<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number 333-32195
WAVETEK WANDEL & GOLTERMANN, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-0457664
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1030 SWABIA COURT
RESEARCH TRIANGLE PARK, NORTH CAROLINA 27709-3585
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(919) 941-5730
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
NOT APPLICABLE
---------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of February 16, 1999,
Registrant had only one class of common stock, of which there were 13,202,323
shares outstanding.
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1998 and September 30, 1998 . . . 3
Consolidated Statements of Operations for the Three Months Ended
December 31, 1998 and December 31, 1997. . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1998 and December 31, 1997. . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 2. CHANGES IN SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . . . . . . 23
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WAVETEK WANDEL & GOLTERMANN, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
(unaudited) (note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . $16,570 $35,544
Accounts receivable (less allowance for doubtful accounts of $4,368 at
December 31, 1998 (unaudited) and $4,432 at September 30, 1998). . . . . . . 91,067 92,281
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,760 74,886
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,136 17,095
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,100 12,736
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,633 232,542
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 65,761 66,597
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,651 178,675
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,694 6,710
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $457,739 $484,524
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,262 $113,085
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,855 37,612
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,934 25,907
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,093 5,956
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 38,866 41,848
Notes payable to related parties . . . . . . . . . . . . . . . . . . . . . . . 11,766 11,746
Current maturities of long-term obligations. . . . . . . . . . . . . . . . . . 6,475 30,222
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,251 266,376
Long-term obligations, less current maturities . . . . . . . . . . . . . . . . . 199,003 121,595
Pension liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,270 39,991
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,260 25,582
Other non-current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 4,004 5,566
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; authorized, 50,000 shares;
issued and outstanding, 13,202 shares . . . . . . . . . . . . . . . . . . . . 132 132
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 72,948 72,948
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,782) (57,645)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . 9,653 9,979
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,951 25,414
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $457,739 $484,524
-------- --------
-------- --------
</TABLE>
Note: The balance sheet at September 30, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $126,465 $90,260
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . 54,635 37,895
-------- -------
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . 71,830 52,365
Operating expenses:
Marketing and selling . . . . . . . . . . . . . . . . . . 35,522 23,682
Research and development. . . . . . . . . . . . . . . . . 17,844 10,603
General and administrative. . . . . . . . . . . . . . . . 12,088 6,609
Amortization of intangible assets . . . . . . . . . . . . 4,816 266
Acquired in-process research and development. . . . . . . - 1,361
-------- -------
70,270 42,521
-------- -------
Operating income. . . . . . . . . . . . . . . . . . . . . . 1,560 9,844
Non-operating income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . 233 387
Interest expense. . . . . . . . . . . . . . . . . . . . . (5,191) (2,565)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . 239 (681)
-------- -------
(4,719) (2,859)
-------- -------
Income (loss) before provision (credit) for income taxes
and minority interest in income (loss) . . . . . . . . . . (3,159) 6,985
Provision (credit) for income taxes . . . . . . . . . . . . (2,022) 7,202
Minority interest in income (loss). . . . . . . . . . . . . - (163)
-------- -------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . $(1,137) $ (54)
-------- -------
-------- -------
Net loss per share. . . . . . . . . . . . . . . . . . . . . $ (0.09) $(0.01)
-------- -------
-------- -------
Weighted average number of shares outstanding . . . . . . . 13,202 8,317
-------- -------
-------- -------
</TABLE>
See accompanying notes.
4
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities . . . . . . . . . . . . $ (8,904) $ 6,324
INVESTING ACTIVITIES
Purchase of business, net of cash acquired. . . . . . . . . . . . . . . . . - (5,185)
Purchase of property and equipment. . . . . . . . . . . . . . . . . . . . . (2,709) (1,876)
Purchase of short-term investments, available for sale. . . . . . . . . . . - (18,150)
Proceeds from sale of short-term investments, available for sale. . . . . . - 18,150
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (396)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (2,709) (7,457)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and long-term obligations . . . . . 96,570 22,881
Principal payments on revolving lines of credit and long-term obligations . (103,949) (8,270)
-------- --------
Net cash provided by (used in) financing activities . . . . . . . . . . . . (7,379) 14,611
Effect of exchange rate changes on cash and cash equivalents. . . . . . . . 18 (7)
Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . (18,974) 13,471
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . 35,544 9,400
-------- --------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . $ 16,570 $ 22,871
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,318 $ 2,059
-------- --------
-------- --------
Cash paid for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . $ 460 $ 706
-------- --------
-------- --------
</TABLE>
See accompanying notes.
5
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
On September 30, 1998, Wavetek Corporation, a Delaware corporation
("Wavetek"), and Wandel & Goltermann Management Holding GmbH, a German
limited liability company ("WG"), consummated an exchange transaction whereby
the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek (the "Exchange Transaction"). In connection with the
Exchange Transaction, Wavetek was renamed Wavetek Wandel & Goltermann, Inc.
(the "Company"). The Exchange Transaction was accounted for as a purchase of
Wavetek by WG. Accordingly, the financial statements of the Company included
herein as of any date or for any period prior to September 30, 1998, are the
historical financial statements of WG.
The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment. The Company
conducts its communications test business, which addresses most sectors of
the communications test market, in four principal business areas: (1)
Telecom Networks (traditional voice/data transmissions and new multi-service
networks), (2) Enterprise Networks (local and wide-area network
infrastructures), (3) Multimedia (cable television and digital video
broadcast) and (4) Wireless (mobile telephony and data). The Company also
designs, manufactures and sells precision measurement instruments,
electromagnetic measurement instruments and general-purpose handheld test
tools. In addition, the Company provides repair, upgrade and calibration
services, as well as value-added professional services such as consulting and
training on a worldwide basis. The accompanying consolidated financial
statements include the operations of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying financial statements and the financial information
included herein are unaudited. However such information includes all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary to fairly state the results of the
interim periods. Interim results are not necessarily indicative of results to
be expected for the full year. It is suggested that these consolidated
financial statements be read in conjunction with the Company's audited
consolidated financial statements and notes thereto, included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998. Certain amounts reported in the accompanying balance sheet as of
September 30, 1998 have been reclassified to conform to the current
presentation.
2. NET INCOME (LOSS) PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER SHARE ("SFAS
128"). Basic net income (loss) per share is based only on average common
shares outstanding and excludes the dilutive effects of the Company's
outstanding stock options. Diluted net income (loss) per share includes the
dilutive effect of the Company's outstanding stock options. The Company has a
simple capital structure and, accordingly, the only difference in the
Company's computations of basic and diluted net income (loss) per share is
the dilutive effect of outstanding stock options. For the three months ended
December 31, 1998, the effect of outstanding stock options would have been
anti-dilutive and, therefore, was not considered in the computation of
diluted loss per share for such periods. There were no outstanding stock
options in the three months ended December 31, 1997. All net income (loss)
per share amounts for all periods have been presented, in accordance with the
requirements of SFAS 128.
6
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. FINANCIAL STATEMENT DETAILS
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Materials . . . . . . . . . . . . . . . . . $17,586 $19,217
Work-in-progress. . . . . . . . . . . . . . 19,045 21,469
Finished goods. . . . . . . . . . . . . . . 31,129 34,200
------- -------
$67,760 $74,886
------- -------
------- -------
</TABLE>
4. COMPREHENSIVE INCOME (LOSS)
On October 1, 1998, the Company adopted SFAS No. 30, "Reporting
Comprehensive Income," ("SFAS 130") which established standards for reporting
and displaying comprehensive income and its components in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income includes net income (loss) and other
comprehensive income. The Company's current and accumulated other
comprehensive income as of and for the periods ended December 31, 1998 and
September 30, 1998 is comprised solely of foreign currency translation
adjustments.
Components of comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1998 1997
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net loss. . . . . . . . . . . . . . . . . . $(1,137) $ (54)
Foreign currency translation adjustments. . (326) (235)
------- -----
Comprehensive loss. . . . . . . . . . . . . $(1,463) $(289)
------- -----
------- -----
</TABLE>
5. MULTI-CURRENCY REVOLVING CREDIT FACILITY
In December 1998, the Company entered into a Facilities Agreement in
relation to a Multi-Currency Revolving Credit Facility and Bilateral
Ancillary Facilities (the "Credit Facility") with a syndicate of four German
banks, providing for revolving borrowings, letters of credit and bank
guarantees aggregating up to a maximum amount of 280 million Deutsche marks
($167.4 million at December 31, 1998). The Credit Facility has a two-year
term and all borrowings bear interest at LIBOR plus 0.9% through September
30, 1999 and at LIBOR plus 1.5% thereafter. Borrowings under the Credit
Facility are secured by the pledge of 65% of the shares of Wandel &
Goltermann Management Holding GmbH, a subsidiary of the Company. In addition,
a $45 million tranche of the Credit Facility, which refinanced and replaced
the previously existing bank credit facility of Wavetek, is guaranteed by a
U.S. subsidiary of the Company. The Credit Facility requires the Company to
comply with certain covenants and maintain certain minimum financial ratios.
The Company was in compliance with all such requirements at December 31,
1998. As of December 31, 1998, the Company had borrowed $77.9 million under
the Credit Facility and $89.5 million was available to borrow. In January
1999, additional amounts were borrowed under the Credit Facility to refinance
certain bank debt at the Company's subsidiaries, and certain bank guarantees
were provided under the Credit Facility to secure other subsidiary bank
borrowings, reducing availability under the Credit Agreement to approximately
$30 million.
7
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA
The Company's payment obligations under its 10-1/8% Senior Subordinated
Notes due 2007 (the "Notes") are guaranteed by all of the Company's current
and future domestic subsidiaries (collectively, the "Subsidiary Guarantors").
WGTI and Wandel & Goltermann ATE Systems, Inc., which became legal Subsidiary
Guarantors upon completion of the Exchange Transaction, are shown as
Subsidiary Guarantors for all periods presented prior to September 30, 1998.
Wavetek U.S. Inc. and its subsidiary, Digital Transport Systems, Inc., are
also included in the financial statements as of September 30, 1998 as a
result of the Exchange Transaction. Such guarantees are full and
unconditional and joint and several. Separate financial statements of the
Subsidiary Guarantors are not presented because the Company's management has
deemed that they would not be material to investors. The following
supplemental condensed consolidating financial data sets forth, on an
unconsolidated basis, balance sheets, statements of operations and statements
of cash flows data for (i) the Company (Wavetek Wandel & Goltermann, Inc.,
formerly Wavetek Corporation, the issuer of the Notes), (ii) the current
Subsidiary Guarantors and (iii) the Company's foreign subsidiaries (the
"Foreign Subsidiaries"). The supplemental financial data reflects the
investments of the Company in the Subsidiary Guarantors and the Foreign
Subsidiaries using the equity method of accounting.
8
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 1998
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 361 $5,814 $10,395 $ - $16,570
Accounts receivable (less allowance for
doubtful accounts of $4,368) . . . . . . . . . (191) 50,259 81,690 (40,691) 91,067
Inventories. . . . . . . . . . . . . . . . . . . - 15,709 56,909 (4,858) 67,760
Deferred income taxes. . . . . . . . . . . . . . 3,592 5,068 5,374 6,102 20,136
Other current assets . . . . . . . . . . . . . . 1,264 2,500 11,701 (365) 15,100
-------- -------- --------- --------- --------
Total current assets . . . . . . . . . . . . . . . 5,026 79,350 166,069 (39,812) 210,633
Property and equipment, net. . . . . . . . . . . . 1,478 7,914 56,369 - 65,761
Intangible assets, net . . . . . . . . . . . . . . 6,992 118,183 48,476 - 173,651
Other assets . . . . . . . . . . . . . . . . . . . 7,714 1,698 5,968 (7,686) 7,694
Investment in subsidiaries . . . . . . . . . . . . 178,146 - - (178,146) -
-------- -------- --------- --------- --------
Total assets . . . . . . . . . . . . . . . . . . . $199,356 $207,145 $276,882 $(225,644) $457,739
-------- -------- --------- --------- --------
-------- -------- --------- --------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks . . . . . . . . . . . . . $ - - $ 52,262 $ - $ 52,262
Trade accounts payable . . . . . . . . . . . . . 20,845 16,391 37,740 (47,121) 27,855
Accrued compensation . . . . . . . . . . . . . . 1,121 4,965 12,848 - 18,934
Income taxes payable . . . . . . . . . . . . . . (12,540) 12,256 8,377 - 8,093
Other current liabilities. . . . . . . . . . . . 2,606 7,522 28,738 - 38,866
Notes payable to related parties . . . . . . . . - 11,766 - 11,766
Current maturities of long-term obligations. . . - 741 5,734 6,475
-------- -------- --------- --------- --------
Total current liabilities. . . . . . . . . . . . . 12,032 41,875 157,465 (47,121) 164,251
Long-term obligations, less current maturities . . 162,889 4,232 33,230 (1,348) 199,003
Pension liabilities. . . . . . . . . . . . . . . . - 353 41,917 - 42,270
Deferred taxes . . . . . . . . . . . . . . . . . . 452 24,716 (908) - 24,260
Other non-current liabilities. . . . . . . . . . . 32 1,582 2,390 - 4,004
Commitments and contingencies
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . 132 - - - 132
Additional paid-in capital . . . . . . . . . . . 72,948 168,071 87,187 (255,258) 72,948
Accumulated deficit. . . . . . . . . . . . . . . (58,782) (33,652) (54,807) 88,459 (58,782)
Foreign currency translation adjustments . . . . 9,653 (32) 10,408 (10,376) 9,653
-------- -------- --------- --------- --------
Total stockholders' equity . . . . . . . . . . . . 23,951 134,387 42,788 (177,175) 23,951
-------- -------- --------- --------- --------
Total liabilities and stockholders' equity . . . . $199,356 $207,145 $276,882 $(225,644) $457,739
-------- -------- --------- --------- --------
-------- -------- --------- --------- --------
</TABLE>
9
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 19 $ 31,143 $ 4,382 $ - $ 35,544
Accounts receivable (less allowance for
doubtful accounts of $4,432) . . . . . . . . . 8,710 27,364 81,907 (25,700) 92,281
Inventories. . . . . . . . . . . . . . . . . . . - 18,033 59,942 (3,089) 74,886
Deferred income taxes. . . . . . . . . . . . . . 3,592 4,408 9,095 - 17,095
Other current assets . . . . . . . . . . . . . . 1,244 1,884 9,608 - 12,736
-------- -------- -------- --------- --------
Total current assets . . . . . . . . . . . . . . . 13,565 82,832 164,934 (28,789) 232,542
Property and equipment, net. . . . . . . . . . . . 1,611 8,015 56,971 - 66,597
Intangible assets, net . . . . . . . . . . . . . . 7,953 120,428 50,294 - 178,675
Investment in subsidiaries . . . . . . . . . . . . 143,579 - 29,932 (173,511) -
Other assets . . . . . . . . . . . . . . . . . . . 213 2,763 3,794 (60) 6,710
-------- -------- -------- --------- --------
Total assets . . . . . . . . . . . . . . . . . . . $166,921 $214,038 $305,925 $(202,360) $484,524
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks . . . . . . . . . . . . . $ 34,463 $ 373 $ 78,249 $ - $113,085
Trade accounts payable . . . . . . . . . . . . . 4,003 20,322 35,845 (22,558) 37,612
Accrued compensation . . . . . . . . . . . . . . 714 5,478 19,715 - 25,907
Income taxes payable . . . . . . . . . . . . . . (10,839) 9,978 6,817 5,956
Other current liabilities. . . . . . . . . . . . 3,683 8,967 30,986 (1,788) 41,848
