11, 1995 (ALCATEL BUSINESS)
<TABLE>
<CAPTION>
ALCATEL PRO FORMA REORGANIZATION
ACQUISITION FOR ALCATEL AND OFFERING PRO FORMA
ACTUAL ADJUSTMENTS ACQUISITION ADJUSTMENTS COMBINED
---------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................................. $ 410,413 $ 7,521(e) $ 417,934 $ 417,934
Cost of goods sold........................ 362,854 7,018(e) 369,780 369,780
(92)(f)
---------- ----------- ----------- -----------
Gross profit............................ 47,559 595 48,154 48,154
Selling, general and administrative
expense.................................. 14,223 336(e) 14,256 $ 2,000(a) 16,256
(303)(g)
Amortization of goodwill.................. 1,556 14(f) 1,570 -- 1,570
---------- ----------- ----------- ------ -----------
Operating income........................ 31,780 548 32,328 (2,000) 30,328
Interest expense, net..................... (17,006) -- (17,006) 6,075(b) (10,931)
Preferred stock dividends of subsidiary... -- -- -- (1,200)(c) (1,200)
Other income, net......................... 55 -- 55 -- 55
---------- ----------- ----------- ------ -----------
Income before taxes..................... 14,829 548 15,377 2,875 18,252
Provision for income taxes................ (6,722) -- (6,722) (1,059)(d) (7,781)
---------- ----------- ----------- ------ -----------
Income from continuing operations....... $ 8,107 $ 548 $ 8,655 $ 1,816 $ 10,471
---------- ----------- ----------- -----------
---------- ----------- ----------- ------ -----------
------
Per share of common stock (based upon
12,024,048 shares outstanding):
Income from continuing operations....... $ 0.67 $ 0.87
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JULY 28, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS COMBINED
---------- ------------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash............................................................... $ 139 $ 60(h) $ 679
88,580(i)
120,000(j)
(3,100)(j)
(205,000)(k)
Accounts receivable, net........................................... 53,223 53,223
Inventories........................................................ 47,737 47,737
Other current assets............................................... 5,999 5,999
---------- ------------------ -----------
Total current assets............................................. 107,098 540 107,638
Property, plant and equipment, net................................... 76,143 76,143
Goodwill, net........................................................ 47,897 47,897
Long-term investments and other assets............................... 1,222 3,100(j) 4,322
---------- ------------------ -----------
Total assets..................................................... $ 232,360 $ 3,640 $ 236,000
---------- -----------
---------- ------------------ -----------
------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................. $ 364 $ 364
Accounts payable................................................... 39,348 39,348
Accrued expenses................................................... 12,777 12,777
---------- -----------
Total current liabilities........................................ 52,489 52,489
Long-term debt, less current portion................................. 11,475 $ 120,000(j) 131,475
Due to Alpine and affiliate.......................................... 102,914 (102,914)(k) --
Other long-term obligations.......................................... 8,050 8,050
Preferred stock of subsidiary........................................ -- 20,000(l) 20,000
Stockholders' equity:
Common stock $.01 par value; authorized 25,000,000 shares; issued
12,024,048 pro forma as of the offering........................... 1 60(h) 121
60(i)
Capital in excess of par value..................................... 42,254 88,520(i) 23,865
(86,909)(k)
(20,000)(l)
Retained earnings.................................................. 15,177 (15,177)(k) --
---------- ------------------ -----------
Total stockholders' equity........................................... 57,432 (33,446) 23,986
---------- ------------------ -----------
Total liabilities and stockholders' equity....................... $ 232,360 $ 3,640 $ 236,000
---------- -----------
---------- ------------------ -----------
------------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) Represents management's estimate of the additional general and
administrative expenses associated with the Company's status as a separate
public company, of which $0.2 million for the three months ended July 28,
1996 and $0.9 million for the year ended April 28, 1996, represents the
amount that the Company would have paid to Alpine for services rendered
under the Services Agreement. See "Certain Transactions and
Relationships--Services Agreement."
(b) Represents the net adjustment to net interest expense resulting from the
difference between the interest expense on the debt incurred by the Company
in connection with the Reorganization and related transactions and the
historical interest expense on the intercompany debt repaid, determined as
follows:
<TABLE>
<CAPTION>
JULY 28, APRIL 28,
1996 1996
--------- -------------
<S> <C> <C>
Interest on Bank Credit Facility (assuming a 7.5% interest rate).... $ 2,250 $ 9,000
Amortization of deferred financing costs............................ 155 620
Less: historical interest on debt being repaid...................... (3,935) (15,695)
--------- -------------
Total adjustment................................................ $ (1,530) $ (6,075)
--------- -------------
--------- -------------
</TABLE>
The adjustment to interest expense assumes that the average amount
outstanding under the Bank Credit Facility was $120.0 million. An increase
or decrease in the interest rate on loans by the Bank Credit Facility of one
percent (1.0%) will increase or decrease interest expense by $1.2 million.
(c) Reflects dividends on Superior Preferred Stock issued by Superior, a
subsidiary of the Company, under the Reorganization. See "The Company -- The
Reorganization and Related Transactions." The Superior Preferred Stock bears
an annual dividend per share of $60 and is redeemable at the option of the
holder in certain amounts in each of the sixth through ninth years of
issuance and at any time thereafter.
(d) Adjusted to reflect an effective tax rate of 40%, which is the Company's
estimate of the effective tax rate inclusive of both state and federal
income taxes. The effective rate is applied to income from continuing
operations before income taxes, excluding minority interest.
(e) Reflects the results of operations of the Alcatel Business for the 11-day
period ended May 11, 1995, the date of acquisition.
(f) Reflects the changes in historical depreciation expense and the amortization
of goodwill resulting from the Alcatel acquisition.
(g) Reflects the elimination of selling, general and administrative expense
incurred by the Alcatel Business in the historical periods offset by
additional selling, general and administrative expense which the Company
estimates was incurred subsequent to the Alcatel acquisition and related
directly to the ongoing operations of the Alcatel Business.
(h) Reflects the initial subscription of 6,024,048 shares of Common Stock and
the related proceeds.
(i) Reflects the issuance of 6,000,000 shares of Common Stock pursuant to this
Offering and the estimated net proceeds of $88.6 million. On completion of
this Offering there will be 12,024,048 shares of Common Stock outstanding
consisting of the 6,024,048 shares issued on initial subscription and the
6,000,000 shares issued pursuant to this Offering.
(j) Reflects $120.0 million of borrowings under the Bank Credit Facility
outstanding after this Offering (assuming a public offering price of $16.00
per share and the repayment of $34.7 million of indebtedness under the Bank
Credit Facility) and $3.1 million in related deferred financing costs.
(k) Reflects the payment by Superior and DNE to Alpine of an aggregate of $205.0
million, consisting of the repayment of existing intercompany debt owed to
Alpine and the payment of that portion of the dividend that is paid
concurrently with the Reorganization. See "Use of Proceeds."
(l) Reflects the issuance of Superior Preferred Stock that Superior issued in a
recapitalization in connection with Reorganization.
21
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA OF THE COMPANY
Set forth below are certain selected historical combined financial data of
the Company. These financial data include the combined results of operations of
DNE and Superior on a prospective basis from the date such entities were
acquired by Alpine. With respect to DNE, such acquisition occurred in February
1992; thus, the results of DNE are included for the 2 1/2 month period ended
April 30, 1992, and for the four-year period ended April 28, 1996. With respect
to Superior, such acquisition occurred in November 1993; thus, the results for
Superior are included for the six-month period ended May 1, 1994, for the years
ended April 30, 1995 and April 28, 1996 and for the quarterly periods ended July
29, 1995 and July 28, 1996. In addition, the results of operations of Superior
for the year ended April 28, 1996 and for the quarterly periods ended July 29,
1995 and July 28, 1996 include the operations of the Alcatel Business which was
acquired by Superior on May 11, 1995. This information should be read in
conjunction with the combined financial statements of DNE and Superior and
related notes included in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
2 1/2 MONTHS
ENDED FISCAL YEAR ENDED QUARTER ENDED
------------ ------------------------------------------ ------------------
APRIL 30, APRIL 30, MAY 1, APRIL 30, APRIL 28, JULY 29, JULY 28,
1992 1993 1994 1995 1996 1995 1996
------------ --------- ------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $4,590 $ 27,897 $68,510 $ 164,485 $ 410,413 $ 99,324 $123,824
Cost of sales...................................... 3,054 15,915 56,250 142,114 362,854 89,821 105,447
------ --------- ------- --------- --------- -------- --------
Gross profit..................................... 1,536 11,982 12,260 22,371 47,559 9,503 18,377
Selling, general & administrative expense.......... 1,209 9,068 8,884 11,632 14,223 3,299 3,888
Amortization of goodwill........................... -- 267 2,186 1,124 1,556 374 432
------ --------- ------- --------- --------- -------- --------
Operating income................................. 327 2,647 1,190 9,615 31,780 5,830 14,057
Interest expense, net.............................. (140) (600) (1,742) (3,700) (17,006) (3,733) (4,258)
Other income (expense)............................. 2 70 (61) 231 55 28 (53)
------ --------- ------- --------- --------- -------- --------
Income (loss) from continuing operations before
taxes........................................... 189 2,117 (613) 6,146 14,829 2,125 9,746
Provision for income taxes......................... -- (462) (521) (2,240) (6,722) (451) (3,778)
------ --------- ------- --------- --------- -------- --------
Income (loss) from continuing operations......... 189 1,655 (1,134) 3,906 8,107 1,674 5,968
(Loss) from discontinued operations................ -- -- (287) (176) -- -- --
------ --------- ------- --------- --------- -------- --------
Income (loss) before extraordinary item.......... 189 1,655 (1,421) 3,730 8,107 1,674 5,968
Extraordinary (loss) on early extinguishment of
debt.............................................. -- -- -- -- (2,645) (2,811) --
------ --------- ------- --------- --------- -------- --------
Net income (loss)................................ $ 189 $ 1,655 $(1,421) $ 3,730 $ 5,462 $ (1,137) $ 5,968
------ --------- ------- --------- --------- -------- --------
------ --------- ------- --------- --------- -------- --------
Per share of common stock (based upon 12,024,048
shares outstanding subsequent to this Offering):
Income from continuing operations................................................................. $ 0.67 $ 0.14 $ 0.50
Extraordinary (loss) on early extinguishment of debt.............................................. (0.22) (0.23) --
--------- -------- --------
Net income (loss)............................................................................... $ 0.45 $ (0.09) $ 0.50
--------- -------- --------
--------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
APRIL APRIL APRIL
30, 30, MAY 1, APRIL 30, 28, JULY 28,
1992 1993 1994 1995 1996 1996
-------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................................. $ 5,773 $ 7,346 $ 23,558 $ 22,750 $ 58,726 $ 54,609
Total assets.................................................... 12,918 18,500 115,338 120,127 244,065 232,360
Total debt, including intercompany.............................. 8,412 8,342 39,095 37,067 125,760 114,753
Total stockholders' equity...................................... 1,807 4,916 48,123 49,854 51,656 57,432
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, through its two subsidiaries, Superior and DNE, is engaged in
the manufacture and sale of copper wire and cable for the telecommunications
industry and data communication and other electronic products and systems for
defense, governmental and commercial applications.
RESULTS OF OPERATIONS
To facilitate a meaningful comparison between periods, this Management's
Discussion and Analysis focuses on pro forma information for the periods
covered, which management believes provides comparability among historical
periods. Period-to-period comparisons of the Company's historical financial
information are less relevant to an understanding of the Company due to the
significance of the Superior acquisition on November 11, 1993 and the Alcatel
acquisition on May 11, 1995. Accordingly, the information in the following
tables and the period-to-period comparisons in this Management's Discussion and
Analysis are based on pro forma data which reflects the impact of the Superior
acquisition and the Alcatel acquisition as if both occurred at the beginning of
the periods presented.
The pro forma data included in the following table for the three months
ended July 28, 1996 and for fiscal year ended April 28, 1996 are derived from
Pro Forma Condensed Combined Statements of Operations included elsewhere herein.
The pro forma data included in the following table for the three months ended
July 29, 1995 and for fiscal 1995 and 1994 have been prepared in a manner
substantially consistent with the aforementioned Pro Forma Condensed Combined
Statements of Operations except for the assumption that this Offering, the
Reorganization and related transactions, the Superior acquisition and the
Alcatel acquisition occurred on May 1, 1993. Such pro forma data for the three
months ended July 29, 1995 and for fiscal 1995 and 1994 include the historical
results of operations of the Company, the historical results of the Alcatel
Business and Superior prior to their respective acquisition by the Company, and
certain pro forma adjustments as more fully described in the footnotes
accompanying the Combined Supplemental Unaudited Pro Forma Operating Data set
forth in the table below. The pro forma data are not necessarily indicative of
the results that would have been achieved had such acquisitions actually
occurred on May 1, 1993, nor are they necessarily indicative of the Company's
future results.
For the twelve months ended July 28, 1996, 88.2% of Superior's net sales
were made to the RBOCs and the two major independent telephone companies.
Superior's sales to these customers are generally pursuant to multi-year supply
agreements under which the customer agrees to have Superior provide certain of
the customer's wire or cable needs as a primary supplier during the term of the
agreement. Prior to awarding a contract, customers typically forecast their
needs, and manufacturers such as Superior bid and quote prices based on the
forecasted order amount. The agreements are generally of a "framework" nature,
establishing prices, subject to adjustment, in certain circumstances, for
fluctuations in copper prices and other raw materials costs and providing other
general terms of purchase and sale. The agreements generally do not obligate
Superior's customers to purchase any minimum amount of the Superior's products.
The terms of these agreements vary from one to seven years. Certain of the
agreements, including agreements with three of the RBOCs and one of the major
independent telephone companies, provide that the customer may terminate the
agreement without cause and either without notice or on 30 or 90 days' notice.
Superior was recently awarded contracts by two RBOCs, including one with which
it did not previously do business. The Company believes that these contracts
will continue to contribute a significant amount of incremental sales to its
results of operations in fiscal 1997 and beyond. The Company believes that these
contracts are part of a recent trend of the RBOCs to enter into longer term
arrangements with a fewer number of suppliers, and that this trend will
continue. See "Business -- Telecommunications Wire and Cable -- Marketing and
Distribution."
Price increases instituted during fiscal 1996 related to both wire and cable
products reflected a reversal of a trend of lower market prices experienced in
fiscal 1994 and early fiscal 1995. During such period,
23
<PAGE>
industry-wide capacity exceeded demand, resulting in a very competitive market
environment. Since such time, reductions in manufacturing capacity coupled with
increasing product demand, as well as the resulting changes in customer
relationships, have resulted in an increase in market prices. The price
increases instituted throughout fiscal 1996 significantly impacted profitability
during the second half of fiscal 1996 and the first quarter of fiscal 1997.
The Alcatel Business, which was acquired in May 1995, was particularly
impacted in fiscal 1995 by the cycle of lower market prices in fiscal 1995, due
to the timing of its contract expirations and the resulting rebidding and
obtaining of new contract awards during a period of very competitive pricing.
The Company has subsequently renegotiated substantially all of these contracts
on improved pricing terms. These contracts generally have terms and provisions
similar to Superior's other customer contracts described above.
The cost of copper has been subject to considerable volatility over the past
several years. While fluctuations in the price of copper directly affect the per
unit prices of Superior's products, this volatility has not had, nor is it
expected to have, a material impact on Superior's profitability due to the
copper price pass-through arrangements contained in the contracts under which
Superior's telecommunications wire and cable products are sold. Generally, the
copper price component passed through in each contract for a particular quarter
is based on the average COMEX copper price over the three-month period ending at
or before the beginning of that quarter. Each month, the Company estimates its
product deliveries several months into the future and enters into price
commitments with its suppliers for a portion of its estimated copper rod
requirements for delivery on a forward basis. The Company uses these forward
purchase commitments to minimize the differences between its raw material copper
costs charged to cost of sales and the pass-through pricing charged to its
customers.
24
<PAGE>
COMBINED SUPPLEMENTAL UNAUDITED PRO FORMA OPERATING DATA (1)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------- QUARTERS ENDED
APRIL APRIL ------------------
MAY 1, 30, 28, JULY 29, JULY 28,
1994 1995 1996 1995 1996
-------- --- --- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
Net sales
Telecommunications wire and cable.......................................... $311,904 $340,756 $391,758 $101,580 $117,969
Data communications and electronics........................................ 21,653 27,907 26,176 5,265 5,855
-------- --- --- -------- --------
Combined net sales....................................................... 333,557 368,663 417,934 106,845 123,824
-------- --- --- -------- --------
-------- --- --- -------- --------
Gross profit (2)(3)
Telecommunications wire and cable.......................................... $ 34,091 $28,433 $40,267 $ 8,505 $ 16,859
Data communications and electronics........................................ 8,252 8,221 7,887 1,593 1,518
-------- --- --- -------- --------
Combined gross profit.................................................... 42,343 36,654 48,154 10,098 18,377
-------- --- --- -------- --------
-------- --- --- -------- --------
Selling, general and administrative expense (4)
Telecommunications wire and cable.......................................... $ 5,249 $6,170 $8,408 $ 1,749 $ 2,322
Data communications and electronics........................................ 6,574 6,511 5,848 1,583 1,566
Corporate (5).............................................................. 2,000 2,000 2,000 500 500
-------- --- --- -------- --------
Combined selling, general and administrative expense..................... 13,823 14,681 16,256 3,832 4,388
-------- --- --- -------- --------
-------- --- --- -------- --------
Amortization of goodwill (6)
Telecommunications wire and cable.......................................... $ 1,570 $1,570 $1,570 $ 388 $ 432
Data communications and electronics (7).................................... 1,753 -- -- -- --
-------- --- --- -------- --------
Combined amortization of goodwill........................................ 3,323 1,570 1,570 388 432
-------- --- --- -------- --------
-------- --- --- -------- --------
Operating income
Telecommunications wire and cable.......................................... $ 27,272 $20,693 $30,289 $ 6,368 $ 14,105
Data communications and electronics........................................ (75) 1,710 2,039 10 (48)
Corporate.................................................................. (2,000) (2,000) (2,000) (500) (500)
-------- --- --- -------- --------
Combined operating income................................................ 25,197 20,403 30,328 5,878 13,557
-------- --- --- -------- --------
-------- --- --- -------- --------
Operating income............................................................. $ 25,197 $20,403 $30,328 $ 5,878 $ 13,557
Interest expense (8)......................................................... (10,931) (10,931) (10,931) (2,728) (2,728)
Preferred stock dividends of subsidiary (9).................................. (1,200) (1,200) (1,200) (300) (300)
Other income (expense)....................................................... (61) 231 55 28 (53)
-------- --- --- -------- --------
Income from continuing operations before income taxes...................... 13,005 8,503 18,252 2,878 10,476
Provision for income taxes (10).............................................. (5,682) (3,881) (7,781) (1,271) (4,310)
-------- --- --- -------- --------
Income from continuing operations.......................................... $ 7,323 $4,622 $10,471 $ 1,607 $ 6,166
-------- --- --- -------- --------
-------- --- --- -------- --------
Income per share of common stock from continuing operations (based upon
12,024,048 shares outstanding).............................................. $ 0.61 $0.38 $0.87 $ 0.13 $ 0.51
-------- --- --- -------- --------
-------- --- --- -------- --------
AS A PERCENTAGE OF NET SALES
----------------------------------------
Gross margin
Telecommunications wire and cable.......................................... 10.9% 8.3% 10.3% 8.4% 14.3%
Data communications and electronics........................................ 38.1 29.5 30.1 30.3 25.9
Combined gross margin.................................................... 12.7 9.9 11.5 9.5 14.8
Operating income margin
Telecommunications wire and cable.......................................... 8.7% 6.1% 7.7% 6.3% 12.0%
Data communications and electronics........................................ (0.3) 6.1 7.8 0.2 (0.8)
Combined operating income margin......................................... 7.6 5.5 7.3 5.5 11.0
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
---------------------------------------------------------------
FISCAL YEAR ENDED QUARTER ENDED
------------------------------------- ------------------------
MAY 1, APRIL 30, APRIL 28, JULY 29, JULY 28,
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales........................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................................... 87.3 90.1 88.5 90.5 85.2
----- ----- ----- ----- -----
Gross profit................................................... 12.7 9.9 11.5 9.5 14.8
Selling, general and administrative expense...................... 4.1 4.0 3.9 3.6 3.5
Amortization of goodwill......................................... 1.0 0.4 0.3 0.4 0.3
----- ----- ----- ----- -----
Operating income............................................... 7.6 5.5 7.3 5.5 11.0
Interest expense, net............................................ 3.3 2.9 2.6 2.5 2.2
Preferred stock dividends of subsidiary.......................... 0.4 0.3 0.3 0.3 0.2
Other income (expense), net...................................... 0.0 0.0 0.0 0.0 0.1
----- ----- ----- ----- -----
Income from continuing operations before income taxes.......... 3.9 2.3 4.4 2.7 8.5
Provision for income taxes....................................... 1.7 1.1 1.9 1.2 3.5
----- ----- ----- ----- -----
Income from continuing operations.............................. 2.2 1.2 2.5 1.5 5.0
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------------
(1) The Combined Supplemental Unaudited Pro Forma Operating Data give effect to
the following transactions as if such transactions occurred on May 1, 1993:
(a) this Offering;
(b) the Reorganization and related transactions;
(c) the acquisition of Superior; and
(d) the acquisition of the Alcatel Business.
(2) Reduced by $250,000 in fiscal 1994 and 1995 to reflect reduced operating
expenses resulting from the Alcatel acquisition.
(3) Adjusted to reflect reductions to the historical depreciation expense
resulting from the Alcatel and Superior acquisitions. The adjustments to
depreciation expense amounted to $3.0 million, $2.9 million and $92,000 in
fiscal 1994, 1995 and 1996, respectively.
(4) Adjusted to reduce historical selling, general and administrative expenses
incurred by the Alcatel Business of $11.6 million and $10.3 million in
fiscal 1994 and 1995 and $0.3 million in the quarter ended July 29, 1995 by
$10.4 million and $9.1 million in fiscal 1994 and 1995, respectively, and
$0.3 million in the quarter ended July 29, 1995. The reduction represented
management fees, allocated administrative fees and employee costs incurred
by the Alcatel Business to the extent such charges were eliminated
subsequent to the Alcatel acquisition.
(5) Reflects estimated additional general and administrative expenses associated
with the Company's status as an independent public company, including $0.2
million for the quarter ended July 28, 1996 and $0.9 million for the year
ended April 28, 1996 which would have been payable pursuant to the Services
Agreement.
(6) Adjusted to reflect incremental amortization resulting from the Alcatel and
Superior acquisitions of $1.1 million and $446,000 in fiscal 1994 and 1995,
respectively and $14,000 in the quarter ended July 29, 1995.
(7) Reflects a $1.5 million write-off of goodwill related to a non-strategic
product line at DNE.
(8) Adjusted to reflect the capital structure that exists as a result of the
Reorganization and related transactions and is based on certain existing
debt and an assumed $120.0 million of debt outstanding under the Bank Credit
Facility during fiscal 1994, 1995 and 1996 and during the quarter ended July
28, 1996.
26
<PAGE>
(9) Reflects dividends on Superior Preferred Stock issued to Alpine in
connection with the Reorganization.
(10)Adjusted to reflect an effective tax rate of 40%, which is the Company's
estimate of the effective tax rate inclusive of both state and federal
income taxes. The effective rate is applied to income from continuing
operations before income taxes, excluding minority interest.
PRO FORMA QUARTERLY RESULTS
The following table presents selected pro forma quarterly condensed combined
financial information for each of the nine quarters through July 28, 1996. This
information is unaudited, but in the opinion of the Company's management,
reflects all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of this information in
accordance with generally accepted accounting principles. Such quarterly results
are not necessarily indicative of future results of operations. The Company's
net sales in the winter months are generally lower than during the summer months
due to reduced construction activities by the RBOCs and the two major
independent telephone companies. This seasonality is generally reflected in
lower net sales for the third fiscal quarter.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------------------------------
JULY OCT. JAN. APRIL JULY OCT. JAN. APRIL JULY
1994 1994 1995 1995 1995 1995 1996 1996 1996
------- ------- ------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................... $92,056 $82,558 $93,577 $100,472 $106,845 $109,076 $91,185 $110,828 $123,824
Cost of sales................................ 80,801 74,824 84,920 91,464 96,747 98,036 80,284 94,713 105,447
------- ------- ------- -------- -------- -------- ------- -------- --------
Gross profit............................... 11,255 7,734 8,657 9,008 10,098 11,040 10,901 16,115 18,377
Selling, general and administrative
expense..................................... 3,591 3,802 3,561 3,727 3,832 3,888 3,984 4,552 4,388
Amortization of goodwill..................... 391 392 393 394 388 390 397 395 432
------- ------- ------- -------- -------- -------- ------- -------- --------
Operating Income........................... 7,273 3,540 4,703 4,887 5,878 6,762 6,520 11,168 13,557
Interest expense............................. (2,733) (2,733) (2,733) (2,733) (2,733) (2,733) (2,733) (2,733) (2,728)
Preferred stock dividends of subsidiary...... (300) (300) (300) (300) (300) (300) (300) (300) (300)
Other income (expense), net.................. 38 39 33 121 28 (4) (7) 38 (53)
------- ------- ------- -------- -------- -------- ------- -------- --------
Income from continuing operations before
income taxes.............................. 4,278 546 1,703 1,975 2,873 3,725 3,480 8,173 10,476
Provision for income taxes................... (1,831) (339) (801) (910) (1,269) (1,610) (1,512) (3,389) (4,310)
------- ------- ------- -------- -------- -------- ------- -------- --------
Income from continuing operations.......... $ 2,447 $ 207 $ 902 $ 1,065 $ 1,604 $ 2,115 $ 1,968 $ 4,784 $ 6,166
------- ------- ------- -------- -------- -------- ------- -------- --------
------- ------- ------- -------- -------- -------- ------- -------- --------
Income per share from continuing operations
(based upon 12,024,048 shares
outstanding)................................ $ 0.20 $ 0.02 $ 0.07 $ 0.09 $ 0.13 $ 0.18 $ 0.16 $ 0.40 $ 0.51
------- ------- ------- -------- -------- -------- ------- -------- --------
------- ------- ------- -------- -------- -------- ------- -------- --------
</TABLE>
PRO FORMA QUARTER ENDED JULY 29, 1995 COMPARED TO PRO FORMA QUARTER ENDED JULY
28, 1996
NET SALES
Combined net sales for the three months ended July 28, 1996 were $123.8
million, representing an increase of $17.0 million, or 15.9%, over combined net
sales of $106.8 million for the same period in fiscal 1996.
Superior's net sales of $118.0 million for the three months ended July 28,
1996, were $16.4 million, or 16.1%, greater than net sales of $101.6 million for
the same period in fiscal 1996. After adjusting for the contractual pass-through
of lower copper prices, in the form of reduced selling prices resulting from
lower copper costs during the fiscal quarter ended July 29, 1996, net sales
would have increased by approximately $21.4 million or 21.1% as compared to the
July 28, 1995 fiscal quarter. Approximately $16.5 million of the adjusted
increase in net sales resulted from sales volume of both wire and cable
products. This increase was attributable to additional sales volume under the
new multi-year supply agreements referred to above as well
27
<PAGE>
as to the continued increase in demand for copper wire and cable products in the
local loop. The remaining $4.9 million increase in sales in the fiscal quarter
ended July 28, 1996 resulted from non-copper based price increases instituted
during the latter half of fiscal 1996 under the new multi-year supply
agreements.
DNE's net sales for the three months ended July 28, 1996 were $5.9 million,
representing an increase of $0.6 million, or 11.2%, as compared to net sales of
$5.3 million for the same period in fiscal 1996. Sales in DNE's contract
manufacturing service operations increased in the current fiscal quarter by $1.4
million, offset somewhat by a decline in sales of military avionic products.
GROSS PROFIT
Combined gross profit for the three months ended July 28, 1996 was $18.4
million, representing an increase of $8.3 million, or 82.0%, over combined gross
profit of $10.1 million for the same period in fiscal 1996.
Superior's gross profit increased by $8.4 million, or 98.3%, to $16.9
million for the three months ended July 28, 1996, as compared to $8.5 million
for the same period in fiscal 1996. Superior's gross margin increased to 14.3%
(13.7%, if adjusted to reflect the contractual pass through of lower copper
prices) for the three months ended July 28, 1996, as compared to 8.4% for the
same period in fiscal 1996. Superior's gross margins in the fiscal quarter ended
July 28, 1996 reflected a continuing trend of steadily improving margins that
began early in fiscal 1996. Over the last four fiscal quarters Superior's gross
margin (as adjusted to reflect the contractual pass-through of a COMEX copper
price of $1.10 per pound), has improved from 9.6% in the second quarter of
fiscal 1996 to 11.3% and 13.8% in the third and fourth quarters of fiscal 1996,
respectively, and to 14.7% in the fiscal quarter ended July 28, 1996. The
continuing increase in gross margins resulted principally from the
aforementioned fiscal 1996 increase in selling prices instituted pursuant to a
majority of Superior's multi-year supply agreements, as well as production
efficiencies caused by higher production levels and the impact of cost savings
from the aforementioned completion of the integration of the Alcatel business
operations.
DNE's gross profit was $1.5 million for the three months ended July 28,
1996, representing a decline of $0.1 million, or 4.7%, as compared to $1.6
million for the same period in fiscal 1996. DNE's gross margin decreased from
30.3% to 25.9% due to the trend toward contract manufacturing operations which
have a lower gross margin than DNE's other operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE ("SG&A EXPENSE")
Combined SG&A expense for the three months ended July 28, 1996 was $4.4
million, representing an increase of $0.6 million, or 14.5% over SG&A expense of
$3.8 million for the same period in fiscal 1996.
Superior's SG&A expense for the three months ended July 28, 1996 was $2.3
million, an increase of $0.6 million, or 32.8% over SG&A expense of $1.7 million
for the same period in fiscal 1996. This increase in SG&A expense reflected
among other factors, the incremental sales and marketing staff required to
support the increased level of sales and the expansion of international and
other marketing activities associated with new product lines and entering new
geographic markets.
DNE's SG&A expense for the three months ended July 28, 1996 was $1.6 million
which is the same as the corresponding period of fiscal 1996.
OPERATING INCOME
Combined operating income for the three months ended July 28, 1996 was $13.6
million, representing an increase of $7.7 million, or 130.6%, as compared to
combined operating income of $5.9 million for the same period in fiscal 1996.
The increase in operating income was attributable to the increase in net sales
at Superior, coupled with an increase in gross margins, as more fully discussed
above.
28
<PAGE>
INCOME FROM CONTINUING OPERATIONS
Combined income from continuing operations for the three months ended July
28, 1996 was $6.2 million, representing an increase of $4.6 million, or 283.7%,
as compared to combined income from continuing operations of $1.6 million for
the same period in fiscal 1996. The increase was attributable to the same
factors impacting operating income, as described above.
PRO FORMA FISCAL 1996 COMPARED TO PRO FORMA FISCAL 1995
NET SALES
Fiscal 1996 combined net sales were $417.9 million, representing an increase
of $49.3 million, or 13.4%, over fiscal 1995 combined net sales of $368.7
million.
Superior's fiscal 1996 net sales of $391.8 million increased $51.0 million,
or 15.0%, over fiscal 1995 net sales of $340.8 million. Approximately $18.0
million of the increase in net sales was attributable to the contractual pass
through, in the form of increased selling prices, of higher copper costs in
fiscal 1996. Of the remaining $33.0 million increase in net sales, approximately
$6.0 million resulted from non-copper based price increases instituted during
fiscal 1996 under multi-year customer supply agreements with the remainder of
the increase (approximately $27.0 million) being the result of higher unit sales
volumes.
Higher unit sales volumes in fiscal 1996 occurred across all of Superior's
product lines. The increase in unit sales volume was attributable to an
expansion of multi-year contractual arrangements under new contract awards with
several RBOCs and a major independent telephone holding company, as well as to a
general increased level of demand for telecommunications wire and cable
products.
DNE's net sales in fiscal 1996 were $26.2 million, which represented a
decline of $1.7 million, or 6.2%, as compared to fiscal 1995. Increased sales in
the Company's contract manufacturing services operations and military data
communications and avionics operations were offset by completion in fiscal 1995
of a major contract with NASA for the manufacture of hardware interface modules.
GROSS PROFIT
Combined gross profit in fiscal 1996 was $48.2 million, representing an
increase of $11.5 million, or 31.4%, over fiscal 1995 combined gross profit of
$36.7 million. The combined gross margin in fiscal 1996 was 11.5% as compared to
9.9% in fiscal 1995.
Superior's gross profit increased by $11.8 million, or 41.6%, to $40.3
million in fiscal 1996. Superior's fiscal 1996 gross margin increased to 10.3%
(10.8% if adjusted to reflect increases in copper prices) as compared to 8.9% in
fiscal 1995. The improvement in Superior's gross margin was reflective of a
positive trend which began in the second fiscal quarter of fiscal 1996 and
continued through the end of the fiscal year. During fiscal 1996, Superior's
gross margin (as adjusted to reflect the contractual pass-through of a COMEX
copper price of $1.10 per pound) was 8.3% in the first quarter, increasing to
9.6%, 11.3% and 13.8% for the second, third and fourth quarters, respectively.
The continued improvement in gross margin during fiscal 1996 resulted from: (i)
the aforementioned price increases instituted during fiscal 1996, the primary
impact of which was reflected in the third and fourth quarters of the fiscal
year; (ii) non-copper raw material cost reductions, impacting primarily the
fourth quarter of fiscal 1996; (iii) improved production efficiencies caused by
higher production levels; and (iv) cost savings resulting from the completion of
the integration of the Alcatel Business operations during the latter half of the
fiscal year.
DNE's gross profit for fiscal 1996 was $7.9 million, representing a decline
of $0.3 million, or 4.1%, as compared to fiscal 1995. The reduction in DNE's
fiscal 1996 gross profit was attributable to lower net sales, the effect of
which was partially offset by a slight increase in DNE's gross margin in fiscal
1996 compared to fiscal 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Combined SG&A expense in fiscal 1996 was $16.3 million, an increase of $1.6
million, or 10.7%, as compared to fiscal 1995.
29
<PAGE>
Superior's SG&A expense in fiscal 1996 was $8.4 million, an increase of
36.3%, as compared to fiscal 1995 SG&A expenses of $6.2 million. This increase
was attributable to a number of factors including duplicative transitionary data
processing charges associated with the Alcatel acquisition, expansion of
international and other marketing activities associated with new product lines
and entering new geographic markets, increase in sales and marketing staff to
support the overall increase in sales demand, and higher expenses associated
with the development and support of data processing systems upgrades.
DNE's SG&A expense declined by $0.7 million or 10.2%, to $5.8 million in
fiscal 1996. This reduction was due primarily to a reorganization of DNE's sales
and marketing efforts and the elimination of overhead associated with activities
in non-strategic product lines and markets.
OPERATING INCOME
Combined operating income was $30.3 million in fiscal 1996, an increase of
$9.9 million, or 48.6%, as compared to fiscal 1995. The increase in operating
income was attributable to the factors discussed above including an increase in
Superior's net sales volume and in its gross margins resulting from price
increases and cost reductions.
INCOME FROM CONTINUING OPERATIONS
Combined income from continuing operations for fiscal 1996 of $10.5 million
represented an increase of $5.8 million, or 126.5%, over fiscal 1995 combined
income from continuing operations of $4.6 million. This increase was
attributable to the same factors that gave rise to the increase in combined
operating income.
PRO FORMA FISCAL 1995 COMPARED TO PRO FORMA FISCAL 1994
NET SALES
Fiscal 1995 combined net sales were $368.7 million, representing an increase
of $35.1 million, or 10.5%, over fiscal 1994 combined net sales of $333.6
million.
Superior's net sales for fiscal 1995 of $340.8 million, were $28.9 million,
or 9.3% greater than fiscal 1994 net sales of $311.9 million. However, a
majority of the fiscal 1995 sales increase ($27.0 million) was attributable to
the pass-through of higher copper costs during fiscal 1995. Excluding the impact
of such higher copper costs, Superior's fiscal 1995 net sales were relatively
constant compared to fiscal 1994 net sales.
During fiscal 1995, Superior's stand-alone historic operations (excluding
the pro forma impact of the Alcatel Business) reflected a $29.6 million, or
27.6%, increase in net sales (of which approximately $9.0 million, or 6.5%, was
attributable to the impact of higher copper costs). This increase in net sales
from Superior's stand-alone historic operations included a $15.6 million
increase in sales of wire products, which increase included the impact of two
new multi-year supply agreements for distribution wire products and increased
sales of premise wire products (including UTP). Sales growth in fiscal 1995 from
Superior's historical operations also included a $5.0 million increase in
distribution cable product sales, again resulting from new multi-year supply
agreement awards.
The stand-alone historical operations of the Alcatel Business in fiscal 1995
reflected a decline in net sales of $0.7 million ($18.0 million after
eliminating the impact of the pass-through of higher copper costs). The decline
of $18.0 million resulted from a decrease in both sales volume and selling
prices. The decrease in sales volume, estimated at $10.0 million, was the result
of the loss of two major RBOC contracts in the latter part of fiscal 1994 (a
portion of which was awarded to Superior), and reflected a trend in the RBOC
market towards the concentration of supplier relationships. Partially offsetting
the reduction in sales volume from the aforementioned RBOC contracts, was the
impact of higher sales in the spot market and the impact of two new multi-year
supply agreements entered into by the Alcatel Business in the first half of
fiscal 1995. The lower selling prices were the result of weak market conditions
that affected the Alcatel Business during that period.
30
<PAGE>
DNE's net sales in fiscal 1995 increased by $6.3 million, or 28.9%, to $27.9
million. This increase was attributable to the aforementioned NASA contract
which accounted for $7.0 million in fiscal 1995 revenues. Net sales of
datacommunications and avionics products to the military declined in fiscal 1995
to $15.9 million as compared to $18.6 million in fiscal 1994. The decline in
military product sales was offset by growth in commercial contract manufacturing
revenues of approximately $3.5 million in fiscal 1995.
GROSS PROFIT
Combined gross profit for fiscal 1995 as compared to fiscal 1994 declined by
13.4%, or $5.7 million, to $36.7 million. The combined gross margin for this
period declined from 12.7% in fiscal 1994 to 9.9% in fiscal 1995.
Superior's gross profit in fiscal 1995 of $28.4 million reflected a decline
of $5.7 million as compared to fiscal 1994. During this same period, the gross
margin declined from 10.9% in fiscal 1994 to 8.3% (9.1% if adjusted to reflect
increases in copper costs) in fiscal 1995. In fiscal 1995, Superior's
stand-alone historical operations reflected an increase in gross profit of $4.3
million (a 44.0% increase over fiscal 1994). During this same period, the gross
margin from Superior's historic operations increased to 10.4% (11.0% if adjusted
to reflect increases in copper costs) in fiscal 1995 from 9.2% in fiscal 1994.
The improvement in gross margin from Superior's historical operations in fiscal
1995 was the result of: (i) the increase in, and the higher proportion of sales
of distribution wire and premise wire which typically generate higher percentage
margins than sales of distribution cable; (ii) the increase in overall product
demand in the latter half of fiscal 1995 and the reduction in industry-wide
capacity resulting in higher pricing on products not subject to multi-year
supply agreements; and (iii) improved production efficiencies caused by higher
production levels.
The fiscal 1995 gross profit for the historical operations of the Alcatel
Business declined by $9.9 million as compared to fiscal 1994. The gross margin
for this same period declined from 10.4% to 5.5% (7.5% if adjusted to exclude
the impact of the pass-through of higher copper costs). The reduction in the
Alcatel Business's historical gross profit and gross margin during fiscal 1995
was the result of the replacement of lost contract business with spot market
sales and business under new supply agreements in the latter half of fiscal
1994, which was during a period of extremely competitive market pricing.
During fiscal 1995, DNE's gross profit remained relatively unchanged at $8.2
million. During this same period, DNE's gross margin declined from 38.1% in
fiscal 1994 to 29.5% in fiscal 1995. A trend in product mix toward lower margin
commercial and government contract manufacturing services caused this decline.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Fiscal 1995 combined SG&A expense was $14.7 million, representing an
increase of $0.9 million, or 6.2%, over fiscal 1994 combined SG&A expense of
$13.8 million.
Superior's SG&A expense in fiscal 1995 was $6.2 million, an increase of $0.9
million over fiscal 1994 SG&A expense. This increase reflected higher marketing
and engineering expense associated with the expansion of Superior's product
lines into the premise wire markets and the growth in revenues in Superior's
traditional wire and cable products and markets.
DNE's SG&A expense in fiscal 1995 as compared to fiscal 1994 was constant at
$6.5 million.
OPERATING INCOME
In fiscal 1995, combined operating income was $20.4 million, representing a
decline of $4.8 million as compared to fiscal 1994. Such decline was due
primarily to the lower comparative gross profit in fiscal 1995 which was
attributable to lower sales volumes and gross margins in the historical
operations of the Alcatel Business during such period.
INCOME FROM CONTINUING OPERATIONS
Combined income from continuing operations for fiscal 1995 of $4.6 million
represented a decline of $2.7 million compared to fiscal 1994 combined income
from continuing operations of $7.3 million. This decline was attributable to the
same factors that gave rise to the decline in combined operating income.
31
<PAGE>
SUPPLEMENTAL COMMENTS ON HISTORICAL RESULTS OF OPERATIONS
During fiscal 1994 and 1996, the Company completed the acquisition of
Superior (November 10, 1993) and the Alcatel Business (May 11, 1995). These
acquisitions significantly increased the Company's net sales and had a major
impact on its operating results and its financial condition and liquidity. The
operations of each entity are included in the historical operating results of
the Company from the respective acquisition dates.
NET SALES
Fiscal 1996 combined net sales were $410.4 million, representing an increase
of $245.9 million, or 149.5%, as compared to fiscal 1995 combined net sales of
$164.5 million. This increase is primarily attributable to the inclusion of the
net sales of the Alcatel Business acquired on May 11, 1995.
Superior's net sales for fiscal 1996 increased by $247.7 million, or 181.3%
to $384.2 million compared to fiscal 1995 net sales of $136.6 million. This
increase is primarily attributable to the Alcatel acquisition. However, also
contributing to the increase in Superior's net sales was the contractual pass
through, in the form of increased selling prices, of higher copper costs in
fiscal 1996, price increases on multi-year contracts negotiated during the
period and strong overall demand for copper wire and cable products. Partially
offsetting the increase in fiscal 1996 net sales was a $1.7 million decline in
DNE revenues. During fiscal 1996, DNE continued its transition away from its
dependence on defense and government markets by increasing its commercial
contract manufacturing services sales.
The increase in the Company's fiscal 1995 net sales of $96.0 million, or
140.1%, as compared to fiscal 1994 was primarily attributable to the inclusion
of Superior's net sales for the full fiscal year as opposed to five and one-half
months in fiscal 1994.
GROSS PROFIT
Combined gross profit increased by $25.2 million in fiscal 1996 to $47.6
million compared to combined gross profit of $22.4 million in fiscal 1995, while
the combined gross margin declined from 13.6% in fiscal 1995 to 11.6% in fiscal
1996. The increase in gross profit as well as the decline in the gross margin is
primarily attributable to the increasing contribution of Superior. Superior
operates in a lower gross margin industry than that in which DNE operates and,
therefore, as Superior's gross profit becomes a greater proportion of total
gross profit, the gross margin percentage declines. On a separate entity basis,
Superior's gross profit increased in fiscal 1996 by $25.5 million to $39.7
million, while gross margin remained constant at 10.4%. DNE's gross profit for
fiscal 1996 declined from $8.2 million in fiscal 1995 to $7.9 million, resulting
from a decrease in net sales, while gross margins remained constant at 30.0%.
Combined gross profit increased in fiscal 1995 by $10.1 million to $22.4
million, while combined gross margin declined from 17.9% in fiscal 1994 to 13.6%
in fiscal 1995. The increase in combined gross profit and decrease in combined
gross margin were primarily the result of the inclusion of Superior's operations
for the full fiscal year. The decline in DNE's gross margin from 38.1% in fiscal
1995 to 29.5% in fiscal 1996, caused primarily by the aforementioned change in
product mix from high margin government sales to lower margin contract
manufacturing services, contributed to the decline in the Company's combined
gross margin.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Combined SG&A expense increased in fiscal 1996 to $14.2 million from $11.6
million in fiscal 1995. SG&A expense as a percentage of net sales, however,
declined from 7.1% in fiscal 1995 to 3.5% in fiscal 1996. The increase in SG&A
expense is primarily attributable to an increase of $3.4 million in SG&A expense
at Superior resulting from the acquisition of the Alcatel Business, which was
partially offset by a decline of $0.7 million in DNE's SG&A expense. The
reduction in DNE's SG&A expense resulted from the reorganization of DNE's sales
and marketing efforts, and the termination of overheads associated with non-
strategic product lines and markets. The decline in SG&A expense as a percentage
of net sales is principally the result of the increase in net sales resulting
from the acquisition of the Alcatel Business without a corresponding percentage
increase in SG&A expense. The percentage of SG&A expense to net sales for
Superior on a standalone basis was 3.7% and 2.2% in fiscal 1995 and 1996,
respectively.
32
<PAGE>
The increase in fiscal 1995 SG&A expense of $2.7 million as compared to
fiscal 1994 resulted from the addition of Superior's results of operations for
the full fiscal year.
INTEREST EXPENSE
Combined interest expense increased to $17.4 million in fiscal 1996 from
$3.7 million in fiscal 1995, an increase of $13.7 million. This increase
resulted primarily from the debt incurred in connection with the Alcatel
acquisition. Similarly the increase in combined interest expense of $1.8 million
in fiscal 1995 as compared to fiscal 1994 resulted from debt incurred in
connection with the Superior acquisition.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended July 28, 1996, the historical combined statement
of cash flows of Superior and DNE included cash flows provided by operating
activities of $12.3 million, which included $4.1 million in cash flows generated
from reductions in working capital accounts consisting primarily of a $10.0
million decrease in inventories, offset by a $6.9 million decrease in accounts
payable due to seasonal working capital adjustments. Cash flows used for
investing activities amounted to $1.6 million, consisting primarily of capital
expenditures. Cash flows used for financing activities amounted to $11.1
million, of which $11.0 million represented a reduction of amounts outstanding
on intercompany loans.
For the year ended April 28, 1996, the historical combined statement of cash
flows for Superior and DNE included cash flows provided by operating activities
of $27.2 million, which included $10.3 million in cash flows generated from
reductions in working capital accounts consisting primarily of a $11.2 million
increase in accounts payable offset by a $2.7 million increase in accounts
receivable. For this same period cash flows used by investing activities
amounted to $111.8 million, which included $103.4 million related to the Alcatel
acquisition, $5.4 million related to the BICC Transaction and $4.3 million in
recurring capital expenditures. Cash flows provided by financing activities
amounted to $84.6 million for the year ended April 28, 1996. The components of
cash flows provided by financing activities included $140.0 million in proceeds
from notes issued by Superior (the "Superior Notes") to finance the initial
Alcatel acquisition along with $112.6 million in proceeds from intercompany
loans (net of repayments) which were used to repay the Superior Notes.
On a pro forma basis, giving effect to the Reorganization and related
transactions, the Company's capital structure consists of $131.8 million in debt
and $24.0 million in total stockholders' equity (see "Capitalization" and "Pro
Forma Condensed Combined Financial Statements"). The pro forma debt balance will
include $120.0 million outstanding under the Bank Credit Facility (assuming a
public offering price of $16.00 per share and the repayment of $34.7 million of
indebtedness under the Bank Credit Facility). Additional availability under the
Bank Credit Facility after completion of this Offering is expected to be $30.0
million. Obligations under the Bank Credit Facility are guaranteed by each of
the Company's direct and indirect domestic subsidiaries. The loans under the
Bank Credit Facility are secured by the common stock of each direct and indirect
subsidiary of the Company (but only 65% of the common stock of Superior's
Canadian Subsidiary) and all other property, equipment, inventory and accounts
receivable of each such subsidiary. The Bank Credit Facility contains customary
performance and financial covenants.
As a result of the Alcatel acquisition, on a pro forma basis to reflect the
Reorganization, the Company's ratio of debt plus preferred stock to equity will
have increased from 1:1.3 at April 30, 1995 to 2.4:1 at April 28, 1996, to 6.3:1
on a pro forma basis for this Offering at July 28, 1996. However, the Company's
debt financing costs will decline as a result of the Reorganization from
approximately 13.8% per year in fiscal 1996 to approximately 8.3% per year on a
pro forma basis for the quarter ended July 28, 1996 and the ratio of EBITDA to
interest expense plus preferred dividends will improve from 2.3:1 for the year
ended April 28, 1996 to approximately 3.9:1 pro forma for the twelve months
ended July 28, 1996. Based on the operating cash flows that the Company
generated over fiscal 1996 and the three months ended July 28, 1996, as
discussed below, the Company expects to generate sufficient funds from
operations to enable it to reduce the balance under the Bank Credit Facility
over the next twelve months.
33
<PAGE>
During the remainder of fiscal 1997, the Company expects to have principal
debt service requirements of $0.4 million and intends to invest $4.5 million to
$6.5 million in capital expenditures for product line expansions, cost
reductions and maintenance of business activities. The Company does not
anticipate any other material commitments over this period.
The Company experienced significant growth in operating cash flows during
fiscal 1996 and for the three months ended July 28, 1996 due to (i) the impact
of the Alcatel Acquisition, (ii) improvements in gross margin and (iii)
improvements in working capital management. During the twelve months ended July
28, 1996, on a pro forma basis, the Company generated $46.8 million in EBITDA
and approximately $20.8 million in cash flows after income taxes, debt service
and capital expenditures. These amounts would have been available to reduce the
balance under the Bank Credit Facility, make additional investments in existing
and new business opportunities or increase cash balances. The Company believes
that its cash flows from operating activities will be sufficient to cover its
principal debt service requirements and its capital expenditures over the next
twelve-month period.
The Company's business is subject to significant risks that could cause the
Company's results to differ materially from those expressed in any
forward-looking statements made in this Prospectus. These risks include the
matters set forth above under this caption, under "Risk Factors," and elsewhere
herein.
34
<PAGE>
BUSINESS
INTRODUCTION
The Company is a leading manufacturer of copper telecommunications wire and
cable products for the local loop segment of the telecommunications network in
the United States (based on 1995 data). It also develops and manufactures data
communications and other electronic equipment, including multiplexers, for
defense, government and commercial applications.
The Company has led a recent consolidation in the telecommunications copper
wire and cable industry by acquiring the Alcatel Business in May 1995 and
consummating the BICC Transaction in November 1995. Through these acquisitions,
the Company increased its annual production capacity from 28 bcf in one plant to
an aggregate of 92 bcf in four geographically diverse plants. The Company
believes that it has successfully integrated its acquired businesses,
particularly by implementing improved production techniques at each of its
plants and reducing the cost structure of its operations.
Due to further industry-wide consolidation, total industry capacity has been
reduced, the number of manufacturers has declined and the size of those
remaining has increased. As a result, the Company has become a key supplier of
copper wire and cable to six of the seven RBOCs and the two major independent
telephone companies and believes that it will continue to be able to compete
effectively as its major customers consolidate their vendor base in order to
stablilize their sources of supply and ensure timely delivery of quality
products on a consistent basis. The Company estimates, based on 1995 data, that
its pro forma share of domestic copper telecommunications cable and wire
production was over 30% for fiscal 1996. The industry consolidation, increased
demand for copper telecommunications wire and cable and the resulting changes in
the nature of customer relationships have led to a recent improvement in the
pricing environment for the Company's products.
TELECOMMUNICATIONS WIRE AND CABLE
INDUSTRY OVERVIEW
Copper wire and cable is the most widely used medium for transmission in the
local loop portion of the telecommunications infrastructure. The Company
believes that copper will continue to be the transmission medium of choice in
the local loop due to factors such as: the installed base of copper cable in the
local loop representing an investment of over $150 billion that must be
maintained by the RBOCs and other local telephone companies; the lower
installation and maintenance costs of copper compared to optical fiber and other
media; technological advancements that expand the bandwidth of the installed
local loop copper network, such as ISDN, HDSL and ADSL, which allow the
continued use of copper as the transmission medium for the new voice, data,
video and multi-media uses demanded by customers; the increasing demand for new
services, which, because of technological advances, can be supported by a
copper-based local loop; and the increasing demand for multiple residential
access lines.
Demand for copper telecommunications wire and cable is dependent on several
factors, including the rate at which new lines are installed in homes and
businesses; the level of spending for highways, bridges and other parts of the
infrastructure, which often necessitates installation of new telecommunications
cable; and the level of general maintenance spending by telephone companies. The
installation of new access lines is in turn dependent on the level of new
construction and, increasingly in recent years, on demand for second telephone
lines and lines dedicated to facsimile machines and computer modems, which are
used for, among other purposes, business communications and access to the
Internet.
Based on the most recently available data published by the U.S. Department
of Commerce, the Company estimates that domestic production of copper
telecommunications distribution wire and cable was $1.2 billion in 1994. A
substantial majority of Superior's products sold in the United States are
purchased by the RBOCs and other domestic telephone companies. Prior to the
break-up of AT&T in 1984, it was the sole supplier of copper telecommunications
wire and cable products to its operating companies. However, after the break-up,
the RBOC market became open to all suppliers. It is estimated that the seven
RBOCs
35
<PAGE>
purchase approximately 60% of the copper telecommunications distribution wire
and cable purchased by U.S. telephone companies, while the two major independent
telephone holding companies (GTE Corporation and North Supply (Sprint)
Corporation) purchase approximately 21% and over 1,200 small local telephone
operating companies purchase the remainder.
The Company believes it is well-positioned to take advantage of the rapid
changes in the telecommunications industry as the demand for voice, data and
video services over the local loop increases dramatically and new technologies
and products are developed to enable the local loop to satisfy that demand.
Installed Base. The local loop is the segment of the telecommunications
network that connects the customer's premises to the nearest telephone company
wire center or central office. It comprises approximately 160 million
residential and business access lines in the United States. The installed base
of copper wire and cable in the local loop represents an investment of over $150
billion that must be maintained by the RBOCs and other local telephone
companies. Although other media, such as fiber optic cable, are used for trunk
lines between central offices, substantially all local loop lines continue to be
copper-based. Local loop lines are continually maintained and replaced,
providing a steady demand for copper wire and cable.
Lower Installation Costs and Ease of Repair. The Company believes that in
the local loop, copper has significantly lower installation costs and is easier
to repair than other media primarily because it does not require an additional
power source and other electronics. Installation of fiber optic cable is both
capital and labor intensive, and deployment of fiber optic cable generally has
been limited to trunk and feeder lines and wide area loop configurations.
Technological Advances. Copper dominance in the local loop continues to be
supported by technological advances that expand the use and bandwidth of the
installed local loop copper network. These advances include ISDN and DSL
technologies, including HDSL and ADSL. These technologies permit
telecommunications carriers, private network owners and end-user consumers to
employ the existing copper wire and cable infrastructure for high speed and
bandwidth-intensive applications.
ISDN is a set of digital transmission signaling protocols and interfaces
that provides end-to-end digital connectivity to support a wide range of
services. ISDN service over the existing copper local loop is rapidly expanding
due to the increased demand for digital telecommunications applications such as
remote office connectivity and Internet access. The Company believes that
globally-standardized ISDN service will become a widely-used vehicle for digital
network services, including Internet access, and that it will support the
continued dominance of copper wire and cable in the local loop.
Another technological advance is DSL technology. DSL technology, which
includes ADSL and HDSL, has increased the bandwidth capacity of copper wire and
cable products in the local loop through sophisticated multiplexing and
modulation techniques. DSL technology currently expands the bandwidth capacity
of twisted pair copper wire in the local loop from 1.5 million bits per second
("bps") (over a T-1 line) to over 6 million bps.
ADSL transmits interactive video and data services including video on
demand, on-line shopping, banking and other data services, as well as Internet
access, over the existing copper-based local loop, requiring substantially less
investment of capital and labor than alternatives such as installing fiber optic
or hybrid fiber optic/coaxial cable products in the local loop. ADSL is
asymmetric in that it is high bandwidth in one direction and lower bandwidth in
the other. This arrangement is primarily intended to support one way high
bandwidth applications, such as the provision of broadcast quality video into
the home. It is easily installed and portable, relatively inexpensive compared
to fiber optic or coaxial cable, and can be deployed for an individual user
anywhere in the network in a short time period.
HDSL, as opposed to ADSL, derives its name from the high bandwidth that is
transmitted in both directions over twisted pair copper wire. HDSL provides
advanced digital voice, data and video services to local loop customers with a
high level of signal quality over the existing copper infrastructure while
doubling the distance a digital signal can travel without the need for
amplification or repeaters. In contrast to fiber
36
<PAGE>
optic cable applications, HDSL uses a minimal amount of power on the remote end
of the line, making the traditional power supplied by copper telecommunications
wire sufficient for its use. In corporate campuses of office buildings, several
satellite locations can be linked with HDSL quickly and inexpensively, using
existing copper wire to produce the equivalent of fiber optic quality
transmission.
Demand for New Services. Technological advances, regulatory developments
and increased competition among service providers have accelerated the demand
for and introduction of new bandwidth intensive telecommunication services.
These services include integrated voice and data, broadcast and conference
quality video, Internet and on-line data services access, high speed LAN to LAN
connectivity, collaborative network processing and other specialized,
bandwidth-intensive applications.
Demand for Multiple Residential Access Lines. An increasing number of U.S.
households are installing additional access lines for multiple telephone lines,
facsimile machines, access to the Internet, home offices and other purposes.
Additional access lines increase the demand for copper telecommunications wire
and cable in the local loop.
BUSINESS STRATEGY
The Company believes that the ongoing alignment of productive capacity with
market demand, technological developments that have enhanced the ability of
end-users to utilize the existing copper wire and cable telecommunications
infrastructure for high speed data, video and imaging transmissions, industry
consolidation and the Company's emphasis on new, higher margin products will
strengthen the Company's competitive position, profitability and cash flow.
The Company's strategy in the telecommunications products business is to (i)
respond to the current and changing needs of its customers' communications
networks and continue to expand its business in the local loop by continuing to
develop, manufacture and sell a full line of copper wire and cable products;
(ii) expand its product lines to include transmission media such as data cable,
including UTP products, and hybrid wire products, including coaxial/copper wire
and fiber optic/copper wire combinations; (iii) take advantage of strategic
acquisition opportunities in data cable, the local loop and its other markets;
and (iv) expand its international business through increased export sales and
the establishment of joint ventures or similar arrangements.
PRODUCTS
Through Superior, the Company manufactures a wide variety of copper
telecommunications wire and cable products. Cable is the transmission medium in
the part of the local loop from a local telephone company's central office to a
subscriber's property line; wire is the transmission media that begins at the
subscriber's property line and runs to the subscriber's access device, and may
be either outside or on-premises. The Company's products include distribution
cable and wire and premises wire products, ranging in size from a single twisted
pair wire to a 4,200 pair cable. These products are variously configured for
aerial and underground use in the local loop and for on-premise applications.
The basic unit of virtually all copper telecommunications wires and cables
is the "twisted pair," a pair of insulated wires twisted around each other. Both
wires in the pair are used to complete the telecommunications connection.
Twisted pairs are bundled together to form telecommunications wires and cables.
In calculating bcf, the length of each wire in a twisted pair is counted.
Superior's copper telecommunications cable products range in size and are
differentiated by design variations depending on where the cable is to be
installed. Cable products used for direct underground burial are designed to be
water resistant and are filled with compounds to prevent moisture from getting
into the cable structure. The individual copper wires in these cables utilize
either a solid polyethylene or polypropylene insulation or cellular polyethylene
covered with a solid polyethylene skin. Cable products used for underground duct
or aerial applications, where water penetration is not a major concern, are
37
<PAGE>
designed with solid polyethylene insulation and no filling compound. The copper
telecommunications cable products normally have metallic shields for mechanical
protection and electromagnetic shielding of the copper wires, as well as an
outer polyethylene jacket.
Superior's distribution wire products range in size from a single twisted
pair to a six-pair product. Similar to copper cable products, distribution wire
products are designed for both direct burial and aerial applications and are
also manufactured in a variety of designs, including a number of different
metallic shield configurations and several different jacketing materials.
Superior's copper telecommunications wire for interior use, or premises
wire, generally ranges in size from a single twisted pair to a four-pair
product. Premises wire is used within buildings to connect telecommunications
devices (telephones, facsimile machines and computer modems) to the
telecommunications network and, in commercial buildings, to establish LANs. All
of Superior's premises wire has been listed by Underwriters' Laboratories, which
is required by most local building codes. Construction of premises wire differs
from distribution wire and cable.
An important element of the Company's strategy in the wire and cable
business is to expand into performance-enhanced copper-based wire products that
provide opportunities for higher growth and higher margins than the Company's
current product lines. The Company will attempt to sell a broader range of wire
and cable products to its existing customers. As described below, the Company
has introduced and is in the process of introducing a number of new products in
this regard.
In fiscal 1995, Superior introduced a line of UTP copper wire products
designed for high-speed data transmission across private networks. The Company
believes that UTP, which was first introduced into the market in the early 1990s
as an alternative to fiber optic cable, has become the medium of choice for
private data network communications due to its (i) significant installation and
maintenance cost advantages over fiber optic cable and (ii) its performance
capabilities, which are sufficient to address a substantial portion of the
market for private data networks requiring high-speed transmission rates.
The Company also has recently developed or is in the process of developing a
number of other new products, including (i) hybrid products combining
twisted-pair copper wires with coaxial or fiber optic cable for distribution
service, (ii) aerial drop non-metallic support products, which utilize
fiberglass yarn and twisted-pair copper wires for distribution service and (iii)
riser products, which are copper wires used inside high-rise buildings or
telephone central offices for vertical connections providing voice and data
transmissions. Sales to date of these products have not been material.
MARKETING AND DISTRIBUTION
For the twelve months ended July 28, 1996, 88.2% of Superior's net sales
were to the RBOCs and the two major independent telephone companies, 10.7% were
sold to other telephone companies in the United States and Canada, construction
companies and others and the remaining 1.1% were sold outside the United States
and Canada.
Superior sells to the RBOCs and the two major independent telephone
companies on a direct basis through a sales force of five salespersons. The
remainder of Superior's products are sold through distributors, original
equipment manufacturers and sales representatives and agents. The Company
believes that there will be opportunities for international expansion of its
wire and cable business, either through export sales or the establishment of
joint ventures or similar arrangements.
Superior's sales to telephone companies are generally pursuant to multi-year
supply agreements in which the customer agrees to have Superior supply certain
of the customer's wire or cable needs as the primary supplier during the term of
the agreement. Prior to awarding a contract, customers forecast their needs and
manufacturers such as Superior bid and quote prices based upon the forecasted
order amount, although customers are not obligated to purchase the forecasted
amount or any minimum amount. Superior currently has multi-year agreements with
respect to certain of its wire and cable products with six of the
38
<PAGE>
seven RBOCs and with two major independent telephone companies. For the twelve
months ended July 28, 1996, sales to Bell South Corporation, North Supply
Corporation (Sprint), GTE Corporation, SBC Corporation and NYNEX Corporation
accounted for 20.4%, 17.0%, 16.3%, 13.5% and 12.8% of Superior's net sales,
respectively. No other single customer accounted for more than 10% of Superior's
net sales. Additionally, as is customary in the industry, the Company's sales to
customers other than large telephone companies are primarily on the "spot"
market on the basis of short-term purchase orders. In recent years these sales
have declined as a proportion of total sales.
MANUFACTURING
Copper rod is the base component for most of Superior's wire and cable
products. The manufacturing processes for these products require that the copper
rod be drawn and insulated. Superior purchases copper rod of 5/16" diameter from
third-party suppliers. Superior then "draws" the wire to one of four American
wire gauges ("AWGs"). Wire drawing is the process of reducing the conductor
diameter by pulling the copper rod through a converging die until the specified
AWG is attained. Since the reduction is limited by the breaking strength of the
conductor, this operation is repeated several times internally within the
machine. As the wire becomes smaller, less pulling force is required. Therefore,
machines operating in specific size ranges are required. Take-up containers or
spools are generally large, allowing one person to operate several machines.
Individual copper wires are then typically insulated with plastic compounds
through an extrusion process. Extrusion involves the feeding, melting and
pumping of a compound through a die to shape it in final form as it is applied
to insulate the wire. Superior uses five primary types of insulating material
compounds: high density polyethylene, high density cellular polyethylene foam,
flame retardant polyethylene, fluoropolymers and polyvinyl chloride. Superior
purchases these insulating compounds from a variety of suppliers.
Superior's products also require that the wire be "twisted" so that two
insulated single conductors are combined to create a twisted pair. Superior's
products are often "cabled" or "stranded" so that multiple twisted pairs of
insulated wires are combined to form larger units of multiple pair cables.
Typically, cabling or stranding is done only on large (I.E., 25 or more) numbers
of pairs. Smaller numbers of pairs (I.E., fewer than 25) are not cabled, but are
sent directly for jacketing.
Once insulated, Superior's copper wire and cable products are "jacketed" or
covered through the application of filling, flooding and shielding compounds to
the insulated wire. Products to be installed underground are protected by
metallic shielding (E.G., aluminum and steel) for electrical and mechanical
isolation and by plastic compounds of polyvinyl chloride or polyethylene for
protection against water and other sources of corrosion and interference. After
the wire and cable products are fabricated, they are packaged and shipped either
directly to customers or to distributors.
RAW MATERIALS
The principal raw materials used by Superior in the manufacture of its wire
and cable products are copper, aluminum, bronze, steel and plastics such as
polyethylene and polyvinyl chloride. These raw materials are available from
several sources and Superior has not experienced any shortages in the recent
past.
The cost of copper, the most significant raw material used by Superior in
its wire and cable business, has been subject to considerable volatility over
the past several years. However, this volatility has not had, nor is it expected
to have, an impact on Superior's profitability due to customers' contractual
arrangements that provide for the pass-through of changes in copper costs
through price revisions. Nevertheless, sharp increases in the price of copper
can reduce demand if telephone companies decide to defer their purchases of
copper telecommunications wire and cable products until copper prices decline.
The production of UTP products is dependent upon teflon, which is currently
manufactured by only two producers and is in short supply. As a result, Superior
is currently evaluating alternative production methods in order to increase the
quantity of production per pound of teflon or to eliminate its requirement.
Until this
39
<PAGE>
is resolved or the supply of teflon increases, Superior will have to limit its
production of UTP. From time to time, particular plastics have been difficult to
obtain, but in recent years none of these shortages has required Superior to
limit production. The inability of Superior to obtain sufficient quantities of
raw materials could adversely affect its operating results.
FOREIGN SALES
The Company's telecommunications wire and cable business has a plant in
Winnipeg, Manitoba that supplies both the Canadian and U.S. markets. Superior's
net sales for the twelve months ended July 28, 1996 to customers outside the
United States and Canada were $4.4 million, or 1.1% of sales, of which the
majority were in Latin America.
COMPETITION
The copper telecommunications wire and cable business is very competitive.
Superior has three major domestic competitors in the copper telecommunications
wire and cable business: Cable Systems International, Inc., General Cable
Corporation, a subsidiary of Wassall, plc; and Essex Group Incorporated, a
subsidiary of BCP/Essex Holding, Inc. Competition in this market is based on
price, service and quality. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations--Results of Operations." Because
several RBOCs have adopted policies of limiting the number of their suppliers
and requiring that these suppliers provide additional services, the degree of
competition based on service is increasing.
DATA COMMUNICATIONS AND ELECTRONICS
Through DNE, the Company designs and manufactures data communications
equipment, integrated access devices and other electronic equipment for defense,
government and commercial applications. It the largest supplier to the U.S.
defense forces of data and voice multiplexers used in tactical secure military
applications. Multiplexers are integrated access devices that combine several
information-carrying channels into one line, thereby permitting simultaneous
multiple voice and data communications over a single line. DNE also produces
military avionic products, including switches, dimmers, relays and other
electronic controllers, sensors and refueling amplifiers.
The Company is considering the expansion of its data communications products
business by developing commercial versions of its integrated access devices and
marketing them to the telecommunications industry, including the Company's
telecommunications wire and cable customers. Such development efforts
potentially could require a significant investment of capital. The Company has
developed and begun marketing a data and voice multiplexer product for the
commercial market.
The Company has reduced its dependence on the defense market in recent years
primarily by taking advantage of opportunities to manufacture equipment on a
contract basis. The Company provides contract manufacturing services for
subassembly equipment to approximately five original equipment manufacturers in
the technology industry and NASA. The Company expects to expand its contract
manufacturing services business for its existing commercial customers and to add
additional commercial customers in the future, while sales to NASA are not
expected after the current contract expires in fiscal 1997. In fiscal 1996,
DNE's sales to customers other than departments of the U.S. government accounted
for 33.6% of DNE's sales, compared to 17.7% in fiscal 1995.
RESEARCH AND DEVELOPMENT
In response to the changing requirements of the telecommunications industry,
Superior has focused its recent product development activities on performance
enhanced copper-based wire products that are designed to meet the existing and
future needs of the telephone companies. Several of these projects have been
undertaken in conjunction with Superior's telephone company customers and
include the development of composite cables that include copper twisted pair
wire and coaxial cable or optical fibers in a single cable construction.
Superior is currently developing shielded twisted pair products and the retail
packaging of certain of its products for on-premise use as well as extensions of
its UTP products, such as patch cords for
40
<PAGE>
use in connecting Superior products within premises and 25-pair UTP cables for
certain data transmission applications. The Company expects to explore new
product development opportunities to meet the evolving needs of its customers.
In response to the evolving product needs of its customers, the Company
intends to spend approximately $2.0 million in fiscal 1997 for the establishment
and operation of a product development center. The purpose of this center will
be to design, develop and test new telecommunications wire and cable products,
including hybrid coaxial and fiber optic cable and wire products.
In order to compete for contracts, DNE frequently invests its own funds on
research and development in order to determine the financial and practical
feasibility of manufacturing the products. DNE is currently in the process of
developing a new multiplexer for secure communications for a U.S. government
agency.
PROPERTIES
The Company conducts its operations primarily at the facilities described
below:
<TABLE>
<CAPTION>
SQUARE
LOCATION PRODUCTS FOOTAGE LEASED/OWNED
- ----------------------------------- ----------------------------- --------- ------------------------
<S> <C> <C> <C>
Brownwood, Texas................... Telecommunications 328,000 Leased (expires 2013)
distribution wire and cable
and premise wire
Tarboro, North Carolina............ Telecommunications 295,000 Owned
distribution wire and cable
Winnipeg, Manitoba................. Telecommunications 190,000 Owned
distribution wire and cable
and premise wire
Elizabethtown, Kentucky............ Telecommunications 163,000 Owned
distribution cable
Wallingford, Connecticut........... Data communications 155,000 Owned
and electronics
Atlanta, Georgia................... Corporate offices 20,000 Leased (expires 2001)
</TABLE>
Depending on product mix, aggregate capacity in the Company's four
telecommunications wire and cable facilities ranges from 85 bcf to 92 bcf. Each
of these facilities is operating at utilization rates of between 90% and 95%.
Facilities in this segment are suitable and adequate for the businesses being
conducted. Capital spending plans for the operations in this segment are
primarily designed to keep up with current technology and to increase capacity
in existing product lines.
The Company's data communications and electronics facility in Wallingford is
adequate and suitable for the businesses being conducted and operates at a
utilization rate of between 50% and 60%. It is subject to a $4.7 million
mortgage.
Pursuant to the Services Agreement, Alpine will share approximately 2,000
square feet of the Company's 20,000 square foot Atlanta, Georgia executive and
administrative office space. Pursuant to such agreement, the Company will share
a portion of Alpine's 5,375 square feet New York executive office. See "Certain
Transactions and Relationships--Services Agreement."
