<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST , 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
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 New York, New York 10004
(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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share............................ 6,900,000 shares $16.00 $110,400,000 $38,069
</TABLE>
(1) Includes 900,000 shares of Common Stock, which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
--------------------------
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>
SUPERIOR TELECOM INC.
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page of Prospectus and Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Outside Back Cover Page of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page; Description of Capital
Stock
10. Interests of Named Experts and Counsel............... Not Applicable
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; The Company;
Dividend Policy; Capitalization; Pro Forma Condensed
Combined Financial Data; Selected Historical
Combined Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions and Relationships; Principal
Stockholders
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<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 , 1996
PROSPECTUS
6,000,000 SHARES
SUPERIOR TELECOM INC.
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
$14.00 and $16.00 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, together with
certain other funds, to complete the Reorganization (as defined in "Prospectus
Summary -- The Reorganization"). See "Use of Proceeds."
The Company has applied for listing of the Common Stock on the Nasdaq
National Market under the symbol "LOOP."
------------------------
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 7.
---------------------
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 $500,000.
(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 NASDAQ NATIONAL MARKET, 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 ITS 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. 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 three major independent telephone
companies under multi-year supply arrangements.
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 to
six of the seven RBOCs and the three 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 delivery of quality products on a
3
<PAGE>
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 AND MAINTENANCE COSTS. The Company believes that in the
local loop, copper has significantly lower installation and maintenance
costs 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.
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 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; (iv) expand
its
4
<PAGE>
international business through increased export sales and the establishment of
joint ventures or similar arrangements; and (v) expand its data communications
products business by developing commercial versions of its integrated access
devices and marketing them to the telecommunications industry.
THE REORGANIZATION. The Alpine Group, Inc. ("Alpine") currently owns all of
the outstanding capital stock of the Company, Superior and DNE. Prior to the
consummation of this Offering, Alpine will recapitalize Superior, as a result of
which Alpine also will own 20,000 shares of the 6% Cumulative Preferred Stock,
par value $1.00 per share, of Superior ("Superior Preferred Stock"), and Alpine
will cause Superior to declare a dividend on its common stock in an amount equal
to the difference between $200.0 million and the net amount of intercompany debt
then owed by Superior and DNE to Alpine. Alpine then will contribute to the
Company all of the issued and outstanding common stock of Superior and DNE
(together with the foregoing transactions, the "Reorganization"). Concurrently
with the completion of this Offering, Superior will pay to Alpine a total of
$200.0 million, consisting of the repayment of existing intercompany debt owed
to Alpine, which was $113.7 million as of April 28, 1996, and the payment of the
dividend referred to above. See "The Company -- The Reorganization and Related
Transactions" 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, the Company will use
the proceeds therefrom to redeem, at its liquidation value, an amount of
Superior Preferred Stock having an aggregate liquidation value equal to those
net proceeds. In that event, Alpine intends to engage in open-market purchases
of Common Stock to restore its ownership of the outstanding Common Stock to
50.1%. See "Principal Stockholders and "Certain Transactions and Relationships."
THE BANK CREDIT FACILITY. Concurrently with or prior to the completion of
this Offering and the completion of the Reorganization, the Company will enter
into a revolving credit agreement (the "Bank Credit Facility") with one or more
lenders under which the Company may have up to approximately $150.0 million of
indebtedness outstanding at any one time, subject to satisfaction of certain
customary conditions. See "The Company -- The Reorganization and Related
Transactions." The initial borrowings under the Bank Credit Facility are
expected to be approximately $120.0 million, which will be used together with
the net proceeds of this Offering to pay the $200.0 million required to complete
the Reorganization and related transactions. See "Use of Proceeds."
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 from this Offering, together
with initial borrowings under the Bank Credit
Facility, will be used to complete the
Reorganization and related transactions and
for working capital purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol...... LOOP
</TABLE>
- ------------------------
(1) Excludes up to 900,000 shares that may be sold pursuant to the Underwriters'
over-allotment option.
(2) Excludes 1,000,000 shares of Common Stock issuable pursuant to options that
may be granted pursuant to the Company's Employee Stock Incentive Plan and
250,000 shares issuable pursuant to options that may be granted pursuant to
the Non-Employee Directors' Stock Option 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 (to be reorganized as the
Company) which have been audited by Arthur Andersen LLP, as indicated in their
report included elsewhere in this Prospectus and are provided on (i) an
historical basis for fiscal 1994, 1995 and 1996; and (ii) a pro forma basis for
the fiscal year ended April 28, 1996 after giving effect to the following
transactions as if they had occurred as of May 1, 1995: (1) the Alcatel
acquisition, (2) this Offering and (3) the Reorganization and related
transactions. 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>
--------------------------------------------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED
--------------------------------------------
HISTORICAL PRO FORMA
------------------------------- -----------
MAY 1, APRIL 30, APRIL 28, APRIL 28,
1994 1995 1996 1996
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Net sales.................................................. $ 68,510 $ 164,485 $ 410,413 $ 417,934
Cost of goods sold......................................... 56,250 142,114 362,854 369,780
--------- --------- --------- -----------
Gross profit............................................. 12,260 22,371 47,559 48,154
Selling, general and administrative expense................ 8,884 11,632 14,223 16,256
Amortization of goodwill................................... 2,186 1,124 1,556 1,570
--------- --------- --------- -----------
Operating income......................................... 1,190 9,615 31,780 30,328
Interest expense, net...................................... (1,742) (3,700) (17,006) (10,411)
Minority interest (1)...................................... -- -- -- (1,200)
Other income (expense), net................................ (61) 231 55 55
--------- --------- --------- -----------
Income (loss) from continuing operations before income
taxes................................................... (613) 6,146 14,829 18,772
Provision for income taxes................................. (521) (2,240) (6,722) (7,989)
--------- --------- --------- -----------
Income (loss) from continuing operations................. (1,134) 3,906 8,107 10,783
(Loss) from discontinued operations........................ (287) (176) -- --
--------- --------- --------- -----------
Income (loss) before extraordinary item.................. (1,421) 3,730 8,107 10,783
Extraordinary (loss) on early extinguishment of debt (2)... -- -- (2,645) --
--------- --------- --------- -----------
Net income (loss)........................................ $ (1,421) $ 3,730 $ 5,462 $ 10,783
--------- --------- --------- -----------
--------- --------- --------- -----------
Per share of common stock (3):
Income from continuing operations................................................
$ 0.67 $ 0.90
Extraordinary (loss) on early extinguishment of debt (2).........................
(0.22) --
--------- -----------
Net income.....................................................................
$ 0.45 $ 0.90
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
AT APRIL 28, 1996
-----------------------
ACTUAL PRO FORMA
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................... $ 58,726 $ 59,926
Total assets.............................................................................. 244,065 247,265
Total debt(4)............................................................................. 125,760 132,024
Total stockholders' equity................................................................ 51,656 28,592
</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. The
debt was substantially replaced by promissory notes payable to Alpine.
(3) Based upon 12,024,048 shares outstanding subsequent to this Offering.
(4) Actual amount includes $113.7 million of intercompany debt owed to Alpine.
6
<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 fiscal year ended
April 28, 1996, six RBOCs and the three major independent telephone companies
accounted for 90.0% of Superior's pro forma net sales. Five of these customers,
BellSouth Corporation, North Supply Corporation (Sprint), GTE Corporation, SBC
Communications, Inc. and NYNEX Corporation accounted for 21.5%, 17.2%, 16.1%,
12.8% and 12.5%, respectively, of the Company's net sales for that year. 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.
7
<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 fundamental changes in the regulation of
the telecommunications industry. It is not possible at this time to predict the
impact that these changes in the regulatory framework 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.
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."
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 will provide, through April 30,
1998, subject to extension by mutual agreement, certain services to the Company,
including, among other things, assistance with public company reporting, certain
financial reporting functions, legal compliance, banking, risk management and
8
<PAGE>
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 will provide 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 will incur 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 April 28, 1996, after giving effect to this Offering, the Reorganization and
related transactions, the Company's consolidated debt would have been $132.0
million, Superior Preferred Stock, at liquidation value, would have been $20.0
million, its stockholders' equity would have been $28.6 million (with its net
tangible book value being ($16.8) million) and its ratio of debt plus Superior
Preferred Stock to stockholders' equity would have been 5.3 to 1.0. See
"Capitalization." Based on pro forma results for the year ended April 28, 1996,
the ratio of earnings before interest, taxes, depreciation and amortization to
interest expense plus dividends on the Superior Preferred Stock would have been
3.3 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."
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
9
<PAGE>
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 and the Reorganization and related
transactions, 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 Underwriters. All of the Restricted
Shares will be held by Alpine upon completion of this Offering and the
completion of the Reorganization and related transactions. 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.
10
<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. Prior to the consummation of this Offering, Alpine will
(i) recapitalize Superior, as a result of which Alpine will own all of the
outstanding common stock of Superior and 20,000 shares of Superior Preferred
Stock and (ii) cause Superior to declare a dividend on its common stock in an
amount equal to the difference between $200.0 million and the amount of existing
intercompany debt owed by Superior and DNE to Alpine, which was $113.7 million
as of April 28, 1996. See "Use of Proceeds." Each share of Superior Preferred
Stock has a liquidation value of $1,000 and bears an annual dividend of $60.00,
payable quarterly. The Superior Preferred Stock is redeemable at its liquidation
value at Superior's option and has no voting rights. Following the
recapitalization of Superior, Alpine will contribute to the Company all of the
issued and outstanding common stock of Superior and DNE.
THE BANK CREDIT FACILITY. Concurrently with or prior to the completion of
this Offering, the Company will enter into a Bank Credit Facility with one or
more lenders under which the Company may have up to approximately $150.0 million
outstanding at any one time. Obligations under the Bank Credit Facility are
expected to be guaranteed by each of the Company's subsidiaries. The loans under
the Bank Credit Facility are expected to be secured by the stock of each direct
and indirect subsidiary of the Company and all other equipment, property,
inventory and accounts receivable of each such subsidiary. The Bank Credit
Facility is expected to contain customary performance and financial covenants.
The Company's initial borrowings under the Bank Credit Facility are expected
to be approximately $120.0 million which will be used, together with the net
proceeds of this Offering, to pay the $200.0 million required to complete the
Reorganization and related transactions. Assuming initial borrowings under the
Bank Credit Facility as described above, the Company will have approximately
$30.0 million of additional availability under the Bank Credit Facility for
working capital and other corporate purposes. It is a condition to the closing
of this Offering that the Reorganization shall have been completed and the Bank
Credit Facility shall have been obtained.
11
<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 $83.2 million ($95.8 million if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $15.00 per share. All such net proceeds, together with
anticipated initial borrowings of approximately $120.0 million under the Bank
Credit Facility, will be applied by the Company as follows:
(1) $200.0 million in payments to Alpine, consisting of (a) the
repayment by Superior of existing intercompany debt owed to
Alpine, which was $113.7 million as of April 28, 1996, and (b) the
payment of the dividend declared by Superior in connection with the
Reorganization; and
(2) $3.2 million, consisting of approximately $2.0 million to pay
expenses incurred in connection with the Bank Credit Facility and
the balance for working capital purposes.
Any net proceeds of this Offering in excess of the amount described above
will reduce the amount of initial borrowings under the Bank Credit Facility. If
the net proceeds of this Offering (before exercise of the Underwriters'
over-allotment option) are less than the amount described above, the additional
amounts necessary to complete such transactions will be borrowed under the Bank
Credit Facility. If the Underwriters' over-allotment option is exercised in part
or in full, the Company will use the net proceeds therefrom to redeem, at
liquidation value, an amount of Superior Preferred Stock having an aggregate
liquidation value equal to the net proceeds.
DIVIDEND POLICY
The Company is newly-formed and has not paid dividends on the Common Stock.
Following the completion of this Offering and the completion of the
Reorganization and related transactions, 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 will contain restrictions on the declaration and
payment of dividends by the Company.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Superior and DNE as of
April 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
$15.00, 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>
APRIL 28, 1996
-----------------------
ACTUAL PRO FORMA
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Due to Alpine and affiliate............................................................... $ 113,736 $ --
Bank Credit Facility...................................................................... -- 120,000
Other..................................................................................... 12,024 12,024
---------- -----------
Total debt.............................................................................. 125,760 132,024
---------- -----------
Minority interest (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 19,070
Retained earnings (3)..................................................................... 9,401 9,401
---------- -----------
Total stockholders' equity.............................................................. 51,656 28,592
---------- -----------
Total capitalization.................................................................. $ 177,416 $ 180,616
---------- -----------
---------- -----------
</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 ($214,000).
13
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at April 28, 1996,
after giving effect to the Reorganization, was $(16.8) million. Although the
Company was organized in July 1996, for purposes of the computation of dilution,
it has been assumed that 6,024,048 shares were outstanding at April 28, 1996, so
that the net tangible book value of the Company as of such date would have been
approximately $(2.78) 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 $16.65 per share. The following table illustrates this per share dilution to
new investors:
<TABLE>
<CAPTION>
Assumed initial public offering price per share (1)......................... $ 15.00
<S> <C> <C>
Net tangible book value per share before the Offering..................... (2.78)
Increase per share attributable to the sale of Common Stock offered hereby
(2)...................................................................... 1.13
---------
Pro forma net tangible book value per share after the Offering.............. (1.65)
---------
Dilution per share to new investors (3)..................................... $ 16.65
---------
---------
</TABLE>
The following table summarizes on a pro forma basis (after giving effect to
the Reorganization) as of April 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 $15.00 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 31.9% $ 7.01
New investors...................................... 6,000,000 49.9% 90,000,000 68.1% $ 15.00
------------ --------- -------------- ---------
Total...................................... 12,024,048 100% $ 132,255,000 100%
------------ --------- -------------- ---------
------------ --------- -------------- ---------
</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 $15.53.
(4) Does not include 590,000 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 Employee Stock Incentive Plan and Non-Employee Directors'
Stock Option Plan. See "Management -- Executive Compensation -- Compensation
Under Plans".
14
<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 (to be 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."
15
<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(a) $ 417,934 $ 417,934
Cost of goods sold........................ 362,854 7,018(a) 369,780 369,780
(92)(b)
---------- ----------- ----------- -----------
Gross profit............................ 47,559 595 48,154 48,154
Selling, general and administrative
expense.................................. 14,223 336(a) 14,256 $ 2,000(d) 16,256
(303)(c)
Amortization of goodwill.................. 1,556 14(b) 1,570 -- 1,570
---------- ----------- ----------- ------ -----------
Operating income........................ 31,780 548 32,328 (2,000) 30,328
Interest expense, net..................... (17,006) -- (17,006) 6,595(e) (10,411)
Minority interest......................... -- -- -- (1,200)(f) (1,200)
Other income, net......................... 55 -- 55 -- 55
---------- ----------- ----------- ------ -----------
Income from continuing operations before
income taxes........................... 14,829 548 15,377 3,395 18,772
Provision for income taxes................ (6,722) -- (6,722) (1,267)(g) (7,989)
---------- ----------- ----------- ------ -----------
Income from continuing operations....... 8,107 548 8,655 2,128 10,783
Extraordinary (loss) on early
extinguishment of debt................... (2,645) -- (2,645) 2,645 --
---------- ----------- ----------- ------ -----------
Net income.............................. $ 5,462 $ 548 $ 6,010 $ 4,773 $ 10,783
---------- ----------- ----------- -----------
---------- ----------- ----------- ------ -----------
------
Per share of common stock (based upon
12,024,048 shares outstanding):
Income from continuing operations......... $ 0.67 $ 0.90
Extraordinary (loss) on early
extinguishment of debt................... (0.22) --
---------- -----------
Net income.............................. $ 0.45 $ 0.90
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
16
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF APRIL 28, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS COMBINED
---------- ------------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash............................................................... $ 351 $ 83,200(h) $ 1,551
120,000(i)
(2,000)(i)
(200,000)(j)
Accounts receivable, net........................................... 53,689 53,689
Inventories........................................................ 57,726 57,726
Other current assets............................................... 6,142 6,142
---------- ------------------ -----------
Total current assets............................................. 117,908 1,200 119,108
Property, plant and equipment, net................................... 76,528 76,528
Goodwill, net........................................................ 48,414 48,414
Long-term investments and other assets............................... 1,215 2,000(i) 3,215
---------- ------------------ -----------
Total assets..................................................... $ 244,065 $ 3,200 $ 247,265
---------- -----------
---------- ------------------ -----------
------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................. $ 484 $ 484
Accounts payable................................................... 46,253 46,253
Accrued expenses................................................... 12,445 12,445
---------- -----------
Total current liabilities........................................ 59,182 59,182
Long-term debt, less current portion................................. 11,540 $ 120,000(i) 131,540
Due to Alpine and affiliate.......................................... 113,736 (113,736)(j) --
Other long-term obligations.......................................... 7,951 7,951
Minority interest.................................................... -- 20,000(k) 20,000
Stockholders' equity:
Common stock....................................................... 1 60(h) 121
60(k)
Capital in excess of par value..................................... 42,254 83,140(h) 19,070
(86,264)(j)
(20,060)(k)
Retained earnings.................................................. 9,401 9,401
---------- ------------------ -----------
Total stockholders' equity........................................... 51,656 (23,064) 28,592
---------- ------------------ -----------
Total liabilities and stockholders' equity....................... $ 244,065 $ 3,200 $ 247,265
---------- -----------
---------- ------------------ -----------
------------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) Reflects the results of operations of the Alcatel Business for the 11-day
period ended May 11, 1995, the date of acquisition.
(b) Reflects the changes in historical depreciation expense and the amortization
of goodwill resulting from the Alcatel acquisition.
(c) 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.
(d) Represents management's estimate of the additional general and
administrative expenses associated with the Company's status as a separate
public company, of which $0.9 million 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."
(e) 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>
<S> <C>
Interest on Bank Credit Facility (assuming a 7.5% interest
rate)......................................................... $ 9,000
Amortization of deferred financing costs....................... 400
Less: historical interest on debt being repaid................. (15,995)
-----------
Total adjustment........................................... $ (6,595)
-----------
-----------
</TABLE>
The adjustment to interest expense assumes that the average amount
outstanding under the Bank Credit Facility was $120.0 million.
(f) Reflects dividends on Superior Preferred Stock issued to Alpine prior to the
Reorganization.
(g) 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.
(h) Reflects estimated net proceeds of $83.2 million from the Offering.
(i) Reflects $120.0 million of initial borrowings under the Bank Credit Facility
and $2.0 million in related deferred financing costs.
(j) Reflects the payment by Superior to Alpine of an aggregate of $200.0
million, consisting of the repayment of existing intercompany debt owed to
Alpine, which was $113.7 million as of April 28, 1996, and the payment of
the dividend that is part of the Reorganization. See "Use of Proceeds."
(k) Reflects the issuance of the Superior Preferred Stock and the completion of
the Reorganization.
18
<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 and for the
years ended April 30, 1995 and April 28, 1996. In addition, the results of
operations of Superior for the year ended April 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
------------- --------------------------------------------
APRIL 30, APRIL 30, MAY 1, APRIL 30, APRIL 28,
1992 1993 1994 1995 1996
------------- --------- --------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 4,590 $ 27,897 $ 68,510 $ 164,485 $ 410,413
Cost of sales........................................ 3,054 15,915 56,250 142,114 362,854
------ --------- --------- ---------- ----------
Gross profit....................................... 1,536 11,982 12,260 22,371 47,559
Selling, general & administrative expense............ 1,209 9,068 8,884 11,632 14,223
Amortization of goodwill............................. -- 267 2,186 1,124 1,556
------ --------- --------- ---------- ----------
Operating income................................... 327 2,647 1,190 9,615 31,780
Interest expense, net................................ (140) (600) (1,742) (3,700) (17,006)
Other income (expense)............................... 2 70 (61) 231 55
------ --------- --------- ---------- ----------
Income (loss) from continuing operations before
taxes............................................. 189 2,117 (613) 6,146 14,829
Provision for income taxes........................... -- (462) (521) (2,240) (6,722)
------ --------- --------- ---------- ----------
Income (loss) from continuing operations........... 189 1,655 (1,134) 3,906 8,107
(Loss) from discontinued operations.................. -- -- (287) (176) --
------ --------- --------- ---------- ----------
Income (loss) before extraordinary item............ 189 1,655 (1,421) 3,730 8,107
Extraordinary (loss) on early extinguishment of
debt................................................ -- -- -- -- (2,645)
------ --------- --------- ---------- ----------
Net income (loss).................................. $ 189 $ 1,655 $ (1,421) $ 3,730 $ 5,462
------ --------- --------- ---------- ----------
------ --------- --------- ---------- ----------
Per share of common stock (based upon 12,024,048
shares outstanding subsequent to this Offering):
Income from continuing operations..................................................................... $ 0.67
Extraordinary (loss) on early extinguishment of debt.................................................. (0.22)
----------
Net income.......................................................................................... $ 0.45
----------
----------
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, APRIL 30, MAY 1, APRIL 30, APRIL 28,
1992 1993 1994 1995 1996
--------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................................ $ 5,773 $ 7,346 $ 23,558 $ 22,750 $ 58,726
Total assets........................................... 12,918 18,500 115,338 120,127 244,065
Total debt, including intercompany..................... 8,412 8,342 39,095 37,067 125,760
Total stockholders' equity............................. 1,807 4,916 48,123 49,854 51,656
</TABLE>
19
<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 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 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 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.
In fiscal 1996, 90.0% of Superior's pro forma net sales were made to the
RBOCs and the three 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 -- although customers are not obligated to purchase the forecasted
amount or, in most cases, any minimum amount. 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 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, 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 had the most significant impact on profitability during
the third and fourth fiscal quarters of fiscal 1996.
20
<PAGE>
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.
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.
21
<PAGE>
COMBINED SUPPLEMENTAL UNAUDITED PRO FORMA OPERATING DATA (1)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------
MAY 1, APRIL 30, APRIL 28,
1994 1995 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net sales
Telecommunications wire and cable.......................................... $ 311,904 $ 340,756 $ 391,758
Data communications and electronics........................................ 21,653 27,907 26,176
---------- ---------- ----------
Combined net sales....................................................... 333,557 368,663 417,934
---------- ---------- ----------
---------- ---------- ----------
Gross profit (2)(3)
Telecommunications wire and cable.......................................... $ 34,091 $ 28,433 $ 40,267
Data communications and electronics........................................ 8,252 8,221 7,887
---------- ---------- ----------
Combined gross profit.................................................... 42,343 36,654 48,154
---------- ---------- ----------
---------- ---------- ----------
Selling, general and administrative expense (4)
Telecommunications wire and cable.......................................... $ 5,249 $ 6,170 $ 8,408
Data communications and electronics........................................ 6,574 6,511 5,848
Corporate (5).............................................................. 2,000 2,000 2,000
---------- ---------- ----------
Combined selling, general and administrative expense..................... 13,823 14,681 16,256
---------- ---------- ----------
---------- ---------- ----------
Amortization of goodwill (6)
Telecommunications wire and cable.......................................... $ 1,570 $ 1,570 $ 1,570
Data communications and electronics (7).................................... 1,753 -- --
---------- ---------- ----------
Combined amortization of goodwill........................................ 3,323 1,570 1,570
---------- ---------- ----------
---------- ---------- ----------
Operating income
Telecommunications wire and cable.......................................... $ 27,272 $ 20,693 $ 30,289
Data communications and electronics........................................ (75) 1,710 2,039
Corporate.................................................................. (2,000) (2,000) (2,000)
---------- ---------- ----------
Combined operating income................................................ 25,197 20,403 30,328
---------- ---------- ----------
---------- ---------- ----------
Operating income............................................................. $ 25,197 $ 20,403 $ 30,328
Interest expense (8)......................................................... (10,411) (10,411) (10,411)
Minority interest (9)........................................................ (1,200) (1,200) (1,200)
Other income (expense)....................................................... (61) 231 55
---------- ---------- ----------
Income from continuing operations before income taxes...................... 13,525 9,023 18,772
Provision for income taxes (10).............................................. (5,890) (4,089) (7,989)
---------- ---------- ----------
Income from continuing operations.......................................... $ 7,635 $ 4,934 $ 10,783
---------- ---------- ----------
---------- ---------- ----------
Income per share of common stock from continuing operations (based upon
12,024,048 shares outstanding).............................................. $ 0.63 $ 0.41 $ 0.90
---------- ---------- ----------
---------- ---------- ----------
AS A PERCENTAGE OF NET SALES
----------------------------------
Gross margin
Telecommunications wire and cable.......................................... 10.9% 8.3% 10.3%
Data communications and electronics........................................ 38.1 29.5 30.1
Combined gross margin.................................................... 12.7 9.9 11.5
Operating income margin
Telecommunications wire and cable.......................................... 8.7% 6.1% 7.7%
Data communications and electronics........................................ (0.3) 6.1 7.8
Combined operating income margin......................................... 7.6 5.5 7.3
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
-------------------------------------
FISCAL YEAR ENDED
-------------------------------------
MAY 1, APRIL 30, APRIL 28,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................................. 100.0% 100.0% 100.0%
Cost of sales.............................................................. 87.3 90.1 88.5
----- ----- -----
Gross profit............................................................. 12.7 9.9 11.5
Selling, general and administrative expense................................ 4.1 4.0 3.9
Amortization of goodwill................................................... 1.0 0.4 0.3
----- ----- -----
Operating income......................................................... 7.6 5.5 7.3
Interest expense, net...................................................... 3.1 2.8 2.5
Minority interest.......................................................... 0.4 0.3 0.3
Other income (expense), net................................................ 0.0 0.0 0.0
----- ----- -----
Income from continuing operations before income taxes.................... 4.1 2.4 4.5
Provision for income taxes................................................. 1.8 1.1 1.9
----- ----- -----
Income from continuing operations........................................ 2.3 1.3 2.6
----- ----- -----
----- ----- -----
</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 eliminate expense of $10.4 million, $9.1 million and $303,000 in
fiscal 1994, 1995 and 1996, respectively. These expenses 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 $0.9
million 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, $446,000 and $14,000 in fiscal 1994,
1995 and 1996, respectively.