Notes payable to related parties . . . . . . . . - - 11,746 - 11,746
Current maturities of long-term obligations. . . 24,000 741 5,481 - 30,222
-------- -------- -------- --------- --------
Total current liabilities. . . . . . . . . . . . . 56,024 45,859 188,839 (24,346) 266,376
Long-term obligations, less current maturities . . 85,000 4,299 33,711 (1,415) 121,595
Pension liabilities. . . . . . . . . . . . . . . . - - 39,991 - 39,991
Deferred taxes . . . . . . . . . . . . . . . . . . 238 25,156 188 - 25,582
Other non-current liabilities. . . . . . . . . . . 245 2,142 3,179 - 5,566
Commitments and contingencies
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . 132 - - - 132
Additional paid-in capital . . . . . . . . . . . 72,948 168,071 85,153 (253,224) 72,948
Accumulated deficit. . . . . . . . . . . . . . . (57,645) (31,463) (55,115) 86,578 (57,645)
Foreign currency translation adjustments . . . . 9,979 (26) 9,979 (9,953) 9,979
-------- -------- -------- --------- --------
Total stockholders' equity . . . . . . . . . . . . 25,414 136,582 40,017 (176,599) 25,414
-------- -------- -------- --------- --------
Total liabilities and stockholders' equity . . . . $166,921 $214,038 $305,925 $(202,360) $484,524
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
</TABLE>
10
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $ - $ 38,834 $ 104,481 $ (16,850) $ 126,465
Cost of goods sold . . . . . . . . . . . . . . . . 28 20,758 48,707 (14,858) 54,635
------- -------- --------- --------- ---------
Gross margin . . . . . . . . . . . . . . . . . . . (28) 18,076 55,774 (1,992) 71,830
Operating expenses:
Marketing and selling. . . . . . . . . . . . . . 1,025 9,060 25,437 - 35,522
Research and development . . . . . . . . . . . . - 5,343 12,501 - 17,844
General and administrative . . . . . . . . . . . 1,061 2,989 8,038 - 12,088
Amortization of intangible assets. . . . . . . . 36 3,008 1,772 - 4,816
------- -------- --------- --------- ---------
2,122 20,400 47,748 - 70,270
------- -------- --------- --------- ---------
Operating income (loss). . . . . . . . . . . . . . (2,150) (2,324) 8,026 (1,992) 1,560
Non-operating income (expense):
Interest income. . . . . . . . . . . . . . . . . 34 50 149 - 233
Interest expense . . . . . . . . . . . . . . . . (2,869) (140) (2,182) - (5,191)
Equity in net income (loss) of subsidiaries. . . 2,012 - (1,452) (560) -
Other, net . . . . . . . . . . . . . . . . . . . 135 253 (149) - 239
------- -------- --------- --------- ---------
(688) 163 (3,634) (560) (4,719)
------- -------- --------- --------- ---------
Income (loss) before provision (credit) for
income taxes . . . . . . . . . . . . . . . . . . (2,838) (2,161) 4,392 (2,552) (3,159)
Provision (credit) for income taxes. . . . . . . . (1,701) 231 3,955 (4,507) (2,022)
------- -------- --------- --------- ---------
Net income (loss). . . . . . . . . . . . . . . . . $(1,137) $ (2,392) $ 437 $ 1,955 $ (1,137)
------- -------- --------- --------- ---------
------- -------- --------- --------- ---------
</TABLE>
11
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $ - $16,725 $84,368 $(10,833) $90,260
Cost of goods sold . . . . . . . . . . . . . . . . - 8,499 40,229 (10,833) 37,895
------ ------- ------- -------- -------
Gross margin . . . . . . . . . . . . . . . . . . . - 8,226 44,139 - 52,365
Operating expenses:
Marketing and selling. . . . . . . . . . . . . . - 4,105 19,577 - 23,682
Research and development . . . . . . . . . . . . - 3,044 7,559 - 10,603
General and administrative . . . . . . . . . . . - 1,402 5,207 - 6,609
Amortization of intangible assets. . . . . . . . - 70 196 - 266
Acquired in-process research and development . . - - 1,361 - 1,361
------ ------- ------- -------- -------
- 8,621 33,900 - 42,521
------ ------- ------- -------- -------
Operating income (loss). . . . . . . . . . . . . . - (395) 10,239 - 9,844
Non-operating income (expense):
Interest income. . . . . . . . . . . . . . . . . - 188 244 (45) 387
Interest expense . . . . . . . . . . . . . . . . - (45) (2,565) 45 (2,565)
Equity in net income (loss) of subsidiaries. . . - - 40 (40) -
Other, net . . . . . . . . . . . . . . . . . . . - 26 (707) - (681)
------ ------- ------- -------- -------
- 169 (2,988) (40) (2,859)
------ ------- ------- -------- -------
Income (loss) before provision (credit) for income
taxes and minority interest in income (loss) . . - (226) 7,251 (40) 6,985
Provision (credit) for income taxes. . . . . . . . - (103) 7,305 - 7,202
Minority interest in income (loss) . . . . . . . . - - - (163) (163)
------ ------- ------- -------- -------
Net income (loss). . . . . . . . . . . . . . . . . $ - $ (123) $ (54) $ 123 $ (54)
------ ------- ------- -------- -------
------ ------- ------- -------- -------
</TABLE>
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . $(11,223) $4,743 $(2,424) $ - $(8,904)
INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . (455) (637) (1,617) - (2,709)
Transfer of subsidiaries . . . . . . . . . . . . . (28,536) - 28,536 - -
-------- ------ ------- ------- -------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . (28,991) (637) 26,919 - (2,709)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term obligations. . . . . . . . . . . . . . 77,889 1,402 17,279 - 96,570
Principal payments on revolving lines of credit
and long-term obligations. . . . . . . . . . . . (58,463) (1,775) (43,711) (103,949)
Capital contribution from Wavetek Wandel &
Goltermann, Inc. to subsidiary . . . . . . . . . (2,034) - 2,034 - -
Loans to subsidiaries. . . . . . . . . . . . . . . (5,832) (66) 5,898 - -
Repayment of loans to subsidiaries . . . . . . . . 28,996 (28,996) - - -
-------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . 40,556 (29,435) (18,500) - (7,379)
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . - - 18 - 18
-------- ------- ------- ------- -------
Increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . 342 (25,329) 6,013 - (18,974)
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . 19 31,143 4,382 - 35,544
-------- ------- ------- ------- -------
Cash and cash equivalents at end of period . . . . $ 361 $ 5,814 $10,395 $ - $16,570
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
13
<PAGE>
WAVETEK WANDEL & GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK
WANDEL &
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . $ - $ 383 $ (2,559) $8,500 $ 6,324
INVESTING ACTIVITIES
Purchase of business, net of cash acquired . . . . - - (5,185) - (5,185)
Purchase of property and equipment . . . . . . . . - (335) (1,541) - (1,876)
Purchase of short-term investments . . . . . . . . - (18,150) - - (18,150)
Proceeds from sale of short-term investments . . . - 18,150 - - 18,150
Other investing activities . . . . . . . . . . . . - 2 (398) - (396)
-------- -------- -------- ------ --------
Net cash used in investing activities. . . . . . . - (333) (7,124) - (7,457)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term obligations. . . . . . . . . . . . . . - - 22,881 - 22,881
Principal payments on revolving lines of credit
and long-term obligations. . . . . . . . . . . . - - (8,270) - (8,270)
-------- -------- -------- ------ --------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . - - 14,611 - 14,611
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . - - (7) - (7)
-------- -------- -------- ------ --------
Increase in cash and cash equivalents. . . . . . . - 50 4,921 8,500 13,471
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . - 13,401 4,499 (8,500) 9,400
-------- -------- -------- ------ --------
Cash and cash equivalents at end of period . . . . $ - $ 13,451 $ 9,420 $ - $22,871
-------- -------- -------- ------ --------
-------- -------- -------- ------ --------
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Statements contained in this Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Quarterly Report on Form 10-Q which are not historical facts may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from
those projected, including, but not limited to, those risks and special
considerations set forth in the Company's other SEC filings. Readers are
cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date hereof. The Company undertakes no obligation
to publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
OVERVIEW
On September 30, 1998, Wavetek Corporation, a Delaware corporation
("Wavetek"), and Wandel & Goltermann Management Holding GmbH, a German
limited liability company ("WG"), consummated an exchange transaction whereby
the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek (the "Exchange Transaction"). In connection with the
Exchange Transaction, Wavetek was renamed Wavetek Wandel & Goltermann, Inc.
(the "Company"). Although WG became a subsidiary of Wavetek, the Exchange
Transaction was treated, for accounting and reporting purposes, as a purchase
of Wavetek by WG. Accordingly, the consolidated financial statements of the
Company included herein as of any date or for any period prior to September
30, 1998 are the historical consolidated financial statements of WG. The
consolidated balance sheets of the Company as of September 30, 1998 and
December 31, 1998 and the consolidated statement of operations for the three
months ended December 31, 1998, included herein, reflect the Exchange
Transaction and the related purchase accounting adjustments. The Company
expects net sales, cost of goods sold, gross margin, operating expenses and
interest expense to increase significantly in fiscal 1999 as a result of the
Exchange Transaction. The Company also expects its operating expenses to
increase as a result of its acquisition of Tinwald Networking Technologies
Inc. in January 1998 and Wavetek's acquisition of Digital Transport Systems,
Inc. effective September 30, 1998.
GENERAL
The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment. The Company
conducts its communications test business, which addresses most sectors of
the communications test market, in four principal business areas: (1)
Telecom Networks (traditional voice/data transmissions and new multi-service
networks), (2) Enterprise Networks (local and wide-area network
infrastructures), (3) Multimedia (cable television and digital video
broadcast) and (4) Wireless (mobile telephony and data). The Company also
designs, manufactures and sells precision measurement instruments,
electromagnetic measurement instruments and general-purpose handheld test
tools. In addition, the Company provides repair, upgrade and calibration
services, as well as value-added professional services such as consulting and
training on a worldwide basis.
The Company sells its products to a broad base of over 5,000 customers
worldwide, including (1) global communications equipment manufacturers such
as Alcatel, Cisco Systems, Inc., L.M. Ericsson Telephon AB ("Ericsson"),
International Business Machines Corp. ("IBM"), Lucent Technologies, Inc.,
Motorola, Inc., Northern Telecom, Ltd. ("Nortel"), NCR Corporation and
Siemens AG, (2) communications service providers such as AT&T Corporation,
15
<PAGE>
TeleCommunications, Inc. ("TCI"), Deutsche Telekom AG, France Telecom,
Embratel, China Telecom and Time Warner Cable and (3) the information service
departments of corporations and governmental entities such as DaimlerChrysler
and the U.S. Navy. For fiscal 1998, no customer represented more than 5% of
the Company's pro forma sales. The Company's sales are also diversified
geographically.
The Company sells and services its products through (1) its global sales
and service organization of over 800 employees in over 25 countries and (2) a
global network of over 250 distributors, resellers and independent
representatives, which together provide the Company with a sales and service
presence in over 85 countries. The Company has design and manufacturing
capabilities through 11 facilities located in the United States, Germany,
France, the United Kingdom, Switzerland and Brazil.
The Company's operating expenses are substantially impacted by marketing
and selling activities and by research and development activities. Marketing
and selling expenses are primarily driven by: (1) sales volume, with respect
to sales force expenses and commission expenses; (2) the extent of market
research activities for new product design efforts; (3) advertising and trade
show activities and (4) the number of new products launched in the period. In
recent periods, the Company has increased its spending on research and
development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial international operations, the United States dollar amount of its
expenses is impacted by changes in foreign currency exchange rates. The
Company's ability to maintain and grow its sales depends on a variety of
factors including its ability to maintain its competitive position in areas
such as technology, performance, price, brand identity, quality, reliability,
distribution and customer service and support. The Company's sales growth
also depends on its ability to continue to introduce new products that
respond to technological change and market demand in a timely manner.
RESULTS OF OPERATIONS
The following table sets forth selected financial information as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1998 1997
----- -----
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 43.2 42.0
----- -----
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . 56.8 58.0
Operating expenses . . . . . . . . . . . . . . . . . . . . . 55.6 47.1
----- -----
Operating income (loss). . . . . . . . . . . . . . . . . . . 1.2 10.9
Interest expense, net. . . . . . . . . . . . . . . . . . . . (3.9) (2.4)
Other non-operating income (expense), net. . . . . . . . . . 0.2 (0.8)
----- -----
Income (loss) before provision (credit) for income taxes
and minority interest in income (loss) . . . . . . . . . . (2.5) 7.7
Provision (credit) for income taxes. . . . . . . . . . . . . (1.6) 8.0
Minority interest in income (loss) . . . . . . . . . . . . . - (0.2)
----- -----
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . (0.9)% (0.1)%
----- -----
----- -----
EBITDA (1) . . . . . . . . . . . . . . . . . . . . . . . . . 10.0% 15.4%
----- -----
----- -----
</TABLE>
16
<PAGE>
The Company's ratio of earnings to fixed charges was as follows for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1998 1997
---- ----
<S> <C> <C>
Ratio of earnings to fixed charges (2) . . . . . . . . . 0.5x 3.3x
</TABLE>
- ---------------
(1) EBITDA is operating income plus depreciation and amortization expense,
acquired in-process research and development, provisions for restructuring
and other non-recurring charges and, for the three months ended December
31, 1998, the one-time non-cash increase in cost of goods sold resulting
from the adjustment of inventories to fair value in connection with the
Exchange Transaction. The Company's definition of EBITDA is consistent with
the definition of Consolidated Cash Flow in the Indenture related to the
Company's 10-1/8% Senior Subordinated Notes due June 15, 2007 (the
"Indenture"). While EBITDA should not be construed as a substitute for
income from operations, net income or cash flows from operating activities
in analyzing the Company's operating performance, financial position or
cash flows, the Company has included EBITDA because it may be viewed as an
indicator of compliance with certain covenants in the Indenture and is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a Company's ability to service debt. EBITDA as presented by
the Company herein may not be comparable to similarly titled measures
reported by other companies. In addition, the amount reported by the
Company as EBITDA may not be fully available for management's discretionary
use due to the Company's needs to conserve funds for debt service, capital
expenditures and other commitments.
(2) For purposes of computing this ratio, earnings consist of income (loss)
before provision (credit) for income taxes plus fixed charges. Fixed
charges consist of interest expense and one-third of the rent expense from
operating leases, which management believes is a reasonable approximation
of the interest factor of the rent.
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997
NET SALES. Net sales in the three months ended December 31, 1998
increased $36.2 million, or 40.1%, to $126.5 million from $90.3 million in
the comparable fiscal 1998 period. This increase was substantially due to the
addition of sales from Wavetek following the Exchange Transaction. Sales to
international customers increased $18.0 million, or 22.4%, to $98.6 million
and sales to customers in the United States increased $18.2 million, or
187.4%, to $27.9 million. The Company's sales to customers outside the United
States decreased to 78.0% of total sales in the three months ended December
31, 1998 from 89.3% in the comparable fiscal 1998 period. Changes in certain
foreign exchange rates had a small favorable impact on the United States
dollar equivalent of the Company's sales denominated in foreign currencies in
the three months ended December 31, 1998. Sales of the Company's
Communications Test products in the three months ended December 31, 1998
increased $29.1 million, or 34.7%, from the comparable fiscal 1998 period to
$113.1 million also primarily due to the addition of sales from Wavetek
following the Exchange Transaction. Sales in the three months ended December
31, 1998 from repair, upgrade and calibration services increased $2.6
million, or 71.6%, from the comparable fiscal 1998 period to $6.2 million.
GROSS MARGIN. The Company's gross margin in the three months ended
December 31, 1998 increased $19.4 million, or 37.2%, to $71.8 million from
$52.4 million in the comparable fiscal 1998 period due to the added gross
margin on the Wavetek sales following the Exchange Transaction. Gross margin
as a percentage of sales decreased to 56.8% in the three months ended
December 31, 1998 from 58.0% in the comparable fiscal 1998 period. The
decrease in the gross margin percentage during the three months ended
December 31, 1998 resulted primarily from the impact of the change in the mix
17
<PAGE>
of products sold following the Exchange Transaction. Changes in foreign
exchange rates had a small favorable impact on the United States dollar
equivalent of gross margins related to international sales denominated in
foreign currencies in the three months ended December 31, 1998.
OPERATING EXPENSES. Operating expenses in the three months ended
December 31, 1998 increased $27.8 million, or 65.3%, to $70.3 million from
$42.5 million in the comparable fiscal 1998 period due primarily to the
addition of expenses from Wavetek following the Exchange Transaction.