EMPLOYEES
As of April 28, 1996, the Company employed 1,678 people, including 1,485 in
the telecommunications wire and cable business and 193 in the data
communications and electronics business.
Approximately 412 persons employed at the Company's Winnipeg and
Elizabethtown plants are represented by unions.
The Company considers relations with its employees to be satisfactory.
41
<PAGE>
ENVIRONMENTAL MATTERS
Superior's and DNE's manufacturing operations are subject to numerous
federal, state and local laws and regulations relating to the storage, handling,
emission, transportation and discharge of hazardous materials and waste
products. Compliance with these laws has not been a material cost to either
company and has not had a material effect upon their respective capital
expenditures, earnings or competitive position. Violation of such laws or
regulations, even if inadvertent, could have an adverse impact on the
operations, business or financial results of the Company.
Operations of Superior and DNE have resulted in releases of hazardous
substances at sites currently or formerly owned or operated by such companies.
Superior and DNE are presently involved in investigatory and remedial activities
at two sites under the oversight of state governmental authorities, as described
below, neither of which is expected to have a material adverse effect on the
Company.
Soil and groundwater at Superior's Brownwood, Texas facility has been found
to be contaminated with volatile organic compounds as a result of operations at
the facility which management believes occurred prior to Superior's acquisition
of the facility. Superior is in the process of obtaining approval for a
remediation plan from the Texas Natural Resource Conservation Commission. Based
upon investigations performed to date, the Company believes that the cost of
this remediation will not be in excess of $0.5 million. Pursuant to an agreement
between Superior and the former owner of the facility, Superior has been
reimbursed for approximately 85% of the costs incurred to date in connection
with the investigation and remediation of this facility, and is entitled to
reimbursement of future expenses at percentages ranging from 85% to 25%
(depending on the time at which such expenses are incurred), subject to an
aggregate expense reimbursement of not less than 75%.
In connection with the sale of a facility in Woburn, Massachusetts formerly
owned by and currently under lease to DNE, low levels of volatile organic
compounds were discovered in shallow groundwater. DNE has assumed responsibility
for this contamination pursuant to an indemnity granted to the purchaser of the
facility, which indemnity is in turn guaranteed by Alpine. This facility has
been designated as a non-priority site by the Massachusetts Department of
Environmental Protection ("MDEP") which granted a waiver to Alpine allowing it
to proceed with further investigation and, if necessary, remediation, of the
groundwater contamination without MDEP oversight, subject to certain conditions.
In accordance with the waiver, investigation and remediation efforts must be
completed by August 1997. Based on the results of a Phase II comprehensive site
assessment completed during May 1996, it appears that no remedial activities are
warranted for this site, but approximately $10,000 may be required to perform
MDEP filing and response actions.
LEGAL PROCEEDINGS
There are no threatened or pending litigations or proceedings that
management believes will have a material adverse effect upon the Company.
42
<PAGE>
MANAGEMENT
Set forth below is certain information concerning the directors, director
nominees and executive officers of the Company (all of whom, other than the
director nominees, were elected to their respective positions with the Company
upon its organization in July 1996) and certain officers of the Company's
subsidiaries. Each director nominee has consented to serve as a director of the
Company upon completion of this Offering. There are no family relationships
among the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------ --------- --------------------------------------------------------
<S> <C> <C>
Steven S. Elbaum 47 Chairman of the Board of Directors, President and Chief
Executive Officer
David S. Aldridge 42 Chief Financial Officer
Justin F. Deedy, Jr. 40 Senior Vice President, President of Superior
Edmond Branger 62 Vice President
William Gill, Jr. 46 President of DNE
T. Mike McMillan 47 Senior Vice President of Superior
Harold M. Karp 39 Senior Vice President - Manufacturing of Superior
Tracye C. Gilleland 37 Vice President - Finance of Superior
Terry A. Richards 37 Vice President - Marketing and Sales of Superior
Charles R. Rudd, Jr. 52 Vice President - International of Superior
Daniel P. Vivone 47 Vice President - Finance and Controller of DNE
Eugene P. Connell 58 Director Nominee
Robert J. Levenson 55 Director Nominee
Bragi F. Schut 55 Director
Charles Y.C. Tse 69 Director Nominee
</TABLE>
STEVEN S. ELBAUM has been Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since July 1996. He has also been the
Chairman of the Board of Directors and Chief Executive Officer of Alpine since
1984. He is also a director of Interim Services, Inc., one of the nation's
largest providers of value-added staffing and health care services, PolyVision
Corporation, an information display company, and Humascan, Inc., a developer of
medical testing devices.
DAVID S. ALDRIDGE has been Chief Financial Officer of the Company since July
1996. He has also been the Chief Financial Officer of Alpine since November 1993
and was Chief Financial Officer of Superior from 1985 until its acquisition by
Alpine in November 1993. The services of Mr. Aldridge will be provided to the
Company by Alpine pursuant to the Services Agreement. See "Relationship between
the Company and Alpine."
JUSTIN F. DEEDY, JR. has been Senior Vice President of the Company since
July 1996 and the President of Superior since July 1993. He was Vice President
of Superior from April 1991 through July 1993 and Vice President and General
Manager of Wilcom Products, Inc., formerly a subsidiary of Superior and a
manufacturer of testing equipment for copper wire and fiber optic transmission
equipment, from May 1989 through March 1991.
EDMOND BRANGER has been Vice President of the Company since July 1996.
During the prior five years, he was employed by Alpine and its affiliates in a
variety of capacities, most recently as Vice President-Planning. He has over 25
years of experience in the information processing and telecommunications
industries.
WILLIAM GILL, JR. has been President of DNE since May 1995. He held various
positions at DNE for more than five years prior thereto.
T. MIKE MCMILLAN has been Senior Vice President of Superior since July 1993.
He joined Superior in 1969 and since then has held numerous positions with
Superior, including General Manager of its Brownwood, Texas facility.
43
<PAGE>
HAROLD M. KARP has been Senior Vice President-Manufacturing of Superior
since the Alcatel acquisition in May 1995. He was employed by the Alcatel
Business as Vice President and General Manager of Copper Cable and Wire Products
from 1994 to 1995 and as Director-Business Planning and Export/Non-Contract
Sales from 1991 to 1994.
TRACYE C. GILLELAND has been Vice President-Finance of Superior since July
1993. She was Superior's Corporate Controller for eight years prior thereto.
TERRY A. RICHARDS has been Vice President-Marketing and Sales of Superior
since 1993. Prior to that, he was a product manager of Wilcom Products, Inc.
from 1990 to 1993.
CHARLES R. RUDD, JR. has been Vice President-International of Superior since
December 1995. He was employed by the telecommunications products division of
Essex Group, Inc., a producer of electrical wire, cable and insulation products,
as Vice President-International Sales and Marketing from 1994 to 1995 and as
Director-International Business Operations from 1987 to 1994.
DANIEL P. VIVONE has been Vice President-Finance and Controller of DNE since
September 1995. He was DNE's Director of Operations from 1988 to September 1995.
EUGENE P. CONNELL is Chairman of Lynch Interactive Corporation, an owner and
operator of independent telephone companies throughout the United States. From
January 1996 to June 1996, he served as Vice President-Global Markets
Integration of NYNEX Corporation. From October 1992 to January 1996, he served
as President, Chief Executive Officer and Director of NYNEX CableComms Group, a
provider of telecommunications services and cable television in the United
Kingdom. From May 1989 to October 1992, he was Vice President of Marketing and
Technology of New York Telephone Company, a subsidiary of NYNEX Corporation. Mr.
Connell held numerous other positions with New York Telephone Company over the
prior 32 years.
ROBERT J. LEVENSON has been an Executive Vice President and a Director of
First Data Corp., a provider of transaction processing and related services,
since May 1993. Mr. Levenson formerly served as the Senior Executive Vice
President, Chief Operating Officer, member of the Office of the President and a
director of Medco Containment Services, Inc., a provider of managed care
prescription benefits (now a subsidiary of Merck & Co., Inc.), from October 1990
through December 1992. From 1985 until October 1990, Mr. Levenson was a Group
President and a Director of Automatic Data Processing, Inc., a provider of
computerized transaction processing. Mr. Levenson also serves as a director of
Broadway and Seymour, Inc., a software and related services company.
BRAGI F. SCHUT has been Executive Vice President of Alpine since 1986 and a
director of Alpine since 1983. He is also a director of PolyVision Corporation.
CHARLES Y.C. TSE is the former Vice-Chairman and President of international
operations of Warner Lambert Company, a major pharmaceutical and consumer
products company. Mr. Tse is a director of Foster Wheeler Corporation and
Transcell Technologies, Inc. Mr. Tse served as President of The Cancer Research
Institute, Inc. from 1991 to 1992.
BOARD OF DIRECTORS
The Company's Board of Directors currently consists of two persons. Upon
completion of this Offering, the Company will expand the size of the Board of
Directors to six persons, of which a majority will not be officers or employees
of the Company and will not be affiliates of Alpine. Alpine has advised the
Company that it will use its best efforts to ensure that following completion of
this Offering a majority of the members of the Company's Board of Directors will
not be officers or employees of the Company or affiliates of Alpine.
Directors who are employees of the Company will receive no compensation, as
such, for service as members of the Board or its committees. Directors who are
not employees of the Company will receive annual compensation of $15,000, plus
$1,000 for each meeting of the Board of Directors or any committee of the Board
of Directors attended by them (other than with respect to any meetings of any
committee on a day
44
<PAGE>
on which the Board of Directors also meets) and will also participate in the
Company's 1996 Stock Option Plan. In addition, all directors will be reimbursed
for expenses incurred in connection with attendance at meetings. See "Management
- -- Executive Compensation -- 1996 Stock Option Plan."
Each director holds office until the next succeeding annual meeting of
stockholders and until his successor has been elected and qualified. Each
officer of the Company holds office for such term as may be prescribed by the
Board of Directors from time to time.
COMMITTEES OF THE BOARD OF DIRECTORS
As soon as practicable after the completion of this Offering, the Board of
Directors will establish an Audit Committee and a Compensation Committee.
The functions of the Audit Committee, which will be comprised solely of
directors who are not affiliated with Alpine, will be to recommend annually to
the Board of Directors the appointment of the independent auditors of the
Company, discuss and review in advance the scope and the fees of the annual
audit and review the results thereof with the independent auditors, review and
approve non-audit services of the independent auditors, review compliance with
existing major accounting and financial reporting policies of the Company,
review the adequacy of the financial organization of the Company and review
management's procedures and policies relating to the adequacy of the Company's
internal accounting controls and compliance with applicable laws relating to
accounting practices. The Audit Committee will also be responsible for the
review and approval of all future agreements between the Company and Alpine,
including amendments to the Services Agreement. The Audit Committee will
establish policies to ensure that the Company's purchase of services from Alpine
are commercially reasonable.
The functions of the Compensation Committee will be to establish the
Company's executive compensation program in order to attract, retain, motivate
and reward qualified persons serving as executive officers of the Company. The
Compensation Committee will make determinations with respect to executive
salaries, bonuses and compensation of each of the Company's executive officers,
except to the extent that any of the foregoing are specified in existing
employment agreements between the Company and such executive officers. The
Compensation Committee will also administer the Company's stock option and other
benefit plans. It is anticipated that the Company's overall compensation
strategy and specific compensation plans will tie a significant portion of an
executive's compensation to the Company's success in meeting specified
performance goals and, through the grant of stock options and other stock-based
awards, to appreciation in the price of the Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation policies and decisions, including those relating to salary,
bonuses and benefits of executive officers, have been set or made by the Board
of Directors since the formation of the Company.
EXECUTIVE COMPENSATION
GENERAL
Because the Company is newly-formed, there was no compensation paid to,
deferred or accrued for the benefit of the Company's Chief Executive Officer or
any other executive officer by the Company during the fiscal year ended April
28, 1996. Similarly, no such individual received any other annual compensation,
restricted stock awards, stock appreciation rights, long-term incentive
performance payouts or other compensation from the Company for the fiscal year
ended April 28, 1996.
EMPLOYMENT AGREEMENTS
As soon as practicable after the completion of this Offering, the Company
intends to enter into an agreement with Steven S. Elbaum for his employment by
the Company as Chairman of the Board of Directors, President and Chief Executive
Officer. The agreement is expected to have an indefinite term and
45
<PAGE>
provide for an annual base salary of $175,000, as adjusted annually for
increases in the Consumer Price Index, and an annual bonus payable at the
discretion of the Board of Directors. It is expected that the agreement will
contain other customary terms and provisions with respect to termination and
other matters.
Superior has entered into an employment agreement with Mr. Deedy (the "Deedy
Agreement") providing for his employment as President of Superior at an annual
base salary of $181,000, as adjusted annually for increases in the Consumer
Price Index, plus an annual performance-based bonus. The Deedy Agreement may be
terminated by either party on notice, for cause by Superior and upon the
occurrence of certain other events. The Deedy Agreement contains certain
provisions relating to compensation upon his termination. Effective upon
completion of this Offering, the Company will assume the Deedy Agreement.
During Superior's fiscal year ended April 28, 1996, Mr. Deedy received a
salary of $164,035, a bonus of $80,000 and $11,584 of other compensation. In
addition, Mr. Deedy was granted options to purchase 95,700 shares of Alpine
common stock at an exercise price equal to or in excess of the fair market value
at the time of grant. As of April 28, 1996, Mr. Deedy held options to purchase
63,800 shares of Alpine common stock at an exercise price of $5.125 per share,
which options expire May 1, 2005, options to purchase 24,000 shares at an
exercise price of $3.75 per share and options to purchase 7,900 shares at an
exercise price of $5.625 per share, which options expire May 1, 2006, options to
purchase 30,503 shares at an exercise price of $7.85 per share, which options
expire November 10, 2003, and options to purchase 13,525 shares at an exercise
price of $3.25 per share, which options expire May 17, 1998. The options
generally vest over a three-year period. During fiscal 1996, Mr. Deedy exercised
options for 14,780 shares and realized a value of $33,240. The values of Mr.
Deedy's remaining exercisable and unexercisable options were $16,906 and
$23,925, respectively, as of April 28, 1996. Mr. Deedy and Mr. Elbaum are
referred to hereinafter as the "Named Executive Officers." Other than Mr. Deedy
no (i) executive offier of the Company or (ii) executive officer of any of its
subsidiaries who performed policy making functions for the Company received in
excess of $100,000 in compensation in fiscal 1996.
COMPENSATION UNDER PLANS
1996 STOCK OPTION PLAN. The Company has adopted a 1996 Employee Stock
Option Plan (the "Stock Option Plan") for the benefit of certain officers and
other key employees of the Company and its subsidiaries with the purpose of
attracting and retaining executives and other key employees who are important to
the success and growth of the Company and creating a long-term mutuality of
interest between such persons and the stockholders of the Company.
Under the Stock Option Plan, options to purchase an aggregate of not more
than 1,250,000 shares of Common Stock (subject to certain adjustments) may be
granted from time to time to key employees and officers of, advisors and
independent consultants to, the Company or its subsidiaries, and directors who
are neither officers nor employees of the Company or its subsidiaries ("Eligible
Directors"). In general, if options are for any reason cancelled, or expire or
terminate unexercised, the shares covered by such options will again be
available for the grant of options. No options may be granted after 10 years
from the effective date of the Stock Option Plan. It is anticipated that options
held by 10 key employees to purchase an aggregate of 575,000 shares of Common
Stock at an exercise price equal to the initial public offering price will be
outstanding on the closing date of this Offering. The Company intends to grant
to Messrs. Elbaum, Deedy and Aldridge options to purchase 250,000, 100,000 and
50,000 shares of Common Stock, respectively, and to grant options to purchase
25,000 shares of Common Stock to each of Messrs. Branger, Gill, McMillan, Karp,
Richards and Rudd and Ms. Gilleland.
The Stock Option Plan will provide for the grant of incentive stock options
("ISOs") to employees and nonqualified stock options ("NQSOs") to employees,
advisors and independent consultants and directors who are neither officers nor
employees of the Company. In the case of ISOs, the exercise price of an option
may not be less than 100% of the fair market value of a share of Common Stock at
the time of grant (or 110% of such fair market value if the optionee owns more
than 10% of the shares of Common Stock outstanding at
46
<PAGE>
the time of grant). In the case of NQSOs, the exercise price of an option may
not be less than 100% of the fair market value of a share of Common Stock at the
time of grant. Unless otherwise provided in the applicable option agreement, all
options granted and not previously exercised will become vested and immediately
exercisable upon a change in control of the Company (as defined in the Stock
Option Plan).
The Stock Option Plan will be administered and interpreted by a committee
(the "Committee") appointed by the Company's Board of Directors consisting of
two or more members of the Company's Board of Directors, each of whom is
intended to be a "disinterested person" as provided by Rule 16b-3 under the
Securities Exchange Act of 1934 (to the extent then required). The Committee
generally is empowered to interpret the Stock Option Plan, prescribe rules and
regulations relating thereto, determine the terms of the option agreements,
amend them (in certain cases only with the consent of the optionee), determine
the individuals to whom options are to be granted, determine the number of
shares subject to each option and the exercise price thereto, and take all
actions in connection with the Stock Option Plan and the options thereunder as
the Committee, in its sole discretion, deems necessary or desirable. Options
will be exercisable for a term determined by the Committee. The Committee may
modify, suspend or terminate the Stock Option Plan; provided, however, that
certain material modifications affecting the Stock Option Plan must be approved
by the Company's stockholders, and any change in the Stock Option Plan that may
adversely affect an optionee's rights under an option previously granted under
the Stock Option Plan requires the consent of the optionee.
Eligible Directors may receive options under the Stock Option Plan in
accordance with the terms thereof. Each Eligible Director will receive an
initial grant of an option to purchase 15,000 shares of Common Stock at an
exercise price equal to the per share price paid for shares purchased in this
Offering. Each year thereafter, other than with respect to the year in which an
Eligible Director receives an initial grant of options, as of the first day of
the month following the annual meeting of stockholders, each Eligible Director
will receive a nonqualified option to purchase 7,500 shares of Common Stock at
an exercise price equal to the fair market value of such shares at the time of
grant.
The options granted to Eligible Directors to purchase shares of Common Stock
will vest evenly in three equal annual installments. Options may be exercised
only after the Eligible Director has served as a director of the Company for at
least one year. In addition, options granted and not previously exercisable will
become vested and fully exercisable immediately upon a "change in control" of
the Company (as defined in the Stock Option Plan).
Each option granted to Eligible Directors will expire upon the tenth
anniversary of the date of grant.
If an Eligible Director terminates his service on the Board of Directors for
any reason, including disability, death, resignation or failure to stand for
reelection, any exercisable option which has not expired may be exercised with
respect to the number of shares of Common Stock which were exercisable on the
date the Eligible Director terminated his service with the Company at any time
during the earlier of (i) the one-year period following such date and (ii) the
remaining term of the option. Any unexpired but unexercisable option shall
terminate and become null and void as of the date the Eligible Director
terminates his service with the Company.
EMPLOYEE STOCK PURCHASE PLAN The Company has adopted an Employee Stock
Purchase Plan (the "Stock Purchase Plan") in which all employees of the Company
who customarily work more than 20 hours per week and at least five months per
year are eligible to participate. The purpose of the Stock Purchase Plan is to
provide employees of the Company with an opportunity to purchase Common Stock
through payroll deductions. The Stock Purchase Plan provides that employees may
utilize 1% to 25% of their "compensation" (as defined in the Stock Purchase
Plan), up to a maximum of $6,250 per calendar quarter, to purchase Common Stock
at a price equal to the lesser of 85% of the fair market value of a share of
Common Stock on
47
<PAGE>
(i) the date immediately preceding the first day of the calendar quarter and
(ii) the last day of such calendar quarter. The Stock Purchase Plan will be
administered by a committee designated by the Board of Directors of the Company
and 250,000 shares of Common Stock are reserved for issuance thereunder.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
SERVICES AGREEMENT
Pursuant to the Services Agreement, Alpine provides certain services to the
Company, including, among other things, assistance with public company
reporting, certain financial reporting functions, legal compliance, banking,
risk management and operational and strategic matters. Pursuant to the Services
Agreement, David S. Aldridge, Alpine's Chief Financial Officer, serves as the
Company's Chief Financial Officer. The Services Agreement provides for the
payment by the Company to Alpine of $0.9 million per year plus reimbursement of
any third party expenses incurred by Alpine. The Company believes that $0.9
million represents a reasonable estimate of the cost of obtaining the services
described above. The Services Agreement will expire on April 30, 1998.
Under the Services Agreement, Alpine shares approximately 2,000 square feet
of the Company's Atlanta office space, and the Company will share a portion of
Alpine's New York office space.
The parties to the Service Agreement have agreed to indemnify each other
against liability arising out of the willful misconduct or gross negligence of
the indemnifying party.
The terms upon which these services will be provided to and by the Company
and the compensation therefor were not determined in arms' length negotiations.
As soon as practicable after the completion of the Offering, the Board of
Directors of the Company will establish an Audit Committee, comprised solely of
directors who are not affiliated with Alpine, which will review and approve all
future agreements between Alpine and the Company and establish policies to
ensure that the Company's purchases of services from Alpine are commercially
reasonable.
PREFERRED STOCK EXCHANGE AGREEMENT
The Company and Alpine have entered into an agreement (the "Preferred Stock
Exchange Agreement") granting Alpine the right to exchange the Superior
Preferred Stock that Alpine will own for preferred stock of the Company having
identical terms. ("TeleCom Preferred Stock"). In addition, pursuant to a
registration rights agreement, Alpine may demand registration under the
Securities Act of the TeleCom Preferred Stock at any time commencing October 31,
1997.
ALPINE FINANCING ARRANGEMENTS
On July 21, 1995, Alpine completed the placement of $153.0 million of 12.25%
Senior Secured Notes (the "Alpine Notes") and entered into an $85.0 million
revolving credit facility (the "Alpine Credit Facility"). The Alpine Notes and
the Alpine Credit Facility were guaranteed by Superior and Adience, Inc.
("Adience"), another subsidiary of Alpine. The Alpine Notes were also secured by
a pledge of the capital stock of Superior and Adience.
An amendment to the indenture relating to the Alpine Notes provides for the
release of the aforementioned pledge and the termination of the Superior
guarantees. Alpine has pledged to the trustee for the benefit of the holders of
the Alpine Notes all of its shares of the Company's Common Stock and the
Superior Preferred Stock. In addition, Alpine's financing arrangements with
Superior and DNE were terminated in connection with the Bank Credit Facility.
See Notes 8 and 16 to the combined financial statements of Superior and DNE.
48
<PAGE>
INTERCOMPANY DEBT
The intercompany debt repaid with the initial borrowings under the Bank
Credit Facility arose in connection with the placement of the Alpine Notes and
the closing of the Alpine Credit Facility. The intercompany debt consisted of
the following:
(1) $88.9 million payable by Superior to Alpine under a note due
2003. The note was subject to certain mandatory prepayment
requirements. Interest was payable semi-annually at an annual rate of
14%.
(2) $10.1 million payable by Superior and DNE to Alpine under
revolving credit facilities due 2000. Interest was payable
monthly at prime rate plus 0.375% or LIBOR plus 2.25%. Borrowings under
the revolving credit facility were subject to a rate borrowing base
determined as a percentage of eligible accounts receivable and inventory.
The revolving credit facility was secured by a pledge of Superior's
accounts receivable and inventory.
(3) $2.3 million payable by DNE to Alpine under a note due 2003.
Interest was payable semi-annually at an annual rate of 14%.
(4) $14.3 million payable by Alpine to Superior. This indebtedness is
a non-interest bearing receivable which arose primarily from
funds advanced by Superior in connection with Alpine's 1995 debt
restructuring.
(5) $0.9 million payable by DNE to Alpine. This indebtedness is a
non-interest bearing receivable which arose primarily due to the
allocation of certain direct expenses, principally related to the
purchase of insurance by Alpine on DNE's behalf.
TAX MATTERS
Superior and DNE currently are included in the consolidated group of
domestic corporations of which Alpine is the common parent for federal income
tax and certain other purposes. Upon consummation of this Offering, the Company
will cease to be included in the consolidated group for federal income tax
purposes of which Alpine is the common parent. Alpine has agreed to indemnify
the Company for any consolidated federal income tax liability (and certain state
and local tax liabilities), including any amounts determined to be due as a
result of redeterminations of the tax liability of Alpine arising from an audit
or otherwise, and certain other liabilities of Alpine or any of its subsidiaries
that the Company is actually required to pay, but only to the extent, if any,
that such liability exceeds the amount of such liability attributable to
Superior, DNE or the Company. The value of this indemnity is dependent upon the
financial condition of Alpine. Neither the Company nor any of its affiliates is
aware of any potential federal income tax liability of the Company or its
subsidiaries (other than the Company's own tax liability) for which the Company
would be liable.
Alpine, the Company and its subsidiaries have entered into a tax allocation
agreement (the "Tax Allocation Agreement") pursuant to which, in general, the
consolidated federal income tax liability (and certain state and local tax
liabilities) will be allocated and assessed among each member of the
consolidated group based on the ratio that each member's tax liability (computed
as though that member filed a separate income tax return) bears to the sum of
the separate return tax liabilities of all members. The Tax Allocation Agreement
also provides for the reimbursement to a member for the utilization of losses,
credits or deductions by other members of the group. The Tax Allocation
Agreement provides that, in general, any consolidated tax liability arising out
of the Reorganization and the Offering and related transactions will be the sole
responsibility of Alpine.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
CAPITAL STOCK OF THE COMPANY
The following table and notes set forth information as of August 1, 1996,
and as adjusted to reflect sale of the shares of Common Stock offered hereby,
with respect to the voting securities of the Company beneficially owned by (i)
each person known by the Company to be the beneficial owner of more than 5% of
the shares of Common Stock, (ii) each director individually, (iii) each Named
Executive Officer individually, and (iv) all executive officers and directors as
a group. The address for Alpine is 1790 Broadway, New York, New York 10019.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THIS PERCENT OF AFTER THIS PERCENT OF COMMON
NAME OF BENEFICIAL OWNER OFFERING COMMON STOCK OFFERING (1) STOCK (1)
- --------------------------------- -------------------- --------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Alpine........................... 6,024,048 100.0% 6,024,048 50.1%
Steven S. Elbaum (2)............. 6,024,048 100.0 6,024,048 50.1
Justin F. Deedy, Jr.............. -- -- -- --
Bragi F. Schut................... -- -- -- --
Directors and officers as a group
(3 individuals) (2)............. 6,024,048 100.0 6,024,048 50.1
</TABLE>
- ------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) Includes 6,024,048 shares of Common Stock owned by Alpine. Mr. Elbaum may be
deemed to be the beneficial owner of such shares by virtue of his position
as Chairman of the Board and Chief Executive Officer of Alpine and his
beneficial ownership of 9.6% of the issued and outstanding common stock of
Alpine.
DESCRIPTION OF CAPITAL STOCK
The following brief description of the Company's capital stock does not
purport to be complete and is subject in all respects to applicable Delaware law
and to the provisions of the Company's Certificate of Incorporation and Bylaws,
copies of which will be filed with the Securities and Exchange Commission (the
"Commission").
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, $.01 par value per share, and 1,000,000 shares of Preferred Stock,
$.01 par value per share (the "Preferred Stock"). Immediately following the
consummation of this Offering, there will be 12,024,048 shares of Common Stock
and no shares of Preferred Stock outstanding. The outstanding shares of Common
Stock are, and the shares of Common Stock to be outstanding upon completion of
this Offering will be, validly issued, fully paid and non-assessable.
COMMON STOCK
Each holder of Common Stock is entitled to one vote per share on any issue
requiring a vote at any meeting. Holders of shares of Common Stock do not have
cumulative voting rights in the election of directors. All shares of Common
Stock are non-assessable and, subject to the rights of holders of any series of
Preferred Stock having a preference over the Common Stock, are entitled to share
equally in such dividends as the Board of Directors of the Company may declare
on the Common Stock from sources legally available therefor. The Company intends
to retain any future earnings for use in its business and does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future. See
"Dividend Policy." Upon any liquidation, dissolution or winding up of the
Company, subject to the prior liquidation rights of the holders of any series of
Preferred Stock, the net assets of the Company remaining after payment of
creditors
50
<PAGE>
will be distributed to the holders of Common Stock in proportion to their
interests. Holders of Common Stock do not have preemptive rights to subscribe
for additional shares of Common Stock if additional shares are offered for sale
by the Company.
PREFERRED STOCK
The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance from time to time of up to
1,000,000 shares of Preferred Stock, in one or more classes or series, with such
powers, designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions as will be set forth
in the resolutions adopted by the Board of Directors of the Company providing
for the issue of such classes or series of Preferred Stock. The holders of
Preferred Stock will have no preemptive rights (unless otherwise provided in the
applicable certificate of designation) and will not be subject to future
assessments by the Company. Such Preferred Stock may have voting or other rights
which could adversely affect the rights of holders of the Common Stock. In
addition, the issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, under
certain circumstances, make it more difficult for a third party to gain control
of the Company, discourage bids for the Common Stock at a premium, or otherwise
adversely affect the market price of the Common Stock. The Company and Alpine
have entered into the Preferred Stock Exchange Agreement granting Alpine the
right to exchange the Superior Preferred Stock that Alpine will own for TeleCom
Preferred Stock. In addition, pursuant to a registration rights agreement,
Alpine may demand registration under the Securities Act of the TeleCom Preferred
Stock at any time commencing October 31, 1997.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain several
provisions that may be deemed to have the effect of making more difficult the
acquisition of control of the Company by means of a hostile tender offer, open
market purchases, a proxy contest or otherwise.
The provisions of the Company's Certificate of Incorporation and Bylaws
discussed below are designed to help ensure that holders of Common Stock are
treated fairly and equally in a multi-step acquisition. In addition, they are
intended to encourage persons seeking to acquire control of the Company to
initiate such an acquisition through arms'-length negotiations with the
Company's Board of Directors. The Company's Certificate of Incorporation and
Bylaws may have the effect of discouraging a third party from making a tender
offer or otherwise attempting to obtain control of the Company, even though such
an attempt might be economically beneficial to the Company and its stockholders.
In addition, because the Company's Certificate of Incorporation and Bylaws are
designed to discourage the accumulation of large blocks of the voting shares of
the Company by purchasers whose objective it is to have such stock repurchased
by the Company at a premium, the anti-takeover provisions of the Company's
Certificate of Incorporation and Bylaws could tend to reduce the price of the
voting shares of the Company caused by such accumulations. In addition, these
provisions may also have the effect of precluding a contest for the election of
directors.
STOCKHOLDER MEETINGS. Subject only to the rights of holders of Preferred
Stock, if any, only a majority of the Company's Board of Directors (other than
those directors affiliated with or elected by an Interested Person, as defined
below), the Chairman of the Board, the Vice Chairman or the Chief Executive
Officer of the Company will be able to call an annual or special meeting of
stockholders. In addition, subject only to the rights of Preferred Stock, if
any, stockholders may not take any action by written consent.
RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS. The Company's Certificate of
Incorporation provides that certain business combinations, such as mergers and
stock and asset sales, with an "Interested Person" (typically a beneficial owner
of more than 15% of the outstanding voting shares of the Company's capital
stock, excluding certain persons, including Messrs. Elbaum and Schut (directors
of the Company), their lineal descendants, affiliates and associates, or trusts
for their benefit), be approved by (i) the holders of two-thirds or more of the
voting power of the then outstanding voting shares, voting together as a single
class, and
51
<PAGE>
(ii) at least a majority of the voting power of the then outstanding voting
shares, voting as a single class, which are not owned beneficially, directly or
indirectly, by the Interested Person, unless the transaction is approved by a
majority of certain directors or meets certain fair price provisions.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATION AND
PROPOSALS. The Company's Certificate of Incorporation and Bylaws establish
advance notice procedures with regard to stockholder proposals and the
nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors.
VOTE REQUIRED TO AMEND OR REPEAL CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS. The Company's Certificate of
Incorporation establishes certain supermajority voting requirements to amend or
repeal certain provisions of the Company's Certificate of Incorporation or
Bylaws.
DIRECTOR'S LIABILITY. The Company's Certificate of Incorporation provides
that to the fullest extent permitted by the GCL, a director of the Company shall
not be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director. Under current Delaware law, liability of a
director may not be limited (i) for any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases, and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of this provision of the Company's
Certificate of Incorporation is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. This provision does not limit or eliminate the rights of the Company
or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company's Certificate of Incorporation provides that the Company shall
indemnify its directors and executive officers to the fullest extent permitted
by Delaware law.
SECTION 203 OF THE GCL. The Company as a Delaware corporation, is subject
to Section 203 of the GCL. In general, Section 203 prevents an "interested
stockholder" (defined as a person who is the owner of 15% or more of a
corporation's voting stock, or who, as an affiliate or associate of a
corporation, was the owner of 15% or more of that corporation's voting stock
within the prior three years) from engaging in a "business combination" (as
defined under the GCL) with a Delaware corporation for three years following the
date such person became an interested stockholder unless: (i) before such person
became an interested stockholder the board of directors of the corporation
approved the transaction or the business combination in which the interested
stockholder became an interested stockholder; (ii) upon consummation of the
transaction that resulted in the interested 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
shares owned by persons who are both officers and directors of the corporation
and shares held by certain employee stock ownership 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
(iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
the corporation not owned by the "interested stockholder." A "business
combination" generally includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the "interested stockholders."
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Upon consummation of this Offering, the Company's authorized but unissued
capital stock will consist of 12,975,952 shares of Common Stock (12,075,952
shares if the Underwriters' over-allotment option is exercised in full) and
1,000,000 shares of Preferred Stock. All of the foregoing authorized but
unissued
52
<PAGE>
shares of capital stock will be available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including issuance pursuant to employee stock options and
other employee plans, director stock options and future public offerings to
raise additional capital or to facilitate corporate acquisitions.
The Company does not presently have any plans to issue additional shares of
Common Stock other than shares of Common Stock which may be issued upon exercise
or options which may be granted in the future to the Company's Directors or
employees.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock will be American Stock
Transfer and Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 12,024,048 shares of
Common Stock outstanding and no shares of Preferred Stock outstanding. Of those
shares, the 6,000,000 shares of Common Stock offered hereby will be available
for immediate sale as of the date of this Prospectus in the public market
without restriction by persons other than "affiliates" of the Company, as that
term is defined in the regulations promulgated under the Securities Act. Alpine
holds an additional 6,024,048 shares which shares will be eligible for sale in
the public markets, subject to the holding period and volume limitations of Rule
144. Sales of substantial amounts of Common Stock in the public market could
have an adverse impact on the market price of the Common Stock.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
(defined generally in Rule 144 as securities issued in transactions not
involving a public offering) for at least two years, including persons who may
be deemed to be affiliates of the Company, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock (which number, immediately following
this Offering, will be 120,240 shares) and the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale, provided that the Company has been subject to and
complied with certain reporting requirements under the Exchange Act, and the
sale is made in a "broker's transaction" or in a transaction directly with a
"market-maker," as those terms are used in Rule 144, without the solicitation of
buy orders by the broker or such person and without such person making any
payment to any person other than the broker who executes the order to sell the
shares of Common Stock. A person (or persons whose shares are aggregated) who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale of restricted securities by such person, and who has
beneficially owned the restricted securities for at least three years (including
the holding period of any prior owner except an affiliate), is entitled to sell
such shares under Rule 144 without regard to the volume limitations and public
information and manner of sale requirements described above. Restricted
securities properly sold in reliance upon Rule 144 are thereafter freely
tradeable without restrictions or registration under the Securities Act, unless
thereafter held by an affiliate of the Company.
The Commission has proposed to amend the holding period required by Rule 144
to permit sales of restricted securities after one year rather than two years
(and two years rather than three years for "non-affiliates" who desire to sell
such shares under Rule 144(k)). If such proposed amendment were enacted, the
restricted securities would become freely tradeable (subject to any applicable
contractual restrictions) at correspondingly earlier dates.
Prior to this Offering, there has been no public market for the Common Stock
of the Company. No predictions can be made of the effect, if any, that the sale
or availability for sale of shares of additional
53
<PAGE>
Common Stock will have on the market price of the Common Stock. Nevertheless,
sales of a substantial amount of such shares by the existing stockholder or by
stockholders purchasing in this Offering could have a negative impact on the
market price of the Common Stock.
UNDERWRITING
Each of the Underwriters named below (the "Underwriters"), for which Furman
Selz LLC, Oppenheimer & Co., Inc. and BT Securities Corporation are acting as
the Representatives, has severally agreed, subject to the terms and conditions
of the Underwriting Agreement, to purchase from the Company the number of shares
of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Furman Selz LLC..................................................................
Oppenheimer & Co., Inc...........................................................
BT Securities Corporation........................................................
----------
Total........................................................................ 6,000,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock listed above are subject to the approval
of certain legal matters by counsel and various other conditions. The
Underwriting Agreement also provides that the Underwriters are committed to
purchase all of the shares of Common Stock offered hereby, if any are purchased
(without consideration of any shares that may be purchased through the
Underwriters' over-allotment option).
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the public
offering price set forth on the cover of this Prospectus and to certain dealers
at such price less a concession not in excess of $ per share. The Underwriters
may allow, and such selected dealers may reallow, a concession not in excess of
$ per share to certain other dealers. After the initial public offering of the
shares, the public offering price and other selling terms may be changed by the
Representatives.
Prior to the offering made hereby, there has been no public market for the
Common Stock. Accordingly, the initial public offering price has been determined
by negotiation between the Company and the Representatives. Among the factors
considered were the Company's results of operations, current financial
condition, estimates of the business potential and prospects of the Company, the
market for the Company's products, the experience of the Company's management,
the economics of the industry in general, the general condition of the equities
market and other relevant factors. There can be no assurance that any active
trading market will develop for the Common Stock or as to the price at which the
Common Stock may trade in the public market from time to time subsequent to the
offering made hereby.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to 900,000
additional shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less underwriting discounts and commissions. To
the extent the Underwriters exercise this option, each Underwriter will have a
firm commitment, subject to certain conditions, to purchase such number of
additional shares of Common Stock as is proportionate to such Underwriter's
initial commitment to purchase shares from the Company. The Underwriters may
exercise such option solely to cover over-allotments, if any, incurred in
connection with the sale of shares of Common Stock offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including under the Securities Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.
54
<PAGE>
The Company and the holders of 6,024,048 shares of Common Stock in the
aggregate, including Alpine and each officer and director of the Company have
agreed, subject to certain exceptions, not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than, in the
case of the Company, the granting of options pursuant to the Company's stock
option plan) for a period of 180 days from the date of the Underwriting
Agreement, without the prior written consent of Furman Selz LLC.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
BT Securities Corporation has provided investment banking services to Alpine
and is acting as Dealer Manager in connection with the tender offer for and
solicitation of consent of the holders of the Alpine Notes, for which services
it will receive customary compensation. Bankers Trust Company, an affiliate of
BT Securities Corporation, will act as Administrative Agent in connection with
the Bank Credit Facility and will receive customary compensation.
The Common Stock has been authorized for listing, subject to notice of
issuance, on the New York Stock Exchange under the symbol "SUT."
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Common Stock offered hereby will be passed upon for the Company by Proskauer
Rose Goetz & Mendelsohn LLP, New York, New York. Certain legal matters relating
to this Offering will be passed upon for the Underwriters by Stroock & Stroock &
Lavan, New York, New York.
EXPERTS
The combined financial statements of Superior and DNE (which have been
reorganized as the Company), as of April 30, 1995 and April 28, 1996 and for
each of the three fiscal years in the period ended April 28, 1996, the combined
financial statements of the Alcatel Business as of December 31, 1993 and 1994
and for each of the three years in the period ended December 31, 1994, and the
balance sheet of the Company as of September 11, 1996, included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included in reliance upon the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus, which is part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules filed therewith. For further information with respect
to the Company and the Common Stock offered hereby, reference is hereby made to
the Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, DC 20549, the New York Regional
Office located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and the Chicago Regional Office located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of all or any part thereof may be obtained
at prescribed rates from the Commission's Public Reference Section at its
principal office. They are also available through the Commission's World Wide
Web site (http://www.sec.gov).
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SUPERIOR TELECOM INC. PAGE
---
Report of independent public accountants......................................... F-2
Balance sheet at September 11, 1996.............................................. F-3
Notes to balance sheet........................................................... F-4
COMBINED FINANCIAL STATEMENTS OF SUPERIOR TELECOMMUNICATION INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES (TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
AUDITED COMBINED FINANCIAL STATEMENTS
Report of independent public accountants......................................... F-5
Combined balance sheets as of April 30, 1995 and April 28, 1996.................. F-6
Combined statements of operations for the years ended May 1, 1994, April 30, 1995
and April 28, 1996.............................................................. F-7
Combined statements of stockholder's equity for the years ended May 1, 1994,
April 30, 1995 and April 28, 1996............................................... F-8
Combined statements of cash flows for the years ended May 1, 1994, April 30,
1995, and April 28, 1996........................................................ F-9
Notes to combined financial statements........................................... F-10
UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
Condensed combined balance sheets as of April 28, 1996 and July 28, 1996......... F-24
Condensed combined statements of operations for the three months ended July 29,
1995 and July 28, 1996.......................................................... F-25
Condensed combined statement of cash flows for the three months ended July 29,
1995 and July 28, 1996.......................................................... F-26
Condensed combined statement of stockholder's equity for the three months ended
July 28, 1996................................................................... F-27
Notes to condensed combined financial statements................................. F-28
THE ALCATEL BUSINESS
AUDITED COMBINED FINANCIAL STATEMENTS
Report of independent public accountants......................................... F-30
Combined balance sheets at December 31, 1993 and 1994............................ F-31
Combined statements of operations for the years ended December 31, 1992, 1993 and
1994............................................................................ F-32
Combined statements of changes in owners' investment for the years ended December
31, 1992, 1993 and 1994......................................................... F-33
Combined statements of cash flows for the years ended December 31, 1992, 1993 and
1994............................................................................ F-34
Notes to combined financial statements........................................... F-35
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: The Alpine Group, Inc.
We have audited the accompanying balance sheet of Superior TeleCom Inc. (a
Delaware corporation) as of September 11, 1996. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Superior TeleCom Inc. as of
September 11, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
October 2, 1996
Atlanta, Georgia
F-2
<PAGE>
SUPERIOR TELECOM INC.
BALANCE SHEET
SEPTEMBER 11, 1996
ASSETS
<TABLE>
<S> <C>
Cash............................................................. $ 60,240
---------
Total assets................................................. $ 60,240
---------
---------
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; authorized 25,000,000 shares, issued
6,024,048......................................................... $ 60,240
---------
Total stockholder's equity................................... $ 60,240
---------
---------
</TABLE>
F-3
<PAGE>
SUPERIOR TELECOM INC.
NOTE TO BALANCE SHEET
SEPTEMBER 11, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Superior TeleCom Inc. ("Superior TeleCom") was incorporated under the laws
of the State of Delaware on July 17, 1996. The purpose of incorporating Superior
TeleCom was to enable The Alpine Group, Inc. ("Alpine"), Superior TeleCom's
parent company and only stockholder, to complete a reorganization whereby two
subsidiaries of Alpine, Superior Telecommunications Inc. ("Superior") and DNE
Systems, Inc. ("DNE") will be contributed to Superior TeleCom. As of July 17,
1996 and to October 2, 1996, Superior TeleCom has not conducted any operations
or had any cash flows subsequent to the $60,240 initial capitalization by
Alpine. There were no commitments and contingencies at September 11, 1996.
In September 1996, Superior TeleCom filed an amendment to a registration
statement with the Securities and Exchange Commission in which it disclosed
Alpine's intention to cause Superior TeleCom to complete an offering of
6,000,000 shares of common stock (or approximately 49.9% of the outstanding
shares after such offering) assuming no exercise of the underwriters'
over-allotment option (the "Offering"). On October 2, 1996, Alpine contributed
all of the common stock of both Superior and DNE to Superior TeleCom and caused
Superior and DNE to declare dividends on their common stock in an aggregate
amount of $117.1 million. Superior also issued to Alpine 20,000 shares of 6%
Cumulative Preferred Stock par value $1.00 per share with a liquidation
preference of $1,000 per share.
On October 2, 1996, Superior TeleCom entered into a five-year revolving
credit facility (the "Bank Credit Facility") under which it borrowed $154.7
million to repay the net amount of the intercompany debt owed to Alpine (which
was $87.9 million), and to pay to Alpine $63.8 million of the declared
dividends. It is management intention to use part of the net proceeds of the
Offering to pay the remainder of the declared dividends. Under the Bank Credit
Facility, up to $175.0 million is available, however, on completion of the
Offering the facility will be reduced to $150.0 million.
F-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: The Alpine Group, Inc.
We have audited the accompanying combined balance sheets of Superior
Telecommunications Inc. and subsidiary and DNE Systems, Inc. and subsidiaries
(collectively referred to as the "Companies" and to be contributed to Superior
TeleCom Inc. in connection with the reorganization as discussed in Note 16) as
of April 30, 1995 and April 28, 1996, and the related combined statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended April 28, 1996. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of April 30, 1995 and April 28, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
April 28, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
September 11, 1996 (except with
respect to the matter discussed
in Note 16, as to which the
date is October 2, 1996)
F-5
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
APRIL 30, APRIL 28,
1995 1996
---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................................... $ 273 $ 351
Accounts receivable (less allowance for doubtful accounts of $59 in 1995 and $166 in
1996).................................................................................. 23,272 53,689
Inventories............................................................................. 25,695 57,726
Other current assets.................................................................... 1,732 6,142
---------- ----------
Total current assets.................................................................. 50,972 117,908
---------- ----------
Property, plant and equipment, net........................................................ 30,044 76,528
Goodwill, net............................................................................. 32,412 48,414
Long-term investments and other assets.................................................... 6,699 1,215
---------- ----------
Total assets.......................................................................... $ 120,127 $ 244,065
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt....................................................... $ 2,758 $ 484
Accounts payable........................................................................ 20,147 46,253
Accrued expenses........................................................................ 5,317 12,445
---------- ----------
Total current liabilities............................................................. 28,222 59,182
---------- ----------
Due to Alpine and affiliate............................................................... 525 113,736
---------- ----------
Long-term debt, less current portion...................................................... 33,784 11,540
---------- ----------
Other long-term liabilities............................................................... 7,742 7,951
---------- ----------
Commitments and contingencies
Stockholder's equity:
Common stock, Superior Telecommunications Inc., $.01 par value; authorized 10,000
shares; issued 1,000 shares............................................................ -- --
Common stock, DNE Systems, Inc. $1.00 par value; authorized 100,000 shares; issued 750
shares................................................................................. 1 1
Capital in excess of par value.......................................................... 45,700 42,254
Cumulative translation adjustment....................................................... -- (214)
Retained earnings....................................................................... 4,153 9,615
---------- ----------
Total stockholder's equity............................................................ 49,854 51,656
---------- ----------
Total liabilities and stockholder's equity............................................ $ 120,127 $ 244,065
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------
MAY 1, APRIL 30, APRIL 28,
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales...................................................................... $ 68,510 $ 164,485 $ 410,413
Cost of goods sold............................................................. 56,250 142,114 362,854
--------- ---------- ----------
Gross profit............................................................... 12,260 22,371 47,559
Selling, general, and administrative expense................................... 8,884 11,632 14,223
Amortization of goodwill....................................................... 2,186 1,124 1,556
--------- ---------- ----------
Operating income........................................................... 1,190 9,615 31,780
Interest income................................................................ 137 -- 349
Interest expense............................................................... (1,879) (3,700) (17,355)
Other income (expense), net.................................................... (61) 231 55
--------- ---------- ----------
Income (loss) from continuing operations before income taxes............... (613) 6,146 14,829
Provision for income taxes..................................................... (521) (2,240) (6,722)
--------- ---------- ----------
Income (loss) from continuing operations................................... (1,134) 3,906 8,107
(Loss) from discontinued operations............................................ (287) (176) --
--------- ---------- ----------
Income (loss) before extraordinary item.................................... (1,421) 3,730 8,107
Extraordinary item -- (loss) on early extinguishment of debt................... -- -- (2,645)
--------- ---------- ----------
Net income (loss).......................................................... $ (1,421) $ 3,730 $ 5,462
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-7
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE YEARS ENDED APRIL 28, 1996
<TABLE>
<CAPTION>
SUPERIOR
DNE SYSTEMS, INC.
TELECOMMUNICATIONS INC.
COMMON SHARES COMMMON SHARES CAPITAL IN CUMULATIVE
-------------------------- -------------------------- EXCESS OF RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT
----------- ------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance at April 30, 1993.......... 750 $ 1 $ 3,071 $ 1,844
Acquisition of Superior............ 1,000 55,712
Superior dividend.................. (14,568)
Transfer of Posterloid from
Alpine............................ 3,485
Net (loss) for the year ended May
1, 1994........................... (1,421)
-- --
--- ----- ----------- ----------- -----
Balance at May 1, 1994......... 750 1 1,000 47,700 423
DNE dividend....................... (2,000)
Net income for the year ended April
30, 1995.......................... 3,730
-- --
--- ----- ----------- ----------- -----
Balance at April 30, 1995...... 750 1 1,000 45,700 4,153
Contribution from Alpine........... 100
Transfer of Posterloid to Alpine... (3,546)
Cumulative translation
adjustment........................ $ (214)
Net income for the year ended April
28, 1996.......................... 5,462
-- --
--- ----- ----------- ----------- -----
Balance at April 28, 1996.......... 750 $ 1 1,000 $ 42,254 $ 9,615 $ (214)
-- --
-- --
--- ----- ----------- ----------- -----
--- ----- ----------- ----------- -----
<CAPTION>
TOTAL
---------
<S> <C>
Balance at April 30, 1993.......... $ 4,916
Acquisition of Superior............ 55,712
Superior dividend.................. (14,568)
Transfer of Posterloid from
Alpine............................ 3,485
Net (loss) for the year ended May
1, 1994........................... (1,421)
---------
Balance at May 1, 1994......... 48,124
DNE dividend....................... (2,000)
Net income for the year ended April
30, 1995.......................... 3,730
---------
Balance at April 30, 1995...... 49,854
Contribution from Alpine........... 100
Transfer of Posterloid to Alpine... (3,546)
Cumulative translation
adjustment........................ (214)
Net income for the year ended April
28, 1996.......................... 5,462
---------
Balance at April 28, 1996.......... $ 51,656
---------
---------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-8
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
MAY 1, APRIL 30, APRIL 28,
1994 1995 1996
---------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash flows from operating activities:
Net income (loss) from continuing operations................................ $ (1,421) $ 3,730 $ 8,107
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization............................................. 4,259 4,586 8,451
Amortization of deferred financing costs.................................. 124 253 360
Change in assets and liabilities:
Accounts receivable....................................................... (3,409) (5,480) (2,709)
Inventories............................................................... 2,157 (3,303) 742
Other assets.............................................................. (120) (145) 808
Accounts payable.......................................................... 533 6,667 11,220
Accrued expenses and other liabilities.................................... (873) 1,046 89
Other, net................................................................ 749 90 170
---------- --------- -----------
Cash provided by operating activities......................................... 1,999 7,444 27,238
---------- --------- -----------
Cash flows from investing activities:
Acquisition, net of cash acquired........................................... -- -- (103,409)
Capital expenditures........................................................ (1,560) (1,782) (4,339)
Acquisition of BICC assets.................................................. -- -- (5,447)
Other....................................................................... (3,683) 43 1,419
---------- --------- -----------
Cash (used for) investing activities.......................................... (5,243) (1,739) (111,776)
---------- --------- -----------
Cash flows from financing activities:
Borrowings (repayments) under revolving credit facilities, net.............. 7,268 (1,181) (17,623)
Borrowings from (repayments to) Alpine, net................................. (169) 141 112,571
Long-term borrowings........................................................ 16,911 -- 141,170
Dividends paid to Alpine.................................................... (17,450) (2,000) --
Repayment of long-term borrowings........................................... (3,771) (3,439) (148,237)
Capitalized financing costs................................................. -- -- (3,365)
Other....................................................................... (422) 370 100
---------- --------- -----------
Cash provided by (used for) financing activities.............................. 2,367 (6,109) 84,616
---------- --------- -----------
Net increase (decrease) in cash and cash equivalents.......................... (877) (404) 78
Cash and cash equivalents at beginning of period.............................. 1,554 677 273
---------- --------- -----------
Cash and cash equivalents at end of period.................................... $ 677 $ 273 $ 351
---------- --------- -----------
---------- --------- -----------
Supplemental disclosures:
Cash interest paid during the period (including interest paid to Alpine).... $ 2,490 $ 4,709 $ 18,620
---------- --------- -----------
---------- --------- -----------
Cash income taxes paid during the period.................................... $ -- $ 228 $ 237
---------- --------- -----------
---------- --------- -----------
Non-cash investing and financing activities:
Acquisition of business:
Assets, net of cash acquired.............................................. $ 126,127
Liabilities assumed....................................................... (22,718)
-----------
Net cash paid........................................................... $ 103,409
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-9
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
Superior Telecommunications Inc. and its wholly-owned subsidiary Superior
Cable Corporation (together referred to as "Superior") and DNE Systems, Inc. and
its wholly-owned subsidiaries DNE Technologies, Inc. and DNE Manufacturing and
Service Company (together referred to as "DNE") were wholly-owned subsidiaries
of The Alpine Group, Inc. ("Alpine"). Concurrently with Superior TeleCom Inc.'s
("Superior TeleCom") entering into the new bank credit facility and prior to the
completion of this Offering of common stock described elsewhere in this
prospectus, Alpine will contribute all of the outstanding common stock of
Superior and DNE to Superior TeleCom for the purpose of completing the
transactions more fully described in Note 16. The accompanying combined
financial statements of Superior and DNE present their combined assets,
liabilities, revenue, expenses and cash flows as if Superior and DNE existed as
a separate corporation during the periods presented which reflects the
acquisition of Superior in November 1993, as discussed in Note 5. The combined
companies are referred to as the "Companies" in the accompanying combined
financial statements.
Superior is engaged in the manufacture and sale of copper wire and cable for
the telecommunications industry and DNE is engaged in the manufacture and sale
of data communication and other electronic products and systems for defense,
government and commercial application.
These combined financial statements include transactions with Alpine
relating to insurance and tax sharing arrangements, intercompany borrowings, as
well as for other administrative services (see Note 8).
The financial information included herein may not necessarily reflect the
financial position, results of operations or cash flows of the Companies in the
future or what the financial position, results of operations or cash flows of
the Companies would have been if they were combined as a separate stand-alone
company during the periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTRACT REVENUE RECOGNITION
Revenues related to certain of DNE's government long-term contracts and
programs, are recognized by the percentage of completion method measured on the
basis of costs incurred to estimated total costs which approximates contract
performance to date. Recognized revenue is that percentage of total contractual
revenue that incurred costs to date bear to estimated total costs after giving
effect to the most recent estimates of costs to complete. Contracts in progress
are reviewed monthly and sales and earnings are adjusted in current accounting
periods based on revisions in contract value and estimated costs at completion.
Provisions for estimated losses on contracts are recorded when identified.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity at acquisition of 90
days or less are considered to be cash equivalents.
INVENTORIES
Inventories, other than inventoried costs relating to DNE's long-term
contracts, are stated at the lower of cost or market, using the first-in,
first-out (FIFO) method. Inventoried costs relating to DNE's long-term contracts
and programs are stated at actual production cost, including factory overhead,
initial tooling and other related nonrecurring costs, reduced by the cost
related to revenue recognized. Included in the
F-10
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accompanying combined balance sheet are DNE inventories amounting to $137,000
and $708,000 at April 30, 1995 and April 28, 1996, respectively, relating to
contracts and programs having production cycles longer than one year.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are provided over
the estimated useful lives of the assets using the straight-line method. The
estimated lives are as follows:
<TABLE>
<S> <C>
5-30
Building and improvements................................ years
3-12
Machinery and equipment.................................. years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Long term
improvements are capitalized as additions to property, plant and equipment. Upon
retirement, or other disposal, the asset cost and related accumulated
depreciation are removed from the accounts and the net amount, less any
proceeds, is charged or credited to income.
GOODWILL
The excess of the purchase price over the net identifiable assets of
businesses acquired is amortized ratably over periods not exceeding 30 years.
Accumulated amortization of goodwill at April 30, 1995 and April 28, 1996 was
$1.4 million and $3.1 million, respectively. Goodwill is allocated to specific
assets or product lines and reviewed periodically to assess recoverability from
future operations using undiscounted cash flows, in accordance with the
provisions of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Impairments would be recognized in operating results, if the anticipated
cash flows from an asset (undiscounted and excluding interest) are less than the
asset's carrying value. During fiscal 1994, DNE expensed $1,511,000 relating to
the remaining unamortized balance of an intangible asset associated with a
product line which was not forecasted to generate sufficient cash flows to
recover the carrying value of such intangible asset.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of Superior's foreign
subsidiary is measured using local currency as the functional currency. Assets
and liabilities of operations denominated in foreign currencies are translated
into U.S. dollars at exchange rates in effect at year-end, while revenues and
expenses are translated at average exchange rates prevailing during the year.
The resulting translation gains and losses are charged directly to cumulative
translation adjustment, a component of stockholder's equity, and are not
included in net income until realized through sale or liquidation of the
investment.
CONCENTRATION OF CREDIT RISK
Superior's revenues constitute 93.6% of the Companies' total revenues for
fiscal 1996. During fiscal 1994, 1995 and 1996 sales to the six regional Bell
operating companies and three major independent telephone companies represented
74%, 78% and 90% of Superior's net sales, respectively (see Note 14). At April
30, 1995 and April 28, 1996, accounts receivable from these customers amounted
to $14.0 million and $41.9 million, respectively.
F-11
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Superior and DNE file a consolidated Federal income tax return with Alpine
and its other subsidiaries. However, income taxes have been provided in the
Companies statements of operations as if the Companies were separate taxable
entities and filed separate Federal income tax returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials........................................................ $ 9,483 $ 11,086
Work in process...................................................... 7,228 13,216
Finished goods....................................................... 8,984 33,424
--------- ---------
$ 25,695 $ 57,726
--------- ---------
--------- ---------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Land................................................................. $ 1,123 $ 2,965
Building and improvements............................................ 9,253 18,678
Machinery and equipment.............................................. 25,264 67,276
--------- ---------
35,640 88,919
Less: accumulated depreciation....................................... 5,596 12,391
--------- ---------
$ 30,044 $ 76,528
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the years ended May 1, 1994 and 1995 and April 28,
1996 was $1.9 million, $3.4 million and $6.7 million, respectively.
5. ACQUISITIONS
ALCATEL ACQUISITION
On May 11, 1995, Superior completed the acquisition (the "Alcatel
Acquisition") of the U.S. and Canadian copper wire and cable business (the
"Alcatel Business") of Alcatel NA Cable System, Inc. and Alcatel Canada Wire,
Inc. (collectively, "Alcatel NA"). In connection with the acquisition, Superior
sold
F-12
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS (CONTINUED)
$140.0 million aggregate principal amount of notes (the "Alcatel Acquisition
Notes"). The Alcatel Acquisition Notes were subsequently redeemed with the
proceeds of funds advanced by Alpine (see Note 8). The following reflects the
allocation of the purchase price of the net assets of the Alcatel Business based
upon the fair values of such assets (in thousands):
<TABLE>
<S> <C>
Acquisition cost.................................................. $ 103,409
Less: historical book value of net assets at May 11, 1995......... (80,909)
Write-up of property, plant and equipment......................... (5,718)
Accrual of Alcatel employee relocation and severance costs........ 500
---------
Acquisition goodwill.............................................. $ 17,282
---------
---------
</TABLE>
The acquisition cost of $103.4 million included $102.9 million paid in cash
to Alcatel NA and acquisition expenses of $500,000.
The Alcatel Acquisition has been accounted for using the purchase method,
and, accordingly, the results of operations of the Alcatel Business are included
in Superior's results on a prospective basis from the date of acquisition.
Goodwill is being amortized on a straight line basis over 30 years.
Unaudited condensed pro forma results of operations which give effect to the
acquisition of the Alcatel Business as if it had occurred on May 1, 1994 are
presented below. The pro forma results of operations for the year ended April
30, 1995 include the results of the Alcatel Business for the 12-month period
ended March 31, 1995. The pro forma amounts reflect acquisition related purchase
accounting adjustments, including adjustments to depreciation and amortization
expense. The pro forma financial information does not purport to be indicative
of either the results of operations that would have occurred had the
acquisitions taken place at the beginning of the periods presented or of future
results of operations.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
----------------------
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Net sales.................................................................... $ 368,663 $ 417,934
Income from continuing operations before income taxes........................ 9,023 15,377
Income from continuing operations before extraordinary item.................. 4,934 8,655
(Loss) from discontinued operations.......................................... (176) --
Extraordinary (loss) on early extinquishment of debt......................... -- (2,645)
Net income................................................................... 4,758 6,010
</TABLE>
SUPERIOR ACQUISITION
On November 9, 1993, Superior's former parent company merged with and into
Alpine resulting in Superior being a wholly owned subsidiary of Alpine. Alpine
paid approximately $19.2 million in cash (including approximately $2.2 million
in merger-related expenses), issued 4,467,610 shares of its common stock and
assumed existing stock options as consideration for the merger.
The merger was accounted for using the purchase method and, accordingly,
Superior's results of operations have been included in the Companies' combined
results on a prospective basis from the date of the merger. The total purchase
price for acquiring Superior (including merger related expenses) amounted
F-13
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS (CONTINUED)
to approximately $55.7 million and was allocated to the fair market value of
Superior's assets and liabilities as of the merger date resulting in goodwill of
approximately $35.3 million. Goodwill is being amortized on a straight line
basis over 30 years.
6. DISCONTINUED OPERATIONS
On October 1, 1993, DNE transferred all of the outstanding capital stock of
Posterloid Corporation ("Posterloid"), then a wholly owned subsidiary of Alpine,
for $1.8 million in cash plus a contingent earnout. The transfer was accounted
for as a reorganization of entities under common control and the excess of the
book value of the net assets transferred over cash exchanged (amounting to $3.5
million) was recorded as a capital contribution in the accompanying Combined
Statement of Stockholder's Equity.
On May 1, 1995, DNE transferred Posterloid back to Alpine for $1.3 million
in cash. The transfer was accounted for as a reorganization of entities under
common control and the excess of the book value of the net assets transferred
over cash received ($3.5 million) was recorded as a return of capital in the
accompanying Combined Statement of Stockholder's Equity. Posterloid's results of
operations from the transfer date through April 30, 1995 have been reflected as
a loss from discontinued operations in the accompanying Combined Statements of
Operations.
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Lease finance obligations (a)........................................ $ 5,968 $ 5,853
Promissory note (b).................................................. -- 1,170
Revolving credit loans (c)........................................... 17,161 --
Term loan (c)........................................................ 5,386 --
Mortgage loan (d).................................................... 5,296 4,996
Subordinated note (e)................................................ 2,469 --
Other................................................................ 262 5
--------- ---------
Total debt........................................................... 36,542 12,024
Less: Current portion............................................ 2,758 484
--------- ---------
Long-term debt....................................................... $ 33,784 $ 11,540
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(a) The lease finance obligations result from the sale/leaseback of two
properties during fiscal 1994 which, because of the Companies' continuing
involvement in the form of repurchase options, were recorded under the
finance method. The lease finance obligations at April 28, 1996 consist of:
(a) $5.0 million related to the sale/leaseback of Superior's manufacturing
facility, and (b) $853,000 related to the sale/ leaseback of a manufacturing
facility owned by DNE.
The Superior sale/leaseback transaction included a sales price of $5.0
million and net cash proceeds (after fees and expenses) of $4.5 million. The
term of the leaseback is twenty years, with five additional option terms (at
Superior's election) of five years each. Superior has a one time option to
repurchase the property during the eleventh year of the lease term at the
greater of the property's Fair Market Value (as defined in the lease) or
$5.0 million plus related ancillary costs. Annual lease payments are
F-14
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED)
approximately $630,000 and are subject to adjustments based on changes in
short-term interest rates (monthly) and increases in the consumer price
index (on a tri-annual basis). Until the repurchase option expires or is
exercised, all lease payments will be reflected as interest expense. The
related asset, which is being depreciated over its estimated useful life,
has a net carrying value of $6.9 million as of April 28, 1996 and is
classified as property, plant and equipment in the accompanying balance
sheet.
The DNE sale/leaseback transaction included a sales price of $1.3 million
and a lease term of nine years. DNE has an option to repurchase the property
during the fourth and fifth years of the lease term for $1.3 million plus
ancillary costs; however, the lessor may elect to terminate the lease in
lieu of accepting such repurchase offer. Annual lease payments are $177,900
and are subject to annual adjustments based on increases in the consumer
price index. As of April 28, 1996, remaining total lease payments amounted
to $1.1 million, of which $853,000 will be applied against principal and
$208,500 will be recorded as interest expense. The related asset, which is
being depreciated over the term of the lease and has a net carrying value of
$785,000 as of April 28, 1996, is classified in long-term investments and
other assets in the accompanying balance sheet.
(b) The promissory note is payable to BICC Phillips, Inc. from which Superior
acquired certain wire and cable manufacturing assets on November 28, 1995.
The note does not bear interest and is due on December 31, 1996.
(c) The revolving credit loans and term loan represented borrowings by Superior
and DNE under credit facilities which were repaid in full during fiscal
1996. The Superior credit facility, which included a $28.0 million revolving
credit facility and a $5.4 million term loan, was repaid from the proceeds
of the Alcatel Acquisition Notes (see Note 5).
The DNE credit facility, which provided for a revolving credit facility of
up to $3.5 million, was repaid by DNE from the proceeds of funds advanced by
Alpine in July 1995 (see Note 8).
(d) The mortgage loan is payable by DNE to the Connecticut Development Authority
("CDA"). The loan is guaranteed by Alpine and collateralized by DNE's real
estate, machinery and equipment. The loan is payable in March 2002 and is
subject to a 20-year amortization schedule. However, DNE may be required to
make additional payments of principal based upon annual retained net cash
earnings (as defined). Based upon retained net cash earnings in fiscal 1996,
DNE is obligated to make a payment of $143,000 in August 1996. The interest
rate is 7.25% through February 28, 1999 and the higher of 7.25% or the yield
on U.S. Treasury securities with the same maturity thereafter. The mortgage
loan contains covenants which limit the ability of DNE to pay dividends and
incur indebtedness.
(e) The subordinated promissory note payable to the previous owners of DNE was
redeemed in August, 1995 at a discount which resulted in recording an
extraordinary gain, net of taxes of $166,000.
At April 28, 1996, the fair value of the Companies debt is estimated to be
$12.2 million, which estimate is based on quoted market prices for the same or
similar issues or on current rates offered for debt of the same remaining
maturities.
F-15
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED)
The aggregate maturities of long-term debt for the five years subsequent to
April 28, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- --------------------------------------------------------------------- ---------------
<S> <C>
(IN THOUSANDS)
1997................................................................. $ 484
1998................................................................. 361
1999................................................................. 388
2000................................................................. 418
2001................................................................. 449
</TABLE>
8. RELATED PARTY TRANSACTIONS
On July 21, 1995, Alpine completed the placement of $153.0 million of 12.25%
Senior Secured Notes (the "Alpine Notes") and entered into an $85.0 million
revolving credit facility (the "Credit Facility"). The Alpine Notes and the
Credit Facility are guaranteed by Superior and Adience, Inc. ("Adience"),
another subsidiary of Alpine. The Alpine Notes are also secured by a pledge of
the capital stock of Superior and Adience.
In connection with the placement of the Senior Notes and the closing of the
Credit Facility, the Companies entered into financing arrangements with Alpine
whereby Alpine advanced funds to the Companies. The proceeds of the funds
advanced by Alpine were used (a)to redeem the Alcatel Acquisition Notes plus
accrued interest (see Note 5), (b) to repay DNE's revolving credit facility and
the subordinated promissory note due to DNE's former parent (see Note 7), and
(c) to fund working capital requirements. At April 28, 1996 the due to Alpine
and affiliates in the accompanying Combined Balance Sheets included notes
payable in the amount of $126.1 million related to such financing arrangements.
Such notes payable to Alpine include:
(1) $88.9 million note payable by Superior due 2003 (subject to certain
mandatory prepayment requirements), with interest payable
semi-annually at an annual rate of 14%.
(2) $35.0 million in borrowings under revolving credit facilities between
Alpine, Superior and DNE due 2000. Interest is payable monthly at
prime plus 0.375% or LIBOR plus 2.25%. Borrowings under the revolving credit
facility are subject to a borrowing base determined as a percentage of
eligible accounts receivable and inventory. The revolving credit facility is
secured by a pledge of Superior's accounts receivable and inventory.
(3) $2.2 million promissory note payable by DNE due in 2003 with interest
payable semiannually at an annual rate of 14%.
Also included in the due to Alpine and affiliates is an amount of $2.0
million owed by Superior Cable Corporation, Superior's Canadian subsidiary to
Adience's Canadian subsidiary. The advance bears interest at 8%.
Further included in the due to Alpine and affiliates is a non-interest
bearing receivable from Alpine which arose primarily from funds advanced by
Superior in connection with Alpine's debt restructuring.
In connection with the redemption of the Alcatel Acquisition Notes, Superior
recorded a $2.8 million extraordinary loss, net of taxes, on the early
extinguishment of debt.
F-16
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Total interest expense charged during fiscal 1996 by Alpine under the
aforementioned financing arrangements amounted to $12.7 million.
Alpine allocates certain direct expenses to the Companies, the most
significant of which is insurance expense which is allocated based upon
projected payrolls, property values and forecasted losses. Such allocated
expenses totaled $1.9 million during fiscal 1996 and were applied as a reduction
in amounts due to Alpine. Alpine also provides, on a limited basis, other
indirect administrative services to the Companies such as treasury and cash
management, tax planning and risk management which were not allocated to the
Companies.
During fiscal 1994 and 1995 DNE was charged $360,000 and $111,000,
respectively for certain incremental indirect costs associated with compliance
with certain contractual arrangements. No such amounts in fiscal 1996 were
significant.
9. DEFINED CONTRIBUTION PLANS
The Companies sponsor several defined contribution plans covering
substantially all U.S. employees. The plans provide for limited company matching
of participants' contributions. Company contributions to these plans amounted to
$227,000, $396,000 and $403,000 for the years ended May 1, 1994, and April 30,
1995 and April 28, 1996, respectively.
10. DEFINED BENEFIT RETIREMENT PLANS
During fiscal 1996, certain employees of Superior participated in various
defined benefit retirement plans sponsored by Alcatel NA. These plans generally
provide for payment of benefits, commencing at retirement between the ages of 55
and 65, based on the employee's length of service and earnings. In connection
with the Alcatel acquisition, Superior is evaluating alternative retirement
planning options and, in substantially all cases, participation in these plans
has been frozen. Expense recorded for fiscal year 1996 service under these plans
was approximately $304,000.
During fiscal 1996, Superior also sponsored a defined benefit pension plan
for employees of one of its manufacturing facilities previously owned by
Alcatel. Benefits under that plan, which were also based on length of service
and earnings, were frozen effective December 31, 1995 and the plan was replaced
with a defined contribution plan. The amount charged to pension expense for
fiscal year 1996 under the plan was $138,000. The accrued pension liability
related to this plan was $67,000 at April 28, 1996 and is included in accrued
liabilities in the accompanying balance sheet.
In addition, Superior sponsored a defined benefit pension plan for employees
of its Canadian manufacturing facility also previously owned by Alcatel.
Benefits under the plan are based on length of service. The amount charged for
pension expense for fiscal year 1996 under the plan was $58,000.
The following table shows the plan's funded status at April 28, 1996:
<TABLE>
<S> <C>
Accumulated benefit obligation (100% vested).................... $2,105,000
Fair value of plan assets....................................... 2,388,000
Projected benefit obligation.................................... 2,314,000
Plan assets in excess of projected benefit obligation........... 74,000
Unrecognized net gain........................................... (74,000)
</TABLE>
F-17
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. DEFINED BENEFIT RETIREMENT PLANS (CONTINUED)
A discount rate of 8% and an expected long-term rate of return on assets of
8% were assumed for the above actuarial calculations.