(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 will exist upon completion of
the Reorganization and related transactions and is based on certain existing
debt and $120.0 million of debt outstanding under the Bank Credit Facility
during fiscal 1994, 1995 and 1996.
(9) Reflects dividends on Superior Preferred Stock issued to Alpine prior to the
Reorganization.
23
<PAGE>
(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.
QUARTERLY RESULTS
The following table presents selected quarterly pro forma condensed combined
financial information for each of the eight quarters through April 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 three 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
1994 1994 1995 1995 1995 1995 1996 1996
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <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
Cost of sales............................. 80,801 74,824 84,920 91,464 96,747 98,036 80,284 94,713
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit............................ 11,255 7,734 8,657 9,008 10,098 11,040 10,901 16,115
Selling, general and administrative
expense.................................. 3,591 3,802 3,561 3,727 3,832 3,888 3,984 4,552
Amortization of goodwill.................. 391 392 393 394 388 390 397 395
--------- --------- --------- --------- --------- --------- --------- ---------
Operating Income........................ 7,273 3,540 4,703 4,887 5,878 6,762 6,520 11,168
Interest expense.......................... (2,602) (2,603) (2,603) (2,603) (2,603) (2,603) (2,603) (2,603)
Minority interest......................... (300) (300) (300) (300) (300) (300) (300) (300)
Other income (expense), net............... 38 39 33 121 28 (4) (7) 38
--------- --------- --------- --------- --------- --------- --------- ---------
Income from continuing operations before
income taxes........................... 4,409 676 1,833 2,105 3,003 3,855 3,610 8,303
Provision for income taxes................ (1,883) (391) (853) (962) (1,321) (1,662) (1,564) (3,441)
--------- --------- --------- --------- --------- --------- --------- ---------
Income from continuing operations....... $ 2,526 $ 285 $ 980 $ 1,143 $ 1,682 $ 2,193 $ 2,046 $ 4,862
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Income per share from continuing
operations (based upon 12,024,048 shares
outstanding)............................. $ 0.21 $ 0.02 $ 0.08 $ 0.10 $ 0.14 $ 0.18 $ 0.17 $ 0.41
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
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.
24
<PAGE>
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 8.3% 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 was 8.4% in the first quarter, increasing to 8.9%, 10.6% and 13.3%
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 ("SG&A EXPENSE")
Combined SG&A expense in fiscal 1996 were $16.3 million, an increase of $1.6
million, or 10.7%, as compared to fiscal 1995.
Superior's SG&A expense in fiscal 1996 were $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 $10.8 million
represented an increase of $5.8 million, or 118.5%, over fiscal 1995 combined
income from continuing operations of $4.9 million. This increase was
attributable to the same factors that gave rise to the increase in combined
operating income.
25
<PAGE>
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.
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.
26
<PAGE>
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 were $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 were $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 were 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 $4.9 million
represented a decline of $2.7 million compared to fiscal 1994 combined income
from continuing operations of $7.6 million. This decline was attributable to the
same factors that gave rise to the decline in combined operating income.
27
<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 combined SG&A expense. The increase 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 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.
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<PAGE>
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 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 will consist of $132.0 million in
debt and $28.6 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.
Obligations under the Bank Credit Facility are expected to be guaranteed by each
of the Company's subsidiaries. The loans under the Bank Credit Facility are
expected to be secured by the common stock of each direct and indirect
subsidiary of the Company and all other equipment, property, inventory and
accounts receivable of each such subsidiary. The Bank Credit Facility is
expected to contain customary performance and financial covenants.
During fiscal 1997, the Company expects to have principal debt service
requirements of $0.5 million and intends to invest $6.0 million to $8.0 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.
Upon completion of this Offering and the Reorganization and related
transactions, and assuming initial borrrowings under the Bank Credit Facility of
$120.0 million, the Company expects to have approximately $30.0 million of
additional availability under the Bank Credit Facility. On an ongoing basis the
Company's liquidity will be impacted by its operating cash flows, its principal
debt service requirements, its capital expenditure levels and its level of
working capital.
On a pro forma basis, giving effect to the Alcatel acquisition and the
Reorganization and related transactions as if they had occurred on April 30,
1995, cash flows from operating activities for the year ended April 28, 1996
would have been approximately $30.0 million, cash flows used by investing
activities would have been $8.3 million, and required principal payments on
outstanding debt would have been $0.5 million, resulting in $21.2 million in
cash flow available for that fiscal period to reduce the balance under the Bank
Credit Facility, make additional investments in existing or 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.
29
<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. 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 to
six of the seven RBOCs and the three 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 that its pro forma share of domestic copper telecommunications
cable and wire production was over 30% in 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 $1.1 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 purchase approximately 60% of the copper telecommunications distribution
wire and cable purchased by
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U.S. telephone companies, while the three major independent telephone holding
companies (Alltel Corporation, GTE Corporation and Sprint Corporation) purchase
approximately 25% 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.
Installation and Maintenance Costs. The Company believes that in the local
loop, copper has significantly lower installation and maintenance costs 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. ADSL technology has been implemented successfully by several telephone
companies. 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
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<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
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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
During fiscal 1996, on a pro forma basis, 90.0% of Superior's net sales were
to the RBOCs and the three major independent telephone companies, 9.0% were sold
to other telephone companies in the United States and Canada, construction
companies and others and the remaining 1.0% were sold outside the United States
and Canada.
Superior sells to the RBOCs and the three 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
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<PAGE>
seven RBOCs and with the three major independent telephone companies. For fiscal
1996, on a pro forma basis, sales to BellSouth Corporation, North Supply
Corporation (Sprint), GTE Corporation, SBC Communications, Inc. and NYNEX
Corporation accounted for 21.5%, 17.2%, 16.1%, 12.8% and 12.5% of Superior's pro
forma net sales, respectively. No other single customer accounted for more than
10% of Superior's pro forma 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
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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
pro forma 1996 net sales to customers outside the United States and Canada were
$3.3 million, or 1.0% 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. 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
PRODUCTS
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's strategy in this area is to expand 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
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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 wire and 328,000 Leased (expires 2013)
cable and UTP
Tarboro, North Carolina............ Telecommunications wire and 295,000 Owned
cable
Winnipeg, Manitoba................. Telecommunications wire and 190,000 Owned
cable
Elizabethtown, Kentucky............ Telecommunications cable 163,000 Owned
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 $5.0 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 30, 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.
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
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<PAGE>
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.
37
<PAGE>
MANAGEMENT
Set forth below is certain information concerning the directors and
executive officers of the Company (all of whom were elected to their respective
positions with the Company upon its organization in July 1996) and certain
officers of the Company's subsidiaries. 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
Bragi F. Schut 55 Director
</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 PolyVision Corporation, an information display
company, and a director of Interim Services, Inc., one of the nation's largest
providers of value-added staffing and health care services.
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.
HAROLD M. KARP has been Senior Vice President-Manufacturing of Superior
since the Alcatel acquisition in May 1995. He worked for 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 to that.
38
<PAGE>
TERRY A. RICHARDS has been Vice President-Marketing and Sales of Superior
since 1993. Prior thereto, 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 worked for 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.
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.
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 on which the Board of Directors also meets) and will also
participate in the Company's 1996 Non-Employee Directors' Stock Option Plan. In
addition, all directors will be reimbursed for expenses incurred in connection
with attendance at meetings. See "Management -- Executive Compensation -- 1996
Non-Employee Directors' Stock Option Plan."
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.
39
<PAGE>
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
Prior to the completion of this Offering, the Company will 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
will have an indefinite term and 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."
COMPENSATION UNDER PLANS
1996 EMPLOYEE STOCK INCENTIVE PLAN. Prior to the completion of this
Offering, the Company will adopt the 1996 Employee Stock Incentive Plan (the
"Plan") for the benefit of certain officers and other key employees of the
Company and its subsidiaries. The purpose of the Plan is to attract and retain
executives and other key employees who are important to the success and growth
of the Company and to create a long-term mutuality of interest between such
persons and the stockholders of the Company.
Under the Plan, options to purchase an aggregate of not more than 1,000,000
shares of Common Stock (subject to certain adjustments) may be granted from time
to time to key employees and officers of, and advisors and independent
consultants to, the Company or its subsidiaries, other than directors who are
neither officers nor employees of the Company or its affiliates. In general, if
options are for any reason
40
<PAGE>
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 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 Plan will provide for the grant of incentive stock options ("ISOs") to
employees and nonqualified stock options ("NQSOs") to employees, advisors and
independent consultants. 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 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 Plan).
The 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 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 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 Plan; provided, however, that
certain material modifications affecting the Plan must be approved by the
Company's stockholders, and any change in the Plan that may adversely affect an
optionee's rights under an option previously granted under the Plan requires the
consent of the optionee.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. Prior to the completion of
this Offering, the Company will adopt the 1996 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan"), which will provide for the granting of
NQSOs to purchase shares of Common Stock to each director of the Company who is
not an employee or officer of the Company or a subsidiary thereof (each, an
"Eligible Director"). The Directors' Plan is designed to provide Eligible
Directors with an opportunity to invest in the Company, thereby maintaining and
strengthening their desire to remain with or join the Company's Board of
Directors and stimulating their efforts on the Company's behalf.
The Directors' Plan authorizes the issuance of up to 250,000 shares of
Common Stock, subject to adjustments in certain circumstances. No options may be
granted after 10 years from the effective date of the Directors' Plan.
Eligible Directors may receive options under the Directors' 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
on exercise price equal to the fair market value of such shares at the time of
grant.
41
<PAGE>
The options to purchase shares of Common Stock described above 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 Directors' Plan).
Each option 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.
The Directors' Plan will be administered by the Board of Directors (or a
duly appointed committee of the Board) which has the full and final authority to
interpret the Directors' Plan and to adopt and amend such rules and regulations
for the administration of the Directors' Plan as the Board may deem desirable.
In addition, the Board of Directors has the right to amend or terminate the
Directors' Plan in certain circumstances; provided, however, that unless first
duly approved by the holders of Common Stock entitled to vote thereon, no
amendment or change may be made in the Directors' Plan to: (i) increase the
number of shares available for grant under the Directors' Plan; (ii) reduce the
minimum exercise price at which any option may be exercised; (iii) change the
requirements as to eligibility for participation under the Directors' Plan; (iv)
change the date on which such options are to be granted; or (v) increase the
benefits accruing to participants under the Directors' Plan.
42
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
SERVICES AGREEMENT
Pursuant to the Services Agreement, Alpine will provide 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, will serve as
the Company's Chief Financial Officer. The Services Agreement will provide 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 will share 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.
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 "Credit Facility"). The Alpine Notes and the
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.
In connection with the placement of the Alpine Notes and the closing of the
Credit Facility, Superior and DNE entered into financing arrangements with
Alpine whereby Alpine advanced funds to those subsidiaries. At April 28, 1996,
those subsidiaries were indebted to Alpine under notes payable in the amount of
$113.7 million related to such financing arrangements.
Prior to the completion of this Offering, an amendment to the indenture
relating to the Alpine Notes will become effective pursuant to which the
aforementioned pledge will be released and the Superior guarantees terminated.
In connection with the completion of this Offering and the Reorganization and
related transactions, Alpine will pledge 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 will be terminated in connection with the Bank Credit Facility.
See Notes 8 and 16 to the combined financial statements of Superior and DNE.
TAX INDEMNIFICATION
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.
43
<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, the Reorganization and related transactions,
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
44
<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.
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 (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.
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<PAGE>
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 Reorganization and related
transactions, 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 shares of capital stock will
be available for future issuance without
46
<PAGE>
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 Securities Exchange Act
of 1934, as amended (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
47
<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.
48
<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 Solicitation Agent in connection with the solicitation of
consent of the holders of the Alpine Notes, for which services it will receive
customary compensation.
The Company has applied for listing of the Common Stock on the Nasdaq
National Market under the symbol "LOOP."
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 (to be 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, and 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, 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).
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COMBINED FINANCIAL STATEMENTS OF SUPERIOR TELECOMMUNICATION INC. AND SUBSIDIARY
AND DNE SYSTEMS, INC. AND SUBSIDIARIES (TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
PAGE
---------
AUDITED COMBINED FINANCIAL STATEMENTS
<S> <C>
Report of independent public accountants........................................... F-2
Combined balance sheets as of April 30, 1995 and April 28, 1996.................... F-3
Combined statements of operations for the years ended May 1, 1994, April 30, 1995
and April 28, 1996................................................................ F-4
Combined statements of stockholder's equity for the years ended May 1, 1994, April
30, 1995 and April 28, 1996....................................................... F-5
Combined statements of cash flows for the years ended May 1, 1994, April 30, 1995,
and April 28, 1996................................................................ F-6
Notes to combined financial statements............................................. F-7
THE ALCATEL BUSINESS
AUDITED COMBINED FINANCIAL STATEMENTS
Report of independent public accountants........................................... F-21
Combined balance sheets at December 31, 1993 and 1994.............................. F-22
Combined statements of operations for the years ended December 31, 1992, 1993 and
1994.............................................................................. F-23
Combined statements of changes in owners' investment for the years ended December
31, 1992, 1993 and 1994........................................................... F-24
Combined statements of cash flows for the years ended December 31, 1992, 1993 and
1994.............................................................................. F-25
Notes to combined financial statements............................................. F-26
</TABLE>
F-1
<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 incorporated as Superior
TeleCom Inc., from the date of 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
August 6, 1996
F-2
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
AND DNE SYSTEMS INC. AND SUBSIDIARIES
(TO BE REORGANIZED AS SUPERIOR TELECOM INC.)
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30, APRIL 28,
1995 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
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-3
<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-4
<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 58,594
Superior dividend.................. (17,450)
Acquisition 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
Sale 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............ 58,594
Superior dividend.................. (17,450)
Acquisition 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
Sale 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-5
<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-6
<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"). Prior to the consummation of the 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 Inc.
("Superior TeleCom") for the purpose of completing the transactions more fully
described in Note 16. The accompanying combined financial statements present the
combined assets, liabilities, revenue, expenses and cash flows as if Superior
and DNE existed as a separate corporation during the periods presented. 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. Provisions for losses
on uncompleted contracts are made if it is determined that a contract will
ultimately result in a loss.
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 accompanying combined balance
sheet are DNE inventories relating to contracts and programs having production
cycles longer than one year.
F-7
<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)
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 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 a permanent diminution in value occurred. 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
income 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. At April 30, 1995 and
April 28, 1996, accounts receivable from these customers amounted to $14.0
million and $41.9 million, respectively.
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.
F-8
<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)
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-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 (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-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)
5. ACQUISITIONS (CONTINUED)
to approximately $58.6 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 purchased 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 purchase was accounted
for as the acquisition of an affiliated entity and the excess of the book value
of the net assets acquired over the purchase price (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 sold Posterloid back to Alpine for $1.3 million in cash.
The sale was accounted for as the disposal of an affiliated entity and the
excess of the book value of the net assets transferred over the sale price ($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
acquisition 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-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)
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-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)
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-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)
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. During fiscal 1994 and 1995 DNE was charged $360,000 and
$111,000, respectively for such services. No such amounts were charged in fiscal
1996.
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>
A discount rate of 8% and an expected long-term rate of return on assets of
8% were assumed for the above actuarial calculations.
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)
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-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)
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-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)
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
------
$ 2,937
------
------
</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-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)
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. 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 form 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.
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-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)
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 30% and 16% of net sales in fiscal 1995 and
five customers accounted for 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 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-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)
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
On August 9, 1996 Superior TeleCom filed a registration statement with the
Securities and Exchange Commission in which it disclosed Alpine's intention to:
(i) recapitalize Superior by issuing 20,000 shares of 6% Cumulative Preferred
Stock par value $1.00 per share with a liquidation preference of $1,000 per
share, (ii) contribute all of the common stock of both Superior and DNE to
Superior TeleCom, (iii) cause Superior to declare a dividend on its common stock
in an amount equal to the difference between $200 million and the net amount of
intercompany debt then owed by Superior and DNE to Alpine and (iv) 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.
In order to finance the payment of the intercompany debt, the dividend and
future working capital needs, Superior TeleCom intends to use the proceeds from
the aforementioned offering and to borrow under a revolving credit facility
which it will enter into with one or more lenders, under which Superior TeleCom
may have up to approximately $150.0 million outstanding at any one time.
Obligations under the revolving credit facility are expected to be guaranteed by
Superior and DNE. The loans under the revolving credit facility are expected to
be secured by the common stock of each direct and indirect subsidiary of
Superior TeleCom and all other equipment, property, inventory and accounts
receivable of each such subsidiary.
F-20
<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-21
<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-22
<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-23
<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-24
<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-25
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
1. ORGANIZATION:
The Copper Cable Group (the "Alcatel Business") is comprised of the
operating divisions of both Alcatel NA Cable Systems, Inc. ("ACS") and its
affiliate, Alcatel Canada Wire and Cable, Inc. ("ACW"), which manufacture and
market copper cable products used in the telecommunications industry. The
Alcatel Business is headquartered in Claremont, North Carolina, and is
controlled by Alcatel Alsthom, a Brussels-based corporation. Various
subsidiaries of Alcatel Alsthom own 100% of the common stock of both ACS and
ACW.
2. SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies followed by the Company are as follows:
PRINCIPLES OF COMBINATION
The combined financial statements include the copper cable operations of ACW
which are located in Winnipeg, Manitoba, and the copper cable operations of ACS
which are located in Tarboro, North Carolina; Elizabethtown, Kentucky; Fordyce,
Arkansas and Claremont, North Carolina. The combined financial statements also
include fiber optic cable and data cable operations that are part of the ACW
facility located in Winnipeg, Manitoba. These operations are not material to
Alcatel Business's operating results as presented herein. All of these
operations are managed by ACS management. All significant intercompany accounts
and transactions have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method for all inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation and amortization. Expenditures for repairs and betterments which
increase the estimated useful life or capacity of assets are capitalized;
expenditures for repairs and maintenance are charged to operations as incurred.
Gains and losses on routine dispositions are included in operations as general
and administrative expenses.
Depreciation is computed using the straight-line method over the estimated
useful lives of the various classes of assets as follows: land improvements --
10 years; buildings -- 20 to 40 years; machinery and equipment -- 3 to 15 years;
furniture and fixtures -- 10 years and transportation equipment -- 5 years.
INCOME TAXES
The U.S. operations of Alcatel Business are included in the consolidated
federal income tax return of Alcatel USA Corp. Pursuant to an income tax sharing
agreement between ACS and Alcatel USA Corp., U.S. federal income taxes are
determined as if Alcatel Business filed its U.S. federal income tax return as a
separate entity. The Canadian operations of Alcatel Business are included in the
Canadian income tax return of ACW, and Canadian income taxes are determined as
if Alcatel Business filed its Canadian income tax return as a separate entity.
Effective January 1, 1993, the Alcatel Business adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes", which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed annually for differences between the financial
statement and tax bases of
F-26
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. The provision (benefit) for income taxes is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
The effect of adopting SFAS No. 109 in 1993 was not material.
PENSION PLANS
The Alcatel Business has various noncontributory pension plans which cover
substantially all employees. Plans covering salaried and certain hourly
employees provide pension benefits that are based on employee compensation.
Other plans, covering most hourly employees and union members, generally provide
benefits of stated amounts for each year of service. The costs of the various
plans are provided over the service life of the employees using an actuarial
method which includes amortization of past service costs. The costs of the
various plans are funded by means of deposits with trustees of the plans.
POSTRETIREMENT BENEFITS
The Alcatel Business provides certain health care and life insurance
benefits for eligible retired employees in the U.S. Substantially all salaried
employees become eligible for these benefits if they reach age 55 while working
for the Company and satisfy certain years of service requirements.
Effective January 1, 1993, the Alcatel Business adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". Under
this statement, the Alcatel Business is required to accrue the estimated cost of
retiree health and life insurance benefits over the years that the employees
render service. The Alcatel Business previously expensed the cost of these
benefits as claims were incurred. The Alcatel Business elected to recognize the
initial accumulated liability, measured as of January 1, 1993, over a 20-year
amortization period as permitted by SFAS No. 106. As a result, the cumulative
effect on prior years of this change in accounting principle was not material.
The effect of this change on 1993 operating results was not significant.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Winnipeg, Manitoba, operations of ACW have
been translated into U.S. dollars at the year-end rate of exchange for asset and
liability accounts and the average rate of exchange for the year for income
statement accounts. Resulting translation gains or losses are included as a
component of owners' investment in the accompanying balance sheet and do not
affect the results of operations. Cumulative currency translation losses were
$2,360 at December 31, 1993, and $3,449 at December 31, 1994.
FINANCIAL INSTRUMENTS
In the normal course of business, the Alcatel Business employs a variety of
off-balance sheet financial instruments to reduce its exposure to changes in
foreign currency exchange rates and commodity prices, including foreign currency
forward exchange contracts and commodity futures contracts.
Realized and unrealized gains and losses on foreign currency forward
exchange contracts that qualify as designated hedges are deferred. Gains and
losses realized on foreign currency transactions that do not qualify as
designated hedges are included in operations.
F-27
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Changes in the market values of commodity futures contracts are included as
a component of inventory cost. Gains and losses resulting from changes in the
market value of commodity futures contracts are recognized when the related
inventory is sold.
3. RESTRUCTURING COSTS:
As a result of management's review of its operating strategies and to
improve competitiveness and future profitability, the Alcatel Business recorded
a restructuring charge of $12,000 in December 1992 for expected costs associated
with the planned shut-down of its Fordyce, Arkansas, manufacturing facility. The
charge included provisions for the write-down of fixed assets ($4,750),
relocation of equipment and employees ($2,840), employee severance costs ($910),
employee benefit plan costs ($1,970) and other costs ($1,530).
The Fordyce facility was closed in late 1993. At that time substantially all
132 employees of the facility were terminated. As a result, all of the severance
costs recorded as part of the restructuring charge were expended in 1993 and
1994. Approximately $520 of the employee benefit plan costs were expended in
1993 and 1994. The remaining employee benefit plan costs will be expended when
required by the funding provisions of the Internal Revenue Service and the
Department of Labor regulations. All other components of the restructuring
charge were expended during 1993 and 1994 with the exception of the $4,750
charge to fixed assets, which was a noncash charge to write-down the book value
of those assets to estimated fair value. All fixed assets at the Fordyce
facility have been disposed or relocated to the Alcatel Business's other
manufacturing facilities as of December 31, 1994. As a result of the
restructuring, the Alcatel Business expects to eliminate most of the fixed costs
previously incurred at the Fordyce facility which are estimated to be $2,000
annually.
4. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Raw materials.............................................. $ 4,478 $ 5,747
Work-in-process............................................ 6,645 5,965
Finished goods............................................. 25,396 25,271
--------- ---------
$ 36,519 $ 36,983
--------- ---------
--------- ---------
</TABLE>
At December 31, 1994, the Alcatel Business had contractual commitments for
purchases of copper of approximately $11,100 and for purchases of other raw
materials of approximately $1,100.
F-28
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Land and improvements...................................... $ 2,725 $ 2,706
Buildings.................................................. 11,663 12,336
Machinery and equipment.................................... 60,029 61,717
Furniture and fixtures..................................... 687 708
Transportation equipment................................... 151 151
Construction-in-progress................................... 1,802 1,943
--------- ---------
77,057 79,561
Less -- Accumulated depreciation........................... (31,355) (37,314)
--------- ---------
$ 45,702 $ 42,247
--------- ---------
--------- ---------
</TABLE>
6. INCOME TAXES:
Provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Current --
U.S.:
Federal............................................ $ 3,489 $ 1,053 $ 609
State.............................................. 727 265 (250)
--------- --------- ---------
4,216 1,318 359
--------- --------- ---------
Deferred --
U.S.:
Federal............................................ (4,440) 737 (659)
State.............................................. (845) 136 329
--------- --------- ---------
(5,285) 873 (330)
--------- --------- ---------
$ (1,069) $ 2,191 $ 29
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-29
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
6. INCOME TAXES: (CONTINUED)
Provision (benefit) for income taxes differed from the amount computed by
applying the federal statutory income tax rate due to:
<TABLE>
<CAPTION>
1992 1993 1994
---------------------- ---------------------- ------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at U.S. federal statutory
rate..................................... $ (1,696) (34.0)% $ 2,451 35.0% $ (198) (35.0)%
State income taxes, net of federal income
tax benefit.............................. (77) (1.5) 261 3.7 51 9.0
Canadian losses........................... 934 18.7 29 0.4 242 42.8
Reduction of income tax reserves.......... (264) (5.3) (600) (8.5) (100) (17.7)
Other, net................................ 34 0.7 50 0.7 34 6.0
--------- ----- --------- ----- ----- -----
$ (1,069) (21.4)% $ 2,191 31.3% $ 29 5.1%
--------- ----- --------- ----- ----- -----
--------- ----- --------- ----- ----- -----
</TABLE>
The Alcatel Business's Canadian operations generated losses of $2,741 in
1992, $83 in 1993 and $690 in 1994, which will be available to offset Canadian
taxable income, if any, through 1999. Because of uncertainties regarding
realization of the tax benefit of these losses in the future, valuation
allowances were established to fully reserve the related net deferred tax asset.
The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Deferred tax assets --
Accounts receivable....................................... $ 324 $ 160
Inventories............................................... 1,021 856
Self-insurance reserves................................... 283 468
Workers' compensation reserves............................ 836 764
Accrued EPA claims........................................ 112 0
Deferred compensation and other compensation-related
accruals................................................. 3,025 2,016
Canadian loss carry forwards (expiring from 1996 to
1999).................................................... 1,331 1,194
Other reserves............................................ 1,753 454
Less -- Valuation allowance............................... (1,533) (1,789)
--------- ---------
7,152 4,123
Deferred tax liabilities -- Property, plant and equipment... (4,727) (1,440)
--------- ---------
Net deferred tax asset.................................. $ 2,425 $ 2,683
--------- ---------
--------- ---------
</TABLE>
In management's opinion, income tax amounts presented in the accompanying
financial statements would not be materially different if the Alcatel Business
had not been eligible to be included in the consolidated income tax return of
Alcatel USA Corp. or in the income tax return of ACW.
F-30
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
7. RELATED PARTIES:
In the normal course of business, the Alcatel Business engages in various
arms-length transactions with its affiliates. Inventories purchased from
affiliates, consisting primarily of copper rod purchases from a division of ACW,
totaled $17,183 in 1992, $20,967 in 1993 and $14,532 in 1994 and sales to
affiliates totaled $583 in 1992, and $1,751 in 1993 and $5,530 in 1994.
The Alcatel Business obtains working capital through the treasury function
provided by ACS. To the extent that the Alcatel Business is in a net borrowing
position with ACS, interest expense is allocated to ACS at ACS's effective
borrowing rate. The net borrowing position is calculated as the average monthly
outstanding net payable balance to ACS. Average short-term borrowings during
1992, 1993 and 1994 were $29,433, $52,540 and $44,000, respectively; and the
weighted average interest rates were 6.0%, 3.7% and 4.5%, respectively.
Under agreements with affiliated companies, the Alcatel Business pays
service charges, research and development assessments and other service fees
(management fees). Management fees incurred by the Alcatel Business under these
agreements totaled $3,534 in 1992, $5,907 in 1993 and $4,971 in 1994.
Alcatel NA, Inc. and ACW provide legal, accounting, tax, treasury,
insurance, employee benefits, data processing, transportation and other services
to the Alcatel Business. Expenses that are directly attributable to the Alcatel
Business are charged directly to the Alcatel Business. Expenses that are not
directly attributable to a particular subsidiary or business unit of Alcatel NA,
Inc. or ACW are allocated each month to all subsidiaries and business units
receiving the services. Amounts allocated are based on a particular subsidiary
or business unit's relative percentage of net sales, payroll expenses and
average total assets to the net sales, payroll expenses and average total assets
of all the subsidiaries and business units receiving services. Administrative
fees allocated to the Alcatel Business for these services totaled $3,389 in
1992, $2,179 in 1993 and $1,254 in 1994. Management believes that the
administrative fees for these services would not have been materially different
if they had been incurred directly by the Alcatel Business.
8. EMPLOYEE BENEFIT PLANS:
The Alcatel Business has various noncontributory pension plans which cover
substantially all employees. Financial information related to these plans was
determined by the Alcatel Business's actuary, William M. Mercer Incorporated.
Net pension cost for the U.S. plans is summarized as follows:
<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost......................................................... $ 304 $ 286 $ 361
Interest cost........................................................ 186 213 279
Return on plan assets................................................ (86) (267) 17
Other................................................................ (76) 251 (235)
--------- --------- ---------
$ 328 $ 483 $ 422
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-31
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The funded status and accrued pension cost for the U.S. plans are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------------
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
------------- -------------
<S> <C> <C>
Fair value of plan assets.................................... $ 1,492 $ 1,050
Projected benefit obligation................................. 2,389 1,383
------ ------
Projected benefit obligation in excess of plan assets........ (897) (333)
Unrecognized net loss........................................ 378 326
Unrecognized prior service cost.............................. (47) 43
Adjustment required to recognize minimum liability........... 0 (371)
------ ------
Accrued pension cost......................................... $ (566) $ (335)
------ ------
------ ------
Accumulated benefits......................................... $ 1,377 $ 1,383
------ ------
------ ------
Vested benefits.............................................. $ 1,260 $ 1,205
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
------------- -------------
<S> <C> <C>
Fair value of plan assets.................................... $ 1,994 $ 1,280
Projected benefit obligation................................. 2,032 1,324
------ ------
Projected benefit obligation in excess of plan assets........ (38) (44)
Unrecognized net (gain) loss................................. (212) 154
Unrecognized prior service cost.............................. (43) 34
Adjustment required to recognize minimum liability........... 0 (186)
------ ------
Accrued pension cost......................................... $ (293) $ (42)
------ ------
------ ------
Accumulated benefits......................................... $ 1,306 $ 1,324
------ ------
------ ------
Vested benefits.............................................. $ 1,220 $ 1,224
------ ------
------ ------
</TABLE>
Actuarial assumptions used for the U.S. plans are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assumed discount rate................................................ 9.0% 8.0% 9.0%
Assumed rate of compensation increase -- salaried plan............... 5.5 5.5 5.0
Expected rate of return on plan assets............................... 8.0 8.0 8.0
-- -- --
-- -- --
</TABLE>
F-32
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
Net pension cost for the Canadian plans is summarized as follows:
<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost........................................................ $ 134 $ 113 $ 106
Interest cost....................................................... 224 224 227
Return on plan assets............................................... (207) (194) (214)
Other............................................................... 13 19 11
--------- --------- ---------
$ 164 $ 162 $ 130
--------- --------- ---------
--------- --------- ---------
</TABLE>
The funded status and accrued pension cost for the Canadian plans are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------------
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
------------- -------------
<S> <C> <C>
Fair value of plan assets.................................... $ 1,071 $ 1,720
Projected benefit obligation................................. 1,045 1,856
------ ------
Projected benefit obligation exceeded by (in excess) of plan
assets...................................................... 26 (136)
Unrecognized net gain........................................ (109) (130)
Unrecognized prior service cost.............................. 0 320
Adjustment required to recognize minimum liability........... 0 (190)
------ ------
Accrued pension cost......................................... $ (83) $ (136)
------ ------
------ ------
Accumulated benefits......................................... $ 725 $ 1,856
------ ------
------ ------
Vested benefits.............................................. $ 724 $ 1,763
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
------------- -------------
<S> <C> <C>
Fair value of plan assets.................................... $ 909 $ 1,584
Projected benefit obligation................................. 1,061 1,851
------ ------
Projected benefit obligation in excess of plan assets........ (152) (267)
Unrecognized net loss........................................ 21 34
Unrecognized prior service cost.............................. 0 284
Adjustment required to recognize minimum liability........... 0 (317)
------ ------
Accrued pension cost......................................... $ (131) $ (266)
------ ------
------ ------
Accumulated benefits......................................... $ 740 $ 1,851
------ ------
------ ------
Vested benefits.............................................. $ 739 $ 1,758
------ ------
------ ------
</TABLE>
F-33
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
Actuarial assumptions used for the Canadian plans are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assumed discount rate................................................ 8.0% 8.0% 8.0%
Assumed rate of compensation increase -- salaried plan............... 5.8 5.8 5.8
Expected rate of return on plan assets............................... 8.0 8.0 8.0
-- -- --
-- -- --
</TABLE>
The provisions of SFAS No. 87, "Employers' Accounting for Pensions," require
companies with any plans that have an unfunded accumulated benefit obligation to
recognize an additional minimum pension liability, an offsetting intangible
pension asset and, in certain situations, an adjustment to owners' investment,
net of the related deferred tax benefit. In accordance with the provisions of
SFAS No. 87, the combined balance sheets at December 31, 1993 and 1994, include
an intangible pension asset of $272 and $366, an additional minimum pension
liability of $561 and $503 and a cumulative adjustment to owners' investment,
net of the related deferred tax benefit of $176 and $96, respectively.
9. POSTRETIREMENT BENEFIT OBLIGATIONS OTHER THAN PENSIONS:
The Alcatel Business provides certain health care and life insurance
benefits for eligible retired employees in the U.S.. Financial information
related to this plan was determined by the Company's actuaries, William M.
Mercer, Incorporated.
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Service cost................................................................. $ 38 $ 37
Interest cost................................................................ 36 36
Amortization of the transition obligation.................................... 20 20
--- ---
$ 94 $ 93
--- ---
--- ---
</TABLE>
The funded status and accrued cost for the plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation --
Retirees................................................................ $ 33 $ 31
Fully eligible active plan participants................................. 100 117
Other active participants............................................... 369 321
--------- ---------
Accumulated benefit obligation............................................ 502 469
Unrealized net gain (loss)................................................ (30) 76
Unrecognized transition obligation........................................ (378) (358)
--------- ---------
Accrued postretirement cost............................................... $ 94 $ 187
--------- ---------
--------- ---------
</TABLE>
F-34
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
9. POSTRETIREMENT BENEFIT OBLIGATIONS OTHER THAN PENSIONS: (CONTINUED)
The accumulated postretirement benefit obligations were computed using an
assumed discount rate of 8.0% in 1993 and 9.0% in 1994. The health care cost
trend rate was assumed to be 13.0% for 1993 and 12.125% for 1994, then the trend
rate was assumed to decline by approximately 1% for each year to 6%, which would
continue for year 2001 and beyond.
If the health care cost trend rate were increased one percent for all future
years, the accumulated postretirement benefit obligation would have increased
20% as of December 31, 1993, and 18% as of December 31, 1994. The effect of this
change on the aggregate of service and interest cost for 1993 would have been an
increase of 23.16% and for 1994 would have been an increase of 20.23%.
10. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest paid.................................................... $ 1,766 $ 1,944 $ 1,980
Income taxes paid (received)..................................... 6,507 (906) 752
--------- --------- ---------
--------- --------- ---------
</TABLE>
11. FINANCIAL INSTRUMENTS AND CREDIT RISK:
The Alcatel Business's activities are primarily concentrated in the
telecommunications industry. As of December 31, 1994, a substantial portion of
the Alcatel Business's trade accounts receivables were from companies in that
industry.
In 1992, sales to these five customers comprised 0%, 4.9%, 10.1%, 24.0% and
14.3% of net sales. In 1993, sales to these five customers comprised 2.7%,
10.8%, 13.5%, 14.4% and 15.2% of net sales. In 1994, net sales to five customers
comprised 22.7%, 13.5%, 12.8%, 4.6% and .6%, respectively, of net sales.
Approximately 79.5% of net sales in 1992, 80.2% of net sales in 1993 and 81.2%
of net sales in 1994 were to 10 customers. Net export sales approximated 2.4% of
net sales in 1992, 15.5% in 1993 and 12.7% in 1994.
At December 31, 1994, the Alcatel Business had $6,027 of foreign currency
forward exchange contracts outstanding to hedge sales denominated in foreign
currencies. The forward exchange contracts' maturity dates do not exceed 12
months and require the Alcatel Business to exchange U.S. dollars for foreign
currencies at maturity, at rates agreed to at inception of the contracts.
The Alcatel Business enters into futures contracts to hedge certain copper
raw material purchases to minimize costs risks due to market fluctuations. At
December 31, 1994, the Alcatel Business had $2,400 million of copper futures
contracts that fix the price for a small portion of 1995 copper purchases.
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments,"
requires the disclosure of estimated fair values for financial instruments. The
statement requires all entities to disclose the fair value of financial
instruments, both assets and liabilities recognized and not recognized in the
balance sheet, for which it is practicable to estimate fair value. Quoted market
prices, if available, are utilized as an estimate of the fair value of financial
instruments.
COMMODITY FUTURES CONTRACTS
The fair value is estimated by obtaining market rate quotes. The contract
value of $2,400 at December 31, 1994, approximates market value.
F-35
<PAGE>
THE COPPER CABLE GROUP OF ALCATEL NA CABLE SYSTEMS, INC. AND
ALCATEL CANADA WIRE AND CABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
11. FINANCIAL INSTRUMENTS AND CREDIT RISK: (CONTINUED)
FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS
The contract value of $6,027 approximates market value.
12. GEOGRAPHIC AREA INFORMATION:
The Alcatel Business is engaged principally in one line of business --
copper telecommunications cable -- which represents substantially all of the
combined net sales. The following table presents information about the Alcatel
Business by geographic area. There were no material amounts of sales or
transfers among geographic areas.
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
---------- --------- ----------
<S> <C> <C> <C>
1992 --
Net sales................................................ $ 192,999 $ 35,853 $ 228,852
Pretax loss.............................................. (2,246) (2,741) (4,987)
Assets................................................... 82,964 23,605 106,569
1993 --
Net sales................................................ 177,519 35,091 212,610
Pretax income (loss)..................................... 7,085 (83) 7,002
Assets................................................... 91,789 26,717 118,506
1994 --
Net sales................................................ 164,062 30,589 194,651
Pretax income (loss)..................................... 125 (690) (565)
Assets................................................... 99,465 19,887 119,352
---------- --------- ----------
---------- --------- ----------
</TABLE>
Net export sales included in the United States net sales amounts above were
$5,401 in 1992, $20,772 in 1993 and $18,264 in 1994. Net export sales included
in the Canadian net sales amounts above were $0 in 1992, $12,107 in 1993 and
$6,431 in 1994.
13. CONTINGENCIES:
The Alcatel Business is involved in various litigation arising in the
ordinary course of business. Although the final outcome of these legal matters
cannot be determined, based on the facts presently known, it is management's
opinion that these matters are not significant and that their final resolution
will not have a material adverse effect on the Alcatel Business's financial
position or future results of operations.
14. SUBSEQUENT EVENTS:
In May 1995, ACS and ACW sold substantially all of the assets of the Alcatel
Business other than accounts receivable from affiliates to Superior TeleTec Inc.
("Superior"), a wholly owned subsidiary of The Alpine Group, Inc., and Superior
assumed certain liabilities of the Alcatel Business which did not include
amounts payable to affiliates.
F-36
<PAGE>
[The inside back cover contains a map of North America which shows the location
of the Company's customers and its manufacturing facilities.]
[INSERT DIAGRAM]
<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................................... 7
The Company.................................... 11
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Pro Forma Condensed Combined Financial
Statements.................................... 15
Selected Historical Combined Financial Data of
the Company................................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 20
Business....................................... 30
Management..................................... 38
Certain Transactions and Relationships......... 44
Principal Stockholders......................... 45
Description of Capital Stock................... 45
Shares Eligible for Future Sale................ 48
Underwriting................................... 49
Legal Matters.................................. 50
Experts........................................ 50
Available Information.......................... 50
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
SUPERIOR TELECOM INC.
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............................................... $ 38,069
NASD fee........................................................... 11,540
NASDAQ entry fee................................................... 47,560
Legal fees and expenses*...........................................
Printing and engraving expenses*...................................
Accounting fees and expenses*......................................
Blue sky fees and expenses*........................................
Miscellaneous*.....................................................
---------
Total.......................................................... $
---------
---------
</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
- --------- ---------------------------------------------------------------------------------------------------
<C> <S>
.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* 1996 Employees' Stock Incentive Plan
10.2* Employment Agreement between the Company and Steven S. Elbaum
10.3 Employment Agreement, dated April 26, 1996, between Superior and Justin F. Deedy, Jr.
10.4 Form of Services Agreement between the Company and Alpine
10.5 Form of Letter Agreement between the Company and Alpine relating to tax indemnification
10.6* Bank Credit Facility
10.7* 1996 Non-Employee Directors' 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)
<C> <S>
12* Statement re: computation of ratios
21 List of subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Proskauer Rose Goetz & Mendelsohn LLP (contained in opinion to be filed as Exhibit 5)
24.1 Power of Attorney (set forth on page II-4)
27* Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
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 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has duly caused this 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 7th day of August, 1996.
SUPERIOR TELECOM INC.
By: /s/ STEVEN S. ELBAUM
-----------------------------------
Steven S. Elbaum
PRESIDENT, CHAIRMAN OF THE BOARD
AND
CHIEF EXECUTIVE OFFICER
SIGNATURES AND POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below hereby constitutes and appoints Steven S. Elbaum and
David S. Aldridge, or either of them, as his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities (until revoked in writing),
any and all amendments (including post-effective amendments) to this
Registration Statement on Form S-1, and any registration statement relating to
the same Offering as this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) and the Securities Act of 1933, to file the same
with all exhibits thereto and all other documents in connection therewith with
the Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do all such other acts and
things requisite or necessary to be done, and to execute all such other
documents as they, or either of them, may deem necessary or desirable in
connection with the foregoing, as fully as the undersigned might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
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 August 7, 1996
Steven S. Elbaum officer)
/s/ DAVID S. ALDRIDGE Chief Financial Officer
------------------------------------------- (principal financial and August 7, 1996
David S. Aldridge accounting officer)
/s/ BRAGI F. SCHUT
------------------------------------------- Director August 7, 1996
Bragi F. Schut
</TABLE>
II-4
<PAGE>
6,000,000 SHARES
SUPERIOR TELECOM INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
_____, 1996
FURMAN SELZ LLC
OPPENHEIMER & CO., INC.
BT SECURITIES CORPORATION
As Representatives of the
several Underwriters
c/o Furman Selz LLC
230 Park Avenue
New York, New York 10169
Dear Sirs:
1. INTRODUCTION. Superior TeleCom Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "Underwriters"), for which Furman Selz LLC, Oppenheimer &
Co., Inc., and BT Securities Corporation are acting as representatives (the
"Representatives"), an aggregate of 6,000,000 shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"). The 6,000,000 shares of
Common Stock to be sold by the Company are referred to herein as the "Firm
Shares." The Company also proposes to issue and sell to the several
Underwriters an aggregate of not more than 900,000 additional shares of Common
Stock (the "Additional Shares"), if requested by the Underwriters in accordance
with Section 9 hereof. The Firm Shares and the Additional Shares are
collectively referred to herein as the "Shares." The words "you" and "your"
refer to the Representatives of the Underwriters.
<PAGE>
The Company hereby agrees with the several Underwriters as follows:
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company and The Alpine Group, Inc. (the "Parent") represent,
warrant and agree with each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-
__________) under the Securities Act of 1933, as amended (the "Act"), with
respect to the Shares, including a form of prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder (the "Rules and
Regulations"). Such registration statement has been filed with the
Commission under the Act, and one or more amendments to such registration
statement may also have been so filed. After the execution of this
Agreement, the Company shall file with the Commission either (i) if such
registration statement, as it may have been amended, has been declared by
the Commission to be effective under the Act, either (A) if the Company
relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Shares, that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements and containing such information as
is required by Rules 434 and 430A under the Act or permitted by Rule 424(b)
under the Act or (B) if the Company does not rely on Rule 434 under the
Act, a prospectus in the form most recently included in an amendment to
such registration statement filed with the Commission (or, if no such
amendment shall have been filed, in such registration statement), with such
insertions and changes as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act, and in the case of either clause
(i)(A) or (i)(B) of this sentence as shall have been provided to and
approved by the Representatives prior to the filing thereof, or (ii) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act, an amendment to
such registration statement, including a form of prospectus, a copy of
which amendment has been furnished to and approved by the Representatives
prior to the filing thereof. As used in this Agreement, the term
"Registration Statement" means such registration statement, as amended at
the time when it was or is declared effective, including all financial
schedules and exhibits thereto; the Registration Statement shall be deemed
to include any information omitted therefrom pursuant to Rule 430A under
the Act and included in the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus"
- 2 -
<PAGE>
means each prospectus subject to completion contained in such registration
statement or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any amendment
thereto or filed pursuant to Rule 424(a) under the Act at the time it was
or is declared effective); the term "Prospectus" means: (A) if the Company
relies on Rule 434 under the Act, the Term Sheet relating to the Shares
that is first filed pursuant to Rule 424(b)(7) under the Act, together with
the Preliminary Prospectus identified therein that such Term Sheet
supplements; (B) if the Company does not rely on Rule 434 under the Act,
the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act; or (C) if the Company does not rely on Rule 434 under the
Act and if no prospectus is required to be filed pursuant to Rule 424(b)
under the Act, the prospectus included in the Registration Statement; and
the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference to the "date" of a Prospectus
that contains a Term Sheet shall mean the date of such Term Sheet. The
Company has made in a timely manner any filing required under Rule 462(b)
under the Act ("Rule 462(b)") and such filing complies with such Rule.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus and has not instituted or
threatened to institute any proceedings with respect to such an order.
When any Preliminary Prospectus was filed with the Commission it (A)
contained all statements required to be stated therein in accordance with,
and complied in all material respects with the requirements of, the Act and
the Rules and Regulations and (B) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (A) contained or will
contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
When the Prospectus or any Term Sheet that is a part thereof and when any
amendment or supplement thereto is filed with the Commission pursuant to
Rule 424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement and when any
amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at all
- 3 -
<PAGE>
times subsequent thereto up to and including the Closing Date (as defined
in Section 3 hereof) and the Option Closing Date (as defined in Section 9
hereof), the Prospectus, as amended or supplemented at any such time,
including any amendment or supplement effected by a Term Sheet (A)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with
the requirements of, the Act and the Rules and Regulations and (B) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (ii) shall not
apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon, and in conformity with,
information furnished in writing to the Company by or on behalf of the
Underwriters through the Representatives expressly for use therein.