Operating expenses as a percentage of sales increased to 55.6% in the three
months ended December 31, 1998 from 47.1% in the comparable fiscal 1998
period. Marketing and selling expenses increased $11.8 million, or 50.0%, to
$35.5 million (28.1% of sales) in the three months ended December 31, 1998
from $23.7 million (26.2% of sales) in the comparable fiscal 1998 period due
primarily to the addition of marketing and selling expenses from Wavetek
following the Exchange Transaction. In addition, the Company incurred certain
costs during the three months ended December 31, 1998 related to a biannual
international sales and marketing meeting and increased its spending related
to certain market development resources and fixed selling expenses. Spending
for research and development activities increased $7.2 million, or 68.3%, to
$17.8 million (14.1% of sales) in the three months ended December 31, 1998
from $10.6 million (11.7% of sales) in the comparable fiscal 1998 period due
primarily to the addition of research and development expenses from Wavetek
following the Exchange Transaction and from other businesses acquired by the
Company during fiscal 1998. The Company also increased research and
development spending in order to accelerate the timing and number of new
product introductions. General and administrative expenses increased $5.5
million, or 82.9%, to $12.1 million (9.6% of sales) in the three months ended
December 31, 1998 from $6.6 million (7.3% of sales) in the comparable fiscal
1998 period due to the addition of general and administrative expenses from
Wavetek following the Exchange Transaction and from other businesses acquired
by the Company during fiscal 1998. In addition, the Company has increased its
general and administrative spending relate to its management information
systems and certain other fixed administrative costs in relation to the
comparable fiscal 1998 period. Operating expenses for the three months ended
December 31, 1998 also reflect an increase in amortization of intangible
assets of $4.6 million, due primarily to the Exchange Transaction, partially
offset by expenses for acquired in-process research and development of $1.4
million which occurred in the three months ended December 31, 1997 and did
not recur in the current period. Changes in foreign exchange rates had a
small unfavorable impact on the United States dollar equivalent of operating
expenses denominated in foreign currencies in the three months ended December
31, 1998.
NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in the three
months ended December 31, 1998 increased by $1.9 million over the comparable
fiscal 1998 period to $4.7 million. The increase was primarily due to an
increase in the Company's net interest expense to $5.0 million during the
three months ended December 31, 1998 from $2.2 million in the comparable
fiscal 1998 period, reflecting additional interest expense due to an increase
in the Company's outstanding debt following the Exchange Transaction. The
increase in net interest expense was partially offset by a reduction of $0.9
million in other non-operating expenses.
PROVISION (CREDIT) FOR INCOME TAXES. The Company's effective tax rate
decreased to approximately 64% in the three months ended December 31, 1998,
from approximately 103% in the comparable fiscal 1998 period. The Company's
effective tax rate takes into account the expected annual mix of income and
related tax rates by geographical location. Such effective rate also reflects
the non-deductibility of the amortization expense related to certain
intangible assets and other expenses related to the Exchange Transaction and
other acquisitions which occurred during fiscal 1998.
NET INCOME (LOSS). As a result of the above factors, net loss was $1.1
million in the three months ended December 31, 1998 as compared to $0.1
million in the comparable fiscal 1998 period.
18
<PAGE>
EBITDA. As a result of the above factors, EBITDA was $12.6 million in
the three months ended December 31, 1998 as compared to $13.9 million in the
comparable fiscal 1998 period. EBITDA as a percentage of sales decreased to
10.0% in the three months ended December 31, 1998 from 15.4% in the
comparable fiscal 1998 period.
RATIO OF EARNINGS TO FIXED CHARGES. As a result of the above factors,
the ratio of earnings to fixed charges was 0.5x in the three months ended
December 31, 1998 as compared to 3.3x in the comparable fiscal 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash provided by (used in) operating activities was $(8.9)
million and $6.3 million in the three months ended December 31, 1998 and
1997, respectively. The Company had cash, cash equivalents and short-term
investments at December 31, 1998 of $16.6 million. The Company invests its
excess cash in highly liquid money market funds, U.S. Treasury obligations
and investment grade commercial paper. In recent years, the Company has
funded its business through operating cash flow, has not relied on sales of
equity to provide cash and has used short-term debt primarily for cash
management purposes. The Company had short-term borrowings outstanding of
$52.3 million at December 31, 1998, including amounts borrowed for working
capital requirements. The Company had additional obligations outstanding
totaling approximately $5.0 million in the form of letters of credit and bank
guarantees.
The Company's primary cash needs have been for the funding of working
capital requirements (primarily inventory and accounts receivable) and
capital expenditures. The Company's net cash used in investing activities was
$2.7 million and $7.5 million in the three months ended December 31, 1998 and
1997, respectively. The Company's recurring cash requirements for investing
activities are primarily for the purchase of businesses and capital
expenditures. The Company made capital expenditures in the three months ended
December 31, 1998 and 1997 of approximately $2.7 million and $1.9 million,
respectively.
The Company's net cash provided by (used in) financing activities was
$(7.4) million and $14.6 million in the three months ended December 31, 1998
and 1997, respectively. The net cash provided by (used in) financing
activities substantially reflects the proceeds from and repayments for
borrowings used to finance the Company's operating and investing activities,
or as an application of the cash generated from these activities.
The Company believes that its cash flow from operations, combined with
the remaining available borrowings under its existing bank credit agreements,
including the Credit Facility discussed in Note 5 to the Company's
consolidated financial Statements included in Item 1 herein, will be
sufficient to fund its debt service obligations, including its obligations
under the Notes, and working capital requirements.
FOREIGN OPERATIONS
As discussed above, a significant portion of the Company's sales and
expenses are denominated in currencies other than the United States dollar.
In order to maintain access to such foreign currencies, the Company and
certain of its foreign subsidiaries have credit facilities providing for
borrowings in local currency. Adjustments made in translating the balance
sheet accounts of the foreign subsidiaries from their respective functional
currencies at appropriate exchange rates are included as a separate component
of stockholders' equity. In addition, the Company periodically uses forward
exchange contracts and collars to hedge certain known foreign exchange
exposures. Gains or losses from such contracts are included in the Company's
consolidated statements of operations to offset gains and losses from the
underlying foreign currency transactions.
19
<PAGE>
The Indenture under which the Company's 10-1/8% Senior Subordinated Notes
due 2007 were issued permits the Company and its subsidiaries to make
investments in, and intercompany loans to, its foreign subsidiaries. Payments
to the Company or its other subsidiaries by such foreign subsidiaries,
including the payment of dividends, redemption of capital stock or repayment
of such intercompany loans, may be restricted by the credit agreements of the
foreign subsidiaries.
On January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between their existing
currencies and a new common currency (the "euro"). The participating
countries adopted the euro as their common legal currency on that date. The
Company is assessing the potential impact from the euro conversion in a
number of areas, including the competitive impact of cross-border price
transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis, and the
impact on currency exchange costs and currency exchange rate risk. At this
stage of its assessment, the Company cannot yet predict the full impact of
the euro conversion on the Company.
PERIODIC FLUCTUATIONS
The Company's net sales occurred in the following percentages in each of the
last four quarters: 20% for the quarter ended March 31, 1998, 21% for the
quarter ended June 30, 1998, 24% for the quarter ended September 30, 1998 and
35% for the quarter ended December 31, 1998. A variety of factors may cause
period-to-period fluctuations in the operating results of the Company. Such
factors include, but are not limited to, the purchase of businesses, product
mix, European summer holidays and other seasonal influences, competitive
pricing pressures, materials costs, currency fluctuations, revenues and
expenses related to new products and enhancements of existing products, as
well as delays in customer purchases in anticipation of the introduction of
new products or product enhancements by the Company or its competitors. The
majority of the Company's revenues in each quarter results from orders
received in that quarter. As a result, the Company establishes its
production, inventory and operating expenditure levels based on anticipated
revenue levels. Thus, if sales do not occur when expected, expenditure levels
could be disproportionately high and operating results for that quarter, and
potentially future quarters, would be adversely affected.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than
the Year 2000. This could result in a system failure or a miscalculation
causing disruption of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.
WG and Wavetek, prior to the Exchange Transaction, independently
addressed the issues involved in the Year 2000 Issue. The Company has
determined that it will be required to modify or replace significant portions
of its hardware and software so that those systems will properly utilize
dates beyond December 31, 1999. The Company presently believes that with
modifications or replacements of existing hardware and software, the Year
2000 Issue can be mitigated. However, if such modifications and replacements
are not made, or are not completed timely, the Year 2000 Issue could have a
material impact on the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. Starting in
1995, both WG and Wavetek began to evaluate their internal business and
information systems for Year 2000 compliance. The Company has completed an
assessment of the impact of the Year 2000
20
<PAGE>
Issue on its internal and external operations, and is in the process of
upgrading or replacing certain hardware, embedded chips and software programs
it employs in the normal course of business, including its manufacturing,
accounting applications and certain other administrative hardware and
software systems. As a result, the Company has already addressed many of its
Year 2000 Issues and continues on schedule to complete this project before it
will have any material impact on the Company's ability to deliver products
and services.
The total cost of the year 2000 Issue project is estimated to be
approximately $2.2 million and is estimated to be completed no later than
June 30, 1999 including testing and implementation. The Company has already
incurred a substantial portion of the costs of this project, including costs
associated with the implementation of certain new core information systems.
Much of this expenditure, both incurred and expected, would have been
necessary in any case as part of the regular process of maintaining and
updating systems. In some instances, the expenditures have been accelerated
in order to comply with Year 2000 requirements. As of December 31, 1998, the
Company has incurred approximately $1.5 million related to the Year 2000
Issue.
The costs of the Year 2000 Issue project and the date on which the
Company believes it will complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no assurance that these
results will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties.
The Company expects to mitigate the Year 2000 Issue so that the Company's
operations or business are not materially adversely affected. In some cases,
the Company is relying upon suppliers to provide Year 2000 compliant upgrades
in a timely manner. The Company has a program in place to assess the extent
to which the Company's systems or business processes may be vulnerable to
third party non-compliance and the ability of its suppliers and business
partners to continue normal operations beyond Year 2000. Where responses from
suppliers or partners to the questions asked as part of this formal
assessment program are unsatisfactory, the Company will take steps to seek
alternative suppliers or partnerships. However, there can be no assurance
that the systems of other companies on which the Company's systems rely will
be timely converted and will not have an adverse effect on the Company's
systems.
As of December 31, 1998, all Company products are delivered Year 2000
compliant. Information has also been provided to address customer inquiries
concerning previously delivered products, including those no longer
manufactured. All expenditures for product correction have been incurred.
The Company has taken steps to minimize the risks for its business
processes and systems. Contingency plans for certain critical applications
are in place. The Company is, however, vulnerable to failures of major
utilities or service providers to become Year 2000 compliant. The Company's
major facilities include 11 discrete locations in six countries, thus
mitigating any potential impact upon the Company as a whole of any such
material failures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses financial instruments, including fixed and variable rate
debt, to finance its operations. The information below summarizes the
Company's market risks associated with debt obligations outstanding as of
December 31, 1998. The following table presents principal cash flows and
related weighted average interest rates by fiscal year of maturity. Variable
interest rate obligations under the Credit Facility and other revolving bank
credit agreements, capital lease obligations and notes payable to related
parties are not included in the table. The information is presented in U.S.
21
<PAGE>
dollar equivalents, which is the Company's reporting currency. The actual
cash flows of the instruments are denominated in U.S. dollars ("US$"), German
Deutsche marks ("DM") and other currencies ("other") as indicated.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(US$ EQUIVALENT IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term Obligations:
Fixed Rate (US$) . . . . . . . . $ 741 $ 685 $ 633 $ 585 $ 541 $85,500 $88,685
Average interest . . . . . . . 8.2% 8.2% 8.2% 8.2% 8.2% 10.1% 10.0%
Fixed Rate (DM). . . . . . . . . $3,826 $4,784 $4,048 $3,676 $3,679 $13,413 $33,426
Average interest rate. . . . . 4.6% 4.4% 3.8% 3.6% 3.6% 5.9% 4.8%
Fixed Rate (other) . . . . . . . $ 152 $ 451 $ 195 $2,008 $ 180 $ 1,660 $ 4,646
Average interest . . . . . . . 5.5% 8.5% 5.6% 5.3% 5.7% 5.6% 5.8%
</TABLE>
The carrying amounts of the Company's debt instruments approximate their
fair values. At December 31, 1998, the Company had interest rate cap and swap
agreements in an aggregate notional amount of $12.0 million to limit its
exposure on interest rate changes related to certain variable interest rate
debt instruments. The carrying values of these interest rate agreements
approximate fair value at December 31, 1998.
The Company uses forward exchange contracts and collars in the ordinary
course of business to mitigate its exposure to changes in foreign currency
exchange rates relating to cash, accounts receivable, accounts payable,
significant transactions and anticipated future sales denominated in foreign
currencies. The terms of these contracts are generally less than one year.
The Company's risk management policies do not provide for the utilization of
financial instruments for trading purposes. Gains and losses on financial
instruments that qualify as hedges of existing assets or liabilities or firm
commitments are recognized in income or as adjustments of carrying amounts
when the hedged transaction occurs. Financial instruments which are not
designated as hedges of specific assets, liabilities, firm commitments or
anticipated transactions are marked to market and any resulting unrealized
gains or losses are recorded in "Other, net" in the accompanying consolidated
statements of operations. At December 31, 1998 and September 30, 1998, the
Company had foreign exchange contracts outstanding in an aggregate notional
amount of $22.2 million and $25.8 million, respectively. While it is not the
Company's intention to terminate any of these contracts, the estimated fair
value of these contracts indicated that termination of the forward currency
exchange contracts at December 31, 1998 would have resulted in a gain of $0.3
million and termination at September 30, 1998 would have resulted in a loss
of $0.6 million. Due to the volatility of currency exchange rates, these
estimated results may or may not be realized.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company from time to time is
subject to legal claims. The Company does not believe that the likely outcome
of any such claims or related lawsuits would have a material adverse effect
on the Company or its ability to develop new products.
ITEM 2. CHANGES IN SECURITIES
None.
22
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Facilities Agreement in relation to a Multi-Currency Revolving
Credit Facility and Bilateral Ancillary Facilities between
Wavetek Wandel & Goltermann, Inc. as Borrower, Wandel &
Goltermann Technologies, Inc. as Guarantor, Commerzbank
Aktiengesellschaft and Deutsche Bank AG as Joint-Arrangers,
Commerzbank International S.A. as Agent and Others, dated
December 23, 1998.
12.1 Schedule Re: Computation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule for the three months ended December 31,
1998
(b) Reports on Form 8-K
On December 14, 1998, the Company filed an amendment to a Current
Report on Form 8-K originally filed on October 6, 1998 relating to the
consummation of the Exchange Transaction. Such amendment included
certain financial statements and pro forma financial information
related to the Exchange Transaction.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of the 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 16, 1999 WAVETEK WANDEL & GOLTERMANN, INC.