11. POSTRETIREMENT HEALTH CARE BENEFITS
The Companies' current policy for postretirement health care benefits
provides certain employees and their spouses upon reaching normal or early
retirement and upon achieving certain minimum service requirements, a fixed
monthly benefit for the purchase of company-sponsored health care insurance. The
amount of the fixed monthly benefit will not be increased in the future,
notwithstanding medical-based inflation cost increases.
The accumulated postretirement health care benefit obligation, which is
included in long-term liabilities in the accompanying balance sheet, consisted
of the following at April 30, 1995 and April 28, 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Retirees................................................................ $ 733 $ 427
Fully eligible active plan participants................................. 164 284
Other active plan participants.......................................... 596 571
--------- ---------
1,493 1,282
Unrealized net gain from past experience and change in assumptions...... -- 211
--------- ---------
$ 1,493 $ 1,493
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit cost includes the following components
for fiscal 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost for benefits earned................................................. $ 24 $ 45 $ 45
Interest cost on accumulated postretirement benefit obligation................... 37 118 117
--- --------- ---------
$ 61 $ 163 $ 162
--- --------- ---------
--- --------- ---------
</TABLE>
An increase in the health care cost trend assumptions would not change the
annual exposure or obligation amounts as the employer cost is effectively
capped.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 6.5%, 8.0% and 7.75% for fiscal years
ended May 1, 1994, April 30, 1995 and April 28, 1996, respectively.
12. INCOME TAXES
For Federal income tax purposes, the Companies' taxable income is included
as part of the Alpine consolidated Federal return. The Companies do, however,
file separate state income tax returns. The Companies account for income taxes
on a stand alone basis, as if they filed a separate Federal return, with any
current Federal income taxes due being reflected as a payable to Alpine.
F-18
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
U.S. income tax expense (benefit) for fiscal 1994, 1995 and 1996 consists of
the following:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal................................................................... $ 166 $ 1,830 $ 7,131
State..................................................................... 23 320 891
--------- --------- ---------
$ 189 $ 2,150 $ 8,022
--------- --------- ---------
Deferred:
Federal................................................................... $ 288 $ 78 $ (1,160)
State..................................................................... 44 12 (140)
--------- --------- ---------
332 90 (1,300)
--------- --------- ---------
Total income tax expense.................................................... $ 521 $ 2,240 $ 6,722
--------- --------- ---------
--------- --------- ---------
</TABLE>
Due to losses incurred, no foreign income taxes were recorded for the year
ended April 28, 1996.
A reconciliation of income tax expense reported in the accompanying
statements of operations to the amount of income tax expense that would result
from applying the Federal statutory rate of 34% to income from continuing
operations before income taxes for the fiscal periods ended 1994, 1995 and 1996
is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Expected income tax expense at Federal statutory tax rate................... $ (208) $ 2,089 $ 5,042
Non deductible goodwill amortization........................................ 147 382 382
State income tax expense; net of Federal tax benefit........................ 44 219 496
Net tax loss of foreign subsidiary.......................................... -- -- 327
Other, net.................................................................. 538 (450) 475
--------- --------- ---------
$ 521 $ 2,240 $ 6,722
--------- --------- ---------
--------- --------- ---------
</TABLE>
Statement of Financial Accounting Standards No 109, "Accounting for Income
Taxes," requires the recognition of deferred tax assets and liabilities for both
the expected future tax impact of temporary differences arising from assets and
liabilities whose tax basis are different from financial statement amounts, and
for the expected future tax benefit to be derived from tax loss carryforwards.
The statement also requires that a valuation allowance be established if it is
more likely than not that all or a portion of deferred tax assets will not be
realized. Realization of the future tax benefits is dependent on the ability to
generate
F-19
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
taxable income within the carryforward period and the periods in which net
temporary differences reverse. Items that result in deferred tax assets
(liabilities) and the related valuation allowance at April 30, 1995 and April
28, 1996 are as follows:
<TABLE>
<CAPTION>
CURRENT LONG-TERM
-------------------- --------------------
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Depreciation and amortization.................................. $ -- $ -- $ (8,452) $ (8,753)
Sale / leaseback............................................... -- -- 1,760 1,735
Accruals not currently deductible for tax...................... 555 1,536 691 626
Inventory reserves............................................. 626 915 -- --
Inventory cost capitalization.................................. 264 719 -- --
Tax net operating loss carryforwards........................... -- -- -- 550
Other.......................................................... 15 -- -- --
--------- --------- --------- ---------
1,460 3,170 (6,001) (5,842)
Less: Valuation allowance...................................... (255) (471) (138) (492)
--------- --------- --------- ---------
Total deferred income tax asset (liability).................... $ 1,205 $ 2,699 $ (6,139) $ (6,334)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
At April 28, 1996, future minimum lease payments under non-cancelable
operating leases are as follows:
<TABLE>
<CAPTION>
REAL AND
PERSONAL
FISCAL YEAR PROPERTY
-------------
<S> <C>
(IN
THOUSANDS)
1997........................................................................... $ 573
1998........................................................................... 400
1999........................................................................... 380
2000........................................................................... 371
2001........................................................................... 320
Thereafter..................................................................... 53
------
$ 2,097
------
------
</TABLE>
Rent expense under cancelable and non-cancelable operating leases was
$288,000, $555,000 and $668,000 for the years ended May 1, 1994, April 30, 1995,
and April 28, 1996, respectively.
Approximately 28% of Superior's total labor force is covered by collective
bargaining agreements. One collective bargaining agreement representing 11% of
Superior's total labor force will expire within one year.
During fiscal 1995, DNE was awarded a $600,000 grant from the Connecticut
Department of Economic Development (DED) in connection with a five year contract
award from National Aeronautics and Space Administration (NASA). The grant
requires that the Company maintain its operation in Connecticut for a period of
ten years, or refund the grant if a relocation out of Connecticut occurs within
the specified period. This grant is being recorded as a reduction of cost of
revenues as earned. At April 28, 1996, $150,000 has yet to be earned.
F-20
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Soil and groundwater at Superior's Brownwood, Texas facility has been found
to be contaminated with volatile organic compounds as a result of operations at
the facility which management believes occurred prior to Superior's acquisition
of the facility. Superior is in the process of obtaining approval for a
remediation plan from the Texas Natural Resource Conservation Commission.
Pursuant to an agreement between Superior and the former owner of the facility,
Superior has been reimbursed for approximately 85% of the costs incurred to date
in connection with the investigation and remediation of this facility, and is
entitled to reimbursement of future expenses at percentages ranging from 85% to
25% (depending on the time at which such expenses are incurred), subject to an
aggregate expense reimbursement of not less than 75%. Based upon investigations
performed to date, the Company has accrued an amount of $84,000 consisting of an
assessment that the remediation costs will total approximately $335,000 offset
by a receivable of $251,000 from the former owner.
In connection with the sale of a facility in Woburn, Massachusetts formerly
owned by and currently under lease to DNE, low levels of volatile organic
compounds were discovered in shallow groundwater. DNE has assumed responsibility
for this contamination pursuant to an indemnity granted to the purchaser of the
facility, which indemnity is in turn guaranteed by Alpine. This facility has
been designated as a non-priority site by the Massachusetts Department of
Environmental Protection ("MDEP") which granted a waiver to Alpine allowing it
to proceed with further investigation and, if necessary, remediation, of the
groundwater contamination with MDEP oversight, subject to certain conditions. In
accordance with the waiver, investigation and remediation efforts must be
completed by August 1997. Based on the results of a Phase II comprehensive site
assessment completed during May 1996, it appears that no remedial activities are
warranted for this site, but approximately $10,000 may be required to perform
MDEP filing and response actions.
The Companies are subject to other legal proceedings and claims which have
primarily arisen in the ordinary course of business and have not been finally
adjudicated.
Two executives of Superior and DNE have employment contracts which generally
provide minimum base salaries aggregating approximately $0.5 million, cash
bonuses based on the Superior and DNE achievement of certain performance
objectives, discretionary stock options and restricted stock grants of Alpine,
and certain retirement and other employee benefits. Further, in the event of
termination or voluntary resignation for "good reason" accompanied by a change
in control of Alpine, as defined, such employment agreements provide for
severance payments equal to two times annual cash compensation and bonus, and
the continuation for stipulated periods of other benefits, as defined.
In the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse affect upon the
Companies financial position, liquidity or results of operations.
14. SEGMENT INFORMATION
The Companies conduct business in two segments: telecommunications wire and
cable products (through Superior, acquired in November 1993, and the Alcatel
Business, acquired in May 1995), and data communications and electronics
(through DNE).
F-21
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. SEGMENT INFORMATION (CONTINUED)
The following provides financial information about each business segment:
<TABLE>
<CAPTION>
MAY 1, APRIL 30, APRIL 28,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales (a):
Telecommunications wire and cable................................ $ 46,857 $ 136,578 $ 384,237
Data communications and electronics.............................. 21,653 27,907 26,176
---------- ---------- ----------
$ 68,510 $ 164,485 $ 410,413
---------- ---------- ----------
---------- ---------- ----------
Operating income (loss):
Telecommunications wire and cable................................ $ 1,625 $ 8,016 $ 29,741
Data communications and electronics.............................. (435) 1,599 2,039
---------- ---------- ----------
$ 1,190 $ 9,615 $ 31,780
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets at year end:
Telecommunications wire and cable................................ $ 95,027 $ 98,497 $ 226,045
Data communications and electronics.............................. 15,340 16,836 18,020
---------- ---------- ----------
$ 110,367 $ 115,333 $ 244,065
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization expense:
Telecommunications wire and cable................................ $ 1,562 $ 3,714 $ 7,719
Data communications and electronics.............................. 2,697 872 732
---------- ---------- ----------
$ 4,259 $ 4,586 $ 8,451
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Telecommunications wire and cable (b)............................ $ 420 $ 1,388 $ 9,337
Data communications and electronics.............................. 1,140 394 449
---------- ---------- ----------
$ 1,560 $ 1,782 $ 9,786
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------------
(a) (i) Two customers accounted for $41.0 million and $21.9 million or 30% and
16%, respectively, of net sales in fiscal 1995 and five customers
accounted for $82.7 million, $65.0 million, $61.7 million, $49.1
million and $48.1 million or 22%, 17%, 16%, 13% and 13% of net sales in
fiscal 1996 in the telecommunications wire and cable segment.
(ii) The data communications and electronics segment has historically been
dependent on government funding of programs in which it participates.
Significant changes in the levels of funding for such programs could
have a material adverse effect on the segment. Sales to agencies of the
U.S. government were $18.7 million, $23.2 million and $17.4 million or
86.4%, 82.3% and 66.4% of net sales of this segment for fiscal 1994,
1995 and 1996, respectively.
(b) During fiscal 1996, Superior acquired certain Canadian assets of BICC
Phillips for $5.4 million, which amount is reflected in capital
expenditures.
F-22
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1995 QUARTER ENDED
-----------------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
--------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Net sales......................................... $ 39,330 $ 40,552 $ 38,266 $ 46,337 $ 164,485
Gross profit...................................... 5,685 5,278 5,068 6,340 22,371
Operating income.................................. 2,604 1,874 2,016 3,121 9,615
Income from continuing operations................. 1,160 403 626 1,717 3,906
(Loss) from discontinued operations............... -- -- -- (176) (176)
--------- ----------- ----------- ---------- ----------
Net income........................................ $ 1,160 $ 403 $ 626 $ 1,541 $ 3,730
--------- ----------- ----------- ---------- ----------
--------- ----------- ----------- ---------- ----------
<CAPTION>
FISCAL 1996 QUARTER ENDED
-----------------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 28 YEAR
--------- ----------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 99,324 $ 109,076 $ 91,185 $ 110,828 $ 410,413
Gross profit...................................... 9,503 11,040 10,901 16,115 47,559
Operating income.................................. 5,830 7,262 7,020 11,668 31,780
Income before extraordinary item.................. 1,674 1,571 1,617 3,245 8,107
Income (loss) from extraordinary item............. (2,811) 166 -- -- (2,645)
--------- ----------- ----------- ---------- ----------
Net income (loss)................................. $ (1,137) $ 1,737 $ 1,617 $ 3,245 $ 5,462
--------- ----------- ----------- ---------- ----------
--------- ----------- ----------- ---------- ----------
</TABLE>
16. SUBSEQUENT EVENT
In September 1996, Superior TeleCom filed an amendment to a registration
statement with the Securities and Exchange Commission in which it disclosed
Alpine's intention to cause Superior TeleCom to complete an offering of
6,000,000 shares of common stock (or approximately 49.9% of the outstanding
shares after such offering) assuming no exercise of the underwriters'
over-allocation option (the "Offering"). On October 2, 1996, Alpine contributed
all of the common stock of both Superior and DNE to Superior TeleCom and caused
Superior and DNE to declare dividends on their common stock in an aggregate
amount of $117.1 million. Superior also issued to Alpine 20,000 shares of 6%
Cumulative Preferred Stock par value $1.00 per share with a liquidation
preference of $1,000 per share.
On October 2, 1996, Superior TeleCom entered into a five-year revolving
credit facility (the "Bank Credit Facility") under which it borrowed $154.7
million to repay the net amount of the intercompany debt owed to Alpine (which
was $87.9 million), and to pay to Alpine $63.8 million of the declared
dividends. It is management intention to use part of the net proceeds of the
Offering to pay the remainder of the declared dividends. Under the Bank Credit
Facility, up to $175.0 million is available, however, on completion of the
Offering the facility will be reduced to $150.0 million. Interest will be
payable monthly based upon prime rate plus 0.5% or Eurodollar rate plus 1.5%;
the variable components of these rates after the first anniversary of the
closing of the facilities are subject to periodic adjustment based on Superior
TeleCom's debt to EBITDA ratio on a trailing twelve month basis. The initial
rate of interest is expected to be approximately 7.5%. Obligations under the
Bank Credit Facility are guaranteed by each of Superior TeleCom's direct and
indirect domestic subsidiaries and secured by all the common stock, equipment,
property, inventory and accounts receivable of each direct and indirect
subsidiary (but only 65% of the common stock of Superior's Canadian subsidiary).
F-23
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JULY 28,
APRIL 28, 1996
1996 (UNAUDITED)
---------- ----------- PRO FORMA
JULY 28,
1996
(UNAUDITED)
-----------
(SEE NOTE
4)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................................ $ 351 $ 139 $ --
Accounts receivable (less allowance for
doubtful accounts; April, $166; July, $63............................... 53,689 53,223 53,223
Inventories.............................................................. 57,726 47,737 47,737
Other current assets..................................................... 6,142 5,999 5,999
---------- ----------- -----------
Total current assets................................................... 117,908 107,098 106,959
---------- ----------- -----------
Property, plant and equipment, net....................................... 76,528 76,143 76,143
Goodwill (less accumulated amortization: April, $3,114;
July, $3,546)........................................................... 48,414 47,897 47,897
Long-term investments and other assets................................... 1,215 1,222 1,222
---------- ----------- -----------
Total assets........................................................... $ 244,065 $ 232,360 $ 232,221
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt........................................ $ 484 $ 364 $ 364
Accounts payable......................................................... 46,253 39,348 156,334
Accrued expenses......................................................... 12,445 12,777 12,777
---------- ----------- -----------
Total current liabilities.............................................. 59,182 52,489 169,475
---------- ----------- -----------
Due to Alpine and affiliate................................................ 113,736 102,914 102,914
---------- ----------- -----------
Long-term debt, less current portion....................................... 11,540 11,475 11,475
---------- ----------- -----------
Other long-term liabilities................................................ 7,951 8,050 8,050
---------- ----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock, Superior Telecommunications Inc.,
$.01 par value; authorized 10,000 shares; issued 1,000 shares........... -- -- --
Common stock, DNE Systems, Inc. $1.00 par value;
authorized 100,000 shares; issued 750 shares............................ 1 1 1
Capital in excess of par value........................................... 42,254 42,254 42,254
Cumulative translation adjustment........................................ (214) (406) (406)
Retained earnings........................................................ 9,615 15,583 (101,542)
---------- ----------- -----------
Total stockholder's equity............................................. 51,656 57,432 (59,693)
---------- ----------- -----------
Total liabilities and stockholder's equity............................. $ 244,065 $ 232,360 $ 232,221
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-40
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOMINC.)
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JULY 29, JULY 28,
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Net sales........................................................................... $ 99,324 $ 123,824
Cost of goods sold.................................................................. 89,821 105,447
---------- ----------
Gross profit.................................................................... 9,503 18,377
Selling, general, and administrative expense........................................ 3,299 3,888
Amortization of goodwill............................................................ 374 432
---------- ----------
Operating income................................................................ 5,830 14,057
Interest income..................................................................... 348 --
Interest expense.................................................................... (4,081) (4,258)
Other income (expense), net......................................................... 28 (53)
---------- ----------
Income (loss) from continuing operations before income taxes.................... 2,125 9,746
Provision for income taxes.......................................................... (451) (3,778)
---------- ----------
Income (loss) from continuing operations........................................ 1,674 5,968
(Loss) from discontinued operations................................................. -- --
---------- ----------
Income (loss) before extraordinary item......................................... 1,674 5,968
Extraordinary item -- (loss) on early extinguishment of debt........................ (2,811) --
---------- ----------
Net income (loss)............................................................... $ (1,137) $ 5,968
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-41
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
JULY 29, JULY 28,
1995 1996
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations.................................................. $ 1,674 $ 5,968
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization........................................................ 1,963 2,251
Amortization of deferred financing costs............................................. 320 12
Change in assets and liabilities:
Accounts receivable.................................................................. (764) 466
Inventories.......................................................................... 10,499 9,989
Other assets......................................................................... 295 112
Accounts payable..................................................................... 10,056 (6,905)
Accrued expenses and other liabilities............................................... (1,309) 332
Other, net........................................................................... 196 67
----------- ----------
Cash provided by operating activities.................................................... 22,930 12,292
----------- ----------
Cash flows from investing activities:
Acquisition, net of cash acquired...................................................... (93,324) --
Capital expenditures................................................................... (1,204) (1,511)
Other.................................................................................. 1,350 (84)
----------- ----------
Cash (used for) investing activities..................................................... (93,178) (1,595)
----------- ----------
Cash flow from financing activities:
Borrowings (repayments) under revolving credit facilities, net......................... (16,014) --
Borrowings from (repayments to) Alpine, net............................................ 95,228 (10,961)
Long-term borrowings................................................................... 140,000 22
Dividends paid to Alpine............................................................... -- --
Repayment of long-term borrowings...................................................... (145,499) (207)
Capitalized financing costs............................................................ (3,215) --
Other.................................................................................. -- --
----------- ----------
Cash provided by (used for) financing activities......................................... 70,500 (11,146)
----------- ----------
Net increase (decrease) in cash and cash equivalents..................................... 252 (449)
Cash and cash equivalents at beginning of period......................................... 273 588
----------- ----------
Cash and cash equivalents at end of period............................................... $ 525 $ 139
----------- ----------
----------- ----------
Supplemental disclosures:
Cash interest paid during the period (including interest paid to Alpine)............... $ 4,709 $ 4,258
----------- ----------
----------- ----------
Cash paid during the period for income taxes........................................... $ 318 $ 418
----------- ----------
----------- ----------
Non-cash investing and financing activities:
Acquisition of business:
Assets, net of cash acquired......................................................... $ 126,127 $ --
Deferred purchase consideration...................................................... (9,909)
Liabilities assumed.................................................................. (22,894) --
----------- ----------
Net cash paid...................................................................... $ (93,324) --
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-42
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 28, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SUPERIOR
DNE SYSTEMS, INC.
TELECOMMUNICATIONS, INC.
COMMON SHARES COMMMON SHARES CAPITAL IN CUMULATIVE
-------------------------- ------------------------ EXCESS OF RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT
----------- ------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance at April 28, 1996.......... 750 $ 1 1,000 $ 42,254 $ 9,615 $ (214)
Cumulative translation
adjustment........................ (192)
Net income for the year ended July
28, 1996.......................... 5,968 --
--
--- ----- --- ----------- ----------- -----
Balance at July 28, 1996........... 750 $ 1 1,000 $ 42,254 $ 15,583 $ (406)
--
--
--- ----- --- ----------- ----------- -----
--- ----- --- ----------- ----------- -----
<CAPTION>
TOTAL
---------
<S> <C>
Balance at April 28, 1996.......... $ 51,656
Cumulative translation
adjustment........................ (192)
Net income for the year ended July
28, 1996.......................... 5,968
---------
Balance at July 28, 1996........... $ 57,432
---------
---------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-43
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements reflect
all adjustments (which consist only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of the results of
operations for the interim periods presented. These financial statements should
be read in conjunction with the summary of accounting policies and the notes to
the financial statements included in the Companies' Combined Financial
Statements for the year ended April 28, 1996.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 28, JULY 28,
1996 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw Material...................................................................... $ 11,086 $ 11,390
Work-in-process................................................................... 13,216 11,290
Finished goods.................................................................... 33,424 25,057
--------- ---------
$ 57,726 $ 47,737
--------- ---------
--------- ---------
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
Soil and groundwater at Superior's Brownwood, Texas facility has been found
to be contaminated with volatile organic compounds as a result of operations at
the facility which management believes occurred prior to Superior's acquisition
of the facility. Superior is in the process of obtaining approval for a
remediation plan from the Texas Natural Resource Conservation Commission. Based
upon investigations performed to date, the Company believes that the cost of
this remediation will not be in excess of $500,000. Pursuant to an agreement
between Superior and the former owner of the facility, Superior has been
reimbursed for approximately 85% of the costs incurred to date in connection
with the investigation and remediation of this facility, and is entitled to
reimbursement of future expenses at percentages ranging from 85% to 25%
(depending on the time at which such expenses are incurred), subject to an
aggregate expense reimbursement of not less than 75%.
In connection with the sale of a facility in Woburn, Massachusetts formerly
owned by and currently under lease to DNE, low levels of volatile organic
compounds were discovered in shallow groundwater. DNE has assumed responsibility
for this contamination pursuant to an indemnity granted to the purchaser of the
facility, which indemnity is in turn guaranteed by Alpine. This facility has
been designated as a non-priority site by the Massachusetts Department of
Environmental Protection ("MDEP") which granted a waiver to Alpine allowing it
to proceed with further investigation and, if necessary, remediation, of the
groundwater contamination with MDEP oversight, subject to certain conditions. In
accordance with the waiver, investigation and remediation efforts must be
completed by August 1997. Based on the results of a Phase II comprehensive site
assessment completed during May 1996, it appears that no remedial activities are
warranted for this site, but approximately $10,000 may be required to perform
MDEP filing and response actions.
The Companies are subject to other legal proceedings and claims which have
primarily arisen in the ordinary course of business and have not been finally
adjudicated.
F-44
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse affect upon the
Companies financial position, liquidity or results of operations.
4. SUBSEQUENT EVENT
In September 1996, Superior TeleCom filed an amendment to a registration
statement with the Securities and Exchange Commission in which it disclosed
Alpine's intention to cause Superior TeleCom to complete an offering of
6,000,000 shares of common stock (or approximately 49.9% of the outstanding
shares after such offering) assuming no exercise of the underwriters'
over-allotment option (the "Offering"). On October 2, 1996, Alpine contributed
all of the common stock of both Superior and DNE to Superior TeleCom and caused
Superior and DNE to declare dividends on their common stock in an aggregate
amount of $117.1 million. Superior also issued to Alpine 20,000 shares of 6%
Cumulative Preferred Stock par value $1.00 per share with a liquidation
preference of $1,000 per share.
On October 2, 1996, Superior TeleCom entered into a five-year revolving
credit facility (the "Bank Credit Facility") under which it borrowed $154.7
million to repay the net amount of the intercompany debt owed to Alpine (which
was $87.9 million), and to pay to Alpine $63.8 million of the declared
dividends. It is management intention to use part of the proceeds of the
Offering to pay the remainder of the declared dividends. Under the Bank Credit
Facility, up to $175.0 million is available, however, on completion of the
Offering the facility will be reduced to $150.0 million. Interest will be
payable monthly based upon prime rate plus 0.5% or Eurodollar rate plus 1.5%;
the variable components of these rates after the first anniversary of the
closing of the facilities are subject to periodic adjustment based on Superior
TeleCom's debt to EBITDA ratio on a trailing twelve month basis. The initial
rate of interest is expected to be approximately 7.5%. Obligations under the
Bank Credit Facility are expected to be guaranteed by each of Superior Telecom's
direct and indirect subsidiaries and secured by the common stock, equipment,
property, inventory and accounts receivable of each direct and indirect
subsidiary (but only 65% of the common stock of Superior's Canadian subsidiary).
The dividends on the common stock of Superior and DNE discussed above, have
been reflected in the accompanying pro forma balance sheet on page F-24,
excluding the effects of offering proceeds and other transactions occurring
simultaneous with this Offering described above, in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 55.
F-45
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JULY 28,
APRIL 28, 1996
1996 (UNAUDITED)
---------- ----------- PRO FORMA
JULY 28,
1996
(UNAUDITED)
-----------
(SEE NOTE
4)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................................ $ 351 $ 139 $ --
Accounts receivable (less allowance for
doubtful accounts; April, $166; July, $63............................... 53,689 53,223 53,223
Inventories.............................................................. 57,726 47,737 47,737
Other current assets..................................................... 6,142 5,999 5,999
---------- ----------- -----------
Total current assets................................................... 117,908 107,098 106,959
---------- ----------- -----------
Property, plant and equipment, net....................................... 76,528 76,143 76,143
Goodwill (less accumulated amortization: April, $3,114;
July, $3,546)........................................................... 48,414 47,897 47,897
Long-term investments and other assets................................... 1,215 1,222 1,222
---------- ----------- -----------
Total assets........................................................... $ 244,065 $ 232,360 $ 232,221
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt........................................ $ 484 $ 364 $ 364
Accounts payable......................................................... 46,253 39,348 156,334
Accrued expenses......................................................... 12,445 12,777 12,777
---------- ----------- -----------
Total current liabilities.............................................. 59,182 52,489 169,475
---------- ----------- -----------
Due to Alpine and affiliate................................................ 113,736 102,914 102,914
---------- ----------- -----------
Long-term debt, less current portion....................................... 11,540 11,475 11,475
---------- ----------- -----------
Other long-term liabilities................................................ 7,951 8,050 8,050
---------- ----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock, Superior Telecommunications Inc.,
$.01 par value; authorized 10,000 shares; issued 1,000 shares........... -- -- --
Common stock, DNE Systems, Inc. $1.00 par value;
authorized 100,000 shares; issued 750 shares............................ 1 1 1
Capital in excess of par value........................................... 42,254 42,254 42,254
Cumulative translation adjustment........................................ (214) (406) (406)
Retained earnings........................................................ 9,615 15,583 (101,542)
---------- ----------- -----------
Total stockholder's equity............................................. 51,656 57,432 (59,693)
---------- ----------- -----------
Total liabilities and stockholder's equity............................. $ 244,065 $ 232,360 $ 232,221
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-24
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOMINC.)
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JULY 29, JULY 28,
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Net sales........................................................................... $ 99,324 $ 123,824
Cost of goods sold.................................................................. 89,821 105,447
---------- ----------
Gross profit.................................................................... 9,503 18,377
Selling, general, and administrative expense........................................ 3,299 3,888
Amortization of goodwill............................................................ 374 432
---------- ----------
Operating income................................................................ 5,830 14,057
Interest income..................................................................... 348 --
Interest expense.................................................................... (4,081) (4,258)
Other income (expense), net......................................................... 28 (53)
---------- ----------
Income (loss) from continuing operations before income taxes.................... 2,125 9,746
Provision for income taxes.......................................................... (451) (3,778)
---------- ----------
Income (loss) from continuing operations........................................ 1,674 5,968
(Loss) from discontinued operations................................................. -- --
---------- ----------
Income (loss) before extraordinary item......................................... 1,674 5,968
Extraordinary item -- (loss) on early extinguishment of debt........................ (2,811) --
---------- ----------
Net income (loss)............................................................... $ (1,137) $ 5,968
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-25
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
JULY 29, JULY 28,
1995 1996
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations.................................................. $ 1,674 $ 5,968
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization........................................................ 1,963 2,251
Amortization of deferred financing costs............................................. 320 12
Change in assets and liabilities:
Accounts receivable.................................................................. (764) 466
Inventories.......................................................................... 10,499 9,989
Other assets......................................................................... 295 112
Accounts payable..................................................................... 10,056 (6,905)
Accrued expenses and other liabilities............................................... (1,309) 332
Other, net........................................................................... 196 67
----------- ----------
Cash provided by operating activities.................................................... 22,930 12,292
----------- ----------
Cash flows from investing activities:
Acquisition, net of cash acquired...................................................... (93,324) --
Capital expenditures................................................................... (1,204) (1,511)
Other.................................................................................. 1,350 (84)
----------- ----------
Cash (used for) investing activities..................................................... (93,178) (1,595)
----------- ----------
Cash flow from financing activities:
Borrowings (repayments) under revolving credit facilities, net......................... (16,014) --
Borrowings from (repayments to) Alpine, net............................................ 95,228 (10,961)
Long-term borrowings................................................................... 140,000 22
Dividends paid to Alpine............................................................... -- --
Repayment of long-term borrowings...................................................... (145,499) (207)
Capitalized financing costs............................................................ (3,215) --
Other.................................................................................. -- --
----------- ----------
Cash provided by (used for) financing activities......................................... 70,500 (11,146)
----------- ----------
Net increase (decrease) in cash and cash equivalents..................................... 252 (449)
Cash and cash equivalents at beginning of period......................................... 273 588
----------- ----------
Cash and cash equivalents at end of period............................................... $ 525 $ 139
----------- ----------
----------- ----------
Supplemental disclosures:
Cash interest paid during the period (including interest paid to Alpine)............... $ 4,709 $ 4,258
----------- ----------
----------- ----------
Cash paid during the period for income taxes........................................... $ 318 $ 418
----------- ----------
----------- ----------
Non-cash investing and financing activities:
Acquisition of business:
Assets, net of cash acquired......................................................... $ 126,127 $ --
Deferred purchase consideration...................................................... (9,909)
Liabilities assumed.................................................................. (22,894) --
----------- ----------
Net cash paid...................................................................... $ (93,324) --
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-26
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
CONDENSED COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 28, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SUPERIOR
DNE SYSTEMS, INC.
TELECOMMUNICATIONS, INC.
COMMON SHARES COMMMON SHARES CAPITAL IN CUMULATIVE
-------------------------- ------------------------ EXCESS OF RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT
----------- ------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance at April 28, 1996.......... 750 $ 1 1,000 $ 42,254 $ 9,615 $ (214)
Cumulative translation
adjustment........................ (192)
Net income for the year ended July
28, 1996.......................... 5,968 --
--
--- ----- --- ----------- ----------- -----
Balance at July 28, 1996........... 750 $ 1 1,000 $ 42,254 $ 15,583 $ (406)
--
--
--- ----- --- ----------- ----------- -----
--- ----- --- ----------- ----------- -----
<CAPTION>
TOTAL
---------
<S> <C>
Balance at April 28, 1996.......... $ 51,656
Cumulative translation
adjustment........................ (192)
Net income for the year ended July
28, 1996.......................... 5,968
---------
Balance at July 28, 1996........... $ 57,432
---------
---------
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
F-27
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements reflect
all adjustments (which consist only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of the results of
operations for the interim periods presented. These financial statements should
be read in conjunction with the summary of accounting policies and the notes to
the financial statements included in the Companies' Combined Financial
Statements for the year ended April 28, 1996.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 28, JULY 28,
1996 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw Material...................................................................... $ 11,086 $ 11,390
Work-in-process................................................................... 13,216 11,290
Finished goods.................................................................... 33,424 25,057
--------- ---------
$ 57,726 $ 47,737
--------- ---------
--------- ---------
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
Soil and groundwater at Superior's Brownwood, Texas facility has been found
to be contaminated with volatile organic compounds as a result of operations at
the facility which management believes occurred prior to Superior's acquisition
of the facility. Superior is in the process of obtaining approval for a
remediation plan from the Texas Natural Resource Conservation Commission. Based
upon investigations performed to date, the Company believes that the cost of
this remediation will not be in excess of $500,000. Pursuant to an agreement
between Superior and the former owner of the facility, Superior has been
reimbursed for approximately 85% of the costs incurred to date in connection
with the investigation and remediation of this facility, and is entitled to
reimbursement of future expenses at percentages ranging from 85% to 25%
(depending on the time at which such expenses are incurred), subject to an
aggregate expense reimbursement of not less than 75%.
In connection with the sale of a facility in Woburn, Massachusetts formerly
owned by and currently under lease to DNE, low levels of volatile organic
compounds were discovered in shallow groundwater. DNE has assumed responsibility
for this contamination pursuant to an indemnity granted to the purchaser of the
facility, which indemnity is in turn guaranteed by Alpine. This facility has
been designated as a non-priority site by the Massachusetts Department of
Environmental Protection ("MDEP") which granted a waiver to Alpine allowing it
to proceed with further investigation and, if necessary, remediation, of the
groundwater contamination with MDEP oversight, subject to certain conditions. In
accordance with the waiver, investigation and remediation efforts must be
completed by August 1997. Based on the results of a Phase II comprehensive site
assessment completed during May 1996, it appears that no remedial activities are
warranted for this site, but approximately $10,000 may be required to perform
MDEP filing and response actions.
The Companies are subject to other legal proceedings and claims which have
primarily arisen in the ordinary course of business and have not been finally
adjudicated.
F-28
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse affect upon the
Companies financial position, liquidity or results of operations.
4. SUBSEQUENT EVENT
In September 1996, Superior TeleCom filed an amendment to a registration
statement with the Securities and Exchange Commission in which it disclosed
Alpine's intention to cause Superior TeleCom to complete an offering of
6,000,000 shares of common stock (or approximately 49.9% of the outstanding
shares after such offering) assuming no exercise of the underwriters'
over-allotment option (the "Offering"). On October 2, 1996, Alpine contributed
all of the common stock of both Superior and DNE to Superior TeleCom and caused
Superior and DNE to declare dividends on their common stock in an aggregate
amount of $117.1 million. Superior also issued to Alpine 20,000 shares of 6%
Cumulative Preferred Stock par value $1.00 per share with a liquidation
preference of $1,000 per share.
On October 2, 1996, Superior TeleCom entered into a five-year revolving
credit facility (the "Bank Credit Facility") under which it borrowed $154.7
million to repay the net amount of the intercompany debt owed to Alpine (which
was $87.9 million), and to pay to Alpine $63.8 million of the declared
dividends. It is management intention to use part of the proceeds of the
Offering to pay the remainder of the declared dividends. Under the Bank Credit
Facility, up to $175.0 million is available, however, on completion of the
Offering the facility will be reduced to $150.0 million. Interest will be
payable monthly based upon prime rate plus 0.5% or Eurodollar rate plus 1.5%;
the variable components of these rates after the first anniversary of the
closing of the facilities are subject to periodic adjustment based on Superior
TeleCom's debt to EBITDA ratio on a trailing twelve month basis. The initial
rate of interest is expected to be approximately 7.5%. Obligations under the
Bank Credit Facility are expected to be guaranteed by each of Superior Telecom's
direct and indirect subsidiaries and secured by the common stock, equipment,
property, inventory and accounts receivable of each direct and indirect
subsidiary (but only 65% of the common stock of Superior's Canadian subsidiary).
The dividends on the common stock of Superior and DNE discussed above, have
been reflected in the accompanying pro forma balance sheet on page F-24,
excluding the effects of offering proceeds and other transactions occurring
simultaneous with this Offering described above, in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 55.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Alcatel NA Cable Systems, Inc. and
Alcatel Canada Wire and Cable, Inc.:
We have audited the accompanying combined balance sheets of The Copper Cable
Group of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire and Cable, Inc.
as of December 31, 1993 and 1994, and the related combined statements of
operations, changes in owners' investment and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Copper Cable Group of
Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire and Cable, Inc. as of
December 31, 1993 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Greensboro, North Carolina,
February 24, 1995
(except for the matter discussed in Note 14,
as to which the date is May 11, 1995).
F-30
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
ASSETS
<TABLE>
<CAPTION>
1993 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash................................................................................. $ 602 $ 3,124
Trade accounts receivable, less allowance for
doubtful accounts of $813 and $457, respectively.................................... 19,171 29,389
Receivables from affiliates (Note 7)................................................. 7,614 1,259
Inventories (Note 4)................................................................. 36,519 36,983
Deferred income taxes (Note 6)....................................................... 7,152 4,123
Other current assets................................................................. 1,474 1,861
---------- ----------
Total current assets............................................................... 72,532 76,739
Property, plant and equipment, net (Note 5)............................................ 45,702 42,247
Intangible asset (Note 8).............................................................. 272 366
---------- ----------
$ 118,506 $ 119,352
---------- ----------
---------- ----------
LIABILITIES AND OWNERS' INVESTMENT
Current liabilities:
Trade accounts payable............................................................... $ 11,386 $ 13,577
Accrued liabilities.................................................................. 17,386 12,184
Income taxes payable (Note 6)........................................................ 664 271
Payables to affiliates (Note 7)...................................................... 31,523 40,663
---------- ----------
Total current liabilities.......................................................... 60,959 66,695
Deferred income taxes (Note 6)......................................................... 4,727 1,440
---------- ----------
Total liabilities.................................................................. 65,686 68,135
Commitments and contingencies (Notes 4, 11 and 13)
Owners' investment..................................................................... 52,820 51,217
---------- ----------
$ 118,506 $ 119,352
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these balance sheets.
F-31
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $ 228,852 $ 212,610 $ 194,651
Cost of goods sold........................................................... 207,476 189,940 182,264
Restructuring costs (Note 3)................................................. 12,000 0 0
---------- ---------- ----------
Gross margin............................................................. 9,376 22,670 12,387
Selling expenses............................................................. 2,907 2,961 2,415
General and administrative expenses.......................................... 2,767 2,677 2,332
Management fees to affiliates (Note 7)....................................... 3,534 5,907 4,971
Administrative fees to affiliates (Note 7)................................... 3,389 2,179 1,254
---------- ---------- ----------
Income (loss) from operations............................................ (3,221) 8,946 1,415
Interest expense to affiliates, net (Note 7)................................. 1,766 1,944 1,980
---------- ---------- ----------
Income (loss) before provision (benefit) for income taxes.................... (4,987) 7,002 (565)
Provision (benefit) for income taxes (Note 6)................................ (1,069) 2,191 29
---------- ---------- ----------
Net income (loss)............................................................ $ (3,918) $ 4,811 $ (594)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
F-32
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
COMBINED STATEMENTS OF CHANGES IN OWNERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance, December 31, 1991......................................................... $ 54,463
Net loss......................................................................... (3,918)
Currency translation adjustment.................................................. (1,444)
Pension equity adjustment (Note 8)............................................... (28)
---------
Balance, December 31, 1992......................................................... 49,073
Net income....................................................................... 4,811
Currency translation adjustment.................................................. (916)
Pension equity adjustment (Note 8)............................................... (148)
---------
Balance, December 31, 1993......................................................... 52,820
Net loss......................................................................... (594)
Currency translation adjustment.................................................. (1,089)
Pension equity adjustment (Note 8)............................................... 80
---------
Balance, December 31, 1994......................................................... $ 51,217
---------
---------
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
F-33
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................. $ (3,918) $ 4,811 $ (594)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities --
Depreciation................................................................ 5,838 6,208 6,219
Deferred income taxes....................................................... (5,285) 873 (330)
Restructuring costs (Note 3)................................................ 12,000 0 0
(Gain) loss on sale of property, plant and equipment........................ (3) (2) 2
Other....................................................................... (764) (540) (417)
Change in current assets and liabilities --
(Increase) decrease in:
Trade accounts receivable................................................... (6,248) (2,375) (10,218)
Receivables from affiliates................................................. (83) (7,502) 6,355
Inventories................................................................. 1,056 105 (464)
Other current assets........................................................ (322) (533) (387)
Increase (decrease) in:
Trade accounts payable...................................................... 6,145 (5,625) 2,191
Accrued liabilities......................................................... 6,770 (5,230) (5,383)
Income taxes payable........................................................ (2,291) 2,224 (393)
Payables to affiliates...................................................... (5,322) 13,143 9,140
--------- --------- ----------
Net cash provided by operating activities................................. 7,573 5,557 5,721
--------- --------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment.................................... (7,076) (7,569) (4,294)
Proceeds from sales of property, plant and equipment.......................... 319 1,603 1,095
--------- --------- ----------
Net cash used for investing activities.................................... (6,757) (5,966) (3,199)
--------- --------- ----------
Net increase (decrease) in cash................................................. 816 (409) 2,522
Cash, beginning of year......................................................... 195 1,011 602
--------- --------- ----------
Cash, end of year............................................................... $ 1,011 $ 602 $ 3,124
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
F-34
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
The Company.................................... 13
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Pro Forma Condensed Combined Financial
Statements.................................... 18
Selected Historical Combined Financial Data of
the Company................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 23
Business....................................... 35
Management..................................... 43
Certain Transactions and Relationships......... 48
Principal Stockholders......................... 50
Description of Capital Stock................... 50
Shares Eligible for Future Sale................ 53
Underwriting................................... 54
Legal Matters.................................. 55
Experts........................................ 55
Available Information.......................... 55
Index to Financial Statements.................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
6,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FURMAN SELZ
OPPENHEIMER & CO., INC.
BT SECURITIES CORPORATION
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred by the Company
in connection with the issuance and distribution of the securities being
registered under this registration statement. Except for the SEC and NASD filing
fees, all expenses have been estimated and are subject to future contingencies.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 40,448
NASD fee.......................................................... 11,540
New York Stock Exchange listing fee............................... 116,100
Legal fees and expenses*.......................................... 185,912
Printing and engraving expenses*.................................. 200,000
Accounting fees and expenses*..................................... 100,000
Blue sky fees and expenses*....................................... 25,000
Transfer agent and registrar fees................................. 3,500
Miscellaneous*.................................................... 17,500
---------
Total......................................................... $ 700,000
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person 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 such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person 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
such person's conduct was unlawful.
In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person 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 such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation. No indemnification may 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 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 Court of Chancery or such other court
shall deem proper.
II-1
<PAGE>
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs. Section 145 requires
that such person be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as authorized in Section 145.
Article Eighth of the Company's Certificate of Incorporation eliminates the
personal liability of the directors of the Company to the Company or its
stockholders for monetary damages for breach of fiduciary duty as directors,
with certain exceptions. Article Ninth requires indemnification of directors and
officers of the Company, and for advancement of litigation expenses, to the
fullest extent permitted by Section 145.
The Underwriting Agreement filed herewith as Exhibit 1.1 provides for
indemnification of the directors, certain officers, and controlling persons of
the Company by the Underwriters against certain civil liabilities, including
liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Alpine subscribed for 6,024,048 shares of Common Stock in July 1996. The
issuance of such shares was exempt from registration pursuant to Section 4(2) of
the Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<S> <C>
1 .1* Form of Underwriting Agreement
3.1* Certificate of Incorporation of the Company
3.2* Certificate of Amendment, dated July 12, 1996, to the Certificate of Incorporation of the Company
3.3* Certificate of Amendment, dated August 6, 1996 to the Certificate of Incorporation of the Company
3.4* By-Laws of the Company
5 Opinion of Proskauer Rose Goetz & Mendelsohn LLP re: validity of securities
10.1 Employee Stock Purchase Plan
10.2 Letter Agreement between the Company and Alpine, dated October 8, 1996, relating to a capital
contribution by Alpine to the Company
10.3* Employment Agreement, dated April 26, 1996, between Superior and Justin F. Deedy, Jr.
10.4 Services Agreement between the Company and Alpine, dated October 2, 1996
10.5 Letter Agreement between the Company and Alpine relating to tax indemnification, dated October 2,
1996
10.6 Revolving Credit Agreement by and among the Company, each domestic subsidiary of the Company,
certain lending institutions and Bankers Trust Company, dated as of October 2, 1996
10.7 1996 Stock Option Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
10.8 Lease Agreement by and between ALP(TX) QRS 11-28, Inc., and Superior, dated as of December 16, 1993
(incorporated herein by reference to Exhibit 10(i) to the Quarterly Report on Form 10-Q of Alpine
for the quarter ended January 31, 1994); First Amendment to Lease Agreement, dated as of May 10,
1995, by and between ALP (TX) QRS 11-28, Inc. and Superior (incorporated herein by reference to
Exhibit 10(o) to the Annual Report on Form 10-K of Alpine for the year ended April 30, 1995);
Second Amendment to Lease Agreement, dated as of July 21, 1995, by and between ALP(TX) QRS 11-28,
Inc. and Superior (incorporated herein by reference to Exhibit 10(x) to the Annual Report on Form
10-K of Alpine for the year ended April 30, 1995); Third Amendment to Lease Agreement, dated as of
October 2, 1996, by and between ALP(TX) QRS 11-28, Inc. and Superior
<S> <C>
10.9 Tax Allocation Agreement among Alpine, the Company and its subsidiaries, dated as of October 2, 1996
10.10 Exchange Agreement, dated October 2, 1996, by and between the Company and The Alpine Group, Inc.
10.11 Registration Rights Agreement, dated October 2, 1996, by and between the Company and The Alpine
Group, Inc.
10.12 First Amendment to Guaranty and Suretyship Agreement between the Company, Alpine and ALP (TX) QRS
11-28), Inc., dated as of October 2, 1996
21* List of subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Proskauer Rose Goetz & Mendelsohn LLP (contained in opinion filed as Exhibit 5)
24.1* Power of Attorney
27 Financial Data Schedule
99.1 Consent of Eugene P. Connell
99.2 Consent of Robert Levenson
99.3 Consent of Charles Y.C. Tse
</TABLE>
- ------------------------
* Previously filed
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement (filed herewith as Exhibit 1.1)
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, 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
II-3
<PAGE>
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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has duly caused this Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 4th day of
October, 1996.
SUPERIOR TELECOM INC.
By: /s/ STEVEN S. ELBAUM
-----------------------------------
Steven S. Elbaum
PRESIDENT, CHAIRMAN OF THE BOARD
AND
CHIEF EXECUTIVE OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
President, Chairman of the Board,
/s/ STEVEN S. ELBAUM Chief Executive Officer and
------------------------------------------- Director (principal executive October 4, 1996
Steven S. Elbaum officer)
/s/ DAVID S. ALDRIDGE Chief Financial Officer
------------------------------------------- (principal financial and October 4, 1996
David S. Aldridge accounting officer)
/s/ BRAGI F. SCHUT
------------------------------------------- Director October 4, 1996
Bragi F. Schut
</TABLE>
II-5
<PAGE>
EXHIBIT 5
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
1585 BROADWAY
NEW YORK, NY 10019
October 7, 1996
The Board of Directors
Superior TeleCom Inc.
1790 Broadway
New York, NY 10019
Ladies and Gentlemen:
You have requested our opinion in connection with the filing by
Superior TeleCom Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission of a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to 6,900,000 shares of common stock, $.01 par value per
share, of the Company ("Common Stock"). The Registration Statement relates to
the proposed issuance of 6,900,000 shares of Common Stock by the Company (the
"Shares").
We have examined such records, documents and other instruments as we
have deemed relevant and necessary as a basis for the opinions hereinafter set
forth. We have also assumed without investigation the authenticity of any
document submitted to us as an original, the conformity to originals of any
document submitted to us as a copy, the authenticity of the originals of such
latter documents, the genuineness of all signatures and the legal capacity of
natural persons signing such documents.
Based upon the foregoing, it is our opinion that the Shares (to the
extent issued and sold by the Company) have been duly authorized and, when
issued and delivered in accordance with the underwriting agreement as described
in the Registration Statement, will be legally issued, fully paid and non-
assessable
<PAGE>
The Board of Directors
January 17, 1996
Page 2
The foregoing opinion relates only to matters of the internal law of
the State of New York, the General Corporation Law of the State of Delaware and
to matters of federal law and does not purport to express any opinion on the
laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement. In so
doing, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ PROSKAUER ROSE GOETZ &
MENDELSOHN LLP
<PAGE>
______________________________________________________________________________
SUPERIOR TELECOM INC.
EMPLOYEE STOCK PURCHASE PLAN
______________________________________________________________________________
October 1, 1996
<PAGE>
SUPERIOR TELECOM INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Code, and the provisions of the Plan shall be
construed in a manner consistent with the requirements of such section of the
Code. The Plan shall become effective upon the date specified by the Board in
their resolutions adopting the Plan, subject to the approval of the Plan by a
majority of the stockholders of the Company who are present in person or
represented by proxy at a meeting of stockholders within a twelve (12) month
period before or after the Plan is adopted.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Capitalization" shall mean any increase,
reduction, or change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company by reason of a
reclassification, recapitalization, merger, consolidation, reorganization, stock
dividend, stock split or reverse stock split, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise,
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean a committee of the Board or such
other committee appointed from time to time by the Board. To the extent that no
Committee exists which has the authority to administer the Plan, the functions
of the Committee shall be exercised by the Board.
(e) "Common Stock" shall mean shares of common stock, par value
$.01 per share, of the Company.
(f) "Company" shall mean Superior TeleCom Inc., a Delaware
corporation.
(g) "Compensation" shall mean the total cash compensation paid
during an Offering Period by the Company, any Designated Subsidiary or any
affiliate of the
<PAGE>
Company to an Employee, including overtime and bonuses, as reported by the
Company, any Designated Subsidiary or any affiliate of the Company for federal
income tax purposes, and including an Employee's portion of salary deferral
contributions pursuant to Section 401(k) of the Code and any amount excludable
pursuant to Section 125 of the Code. Compensation shall not include any
contributions by the Company or any of its affiliates to, or benefits paid
under, this Plan or under any other pension, profit-sharing, fringe benefit,
group insurance or other employee welfare plan heretofore or hereafter adopted
or any deferred compensation arrangement. For purposes of this Section,
affiliate shall mean any entity required to be aggregated with the Company under
Section 414 (b), (c), (m) or (o) of the Code.
(h) "Designated Subsidiaries" shall mean each Subsidiary
Corporation of the Company on the effective date of the Plan and future
Subsidiary Corporations which have been designated by the Board from time to
time in its sole discretion as eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an officer, who
is regularly and continuously employed by the Company or one of its Designated
Subsidiaries.
(j) "Employer" shall mean, with respect to any Employee, the
Company or Designated Subsidiary by which the Employee is employed.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Exercise Date" shall mean the last business day of each
Offering Period in which payroll deductions are made under the Plan.
(m) "Fair Market Value" for purposes of this Plan, unless
otherwise required by any applicable provision of the Code or any regulations
issued thereunder, shall mean, as of the Exercise Date, the last sales price
reported for the Common Stock on the applicable date (i) as reported by the
principal national securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National Association of
Securities Dealers. If the Common Stock is not readily tradable on a national
securities exchange or any system sponsored by the National Association of
Securities Dealers, its Fair Market Value shall be set in good faith by the
Committee on the advice of a registered investment adviser (as defined under the
Investment Advisers Act of 1940).
(n) "Offering Date" shall mean the first day of each calendar
quarter.
(o) "Offering Period" shall mean each calendar quarter during
the effectiveness of the Plan, commencing on each Offering Date, PROVIDED that
the Committee shall have the power to change the duration of Offering Periods.
2
<PAGE>
(p) "Option" shall mean an option to purchase shares of Common
Stock of the Company.
(q) "Parent Corporation" shall mean any corporation (other than
the Company) in an unbroken chain of corporations ending with the employer
corporation if, at the time of granting an Option, each of the corporations
other than the employer corporation owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(r) "Participant" shall mean an Employee who participates in the
Plan.
(s) "Plan" shall mean the Superior TeleCom Inc. Employee Stock
Purchase Plan, as amended from time to time.
(t) "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of
the Exchange Act as then in effect or any successor provisions.
(u) "Subsidiary Corporation" shall mean any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
3. ELIGIBILITY.
(a) Subject to the requirements of Section 4(b) hereof, any
person who is (i) an Employee as of an Offering Date and (ii) who customarily
works more than twenty (20) hours per week for an Employer and at least five (5)
months per year shall be eligible to participate in the Plan and be granted an
Option for the Offering Period commencing on such Offering Date.
(b) Notwithstanding any provisions of the Plan to the contrary,
no Employee shall be granted an Option under the Plan:
(i) if, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own stock and/or hold outstanding
Options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Company or of any Subsidiary Corporation or Parent Corporation; or
(ii) which permits such Employee's right to purchase stock under
all employee stock purchase plans (as described in Section 423 of the
Code) of the
3
<PAGE>
Company and any Subsidiary Corporation or Parent Corporation to accrue
at a rate which exceeds six thousand two hundred fifty dollars
($6,250) of Fair Market Value of such stock (determined at the time
such Option is granted) for any Offering Period in which such Option
is outstanding at any time.
4. GRANT OF OPTION; PARTICIPATION.
(a) On each Offering Date, the Company shall commence an offer
by granting each eligible Employee an Option to purchase shares of Common Stock,
subject to the limitations set forth in Sections 3(b) and 10 hereof. The
Committee shall specify the terms and conditions for each such offer, including
the number of shares of Common Stock that may be purchased thereunder.
(b) Each eligible Employee may elect to become a Participant in
the Plan with respect to an Offering Period, only by filing an agreement with
the Company authorizing payroll deductions (as set forth in Section 5 hereof).
(c) The Option price per share of the Common Stock subject to an
offering shall be the lesser of: (i) eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock on the date immediately prior to the
Offering Date or (ii) eighty-five (85%) of the Fair Market Value of a share of
Common Stock on the Exercise Date.
5. PAYROLL DEDUCTIONS.
(a) Prior to each Option Date, a Participant may, in accordance
with rules adopted by the Committee, authorize a payroll deduction of any whole
percentage from one percent (1%) to the maximum percentage, determined by the
Committee prior to the Offering Date, of his or her Compensation, provided, that
the maximum percentage shall not exceed twenty five percent (25%) of the
Participant's Compensation. Each authorization shall only be effective with
respect to the Offering Period for which the authorization is made.
(b) All payroll deductions made by a Participant shall be
credited to such Participant's account under the Plan. A Participant may not
make any additional payments into such account.
6. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as provided in
Section 8 hereof, such Participant's election to purchase shares of Common Stock
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares of Common Stock subject to such Option shall be purchased for such
Participant at the applicable Option price with the accumulated payroll
deductions in such Participant's account.
4
<PAGE>
In no event shall any fractional shares be issued under the Plan. A
Participant's Option to purchase shares hereunder is exercisable only by such
Participant.
(b) Any cash balance remaining in a Participant's account after
the termination of an Offering Period shall be carried forward in the
Participant's account for the purchase of Common Stock during the next Offering
Period if the Participant has elected to continue to participate in the Plan.
Otherwise the Participant shall receive a cash payment equal to the balance of
his or her account, without any interest thereon as provided in Section 9(b).
(c) The shares of Common Stock purchased upon exercise of an
Option hereunder shall be credited to the Participant's account under the Plan
and shall be deemed to be transferred to the Participant on the Exercise Date
and, except as otherwise provided herein, the Participant shall have all rights
of a stockholder with respect to such shares, including, without limitation, the
right to receive dividends on the shares and the right to vote or tender such
shares.
7. DELIVERY OF COMMON STOCK.
Delivery of the shares of Common Stock purchased upon the exercise of
each Option shall be made by the Company within sixty (60) days after the
Exercise Date, or such shorter period of time as the Committee, in its sole
discretion, may determine, provided, however, the Committee, in its sole
discretion, may also determine that the Company may retain stock certificates
issued to each employee until such time as the employee requests delivery of
such certificates.
8. TERMINATION OF EMPLOYMENT.
(a) If a Participant retires or terminates his or her employment
for any reason other than death, the payroll deductions credited to such
Participant's account (that have not been used to purchase shares of Common
Stock) shall be returned or distributed to the Participant (without interest) as
soon as practicable following the Participant's retirement or other termination
of employment.
(b) In the event of the Participant's death, the Participant's
Option shall be exercised in accordance with the terms of the Plan such that the
payroll deductions credited to such Participant's account after the Option Date
(whether before or immediately following the Participant's death) shall be used
to purchase shares of Common Stock in accordance with the terms of the Plan.
5
<PAGE>
9. DIVIDENDS AND INTEREST.
(a) Cash dividends, if any, on shares of Common Stock acquired
through the Plan will be automatically paid by check directly to the Participant
by the Company. Dividends paid in property other than cash or Common Stock
shall be distributed to Participants as soon as practicable.
(b) No interest shall accrue on or be payable with respect to
the payroll deductions of a Participant in the Plan.
10. STOCK.
(a) The maximum number of shares of Common Stock which shall be
reserved for sale under the Plan shall be 250,000, subject to adjustment as
provided in Section 16 hereof. If the total number of shares which would
otherwise be subject to Options granted pursuant to Section 4(a) hereof on an
Offering Date exceeds the number of shares then available under the Plan (after
deduction of all shares for which Options have been exercised or are then
outstanding), the Committee shall make a pro rata allocation of the shares
remaining available for Option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Committee shall give written notice to each Participant of such reduction of the
number of Option shares affected thereby and shall similarly reduce the rate of
payroll deductions, if necessary.
(b) Shares of Common Stock to be delivered to a Participant
under the Plan shall be registered in the name of the Participant or, at the
election of the Participant, in the name of the Participant and another person
as joint tenants with rights of survivorship.
11. ADMINISTRATION.
The Plan shall be administered by the Committee, and the Committee may
select an administrator to whom its duties and responsibilities hereunder may be
delegated. The Committee shall have full power and authority, subject to the
provisions of the Plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the Plan, to interpret the provisions
and supervise the administration of the Plan, and to take all action in
connection therewith or in relation thereto as it deems necessary or advisable.
All interpretations and determinations of the Committee shall be made in its
sole and absolute discretion based on the Plan document and shall be final,
conclusive and binding on all parties. The Company shall, to the fullest extent
permitted by law and the Certificate of Incorporation and By-laws of the Company
and, to the extent not covered by insurance, indemnify each director, officer or
employee of the Employer (including the heirs, executors, administrators and
other personal representatives of such person) and each member of the Committee
against all expenses, costs, liabilities and losses (including attorneys' fees,
judgments, fines, excise taxes or penalties, and amounts paid or to be paid in
settlement)
6
<PAGE>
actually and reasonably incurred by such person in connection with any
threatened, pending or actual suit, action or proceeding (whether civil,
criminal, administrative or investigative in nature or otherwise) in which such
person may be involved by reason of the fact that he or she is or was serving
this Plan in any capacity at the request of the Employer, except in instances
where any such person engages in willful neglect or fraud. Such right of
indemnification shall include the right to be paid by the Company for expenses
incurred or reasonably anticipated to be incurred in defending any such suit,
action or proceeding in advance of its disposition; provided, however, that the
payment of expenses in advance of the settlement or final disposition of a suit,
action or proceeding, shall be made only upon delivery to the Company of an
undertaking by or on behalf of such person to repay all amounts so advanced if
it is ultimately determined that such person is not entitled to be indemnified
hereunder. Such indemnification shall be in addition to any rights of
indemnification the person may have as a director, officer or employee or under
the Certificate of Incorporation of the Company or the By-Laws of the Company.
Expenses incurred by the Committee or the Board in the engagement of any such
counsel, consultant or agent shall be paid by the Company.
12. DESIGNATION OF BENEFICIARY.
A Participant may file, on forms supplied by and delivered to the
Company, a written designation of a beneficiary who is to receive any shares of
Common Stock and cash remaining in such Participant's account under the Plan in
the event of the Participant's death. Such designation of beneficiary may be
changed by the Participant at any time by written notice. If a Participant is
married on the date of his death and no beneficiary had been designated by the
Participant prior to his death, the Participant's spouse will be presumed to be
his beneficiary. If a Participant is not married on the date of his death and
no beneficiary had been designated by the Participant prior to his death, the
Participant's beneficiary shall be his estate.
13. TRANSFERABILITY.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an Option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in an way
(other than by will, the laws of descent and distribution or as provided in
Section 12 hereof) by the Participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.
7
<PAGE>
15. REPORTS.
Individual accounts shall be maintained for each Participant in the
Plan. Statements of account shall be given to participating Employees as soon
as practicable following each Offering Period, which statements shall set forth
the amounts of payroll deductions, the per share purchase price, the number of
shares of Common Stock purchased, the aggregate shares in the Participant's
account and the remaining cash balance, if any.
16. EFFECT OF CERTAIN CHANGES.
(a) In the event of any increase, reduction, or change or
exchange of shares of Common Stock for a different number or kind of shares or
other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividend, stock
split or reverse stock split, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise, or the distribution of an
extraordinary dividend, the Committee shall conclusively determine the
appropriate equitable adjustments, if any, to be made under the Plan, including
without limitation adjustments to the number of shares of Common Stock which
have been authorized for issuance under the Plan but have not yet been placed
under Option, as well as the price per share of Common Stock covered by each
Option under the Plan which has not yet been exercised.
(b) In the event of the complete liquidation of the Company or
of a reorganization, consolidation or merger in which the Company is not the
surviving Corporation, any Option granted under the Plan shall continue in full
force and effect unless either (i) the Board modifies such Option so that it is
fully exercisable with respect to all of the Common Stock subject thereto prior
to the effective date of such transaction or (ii) the surviving corporation
issues or assumes a stock option as contemplated under Section 424(a) of the
Code.
17. AMENDMENT OR TERMINATION.
The Company, by action of the Board (or a duly authorized committee
thereof), may at any time terminate or amend the Plan. No such termination
shall adversely affect Options previously granted and no amendment may make any
change in any Option theretofore granted which adversely affects the rights of
any Participant. No amendment shall be effective unless approved by the
stockholders of the Company if stockholder approval of such amendment is
required to comply with Section 423 of the Code or to comply with any other
applicable law, regulation or stock exchange rule. Upon termination of the
Plan, the Company shall return or distribute the payroll deductions credited to
such Participant's account (that have not been used to purchase shares of Common
Stock).
8
<PAGE>
18. NOTICES.
All notices or other communications by a Participant to the Company or
the Committee under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company or Committee at
the location, or by the person, designated for the receipt thereof. Each
Participant shall be responsible for furnishing the Committee with the current
and proper address for the mailing of notices and the delivery of other
information. Any notices or communications by the Company to a Participant
shall be deemed given if directed to such address and mailed by regular United
States mail, first-class and prepaid. If any item mailed to such address is
returned as undeliverable to the addressee, mailing shall be suspended until the
Participant furnishes the proper address.
19. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Delaware without giving effect to the choice of law principles thereof, except
to the extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver shares of
Common Stock with respect to Options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(c) To the extent required, the Plan is intended to comply with
Rule 16b-3 and the Committee shall interpret and administer the provisions of
the Plan in a manner consistent therewith. Any provisions inconsistent with
Rule 16b-3 shall be inoperative and shall not affect the validity of the Plan.
The Committee may establish and adopt written administrative guidelines,
designed to facilitate compliance with Section 16(b) of the Exchange Act and
Rule 16b-3, as it may deem necessary or proper for the administration and
operation of the Plan and the transaction of business thereunder.
20. WITHHOLDING OF TAXES.
(a) If the Participant makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder, of any
share or shares issued to such Participant pursuant to such Participant's
exercise of an Option, and such disposition occurs within the two-year period
commencing on the day after the Offering Date or within the one-year period
commencing on the day after the Exercise Date, such Participant shall, within
such time of such disposition as prescribed by the Committee, notify the Company
thereof and thereafter immediately deliver to the Company any amount of federal,
state or local income taxes and other amounts which the Company informs the
Participant the
9
<PAGE>
Company is required to withhold. Notwithstanding anything herein to the
contrary, the Committee may permit any such withholding obligation with regard
to any Participant to be satisfied by reducing the number of shares of Common
Stock otherwise deliverable or by delivering shares of Common Stock already
owned, provided such arrangement is approved to the extent necessary to satisfy
Rule 16b-3.
(b) Notwithstanding anything herein to the contrary, the
Employer shall have the right to make such provisions as it deems necessary to
satisfy any obligations to withhold federal, state, or local income taxes or
other taxes incurred by reason of the issuance of Common Stock pursuant to the
Plan. Notwithstanding anything herein to the contrary, the Employer may require
a Participant to remit an amount equal to the required withholding amount and
may invalidate any election if the Participant does not remit applicable
withholding taxes.
21. NO EMPLOYMENT RIGHTS.
The establishment and operation of this Plan shall not confer any
legal rights upon any Participant or other person for a continuation of
employment, nor shall it interfere with the rights of an Employer to discharge
any Employee and to treat him without regard to the effect which that treatment
might have upon him as a Participant or potential Participant under the Plan.
22. SEVERABILITY OF PROVISIONS.
If any provision of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and the Plan shall be construed and enforced as if such provisions had
not been included.
23. CONSTRUCTION.
The use of a masculine pronoun shall include the feminine, and the
singular form shall include the plural form, unless the context clearly
indicates otherwise. The headings and captions herein are provided for
reference and convenience only, shall not be considered part of the Plan, and
shall not be employed in the construction of the Plan.
10
<PAGE>
Table of Contents
-----------------
Page
----
1. Purpose............................................................ 1
2. Definitions........................................................ 1
3. Eligibility........................................................ 3
4. Grant of Option; Participation..................................... 4
5. Payroll Deductions................................................. 4
6. Exercise of Option................................................. 4
7. Delivery of Common Stock........................................... 5
8. Termination of Employment.......................................... 5
9. Dividends and Interest............................................. 6
10. Stock.............................................................. 6
11. Administration..................................................... 6
12. Designation of Beneficiary......................................... 7
13. Transferability.................................................... 7
14. Use of Funds....................................................... 7
15. Reports............................................................ 8
16. Effect of Certain Changes.......................................... 8
17. Amendment or Termination........................................... 8
18. Notices............................................................ 9
19. Regulations and Other Approvals; Governing Law..................... 9
20. Withholding of Taxes............................................... 9
21. No Employment Rights.............................................. 10
22. Severability of Provisions........................................ 10
23. Construction...................................................... 10
<PAGE>
EXHIBIT 10.2
Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
October 8, 1996
The Alpine Group Inc.
1790 Broadway
New York, New York 10019
Gentlemen:
This letter will set forth the agreement between Superior TeleCom Inc.
(the "Company") and The Alpine Group, Inc. ("Alpine") with respect to the shares
of 6% Cumulative Preferred Stock of Superior Telecommunications Inc. ("Superior
Preferred Stock") owned by Alpine and shares of Common Stock of the Company
("Common Stock"). The parties acknowledge that the Company intends to offer
shares of Common Stock pursuant to a certain Underwriting Agreement to be
entered into among the Company and the underwriters named therein (the
"Underwriters") and as described in the Company's registration statement
relating thereto (the "Registration Statement").
In connection with the Reorganization, including the contribution by
Alpine of the stock of Superior and DNE (each as defined in the Registration
Statement), if the over-allotment option granted to the Underwriters by the
Company is exercised, Alpine shall restore its ownership of the outstanding
Common Stock to 50.1% by contributing to the capital of the Company a portion of
the shares of Superior Preferred Stock owned by it in exchange for shares of
Common Stock. The amount of Superior Preferred Stock to be contributed by Alpine
shall be that number of shares having an aggregate liquidation value equal to
the aggregate price paid by the Company (including brokers' commissions) for the
shares of Common Stock to be transferred to Alpine. The Company shall acquire
such shares of Common Stock through open market purchases or otherwise using
only net proceeds of the exercise of the over-allotment option.
Please execute this letter below to express your agreement to the
foregoing.
Very truly yours,
SUPERIOR TELECOM INC.
By: /s/ David S. Aldridge
---------------------
Chief Financial Officer
AGREED TO:
THE ALPINE GROUP, INC.
By: /s/ Bragi F. Schut
------------------
Executive Vice President
<PAGE>
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made and entered into as
of October 2, 1996 by and between The Alpine Group, Inc, a Delaware corporation
("Alpine"), and Superior TeleCom Inc., a Delaware corporation ("Superior").
RECITALS
A. Superior is a wholly owned subsidiary of Alpine.
B. Alpine and Superior intend to effect an initial public offering
of shares of common stock of Superior (the "Offering").
C. Historically, Alpine has provided to its subsidiaries, including
Superior and its subsidiaries, certain administrative, financial and
other services.
THEREFORE, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) The term "Business Day" shall mean a day on which banks
are not required or permitted to close in New York City or
Atlanta, Georgia.
(b) The term "Effective Time" shall mean the date and time
at which Alpine contributes the shares of common stock of
its Superior Telecommunications Inc. and DNE Systems, Inc.
subsidiaries to Superior.
(c) The term "Services" shall have the meaning set forth in
Section 4 hereof.
1
<PAGE>
2. ADMINISTRATIVE SERVICES. Alpine shall provide or cause to be
provided to Superior and its subsidiaries the services described in Exhibit A
hereto and, if, when and to the extent requested by Superior, such other
services that Alpine is capable of providing with its then-current personnel and
facilities without unreasonable interference with Alpine's normal business
operations (the "Services"). It is understood that certain of the Services will
be performed by David S. Aldridge, Alpine's Chief Financial Officer or his
successor, who may be Superior's Chief Financial Officer, and by Stephen M.
Johnson, Alpine's Executive Vice President-Chief Operating Officer or his
successor, who shall provide advice and assistance regarding operations to
Superior.
3. CHARGES FOR SERVICES.
(a) From the Effective Time through the completion of the
Offering, Superior shall pay to Alpine a fee at the rate of $2,000,000 per year,
pro-rated for partial years, for the Services described on Exhibit A and use of
the New York facility pursuant to this Agreement (such fee reflects on a net
basis the consideration for Alpine's use of the Atlanta Facility). Superior
shall reimburse Alpine for third-party charges incurred by Alpine on Superior's
behalf only in accordance with past practice.
(b) Upon completion of the Offering, and in lieu of the fee
described in Section 3(a) hereof, Superior shall pay to Alpine at the rate of
$925,000 per year, pro-rated for partial years, for the Services described on
Exhibit A and use of the New York Facility pursuant to this Agreement (such fee
reflects on a net basis the consideration for Alpine's use of the Atlanta
Facility). In addition, Superior shall reimburse Alpine for any third-party
charges incurred by Alpine on Superior's behalf.
(c) In the event Superior requests and Alpine agrees to provide
any Services other than those described on Exhibit A, Superior shall pay to
Alpine the actual costs and expenses, including third-party charges, incurred by
Alpine in providing such Services that are separately identifiable, and that
portion of such costs and expenses reasonably attributable to Superior based on
such methodology as Alpine determines to be appropriate (subject to the approval
of Superior, which approval shall not be unreasonably withheld) for all such
costs and expenses that are not separately identifiable.
4. PAYMENTS. (a) Alpine shall submit to Superior by the 5th day of
each month an invoice for the applicable fee, and, if the Offering has been
completed, any third-party charges incurred by Alpine in connection with the
Services
2
<PAGE>
for the preceding month. Except as provided in Section 4(b) hereof, Superior
shall remit payment in full for all charges invoiced on or before the last day
of the month in which the invoice is received.
(a) In the event of a dispute as to an invoiced amount, Superior
shall promptly pay all undisputed amounts, but shall be entitled to withhold
amounts in dispute. Superior shall promptly notify Alpine of any such dispute.
Each party will provide the other sufficient records and information to resolve
any such dispute and, without limiting the rights and remedies of the parties
thereunder, will negotiate in good faith a resolution thereto.
5. METHOD OF PAYMENT. Transfer of funds pursuant to this Agreement
shall be made in U.S. dollars by wire transfer of immediately available funds to
an account or accounts specified by the party receiving such payment. Whenever
any payment hereunder is required or requested on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and any
such extension of time shall be included in the computation of the payment of
interest.