(iii) Each of the Company and its subsidiaries (each, a
"Subsidiary" and together, the "Subsidiaries") (A) is a duly incorporated
and validly existing corporation in good standing under the laws of its
jurisdiction of incorporation, with full power and authority (corporate and
other) to own or lease its properties and to conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus);
and (B) is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction (x) in which the conduct of its business
requires such qualification (except for those jurisdictions in which the
failure so to qualify has not had and will not have a Material Adverse
Effect (as hereinafter defined)) and (y) in which it owns or leases
property. "Material Adverse Effect" means, when used in connection with
the Company or a Subsidiary, any development, change or effect that is
materially adverse to the business, properties, assets, net worth,
condition (financial or other), results of operations or prospects of the
Company and the Subsidiaries taken as a whole.
(iv) The Company has the duly authorized and validly outstanding
capitalization set forth under the caption "Capitalization" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, based on the
assumptions set forth therein. The securities of the Company conform to
the descriptions
- 4 -
<PAGE>
thereof contained in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The outstanding shares
of Common Stock have been duly authorized and validly issued by the Company
and are fully paid and nonassessable. Except as created hereby or referred
to in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), there are no outstanding options, warrants,
rights or other arrangements requiring the Company or any Subsidiary at any
time to issue any capital stock. No holders of outstanding shares of
capital stock of the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Shares and neither the filing of
the registration statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to, the registration
of any securities of the Company. The Shares have been duly authorized; on
the Closing Date or the Option Closing Date (as the case may be), after
payment therefor in accordance with the terms of this Agreement, (A) the
Firm Shares and the Additional Shares to be sold by the Company hereunder
will be validly issued, fully paid and nonassessable, and (B) good and
marketable title to the Shares will pass to the Underwriters on the Closing
Date or the Option Closing Date (as the case may be) free and clear of any
lien, encumbrance, security interest, claim or other restriction
whatsoever. Except for 20,000 shares of 6% Cumulative Non-Voting Preferred
Stock of Superior owned by the Parent (the "Superior Preferred Stock"), all
the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are
owned directly by the Company, free and clear of any lien, encumbrance,
security interest, claim or other restriction whatsoever. The Company has
received, subject to notice of issuance, approval to have the Shares listed
on the National Association of Securities Dealers' Automated Quotation
National Market ("Nasdaq National Market") and the Company knows of no
reason or set of facts which is likely to adversely affect such approval.
(v) The combined financial statements of Superior
Telecommunications Inc. and subsidiary and DNE Systems Inc. and
subsidiaries and the related notes and schedules thereto included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the
combined financial condition, results of operations, stockholders' equity
and cash flows of Superior Telecommunications Inc. and subsidiary and DNE
Systems Inc. and subsidiaries at the dates and for the periods specified
therein. The combined financial statements of The Copper
- 5 -
<PAGE>
Cable Group of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire and
Cable, Inc. included in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present the combined financial condition, results of
operations, stockholders' equity and cash flows of The Copper Cable Group
of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire and Cable, Inc.
at the dates and for the periods specified therein. The financial
statements described in the two preceding sentences and the related notes
and schedules thereto have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein) and such financial statements
as are audited have been examined by Arthur Andersen LLP, who are
independent public accountants within the meaning of the Act and the Rules
and Regulations, as indicated in their reports filed therewith. The
selected financial information and statistical data set forth under the
caption "Selected Historical Combined Financial Data of the Company" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) have been prepared on a basis consistent with the
financial statements of the Company and the Subsidiaries. The unaudited
pro forma condensed combined financial statements of the Company and the
related notes thereto set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence the most recent
Preliminary Prospectus), have been prepared in conformity with the
requirements of the Act and the Rules and Regulations and present fairly
the information shown therein; and the pro forma adjustments on such
unaudited pro forma condensed combined financial statements have been
properly applied on the basis described in the related notes thereto. The
pro forma financial data set forth in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), under the
caption "Summary Financial Data" have been prepared on a basis consistent
with the unaudited pro forma condensed combined financial statements of the
Company.
(vi) The Company and each of the Subsidiaries have filed all
necessary federal, state and local income, franchise and other material tax
returns and have paid all taxes shown as due thereunder, and the Company
has no knowledge of any tax deficiency which might be assessed against the
Company which, if so assessed, may have a Materially Adverse Effect.
(vii) The Company and each of the Subsidiaries maintain insurance
of the types and in amounts which they reasonably believe to be adequate
for their business in
- 6 -
<PAGE>
such amounts and with such deductibles as is customary for companies in the
same or similar business, all of which insurance is in full force and
effect.
(viii) Except as disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there is no
pending action, suit, proceeding or investigation or threatened action,
suit, proceeding or investigation before or by any court, regulatory body
or administrative agency or any other governmental agency or body, domestic
or foreign, which (A) questions the validity of the capital stock of the
Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (B) is required
to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings, if any, as are summarized in the Registration
Statement are accurately summarized in all respects), or (C) may have a
Material Adverse Effect.
(ix) The Company has full legal right, power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. This Agreement has been duly authorized, executed and delivered by
the Company and, assuming it is a binding agreement of yours, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting the enforcement
of creditors' rights and the application of equitable principles relating
to the availability of remedies and except as rights to indemnity or
contribution may be limited by federal or state securities laws and the
public policy underlying such laws), and none of the Company's execution or
delivery of this Agreement, its performance hereunder, its consummation of
the transactions contemplated herein, its application of the net proceeds
of the offering in the manner set forth under the caption "Use of Proceeds"
or the conduct of its business as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
conflicts or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a default under, causes or will cause (or permits or will
permit) the maturation or acceleration of any liability or obligation or
the termination or right of termination of any right under, or result in
the creation or imposition of any lien, charge, or encumbrance upon, any
property or assets of the Company or any of the Subsidiaries pursuant to
the terms of (A) the certificate of incorporation or by-
- 7 -
<PAGE>
laws of the Company or any of the Subsidiaries, (B) any indenture,
mortgage, deed of trust, voting trust agreement, stockholders' agreement,
note agreement or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which any of them are or may be bound
or to which any of their respective property is or may be subject or
(C) any statute, judgment, decree, order, rule or regulation applicable to
the Company or any of the Subsidiaries of any government, arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body, domestic or foreign, having jurisdiction over the Company,
any of the Subsidiaries or any of their respective activities or
properties.
(x) All executed agreements or copies of executed agreements
filed or incorporated by reference as exhibits to the Registration
Statement to which the Company or any of the Subsidiaries is a party or by
which any of them are or may be bound or to which any of their assets,
properties or businesses is or may be subject have been duly and validly
authorized, executed and delivered by the Company or such Subsidiary, as
the case may be, and constitute the legal, valid and binding agreements of
the Company or such Subsidiary, as the case may be, enforceable against
each of them in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors'
rights generally, and general equitable principles relating to the
availability of remedies, and except as rights to indemnity or contribution
may be limited by federal or state securities laws and the public policy
underlying such laws). The descriptions in the Registration Statement of
contracts and other documents are accurate and fairly present the
information required to be shown with respect thereto by the Act and the
Rules and Regulations, and there are no contracts or other documents which
are required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required or incorporated therein by
reference, and the exhibits which have been filed are complete and correct
copies of the documents of which they purport to be copies.
(xi) Subsequent to the most recent respective dates as of which
information is given in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and except as expressly
contemplated therein, neither the Company nor any of the Subsidiaries has
incurred, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent, purchased any of its
- 8 -
<PAGE>
outstanding capital stock, paid or declared any dividends or other
distributions on its capital stock or entered into any material
transactions not in the ordinary course of business, and there has been no
material change in capital stock or debt or any material adverse change in
the business, properties, assets, net worth, condition (financial or
other), or results of operations or prospects of the Company and the
Subsidiaries taken as a whole. Neither the Company nor any of the
Subsidiaries (or the manner in which any of them conducts its business) is
in breach or violation of, or in default under, any term or provision of
(A) its certificate of incorporation or bylaws, (B) any indenture,
mortgage, deed of trust, voting trust agreement, stockholders' agreement,
note agreement or other agreement or instrument to which it is a party or
by which it is or may be bound or to which any of its property is or may be
subject, or any indebtedness, the effect of which breach or default singly
or in the aggregate may have a Material Adverse Effect, or (C) any statute,
judgment, decree, order, rule or regulation applicable to the Company or
any of the Subsidiaries or of any arbitrator, court, regulatory body,
administrative agency or any other governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of the Subsidiaries or
any of their respective activities or properties and the effect of which
breach or default singly or in the aggregate may have a Material Adverse
Effect.
(xii) No labor disturbance by the employees of the Company or any
of the Subsidiaries exists or is imminent which may have a Material Adverse
Effect.
(xiii) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(xiv) Each of the Company and the Subsidiaries owns, or is
licensed or otherwise has sufficient right to use, the proprietary
knowledge, inventions, patents, trademarks, service marks, trade names,
logo marks and copyrights used in or necessary for the conduct of its
business (collectively "Rights") as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
No claims have been asserted against the Company or any of the Subsidiaries
by any person with respect to the use of any such Rights or challenging or
questioning the validity or effectiveness of any such Rights. The use, in
connection with the business and operations of the Company of such Rights
does not, to the Company's best knowledge, infringe on the rights of any
person.
- 9 -
<PAGE>
(xv) No consent, approval, authorization or order of or filing
with any court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, is required for the
performance of this Agreement or the consummation of the transactions
contemplated hereby, except such as have been or may be obtained under the
Act or may be required under state securities or Blue Sky laws in
connection with the Underwriters' purchase and distribution of the Shares.
(xvi) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities under the Registration Statement
(other than those that have been disclosed in the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
that have not been waived with respect to the Registration Statement.
(xvii) Neither the Company nor any of its officers, directors or
affiliates (within the meaning of the Rules and Regulations) has taken,
directly or indirectly, any action designed to stabilize or manipulate the
price of any security of the Company, or which has constituted or which
might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company,
to facilitate the sale or resale of the Shares or otherwise.
(xviii) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold interests in, all
properties and assets owned or leased by it, free and clear of all liens,
encumbrances, security interests, claims, restrictions, equities, claims
and defects, except (A) such as are described in the Registration Statement
and Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), or such as do not materially adversely affect the
value of any of such properties or assets taken as a whole and do not
materially interfere with the use made and proposed to be made of any of
such properties or assets, and (B) liens for taxes not yet due and payable
as to which appropriate reserves have been established and reflected in the
financial statements included in the Registration Statement. The Company
owns or leases all such properties as are necessary to its operations as
now conducted, and as proposed to be conducted as set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus); and
- 10 -
<PAGE>
the properties and business of the Company and the Subsidiaries conform in
all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All the material leases
and subleases of the Company and the Subsidiaries, and under which the
Company or any Subsidiary holds properties or assets as lessee or
sublessee, constitute valid leasehold interests of the Company or such
Subsidiary free and clear of any lien, encumbrance, security interest,
restriction, equity, claim or defect, are in full force and effect, and
neither the Company nor any Subsidiary is in default in respect of any of
the material terms or provisions of any such material leases or subleases,
and neither the Company nor any Subsidiary has notice of any claim which
has been asserted by anyone adverse to the Company's or any of its
Subsidiary's rights as lessee or sublessee under either the material lease
or sublease, or affecting or questioning the Company's or any Subsidiary's
right to the continued possession of the leased or subleased premises under
any such material lease or sublease, which may have a Material Adverse
Effect.
(xix) Neither the Company nor any Subsidiary has violated any
applicable environmental, safety, health or similar law applicable to the
business of the Company, nor any federal or state law relating to
discrimination in the hiring, promotion, or pay of employees, nor any
applicable federal or state wages and hours law, nor any provisions of
ERISA or the rules and regulations promulgated thereunder, the consequences
of which violation may have a Material Adverse Effect.
(xx) Each of the Company and the Subsidiaries holds all
franchises, licenses, permits, approvals, certificates and other
authorizations from federal, state and other governmental or regulatory
authorities necessary to the ownership, leasing and operation of its
properties or required for the present conduct of its business, and such
franchises, licenses, permits, approvals, certificates and other
governmental authorizations are in full force and effect and the Company
and the Subsidiaries are in compliance therewith in all material respects
except where the failure so to obtain, maintain or comply with would not
have a Material Adverse Effect.
(xxi) No Subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such Subsidiary's capital stock, from
repaying to the Company any loans or advances to such Subsidiary from the
Company or from transferring any of
- 11 -
<PAGE>
such Subsidiary's property or assets to the Company or any other Subsidiary
of the Company, except as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xxii) The descriptions in the Registration Statement of the
Reorganization (as defined in the Registration Statement) and related
transactions referred to in the Prospectus, the Bank Credit Facility, (as
defined in the Registration Statement) and the Superior Preferred Stock are
accurate and fairly present in all material respects the information
required to be shown with respect thereto by the Act and the Rules and
Regulations. The $2,000,000 cost of pro forma services which would have
been rendered by the Parent to the Company, as set forth under "Certain
Transactions and Relationships," represents the Company's good faith
estimate of such cost, based on the best information available to it. The
Bank Credit Facility and the Reorganization and the consummation by the
Company of the related transactions have been duly and validly authorized
by the directors of the Company and by the Parent as sole stockholder of
the Company, and no other corporate proceedings on the part of the Company,
or other person or entity, are necessary to authorize the Bank Credit
Facility and the Reorganization or the consummation by the Company of the
related transactions. All approvals, consents, licenses and authorizations
of, and declarations and exemptions from, and filings and registrations
with, all persons and entities required in connection with the Bank Credit
Facility and the Reorganization and the consummation by the Company of the
related transactions have been obtained or made, as the case may be. None
of the Bank Credit Facility and the Reorganization and related transactions
will violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
the right of termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, the conditions or
provisions of any material contract of the Company, the Parent or any of
the Subsidiaries.
3. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to sell
to each Underwriter and each Underwriter, severally and not jointly, agrees to
purchase from the Company at a purchase price of $______________ per Share, the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule I hereto.
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<PAGE>
Delivery of certificates, and payment of the purchase price, for the Firm
Shares shall be made at the offices of Furman Selz LLC at 230 Park Avenue, New
York, New York 10169, or such other location as shall be agreed upon by the
Company and the Representatives. Such delivery and payment shall be made at
10:00 a.m., New York City time, on __________, 1996 or at such other time and
date not more than ten business days thereafter as shall be agreed upon by the
Representatives and the Company. The time and date of such delivery and payment
are herein called the "Closing Date." Delivery of the certificates for the Firm
Shares shall be made to the Representatives for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price for the Firm Shares by certified or
official bank checks in New York Clearing House (next day) funds drawn to the
order of the Company in the case of the Firm Shares sold by it. The
certificates for the Shares to be so delivered will be in definitive, fully
registered form, will bear no restrictive legends and will be in such
denominations and registered in such names as the Representatives shall request,
not less than two full business days prior to the Closing Date. The
certificates for the Firm Shares will be made available to the Representatives
at such office or such other place as the Representatives may designate for
inspection, checking and packaging not later than 9:30 a.m., New York time on
the business day prior to the Closing Date.
4. PUBLIC OFFERING OF THE SHARES. It is understood that the Underwriters
propose to make a public offering of the Shares at the price and upon the other
terms set forth in the Prospectus.
5. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with each of the Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as promptly as
practicable. If required, the Company will file the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement
thereto with the Commission in the manner and within the time period
required by Rules 424(b) and 434 under the Act. During any time when a
prospectus relating to the Shares is required to be delivered under the
Act, the Company (A) will comply with all requirements imposed upon it by
the Act and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and of the Prospectus, as then amended or
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supplemented, and (B) will not file with the Commission the prospectus,
Term Sheet or the amendment referred to in the third sentence of Section
2(a)(i) hereof, any amendment or supplement to such prospectus, Term Sheet
or any amendment to the Registration Statement of which the Representatives
shall not previously have been advised and furnished with a copy a
reasonable period of time prior to the proposed filing and as to which
filing the Representatives shall not have given their consent. In the
event that the Registration Statement is effective at the time of execution
of this Agreement but the total number of Shares subject to this Agreement
exceeds the number of Shares covered by the Registration Statement, the
Company will promptly file with the Commission on the date hereof a
registration statement pursuant to Rule 462(b) in accordance with the
requirements of such Rule and will make payment of the filing fee therefor
in accordance with the requirements of Rule 111(b) under the Act.
(ii) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representatives (A) when the
Registration Statement, as amended, has become effective; if the provisions
of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(B) of any request made by the Commission for amending the Registration
Statement, for supplementing any Preliminary Prospectus or the Prospectus
or for additional information, or (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or any post-effective amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or the institution or threat of any
investigation or proceeding for that purpose, and will use its best efforts
to prevent the issuance of any such order and, if issued, to obtain the
lifting thereof as soon as possible.
(iii) The Company will (A) use its best efforts to arrange for the
qualification of the Shares for offer and sale under the state securities
or blue sky laws of such jurisdictions as the Representatives may
designate, (B) continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares, and (C) make such
applications, file such documents and furnish such information as may be
required for the purposes set forth in clauses (A) and (B); PROVIDED,
HOWEVER, that the Company shall not be required to qualify as a foreign
corporation or file a general or unlimited consent to service of process in
any such jurisdiction.
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<PAGE>
(iv) The Company consents to the use of the Prospectus (and any
amendment or supplement thereto) by the Underwriters and all dealers to
whom the Shares may be sold, in connection with the offering or sale of the
Shares and for such period of time thereafter as the Prospectus is required
by law to be delivered in connection therewith. If, at any time when a
prospectus relating to the Shares is required to be delivered under the
Act, any event occurs as a result of which the Prospectus, as then amended
or supplemented, would include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading, or if it becomes necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Rules and Regulations, the
Company promptly will so notify the Representatives and, subject to Section
5(a)(i) hereof, will prepare and file with the Commission an amendment to
the Registration Statement or an amendment or supplement to the Prospectus
which will correct such statement or omission or effect such compliance,
each such amendment or supplement to be reasonably satisfactory to counsel
to the Underwriters.
(v) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company
will make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representatives, an earnings statement which will be in the detail required
by, and will otherwise comply with, the provisions of Section 11(a) of the
Act and Rule 158(a) of the Rules and Regulations, which statement need not
be audited unless required by the Act or the Rules and Regulations,
covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(vi) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver
to the Representatives:
(A) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each quarter
in the form furnished to the Company's stockholders and certified
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<PAGE>
by the Company's principal financial or accounting officer;
(B) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of independent
public accountants;
(C) as soon as they are available, copies of all
information (financial or other) mailed to stockholders;
(D) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the National Association of Securities Dealers, Inc. ("NASD") or any
securities exchange;
(E) every press release and every material news item or
article of interest to the financial community in respect of the
Company or its affairs which was released or prepared by the Company;
and
(F) any additional information of a public nature
concerning the Company or its business which the Representatives may
reasonably request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and the Subsidiaries
are consolidated, and will be accompanied by similar financial statements
for any significant Subsidiary which is not so consolidated.
(vii) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which
may be the same entity as the Transfer Agent) for its Common Stock.
(viii) The Company will furnish, without charge, to the
Representatives or on the Representatives' order, at such place as the
Representatives may designate, copies of the each Preliminary Prospectus,
the Registration Statement and any pre-effective or post-effective
amendments thereto, and any registration statement filed pursuant to Rule
462(b) (two of which copies will be signed and will include all financial
statements and exhibits) and the Prospectus, and all amendments and
supplements thereto, including any
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<PAGE>
Term Sheet, in each case as soon as available and in such quantities as the
Representatives may reasonably request. The Company will provide or cause
to be provided to the Representatives and upon request to each Underwriter,
a copy of the report on Form SR filed by the Company as required by Rule
463 under the Act.
(ix) The Company will not, directly or indirectly, without the
prior written consent of the Representatives, issue, offer, sell, grant any
option to purchase or otherwise dispose (or announce any issuance, offer,
sale, grant of any option to purchase or other disposition) of any shares
of Common Stock or any securities convertible into, or exchangeable or
exercisable for, shares of Common Stock for a period of 180 days after the
date hereof, except pursuant to this Agreement and except as contemplated
by the Prospectus.
(x) The Company will cause the Shares to be duly listed on the
Nasdaq National Market prior to the Closing Date.
(xi) Neither the Company nor any of its officers or directors,
nor affiliates of any of them (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the
Company.
(xii) The Company will apply the net proceeds of the offering
received by it in the manner set forth under the caption "Use of Proceeds"
in the Prospectus.
(xiii) The Company will timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Rules and Regulations, the Exchange Act, and the rules and regulations
thereunder, and all such reports, forms and documents filed will comply as
to form and substance with the applicable requirements under the Act, the
Rules and Regulations, the Exchange Act and the rules and regulations
thereunder.
(xiv) As soon as practicable after the completion of the Offering,
the Company will establish an Audit Committee of the Board of Directors
which will establish policies to review and approve any future agreements
between or among any of the Parent, the Company, and the Subsidiaries and
will ensure that all purchases by the Company of services from the Parent
are on commercially reasonable terms.
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<PAGE>
6. EXPENSES.
(a) Regardless of whether the transactions contemplated in this
Agreement are consummated, and regardless of whether for any reason this
Agreement is terminated, the Company will pay, and hereby agree to indemnify
each Underwriter against, all fees and expenses incident to the performance of
the obligations of the Company under this Agreement, including, but not limited
to, (i) fees and expenses of accountants and counsel for the Company, (ii) all
costs and expenses incurred in connection with the preparation, duplication,
printing, filing, delivery and shipping of copies of the Registration Statement
and any pre-effective or post-effective amendments thereto, any registration
statement filed pursuant to Rule 462(b) any Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto (including postage costs
related to the delivery by the Underwriters of any Preliminary Prospectus or
Prospectus, or any amendment or supplement thereto), this Agreement, the
Agreement Among Underwriters, any Selected Dealer Agreement, Underwriters'
Questionnaire, Underwriters' Power of Attorney, and all other documents in
connection with the transactions contemplated herein, including the cost of all
copies thereof, (iii) fees and expenses relating to qualification of the Shares
under state securities or blue sky laws, including the cost of preparing and
mailing the preliminary and final blue sky memoranda and filing fees and
disbursements and fees of counsel and other related expenses, if any, in
connection therewith, (iv) filing fees of the Commission and the NASD relating
to the Shares, (v) any fees and expenses in connection with the quotation of the
Shares on the Nasdaq National Market and (vi) costs and expenses incident to the
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including transfer agent's and registrar's fees and any
applicable transfer taxes incurred in connection with the delivery to the
Underwriters of the Shares to be sold by the Company pursuant to this Agreement.
(b) If the purchase of the Shares as herein contemplated is not
consummated for any reason other than the Underwriters' default under this
Agreement or other than by reason of Section 11(a), the Company shall reimburse
the several Underwriters for their out-of-pocket expenses (including reasonable
counsel fees and disbursements) in connection with any investigation made by
them, and any preparation made by them in respect of marketing of the Shares or
in contemplation of the performance by them of their obligations hereunder.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Shares set forth opposite the name of
such Underwriter in Schedule I is subject to the continuing accuracy of the
representations and warranties of the Company herein as of the
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<PAGE>
date hereof and as of the Closing Date as if they had been made on and as of the
Closing Date; the accuracy on and as of the Closing Date of the statements of
officers of the Company made pursuant to the provisions hereof; the performance
by the Company on and as of the Closing Date of its covenants and agreements
hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the Act,
the Registration Statement shall have been declared effective, and the
Prospectus (containing the information omitted pursuant to Rule 430A) shall have
been filed with the Commission not later than the Commission's close of business
on the second business day following the date hereof or such later time and date
to which the Representatives shall have consented; if the Company does not elect
to rely on Rule 430A, the Registration Statement shall have been declared
effective not later than 11:00 A.M., New York time, on the date hereof or such
later time and date to which the Representatives shall have consented; if
required, in the case of any changes in or amendments or supplements to the
Prospectus in addition to those contemplated above, the Company shall have filed
such Prospectus or any Term Sheet that constitutes a part thereof as amended or
supplemented with the Commission in the manner and within the time period
required by Rules 424(b) and 434 under the Act; no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall have
been issued, and no proceedings for that purpose shall have been instituted or
threatened or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission; and the Company shall have complied with any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise).