(Registrant)
/s/VICKIE L. CAPPS
---------------------------------
Vickie L. Capps
Senior Vice President-Finance, Treasurer,
Secretary and Acting Chief Financial Officer
24
<PAGE>
CONFORMED COPY
DM 280,000,000
FACILITIES AGREEMENT
in relation to a
MULTI-CURRENCY REVOLVING CREDIT FACILITY
and
BILATERAL ANCILLARY FACILITIES
between
WAVETEK WANDEL & GOLTERMANN, INC.
as Borrower
and
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
as Guarantor
and
COMMERZBANK AKTIENGESELLSCHAFT
and
DEUTSCHE BANK AG
as Joint-Arrangers
and
COMMERZBANK INTERNATIONAL S.A.
as Agent
and
OTHERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. THE FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. CONDITIONS PRECEDENT, NOTICE OF BORROWING AND. . . . . . . . . . . . . . . . . 14
DETERMINATION OF TRANCHE B . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. TERM OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. CURRENCY OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. SUBSTITUTE BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. REPAYMENT AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. MAINTENANCE OF DLJ LOAN REFINANCING. . . . . . . . . . . . . . . . . . . . . . 20
11. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12. EVIDENCE OF DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14. DEFAULT INTEREST AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . 25
15. SET-OFF AND REDISTRIBUTION OF PAYMENTS . . . . . . . . . . . . . . . . . . . . 26
16. CHANGE OF CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17. THE GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
18. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 32
19. UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
20. FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
21. EVENTS OF EARLY REPAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
22. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
23. EXPENSES AND STAMP DUTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
24. THE AGENT, THE ARRANGERS AND THE BANKS . . . . . . . . . . . . . . . . . . . . 48
25. CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
26. NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
27. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
28. AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
29. CHANGE OF LENDING OFFICE AND ASSIGNMENTS . . . . . . . . . . . . . . . . . . . 54
30. LANGUAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
31. APPOINTMENT OF WGMH AS REPRESENTATIVE. . . . . . . . . . . . . . . . . . . . . 56
32. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
33. APPLICABLE LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . 57
34. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
THE FIRST SCHEDULE - Banks and Commitments . . . . . . . . . . . . . . . . . . 61
THE SECOND SCHEDULE - Conditions Precedent . . . . . . . . . . . . . . . . . . 62
THE THIRD SCHEDULE - Notice of Borrowing . . . . . . . . . . . . . . . . . . . 64
THE FOURTH SCHEDULE - Form of Transfer Certificate . . . . . . . . . . . . . . 66
THE FIFTH SCHEDULE - Share Pledge Agreement. . . . . . . . . . . . . . . . . . 69
THE SIXTH SCHEDULE - Ancillary Facilities. . . . . . . . . . . . . . . . . . . 81
</TABLE>
<PAGE>
This Facilities Agreement (the "AGREEMENT") is made the 23rd day of December,
1998 between
(1) Wavetek Wandel & Goltermann, Inc., a Delaware Corporation, Research
Triangle Park, North Carolina, USA as borrower (hereinafter referred
to as the "BORROWER") ,
(2) Wandel & Goltermann Technologies, Inc., a North Carolina Corporation,
Research Triangle Park, North Carolina, USA as guarantor (hereinafter
referred to as the "GUARANTOR"),
(3) Commerzbank Aktiengesellschaft and Deutsche Bank AG as Joint-Arrangers
(hereinafter referred to in such capacity as the "ARRANGERS" and each
individually as an "ARRANGER"),
(4) the financial institutions named inthe First Schedule (hereinafter
referred to collectively as the "BANKS"),
(5) Deutsche Bank AG, Reutlingen Branch, as additional party under an
Ancillary Facility to be made between Deutsche Bank AG, Reutlingen
Branch and the Borrower in accordance with this Agreement (hereinafter
referred to as "DEUTSCHE BANK AG, REUTLINGEN BRANCH" or the
"ADDITIONAL LENDER"),
(6) Commerzbank International S.A. as agent for the Banks (hereinafter
referred to in such capacity as the "AGENT").
Now it is hereby agreed as follows:
1. DEFINITIONS
(A) In this Agreement the following terms have the following meanings:
"ACQUIRED FINANCIAL INDEBTEDNESS" means the financial indebtedness refered to
under Article 19 (I)(8).
"ADVANCE" means the principal amount of each advance made or to be made by
the Banks to the Borrower under the Revolving Credit Facility (as from time
to time reduced by prepayment or repayment).
<PAGE>
"ANCILLARY COMMITMENTS" means in relation to any Bank its commitment with
respect to the Ancillary Facilities as set out in the Sixth Schedule.
"ANCILLARY FACILITIES" means all ancillary facilities referred to in Article
2 (B).
"ATE" means Wandel & Goltermann ATE Systems, Inc.
"BILATERAL FACILITIES" means all existing bilateral facilities of the
Borrower or its subsidiaries set out in the Disclosure Letters.
"BORROWING AMOUNT" means DM 10 million (or following the Commencement Date
EURO 5 million) or, if more, an integral multiple of DM 5 million (or
following the Commencement Date EURO 2.5 million) or the remainder of Tranche
A or Tranche B respectively (or the equivalent of any such amount in an
Optional Currency).
"BUSINESS DAY" means (a) a day (other than a Saturday or Sunday) on which
banks are open for business as required in connection herewith (other than in
relation to a payment of or rate fixing to EUROs), in London, Luxembourg and
Frankfurt, and if such reference relates to the date for the payment or
purchase of any sum denominated in any Optional Currency in the principal
financial centre of the country of such Optional Currency and (b) in relation
to a payment of or rate fixing relating to EUROs, a TARGET Day.
"CODE" means the United States Internal Revenue Code of 1986, as amended,
from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"COMMENCEMENT DATE" means the date of the third stage of EMU as contemplated
by the Treaty (at the date of this Agreement expected to be 1 January, 1999).
"COMMITMENT PERIOD" means the period commencing on the date hereof and ending
on the Final Maturity Date (both dates inclusive).
"DEUTSCHE MARK" or "DM" means the lawful currency for the time being of the
Federal Republic of Germany.
<PAGE>
"DISCLOSURE LETTERS" means the letters from the Borrower to the Agent dated
22nd day of December, 1998 setting out details of certain existing
encumbrances and existing long-term facilities.
"DLJ LOAN" means the credit facilities in the amount of USD 45,000,000 made
available to the Borrower under a credit agreement dated June 11, 1997, and
made between the Borrower (at that time named Wavetek Corporation), DLJ
Capital Funding Inc. and the banks named therein.
"ECU" means the European Currency Unit.
"EMU" means the Economic and Monetary Union as contemplated in the Treaty.
"EMU LEGISLATION" means legislative measures of the European Council for the
introduction of, changeover to, or operation of, a single or unified European
currency.
"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA AFFILIATE" means, at any time, each person (as defined in Section 3
(9) of ERISA) that would, at the time, be treated together with a member of
the Group as a "single employer" (i) within the meaning of Section 414 (b),
(c), (m) or (o) of the Code or (ii) as a result of such member of the Group
being or having been a general partner of such person.
"EURIBOR" means the percentage rate per annum equal to the rate for deposits
in EUROs for a period equal to the period for which an interest rate has to
be determined hereunder (hereinafter referred to as the "Relevant Period")
which appears on the page of the Bridge Telerate Screen which displays for
spot value (D+2) and on an actual/360 day-count convention basis the average
EURIBOR rate as agreed with Euribor FBE (anticipated to be page 248) at or
about 11:00 a.m. Brussels time on the Interest Determination Date.
"EURO OR EUROS" means the single currency to be introduced on the
Commencement Date but, prior to the Commencement Date, references to the
"EURO" or to "EUROs" shall be read as references to ECU.
"EURO UNIT" means a unit of the EURO as defined in EMU legislation.
<PAGE>
"EVENT OF EARLY REPAYMENT" means any of the events described in Article 21.
"FACILITIES" means the Revolving Credit Facility and the Ancillary Facilities
and "FACILITY" shall mean one of them granted to the Borrower under Article 2
as from time to time reduced pursuant to the terms hereof.
"FACILITY AMOUNT" means the amount in DM set out with respect to the
Revolving Credit Facility in Article 2 (A) adjusted, as the case may be, to
take into account any reduction in accordance with the terms hereof.
"FACILITY DOCUMENTS" means this Agreement, the Share Pledge Agreement and any
document evidencing the terms of any other agreement or document that may be
entered into or executed pursuant to or in connection with any of the
foregoing by the Obligors or either of them or entered into by any person
creating or evidencing security for the obligations of the Borrower hereunder
whether by way of personal covenant, charge, security interest, mortgage,
pledge or otherwise or regulating the priorities of such security, and any
other agreement or document designated in writing as a "Facility Document" by
the Borrower and the Agent.
"FINAL MATURITY DATE" means, subject to any cancellation or other termination
of all Banks' Commitments in accordance with the terms hereof, the date which
falls on the second anniversary of the date hereof.
"GAAP" means, in relation to an Obligor the accounting principles generally
accepted in the United States.
"GBP" means the lawful currency for the time being of the United Kingdom.
"GROUP" means the Borrower and all of its subsidiaries.
"GUARANTEED AMOUNT" means the amount set out in Article 17 (A).
"IMMATERIAL SUBSIDIARIES" means for the purposes of Article 18 (A) (8) and
Article 21 (F) and (J) (i) any subsidiary the annual turnover of which is
less than DM 2 million and the total assets of which amount for not more than
DM 2 million as of the end of the most recent fiscal quarter and (ii) Wandel
& Goltermann Inc., Canada as long as its annual turnover is not higher than
in its financial statements of September 30, 1998.
<PAGE>
"INTERBANK MARKET" means the European Interbank euro-currency Market.
"INTERBANK RATE" means in relation to any Advance
(i) in the case of EUROs EURIBOR, or
(ii) in the case of any other currency (other than Sterling LIBOR), meaning
the per annum rate of interest for the relevant term appearing on
Telerate Screen page 3750 or 3740, as the case may be, or any
equivalent successor to any such page at or about 11:00 a.m. on the
Interest Determination Date for the relevant term, as being the
interest rate offered in the Interbank Market for deposits in the
currency of the Advance for delivery on the first day of such term and
for a period approximately equal to such term, or
(iii) in the case of Sterling or if the relevant rate does not appear on the
relevant Telerate Screen or the Agent determines that no rate for a
period of comparable duration to the relevant term appears on the
relevant Telerate Screen for the currency of the Advance, the rate per
annum determined by the Agent to be the arithmetic mean (rounded
upwards, if necessary to the nearest whole multiple of one sixteenth
of one per cent (1/16 %)) of the rates at which each of the Reference
Banks was offered by prime banks in the Interbank Market deposits in
the currency in which such Advance is to be denominated at or about
11:00 a.m. on the Interest Determination Date for the relevant term.
"INTEREST DETERMINATION DATE" means in relation to any Advance the Business
Day which is two Business Days prior to the making of such Advance.
"LENDING OFFICE" means in relation to a Bank, the office identified with its
signature below or such other office as notified by such Bank to the Agent
pursuant to Article 29 (B).
"LOAN" means the aggregate principal amount for the time being advanced and
outstanding pursuant to this Agreement.
"MAJORITY BANKS" means whilst there are no Advances outstanding a group of
Banks whose aggregate Revolving Credit Facility Commitments at the relevant
time exceed 66 2/3 per cent. of the Facility Amount and, whilst (an)
Advance(s) is/are outstanding, a group of Banks to whom in aggregate more
than 66 2/3 per cent. of the Loan is owing.
"MARGIN" means (i) in any case 0.9 per cent. per annum and (ii) following
September 30, 1999 1.5 per cent. per annum if and as long as the Revolving
Credit Facility Commitments have not
<PAGE>
been reduced in the minimum amount of DM 100,000,000 in accordance with
Article 9 and Article 11.
"MATERIAL ADVERSE EFFECT" means, for the purposes of Articles 18 (A)(7) and
(11) and 19 (G) and 21 (R), a material adverse affect on the business or
financial condition of either Obligor and / or the Group taken as a whole or
on the ability of either of the Obligors to perform its obligations hereunder.
"MATERIAL MEMBER OF THE GROUP" means any member of the Group other than
Immaterial Subsidiaries.
"MATURITY DATE" means in relation to any Advance, the last day of the term of
such Advance.
"MERGER AGREEMENT" means the Exchange and Merger Agreement, dated as of June
12, 1998, by and among the Borrower, WGMH and the stockholders listed
therein, as amended.
"MULTIEMPLOYER PLAN" means any multiemployer plans defined in Section 4001 of
ERISA, which is contributed to by (or which there is an obligation to
contribute) the Borrower, the Guarantor or any of their subsidiaries or an
ERISA Affiliate, each such plan for the five year period immediately
following the latest date on which the Borrower, the Guarantor or any of
their subsidiaries or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a EURO unit)
of a Treaty Country.
"NOTICE OF BORROWING" means the written notice of borrowing to be given by
the Borrower to the Agent in the form of the Third Schedule.
"OBLIGORS" means the Borrower and the Guarantor and "OBLIGOR" means each and
either of the Obligors.
"OPTIONAL CURRENCY" means any lawful euro-currency (including for the
avoidance of doubt INTER ALIA USD, YEN, SFR, GBP) other than the Original
Currency (excluding ECU and, following the Commencement Date, the National
Currency Units of the member states of the European Union participating in
the third stage of EMU), which is freely transferable and convertible into
the Original Currency and of which deposits are freely available to each Bank
in the Interbank Market.
<PAGE>
"ORIGINAL CURRENCY" means DM or, following the Commencement Date, EURO.
"ORIGINAL CURRENCY AMOUNT" in relation to an Advance means the amount in the
Original Currency which would have been outstanding if such Advance had been
made available in the Original Currency.
"ORIGINAL CURRENCY EQUIVALENT" in relation to an Advance means the amount in
the relevant Optional Currency ascertained by converting the Original
Currency Amount of the Advance into such Optional Currency at the spot rate
of exchange (as conclusively determined by the Agent) for the purchase by the
Agent in the relevant foreign exchange market of such Optional Currency at or
about 11:00 a.m. one Business Day prior to the Interest Determination Date.
"ORIGINAL FINANCIAL STATEMENTS" means
(i) in relation to the Borrower its audited consolidated and
unconsolidated financial statements for the business year ending
September 30, 1998; and
(ii) in relation to the Guarantor its unaudited consolidated and
unconsolidated financial statements for the business year ending
September 30, 1998; and
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PLAN" shall mean any multiemployer or single-employer plan as defined in
Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Borrower the Guarantor or any of
their subsidiaries or an ERISA Affiliate, and each such plan for the five yer
period immediately following the latest date on which the Company, or a
Subsidiary of the Company or an ERISA Affiliate maintained, contributed to or
had an obligation to contribute to such plan.
"REFERENCE BANKS" means Baden Wurttembergische Bank AG, Commerzbank
International S.A., Deutsche Bank Luxembourg S.A. or such other Bank or Banks
as may be substituted therefor with the consent of the Borrower in accordance
with this Agreement.
"RELEVANT JURISDICTION" means in relation to any Obligor the jurisdiction in
which it is incorporated.
<PAGE>
"REPORTABLE EVENT" means a "reportable event" as defined in Section 4043 (b)
of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under sub-section .3, 14, 16, 18, 19 or 20 of
PBGC Regulation Section 2615.
"REVOLVING CREDIT FACILITY " means the revolving loan facility referred to in
Article 2 (A).
"REVOLVING CREDIT FACILITY COMMITMENT" means the amount set out under the
heading "REVOLVING COMMITMENT" for each Bank the First Schedule.
"REVOLVING LOAN" means the aggregate amount of the Advances outstanding.
"SHARE PLEDGE AGREEMENT" means the share pledge agreement between the
Borrower and the Banks to be made in accordance with the form set forth in
the Fifth Schedule.
"STERLING" means the lawfull currency for the time being of the United
Kingdom.
"TARGET" means the Trans-European Automated Real-time Gross Settlement
Express Transfer System.
"TARGET DAY" means a day on which payments in EUROs are settled in the TARGET
system.
"TOTAL COMMITMENTS" means in relation to any Bank the aggregate of its
Revolving Credit Facility Commitment and its Ancillary Commitment.
"TRANCHE A" means the Tranche A of the Revolving Credit Facility referred to
in Article 2 (A).
"TRANCHE A OUTSTANDINGS" means the aggregated USD-countervalue of all
Advances made under Tranche A provided that the USD-countervalue of such
Advances is determined by the Agent for each of such Advances separately at
the spot rate of exchange (as conclusively determined by the Agent) for the
purchase by the Agent in the relevant foreign exchange market of the currency
of such Advances at or about 11:00 a.m. one Business Day prior to the
Interest Determination Date for each such Advance.
"TRANCHE B" means the Tranche B of the Revolving Credit Facility referred to
in Article 2 (A).
"TRANCHE B AMOUNT" means the amount available under Tranche B from time to
time as determined under Article 2 (A).