6. PERFORMANCE OF SERVICES.
(a) DEGREE OF CARE. Alpine shall perform the Services with the
same degree of care, skill and prudence customarily exercised by it in respect
of its own business, operations and affairs.
(b) CERTAIN LIMITATIONS. Each party acknowledges that the
Services shall be provided only with respect to the businesses of Superior and
its subsidiaries as such businesses exist as of the Effective Time or as
otherwise mutually agreed by the parties. Alpine will not be obligated to
provide Services for the benefit of entities other than Superior and its
subsidiaries. Superior shall use the Services only in accordance with all
applicable federal, state and local laws and regulations.
(c) CERTAIN INFORMATION. Superior shall provide, and shall
cause each of its subsidiaries to provide, in a manner consistent with the
practices employed by the parties prior to the Effective Time, any information
needed by Alpine from Superior or such subsidiary, as the case may be, to
perform the Services pursuant hereto. If the failure to provide such
information renders the performance of any requested Services impossible or
unreasonably difficult, Alpine may, upon reasonable notice to Superior, refuse
to provide such Services.
3
<PAGE>
7. SPACE SHARING
(a) USE BY ALPINE. Alpine shall permit Superior to use a portion
of its corporate headquarters in New York (the "New York Facility") for the
purposes permitted under lease agreement (the "New York Lease") pursuant to
which Alpine leases the New York Facility, subject to the terms and conditions
set forth in this Agreement.
(b) USE BY SUPERIOR. Superior shall permit Alpine to use a
portion of its principal offices in Atlanta (the "Atlanta Facility") for the
purposes permitted under the lease agreement (the "Atlanta Lease") pursuant to
which Superior leases the Atlanta Facility, subject to the terms and conditions
set forth in this Agreement.
(c) COMPLIANCE WITH LEASES. Alpine has provided Superior with a
copy of the New York Lease and Superior acknowledges receipt thereof. Superior
hereby agrees not to take any action or fail to take any action in connection
with its use of a portion of the New York Facility a result of which would be
Alpine's violation of any of the terms and conditions of the New York Lease, the
provisions of which are hereby incorporated by reference. Superior agrees to
comply with the terms and provisions of the New York Lease with respect to its
use of a portion of the New York Facility. Superior acknowledges and agrees
that Alpine has the right to modify or otherwise amend the New York Lease
without the consent of Superior. Alpine will provide Superior with a copy of
any such amendment. Superior has provided Alpine with copies of the Atlanta
Lease and Alpine acknowledges receipt thereof. Alpine hereby agrees not to take
any action or fail to take any action in connection with its use of the Atlanta
Facility a result of which would be Superior's violation of any of the terms and
conditions of the Atlanta Lease with respect to its use of the Atlanta Facility.
Alpine acknowledges and agrees that Superior has the right to modify or
otherwise amend the Atlanta Lease without the consent of Alpine. Superior will
provide Alpine with a copy of any such amendment.
(d) RELOCATION. Superior acknowledges that Alpine may relocate
its corporate headquarters. The parties hereto acknowledge and agree that,
effective as of such relocation, all references in this Agreement to the New
York Lease and the New York Facility shall mean the lease agreement and the
office space, respectively, associated with Alpine's corporate headquarters
following such relocation.
8. LIMITATIONS ON LIABILITY AND INDEMNIFICATION.
4
<PAGE>
(a) LIMITATIONS ON LIABILITY. Neither party shall have any
liability under this Agreement (including any liability for its own negligence)
for damages, losses or expenses suffered by the other party or its subsidiaries
as a result of the performance or non-performance of such party's obligations
hereunder, unless such damages, losses or expenses are caused by or arise out of
the willful misconduct or gross negligence of such party or a breach by such
party of any of the express provisions hereof. In no event shall either party
have any liability to the other party for indirect, incidental or consequential
damages that such other party or its subsidiaries or any third party may incur
or experience on account of the performance or non-performance of such party's
obligations hereunder.
(b) INDEMNIFICATION. Subject to the limitations on liability
set forth in the last sentence of Section 8(a) hereof, each party shall
indemnify, defend and hold harmless the other party and its directors,
employees, agents and representatives from and against all claims, liabilities,
damages, losses and expenses (including reasonable attorneys fees and expenses)
caused by or arising out of the willful misconduct or gross negligence of such
indemnifying party in the performance or non-performance of its obligations
hereunder or the breach by such indemnifying party of any of the express
provisions hereof.
(c) SURVIVAL. The provisions of this Section 8 shall survive
any termination of this Agreement.
9. TERM OF AGREEMENT. This Agreement shall become effective at the
Effective Time and shall automatically terminate on April 30, 1998.
10. CONFIDENTIALITY. Each party will hold in trust and maintain
confidential and, except as required by law, not disclose to others without the
prior written approval of the other party, any information received by it from
the other party or developed or otherwise obtained by it in connection with the
performance of its obligations hereunder (the "Information"). Within 90 days
after the date of termination of this Agreement, each party will return to the
other party, or, with the written consent of the other party, destroy all
documents, data and other materials of whatever nature relating to the
businesses of the other and its subsidiaries that it obtained in connection with
the performance of its obligations hereunder, provided that the parties may
retain any Information to the extent reasonably needed to comply with applicable
tax, accounting or financial reporting requirements or to resolve any legal
issues identified at the time of termination. The provisions of this Section 10
shall survive any termination of this Agreement.
5
<PAGE>
11. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by either
party hereto to any other person except that either party may assign this
Agreement to any of its affiliates.
(b) NO THIRD-PARTY BENEFICIARIES. Except for the persons
entitled to indemnification pursuant to Section 9(b) hereof, each of whom is an
intended third-party beneficiary hereunder, nothing expressed or implied in this
Agreement shall be construed to give any person or entity other than the parties
hereto any legal or equitable rights hereunder.
(c) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof.
(d) AMENDMENT. This Agreement may not be amended except by an
instrument signed by the parties hereto.
(e) WAIVERS. Either party hereto may (i) extend the time for
the performance of any of the obligations or other act of the other party or
(ii) waive compliance with any of the agreements contained herein. No waiver of
any term shall be construed as a waiver of the same term, or a waiver of any
other term, of this Agreement. The failure of any party to assert any of its
rights hereunder will not constitute a waiver of any such rights.
(f) SEVERABILITY. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
(g) HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(h) NOTICES. All notices given in connection with this
Agreement shall be in writing. Service of such notices shall be deemed complete
(i) if
6
<PAGE>
hand delivered, on the date of delivery, (ii) if my mail, on the fourth business
day following the day of deposit in the United States mail, by certified or
registered mail, first-class postage prepaid, or (iii) if sent by FedEx or
equivalent courier service, on the next business day. Such notices shall be
addressed to the parties at the following addresses or at such other address for
a party as shall be specified by like notice (except that notices of change of
address shall be effective upon receipt):
If to Alpine: The Alpine Group
1790 Broadway
New York, New York 10019
Attention: Chairman
Telecopy No.: (212) 757-3423
If to Superior: Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
Attention: President
Telecopy No.: (212) 757-3423
(i) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, without giving
effect to the principles of conflict of laws of such State.
(j) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but on and the same instrument.
IN WITNESS WHEREOF, Alpine and Superior have caused this Agreement to
be executed on the date first above written.
THE ALPINE GROUP, INC.
By: /s/ Bragi F. Schut
Executive Vice President
SUPERIOR TELECOM INC.
7
<PAGE>
By: /s/ Stewart H. Wahrsager
Secretary
8
<PAGE>
EXHIBIT A
---------
SERVICES
FINANCIAL SERVICES
- - Preparation of all SEC reports including Forms 10-K and 10-Q and Proxy
statements
- - Prepare separate financial statements on behalf of Superior TeleCom
subsidiaries
- - Perform accounting and financial research on an as requested basis
- - Maintain a corporate ledger
- - Prepare consolidated monthly reports to be distributed to management and
the Board of Directors
- - Prepare consolidated financial forecasts and budgets
- - Perform all government compliance with respect to Superior TeleCom
- - Prepare all consolidated and separate state and federal tax returns and
quarterly payments
- - Perform all tax planning (in conjunction with the external auditors)
- - Coordinate all tax examinations performed by the I.R.S.
INTERNAL AND EXTERNAL AUDIT AND ACCOUNTING SERVICES
- - Conduct all liaison with external auditors
- - Conduct all liaison with the audit committee of the Board of Directors
- - Coordinate all special projects with the external auditors
- - Review internal accounting and administrative controls
- - Review operational and financial management
CORPORATE FINANCE AND STRATEGIC PLANNING
- - Advice and assist once in preparation of business plans and budgets
- - Advice and assist with respect to strategic planning, including evaluating
acquisition opportunities
- - Advice and assistance regarding banking matter (including compliance)
9
<PAGE>
LEGAL
- - Substantially all legal work, other than litigation handled by outside
counsel; but including commercial consulting, anti-trust, pension,
acquisition, employment matters, environmental, claims, real estate, etc.
TREASURY
- - Centralized cash management
- - Bank reconciliations
- - Forecasting of cash requirements
- - Letters of credit
- - Money movements
GROUP INSURANCE
- - Design, implement and communicate the property/casualty insurance coverage
- - Analysis of plans and costs
- - Management reporting
OTHER MANDATED SERVICES
- - Investor relations
- - Stock option and grant administration
10
<PAGE>
The Alpine Group, Inc.
1790 Broadway
New York, New York 10019
October 2, 1996
Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
Gentlemen:
This will confirm that in connection with the Reorganization, as
defined in Amendment No.1 to the Registration Statement of Superior TeleCom Inc.
("Superior") filed with the Securities and Exchange Commission on August 9,
1996, The Alpine Group, Inc. ("Alpine") agrees as follows:
Alpine shall indemnify, defend and hold harmless Superior and its
directors, employees, agents and representatives from and against (i) any and
all consolidated federal income tax liability (and certain state and local tax
liabilities) of Alpine or any of its subsidiaries, including any amounts
determined to be due as a result of redeterminations of the tax liability of
Alpine arising from an audit or otherwise, and (ii) any other liability of
Alpine or any of its subsidiaries, including without limitation, liabilities
arising under employee benefit plan obligations, in each case that Superior is
actually required to pay, but only to the extent, if any, that such liability
exceeds the amount of such liability attributable to Superior or any of its
subsidiaries.
Please sign this letter agreement below to express your agreement to
the foregoing.
THE ALPINE GROUP, INC.
By: /s/ Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Senior Vice President and
Secretary
AGREED:
SUPERIOR TELECOM INC.
By: /s/Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Secretary
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
among
SUPERIOR TELECOM INC.,
THE SUBSIDIARY GUARANTORS NAMED HEREIN,
THE LENDING INSTITUTIONS LISTED HEREIN
and
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT,
and
BANK OF BOSTON CONNECTICUT,
AS DOCUMENTATION AGENT
______________________
Dated as of October 2, 1996
______________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit. . . . . . . . . . . . . . . . . . 2
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . 4
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . 5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . 7
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 8
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . 10
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 12
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . 13
1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . 13
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 14
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 14
2.02 Letter of Credit Requests; Notices of Issuance. . . . . . . . 16
2.03 Agreement to Repay Letter of Credit Drawings. . . . . . . . . 16
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . 17
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 20
3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.02 Voluntary Termination or Reduction of Total
Unutilized Revolving Loan Commitment. . . . . . . . . . . . . 21
3.03 Mandatory Reduction of Revolving Loan Commitments . . . . . . 22
SECTION 4. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . 24
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 25
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . 27
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 29
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . 29
5.02 No Default; Representations and Warranties. . . . . . . . . . 30
5.03 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 30
5.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 30
5.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . 30
5.06 Adverse Change, etc.. . . . . . . . . . . . . . . . . . . . . 31
5.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.08 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.09 Consummation of the Transaction . . . . . . . . . . . . . . . 31
5.10 Existing Credit Agreement . . . . . . . . . . . . . . . . . . 32
5.11 Security Documents. . . . . . . . . . . . . . . . . . . . . . 32
5.12 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . 33
i
<PAGE>
Page
----
5.13 Conditions Relating to Mortgaged Real Properties. . . . . . . 33
5.14 Existing Indebtedness Agreements; Tax
Allocation Agreements, etc. . . . . . . . . . . . . . . . . . 36
5.15 Solvency Certificate; Evidence of Insurance . . . . . . . . . 36
5.16 Pro Forma Balance Sheet . . . . . . . . . . . . . . . . . . . 37
5.17 Projections . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.18 Consent Solicitation. . . . . . . . . . . . . . . . . . . . . 37
5.19 Consent of the Connecticut Development Authority. . . . . . . 37
5.20 Notice of Borrowing; Letter of Credit Request . . . . . . . . 37
SECTION 6. Representations, Warranties and Agreements. . . . . . . . . . 38
6.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . 38
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . 38
6.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . 39
6.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . 39
6.06 Governmental Approvals. . . . . . . . . . . . . . . . . . . . 40
6.07 Investment Company Act. . . . . . . . . . . . . . . . . . . . 40
6.08 Public Utility Holding Company Act. . . . . . . . . . . . . . 40
6.09 True and Complete Disclosure. . . . . . . . . . . . . . . . . 40
6.10 Financial Condition; Financial Statements . . . . . . . . . . 41
6.11 Security Interests. . . . . . . . . . . . . . . . . . . . . . 42
6.12 Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.13 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 43
6.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 44
6.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 44
6.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . 45
6.17 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . 45
6.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . 45
6.19 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.20 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . 46
6.21 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . 47
6.22 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . 47
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 47
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . 48
7.02 Books, Records and Inspections. . . . . . . . . . . . . . . . 51
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.04 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . 52
7.05 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . 52
7.06 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . 52
7.07 Compliance with Environmental Laws. . . . . . . . . . . . . . 53
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.09 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.10 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . 55
7.11 Additional Security; Further Assurances . . . . . . . . . . . 55
7.12 Register. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.13 Interest Rate Protection Agreements . . . . . . . . . . . . . 57
ii
<PAGE>
Page
----
SECTION 8. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 57
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . 57
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. . . . 57
8.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 63
8.05 Advances, Investments and Loans . . . . . . . . . . . . . . . 64
8.06 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . 67
8.07 Transactions with Affiliates. . . . . . . . . . . . . . . . . 69
8.08 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . 69
8.09 Minimum Consolidated EBITDA . . . . . . . . . . . . . . . . . 70
8.10 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . 70
8.11 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . 71
8.12 Limitation on Voluntary Payments and Modifications
of Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements;
Issuances of Capital Stock; etc.. . . . . . . . . . . . . . . 71
8.13 Limitation on Certain Restrictions on Subsidiaries. . . . . . 72
8.14 Limitation on the Creation of Subsidiaries. . . . . . . . . . 72
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . 73
9.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . 73
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.04 Default Under Other Agreements. . . . . . . . . . . . . . . . 74
9.05 Bankruptcy, etc.. . . . . . . . . . . . . . . . . . . . . . . 74
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.07 Security Documents. . . . . . . . . . . . . . . . . . . . . . 75
9.08 Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.10 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . .101
11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . .101
11.02 Delegation of Duties. . . . . . . . . . . . . . . . . . . . .102
11.03 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . .102
11.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . .102
11.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . .103
11.06 Nonreliance on Agent and Other Banks. . . . . . . . . . . . .103
11.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . .104
11.08 Agent in Its Individual Capacity. . . . . . . . . . . . . . .104
11.09 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . .105
11.10 Resignation of the Agent; Successor Agent . . . . . . . . . .105
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . .105
12.01 Payment of Expenses, Etc. . . . . . . . . . . . . . . . . . .105
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . .106
iii
<PAGE>
Page
----
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .107
12.04 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . .107
12.05 No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . .109
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . .109
12.07 Calculations; Computations. . . . . . . . . . . . . . . . . .110
12.08 Governing Law; Submission to Jurisdiction; Venue. . . . . . .110
12.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .111
12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . .111
12.11 Headings Descriptive. . . . . . . . . . . . . . . . . . . . .111
12.12 Amendment or Waiver; etc. . . . . . . . . . . . . . . . . . .111
12.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . .113
12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . .113
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . .113
12.16 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . .114
SECTION 13. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . .114
13.01 The Guaranty. . . . . . . . . . . . . . . . . . . . . . . . .114
13.02 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . .116
13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . .116
13.04 Independent Obligation. . . . . . . . . . . . . . . . . . . .117
13.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . .117
13.06 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . .118
13.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . .118
13.08 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .119
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
[ANNEX III Existing Letters of Credit]
ANNEX IV Real Properties
ANNEX V Existing Investments
ANNEX VI Subsidiaries
ANNEX VII Existing Indebtedness
ANNEX VIII Insurance
ANNEX IX Existing Liens
SCHEDULE 6.04 Litigation
SCHEDULE 6.10 Financial Condition
SCHEDULE 6.18 Environmental Matters
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Letter of Credit Request
EXHIBIT B-1 -- Form of Revolving Note
EXHIBIT B-2 -- Form of Swingline Note
EXHIBIT C -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT D -- Form of Opinion of Company's Counsel
EXHIBIT E -- Form of Officers' Certificate
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Security Agreement
EXHIBIT I -- Form of Solvency Certificate
iv
<PAGE>
Page
----
EXHIBIT K -- Form of Assignment and Assumption Agreement
EXHIBIT L -- Form of Intercompany Note
EXHIBIT M-1 -- Form of Mortgage
EXHIBIT M-2 -- Form of Deed of Trust
v
<PAGE>
This REVOLVING CREDIT AGREEMENT, dated as of October 2, 1996 (the
"Agreement"), among SUPERIOR TELECOM INC., a Delaware corporation (the
"Company"), each of the Subsidiary Guarantors party hereto (the "Guarantors"),
the lending institutions from time to time party hereto (each a "Bank" and,
collectively, the "Banks") and BANKERS TRUST COMPANY, as Administrative Agent
(in such capacity, the "Agent"), and BANK OF BOSTON CONNECTICUT, as
Documentation Agent. Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 10 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, The Alpine Group, Inc., a Delaware corporation ("Alpine"),
currently owns all of the outstanding stock of (i) the Company, (ii) Superior
Telecommunications Inc., a Georgia corporation ("Superior"), and (iii) DNE
Systems, Inc., a Delaware corporation ("DNE");
WHEREAS, in connection with the reorganization of the ownership of
Superior and DNE as direct subsidiaries of the Company as described below,
Alpine intends to, among other things, recapitalize the capital stock of
Superior into shares of common stock, all of which will be held directly by the
Company, and preferred stock, including 20,000 shares of the 6% Cumulative
Preferred Stock, par value $1.00 per share, of Superior having an aggregate
liquidation preference of $20,000,000 (the "Superior Preferred Stock"), which
will be retained by Alpine following the reorganization;
WHEREAS, Alpine intends to contribute to the Company (the
"Contribution") (x) all of the issued and outstanding common stock of Superior
and (y) all of the issued and outstanding capital stock of DNE;
WHEREAS, in connection with the reorganization of the ownership of
Superior and DNE described above, Alpine will, immediately prior to the
Contribution, cause Superior and DNE to (a) repay all intercompany debt owed by
Superior and DNE to any of their Affiliates and (b) declare one or more
dividends on its common stock, which repayment and dividend shall not exceed, in
the aggregate, $151,700,000 (the "Repayment" and, together with the
Contribution, the "Transaction");
WHEREAS, the Company, concurrently with or shortly after the
Transaction, currently intends to consummate an initial public offering of
Company Common Stock generating gross cash proceeds to the Company of at least
$75.0 million (such initial public offering, if consummated on or before
November 15, 1996, is hereinafter called the "Initial Public Offering"); and
<PAGE>
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make Revolving Loans to the Company and issue
Letters of Credit for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein, each of the Company, the Banks, the
Documentation Agent and the Agent hereby agrees as follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. (a) Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees, at any time and from time to time
on and after the Initial Borrowing Date and prior to the Final Maturity Date, to
make a revolving loan or loans (each a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Company, which Revolving Loans: (i) shall be
denominated in U.S. Dollars, (ii) except as hereinafter provided, shall, at the
option of the Company, be incurred and maintained as and/or converted into Base
Rate Loans or Eurodollar Loans (PROVIDED, HOWEVER, that all Loans from the
Initial Borrowing Date until the 30th day after the Initial Borrowing Date shall
be Base Rate Loans); and FURTHER PROVIDED that (x) all Revolving Loans made as
part of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Revolving Loans of the same Type and (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), no more than two Borrowings of Revolving Loans
to be maintained as Eurodollar Loans may be incurred after the 30th day after
the Initial Borrowing Date and prior to the 90th day after the Initial Borrowing
Date (each of which Borrowings of Eurodollar Loans may only have an Interest
Period of one month, and the first of which Borrowings may only be made on a
single date on or after such 30th day and the second of which Borrowings may
only be made on the last day of the Interest Period of the first such
Borrowing), (iii) may be repaid and reborrowed in accordance with the provisions
hereof and (iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when combined with such Bank's Percentage of
the Swingline Loans then outstanding and the Letter of Credit Outstandings
(exclusive of Unpaid Drawings relating to Letters of Credit which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time, equals the Revolving Loan
Commitment of such Bank at such time.
(b) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
on and after the Initial Borrowing Date and prior to the Swingline Expiry Date,
a loan or loans to the Company (each a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made
2
<PAGE>
and maintained as Base Rate Loans, (ii) shall be denominated in U.S. Dollars,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed in aggregate principal amount at any time outstanding,
when combined with the aggregate principal amount of all Revolving Loans then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings
relating to Letters of Credit which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans) at such time, an amount equal to the Total Revolving Loan Commitment then
in effect and (v) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount. BTCo shall not be obligated to make
any Swingline Loans at a time when a Bank Default exists unless BTCo has entered
into arrangements satisfactory to it and the Company to eliminate BTCo's risk
with respect to the Defaulting Bank's or Banks' participation in such Swingline
Loans, including by cash collateralizing such Defaulting Bank's or Banks'
Percentage of the outstanding Swingline Loans. BTCo will not make a Swingline
Loan after it has received written notice from the Company or the Required Banks
stating that a Default or an Event of Default exists until such time as BTCo
shall have received a written notice of (i) rescission of such notice from the
party or parties originally delivering the same or (ii) a waiver of such Default
or Event of Default from the Required Banks.
(c) On any Business Day, BTCo may, in its sole discretion, give
notice to the Banks and the Company that its outstanding Swingline Loans shall
be funded with a Borrowing of Revolving Loans (PROVIDED that each such notice
shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 9.05 or upon the exercise of any of
the remedies provided in the last paragraph of Section 9), in which case a
Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing,
a "Mandatory Borrowing") shall be made on the immediately succeeding Business
Day by all Banks PRO RATA based on each Bank's Percentage, and the proceeds
thereof shall be applied directly to repay BTCo for such outstanding Swingline
Loans. Each Bank hereby irrevocably agrees to make Base Rate Loans upon one
Business Day's notice pursuant to each Mandatory Borrowing in the amount and in
the manner specified in the preceding sentence and on the date specified in
writing by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing
may not comply with the Minimum Borrowing Amount otherwise required hereunder,
(ii) whether any conditions specified in Section 5 are then satisfied, (iii)
whether a Default or an Event of Default has occurred and is continuing, (iv)
the date of such Mandatory Borrowing and (v) any reduction in the Total
Revolving Loan Commitment after any such Swingline Loans were made. In the
event that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code in respect
3
<PAGE>
of the Company), each Bank (other than BTCo) hereby agrees that it shall
forthwith purchase from BTCo (without recourse or warranty) such assignment of
the outstanding Swingline Loans as shall be necessary to cause the Banks to
share in such Swingline Loans ratably based upon their respective Percentages;
PROVIDED that all interest payable on the Swingline Loans shall be for the
account of BTCo until the date the respective assignments is purchased and, to
the extent attributable to the purchased assignment, shall be payable to the
Bank purchasing same from and after such date of purchase.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount
of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount
applicable to such Loans, except that no Minimum Borrowing Amount shall be
applicable to any Revolving Loan requested by the Company which will be used to
repay a Swingline Loan. More than one Borrowing may be incurred on any day;
PROVIDED that at no time shall there be outstanding more than three Borrowings
of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Company desires to incur
Revolving Loans hereunder (excluding Borrowings of Revolving Loans incurred
pursuant to Mandatory Borrowings), it shall give the Agent at its Notice Office,
prior to 10:00 A.M. (New York time), at least two Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each a "Notice of Borrowing")
shall, except as provided in Section 1.10, be irrevocable, and, in the case of
each written notice and each confirmation of telephonic notice, shall be in the
form of EXHIBIT A-1, appropriately completed to specify (i) the aggregate
principal amount of the Revolving Loans to be made pursuant to such Borrowing,
(ii) the date of such Borrowing (which shall be a Business Day) and (iii)
whether the respective Borrowing shall consist of Base Rate Loans or, to the
extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Agent shall promptly
give each Bank written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Company desires to incur Swingline Loans
hereunder, it shall give BTCo not later than 2:00 P.M. (New York time) on the
day such Swingline Loan is to be made, written notice (or telephonic notice
promptly confirmed in writing) of each Swingline Loan to be made hereunder.
Each such notice shall be irrevocable and shall specify in each case (x) the
date of such Borrowing (which shall be a Business Day) and
4
<PAGE>
(y) the aggregate principal amount of the Swingline Loan to be made pursuant to
such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified
in Section 1.01(c), with the Company irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(c).
(c) Without in any way limiting the obligation of the Company to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the Letter of
Credit Issuer (in the case of the issuance of Letters of Credit), as the case
may be, may prior to receipt of written confirmation act without liability upon
the basis of such telephonic notice, believed by the Agent, BTCo or the Letter
of Credit Issuer, as the case may be, in good faith to be from an Authorized
Officer of the Company. The Agent's, BTCo's or the Letter of Credit Issuer's
record of the terms of such telephonic notice shall be final, conclusive and
binding absent manifest error.
1.04 DISBURSEMENT OF FUNDS. (a) Not later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 4:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(c)), each Bank
will make available its pro rata share, if any, of each Borrowing requested to
be made on such date (or in the case of Swingline Loans, BTCo shall make
available the full amount thereof) in the manner provided below. All amounts
shall be made available to the Agent in U.S. Dollars and in immediately
available funds at the Payment Office and the Agent promptly will make available
to the Company by depositing to its account at the Payment Office the aggregate
of the amounts so made available in the type of funds received. Unless the
Agent shall have been notified by any Bank prior to the date of Borrowing that
such Bank does not intend to make available to the Agent its portion of the
Borrowing or Borrowings to be made on such date, the Agent may assume that such
Bank has made such amount available to the Agent on such date of Borrowing, and
the Agent, in reliance upon such assumption, may (in its sole discretion and
without any obligation to do so) make available to the Company a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Bank and the Agent has made available same to the Company, the Agent
shall be entitled to recover such corresponding amount from such Bank. If such
Bank does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Company, and the Company shall
immediately pay such corresponding amount to the Agent, which payment may be
made, subject to the terms and conditions of this Agreement, from the proceeds
of a Loan. The Agent shall also be entitled to recover from the Bank
5
<PAGE>
or the Company, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by the Agent to the Company to the date such corresponding amount is recovered
by the Agent, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Rate or (y) if paid by the Company, the then applicable
rate of interest, calculated in accordance with Section 1.08.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Company may have against any Bank as a result of any default by such Bank
hereunder.
1.05 NOTES. (a) The Company's obligation to pay the principal of,
and interest on, all the Loans made to it by each Bank shall be evidenced (i) in
the case of Revolving Loans, by a promissory note substantially in the form of
EXHIBIT B-1 with blanks appropriately completed in conformity herewith (each a
"Revolving Note" and, collectively, the "Revolving Notes") and (ii) in the case
of Swingline Loans, by a promissory note substantially in the form of EXHIBIT
B-2 with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The Revolving Note issued to each Bank shall (i) be executed by
the Company, (ii) be payable to such Bank or its registered assigns and be dated
the Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the principal amount of
the outstanding Revolving Loans evidenced thereby, (iv) mature on the Final
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii)
be entitled to the benefits of the Credit Documents.
(c) The Swingline Note issued to BTCo shall (i) be executed by the
Company, (ii) be payable to BTCo or its registered assigns and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline
Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the
Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01, and mandatory repayment as provided in Section 4.02,
and (vii) be entitled to the benefits of the Credit Documents.
(d) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes
6
<PAGE>
endorse on the reverse side thereof the outstanding principal amount of Loans
evidenced thereby. Failure to make any such notation shall not affect the
Company's obligations in respect of such Loans.
1.06 CONVERSIONS. The Company shall have the option to convert on any
Business Day occurring on or after the Initial Borrowing Date, all or a portion
at least equal to the applicable Minimum Borrowing Amount of the outstanding
principal amount of Revolving Loans made pursuant to one or more Borrowings of
one or more Types of Revolving Loans into a Borrowing or Borrowings of another
Type of Revolving Loan; PROVIDED that (i) except as otherwise provided in
Section 1.10(b), no partial conversion of a Borrowing of Eurodollar Loans shall
reduce the outstanding principal amount of the Eurodollar Loans made pursuant to
such Borrowing to less than the Minimum Borrowing Amount applicable thereto,
(ii) Base Rate Loans may only be converted into Eurodollar Loans if no payment
Default, or Event of Default, is in existence on the date of the conversion,
(iii) unless the Agent has determined that the Syndication Date has occurred (at
which time this clause (iii) shall no longer be applicable), after the 30th day
after the Initial Borrowing Date and prior to the 90th day after the Initial
Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be
made if any such conversion is effective on the first day of the first or second
Interest Period referred to in clause (y) of the proviso to Section 1.01(a)(ii)
and then only so long as such conversion does not result in a greater number of
Borrowings of Eurodollar Loans prior to the 90th day after the Initial Borrowing
Date as are permitted under such Section 1.01(a)(ii) and (iv) Borrowings of
Eurodollar Loans resulting from this Section 1.06 shall be limited in number as
provided in Section 1.02. Each such conversion shall be effected by the Company
by giving the Agent at its Notice Office, prior to 10:00 A.M. (New York time),
at least two Business Days' (or one Business Day's in the case of a conversion
into Base Rate Loans) prior written notice (or telephonic notice promptly
confirmed in writing) (each a "Notice of Conversion") specifying the Revolving
Loans to be so converted, the Borrowing(s) pursuant to which the Revolving Loans
were made and, if to be converted into a Borrowing of Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Agent shall give each
Bank prompt notice of any such proposed conversion affecting any of its
Revolving Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Revolving Loans under
this Agreement shall be made by the Banks PRO RATA on the basis of their
Revolving Loan Commitments. It is understood that no Bank shall be responsible
for any default by any other Bank of its obligation to make Revolving Loans
hereunder and that each Bank shall be obligated to make the Revolving Loans to
be made by it hereunder, regardless of the failure of any other Bank to fulfill
its commitments hereunder.
7
<PAGE>
1.08 INTEREST. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Base Rate Margin in excess of the Base Rate in effect from time to
time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all
times be the Applicable Eurodollar Margin in excess of the relevant Eurodollar
Rate.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (x) the rate which is 2% in excess of the rate then borne by
such Loans and (y) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans from time to time. Interest which accrues under
this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof (determined in
accordance with Section 4.03) and shall be payable (i) in respect of each Base
Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect
of each Eurodollar Loan, on (x) the date of any prepayment or repayment thereof
(on the amount prepaid or repaid), (y) the date of any conversion into a Base
Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable (on the
amount so converted) and (z) the last day of each Interest Period applicable
thereto and, in the case of an Interest Period in excess of three months, on
each date occurring at three month intervals after the first day of such
Interest Period and (iii) in respect of each Loan, at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period, shall promptly notify the Company
and the Banks thereof.
1.09 INTEREST PERIODS. At the time the Company gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto)
8
<PAGE>
or prior to 10:00 A.M. (New York time) on the second Business Day prior to the
expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans,
the Company shall have the right to elect by giving the Agent written notice (or
telephonic notice promptly confirmed in writing) of the Interest Period
applicable to such Borrowing, which Interest Period shall, at the option of the
Company (but otherwise subject to clause (y) of the proviso to Section
1.01(a)(ii)), be a one, two, three or six month period. Notwithstanding
anything to the contrary contained above:
(i) all Eurodollar Loans comprising a single Borrowing shall
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing (including
the date of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period shall be elected which extends beyond
the Final Maturity Date;
(vi) no Interest Period may be elected at any time when a
Default or any Event of Default is then in existence; and
(vii) no Interest Period in respect of any Borrowing of
Eurodollar Loans shall be elected which extends beyond any date upon which
a mandatory prepayment of Revolving Loans is required to be made under
Section 4.02(a), as a result of reductions to the Total Revolving Loan
Commitment pursuant to Section 3.03(b), unless the aggregate principal
amount of Revolving Loans which are maintained as Base Rate Loans or which
have Interest Periods which will expire on or before such date will be
sufficient to make such required payment.
9
<PAGE>
If upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans, the Company has failed to elect, or is not permitted to elect
by virtue of the application of clause (vi) above, a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans as provided above,
the Company shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such current
Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period, that, by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of net income taxes or similar charges) because of (x) any
change since the date of this Agreement in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having the
force of law), or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule, regulation,
guideline, order or request (such as, for example, but not limited to, a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the date of this Agreement, that the
making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force of
law but with which such Bank customarily complies even though the failure
to comply therewith would not be unlawful), or has become impracticable as
a result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;
10
<PAGE>
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall (x) within five Business Days after any such event and (y) within
five Business Days of the date on which such event no longer exists give notice
(by telephone confirmed in writing) to the Company and (except in the case of
clause (i)) to the Agent of such determination (which notice the Agent shall
promptly transmit to each of the other Banks). Thereafter, (x) in the case of
clause (i) above, Eurodollar Loans shall no longer be available until such time
as the Agent notifies the Company and the Banks that the circumstances giving
rise to such notice by the Agent no longer exist (which notice the Agent shall
endeavor to give promptly after any express determination thereof by the Agent),
and any Notice of Borrowing or Notice of Conversion given by the Company with
respect to Eurodollar Loans which have not yet been incurred shall be deemed
rescinded by the Company, (y) in the case of clause (ii) above, the Company
agrees to pay to such Bank, upon written demand therefor (accompanied by the
written notice referred to below), such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts received
or receivable hereunder (a written notice as to the additional amounts owed to
such Bank, showing the basis for the calculation thereof, submitted to the
Company by such Bank shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Company shall take one of the actions specified in Section 1.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Company may (and in
the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Company shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the Company
was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the
affected Eurodollar Loan is then outstanding, upon at least two Business Days'
notice to the Agent, require the affected Bank to convert each such Eurodollar
Loan into a Base Rate Loan (which conversion, in the case of the circumstances
described in Section 1.10(a)(iii), shall occur no later than the last day of the
Interest Period then applicable to such Eurodollar Loan (or such earlier date as
shall be required by applicable law)); provided that if more than one Bank is
affected at any time, then all affected Banks must be treated the same pursuant
to this Section 1.10(b).
(c) If any Bank shall have determined that the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or
11
<PAGE>
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or any corporation
controlling such Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, in each case, after the date of this Agreement, has or would
have the effect of reducing the rate of return on such Bank's or such other
corporation's capital or assets as a consequence of such Bank's Revolving Loan
Commitment or obligations hereunder to a level below that which such Bank or
such other corporation could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration such Bank's or such other
corporation's policies with respect to capital adequacy), then from time to
time, upon written demand by such Bank (with a copy to the Agent), accompanied
by the notice referred to in the last sentence of this clause (c), the Company
shall pay to such Bank such additional amount or amounts as will compensate such
Bank or such other corporation for such reduction. Each Bank, upon determining
in good faith that any additional amounts will be payable pursuant to this
Section 1.10(c), will give prompt written notice thereof to the Company, which
notice shall set forth the basis of the calculation of such additional amounts,
although the failure to give any such notice shall not release or diminish the
Company's obligations to pay additional amounts pursuant to this Section 1.10(c)
upon the subsequent receipt of such notice.
1.11 COMPENSATION. The Company shall compensate each Bank, promptly
upon its written request (which request shall set forth the basis for requesting
such compensation), for all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans but excluding loss of anticipated profit
with respect to any Eurodollar Loans) which such Bank may sustain: (i) if for
any reason (other than a default by such Bank or the Agent) a Borrowing of
Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Company or
deemed withdrawn pursuant to Section 1.10(a) or (b)); (ii) if any repayment
(including any repayment made pursuant to Section 4.01 or 4.02 or as a result of
an acceleration of the Loans pursuant to Section 9) or conversion of any
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the Company;
or (iv) as a consequence of (x) any other default by the Company to repay its
Eurodollar Loans when required by the terms of this Agreement or (y) an election
made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank
under this Section 1.11 shall be made as though that Bank had actually funded
its relevant
12
<PAGE>
Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of that Loan, having
maturity comparable to the relevant Interest Period and through the transfer of
such Eurodollar deposit from an offshore office of that Bank to a domestic
office of that Bank in the Unites States of America; PROVIDED, HOWEVER, that
each Bank may fund each of its Eurodollar Loans in any manner it sees fit and
the foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 1.11. It is further understood and agreed that if
any repayment of Eurodollar Loans pursuant to Section 4.01 or any conversion of
Eurodollar Loans pursuant to Section 1.06 in either case occurs on a date which
is not the last day of an Interest Period applicable thereto, such repayment or
conversion shall be accompanied by any amounts owing to any Bank pursuant to
this Section 1.11.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Company, use reasonable efforts (subject to overall policy considerations of
such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; PROVIDED that such designation is made on such
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Company or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 REPLACEMENT OF BANKS. (x) If any Bank becomes a Defaulting Bank,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Company increased costs
in excess of those being generally charged by the other Banks or (z) in the case
of a refusal by a Bank to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks as provided in Section 12.12(b) the Company shall have the right,
if no Default or Event of Default then exists or, in the case of clause (z)
above, would exist after giving effect to such replacement, to replace such Bank
(the "Replaced Bank") with one or more other Eligible Transferee or Transferees,
none of whom shall constitute a Defaulting Bank at the time of such replacement
(collectively, the "Replacement Bank") and each of whom shall be acceptable to
the Agent; PROVIDED that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the
13
<PAGE>
Replacement Bank) pursuant to which the Replacement Bank shall acquire the
Revolving Loan Commitment and outstanding Revolving Loans of, and in each case
participations in Letters of Credit by, the Replaced Bank and, in connection
therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal
to the sum of (A) an amount equal to the principal of, and all accrued interest
on, all outstanding Revolving Loans of the Replaced Bank, (B) an amount equal to
all Unpaid Drawings that have been funded by (and not reimbursed to) such
Replaced Bank, together with all then unpaid interest with respect thereto at
such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees
owing to the Replaced Bank pursuant to Section 3.01, (y) each Letter of Credit
Issuer an amount equal to such Replaced Bank's Percentage of any Unpaid Drawing
relating to Letters of Credit issued by such Letter of Credit Issuer (which at
such time remains an Unpaid Drawing) to the extent such amount was not
theretofore funded by such Replaced Bank and (z) BTCo an amount equal to such
Replaced Bank's Percentage of any Mandatory Borrowing to the extent such amount
was not theretofore funded by such Replaced Bank, and (ii) all obligations of
the Company then owing to the Replaced Bank (other than those specifically
described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid, but including all amounts, if any,
owing under Section 1.11) shall be paid in full to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreements, the payment of amounts referred to in
clauses (i) and (ii) above, recordation of the assignment on the Register by the
Agent pursuant to Section 7.12 and, if so requested by the Replacement Bank of
the appropriate Revolving Note or Revolving Notes executed by the Company, the
Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease
to constitute a Bank hereunder, except with respect to indemnification
provisions under this Agreement (including, without limitation, Sections 1.10,
1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to such Replaced
Bank.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Company may request the Letter of Credit Issuer
at any time and from time to time on or after the Initial Borrowing Date and
prior to the Business Day preceding the Final Maturity Date to issue, for the
account of the Company and in support of, on a standby basis, L/C Supportable
Indebtedness of the Company or any of its Subsidiaries that are Guarantors to
any other Person, irrevocable letters of credit in such form as may be approved
by such Letter of Credit Issuer (each such letter of credit, a "Letter of
Credit" and, collectively, the "Letters of Credit"). Notwithstanding the
foregoing, no Letter of Credit Issuer shall be under any obligation to issue any
Letter of Credit if at the time of such issuance:
14
<PAGE>
(i) any order, judgment or decree of any governmental authority
or arbitrator shall purport by its terms to enjoin or restrain such Letter
of Credit Issuer from issuing such Letter of Credit or any requirement of
law applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated pursuant to the terms
hereof) not in effect on the date hereof, or any unreimbursed loss, cost or
expense which was not applicable, in effect or known to such Letter of
Credit Issuer as of the date hereof and which such Letter of Credit Issuer
in good faith deems material to it; or
(ii) such Letter of Credit Issuer shall have received notice from
the Company or the Required Banks prior to the issuance of such Letter of
Credit of the type described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) the Letter of Credit Sublimit or (y) when added to the
aggregate principal amount of all Revolving Loans and Swingline Loans then
outstanding, the Total Revolving Loan Commitment at such time; (ii) each Letter
of Credit shall have an expiry date occurring not later than one year after such
Letter of Credit's date of issuance; provided that any such Letter of Credit may
be automatically extendable for periods of up to one year so long as such Letter
of Credit provides that the respective Letter of Credit Issuer retains an
option, satisfactory to such Letter of Credit Issuer, to terminate such Letter
of Credit within a specified period of time prior to each scheduled extension
date; PROVIDED, FURTHER, that each Letter of Credit shall state and shall
provide that it shall, in no event, expire no later than five Business Days
prior to the Final Maturity Date; (iii) each Letter of Credit shall be
denominated in U.S. Dollars; (iv) each Letter of Credit shall provide that the
Stated Amount of each Letter of Credit shall not be less than $25,000 or such
lesser amount as is acceptable to the respective Letter of Credit Issuer; and
(v) no Letter of Credit Issuer will issue any Letter of Credit after it has
received written notice from the Company or the Required Banks stating that a
Default or an Event of Default exists until such time as such Letter of Credit
Issuer shall have received a written notice of (x) rescission of such
15
<PAGE>
notice from the party or parties originally delivering the same or (y) a waiver
of such Default or Event of Default by the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Company to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' Percentage of the Letter of Credit Outstandings, as the case
may be. No such arrangement shall prejudice the right of the Company or the
Letter of Credit Issuer to pursue any available remedies it may have against any
Defaulting Bank.
2.02 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a) Whenever
the Company desires that a Letter of Credit be issued, the Company shall give
the Agent and the respective Letter of Credit Issuer written notice (or
telephonic notice confirmed in writing) thereof prior to 12:00 Noon (New York
time) at least two Business Days (or such shorter period as may be acceptable to
the respective Letter of Credit Issuer) prior to the proposed date of issuance
(which shall be a Business Day) which written notice shall be in the form of
EXHIBIT A-2 (each, a "Letter of Credit Request"). Each Letter of Credit Request
shall include any other documents as such Letter of Credit Issuer customarily
requires in connection therewith.
(b) Each Letter of Credit Issuer shall, promptly after each issuance
of, or amendment or modification to, a Letter of Credit issued by it, give the
Agent, each Bank and the Company written notice of the issuance of, or amendment
or modification to, such Letter of Credit, accompanied by a copy of the Letter
of Credit or Letters of Credit issued by it and each such amendment or
modification thereto.
2.03 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (e) The Company
hereby agrees to reimburse each Letter of Credit Issuer, by making payment to
the Agent in immediately available funds at the Payment Office, for any payment
or disbursement made by such Letter of Credit Issuer under any Letter of Credit
issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid
Drawing") no later than one Business Day following the date of such payment or
disbursement, with interest on the amount so paid or disbursed by such Letter of
Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time)
on the date of such payment or disbursement, from and including the date paid or
disbursed to but not including the date such Letter of Credit Issuer is
reimbursed therefor at a rate per annum which shall be the Applicable Base Rate
Margin in excess of the Base Rate as in effect from time to time (plus an
additional 2% per
16
<PAGE>
annum if not reimbursed by the third Business Day after the date of such payment
or disbursement), such interest also to be payable on demand. Each Letter of
Credit Issuer shall provide the Company prompt notice of any payment or
disbursement made by it under any Letter of Credit issued by it, although the
failure of, or delay in, giving any such notice shall not release or diminish
the obligations of the Company under this Section 2.03(a) or under any other
Section of this Agreement.
(b) The Company's obligation under this Section 2.03 to reimburse the
respective Letter of Credit Issuer with respect to Unpaid Drawings (including,
in each case, interest thereon) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Company or any of its Subsidiaries may have or have had
against such Letter of Credit Issuer, the Agent or any Bank, including, without
limitation, any defense based upon the failure of any drawing under a Letter of
Credit issued by it to conform to the terms of the Letter of Credit or any
nonapplication or misapplication by the beneficiary of the proceeds of such
drawing; PROVIDED, HOWEVER, that the Company shall not be obligated to reimburse
such Letter of Credit Issuer for any wrongful payment made by such Letter of
Credit Issuer under a Letter of Credit issued by it as a result of acts or
omissions that have been found to constitute willful misconduct or gross
negligence on the part of such Letter of Credit Issuer.
2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (each a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Percentage, in such Letter of Credit, each
substitute Letter of Credit, each drawing made thereunder and the obligations of
the Company under this Agreement with respect thereto (although Letter of Credit
Fees shall be payable directly to the Agent for the account of the Banks as
provided in Section 3.01(b) and the Participants shall have no right to receive
any portion of any Facing Fees with respective to such Letters of Credit) and
any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Loan Commitments of the Banks pursuant to Section 1.13 or 12.04(b), it
is hereby agreed that, with respect to all outstanding Letter of Credit and
Unpaid Drawings with respect thereto, there shall be an automatic adjustment to
the participations pursuant to this Section 2.04 to reflect the new Percentages
of the assigning and assignee Bank.
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any
17
<PAGE>
documents required to be delivered under such Letter of Credit have been
delivered and that they appear to substantially comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by any Letter of Credit Issuer under or in connection with any Letter of Credit
issued by it if taken or omitted in the absence of such a finding of gross
negligence or willful misconduct, shall not create for such Letter of Credit
Issuer any resulting liability.
(g) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Company shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Participant of such failure, and each
such Participant shall promptly and unconditionally pay to the Agent for the
account of such Letter of Credit Issuer, the amount of such Participant's
Percentage of such payment in U.S. Dollars and in same day funds; PROVIDED,
HOWEVER, that no Participant shall be obligated to pay to the Agent its
Percentage of such unreimbursed amount for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit issued by it as a result of
acts or omissions that have been found to constitute willful misconduct or gross
negligence on the part of such Letter of Credit Issuer. If the Agent so
notifies any Participant required to fund a payment under a Letter of Credit
prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall
make available to the Agent for the account of the respective Letter of Credit
Issuer such Participant's Percentage of the amount of such payment on such
Business Day in same day funds (and, to the extent such notice is given after
11:00 A.M. (New York time) on any Business Day, such Participant shall make such
payment on the immediately following Business Day). If and to the extent such
Participant shall not have so made its Percentage of the amount of such payment
available to the Agent for the account of the respective Letter of Credit
Issuer, such Participant agrees to pay to the Agent for the account of such
Letter of Credit Issuer, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Agent for the account of the Letter of Credit Issuer at the overnight Federal
Funds Rate. The failure of any Participant to make available to the Agent for
the account of the respective Letter of Credit Issuer its Percentage of any
payment under any Letter of Credit issued by it shall not relieve any other
Participant of its obligation hereunder to make available to the Agent for the
account of such Letter of Credit Issuer its applicable Percentage of any payment
under any such Letter of Credit on the date required, as specified above, but no
Participant shall be responsible for the failure of any other Participant to
make available to the Agent for the account of such Letter of Credit Issuer such
other Participant's Percentage of any such payment.
18
<PAGE>
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
such Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, such Letter of Credit Issuer shall pay to the Agent and the
Agent shall promptly pay to each Participant which has paid its Percentage
thereof, in U.S. Dollars and in same day funds, an amount equal to such
Participant's Percentage of the principal amount thereof and interest thereon
accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to each
Letter of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, any Letter of Credit Issuer, any Bank, or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Company or any of its Subsidiaries and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 INCREASED COSTS. If the adoption or effectiveness of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Letter of Credit Issuer or any Participant with
any request or directive (whether or not having the force of
19
<PAGE>
law) by any such authority, central bank or comparable agency, in each case,
after the date hereof, shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by such Letter of Credit Issuer or such Participant's
participation therein, or (ii) impose on any Letter of Credit Issuer or any
Participant any other conditions affecting this Agreement, any Letter of Credit
or such Participant's participation therein; and the result of any of the
foregoing is to increase the cost to such Letter of Credit Issuer or such
Participant of issuing, maintaining or participating in any Letter of Credit, or
to reduce the amount of any sum received or receivable by such Letter of Credit
Issuer or such Participant hereunder, then, upon written demand to the Company
by such Letter of Credit Issuer or such Participant (a copy of which notice
shall be sent by such Letter of Credit Issuer or such Participant to the Agent),
accompanied by the certificate described in the last sentence of this Section
2.05, the Company shall pay to such Letter of Credit Issuer or such Participant
such additional amount or amounts as will compensate such Letter of Credit
Issuer or such Participant for such increased cost or reduction. A certificate
submitted to the Company by such Letter of Credit Issuer or such Participant, as
the case may be (a copy of which certificate shall be sent by such Letter of
Credit Issuer or such Participant to the Agent), setting forth the basis for the
determination of such additional amount or amounts necessary to compensate such
Letter of Credit Issuer or such Participant as aforesaid shall be final and
conclusive and binding on the Company absent manifest error, although the
failure to deliver any such certificate shall not release or diminish the
Company's obligations to pay additional amounts pursuant to this Section 2.05
upon subsequent receipt of such certificate.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Company shall pay to the Agent for distribution
to each Non-Defaulting Bank a commitment fee (the "Commitment Fee") for the
period from and including the Effective Date to but not including the Final
Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall
have been terminated), computed at a rate for each day equal to .50% on the
daily average Unutilized Revolving Loan Commitment of such Bank. Accrued
Commitment Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date and the date upon which the Total Revolving Loan Commitment is
terminated.
(b) The Company shall pay to the Agent for the account of the Banks
PRO RATA on the basis of their Percentages, a fee in respect of each Letter of
Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Eurodollar Margin then in effect on the daily Stated Amount of such
Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and
20
<PAGE>
upon and until the first day on or after the termination of the Total Revolving
Loan Commitment upon which no Letters of Credit remain outstanding.
(c) The Company shall pay to the Agent for the account of each Letter
of Credit Issuer a fee in respect of each Letter of Credit issued by such Letter
of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of 1% per annum
on the daily Stated Amount of such Letter of Credit; PROVIDED that in no event
shall the annual Facing Fee with respect to each Letter of Credit be less $500;
it being agreed that, on the date of issuance of any Letter of Credit and on
each anniversary thereof prior to the termination of such Letter of Credit, if
$500 will exceed the amount of Facing Fees that will accrue with respect to such
Letter of Credit for the immediately succeeding 12-month period, the full $500
shall be payable on the date of issuance of such Letter of Credit and on each
such anniversary thereof prior to the termination of such Letter of Credit.
Except as provided in the immediately preceding sentence, accrued Facing Fees
shall be due and payable quarterly in arrears on each Quarterly Payment Date and
upon the first day on or after the termination of the Total Revolving Loan
Commitment upon which no Letters of Credit remain outstanding.
(d) The Company shall pay directly to each Letter of Credit Issuer
upon each issuance of, payment under, and/or amendment of, a Letter of Credit
issued by such Letter of Credit Issuer such amount as shall at the time of such
issuance, payment or amendment be the administrative charge which such Letter of
Credit Issuer is customarily charging for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Company shall pay to the Agent and the Documentation Agent,
for its own respective account, such fees as may be agreed to from time to time
between the Company and the Agent and the Company and the Documentation Agent,
as the case may be, in each case, when and as due.
(f) All computations of Fees shall be made in accordance with Section
12.07(b).
3.02 VOLUNTARY TERMINATION OR REDUCTION OF TOTAL UNUTILIZED REVOLVING
LOAN COMMITMENT. (a) Upon at least two Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) to the Agent as its Notice
Office (which notice the Agent shall promptly transmit to each of the Banks),
the Company shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Revolving Loan Commitment; PROVIDED that
(x) any such termination or partial reduction shall apply to proportionately and
permanently reduce the Revolving Loan Commitment of each of the Banks and (y)
any partial reduction pursuant to this Section 3.02(a) shall be in the amount of
at least $500,000.
21
<PAGE>
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Company (with the consent of the Agent) shall have the right, upon
five Business Days' prior written notice to the Agent at its Notice Office
(which notice the Agent shall promptly transmit to each of the Banks), to
terminate the entire Revolving Loan Commitment of such Bank, so long as all
Revolving Loans, together with accrued and unpaid interest, Fees and all other
amounts, owing to such Bank (including all amounts, if any, owing pursuant to
Section 1.11) are repaid concurrently with the effectiveness of such termination
pursuant to Section 4.01(b) and the Company shall pay to the Agent as such time
an amount in cash and/or Cash Equivalents equal to such Bank's applicable
Percentage of the outstanding Letters of Credit (which cash and/or Cash
Equivalents shall be held by the Agent as security for the obligations of the
Company hereunder in respect of the outstanding Letters of Credit pursuant to a
cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Agent, which shall permit certain investments in Cash
Equivalents reasonably satisfactory to the Agent until the proceeds are applied
to the secured obligations) (at which time Annex I shall be deemed modified to
reflect such changed amounts), and at such time, such Bank shall no longer
constitute a "Bank" for purposes of this Agreement, except with respect to
indemnification under this Agreement (including, without limitation, Sections
1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to such repaid
Bank.
3.03 MANDATORY REDUCTION OF REVOLVING LOAN COMMITMENTS. (a) The
Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank)
shall terminate in its entirety on November 30, 1996 unless the Initial
Borrowing Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment shall be permanently
reduced on the dates set forth below and by the amounts set forth opposite such
dates below:
Amount of Reduction Amount of Reduction
if the Initial if the Initial
Public Offering Public Offering
Date Has Not Occurred Has Occurred
- --------------------------------------------------------------------------------
October 31, 1999 $ 30,000,000 $ 25,000,000
October 31, 2000 $ 30,000,000 $ 25,000,000
October 31, 2001 $115,000,000 $100,000,000
22
<PAGE>
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Initial Borrowing Date on
which the Company or any of its Subsidiaries receives Net Cash Proceeds from an
Asset Sale or Sales in excess of $1,000,000 individually or $1,000,000 in the
aggregate in any consecutive twelve month period, the Total Revolving Loan
Commitment shall be permanently reduced by an amount equal to 100% of such Net
Cash Proceeds; PROVIDED that with respect to no more than $5,000,000 in the
aggregate of such Net Cash Proceeds in any consecutive twelve month period of
the Company, such Net Cash Proceeds shall not give rise to a reduction to the
Total Revolving Loan Commitment on such date to the extent that no Default or
Event of Default then exists and the Company delivers a certificate to the Agent
on or prior to such date stating that such Net Cash Proceeds shall be used to
purchase assets used or to be used in the businesses permitted pursuant to
Section 8.01 (including, without limitation (but only to the extent permitted by
Section 8.02), the purchase of the capital stock (or other equity interests) of
a Person engaged in such businesses) within one year following the date of
receipt of such Net Cash Proceeds from such Asset Sale (which certificate shall
set forth the estimates of the proceeds to be so expended); and PROVIDED,
FURTHER, that (1) if all or any portion of such Net Cash Proceeds are not so
used (or contractually committed to be used) within such one year period, the
Total Revolving Loan Commitment shall be permanently reduced on the last day of
such period by an amount equal to such remaining portion and (2) if all or any
portion of such Net Cash Proceeds are not so used within such one year period
referred to in clause (1) above because such amount is contractually committed
to be used and subsequent to such date such contract is terminated or expires
without such portion being so used, the Total Revolving Loan Commitment shall be
permanently reduced on the date of such termination or expiration by an amount
equal to such remaining portion.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Initial Borrowing Date on
which the Company or any of its Subsidiaries receives any cash proceeds from any
incurrence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 8.04) by the Company or any of its Subsidiaries, the Total
Revolving Loan Commitment shall be permanently reduced by an amount equal to
100% of the cash proceeds (net of all underwriting discounts, fees and
commissions and other costs and expenses associated therewith) of the respective
incurrence of Indebtedness.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Initial Borrowing Date on
which the Company or any of its Subsidiaries receives any cash proceeds
exceeding, in one transaction or series of related transactions, $25,000,000,
from
23
<PAGE>
any sale or issuance of preferred or common equity of (or cash capital
contributions to) the Company or any of its Subsidiaries (other than proceeds
received from (u) the Transaction, (v) the Initial Public Offering (except as
otherwise expressly provided herein), (w) issuances of options to purchase the
Company Common Stock to management, directors, non-employee consultants, and
employees of the Company and its Subsidiaries, (x) issuances of the Company
Common Stock (including as a result of the exercise of any options with regard
thereto) to management, directors, non-employee consultants, and employees of
the Company and its Subsidiaries, (y) issuance of Company Common Stock as
consideration for a Permitted Acquisition and (z) equity contributions to any
Subsidiary of the Company made by the Company or any other Subsidiary of the
Company), the Total Revolving Loan Commitment shall be permanently reduced by an
amount equal to one-half of such cash proceeds (net of all underwriting
discounts, fees and commissions and other costs and expenses associated
therewith) of the respective equity issuance or capital contribution; PROVIDED
that upon consummation of the Initial Public Offering, (x) the Company shall
repay Loans so that, after giving effect to the Initial Public Offering, the
aggregate amount of Loans then outstanding shall not exceed the Target Amount
and (y) the Total Revolving Loan Commitment shall be reduced (to the extent not
previously reduced) to $150,000,000.
(f) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, within 10 days following each date on or after the Initial
Borrowing Date on which the Company or any of its Subsidiaries receives any Net
Award in respect of any Condemnation or any Net Proceeds in respect of any
Destruction, the Total Revolving Loan Commitment shall be permanently reduced by
an amount equal to 100% of such Net Award or Net Proceeds, as applicable, but
only if required to be applied to repayment of the Loans pursuant to the terms
of the applicable Mortgage.
(g) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate in its entirety on the Final Maturity
Date.
(h) Each reduction to the Total Revolving Loan Commitment pursuant to
this Section 3.03 shall apply proportionately to reduce the Revolving Loan
Commitment of each Bank.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. (a) The Company shall have the right to
prepay the Loans, in whole or in part, without premium or penalty except as
otherwise provided in this Agreement, from time to time on the following terms
and conditions: (i) the Company shall give the Agent at its Notice
24
<PAGE>
Office written notice (or telephonic notice promptly confirmed in writing) of
its intent to prepay the Loans, whether such Loans are Revolving Loans or
Swingline Loans, the amount of such prepayment and (in the case of Eurodollar
Loans) the specific Borrowing(s) pursuant to which such Loans were made, which
notice shall be given by the Company prior to 11:00 A.M. (New York time) (x) at
least one Business Day prior to the date of such prepayment in the case of
Revolving Loans maintained as Base Rate Loans, (y) on the date of such
prepayment in the case of Swingline Loans and (z) at least three Business Days
prior to the date of such prepayment in the case of Eurodollar Loans, which
notice shall, except in the case of Swingline Loans, promptly be transmitted by
the Agent to each of the Banks; (ii) each prepayment shall be in an aggregate
principal amount of at least $1,000,000 (or $100,000 (or, if less, the full
amount of Swingline Loans then outstanding) in the case of Swingline Loans);
PROVIDED that no partial payment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Eurodollar Loans
outstanding pursuant to such Borrowing to an amount less than the Minimum
Borrowing Amount applicable thereto; and (iii) each prepayment in respect of any
Revolving Loans made pursuant to a Borrowing shall be applied PRO rata among
such Revolving Loans; PROVIDED that such prepayment shall not be applied to any
Revolving Loans of a Defaulting Bank.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Company shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks) to repay all Revolving Loans of such
Bank (including all amounts, if any, owing pursuant to Section 1.11), together
with accrued and unpaid interest, Fees and all other amounts then owing to such
Bank in accordance with said Section 12.12(b) so long as (A) the Revolving Loan
Commitment of such Bank is terminated concurrently with such repayment pursuant
to Section 3.02(b) (at which time Annex I shall be deemed modified to reflect
the changed Revolving Loan Commitments), (B) the Company shall cash
collateralize such Bank's applicable Percentage of the Letter of Credit
Outstandings in accordance with Section 3.02(b) and (C) in the case of the
repayment of Revolving Loans of such Bank, the consents required by Section
12.12(b) in connection with the repayment pursuant to this clause (b) shall have
been obtained.
4.02 MANDATORY PREPAYMENTS. (a) If on any date the sum of (i) the
aggregate outstanding principal amount of Revolving Loans and Swingline Loans
(after giving effect to all other repayments thereof on such date) plus (ii) the
Letter of Credit Outstandings on such date exceeds the Total Revolving Loan
Commitment as then in effect, the Company shall repay on such date the principal
of Swingline Loans, and if no Swingline Loans
25
<PAGE>
are or remain outstanding, Revolving Loans in an aggregate amount equal to such
excess. If, after giving effect to the prepayment of all outstanding Swingline
Loans and Revolving Loans, the aggregate amount of Letter of Credit Outstandings
exceeds the Total Revolving Loan Commitment as then in effect, the Company shall
pay to the Agent on such date an amount in cash and/or Cash Equivalents equal to
such excess (up to the aggregate amount of Letter of Credit Outstandings at such
time) and the Agent shall hold such payment as security for the obligations of
the Company hereunder pursuant to a cash collateral agreement to be entered into
in form and substance reasonably satisfactory to the Agent (which shall permit
certain investments in Cash Equivalents reasonably satisfactory to the Agent
until the proceeds are applied to the secured obligations); PROVIDED that any
such Cash collateral shall be released to the Company at any time at which such
excess shall no longer exist.
(b) Within ten days following the date of receipt by the Company or
any Subsidiary Guarantor of any Net Award in respect of a Taking of any
Mortgaged Real Property or Net Proceeds of a Destruction of any Mortgaged Real
Property required pursuant to the applicable Mortgage to be applied to repayment
of the Loans, the Company or such Subsidiary Guarantor shall cause 100% of such
Net Award or Net Proceeds to be paid to the Agent. Any such payment shall be
applied first to repay outstanding Swingline Loans and then to repay outstanding
Revolving Loans.
(c) With respect to each repayment of Revolving Loans required by
this Section 4.02, the Company may designate the Types of Revolving Loans which
are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing(s)
pursuant to which such Loans were made; PROVIDED that (i) Eurodollar Loans may
be designated for repayment pursuant to this Section 4.02 only on the last day
of an Interest Period applicable thereto unless all Eurodollar Loans with
Interest Periods ending on such date of required prepayment and all Base Rate
Loans have been paid in full; (ii) if any repayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans to
an amount less than the Minimum Borrowing Amount, such Borrowing shall be
immediately converted into Base Rate Loans; and (iii) each repayment of any
Revolving Loans made pursuant to a Borrowing shall be applied PRO RATA among
such Revolving Loans. In the absence of a designation by the Company as
described in the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion with a view, but no obligation, to
minimize breakage costs owing under Section 1.11.
(d) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all then outstanding Revolving Loans shall
be repaid in full on the Final Maturity Date.
26
<PAGE>
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or under any Note shall be
made to the Agent for the ratable account of the Banks entitled thereto, not
later than 2:00 P.M. (New York time) on the date when due and shall be made in
immediately available funds and in U.S. Dollars at the Payment Office, it being
understood that written, telex or facsimile transmission notice by the Company
to the Agent to make a payment from the funds in the Company's account at the
Payment Office shall constitute the making of such payment to the extent of such
funds held in such account. Any payments under this Agreement or under any Note
which are made later than 2:00 P.M. (New York time) shall be deemed to have been
made on the next succeeding Business Day. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is not a
Business Day (unless otherwise provided herein), the due date thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest shall be payable during such extension at the applicable
rate in effect immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Company hereunder or
under any Note will be made without setoff, counterclaim or other defense (which
payment shall not be deemed a waiver by the Company of any claims arising under
this Agreement). Except as provided in Section 4.04(b), all such payments will
be made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payment
(but excluding, except as provided in the second succeeding sentence, any tax
(including any franchise tax) imposed on or measured by the net income or net
profits of a Bank pursuant to the laws of the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Bank is located or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect thereto (all
such nonexcluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Company agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Company agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing
27
<PAGE>
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence; PROVIDED, HOWEVER, that no such reimbursement shall
be required unless such Bank determines that the amount of such Taxes exceeds
the amount of any credit, allowance or deduction allowable to such Bank as an
offset against any Taxes payable on behalf of such Bank and in such event
reimbursement shall not be required in any amount greater than such excess. The
Company will furnish to the Agent within 45 days after the date the payment of
any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Company. The Company agrees to indemnify and
hold harmless each Bank and the Agent, and reimburse such Bank and the Agent
upon its written request, for the amount of any Taxes so levied or imposed and
paid by such Bank or the Agent. A certificate as to the amount of any such
required indemnification payment prepared by such Bank or the Agent shall be
final, conclusive and binding for all purposes absent manifest error.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Company and
the Agent on or prior to the Effective Date, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
1.13 or 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver promptly to the Company and the Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm
28
<PAGE>
or establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Company and the Agent
of its inability to deliver any such Form or Certificate in which case such Bank
shall not be required to deliver any such Form or Certificate pursuant to this
Section 4.04(b). Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 12.04(b) and the immediately succeeding
sentence, (x) the Company shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Bank which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Bank has not provided to the Company U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and (y)
the Company shall not be obligated pursuant to Section 4.04(a) hereof to
gross-up payments to be made to a Bank in respect of income withholding or
similar taxes imposed by the United States if (I) such Bank has not provided to
the Company the Internal Revenue Service Forms required to be provided to the
Company pursuant to this Section 4.04(b) or (II) in the case of a payment, other
than interest, to a Bank described in clause (ii) above, to the extent that such
Forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 4.04 and except as set forth in Section 12.04(b), the
Company agrees to pay additional amounts and to indemnify each Bank and the
Agent in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Effective Date in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of income or
similar Taxes.
SECTION 5. CONDITIONS PRECEDENT. The obligation of each Bank to make
each Loan to the Company hereunder, and the obligation of the Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, at the time of each
such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate
Revolving Note and to BTCo the Swingline Note, in each case executed by the
Company and in the amount, maturity and as otherwise provided herein.
29
<PAGE>
5.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
Credit Event and also after giving effect thereto, (i) there shall exist no
Default of Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
5.03 OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the Agent
shall have received a certificate dated such date signed by an appropriate
officer of the Company stating that all of the applicable conditions set forth
in Sections 5.02, 5.06, 5.07, 5.08, 5.09 (deleting the reference to the Agent
therein), 5.10(a) and (b) (deleting the reference to the Agent therein), 5.14
(other than clause (x) thereof), 5.18 and 5.19 exist as of such date.
5.04 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the Agent
and the Documentation Agent shall have received opinions, addressed to the Agent
and the Documentation Agent and each of the Banks and dated the Initial
Borrowing Date, from (i) Proskauer Rose Goetz & Mendelsohn LLP, counsel to the
Credit Parties, in the form of EXHIBIT D and (ii) local and other counsel to the
Credit Parties and/or the Agent in each jurisdiction in which the Collateral is
located reasonably, which opinions shall cover such matters incident to the
transactions contemplated herein and in the other Credit Documents as the Agent
may reasonably request and shall be in form and substance reasonably
satisfactory to the Agent.
5.05 CORPORATE PROCEEDINGS. (a) On the Initial Borrowing Date, the
Agent shall have received from each Credit Party a certificate, dated the
Initial Borrowing Date, signed by the chairman, a vice chairman, the president
or any vice- president of such Credit Party, and attested to by the secretary or
any assistant secretary of such Credit Party, in the form of EXHIBIT E with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws of such Credit Party and the resolutions of such Credit Party
referred to in such certificate and all of the foregoing (including each such
Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to
the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by the Credit Documents shall be reasonably
satisfactory in form and substance to the Agent, and the Agent shall have
received all information and copies of all certificates, documents and papers,
including
30
<PAGE>
good standing certificates, bring-down certificates and any other records of
corporate proceedings and governmental approvals, if any, which the Agent
reasonably may have requested in connection therewith, such documents and
papers, where appropriate, to be certified by proper corporate or governmental
authorities.
5.06 ADVERSE CHANGE, ETC. At the time of each Credit Event and after
giving effect thereto, nothing shall have occurred since April 28, 1996 (and
neither the Banks nor the Agent shall have become aware of any facts or
conditions not previously known or as disclosed in the Registration Statement)
which (a) has, or could reasonably be expected to have, a material adverse
effect on the rights or remedies of the Banks or the Agent, or on the ability of
any Credit Party to perform its obligations to them hereunder or under any other
Credit Document or (b) has, or could reasonably be expected to have, a Material
Adverse Effect.
5.07 LITIGATION. At the time of each Credit Event and after giving
effect thereto, there shall be no actions, suits or proceedings pending or
threatened (a) with respect to this Agreement or any other Document or the
Transaction or (b) which could reasonably be expected to (i) have a Material
Adverse Effect or (ii) have a material adverse effect on the Transaction, the
rights or remedies of the Banks or the Agent hereunder or under any other Credit
Document or on the ability of any Credit Party to perform its respective
obligations to the Banks or the Agent hereunder or under any other Credit
Document.
5.08 APPROVALS. On or prior to the Initial Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the Transaction, the transactions contemplated by the Credit
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect (other than any such governmental approvals required to
consummate the Initial Public Offering), and all applicable waiting periods
shall have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein. Additionally, there shall not
exist any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the consummation of
the Transaction or the making of Loans.
5.09 CONSUMMATION OF THE TRANSACTION. On the Initial Borrowing Date,
the Company shall have consummated the Transaction on terms, and pursuant to
documentation, in form and substance reasonably satisfactory to the Agent.
31
<PAGE>
5.10 EXISTING CREDIT AGREEMENT. (a) On the Initial Borrowing Date,
the commitments under the Existing Credit Agreement shall have been terminated,
all loans thereunder shall have been repaid in full, together with all accrued
and unpaid interest thereon, all accrued and unpaid fees thereon shall have been
repaid in full, all letters of credit issued thereunder shall have been
terminated or incorporated hereunder as Letters of Credit, and all other amounts
then owing pursuant to the Existing Credit Agreement shall have been repaid in
full.
(b) On the Initial Borrowing Date, all security interests and Liens
created under the Existing Credit Agreement and the related security documents
on the capital stock of, and assets (including intercompany notes) owned by, the
Company and its Subsidiaries shall have been terminated and released, and the
Agent shall have received all such releases as may have been requested by the
Agent, which releases shall be in the form and substance reasonably satisfactory
to the Agent.
(c) The Agent shall have received evidence from the lenders under the
Existing Credit Agreement in form, scope and substance reasonably satisfactory
to it that the matters set forth in this Section 5.10(a) and (b) have been
satisfied at such time.
5.11 SECURITY DOCUMENTS. (a) On the Initial Borrowing Date, each
Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement in the form of EXHIBIT F (as modified, amended or supplemented from
time to time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the Pledged Securities referred to therein (which, in the
case of a Foreign Subsidiary that is not a Guarantor, shall equal 65% of its
outstanding capital stock), endorsed in blank in the case of promissory notes or
accompanied by executed and undated stock powers in the case of capital stock,
and the Pledge Agreement shall be in full force and effect.