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representatives' opinion, is material, or omits to state a
fact which, in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representatives' opinion, is material, or omits to state a
fact which, in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representatives shall have
received from counsel to the Underwriters, such opinion or opinions with respect
to the issuance and sale of the Firm Shares, the Registration Statement and the
Prospectus and such other related matters as the Repre
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<PAGE>
sentatives reasonably may request and such counsel shall have received such
documents and other information as they request to enable them to pass upon such
matters.
(d) On the Closing Date the Underwriters shall have received the
opinion, dated the Closing Date, of Proskauer Rose Goetz & Mendelsohn LLP,
counsel to the Company ("Company Counsel"), to the effect set forth below:
(i) Each of the Company and each of the Subsidiaries (A) is a
duly incorporated and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation with full power and authority
(corporate and other) to own or lease its properties and to conduct its
business as described in the Prospectus, and (B) is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction (x) in which the conduct of its business requires such
qualification (except for those jurisdictions in which the failure so to
qualify can be cured without having a Material Adverse Effect) and (y) in
which it owns or leases property;
(ii) The Company has authorized capital stock as set forth in the
Prospectus; the securities of the Company conform in all material respects
to the description thereof contained in the Prospectus; the outstanding
shares of Common Stock have been duly authorized and validly issued by the
Company, are fully paid and nonassessable, and are free of any preemptive,
subscription or other rights to subscribe for any of the Shares; the
Company has duly authorized the issuance and sale of the Shares to be sold
by it hereunder; such Shares, when issued by the Company and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will conform in all material respects to the description
thereof contained in the Prospectus and will not be subject to any
preemptive, subscription or other similar rights; and the Shares have been
duly authorized for quotation on the Nasdaq National Market;
(iii) The Registration Statement is effective under the Act; any
required filing of a registration statement pursuant to Rule 462(b) has
been in the manner and within the time period required by Rule 462(b); any
required filing of the Prospectus or any Term Sheet that constitutes a part
thereof pursuant to Rules 424(b) and 434 has been made in the manner and
within the time periods required by Rules 424(b) and 434; and no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto has been issued, and no proceedings for that purpose have been
instituted or are
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pending or, to the best knowledge of such counsel, are threatened or
contemplated under the Act; the registration statement originally filed
with respect to the Shares and each amendment thereto and the Prospectus
and, if any, each amendment and supplement thereto (except for the
financial statements, schedules and other financial data included therein,
as to which such counsel need not express any opinion), complied as to form
in all material respects with the requirements of the Act and the Rules and
Regulations; the descriptions contained and summarized in the Registration
Statement and the Prospectus of contracts and other documents, are accurate
and fairly represent in all material respects the information required to
be shown by the Act and the Rules and Regulations; to the best knowledge of
such counsel, there are no contracts or documents which are required by the
Act to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not described
or filed as required by the Act and the Rules and Regulations; to the best
knowledge of such counsel, there is not pending or threatened against the
Company any action, suit, proceeding or investigation before or by any
court, regulatory body, or administrative agency or any other governmental
agency or body, domestic or foreign, of a character required to be
disclosed in the Registration Statement or the Prospectus which is not so
disclosed therein; and the statements set forth under the headings "Risk
Factors -- Intercorporate Relationships with Alpine;" "Risk Factors --
Environmental Matters;" "Risk Factors -- Potential Effects of Anti-Takeover
Provisions;" "The Company -- The Reorganization and Related Transactions;"
"Business -- Properties;" "Business -- Environmental Matters;" "Business --
Legal Proceedings;" "Management -- Executive Compensation;" "Certain
Transactions and Relationships;" "Description of Capital Stock;" and "Legal
Matters" in the Prospectus, insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein, provide
an accurate summary of such legal matters, documents and proceedings;
(iv) The Company has full legal right, power, and authority to
enter into this Agreement and to consummate the transactions provided for
herein; this Agreement has been duly authorized, executed and delivered by
the Company; and this Agreement, assuming due authorization, execution and
delivery by each other party hereto, is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
now or hereafter in effect relating to or affecting creditors' rights
generally or by general principles of equity relating to the availability
of remedies and except
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as rights to indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. None of the
Company's execution or delivery of this Agreement, its performance hereof,
its consummation of the transactions contemplated herein or its application
of the net proceeds of the offering in the manner set forth under the
caption "Use of Proceeds", conflicts or will conflict with or results or
will result in any breach or violation of any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon, any property or assets of the
Company or any of the Subsidiaries pursuant to the terms of the certificate
of incorporation or by-laws of the Company or any of the Subsidiaries; the
terms of any indenture, mortgage, deed of trust, voting trust agreement,
stockholder's agreement, note agreement or other agreement or instrument
known to such counsel after reasonable investigation to which the Company
or any of the Subsidiaries is a party or by which it or any of the
Subsidiaries is or may be bound or to which any of their respective
properties may be subject; any statute, rule or regulation of any
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having jurisdiction over the Company or any of
the Subsidiaries or any of their respective activities or properties; or
any judgment, decree or order, known to such counsel after reasonable
investigation, of any government, arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, domestic or
foreign, having such jurisdiction; and no consent, approval, authorization
or order of any court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, has been or is required
for the Company's performance of this Agreement or the consummation of the
transactions contemplated hereby, except such as have been obtained under
the Act or may be required under state securities or blue sky laws in
connection with the purchase and distribution by the Underwriters of the
Shares;
(v) To the best of such counsel's knowledge, the conduct of the
businesses of the Company and the Subsidiaries is not in violation of any
federal, state or local statute, administrative regulation or other law,
which violation is likely to have a Material Adverse Effect; and each of
the Company and the Subsidiaries has obtained all licenses, permits,
franchises, certificates and other authorizations from state, federal and
other regulatory authorities as are necessary or required for the
ownership, leasing and operation of its properties and the
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conduct of its business as presently conducted and as contemplated in the
Prospectus;
(vi) The issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and are owned by the Company free and clear of any
perfected security interests or, to the best knowledge of such counsel, any
other liens, encumbrances, claims or security interests; no Subsidiary of
the Company is currently prohibited, directly or indirectly, from paying
any dividends to the Company, from making any other distribution on such
Subsidiary's capital stock, from repaying to the Company any loans or
advances to such Subsidiary from the Company or from transferring any of
such Subsidiary's property or assets to the Company or any other Subsidiary
of the Company, except as described in or contemplated by the Prospectus;
(vii) Each of the Company and the Subsidiaries owns, or is
licensed or otherwise has sufficient rights to use, the Rights used in, or
necessary for, the conduct of its business as described in the Prospectus.
To the best of such counsel's knowledge, except as described in the
Prospectus, no claims have been asserted against the Company or any of the
Subsidiaries by any person to the use of any such rights or challenging or
questioning the validity or effectiveness of any such rights. The use, in
connection with the business and operations of the Company and the
Subsidiaries of such rights does not, to the best of such counsel's
knowledge, infringe on the rights of any person.
(viii) The descriptions in the Registration Statement of the
Reorganization and related transactions, the Bank Credit Facility and the
Superior Preferred Stock are accurate and fairly present in all material
respects the information required to be shown with respect thereto by the
Act and the Rules and Regulations. The Bank Credit Facility and the
Reorganization and the consummation by the Company of the related
transactions have been duly and validly authorized by the directors of the
Company and by the Parent as sole stockholder of the Company, and no other
corporate proceedings on the part of the Company, or other person or
entity, are necessary to authorize the Bank Credit Facility and the
Reorganization and the consummation by the Company of the related
transactions. All approvals, consents, licenses and authorizations of, and
declarations and exemptions from, and filings and registrations with, all
persons and entities required in connection with the Bank Credit Facility
and the Reorganization and the consummation by the Company of the related
transactions have been obtained or made, as the case may be. None of
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the Bank Credit Facility and the Reorganization and related transactions
will violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
the right of termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, the conditions or
provisions of any material contract of the Company, the Parent or any of
the Subsidiaries.
(ix) The borrowings under the Bank Credit Facility and the
Reorganization and related transactions have been consummated as described
in the Prospectus in all material respects and in compliance with all
applicable laws, statutes, regulations, ordinances, codes, decrees,
judgments, orders or other legal requirements, domestic or foreign.
(e) On the Closing Date the Underwriters shall have received an
opinion, dated the Closing Date, of Morris, Nichols Arsht & Tunnell, counsel to
the Parent, to the effect that the Reorganization does not require the approval
of the shareholders of the Parent pursuant to the Delaware General Corporation
Law (the "DGCL").
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel has
participated in conferences with officers and representatives of the Company and
with the Company's independent public accountants, at which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Registration Statement and the Prospectus and
(without taking any further action to verify independently the statements made
in the Registration Statement and the Prospectus and, except as stated in the
foregoing opinion, without assuming responsibility for the accuracy,
completeness or fairness of such statements) nothing has come to such counsel's
attention that causes such counsel to believe that either the Registration
Statement as of the date it is declared effective and as of the Closing Date or
the Prospectus as of the date thereof and as of the Closing Date contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (it being understood that such counsel need not express
any opinion with respect to the financial statements, schedules and other
financial data included in the Registration Statement or the Prospectus).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper,
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on certificates of responsible officers of the Company and public officials.
References to the Registration Statement and the Prospectus in this
paragraph (e) shall include any amendment or supplement thereto at the date of
such opinion.
(f) On or prior to the Closing Date, counsel to the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require in order to evidence the accuracy, completeness or
satisfaction of any of the representations or warranties of the Company, or
conditions herein contained.
(g) At the time that this Agreement is executed by the Company the
Underwriters shall have received from Arthur Andersen LLP a letter as of the
date this Agreement is executed by the Company in form and substance
satisfactory to you (the "Original Letter"), and on the Closing Date the
Underwriters shall have received from such firm a letter dated the Closing Date
stating that, as of a specified date not earlier than five (5) days prior to the
Closing Date, nothing has come to the attention of such firm to suggest that the
statements made in the Original Letter are not true and correct.
(h) On the Closing Date, the Underwriters shall have received a
certificate, dated the Closing Date, of the principal executive officer and the
principal financial or accounting officer of the Company to the effect that each
of such persons has carefully examined the Registration Statement and the
Prospectus and any amendments or supplements thereto and this Agreement, and
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date,
and the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best knowledge of each of
such persons are contemplated or threatened under the Act and any and all
filings required by Rule 424, Rule 430A, Rule 434 and Rule 462(b) have been
timely made;
(iii) The Registration Statement and Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and neither the Registration
Statement
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nor any amendment thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither the
Prospectus (or any supplement thereto) or any Preliminary Prospectus
includes or included any untrue statement of a material fact or omits or
omitted 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
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus up to and
including the Closing Date, neither the Company nor any of the Subsidiaries
has incurred, other than in the ordinary course of its business, any
material liabilities or obligations, direct or contingent; neither the
Company nor any of the Subsidiaries has purchased any of its outstanding
capital stock or paid or declared any dividends or other distributions on
its capital stock; neither the Company nor any of the Subsidiaries has
entered into any transactions not in the ordinary course of business; and
there has not been any change in the capital stock or consolidated long-
term debt or any increase in the consolidated short-term borrowings (other
than any increase in short-term borrowings in the ordinary course of
business) of the Company or any material adverse change to the business
properties, assets, net worth, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries taken as a
whole; neither the Company nor any of the Subsidiaries has sustained any
material loss or damage to its property or assets, whether or not insured;
there is no litigation which is pending or threatened against the Company
or any of the Subsidiaries which is required under the Act or the Rules and
Regulations to be set forth in an amended or supplemented Prospectus which
has not been set forth; and there has not occurred any event required to be
set forth in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in
this paragraph (h) are to such documents as amended and supplemented at the
date of the certificate.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus up to and including the
Closing Date there has not been (i) any change or decrease specified in the
letter or letters referred to in paragraph (g) of this Section 7 or (ii) any
change, or any development involving a prospective change, in the business or
properties of the Company or the Subsidiaries
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which change or decrease in the case of clause (i) or change or development in
the case of clause (ii) makes it impractical or inadvisable in the
Representatives' judgment to proceed with the public offering or the delivery of
the Shares as contemplated by the Prospectus.
(j) No order suspending the sale of the Shares in any jurisdiction
designated by you pursuant to Section 5(a)(iii)(A) hereof has been issued on or
prior to the Closing Date and no proceedings for that purpose have been
instituted or, to your knowledge or that of the Company, have been or are
contemplated.
(k) The Representatives shall have received from the Parent and each
person who is a director or officer of the Company or who owns 5.0% or more of
the outstanding shares of Common Stock an agreement to the effect that the
Parent or such person will not, directly or indirectly, without the prior
written consent of the Representatives, offer, sell, grant any option to
purchase or otherwise dispose (or announce any offer, sale, grant of an option
to purchase or other disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock for a period of 180 days after the date of this Agreement.
(l) The Company shall have furnished the Underwriters with such
further opinions, letters, certificates or documents as you or counsel for the
Underwriters may reasonably request. All opinions, certificates, letters and
documents to be furnished by the Company will comply with the provisions hereof
only if they are reasonably satisfactory in all material respects to the
Underwriters and to counsel for the Underwriters. The Company shall furnish the
Underwriters with conformed copies of such opinions, certificates, letters and
documents in such quantities as you reasonably request. The certificates
delivered under this Section 7 shall constitute representations, warranties and
agreements of the Company, as the case may be, as to all matters set forth
therein as fully and effectively as if such matters had been set forth in
Section 2 of this Agreement.
(m) The borrowing under the Bank Credit Facility and the
Reorganization and related transactions shall have been consummated as described
in the Prospectus in all material respects and in compliance with all applicable
laws, statutes, regulations, ordinances, codes, decrees, judgments, orders or
other legal requirements, domestic or foreign.
8. INDEMNIFICATION.
(a) The Company and the Parent, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within
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the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any and all losses, claims, damages or liabilities, joint or several (and
actions in respect thereof), to which such Underwriter or such controlling
person may become subject, under the Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or the Prospectus or any Preliminary Prospectus, or any
amendment or supplement thereto, or any blue sky application or other document
executed by the Company specifically for the purpose of qualifying, or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify, any or all of the Shares under the securities
or blue sky laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements not misleading and will
reimburse, as incurred, such Underwriter or such controlling persons for any
legal or other expenses incurred by such Underwriter or such controlling persons
in connection with investigating, defending or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER that neither the Company nor the Parent will be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in any of such documents in reliance upon
and in conformity with information furnished in writing to the Company on behalf
of such Underwriter through the Representatives expressly for use therein, and
PROVIDED, FURTHER, that such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage, liability or action purchased Shares which are the
subject thereof to the extent that any such loss, claim, damage, liability or
action (i) results from the fact that such Underwriter failed to send or give a
copy of the Prospectus (as amended or supplemented) to such person at or prior
to the confirmation of the sale of such Shares to such person in any case where
such delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (as amended and supplemented),
unless such failure resulted from non-compliance by the Company with Section
5(a)(viii) hereof.
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<PAGE>
The indemnity agreement in this paragraph (a) shall be in addition to
any liability which the Company or the Parent may otherwise have.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company and the Parent, each of their directors,
each of the officers who has signed the Registration Statement, each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and against any and all losses, claims, damages
or liabilities (and actions in respect thereof) to which the Company or the
Parent, or any such director, officer, or controlling person may become subject,
under the Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto
or in any Blue Sky Application, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished in writing by that Underwriter through the
Representatives to the Company expressly for use therein; and will reimburse, as
incurred, all legal or other expenses reasonably incurred by the Company, the
Parent, or any such director, officer, controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
The Company and the Parent acknowledge that the statements with respect to the
public offering of the Shares set forth in the first, third, and seventh
paragraphs under the heading "Underwriting" and the stabilization legend in the
Prospectus have been furnished by the Underwriters to the Company expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus. The indemnity
agreement contained in this subsection (b) shall be in addition to any liability
which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against one or more indemnifying parties
under this Section 8, notify such indemnifying party or parties of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) of this Section 8 or to the extent
that
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<PAGE>
the indemnifying party was not adversely affected by such omission. In case any
such action is brought against an indemnified party and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
PROVIDED HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and otherwise
to participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses (other than the reasonable costs of investigation) subsequently
incurred by such indemnified party in connection with the defense thereof unless
(i) the indemnified party has employed such counsel in connection with the
assumption of such different or additional legal defenses in accordance with the
proviso to the immediately preceding sentence, (ii) the indemnifying party has
not employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized in
writing the employment of counsel for the indemnified party at the expense of
the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) above in respect of any losses, claims, damages, expenses
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) (i) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the offering of
the Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand in connection
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with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. In any
case where the Company or the Parent is a contributing party and the
Underwriters are the indemnified party, the relative benefits received by the
Company and the Parent on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, the
Parent or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this paragraph (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph (d), the Underwriters shall not
be required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by the Underwriters hereunder. The
Underwriters' obligations to contribute pursuant to this paragraph (d) are
several in proportion to their respective underwriting obligations, and not
joint. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
paragraph (d), (i) each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter and (ii) each director of
the Company or the Parent, each officer of the Company who has signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as the Company, subject in each case to
this paragraph (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against another
party or parties under this paragraph (d), notify such party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any other obligation (x) it or they may have hereunder or otherwise
than under this paragraph (d) or (y) to the extent that such party or
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parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may otherwise have.
9. RIGHT TO INCREASE OFFERING. At anytime during a period of 30 days
from the date of the Prospectus, the Underwriters, by no less than two business
days' prior notice to the Company, may designate a closing (which may be
concurrent with, and part of, the closing on the Closing Date with respect to
the Firm Shares or may be a second closing held on a date subsequent to the
Closing Date, in either case such date shall be referred to herein as the
"Option Closing Date") at which the Underwriters may purchase all or less than
all of the Additional Shares in accordance with the provisions of this Section 9
at the purchase price per share to be paid for the Firm Shares. In no event
shall the Option Closing Date be later than 10 business days after written
notice of election to purchase Additional Shares is given.
The Company agrees to sell to the several Underwriters on the Option
Closing Date the number of Additional Shares specified in such notice and the
Underwriters agree severally and not jointly, to purchase such Additional Shares
on the Option Closing Date. Such Additional Shares shall be purchased for the
account of each Underwriter in the same proportion as the number of Firm Shares
set forth opposite the name of such Underwriter in Column (3) of Schedule I
bears to the total number of Firm Shares (subject to adjustment by you to
eliminate fractions) and may be purchased by the Underwriters only for the
purpose of covering over-allotments made in connection with the sale of the Firm
Shares.
No Additional Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Additional Shares or any portion thereof may be surrendered and
terminated at any time upon notice by you to the Company.
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Firm Shares shall apply, MUTATIS MUTANDIS, to the
Option Closing Date for the sale of the Additional Shares.
10. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and its officers, and the Underwriters,
respectively, set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriters, and will survive delivery of and payment for the Shares. Any
successors to the Underwriters shall be
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<PAGE>
entitled to the indemnity, contribution and reimbursement agreements contained
in this Agreement.
11. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at 11:00 A.M., New York
time on the first business day following the date hereof, or at such earlier
time after the Registration Statement becomes effective as the Representatives,
in their sole discretion, shall release the Shares for the sale to the public
unless prior to such time the Representatives shall have received written notice
from the Company that it elects that this Agreement shall not become effective,
or the Representatives shall have given written notice to the Company that the
Representatives on behalf of the Underwriters elect that this Agreement shall
not become effective; PROVIDED, HOWEVER, that the provisions of this Section and
of Section 6 and Section 8 hereof shall at all times be effective. For purposes
of this Section 11(a), the Shares to be purchased hereunder shall be deemed to
have been so released upon the earlier of notification by the Representatives to
securities dealers releasing such Shares for offering or the release by the
Representatives for publication of the first newspaper advertisement which is
subsequently published relating to the Shares.
(b) This Agreement (except for the provisions of Sections 6 and 8
hereof) may be terminated by the Representatives by notice to the Company in the
event that the Company has failed to comply in any respect with any of the
provisions of this Agreement required on its part to be performed at or prior to
the Closing Date or the Option Closing Date, or if any of the representations or
warranties of the Company is not accurate in any respect or if the covenants,
agreements or conditions of, or applicable to the Company herein contained have
not been complied with in any respect or satisfied within the time specified on
the Closing Date or the Option Closing Date, respectively, or if prior to the
Closing Date or the Option Closing Date:
(i) the Company or any of the Subsidiaries shall have sustained
a loss by strike, fire, flood, accident or other calamity of such a
character as to interfere materially with the conduct of the business and
operations of the Company and the Subsidiaries takes as a whole regardless
of whether or not such loss was insured;
(ii) trading in the Common Stock shall have been suspended by the
Commissionor the Nasdaq National Market or trading in securities generally
on the New York Stock Exchange or the Nasdaq National Market shall have
been suspended or a material limitation on such trading shall
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<PAGE>
have been imposed or minimum or maximum prices shall have been established
on either such exchange or market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak
or escalation of any other insurrection or armed conflict involving the
United States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the present or
prospective business or condition (financial or other) of the Company and
the Subsidiaries taken as a whole that, in each case, in the
Representatives' judgment makes it impracticable or inadvisable to make or
consummate the public offering, sale or delivery of the Company's Shares on
the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
(c) Termination of this Agreement under this Section 11 or Section 12
after the Firm Shares have been purchased by the Underwriters hereunder shall be
applicable only to the Additional Shares. Termination of this Agreement shall
be without liability of any party to any other party other than as provided in
Sections 6 and 8 hereof.
12. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 7 or 11 hereof) to
purchase and pay for (a) in the case of the Closing Date, the number of Firm
Shares agreed to be purchased by such Underwriter or Underwriters upon tender to
you of such Firm Shares in accordance with the terms hereof or (b) in the case
of the Option Closing Date, the number of Additional Shares agreed to be
purchased by such Underwriter or Underwriters upon tender to you of such
Additional Shares in accordance with the terms hereof, and the number of such
Shares shall not exceed 10% of the Firm Shares or Additional Shares required to
be purchased on the Closing Date or the Option Closing Date, as the case may be,
then, each of the non-defaulting Underwriters shall purchase and pay for (in
addition to the number of such Shares which it has severally agreed to purchase
hereunder) that proportion of the number of Shares which the defaulting
Underwriter or Underwriters shall have so failed or refused to purchase on such
Closing Date or Option Closing Date, as the case may be, which the number of
Shares agreed to be purchased by such non-defaulting Underwriter bears to the
aggregate number of Shares
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<PAGE>
so agreed to be purchased by all such non-defaulting Underwriters on such
Closing Date or Option Closing Date, as the case may be. In such case, you
shall have the right to postpone the Closing Date or the Option Closing Date, as
the case may be, to a date not exceeding seven full business days after the date
originally fixed as such Closing Date or the Option Closing Date, as the case
may be, pursuant to the terms hereof in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made.
If one or more of the Underwriters shall fail or refuse (otherwise than for
a reason sufficient to justify the termination of this Agreement under the
provisions of Section 7 or 11 hereof) to purchase and pay for (a) in the case of
the Closing Date, the number of Firm Shares agreed to be purchased by such
Underwriter or Underwriters upon tender to you of such Firm Shares in accordance
with the terms hereof or (b) in the case of the Option Closing Date, the number
of Additional Shares agreed to be purchased by such Underwriter or Underwriters
upon tender to you of such Additional Shares in accordance with the terms
hereof, and the number of such Shares shall exceed 10% of the Firm Shares or
Additional Shares required to be purchased by all the Underwriters on the
Closing Date or the Option Closing Date, as the case may be, then (unless within
48 hours after such default arrangements to your satisfaction shall have been
made for the purchase of the defaulted Shares by an Underwriter or Underwriters)
and subject to the provisions of Section 11(b) hereof, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or on
the part of the Company except as otherwise provided in Sections 6 and 8 hereof.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this paragraph. Nothing in this Section
12, and no action taken hereunder, shall relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
13. NOTICES. All communications hereunder shall be in writing and if sent
to the Representatives shall be mailed or delivered or telegraphed and confirmed
by letter or telecopied and confirmed by letter to c/o Furman Selz LLC at 230
Park Avenue, New York, New York 10169, Attention: Syndicate Department or, if
sent to the Company, shall be mailed or delivered or telegraphed and confirmed
to the Company at 1790 Broadway, New York, New York 10019.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Company and each Underwriter and the Company's and each
Underwriter's respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained,
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<PAGE>
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person, except that the representations, warranties, indemnities and
contribution agreements of the Company contained in this Agreement shall also be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and except that the Underwriters' indemnity and contribution agreements shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, any person or persons, if
any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from the Underwriters
will be deemed a successor because of such purchase.
15. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the choice of law or conflict of law principles thereof. Each party
hereto consents to the jurisdiction of each court in which any action is
commenced seeking indemnity or contribution pursuant to Section 8 above and
agrees to accept, either directly or through an agent, service of process of
each such court.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
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If the foregoing correctly sets forth our understanding, please indicate
the Underwriters' acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
SUPERIOR TELECOM INC.
By: __________________________
Name:
Title:
THE ALPINE GROUP, INC.
By: __________________________
Name:
Title:
Accepted as of the date first
above written:
FURMAN SELZ LLC
OPPENHEIMER & CO., INC.
BT SECURITIES CORPORATION
By: FURMAN SELZ LLC
Acting on its own behalf and as
one of the Representatives
of the several Underwriters
referred to in the foregoing Agreement
By: ___________________________
Title: ________________________
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<PAGE>
CERTIFICATE OF INCORPORATION
OF
NCS, INC.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware, certifies as follows:
FIRST: NAME.
The name of the corporation is NCS, Inc. (the "Corporation").
SECOND: ADDRESS.
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of
its registered agent at that address is The Prentice-Hall Corporation System,
Inc.
THIRD: PURPOSE.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: CAPITALIZATION.
SECTION I. AUTHORIZED CAPITAL. The total number of shares of stock
which the Corporation shall have authority to issue is 26,000,000 shares,
consisting of 25,000,000 shares of Common Stock, par value $.01 per share
("Common Stock") and 1,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock").
SECTION 2. CAPITAL STOCK. Subject to the prior or equal rights, if
any, of the Preferred Stock of any and all series stated and expressed by the
Board of Directors in the resolution or resolutions providing for the issuance
of such Preferred Stock, the holders of Common Stock shall be entitled (i) to
receive dividends when, as and if declared by the Board of Directors out of any
funds legally available therefor, (ii) in the event of any dissolution,
liquidation or winding up of the Corporation, to receive the remaining assets of
the Corporation, ratably according to the number of shares of Common Stock held,
and (iii) to one vote for each share of Common Stock held on all matters
submitted to a vote of stockholders. No holder of stock of any class of the
Corporation shall have any preemptive right to purchase or
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subscribe for any part of any issue of stock or of securities of the Corporation
convertible into stock of any class whatsoever, whether now or hereafter
authorized.
The Board of Directors is expressly authorized at any time, and from time
to time, to provide for the issuance of shares of Preferred Stock in one or more
series, with such voting powers, full or limited, or without voting powers and
with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, subject to the limitations
prescribed by law.
FIFTH: BOARD OF DIRECTORS
SECTION 1. NUMBER. The business, property and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The number of directors shall be fixed from time to time by the
Board of Directors pursuant to the Bylaws.
SECTION 2. TERM. Directors shall be elected at each annual meeting of
stockholders by a plurality of the votes cast and shall hold office until the
next annual meeting of stockholders and until the election and qualification of
their respective successors, subject to Section 5 of this Article Fifth of the
Certificate of Incorporation.
SECTION 3. NOMINATION. Only the persons who are nominated in
accordance with the procedures set forth in this Section 3 of Article Fifth of
the Certificate of Incorporation shall be eligible to serve as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at an annual meeting of stockholders (a) by or at the direction of
the Board of Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving notice provided for in this Section 3 of Article Fifth, who shall be
entitled to vote for the election of directors at the meeting and who complies
with the procedures set forth below. Any nominations not made by or at the
direction of the Board of Directors must be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the anniversary date of the immediately preceding annual meeting; provided,
however, that in the event that the annual meeting with respect to which such
notice is to be tendered is not held within 30 days before or after such
anniversary date, notice by the stockholder to be timely must by received no
later than the close of business on the earlier of the
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10th day following the day on which notice of the meeting was given or made or
public disclosure thereof was given or made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named as a nominee and to
serving as a director if elected); and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder, (ii) the class and number of shares of stock of the
Corporation which are beneficially owned by such stockholder, (iii) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to nominate the persons named in its notice and (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with such
nomination and any material interest of such stockholder in such nomination. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. If the Board of Directors shall
determine, based on the facts, that a nomination was not made in accordance with
the procedures set forth in this Section 3 of Article Fifth, the Chairman shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 3 of Article Fifth, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 3 of Article Fifth.
SECTION 4. VACANCIES. Newly-created directorships resulting from
death, resignation, retirement, disqualification, removal from office or
other cause, may be filled by a majority vote of the remaining directors then in
office, though less than a quorum, or by the sole remaining director, and each
director so chosen shall hold office until such director's successor shall have
been duly elected and qualified. No decrease in the authorized number of
directors shall shorten the term of any incumbent director.
SECTION 5. REMOVAL. A director may be removed only for cause. A
director may be removed only by the holders of a majority of the outstanding
shares of all classes of capital stock of the Corporation entitled to vote in
the election of directors, considered for this purpose as one class.
SIXTH: STOCKHOLDER ACTION.
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Any action required or permitted to be taken by stockholders may be
effected only at a duly called annual or special meeting of stockholders with
prior notice and with a vote, and may not be effected by consent in writing.
Except as otherwise required by law, annual meetings and special meetings of
stockholders may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the Continuing Directors (as defined in
Article Seventh), or by the Chairman of the Board, the Vice Chairman of the
Board or the Chief Executive Officer or a Co-Chief Executive Officer.
Stockholders are not permitted to call an annual meeting or to call a special
meeting of stockholders or to require that the Board of Directors call such an
annual or special meeting.
SEVENTH: CERTAIN BUSINESS COMBINATIONS.
SECTION 1. STOCKHOLDER APPROVAL. In addition to any affirmative vote
required by, or other conditions to be complied with pursuant to, applicable law
or this Certificate of Incorporation, and except as otherwise expressly provided
in Section 2 of this Article Seventh,
(a) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) an Interested Stockholder (as hereinafter
defined) or (ii) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate (as such terms are hereinafter defined) of an
Interested Stockholder, or
(b) any sale, lease, exchange, mortgage, pledge, grant of a security
interest, transfer or other disposition (in one transaction or a series of
transactions) to or with (i) an Interested Stockholder or (ii) any other
person (whether or not itself an Interested Stockholder) which is, or after
such sale, lease, exchange, mortgage, pledge, grant of a security interest,
transfer or other disposition would be, an Affiliate or Associate of an
Interested Stockholder, directly or indirectly, of assets of the
Corporation (including, without limitation, any voting securities of a
Subsidiary) or any Subsidiary, or both, having an aggregate Fair Market
Value (as hereinafter defined) of $10,000,000 or more, or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or series of transactions) of any securities of the
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Corporation or any Subsidiary, or both, to (i) an Interested Stockholder or
(ii) any other person (whether or not itself an Interested Stockholder)
which is, or after such issuance or transfer would be, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder, in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $10,000,000 or more, other
than the issuance of securities upon the conversion of convertible
securities of the Corporation or any Subsidiary which were not acquired by
such Interested Stockholder (or such Affiliate or Associate) from the
Corporation or a Subsidiary, or,
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of an Interested Stockholder, or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder), which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
directly or indirectly beneficially owned by (i) an Interested Stockholder
or (ii) any other person (whether or not itself an Interested Stockholder)
which is, or after such reclassification, recapitalization, merger or
consolidation or other transaction would be, an Affiliate or Associate or
an Interested Stockholder;
shall not be consummated unless such consummation shall have been approved by
the affirmative vote of the holders of record of outstanding shares representing
(i) at least two-thirds of the voting power of the then outstanding Voting
Shares (as hereinafter defined) of the Corporation, voting together as a single
class and (ii) at least a majority of the voting power of the then outstanding
Voting Shares of the Corporation, voting together as a single class, which are
not beneficially owned, directly or indirectly, by such Interested Stockholder.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be
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required, or that a lesser percentage may be specified, by law, in this
Certificate of Incorporation or in any agreement with any national securities
exchange or otherwise.
SECTION 2. ALTERNATIVE PROCEDURAL REQUIREMENTs. The provisions of
Section 1 of this Article Seventh shall not be applicable to any particular
Business Combination (as hereinafter defined), and such Business Combination
shall require only such affirmative vote as required by law and any other
provision of this Certificate of Incorporation, if the Business Combination
shall have been approved by a majority of the Continuing Directors (as
hereinafter defined). The approval of a majority of the Continuing Directors
shall be required whether or not the particular Business Combination meets the
criteria set forth below (but meeting such criteria shall not be deemed to mean
the proposed Business Combination is fair or require the Continuing Directors to
approve the Business Combination); #PROVIDED, HOWEVER, that if such criteria are
not met, then prior to approving such Business Combination, the Continuing
Directors shall obtain the advice of a financial advisor to the effect that such
Business Combination is fair to the holders of Voting Shares (other than a
Interested Stockholder); provided further, that, subject to the foregoing, the
Continuing Directors shall have no obligation to approve such Business
Combination unless:
(a) The transaction constituting the Business Combination shall
provide for a consideration to be received by all holders of Common Stock
in exchange for all shares of their Commons Stock, and the aggregate amount
of the cash and the Fair Market Value as of the date of the consummation
of the Business Combination of consideration other than cash to be received
per share by holders of Common Stock in such Business Combination, shall be
at least equal to the higher of the following:
(i) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid in
order to acquire any shares of Common Stock beneficially owned by an
Interested Stockholder (1) within the two-year period immediately prior to
the Announcement Date (as hereinafter defined), (2) within the two-year
period immediately prior to the Determination Date (as hereinafter defined)
or (3) in the transaction in which it became an Interested Stockholder,
whichever is highest; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher;
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(b) If the transaction constituting the Business Combination shall
provide for a consideration to be received by holders of any class or series of
outstanding Voting Shares other than Common Stock, the aggregate amount of the
cash and the Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of shares of such class or series of Voting Shares shall be at least
equal to the highest of the following (it being intended that the requirements
of this subsection (b) shall be required to be met with respect to every class
and series of outstanding Voting Shares, whether or not an Interested
Stockholder has previously acquired any shares of a particular class of Voting
Shares):
(i) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid in
order to acquire any shares of such class or series of Voting Shares
beneficially owned by an Interested Stockholder (1) within the two-year
period immediately prior to the Announcement Date, (2) within the two-year
period immediately prior to the Determination Date or (3) in the
transaction in which it became an Interested Stockholder, whichever is
highest; or
(ii) the Fair Market Value per share of such class or series of
Voting Shares on the Announcement Date or the Determination Date, whichever
is higher; or
(iii) if applicable, the highest preferential amount per share
to which the holders of shares of such class or series of Voting Shares are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(c) The consideration to be received by holders of a particular
class or series of outstanding Voting Shares (including Common Stock) shall
be in cash or in the same form as was previously paid in order to acquire
shares of such class or series of Voting Shares which are beneficially owned
by an Interested Stockholder and, if an Interested Stockholder beneficially
owns shares of any class or series of Voting Shares which were acquired with
varying forms of consideration, the form of consideration for such class or
series of Voting Shares shall be either cash or the form used to acquire the
largest number of shares of such class or series of Voting Shares
beneficially owned by it. The price determined in accordance with subsections
(a) and (b) of this Section 2 of Article Seventh shall be subject to
appropriate
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adjustment in the event of any recapitalization, stock dividend, stock split,
combination of shares or similar event;
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(i) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over the Common
Stock as to dividends or liquidation;
(ii) there shall have been (1) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock) except as approved by a majority
of the Continuing Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure to so increase such
annual rate is approved by a majority of the Continuing Directors; and
(iii) such Interested Stockholder shall not have become the
beneficial owner of any additional Voting Shares except as part of the
transaction in which it became an Interested Stockholder;
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guaranties, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise; and
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Exchange Act
and the rules and regulations thereunder (or any subsequent provisions
replacing the Exchange Act or such rules or regulations) shall be mailed to
the stockholders of the Corporation, not later than the earlier of (i) 30
days prior to any vote on the proposed Business Combination or (ii) if no
vote on such Business Combination or (ii) if no vote on such Business
Combination is required, 60 days prior to the consummation of such Business
Combination (whether or not such
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proxy or information statement is required to be mailed pursuant to the Exchange
Act or any subsequent provisions replacing the Exchange Act). Such proxy
statement shall contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the Business
Combination which the Continuing Directors, or any of them, may have furnished
in writing and, if deemed advisable by a majority of the Continuing Directors,
an opinion of a reputable investment banking firm as to the fairness (or lack of
fairness) of the terms of such Business Combination, from the point of view of
the holders of Voting Shares other than an Interested Stockholder (such
investment banking firm to be selected by a majority of the Continuing
Directors, to be furnished with all information it reasonably requests and to be
paid a reasonable fee for its services upon receipt by the Corporation of such
opinion).
SECTION 3. CERTAIN DEFINITIONS. For the purposes of this Article:
(a) "Business Combination" shall mean any transaction which is
referred to in any one or more of subsections (a) through (e) of Section 1 of
this Article Seventh.
(b) "Voting Shares" shall mean shares of all classes and series of
stock of the Corporation entitled to vote generally in the election of
directors.
(c) "Person" shall mean any individual, firm, trust, partnership,
association, corporation, unincorporated organization or other entity (other
than the Corporation, any Subsidiary of the Corporation for itself or as a
fiduciary for customers, or a trustee holding stock for the benefit of the
employees of the Corporation or its Subsidiaries, or any one of them,
pursuant to one or more employee benefit plans or arrangements), as well as
two or more persons acting as a partnership, limited partnership, syndicate,
association or other group for the purpose of acquiring, holding or disposing
of shares of stock.
(d) "Interested Stockholder" shall mean any person (other than: (i)
the Corporation; (ii) any Subsidiary of the Corporation; (iii) any employee
benefit plan of the Corporation or any Subsidiary of the Corporation or any
entity holding shares of Common Stock for or pursuant to the terms of any
such plan; (iv) Steven S. Elbaum; (v) Bragi F. Schut; (vi) the lineal
descendants of Steven S. Elbaum or Bragi F. Schut; (vii) in the event of the
death or incompetence of any of the Persons described in clauses (iv), (v)
and (vi), such Person's estate, executor, administrator, committee or other
personal representative; (vii) any trusts created for the benefit of the
Persons described in clause (iv), (v) or (vi); (ix) any Affiliate or
Associate of the Persons described in clause (iv), (v), (vi) or (viii); or
(x) any person
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who acquires beneficial ownership of more than 15% of the outstanding Voting
Shares with the prior approval of a majority of the Continuing Directors), who
or which:
(i) is the beneficial owner, directly or indirectly, of more
than 15% of the combined voting power of the then outstanding Voting
Shares; or
(ii) is an assignee of or has otherwise succeeded to the
beneficial ownership of any Voting Shares which were at any time
within the two-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder.
Notwithstanding the foregoing, no person shall become an Interested Stockholder
as a result of an acquisition of Voting Shares by the Corporation which, by
reducing the number of shares of Common Stock outstanding, increases the
proportionate number of shares beneficially owned by such person to 15% or more
of the Voting Shares of the Corporation then outstanding; PROVIDED, HOWEVER,
that if a person shall become the beneficial owner of 15% or more of the Voting
Shares of the Corporation then outstanding by reason of shares purchased by the
Corporation, and after such purchases by the Corporation becomes the beneficial
owner of any additional Voting Shares of the Corporation, then such person shall
be deemed to be an Interested Stockholder.
For purposes of determining whether a person is an "Interested Stockholder,"
the number of Voting Shares deemed to be outstanding shall include shares
deemed owned through application of subsection (e) below but shall not
include any other Voting Shares which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(e) A person shall be a "beneficial owner" of any Voting Shares:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates
has (1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise or
conversion of rights, exchange rights, warrants or options, or
otherwise or (2) the right to vote or to direct the voting thereof
pursuant to any agreement, arrangement or understanding; or
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(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Voting
Shares.
(f) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(g) "Subsidiary" shall mean any corporation, partnership or other
entity of which a majority of any class of equity security (as defined in Rule
3a(11)-1 of the General Rules and Regulations under the Exchange Act), is owned,
directly or indirectly, by the Corporation; provided, however, that for purposes
of the definition of Interested Stockholder set forth above in subsection (d),
the term "Subsidiary" shall mean only a corporation, partnership or other entity
of which a majority of each class of equity security is beneficially owned,
directly or indirectly, by the Corporation.
(h) "Continuing Director" shall mean any member of the Board of
Directors who is unaffiliated with, and not a nominee of, an "Interested
Stockholder," and was a member of the Board of Directors prior to the time
that such Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director who is unaffiliated with, and not a
nominee of, an Interested Stockholder and is recommended to succeed a
"Continuing Director" by a majority of Continuing Directors then on the Board
of Directors.
(i) "Announcement Date" shall mean the date of the first public
announcement of the proposed Business Combination.
(j) "Determination Date" shall mean the date which is two years prior
to the date on which the Interested Stockholder became an Interested
Stockholder.
(k) "Fair Market Value" shall mean: (1) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange Listed Shares, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under the Exchange
Act on which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotation System or any system
then in use, or, if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by a majority of
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the Continuing Directors in good faith; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by a majority of the Continuing Directors in good faith.
SECTION 4. DETERMINATIONS BY THE BOARD OF DIRECTORS. A majority
of the Continuing Directors shall have the power and duty to determine for the
purposes of this Article Seventh, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Article Seventh including, without limitation, (i) whether a person is an
Interested Stockholder, (ii) the number of Voting Shares beneficially owned by
any person, (iii) whether a person is an Affiliate or Associate of another, (iv)
whether the assets that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
corporation or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $10,000,000 or more, (v) whether the requirements of Section 2
of this Article Seventh have been met and (vi) such other matters with respect
to which a determination is required under this Article Seventh. The good faith
determination of a majority of the Continuing Directors on such matters shall be
conclusive and binding for all purposes of this Article Seventh, and no director
will have any liability to the Corporation or any other person by reason of any
such determination so made.
SECTION 5. FIDUCIARY OBLIGATIONS. Nothing contained in this
Article Seventh shall be construed to relieve the members of the Board of
Directors or an Interested Stockholder from any fiduciary obligation imposed by
law.
The fact that any Business Combination complies with the provisions of
Section 2 of this Article Seventh shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
EIGHTH: LIABILITY OF DIRECTORS.
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that to the extent required by the provisions of Section
102(b)(7) of the General Corporation Law of the State of Delaware or any
successor statute, or any other laws of the State of Delaware, this provision
shall not eliminate or limit the liability of a director (i) for any breach of
the
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director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware hereafter is amended to authorize the further elimination of
or limitation on personal liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal
liability provided herein, shall be limited to the fullest extent permitted by
the amended General Corporation Law of the State of Delaware. Any repeal or
modification of this Article Eighth by the stockholders of the Corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
NINTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
SECTION 1. INDEMNIFICATION. The Corporation shall indemnify each
person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding"), by
reason of the fact that he or she, or a person of which he or she is the legal
representative, is or was a director or officer, or had agreed to serve as a
director or officer, of the Corporation or is or was serving or has agreed to
serve at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, or by
reason of any act alleged to have been taken or omitted in such capacity,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or alleged action in any other
capacity while serving as a director, officer, employee or agent, to the maximum
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all cost, expense, liability and loss (including
attorney's fees, judgements, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) actually and reasonably incurred by such
person or on his or her behalf in connection with such proceeding shall continue
as to a person who has ceased to be a director.
SECTION 2. INDEMNIFICATION FOR COSTS, CHARGES, AND EXPENSES FOR
SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article Ninth,
to the extent that a director or
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officer of the Corporation has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, in
defense of any action, suit or proceeding referred to in Section 1 of this
Article Ninth, or in the defense of any claim, issue or matter therein, he shall
be indemnified against all costs, charges and expenses (including attorney's
fees) actually and reasonably incurred by him or on his behalf in connection
therewith.
SECTION 3. ADVANCEMENT OF COSTS, CHARGES AND EXPENSES. Costs,
charges and expenses (including attorney's fees) incurred by a person referred
to in Section 1 of this Article Ninth in defending a civil or criminal action,
suit or proceeding, (including investigations by any government agency and all
costs, charges and expenses incurred in preparing for any threatened action,
suit or proceeding) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; PROVIDED, HOWEVER, that if
Delaware General Corporation Law so requires, the payment of such costs, charges
and expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer) in advance of the final disposition of
such action, suit or proceeding shall be made only upon receipt of an
undertaking by or on behalf of the director or officer to repay all amounts so
advanced in the event that it shall ultimately be determined that such director
or officer is not entitled to be indemnified by the Corporation as authorized in
this Article Ninth or otherwise. No security shall be required for such
undertaking and such undertaking shall be accepted without reference to the
recipient's financial ability to make repayment. The termination of any action,
suit or proceeding by judgement, order, settlement, conviction or upon a plea of
NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption
that the person did not meet any standard of conduct for indemnification imposed
by the Delaware General Corporation Law. The Board of Directors may, in the
manner set forth above, and subject to the approval of such director or officer,
authorize the Corporation's counsel to represent such person in any action, suit
or proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
SECTION 4. PROCEDURE FOR INDEMNIFICATION. Any indemnification
under Section 1 or advance of costs, charges and expenses under Section 3 of
this Article Ninth shall be made promptly, and in any event within 60 days, upon
the written request by the director or officer directed to the Secretary of the
Corporation. The right to indemnification or advances as granted by this
Article Ninth shall be enforceable by the director or officer in any court of
competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within 60 days. Such person's costs
and expenses
14
<PAGE>
incurred in connection with successfully establishing his right to
indemnification or advances, in whole or in part, in any such action shall also
be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advance of costs,
charges and expenses under Section 3 of this Article Ninth where the required
undertaking, if any, has not been received by the Corporation) that the claimant
has not met the standard of conduct, if any, set forth in the Delaware General
Corporation Law, but the burden of proving that such standard of conduct has not
been met shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct, if any, set forth in the
Delaware General Corporation Law, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel, and it stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
SECTION 5. OTHER RIGHTS; CONTINUATION OF RIGHTS OF
INDEMNIFICATION. The indemnification provided by this Article Ninth shall not
be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the estate, heirs, executors and
administrators of such person. All rights to indemnification under this Article
Ninth shall be deemed to be a contract between the Corporation and each director
and officer of the Corporation who serves or served in such capacity at any time
while this Article Ninth is in effect. No amendment or repeal of this Article
Ninth or of any relevant provisions of the Delaware General Corporation Law or
any other applicable laws shall adversely affect or deny to any director or
officer any rights to indemnification which such person may have, or change or
release any obligations of the Corporation, under this Article Ninth with
respect to any costs, charges, expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement which arise out of an action, suit or
proceeding based in whole or substantial part on any act or failure to act,
actual or alleged, which takes place before or while this Article Ninth is in
effect. The provisions of this Section 5 of Article Ninth shall apply to any
such action, suit or proceeding whenever commenced, including any such action,
suit or proceeding commenced after any amendment or repeal of this Article
Ninth. The right to indemnification and
15
<PAGE>
advancement of expenses conferred on any person by this Article Ninth shall not
limit the Corporation from providing any other indemnification permitted by law.
SECTION 6. SAVING CLAUSE. If this Article Ninth or any portion
hereof shall be invalidated on any ground by a court of competent jurisdiction,
then the Corporation shall nevertheless indemnify each director and officer of
the Corporation as to costs, charges and expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article Ninth that shall not have
been invalidated and to the full extent permitted by applicable law.
SECTION 7. INDEMNIFICATION OF OTHER PERSONS. If authorized by the
Board of Directors, the Corporation may indemnify and advance expenses to any
other person whom it has the power to indemnify under Section 145 of the
Delaware General Corporation Law to the fullest extent permitted by such
statute.
SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person pursuant to the
Delaware General Corporation Law.