<PAGE>
"TRANSFER CERTIFICATE" means a certificate substantially in the form of the
Fourth Schedule.
"TREATY" means the Treaty Establishing the European Community being the
Treaty of Rome of 25 March, 1957, as amended by the Single European Act 1986
and the Maastricht Treaty (which was signed at Maastricht on 7 February, 1992
and came into force on 1 November, 1993), as amended from time to time.
"TREATY COUNTRY" means each state described as a participating member state
in any EMU legislation.
"UNFUNDED CURRENT LIABILITY" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated plan benefits under the Plan
as of the close of its most recent plan year exceeds the fair market value of
the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial assumptions
used by the Plan's actuary in the most recent annual valuation of the Plan.
"USD" means the lawful currency for the time being of the United States of
America.
"WAVETEK BOND" means the USD 85 million 10 1/8 % Senior Subordinated Notes
due June 15, 2007 of Wavetek Wandel & Goltermann, Inc. (formerly named
Wavetek Corporation) as borrower and Wavetek U.S., Inc., Wandel & Goltermann
Technologies, Inc., ATE, W & G Equities, Inc. and Digital Transport Systems,
Inc as guarantors.
"WGMH" means Wandel & Goltermann Holding GmbH.
(B) Any reference in this Agreement to:
(i) an "AFFILIATE" of any person is a reference to a holding company or a
subsidiary, or a subsidiary of a holding company of such person;
(ii) the "BANKS" shall also be construed as a reference to their respective
successors and permitted assignees;
(iii) "CURRENCY OF THE ADVANCE" shall be construed as a reference to
Deutsche Mark or, as the case may be, such other currency in which the
relevant Advance may be outstanding pursuant to the provisions hereof;
<PAGE>
(iv) "ENCUMBRANCE" shall be construed as a reference to a mortgage, pledge,
lien, charge (whether fixed or floating), assignment, hypothecation,
security interest, title retention, preferential right or trust
arrangement and any other security agreement or arrangement whether to
existing or future assets or revenues;
(v) "EQUIVALENT", on any date in one currency (the "FIRST CURRENCY") of an
amount denominated in another currency (the "SECOND CURRENCY"), is a
reference to the amount of the first currency which could be purchased
with the amount of the second currency at the spot rate of exchange
quoted by the Agent at or about 11.00 a.m. (or such other time as may
be appropriate) on such date for the purchase of the first currency
with the second currency;
(vi) "FINANCIAL INDEBTEDNESS" shall be construed so as to include any
obligation for the payment or repayment of money, whether present or
future, of any person for or in respect of:
(a) any indebtedness for monies borrowed and debit balances at banks;
(b) any indebtedness (actual or contingent) under a guarantee, bond,
security indemnity or other commitment designed to assure any
creditor against any loss in respect of any financial indebtedness
of any third party;
(c) any indebtedness under any acceptance credit;
(d) any indebtedness under any debenture, note, bond, bill of exchange
or commercial paper instrument issued for borrowing purposes;
(e) any indebtedness for monies owing in respect of any interest rate
swap or cross-currency swap or forward sale or purchase contract
or other form of interest or currency hedging transaction; and
(f) any other payment obligation under any capital lease
(FINANZIERUNGSLEASING) entered into for the purpose of obtaining
or raising finance and reflected or to be reflected in accordance
with GAAP on the consolidated balance sheet of the Borrower;
(vii) "INDEBTEDNESS" shall be construed so as to include any obligation for
the payment or repayment of money, whether present or future, actual
or contingent (including contingent obligations by reason of any
guarantee or other assumption of liability for obligations of third
parties);
(viii) a "LIQUIDATION" shall be construed so as to include any winding-up and
dissolution and "LIQUIDATION LAW" shall be construed accordingly;
<PAGE>
(ix) a "PERSON" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
(x) a "SUBSIDIARY" of a company or corporation shall be construed as a
reference to any company or corporation:
(a) which is controlled by the firstmentioned company or corporation
in the meaning of Section 15 et. seq. of the German Stock
Corporation Act (AKTG); or
(b) which is a subsidiary of another subsidiary of the first-mentioned
company or corporation;
(xi) "TAXES" shall be construed so as to include all present and future
taxes, levies, imposts, duties, charges, fees, deductions and
withholdings, and any restrictions or conditions resulting in a
charge, and "TAX" and "TAXATION" shall be construed accordingly;
(xii) an Article or a Schedule or a Part is a reference to an article
hereof, a schedule hereto or a part hereof, respectively;
(xiii) a paragraph is, unless otherwise stated, a reference to a paragraph of
the Article in which the reference appears;
(xiv) a sub-paragraph is, unless otherwise stated, a reference to a
sub-paragraph of the paragraph in which the reference appears;
(xv) a time of day shall, save where the contrary is indicated, be
construed as a reference to London time.
(C) Article headings are for ease of reference only and shall be
disregarded in the construction of this Agreement.
(D) Unless the context otherwise requires, words importing the singular
number shall include the plural and vice versa.
(E) Any provision of this Agreement that states that it will come into
effect as from the Commencement Date shall, to the extent that any such
provision related to any currency of a state which is not a Treaty Country on
the Commencement Date, come into effect in relation to the currency of such
state on and from the date on which such state becomes a Treaty Country.
<PAGE>
2. THE FACILITIES
(A) The Banks agree to make available through their respective Lending
Offices to the Borrower upon the terms and subject to the conditions hereof a
revolving credit facility in the maximum aggregate principal amount of DM
195,000,000 (Deutsche Mark one hundred and ninety five million) or its
equivalent from time to time in Optional Currencies which is divided in (i) a
Tranche A in the amount of the DM-equivalent of USD 45,000,000 (or if lower,
the USD-equivalent of DM 195,000,000), and (ii) a Tranche B in the amount
equal to the difference between DM 195,000,000 and the Amount of Tranche A as
determined by the Agent in accordance with Article 4 (B) reduced by the
amount of the Acquired Financial Indebtedness (if any).
(B) Each Bank (except Deutsche Bank Luxembourg S.A.) and Deutsche Bank AG,
Reutlingen Branch, agrees to make available an Ancillary Facility to the
Borrower in the amount set out for each Bank individually in the Sixth
Schedule and the aggregate amount of all such Ancillary Facilities will at no
time exceed an amount of DM 85,000,000 or its equivalent. The Ancillary
Facilities may only comprise facilities for the issue of guarantees, security
indemnity (or other commitment designed to assure any creditor against any
loss), trade or stand-by letters of credit, overdrafts, short term loans,
automated payment, cheque drawing and other current account facilities,
interest rate swaps or cross-currency swaps or forward sale or purchase
contracts or other form of interest or currency hedging transactions and each
Bank undertakes and warrants to the other Banks that the terms and conditions
governing the respective Ancillary Facility to which it is party shall have
to the extent legally possible the same terms and conditions as the terms and
conditions hereof.
(C) The Facilities shall be made available severally by each Bank (and
Deutsche Bank AG, Reutlingen Branch respectively) in the amount of its Total
Commitment (and in the case of Deutsche Bank AG, Reutlingen Branch, its
commitment set out in the Sixth Schedule) and each Bank shall participate in
each Advance to be made under the Revolving Credit Facility in the proportion
which its Revolving Credit Facility Commitment bears to the amount of the
Revolving Credit Facility.
(D) The failure of any Bank (and Deutsche Bank AG, Reutlingen Branch
respectively) to perform its obligations hereunder shall neither affect the
obligations of the Agent or the other Banks (and Deutsche Bank AG, Reutlingen
Branch respectively) towards the Borrower nor the obligations of the Borrower
towards the Agent or any other Bank (and Deutsche Bank AG, Reutlingen Branch
respectively), nor shall the Agent or any other Bank (and Deutsche Bank AG,
<PAGE>
Reutlingen Branch respectively) be liable for the failure of such Bank (and
Deutsche Bank AG, Reutlingen Branch respectively) to perform its obligations
hereunder.
(E) The obligations of the Banks (and Deutsche Bank AG, Reutlingen Branch
respectively) hereunder, and the rights of the Agent and the Banks (and
Deutsche Bank AG, Reutlingen Branch respectively) hereunder, shall be
several. The amounts outstanding at any time hereunder from the Borrower to
any of the Banks (and Deutsche Bank AG, Reutlingen Branch respectively), the
Arrangers or the Agent shall be a separate and independent debt and each such
party shall be entitled to protect and enforce its rights arising out of this
Agreement and the Ancillary Facilities independently of any other party and
it shall not be necessary for any other party hereto to be joined by an
additional party in any proceedings for this purpose.
(F) Immediately following the Commencement Date the Facilities shall be
re-denominated in EURO and all DM-amounts set out in paragraphs A and B shall
be the countervalue of such DM-amount. Each such EURO-countervalue shall be
determined by the Agent on the basis of the official DM/EURO conversion rate
set by the European Council on the Commencement Date pursuant to Article 109L
sub-paragraph 4 first sentence of the Treaty. The First Schedule, the Sixth
Schedule and sub-paragraphs (A) and (B) shall be adjusted accordingly
(G) In the case that any bank chosen by the Borrower shall be willing to
become a bank hereunder the parties hereto will consider an amendment of this
Agreement to the effect that such bank shall become a Bank hereunder bearing
a Revolving Credit Facility Commitment in the maximum amount of DM 15,000,000
and an Ancillary Facilities Commitment of a maximum of DM 5,000,000.
3. PURPOSE
(A) Save to the provisions of Article 4 (A) the Borrower shall apply the
amounts raised by it under the Revolving Credit Facility and/or the Ancillary
Facilities (a) to the extent raised under Tranche A, for the refinancing and
replacement of the DLJ Loan or any other facility that has refinanced or
replaced such DLJ Loan in accordance with the provisions thereof, and (b) in
any case other than pursuant to subclause (a) above, an amount of
approximately DM 51,000,000 or its equivalent for the acquisition of all
shares in the Guarantor and ATE from WGMH and (c) for the refinancing of the
Bilateral Facilities and (d) for the general financing requirements of it and
any of its subsidiaries.
<PAGE>
(B) Without prejudice to the obligations of the Borrower under paragraph (A),
neither the Arrangers, the Agent and the Banks nor any of them shall be
obliged to concern themselves with the application of amounts advanced or
raised hereunder.
4. CONDITIONS PRECEDENT, NOTICE OF BORROWING AND
DETERMINATION OF TRANCHE B
(A) Subject to:
(1) all representations and warranties listed in Article 18 being true and
correct on and as of the date on which an Advance is to be made
hereunder; and
(2) no Event of Early Repayment or an event which with the giving of
notice, lapse of time or fulfilment of any other condition (all as
provided for herein) would constitute an Event of Early Repayment
having occurred; and
(3) the receipt by the Agent of a Notice of Borrowing duly completed, such
Notice of Borrowing to be received by the Agent not later than at
11.00 a.m. on the fourth Business Day prior to the date on which the
relevant Advance is to be made hereunder and not later than one month
before the Final Maturity Date; and
(4) the total number of Advances which have been made hereunder and have
not, or will have not as of the proposed drawdown date of the relevant
Advance, fallen due for repayment is not more than fifteen; and
(5) the proposed amount of the Advances being an amount which when
aggregated with the amounts of all previous Advances then outstanding
(including any other Advances to be made on or before the proposed
date for the making of such Advances but excluding any Advances
respectively to be repaid on or before the proposed date for the
making of such Advances) shall not be such as to cause the aggregate
of all outstanding Advances to exceed the maximum amounts set out in
Article 2 (A); and
(6) the Loan not being outstanding in more than seven different currencies
if the Advance is made; and
(7) in the case of any Advance to be made under Tranche B the amount of
the Tranche A Outstandings is 45,000,000 USD;
<PAGE>
the Borrower may draw Borrowing Amounts on any Business Day during the
Commitment Period, provided that the Borrower may not deliver a Notice of
Borrowing unless the Agent has confirmed to the Borrower and the Banks that
it has received within a period of six weeks after the date hereof all of the
documents listed in the Second Schedule and that each is, in form and
substance, satisfactory to the Agent.
(B) If a drawdown shall be made under Tranche B the Agent shall determine
the Tranche B Amount one Business Day prior to the Interest Determination
Date by deducting the DM-equivalent of USD 45,000,000 and the Acquired
Financial Indebtedness (if any) from the amount of DM 195,000,000. If the
proposed Amount of the Advance does exceed the undrawn part of the Tranche B
Amount the Agent shall reduce the amount of such Advance accordingly and the
Agent shall notify the Borrower by 4:00 p.m. about such reduction.
(C) Each Notice of Borrowing shall be irrevocable and the Borrower shall
be bound to borrow in accordance with such notice.
(D) The Borrower shall not make any borrowings under the Ancillary
Facilities and none of the Banks and Deutsche Bank AG, Reutlingen Branch will
allow the Borrower to make such borrowings as long as the amount of the
Tranche A Outstandings is below USD 45,000,000. If the Revolving Credit
Facility Commitment is reduced in an amount of DM 100,000,000 in accordance
with Article 9 (D) and/or Article 11 (C) following an initial public offering
the parties will enter into negotiations with respect to the restrictions of
any borrowings under the Ancillary Facilities pursuant to this paragraph (D).
5. TERM OF ADVANCES
(A) Each Advance shall have a term of one, two, three or six months or
such other period as may be agreed between the Borrower and the Agent (with
consent of the Banks), in each case as the Borrower shall select in the
Notice of Borrowing.
(B) Notwithstanding the provisions of paragraph (A),
(1) if the term of any Advance would otherwise end on a day which is not a
Business Day, then such term or such interest period shall be extended
to the next succeeding day which is a Business Day unless such next
succeeding Business Day falls in another calendar month in which event
such term shall end upon the immediately preceding Business Day;
<PAGE>
(2) if the term of any Advance commences on the last Business Day in a
calendar month or if there is no numerically corresponding day in the
month in which that term ends, that term shall end on the last
Business Day in that later month; and
(3) if the term of any Advance would otherwise extend beyond the Final
Maturity Date, it shall end on the Final Maturity Date.
6. INTEREST
(A) The Borrower shall pay to the Agent for account of the Banks on the
Maturity Date of any Advance the interest on the amount of such Advance
accrued for the respective period (unless the term is longer than six months,
then interest shall be payable in semi-annual intervals and at the end of the
relevant term).
(B) The rate of interest applicable to each Advance during its term shall
be the Interbank Rate increased by the Margin.
(C) Interest payable pursuant to this Agreement shall be calculated on the
basis of the actual number of days elapsed and a 360-day-year or, where
market practice differs, 365 days or otherwise in accordance with market
practice.
(D) Each determination of an interest rate made by the Agent under this
Agreement shall be promptly notified by the Agent to the Borrower and each
Bank.
7. CURRENCY OPTION
(A) The Borrower may request in any Notice of Borrowing that the Advance
to which such Notice of Borrowing relates be denominated in a specified
Optional Currency and, if the Borrower shall so request and subject to the
following provisions of this Article, the relevant Advance shall be
denominated in the Optional Currency so specified.
(B) Notwithstanding the provisions of paragraph (A), if any Bank
determines that deposits in the specified Optional Currency (other than USD)
are not or will not be available to it in the relevant amount and for the
relevant period in the Interbank Market, it may give notice thereof to the
Agent not later than 1:00 p.m. on the third Business Day preceding the date
of the proposed Advance.
<PAGE>
(C) If the Agent receives a notification pursuant to paragraph (B) the
relevant Advance shall
(1) if the Borrower has given instruction to that effect in the Notice of
Borrowing, not be made in the specified Optional Currency but shall
instead be made available in DM (or, after the Commencement Date,
EURO), the amount of DM or EURO to be so advanced by the Banks being
the Original Currency Amount specified in the relevant Notice of
Borrowing; or
(2) if the Borrower has given instruction to that effect in the Notice of
Borrowing, not be made in the specified Optional Currency but shall
instead be made available in USD, the amount of USD to be so advanced
by the Banks being the Original Currency Equivalent; or
(3) if the Borrower has failed to give any instruction as referred to in
(1) or (2) above, not be made.