(b) On the Initial Borrowing Date, each Credit Party shall have duly
authorized, executed and delivered a Security Agreement in the form of EXHIBIT G
(as modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, the "Security Agreement") covering all of the Security
Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the UCC
or appropriate local equivalent of each jurisdiction as may be necessary to
perfect the security interests purported to be created by the Security
Agreement;
32
<PAGE>
(B) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all effective
financing statements that name the Company or any of its Domestic
Subsidiaries as debtor and that are filed in the jurisdictions referred to
in clause (A) above, together with copies of such financing statements that
name the Company or any of its Domestic Subsidiaries as debtor (none of
which shall cover the Collateral except (x) those with respect to which
appropriate termination statements executed by the secured lender
thereunder have been delivered to the Agent and (y) to the extent
evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable, to perfect the
security interests purported to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable, to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
5.12 PAYMENT OF FEES. On or before the Initial Borrowing Date and
thereafter at the time of each Credit Event and after giving effect thereto, all
costs, fees and expenses, and all other compensation contemplated by this
Agreement or any other agreement with the Agent, the Documentation Agent or any
Bank, due to the Agent, the Documentation Agent or the Banks (including, without
limitation, legal fees and expenses) shall have been paid to the extent then
due.
5.13 CONDITIONS RELATING TO MORTGAGED REAL PROPERTIES. On or prior to
the Initial Borrowing Date, the Company and each Subsidiary Guarantor shall have
caused to be delivered to the Collateral Agent, on behalf of the Banks, the
following documents and instruments:
(i) a Mortgage encumbering each Mortgaged Real Property in favor
of the Collateral Agent, for the benefit of the Banks, duly executed and
acknowledged by the Company or the Subsidiary Guarantor that is the owner
of or holder of an interest in such Mortgaged Real Property, and otherwise
in form for recording in the recording office of each political subdivision
or foreign jurisdiction where each such Mortgaged Real Property is
situated, together with such certificates, affidavits, questionnaires or
returns as shall be required in connection with the recording or filing
thereof to create a lien under applicable law, and such
33
<PAGE>
UCC-1 financing statements and other similar statements as are contemplated
by the counsel opinions described in Section 5.04 in respect of such
Mortgage, all of which shall be in form and substance reasonably
satisfactory to the Collateral Agent, and any other instruments necessary
to grant a mortgage lien under the laws of any applicable jurisdiction,
which Mortgage and financing statements and other instruments shall be
effective to create a first priority Lien on such Mortgaged Real Property
subject to no Liens other than Prior Liens applicable to such Mortgaged
Real Property;
(ii) with respect to each Mortgaged Real Property, such
consents, approvals, amendments, supplements, estoppels, tenant
subordination agreements or other instruments as necessary or required to
consummate the transactions contemplated hereby or as shall reasonably be
deemed necessary by the Collateral Agent in order for the owner or holder
of the fee interest constituting such Mortgaged Real Property to grant the
Lien contemplated by the Mortgage with respect to such Mortgaged Real
Property;
(iii) with respect to each Mortgage, a policy (or commitment to
issue a policy) of title insurance insuring (or committing to insure) the
Lien of such Mortgage as a valid first priority Lien on the real property
and fixtures described therein in an amount not less than 115% of the fair
market value thereof which policy (or commitment) shall (a) be issued by
the Title Company, (b) include such reinsurance arrangements (with
provisions for direct access) as shall be reasonably acceptable to the
Collateral Agent, (c) contain a "tie-in" or "cluster" endorsement (if
available under applicable law) (I.E., policies which insure against losses
regardless of location or allocated value of the insured property up to a
stated maximum coverage amount), (d) have been supplemented by such
endorsements (or where such endorsements are not available, opinions of
special counsel, architects or other professionals reasonably acceptable to
the Collateral Agent to the extent that such opinions can be obtained at a
cost which is reasonable with respect to the value of the Real Property
subject to such Mortgage) as shall be reasonably requested by the
Collateral Agent (including, without limitation, endorsements on matters
relating to usury, first loss, last dollar, zoning, contiguity, revolving
credit doing business non-imputation, public road access, survey, variable
rate and so-called comprehensive coverage over covenants and restrictions)
and (e) contain no exceptions to title other than exceptions for the Prior
Liens applicable to such Mortgaged Real Property;
(iv) with respect to each Mortgaged Real Property, a Survey;
34
<PAGE>
(v) with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating thereto,
which policies or certificates shall comply with the insurance requirements
contained in such Mortgage;
(vi) with respect to each Real Property and each Mortgaged Real
Property, UCC, judgment and tax lien searches confirming that the personal
property comprising a part of such Real Property or Mortgaged Real Property
is subject to no Liens other than Prior Liens;
(vii) with respect to each Mortgaged Real Property, such
affidavits, certificates, information (including financial data) and
instruments of indemnification (including, without limitation, a so-called
"gap" indemnification) as shall be required to induce the Title Company to
issue the policy or policies (or commitment) and endorsements contemplated
in subparagraph (iii) above;
(viii) evidence acceptable to the Collateral Agent of payment by
the Company of all title insurance premiums, search and examination
charges, survey costs and related charges, mortgage recording taxes, fees,
charges, costs and expenses required for the recording of the Mortgages and
issuance of the title insurance policies referred to in subparagraph (iii)
above;
(ix) with respect to each Mortgaged Real Property, copies of
all Leases, subleases, leases in which the Company or a Subsidiary
Guarantor holds the tenant's interest or other agreements relating to
possessory interests. To the extent any of the foregoing affect any
Mortgaged Real Property, such agreement shall be subordinate to the Lien of
the Mortgage to be recorded against such Mortgaged Real Property, either
expressly by its terms or pursuant to a subordination, non-disturbance and
attornment agreement, and shall otherwise be acceptable to the Collateral
Agent;
(x) with respect to each Mortgaged Real Property, an officer's
certificate or other evidence satisfactory to the Collateral Agent that as
of the date thereof there (a) has been issued and is in effect a valid and
proper certificate of occupancy or local or foreign equivalent for the use
then being made of such Mortgaged Real Property (or that none is required
under law) and that there is not outstanding any citation, violation or
similar notice indicating that such Mortgaged Real Property contains
conditions which are not in compliance with local or foreign codes or
ordinances relating to building or fire safety or structural soundness, (b)
has not occurred any Taking or Destruction of any Mortgaged Real Property
and (c) are no disputes regarding boundary lines, location, encroachment or
possession of such
35
<PAGE>
Mortgaged Real Property and no state of facts existing which could
reasonably be expected to give rise to any such claim.
5.14 EXISTING INDEBTEDNESS AGREEMENTS; TAX ALLOCATION AGREEMENTS, ETC.
On or prior to the Initial Borrowing Date, there shall have been delivered to
the Agent copies, certified as true and correct by an appropriate officer of the
Company, of:
(a) all agreements evidencing or relating to the Existing
Indebtedness that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Existing Indebtedness
Agreements");
(b) any tax sharing or tax allocation agreements entered into, or to
be entered into, by the Company or any of its Subsidiaries (collectively,
the "Tax Allocation Agreements"); and
(c) all agreements and documents relating to the Transaction,
including, without limitation, the certificate of designation relating to
the Superior Preferred Stock (collectively, the "Transaction Documents");
all of which agreements and documents shall be (x) in form and substance
satisfactory to the Agent and (y) in full force and effect on the Initial
Borrowing Date.
5.15 SOLVENCY CERTIFICATE; EVIDENCE OF INSURANCE. On the Initial
Borrowing Date, the Agent shall have received:
(a) (i) a solvency opinion from Houlihan Lokey, in form and
substance satisfactory to the Agent, and (ii) one or more solvency
certificates in the form of EXHIBIT I from the chief financial officer of
the Company and of each Guarantor and dated the Initial Borrowing Date, in
each case, addressed to the Agent, the Documentation Agent and each Bank,
and reciting that, both prior to and after giving effect to the Transaction
and the incurrence of all financings contemplated herein, the Company and
each of its Subsidiaries (on a stand-alone basis) are not and will not be
rendered insolvent or inadequately capitalized for the respective
businesses they intend to conduct and have not and will not have incurred
debts beyond their ability to pay as they mature and that, upon
consummation of the Transaction, (x) the total assets of Superior exceeds
the amount necessary to pay all of its liabilities and, unless otherwise
provided by the Superior certificate of incorporation, to pay any
distribution preference on any outstanding preferred stock upon dissolution
and (y) the amount by which the total assets of the Company and DNE exceeds
and will exceed its liabilities is no less than their respective stated
capital; and that neither the Company nor any of its Subsidiaries is
entering into the
36
<PAGE>
Transaction with the intent to hinder, delay or defraud any creditor of the
Company or any of its Subsidiaries; and
(b) evidence of insurance complying with the requirements of Section
7.03 for the business and properties of the Company and its Subsidiaries,
in scope, form and substance reasonably satisfactory to the Agent and
naming the Collateral Agent as an additional insured and/or loss payee, and
stating that such insurance shall not be cancelled or revised without at
least 30 days' (or 10 days' in the case of non-payment of premium) prior
written notice by the insurer to the Collateral Agent.
5.16 PRO FORMA BALANCE SHEET. On or prior to the Initial Borrowing
Date, there shall have been delivered to the Agent an unaudited PRO FORMA
consolidated balance sheet of the Company and its Subsidiaries as of July 28,
1996 after giving effect to the Transaction and the borrowings to occur on the
Initial Borrowing Date and prepared in accordance with GAAP, together with a
related funds flow statement, which PRO FORMA balance sheets and funds flow
statement shall be reasonably satisfactory in form and substance to the Agent
and the Required Banks.
5.17 PROJECTIONS. On or prior to the Initial Borrowing Date, the
Banks shall have received the financial projections dated August 29, 1996 (the
"Projections"), which include the projected consolidated and consolidating
results of the Company and its Subsidiaries for at least the five fiscal years
ended after the Initial Borrowing Date.
5.18 CONSENT SOLICITATION. On or prior to the Initial Borrowing Date,
the consent solicitation with respect to the Alpine Senior Secured Notes shall
have been consummated in accordance with the terms of the Consent Solicitation
dated August 29, 1996 and the related amendments to such Senior Secured Notes
shall have become effective, which amendments shall include an amendment that
the Company and its Subsidiaries are Unrestricted Subsidiaries for all purposes
of such Notes.
5.19 CONSENT OF THE CONNECTICUT DEVELOPMENT AUTHORITY. On or prior to
the Initial Borrowing Date, the Connecticut Development Authority shall consent
to the Transaction and the execution, delivery and performance by the Credit
Parties of the Credit Documents including changing all references to the
Existing Credit Agreement in the loan agreement between DNE and the Connecticut
Development Authority to the Credit Documents.
5.20 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. The Agent shall
have received a Notice of Borrowing satisfying the requirements of Section 1.03
with respect to each incurrence of Loans; and the Agent and the Letter of Credit
Issuer shall have received a Letter of Credit Request satisfying the
37
<PAGE>
requirements of Section 2.02 with respect to each issuance of a Letter of
Credit.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to the Agent and each of the
Banks that all of the applicable conditions specified above exist as of the date
of such Credit Event. All of the certificates, legal opinions and other
documents and papers referred to in this Section 5, unless otherwise specified,
shall be delivered to the Agent at its Notice Office for the account of each of
the Banks and, except for the Notes, in sufficient counterparts for each of the
Banks and shall be reasonably satisfactory in form and substance to the Agent
and the Required Banks.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, the Company
makes the following representations, warranties and agreements with the Banks
(in each case after giving PRO FORMA effect to the Transaction including the
repayment of Indebtedness under the Existing Credit Agreement to the extent it
occurs on the Initial Borrowing Date and (other than with respect to scheduling
consents required or necessary) the receipt of all required or necessary
consents to the extent that they have been received and are effective on and
after the Initial Borrowing Date), all of which shall survive the execution and
delivery of this Agreement, the making of the Loans and the issuance of the
Letters of Credit (with the occurrence of each Credit Event being deemed to
constitute a representation and warranty that the matters specified in this
Section 6 are true and correct in all material respects on and as of the date of
each such Credit Event, unless stated to relate to a specific earlier date in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date):
6.01 CORPORATE STATUS. Each of the Company and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization, (ii) has the
requisite corporate power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage
and (iii) is duly qualified and is authorized to do business and is in good
standing in all jurisdictions where it is required to be so qualified and where
the failure to be so qualified would have a Material Adverse Effect.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
requisite corporate power and authority to execute, deliver and carry out the
terms and provisions of the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
38
<PAGE>
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party and
each such Credit Document constitutes the legal, valid and binding obligation of
such Credit Party enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Credit Documents to which it is a party nor compliance
by any Credit Party with the terms and provisions thereof, nor the consummation
of the transactions contemplated herein or therein, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
(other than pursuant to the Security Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of the Company or any of its Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement, credit
agreement or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of the Certificate of Incorporation or By-Laws of the Company or any
of its Subsidiaries.
6.04 LITIGATION. There are no actions, suits or proceedings pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened, with
respect to the Company or any of its Subsidiaries (i) that are likely to have a
Material Adverse Effect, except as set forth on Schedule 6.04, or (ii) that
could reasonably be expected to have a material adverse effect on the rights or
remedies of the Agent or the Banks or on the ability of any Credit Party to
perform its respective obligations to the Agent or the Banks hereunder and under
the other Credit Documents to which it is, or will be, a party. Additionally,
there does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the occurrence of any Credit Event.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of the
Loans shall be utilized (I) on the Initial Borrowing Date to (i) consummate the
Transaction and (ii) pay fees and expenses in connection with the Transaction;
provided that such borrowings on the Initial Borrowing Date shall not exceed
$154,700,000 (or the Target Amount if the Initial Public
39
<PAGE>
Offering has occurred on or before the Initial Borrowing Date) and (II) on and
after the Initial Borrowing Date provide (subject to the terms and conditions
contained in the Credit Documents) for the general corporate purposes of the
Company and its Subsidiaries.
(b) Neither the making of any Loan, nor the use of the proceeds
thereof, will violate the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System and no part of the proceeds of any Loan
will be used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock.
6.06 GOVERNMENTAL APPROVALS. Except for filings with applicable
governmental authority contemplated by the Security Documents, all of which
shall be made in accordance with such Security Documents, no order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, is required to authorize
or is required in connection with (i) the execution, delivery and performance of
any Credit Document or (ii) the legality, validity, binding effect or
enforceability of any Credit Document.
6.07 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as
a whole) (which term shall not include, for purposes of this Section 6.09, the
Projections or PRO FORMA information delivered in connection herewith)
heretofore or contemporaneously furnished by or on behalf of the Company or any
of its Subsidiaries in writing to the Agent or any Bank (including, without
limitation, all information contained in the Credit Documents) for purposes of
or in connection with the Credit Documents or any transaction contemplated
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Persons in writing to the Agent or any
Bank will be, true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information (taken as a whole) not
misleading at such time.
40
<PAGE>
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the
Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and to all Indebtedness incurred, and to be incurred, and Liens
created, and to be created, by each Credit Party in connection therewith, (x)
the sum of the assets, at a fair valuation (I.E., the amount that may be
realized within a reasonable time, considered to be six months to one year,
either through collection or sale at the regular market value, conceiving the
latter as the amount that would be obtained for such assets within such period
by a capable and diligent businessman from an interested buyer who is willing to
purchase under ordinary selling conditions), of each of the Company and its
Subsidiaries (on a consolidated basis) and the Company (on a stand-alone basis)
will exceed its debts, (y) each Credit Party has not incurred nor intended to,
nor believes that it will, incur debts beyond its ability to pay such debts as
such debts mature and (z) each Credit Party will have sufficient capital with
which to conduct its business. For purposes of this Section 6.10, "debt" means
any liability on a claim, and "claim" means (i) right to payment whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured; PROVIDED that to the extent any such "claim"
is not fixed, the amount thereof shall equal the Company's good faith estimate
of the maximum amount thereof.
(b) The annual and interim financial statements included in the
Registration Statement (both as to the Company and as to its Subsidiaries on a
combined basis) (including statements of income and cash flows and changes in
shareholders' equity), present fairly in all material respects the financial
condition of the relevant Persons at the dates of said statements and the
results for the periods covered thereby. All such financial statements have
been prepared in accordance with GAAP consistently applied and the financial
statements as of and for the fiscal years have been audited by and accompanied
by the opinion of Arthur Andersen LLP, independent public accountants.
(c) Since April 28, 1996, nothing has occurred that has had or could
reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 6.10(b) and the Indebtedness incurred under this Agreement and except
as set forth in Schedule 6.10 hereto, (i) there were as of the Initial Borrowing
Date (and after giving effect to any Loans made on such date), no liabilities or
obligations (excluding obligations or liabilities incurred in the ordinary
course of business, which, individually
41
<PAGE>
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect) with respect to the Company or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due), and (ii) neither the Company nor any of its Subsidiaries knows of any
basis for the assertion against the Company or any of its Subsidiaries of any
such liability or obligation which, either individually or in the aggregate,
has, or could be reasonably likely to have, a Material Adverse Effect.
(e) The PRO FORMA information contained in the Registration Statement
and the Projections are based on good faith estimates and assumptions made by
the management of the Company, and on the Initial Borrowing Date such management
believes that the Projections and such PRO FORMA information were reasonable
and, in the case of the Projections, attainable under the facts and
circumstances known to management of the Company, it being recognized by the
Banks, however, that projections as to future events are not to be viewed as
facts and that the actual results during the period or periods covered by the
Projections may differ from the projected results and that the differences could
be material. There is no fact known to the Company or any of its Subsidiaries
which would have a Material Adverse Effect which has not been disclosed herein
or in such other documents, certificates and statements furnished to the Banks
for use in connection with the transactions contemplated hereby.
6.11 SECURITY INTERESTS. On and after the Initial Borrowing Date,
each of the Security Documents creates (or after the execution and delivery
thereof and, where applicable, filing and/or recording thereof will create), as
security for the Obligations, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, superior to and
prior to the rights of all third Persons, and subject to no Liens other than
Prior Liens and Liens permitted under the Security Documents. No filings or
recordings are required in order to perfect the security interests created under
any Security Document except for filings or recordings required in connection
with any such Security Document which shall have been made on or prior to the
Initial Borrowing Date as contemplated by Section 5.11(b) or on or prior to the
execution and delivery thereof as contemplated by Sections 7.11 and 8.14.
6.12 TRANSACTION. At the time of consummation of the Transaction, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required to make or consummate the Transaction shall have been
obtained, given, filed or taken or waived and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained)
except where the failure to obtain, give, file, or take would not reasonably be
expected to have a Material Adverse Affect. All applicable waiting periods with
respect thereto have
42
<PAGE>
or, prior to the time when required, will have, expired without, in all such
cases, any action being taken by any competent authority which restrains,
prevents, or imposes material adverse conditions upon the Transaction.
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the Transaction, or the occurrence
of any Credit Event or the performance by the Company and its Subsidiaries of
their obligations under the Documents and all applicable laws. The Transaction
has been consummated in accordance with the respective Documents and all
applicable laws.
6.13 COMPLIANCE WITH ERISA. (a) The Company, its respective
Subsidiaries and its respective ERISA Affiliates are in compliance with all
applicable provisions of ERISA and the Code and the published regulations and
interpretations thereunder with respect to all employee benefit plans (as
defined in Section 3(3) of ERISA); no Reportable Event has occurred with respect
to a Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan has an accumulated or waived funding deficiency, has
permitted decreases in its funding standard account or has applied for a waiver
of the minimum funding standard or an extension of any amortization period
within the meaning of Section 412 of the Code; all contributions required to be
made with respect to a Plan and a Foreign Pension Plan have been timely made;
neither the Company nor any Subsidiary of the Company nor any ERISA Affiliate
has incurred any liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code or reasonably expects to
incur any liability (including any indirect, contingent or secondary liability)
under any of the foregoing Sections with respect to any Plan (other than
liabilities of any ERISA Affiliate which could not, by operation of law or
otherwise, become a liability of the Company or any of its Subsidiaries); no
proceedings have been instituted to terminate, or to appoint a trustee to
administer, any Plan; no condition exists which presents a material risk to the
Company or any Subsidiary of the Company or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; using actuarial assumptions and computation methods
consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of the Company and its Subsidiaries and its ERISA Affiliates to all
Multiemployer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not, singly or in the aggregate, result
in a Material Adverse Effect; no lien imposed under the Code or ERISA on the
assets of the Company or any Subsidiary of the Company or any ERISA Affiliate
exists or is reasonably likely to arise on account of any Plan; and the Company
and its Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to
retired
43
<PAGE>
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which could reasonably be expected,
singly or in the aggregate, to have a Material Adverse Effect.
(b) Each Foreign Pension Plan has been maintained in compliance with
its terms and with the requirements of any and all applicable laws, statutes,
rules, regulations and orders and has been maintained, where required, in good
standing with applicable regulatory authorities. Neither the Company nor any of
its Subsidiaries has incurred any obligation in connection with the termination
of or withdrawal from any Foreign Pension Plan. The present value of the
accrued benefit liabilities (whether or not vested) under each Foreign Pension
Plan which is funded, determined as of the end of the most recently ended fiscal
year of the Company on the basis of actuarial assumptions, each of which is
reasonable, did not exceed the current value of the assets of such Foreign
Pension Plan, and for each Foreign Pension Plan which is not funded, the
obligations of such Foreign Pension Plan are properly accrued.
(c) Notwithstanding the foregoing, the representations, warranties
and agreements contained in this Section 6.13 are qualified such that a breach
or failure thereof shall not be treated as such unless the circumstances of such
breach or failure have resulted in or are reasonably expected to result in
either (i) a Material Adverse Effect or (ii) the imposition of a lien on the
assets of the Company or any Subsidiary.
6.14 CAPITALIZATION. On the Initial Borrowing Date, the authorized
capital stock of the Company shall consist of (i) 25,000,000 shares of common
stock, $.01 par value per share (the "Company Common Stock"), and (ii) 1,000,000
shares of preferred stock, $.01 par value per share, none of which shares of
preferred stock shall be issued and outstanding. All outstanding shares of the
Company Common Stock have been duly and validly issued, and are fully paid and
nonassessable. The Company does not have outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock except for
options to purchase the Company Common Stock issued or to be issued to certain
officers, employees and directors and consultants of the Company and its
Subsidiaries.
6.15 SUBSIDIARIES. On and as of the Initial Borrowing Date and after
giving effect to the consummation of the Transaction, the Company has no
Subsidiaries other than those Subsidiaries listed on Annex VI. Annex VI
correctly sets forth, as of the Initial Borrowing Date and after giving effect
to the
44
<PAGE>
Transaction, the percentage ownership (direct and indirect) of the Company in
each class of capital stock of each of its Subsidiaries and also identifies the
direct owner thereof.
6.16 INTELLECTUAL PROPERTY. Each of the Company and each of its
Subsidiaries owns or holds a valid license to use all the material patents,
trademarks, permits, service marks, trade names, technology, know-how and
formulas or other rights with respect to the foregoing, free from restrictions
that are materially adverse to the use thereof, that are used in the operation
of the business of the Company and each of its Subsidiaries as presently
conducted.
6.17 COMPLIANCE WITH STATUTES, ETC. Each of the Company and each of
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (PROVIDED, HOWEVER, that this Section 6.17 does not apply to (i)
compliance with respect to Environmental Laws, as to which no representation is
made in this Section 6.17, but which is covered by Section 6.18 hereof, (ii)
compliance with respect to Taxes, as to which no representation is made in this
Section 6.17, but which is covered by Section 6.21 hereof, (iii) compliance with
respect to ERISA, as to which no representation is made in this Section 6.17,
but which is covered by Section 6.13 hereof, and (iv) compliance with respect to
labor relations matters, as to which no representation is made in this Section
6.17, but which is covered by Section 6.20), except such non-compliance as is
not likely to, individually or in the aggregate, have a Material Adverse Effect.
6.18 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 6.18: (a)
Each of the Company and each of its Subsidiaries, and their respective
businesses and Real Property, has complied with, and on the date of each Credit
Event is in compliance with, all applicable Environmental Laws and the
requirements of any permits, licenses or other authorizations issued under such
Environmental Laws. There are no pending or past or, to the best knowledge of
the Company and its Subsidiaries, threatened Environmental Claims against the
Company or any of its Subsidiaries or any Real Property currently or formerly
owned or operated by the Company or any of its Subsidiaries. There are no
facts, circumstances, conditions or occurrences on any Real Property currently
or formerly owned or operated by the Company or any of its Subsidiaries or, to
the best knowledge of the Company and its Subsidiaries, on any property
adjoining or in the vicinity of any such Real Property that would reasonably be
expected (i) to form the basis of an Environmental Claim against the Company or
any of its Subsidiaries or any such Real Property or (ii) to cause any such Real
Property to be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property by the
45
<PAGE>
Company or any of its Subsidiaries under any applicable Environmental Law.
(b) Except as set forth in Schedule 6.18, Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to or
from, any Real Property currently or formerly owned or operated by the Company
or any of its Subsidiaries where such generation, use, treatment or storage has
violated or could reasonably be expected to violate any Environmental Law.
Hazardous Materials have not at any time been Released on or from any Real
Property currently or formerly owned or operated by the Company or any of its
Subsidiaries. There are not now any underground storage tanks or related piping
located on any Real Property currently or formerly owned or operated by the
Company or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.18,
the representations made in this Section 6.18 shall only be untrue if either the
individual or aggregate effect of all conditions, failures, noncompliances,
Environmental Claims, Releases and presence of underground storage tanks or
related piping, in each case of the types described above, could reasonably be
expected to have a Material Adverse Effect.
6.19 PROPERTIES. All Real Property owned by the Company or any of its
Subsidiaries and all material Leaseholds leased by the Company or any of its
Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Annex IV. Each of the Company and each of its Subsidiaries has
good and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned or leased by it, including all Real Property reflected
in Annex IV or in the financial statements referred to in Section 6.10(b), free
and clear of all Liens, other than Liens which are (x) in the case of Mortgaged
Real Property, Prior Liens and Liens permitted by the applicable Mortgage and
(y) in the case of other Real Property, Permitted Liens.
6.20 LABOR RELATIONS. Neither the Company nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Company or any of its Subsidiaries or
threatened against any of them, before the National Labor Relations Board, and
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against any of
them, (ii) no strike, labor dispute, slowdown or stoppage pending against the
Company or any of its Subsidiaries or threatened against the Company or any of
its Subsidiaries and (iii) no union representation question existing with
respect to the employees of the Company or any of
46
<PAGE>
its Subsidiaries and no union organizing activities are taking place, except
(with respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.21 TAX RETURNS AND PAYMENTS. All Federal, material state and other
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Company and/or any of its Subsidiaries have been timely filed with the
appropriate taxing authority. The Returns accurately reflect all liability for
taxes of the Company and its Subsidiaries for the periods covered thereby. The
Company and each of its Subsidiaries have paid all taxes payable by them other
than immaterial taxes and other taxes which are not yet due and payable, and
other than taxes contested in good faith and for which adequate reserves have
been established in accordance with GAAP. Except as disclosed in the financial
statements referred to in Section 6.10(b), (a) there is no material action,
suit, proceeding, investigation, audit or claim now pending or threatened by any
authority regarding any taxes relating to the Company or any of its Subsidiaries
and (b) neither the Company nor any of its Subsidiaries (nor any other person on
their behalf or as part of a consolidated group) has entered into an agreement
or waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of the
Company or any of its Subsidiaries, or is aware of any circumstances that would
cause the taxable years or other taxable periods of the Company or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations. Neither the Company nor any of its Subsidiaries (nor any other
person on their behalf or as part of a consolidated group) has provided, with
respect to themselves or property held by them, any consent under Section 341 of
the Code. Neither the Company nor any of its Subsidiaries has incurred, or will
incur, any material tax liability in connection with the Transaction and the
other transactions contemplated hereby.
6.22 EXISTING INDEBTEDNESS. Annex VII sets forth a true and complete
list of all Indebtedness of the Company and its Subsidiaries (other than
Indebtedness which in the aggregate does not exceed $100,000) as of the Initial
Borrowing Date and which is to remain outstanding after giving effect to the
Transaction and the incurrence of Loans on such date (excluding the Loans and
the Letters of Credit, the "Existing Indebtedness"), in each case showing the
aggregate principal amount thereof and the name of the respective borrower and
any other entity which directly or indirectly guaranteed such debt.
SECTION 7. AFFIRMATIVE COVENANTS. The Company hereby covenants and
agrees that as of the Initial Borrowing Date and thereafter for so long as this
Agreement is in effect and until
47
<PAGE>
the Total Revolving Loan Commitment has terminated, no Letters of Credit (other
than Letters of Credit, together with all Fees that have accrued and will accrue
thereon through the stated termination date of such Letters of Credit, which
have been supported in a manner satisfactory to the Letter of Credit Issuer in
its sole and absolute discretion) or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than any indemnities described in Section 12.13 which are not then due and
payable) incurred hereunder, are paid in full:
7.01 INFORMATION COVENANTS. The Company will furnish to each Bank:
(a) MONTHLY REPORTS. Within 30 days after the end of each fiscal
month of the Company (other than the end of a fiscal quarter or fiscal
year), the consolidated and consolidating balance sheet of the Company and
its Subsidiaries as at the end of such fiscal month and the related
consolidated and consolidating statements of income and statements of cash
flows for such fiscal month and for the elapsed portion of the fiscal year
ended with the last day of such fiscal month, in each case setting forth
comparative figures for the corresponding periods in the prior fiscal year
(sales to be broken down by outside plant cable, outside plant wire,
premise wire and fiber/ coax cable and total military and
commercial/governmental sales) and comparable budgeted figures for the
current fiscal month and year-to-date results, all of which shall be
certified by the chief financial officer or other Authorized Officer of the
Company, subject to normal year-end audit adjustments and the absence of
footnotes.
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close
of each of the first three quarterly accounting periods in each fiscal year
of the Company, the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as at the end of such quarterly accounting
period and the related consolidated and consolidating statements of income,
statements of changes in stockholders equity and statements of cash flows
for such quarterly accounting period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly accounting period
(sales to be broken down by outside plant cable, outside plant wire,
premise wire and fiber/coax cable and total military and
commercial/governmental sales); all of which shall be in reasonable detail
and certified by the chief financial officer or other Authorized Officer of
the Company that they fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the dates indicated and
the results of their operations and changes in their cash flows for the
periods
48
<PAGE>
indicated, subject to normal year-end audit adjustments and the absence of
footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of
each fiscal year of the Company, the consolidated and consolidating balance
sheet of the Company and its Subsidiaries as at the end of such fiscal year
and the related consolidated and consolidating statements of income,
statements of changes in stockholders equity and statements of cash flows
(sales to be broken down by outside plant cable, outside plant wire,
premise wire and fiber/coax cable and total military and
commercial/governmental sales) for such fiscal year and setting forth
comparative consolidated figures for the preceding fiscal year and
comparable budgeted figures for the current fiscal year and (except for
such comparable budgeted figures and the sales breakdown referred to above)
certified (in the case of consolidated information) by Arthur Andersen LLP
or such other independent certified public accountants of recognized
national standing as shall be reasonably acceptable to the Agent, in each
case to the effect that such statements fairly present in all material
respects the financial condition of the Company and its Subsidiaries as of
the dates indicated and the results of their operations and cash flows,
together with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Company and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, no Default or Event of Default which has
occurred and is continuing has come to their attention insofar as such
Default or Event of Default relates to financial and accounting matters or,
if such a Default or an Event of Default has come to their attention a
statement as to the nature thereof.
(d) BUDGETS, ETC. No more than 60 days after the commencement of
each fiscal year of the Company, budgets of and for the Company and its
Subsidiaries in reasonable detail for each of the four fiscal quarters of
such fiscal year and an annual budget for the immediately succeeding fiscal
year, in each case as customarily prepared by management for its internal
use setting forth, with appropriate discussion, the principal assumptions
upon which such budgets are based. Together with each delivery of
financial statements pursuant to Section 7.01(b) and (c), a comparison of
the current year to date financial results (other than in respect of the
balance sheets included therein) against the budgets required to be
submitted pursuant to this clause (d) shall be presented.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 7.01(b) and (c), a certificate
of the chief financial
49
<PAGE>
officer or other Authorized Officer of the Company to the effect than no
Default or Event of Default exists or, if any Default or Event of Default
does exist, specifying the nature and extent thereof, which certificate
shall set forth the calculations required to establish whether the Company
and its Subsidiaries were in compliance with the provisions of Sections
8.04(d) and (i), 8.05(d), (g), (k) and (n), 8.06, 8.08, 8.09, 8.10 and
8.11, as at the end of such fiscal quarter or fiscal year, as the case may
be.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within five Business Days (or 10 Business Days in the case of clause (y)
below) after any executive or senior officer of the Company obtains actual
knowledge thereof, notice of (x) the occurrence of any event which
constitutes a Default or an Event of Default, which notice shall specify
the nature thereof, the period of existence thereof and what action the
Company proposes to take with respect thereto and (y) the commencement of,
or threat of, any litigation or governmental proceeding pending against the
Company or any of its Subsidiaries which is reasonably likely to have a
Material Adverse Effect, or a material adverse effect on the ability of any
Credit Party to perform its respective obligations hereunder or under any
other Credit Document.
(g) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each
report or "management letter" submitted to the Company or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any of
its Subsidiaries.
(h) ENVIRONMENTAL MATTERS. Promptly, and in any event, within five
Business Days after obtaining knowledge of any of the following (but only
to the extent that any of the following, either individually or in the
aggregate, could have a Material Adverse Effect), written notice of:
(i) any pending or threatened Environmental Claim against
the Company or any of its Subsidiaries or any Real Property currently
or formerly owned or operated by the Company or any of its
Subsidiaries;
(ii) any condition or occurrence on any Real Property
currently or formerly owned or operated by the Company or any of its
Subsidiaries that (x) results in material noncompliance by the Company
or any of its Subsidiaries with any applicable Environmental Law or
(y) could reasonably be anticipated to form the basis of an
Environmental Claim against the Company or any of its Subsidiaries or
any such Real Property;
50
<PAGE>
(iii) any condition or occurrence on any Real Property
currently or formerly owned or operated by the Company or any of its
Subsidiaries that could reasonably be anticipated to cause such Real
Property to be subject to any material restrictions on the ownership,
occupancy, use or transferability by the Company or its Subsidiary, as
the case may be, of its interest in such Real Property under any
Environmental Law; and
(iv) the taking of any material removal, remedial
corrective or other response action in response to the actual or
alleged presence of any Hazardous Material on any Real Property
currently or formerly owned or operated by the Company or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal, remedial,
corrective or other response action and the Company's response thereto. In
addition, the Company agrees to provide the Banks with copies of all
material written communications by or to the Company or any of its
Subsidiaries with or from any Person, government or governmental agency
relating to any of the matters set forth in clauses (i)-(iv) above, and
such detailed reports relating to any of the matters set forth in clauses
(i)-(iv) above as may reasonably be requested by the Agent or the Required
Banks.
(i) OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the SEC by the Company
or any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as the Company or any of its Subsidiaries
shall send generally to analysts or the holders of their capital stock in
their capacity as such holders (to the extent not theretofore delivered to
the Banks pursuant to this Agreement) and, with reasonable promptness, such
other information or documents (financial or otherwise) as the Agent on its
own behalf or on behalf of the Required Banks may reasonably request from
time to time.
7.02 BOOKS, RECORDS AND INSPECTIONS. The Company will, and will cause
each of its Subsidiaries to, permit, upon notice to the chief financial officer
or other Authorized Officer of the Company, officers and designated
representatives of the Agent or the Required Banks to visit and inspect any of
the properties or assets of the Company and any of its Subsidiaries in
whomsoever's possession, and to examine the books of account of the Company and
of any of its Subsidiaries and discuss the affairs, finances and accounts of the
Company and of any of its Subsidiaries with, and be advised as to the same by,
their officers and independent accountants, all at such reasonable
51
<PAGE>
times and intervals and to such reasonable extent as the Agent or the Required
Banks may desire.
7.03 INSURANCE. The Company will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance with
reputable and solvent insurance carriers in such amount, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice and as required pursuant to the
Security Documents. The Company will furnish to the Agent on the Initial
Borrowing Date and on each such later date as the Agent or the Required Banks
may reasonably request a summary of the insurance carried in respect of the
Company and its Subsidiaries and the assets of the Company and its Subsidiaries
together with certificates of insurance and other evidence of such insurance, if
any, naming the Collateral Agent as an additional insured and/or loss payee as
required pursuant to the Security Documents.
7.04 PAYMENT OF TAXES. The Company will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims for sums that have become due
and payable which, if unpaid, might become a Lien not otherwise permitted under
Section 8.03(a) or charge upon any properties of the Company or any of its
Subsidiaries; PROVIDED that neither the Company nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
7.05 CORPORATE FRANCHISES. The Company will do, and will cause each
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; PROVIDED, HOWEVER, that any transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. The Company will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (PROVIDED, HOWEVER, that this Section 7.06 does not
apply to applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls, as to which no covenant is made in this
Section 7.06, but which are referred to in Section 7.07 hereof) except for such
noncompliance as would not, singly or in the aggregate, have a Material Adverse
Effect or a material adverse effect on the
52
<PAGE>
ability of any Credit Party to perform its obligations under any Credit Document
to which it is a party.
7.07 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Company will pay,
and will cause each of its Subsidiaries to pay, all costs and expenses incurred
by it in keeping in compliance in all material respects with, and avoiding
liability under, all Environmental Laws, and will keep or cause to be kept all
Real Properties owned or operated by the Company or any of its Subsidiaries free
and clear of any Liens imposed pursuant to such Environmental Laws; and (b)
neither the Company nor any of its Subsidiaries will generate, use, treat,
store, release or dispose of, or permit the generation, use, treatment, storage,
release or disposal of, Hazardous Materials on any Real Property owned or
operated by the Company or any of its Subsidiaries, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property, where
the failure to comply with clause (a) above, either individually or in the
aggregate, could reasonably be expected to result in a material liability to the
Company or any Subsidiary of the Company or the failure to comply with clause
(b) above, either individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect. If the Company or any of its
Subsidiaries, or any tenant or occupant of any Real Property owned or operated
by the Company or any of its Subsidiaries, causes or permits any intentional or
unintentional act or omission resulting in, or otherwise discovers, the presence
or Release of any Hazardous Material (except in compliance with applicable
Environmental Laws), the Company agrees to undertake, and/or to cause any of its
Subsidiaries, tenants or occupants to undertake, promptly and at their sole
expense, any clean up, investigation, removal, remedial, corrective or other
action required pursuant to Environmental Laws to investigate, remove or cleanup
any Hazardous Materials from any Real Property where the failure to do so,
either individually or in the aggregate, could reasonably be expected to result
in a material liability to the Company or any Subsidiary of the Company;
PROVIDED that neither the Company nor any of its Subsidiaries shall be required
to comply with any such order or directive which is being contested in good
faith and by proper proceedings so long as it has maintained adequate reserves
with respect to such compliance to the extent required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within 30 days
after the Company knows or has reason to know of the occurrence of any of the
following events to the extent that one or more of such events is reasonably
likely to result in a material liability to the Company or any Subsidiary of the
Company, the Company will deliver to each of the Banks a certificate of the
chief financial officer or other Authorized Officer of the Company setting forth
details as to such occurrence and the action, if any, which the Company, such
Subsidiary or such ERISA Affiliate is required or proposes to
53
<PAGE>
take, together with any notices required or proposed to be given to or filed
with or by the Company, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred; that an accumulated funding deficiency (as such term is
defined in Section 412(a) of the Code) has been incurred or an application is
reasonably expected to be or has been made to the Secretary of the Treasury for
a waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan; that a contribution required to be made
to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been
or is reasonably expected to be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings are reasonably
expected to be or have been instituted to terminate or appoint a trustee to
administer a Plan; that a proceeding has been instituted pursuant to Section 515
of ERISA to collect a delinquent contribution to a Plan; that the Company, any
Subsidiary of the Company or any ERISA Affiliate will or is reasonably expected
to incur any material liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or
Section 409, 502(i) or 502(l) of ERISA; or that the Company or any Subsidiary of
the Company has or is reasonably expected to incur any material liability under
any employee welfare benefit plan (within the meaning of Section 3(l) of ERISA)
that provides benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or any employee pension benefit plan
(as defined in Section 3(2) of ERISA). At the request of any Bank, the Company
will deliver to such Bank a complete copy of the annual report (Form 5500) of
each Plan required to be filed with the Internal Revenue Service. In addition
to any certificates or notices delivered to the Banks pursuant to the first
sentence hereof, at the request of the Agent or any Bank, copies of annual
reports and any notices received by the Company or any Subsidiary of the Company
or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be
delivered to the Banks no later than 30 days after the date such report has been
filed with the Internal Revenue Service or received by the Company or the
Subsidiary or the ERISA Affiliate.
7.09 GOOD REPAIR. The Company will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 8.08, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions,
54
<PAGE>
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.
7.10 END OF FISCAL YEARS; FISCAL QUARTERS. The Company will, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on or about April 30th of each year and (ii)
each of its, and each of its Subsidiaries', fiscal quarters to end on or about
July 31st, October 31st and January 31st of each year; PROVIDED that the Company
may change such fiscal year to any other fiscal year period of twelve
consecutive months with the consent of the Agent.
7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) PLEDGE OF
ADDITIONAL COLLATERAL. Promptly, and in any event within 30 days after the
acquisition of assets of the type that would have constituted Collateral (if the
person acquiring such assets had executed an appropriate Security Document on
the Initial Borrowing Date) at the Initial Borrowing Date (the "Additional
Collateral"), the Company will, and will cause each of the Guarantors to, at the
request of the Collateral Agent following consultation with the Company as to
the value of any such Additional Collateral, take all necessary action,
including entering into the appropriate security documents and filing the
appropriate financing statements under the provisions of the UCC or applicable
foreign, domestic or local laws, rules or regulations in each of the offices
where such filing is necessary or appropriate to grant the Collateral Agent a
perfected Lien in such Collateral (or comparable interest under foreign law in
the case of foreign Collateral) pursuant to and to the full extent required by
the Security Documents and this Agreement; PROVIDED that no such action will be
required by the Company or any Guarantor to the extent that any such Additional
Collateral is subject to a preexisting agreement which prohibits the granting of
any additional liens; PROVIDED FURTHER that such preexisting agreement was not
entered into in connection with, or in anticipation of or contemplation of, the
acquisition of such assets by the Company or any of its Subsidiaries. In the
event that the Company or a Guarantor acquires an interest in additional real
property, the Company or such Guarantor, as the case may be, will take such
actions and execute such documents as the Agent shall require to confirm the
Lien of a Mortgage, if applicable, or to create a new Mortgage (including,
without limitation, satisfaction of the conditions set forth in Sections 5.04
and 5.13). All actions taken by the parties in connection with the pledge of
Additional Collateral, including, without limitation, costs of counsel for the
Collateral Agent, shall be for the account of the Company, which shall pay all
sums due on demand.
(b) The Company will, and will cause each of the Guarantors to, at
the expense of the Company, make, execute,
55
<PAGE>
endorse, acknowledge, file and/or deliver to the Collateral Agent from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
real property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, the
Company shall cause to be delivered to the Collateral Agent such opinions of
counsel, title insurance and other related documents as may be reasonably
requested by the Agent to assure themselves that this Section 7.11 has been
complied with.
(c) If the Agent or the Required Banks determine (and so advise the
Company) that they are required by law or regulation to have appraisals prepared
in respect of the Real Property of the Company and its Subsidiaries constituting
Collateral, the Company shall provide to the Agent appraisals which satisfy the
applicable requirements of the Real Estate Appraisal Reform Amendments of the
Financial Institution Reform, Recovery and Enforcement Act of 1989 and which
shall be in form and substance reasonably satisfactory to the Agent.
(d) The Company agrees that each action required above by this
Section 7.11 shall be completed within 60 days after such action is either
requested to be taken by the Agent or the Required Banks or required to be taken
by the Company or any Subsidiary Guarantor pursuant to the terms of this Section
7.11; PROVIDED that in no event shall the Company or any of its Subsidiaries be
required to take any action, other than using its best efforts, to obtain
consents from third parties with respect to its compliance with this Section
7.11.
7.12 REGISTER. The Company hereby designates the Agent to serve as
the Company's agent, solely for purposes of this Section 7.12, to maintain a
register (the "Register") on which it will record the Revolving Loan Commitment
from time to time of each of the Banks, the Revolving Loans made by each of the
Banks and each repayment in respect of the principal amount of the Revolving
Loans of each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Company's obligations in respect of such
Revolving Loans. With respect to any Bank, the transfer of the Revolving Loan
Commitment of such Bank and the rights to the principal of, and interest on, any
Revolving Loan made pursuant to such Revolving Loan Commitment shall not be
effective until such transfer is recorded on the Register maintained by the
Agent with respect to ownership of such Revolving Loan Commitment and Revolving
Loans and prior to such recordation all amounts owing to the transferor with
respect to such Revolving Loan Commitment and Revolving Loans shall remain owing
to the transferor. The registration of assignment or transfer of all or part of
any Revolving Loan Commitment and Revolving Loans shall be recorded by the Agent
on
56
<PAGE>
the Register only upon the acceptance by the Agent of a properly executed and
delivered Assignment and Assumption Agreement pursuant to Section 12.04(b).
Coincident with the delivery of such an Assignment and Assumption Agreement to
the Agent for acceptance and registration of assignment or transfer of all or
part of a Revolving Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Revolving Note evidencing such Revolving
Loan, and thereupon one or more new Revolving Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Company agrees to indemnify the Agent from and against any and
all losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Agent in performing its duties
under this Section 7.12, except to the extent that any such losses, claims,
damages or liabilities are found to have resulted from the gross negligence or
willful misconduct of the Agent.
7.13 INTEREST RATE PROTECTION AGREEMENTS. The Company will maintain,
commencing no later than thirty days after the Initial Borrowing Date, in full
force and effect Interest Rate Protection Agreements with parties reasonably
acceptable to the Agent on no less than 50% of the principal amount of the Total
Revolving Loan Commitment.
SECTION 8. NEGATIVE COVENANTS. The Company hereby covenants and
agrees that as of the Initial Borrowing Date and thereafter for so long as this
Agreement is in effect and until the Total Revolving Loan Commitment has
terminated, no Letters of Credit (other than Letters of Credit, together with
all Fees that have accrued and will accrue thereon through the stated
termination date of such Letters of Credit, which have been supported in a
manner satisfactory to the Letter of Credit Issuer in its sole and absolute
discretion) or Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 12.13
which are not then due and payable) incurred hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. The Company and its Subsidiaries will not
engage in any business other than the businesses in which the Company and its
Subsidiaries are engaged in as of the Effective Date and activities incidental
thereto, and similar or related businesses.
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The
Company will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory in the ordinary course of business, including sales
of inventory on consignment in the ordinary course of business), or enter into
any partnerships,
57
<PAGE>
joint ventures or sale-leaseback transactions, or purchase or otherwise acquire
(in one or a series of related transactions) any part of the property or assets
(other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any Person, except that the
following shall be permitted:
(a) the Company and its Subsidiaries may, as lessee or lessor, enter
into operating leases in the ordinary course of business with respect to
real or personal property;
(b) Capital Expenditures by the Company and its Subsidiaries to the
extent not in violation of Section 8.08;
(c) the advances, investments and loans permitted pursuant to Section
8.05;
(d) the Company and its Subsidiaries may sell other assets other than
Mortgaged Real Property; PROVIDED that the aggregate sale proceeds from all
assets subject to such sales pursuant to this clause (d) shall not exceed
$5,000,000 in any consecutive twelve month period of the Company (exclusive
of sale proceeds in respect of obsolete, outmoded or worn-out machinery,
equipment, furniture or fixtures) and each such asset sale subject to this
clause (d) is for at least 85% cash and at fair market value (as determined
in good faith by the Company);
(e) the Company and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivable arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(f) without limitation to clause (d), the Company and its
Subsidiaries may sell or exchange specific items of machinery or equipment,
so long as the proceeds of each such sale or exchange is used (or
contractually committed to be used) to acquire (and results within 180 days
of such sale or exchange in the acquisition of) replacement items of
machinery or equipment which are the functional equivalent of the item of
equipment so sold or exchanged;
(g) the Company and its Subsidiaries may, in the ordinary course of
business, license, as licensor or licensee, patents, trademarks, copyrights
and know-how to third Persons and to one another, so long as any such
license by the Company or its Subsidiaries in its capacity as licensor is
permitted to be assigned pursuant to the Security Agreement (to the extent
that a security interest in such patents, trademarks, copyrights and
know-how is granted thereunder) and does not otherwise prohibit the
granting of a Lien by the Company or any of its Subsidiaries
58
<PAGE>
pursuant to the Security Agreement in the intellectual property covered by
such license;
(h) the assets of any Foreign Subsidiary of the Company may be
transferred to the Company or any of its Subsidiaries, and any Foreign
Subsidiary of the Company may be merged with and into, or be dissolved or
liquidated into, the Company or any of its Subsidiaries so long as the
Company or such Subsidiary is the surviving corporation of any such merger,
dissolution or liquidation;
(i) any Domestic Subsidiary of the Company may transfer assets to the
Company or to any other Domestic Subsidiary of the Company, so long as (i)
if the transferee is a Subsidiary, such Subsidiary is a Guarantor and (ii)
the security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets so
transferred shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer);
(j) any Domestic Subsidiary of the Company may merge with and into,
or be dissolved or liquidated into, the Company so long as (i) the Company
is the surviving corporation of any such merger, dissolution or liquidation
and (ii) the security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Security Documents in the
assets of such Domestic Subsidiary shall remain in full force and effect
and perfected (to at least the same extent as in effect immediately prior
to such merger, dissolution or liquidation);
(k) any Domestic Subsidiary of the Company may merge with and into,
or be dissolved or liquidated into, any Domestic Subsidiary of the Company
so long as (i) such Domestic Subsidiary is a Guarantor and is the surviving
corporation of any such merger, dissolution or liquidation and (ii) the
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents in the assets of such
Domestic Subsidiary shall remain in full force and effect and perfected (to
at least the same extent as in effect immediately prior to such merger,
dissolution or liquidation);
(l) so long as no Default or Event of Default then exists or would
result therefrom (including giving PRO FORMA effect to such acquisition and
any additional Indebtedness resulting therefrom or incurred or assumed in
connection therewith as if such acquisition had occurred and such
Indebtedness had been incurred as of the first day of the most recently
completed Test Period (including any other
59
<PAGE>
Permitted Acquisition that occurred, and related Indebtedness that was
incurred, during such Test Period)), the Company and its Wholly-Owned
Subsidiaries may acquire assets or the capital stock of any Person (any
such acquisition permitted by this clause (l), a "Permitted Acquisition");
PROVIDED that (i) such Person (or the assets so acquired) was, immediately
prior to such acquisition, engaged (or used) primarily in the business
permitted pursuant to Section 8.01, (ii) if such acquisition is structured
as a stock or other equity acquisition, then either (A) the Person so
acquired becomes a Wholly-Owned Subsidiary of the Company and a Guarantor
or (B) such Person is merged with and into the Company or a Wholly-Owned
Subsidiary of the Company that is a Guarantor (with the Company or such
Wholly-Owned Subsidiary being the surviving corporation of such merger),
and in any case, all of the provisions of Section 8.14 have been complied
with in respect of such Person, (iii) any Liens or Indebtedness assumed or
issued in connection with such acquisition is otherwise permitted under
Section 8.03 or 8.04, as the case may be, and (iv) after giving effect
thereto, the Unutilized Revolving Loan Commitment would be at least
$15,000,000; PROVIDED, FURTHER, that any such Permitted Acquisition (or
series of related Permitted Acquisitions) involving total consideration
(including, without limitation, any earn- out, non-compete or deferred
compensation arrangements and the value of any Company securities, but not
including any Indebtedness assumed that complies with Section 8.04(h)) by
the Company and its Wholly-Owned Subsidiaries in excess of the Total
Consideration Amount shall not be consummated without the prior written
consent of the Required Banks; and PROVIDED, FURTHER, that the Company
shall have delivered to the Agent a certificate of the Chief Financial
Officer of the Company showing compliance (in reasonable detail as to pro
forma calculations) with all of the provisions of this paragraph (l);
(m) leases or subleases granted by the Company or any of its
Subsidiaries to third Persons not interfering in any material respect with
the business of the Company or any of its Subsidiaries, including any
arm's-length lease by the Company or any Subsidiary of the Company of up to
50,000 square feet of its Wallingford, Connecticut facility;
(n) the Company and its Subsidiaries may, in the ordinary course of
business, sell, transfer or otherwise dispose of patents, trademarks,
copyrights and know-how which, in the reasonable judgment of the Company or
such Subsidiary, are determined to be uneconomical, negligible or obsolete
in the conduct of business; and
(o) "inactive" or "shell" Subsidiaries may be dissolved or otherwise
liquidated.
60
<PAGE>
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
in each case shall be sold or otherwise disposed of free and clear of the Liens
created by the Security Documents and the Agent shall take such actions
(including, without limitation, directing the Collateral Agent to take such
actions) as are appropriate in connection therewith.
8.03 LIENS. The Company will not, and will not permit any Guarantor
to, create, incur, assume or suffer to exist any Lien upon or with respect to
any item constituting Collateral except for the Lien of the Security Documents
relating thereto, the Prior Liens applicable thereto and other Liens expressly
permitted by such Security Documents. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any property or assets of the Company or such Subsidiary
which does not constitute Collateral, whether now owned or hereafter acquired,
or sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets or assign any
right to receive income, or file or permit the filing of any financing statement
under the UCC or any other similar notice of Lien under any similar recording or
notice statute, except the following (collectively referred to as "Permitted
Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges of
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Company or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business or in connection with any Capital Expenditure permitted by the
terms of this Agreement and which have not arisen to secure Indebtedness
for borrowed money, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, and other similar Liens arising in the ordinary
course of business, and which either (x) do not in the aggregate materially
detract from the value of such property or assets or materially impair the
use thereof in the operation of the business of the Company or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
61
<PAGE>
(c) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex IX, and
extensions, renewals or related refinancings thereof, PROVIDED that such
extensions, renewals or related refinancings pursuant to Section 8.04(b)
(x) do not increase the obligations so secured and (y) apply to additional
assets not subject to the lien being extended or renewed;
(d) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
(e) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and (y) to
secure the performance of leases of Real Property, to the extent incurred
or made in the ordinary course of business consistent with past practices;
(f) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Company or any
of its Subsidiaries;
(g) easements, zoning restrictions, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries;
(h) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(i) any interest or title of a licensor, lessor or sublessor under
any license or lease permitted by this Agreement;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(d);
(k) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Initial Borrowing Date; PROVIDED
that (i) any such Liens attach only to the assets so purchased, (ii) the
Indebted-
62
<PAGE>
ness secured by any such Lien (including refinancings thereof) does not
exceed 100% of the lesser of the fair market value or the purchase price of
the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 8.04(d);
(l) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Company in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition; PROVIDED that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 8.04(h), and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Company or any of its Subsidiaries; and
(m) additional Liens (on assets other than the Collateral) incurred
by the Company and its Subsidiaries so long as the aggregate value of the
property subject to such Liens, and the Indebtedness and other obligations
secured thereby, do not exceed $1,000,000.
8.04 INDEBTEDNESS. The Company will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Annex VII, including any extensions, refinancings,
replacements or restructurings thereof, PROVIDED that the then outstanding
principal amount thereof is not increased;
(c) Indebtedness under Interest Rate Protection Agreement, and Other
Hedging Agreements permitted by Section 8.05(d);
(d) Capitalized Lease Obligations and Indebtedness of the Company and
its Subsidiaries incurred pursuant to purchase money Liens permitted under
Section 8.03(k); PROVIDED that all such Capitalized Lease Obligations are
permitted under Section 8.08, and (ii) the sum of (x) the aggregate
Capitalized Lease Obligations outstanding at any time plus (y) the
aggregate principal amount of such purchase money Indebtedness outstanding
at such time shall not exceed $12,000,000 (including Capital Lease
Obligations referred to on Exhibit VII);
63
<PAGE>
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(f) Indebtedness of Foreign Subsidiaries to the Company or any of its
Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.05(k);
(g) Indebtedness consisting of guaranties (x) by the Company of
Indebtedness, leases and other contractual obligations permitted to be
incurred by Subsidiaries of the Company that are Guarantors and (y) by
Foreign Subsidiaries of the Company of Indebtedness, leases and other
contractual obligations permitted to be incurred by the Company and its
Subsidiaries;
(h) Indebtedness of a Subsidiary acquired as a result of a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness); PROVIDED that (i) such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, (ii) at the time of such
Permitted Acquisition such Indebtedness does not exceed 25% of the total
then fair market value of the assets of the Subsidiary so acquired, or of
the asset so acquired, as the case may be, (iii) so long as, before and
after giving effect to such Permitted Acquisition, no Default or Event of
Default shall have occurred or would result therefrom and (iv) such
Indebtedness is not recourse to any assets of the Company or its
Subsidiaries other than the Subsidiary and assets so acquired; and
(i) additional Indebtedness of the Company and its Subsidiaries not
otherwise permitted hereunder not exceeding $5,000,000 in aggregate
principal amount at any time outstanding.
8.05 ADVANCES, INVESTMENTS AND LOANS. The Company will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash Equivalents
(collectively, "Investments"), except:
(a) the Company and its Subsidiaries may invest in cash and Cash
Equivalents, and, in the case of Foreign Subsidiaries, Foreign Cash
Equivalents;
(b) the Company and its Subsidiaries may acquire and hold receivables
owing to it, if created or acquired in the
64
<PAGE>
ordinary course of business and payable or dischargeable in accordance with
customary trade terms (including the dating of receivables) of the Company
or such Subsidiary;
(c) the Company and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
(d) (w) Interest Rate Protection Agreements entered into to protect
the Company against fluctuations in interest rates in respect of the
Obligations, (x) Other Hedging Agreements with respect to Canadian Dollars
to protect against fluctuations in the value of the Canadian dollar against
the U.S. dollar, but only with respect to the loans contemplated by clause
(k) of this Section 8.05, (y) Other Hedging Agreements with respect to
copper and other raw materials to be used in the business of the Company
and its Subsidiaries, provided that such purchases are entered into in the
ordinary course of business and consistent with past practices and for bona
fide business (and not speculative) purposes and (z) Other Hedging
Agreements with respect to foreign sales by the Company and its
Subsidiaries, provided that such agreement to protect against fluctuations
in currency values are entered into the ordinary course of business and for
bona fide business (and not speculative) purposes;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Annex V shall be permitted, without giving
effect to any additions thereto or replacements thereof (except those
additions or replacements which are existing obligations as of the Initial
Borrowing Date but only to the extent such further obligations are
described on such Annex V);
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases or other contractual
arrangements shall be permitted;
(g) the Company may make intercompany loans and advances to any of
its Subsidiaries that are Guarantors and any Subsidiary of the Company may
make intercompany loans and advances to the Company or any other Subsidiary
of the Company that is a Guarantor (collectively, "Intercompany Loans");
PROVIDED that (x) each Intercompany Loan shall contain subordination
provisions satisfactory to the Agent, (y) each Intercompany Loan shall be
evidenced by an Intercompany Note and (z) each such Intercompany Note shall
be pledged to the Collateral Agent pursuant to the Pledge Agreement;
65
<PAGE>
(h) loans and advances by the Company and its Subsidiaries to
employees of the Company and its Subsidiaries for moving and travel
expenses and other similar expenses or in connection with stock purchases
in each case incurred in the ordinary course of business and consistent
with past practices shall be permitted in an aggregate principal amount not
to exceed $2,500,000 at any one time outstanding;
(i) Permitted Acquisitions shall be permitted;
(j) the Company and its Subsidiaries may acquire and hold promissory
notes and/or equity securities issued by the purchaser or purchasers in
connection with the sale of assets to the extent permitted under Section
8.02(d);
(k) the Company may lend, on a senior basis, funds to the Canadian
Subsidiary, provided that (x) the aggregate amount of such loans may not,
at any time, exceed $6,000,000, (y) such loans shall (i) be made pursuant
to a note, in form and substance, satisfactory to the Agent, (ii) bear
interest at a rate equal to that determined in accordance with Section
1.08(a), (iii) be prepayable at any time upon demand by the Company and
(iv) be secured (at all times commencing no later than 90 days after the
Initial Borrowing Date) by the assets of the Canadian Subsidiary and its
Subsidiaries, on terms and conditions satisfactory to the Agent and (z)
such loans and notes shall constitute Collateral and be pledged to the
Collateral Agent on behalf of the Secured Creditors;
(l) the Company may contribute cash to one or more of its
Subsidiaries that are or become Guarantors formed after the Initial
Borrowing Date in accordance with Section 8.14 (including in connection
with a Permitted Acquisition) so long as such Subsidiary remains a
Guarantor;
(m) the Company may purchase shares of the Company common stock to
the extent permitted by Sections 8.06(ii);
(n) the Company and its Subsidiaries may make cash Investments in or
to Persons that are not Affiliates (other than joint ventures in which an
Affiliate of the Company has an ownership interest other than through the
Company or a Subsidiary of the Company) in an amount not to exceed
$25,000,000 outstanding at any one time (giving effect to any repayments in
cash, but without giving effect to any distributions or profits thereon,
write-downs or non-cash payments) PROVIDED, before and after giving effect
to each such Investment, (x) no Default or Event of Default shall have
occurred or result therefrom and (y) the Unutilized Revolving Loan
Commitment would be at least $15,000,000; and
66
<PAGE>
(o) The Company and its Subsidiaries may make cash Investments in or
to Persons that are not Affiliates of the Company in an amount not to
exceed $5,000,000 outstanding at any one time, giving effect to any
repayments in cash, but without giving effect to any distributions thereon,
write-downs or non-cash payments (PROVIDED, that before and after giving
effect to each such Investment, no Default or Event of Default shall have
occurred or result therefrom).
8.06 DIVIDENDS, ETC. The Company will not, and will not permit any of
its Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of the Company or any such Subsidiary, as the case may
be) or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for any consideration, any shares of any class of its capital stock, now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights (other than such rights as are granted only to employees as compensation
for their employment) in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Company will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Company or any Subsidiary of the Company
now or hereafter outstanding (or any options or warrants or such stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends", it being understood that the payments made in
accordance with the clauses contained in the proviso of Section 8.07 shall not
be deemed to be Dividends), except that:
(i) any Subsidiary of the Company may pay Dividends to the
Company or any Wholly-Owned Subsidiary of the Company;
(ii) prior to consummation of an initial public offering
(including the Initial Public Offering), the Company may redeem or purchase
shares of the Company Common Stock or options to purchase the Company
Common Stock, as the case may be, held by former employees (or their heirs)
of the Company or any of its Subsidiaries following the termination of
their employment; PROVIDED that (x) the only consideration paid by the
Company in respect of such redemptions and/or purchases shall be cash
and/or subordinated notes of the Company in form and substance satisfactory
to the Agent and (y) the sum of (I) the aggregate amount paid by the
Company in cash in respect of all such redemptions and/or purchases plus
(II) the aggregate amount of all principal and interest payments made on
such subordinated notes shall not exceed $1,000,000 in any consecutive
twelve months of the Company;
67
<PAGE>
(iii) as long as no Default or Event of Default shall then exist
or result therefrom, regular quarterly cash dividends on the Superior
Preferred Stock may be paid in an aggregate amount per fiscal quarter of
the Company not to exceed $300,000, PROVIDED that such dividend is not
declared earlier than ten days after the delivery to the Banks of the
required financial statements and related Officer's Certificate for such
period contemplated by Section 7.01 of this Agreement;
(iv) as long as no Default or Event of Default shall then exist
or result therefrom, with respect to each Special Dividend Period, the
Company may declare and pay a dividend on the Company's Common Stock in an
amount not to exceed $5,000,000; PROVIDED that the ratio of Consolidated
EBITDA of the Company to Consolidated Fixed Charges of the Company for such
Special Dividend Period (determined on a PRO FORMA basis after giving
effect to such dividend) exceeds 1.0 to 1.0, except that with respect to
the second Special Dividend Period and each Special Dividend Period
thereafter, the amount of such dividend may exceed $5,000,000 (but may not
exceed $7,500,000) but only if such ratio for such Special Dividend Period
exceeds 1.10 to 1, it being understood that for each such Special Dividend
Period any dividend under this Section 8.06(iv) may not be declared earlier
than ten days after the delivery to the Banks of the financial statements
and related Officer's Certificate for the last fiscal period of such
Special Dividend Period required by Section 7.01 and an Officer's
Certificate showing, in reasonable detail, compliance with the applicable
ratio set forth in this Section 8.06;
(v) so long as no Default or Event of Default shall then exist
or result therefrom, the Company may declare and pay a Dividend from, and
in an amount not to exceed, the net cash proceeds of the Initial Public
Offering but only after giving effect to all repayments and commitment
reductions resulting from the Initial Public Offering as contemplated by
this Agreement, including without limitation, Section 3 hereof; PROVIDED
that such dividend may not exceed the sum of (x) $53,300,000 and (y) the
net cash proceeds (net of all underwriting discounts, fees and commissions
and other costs and expenses associated therewith) from the sale of Company
Common Stock in the Initial Public Offering upon exercise of the
underwriters' over-allotment option; and
(vi) shares of the Superior Preferred Stock may be repurchased,
PROVIDED that the only consideration to be paid in connection therewith
shall be shares of (x) Company Common Stock and/or (y) Company preferred
stock having terms identical, in all material respects, to the Superior
Preferred Stock (including as to dividend rate and
68
<PAGE>
liquidation preferences) except that the issuer thereof shall be the
Company.
8.07 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to the Company or such
Subsidiary as would be reasonably expected to be obtainable by the Company or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate; PROVIDED that the following shall in any event
be permitted: (i) the Transaction; (ii) the performance of the Services
Agreement PROVIDED that (x) such payments may not exceed $2,000,000 in any four
fiscal quarter period and (y) the portion of such payment for services described
in Section 3(b) thereof shall be subject to the "arm's-length" standard
described in this Section 8.07; (iii) the Company and its Domestic Subsidiaries
may enter into the Company Tax Allocation Agreement and may make payments
thereunder and the Alpine Tax Allocation Agreement and may make payments
thereunder; (iv) transactions between or among the Company and its Subsidiaries
to the extent that such trans- actions are otherwise specifically permitted
under this Agreement and (v) the employment agreement with Steven S. Elbaum in
terms no more adverse to the Company than those described in the Registration
Statement.
8.08 CAPITAL EXPENDITURES. (a) The Company will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(x) during the period (taken as one accounting period) commencing on the Initial
Borrowing Date and ending on April 27, 1997, the Company and its Subsidiaries
may make Capital Expenditures so long as the aggregate amount does not exceed
$7,100,000 during such period and (y) during any fiscal year thereafter, the
Company and its Subsidiaries may make Capital Expenditures so long as the
aggregate amount of such Capital Expenditures does not exceed $11,000,000.
(b) In the event that the amount of Capital Expenditures permitted to
be made by the Company and its Subsidiaries pursuant to clause (a) above in any
fiscal year (before giving effect to any increase in such permitted expenditure
amount pursuant to this clause (b)) is greater than the amount of such Capital
Expenditures actually made by the Company and its Subsidiaries during such
fiscal year, such excess (the "Rollover Amount") may be carried forward and
utilized to make Capital Expenditures in succeeding fiscal years; PROVIDED that
in no event shall the aggregate amount of Capital Expenditures made by the
Company and its Subsidiaries during any fiscal year pursuant to Section 8.08(a)
exceed 125% of the direct amount set forth for such fiscal year in such Section
8.08(a).
69
<PAGE>
(c) Notwithstanding the proviso in Section 8.08(b), the Company and
its Subsidiaries may make additional Capital Expenditures with the Net Cash
Proceeds of Asset Sales to the extent such proceeds are not required to be
applied to reduce the Total Revolving Loan Commitment pursuant to Section
3.03(c) and such proceeds are reinvested as required by Section 3.03(c).
(d) The Company and its Subsidiaries may make additional Capital
Expenditures with the insurance proceeds received by the Company or any of its
Subsidiaries from any Taking or Destruction so long as such Capital Expenditures
are to replace or restore any properties or assets in respect of which such
proceeds were paid within one year following the date of the receipt of such
insurance proceeds to the extent such insurance proceeds are not required to be
applied to reduce the Total Revolving Loan Commitment pursuant to Section
3.03(f).
(e) The Company and its Wholly-Owned Subsidiaries may make Permitted
Acquisitions.
8.09 MINIMUM CONSOLIDATED EBITDA. The Company will not permit
Consolidated EBITDA during any Test Period set forth below to be less than the
amount set forth below with respect to such Test Period:
($ in millions)
Test Period Ending: Amount:
------------------ ------
10/31/96 $46.3
01/31/97 46.5
04/30/97 46.7
07/28/97 45.3
10/31/97 46.4
01/31/98 47.4
04/30/98 48.0
07/28/98 48.3
10/31/98 48.5
01/31/99 48.8
04/30/99 49.0
and the last day
of each Fiscal Quarter
thereafter
8.10 INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio for any Test Period set forth below to be equal to or
less than the ratio set forth below with respect to such Test Period:
Test Period Ending: Ratio:
------------------ -----
10/31/96 3.1x
01/31/97 3.1x
04/30/97 3.2x
70
<PAGE>
07/28/97 3.2x
10/31/97 3.3x
01/31/98 3.5x
04/30/98 3.7x
07/28/98 3.8x
10/31/98 3.9x
01/31/99 3.9x
04/30/99 4.0x
and the last day
of each Fiscal Quarter
thereafter
8.11 LEVERAGE RATIO. The Company will not permit the Pro Forma
Leverage Ratio at any time during the Test Period set forth below to be equal to
or more than the ratio set forth below with respect to such Test Period:
Test Period Ending: Ratio:
------------------ -----
10/31/96 4.167x
01/31/97 4.083x
04/30/97 4.000x
07/28/97 3.875x
10/31/97 3.750x
01/31/98 3.625x
04/30/98 3.500x
07/28/98 3.375x
10/31/98 3.250x
01/31/99 3.150x
04/30/99 3.100x
and the last day
of each Fiscal Quarter
thereafter
8.12 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN
OTHER AGREEMENTS; ISSUANCES OF CAPITAL STOCK; ETC. The Company will not, and
will not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) any Superior Preferred Stock (except as
permitted by clause (vi) of Section 8.06) or any Existing Indebtedness.
(ii) amend or modify in any material respect or in any manner
adverse to the Company or the Banks, or permit such an amendment or
modification of, any provision of the Superior Preferred Stock or Existing
Indebtedness;
71
<PAGE>
(iii) amend, modify or change in any way adverse to the
interests of the Banks, any Tax Allocation Agreement, its Certificate of
Incorporation (including, without limitation, by the filing or modification
of any certificate of designation) or By-Laws; and
(iv) issue any class of capital stock other than common stock.
8.13 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. The Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any Subsidiary
of the Company, or pay any Indebtedness owed to the Company or a Subsidiary of
the Company, (b) make loans or advances to the Company or any of the Company's
Subsidiaries or (c) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) the Credit Documents, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Company or a Subsidiary of the Company, (iv)
customary provisions restricting assignment of any licensing agreement entered
into by the Company or a Subsidiary of the Company in the ordinary course of
business, (vi) in the case of DNE and its Subsidiaries, the Existing
Indebtedness Agreements as modified by the consent contemplated under Section
5.19, and in the case of Superior and the Company, that certain lease agreement
dated as of May 10, 1995 (the "Brownwood Lease") as amended, between Superior
and ALP (TX) QRS-11-28, Inc., (vii) customary provisions restricting the
transfer of or by those assets pursuant to, and subject to other Liens permitted
under Section 8.03(h), (i), (j), (k) or (l) and (viii) restrictions or
encumbrances pursuant to Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed at the time of a Permitted
Acquisition) or an asset securing such Indebtedness, PROVIDED that such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, PROVIDED, FURTHER, such
restrictions or encumbrances apply solely to such Subsidiary or asset so
acquired.