TENTH: ARRANGEMENTS WITH CREDITORS.
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware General Corporation Law
or on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware General Corporation Law, order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as
16
<PAGE>
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
ELEVENTH: AMENDMENT OF BYLAWS.
The Board of Directors shall have power to make, amend and repeal the
Bylaws. Any Bylaws made by the Board of Directors under the powers conferred
hereby may be amended or repealed by the Board of Directors or by the
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, Sections 1.1, 1.2, and 1.9 of
Article I, Section 2.2 of Article II, and Article VII of the Bylaws shall not
be amended or repealed, and no provision inconsistent therewith shall be
adopted, without the affirmative vote of the holders of record of outstanding
shares representing (i) at least two-thirds of the voting power of the then
outstanding Voting Shares (as defined in Article Seventh), voting together as a
single class and (ii) if there is then an Interested Stockholder (as defined in
Article Seventh), at least a majority of the voting power of the then
outstanding Voting Shares, voting together as a single class which are not
beneficially owned, directly or indirectly, by an Interested Stockholder,
effected at a duly called annual or special meeting of such stockholders, with
such prior notice as is required by the Bylaws; provided, however, that the
provisions of this sentence shall not apply to any amendment, repeal or adoption
of any inconsistent provision declared advisable by the Board of Directors by
the affirmative vote of a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors and,
if there is then an Interested Stockholder, a majority of the Continuing
Directors (as defined in Article Seventh).
TWELFTH: AMENDMENT OF CERTIFICATE OF INCORPORATION.
The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation. Notwithstanding any other provision of this
Certificate of Incorporation or the Bylaws (and in addition to any other vote
that may be required by applicable law, by this Certificate of Incorporation or
by the Bylaws), the affirmative vote of the holders or record of outstanding
shares representing (i) at least two-thirds of the voting power of the then
outstanding Voting Shares of the Corporation, voting together as a single class,
and (ii) if there is then an Interested Stockholder (as defined in Article
Seventh), at least a majority of the voting power of the
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<PAGE>
then outstanding Voting Shares of the Corporation, voting together as a single
class, which are not beneficially owned, directly or indirectly, by an
Interested Stockholder, voting at a duly called annual or special meeting of
such stockholders, with prior notice, and with a vote and not by written
consent, shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article or Articles Fifth through Twelfth of this
Certificate of Incorporation; PROVIDED, HOWEVER, that the provisions of this
sentence shall not apply to any amendment, repeal or adoption of any
inconsistent provision declared advisable by the Board of Directors by the
affirmative vote of a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors and,
if there is then an Interested Stockholder, a majority of the Continuing
Directors (as defined in Article Seventh).
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation and hereby affirms that the statements made herein are true under
the penalties of perjury, this 17th day of July, 1996.
/s/ Alex S. Navarro
--------------------
Alex S. Navarro, Sole Incorporator
18
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF ANY PART OF THE CAPITAL
OF
NCS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is:
NCS, Inc.
2. The corporation has not received any payment for any of its
stock.
3. The certificate of incorporation of the corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article:
The name of the corporation is:
Superior Telecom, Inc.
4. The amendment of the certificate of incorporation of the
Corporation herein certified was duly adopted, pursuant to the provisions of
Section 241 of the General Corporation Law of the State of Delaware, by the sole
incorporator, no directors having been named in the certificate of incorporation
and no directors having been elected.
Signed on July 18, 1996
/s/ Alex S. Navarro
-------------------
Alex S. Navarro, Esq.
Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SUPERIOR TELECOM, INC.
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is:
Superior TeleCom, Inc.
SECOND: The corporation hereby amends it Certificate of Incorporation
as follows:
Paragraph FIRST of the Certificate of Incorporation, relating to the
corporate title of the corporation, is hereby amended to read, in its
entirety, as follows:
FIRST: The name of the corporation is:
Superior TeleCom Inc.
THIRD: The written amendment effected herein was authorized by the
written consent, setting forth the action so taken, of the sole shareholder
of all of the outstanding shares entitled to vote thereon pursuant to Sections
228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 6th day
of August, 1996.
By: /s/ Gary Edwards
--------------------
Name: Gary Edwards
Title: Controller
ATTESTED AND ACKNOWLEDGED:
/s/ Stewart H. Wahrsager
- ----------------------------
Name: Stewart H. Wahrsager
Title: Assistant Secretary
<PAGE>
BYLAWS
of
SUPERIOR TELECOM, INC.
<PAGE>
SUPERIOR TELECOM, INC.
A Delaware Corporation
BYLAWS
----------------------
ARTICLE I
STOCKHOLDERS
Section 1.1 ANNUAL MEETING.
An annual meeting of stockholders for the purpose of electing
directors and of transacting such other business as may properly come before it
in accordance with Section 1.9 hereof shall be held each year only upon call of
the person or persons designated in the Certificate of Incorporation, at such
date, time, and place, either within or without the State of Delaware, as may be
stated in the notice.
Section 1.2 SPECIAL MEETINGS.
Subject to the rights of holders of any series of preferred stock,
special meetings of stockholders for any purpose or purposes may be held at any
time only upon call of the person or persons designated in the Certificate of
Incorporation, at such date, time, and place, either within or without the State
of Delaware, as may be stated in the notice.
<PAGE>
Section 1.3 NOTICE OF MEETINGS.
Written notice of duly called stockholders meetings, stating the
place, date, and hour thereof shall be given by the Chairman of the Board, the
Vice Chairman of the Board, the President, any Vice President, the Secretary, or
an Assistant Secretary, to each stockholder entitled to vote thereat at least
ten days but not more than sixty days before the date of the meeting, unless a
different period is prescribed by law. The notice of an annual meeting shall
state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall, if any other action which could be taken at a special meeting is to be
taken at such annual meeting, state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called.
Section 1.4 QUORUM.
Except as otherwise provided by law or in the Certificate of
Incorporation or these Bylaws, at any meeting of stockholders, the holders of a
majority of the outstanding shares of each class of stock entitled to vote at
the meeting shall be present or represented by proxy in order to constitute a
quorum for the transaction of any business. In the absence of a quorum, a
majority in voting interest of the stockholders present or the chairman of the
meeting may adjourn the meeting from time to time in the manner provided in
Section 1.5 of these Bylaws until a quorum shall attend.
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Section 1.5 ADJOURNMENT.
Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 1.6 ORGANIZATION.
The Chairman of the Board, or in his or her absence the Vice Chairman
of the Board, or in their absence one of the following officers, the Chief
Executive Officer or a Co-Chief Executive Officer, the President, or a Vice
President, shall call to order meetings of stockholders, and shall act as
chairman of such meetings. The Board of Directors or, if the Board fails to
act, the stockholders, may appoint any stockholder, director, or officer of the
Corporation to act as chairman of any meeting in the absence of the Chairman of
the Board, the Vice Chairman of the Board, the Chief Executive Officer or the
Co-Chief Executive Officers, the President, and all Vice Presidents.
The Secretary of the Corporation shall act as secretary of all
meetings of stockholders, but, in the absence of the Secretary, the chairman of
the meeting may appoint any other person to act as secretary of the meeting.
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<PAGE>
Section 1.7 VOTING.
Except as otherwise provided by law or in the Certificate of
Incorporation or these Bylaws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, a majority of the
votes cast at such meeting upon a given question by the holders of outstanding
shares of stock of all classes of stock of the Corporation entitled to vote
thereon who are present in person or by proxy shall decide such question. At
any meeting duly called and held for the election of directors at which a quorum
is present, directors shall be elected by a plurality of the votes cast by the
holders (acting as such) of shares of stock of the Corporation entitled to elect
such directors.
Section 1.8 PROXY REPRESENTATION.
Each stockholder entitled to vote at any meeting of stockholders or to
express consent to or dissent from corporate action in writing without a meeting
may authorize another person to act for him by proxy. No proxy shall be valid
after three years from its date, unless it provides otherwise.
Section 1.9 STOCKHOLDERS.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by a stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in this Section 1.9, who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in the Certificate of Incorporation and this Section 1.9.
For business to be properly brought before an annual meeting by a stockholder
pursuant to clause (c) above, the stockholder must have given timely notice
thereof in writing to the Secretary of the
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<PAGE>
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the anniversary of the
preceding year's annual meeting; provided, however, that if the date of the
meeting is changed by more than 30 days from such anniversary date, notice by
the stockholder to be timely must be received no later than the close of
business on the earlier of the 10th day following the date on which notice of
the date of the meeting was mailed or public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
Corporation's books of the stockholder proposing such business, and the name and
address of the beneficial owner, if any, on whose behalf the proposal is made,
(c) the class and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf the proposal is made, and (d) any material
interest of such stockholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such business. Notwithstanding anything in
this Section 1.9 to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 1.9.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting whether or not business was properly brought before the meeting
in accordance with the procedures prescribed by these Bylaws, and if (s)he
should so determine, (s)he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Notwithstanding the
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<PAGE>
foregoing provisions of this Section 1.9, a stockholder also shall comply with
all applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as well as the Certificate of
Incorporation, with respect to the matters set forth in this Section 1.9.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 NUMBER AND TERM OF OFFICE.
The business, property, and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the Corporation.
The initial number of directors which shall constitute the whole Board of
Directors shall be six; provided, however, that the Board of Directors, by
resolution adopted by vote of a majority of the then authorized number of
directors, may increase or decrease the number of directors. No decrease in the
number of directors may shorten the term of any incumbent director. The
directors shall be elected by the holders of shares entitled to vote thereon at
the annual meeting of stockholders, and each shall serve (subject to the
provisions of Article IV and the Certificate of Incorporation) until the next
succeeding annual meeting of stockholders and until his respective successor has
been elected and qualified.
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<PAGE>
Section 2.2 NOMINATION, ELECTION, AND TERM.
The nomination, election, and term of directors shall be governed by
the Certificate of Incorporation.
Section 2.3 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD.
The directors may elect a Chairman and a Vice Chairman of the Board of
Directors. The Chairman and Vice Chairman shall be executive officers of the
Corporation and shall be subject to the control of and may be removed by the
Board of Directors.
Section 2.4 MEETINGS.
Regular meetings of the Board of Directors may be held without notice
at such time and place as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held at such time
and place as shall be designated in the notice of the meeting whenever called by
the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, a Co-
Chief Executive Officer, or by a majority of the directors then in office.
Section 2.5 NOTICE OF SPECIAL MEETINGS.
The Secretary, or in his or her absence any other officer of the
Corporation, shall give each director notice of the time and place of holding of
special meetings of the Board of Directors by mail at least seven days before
the meeting, or by telecopy, telegram, cable, radiogram, or personal service at
least two days before the meeting. Unless otherwise stated in the notice
thereof, any and all business may be transacted at any meeting without
specification of such business in the notice.
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<PAGE>
Section 2.6 QUORUM AND ORGANIZATION OF MEETINGS.
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place, and
the meeting may be held as adjourned without further notice or waiver. Except
as otherwise provided by law or in the Certificate of Incorporation or these
Bylaws, a majority of the directors present at any meeting at which a quorum is
present may decide any question brought before such meeting. Meetings shall be
presided over by the Chairman of the Board, or in his or her absence by the Vice
Chairman, the Chief Executive Officer or a Co-Chief Executive Officer, the
President, or such other person as the directors may select. The Secretary of
the Corporation shall act as secretary of the meeting, but in his or her
absence, the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 2.7 COMMITTEES.
The Board of Directors may, by resolution adopted by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute
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<PAGE>
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business, property, and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have power or authority
in reference to amending the Certificate of Incorporation of the Corporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors pursuant to authority expressly granted to the Board of Directors
by the Corporation's Certificate of Incorporation, fix any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation, or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation),
adopting an agreement of merger or consolidation under Section 251 or 252 of the
General Corporation Law of the State of Delaware, recommending to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, or amending these
Bylaws; and, unless the resolution expressly so provided, no such committee
shall have the power or authority to declare a dividend, to authorize the
issuance of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of the State of Delaware. Each
committee which may be established by the Board of Directors pursuant to these
Bylaws may fix
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<PAGE>
its own rules and procedures. Notice of meetings of committees, other than of
regular meetings provided for by the rules, shall be given to committee members.
All action taken by committees shall be recorded in minutes of the meetings.
Section 2.8 ACTION WITHOUT MEETING.
Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of Directors or any committee designated by the
Board to take any action required or permitted to be taken by them without a
meeting, if all the members of the Board of Directors or committee, as the case
may be, consent in writing to the adoption, and the writing or writings are
filed with the minutes of proceedings of the Board or Committee.
Section 2.9 TELEPHONE MEETINGS.
Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of Directors, or any committee designated by the
Board, to participate in a meeting of the Board, or committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
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<PAGE>
ARTICLE III
OFFICERS
Section 3.1 EXECUTIVE OFFICERS.
The executive officers of the Corporation shall consist of a Chief
Executive Officer or Co-Chief Executive Officers, a President, a Secretary, a
Chief Financial Officer, and if deemed necessary, expedient, or desirable, a
Chairman of the Board, a Vice Chairman of the Board, and one or more Executive
Vice Presidents, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint such other officers (including one or
more Senior Vice Presidents, one or more other Vice Presidents, a Controller,
and one or more Assistant Treasurers and Assistant Secretaries) as it may deem
necessary or desirable. Each officer shall hold office for such term as may be
prescribed by the Board of Directors from time to time. Any person may hold at
one time two or more offices.
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<PAGE>
Section 3.2 CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board shall
have the power to fix the compensation of elected officers whose compensation is
not fixed by the Board of Directors or a committee thereof and also to engage,
discharge, determine the duties and fix the compensation of all employees and
agents of the Corporation necessary or proper for the transaction of the
business of the Corporation. The Chairman of the Board shall also be the Chief
Executive Officer of the Corporation, unless another person is so designated by
the Board of Directors.
Section 3.3 VICE CHAIRMAN OF THE BOARD.
The Vice Chairman of the Board shall, at the request, or in the
absence or disability, of the Chairman of the Board, perform the duties and
exercise the powers of such office.
Section 3.4 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer of the Corporation shall have general
supervision of the business, affairs and property of the Corporation, and over
its several officers. In general, the Chief Executive Officer shall have all
authority incident to the office of Chief Executive Officer and shall have such
other authority and perform such other duties as may from time to time be
assigned by the Board of Directors or by any duly authorized committee of
directors. The Board of Directors may from time to time designate more than one
person a Co-Chief Executive Officer. If the Chief Executive Officer is not also
the Chairman of the Board, then the Chief Executive Officer shall report to the
Chairman of the Board or the Vice Chairman, as the case may be.
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<PAGE>
Section 3.5 PRESIDENT.
The President shall be the chief operating officer of the Corporation
and, subject to the direction of the Board of Directors, or any duly authorized
committee of directors, and the Chairman of the Board and the Chief Executive
Officer, and subject to any contractual restriction, shall have general
supervision of the operations of the Corporation. In general, but subject to
any contractual restriction, the President shall have all authority incident to
the office of President and chief operating officer and shall have such other
authority and perform such other duties as may from time to time be assigned by
the Board of Directors or by any duly authorized committee of directors or by
the Chairman of the Board of Directors. The President shall, at the request or
in the absence or disability of the Chairman or Vice Chairman of the Board, or
the Chief Executive Officer, perform the duties and exercise the powers of such
officer.
Section 3.6 VICE PRESIDENTS.
Each vice president shall have such powers and duties as the Board or
the President assigns to him.
Section 3.7 CHIEF FINANCIAL OFFICER.
The Chief Financial Officer of the Corporation shall be in charge of
the corporation's books and accounts. Subject to the control of the Board, he
shall have such other powers and duties as the Board or the president assigns to
him.
Section 3.8 SECRETARY.
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The Secretary shall be the secretary of, and keep the minutes of, all
meetings of the Board and the stockholders, and shall have such other powers and
duties as the Board or the President assigns to him. In the absence of the
Secretary from any meeting, the minutes shall be kept by the person appointed
for that purpose by the chairman of the meeting.
ARTICLE IV
Resignations, Removals, And Vacancies
Section 4.1 RESIGNATIONS.
Any director or officer of the Corporation, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the President, or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time be
not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.
Section 4.2 REMOVALS.
The Board of Directors, by a vote of not less than a majority of the
entire Board, at any meeting thereof, or by written consent, at any time, may,
to the extent permitted by law, remove with or without cause from office or
terminate the employment of any officer or member of any committee and may, with
or without cause, disband any committee.
The removal of any director or the entire Board of Directors shall be
governed by the Certificate of Incorporation.
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Section 4.3 VACANCIES.
The filling of newly-created directorships and vacancies in the Board
of Directors shall be governed by Certificate of Incorporation.
ARTICLE V
CAPITAL STOCK
Section 5.1 STOCK CERTIFICATES.
The certificates for shares of the capital stock of the Corporation
shall be in such form as shall be prescribed by law and approved, from time to
time, by the Board of Directors. Each certificate shall be signed by the
Chairman or Vice Chairman of the Board of Directors, if any, or by the Chief
Executive Officer or a Co-Chief Executive Officer or the President and by the
Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation. Any and all signatures on any such
certificates may be facsimiles. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 5.2 TRANSFER OF SHARES.
Upon compliance with provisions restricting the transfer or
registration of transfer of shares of capital stock, if any, shares of the
capital stock of the Corporation may be transferred on the books of the
Corporation only by the holder of such shares or by his or her duly authorized
attorney, upon the surrender to the
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Corporation or its transfer agent of the certificate representing such stock
properly endorsed and the payment of taxes due thereon.
Section 5.3 FIXING RECORD DATE.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion, or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which, unless
otherwise provided by law, shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action.
Section 5.4 LOST CERTIFICATES.
The Board of Directors or any transfer agent of the Corporation may
direct a new certificate or certificates representing stock of the Corporation
to be issued in place of any certificate or certificates theretofore issued by
the Corporation, alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board of
Directors
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(or any transfer agent so authorized) shall direct to indemnify the Corporation
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen, or destroyed or the issuance of
such new certificates, and such requirement may be general or confined to
specific instances.
Section 5.5 REGULATIONS.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
ARTICLE VI
MISCELLANEOUS
Section 6.1 CORPORATE SEAL.
The corporate seal shall have inscribed thereon the name of the
Corporation and shall be in such form as may be approved from time to time by
the Board of Directors.
Section 6.2 FISCAL YEAR.
The fiscal year of the Corporation shall be determined by resolution
of the Board of Directors.
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Section 6.3 NOTICES AND WAIVERS THEREOF.
Whenever any notice whatever is required by law, the Certificate of
Incorporation, or these Bylaws to be given to any stockholder, director, or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, or, in the case of directors or officers, by telecopy,
telegram, cable, or radiogram, addressed to such address as appears on the books
of the Corporation. Any notice given by telecopy, telegram, cable, or radiogram
shall be deemed to have been given when it shall have been delivered for
transmission and any notice given by mail shall be deemed to have been given
when it shall have been deposited in the United States mail with postage thereon
prepaid.
Whenever any notice is required to be given by law, the Certificate of
Incorporation, or these Bylaws, a written waiver thereof, signed by the person
entitled to such notice, whether before or after the meeting or the time stated
therein, shall be deemed equivalent in all respects to such notice to the full
extent permitted by law.
Section 6.4 STOCK OF OTHER CORPORATIONS OR OTHER INTERESTS.
Unless otherwise ordered by the Board of Directors, the Chairman of
the Board, the Vice Chairman of the Board, or the Chief Executive Officer or a
Co-Chief Executive Officer, and such attorneys or agents of the Corporation as
may from time to time be authorized by the Board of Directors or the Chairman of
the Board shall have full power and authority on behalf of this Corporation to
attend and to act and vote in person or by proxy at any meeting of the holders
of securities of any corporation or other entity in which this Corporation may
own or hold shares or other securities, and at such meetings shall possess and
may exercise all the rights and
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powers incident to the ownership of such shares or other securities which this
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer or a Co-Chief Executive Officer, or such attorneys or
agents, may also execute and deliver on behalf of this Corporation powers of
attorney, proxies, consents, waivers, and other instruments relating to the
shares or securities owned or held by this Corporation.
ARTICLE VII
AMENDMENTS
Subject to the provisions of the General Corporation Law, the power to
adopt, amend, or repeal the Bylaws of the Corporation shall be as provided in
the Certificate of Incorporation.
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EMPLOYMENT AGREEMENT
This AGREEMENT dated as of the 26th day of April, 1996, between Superior
Telecommunications Inc., a Georgia corporation (the "Company"), a wholly owned
subsidiary of The Alpine Group, Inc., a Delaware corporation ("Parent"), and
Justin F. Deedy, Jr. (the "Executive").
The Board of Directors of Parent (the "Parent Board") recognizes that the
Executive's contribution to the future growth and success of the Company is
expected to be substantial. Whereas the Executive has served as the President
of the Company since November 10, 1993; and whereas the Executive and the
Company are parties to an Employment Agreement (the "Old Agreement") dated as of
November 10, 1993. Whereas the Parent Board desires to provide for the
continued employment of the Executive with the Company which the Parent Board
has determined will reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the Company's
management, in the best interest of the Company, Parent and its shareholders.
Whereas the Executive is willing to commit himself to serve the Company, on the
terms and conditions herein provided.
Moreover, the Parent Board has determined that it is in the best interests
of the Company, Parent and its shareholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of Parent. The
Parent Board believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
In order to effect the foregoing, the Company and the Executive wish to
amend and restate the Old Agreement by entering into this Agreement on the terms
and conditions set forth below. Accordingly, in consideration of the premises
and the respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, on the terms and conditions set
forth herein.
2. TERM.
<PAGE>
(a) The employment of the Executive by the Company hereunder commenced
on November 10, 1993 (the "Commencement Date") and will continue in effect (i)
until either party gives notice to the other, as provided in Section 8(d), that
it does not wish to continue the Executive's employment hereunder or (ii) unless
terminated as provided in Section 8(a), (b), (c) or (d). The "Term" shall be
the period commencing on the date hereof and ending on the earlier to occur of
the events specified in clause (i) or (ii) of the preceding sentence.
(b) Notwithstanding paragraph (a) above or the provisions of Section
8(d), the Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, during any Transition Period. For
purposes of this Agreement, the Term shall, unless otherwise specified, include
any Transition Period.
3. CERTAIN DEFINITIONS. (a) A "COC Transition Date" shall mean a date
during the Term (as defined in Section 2) on which a Change of Control (as
defined in Section 4) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and its affiliated companies is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "COC Transition Date" shall mean the
date immediately prior to the date of such termination of employment.
(b) A "Transition Period" is a period commencing on a COC Transition
Date and ending on the third anniversary of such date. If a subsequent COC
Transition Date is determined to occur during a Transition Period, then such
Transition Period shall continue until the third anniversary of such subsequent
COC Transition Date. If a subsequent COC Transition Date occurs after the
expiration of a Transition Period, a new Transition Period will commence on such
date and end on the third anniversary thereof.
(c) Notwithstanding anything to the contrary in this Agreement, for
purposes of calculating payments under Section 13(f), "Applicable Bonus" means
the higher of (i) the Highest Recent Bonus (as defined in Section 13(b)(i)) and
(ii) the Annual Bonus (as defined in Section 6(b)) paid or payable, including
any bonus or portion thereof which has been earned but deferred (and annualized
for any fiscal year consisting of less than twelve full months or during which
the Executive was employed for less than
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twelve full months), for the most recently completed fiscal year during the
Term, if any (the "Recent Annual Bonus") (such higher amount being referred to
as the "Highest Annual Bonus"). For purposes of calculating payments under all
sections of this Agreement other than Section 13(f), Applicable Bonus means the
Recent Annual Bonus.
(d) A "Stock Option" is an option to purchase a number of shares of
stock of Parent at a fixed exercise price granted to the Executive by Parent,
whether or not exercisable.
4. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of Parent where such acquisition causes such Person to own more than
20% or more of the combined voting power of the then outstanding voting
securities of Parent entitled to vote generally in the election of directors
(the "Outstanding Parent Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not be deemed
to result in a Change of Control: (i) any acquisition directly from Parent,
(ii) any acquisition by Parent, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Parent or any corporation
controlled by Parent or (iv) any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii) and (iii) of subsection (c)
below; and provided, further, that if any Person's beneficial ownership of the
Outstanding Parent Voting Securities reaches or exceeds more than 20% as a
result of a transaction described in clause (i) or (ii) above, and such Person
subsequently acquires beneficial ownership of additional voting securities of
Parent, such subsequent acquisition shall be treated as an acquisition that
causes such Person to own more than 20% or more of the Outstanding Parent Voting
Securities; or
(b) individuals who, as of the date hereof, constitute the Parent
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Parent Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by Parent's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened
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election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Parent Board; or
(c) The consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of Parent or
the acquisition of assets of another corporation ("Business Combination");
excluding, however, such a Business Combination pursuant to which (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Parent Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns Parent or all or
substantially all of Parent's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Parent Voting
Securities, (ii) no Person (excluding any employee benefit plan (or related
trust) of Parent or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, more than 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Parent Board,
providing for such Business Combination; or
(d) approval by the shareholders of Parent of a complete liquidation
or dissolution of Parent.
5. POSITION AND DUTIES.
(a) The Executive shall serve as President of the Company with such
responsibilities, duties and authority as are from time to time assigned to the
Executive by the Chief Executive Officer of the Parent (the "CEO") or the Board
of Directors of the Company (the "Company Board"). The Executive's duties shall
be performed primarily at the Company's headquarters office, wherever it may be
located.
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(b) During the Term, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Term it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, provided that the CEO first approves of such service, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
6. COMPENSATION AND RELATED MATTERS.
(a) SALARY. (i) During the Term, the Company shall pay to the
Executive an annual base salary (the "Annual Base Salary") at a rate not less
than $181,000 or such higher rate as may from time to time be determined by the
Company Board, such salary to be paid in substantially equal installments in
accordance with the normal payroll practice of the Company. The Executive's
salary will be reviewed at least annually and shall be increased pursuant to
such review by a percentage no less than the percentage increase in the consumer
price index, as published by Bureau of Labor Statistics of the U.S. Department
of Labor, for the calendar year immediately preceding such review (the "CPI
Percentage"). Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(b) ANNUAL BONUS. In addition to the Annual Base Salary, the Company
will pay the Executive an annual cash bonus (the "Annual Bonus") within 90 days
following the last day of the Company's fiscal year for which the Annual Bonus
is awarded in an amount, if any, determined in accordance with and otherwise
calculated in the manner set forth in the "Annual Cash Bonus Incentive" section
of Schedule 1 attached hereto, as the same may be amended from time to time in
the discretion of the Compensation Committee of Parent's Board of Directors (the
"Compensation Committee").
(c) STOCK OPTIONS. On the Commencement Date, Parent granted the
Executive 25,000 Stock Options (the "Initial Options")
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to purchase shares of common stock of Parent ("Parent Stock"), as subsequently
adjusted in accordance with the adjustments made by the Compensation Committee
on November 10, 1995, having an exercise price per share of 105% (now adjusted
to 86.05%) of the average of the high and low sales prices of the Parent Stock
on the American Stock Exchange on the Commencement Date.
The Initial Options have and will become exercisable by the Executive
in the following amounts on the following dates:
7,625 Upon the 1st Anniversary of the Commencement Date
15,250 Upon the 2nd Anniversary of the Commencement Date
22,875 Upon the 3rd Anniversary of the Commencement Date
30,500 Upon the 4th Anniversary of the Commencement Date
In the event of termination of employment (i) by the Executive other
than because of death or for Good Reason, prior to the fourth anniversary of the
Commencement Date or (ii) by the Company for Cause, all Stock Options
(including, without limitation, the Initial Options) not theretofore exercisable
will lapse and be forfeited. In the event the Executive's employment is
terminated for any other reason prior to the fourth anniversary of the
Commencement Date all Stock Options (including, without limitation, the Initial
Options) not theretofore exercisable will thereupon become exercisable. Except
as provided in Section 11 each Initial Option will expire 10 years after it is
granted.
(d) RESTRICTED STOCK GRANT. On the Commencement Date, Parent granted
to the Executive 15,000 shares of Parent Stock pursuant to the Restricted Stock
Plan, as amended, which restricted shares have been set aside in the custody,
control and possession of Parent and have and will be released to the Executive
at the rate of 3.750 shares on each anniversary of the Commencement Date,
provided that in the event Executive's employment is terminated for Cause or by
Executive without Good Reason, prior to the fourth anniversary of the
Commencement Date, then the scheduled releases on any subsequent anniversary of
the Commencement Date shall be cancelled and all shares of Restricted Stock not
theretofore released shall be forfeited by the Executive and shall be cancelled
and retired by Parent.
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(e) INCOME TAX INDEMNIFICATION. Not less than 10 days prior to the
due date of the Executive's federal income tax return for every taxable year of
the Executive in which his income tax liability is affected by the matters
contained in Section 6(d), the Company will pay to the Executive an amount
necessary to indemnify and hold harmless the Executive from (i) any and all
federal, state or local income tax, excise taxes or other liability or payment
shown to be due or arising from or related to the matters contained in Section
6(d) and (ii) any additional income or excise taxes arising from or related to
the reimbursement provided for in preceding clause (i). The Executive will
timely furnish the Company with a written statement prepared by the Executive's
certified public accountant setting forth the amount of the required payment and
the due date or dates of such tax liability.
(f) EXPENSES. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable and customary expenses incurred by the Executive in performing
services hereunder, including (i) all expenses of travel and living expenses
while away from home or business or at the request of and in the service of the
Company and (ii) an automobile, plus all expenses of maintaining and operating
the automobile, provided that all such expenses are accounted for in accordance
with the policies and procedures established by the Company, or a monthly cash
allowance in lieu thereof.
(g) WELFARE BENEFITS. During the Term, the Executive and/or the
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are materially less favorable, in the aggregate, than the most favorable
of such plans, practices, policies and programs in effect for the Executive as
of the date hereof or, if more favorable to the Executive, those provided
generally at any time to other peer executives of the Company and its affiliated
companies. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(h) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Term, the
Executive shall be entitled to participate in all
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incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, including without limitation the Long Term Incentive Award program
applicable to the Executive set forth on Schedule 1 (the "LTI Award"). In
addition, the Parent and the Company covenant to adopt on or before February 1,
1997, and to name the Executive as a participant in, a Senior Executive
Retirement Plan substantially in the form as set forth in Exhibit A attached
hereto.
(i) FRINGE BENEFITS. During the Term:
(i) The Company shall reimburse the Executive for the reasonable
expenses incurred by the Executive in undergoing an annual physical examination
by a licensed physician.
(ii) The Company shall reimburse the Executive for the reasonable
expenses incurred by the Executive in connection with obtaining professional tax
and financial planning advice.
(j) VACATION. During the Term, the Executive shall be entitled to
paid vacation of four weeks per year, any unused portion of which shall be
forfeited as of the end of each year.
(k) DISABILITY OFFSET. Payments made to the Executive pursuant to
this Section 6 shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce any such
payments.
7. OFFICES. Subject to Section 5, the Executive agrees to serve without
additional compensation, if elected or appointed thereto, as a director of the
Company and any of its affiliated companies and in one or more executive offices
of any of Parent's subsidiaries, provided that the Executive is indemnified for
serving in any and all such capacities.
8. TERMINATION. The Executive's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Term. If the Company
determines in good faith that Disability of the Executive has occurred during
the Term (pursuant to the definition of Disability set forth below), it may give
to the Executive written notice in accordance with Section 18 of this
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Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days (or such shorter period as will suffice for
the Executive to qualify for full disability benefits under the applicable
disability insurance policy or policies of the Company) as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Term for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties pursuant to this Agreement (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered
to the Executive by the Company Board or the CEO which specifically
identifies the manner in which the Company Board or the CEO believes that
the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company or
its affiliated companies.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Company Board or upon the instructions of the CEO or a senior
officer of Parent or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a
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resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Parent Board at a meeting of the Parent Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Parent Board), finding that, in the good faith opinion of
the Parent Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) TERMINATION BY THE EXECUTIVE FOR GOOD REASON.
The Executive's employment may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties materially
inconsistent with the Executive's position (including status, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 5(a) of this Agreement, or any other action by the
Company which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose isolated and
inadvertent action(s) not taken in bad faith and remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(ii) any material failure by the Company to comply with any of the
provisions of Section 6 or Section 13(a) or (b) of this Agreement, other
than isolated and inadvertent failure(s) not occurring in bad faith and
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 5(a) hereof;
(iv) any termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
17(a) of this Agreement.
(d) TERMINATION ELECTION. Subject to the provisions of Section 2(b):
(i) A notice to Executive by the Company will constitute an
election by the Company to terminate the Executive's
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employment pursuant to Section 2(a) 60 days following the date of delivery of
the notice;
(ii) A notice to the Company by the Executive will constitute an
election by the Executive to terminate Executive's employment pursuant to
Section 2(a) 90 days following the date of delivery of the notice;
(iii) In no event, however, shall the Term of the Executive's
employment hereunder extend beyond the end of the month in which the Executive's
sixty-fifth (65th) birthday occurs.
(e) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination by reason
of the Executive's death) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 18 hereof. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date. The good faith failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be,
(ii) if the Executive's employment is terminated for Cause, the date specified
in the Notice of Termination, and (iii) if the Executive's employment is
terminated by either of the elections pursuant to Section 8(d) above, the
applicable date of termination determined under Section 8(d) above, and (iv) if
the Executive's employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided, however, that, if within thirty (30)
days after any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order
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or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
9. COMPENSATION UPON TERMINATION.
(a) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Term, this Agreement shall terminate
without further obligations to the Executive, other than for payment of Accrued
Obligations (as defined in Section 13(f)(i)a.) and the timely payment or
provision of Other Benefits (as defined in Section 13(f)(iv)). Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. Notwithstanding the foregoing, the Company shall
maintain, at the Company's sole expense, in full force and effect, for the
continued benefit of the Executive for twelve months following the Disability
Effective Date, all employee welfare benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Disability
Effective Date provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued participation is
barred.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Term, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of Accrued Obligations (as defined in
Section 13(f)(i)a.), calculated as if the Executive's employment had continued
for a period of 12 months following the date of death; and (ii) the timely
payment or provision of Other Benefits (as defined in Section 13(f)(iv)).
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
(c) CAUSE. If the Executive's employment shall be terminated for
Cause during the Term, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
(x) his Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Executive, and (z) Other Benefits,
in each case to the extent theretofore unpaid.
(d) VOLUNTARY TERMINATION. If the Executive voluntarily terminates
employment during the Term, excluding a termination for
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Good Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(e) TERMINATION ELECTION BY COMPANY; TERMINATION BY EXECUTIVE FOR GOOD
REASON. If the Executive's employment is terminated by the Company under
Section 8(d)(i) hereof or by the Executive under Section 8(c) hereof: (i) the
Company shall pay to the Executive a lump sum in cash within ten days of the
Date of Termination in an amount equal to the sum of (x) the product of the sum
of the Annual Base Salary in effect immediately prior to termination plus the
Applicable Bonus times either (A) one and one-half, if the Termination Date
occurs prior to the fifth anniversary of the Commencement Date or (B) one, if
the Termination Date occurs on or after the fifth anniversary of the
Commencement Date plus (y) the Accrued Obligations (as defined in Section
13(f)(i)a.), (ii) with respect to each current three-year LTI Award performance
cycle in effect as of the Date of Termination, the Company shall grant to the
Executive a number of fully vested and exercisable Stock Options equal to the
product of (x) the "standard performance stock option grant" set forth in
Section V.B.(ii) of Schedule 1 as adjusted in accordance with the conversion
matrix included as Attachment D thereof, based on performance as of the Date of
Termination as determined in good faith by the Company (but which performance
level shall, for purposes of determining the appropriate conversion percentage,
in no event be lower than the performance as of the close of the Company's most
recently completed fiscal year) times (y) a fraction, the numerator of which is
the number of whole months elapsed since the commencement of the relevant
three-year LTI Award performance cycle, and the denominator of which is 36, with
an exercise price per share equal to the fair market value of a share of Parent
Stock on the date of grant (the foregoing grant of Stock Options described in
this clause (ii) shall hereinafter be referred to as the "Accrued LTI
Performance Award"), and (iii) the Company shall continue to comply with its
obligations under Section 6(e).
10. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 22, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with
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the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
11. STOCK OPTIONS AND PARENT STOCK.
(a) In the event of the Executive's death, whether his death occurs
during or after the Term of this Agreement, all unexercised and exercisable
Stock Options shall be assigned to his Estate.
(b) In the event of the termination of the employment of the Executive
for any reason, all unexercised and exercisable Stock Options must be exercised
by him, or his estate (or heir(s)) as the case may be, before the second
anniversary of the termination of his employment, but in no event after the
tenth anniversary of the date of grant thereof, any such Stock Options not
exercised by that date will lapse immediately thereafter.
(c) In the Event of any change in the number of issued shares of
Parent Stock resulting from a subdivision or consolidation of shares or other
capital adjustment, or the payment of a stock dividend, or other increase or
decrease in such shares, then appropriate adjustments in the terms of any
unexercised Stock Options shall be made by Parent.
12. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. Unless the
Executive's Termination of employment gives rise to a right to payments and
benefits described in Section 13, if the Executive secures other employment,
any benefits the Company is required to provide to the Executive following
termination of the Executive's employment shall be secondary to those provided
by another employer (if any). However, if the Executive's employment is
terminated such that the Executive has a right to payments and benefits under
Section 13, such amounts shall not be reduced whether or not the Executive
obtains other employment.
13. CHANGE OF CONTROL PROVISIONS. The following provisions of this Section
13 shall apply notwithstanding any contrary or inconsistent provision in any
other section of this Agreement, and all other provisions of this Agreement, to
the extent they may be
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contrary to or inconsistent with the provisions of this Section 13, are hereby
made subject to the provisions of this Section 13, which shall be paramount in
all respects, PROVIDED, however, that the provisions of Section 3(c) shall
apply, where applicable.
(a) POSITION AND DUTIES. During any Transition Period, the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding a COC Transition Date, and the Executive's services shall be performed
at the location where the Executive was employed immediately preceding a COC
Transition Date.
(b) COMPENSATION AND RELATED MATTERS.
(i) ANNUAL BONUS. For each fiscal year ending during any
Transition Period, the Company shall pay to the Executive an Annual Bonus in
cash at least equal to the Executive's highest cash bonus under the Company's
annual cash bonus program, or any comparable cash bonus under any predecessor or
successor plan, for the last three full fiscal years prior to the latest COC
Transition Date (the "Highest Recent Bonus"). Each such Annual Bonus shall be
paid no later than 60 days following the commencement of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(ii) WELFARE BENEFITS. During any Transition Period, the
benefits to which the Executive and/or the Executive's family are entitled to
pursuant to Section 6(h) shall be no less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the latest
COC Transition Date or, if more favorable to the Executive, those provided
generally at any time after the latest COC Transition Date to other peer
executives of the Company and its affiliated companies.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During any Transition
Period, the plans, practices, policies and programs in which the Executive is
entitled to participate pursuant to Section 6(i) shall provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, at least as favorable, in the aggregate, as the most favorable of those
provided by the Company
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and its affiliated companies for the Executive under such plans, practices,
policies and programs as of the date hereof or if more favorable to the
Executive, those provided generally at any time to other peer executives of the
Company and its affiliated companies.
(iv) FRINGE BENEFITS. During any Transition Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
the benefits described in Section 6(j), in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period
immediately preceding the latest COC Transition Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(v) OFFICE AND SUPPORT STAFF. During any Transition Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the latest COC Transition Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(vi) VACATION. During any Transition Period, the Executive shall
be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the latest COC Transition Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(c) GOOD REASON. During any Transition Period, for purposes of this
Agreement, "Good Reason" shall mean:
i. the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Sections 5(a) or 13(a) of this Agreement, or any other
action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose isolated,
insubstantial and inadvertent action(s) not taken in bad faith and remedied
by the Company promptly after receipt of notice thereof given by the
Executive;
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ii. any failure by the Company to comply with any of the provisions
of Section 6 or Section 13(a) or (b) of this Agreement, other than
isolated, insubstantial and inadvertent failure(s) not occurring in bad
faith and remedied by the Company promptly after receipt of notice thereof
given by the Executive;
iii. the Company's requiring the Executive to be based at any office
or location other than as provided in Sections 5(a) or 13(a) hereof;
iv. any termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
v. any failure by the Company to comply with and satisfy Section
17(a) of this Agreement.
For purposes of this Section 13(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. A termination by the
Executive for any reason during the 30-day period immediately following the
first anniversary of any COC Transition Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement.
(d) COMPENSATION UPON TERMINATION FOR DISABILITY. If the Executive's
employment is terminated by reason of the Executive's Disability during any
Transition Period, then with respect to the provision of Other Benefits, the
term Other Benefits as utilized in Section 9(a) shall include, and the Executive
shall be entitled after the Disability Effective Date to receive, disability and
other benefits at least equal to the most favorable of those generally provided
by the Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to the most
senior executives and their families at any time during the 120-day period
immediately preceding the latest COC Transition Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(e) COMPENSATION UPON TERMINATION BY DEATH. If the Executive's death
occurs during any Transition Period, then with respect to the provision of
Other Benefits, the term Other Benefits as utilized in Section 9(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits
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provided by the Company and its affiliated companies to the estates and
beneficiaries of the most senior executives of the Company and its affiliated
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to the most senior executives and
their beneficiaries at any time during the 120-day period immediately preceding
the latest COC Transition Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of the
Executive's death with respect to other peer executives of the Company and its
affiliated companies and their beneficiaries.
(f) COMPENSATION UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR FOR
GOOD REASON. If, during any Transition Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the Executive shall
terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
i. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Applicable Bonus and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be referred to in this
Agreement as the "Accrued Obligations"); and
ii. the amount equal to the product of (1) two and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
iii. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's defined benefit
retirement plans, including any excess or supplemental retirement plan
in which the Executive participates (together, the "Retirement Plans")
(utilizing actuarial assumptions no less favorable to the Executive
than those in effect under the Retirement Plans immediately prior to
the latest COC Transition Date), which the Executive would receive if
the Executive's employment continued for two years after the Date of
Termination assuming for this purpose that all accrued
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benefits are fully vested, and, assuming that the Executive's
compensation in both of the two years is that required by Section 6(a)
and Section 6(b), over (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), if any, under the Retirement Plans
as of the Date of Termination;
(ii) for two years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 6(h) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until two years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion, and which shall
include the provision of reasonable office space and secretarial
assistance, provided, that the Company's responsibility under this clause
(iii) shall be limited to $30,000;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts
and benefits shall be referred to in this Agreement as the "Other
Benefits");
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(v) the Company shall grant to the Executive the Accrued LTI
Performance Award, as defined in Section 9(e), and Parent shall cause all
Stock Options and Parent Stock held by or for the benefit of the Executive
to become immediately fully vested and/or exercisable.
14. LEGAL FEES.
(a) Following any termination of the Executive's employment that gives
rise to a right to payments and benefits under Section 13, the Company shall pay
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
(b) Following any termination of the Executive's employment other than
a termination of employment described in paragraph (a), above, the Company shall
promptly reimburse the Executive, to the extent permitted by law, for all
reasonable legal fees and expenses reasonably incurred by the Executive as a
result of any contest by the Company or the Executive of the validity or
enforceability of, or liability under, any provisions of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code, provided, that such
reimbursement shall be limited to fees and expenses incurred in connection with
the contest of issues on which the Executive substantially prevails.
15. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 15) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any
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such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 15(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed
110% of the greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 15(c), all determinations
required to be made under this Section 15, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Arthur
Andersen LLP or such other certified public accounting firm as may be designated
by the Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 15, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 15(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be
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promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 15(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate
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courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 15(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 15(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 15(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
16. NONCOMPETITION.
(a) So long as the Executive is employed by the Company under this
Agreement and unless this Agreement is terminated for any reason, the Executive
agrees not to enter into competitive endeavors.
(b) During the Term and any period thereafter during which or in
respect of which the Executive receives payments from the Company under Section
9 or Section 13, the Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during
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the Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company and its
affiliated companies, the Executive shall not, without the prior written consent
of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 16 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under Section 13
of this Agreement.
17. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of the Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in the Agreement, Company shall mean
the Company as herein before defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 12 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If the Executive should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devise, legatee, or other designee or, if there be
no such designee, to the Executive's estate.
-24-
<PAGE>
18. NOTICE. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Mr. Justin F. Deedy, Jr.
4816 Upper Brandon Place
Marietta, Georgia 30068
If to the Company:
Superior Telecommunications Inc.
Suite 300
150 Interstate North Parkway
Atlanta, Georgia 30339
with a copy to:
The Alpine Group, Inc.
1790 Broadway
15th Floor
New York, NY 10019-1412
Attention: Chief Executive Officer
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
19. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer of the Company as may be
authorized by the Company Board. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of New York without regard to its conflicts of law principles.
-25-
<PAGE>
20. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
22. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officers employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled, provided, however, that this
Agreement should not supersede any existing benefit or agreement which provides
such benefit, including, without limitation, life or disability insurance
agreements and retirement plans currently in effect.
-26-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
ATTEST: SUPERIOR
TELECOMMUNICATIONS INC.
____________________ By:____________________(SEAL)
Name:
Title:
ATTEST: EXECUTIVE
____________________ ____________________
Justin F. Deedy, Jr.
The obligations of the Company hereunder are hereby unconditionally guaranteed
by Parent. Acknowledged and agreed to:
THE ALPINE GROUP, INC.
By:____________________(SEAL)
Name:
Title:
-27-
<PAGE>
EXHIBIT 10.4
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made and entered into as
of _________, 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 Date" shall mean date on which the
purchase and sale of shares of common stock of Superior pursuant to the Offering
first occurs, or such earlier date upon which the parties hereto may hereafter
agree.
(c) The term "Services" shall have the meaning set forth in
Section 4 hereof.
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
<PAGE>
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) Superior shall pay to Alpine a fee 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.
(b) 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, plus any third-party charges
incurred by Alpine in connection with the Services 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.
(b) 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.
-2-
<PAGE>
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 Date 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 Date, 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.
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.
-3-
<PAGE>
(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.
(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
-4-
<PAGE>
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 on the
Effective Date 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
-5-
<PAGE>
at the time of termination. The provisions of this Section 10 shall survive any
termination of this Agreement.
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.
-6-
<PAGE>
(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 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, Inc.
1790 Broadway
New York, New York 10019
Attention: Chairman
Telecopy No.: (212) 757-3423
If to SIC: 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.
-7-
<PAGE>
IN WITNESS WHEREOF, Alpine and Superior have caused this Agreement to
be executed on the date first above written.
THE ALPINE GROUP, INC.
By: ______________________________
Bragi F. Schut
Executive Vice President
SUPERIOR TELECOM INC.
By: ______________________________
Justin F. Deedy, Jr.
Senior Vice President
-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)
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
<PAGE>
EXHIBIT 10.5
The Alpine Group, Inc.
1790 Broadway
New York, New York 10019
August __, 1996
Superior TeleCom Inc.
1790 Broadway
New York, New York 10019
Attention: President
Gentlemen:
This will confirm that in connection with the Reorganization, as
defined in the Registration Statement of Superior TeleCom Inc. ("Superior")
filed with the Securities and Exchange Commission on August __, 1996, The Alpine
Group, Inc. 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.
1
<PAGE>
Please sign this letter agreement below to express your agreement to
the foregoing.
THE ALPINE GROUP, INC.
By: _______________________
Name:
Title:
AGREED:
SUPERIOR TELECOM INC.
By:____________________________
Name:
Title:
2
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION
OF
SUBSIDIARY ORGANIZATION
- ----------------------------------------------------------------- ------------
<S> <C>
Superior Telecommunications Inc................................... Georgia
Superior Cable Corporation........................................ Ontario
DNE Systems, Inc.................................................. Delaware
DNE Technologies, Inc............................................. Delaware
DNE Manufacturing and Service Company............................. Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form S-1 of (1) our report dated August 6, 1996 for
Superior Telecommunications Inc. and subsidiary and DNE Systems, Inc. and
subsidiaries (to be reorganized as Superior TeleCom Inc.) and (2) 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
New York, New York
August 6, 1996