The Agent shall notify each Bank and the Borrower by 4:00 p.m. on the third
Business Day preceding the date of the proposed Advance of the receipt of any
such notice from a Bank as is referred to in paragraph (B) and, in the case
of (1) or (2) above, of the amount in DM, EURO, or, as the case may be, USD,
to be advanced by each Bank or in case of (3) above that such proposed
Advance shall not be made.
(D) Notwithstanding the foregoing provisions of this Article, if any such
event as is described in paragraph (E) shall occur the Agent may (and shall,
if so instructed by the Majority Banks), at any time before, or not later
than 9:00 a.m. on the date on which an Advance would otherwise fall to be
made in an Optional Currency, give notice to the Borrower to the effect that
in consequence of such event it will not be possible for such Advance to be
denominated in the Optional Currency in question, in which case such Advance
shall then not be made at all and the Borrower shall pay to each Bank such
amount as is necessary to compensate such Bank for any and all losses and
costs incurred by it in liquidating and/or employing amounts borrowed or
contracted for, and/or in terminating or unwinding any contract entered into,
in order to fund its participation in the proposed Advance.
(E) The events referred to in paragraph (D) are such changes in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls as (in any such case) would, in the
reasonable opinion of the Agent (if feasible, after consultation with the
Borrower and the Reference Banks), make it impracticable for the Advance (or
the relevant part thereof) to be denominated in the Optional Currency in
question.
<PAGE>
(F) If an Advance is to be made available in an Optional Currency, each
Bank through the Agent will make available to the Borrower the Original
Currency Equivalent of such Advance.
8. SUBSTITUTE BASIS
(A) If, in relation to an Advance:
(1) the Agent determines that at or about 11:00 a.m. on the Interest
Determination Date for the relevant term in respect of such Advance
(a) none or only one of the Reference Banks was being offered by prime
banks in the Interbank Market deposits in the relevant currency for
the proposed duration of such term or (b) by reason of circumstances
affecting the Interbank Market generally such deposits are not
available to banks in such market; or
(2) before the close of business in Luxembourg on the Interest
Determination Date for such term the Agent has been notified in
writing by each Bank of a group of Banks to whom in aggregate
thirty-five per cent. or more of the Original Currency Amount of the
Loan is (or, if such Advance were then made, would be) owed that the
Interbank Rate as determined by the Agent does not reflect its cost of
obtaining such deposits;
then the Agent shall as soon as practicable give notice of such determination
to the Borrower and each Bank.
(B) If the Agent gives notice pursuant to paragraph (A) (1) then if such
notice is given with respect to an Advance to be made, such Advance shall not
be made and in any case the Agent shall negotiate with the Borrower with a
view to agreeing an alternative basis (whether an alternative method of
fixing the rate of interest or (in the case of Advances to be made) an
alternative term or an alternative currency) for such Advance. Any
alternative basis agreed in writing within 30 days of the Agent's
notification of the event in question by the Agent (with the consent of all
the Banks) and the Borrower shall take effect in accordance with its terms
and the Borrower may make further requests for the making of Advances on such
alternative basis (subject as herein provided) whilst the circumstances
referred to under paragraph (A) (1) continue to exist. After the Agent has
determined that the circumstances referred to under paragraph (A) (1) have
ceased to exist, the rate of interest in respect of subsequent Advances or
(as the case may be) subsequent Interest Periods shall be the Interbank Rate
plus the Margin calculated in accordance with the provisions of this
Agreement.
<PAGE>
(C) If the Agent gives notice pursuant to paragraph (A) (2), the Advance
shall be made and the Agent shall then negotiate with the Borrower with a
view to agreeing an alternative basis for fixing the rate of interest payable
on the relevant Advance. Any alternative basis agreed in writing within 10
days of the Agent's notification of the event in question by the Agent (with
the consent of all the Banks) and the Borrower shall take effect in
accordance with its terms and the Borrower may make further requests for the
making of Advances on such alternative basis (subject as herein provided)
whilst the circumstances referred to under paragraph (A) (2) continue to
exist, provided that if such alternative basis is not agreed, each Bank's
share of the relevant Advance(s) shall bear interest at the rate per annum
determined by the Agent as being the sum of (i) the cost to such Bank (as
certified to the Agent with a copy to the Borrower) of funding its share of
such Advance from whatever sources it may, in the ordinary course of its
business, reasonably select (expressed as a rate per annum) and (ii) the
Margin. After the Agent has determined that the circumstances referred to
under paragraph (A) (2) have ceased to exist, the rate of interest in respect
of subsequent Advances shall be the Interbank Rate plus the Margin calculated
in accordance with the provisions of this Agreement.
9. REPAYMENT AND PREPAYMENT
(A) The amount of each Revolving Credit Advance shall be repaid by the
Borrower on its Maturity Date. Any amount repaid pursuant to this paragraph
(A) may, subject to the provisions of this Agreement, be reborrowed.
(B) The Borrower shall not repay or prepay all or any part of the Advances
except in accordance with the terms of this Agreement.
(C) The Borrower may, by notice to the Agent not later than on the tenth
Business Day before the proposed date for the making of such prepayment,
prepay the whole of any Advance or any part (being a Borrowing Amount) on a
day other than the Maturity Date relating thereto provided that such
prepayment is made together with the payment of accrued interest on such
Advance or part thereof to be prepaid and any amount payable by the Borrower
under Article 14 (D).
(D) To the extent the Revolving Loan exceeds the amount of DM 95,000,000
(the "EXCEEDING AMOUNT") the Borrower shall apply any net proceeds from any
monies raised by the Group in the national or international equity or capital
markets (via an IPO, a private equity placement, a public or private bond
offering or otherwise) to prepay the Exceeding Amount. Any such amounts to be
applied towards the prepayment of the Revolving Loan shall be paid to the
Agent and the Agent shall deposit such amounts on behalf of the Banks in an
interest bearing account and shall (save to the provisions of Article 10) be
applied (including accrued interest
<PAGE>
thereon) on the last day of the then relevant current Interest Period towards
the prepayment of any outstanding Advances PRO RATA.
(E) The Borrower shall apply an amount equal to the net proceeds resulting
from (i) a disposal of assets made under a sale and lease back transaction by
any member of the Group permitted under Article 19 (D) (other than proceeds
from sale-lease-back transactions applied towards the repayment of existing
debt in accordance with Article 19 (D)(4)) and (ii) the sale of a certain
subsidiary to be agreed upon with the Banks permitted under Article 19 (E)
towards the repayment of the Revolving Loan.
(F) Any amount prepaid pursuant to paragraph (C) may, subject to the
provisions of this Agreement, be reborrowed. Amounts prepaid pursuant to
paragraph (D) or repaid pursuant to paragraph (E) may not be reborrowed and
any such payment shall reduce the Revolving Credit Facility Commitment of
each Bank rateably.
10. MAINTENANCE OF DLJ LOAN REFINANCING
Any prepayment made hereunder shall be made in a manner that any amount
raised by the Borrower under Tranche A for the repayment, replacement and /or
refinancing of the DLJ Loan or any loans the proceeds of which were used for
the repayment, replacement and/or refinancing of the DLJ Loan shall save to
make any agreement between parties hereto following any negations in
accordance with Article 4 (D) only be prepaid if (i) there are no other
outstandings under this Agreement and the Ancillary Facilities and (ii) the
Borrower has cancelled (a) any commitment of the Banks for future borrowings
under this Agreement and (b) any commitment of the relevant Banks and
Deutsche Bank AG, Reutlingen Branch respectively for future borrowings under
the Ancillary Facilities.
11. CANCELLATION
(A) Unless otherwise agreed between the Borrower and the Banks (and
Deutsche Bank AG, Reutlingen Branch respectively), any Commitment of any Bank
(and Deutsche Bank AG, Reutlingen Branch respectively) made hereunder will
automatically cease to exist if the Agent has not received all of the
documents listed in the Second Schedule within a period of six weeks after
the date hereof;
(B) The Borrower may, by giving to the Agent not less than ten Business
Days' prior written notice to that effect, cancel the whole or any part
(being a Borrowing Amount) of the then
<PAGE>
undrawn part of the Revolving Credit Facility Commitments. Any such
cancellation shall reduce the Revolving Credit Facility Commitment of each
Bank rateably.
(C) The Borrower shall cancel the then undrawn part of the Revolving
Credit Facility Commitment in an amount equal to (i) the amount of any
proceeds resulting from a disposal of assets made under a sale and lease back
transaction by any member of the Group permitted under Article 19 (D) (other
than proceeds from sale-lease-back transactions applied towards the repayment
of existing debt in accordance with Article 19 (D)(4)) and the sale of the
certain subsidiary permitted in accordance with Article 19 (E) if any such
amount is not applied for repayment in accordance with Article 9 (E), and/or
(ii) an amount of up to DM 100,000,000 out of any net proceeds from any
monies raised by the Group in the national or international equity or capital
markets (via an IPO, a private equity placement, a public or private bond
offering or otherwise) if any such amount is not applied for prepayment in
accordance with Article 9 (D).
(D) If any Bank claims a payment or indemnification from the Borrower
under Article 13 (A)(1), Article 16 (A) or Article 16 (B), the Borrower may,
within thirty days thereafter and by not less than fifteen days' prior notice
to the Agent, cancel such Bank's Commitment whereupon such Bank shall cease
to be obliged to participate in further Advances and its Commitment shall be
reduced to zero.
(E) Any notice of cancellation given by the Borrower pursuant to
paragraphs (A) through (D) shall be irrevocable and shall specify the date
upon which such cancellation is to be made and (in case of a cancellation
pursuant to paragraph (B) and (C)) the amount of such cancellation and in any
case Tranche B is deemed to be cancelled first.
12. EVIDENCE OF DEBT
(A) Each Bank shall maintain, in accordance with its usual practice,
accounts evidencing the amounts from time to time lent by and owing to it
hereunder.
(B) The Agent shall maintain in its books a control account or accounts in
which shall be recorded (i) the amounts outstanding under Tranche A and
Tranche B and each Bank's share therein, (ii) the amount of the Tranche A
Outstandings, and (iii) the amount of any principal or interest or other sums
due or to become due from the Borrower to the Banks hereunder and each Bank's
share therein and (iv) the amount of any sum received or recovered by the
Agent hereunder and each Bank's share therein.
<PAGE>
(C) In any legal action or proceedings arising out of or in connection
with this Agreement the entries made in the accounts maintained pursuant to
paragraphs (A) and (B) shall save for manifest errors give PRIMA FACIE
evidence of the existence and amounts of the obligations of each of the
Obligors therein recorded.
13. PAYMENTS
(A) All amounts payable under this Agreement by either Obligor including
amounts payable under this paragraph (A), shall be paid in full without
set-off or counterclaim or right of retention or other restrictions and free
and clear of and without any deduction or withholding for or on account of
any taxes or any charges or otherwise. In the event that either of the
Obligors is required by law to make any such deduction or withholding from
any payment hereunder then:
(1) such Obligor shall, save where a Bank has failed to comply with
paragraph (G) due to reasons not beyond such Bank's control, forthwith
pay to the Agent for account of the respective Bank or, as the case
may be, the Agent such additional amount as will result in the
immediate receipt by such Bank or, as the case may be, the Agent of
the full amount (free from any liability in respect of any such
deduction or withholding) which would have been received hereunder had
no such deduction or withholding been made; and
(2) such Obligor shall pay the full amount required to be deducted or
withheld to the relevant taxation or other authority within the time
allowed for such payment and shall promptly, but in any case within 20
days, forward to the Agent official receipts of the relevant taxation
or other authority or other evidence acceptable to such Bank to the
extent available from such relevant authority or, as the case may be,
the Agent of the amount deducted or withheld as aforesaid.
(B) All payments of principal and/or interest in respect of an Advance to
be made by either of the Obligors under this Agreement shall be made in the
currency of that Advance in mmediately available funds not later than 10:00
a.m. (local time at the place of payment) on the date upon which the relevant
payment is due (i) in case such amount is denominated in DM to the account
no. 400/8716961 of the Agent with Commerzbank Aktiengesellschaft, Frankfurt
am Main (or to such other account as the Agent may from time to time
designate by timely written notice to the relevant Obligor) or (ii) in case
such amount is denominated in any other currency to such account of the Agent
with such bank as the Agent may have timely specified for this purpose.
(C) All payments to be made by the Agent under this Agreement to the
Borrower shall be made in the currency of the Advance not later than 10:00
a.m. (local time at the place of
<PAGE>
payment) on the date upon which the relevant payment is due and be remitted
to such account and bank as the Borrower may from time to time designate by
written notice to the Agent.
(D) Each Bank shall make available to the Agent its portion of an Advance
to be made to the Borrower hereunder prior to 10:00 a.m. (local time at the
place of payment) on the date of the proposed borrowing by payment in the
currency of the Advance and in immediately available funds to such account as
the Agent may from time to time designate.
(E) Except for payments received by the Agent for its account or for the
account of a specific Bank in accordance with this Agreement, the Agent shall
forthwith distribute in like funds and currency each payment received by it
for the account of the Banks rateably in proportion to their respective share
of the Revolving Loan respectively or, as the case may be, their respective
Revolving Credit Facility Commitment.
(F) Where a sum is to be paid hereunder to the Agent for account of
another person pursuant to the provisions hereof, the Agent shall not be
obliged to make the same available to that other person until it has been
able to establish to its satisfaction that it has actually received such sum,
but if it makes the same sum available to that other person before it has
been able to establish to its satisfaction that it has actually received such
sum and it proves to be the case that it has not actually received such sum,
then the person to whom such sum was so made available shall on request
(which shall be made as soon as practicable after the Agent has established
that it has not actually received that sum) refund the same to the Agent
together with an amount sufficient to indemnify the Agent against any
reasonable cost or loss it may have suffered or incurred by reason of its
having paid out such sum prior to its having received such sum.
(G) Each Bank agrees that, upon request by the Obligor affected, it shall
deliver, as soon as it can do so in the ordinary course of business, to such
Obligor such relevant tax form(s) as may be required under the laws of the
Relevant Jurisdiction or under an applicable double taxation treaty to avoid
or reduce a deduction or withholding on payments as described in paragraph (A).
(H) If and to the extent that any Obligor pays any additional amount under
paragraph (A), and any Bank receives or has been granted a credit against or
relief or remission for or repayment of any tax paid or payable by it (the
"TAX CREDIT") in respect of or calculated with reference to the deduction or
withholding in respect of which such additional amount has been paid, then
such Bank shall - to the extent that it can do so without prejudice to the
retention of such Tax Credit - pay to the relevant Obligor such amount as it
shall, in its opinion, determine to be attributable to the relevant deduction
or withholding, and any such payment to the relevant Obligor shall constitute
full and final settlement of any rights of reimbursement in respect of such
Tax Credit.
<PAGE>
It shall be each Bank's sole discretion (to be exercised in good faith) to
decide as to whether and how and when and to what extent to claim any Tax
Credit and no Bank shall be obliged to disclose any information as to its tax
affairs which it regards as proprietary or confidential and each Bank shall
be entitled to arrange and organize its tax and other affairs in any way it
thinks fit.
(I) If, in respect of any Bank, circumstances arise which result or would
result in a claim for payment or a payment of an additional amount to it or
for its account pursuant to paragraph (A) (1), then, without in any way
limiting, reducing or otherwise qualifying the obligations of the Obligors
hereunder, such Bank shall promptly upon becoming aware of the same notify
the Agent thereof and shall, in consultation with the Agent and the Obligors
to the extent that it can do so without prejudice to its own position, take
such reasonable steps as may be open to it to mitigate or avoid the effects
of such circumstances, including the change of its Lending Office or the
transfer of its rights and obligations hereunder to another bank acceptable
to the Obligors and willing to participate in the Facilities provided that
such Bank shall be under no obligations to take any such action if, in such
Bank's BONA FIDE opinion, to do so may have any adverse effect upon its
business, operations or financial condition. No Bank shall be obliged to
disclose any information as to its tax affairs which it regards as
proprietary or confidential and each Bank shall be entitled to arrange and
organize its tax and other affairs in any way it thinks fit.