8.14 LIMITATION ON THE CREATION OF SUBSIDIARIES. Notwithstanding
anything to the contrary contained in this Agreement, the Company will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Initial Borrowing Date any Subsidiary; PROVIDED that the Company and its
Wholly-Owned Subsidiaries shall be permitted to establish or create Subsidiaries
as a result of investments made pursuant to Section 8.05(l) or Section 8.05(n)
so long as, in each case, (i)
72
<PAGE>
at least 15 days' prior written notice thereof is given to the Agent (or such
shorter period of time as is acceptable to the Agent), (ii) unless otherwise
consented to by the Agent because such Subsidiary is a Foreign Subsidiary, the
capital stock of such new Subsidiary is promptly pledged pursuant to, and to the
extent required by, this Agreement and the Pledge Agreement and the
certificates, if any, representing such stock, together with stock powers duly
executed in blank, are delivered to the Collateral Agent, (iii) unless otherwise
consented to by the Agent because such Subsidiary is a Foreign Subsidiary, such
new Subsidiary promptly executes a counterpart of the Guaranty, the Pledge
Agreement and the Security Agreement, and (iv) to the extent requested by the
Agent or the Required Banks, takes all actions required pursuant to Section
7.11, PROVIDED that no such action will be required by any new Subsidiary (that
is not a Wholly-Owned Subsidiary) to the extent such new Subsidiary is a party
to a preexisting agreement which prohibits such new Subsidiary from executing a
Guaranty; PROVIDED, FURTHER, such preexisting agreement was not entered into for
the purpose of avoiding the requirements of Section 8.14 and the restrictions
contained therein are no more adverse to the Company and its Subsidiaries than
to the other equity owners in such new Subsidiary. In addition, each new
Subsidiary that is required to execute any Credit Document shall execute and
deliver, or cause to be executed and delivered, all other relevant documentation
of the type described in Section 5 as such new Subsidiary would have had to
deliver if such new Subsidiary were a Credit Party on the Initial Borrowing
Date.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 PAYMENTS. The Company shall (i) default in the payment when due
of any principal of the Loans or (ii) default, and such default shall continue
for three or more days, in the payment when due of any Unpaid Drawing, any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document;
9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement
made by any Credit Party in any Credit Document or in any statement or
certificate delivered pursuant thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
9.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8, or (b) default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in Section 9.01, 9.02
or clause (a) of this Section 9.03) contained in this Agreement and such default
shall continue unremedied for a period of at least
73
<PAGE>
30 days after notice to the defaulting party by the Agent or the Required Banks,
PROVIDED that if any such default covered by this clause (b) (i) is not capable
of being remedied within such 30-day period, (ii) is capable of being remedied
within an additional 30-day period and (iii) the Credit Party is diligently
pursuing such remedy during the periods contemplated by (i) and (ii) and has
advised the Agent as to the remedy thereof, the first 30-day period referred to
in this clause (b) shall be extended for an additional 30-day period but only so
long as (x) the Credit Party continues to diligently pursue such remedy and (y)
such default remains capable of being remedied within such period; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any of its
Subsidiaries shall (i) default in any payment on or with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, any such
Indebtedness to become due prior to its stated maturity; or (b) any Indebtedness
(other than the Obligations) of the Company or any of its Subsidiaries shall be
declared to be due and payable, or shall be required to be prepaid other than by
a regularly scheduled required prepayment or as a mandatory prepayment (unless
such required prepayment or mandatory prepayment results from a default
thereunder or an event of the type that constitutes an Event of Default), prior
to the stated maturity thereof; PROVIDED that it shall not constitute an Event
of Default pursuant to clause (a) or (b) of this Section 9.04 unless the
principal amount of any one issue of such Indebtedness, or the aggregate amount
of all such Indebtedness referred to in clauses (a) and (b) above, exceeds
$5,000,000 at any one time; or
9.05 BANKRUPTCY, ETC. The Company or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Company or any of its Subsidiaries and the petition is not controverted within
30 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Company or any of its
Subsidiaries; or the Company or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or
74
<PAGE>
hereafter in effect relating to the Company or any of its Subsidiaries; or there
is commenced against the Company or any of its Subsidiaries any such proceeding
which remains undismissed for a period of 60 days; or the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Company or
any of its Subsidiaries suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Company or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Company or any of its Subsidiaries for the purpose of effecting any
of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan is, shall have been or is likely to be terminated
or the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made to a Plan or a
Foreign Pension Plan has not been timely made, the Company or any Subsidiary of
the Company or any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(2), 4971,
4975 or 4980 of the Code, or the Company or any Subsidiary of the Company has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) which provide
benefits to retired employees and other former employees (other than as required
by Section 601 of ERISA) or employee pension benefit plans (as defined in
Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall result from any
such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of imposition of a lien, granting of
a security interest or incurring a liability; and (c) which lien, security
interest or liability which arises from such event or events is reasonably
likely to have a Material Adverse Effect; or
9.07 SECURITY DOCUMENTS. (a) Any Security Document shall cease to be
in full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby in favor of the
Collateral Agent with respect to any portion of the Collateral which is not DE
MINIMIS, or (b) any Credit Party shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any such Security Document and such default shall continue
beyond any
75
<PAGE>
cure or grace period specifically applicable thereto pursuant to the terms of
any such Security Document; or
9.08 GUARANTEES. The Guarantees or any provision thereof shall cease
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Guaranty; or
9.09 JUDGMENTS. One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by insurance) in excess of $5,000,000 for
all such judgments and decrees and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
9.10 OWNERSHIP. A Change of Control Event shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent may, (and shall, upon the written request of
the Required Banks), by written notice to the Company, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Guarantor or the Company, except as otherwise
specifically provided for in this Agreement (PROVIDED that if an Event of
Default specified in Section 9.05 shall occur with respect to the Company, the
result which would occur upon the giving of written notice by the Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Revolving Loan Commitment
terminated, whereupon the Revolving Loan Commitment of each Bank shall forthwith
terminate immediately and any Commitment Fees shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company; (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; and (v) direct the Company to pay (and the Company hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default specified
in Section 9.05, to pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Company's
reimbursement obligations in respect
76
<PAGE>
of Letters of Credit then outstanding, equal to the aggregate Stated Amount of
all Letters of Credit then outstanding.
SECTION 10. DEFINITIONS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
BTCo to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise. Without limiting the foregoing,
Alpine and its Affiliates shall be deemed to be Affiliates of the Company and
its Subsidiaries so long as the Service Agreement is in place.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.10.
77
<PAGE>
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Alpine" shall have the meaning set forth in the whereas clauses to
this Agreement.
"Alpine Tax Allocation Agreement" shall mean the tax allocation
agreement by and among Alpine, the Company and their Affiliates dated as of
October 2, 1996, effective as of May 1, 1996.
"Applicable Base Rate Margin" shall mean a percentage per annum equal
to 1.25%, less the then applicable Interest Reduction Discount, if any; PROVIDED
that in no event shall the Applicable Base Rate Margin be less than 0%.
"Applicable Eurodollar Margin" shall mean a percentage per annum equal
to 2.25%, less the then applicable Interest Reduction Discount, if any; PROVIDED
that in no event shall the Applicable Eurodollar Margin be less than 1.00%.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Company or any of its Subsidiaries to any Person of any asset (including,
without limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Company or
such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to, Sections 8.02(e), (f), (g), (h), (i) and (n).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of EXHIBIT K (appropriately
completed).
"Authorized Officer" shall mean any senior officer of the Company
designated as such in writing to the Agent by the Company to the extent
reasonably acceptable to the Agent.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.04(c) or (ii) a Bank having notified the Agent and/or the
Company that it does not intend to comply with the obligations under Section
1.01(a), 1.01(c) or 2.04(c), in the case of either clause (i) or (ii) above as a
result of the appointment of a receiver or conservator with respect to such Bank
at the direction or request of any regulatory agency or authority.
78
<PAGE>
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the highest of (x) the rate which
is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the
Prime Lending Rate and (z) the rate which is 1/2 of 1% in excess of the Federal
Funds Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the borrowing of one Type of Revolving
Loan from all of the Banks on a given date (or resulting from conversions on a
given date), having in the case of Eurodollar Loans the same Interest Period;
PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Canadian Subsidiary" shall mean Superior Cable Corporation, an
Ontario corporation.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be added to the fixed assets account on
the consolidated balance sheet of such Person in accordance with GAAP (which
shall not include interest capitalized during construction but only to the
extent included in Consolidated Interest Expense), including all such
expenditures with respect to plant, property or equipment (including, without
limitation, expenditures for maintenance and repairs which should be capitalized
in accordance with GAAP) and the amount of all Capitalized Lease Obligations
incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, should be
79
<PAGE>
accounted for as a capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Company or any of its Subsidiaries in each case taken at
the amount thereof that should be accounted for as liabilities in accordance
with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and banker acceptances of (x) any Bank or
(y) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank or Bank, an "Approved Bank"), in each case with
maturities of not more than twelve months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, as the case may be, and in each case maturing within twelve months
after the date of acquisition, (iv) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within twelve months from
the date of acquisition thereof and, at the time of acquisition having one of
the two highest ratings obtainable from either S&P or Moody's, (v) any
repurchase agreement entered into with any Approved Bank which is secured by any
obligation of the type described in any of clauses (i) through (iii) and (vi)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Company and/or any of its Subsidiaries from
such Asset Sale.
"Change of Control Event" shall mean (a) the Company shall cease to
own directly 100% on a fully diluted basis of the economic and voting interest
in the capital stock of Superior or DNE (other than the shares of Superior
Preferred Stock referred to in the recitals to this Agreement) or (b) any Person
or "group" (within the meaning of Rules 13d-3 and 13d-5 under the
80
<PAGE>
Securities Exchange Act of 1934, as in effect on the (Effective Date), other
than Alpine, shall (A) have acquired beneficial ownership of 20% or more on a
fully diluted basis of the voting and/or economic interest in the Company's
capital stock (PROVIDED, HOWEVER, such referenced percentage in this clause (A)
shall be 25% if, and so long as, Alpine directly maintains ownership of more
than 30% on a fully diluted basis of the economic and voting interests in the
Company's capital stock) or (B) obtained the power (whether or not exercised) to
elect a majority of the Company' directors or (C) the Board of Directors of the
Company shall cease to consist of a majority of Continuing Directors.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and ruling issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Pledged Collateral, Pledged
Securities and Mortgaged Property.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Company" shall have the meaning provided in the first paragraph of
this Agreement.
"Company Common Stock" shall have the meaning provided in Section
6.14.
"Company Tax Allocation Agreement" shall mean the tax allocation
agreement by and among the Company and its Subsidiaries dated as of October 2,
1996, effective as of May 1, 1996.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Company and its Subsidiaries determined on a consolidated basis; PROVIDED that
for purposes of this definition, the amount of Indebtedness in respect of
Interest Rate Protection Agreements and Other Hedging Agreements shall be at any
time equal to the unrealized net loss position, if any, of the Company and/or
its Subsidiaries thereunder on a marked to market basis determined no more than
one month prior to such time.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income, before total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest
81
<PAGE>
Rate Protection Agreements and any original issue discount) and before minority
charges resulting from the existence of the Superior Preferred Stock of the
Company and its Subsidiaries determined on a consolidated basis and provisions
for taxes based on income, whether paid or deferred.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation expense and
amortization expense plus non-cash compensation expenses relating to restricted
stock and stock- option grants, in each case, that were deducted in determining
Consolidated EBIT for such period, plus net earnings of any Person (other than a
consolidated Subsidiary that is a Guarantor) in which the Company or any
consolidated Subsidiary has an ownership interest to the extent such net
earnings shall have actually been received by the Company or such consolidated
Subsidiary in the form of cash distributions.
"Consolidated Fixed Charges" shall mean, for any period the sum of
Consolidated Interest Expense for such period plus (v) all dividends paid or
accrued on capital stock of the Company and its Subsidiaries held by persons
other than the Company and its Subsidiaries that are Guarantors plus (w) the
amount of all Capital Expenditures of the Company (other than Capital
Expenditures made pursuant to clause (d) or (e) of Section 8.08) and its
Subsidiaries paid or accrued with respect to such period plus (x) all cash taxes
paid or accrued with respect to such period (other than with respect to net
income taxes attributable to items that are excluded from the calculation of
Consolidated Net Income in the period) plus (y) $10,000,000 for the first
Special Dividend Period, $10,000,000 for the next succeeding Special Dividend
Period, $15,000,000 for the next succeeding Special Dividend Period, $20,000,000
for the next succeeding Special Dividend Period, and $40,000,000 for the next
succeeding Special Dividend Period and (z) mandatory principal payments on
Indebtedness (other than with respect to Loans) required to be made during such
period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to (A) any rent paid in respect of
Capital Leases which is or should be allocable to interest expense in accordance
with GAAP and (B) interest capitalized during the construction of any Capital
Expenditure) of the Company and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of any payments made to obtain
any Interest Rate Protection Agreement and Other Hedging Agreements and deferred
financing costs and any interest expense on deferred compensation
82
<PAGE>
arrangements to the extent included in total interest expense; PROVIDED, for
that portion of any Test Period prior to the Initial Borrowing Date,
Consolidated Interest Expense shall be determined on a PRO FORMA basis as if (i)
no loans were outstanding under the Existing Credit Agreement, (ii) Loans in an
aggregate principal amount equal to the amount outstanding on the Initial
Borrowing Date (after giving effect to the Transaction) had been outstanding at
all times since the first day of such Test Period and that such Loans had
accrued interest at a per annum rate equal to the Eurodollar Rate that would
have been in effect on the Initial Borrowing Date as if Eurodollar Loans were
incurred on such date.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provisions for income taxes (other than with respect to net
income taxes attributable to items that are excluded from the calculation of
Consolidated Net Income in the period), of the Company and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period in
conformity with GAAP but excluding in any event (a) any extraordinary gains (net
of extraordinary losses) but with giving effect to gains or losses from sales of
assets sold in the ordinary course of business; (b) net earnings of any person
(other than a consolidated Subsidiary that is a Guarantor or the Canadian
Subsidiary) in which the Borrower or any consolidated Subsidiary has an
ownership interest unless such net earnings shall have actually been received by
the Borrower or such consolidated Subsidiary in the form of cash distributions;
(c) any portion of the net earnings of any consolidated Subsidiary which is
unavailable for payment of dividends to the Borrower or any other consolidated
Subsidiary by reason of the provisions of any agreement or applicable law or
regulation (including, without limitation, those agreements referred to in the
exceptions set forth in Section 8.13); (d) earnings resulting from any
reappraisal, revaluation or write-up of assets; (e) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of such Person or is
merged into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or any of its Subsidiaries; (f) the
aggregate net gain (or loss) during such period arising from the revaluation
(but not sale) of readily marketable securities; (g) the income (or loss) from
discontinued operations; and (h) non-cash charges and cash charges (but only to
the extent such cash charges are reimbursed by a controlling Affiliate in cash
at the time of incurrence thereof), in each case, relating to the Transaction,
repayment of Indebtedness incurred under the Existing Credit Agreement and any
Dividend paid, in accordance with the terms hereof, from proceeds of the Initial
Public Offering.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other
83
<PAGE>
obligations ("primary obligations") of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (a) to purchase any
such primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligations of the ability
of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; PROVIDED, HOWEVER, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection or standard contractual indemnities entered into, in each case in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Continuing Directors" shall mean the directors of the Company on the
Initial Borrowing Date and each other director if such director's nomination for
the election to the Board of Directors of the Company is recommended by a
majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, each of the Notes and
each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean the Company and each Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Destruction" has the meaning assigned to that term in each Mortgage.
84
<PAGE>
"Dividends" shall have the meaning provided in Section 8.07.
"Documents" shall mean the Credit Documents and the IPO Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Company
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean a commercial bank, financial
institution or other institutional "accredited investor" (as defined in
Regulation D of the Securities Act).
"End Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance, deficiency, liability or violation, investigations or
proceedings relating in any way to any violation or liability (or alleged
violation or liability) by the Company or any of its Subsidiaries under any
Environmental Law (hereafter "Claims") or any permit, license or other
authorization issued to the Company or any of its Subsidiaries under any such
law, including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, remedial, corrective,
response or other actions or damages pursuant to any Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" shall mean any foreign, federal, state or local
policy, statute, law, rule, regulation, ordinance, code or rule of common law
now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials, or
health and safety to the extent such health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date
85
<PAGE>
of this Agreement and any subsequent provisions of ERISA amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Company or any Subsidiary of the Company would
be deemed to be a "single employer" within the meaning of Section 414(b) or (c)
of the Code or (to the extent required by operation of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA) Section 414(m) or (o) of the
Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/16 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds generally
comparable to the aggregate principal amount of the Eurodollar Loan for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Existing Credit Agreement" means the credit facility provided to
Alpine and certain Subsidiaries pursuant to the Loan and Security Agreement
dated as of July 21, 1995 among Alpine, the Subsidiaries named therein, the
financial institutions party thereto, and Shawmut Capital Corporation as Agent,
as amended.
"Existing Indebtedness" shall have the meaning provided in Section
6.22.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.14.
"Existing Letters of Credit" shall have the meaning provided in
Section 2.01(a).
"Facing Fee" shall have the meaning provided in Section 3.01(c).
86
<PAGE>
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Final Maturity Date" shall mean October 31, 2001.
"Foreign Cash Equivalents" shall mean Canadian dollar denominated
certificates of deposit or bankers acceptances of any bank organized under the
laws of Canada, provided that the short-term commercial paper rating of such
bank from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof, in each case with maturities of not more
than twelve months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Company or any one or
more of its Subsidiaries primarily for the benefit of employees of the Company
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code,
or any such plan as to which the Company or any of its Subsidiaries may have any
liability.
"Foreign Subsidiary" shall mean each Subsidiary of the Company other
than a Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 8 and
the definition of Interest Reduction Discount, including defined terms as used
therein, are subject (to the extent provided therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the Agent, the
Collateral Agent, the Banks and each Letter of Credit Issuer.
87
<PAGE>
"Guaranteed Obligations" shall mean the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each Note issued by the Company to each Bank, and
Loans made, under this Agreement and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit, together with all the other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Company or any Guarantor to such Bank, the Agent and the Collateral Agent now
existing or hereafter incurred under, arising out of or in connection with any
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in each of the Credit Documents by the
Company.
"Guarantor" shall mean each Subsidiary of the Company (other than a
Foreign Subsidiary except to the extent otherwise provided in Section 8.14).
"Guaranty" shall mean the Guaranty contained in Section 13 hereof.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products or wastes (including crude oil or any fraction thereof), radioactive
materials, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
and (b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous wastes," "restrictive
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar meaning and regulatory effect under any
Environmental Law.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed; PROVIDED, HOWEVER, that in the event that the liability of such first
Person is non-recourse to such Person and is recourse only to specified assets
of such Person, the amount of Indebtedness attributed thereto shall not exceed
the greater of the market value of such assets or the book
88
<PAGE>
value of such assets, (v) all Capitalized Lease Obligations of such Person, (vi)
all obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person;
PROVIDED that Indebtedness shall not include trade payables and accrued
expenses, in each case arising and payable in the ordinary course of business
and consistent with past practice (so long as so paid in the ordinary course of
business and consistent with past practice).
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Initial Public Offering" shall have the meaning provided in the
recitals of this Agreement.
"Intercompany Loan" shall have the meaning provided in Section
8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form of
EXHIBIT L, evidencing an Intercompany Loan.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean zero; PROVIDED that from and
after the first day of any Margin Reduction Period (the "Start Date") to and
including the last day of such Margin Reduction Period (the "End Date"), the
Interest Reduction Discount shall be the respective percentage per annum set
forth in clause (A), (B), (C), (D) or (E) below if, but only if, as of the last
day of the most recent fiscal quarter or year, as the case may be, ended
immediately prior to such Start Date (the "Test Date"), the applicable
conditions set forth in clause (A), (B), (C), (D) or (E) below, as the case may
be, are met:
(A) .25% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.75:1.0 and none of the conditions set forth in
clause (B), (C), (D) or (E) below, as the case may be, are satisfied;
89
<PAGE>
(B) .50% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.50:1.0 and none of the conditions set forth in
clause (C), (D) or (E) below, as the case may be, are satisfied;
(C) .75% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.25:1.0 and neither of the conditions set forth
in clause (D) or (E) below is satisfied; or
(D) 1% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.00:1.0 and the condition set forth in clause (E)
below is not satisfied; or
(E) 1.25% if, but only if, as of the Test Date for such Start Date
the Pro Forma Leverage Ratio for the Test Period ended on such Test Date
shall be equal to or less than 2.50:1.0.
Notwithstanding anything to the contrary contained above in this definition, (x)
the Interest Reduction Discount shall not exceed that set forth in clause (C)
prior to the first Test Date to occur after the first anniversary of the Initial
Borrowing Date, (y) the Interest Reduction Discount shall be zero at any time
when a Default or an Event of Default shall exist and (z) upon consummation of
the Initial Public Offering, the then in effect Interest Reduction Discount
shall be adjusted to give effect to the net reduction of outstanding Loans as a
result of any repayment from the proceeds of such Initial Public Offering (net
of any incremental Borrowings) as if such net reduction had occurred on the
relevant Test Date (such adjustment to take effect upon such repayment of
Loans).
"IPO Documents" shall mean the Registration Statement relating to the
registration of the the Company Common Stock, and all other documents or
agreements related to the consummation of the IPO, including, without
limitation, all underwriting or similar agreements and all documents filed with
the SEC.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Company or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Company or any of its Subsidiaries as are reasonably acceptable to the Agent and
the Letter of Credit Issuer and otherwise permitted to exist pursuant to the
terms of this Agreement.
90
<PAGE>
"Lease" shall mean any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Letter of Credit Sublimit" shall mean $7,500,000.
"Leverage Ratio" shall mean, at any time, the ratio of (x)
Consolidated Debt as of the last day of the relevant Test Period to (y)
Consolidated EBITDA for the relevant Test Period.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(c).
"Margin Reduction Period" shall mean each period which shall commence
on a date on which the financial statements are delivered pursuant to Section
7.01(b) or (c), as the case may be, and which shall end on the earlier of (i)
the date of actual delivery of the next financial statements pursuant to Section
7.01(b) or (c), as the case may be, and (ii) the latest date on which the next
financial statements are required to be delivered pursuant to Section 7.01(b) or
(c), as the case may be; PROVIDED
91
<PAGE>
that the first Margin Reduction Period shall commence on the date that the
financial statements are delivered for the Company's first fiscal quarter ending
after the Initial Borrowing Date.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole and after giving
effect to the Transaction.
"Maximum Swingline Amount" shall mean $7,500,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000 and (ii) for Swingline Loans, $250,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall mean a revolving credit mortgage, assignment of
leases, security agreement and fixture filing, or a revolving credit deed of
trust, assignment of leases, security agreement and fixture filing creating and
evidencing a Lien on a Mortgaged Real Property, which shall be substantially in
the form of Exhibit M-1 or M-2 (as appropriate) hereto, containing such
schedules and including such additional provisions and other deviations from
such Exhibits as shall be necessary to conform such document to applicable or
local law or as shall be customary under local law and which shall be dated the
date of delivery thereof and made by the owner of the Mortgaged Real Property
described therein for the benefit of the Collateral Agent, as mortgagee (grantee
or beneficiary), assignee and secured party, as the same may at any time be
amended, modified or supplemented in accordance with the terms thereof and
hereof.
"Mortgaged Property" shall have the meaning assigned to such term in
the Mortgages.
"Mortgaged Real Property" shall mean and include the Real Properties
owned or leased by the Company and the Guarantors to the extent designated as
such on Annex IV and any additional Real Property which shall be subject to a
Mortgage delivered pursuant to Section 5.13.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA).
"Net Award" has the meaning assigned to such term in each Mortgage.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of (a) cash
92
<PAGE>
expenses of sale (including, without limitation, brokerage fees, if any,
transfer taxes and payment of principal, premium and interest of Indebtedness
other than the Loans required to be repaid as a result of such Asset Sale), (b)
all foreign, federal, state and local taxes to the extent payable as a direct
consequence of any such Asset Sale and (c) deduction of reasonable amounts,
determined in accordance with GAAP, required to be provided by the Company or
such Subsidiary as a reserve against any liabilities retained by the Company or
any Subsidiary of the Company associated with such assets after such Asset Sale,
including, without limitation, any indemnification, pension and other
post-employment benefit liabilities, workers compensation liabilities,
liabilities associated with retiree benefits and liabilities relating to
environmental matters, except and until such reserves are reversed, in which
case the amount of such reversal shall constitute Net Cash Proceeds.
"Net Proceeds" has the meaning assigned to that term in each Mortgage.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Company and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent or any Bank pursuant to the terms of any Credit
Document.
"Other Hedging Agreements" shall mean (x) any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values and (y) agreements
relating to the future purchase of commodities or designed to protect against
fluctuations in the prices of specific commodities.
"Participant" shall have the meaning provided in Section 2.04(a)(i).
93
<PAGE>
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Company and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving Loan Commitment then in effect; PROVIDED that if the Total
Revolving Loan Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Revolving Loan Commitment as in effect
immediately prior to such termination by the Total Revolving Loan Commitment as
in effect immediately prior to such termination.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(l).
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company or partnership, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any multiemployer plan or single- employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) the Company, any of its
Subsidiaries or any ERISA Affiliate and each such plan for the five calendar
year period immediately following the latest date on which the Company, any of
its Subsidiaries or any ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan or any such plan as to which the Company,
any of its Subsidiaries or any ERISA Affiliate may have any liability, PROVIDED,
HOWEVER, the term "Plan" shall not include any Foreign Pension Plan.
"Pledge Agreement" shall have the meaning provided in Section 5.11(a)
and shall include any additional pledge agreement executed by the Company or any
of its Subsidiaries pursuant to Section 7.11.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
94
<PAGE>
"Pledged Collateral" shall have the meaning assigned to such term in
the Security Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Prior Liens" shall mean Liens which, pursuant to the provisions of
any Security Document, are or may be superior to the Lien of such Security
Document.
"Pro Forma Leverage Ratio" shall mean, at any time for the
determination thereof, the ratio of (x) Consolidated Debt at such time to (y)
Consolidated EBITDA for the Test Period then last ended, with such Pro Forma
Leverage Ratio to be determined on a PRO FORMA basis as if such Permitted
Acquisition (and any other Permitted Acquisition) that occurred during such Test
Period (and the incurrence, assumption and/or repayment of any Indebtedness in
connection with any such Permitted Acquisition), as the case may be, had
occurred on the first day of such Test Period (and such Indebtedness, if any,
had remained outstanding (or had not been outstanding, as the case may be)
throughout such Test Period) it being understood that in calculating the Pro
Forma Leverage Ratio in connection with each and every Permitted Acquisition,
Consolidated EBITDA shall include the results of operations of the Person or
assets acquired pursuant to each such Permitted Acquisition on a PRO FORMA basis
as if such acquisition had occurred on the first day of the respective Test
Period. On the date of any Permitted Acquisition pursuant to which the Pro
Forma Leverage Ratio is to be calculated and on each date of calculation of Pro
Forma Leverage Ratio, the Company shall deliver to the Agent a certificate of
the Company's chief financial officer setting forth in reasonable detail the PRO
FORMA calculations required to establish the Pro Forma Leverage Ratio (with such
PRO FORMA calculations to be made on a basis reasonably satisfactory to the
Agent and to assume that the interest expense attributable to any Indebtedness
(whether existing or being incurred) bearing a floating interest rate shall be
computed as if the rate in effect on the date of such Permitted Acquisition
(taking into account any Interest Rate Protection Agreement applicable to such
Indebtedness if such Interest Rate Protection Agreement has a remaining term in
excess of 12 months) had been the applicable rate for the entire period).
95
<PAGE>
"Projections" shall have the meaning provided in Section 5.17.
"Quarterly Payment Date" shall mean the last Business Day of each
fiscal quarter (including the fourth fiscal quarter) of the Company.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Register" shall have the meaning provided in Section 7.12.
"Registration Statement" shall mean the Company's Registration
Statement on Form S-1 as filed on September 12, 1996 with the SEC.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the
96
<PAGE>
30-day notice requirement has not been waived by the PGBC by regulation.
"Required Banks" shall mean collectively (and not individually)
Non-Defaulting Banks the sum of whose Revolving Loan Commitments (or, if after
the Total Revolving Loan Commitment has been terminated, outstanding Revolving
Loans and Percentages of outstanding Swingline Loans and Letter of Credit
Outstandings) constitute greater than 50% of the Total Revolving Loan Commitment
less the aggregate Revolving Loan Commitments of Defaulting Banks (or, if after
the Total Revolving Loan Commitment has been terminated, the total outstanding
Revolving Loans of Non-Defaulting Banks and the aggregate Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Returns" shall have the meaning provided in Section 6.22.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "Revolving Loan Commitment," as the same may be reduced from time to
time pursuant to Section 3.02, Section 3.03, Section 9 and/or the definition of
"Total Revolving Loan Commitment."
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Rollover Amount" shall have the meaning provided in Section 8.08(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Security Agreement" shall have the meaning provided in Section
5.11(b) and shall include any additional security agreement executed by the
Company or any of its Subsidiaries pursuant to Section 7.11.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement and each Mortgage.
97
<PAGE>
"Services Agreement" shall mean the services agreement between Alpine
and the Company, dated the Initial Borrowing Date, in the form approved by the
Agent.
"S&P" shall mean Standard & Poors' Ratings Service.
"Special Dividend Period" shall mean each four consecutive fiscal
quarters of the Company commencing with the fiscal quarter beginning July 28,
1996 and each four fiscal periods thereafter commencing on the date immediately
following the last day of the immediately preceding Special Dividend Period.
"Start Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a corporation) in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Superior Preferred Stock" shall have the meaning set forth in the
recitals to this Agreement (but shall include any Company preferred stock issued
in exchange therefor pursuant to clause (vi)(y) of Section 8.06).
"Survey" means a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state, province or country where such Mortgaged Real
Property is located, (ii) dated (or redated) not earlier than six months prior
to the date of delivery thereof unless there shall have occurred within the six
months prior to such date of delivery any exterior construction on the site of
such Mortgaged Real Property, in which event such survey shall be dated (or
redated) after the completion of such construction or if such construction shall
not have been completed as of such date of delivery, not earlier than 20 days
prior to such date of delivery, (iii) certified by the surveyor (in a manner
reasonably acceptable to the Collateral Agent) to the Collateral Agent and the
Title Company and (iv) complying in all respects with the minimum detail
requirements of the American
98
<PAGE>
Land Title Association as such requirements are in effect on the date of
preparation of such survey.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(b).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Company and the Banks) that the primary syndication
(and resultant addition of Persons as Banks pursuant to Section 12.04(b)) has
been completed.
"Taking" has the meaning assigned to such term in each Mortgage.
"Target Amount" shall mean $120,000,000 except that if the gross
proceeds of the Initial Public Offering, less underwriting discounts, not to
exceed 7.00% and up to $700,000 of expenses (the "Net Proceeds") is less than
$88,580,000, then the Target Amount shall be increased by an amount equal to the
difference between the Net Proceeds and $88,580,000, but in no event shall the
Target Amount be greater than $130,580,000.
"Taxes" shall have the meaning provided in Section 4.04.
"Test Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Test Period" shall mean four consecutive fiscal quarters of the
Company (taken as one accounting period) ended, in the case of any determination
of Interest Reduction Discount, on the applicable Test Date and, in all other
cases, ended on the date indicated in the applicable Section hereof.
"Title Company" shall mean First American Title Insurance Company or
such other title insurance or abstract company as shall be designated by the
Agent.
"Total Consideration Amount" shall mean (with respect to any Permitted
Acquisition, or series of related Permitted Acquisitions) $30,000,000, PROVIDED
that if at least 90% of the total consideration with respect thereto (as
determined in accordance with Section 8.02(l)) is paid in shares of Company
Common Stock, such amount shall be $75,000,000.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks it being
99
<PAGE>
understood that the Total Revolving Loan Commitment as of the Initial Borrowing
Date shall be $175,000,000, PROVIDED that if the Initial Public Offering occurs
on or before that date, the Total Revolving Loan Commitment shall be reduced to
$150,000,000 with such reduction to reduce the Revolving Loan Commitments of
each Bank proportionately in proportion to their respective Revolving Loan
Commitments.
"Total Revolving Outstandings" shall mean, at any time, the sum of (i)
the aggregate principal amount of all Revolving Loans outstanding at such time,
(ii) the aggregate principal amount of all Swingline Loans outstanding at such
time and (iii) the aggregate amount of all Letter of Credit Outstandings at such
time.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) Total Revolving
Outstandings at such time.
"Transaction" shall have the meaning set forth in the Recitals to the
Agreement.
"Type" shall mean any type of Revolving Loan determined with respect
to the interest option applicable thereto, i.e., a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank at any
time shall mean such Bank's Revolving Loan Commitment at such time less the sum
of (i) the aggregate then outstanding principal amount of all Revolving Loans
made by such Bank, (ii) such Bank's Percentage of the then Letter of Credit
Outstandings and (iii) in the case of BTCo, the aggregate then outstanding
principal amount of all Swingline Loans.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
100
<PAGE>
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Written" (whether lower or upper case) or "in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, or telegraph or cable.
SECTION 11. THE AGENT.
11.01 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of the
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of the Credit Documents, together
with such other powers as are reasonably incidental thereto. The Agent agrees
to act as such upon the express conditions contained in this Section 11.
Notwithstanding any provision to the contrary elsewhere in any Credit Document,
the Agent shall not have any duties or responsibilities, except those expressly
set forth in the Credit Documents, or any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise (including by
operation of law) to exist against the Agent. The provisions of this Section 11
are solely for the benefit of the Agent and the Banks, and neither the Company
nor any of its Subsidiaries or Affiliates shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the Banks
and the Agent does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for the Company or any of
its Subsidiaries or Affiliates.
101
<PAGE>
11.02 DELEGATION OF DUTIES. The Agent may execute any of its duties
under or any Credit Document by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care except to
the extent otherwise required by Section 11.03.
11.03 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
Affiliates or any of their officers, directors, employees, agents or
attorneys-in-fact shall be (i) liable for any action lawfully taken or omitted
to be taken by it or such Person in its capacity as Agent under or in connection
with any Credit Document (except to the extent found to have resulted from such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Banks for any recitals, statements, representations or
warranties made by the Company, any of its Subsidiaries or any of their
respective officers contained in any Credit Document, any other Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, any Document or for
any failure of the Company or any of its Subsidiaries or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or condition
of, any Document, or to inspect the properties, books or records of the Company
or any of its Subsidiaries. The Agent shall not be responsible to any Bank for
the effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of any Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement or in
any financial or other statements, instruments, reports, certificates or any
other documents in connection herewith or therewith furnished or made by the
Agent to the Banks or by or on behalf of the Company or any of its Subsidiaries
to the Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Default or Event of
Default.
11.04 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Company or any of
its Subsidiaries), independent accountants and other experts selected by the
Agent.
102
<PAGE>
The Agent shall be fully justified in failing or refusing to take any action
under any Credit Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under any of the Credit Documents in accordance with
a request of the Required Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Banks.
11.05 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has actually received notice from a Bank or the Company referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Banks. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Banks; PROVIDED that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.
11.06 NONRELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents or attorneys-in-fact have made
any representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent or any such other Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the Agent or any such
other Person or any other Bank, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other condition, prospects
and creditworthiness of the Company and its Subsidiaries and made its own
decision to make its Loans hereunder and enter into this Agreement. Each Bank
also represents that it will, independently and without reliance upon the Agent
or any such other Person or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
condition, prospects and creditworthiness of the Company and its Subsidiaries.
The
103
<PAGE>
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations, assets,
property, financial and other condition, prospects or creditworthiness of the
Company or any of its Subsidiaries which may come into the possession of the
Agent or any of its Affiliates or any of their officers, directors, employees,
agents or attorneys-in-fact.
11.07 INDEMNIFICATION. The Banks agree to indemnify the Agent in its
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time (with such "percentages" to be
determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of any Credit Document,
or any documents contemplated by or referred to herein or therein, or the
transactions contemplated hereby or thereby or any action taken or omitted to be
taken by the Agent under or in connection with any of the foregoing, but only to
the extent that any of the foregoing is not paid by the Company or any of its
Subsidiaries; PROVIDED that no Bank shall be liable to the Agent for the payment
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent found
to have resulted solely from the gross negligence or willful misconduct of the
Agent. To the extent any Bank would be required to indemnify the Agent pursuant
to the immediately preceding sentence but for the fact that it is a Defaulting
Bank, such Defaulting Bank shall not be entitled to receive any portion of any
payment or other distribution hereunder (including, without limitation as to
principal of or interest on any Loans) until each other Bank shall have been
reimbursed for the excess, if any, of the aggregate amount paid by such Bank
under this Section 11.07 over the aggregate amount such Bank would have been
obligated to pay had such first Bank not been a Defaulting Bank. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section 11.07
shall survive the payment of all Obligations.
11.08 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Company and its Subsidiaries and Affiliates as though the
Agent were not the Agent hereunder. With respect to the Loans made by it and
all Obligations owing to it, the Agent shall have the same rights and powers
under this Agreement as any Bank and may exercise the same
104
<PAGE>
as though it were not the Agent and the terms "Bank" and "Banks" shall include
the Agent in its individual capacity.
11.09 HOLDERS. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.10 RESIGNATION OF THE AGENT; SUCCESSOR AGENT. The Agent may
resign as the Agent upon 60 days' notice to the Banks and the Company. Upon the
resignation of the Agent, the Required Banks shall appoint from among the Banks
a successor Agent which is a bank or a trust company for the Banks subject to
prior approval by the Company (such approval not to be unreasonably withheld,
provided that such approval shall not be required if a Default or an Event of
Default then exists), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall include such
successor agent effective upon its appointment, and the resigning Agent's
rights, powers and duties as the Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement. After the resignation of the Agent hereunder, the provisions of
this Section 11 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Company agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all
out-of-pocket costs and expenses of the Agent and the Documentation Agent
(including, without limitation, the reasonable fees and disbursements of Cahill
Gordon & Reindel and Updike, Kelly & Spellacy and local counsel) in connection
with the negotiation, preparation, execution and delivery of the Credit
Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto and in connection with the Agent's
syndication efforts with respect to this Agreement; (ii) pay all out-of-pocket
costs and expenses of the Agent and the Documentation Agent, each Letter of
Credit Issuer and each of the Banks in connection with the enforcement of the
Credit Documents and the documents and instruments referred to therein and,
after a Default or an Event of Default shall have occurred and be continuing,
the protection of the rights of the Agent and the Documentation Agent, each
Letter of Credit Issuer and each of the Banks thereunder (including,
105
<PAGE>
without limitation, the fees and disbursements of counsel for the Agent, the
Documentation Agent, for each Letter of Credit Issuer and for each of the
Banks); (iii) pay and hold each of the Banks harmless from and against any and
all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent, each Letter of Credit Issuer and each
Bank and each of their Affiliates, and each of their respective officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, (a) any investigation, litigation or other proceeding
(whether or not any such Person is a party thereto and whether or not any such
investigation, litigation or other proceeding is between or among any such
Person, or any third Person or otherwise) related to the entering into and/or
performance of any Credit Document or the use of the proceeds of any Loans
hereunder or the consummation of any other transactions contemplated in any
Credit Document (but excluding any such losses, liabilities, claims, damages or
expenses to the extent found to have been incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified), or (b) the
actual or alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Real Property or any
Environmental Claim, in each case, including, without limitation, the reasonable
fees and disbursements of counsel and independent consultants incurred in
connection with any such investigation, litigation or other proceeding.
12.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, the Agent and the
Documentation Agent, each Letter of Credit Issuer and each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or any other notice of any kind to the Company or any of its
Subsidiaries or any Guarantor or any other Person, any such notice, to the full
extent permitted by applicable law, being hereby expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by the Agent, Documentation Agent,
such Letter of Credit Issuer or such Bank (including, without limitation, by
branches and agencies of the Agent, Documentation Agent, such Letter of Credit
Issuer and such Bank wherever located) to or for the credit or the account of
the Company or any Guarantor against and on account of the Obligations of the
Company or any Guarantor to the Agent, Documentation Agent, such Letter of
Credit Issuer or such Bank under this Agreement or under any of the other Credit
Documents,
106
<PAGE>
including, without limitation, all interests in Obligations of the Company or
any Guarantor purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with any Credit
Document, irrespective of whether or not the Agent, the Documentation Agent,
such Letter of Credit Issuer or such Bank shall have made any demand hereunder
and although said Obligations shall be contingent or unmatured.
12.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; PROVIDED, HOWEVER, neither the Company nor any
Guarantor may assign or transfer any of its rights, obligations or interest
under any Credit Document without the prior written consent of the Banks; and
PROVIDED, FURTHER, that, although any Bank may transfer, assign or grant
participations in its rights hereunder, such Bank shall remain a "Bank" for all
purposes hereunder (and may not transfer or assign all or any portion of its
Revolving Loan Commitment hereunder except as provided in Section 12.04(b)) and
the transferee, assignee or participant, as the case may be, shall not
constitute a "Bank" hereunder; and PROVIDED, FURTHER, that no Bank shall
transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of any Credit Document except to
the extent such amendment or waiver would (i) extend the Final Maturity Date, or
reduce the rate or extend the time of payment of interest or Fees on Loans or
Letters of Credit in which such participant is participating (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof (it being understood that
any amendment or modification to the financial definitions in this Agreement
shall not constitute a reduction in any rate of interest or fees for purposes of
this clause (i), or increase the amount of the participant's participation over
the amount thereof, or increase the amount of the participant's participation
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Revolving
Loan Commitment
107
<PAGE>
shall not constitute a change in the terms of such participation, and that an
increase in any Revolving Loan Commitment or Loan shall be permitted without the
consent of any participant if the participant's participation is not increased
as a result thereof), (ii) con- sent to the assignment or transfer by the
Company of its rights and obligations under this Agreement or (iii) release all
or substantially all of the Collateral under all of the Security Documents
(except as expressly provided in the Credit Documents) supporting the Loans in
which such participant is participating. In the case of any such participation,
the participant shall not have any rights under any of the Credit Documents (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Company hereunder
shall be determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) to any Affiliate
of such Bank which is at least 50% owned by such Bank or its parent company or
to one or more Banks or (y) assign all, or if less than all, a portion equal to
at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks,
of such Revolving Loan Commitment (and related outstanding Obligations
hereunder) to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement; PROVIDED that (i) at such time Annex I shall be deemed
modified to reflect the Revolving Loan Commitments of such new Bank and of the
existing Banks, (ii) upon surrender of the old Revolving Notes, new Revolving
Notes will be issued, at the Company's expense, to such new Bank and to the
assigning Bank, such new Revolving Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Revolving Loan Commitments, (iii) the consent of
the Agent shall be required in connection with any such assignment pursuant to
clause (y) of this Section 12.04(b) and (iv) the Agent shall receive at the time
of each such assignment, from the assigning or assignee Bank, the payment of a
non-refundable assignment fee of $3,500; and PROVIDED, FURTHER, that such
transfer or assignment will not be effective until recorded by the Agent on the
Register pursuant to Section 7.12. To the extent of any assignment pursuant to
this Section 12.04(b), the assigning Bank shall be relieved of its obligations
hereunder with respect to its assigned Revolving Loan Commitment. At the time
of each assignment pursuant to this Section 12.04(b) to a Person which is not
already a Bank hereunder and which is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes,
the respective assignee Bank shall provide to the Company and the Agent the
appropriate
108
<PAGE>
Internal Revenue Service Forms (and, if applicable, a Section 4.04(b)(ii)
Certificate) described in Section 4.04(b).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of any party in exercising any right, power or privilege under any Credit
Document and no course of dealing between any Credit Party and the Agent, the
Documentation Agent or any Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege under any Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which any party would otherwise have. No notice to or demand
on any Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Agent or the Banks to any other or further action in
any circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Agent agrees that promptly after its
receipt of each payment from or on behalf of any Credit Party in respect of any
Obligations of such Credit Party, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Banks (other than any Bank that has
consented in writing to waive its PRO RATA share of such payment) PRO RATA based
upon their respective shares, if any, of the Obligations with respect to which
such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, determined in accordance with the terms of this Agreement, then such
Bank receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of the respective
Credit Party to such Banks in such amount as shall result in a proportional
participation by all of the Banks in such amount; PROVIDED that if all or any
portion of such excess amount is thereafter recovered from such Bank, such
purchase shall be
109
<PAGE>
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the Company
to the Banks); PROVIDED that except as otherwise specifically provided herein,
all computations determining compliance with Sections 3.03 and 8, including
definitions used therein, and in determining the Interest Reduction Discount
shall, (x) in each case, utilize accounting principles and policies in effect at
the time of the preparation of, and in conformity with those used to prepare,
the April 28, 1996 financial statements delivered to the Banks pursuant to
Section 6.10(b), and (y) to the extent any period covered by such computation
(including any Test Period) includes a period prior to the date of the
consummation of the Transaction, such computation shall be made on a PRO FORMA
basis as if the Transaction had occurred at the beginning of such period
(including, without limitation, giving PRO FORMA effect to the application of
the Services Agreement and payments thereunder), such PRO FORMA basis to be
consistent with the PRO FORMA presentation relating to the Company contained in
the Registration Statement.
(b) All computations of interest and Fees hereunder shall be based on
the actual number of days elapsed over a year of 360 days (except for interest
payable in respect of Base Rate Loans based on the Prime Lending Rate, which
shall be computed on the bases of a 365/66 day year).
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND (EXCEPT AS OTHERWISE EXPRESSLY STATED THEREIN) THEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK. Any legal action or proceeding with respect to this Agreement or any
other Credit Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, each Credit Party hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each Credit Party hereby further
irrevocably waives any claim that any such courts lack jurisdiction over such
Credit Party, and agrees not to plead or claim, in any legal action or
proceeding with respect to any Credit Document brought in any of the aforesaid
courts, that any such court lacks jurisdiction over such Credit Party. Each
Credit Party irrevocably consents to the service of process in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such Credit Party, at its address for notices pursuant to
Section
110
<PAGE>
12.03, such service to become effective 30 days after such mailing. Each Credit
Party hereby irrevocably waives any objection to such service of process and
further irrevocably waives and agrees not to plead or claim in any action or
proceeding commenced under any Credit Document that service of process was in
any way invalid or ineffective. Nothing herein shall affect the right of the
Agent, any Bank or the holder of any Note to serve process in any other manner
permitted by applicable law or to commence legal proceedings or otherwise
proceed against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with any Credit Document
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all of the parties hereto shall be lodged with the
Company and the Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which the Company, each Guarantor, the Agent and
each of the Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Agent at the
Notice Office or, in the case of the Banks, shall have given to the Agent
telephonic (confirmed in writing), written, telex or facsimile notice (actually
received) at such office that the same has been signed and mailed to it. The
Agent will give the Company and each Bank prompt written notice of the
occurrence of the Effective Date.
12.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks; PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected
111
<PAGE>
thereby in the case of the following clause (i)), (i) extend the Final Maturity
Date, or reduce the rate or extend the time of payment of interest or Fees on
any Loan or Letter of Credit thereon, or reduce the principal amount thereof (it
being understood that any amendment or modification to the financial definitions
in this Agreement shall not constitute a reduction in any rate of interest or
fees for purposes of this clause (i)), (ii) release all or substantially all of
the Collateral (except as expressly provided in the Security Documents) under
all the Security Documents, or release any Guarantor (other than in connection
with a sale otherwise permitted hereby), (iii) amend, modify or waive any
provision of this Section 12.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Revolving Loan Commitments are included on the
Effective Date) or (v) consent to the assignment or transfer by the Company of
any of its rights and obligations under this Agreement; PROVIDED, FURTHER, that
no such change, waiver, discharge or termination shall (w) increase the
Revolving Loan Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Revolving Loan Commitment shall not
constitute an increase of the Revolving Loan Commitment of any Bank, and that an
increase in the available portion of any Revolving Loan Commitment of any Bank
shall not constitute an increase in the Revolving Loan Commitment of such Bank),
(x) without the consent of BTCo., amend, modify or waive any provision of
Section 2 or alter its rights or obligations with respect to Letters of Credit
or Swingline Loans, (y) without the consent of the Agent, amend, modify or waive
any provision of Section 11 as the same applies to the Agent or any other
provision as the same relates to the rights or obligations of the Agent and (z)
without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination of any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 12.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Company
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks with one or more
Replacement Banks pursuant to Section 1.13 so long as at the time of such
replacement, each Replacement Bank consents to the proposed change, waiver,
discharge or termination or (B) terminate such
112
<PAGE>
non-consenting Bank's Revolving Loan Commitment and repay in full its
outstanding Revolving Loans and cash collateralize its applicable Percentage of
the Letter of Credit Outstandings in accordance with Sections 3.02(b) and/or
4.01(b); but only if, in each such case, such Replacement Bank at the time of
such action is acceptable to the Agent, PROVIDED that, unless the Revolving Loan
Commitment which is terminated and Revolving Loans which are repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through the
additional of new Banks or the increase of the Revolving Loan Commitments and/or
outstanding Revolving Loans of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined before giving effect to the
proposed action) shall specifically consent thereto; PROVIDED, FURTHER, that the
Company shall not have the right to replace a Bank solely as a result of the
exercise of such Bank's rights (and the withholding of any required consent by
such Bank) pursuant to the second proviso to Section 12.12(a).
12.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank; PROVIDED that the Company shall not be responsible for costs arising under
Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other than a
transfer pursuant to Section 1.12) to the extent such costs would not otherwise
be applicable to such Bank in the absence of such transfer.
12.15 CONFIDENTIALITY. Each of the Banks agrees that it will use its
reasonable efforts not to disclose without the prior consent of the Company
(other than to Affiliates of such Banks and their respective directors,
employees, auditors, counsel or other professional advisors) any confidential
information with respect to the Company or any of its Subsidiaries which is
furnished pursuant to this Agreement; PROVIDED that any Bank may disclose any
such information (a) that is or has become generally available to the public,
(b) as may be required or appropriate (x) in any report, statement or testimony
submitted to any municipal, state or Federal or other governmental regulatory
body having or claiming to have jurisdiction over such Bank or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors or
(y) in connection with any request or requirement of any such regulatory body,
(c) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (d) to comply with any law,
113
<PAGE>
order, regulation or ruling applicable to such Bank, and (e) to any prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank; PROVIDED that such prospective transferee
agrees to be bound by this Section 12.15 to the same extent as such Bank.
12.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 13. GUARANTY.
13.01 THE GUARANTY. (a) In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
and indirect benefits to be received by each Guarantor from the proceeds of the
Loans and the issuance of the Letters of Credit, each Guarantor hereby agrees
with the Banks as follows: Each Guarantor hereby unconditionally and
irrevocably, jointly and severally, guarantees, as primary obligor and not
merely as surety the full and prompt payment when due, whether upon maturity,
acceleration or otherwise, of any and all of the Guaranteed Obligations of the
Company to the Guaranteed Creditors. If any or all of the Guaranteed
Obligations of the Company to the Guaranteed Creditors becomes due and payable
hereunder, each Guarantor, jointly and severally, and unconditionally promises
to pay such indebtedness to the Guaranteed Creditors, or order, on demand,
together with any and all expenses (including reasonable legal fees and
expenses) which may be incurred by the Guaranteed Creditors in collecting or
enforcing any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Company), then and in such event each Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon
such Guarantor, notwithstanding any revocation of this Guaranty or any other
instrument evidencing any liability of the Company, and each Parent Guarantor
shall be and remain jointly and severally liable to the aforesaid payees
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by any such payee. This is a guaranty
of payment and not of collection.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be limited to
a maximum aggregate amount equal to
114
<PAGE>
the largest amount that would not render its obligations and/or the grant of
security interests in Collateral to secure its Obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of the
Bankruptcy Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Guarantor in respect of intercompany Indebtedness to the
Company or other Affiliates of the Company to the extent that such Indebtedness
would be discharged in an amount equal to the amount paid by such Guarantor
hereunder, and after giving effect (x) to the direct and indirect benefits
received by such Guarantor as a result of the Credit Documents and the Loans and
(y) as assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of such Guarantor pursuant to applicable law or
pursuant to the terms of any agreement (including without limitation any such
right of contribution under Section 13.01(c)).
(c) Guarantors under this Guaranty together desire to allocate among
themselves in a fair and equitable manner their obligations arising under this
Guaranty. Accordingly, in the event any payment or distribution is made on any
date by any Guarantor under this Guaranty (a "Funding Guarantor") that exceeds
its Fair Share (as defined below) as of such date, that Funding Guarantor shall
be entitled to a contribution from each of the other Guarantors in the amount of
such other Guarantor's Fair Share Shortfall (as defined below) as of such date,
with the result that all such contributions will cause each Guarantor's
Aggregate Payments (as defined below) to equal its Fair Share as of such date.
"Fair Share" means, with respect to a Guarantor as of any date of determination,
an amount equal to (i) the ratio of (x) the Adjusted Maximum Amount (as defined
below) with respect to such Guarantor to (y) the aggregate of the Adjusted
Maximum Amounts with respect to all Guarantors, MULTIPLIED BY (ii) the aggregate
amount paid or distributed on or before such date by all Funding Guarantors
under this Guaranty in respect of the obligations guarantied. "Fair Share
Shortfall" means, with respect to a Guarantor as of any date of determination,
the excess, if any, of the Fair Share of such Guarantor over the Aggregate
Payments of such Guarantor. "Adjusted Maximum Amount" means, with respect to a
Guarantor as of any date of determination, the maximum aggregate amount of the
obligations of such Guarantor under this Guaranty, determined as of such date in
accordance with this Section 13.01; PROVIDED that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Guarantor for
purposes of this Section 13.01(c), any assets or liabilities of such Guarantor
arising by virtue of any rights to subrogation, reimbursement or indemnification
or any rights to or obligations of contribution hereunder shall not
115
<PAGE>
be considered as assets or liabilities of such Guarantor. "Aggregate Payments"
means, with respect to a Guarantor as of any date of determination, an amount
equal to (i) the aggregate amount of all payments and distributions made on or
before such date by such Guarantor in respect of this Guaranty (including,
without limitation, in respect of this Section 13.01(c)) MINUS (ii) the
aggregate amount of all payments received on or before such date by such
Guarantor from the other Guarantors as contributions under this Section
13.01(c). The amounts payable as contributions hereunder shall be determined as
of the date on which the related payment or distribution is made by the
applicable Funding Guarantor. The allocation among Guarantors of their
obligations as set forth in this Section 13.01(c) shall not be construed in any
way to limit the liability of any Guarantor hereunder.
13.02 BANKRUPTCY. Additionally, each Guarantor unconditionally and
irrevocably, jointly and severally, guarantees the payment of any and all of the
Guaranteed Obligations of the Company to the Guaranteed Creditors whether or not
due or payable by the Company upon the occurrence of any of the events specified
in Section 9.05, and unconditionally, and jointly and severally, promises to pay
such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful
money of the United States.
13.03 NATURE OF LIABILITY. (a) The liability of each Guarantor
hereunder is joint and several and exclusive and independent of any security for
or other guaranty of the Guaranteed Obligations of the Company whether executed
by such Guarantor, any other Guarantor, any other guarantor or by any other
party, and the liability of each Guarantor hereunder is not affected or impaired
by (a) any direction as to application of payment by the Company or by any other
party, or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the Guaranteed Obligations
of the Company, or (c) any payment on or in reduction of any such other guaranty
or undertaking, or (d) any dissolution, termination or increase, decrease or
change in personnel by the Company, or (e) any payment made to the Guaranteed
Creditors on the Guaranteed Obligations which any such Guaranteed Creditor
repays to the Company pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Guarantor,
to the extent permitted by applicable law, waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
(b) It is the desire and intent of each Guarantor and the Guaranteed
Creditors that this Guaranty shall be enforced against each Guarantor to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If, however, and to the extent
116
<PAGE>
that, the obligations of any Guarantor under this Guaranty shall be adjudicated
to be invalid or unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to fraudulent
conveyances or transfers), then the amount of the Guaranteed Obligations of such
Guarantor shall be deemed to be reduced and such Guarantor shall pay the maximum
amount of the Guaranteed Obligations which would be permissible under applicable
law.
13.04 INDEPENDENT OBLIGATION. The obligations of each Guarantor
hereunder are independent of the obligations of any other Guarantor, any other
guarantor, any other party or the Company, and a separate action or actions may
be brought and prosecuted against each Guarantor whether or not action is
brought against any other Guarantor, any other guarantor, any other party or the
Company and whether or not any other guarantor, any other party or the Company
is joined in any such action or actions. Each Guarantor waives, to the full
extent permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Company or
other circumstance which operates to toll any statute of limitations as to the
Company shall operate to toll the statute of limitations as to any Guarantor.
13.05 AUTHORIZATION. Each Guarantor authorizes the Guaranteed
Creditors without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Company or others or otherwise act or refrain from acting;
117
<PAGE>
(d) release or substitute any one or more endorsers, guarantors, the
Company or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Company to its creditors other than
the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Company to the Guaranteed Creditors
regardless of what liability or liabilities of the Company remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document or
any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
any Guarantor from its liabilities under this Guaranty.
13.06 RELIANCE. It is not necessary for the Guaranteed Creditors to
inquire into the capacity or powers of the Company or the officers, directors,
partners or agents acting or purporting to act on its behalf, and any Guaranteed
Obligations made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
13.07 SUBORDINATION. Any of the indebtedness of the Company now or
hereafter owing to any Guarantor is hereby subordinated to the Guaranteed
Obligations of the Company owing to the Guaranteed Creditors; and if the Agent
so requests at a time when an Event of Default exists, all such indebtedness of
the Company to any Guarantor shall be collected, enforced and received by such
Guarantor for the benefit of the Guaranteed Creditors and be paid over to the
Agent on behalf of the Guaranteed Creditors on account of the Guaranteed
Obligations of the Company to the Guaranteed Creditors, but without affecting or
impairing in any manner the liability of any Guarantor under the other
provisions of this Guaranty (other than the reduction of any such liability
attributable to such payment). Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any of the indebtedness of the Company
to such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without limiting
the generality of the foregoing,
118
<PAGE>
each Guarantor hereby agrees with the Guaranteed Creditors that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
13.08 WAIVER. (a) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Company, any other Guarantor, any other
guarantor or any other party, (ii) proceed against or exhaust any security held
from the Company, any other Guarantor, any other guarantor or any other party or
(iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever.
Each Guarantor waives any defense based on or arising out of any defense of the
Company, any other Guarantor, any other guarantor or any other party, other than
payment in full of the Guaranteed Obligations, based on or arising out of the
disability of the Company, any other Guarantor, any other guarantor or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Company
other than payment in full of the Guaranteed Obligations. The Guaranteed
Creditors may, at their election, foreclose on any security held by the Agent,
the Collateral Agent or any other Guaranteed Creditor by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable (to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Guaranteed Creditors may have against the Company
or any other party, or any security, without affecting or impairing in any way
the liability of any Guarantor hereunder except to the extent the Guaranteed
Obligations have been paid. Each Guarantor waives any defense arising out of
any such election by the Guaranteed Creditors, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of such Guarantor against the Company or any other party
or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Company's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which each Guarantor
assumes and incurs hereunder, and agrees that the Guaranteed Creditors shall
have no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
119
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
ADDRESS: SUPERIOR TELECOM INC.
150 Interstate North Parkway
Suite 300
Atlanta, Georgia 30334 By /s/ Bragi F. Schut
------------------------------
Telephone No.: (770) 953-8338 Title: Sr. Vice President
Facsimile No.: (770) 984-3218
ADDRESS: SUPERIOR TELECOMMUNICATIONS INC.
150 Interstate North Parkway as Guarantor
Suite 300
Atlanta, Georgia 30334
Telephone No.: (770) 953-8338 By /s/ Bragi F. SCHUT
------------------------------
Facsimile No.: (770) 984-3218 Title: Sr. Vice President
ADDRESS: DNE SYSTEMS, INC.
as Guarantor
50 Barnes Park North
Wallingford, Connecticut 06492
Telephone No.: (203) By /s/ Bragi F. Schut
------------------------------
Facsimile No.: (203) 984-3218 Title: Sr. Vice President
ADDRESS: DNE MANUFACTURING & SERVICE COMPANY,
50 Barnes Park North as Guarantor
Wallingford, Connecticut 06492
Telephone No.: (203)
Facsimile No.: (203) 984-3218 By /s/ Bragi F. Schut
------------------------------
Title: Sr. Vice President
ADDRESS: DNE TECHNOLOGIES, INC.
as Guarantor
50 Barnes Park North
Wallingford, Connecticut 06492
Telephone No.: (203) By /s/ Bragi F. Schut
------------------------------
Facsimile No.: (203) 265-7801 Title: Sr. Vice President
S-1
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By /s/ Gina S. Thompson
------------------------------
Title: Vice President
BANK OF BOSTON CONNECTICUT, Individually and
as Documentation Agent
By ______________________________
Title: Director
S-2
<PAGE>
ANNEX I
LIST OF BANKS AND COMMITMENTS
Revolving Loan
Bank Loan Commitment
- ---- ---------------
Bankers Trust Company 36,500,000
Bank of Boston Connecticut 36,500,000
Corestates Bank, N.A. 20,000,000
Creditanstalt-Bankverein 15,000,000
Fleet Bank, N.A. 15,000,000
LaSalle National Bank 20,000,000
National Bank of Canada 12,000,000
PNC Bank, N.A.20,000,000
----------
Total: $175,000,000
<PAGE>
ANNEX II
BANK ADDRESSES
Bank Address
- ----
Bankers Trust Company One Bankers Trust Plaza
New York, New York 10006
Attention: Gina Thompson
Telephone No.: (212) 250-7356
Facsimile No.: (212) 250-7218
Bank of Boston Connecticut 100 Pearl St.
Hartford, Connecticut 06103
Attention: Scott Barnett
Telephone No.: (860) 727-6557
Facsimile No.: (860) 727-6575
Corestates Bank, N.A. 1339 Chestnut Street
FC # 1-8-4-18
Philadelphia, PA 19107-3579
Attention: Mark Brown
Telephone No.: (412) 762-2539
Facsimile No.: (412) 762-6484
Creditanstalt-Bankverein Two Ravina Drive
Suite 1680
Atlanta, Ga. 30346
Attention: Joseph Longosy
Telephone No.: (770) 390-1850
Facsimile No.: (770) 390-1851
Fleet Bank, N.A. 56 East 42nd Street
New York, NY 10017
Attention: Alex Sade
Telephone No.: (212) 907-5219
Facsimile No.: (212) 907-5610
LaSalle National Bank 135 South LaSalle Street
Room 906
Chicago, IL 60603
Attention: John Kennedy
Telephone No.: (312) 904-2748
Facsimile No.: (312) 904-6546
<PAGE>
ANNEX II
Page 2
National Bank of Canada 125 West 55th Street
New York, NY 10019
Attention: Gaetan Fosina
Telephone No.: (212) 632-8525
Facsimile No.: (212) 632-8545
PNC Bank, N.A. 249 Fifth Avenue
Pittsburgh, PA 15222
Attention: Rose Crump
Telephone No.: (412) 762-2539
Facsimile No.: (412) 762-6484
<PAGE>
SUPERIOR TELECOM INC.
1996 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV. SHARE AND OTHER LIMITATIONS . . . . . . . . . . . . . . . . . 7
ARTICLE V. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI. EMPLOYEE STOCK OPTION GRANTS. . . . . . . . . . . . . . . . . 9
ARTICLE VII. NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS . . . . . . . . . . 13
ARTICLE VIII. NON-TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX. CHANGE IN CONTROL PROVISIONS. . . . . . . . . . . . . . . . . 16
ARTICLE X. TERMINATION OR AMENDMENT OF THE PLAN. . . . . . . . . . . . . 18
ARTICLE XI. UNFUNDED PLAN . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XII. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XIII. TERM OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV. NAME OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 22
i
<PAGE>
SUPERIOR TELECOM INC.
1996 STOCK OPTION PLAN
ARTICLE I.
PURPOSE
The purpose of this Superior TeleCom Inc. 1996 Stock Option Plan (the
"Plan") is to enhance the profitability and value of Superior TeleCom Inc. (the
"Company") for the benefit of its stockholders by enabling the Company (i) to
offer employees and Consultants of the Company and its Subsidiaries stock based
incentives, thereby creating a means to raise the level of stock ownership by
employees and Consultants in order to attract, retain and reward such employees
and Consultants and strengthen the mutuality of interests between employees and
Consultants and the Company's stockholders and (ii) to make equity based awards
to non-employee directors thereby attracting, retaining and rewarding such
non-employee directors and strengthening the mutuality of interests between
non-employee directors and the Company's stockholders.
ARTICLE II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Board" shall mean the Board of Directors of the Company.
2.2. "Cause" shall mean, with respect to a Participant's Termination
of Employment or Termination of Consultancy, unless otherwise determined by
the Committee at grant, or, if no rights of the Participant are reduced,
thereafter, termination due to a Participant's dishonesty, fraud,
insubordination, willful misconduct, refusal to perform services (for any
reason other than illness or incapacity) or materially unsatisfactory
performance of his or her duties for the Company as determined by the
Committee in its sole discretion. With respect to a Participant's
Termination of Directorship, Cause shall mean an act or failure to act that
constitutes "cause" for removal of a director under applicable Delaware
law.
2.3. "Change in Control" shall have the meaning set forth in
Article IX.
2.4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Any reference to any section of the Code shall also be a reference to any
successor provision.
<PAGE>
2.5. "Committee" shall mean a committee of the Board appointed from
time to time by the Board. Solely to the extent required under Rule 16b-3
and Section 162(m) of the Code, such committee shall consist of two or more
non-employee directors, each of whom shall be a non-employee director as
defined in Rule 16b-3 and an outside director as defined under Section
162(m) of the Code. To the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee shall be
exercised by the Board. If for any reason the appointed Committee does not
meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
noncompliance with the requirements of Rule 16b-3 or Section 162(m) of the
Code shall not affect the validity of the awards, grants, interpretations
or other actions of the Committee.
2.6. "Common Stock" means the Common Stock, $.01 par value per share,
of the Company.
2.7. "Consultant" means any adviser or consultant to the Company and
its Subsidiaries who is eligible pursuant to Section 5.1 to be granted
Options under this Plan.
2.8. "Disability" shall mean total and permanent disability, as
defined in Section 22(e)(3) of the Code.
2.9. "Effective Date" shall mean October 2, 1996.
2.10. "Eligible Employees" shall mean the employees of the Company and
its Subsidiaries who are eligible pursuant to Section 5.1 to be granted
Options under this Plan.
2.11. "Exchange Act" shall mean the Securities Exchange Act of 1934.
2.12. "Fair Market Value" for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the last sales price reported for
the Common Stock on the applicable date (i) as reported by the principal
national securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National
Association of Securities Dealers. If the Common Stock is not readily
tradable on a national securities exchange or any system sponsored by the
National Association of Securities Dealers, its Fair Market Value shall be
set in good faith by the Committee on the advice of a registered investment
adviser (as defined under the Investment Advisers Act of 1940). For
purposes of the grant of any Stock Option, the applicable date shall be the
date for which the last sales price is available at the time of grant.
2
<PAGE>
2.13. "Good Reason" shall mean, with respect to a Participant's
Termination of Employment or Termination of Consultancy unless otherwise
determined by the Committee at grant, or, if no rights of the Participant
are reduced, thereafter, a voluntary termination due to "good reason," as
the Committee, in its sole discretion, decides to treat as a Good Reason
termination.
2.14. "Incentive Stock Option" shall mean any Stock Option awarded
under this Plan intended to be and designated as an "Incentive Stock
Option" within the meaning of Section 422 of the Code.
2.15. "Non-Qualified Stock Option" shall mean any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.16. "Participant" shall mean the following persons to whom an Option
has been granted pursuant to this Plan: Eligible Employees and Consultants
of the Company and its Subsidiaries and non-employee directors of the
Company; provided, however, that non-employee directors shall be
Participants for purposes of the Plan solely with respect to awards of
Stock Options pursuant to Article VII.
2.17. "Retirement" with respect to a Participant's Termination of
Employment or Termination of Consultancy, shall mean a Termination of
Employment or Termination of Consultancy without Cause from the Company by
a Participant who has attained (i) at least age sixty-five (65); or
(ii) such earlier date after age fifty-five (55) as approved by the
Committee with regard to such Participant. With respect to a Participant's
Termination of Directorship, Retirement shall mean the failure to stand for
reelection or the failure to be reelected after a Participant has attained
age sixty-five (65).
2.18. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.19. "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any
Treasury regulations thereunder.
2.20. "Stock Option" or "Option" shall mean any Option to purchase
shares of Common Stock granted to Eligible Employees or Consultants
pursuant to Article VI or non-employee directors pursuant to Article VII.
2.21. "Subsidiary" shall mean any corporation that is defined as a
subsidiary corporation in Section 424(f) of the Code.
2.22. "Ten Percent Stockholder" shall mean a person owning Common
Stock of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company as defined in
Section 422 of the Code.
3
<PAGE>
2.23. "Termination of Consultancy" shall mean, with respect to an
individual that the individual is no longer acting as a Consultant to the
Company or a Subsidiary. In the event an entity shall cease to be a
Subsidiary, there shall be deemed a Termination of Consultancy of any
individual who is not otherwise a Consultant of the Company or another
Subsidiary at the time the entity ceases to be a Subsidiary.
2.24. "Termination of Directorship" shall mean, with respect to a non-
employee director, that the non-employee director has ceased to be a
director of the Company.
2.25. "Termination of Employment" shall mean (i) a termination of
service (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its
Subsidiaries; or (ii) when an entity which is employing a Participant
ceases to be a Subsidiary, unless the Participant thereupon becomes
employed by the Company or another Subsidiary.
2.26. "Transfer" or "Transferred" shall mean anticipate, alienate,
attach, sell, assign, pledge, encumber, charge or otherwise transfer.
2.27. "Withholding Election" shall have the meaning set forth in
Section 12.4.
ARTICLE III.
ADMINISTRATION
3.1. THE COMMITTEE. The Plan shall be administered and interpreted by the
Committee.
3.2. STOCK OPTION GRANTS. The Committee shall have full authority to grant
Stock Options, pursuant to the terms of this Plan. Stock Options shall be
granted to non-employee directors of the Company pursuant to Article VII. In
particular, the Committee shall have the authority:
(a) to select the Eligible Employees and Consultants to whom Stock
Options may from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options are to be
granted hereunder to one or more Eligible Employees or Consultants;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Stock Option granted
to an Eligible Employee or Consultant hereunder;
4
<PAGE>
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Option granted hereunder to an Eligible Employee
or Consultant (including, but not limited to, the share price, any
restriction or limitation, any vesting schedule or acceleration thereof, or
any forfeiture restrictions or waiver thereof, regarding any Stock Option
and the shares of Common Stock relating thereto, based on such factors, if
any, as the Committee shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash and/or Common Stock under Subsection 6.3(d);
(f) to determine whether, to what extent and under what circumstances
to provide loans (which shall be on a recourse basis and shall bear a
reasonable rate of interest) to Eligible Employees and Consultants in order
to exercise Options under the Plan; and
(g) to determine whether to require an Eligible Employee or
Consultant, as a condition of the granting of any Option, to not sell or
otherwise dispose of shares acquired pursuant to the exercise of the Option
for a period of time as determined by the Committee, in its sole
discretion, following the date of the acquisition of such Option.
3.3. GUIDELINES. Subject to Article X hereof, the Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing this Plan and perform all acts, including the delegation of
its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Option issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this Plan or
in any agreement relating thereto in the manner and to the extent it shall deem
necessary to carry this Plan into effect, but only to the extent any such action
would be permitted under the applicable provisions of Rule 16b-3 (if any) and
the applicable provisions of Section 162(m) of the Code (if any). The Committee
may adopt special guidelines and provisions for persons who are residing in, or
subject to, the taxes of, countries other than the United States to comply with
applicable tax and securities laws. If and to the extent applicable, this Plan
is intended to comply with Section 162(m) of the Code and the applicable
requirements of Rule 16b-3 and shall be limited, construed and interpreted in a
manner so as to comply therewith.