(J) Save to the provisions of Article 10 the Agent may (notwithstanding
any appropriation of that payment by such Obligor) apply any payment received
from either Obligor towards the obligations of the Obligors hereunder in the
following order:
FIRST, in or towards payment of any unpaid costs and expenses of each of the
Agent and the Arrangers;
SECONDLY, in or towards payment pro rata of any accrued fees due but unpaid;
THIRDLY, in or towards payment pro rata of any accrued interest due but
unpaid;
FOURTHLY, in or towards payment pro rata of any principal due but unpaid; and
FIFTHLY, in or towards payment pro rata of any other sum due but unpaid.
(K) Any payment hereunder falling due on a day which is not a Business Day
shall be payable on the next succeeding day which is a Business Day, unless
such next succeeding
<PAGE>
Business Day falls in another calendar month in which event such payment
shall be due on the immediately preceding Business Day.
14. DEFAULT INTEREST AND INDEMNITY
(A) In the event of a failure of either of the Obligors to pay any sum
other than interest on the date on which such sum is due and payable pursuant
to this Agreement and irrespective of any notice by the Agent to such Obligor
in respect of such failure, such Obligor shall pay interest on such sum on
demand from the date of such failure up to the date of actual payment (as
well after as before judgement) at the rate, increased by the Margin plus one
per cent. (1 %), determined by the Agent to be the arithmetic mean (rounded
upwards, if necessary, to the nearest multiple of one sixteenth of one per
cent (1/16 %)) of the per annum rates, notified to the Agent by the Banks to
be those at which deposits in the currency of the unpaid sum for such period
as the Agent may select in its discretion (after consultation with the Banks)
are offered to each Bank by prime banks in the Interbank Market for value two
Business Days later as at 11:00 a.m. on the Business Day immediately
succeeding that on which the Agent becomes aware of the failure and, so long
as the failure continues, such rate shall be calculated on the same basis
thereafter. Interest accruing under this paragraph shall be due and payable
at the end of each period by reference to which it is calculated.
(B) Without prejudice to the foregoing and irrespective of any notice by
the Agent to either of the Obligors in respect of such Obligor's failure to
make any payment when due, such Obligor shall indemnify the Agent and the
Banks against any other damages, losses or expenses (including losses
incurred in paying overdraft interest or in liquidating or employing deposits
from third parties acquired to make, fund or maintain the Loan or any part
thereof) which any of them may sustain or incur as a consequence of (i) the
failure by such Obligor to pay any sum when due and payable under this
Agreement, (ii) the occurrence of any Event of Early Repayment, or (iii) an
Advance requested in a Notice of Borrowing given by the relevant Obligor but
not being made by reason of the operation of any one or more of the
provisions hereof.
(C) If any sum due from either of the Obligors under this Agreement or any
order or judgment given or made in relation hereto has to be converted from
the currency (the "FIRST CURRENCY") in which the same is payable hereunder
into another currency (the "SECOND CURRENCY") for the purpose of (i) making
or filing a claim or proof against such Obligor, (ii) obtaining an order or
judgement in any court or other tribunal or (iii) enforcing any order or
judgement given or made in relation hereto, such Obligor shall indemnify and
hold harmless each of the persons to whom such sum is due from and against
any damages or losses suffered as a result of any discrepancy between (a) the
rate of exchange used for such purpose to convert the
<PAGE>
sum in question from the first currency into the second currency and (b) the
rate or rates of exchange at which such person may in the ordinary course of
business purchase the first currency with the second currency upon receipt of
a sum paid to it in satisfaction, in whole or in part, of any such order,
judgement, claim or proof. The above indemnity shall constitute an
independent obligation of the Obligors separate from each of their other
obligations hereunder and shall apply irrespective of any indulgence granted
by the Agent or the Banks.
(D) Any prepayment or repayment of principal made under this Agreement
shall, if made otherwise than on the Maturity Date relative to the amounts
prepaid or repaid, be made together with accrued interest thereon and such
additional amount as each Bank may certify as necessary to compensate it for
any damages or losses incurred or to be incurred by it in connection with
such prepayment or repayment (including loss of Margin and losses on account
of funds borrowed in order to make, fund or maintain its portion of the Loan
or any part thereof prepaid or repaid).
15. SET-OFF AND REDISTRIBUTION OF PAYMENTS
(A) Each of the Obligors authorizes each Bank to apply any credit balance
to which such Obligor is entitled on any account of such Obligor with that
Bank in satisfaction of any sum due and payable from such Obligor to such
Bank hereunder but (following the termination of a grace period (if any))
unpaid; for this purpose, each Bank is authorized to purchase with the monies
standing to the credit of any such account such other currencies as may be
necessary to effect such application. No Bank shall be obliged to exercise
any right given to it by this paragraph (A) but if it does so it shall notify
the Agent and the relevant Obligor of such exercise.
(B) If at any time the proportion received or recovered by any Bank or
Deutsche Bank AG, Reutlingen Branch (a "RECOVERING BANK") by way of set-off
or otherwise (other than through the Agent in accordance with Article 13 (E))
in respect of its portion of any amounts due from an Obligor to the Banks
under this Agreement or an Ancillary Facility to which such Recovering Bank
is a party is greater than the proportion thereof which the relevant
Recovering Bank would have received through the Agent if distributed in
accordance with Article 13 (E) or which such Recovering Bank is entitled to
receive under the relevant Ancillary Facility (the difference between the
amount received or recovered by the Recovering Bank and the amount which the
Recovering Bank would have received or recovered had the recovery been
received through the Agent if distributed in accordance with Article 13 (E)
or under the relevant Ancillary Facility respectively hereinafter called the
"EXCESS AMOUNT"), then:
<PAGE>
(1) such Recovering Bank shall promptly notify the Agent and pay to the
Agent an amount equal to the Excess Amount (the "SHARING PAYMENT")
within three Business Days of such notification;
(2) the Agent shall account for such payment to the Banks and Deutsche
Bank AG, Reutlingen Branch respectively (excluding the Recovering Bank
having received the Excess Amount) as if it were a payment by the
relevant Obligor on account of the sum owed to the Banks under this
Agreement and the Ancillary Facilities; and
(3) to the extent that amounts received or recovered by a Recovering Bank
resulted in the satisfaction of a Recovering Bank's claim hereunder or
under the Ancillary Facility to which such Bank is party, but are
allocated in accordance with this Article 15 to another Bank and
Deutsche Bank AG, Reutlingen Branch respectively, the latter shall
assign to the Recovering Bank the claims (or the part thereof) to
which the amount is allocated.
(4) If any part of the Sharing Payment received or recovered by a
Recovering Bank becomes repayable and is repaid by such Recovering
Bank, then each party which has received a share of such Sharing
Payment pursuant to paragraph (2) shall, upon request of the Agent,
pay to the Agent for account of such Recovering Bank an amount equal
to its share of such Sharing Payment together with its proportionate
share of any interest or other sum paid to such Obligor by the
Recovering Bank in respect of the Sharing Payment and such Recovering
Bank shall re-assign to the relevant Bank any claim assigned to it by
such Bank pursuant to paragraph (3).
(5) This Article 15 shall not apply if the Recovering Bank would not,
after making any payment pursuant hereto, have a valid and enforceable
claim against the relevant Obligor and sums recovered as a result of
litigation started by a Bank to enforce its rights under this
Agreement and resulting in an Excess Amount shall only be shared with
such Banks that have joined in such litigation or commenced and
diligently pursued separate litigation to enforce their rights under
this Agreement and/or the Ancillary Facility to which such Bank is
party.
16. CHANGE OF CIRCUMSTANCES
(A) If:
(1) by reason of any change or coming into force after the date hereof of
law, regulation, treaty or official directive which any Bank or any
holding company of such Bank is
<PAGE>
required to comply with (whether or not having the force of law
provided that in case of an official directive not having the force of
law compliance must be customary in the ordinary course of business)
or any change of the interpretation thereof by any authority charged
with the administration or application thereof (including, for the
avoidance of doubt, any such change or compliance in connection with
the introduction of, changeover to or operation of the Euro):
(a) subjects any Bank (or any holding company of such Bank) to any
tax with respect to payments of principal of or interest on its
portion of any Advance or any other amount payable hereunder
(other than a tax imposed or calculated by reference to the net
income of such Bank or holding company); or
(b) changes the basis of taxation of payments to any Bank (or any
holding company of such Bank) of principal of or interest on
its portion of any Advance or of any other amount payable
hereunder (other than a change in the rate of any tax imposed
on or calculated by reference to the net income of such Bank or
holding company of such Bank); or
(c) imposes, modifies or deems applicable any reserve and/or
special deposit requirements against or in respect of assets or
liabilities of, or deposits with or for the account of, or
loans or credit extended by, any Bank (or any holding company
of such Bank); or
(d) affects the manner in which a Bank (or any holding company of
such Bank) allocates capital resources to its obligations
hereunder; or
(2) any Bank (or any holding company of such Bank) complies with any law,
regulation or binding official request or directive from any applicable
fiscal or monetary authority (whether or not having the force of law);
and as a result of any of the foregoing:
(a) the cost to such Bank (or such holding company) of making, funding or
maintaining its portion of any Advance or of maintaining its
Commitment is increased; or
(b) the amount of principal, interest or other amount payable hereunder to
such Bank or the effective return to such Bank (or such holding
company) hereunder is reduced; or
<PAGE>
(c) such Bank (or any holding company of such Bank) makes any payment or
forgoes any interest or other return on or calculated by reference to
the gross amount of any sum receivable by such Bank from any of the
Obligors hereunder,
then and in any such case:
(i) upon demand from time to time the Borrower shall pay to the Agent for
account of such Bank such amount as shall compensate such Bank or any
such holding company for such increased cost (or such proportion of
such cost as is, in such Bank's BONA FIDE opinion, attributable to the
relevant Advance and its term respectively to such Bank's Revolving
Credit Facility Commitment hereunder), reduction, payment or forgone
interest or other return. A Bank entitled to make a claim pursuant to
this paragraph shall notify the Agent of the event by reason of which
it is so entitled whereupon the Agent shall notify the Borrower
thereof. Such Bank shall submit to the Agent a certificate setting out
reasonable details of the event giving rise to such compensation, the
amount thereof and the manner in which it has been calculated and such
certificate shall be forwarded promptly by the Agent to the Borrower,
provided, however, that nothing herein shall require such Bank to
disclose any confidential information relating to the organisation of
its or its holding company's affairs; and
(ii) the Borrower may prepay such Bank's portion of such Advance together
with all interest accrued thereon and all fees and other amounts
(including amounts payable under sub-paragraph (i) and Article 14 (D))
payable to such Bank hereunder, on giving not less than fifteen days'
prior written irrevocable notice to the Agent.
Notwithstanding the foregoing provisions of this Article 16, no Bank shall be
entitled to claim under paragraph (A) in respect of any amount which is
compensated for by the operation of paragraph (B).
(B) If any sum payable by any Obligor hereunder whether in respect of
principal, interest or otherwise or any recipient of any such sum by reason
of its receiving such sum is or becomes subject at any time to taxation in
the Relevant Jurisdiction, such Obligor will indemnify such recipient in
respect of such tax liability so that such recipient receives or retains a
net sum equal to the sum it would have received or retained had there been no
such tax liability. In addition, such Obligor shall indemnify the Agent and
each Bank, respectively, against any present or future claim or liability for
taxes in the Relevant Jurisdiction imposed on any of them or on any agent,
branch, employee, intermediary, representative or representative office of
any of them
<PAGE>
only by virtue of the negotiation, preparation or execution of this
Agreement, the performance of any obligation hereunder or any entitlement to
or receipt of any payment hereunder.
(C) Notwithstanding anything to the contrary herein contained, if any
change in law, regulation or treaty or in the binding and official
interpretation or application thereof by any authority charged with the
administration or application thereof shall make it unlawful for any Bank to
make, fund or maintain all or any of its portion of the Advances made or to
be made hereunder or to give effect to its obligations through its Lending
Office as contemplated hereby, such Bank may, by written notice thereof to
the Agent to be forwarded by the Agent to the Borrower declare that such
Bank's obligations shall be terminated forthwith (or if permitted on the
latest day allowed by such law, regulation or treaty) whereupon the Borrower
shall prepay forthwith (or if permitted by such law, regulation or treaty on
the next following Maturity Date in relation to such outstanding Advance)
such Bank's portion in any Advance outstanding together with all interest
accrued thereon and all fees and other amounts payable by it to such Bank
hereunder. Such Bank's obligations hereunder and its Revolving Credit
Facility Commitment shall be cancelled upon the Agent's receipt of such
notice.
(D) If, in respect of any Bank, circumstances arise which result in an
increase in the amount of any payment to be made to it or for its account
pursuant to paragraph (A) or a claim for indemnification under paragraph (B),
then, without in any way limiting, reducing or otherwise qualifying the
obligations of the Obligors hereunder, such Bank shall promptly upon becoming
aware of the same notify the Agent thereof and shall, in consultation with
the Agent and the Borrower and to the extent that it can do so without
prejudice to its own position, take all reasonable steps as may be open to it
to mitigate or avoid the effects of such circumstances, including the change
of its Lending Office or the transfer of its rights and obligations hereunder
to another bank acceptable to the Borrower and willing to participate in the
Facility provided that such Bank shall be under no obligation to take any
such action if, in such Bank's BONA FIDE opinion, to do so may have any
adverse effect upon its business, operations or financial condition.
(E) The provisions of Article 13 (I) shall apply MUTATIS MUTANDIS in
respect of or in relation to any payment made or to be made by any Obligor
pursuant to the provisions of paragraph (B).
17. THE GUARANTEE
(A) The Guarantor irrevocably and unconditionally guarantees by way of an
independent guarantee ("GARANTIE AUF ERSTES ANFORDERN") to the Agent and each
Bank the due and punctual payment by the Borrower, under and in connection
with the terms of this Agreement, and
<PAGE>
covenants to pay or cause to be paid to the person entitled thereto in the
currency in which the same is for the time being due and payable under this
Agreement (and which remain for the time being unpaid) of (i) any amount up
to USD 45,000,000 or its equivalent borrowed under Tranche A, and (ii) any
the sum of principal, interest and all other monies which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement with respect to the said amount.
(B) The Guarantor shall effect payment hereunder promptly upon demand of
the Agent (or any Bank through the Agent) and confirmation that the amount
claimed from the Guarantor is equal to the Guaranteed Amount which the
Borrower has not paid when due.
(C) The obligations of the Guarantor hereunder (i) shall be separate and
independent from the obligations of the Borrower, (ii) shall exist
irrespective of the legality, validity, binding effect and enforceability of
any obligation of the Borrower under this Agreement, (iii) shall not be
affected by any event, condition or circumstance of whatever nature, whether
factual or legal, save the full, definite and irrevocable satisfaction of any
and all payment obligations expressed to be assumed under this Agreement and
(iv) shall be deemed "Senior Debt" under the indenture governing the Wavetek
Bond.
(D) The Agent and each Bank may at any time without thereby discharging,
impairing or otherwise affecting the obligations of the Guarantor hereunder
(i) give or agree to give any time or other indulgence to the Borrower in
respect of its obligations under this Agreement or any of them, (ii) (with
the consent of the Guarantor) offer or agree to or enter into any agreement
for any variation of this Agreement, or (iii) prove or abstain from proving,
in respect of the obligations of the Borrower under this Agreement, in a
bankruptcy, winding-up, liquidation or reorganization of the Borrower.
(E) The obligations of the Guarantor hereunder are (and are intended to
be) a continuing and independent security to the Agent and each Bank, as the
case may be, for the due and punctual payment by the Borrower, under and in
accordance with the terms of this Agreement, of the Guaranteed Amount and
interest thereon and all other monies related thereto which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement and accordingly the said obligations (i) shall be in addition
to and not in substitution for or derogation from any other encumbrance,
guarantee or other security now or at any time hereafter held by or on behalf
of the Agent or such Bank in respect of the obligations of the Borrower under
this Agreement or any of them, (ii) shall not be or be construed to be
satisfied by any discharge of or payment of or on account of the obligations
of the Borrower under this Agreement or any of them which has not resulted in
a final and irrevocable settlement of the
<PAGE>
respective obligation, and (iii) shall at all times extend to cover the
balance of principal, interest and all other monies which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement.