3.4. DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of the Company, the Board, or the
Committee, as the case may be, and shall be final, binding and conclusive on the
Company and all employees and Participants and their respective heirs,
executors, administrators, successors and assigns.
5
<PAGE>
3.5. RELIANCE ON COUNSEL. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. PROCEDURES. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the By-Laws of the Company, at such times and places as it
shall deem advisable. A majority of the Committee members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by all
Committee members in accordance with the By-Laws of the Company shall be fully
effective as if it had been made by a vote at a meeting duly called and held.
The Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
3.7. DESIGNATION OF CONSULTANTS -- LIABILITY.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of the
Plan and may grant authority to employees to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of the Plan and may
rely upon any opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. Expenses incurred
by the Committee or Board in the engagement of any such counsel, consultant
or agent shall be paid by the Company. The Committee, its members and any
person designated pursuant to paragraph (a) above shall not be liable for
any action or determination made in good faith with respect to the Plan. To
the maximum extent permitted by applicable law, no officer of the Company
or member or former member of the Committee or of the Board shall be liable
for any action or determination made in good faith with respect to the Plan
or any Option granted under it. To the maximum extent permitted by
applicable law and the Certificate of Incorporation and By-Laws of the
Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and
held harmless by the Company against any cost or expense (including
reasonable fees of counsel reasonably acceptable to the Company) or
liability (including any sum paid in settlement of a claim with the
approval of the Company), and advanced amounts necessary to pay the
foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with the Plan, except to
the extent arising out of such officer's, member's or former member's own
fraud or bad faith. Such indemnification shall be in addition to any
rights of indemnification the officers, directors or members or former
officers, directors or members may have under
6
<PAGE>
applicable law or under the Certificate of Incorporation or By-Laws of the
Company or Subsidiary. Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations made by an
individual with regard to Options granted to him or her under this Plan.
ARTICLE IV.
SHARE AND OTHER LIMITATIONS
4.1. SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of Common
Stock which may be issued under this Plan shall not exceed 1,250,000 shares
(subject to any increase or decrease pursuant to Section 4.2) which may be
either authorized and unissued Common Stock or Common Stock held in or
acquired for the treasury of the Company. If any Option granted under this
Plan expires, terminates or is cancelled for any reason without having been
exercised in full or the Company repurchases any Option pursuant to Section
6.3(f), the number of shares of Common Stock underlying the repurchased
Option and/or the number of shares of Common Stock underlying any
unexercised Option shall again be available for the purposes of awards
under the Plan.
(b) INDIVIDUAL PARTICIPANT LIMITATIONS. The maximum number of shares
of Common Stock subject to any Option which may be granted under this Plan
to each Participant shall not exceed 250,000 shares (subject to any
increase or decrease pursuant to Section 4.2) during each fiscal year of
the Company.
4.2. CHANGES.
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company or Subsidiary, any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or
Subsidiary, any sale or transfer of all or part of its assets or business
or any other corporate act or proceeding.
(b) In the event of any such change in the capital structure or
business of the Company by reason of any stock dividend or distribution,
stock split or reverse stock split, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of shares,
distribution with respect to its outstanding Common Stock or capital stock
other than Common Stock, sale or transfer of all or part of its assets or
business, reclassification of its capital stock, or any similar change
affecting the
7
<PAGE>
Company's capital structure or business and the Committee determines an
adjustment is appropriate under the Plan, then the aggregate number and
kind of shares which thereafter may be issued under this Plan, the number
and kind of shares to be issued upon exercise of an outstanding Option
granted under this Plan and the exercise price thereof shall be
appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement
of the rights granted to, or available for, Participants under this Plan or
as otherwise necessary to reflect the change, and any such adjustment
determined by the Committee shall be binding and conclusive on the Company
and all Participants and employees and their respective heirs, executors,
administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options pursuant to Section 4.2(a) or (b) shall be aggregated until, and
eliminated at, the time of exercise by rounding-down for fractions less
than one-half (1/2) and rounding-up for fractions equal to or greater than
one-half (1/2). No cash settlements shall be made with respect to
fractional shares eliminated by rounding. Notice of any adjustment shall
be given by the Committee to each Participant whose Option has been
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
(d) In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all of the
Company's assets (all of the foregoing being referred to as "Acquisition
Events"), then the Committee may, in its sole discretion, terminate all
outstanding Options of Eligible Employees and Consultants, effective as of
the date of the Acquisition Event, by delivering notice of termination to
each such Participant at least twenty (20) days prior to the date of
consummation of the Acquisition Event; provided, that during the period
from the date on which such notice of termination is delivered to the
consummation of the Acquisition Event, each such Participant shall have the
right to exercise in full all of his or her Options that are then
outstanding (without regard to any limitations on exercisability otherwise
contained in the Option Agreements) but contingent on occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event does not
take place within a specified period after giving such notice for any
reason whatsoever, the notice and exercise shall be null and void.
Notwithstanding the foregoing and solely to the extent required by
Section 16 of the Exchange Act, at the discretion of the Committee, the
provisions contained in this subsection shall be adjusted as they apply to
Options granted to Eligible Employees and Consultants within six (6) months
before the occurrence of an Acquisition Event if the holder of such Option
is subject to the reporting requirements of Section 16(a) of the Exchange
Act in such manner as determined by the
8
<PAGE>
Committee, including without limitation, terminating Options at specific
dates after the Acquisition Event, in order to give the holder the benefit
of the Option.
If an Acquisition Event occurs, to the extent the Committee does not
terminate the outstanding Options pursuant to this Section 4.2(d), then the
provisions of Section 4.2(b) shall apply.
ARTICLE V.
ELIGIBILITY
5.1. Consultants and all employees of the Company and its Subsidiaries are
eligible to be granted Options under this Plan. Eligibility under this Plan
shall be determined by the Committee in its sole discretion.
5.2. Non-employee directors of the Company are only eligible to receive an
award of Stock Options in accordance with Article VII of the Plan.
ARTICLE VI.
EMPLOYEE STOCK OPTION GRANTS
6.1. OPTIONS. Each Stock Option granted hereunder shall be one of two
types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code or (ii) a Non-Qualified Stock Option.
6.2. GRANTS. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options. The Committee shall have the authority
to grant to any Consultant one or more Non-Qualified Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify,
shall constitute a separate Non-Qualified Stock Option.
6.3. TERMS OF OPTIONS. Options granted under this Plan shall be subject to
the following terms and conditions, and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock
purchasable under an Incentive Stock Option shall be determined by the
Committee at the time of grant but shall not be less than 100% of the Fair
Market Value of the share of Common Stock at the time of grant; provided,
however, if an Incentive Stock Option
9
<PAGE>
is granted to a Ten Percent Stockholder, the purchase price shall be no
less than 110% of the Fair Market Value of the Common Stock. The purchase
price of shares of Common Stock subject to a Non-Qualified Stock Option
shall be determined by the Committee but shall not be less than the 100% of
the Fair Market Value of the Common Stock at the time of grant.
Notwithstanding the foregoing, if an Option is modified, extended or
renewed and, thereby, deemed to be the issuance of a new Option under the
Code, the exercise price of an Option may continue to be the original
exercise price even if less than the Fair Market Value of the Common Stock
at the time of such modification, extension or renewal.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted, provided, however, the term of
an Incentive Stock Option granted to a Ten Percent Stockholder may not
exceed five (5) years.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee at grant. If the Committee provides, in its discretion, that
any Stock Option is exercisable subject to certain limitations (including,
without limitation, that it is exercisable only in installments or within
certain time periods), the Committee may waive such limitations on the
exercisability at any time at or after grant in whole or in part
(including, without limitation, that the Committee may waive the
installment exercise provisions or accelerate the time at which Options may
be exercised), based on such factors, if any, as the Committee shall
determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock Options
may be exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in
full of the purchase price in such form, or such other arrangement for the
satisfaction of the purchase price, as the Committee may accept. If and to
the extent determined by the Committee in its sole discretion at or after
grant, payment in full or in part may also be made in the form of Common
Stock withheld from the shares to be received on the exercise of a Stock
Option hereunder or Common Stock owned by the Participant (and for which
the Participant has good title free and clear of any liens and
encumbrances) based, in each case, on the Fair Market Value of the Common
Stock on the payment date as determined by the Committee . No shares of
Common Stock shall be issued until payment, as provided herein, therefor
has been made or provided for.
(e) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
the Plan and/or any other stock option plan of the Company or any
Subsidiary or parent corporation (within the meaning of
10
<PAGE>
Section 424(e) of the Code) exceeds $100,000, such Options shall be treated
as Options which are not Incentive Stock Options.
Should the foregoing provision not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(f) BUY OUT AND SETTLEMENT PROVISIONS. The Committee may at any time
on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
(g) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, an Option
shall be evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may modify, extend or renew outstanding
Options granted under the Plan (provided that the rights of a Participant
are not reduced without his consent), or accept the surrender of
outstanding Options (up to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
(h) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of the Plan, as the Committee shall deem appropriate including, without
limitation, permitting "reloads" such that the same number of Options are
granted as the number of Options exercised, shares used to pay for the
exercise price of Options or shares used to pay withholding taxes
("Reloads"). With respect to Reloads, the exercise price of the new Stock
Option shall be the Fair Market Value on the date of the "reload" and the
term of the Stock Option shall be the same as the remaining term of the
Options that are exercised, if applicable, or such other exercise price and
term as determined by the Committee.
6.4. TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The
following rules apply with regard to Options upon the Termination of Employment
of a Participant:
(a) TERMINATION BY REASON OF DEATH. If a Participant's Termination of
Employment or Termination of Consultancy is by reason of death, any Stock
Option held by such Participant, unless otherwise determined by the
Committee at grant or, if no rights of the Participant's estate are
reduced, thereafter, may be exercised, to the extent exercisable at the
Participant's death, by the legal representative of the estate, at any time
within a period of one (1) year from the date of such death, but in no
event beyond the expiration of the stated term of such Stock Option.
11
<PAGE>
(b) TERMINATION BY REASON OF DISABILITY. If a Participant's
Termination of Employment or Termination of Consultancy is by reason of
Disability, any Stock Option held by such Participant, unless otherwise
determined by the Committee at grant or, if no rights of the Participant
are reduced, thereafter, may be exercised, to the extent exercisable at the
Participant's termination, by the Participant (or the legal representative
of the Participant's estate if the Participant dies after termination) at
any time within a period of one (1) year from the date of such termination,
but in no event beyond the expiration of the stated term of such Stock
Option.
(c) TERMINATION BY REASON OF RETIREMENT. If a Participant's
Termination of Employment or Termination of Consultancy is by reason of
Retirement, any Stock Option held by such Participant, unless otherwise
determined by the Committee at grant, or, if no rights of the Participant
are reduced, thereafter, shall be fully vested and may thereafter be
exercised by the Participant at any time within a period of one (1) year
from the date of such termination, but in no event beyond the expiration of
the stated term of such Stock Option; provided, however, that, if the
Participant dies within such exercise period, any unexercised Stock Option
held by such Participant shall thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period of one (1) year
(or such other period as the Committee may specify at grant or, if no
rights of the Participant's estate are reduced, thereafter) from the date
of such death, but in no event beyond the expiration of the stated term of
such Stock Option.
(d) INVOLUNTARY TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD
REASON. If a Participant's Termination of Employment or Termination of
Consultancy is by involuntary termination without Cause or for Good Reason,
any Stock Option held by such Participant, unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of ninety (90) days from the
date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.
(e) TERMINATION WITHOUT GOOD REASON. If a Participant's Termination
of Employment or Termination of Consultancy is voluntary but without Good
Reason and occurs prior to, or more than ninety (90) days after, the
occurrence of an event which would be grounds for Termination of Employment
or Termination of Consultancy by the Company for Cause (without regard to
any notice or cure period requirements), any Stock Option held by such
Participant, unless otherwise determined by the Committee at grant or, if
no rights of the Participant are reduced, thereafter, may be exercised, to
the extent exercisable at termination, by the Participant at any time
within a period of thirty (30) days from the date of such termination, but
in no event beyond the expiration of the stated term of such Stock Option.
12
<PAGE>
(f) OTHER TERMINATION. Unless otherwise determined by the Committee
at grant or, if no rights of the Participant are reduced, thereafter, if a
Participant's Termination of Employment or Termination of Consultancy is
for any reason other than death, Disability, Retirement, Good Reason,
involuntary termination without Cause or voluntary termination as provided
in subsection (e) above, any Stock Option held by such Participant shall
thereupon terminate and expire as of the date of termination, provided that
(unless the Committee determines a different period upon grant or, if, no
rights of the Participant are reduced, thereafter) in the event the
termination is for Cause or is a voluntary termination without Good Reason
within ninety (90) days after occurrence of an event which would be grounds
for Termination of Employment or Termination of Consultancy by the Company
for Cause (without regard to any notice or cure period requirement), any
Stock Option held by the Participant at the time of occurrence of the event
which would be grounds for Termination of Employment or Termination of
Consultancy by the Company for Cause shall be deemed to have terminated and
expired upon occurrence of the event which would be grounds for Termination
of Employment or Termination of Consultancy by the Company for Cause.
ARTICLE VII.
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
7.1. OPTIONS. The terms of this Article VII shall apply only to Options
granted to non-employee directors.
7.2. GRANTS. Without further action by the Board or the stockholders of
the Company, each non-employee director shall:
(a) subject to the terms of the Plan, be granted Options to purchase
15,000 shares of Common Stock upon (1) the date on which the offering price
in connection with the initial public offering of the Common Stock (the
"Offering") is agreed upon between the Company and the underwriters (the
"Price to the Public); or if later, (2) as of the date the non-employee
director begins service as a director on the Board; and
(b) subject to the terms of the Plan, be granted Options to purchase
7,500 shares of Common Stock upon each anniversary of the date on which he
began service as a director of the Board.
7.3. NON-QUALIFIED STOCK OPTIONS. Stock Options granted under this Article
VII shall be Non-Qualified Stock Options.
13
<PAGE>
7.4. TERMS OF OPTIONS. Options granted under this Article VII shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with terms of
this Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price per share deliverable upon the
exercise of an Option granted pursuant to Section 7.2(a)(1) shall be the
Price to the Public and the purchase price per share deliverable upon the
exercise of an Option granted pursuant to Section 7.2(a)(2) shall be 100%
of the Fair Market Value of such Common Stock at the time of the grant of
the Option, or the par value of the Common Stock, whichever is greater.
(b) EXERCISABILITY. Except as otherwise provided herein, thirty-
three percent (33%) of any Option granted under this Article VII shall be
exercisable on or after each of the three anniversaries following the date
of grant. All Options shall fully vest upon a Change in Control.
(c) METHOD FOR EXERCISE. A non-employee director electing to
exercise one or more Options shall give written notice of exercise to the
Company specifying the number of shares to be purchased. Common Stock
purchased pursuant to the exercise of Options shall be paid for at the time
of exercise in cash or by delivery of unencumbered Common Stock owned by
the non-employee director or a combination thereof or by such other method
as approved by the Board.
(d) OPTION TERM. Except as otherwise provided herein, if not
previously exercised each Option shall expire upon the tenth anniversary of
the date of the grant thereof.
7.5. TERMINATION OF DIRECTORSHIP. The following rules apply with regard to
Options upon the Termination of Directorship:
(a) DEATH, DISABILITY OR OTHERWISE CEASING TO BE A DIRECTOR OTHER
THAN FOR CAUSE. Except as otherwise provided herein, upon the Termination
of Directorship, on account of Disability, death, Retirement, resignation,
failure to stand for reelection or failure to be reelected or otherwise
other than as set forth in (b) below, all outstanding Options then
exercisable and not exercised by the Participant prior to such Termination
of Directorship shall remain exercisable, to the extent exercisable at the
Termination of Directorship, by the Participant or, in the case of death,
by the Participant's estate or by the person given authority to exercise
such Options by his or her will or by operation of law, for the remainder
of the stated term of such Options.
(b) CAUSE. Upon removal, failure to stand for reelection or failure
to be renominated for Cause, or if the Company obtains or discovers
information after Termination of Directorship that such Participant had
engaged in conduct that would
14
<PAGE>
have justified a removal for Cause during such directorship, all
outstanding Options of such Participant shall immediately terminate and
shall be null and void.
(c) CANCELLATION OF OPTIONS. No Options that were not exercisable
during the period such person serves as a director shall thereafter become
exercisable upon a Termination of Directorship for any reason or no reason
whatsoever, and such Options shall terminate and become null and void upon
a Termination of Directorship.
7.6. CHANGES. (a) The Awards to a non-employee director shall be subject
to Sections 4.2(a), (b) and (c) of the Plan and this Section 7.6, but shall
not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving corporation in any
merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options or
substitutes new Options which are determined by the Board in its sole
discretion to be substantially similar in nature and equivalent in terms
and value for Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised Options
shall expire without additional compensation to the holder thereof;
provided, that, the Committee shall deliver notice to each non-employee
director at least twenty (20) days prior to the date of consummation of
such merger, consolidation, dissolution or liquidation which would result
in the expiration of the Options and during the period from the date on
which such notice of termination is delivered to the consummation of the
merger, consolidation, dissolution or liquidation, such Participant shall
have the right to exercise in full effective as of such consummation all
Options that are then outstanding (without regard to limitations on
exercise otherwise contained in the Options) but contingent on occurrence
of the merger, consolidation, dissolution or liquidation, and, provided
that, if the contemplated transaction does not take place within a ninety
(90) day period after giving such notice for any reason whatsoever, the
notice, accelerated vesting and exercise shall be null and void and, if and
when appropriate, new notice shall be given as aforesaid.
ARTICLE VIII.
NON-TRANSFERABILITY
No Stock Option shall be Transferable by the Participant otherwise than by
will or by the laws of descent and distribution. All Stock Options shall be
exercisable, during the Participant's lifetime, only by the Participant. No
Option shall, except as otherwise specifically provided by law or herein, be
Transferable in any manner, and any attempt to Transfer any such Option shall be
void, and no such Option shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person who shall be
entitled to such Option nor shall it be subject to attachment or legal process
for or against such person.
15
<PAGE>
ARTICLE IX.
CHANGE IN CONTROL PROVISIONS
9.1. BENEFITS. In the event of a Change in Control of the Company (as
defined below), except as otherwise provided by the Committee upon the grant of
an Option, the Participant shall be entitled to the following benefits:
(a) Subject to paragraph (c) below with regard to Options granted to
Eligible Employees and Consultants, all outstanding Options of such
Participant granted prior to the Change in Control shall be fully vested
and immediately exercisable in their entirety. The Committee, in its sole
discretion, may provide for the purchase of any such Stock Options by the
Company for an amount of cash equal to the excess of the Change in Control
price (as defined below) of the shares of Common Stock covered by such
Stock Options, over the aggregate exercise price of such Stock Options. For
purposes of this Section 9.1, Change in Control price shall mean the higher
of (i) the highest price per share of Common Stock paid in any transaction
related to a Change in Control of the Company, or (ii) the highest Fair
Market Value per share of Common Stock at any time during the sixty (60)
day period preceding a Change in Control.
(b) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time an Option is granted to an
Eligible Employee hereunder or thereafter, no acceleration of
exercisability shall occur with respect to such Option if the Committee
reasonably determines in good faith, prior to the occurrence of the Change
in Control, that the Options shall be honored or assumed, or new rights
substituted therefor (each such honored, assumed or substituted option
hereinafter called an "Alternative Option"), by a Participant's employer
(or the parent or a subsidiary of such employer), or, in the case of a
Consultant, by the entity (or its parent or subsidiary) which retains the
Consultant, immediately following the Change in Control, provided that any
such Alternative Option must meet the following criteria:
(i) the Alternative Option must be based on stock which is traded
on an established securities market, or which will be so traded within
thirty (30) days of the Change in Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Option, including, but
not limited to, an identical or better exercise schedule; and
(iii) the Alternative Option must have economic value
substantially equivalent to the value of such Option (determined at the
time of the Change in Control).
16
<PAGE>
For purposes of Incentive Stock Options, any assumed or substituted
Option shall comply with the requirements of Treasury regulation Section
1.425-1 (and any amendments thereto).
(c) Notwithstanding anything else herein, the Committee may, in its
sole discretion, provide for accelerated vesting of an Option (other than a
grant to a non-employee director pursuant to Article VII hereof), upon a
Termination of Employment or Termination of Consultancy during the Pre-
Change in Control Period. Unless otherwise determined by the Committee,
the Pre-Change in Control Period shall be the one hundred eighty (180) day
period prior to a Change in Control.
9.2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred:
(a) upon any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, any
company owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of Common Stock of
the Company, or as a group or individually Steven S. Elbaum or The Alpine
Group, Inc., becoming the owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power
of the Company's then outstanding securities (including, without
limitation, securities owned at the time of any increase in ownership);
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in
paragraph (a), (c), or (d) of this section) or a director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board of Directors of the Company whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board of Directors;
(c) upon the merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding
17
<PAGE>
immediately after such merger or consolidation; provided, however, that a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person (other than those
covered by the exceptions in (a) above) acquires more than twenty-five
percent (25%) of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of the
Company; or
(d) upon the stockholder's of the Company approval of a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets other than the sale of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or more of the combined voting
power of the outstanding voting securities of the Company at the time of
the sale.
ARTICLE X.
TERMINATION OR AMENDMENT OF THE PLAN
10.1. TERMINATION OR AMENDMENT. Notwithstanding any other provision of
this Plan, the Board may at any time, and from time to time, amend, in whole or
in part, any or all of the provisions of the Plan, or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided herein, the rights of a Participant
with respect to Options granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company, if
and to the extent required by the applicable provisions of Rule 16b-3 or, if and
to the extent required, under the applicable provisions of Section 162(m) of the
Code, or with regard to Incentive Stock Options, Section 422 of the Code, no
amendment may be made which would (i) increase the aggregate number of shares of
Common Stock that may be issued under this Plan; (ii) increase the maximum
individual Participant limitations for a fiscal year under Section 4.1(b);
(iii) change the classification of employees, Consultants and non-employee
directors eligible to receive Options under this Plan; (iv) decrease the minimum
Option price of any Stock Option; (v) extend the maximum Option period under
Section 6.3; (vi) change any rights under the Plan with regard to non-employee
directors; or (vii) require stockholder approval in order for the Plan to
continue to comply with the applicable provisions, if any, of Rule 16b-3,
Section 162(m) of the Code or, with regard to Incentive Stock Options, Section
422 of the Code. In no event may the Plan be amended without the approval of
the stockholders of the Company in accordance with the applicable laws or other
requirements to increase the aggregate number of shares of Common Stock that may
be issued under the Plan, decrease the minimum option price of any Stock Option,
or to make any other amendment that would require stockholder approval under the
rules of any exchange or system on which the Company's securities are listed or
traded at the request of the Company.
18
<PAGE>
Except with respect to the award of Stock Options to non-employee directors
under Article VII, the Committee may amend the terms of any Option theretofore
granted, prospectively or retroactively, but, subject to Article IV above or as
otherwise specifically provided herein, no such amendment or other action by the
Committee shall impair the rights of any Participant without the Participant's
consent.
ARTICLE XI.
UNFUNDED PLAN
11.1. UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments as to
which a Participant has a fixed and vested interest but which are not yet made
to a Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.
ARTICLE XII.
GENERAL PROVISIONS
12.1. LEGEND. The Committee may require each person receiving shares
pursuant to the exercise of an Option under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the shares without
a view to distribution thereof. In addition to any legend required by this
Plan, the certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed or any national securities association system upon whose
system the Common Stock is then quoted, any applicable Federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
12.2. OTHER PLANS. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
12.3. NO RIGHT TO EMPLOYMENT/CONSULTANCY/DIRECTORSHIP. Neither this Plan
nor the grant of any Option hereunder shall give any Participant or other
employee any right with
19
<PAGE>
respect to continuance of employment or consultancy with the Company or any
Subsidiary, nor shall they be a limitation in any way on the right of the
Company or any Subsidiary by which an employee is employed or consultant
retained to terminate his employment or consultancy, as applicable, at any time.
Neither this Plan nor the grant of any Option hereunder shall impose any
obligations on the Company to retain any Participant as a director nor shall it
impose on the part of any Participant any obligation to remain as a director of
the Company.
12.4. WITHHOLDING OF TAXES. The Company shall have the right to deduct
from any payment to be made to a Participant, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.
The Committee may permit any such withholding obligation with regard to any
Participant to be satisfied by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already owned. Any
fraction of a share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead in cash by the
Participant.
12.5. LISTING AND OTHER CONDITIONS.
(a) If the Common Stock becomes listed on a national securities
exchange or system sponsored by a national securities association, the
issue of any shares of Common Stock pursuant to the exercise of an Option
shall be conditioned upon such shares being listed on such exchange or
system. The Company shall have no obligation to issue such shares unless
and until such shares are so listed, and the right to exercise any Option
with respect to such shares shall be suspended until such listing has been
effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to the exercise of
an Option is or may in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, or to make any application or to
effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Options and the right to exercise any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery
shall be lawful or will not result in the imposition of excise taxes on the
Company.
(c) Upon termination of any period of suspension under this Section
12.5, any Option affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension
shall extend the term of any Option.
20
<PAGE>
12.6. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
12.7. CONSTRUCTION. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
12.8. OTHER BENEFITS. No Option payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
12.9. COSTS. The Company shall bear all expenses included in administering
this Plan, including expenses of issuing Common Stock pursuant to any Options
hereunder.
12.10. NO RIGHT TO SAME BENEFITS. The provisions of Options need not be
the same with respect to each Participant, and such Options granted to
individual Participants need not be the same in subsequent years.
12.11. DEATH/DISABILITY. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Option. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of the Plan.
12.12. SECTION 16(b) OF THE EXCHANGE ACT. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable condition
under Rule 16b-3. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the Exchange
Act, as it may deem necessary or proper for the administration and operation of
the Plan and the transaction of business thereunder.
12.13. SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
12.14. HEADINGS AND CAPTIONS. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
21
<PAGE>
ARTICLE XIII.
TERM OF PLAN
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval, but Options granted prior to such tenth anniversary may
extend beyond that date.
ARTICLE XIV.
NAME OF PLAN
This Plan shall be known as the Superior TeleCom Inc. 1996 Stock Option
Plan.
22
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT
THIS THIRD AMENDMENT TO LEASE AGREEMENT (this "Amendment"), dated as
of October 2, 1996, between ALP (TX) QRS 11-28, INC., a Texas corporation
("Landlord"), and SUPERIOR TELECOMMUNICATIONS INC., a Georgia corporation f/k/a
Superior Teletec, Inc. and Superior TeleTec Transmission Products, Inc.
("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant have entered into that certain Lease
Agreement, dated as of December 16, 1993, as amended by a First Amendment to
Lease Agreement, dated as of May 10, 1995, and a Second Amendment (the "Second
Amendment") to Lease Agreement, dated as of July 21, 1995 (as amended, the
"Lease");
WHEREAS, the parties hereto are entering into this Amendment
concurrently with the closing of the Revolving Credit Agreement by and among
Superior TeleCom Inc. ("TeleCom"), each subsidiary of TeleCom (including
Tenant), certain lending institutions and Bankers Trust Company dated as of
October 2, 1996 (as the same may be amended, the "BT Loan Agreement"); and
WHEREAS, the parties hereto have agreed to amend the Lease as
hereinafter set forth.
NOW, THEREFORE, intending to be legally bound and for good valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
1. DEFINITIONS. (a) Capitalized terms used herein and in Annex A
hereto and not otherwise defined shall have the meanings assigned to them in the
Lease.
(b) The definition of "Guarantor" is hereby
amended by adding thereto "and Superior TeleCom Inc., jointly and severally,"
after the word "Corporation" in the second line thereof; and
(c) The definition of "Guaranty" is hereby amended
by adding the phrase "as the same may be amended from time to time" after the
work "Landlord" in the second line thereof.
2. WAIVER. Landlord hereby waives compliance by Tenant with
Financial Covenants contained in the Second Amendment in connection with the
occurrence of the transactions substantially as described on Annex A attached
hereto, including such other
<PAGE>
transactions as may be incidental to, necessary, or desirable to give effect to
such transactions. such transactions.
3. FINANCIAL COVENANTS. The Lease is hereby amended by deleting the
Financial Covenants attached to the Second Amendment as Exhibit E and inserting
the Financial Covenants attached hereto as Exhibit E in lieu thereof.
4. EVENTS OF DEFAULT. The Lease is hereby amended by replacing the
words "Tenant shall breach any covenant" in clause (vii) of Paragraph 22(a) with
the words "Tenant shall breach any Covenant or Superior TeleCom Inc. shall
breach any covenant contained in the Guaranty."
5. REPRESENTATION. Tenant represents to Landlord that its leasehold
interest in the Premises is free and clear of any mortgage, lien, security
interest or encumbrance of any kind held by Nomura International Trust Company.
6. SUCCESSORS AND ASSIGNS. Except as specifically amended by this
Amendment, the terms and conditions of the Lease shall remain in full force and
effect and shall be binding upon Landlord and Tenant and their respective
successors and assigns.
7. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed shall be deemed an original, but all such counterparts
shall constitute but one and the same instrument.
<PAGE>
[Signature Page to Third Amendment to Lease Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
ATTEST ALP (TX) QRS 11-28, INC.
By:/s/Ruth Perfido By:/s/Gordon J. Whiting
Title: Title: Vice President
ATTEST SUPERIOR TELECOMMUNICATIONS INC.
By:/s/Stewart H. Wahrsager By:Bragi F. Schut
Title: Secretary Title: Senior Vice President
<PAGE>
ANNEX A
DESCRIPTION OF TRANSACTIONS
- Guarantor will contribute the stock of its subsidiaries, Tenant
and DNE Systems, Inc. ("DNE") to a new subsidiary, Superior TeleCom Inc.
("Superior TeleCom").
- In connection with the foregoing reorganization, Guarantor will
cause Tenant, DNE and/or Superior TeleCom to declare a dividend or dividends on
its common stock, or otherwise make a distribution to Guarantor as described
further below, and permit Guarantor to recapitalize Tenant, as a result of which
the Company would own all the outstanding common stock of Superior TeleCom and
shares of a new series of preferred stock of Tenant having a liquidation value
of approximately $20,000,000.
- The payment by Tenant, DNE and/or Superior TeleCom to Guarantor
of an aggregate of $205 million, consisting of the repayment by Tenant of
existing intercompany debt owed to the Guarantor, which was $102.9 million as of
July 28, 1996, net of amounts owed by Guarantor to Tenant, and the balance by
payment of a dividend or dividends to be declared or equivalent distribution to
be made in connection with the recapitalization described above.
- The sale by Superior TeleCom of up to 49.9% (approximately 53.4%
if the underwriters exercise their over-allotment option) of its common stock to
the public in a registered public offering (the "IPO"). If, in connection with
the public offering, the underwriters exercise their over-allotment option, the
proceeds of such exercise would be used to redeem a portion of the preferred
stock described above, and Guarantor then would be entitled to use the proceeds
thereof to restore its ownership of Superior TeleCom to 50.1% through open
market purchases of Superior TeleCom common stock.
- Superior TeleCom has obtained a commitment from Bankers Trust
Company and Bank of Boston with respect to the provision of a $175.0 million
revolving credit facility (the "Bank Financing"). Superior TeleCom will
complete an initial borrowing of approximately $154.7 million under the Bank
Financing and will distribute approximately $151.7 million to the Company to
complete the reorganization and the purchase of Notes.
Under the Bank Financing, Superior TeleCom initially will be
permitted to have outstanding revolving credit loans of up to $175.0 million.
However, if Superior TeleCom completes a public offering of its common stock as
described above (on terms and conditions set forth in the Bank Financing), the
amount of the facility will be reduced to $150.0 million. Superior TeleCom also
will be required to reduce the commitments by $30.0 million ($25.0 million if
the commitment amount is reduced to $150.0 million as described above) in each
of 1999 and 2000, and the facility will terminate in 2001. Loans under the Bank
Financing will be based on either a LIBOR rate or the base rate of Bankers
Trust, in each case plus a margin. The facility will be secured by
substantially all of the assets of
<PAGE>
Superior TeleCom and its subsidiaries, including Tenant. The stock of Tenant
will be pledged to the lenders as security for the Bank Financing.
- Guarantor will effect an amendment to the indenture relating to
its 12-1/4% Series B Senior Secured Notes due 2003 and, in connection therewith,
complete a tender offer for at least 50% of the outstanding aggregate amount of
such notes.
- Guarantor will enter into a Services Agreement, a Tax
Indemnification Agreement and a Tax Sharing Agreement with Superior TeleCom and
such other related party transactions as are described in the preliminary and in
any final prospectus contained in the registration statement filed with the
Securities and Exchange Commission relating to the IPO.
<PAGE>
EXHIBIT 10.9
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT, made as of October 2, 1996 (the "Agreement"), by
and among The Alpine Group, Inc. (hereinafter referred to as "Parent or Alpine),
Superior Telecom Inc., (hereinafter referred to as "Telecom"), and such of their
affiliates, whether presently existing or hereafter acquired, as are or shall be
part of the "Alpine Group" as hereinafter defined (hereinafter referred to
individually as a "Subsidiary" and collectively as "Subsidiaries") for taxable
years commencing on and AFTER May 1, 1996.
WITNESSETH
WHEREAS, Telecom is a wholly owned direct subsidiary of Alpine, and Alpine,
Telecom and the Subsidiaries, together form an affiliated Group (the "Alpine
Group") within the meaning of Section 1504(a) of the Internal Revenue Code as it
presently exists or as it may be amended, including any successor thereto (the
"Code"), desire to continue to file a consolidated Federal income tax return and
consolidated or combined state income tax returns where allowed by law;
WHEREAS, prior to or concurrently with the execution of this Agreement, (i)
Alpine will cause Superior Telecommunications, Inc. ("Superior") and DNE
Technologies, Inc. ("DNE") to declare dividends on their common stock and repay
all intercompany debt owed by Superior and DNE to any of their affiliates, (ii)
Superior will issue 20,000 shares of Superior Preferred Stock to Alpine and
(iii) Alpine will contribute to Telecom all of the issued and outstanding common
stock of Superior and DNE (the "Reorganization");
WHEREAS, it is contemplated that concurrently with or shortly after the
execution of this Agreement, (i) Telecom will declare a dividend on its common
stock, (ii) Telecom will consummate an initial public offering of common stock
and (iii) previously declared dividends will be paid (the "IPO and Related
Transactions");
WHEREAS, Parent, Telecom and Subsidiaries wish to preserve the economic rights
and privileges which would accrue to each from the filing of separate Federal
and state income tax returns, and, further, wish to set forth their agreement
regarding those rights and privileges in writing; and
WHEREAS, it would be to the mutual advantage of the parties hereto, and could
result in reduced Federal and State income tax being paid by all parties, if a
consolidated Federal income tax return and consolidated or combined state income
(or franchise) tax returns (where allowed) are filed which will include any
Subsidiaries and affiliates of the parties in accordance with the terms of the
Code and related Income Tax Regulations ("Regulations") and in accordance with
the terms of applicable state law and regulations.
<PAGE>
NOW, THEREFORE, PARENT, TELECOM, AND SUBSIDIARIES HEREBY AGREE AS FOLLOWS:
I. CONSOLIDATED RETURN
A. Parent, Telecom, and Subsidiaries shall file such consents and other
documents and take such action as may be necessary to continue in
filing a consolidated tax return for the Group, and such consolidated
or combined state income tax returns as allowed.
B. Parent, Telecom, and Subsidiaries shall cause any corporation which
hereafter becomes an affiliate of any of them and a member of the
Alpine Group to join in this Agreement.
C. Parent, Telecom, and Subsidiaries shall maintain, and shall cause any
Subsidiaries subsequently formed or acquired to maintain, concurrent
fiscal years.
D. Telecom shall pay to Parent all amounts calculated in accordance with
the provisions of Sections II and III, including without limitation
amounts satisfying quarterly estimated tax liabilities, as well as
annual liabilities. Such payment to be made in accordance with the
provisions of Section IV hereof.
E. Any dispute between the parties with respect to the operation or
interpretation of this Agreement shall be referred to and decided by
the independent public accountants for Alpine.
II. CALCULATION OF INDIVIDUAL CORPORATE INCOME TAX LIABILITY
A. Beginning with the tax year commencing May 1, 1996, and for each tax
year (or portion thereof during which Telecom is a member of the
Alpine Group) thereafter, Telecom will pay to Parent an amount equal
to the Federal corporate income tax liability of Telecom for any such
period, computed as if Telecom were not affiliated with Alpine and
Telecom and its subsidiaries ("the Telecom Group") filed a
consolidated Federal income tax return for such period and all prior
periods, except that as to the items of the Telecom Group (other than
as set forth in paragraph B, below) that are specified in Treas. Reg.
Section 1.1552-1(a)(2)(ii) - (a) through (i) shall be treated in
accordance with the consolidated return regulations as if all of the
members of the Telecom Group were members of the Alpine Group and the
Alpine Group was filing a consolidated return. For this purpose, for
the tax year that includes the date of this Agreement, the income of
each member of the Telecom Group will be taken into account beginning
May 1, 1996.
2
<PAGE>
B. In applying paragraph A above, any taxable income and income tax
liability thereon, arising out of the Reorganization, IPO and Related
Transactions (other than any taxable income or tax liability thereon
that would constitute a separate return tax liability of a member
E.G., tax payable on deferred gains realized by Subsidiaries on
deferred intercompany transactions) shall be the sole responsibility
of Parent and no portion of such income tax liability shall be paid by
any member of the Telecom Group.
C. Principles similar to the principles set forth in this Section II
shall be applied in determining the amounts of any consolidated or
combined state corporate income (or franchise) tax liability that is
required to be paid by Telecom to Parent.
III. LIABILITY FOR TAX PAYMENTS
A. Parent will pay the Federal corporate tax liabilities of the Alpine
Group for any period in which the Alpine Group files a consolidated
Federal income tax return. If the Alpine Group files a consolidated
or combined return for any state for any period, Alpine will pay the
liability arising out of that return.
B. Telecom shall pay to Parent of the amount the federal tax liability
(and where a member of the Telecom Group has been included in a
consolidated or combined return, the amount of the state tax liability
relating to such inclusion) as computed pursuant to the provisions of
Section II, above.
C. In the event Telecom or any member of the Telecom Group is required to
pay to any taxing authority or Parent any tax liability in excess of
the amounts Telecom is required to pay to Parent in accordance with
Sections II, III or IV of this Agreement, Parent shall within 30 days
of such payment, indemnify, reimburse and pay over to Telecom such
excess.
D. If the consolidated federal income tax liability is adjusted for any
taxable period, whether by means of an amended return, claim for
refund, or audit by the Internal Revenue Service, the obligation of
each member shall be recomputed under Section II and this Section III
of this Agreement to give effect to such adjustments. In the case of
a refund, Parent shall make payments to Telecom for its share of the
refund, within thirty days after the refund is received by the Parent,
and in the case of an increase in tax liability, Telecom shall pay to
the Parent its allocable share of such increased tax liability within
thirty days after receiving notice of such liability from Parent. If
any interest (or penalty) is to be paid or received as a result of a
consolidated federal income tax deficiency or refund, such
3
<PAGE>
interest shall be allocated in the ratio each member's change in
federal income tax liability bears to the total change in tax
liability.
IV. METHOD AND TIME OF PAYMENT
Payments of consolidated estimated tax for the consolidated Alpine Group at the
normal quarterly due dates will be made by Parent. Telecom will pay to Parent
at those quarterly due dates such amounts as determined by Parent, based on
estimates of the payment obligation of Telecom pursuant to this Agreement
prepared by the Parent and computed pursuant to the provisions of Section II,
above, as of the close of the appropriate quarter. Upon the determination by
Parent of the Alpine Group's consolidated tax liability for the year, Telecom
shall make/receive payment to/from Parent in an amount equal to Telecom's
liability for the entire year determined pursuant to paragraph III, above, less
amounts already paid for estimated tax (including for this purpose any payment
made directly by any Telecom subsidiary to Parent). In the event Telecom or any
member of the Telecom Group leaves the Alpine Group, the payment obligation of
or to Telecom or any such member pursuant to this paragraph shall be computed as
of the day immediately preceding the first day Telecom or any such member is no
longer a member of the Alpine Group and payment of the obligation of Telecom or
any such member shall be made by Telecom no later than the quarterly due date as
described above and payments by Parent to Telecom shall be made no later than 30
days after the close of the last quarter of the taxable year.
V. FINANCIAL STATEMENT TAX PROVISION
In consolidated financial statements of Parent and its Subsidiaries, the
financial reporting policy for tax provision allocations shall be based upon a
separate entity concept whereby each subsidiary's income tax expense (or
benefits) are reflected as if it were filing on a separate tax return basis and
the consolidated financial reporting allocation basis shall be charged or
credited to Parent's separate tax provision.
VI. SUCCESSORS ASSIGNS
The provisions and terms of this Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, of any
of the parties hereto.
VII. NEW MEMBERS/MEMBERS LEAVING THE GROUP
If, at any time any other company becomes a member of the Alpine Group, the
parties hereto agree that such member shall become a party to this Agreement by
executing a duplicate copy of this Agreement. Unless otherwise specified, such
named member shall have all the rights and obligations of a subsidiary under
this Agreement. Any member
4
<PAGE>
corporation which leaves the Alpine Group shall continue to be bound by this
Agreement with respect to periods during which it was a member.
VIII. PARENT DESIGNATE
Parent may designate a Subsidiary to act on behalf of the Parent in performing
the duties identified in this Agreement.
IX. DURATION
Unless earlier terminated by mutual agreement of the parties, this Agreement
shall remain in effect with respect to any tax year for which consolidated
federal or consolidated or combined state income tax returns are filed by the
Alpine Group.
X. GENERAL
All material including but not limited to, returns, supporting schedules,
workpapers, correspondence and other documents relating to the consolidated
return shall be made available to any party to this Agreement during regular
business hours. This Agreement shall be governed by the laws of Delaware.
THIS AGREEMENT contains the entire agreement of the parties and there are no
agreements, representations or warranties not contained herein. This Agreement
may not be modified or amended except by written instrument executed with the
same formality as this Agreement. This Agreement may be executed in
counterparts.
IN WITNESS WHEREOF, the parties hereto have caused their names to be subscribed
and executed by their respective authorized officers on the dates indicated,
effective with respect to the periods written above.
THE ALPINE GROUP, INC.
By: /s/ Bragi F. Schut
Executive Vice President
SUPERIOR TELECOM, INC.
By: /s/ Bragi F. Schut
Senior Vice President
5
<PAGE>
EXHIBIT 10.10
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of October 2, 1996, between The Alpine
Group, Inc., a Delaware corporation ("ALPINE"), and Superior TeleCom Inc., a
Delaware corporation ("TELECOM");
RECITALS
The Boards of Directors of each of the parties hereto, deem it
advisable for the benefit of each of the parties hereto and their respective
stockholders that Alpine have the right to exchange certain shares of 6%
Cumulative Preferred Stock, par value $1.00 per share ("SUPERIOR PREFERRED
STOCK"), of Superior Telecommunications Inc., a Georgia corporation, for shares
of 6% Cumulative Preferred Stock, par value $1.00 per share, of TeleCom
("TELECOM PREFERRED STOCK");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, and warranties contained herein and subject to the
conditions and other terms contained herein, the parties hereto do hereby agree
as follows:
Section 1. EXCHANGE OF SHARES.
(a) Subject to and in accordance with the terms and conditions
of this Agreement, Alpine shall have the right from time to time, upon notice to
TeleCom at any time subsequent to October 31, 1997, to sell and transfer to
TeleCom up to an aggregate of 20,000 shares of Superior Preferred Stock, in
exchange for shares of TeleCom Preferred Stock having substantially the same
rights, privileges, terms and conditions as the Superior Preferred Stock, at an
exchange ratio of one share of TeleCom Preferred Stock for each share of
Superior Preferred Stock.
(b) The exchange of shares shall occur as promptly as
practicable after delivery of the notice provided in Section 1(a). Upon such
exchange, Alpine shall deliver to TeleCom stock certificates representing the
shares of Superior Preferred Stock, duly endorsed in blank or with appropriate
stock powers executed in blank, in proper form for transfer and in form
satisfactory to counsel for TeleCom, together with a certificate executed by an
officer of Alpine to the effect that the representations, warranties and
covenants contained in Section 2 hereof continue to be accurate in all material
respects as of the date of such certificate. TeleCom shall deliver to Alpine
duly executed stock certificates representing the shares of TeleCom Preferred
Stock, duly endorsed in blank or with appropriate stock powers executed in
blank, in proper form for transfer and in form
<PAGE>
satisfactory to counsel for Alpine, together with a certificate executed by an
officer of TeleCom to the effect that the representations, warranties and
covenants contained in Section 3 hereof continue to be accurate in all material
respects as of the date of such certificate.
Section 2. REPRESENTATIONS OF ALPINE.
Alpine represents to and agrees with TeleCom as follows:
(a) Alpine owns the shares of Superior Preferred Stock free
and clear of all claims, liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts.
(b) Alpine has all requisite power and authority to execute
and deliver this Agreement and perform its obligations hereunder.
(c) All necessary corporate proceedings or other similar
actions have been duly taken by Alpine to authorize the execution and delivery
of this Agreement and the performance of Alpine's obligations hereunder.
(d) Alpine is an "accredited investor," as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT").
(e) Alpine will acquire the shares of TeleCom Preferred
Stock for its own account for investment and not with a view to, or for sale in
connection with, any public distribution thereof in violation of the Securities
Act and understands that such shares of TeleCom Preferred Stock will not be
registered for sale under the Securities Act or qualified under applicable state
securities laws and that the shares of TeleCom Preferred Stock will be delivered
to Alpine pursuant to one or more exemptions from the registration or
qualification requirements of such securities laws and that the representations
and warranties contained in this Section 2 are given with the intention that
TeleCom may rely thereon for purposes of claiming such exemptions. Alpine
understands that the TeleCom Preferred Stock cannot be sold unless registered
under the Securities Act and qualified under state securities laws, unless an
exemption from such registration and qualification is available.
(f) Alpine hereby agrees that there may be endorsed upon
any certificate representing the shares of TeleCom Preferred Stock acquired
pursuant hereto (and any certificates issued in substitution therefor) the
following legend calling attention to the foregoing restrictions on
transferability and stating in substance:
2
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR QUALIFICATION
UNDER THE BLUE SKY LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF, BENEFICIALLY OR ON THE RECORDS OF THE
CORPORATION, UNLESS THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
AND QUALIFIED UNDER APPLICABLE BLUE SKY LAWS OR AN EXEMPTION
FROM SUCH REGISTRATION AND QUALIFICATION IS AVAILABLE."
Section 3. REPRESENTATIONS OF TELECOM.
TeleCom represents to and agrees with Alpine as follows:
(a) Upon the transfer to Alpine of the shares of TeleCom
Preferred Stock hereunder, Alpine will acquire good and valid title to such
shares free and clear of all claims, liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, and voting trusts (other than
any created by Alpine).
(b) TeleCom has all requisite power and authority to
execute and deliver this Agreement, perform its obligations hereunder, and to
issue to and exchange with Alpine the shares of TeleCom Preferred Stock to be
exchanged by TeleCom pursuant hereto.
(c) All necessary corporate proceedings or other similar
actions have been duly taken by TeleCom to authorize the execution and delivery
of this Agreement, the performance of TeleCom's obligations hereunder, and to
authorize the issuance to and exchange with Alpine of the shares of stock to be
exchanged by TeleCom pursuant hereto.
(d) TeleCom is an "accredited investor," as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
(e) TeleCom will acquire the shares of Superior Preferred
Stock pursuant hereto for its own account for investment and not with a view to,
or for sale in connection with, any public distribution thereof in violation of
the Securities Act and understands that such shares of Superior Preferred Stock
have not been registered for sale under the Securities Act or qualified under
applicable state securities laws and that the shares of Superior Preferred Stock
will be delivered to TeleCom pursuant to one or more exemptions from the
registration or
3
<PAGE>
qualification requirements of such securities laws and that the representations
and warranties contained in this Section 3 are given with the intention that
such representations and warranties may be relied upon for purposes of claiming
such exemptions. TeleCom understands that the Superior Preferred Stock cannot
be sold unless registered under the Securities Act and qualified under state
securities laws, unless an exemption from such registration and qualification is
available.
(f) TeleCom hereby agrees that there may be endorsed upon
any certificate representing the Superior Preferred Stock acquired pursuant
hereto (and any certificates issued in substitution therefor) the following
legend calling attention to the foregoing restrictions on transferability and
stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR QUALIFICATION
UNDER THE BLUE SKY LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF, BENEFICIALLY OR ON THE RECORDS OF THE
CORPORATION, UNLESS THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
AND QUALIFIED UNDER APPLICABLE BLUE SKY LAWS OR AN EXEMPTION
FROM SUCH REGISTRATION AND QUALIFICATION IS AVAILABLE."
Section 4. REGISTRATION UNDER THE SECURITIES ACT. Simultaneosly with
the execution of this Agreement, the parties are entering into a Registration
Rights Agreement substantially in the form attached hereto as Exhibit A.
Section 5. AMENDMENT AND MODIFICATION. To the fullest extent
provided by applicable law, this Agreement may be amended, modified, and
supplemented with respect to any of the terms contained herein by mutual consent
of the respective Boards of Directors of the parties hereto or by their
respective officers duly authorized by such Boards of Directors by an
appropriate written instrument.
Section 6. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
either party without the prior written consent of the other party, except that
Alpine may assign its rights and obligations hereunder to any transferee of the
TeleCom Preferred Stock received by Alpine hereunder.
4
<PAGE>
Section 7. GOVERNING LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the law of the State of New York, without giving effect to conflict of laws.
Section 8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
Section 9. HEADINGS AND REFERENCES. The headings contained in this
Agreement are solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
Section 10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
Section 11. COMMUNICATIONS. All notices or other communications
hereunder shall be in writing and shall be given by registered or certified mail
(postage prepaid and return receipt requested), by an overnight courier service
which obtains a receipt to evidence delivery, or by telex or facsimile
transmission (provided that written confirmation of receipt is provided),
addressed as set forth on the signature page hereof or such other address as
either party may designate to the other in accordance with the aforesaid
procedure. All notices and other communications sent by overnight courier
service shall be deemed to have been given as of the second Business Day after
delivery thereof to such courier service, those given by telex or facsimile
transmission shall be deemed given when sent, and all notices and other
communications sent by mail shall be deemed given as of the third Business Day
after the date of deposit in the United States mail. As used herein, "Business
Day" shall mean any day other than Saturday, Sunday, or any other day when banks
in New York City are required or permitted to be closed.
Section 12. FURTHER ACTIONS. At any time and from time to time, each
party agrees, without further consideration, to take such actions and to execute
and deliver such documents as may be reasonably necessary to effectuate the
purposes of this Agreement.
* * *
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first written above.
THE ALPINE GROUP, INC.
By /s/ Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Senior Vice President and
Secretary
Address for notices:
The Alpine Group, Inc.
1790 Broadway
New York, New York 10019
Attention: President
SUPERIOR TELECOM INC.
By /s/ Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Secretary
Address for notices:
Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
Attention: President
6
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of October 2,
1996 by and between The Alpine Group, Inc., a Delaware corporation ("ALPINE"),
and Superior TeleCom Inc., a Delaware corporation (the "COMPANY").
This Agreement is being entered into in connection with the issuance
of certain shares of 6% Cumulative Preferred Stock, par value $1.00 per share
("SUPERIOR PREFERRED STOCK"), of Superior Telecommunications Inc., a Georgia
corporation, which by their terms will be exchangeable for shares of 6%
Cumulative Preferred Stock, par value $1.00 per share, of the Company ("TELECOM
PREFERRED STOCK");
In consideration of the foregoing, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" means, with respect to any specified Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified Person.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" shall have the meaning set forth in the preamble and shall
include the Company's successors by merger, acquisition, reorganization or
otherwise.
"CONTROLLING PERSONS" shall have the meaning set forth in Section
6(a).
"DAMAGES" shall have the meaning set forth in Section 6(a).
"DEMAND REGISTRATION" shall have the meaning set forth in Section
2(a).
"DEMAND REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
<PAGE>
"HOLDER" means Alpine and each Person (other than the Company and its
Affiliates) to whom Alpine or a Holder transfers Securities if such Person
acquires such Securities as Registrable Securities.
"HOLDERS' COUNSEL" means any counsel selected by Holders of a majority
in interest of the Registrable Securities.
"INSPECTORS" shall have the meaning set forth in Section 4(m).
"NASD" shall have the meaning set forth in Section 4(q).
"NASDAQ" shall have the meaning set forth in Section 4(o).
"OBJECTION NOTICE" shall have the meaning set forth in Section 4(a).
"OBJECTING PARTY" shall have the meaning set forth in Section 4(a).
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or other agency or political
subdivision thereof.
"PIGGY-BACK REGISTRATION" shall have the meaning set forth in Section
3(a).
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"RECORDS" shall have the meaning set forth in Section 4(m).
"REGISTRABLE SECURITIES" means the Securities; PROVIDED, HOWEVER, that
any Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) such Registrable Securities are transferred to any
Person other than a Holder pursuant to Rule 144 (or any similar provision then
in force, but not Rule 144A) under the Securities Act, including a sale pursuant
to the provisions of Rule 144(k), (iii) such Securities shall have ceased to be
outstanding or (iv) such Securities may be sold pursuant to Rule 144(k) (or a
successor provision then in force) under the Securities Act without reference to
volume or manner of sale restrictions, and the Company shall have delivered to
the transfer agent with respect to the Securities an opinion of counsel to such
effect and shall have taken such other actions as
2
<PAGE>
are necessary to enable the Holders to have legends restricting the transfer of
the Securities removed from the certificates representing the Securities prior
to or contemporaneously with any sale thereof by the Holders. Nothing herein
shall allow a Holder to register the same Registrable Securities on more than
one Registration Statement at any one time.
"REGISTRATION EXPENSES" shall have the meaning set forth in Section 5.
"REGISTRATION STATEMENT" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement (including any Demand Registration Statement), and all
amendments and supplements to any such registration statement, including post-
effective amendments, in each case including the Prospectus, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"SECURITIES" means the shares of TeleCom Preferred Stock (together
with any securities issued or issuable with respect to such shares by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization.)
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
SECTION 2. DEMAND REGISTRATION.
(a) FILING, EFFECTIVENESS. Upon the request of Holders owning
at least 50 percent of the Registrable Securities delivered any time after the
initial delivery of the Securities to Alpine, but not earlier than October 31,
1997, and provided that such Holders have not previously participated in a
Piggy-Back Registration, the Company shall prepare and file with the Commission
a registration statement on the appropriate form for an offering under the
Securities Act covering the Registrable Securities owned by such Holders (the
"DEMAND REGISTRATION STATEMENT"), and the Company will use its best efforts to
effect the registration under the Securities Act of the Registrable Securities
permitting the public resale by such Holders or their transferees of the
Registrable Securities (a "DEMAND REGISTRATION"). The Company shall not be
required to effect more than one Demand Registration.
(b) SUPPLEMENTS; AMENDMENTS. The Company agrees, if necessary,
to supplement or amend the Demand Registration Statement, as required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Demand Registration Statement or by the Securities Act or
as requested (which request shall result in the filing of a supplement or
amendment) by any Holder of Registrable Securities to which such Demand
Registration Statement relates, and the Company agrees to furnish to the
Holders, Holders' Counsel and any managing underwriter copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission.
3
<PAGE>
(c) EFFECTIVE REGISTRATION. A registration will not be deemed
to have been effected as a Demand Registration Statement unless the Demand
Registration Statement with respect thereto has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; PROVIDED, HOWEVER, that
if after it has been declared effective, the offering of Registrable Securities
pursuant to a Demand Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the Commission or any other
governmental agency or court, such Demand Registration Statement will be deemed
not to have become effective during the period of such interference until the
offering of Registrable Securities pursuant to such Demand Registration
Statement may legally resume. If a registration requested pursuant to this
Section 2 is deemed not to have been effected, then the Company shall continue
to be obligated to effect a registration pursuant to this Section 2.
(d) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration Statement
shall be in the form of an underwritten offering. If they so elect, the Holders
participating in such Demand Registration Statement shall select one or more
nationally recognized firms of investment bankers (reasonably acceptable to the
Company) to act as the book-running managing underwriter or underwriters in
connection with such offering and shall select any additional investment bankers
and managers to be used in connection with the offering.
SECTION 3. PIGGY-BACK REGISTRATION.
(a) REQUEST FOR REGISTRATION. Each time after the initial
delivery of the Securities to Alpine, but not earlier than October 31, 1997, the
Company proposes to file a registration statement under the Securities Act with
respect to an offering by the Company for its own account or for the account of
any of its security holders of any class of equity security (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that is
adopted by the Commission) or (ii) a registration statement filed in connection
with an exchange offer or offering of securities solely to the Company's
existing security holders), and provided that the Holders have not previously
exercised their right to require the Company to effect a Demand Registration,
then the Company shall give written notice of such proposed filing to the
Holders of Registrable Securities as soon as practicable (but in no event less
than 30 days before the anticipated filing date), and such notice shall offer
such Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration"). The
Company shall use its best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Each Holder agrees (i) to enter into an
underwriting agreement, upon terms and conditions reasonably agreeable to such
Holder, as may be required by any managing underwriter in connection with a
Piggy-Back
4
<PAGE>
Registration and (ii) while the Piggy-Back Registration is in effect such Holder
will not effect sales, by use of the prospectus included in the Demand
Registration Statement, of shares that are also covered by the Piggy-Back
Registration. Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 3 by giving written notice to the Company of such withdrawal.
The Company may withdraw a Piggy-Back Registration at any time prior to the time
it becomes effective, provided that the Company shall give immediate notice of
such withdrawal to the Holders of Registrable Securities requested to be
included in such Piggy-Back Registration and shall reimburse such Holders for
all reasonable out-of-pocket expenses (including counsel fees and expenses)
incurred prior to such withdrawal.
(b) REDUCTION OF OFFERING. In connection with an underwritten
offering where Piggy-Back Registration has been requested as provided in Section
3(a), the Company shall use its best efforts to cause all Registrable Securities
requested to be included in such Piggy-Back Registration to be included as
provided in Section 3(a). If the managing underwriter or underwriters of any
such underwritten offering have informed, in writing, the Holders of the
Registrable Securities requesting inclusion in such offering that it is their
opinion that the total number of shares which the Company, Holders of
Registrable Securities and any other Persons participating or requesting to
participate in such registration intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the number
of shares to be offered for the account of all Persons (other than the Company)
participating in such registration shall be reduced or limited (to zero if
necessary) PRO RATA in proportion to the respective number of shares requested
to be registered by such Persons to the extent necessary to reduce the total
number of shares requested to be included in such offering to the number of
shares, if any, recommended by such managing underwriter or underwriters (except
to the extent otherwise provided in any other agreement entered into prior to
the date hereof (other than agreements with parties to the Acquisition
Agreements) between the Company and holders of its securities relating to
registration rights).
SECTION 4. REGISTRATION PROCEDURES.
In connection with the obligations of the Company to effect or cause
the registration of any Registrable Securities pursuant to the terms and
conditions of this Agreement, the Company shall use its best efforts to effect
the registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection therewith:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities Act,
which form shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith, and use its best efforts
to cause such Registration Statement to become effective and remain
effective in accordance with the provisions of this Agreement; PROVIDED,
HOWEVER, that, at least five Business Days prior to filing a
5
<PAGE>
Registration Statement or Prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial
filing of the Registration Statement, the Company shall furnish to the
Holders of the Registrable Securities covered by such Registration
Statement, Holders' Counsel and the underwriters, if any, draft copies of
all such documents proposed to be filed, which documents will be subject to
the review of Holders' Counsel and the underwriters, if any, and the
Company will not, unless required by law or this Agreement, file any
Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which Holders holding a majority in interest of the
Registrable Securities covered by such Registration Statement or the
underwriters with respect to such Securities, if any, shall object in good
faith as a result of perceived omissions or misstatements of material fact
in such document; PROVIDED, HOWEVER, that any such objection to the filing
of any Registration Statement or amendment thereto or any Prospectus or
supplement thereto shall be made by written notice (the "OBJECTION NOTICE")
delivered to the Company no later than five Business Days after the party
or parties asserting such objection (the "OBJECTING PARTY") receives draft
copies of the documents that the Company proposes to file. The Objection
Notice shall set forth the objections and the specific areas in the draft
documents where such objections arise. The Company shall have five
Business Days after receipt of the Objection Notice to correct such
deficiencies to the satisfaction of the Objecting Party, and will notify
each Holder of any stop order issued or threatened by the Commission in
connection therewith and shall use its best efforts to prevent the entry of
such stop order or to remove it if entered at the earliest possible moment.
(b) The Company shall promptly prepare and file with the
Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for as long as such registration is required to remain
effective pursuant to the terms hereof; shall cause the Prospectus to be
supplemented by any required Prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
and shall comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all Registrable Securities covered by
such Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Holders set forth in such
Registration Statement or supplement to the Prospectus.
(c) The Company shall promptly furnish to any Holder and the
underwriters, if any, without charge, such number of conformed copies of
such Registration Statement and any post-effective amendment thereto and
such number of copies of the Prospectus (including each preliminary
Prospectus) and any amendments or supplements thereto, any documents
incorporated by reference therein and such other documents as such Holder
or underwriter may request in order to facilitate the public sale or other
disposition of the Registrable Securities being sold by such Holder.
6
<PAGE>
(d) The Company shall, on or prior to the date on which a
Registration Statement is declared effective, (i) use its best efforts to
register or qualify the Registrable Securities covered by such Registration
Statement under the securities or "blue sky" laws of each of the 50 states
of the United States; (ii) do any and all other acts and things which may
be reasonably necessary or reasonably advisable to enable such Holder to
consummate the disposition of such Registrable Securities owned by such
Holder; (iii) use its best efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period in which
the Registration Statement is required to be kept effective; and (iv) use
its best efforts to do any and all other acts or things reasonably
necessary or reasonably advisable to enable the disposition in such
jurisdictions of such Registrable Securities; PROVIDED, HOWEVER, that the
Company shall not be required (x) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 4(d) or (y) to file any general consent to service of process.
(e) The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company to
enable the Holders to consummate the disposition of such Registrable
Securities.
(f) The Company shall promptly notify each Holder, Holders'
Counsel and any underwriter and (if requested by any such Person) confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement
or post-effective amendment has been filed and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation or threatening of any proceedings for that
purpose, (iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption
from qualification of any of the Registrable Securities under state
securities or "blue sky" laws or the initiation of any proceedings for that
purpose, (v) if, between the effective date of a Registration Statement and
the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material
respects, and (vi) of the happening of any event which makes any statement
of a material fact made in a Registration Statement or related Prospectus
untrue or which requires the making of any changes in such Registration
Statement or Prospectus so that they will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading; and, as promptly
as
7
<PAGE>
practicable thereafter, prepare and file with the Commission and furnish a
supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(g) The Company shall make generally available to the Holders an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 45 days after the end of the 12-month period
beginning with the first day of the Company's first fiscal quarter
commencing after the effective date of a Registration Statement, which
earnings statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Company timely files complete and
accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and
otherwise complies with Rule 158 under the Securities Act.
(h) The Company shall promptly use its best efforts to prevent
the issuance of any order suspending the effectiveness of a Registration
Statement and, if one is issued, shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration
Statement at the earliest possible moment.
(i) The Company shall, if requested by the managing underwriter
or underwriters, if any, Holders' Counsel, or any Holder, promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters or Holder or
Holders' Counsel reasonably requests to be included therein, including,
without limitation, with respect to the Registrable Securities being sold
by such Holder to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and any other terms
of an underwritten offering of the Registrable Securities to be sold in
such offering, and the Company shall promptly make all required filings of
such Prospectus supplement or post-effective amendment.
(j) The Company shall, as promptly as practicable after filing
with the Commission of any document which is incorporated by reference into
a Registration Statement (in the form in which it was incorporated),
deliver a copy of each such document to each of the Holders and to Holders'
Counsel.
(k) The Company shall cooperate with the Holders and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law) representing
securities sold under a Registration Statement, and enable such securities
to be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such Holders may request and keep
available and make available to the Company's transfer agent prior to the
effectiveness of such Registration Statement a supply of such certificates.
8
<PAGE>
(l) The Company shall enter into such customary agreements
(including, if applicable, an underwriting agreement in customary form) and
take such other actions as the Holders or the underwriters retained by the
Holders participating in an underwritten public offering, if any, may
request in order to expedite or facilitate the disposition of Registrable
Securities (the Holders may, at their option, require that any or all of
the representations, warranties and covenants of the Company to or for the
benefit of any underwriters also be made to and for the benefit of the
Holders).
(m) The Company shall promptly make available to each Holder,
any underwriter participating in any disposition pursuant to a Registration
Statement, and any attorney, accountant or other agent or representative
retained by any such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information requested by any such Inspector in
connection with such Registration Statement; PROVIDED that, unless the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, the Company shall not be required to provide any information
under this paragraph, (1) if the Company believes, after consultation with
counsel for the Company and counsel for the Holders, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (2) if either (i) the Company has
requested and been granted from the Commission confidential treatment of
such information contained in any filing with the Commission or documents
provided supplementally or otherwise or (ii) the Company reasonably
determines in good faith that such Records are confidential and so notifies
the Inspectors in writing unless prior to furnishing any such information
with respect to (i) or (ii) such Holder requesting such information agrees
to enter into a confidentiality agreement in customary form and subject to
customary exceptions; and provided, further, that each such Holder agrees
that it will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential (it being understood that in
any event such Holder shall be entitled to disclose any Records to the
extent such Holder in good faith believes that such disclosure is required
in response to a request or investigation by a court or other governmental
agency or body).
(n) The Company shall furnish to each Holder and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion or opinions of counsel to the Company, and
(ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case may
be, as the Holders of Registrable
9
<PAGE>
Securities included in such offering or the managing underwriter therefor
reasonably requests.
(o) The Company shall use its best efforts to cause the
Registrable Securities included in a Registration Statement to be (i)
listed on each securities exchange, if any, on which similar securities
issued by the Company are then listed, or (ii) authorized to be quoted
and/or listed, as applicable, on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") or the National Market System
of NASDAQ if the Registrable Securities so qualify.
(p) The Company shall provide a CUSIP number for all Registrable
Securities covered by a Registration Statement not later than the effective
date of such Registration Statement.
(q) The Company shall cooperate with each Holder and each
underwriter participating in the disposition of Registrable Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. ("NASD").
(r) The Company shall, during the period when the Prospectus is
required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer agent and registrar for
all Registrable Securities covered by a Registration Statement not later
than the effective date of such Registration Statement.
(t) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing
underwriter for the offering or the Holders, in customary efforts to sell
the securities under the offering, including without limitation,
participating in "road shows."
(u) If the Registrable Securities are of a class of securities
that is listed on a national securities exchange, the Company will file
copies of any Prospectus with such exchange in compliance with Rule 153
under the Securities Act so that the Holders shall benefit from the
prospectus delivery procedures described therein.
If any Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting
10
<PAGE>
any future financial requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar Federal or state "blue sky" statute and the rules and
regulations thereunder then in force. the deletion of the reference to such
Holder.
SECTION 5. REGISTRATION EXPENSES. Any and all expenses incident
to the Company's performance of or compliance with this Agreement, including
without limitation, all Commission and securities exchange, NASDAQ or NASD
registration and filing fees, all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including reasonable fees
and disbursements of counsel for any underwriters or Holders in connection with
"blue sky" qualifications of the Registrable Securities), printing expenses,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), all expenses for word processing,
printing and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, the fees and expenses incurred in connection with the
listing of the Registrable Securities, the fees and disbursements of counsel for
the Company and of the independent certified public accountants of the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letter requested pursuant to Section 4(n)), Securities Act liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts or other Persons retained by the Company in
connection with any registration, Counsel Fees (as hereinafter defined) and
disbursements of Holders' Counsel (which counsel, it is understood, shall be a
single firm representing all of the Holders) and any reasonable out-of-pocket
expenses of the Holders and their agents, including any reasonable travel costs,
but excluding underwriting discounts and commissions and transfer taxes, if any
(which shall be paid by the Holders, pro rata in accordance with the number of
Shares sold in the offering), relating to the sale or disposition of Registrable
Securities (all such expenses being herein called "Registration Expenses"), will
be borne by the Company whether or not the Demand Registration Statement or
Piggy-Back Registration to which such expenses relate becomes effective. As
used herein, Counsel Fees means the reasonable fees and disbursements of
Holders' Counsel for representation of the Holders in connection with the review
of a Registration Statement, which fees shall be supported by detail; PROVIDED,
HOWEVER, that the maximum amount of Counsel Fees for which the Company shall be
obligated to reimburse the Holders is $7,500 for a particular Registration
Statement.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each Holder,
its partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers, and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with, or is
11
<PAGE>
controlled by, such Holder, together with the partners, officers, directors,
trustees, stockholders, employees, agents and investment advisors of such Person
(collectively, the "Controlling Persons"), from and against all losses, claims,
damages, liabilities and expenses (including without limitation any legal or
other fees and expenses incurred by any Holder or any such Controlling Person in
connection with defending or investigating any action or claim in respect
thereof) (collectively, the "Damages") to which such Holder, its partners,
officers, directors, trustees, stockholders, employees, agents and investment
advisers, and any such Controlling Person, may become subject under the
Securities Act or otherwise, insofar as such Damages (or proceedings in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of material fact contained in any Registration Statement (or any amendment
thereto) pursuant to which Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by reference, or
caused by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission
based upon information relating to such Holder furnished in writing to the
Company by such Holder expressly for use therein; PROVIDED, HOWEVER, that the
Company shall not be liable to any Holder under this Section 6(a) to the extent
that any such Damages were caused by the fact that such Holder sold Securities
to a Person as to whom it shall be established that there was not sent or given,
or deemed sent or given pursuant to Rule 153 under the Securities Act, at or
prior to the written confirmation of such sale, a copy of the Prospectus as then
amended or supplemented if, and only if, (i) the Company has previously
furnished copies of such amended or supplemented Prospectus to such Holder and
(ii) such Damages were caused by any untrue statement or omission or alleged
untrue statement or omission contained in the Prospectus so delivered which was
corrected in such amended or supplemented Prospectus. In connection with an
underwritten offering, the Company will indemnify the underwriters thereof,
their officers and directors and each Person who controls such underwriters
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities except with respect to
information provided by the underwriter specifically for inclusion therein.
(b) INDEMNIFICATION BY THE HOLDERS. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors, officers, stockholders, employees and agents and each Person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, the Company, together with the partners, officers,
directors, stockholders, employees and agents of such Person, to the same extent
as the foregoing indemnity from the Company to such Holder, but only with
reference to (i) information relating to such Holder furnished to the Company in
writing by such
12
<PAGE>
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) the
failure of a Holder to deliver a Prospectus as described in the proviso to the
preceding paragraph (a); PROVIDED, HOWEVER, that such Holder shall not be
obligated to provide such indemnity to the extent that such Damages result from
the failure of the Company to promptly amend or take action to correct or
supplement any such Registration Statement or Prospectus on the basis of
corrected or supplemental information provided in writing by such Holder to the
Company expressly for such purpose. In no event shall the liability of any
Holder of Registrable Securities hereunder be greater in amount than the amount
of the proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) INDEMNIFICATION PROCEDURES. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "indemnified party") shall promptly notify
the Person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceedings and shall pay the fees and disbursements of such
counsel relating to such proceeding. The failure of an indemnified party to
notify the indemnifying party with respect to a particular proceeding shall not
relieve the indemnifying party from any obligation or liability (i) which it may
have pursuant to this Agreement if the indemnifying party is not substantially
prejudiced by the failure to notify or (ii) which it may have otherwise than
pursuant to this Agreement. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, or (ii) the indemnifying party fails promptly to
assume the defense of such proceeding or fails to employ counsel reasonably
satisfactory to such indemnified party or parties, or (iii) (A) the named
parties to any such proceeding (including any impleaded parties) include both
such indemnified party or parties and any indemnifying party or an Affiliate of
such indemnified party or parties or of any indemnifying party, (B) there may be
one or more defenses available to such indemnified party or parties or such
Affiliate of such indemnified party or parties that are different from or
additional to those available to any indemnifying party or such Affiliate of any
indemnifying party and (C) such indemnified party or parties shall have been
advised by such counsel that there may exist a conflict of interest between or
among such indemnified party or parties or such Affiliate of such indemnified
party or parties and any indemnifying party or such Affiliate of any
indemnifying party, in which case, if such indemnified party or parties notifies
the indemnifying party or parties in writing that it elects to employ separate
counsel of its choice at the expense of the indemnifying parties, the
indemnifying parties shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the indemnifying parties, it being
understood, however, that unless there exists a conflict among indemnified
parties, the indemnifying parties shall not, in connection with any one such
proceeding or separate but substantially similar or related
13
<PAGE>
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but, if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party or
parties from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which such indemnified party is a party, and indemnity could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding, with no payment by such
indemnified party of consideration.
(d) CONTRIBUTION. If the indemnification from the indemnifying
party provided for in this Section 6 is found, in a final judicial determination
not subject to final appeal, to be unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 6(c), any
reasonable legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no selling Holder
shall be required to contribute any amount in excess of the amount by which the
total proceeds received by such selling Holder with respect to Registrable
Securities sold exceeds the amount of any damages which such selling Holder has
otherwise been required to pay by reason of such untrue statement or
14
<PAGE>
omission. Each Holder's obligation to contribute pursuant to this Section 6(d)
is several in the proportion that the proceeds of the offering received by such
Holder bears to the total proceeds of the offering received by all the Holders
and not joint. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11 (f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 6(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 6(d).
SECTION 7. RULE 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
(or, if the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales under Rule 144 under the Securities Act), and it will
take such further action as any Holder may request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
SECTION 8. RULE 144A. The Company covenants that it will file all
reports required to be filed by it under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder (or if
the Company is not required to file such reports, it will, upon the request of
any Holder, make available other information so long as necessary to permit
sales of the Registrable Securities pursuant to Rule 144A under the Securities
Act), all to the extent as may be required from time to time to enable such
Holder to sell the Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144A, as such rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission, in each case to the extent that
the Registrable Securities were not when issued of the same class as securities
listed on a national securities exchange or quoted in a U.S. automated
interdealer quotation system.
SECTION 9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights
15
<PAGE>
granted to the holders of the Company's other issued and outstanding securities
under any such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority in interest of the outstanding Registrable Securities
affected by such amendment, modification, supplement, waiver or consent;
PROVIDED, HOWEVER, that, no amendment, modification, supplement, waiver or
consent to any departure from the provisions of Section 4 hereof (other than any
immaterial amendment, modification, supplement, waiver or consent) shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder.
(c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopier, registered or certified
mail (return receipt requested), postage prepaid or courier to the parties at
their respective addresses set forth on the signature pages hereof (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; by confirmed
receipt of transmission, if telecopied; and on the next Business Day if timely
delivered to a courier guaranteeing overnight delivery.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders. If any transferee of any Holder shall
acquire Registrable Securities in any manner, whether by operation of law or
otherwise, such Registrable Securities shall be held subject to all of the terms
of this Agreement, and by taking and holding such Registrable Securities such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
16
<PAGE>
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles or rules of conflicts of law.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holders shall be enforceable to the fullest extent permitted by law,
(i) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(j) ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
(k) FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
(l) REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall
be specifically enforceable, it being agreed by the parties that remedies at law
for violations hereof, including monetary damages, are inadequate and that the
right to object in any action for specific performance or injunctive relief
hereunder on the basis that a remedy at law would be adequate is waived.
17
<PAGE>
IN WITNESS WHEREOF. the parties have executed this Agreement as of the
date first written above.
THE ALPINE GROUP, INC.
By:/s/ Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Senior Vice President and
Secretary
Address for notices:
The Alpine Group, Inc.
1790 Broadway
New York, New York 10019
Attention: President
SUPERIOR TELECOM INC.
By: /s/ Stewart H. Wahrsager
Name: Stewart H. Wahrsager
Title: Secretary
Address for notices:
Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
Attention: President
18
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO GUARANTY AND SURETYSHIP AGREEMENT
THIS FIRST AMENDMENT TO GUARANTY AND SURETYSHIP AGREEMENT (this
"Amendment"), dated as of October 2, 1996, between ALP (TX) QRS 11-28, INC., a
Texas corporation ("Landlord"), SUPERIOR TELECOM INC., a Delaware corporation
("TeleCom" or the "Company"), and THE ALPINE GROUP, INC., a Delaware corporation
("Alpine").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Landlord and Alpine entered into that certain Guaranty and
Suretyship Agreement, dated as of December 16, 1993, as modified by a Consent of
Guarantor instrument executed on or about May 10, 1995 (as modified, the
"Guaranty Agreement");
WHEREAS, the parties hereto are entering into this Amendment
concurrently with the closing of a Revolving Credit Agreement by and among
TeleCom, each subsidiary of TeleCom (including Tenant), certain lending
institutions and Bankers Trust Company dated as of October 2, 1996; and
WHEREAS, the parties hereto have agreed to amend the Guaranty
Agreement as hereinafter set forth.
NOW, THEREFORE, intending to be legally bound and for good valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
1. DEFINITIONS.
a. As used herein and in the Guaranty Agreement, "Guarantor"
shall mean each of TeleCom and Alpine, together with any corporation succeeding
thereto by consolidation, merger or acquisition of its assets substantially as
an entirety.
b. Capitalized terms used herein and in Annex A hereto and not
otherwise defined shall have the meanings assigned to them in the Guaranty
Agreement.
2. WAIVER. Landlord hereby waives compliance by Alpine with the
Covenants contained in the Second Amendment to Lease, dated July 21, 1995, in
connection with the occurrence of the transactions substantially as described on
Annex A attached hereto, including such other transactions as may be incidental
to or necessary or desirable to give effect to such transactions.
<PAGE>
3. FINANCIAL COVENANTS.
a. Alpine shall not be bound by or obliged to comply with the
Covenants contained in the Lease or in any amendment to the Lease.
b. TeleCom covenants and agrees to observe and be bound by the
covenants annexed hereto as Exhibit E.
4. SUCCESSORS AND ASSIGNS. Except as specifically amended by this
Amendment, the terms and conditions of the Guaranty Agreement shall remain in
full force and effect and shall be binding upon Landlord and Guarantor and their
respective successors and assigns.
5. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed shall be deemed an original, but all such counterparts
shall constitute but one and the same instrument.
* * *
<PAGE>
[Signature Page to First Amendment to Guaranty and Suretyship Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
ATTEST ALP (TX) QRS 11-28, INC.
By:/s/ Ruth Perfido By:/s/ Gordon J. Whiting
Name:Ruth Perfido Name: Gordon J. Whiting
Title:Assistant Secretary Title: Vice President
ATTEST THE ALPINE GROUP, INC.
By:/s/Stewart H. Wahrsager By:/s/Bragi F. Schut
Name:Stewart H. Wahrsager Name: Bragi F. Schut
Title:Secretary Title: Exec. VP
ATTEST SUPERIOR TELECOM INC.
By:Stewart H. Wahrsager By:/s/ Bragi F. Schut
Name:Stewart H. Wahrsager Name: Bragi F. Schut
Title:Secretary Title: Senior Vice President
<PAGE>
ANNEX A
DESCRIPTION OF TRANSACTIONS
- Alpine will contribute the stock of its subsidiaries, Tenant and
DNE Systems, Inc. ("DNE") into a new subsidiary, Superior TeleCom Inc.
("Superior TeleCom").
- In connection with the foregoing reorganization, Alpine will
cause Tenant, DNE and/or Superior TeleCom to declare a dividend or dividends on
its common stock, or otherwise make a distribution to Alpine as described
further below, and permit Alpine to recapitalize Tenant, as a result of which
the Company would own all the outstanding common stock of Superior TeleCom and
shares of a new series of preferred stock of Tenant having a liquidation value
of approximately $20,000,000.
- The payment by Tenant, DNE and/or Superior TeleCom to Alpine of
an aggregate of $205 million, consisting of the repayment by Tenant of existing
intercompany debt owed to the Alpine, which was $102.9 million as of July 28,
1996, net of amounts owed by Alpine to Tenant, and the balance by payment of a
dividend or dividends to be declared or equivalent distribution to be made in
connection with the recapitalization described above.
- The sale by Superior TeleCom of up to 49.9% (approximately 53.4%
if the underwriters exercise their over-allotment option) of its common stock to
the public in a registered public offering (the "IPO"). If, in connection with
the public offering, the underwriters exercise their over-allotment option, the
proceeds of such exercise would be used to redeem a portion of the preferred
stock described above, and Alpine then would be entitled to use the proceeds
thereof to restore its ownership of Superior TeleCom to 50.1% through open
market purchases of Superior TeleCom common stock.
- Superior TeleCom has obtained a commitment from Bankers Trust
Company and Bank of Boston with respect to the provision of a $175.0 million
revolving credit facility (the "Bank Financing"). Superior TeleCom will
complete an initial borrowing of approximately $154.7 million under the Bank
Financing and will distribute approximately $151.7 million to the Company to
complete the reorganization and the purchase of Notes.
Under the Bank Financing, Superior TeleCom initially will be
permitted to have outstanding revolving credit loans of up to $175.0 million.
However, if Superior TeleCom completes a public offering of its common stock as
described above (on terms and conditions set forth in the Bank Financing), the
amount of the facility will be reduced to $150.0 million. Superior TeleCom also
will be required to reduce the commitments by $30.0 million ($25.0 million if
the commitment amount is reduced to $150.0 million as described above) in each
of 1999 and 2000, and the facility will terminate in 2001. Loans under the Bank
Financing will be based on either a LIBOR rate or the base rate of Bankers
Trust, in each case plus a margin. The facility will be secured by
substantially all of the assets of Superior TeleCom and its subsidiaries,
including Tenant. The stock of Tenant will be pledged to the lenders as
security for the Bank Financing.
<PAGE>
- Alpine will effect an amendment to the indenture relating to its
12-1/4% Series B Senior Secured Notes due 2003 and, in connection therewith,
complete a tender offer for at least 50% of the outstanding aggregate amount of
such notes.
- Alpine will enter into a Services Agreement, a Tax
Indemnification Agreement and a Tax Sharing Agreement with Superior TeleCom and
such other related party transactions as are described in the preliminary and
any final prospectus contained in the registration statement filed with the
Securities and Exchange Commission relating to the IPO.
<PAGE>
EXHIBIT E TO FIRST AMENDMENT TO GUARANTY AND SURETYSHIP AGREEMENT
SECTION 1. DEFINITIONS. As used IN THIS EXHIBIT E, the following
terms shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this EXHIBIT E shall include in the singular number
the plural and in the plural the singular:
"LEASE AGREEMENT" MEANS THE LEASE AGREEMENT, DATED AS OF DECEMBER 16,
1993, BETWEEN BETWEEN ALP (TX) QRS 11-28, INC., A TEXAS CORPORATION
("LANDLORD"), AND SUPERIOR TELECOMMUNICATIONS INC., A GEORGIA CORPORATION F/K/A
SUPERIOR TELETEC, INC. AND SUPERIOR TELETEC TRANSMISSION PRODUCTS, INC.
("TENANT" OR "SUPERIOR"), AS AMENDED.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
BTCo to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise. Without limiting the foregoing,
Alpine and its Affiliates shall be deemed to be Affiliates of the Company and
its Subsidiaries so long as the Service Agreement is in place.
E-6
<PAGE>
"Agent" shall MEAN BANKERS TRUST COMPANY and shall include any
successor to the Agent appointed pursuant to Section 11.10 OF THE AGREEMENT.
"Agreement" shall MEAN THE REVOLVING CREDIT AGREEMENT, DATED AS OF
OCTOBER 2, 1996, AMONG SUPERIOR TELECOM INC., A DELAWARE CORPORATION, EACH OF
THE SUBSIDIARY GUARANTORS PARTY HERETO (THE "GUARANTORS"), THE LENDING
INSTITUTIONS FROM TIME TO TIME PARTY HERETO (EACH A "BANK" AND, COLLECTIVELY,
THE "BANKS") AND BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT (IN SUCH
CAPACITY, THE "AGENT"), AND BANK OF BOSTON CONNECTICUT, AS DOCUMENTATION AGENT.
"Alpine" shall MEAN THE ALPINE GROUP, INC., A DELAWARE CORPORATION.
"Alpine Tax Allocation Agreement" shall mean the tax allocation
agreement by and among Alpine, the Company and their Affiliates dated as of
October 2, 1996, effective as of May 1, 1996.
"Applicable Base Rate Margin" shall mean a percentage per annum equal
to 1.25%, less the then applicable Interest Reduction Discount, if any; PROVIDED
that in no event shall the Applicable Base Rate Margin be less than 0%.
"Applicable Eurodollar Margin" shall mean a percentage per annum equal
to 2.25%, less the then applicable Interest Reduction Discount, if any; PROVIDED
that in no event shall the Applicable Eurodollar Margin be less than 1.00%.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Company or any of its Subsidiaries to any Person of any asset (including,
without limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Company or
such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to, Sections 8.02(e), (f), (g), (h), (i) and (n) OF THE AGREEMENT.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of EXHIBIT K TO THE AGREEMENT.
"Authorized Officer" shall mean any senior officer of the Company
designated as such in writing to the LANDLORD by the Company to the extent
reasonably acceptable to the LANDLORD.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.04(c) OF THE AGREEMENT or (ii) a Bank having notified the Agent
and/or the Company that it does not
E-7
<PAGE>
intend to comply with the obligations under Section 1.01(a), 1.01(c) or 2.04(c)
OF THE AGREEMENT, in the case of either clause (i) or (ii) above as a result of
the appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05 OF
THIS EXHIBIT E.
"Base Rate" at any time shall mean the highest of (x) the rate which
is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the
Prime Lending Rate and (z) the rate which is 1/2 of 1% in excess of the Federal
Funds Rate.
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the borrowing of one Type of Revolving
Loan from all of the Banks on a given date (or resulting from conversions on a
given date), having in the case of Eurodollar Loans the same Interest Period;
PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) OF THE
AGREEMENT shall be considered part of any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Canadian Subsidiary" shall mean Superior Cable Corporation, an
ONTARIO corporation.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be added to the fixed assets account on
the consolidated balance sheet of such Person in accordance with GAAP (which
shall not include interest capitalized during construction but only to the
extent included in Consolidated Interest Expense), including all such
expenditures with respect to plant, property or equipment (including, without
limitation, expenditures for maintenance and repairs which should be capitalized
in accordance with GAAP) and the amount of all Capitalized Lease Obligations
incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, should be accounted for as a capital lease on the balance
sheet of that Person.
E-8
<PAGE>
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Company or any of its Subsidiaries in each case taken at
the amount thereof that should be accounted for as liabilities in accordance
with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and banker acceptances of (x) any Bank or
(y) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank or Bank, an "Approved Bank"), in each case with
maturities of not more than twelve months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, as the case may be, and in each case maturing within twelve months
after the date of acquisition, (iv) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within twelve months from
the date of acquisition thereof and, at the time of acquisition having one of
the two highest ratings obtainable from either S&P or Moody's, (v) any
repurchase agreement entered into with any Approved Bank which is secured by any
obligation of the type described in any of clauses (i) through (iii) and (vi)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Company and/or any of its Subsidiaries from
such Asset Sale.
"Change of Control Event" shall mean (a) the Company shall cease to
own directly 100% on a fully diluted basis of the economic and voting interest
in the capital stock of Superior or DNE (other than the shares of Superior
Preferred Stock referred to in the recitals to this Agreement) or (b) any Person
or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as in effect on the (Effective Date), other than Alpine,
shall (A) have acquired beneficial ownership of 20% or more on a fully diluted
basis of the voting and/or economic interest in the Company's capital stock
(PROVIDED, HOWEVER, such referenced percentage in this clause (A) shall be 25%
if, and so long as, Alpine directly maintains ownership of more than 30% on a
fully diluted basis of the economic and voting interests in the Company's
capital stock) or (B) obtained the power (whether or not exercised) to elect a
majority of the Company' directors or (C) the Board of Directors of the Company
shall cease to consist of a majority of Continuing Directors.
E-9
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and ruling issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Pledged Collateral, Pledged
Securities and Mortgaged Property.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Commitment Fee" shall have the meaning provided in Section 3.01(a) OF
THE AGREEMENT.
"Company" shall MEAN SUPERIOR TELECOM INC.
"Company Common Stock" shall MEAN THE COMMON STOCK, PAR VALUE $.01, OF
THE COMPANY.
"Company Tax Allocation Agreement" shall mean the tax allocation
agreement by and among the Company and its Subsidiaries dated as of October 2,
1996, effective as of May 1, 1996.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Company and its Subsidiaries determined on a consolidated basis; PROVIDED that
for purposes of this definition, the amount of Indebtedness in respect of
Interest Rate Protection Agreements and Other Hedging Agreements shall be at any
time equal to the unrealized net loss position, if any, of the Company and/or
its Subsidiaries thereunder on a marked to market basis determined no more than
one month prior to such time.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income, before total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest Rate Protection Agreements and any original
issue discount) and before minority charges resulting from the existence of the
Superior Preferred Stock of the Company and its Subsidiaries determined on a
consolidated basis and provisions for taxes based on income, whether paid or
deferred.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation expense and
amortization expense plus non-cash compensation expenses relating to restricted
stock and stock- option grants, in each case, that were deducted in determining
Consolidated EBIT for such period, plus net earnings of any Person (other than a
consolidated Subsidiary that is a Guarantor) in which the Company or any
consolidated Subsidiary has an ownership interest to the extent such net
earnings shall have actually been received by the Company or such consolidated
Subsidiary in the form of cash distributions.
E-10
<PAGE>
"Consolidated Fixed Charges" shall mean, for any period the sum of
Consolidated Interest Expense for such period plus (v) all dividends paid or
accrued on capital stock of the Company and its Subsidiaries held by persons
other than the Company and its Subsidiaries that are Guarantors plus (w) the
amount of all Capital Expenditures of the Company (other than Capital
Expenditures made pursuant to clause (d) or (e) of Section 8.08) and its
Subsidiaries paid or accrued with respect to such period plus (x) all cash taxes
paid or accrued with respect to such period (other than with respect to net
income taxes attributable to items that are excluded from the calculation of
Consolidated Net Income in the period) plus (y) $10,000,000 for the first
Special Dividend Period, $10,000,000 for the next succeeding Special Dividend
Period, $15,000,000 for the next succeeding Special Dividend Period, $20,000,000
for the next succeeding Special Dividend Period, and $40,000,000 for the next
succeeding Special Dividend Period and (z) mandatory principal payments on
Indebtedness (other than with respect to Loans) required to be made during such
period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to (A) any rent paid in respect of
Capital Leases which is or should be allocable to interest expense in accordance
with GAAP and (B) interest capitalized during the construction of any Capital
Expenditure) of the Company and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of any payments made to obtain
any Interest Rate Protection Agreement and Other Hedging Agreements and deferred
financing costs and any interest expense on deferred compensation arrangements
to the extent included in total interest expense; PROVIDED, for that portion of
any Test Period prior to the Initial Borrowing Date, Consolidated Interest
Expense shall be determined on a PRO FORMA basis as if (i) no loans were
outstanding under the Existing Credit Agreement, (ii) Loans in an aggregate
principal amount equal to the amount outstanding on the Initial Borrowing Date
(after giving effect to the Transaction) had been outstanding at all times since
the first day of such Test Period and that such Loans had accrued interest at a
per annum rate equal to the Eurodollar Rate that would have been in effect on
the Initial Borrowing Date as if Eurodollar Loans were incurred on such date.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provisions for income taxes (other than with respect to net
income taxes attributable to items that are excluded from the calculation of
Consolidated Net Income in the period), of the Company and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period in
conformity with GAAP but excluding in any event (a) any extraordinary gains (net
of extraordinary losses) but with giving effect to gains or losses from sales of
assets sold in the ordinary course of business; (b) net earnings of any person
(other than a consolidated Subsidiary that is a Guarantor or the Canadian
Subsidiary) in which the Borrower or any consolidated Subsidiary has an
ownership interest unless such net earnings shall have actually been received by
the Borrower or such consolidated Subsidiary in the form of cash distributions;
(c) any portion of the net earnings of any consolidated Subsidiary which
E-11
<PAGE>
is unavailable for payment of dividends to the Borrower or any other
consolidated Subsidiary by reason of the provisions of any agreement or
applicable law or regulation (including, without limitation, those agreements
referred to in the exceptions set forth in Section 8.13 OF THE AGREEMENT); (d)
earnings resulting from any reappraisal, revaluation or write-up of assets; (e)
the income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its Subsidiaries or that Person's assets are acquired by such Person or
any of its Subsidiaries; (f) the aggregate net gain (or loss) during such period
arising from the revaluation (but not sale) of readily marketable securities;
(g) the income (or loss) from discontinued operations; and (h) non-cash charges
and cash charges (but only to the extent such cash charges are reimbursed by a
controlling Affiliate in cash at the time of incurrence thereof), in each case,
relating to the Transaction, repayment of Indebtedness incurred under the
Existing Credit Agreement and any Dividend paid, in accordance with the terms
hereof, from proceeds of the Initial Public Offering.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligations of the ability of the primary obligor to make payment
of such primary obligation or (d) otherwise to assure or hold harmless the owner
of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection or standard contractual indemnities
entered into, in each case in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the Company on the
Initial Borrowing Date and each other director if such director's nomination for
the election to the Board of Directors of the Company is recommended by a
majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, each of the Notes and
each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
E-12
<PAGE>
"Credit Party" shall mean the Company and each Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Destruction" has the meaning assigned to that term in each Mortgage.
"Dividends" shall have the meaning provided in Section 8.07 OF THIS
EXHIBIT E.
"Documents" shall mean the Credit Documents and the IPO Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Company
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall mean OCTOBER 2, 1996.
"Eligible Transferee" shall mean a commercial bank, financial
institution or other institutional "accredited investor" (as defined in
Regulation D of the Securities Act).
"End Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance, deficiency, liability or violation, investigations or
proceedings relating in any way to any violation or liability (or alleged
violation or liability) by the Company or any of its Subsidiaries under any
Environmental Law (hereafter "Claims") or any permit, license or other
authorization issued to the Company or any of its Subsidiaries under any such
law, including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, remedial, corrective,
response or other actions or damages pursuant to any Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" shall mean any foreign, federal, state or local
policy, statute, law, rule, regulation, ordinance, code or rule of common law
now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials, or
E-13
<PAGE>
health and safety to the extent such health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Company or any Subsidiary of the Company would
be deemed to be a "single employer" within the meaning of Section 414(b) or (c)
of the Code or (to the extent required by operation of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA) Section 414(m) or (o) of the
Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b) OF THE AGREEMENT.
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/16 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds generally
comparable to the aggregate principal amount of the Eurodollar Loan for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall mean AN "EVENT OF DEFAULT" AS DEFINED IN THE
AGREEMENT OR PARAGRAPH 22 OF THE LEASE AGREEMENT.
"Existing Credit Agreement" means the credit facility provided to
Alpine and certain Subsidiaries pursuant to the Loan and Security Agreement
dated as of July 21, 1995 among Alpine, the Subsidiaries named therein, the
financial institutions party thereto, and Shawmut Capital Corporation as Agent,
as amended.
"Existing Indebtedness" shall have the meaning
provided in Section 6.22 OF THE AGREEMENT.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.14 OF THE AGREEMENT.
E-14
<PAGE>
"Existing Letters of Credit" shall have the meaning provided in
Section 2.01(a) OF THE AGREEMENT.
"Facing Fee" shall have the meaning provided in Section 3.01(c) OF THE
AGREEMENT.
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01 OF THE AGREEMENT.
"Final Maturity Date" shall mean October 31, 2001.
"Foreign Cash Equivalents" shall mean Canadian dollar denominated
certificates of deposit or bankers acceptances of any bank organized under the
laws of Canada, provided that the short-term commercial paper rating of such
bank from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof, in each case with maturities of not more
than twelve months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Company or any one or
more of its Subsidiaries primarily for the benefit of employees of the Company
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code,
or any such plan as to which the Company or any of its Subsidiaries may have any
liability.
"Foreign Subsidiary" shall mean each Subsidiary of the Company other
than a Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 8 OF
THIS EXHIBIT E and the definition of Interest Reduction Discount, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 12.07(a) OF THE AGREEMENT.
E-15
<PAGE>
"Guarantor" shall mean each Subsidiary of the Company (other than a
Foreign Subsidiary except to the extent otherwise provided in Section 8.14 OF
THIS EXHIBIT E).
"Guaranty" shall mean the Guaranty contained in Section 13 OF THE
AGREEMENT.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products or wastes (including crude oil or any fraction thereof), radioactive
materials, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
and (b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous wastes," "restrictive
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar meaning and regulatory effect under any
Environmental Law.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed; PROVIDED, HOWEVER, that in the event that the liability of such first
Person is non-recourse to such Person and is recourse only to specified assets
of such Person, the amount of Indebtedness attributed thereto shall not exceed
the greater of the market value of such assets or the book value of such assets,
(v) all Capitalized Lease Obligations of such Person, (vi) all obligations of
such Person to pay a specified purchase price for goods or services whether or
not delivered or accepted, I.E., take-or-pay and similar obligations, (vii) all
obligations under Interest Rate Protection Agreements and Other Hedging
Agreements and (viii) all Contingent Obligations of such Person; PROVIDED that
Indebtedness shall not include trade payables and accrued expenses, in each case
arising and payable in the ordinary course of business and consistent with past
practice (so long as so paid in the ordinary course of business and consistent
with past practice).
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Initial Public Offering" shall have the meaning provided in the
recitals of this Agreement.
"Intercompany Loan" shall have the meaning provided in Section 8.05(g)
OF THIS EXHIBIT E.
E-16
<PAGE>
"Intercompany Notes" shall mean promissory notes, in the form of
EXHIBIT L TO THE AGREEMENT, evidencing an Intercompany Loan.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09 OF
THE AGREEMENT.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean zero; PROVIDED that from and
after the first day of any Margin Reduction Period (the "Start Date") to and
including the last day of such Margin Reduction Period (the "End Date"), the
Interest Reduction Discount shall be the respective percentage per annum set
forth in clause (A), (B), (C), (D) or (E) below if, but only if, as of the last
day of the most recent fiscal quarter or year, as the case may be, ended
immediately prior to such Start Date (the "Test Date"), the applicable
conditions set forth in clause (A), (B), (C), (D) or (E) below, as the case may
be, are met:
(A) .25% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.75:1.0 and none of the conditions set forth in
clause (B), (C), (D) or (E) below, as the case may be, are satisfied;
(B) .50% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.50:1.0 and none of the conditions set forth in
clause (C), (D) or (E) below, as the case may be, are satisfied;
(C) .75% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.25:1.0 and neither of the conditions set forth
in clause (D) or (E) below is satisfied; or
(D) 1% if, but only if, as of the Test Date for such Start Date the
Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall
be equal to or less than 3.00:1.0 and the condition set forth in clause (E)
below is not satisfied; or
(E) 1.25% if, but only if, as of the Test Date for such Start Date
the Pro Forma Leverage Ratio for the Test Period ended on such Test Date
shall be equal to or less than 2.50:1.0.
E-17
<PAGE>
Notwithstanding anything to the contrary contained above in this definition, (x)
the Interest Reduction Discount shall not exceed that set forth in clause (C)
prior to the first Test Date to occur after the first anniversary of the Initial
Borrowing Date, (y) the Interest Reduction Discount shall be zero at any time
when a Default or an Event of Default shall exist and (z) upon consummation of
the Initial Public Offering, the then in effect Interest Reduction Discount
shall be adjusted to give effect to the net reduction of outstanding Loans as a
result of any repayment from the proceeds of such Initial Public Offering (net
of any incremental Borrowings) as if such net reduction had occurred on the
relevant Test Date (such adjustment to take effect upon such repayment of
Loans).
"IPO Documents" shall mean the Registration Statement relating to the
registration of the the Company Common Stock, and all other documents or
agreements related to the consummation of the IPO, including, without
limitation, all underwriting or similar agreements and all documents filed with
the SEC.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Company or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Company or any of its Subsidiaries as are reasonably acceptable to the Agent and
the Letter of Credit Issuer and otherwise permitted to exist pursuant to the
terms of this Agreement.
"Lease" shall mean any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a)
OF THE AGREEMENT.
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b) OF THE AGREEMENT.
"Letter of Credit Issuer" shall mean BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a) OF THE AGREEMENT.
"Letter of Credit Sublimit" shall mean $7,500,000.
E-18
<PAGE>
"Leverage Ratio" shall mean, at any time, the ratio of (x)
Consolidated Debt as of the last day of the relevant Test Period to (y)
Consolidated EBITDA for the relevant Test Period.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(c) OF THE AGREEMENT.
"Margin Reduction Period" shall mean each period which shall commence
on a date on which the financial statements are delivered pursuant to Section
7.01(b) or (c) OF THIS EXHIBIT E, as the case may be, and which shall end on the
earlier of (i) the date of actual delivery of the next financial statements
pursuant to Section 7.01(b) or (c), as the case may be, and (ii) the latest date
on which the next financial statements are required to be delivered pursuant to
Section 7.01(b) or (c), as the case may be; PROVIDED that the first Margin
Reduction Period shall commence on the date that the financial statements are
delivered for the Company's first fiscal quarter ending after the Initial
Borrowing Date.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole and after giving
effect to the Transaction.
"Maximum Swingline Amount" shall mean $7,500,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000 and (ii) for Swingline Loans, $250,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall mean a revolving credit mortgage, assignment of
leases, security agreement and fixture filing, or a revolving credit deed of
trust, assignment of leases, security agreement and fixture filing creating and
evidencing a Lien on a Mortgaged Real Property, which shall be substantially in
the form of Exhibit M-1 or M-2 (as appropriate) hereto, containing such
schedules and including such additional provisions and other deviations from
such Exhibits as shall be necessary to conform such document to applicable or
local law or as shall be customary under local law and which shall be dated the
date of delivery thereof and made by the owner of the Mortgaged Real Property
described therein for
E-19
<PAGE>
the benefit of the Collateral Agent, as mortgagee (grantee or beneficiary),
assignee and secured party, as the same may at any time be amended, modified or
supplemented in accordance with the terms thereof and hereof.
"Mortgaged Property" shall have the meaning assigned to such term in
the Mortgages.
"Mortgaged Real Property" shall mean and include the Real Properties
owned or leased by the Company and the Guarantors to the extent designated as
such on Annex IV TO THE AGREEMENT and any additional Real Property which shall
be subject to a Mortgage delivered pursuant to Section 5.13.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA).
"Net Award" has the meaning assigned to such term in each Mortgage.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of (a) cash expenses of sale (including,
without limitation, brokerage fees, if any, transfer taxes and payment of
principal, premium and interest of Indebtedness other than the Loans required to
be repaid as a result of such Asset Sale), (b) all foreign, federal, state and
local taxes to the extent payable as a direct consequence of any such Asset Sale
and (c) deduction of reasonable amounts, determined in accordance with GAAP,
required to be provided by the Company or such Subsidiary as a reserve against
any liabilities retained by the Company or any Subsidiary of the Company
associated with such assets after such Asset Sale, including, without
limitation, any indemnification, pension and other post-employment benefit
liabilities, workers compensation liabilities, liabilities associated with
retiree benefits and liabilities relating to environmental matters, except and
until such reserves are reversed, in which case the amount of such reversal
shall constitute Net Cash Proceeds.
"Net Proceeds" has the meaning assigned to that term in each Mortgage.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Revolving Note and the Swingline Note.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent or any Bank pursuant to the terms of any Credit
Document.
"Other Hedging Agreements" shall mean (x) any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values and (y) agreements
relating to the future purchase of commodities or designed to protect against
fluctuations in the prices of specific commodities.
E-20
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving Loan Commitment then in effect; PROVIDED that if the Total
Revolving Loan Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Revolving Loan Commitment as in effect
immediately prior to such termination by the Total Revolving Loan Commitment as
in effect immediately prior to such termination.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(l) OF THIS EXHIBIT E.
"Permitted Liens" shall have the meaning provided in Section 8.03 OF
THIS EXHIBIT E.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company or partnership, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any multiemployer plan or single- employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) the Company, any of its
Subsidiaries or any ERISA Affiliate and each such plan for the five calendar
year period immediately following the latest date on which the Company, any of
its Subsidiaries or any ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan or any such plan as to which the Company,
any of its Subsidiaries or any ERISA Affiliate may have any liability, PROVIDED,
HOWEVER, the term "Plan" shall not include any Foreign Pension Plan.
"Pledge Agreement" shall have the meaning provided in Section 5.11(a)
OF THE AGREEMENT and shall include any additional pledge agreement executed by
the Company or any of its Subsidiaries pursuant to Section 7.11 OF THE
AGREEMENT.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
"Pledged Collateral" shall have the meaning assigned to such term in
the Security Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime
E-21
<PAGE>
lending rate changes. The Prime Lending Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
BTCo may make commercial loans or other loans at rates of interest at, above or
below the Prime Lending Rate.
"Prior Liens" shall mean Liens which, pursuant to the provisions of
any Security Document, are or may be superior to the Lien of such Security
Document.
"Pro Forma Leverage Ratio" shall mean, at any time for the
determination thereof, the ratio of (x) Consolidated Debt at such time to (y)
Consolidated EBITDA for the Test Period then last ended, with such Pro Forma
Leverage Ratio to be determined on a PRO FORMA basis as if such Permitted
Acquisition (and any other Permitted Acquisition) that occurred during such Test
Period (and the incurrence, assumption and/or repayment of any Indebtedness in
connection with any such Permitted Acquisition), as the case may be, had
occurred on the first day of such Test Period (and such Indebtedness, if any,
had remained outstanding (or had not been outstanding, as the case may be)
throughout such Test Period) it being understood that in calculating the Pro
Forma Leverage Ratio in connection with each and every Permitted Acquisition,
Consolidated EBITDA shall include the results of operations of the Person or
assets acquired pursuant to each such Permitted Acquisition on a PRO FORMA basis
as if such acquisition had occurred on the first day of the respective Test
Period. On the date of any Permitted Acquisition pursuant to which the Pro
Forma Leverage Ratio is to be calculated and on each date of calculation of Pro
Forma Leverage Ratio, the Company shall deliver to the LANDLORD a certificate of
the Company's chief financial officer setting forth in reasonable detail the PRO
FORMA calculations required to establish the Pro Forma Leverage Ratio (with such
PRO FORMA calculations to be made on a basis reasonably satisfactory to the
LANDLORD and to assume that the interest expense attributable to any
Indebtedness (whether existing or being incurred) bearing a floating interest
rate shall be computed as if the rate in effect on the date of such Permitted
Acquisition (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months) had been the applicable rate for the
entire period).
"Quarterly Payment Date" shall mean the last Business Day of each
fiscal quarter (including the fourth fiscal quarter) of the Company.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Registration Statement" shall mean the Company's Registration
Statement on Form S-1 as filed on September 12, 1996 with the SEC.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
E-22
<PAGE>
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PGBC by regulation.
"Required Banks" shall mean collectively (and not individually)
Non-Defaulting Banks the sum of whose Revolving Loan Commitments (or, if after
the Total Revolving Loan Commitment has been terminated, outstanding Revolving
Loans and Percentages of outstanding Swingline Loans and Letter of Credit
Outstandings) constitute greater than 50% of the Total Revolving Loan Commitment
less the aggregate Revolving Loan Commitments of Defaulting Banks (or, if after
the Total Revolving Loan Commitment has been terminated, the total outstanding
Revolving Loans of Non-Defaulting Banks and the aggregate Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Revolving Loan" shall have the meaning provided in Section 1.01(a) OF
THE AGREEMENT.
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I TO THE AGREEMENT directly
below the column entitled "Revolving Loan Commitment," as the same may be
reduced from time to time pursuant to Section 3.02, Section 3.03, Section 9 OF
THE AGREEMENT and/or the definition of "Total Revolving Loan Commitment."
"Revolving Note" shall have the meaning provided in Section 1.05(a) OF
THE AGREEMENT.
"Rollover Amount" shall have the meaning provided in Section 8.08(b)
OF THE AGREEMENT.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Secured Creditors" shall have the meaning provided in the Security
Documents (AS DEFINED IN THE AGREEMENT).
E-23
<PAGE>
"Security Agreement" shall have the meaning provided in Section
5.11(b) OF THE AGREEMENT and shall include any additional security agreement
executed by the Company or any of its Subsidiaries pursuant to Section 7.11 OF
THE AGREEMENT.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement and each Mortgage.
"Services Agreement" shall mean the services agreement between Alpine
and the Company, dated the Initial Borrowing Date, in the form approved by the
Agent.
"S&P" shall mean Standard & Poors' Ratings Service.
"Special Dividend Period" shall mean each four consecutive fiscal
quarters of the Company commencing with the fiscal quarter beginning July 28,
1996 and each four fiscal periods thereafter commencing on the date immediately
following the last day of the immediately preceding Special Dividend Period.
"Start Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a corporation) in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Superior Preferred Stock" shall MEAN 20,000 SHARES OF THE 6%
CUMULATIVE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, OF SUPERIOR HAVING AN
AGGREGATE LIQUIDATION PREFERENCE OF $20,000,000 (but shall include any Company
preferred stock issued in exchange therefor pursuant to clause (vi)(y) of
Section 8.06 OF THIS EXHIBIT E).
"Survey" means a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state, province or country where such Mortgaged Real
Property is located, (ii) dated (or redated) not earlier than six months prior
to the date of delivery thereof unless there shall have occurred within the six
months prior to such date of delivery any exterior construction on the site of
such Mortgaged Real Property, in which event such survey shall be dated (or
E-24
<PAGE>
redated) after the completion of such construction or if such construction shall
not have been completed as of such date of delivery, not earlier than 20 days
prior to such date of delivery, (iii) certified by the surveyor (in a manner
reasonably acceptable to the Collateral Agent) to the Collateral Agent and the
Title Company and (iv) complying in all respects with the minimum detail
requirements of the American Land Title Association as such requirements are in
effect on the date of preparation of such survey.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(b) OF
THE AGREEMENT.
"Swingline Note" shall have the meaning provided in Section 1.05(a) OF
THE AGREEMENT.
"Taking" has the meaning assigned to such term in each Mortgage.
"Target Amount" shall mean $120,000,000 except that if the gross
proceeds of the Initial Public Offering, less underwriting discounts, not to
exceed 7.00% and up to $700,000 of expenses, (the "Net Proceeds") is less than
$88,580,000, then the Target Amount shall be increased by an amount equal to the
difference between the Net Proceeds and $88,580,000, but in no event shall the
Target Amount be less than $130,580,000.
"Test Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Test Period" shall mean four consecutive fiscal quarters of the
Company (taken as one accounting period) ended, in the case of any determination
of Interest Reduction Discount, on the applicable Test Date and, in all other
cases, ended on the date indicated in the applicable Section hereof.
"Title Company" shall mean First American Title Insurance Company or
such other title insurance or abstract company as shall be designated by the
LANDLORD.
"Total Consideration Amount" shall mean (with respect to any Permitted
Acquisition, or series of related Permitted Acquisitions) $30,000,000, PROVIDED
that if at least 90% of the total consideration with respect thereto (as
determined in accordance with Section 8.02(l)) OF THIS EXHIBIT E is paid in
shares of Company Common Stock, such amount shall be $75,000,000.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks it being understood that the Total
Revolving Loan Commitment as of the Initial Borrowing Date shall be
$175,000,000, PROVIDED that if the Initial Public Offering occurs on or before
that date, the Total Revolving Loan Commitment
E-25
<PAGE>
shall be reduced to $150,000,000 with such reduction to reduce the Revolving
Loan Commitments of each Bank proportionately in proportion to their respective
Revolving Loan Commitments.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) Total Revolving
Outstandings at such time.
"Transaction" shall have the meaning set forth in the Recitals to the
Agreement.
"Type" shall mean any type of Revolving Loan determined with respect
to the interest option applicable thereto, i.e., a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a) OF
THIS AGREEMENT.
"Unutilized Revolving Loan Commitment" with respect to any Bank at any
time shall mean such Bank's Revolving Loan Commitment at such time less the sum
of (i) the aggregate then outstanding principal amount of all Revolving Loans
made by such Bank, (ii) such Bank's Percentage of the then Letter of Credit
Outstandings and (iii) in the case of BTCo, the aggregate then outstanding
principal amount of all Swingline Loans.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such
E-26
<PAGE>
Person and (ii) any partnership, association, joint venture or other entity in
which such Person and/or one or more Wholly-Owned Subsidiaries of such Person
has a 100% equity interest at such time.
"Written" (whether lower or upper case) or "in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, or telegraph or cable.
E-27
<PAGE>
SECTION 8. NEGATIVE COVENANTS. The Company hereby covenants and
agrees that UNLESS THE LANDLORD CONSENTS THERETO IN WRITING:
8.01 CHANGES IN BUSINESS. The Company and its Subsidiaries will not
engage in any business other than the businesses in which the Company and its
Subsidiaries are engaged in as of the Effective Date and activities incidental
thereto, and similar or related businesses.
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The
Company will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory in the ordinary course of business, including sales
of inventory on consignment in the ordinary course of business), or enter into
any partnerships, joint ventures or sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of any Person,
except that the following shall be permitted:
(a) the Company and its Subsidiaries may, as lessee or lessor, enter
into operating leases in the ordinary course of business with respect to
real or personal property;
(b) Capital Expenditures by the Company and its Subsidiaries to the
extent not in violation of Section 8.08;
(c) the advances, investments and loans permitted pursuant to Section
8.05 OF THIS EXHIBIT E;
(d) the Company and its Subsidiaries may sell other assets other than
Mortgaged Real Property; provided that the aggregate sale proceeds from all
assets subject to such sales pursuant to this clause (d) shall not exceed
$5,000,000 in any consecutive twelve month period of the Company (exclusive
of sale proceeds in respect of obsolete, outmoded or worn-out machinery,
equipment, furniture or fixtures) and each such asset sale subject to this
clause (d) is for at least 85% cash and at fair market value (as determined
in good faith by the Company);
(e) the Company and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivable arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(f) without limitation to clause (d), the Company and its
Subsidiaries may sell or exchange specific items of machinery or equipment,
so long as the proceeds of each such sale or exchange is used (or
contractually committed to be used) to acquire (and
E-28
<PAGE>
results within 180 days of such sale or exchange in the acquisition of)
replacement items of machinery or equipment which are the functional
equivalent of the item of equipment so sold or exchanged;
(g) the Company and its Subsidiaries may, in the ordinary course of
business, license, as licensor or licensee, patents, trademarks, copyrights
and know-how to third Persons and to one another, so long as any such
license by the Company or its Subsidiaries in its capacity as licensor is
permitted to be assigned pursuant to the Security Agreement (to the extent
that a security interest in such patents, trademarks, copyrights and
know-how is granted thereunder) and does not otherwise prohibit the
granting of a Lien by the Company or any of its Subsidiaries pursuant to
the Security Agreement in the intellectual property covered by such
license;
(h) the assets of any Foreign Subsidiary of the Company may be
transferred to the Company or any of its Subsidiaries, and any Foreign
Subsidiary of the Company may be merged with and into, or be dissolved or
liquidated into, the Company or any of its Subsidiaries so long as the
Company or such Subsidiary is the surviving corporation of any such merger,
dissolution or liquidation;
(i) any Domestic Subsidiary of the Company may transfer assets to the
Company or to any other Domestic Subsidiary of the Company, so long as (i)
if the transferee is a Subsidiary, such Subsidiary is a Guarantor and (ii)
the security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets so
transferred shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer);
(j) any Domestic Subsidiary of the Company may merge with and into,
or be dissolved or liquidated into, the Company so long as (i) the Company
is the surviving corporation of any such merger, dissolution or liquidation
and (ii) the security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Security Documents in the
assets of such Domestic Subsidiary shall remain in full force and effect
and perfected (to at least the same extent as in effect immediately prior
to such merger, dissolution or liquidation);
(k) any Domestic Subsidiary of the Company may merge with and into,
or be dissolved or liquidated into, any Domestic Subsidiary of the Company
so long as (i) such Domestic Subsidiary is a Guarantor and is the surviving
corporation of any such merger, dissolution or liquidation and (ii) the
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents in the assets of such
Domestic Subsidiary shall remain in full force and effect and perfected (to
at least the same extent as in effect immediately prior to such merger,
dissolution or liquidation);
E-29
<PAGE>
(l) so long as no Default or Event of Default then exists or would
result therefrom (including giving pro forma effect to such acquisition and
any additional Indebtedness resulting therefrom or incurred or assumed in
connection therewith as if such acquisition had occurred and such
Indebtedness had been incurred as of the first day of the most recently
completed Test Period (including any other Permitted Acquisition that
occurred, and related Indebtedness that was incurred, during such Test
Period)), the Company and its Wholly-Owned Subsidiaries may acquire assets
or the capital stock of any Person (any such acquisition permitted by this
clause (l), a "Permitted Acquisition"); PROVIDED that (i) such Person (or
the assets so acquired) was, immediately prior to such acquisition, engaged
(or used) primarily in the business permitted pursuant to Section 8.01,
(ii) if such acquisition is structured as a stock or other equity
acquisition, then either (A) the Person so acquired becomes a Wholly-Owned
Subsidiary of the Company and a Guarantor or (B) such Person is merged with
and into the Company or a Wholly-Owned Subsidiary of the Company that is a
Guarantor (with the Company or such Wholly-Owned Subsidiary being the
surviving corporation of such merger), and in any case, all of the
provisions of Section 8.14 have been complied with in respect of such
Person, (iii) any Liens or Indebtedness assumed or issued in connection
with such acquisition is otherwise permitted under Section 8.03 or 8.04 OF
THIS EXHIBIT E, as the case may be, and (iv) after giving effect thereto,
the Unutilized Revolving Loan Commitment would be at least $15,000,000;
PROVIDED, FURTHER, that any such Permitted Acquisition (or series of
related Permitted Acquisitions) involving total consideration (including,
without limitation, any earn- out, non-compete or deferred compensation
arrangements and the value of any Company securities, but not including any
Indebtedness assumed that complies with Section 8.04(h)) OF THIS EXHIBIT E
by the Company and its Wholly-Owned Subsidiaries in excess of the Total
Consideration Amount shall not be consummated without the prior written
consent of the Required Banks; and PROVIDED, FURTHER, that the Company
shall have delivered to the LANDLORD a certificate of the Chief Financial
Officer of the Company showing compliance (in reasonable detail as to pro
forma calculations) with all of the provisions of this paragraph (l);
(m) leases or subleases granted by the Company or any of its
Subsidiaries to third Persons not interfering in any material respect with
the business of the Company or any of its Subsidiaries, including any
arm's-length lease by the Company or any Subsidiary of the Company of up to
50,000 square feet of its Wallingford, Connecticut facility;
(n) the Company and its Subsidiaries may, in the ordinary course of
business, sell, transfer or otherwise dispose of patents, trademarks,
copyrights and know-how which, in the reasonable judgment of the Company or
such Subsidiary, are determined to be uneconomical, negligible or obsolete
in the conduct of business; and
(o) "inactive" or "shell" Subsidiaries may be dissolved or otherwise
liquidated.
E-30
<PAGE>
To the extent the LANDLORD waiveS the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
in each case shall be sold or otherwise disposed of free and clear of the Liens
created by the Security Documents and the LANDLORD shall take such actions as
are appropriate in connection therewith.
8.03 LIENS. The Company will not, and will not permit any Guarantor
to, create, incur, assume or suffer to exist any Lien upon or with respect to
any item constituting Collateral except for the Lien of the Security Documents
relating thereto, the Prior Liens applicable thereto and other Liens expressly
permitted by such Security Documents. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any property or assets of the Company or such Subsidiary
which does not constitute Collateral, whether now owned or hereafter acquired,
or sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets or assign any
right to receive income, or file or permit the filing of any financing statement
under the UCC or any other similar notice of Lien under any similar recording or
notice statute, except the following (collectively referred to as "Permitted
Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges of
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Company or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business or in connection with any Capital Expenditure permitted by the
terms of this Agreement and which have not arisen to secure Indebtedness
for borrowed money, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, and other similar Liens arising in the ordinary
course of business, and which either (x) do not in the aggregate materially
detract from the value of such property or assets or materially impair the
use thereof in the operation of the business of the Company or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex IX TO THE
AGREEMENT, and extensions, renewals or related refinancings thereof
pursuant to Section 8.04(b) OF THIS EXHIBIT E, provided that such
extensions, renewals or related refinancings thereof pursuant to Section
8.04(b) (x) OF THIS EXHIBIT E do not increase the obligations so secured
and (y) apply to additional assets not subject to the lien being extended
or renewed;
E-31
<PAGE>
(d) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09 OF
THE AGREEMENT;
(e) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and (y) to
secure the performance of leases of Real Property, to the extent incurred
or made in the ordinary course of business consistent with past practices;
(f) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Company or any
of its Subsidiaries;
(g) easements, zoning restrictions, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries;
(h) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(i) any interest or title of a licensor, lessor or sublessor under
any license or lease permitted by this Agreement;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(d) OF THIS EXHIBIT E;
(k) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Initial Borrowing Date; provided
that (i) any such Liens attach only to the assets so purchased, (ii) the
Indebtedness secured by any such Lien (including refinancings thereof) does
not exceed 100% of the lesser of the fair market value or the purchase
price of the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 8.04(d) OF THIS EXHIBIT E;
(l) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Company in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition; PROVIDED that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 8.04(h) OF THIS EXHIBIT E, and
(ii) such Liens are not incurred in connection with, or in
E-32
<PAGE>
contemplation or anticipation of, such Permitted Acquisition and do not
attach to any other asset of the Company or any of its Subsidiaries; and
(m) additional Liens (on assets other than the Collateral) incurred
by the Company and its Subsidiaries so long as the aggregate value of the
property subject to such Liens, and the Indebtedness and other obligations
secured thereby, do not exceed $1,000,000.
8.04 INDEBTEDNESS. The Company will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Annex VII TO THE AGREEMENT, including any extensions,
refinancings, replacements or restructurings thereof, provided that the
then outstanding principal amount thereof is not increased;
(c) Indebtedness under Interest Rate Protection Agreement, and Other
Hedging Agreements permitted by Section 8.05(d) OF THIS EXHIBIT E;
(d) Capitalized Lease Obligations and Indebtedness of the Company and
its Subsidiaries incurred pursuant to purchase money Liens permitted under
Section 8.03(k) OF THIS EXHIBIT; provided that all such Capitalized Lease
Obligations are permitted under Section 8.08 OF THIS EXHIBIT E, and (ii)
the sum of (x) the aggregate Capitalized Lease Obligations outstanding at
any time plus (y) the aggregate principal amount of such purchase money
Indebtedness outstanding at such time shall not exceed $12,000,000
(including Capital Lease Obligations referred to on Exhibit VII);
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g) OF THIS EXHIBIT E;
(f) Indebtedness of Foreign Subsidiaries to the Company or any of its
Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.05(k) OF THIS EXHIBIT E;
(g) Indebtedness consisting of guaranties (x) by the Company of
Indebtedness, leases and other contractual obligations permitted to be
incurred by Subsidiaries of the Company that are Guarantors and (y) by
Foreign Subsidiaries of the Company of Indebtedness, leases and other
contractual obligations permitted to be incurred by the Company and its
Subsidiaries;
E-33
<PAGE>
(h) Indebtedness of a Subsidiary acquired as a result of a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness); provided that (i) such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, (ii) at the time of such
Permitted Acquisition such Indebtedness does not exceed 25% of the total
then fair market value of the assets of the Subsidiary so acquired, or of
the asset so acquired, as the case may be, (iii) so long as, before and
after giving effect to such Permitted Acquisition, no Default or Event of
Default shall have occurred or would result therefrom and (iv) such
Indebtedness is not recourse to any assets of the Company or its
Subsidiaries other than the Subsidiary and assets so acquired; and
(i) additional Indebtedness of the Company and its Subsidiaries not
otherwise permitted hereunder not exceeding $5,000,000 in aggregate
principal amount at any time outstanding.
8.05 ADVANCES, INVESTMENTS AND LOANS. The Company will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash Equivalents
(collectively, "Investments"), except:
(a) the Company and its Subsidiaries may invest in cash and Cash
Equivalents, and, in the case of Foreign Subsidiaries, Foreign Cash
Equivalents;
(b) the Company and its Subsidiaries may acquire and hold receivables
owing to it, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms
(including the dating of receivables) of the Company or such Subsidiary;
(c) the Company and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
(d) (w) Interest Rate Protection Agreements entered into to protect
the Company against fluctuations in interest rates in respect of the
Obligations, (x) Other Hedging Agreements with respect to Canadian Dollars
to protect against fluctuations in the value of the Canadian dollar against
the U.S. dollar, but only with respect to the loans contemplated by clause
(k) of this Section 8.05, (y) Other Hedging Agreements with respect to
copper and other raw materials to be used in the business of the Company
and its Subsidiaries, provided that such purchases are entered into in the
ordinary course of business and consistent with past practices and for bona
fide
E-34
<PAGE>
business (and not speculative) purposes and (z) Other Hedging Agreements
with respect to foreign sales by the Company and its Subsidiaries, provided
that such agreement to protect against fluctuations in currency values are
entered into the ordinary course of business and for bona fide business
(and not speculative) purposes;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Annex V TO THE AGREEMENT shall be permitted,
without giving effect to any additions thereto or replacements thereof
(except those additions or replacements which are existing obligations as
of the Initial Borrowing Date but only to the extent such further
obligations are described on such Annex V);
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases or other contractual
arrangements shall be permitted;
(g) the Company may make intercompany loans and advances to any of
its Subsidiaries that are Guarantors and any Subsidiary of the Company may
make intercompany loans and advances to the Company or any other Subsidiary
of the Company that is a Guarantor (collectively, "Intercompany Loans");
PROVIDED that (x) each Intercompany Loan shall contain subordination
provisions satisfactory to the LANDLORD, (y) each Intercompany Loan shall
be evidenced by an Intercompany Note and (z) each such Intercompany Note
shall be pledged to the Collateral Agent pursuant to the Pledge Agreement;
(h) loans and advances by the Company and its Subsidiaries to
employees of the Company and its Subsidiaries for moving and travel
expenses and other similar expenses or in connection with stock purchases
in each case incurred in the ordinary course of business and consistent
with past practices shall be permitted in an aggregate principal amount not
to exceed $2,500,000 at any one time outstanding;
(i) Permitted Acquisitions shall be permitted;
(j) the Company and its Subsidiaries may acquire and hold promissory
notes and/or equity securities issued by the purchaser or purchasers in
connection with the sale of assets to the extent permitted under Section
8.02(d) OF THIS EXHIBIT E;
(k) the Company may lend, on a senior basis, funds to the Canadian
Subsidiary, provided that (x) the aggregate amount of such loans may not,
at any time, exceed $6,000,000, (y) such loans shall (i) be made pursuant
to a note, in form and substance, satisfactory to the LANDLORD, (ii) bear
interest at a rate equal to that determined in accordance with Section
1.08(a) OF THE AGREEMENT, (iii) be prepayable at any time upon demand by
the Company and (iv) be secured (at all times commencing no later than 90
days after the Initial Borrowing Date) by the assets of the Canadian
Subsidiary and its Subsidiaries, on terms and conditions satisfactory to
E-35
<PAGE>
the LANDLORD and (z) such loans and notes shall constitute Collateral and
be pledged to the Collateral Agent on behalf of the Secured Creditors;
(l) the Company may contribute cash to one or more of its
Subsidiaries that are or become Guarantors formed after the Initial
Borrowing Date in accordance with Section 8.14 OF THIS EXHIBIT E (including
in connection with a Permitted Acquisition) so long as such Subsidiary
remains a Guarantor;
(m) the Company may purchase shares of the Company common stock to
the extent permitted by Sections 8.06(ii) OF THIS EXHIBIT E;
(n) the Company and its Subsidiaries may make cash Investments in or
to Persons that are not Affiliates (other than joint ventures in which an
Affiliate of the Company has an ownership interest other than through the
Company or a Subsidiary of the Company) in an amount not to exceed
$25,000,000 outstanding at any one time (giving effect to any repayments in
cash, but without giving effect to any distributions or profits thereon,
write-downs or non-cash payments) PROVIDED, before and after giving effect
to each such Investment, (x) no Default or Event of Default shall have
occurred or result therefrom and (y) the Unutilized Revolving Loan
Commitment would be at least $15,000,000; and
(o) The Company and its Subsidiaries may make cash Investments in or
to Persons that are not Affiliates of the Company in an amount not to
exceed $5,000,000 outstanding at any one time, giving effect to any
repayments in cash, but without giving effect to any distributions thereon,
write-downs or non-cash payments (provided, that before and after giving
effect to each such Investment, no Default or Event of Default shall have
occurred or result therefrom).
8.06 DIVIDENDS, ETC. The Company will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock of the Company or any such Subsidiary, as the
case may be) or return any capital to, its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its stockholders
as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for any consideration, any shares of any class of its capital stock,
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights (other than such rights as are granted only to employees as
compensation for their employment) in respect of any of such shares), or set
aside any funds for any of the foregoing purposes, and the Company will not
permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock of the Company or any
Subsidiary of the Company now or hereafter outstanding (or any options or
warrants or such stock appreciation rights issued by such Person with respect to
its capital stock) (all of the foregoing "Dividends", it being understood that
the payments made in accordance with the clauses contained in the proviso of
Section 8.07 OF THIS EXHIBIT E shall not be deemed to be Dividends), except
that:
E-36
<PAGE>
(i) any Subsidiary of the Company may pay Dividends to the Company or
any Wholly-Owned Subsidiary of the Company;
(ii) prior to consummation of an initial public offering (including
the Initial Public Offering), the Company may redeem or purchase shares of
the Company Common Stock or options to purchase the Company Common Stock,
as the case may be, held by former employees (or their heirs) of the
Company or any of its Subsidiaries following the termination of their
employment; provided that (x) the only consideration paid by the Company in
respect of such redemptions and/or purchases shall be cash and/or
subordinated notes of the Company in form and substance satisfactory to the
LANDLORD and (y) the sum of (I) the aggregate amount paid by the Company in
cash in respect of all such redemptions and/or purchases plus (II) the
aggregate amount of all principal and interest payments made on such
subordinated notes shall not exceed $1,000,000 in any consecutive twelve
months of the Company;
(iii) as long as no Default or Event of Default shall then exist or
result therefrom, regular quarterly cash dividends on the Superior
Preferred Stock may be paid in an aggregate amount per fiscal quarter of
the Company not to exceed $300,000, PROVIDED that such dividend is not
declared earlier than ten days after the delivery to the LANDLORD of the
required financial statements and related Officer's Certificate for such
period contemplated by Section 7.01 OF THE AGREEMENT;
(iv) as long as no Default or Event of Default shall then exist or
result therefrom, with respect to each Special Dividend Period, the Company
may declare and pay a dividend on the Company's Common Stock in an amount
not to exceed $5,000,000; PROVIDED that the ratio of Consolidated EBITDA of
the Company to Consolidated Fixed Charges of the Company for such Special
Dividend Period (determined on a PRO FORMA basis after giving effect to
such dividend) exceeds 1.0 to 1.0, except that with respect to the second
Special Dividend Period and each Special Dividend Period thereafter, the
amount of such dividend may exceed $5,000,000 (but may not exceed
$7,500,000) but only if such ratio for such Special Dividend Period exceeds
1.10 to 1, it being understood that for each such Special Dividend Period
any dividend under this Section 8.06(iv) may not be declared earlier than
ten days after the delivery to the LANDLORD of the financial statements and
related Officer's Certificate for the last fiscal period of such Special
Dividend Period required by Section 7.01 OF THE AGREEMENT and an Officer's
Certificate showing, in reasonable detail, compliance with the applicable
ratio set forth in this Section 8.06;
(v) so long as no Default or Event of Default shall then exist or
result therefrom, the Company may declare and pay a Dividend from, and in
an amount not to exceed, the net cash proceeds of the Initial Public
Offering but only after giving effect to all repayments and commitment
reductions resulting from the Initial Public Offering as contemplated by
THE Agreement, including without limitation, Section 3 OF THE AGREEMENT;
PROVIDED that such dividend may not exceed the sum of (x) $53,300,000 and
(y) the net cash proceeds (net of all underwriting discounts, fees and
E-37
<PAGE>
commissions and other costs and expenses associated therewith) from the
sale of Company Common Stock in the Initial Public Offering upon exercise
of the underwriters' over-allotment option; and
(vi) shares of the Superior Preferred Stock may be repurchased,
PROVIDED that the only consideration to be paid in connection therewith
shall be shares of (x) Company Common Stock and/or (y) Company preferred
stock having terms identical, in all material respects, to the Superior
Preferred Stock (including as to dividend rate and liquidation preferences)
except that the issuer thereof shall be the Company.
8.07 TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to the Company or such
Subsidiary as would be reasonably expected to be obtainable by the Company or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate; PROVIDED that the following shall in any event
be permitted: (i) the Transaction; (ii) the performance of the Services
Agreement PROVIDED that (x) such payments may not exceed $2,000,000 in any four
fiscal quarter period and (y) the portion of such payment for services described
in Section 3(b) thereof shall be subject to the "arm's-length" standard
described in this Section 8.07; (iii) the Company and its Domestic Subsidiaries
may enter into the Company Tax Allocation Agreement and may make payments
thereunder and the Alpine Tax Allocation Agreement; (iv) transactions between or
among the Company and its Subsidiaries to the extent that such transactions are
otherwise specifically permitted under this Agreement and (v) the employment
agreement with Steven S. Elbaum in terms and not more adverse to the Company
that those described in the Registration Statement.
8.08 CAPITAL EXPENDITURES. (a) The Company will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(x) during the period (taken as one accounting period) commencing on the Initial
Borrowing Date and ending on April 27, 1997, the Company and its Subsidiaries
may make Capital Expenditures so long as the aggregate amount does not exceed
$7,100,000 during such period and (y) during any fiscal year thereafter, the
Company and its Subsidiaries may make Capital Expenditures so long as the
aggregate amount of such Capital Expenditures does not exceed $11,000,000.
(b) In the event that the amount of Capital Expenditures permitted to
be made by the Company and its Subsidiaries pursuant to clause (a) above in any
fiscal year (before giving effect to any increase in such permitted expenditure
amount pursuant to this clause (b)) is greater than the amount of such Capital
Expenditures actually made by the Company and its Subsidiaries during such
fiscal year, such excess (the "Rollover Amount") may be carried forward and
utilized to make Capital Expenditures in succeeding fiscal years; PROVIDED that
in no event shall the aggregate amount of Capital Expenditures made by the
Company and its Subsidiaries during any fiscal year pursuant to Section 8.08(a)
OF THIS EXHIBIT E exceed 125% of the direct amount set forth for such fiscal
year in such Section 8.08(a).
E-38
<PAGE>
(c) Notwithstanding the proviso in Section 8.08(b) OF THIS EXHIBIT E,
the Company and its Subsidiaries may make additional Capital Expenditures with
the Net Cash Proceeds of Asset Sales to the extent such proceeds are not
required to be applied to reduce the Total Revolving Loan Commitment pursuant to
Section 3.03(c) OF THE AGREEMENT and such proceeds are reinvested as required by
Section 3.03(c) OF THE AGREEMENT.
(d) The Company and its Subsidiaries may make additional Capital
Expenditures with the insurance proceeds received by the Company or any of its
Subsidiaries from any Taking or Destruction so long as such Capital Expenditures
are to replace or restore any properties or assets in respect of which such
proceeds were paid within one year following the date of the receipt of such
insurance proceeds to the extent such insurance proceeds are not required to be
applied to reduce the Total Revolving Loan Commitment pursuant to Section
3.03(f) OF THE AGREEMENT.
(e) The Company and its Wholly-Owned Subsidiaries may make Permitted
Acquisitions.
8.09 MINIMUM CONSOLIDATED EBITDA. The Company will not permit
Consolidated EBITDA during any Test Period set forth below to be less than the
amount set forth below with respect to such Test Period:
($ in millions)
Test Period Ending: Amount:
------------------ -----
10/31/96 $46.3
01/31/97 46.5
04/30/97 46.7
07/28/97 45.3
10/31/97 46.4
01/31/98 47.4
04/30/98 48.0
07/28/98 48.3
10/31/98 48.5
01/31/99 48.8
04/30/99 49.0
and the last day
of each Fiscal Quarter
thereafter
8.10 INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio for any Test Period set forth below to be equal to or
less than the ratio set forth below with respect to such Test Period:
Test Period Ending: Ratio:
------------------ ------
E-39
<PAGE>
10/31/96 3.1x
01/31/97 3.1x
04/30/97 3.2x
07/28/97 3.2x
10/31/97 3.3x
01/31/98 3.5x
04/30/98 3.7x
07/28/98 3.8x
10/31/98 3.9x
01/31/99 3.9x
04/30/99 4.0x
and the last day
of each Fiscal Quarter
thereafter
8.11 LEVERAGE RATIO. The Company will not permit the Pro Forma
Leverage Ratio at any time during the Test Period set forth below to be equal to
or more than the ratio set forth below with respect to such Test Period:
Test Period Ending: Ratio:
------------------ ------
10/31/96 4.167x
01/31/97 4.083x
04/30/97 4.000x
07/28/97 3.875x
10/31/97 3.750x
01/31/98 3.625x
04/30/98 3.500x
07/28/98 3.375x
10/31/98 3.250x
01/31/99 3.150x
04/30/99 3.100x
and the last day
of each Fiscal Quarter
thereafter
8.12 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN
OTHER AGREEMENTS; ISSUANCES OF CAPITAL STOCK; ETC. The Company will not, and
will not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) any Superior Preferred Stock (except
E-40
<PAGE>
as permitted by clause (vi) of Section 8.06 OF THIS EXHIBIT E) or any
Existing Indebtedness.
(ii) amend or modify in any material respect or in any manner adverse
to the Company or the Banks, or permit such an amendment or modification
of, any provision of the Superior Preferred Stock or Existing Indebtedness;
(iii) amend, modify or change in any way adverse to the interests of
the Banks, any Tax Allocation Agreement, its Certificate of Incorporation
(including, without limitation, by the filing or modification of any
certificate of designation) or By-Laws; and
(iv) issue any class of capital stock other than common stock.
8.13 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. The Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any Subsidiary
of the Company, or pay any Indebtedness owed to the Company or a Subsidiary of
the Company, (b) make loans or advances to the Company or any of the Company's
Subsidiaries or (c) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) the Credit Documents, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Company or a Subsidiary of the Company, (iv)
customary provisions restricting assignment of any licensing agreement entered
into by the Company or a Subsidiary of the Company in the ordinary course of
business, (vi) in the case of DNE and its Subsidiaries, the Existing
Indebtedness Agreements as modified by the consent contemplated under Section
5.19 OF THE AGREEMENT, and in the case of Superior and the Company, the
Brownwood, Texas lease (but only with respect to the property and assets subject
to such lease), (vii) customary provisions restricting the transfer of or by
those assets pursuant to, and subject to other Liens permitted under Section
8.03(h), (i), (j), (k) or (l) and (viii) OF THIS EXHIBIT E restrictions or
encumbrances pursuant to Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed at the time of a Permitted
Acquisition) or an asset securing such Indebtedness, PROVIDED that such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, PROVIDED, FURTHER, such
restrictions or encumbrances apply solely to such Subsidiary or asset so
acquired.
8.14 LIMITATION ON THE CREATION OF SUBSIDIARIES. Notwithstanding
anything to the contrary contained in this Agreement, the Company will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Initial Borrowing Date any Subsidiary; PROVIDED that the Company and its
Wholly-Owned Subsidiaries shall be permitted to establish or create Subsidiaries
as a result of investments made pursuant to Section 8.05(l) or Section 8.05(n)
OF THIS EXHIBIT E so long as, in each case, (i) at least 15 days' prior written
E-41
<PAGE>
notice thereof is given to the LANDLORD (or such shorter period of time as is
acceptable to the LANDLORD), (ii) unless otherwise consented to by the LANDLORD
because such Subsidiary is a Foreign Subsidiary, the capital stock of such new
Subsidiary is promptly pledged pursuant to, and to the extent required by, this
Agreement and the Pledge Agreement and the certificates, if any, representing
such stock, together with stock powers duly executed in blank, are delivered to
the Collateral Agent, (iii) unless otherwise consented to by the LANDLORD
because such Subsidiary is a Foreign Subsidiary, such new Subsidiary promptly
executes a counterpart of the Guaranty, the Pledge Agreement and the Security
Agreement, and (iv) to the extent requested by the LANDLORD, takes all actions
required pursuant to Section 7.11 OF THE AGREEMENT, PROVIDED that no such action
will be required by any new Subsidiary (that is not a Wholly-Owned Subsidiary)
to the extent such new Subsidiary is a party to a preexisting agreement which
prohibits such new Subsidiary from executing a Guaranty; PROVIDED, FURTHER, such
preexisting agreement was not entered into for the purpose of avoiding the
requirements of Section 8.14 OF THIS EXHIBIT E and the restrictions contained
therein are no more adverse to the Company and its Subsidiaries than to the
other equity owners in such new Subsidiary. In addition, each new Subsidiary
that is required to execute any Credit Document shall execute and deliver, or
cause to be executed and delivered, all other relevant documentation of the type
described in Section 5 OF THE AGREEMENT as such new Subsidiary would have had to
deliver if such new Subsidiary were a Credit Party on the Initial Borrowing
Date.
E-42
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
amendment no. 2 to a registration statement on Form S-1 of (1) our report
dated September 11, 1996 (except for the matter discussed in Note 16, as to
which the date is October 2, 1996) for Superior Telecommunications Inc. and
subsidiary and DNE Systems, Inc. and subsidiaries (to be reorganized as
Superior TeleCom Inc.), (2) our report dated October 2, 1996 for Superior
TeleCom Inc. and (3) our report dated February 24, 1995 (except for the
matter discussed in Note 14, as to which the date is May 11, 1995) for
Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire and Cable, Inc. and to
all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 7, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERIOR
TELECOM INC BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> JUL-17-1996
<PERIOD-END> SEP-11-1996
<CASH> 60,240
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,240
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,240
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 60,240
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60,240
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
CONSENT
The undersigned hereby consents, in accordance with Rule 438 under the
Securities Act of 1933, to (a) being named in the registration statement (as
amended, the "Registration Statement") filed by Superior TeleCom Inc. (the
"Company") as a person who will become a director of the Company as described
in the Registration Statement and (b) the filing of this Consent as an
exhibit to the Registration Statement.
Dated: October 7, 1996
/s/ Eugene P. Connell
---------------------
Eugene P. Connell
<PAGE>
EXHIBIT 99.2
CONSENT
The undersigned hereby consents, in accordance with Rule 438 under the
Securities Act of 1933, to (a) being named in the registration statement (as
amended, the "Registration Statement") filed by Superior TeleCom Inc. (the
"Company") as a person who will become a director of the Company as described
in the Registration Statement and (b) the filing of this Consent as an
exhibit to the Registration Statement.
Dated: October 7, 1996
/s/ Robert J. Levenson
----------------------
Robert J. Levenson
<PAGE>
EXHIBIT 99.3
CONSENT
The undersigned hereby consents, in accordance with Rule 438 under the
Securities Act of 1933, to (a) being named in the registration statement (as
amended, the "Registration Statement") filed by Superior Telecom Inc. (the
"Company") as a person who will become a director of the Company as described
in the Registration Statement (b) the filing of this Consent as an exhibit to
the Registration Statement.
Dated: October 7, 1996
/s/ Charles Y.C. Tse
--------------------
Charles Y.C. Tse