(F) Neither the Agent nor any Bank shall be obliged before asserting or
enforcing the obligations of the Guarantor hereunder (i) to take action or
obtain judgement against the Borrower in any court, (ii) to make or file any
claim or proof in any bankruptcy, winding-up, liquidation or reorganization
of the Borrower or (iii) to enforce or seek to enforce any other encumbrance,
guarantee or other security now or at any time hereafter held by or on behalf
of the Agent or such Bank in respect of the obligations of the Borrower under
this Agreement or any of them.
(G) Where any payment has been made by the Guarantor to the Agent or any
Bank hereunder the Guarantor shall not take the benefit of subrogation (if
any) of any rights of any such person or any encumbrance, guarantee or other
security now or any time hereafter held by or on behalf of such person in
respect of the obligations of the Borrower under this Agreement or any of
them until and unless all obligations of the Borrower under this Agreement
have been discharged in full.
(H) The guarantee given under this Agreement may be enforced against the
Guarantor by each Bank or by the Agent as agent for the Banks in any
proceedings, including enforcement proceedings.
(I) The Agent and the Banks confirm that it is the intention of all
parties that the guarantee by the Guarantor not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law. To effectuate the foregoing intention, the Banks and
the Guarantor hereby irrevocably agree that the obligations of the Guarantor
under this Article 17 shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such
Guarantor, result in the obligations of the Guarantor under the guarantee not
constituting a fraudulent transfer or conveyance.
18. REPRESENTATIONS AND WARRANTIES
(A) Each of the Obligors represents and warrants to the Agent and the
Banks that:
(1) It has the power and authority to own its assets and carry on its
business in each jurisdiction in which it owns assets (other than an
immaterial part thereof) or carries on business
<PAGE>
(other than minor business activities) and it is a corporation duly
organized, validly existing and in good standing under the laws of the
Relevant Jurisdiction;
(2) It has the power to enter into, exercise its rights and perform and
comply with its obligations under each of the Facility Documents to which it
is a party, subject to bankruptcy, insolvency, fraudulent transfer,
reorganisation, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(3) The execution, delivery and performance of the Facility Documents to
which it is a party does not and will not violate or exceed the powers
granted to it by, or any provision of, (i) any law or regulation in force as
of the date hereof in the Relevant Jurisdiction, (ii) any order or decree in
force as of the date hereof of any governmental agency or court of or in the
Relevant Jurisdiction, (iii) its charter or by-laws or (iv) (in any material
respect) any mortgage, deed, indenture, contract or agreement or (v) any bond
issue (including, but not limited to the Wavetek Bond) to which it is a party
or which is binding upon it or any of its respective assets and will not
cause any encumbrance to arise over or attach to all or any part of its
revenues or assets nor oblige it to create any such encumbrance except as
contemplated hereby;
(4) All actions, conditions and things required in the Relevant
Jurisdiction in order (i) to enable it lawfully to enter into and exercise
and perform its respective rights and obligations under the Facility
Documents to which it is party, (ii) to ensure that its obligations hereunder
are legal, valid and enforceable, and (iii) to make the Facility Documents
admissible in evidence in such jurisdiction have been obtained or made and
are in full force and effect;
(5) Each Facility Document to which it is party constitutes its legal,
valid, binding and unconditional obligations enforceable against it in
accordance with the terms thereof, subject to bankruptcy, insolvency,
fraudulent transfer, reorganisation, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(6) Neither it nor, to the best of its knowledge after due enquiry, any of
its subsidiaries is currently in default with the payment of any material sum
(as set out in Article 21 (E)) due and payable and no event has occurred and
is continuing which constitutes, or which with the giving of notice or lapse
of time or fulfilment of any other condition would constitute an Event of
Early Repayment;
(7) Neither it nor any other member of the Group is involved in any legal
or arbitration or administrative proceedings other than disclosed in the
financial statements of the Borrower as of September 30, 1998 and the notes
thereto nor, so far as the Borrower is aware, are any such
<PAGE>
proceedings pending or threatened against any member of the Group where such,
proceedings if determined adversely, could reasonably be expected to have a
Material Adverse Effect other than the proceedings threatened by the law firm
of Fried, Frank, Harris, Shriver & Jacobson, New York, in a letter dated
December 11, 1998 with respect to the Wavetek Bond;
(8) Neither it nor, to the best of its knowledge after due enquiry, any of
its subsidiaries has taken any corporate action or have any other steps been
taken or legal proceedings been started (except for the purpose of a solvent
restructuring) or, so far as the Obligors are aware, threatened against any
Obligor or any member of the Group for its winding-up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer of it or
of any material part or all of its assets or revenues, except for the
voluntary dissolutions of inactive or Immaterial Subsidiaries;
(9) Its Original Financial Statements are complete and correct in all
material respects and present fairly the financial position and the results
of the operations of the Obligors as of the date as of which they were
prepared and for the financial year then ended on such date and have been
prepared in accordance with GAAP and applied on a consistent basis with the
financial statements in respect of previous financial years 1996 and 1997 and
accordingly as of the date of its Original Financial Statements there were
neither any material liabilities, direct or indirect, actual or contingent,
of it nor any material unrealized or anticipated losses from any unfavourable
commitments required to be disclosed by it or reserved against in any such
financial statement or in the notes thereto (in accordance with GAAP) and not
disclosed or reserved;
(10) Between the date its Original Financial Statements refer to and the
date hereof there has been no material adverse change in its business, assets
or financial condition or the business, assets or financial condition of any
Obligor or the Group taken as a whole;
(11) It is in compliance with all relevant laws, regulations, permits,
treaties and agreements (including, without limitation, laws and permits
pertaining to environmental matters), non-compliance which can reasonably be
expected to have a Material Adverse Effect;
(12) Its respective obligations under this Agreement rank and will continue
to rank at least pari passu in respect of priority of payment and in all
other respects with all its other unsecured and unsubordinated indebtedness
and the obligations of the Obligors under this agreement will in any case
rank before any of their current or future obligations under the Wavetek
Bond, save as provided by applicable laws of bankruptcy, insolvency,
liquidation or similar laws of general
<PAGE>
application and, save as permitted by Article 19 (C), no encumbrance exists
over all or any of its present or future revenues or assets;
(13) The holders of the Wavetek Bond are not and will not be entitled to
repayment of any outstandings under the Wavetek Bond and the Borrower was not
and will not be required to make a Change of Control Offer as set out under
Section 4.06 of the indenture relating to the Wavetek Bond because (i) the
Borrower and WGMH consummated the transactions contemplated under the Merger
Agreement, and/or (ii) the Obligors enter into this Agreement (and in the
case of the Borrower the Share Pledge Agreement and the Ancillary
Facilities), and/or the Obligors or the Banks exercise their rights hereunder
(other than pursuant to Article 21) nor will the aforesaid result in a
default under or breach of the indenture relating to the Wavetek Bond.
(14) Under the laws of the Relevant Jurisdiction in force at the date
hereof, it will not be required to make any deduction or withholding from any
payment it may make hereunder on account of any withholding taxes referred to
in the proviso to Article 13 (A) which cannot be avoided by the relevant
Bank(s) by complying with Article 13 (G);
(15) Under the laws of the Relevant Jurisdiction in force at the date
hereof, it is not necessary to ensure the legality, validity, enforceability
or admissibility in evidence of this Agreement in such jurisdiction in
respect of such Obligor that it be filed, recorded or enrolled with any
governmental authority or agency in such jurisdiction or that it be stamped
with any stamp, registration or similar transaction tax in such jurisdiction.
(B) The Obligors further represent that:
Each Plan is in substantial compliance with ERISA, and the Code and any
applicable requirement of law; no Reportable Event has occurred with respect
to any Plan; no Plan is insolvent or in reorganisation, and no written notice
of any insolvency or reorganisation has been given to any member of the Group
or any ERISA Affiliate with respect to any Multiemployer Plan; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency or has applied for an extension of any amortisation period within
the meaning of Section 412 of the Code; all contributions required to be made
with respect to a Plan and a Foreign Pension Plan have been timely made;
neither any member of the Group nor any of its subsidiaries nor any ERISA
Affiliate has incurred any material liability to or on account of (i) a Plan
pursuant to Section 409, 502 (1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401 (a)(29), 4971, 4975 or 4900 of the Code or
(ii) a Multiemployer Plan pursuant to Section 515, 4201, 4202 or 4112 of ERISA
or Section 4971 of the Code or expects to
<PAGE>
incur any liability (including any indirect, contingent, or secondary
liability) under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate or appoint a trustee to
administer any Plan; no condition exists which presents a material risk to
the Company or any member of the Group or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no lien imposed under the Code or ERISA on its or any
subsidiaries assets or on the assets of any ERISA Affiliate exists or is
likely to arise on account of any Plan; and it and its subsidiaries may cease
contributions to or terminate any employee benefit plan maintained by any of
them without incurring any material liability.
19. UNDERTAKINGS
Each of the Obligors undertakes or, as the case may be, the Borrower
undertakes to procure
(A) to supply to the Agent (with a sufficient number of copies for the Banks)
(1) as soon as the same are available, and in any event within 120 days of
the end of each of its financial years, the Borrower's audited
consolidated balance sheet and profit and loss account for that
financial year and the Borrower's, WGMH's and the Guarantor's
unaudited unconsolidated balance sheet and profit and loss account
(included in Form 10-K with the U.S. Securities and Exchange
Commission); and
(2) as soon as the same are available, and in any event within 45 days of
the end of each of the first, second and third financial quarters, the
Borrower's unaudited financial statements for that quarter included in
Form 10-Q with the U.S. Securities and r WGMH's unaudited
unconsolidated semi-annual financial statements); and
(3) (in the case of the Borrower) as soon as the same are available, and
in any event within 30 days of the end of the respective month of its
consolidated key figures on incoming orders, sales and earnings before
interest and taxes, as available in the Borrower's unaudited internal
financial statements; and
(4) such other information regarding its business or financial condition
as the Agent or any Bank through the Agent may from time to time in
accordance with normal market practice and regulatory requirements
reasonably request; and
(5) as soon as the same are available, and in any event within 20 days
following the date hereof a certificate of WGMH confirming the receipt
of a notification in accordance with
<PAGE>
Section 16 of the Limited Liabilities Companies Act (GMBHG) relating
to the Share Pledge Agreement.
(B) that the financial statements to be furnished from time to time in
accordance with paragraph (A)(1) are prepared in accordance with GAAP (in the
case of WGMH in accordance with GAAP or the Commercial Code (HGB)) and are
complete in all material respects and shall present fairly the consolidated
or, as the case may be, the unconsolidated financial position and the results
of the operations of the relevant Obligor as of such date and for the period
to which the financial statements relate and to notify in writing the Agent
of any material change in the application of accounting principles unless
such change has been disclosed in the notes to or, as the case may be, the
notes to the relevant financial statement.
(C) none of the Obligors shall and the Borrower shall ensure that no other
member of the Group shall at any time while any amounts remain outstanding
from any Borrower under this Agreement, create or permit to subsist any
encumbrance over all or any of its present or future revenues or assets
(including but not limited to for the avoidance of doubt the proportion of
approximately 35 % of the share in WGMH remaining unpledged under the Share
Pledge Agreement) as security for any financial indebtedness of any person
other than:
(1) encumbrances set out in the Disclosure Letter;
(2) any encumbrance in connection with the assignment of trade receivables
made with respect to the indebtedness assumed by the Group's
distribution subsidiaries in accordance with paragraph (I)(4) provided
that the aggregate financial indebtedness which is at any time
outstanding and secured by encumbrances created or existing in
reliance on this sub-paragraph (2) does not exceed the amount set out
under paragraph (I)(4);
(3) any encumbrance arising in the ordinary course of business solely by
operation of law (or by an agreement evidencing the same) and not due
to a default;
(4) in the case of an acquisition of assets (including for the avoidance
of doubt stock) any encumbrance over assets and which encumbrance is
in existence prior to such acquisition (provided that such encumbrance
is not created in contemplation of such acquisition and the
acquisition is at fair market value and on an arms' length basis);
(5) encumbrances created or permitted to subsist with the prior written
consent of the Majority Banks;
<PAGE>
(6) any attachment, judgement or encumbrance not constituting an Event of
Early Repayment.
(D) none of the Obligors shall and the Borrower shall procure that no
other member of the Group shall, either in a single transaction or in a
series of transactions, whether related or not and whether voluntarily or
involuntarily, sell, transfer, grant or lease or otherwise dispose of any
part of its assets or enter into any merger agreement or transfer any of its
assets by way of a spin off or any contribution to another entity (a "hive
down", AUSGLIEDERUNG) other than:
(1) disposals in the ordinary course of business (including, but not
limited to customary forfaiting) on an arm's length basis and at fair
market value; or
(2) disposals made by one member of the Group (other than the Borrower) to
another member of the Group or any merger between or spin off or
contribution to any member of the Group; or
(3) disposals (other than such disposals referred to under subparagraph
(1) above) on an arm's length basis and at fair market value provided
that the book value of such assets or revenues derived from such
assets when aggregated over the lifetime of this Agreement under this
sub-clause (3) does not exceed 5 per cent. of the total consolidated
assets of the Group or its consolidated revenues as to be determined
on the basis of the most recent annual balance sheet and income
statement; or
(4) disposals made in the way of sale- and lease-back transactions
generating at least book value of the assets and if such assets are
pledged or otherwise being used as security for any financial
indebtedness the net proceeds of such transactions are applied towards
the repayment of the relevant secured debt; or
(5) disposals made with the prior consent of the Majority Banks.
(E) the Borrower shall under no circumstances dispose of and shall procure
that no member of the Group disposes of any of its shareholdings (including
in particular but not limited to the Pledged Share in WGMH) in its
subsidiaries other than the certain subsidiary referred to under Article 9
(E) without the prior written consent of the Banks or any disposals within
the Group.
(F) that it will obtain promptly at any time and from time to time such
registrations, licenses, consents and approvals as may be required in respect
of this Facility Agreement to which it is
<PAGE>
party under applicable law or regulation to enable it to perform its
obligations hereunder and upon the Agent's request promptly supply the Agent
with copies thereof.
(G) all members of the Group shall comply in all respects with all
obligations under ERISA and with all environmental laws the failure to comply
with or to observe could reasonably be expected to have a Material Adverse
Effect.
(H) no member of the Group shall, without the prior written consent of the
Majority Banks, make any loans, grant any credit or give any guarantee or
indemnity to or for the benefit of any person or otherwise voluntarily assume
any liability, whether actual or contingent, in respect of any obligations of
any other person other than (i) loans made or credits granted to or in favour
of any other members of the Group or otherwise in the ordinary course of
business or (ii) any guarantee or indemnity given in the ordinary course of
business or (iii) guarantees required under the Wavetek Bond.
(I) no member of the Group will incur or permit to subsist any financial
indebtedness other than:
(1) any such indebtedness incurred hereunder; or
(2) any such indebtedness owing by a member of the Group to another member
of the Group; or
(3) any indebtedness incurred under the existing DM 10 million credit
facility maintained by Wandel & Goltermann Elektronische Messtechnik
GmbH & Co. KG with Kreissparkasse Reutlingen; or
(4) any short-term facilities maintained by any distribution subsidiaries
to the extent the aggregate amount of such indebtedness does not
exceed DM 30 million (or its equivalent); or
(5) any indebtedness incurred under the long-term facility of the Group
set out in the Disclosure Letter to the extent any indebtedness
thereunder does not exceed an amount of DM 70 million (or its
equivalent); or
(6) any amount outstanding under the Wavetek Bond at the time being USD
85,000,000; or
<PAGE>
(7) any indebtedness in the aggregate amount of DM 85,000,000 or its
equivalent incurred under the Ancillary Facilities maintained in
accordance with the provisions hereof or any facilities supported by
the Ancillary Facilities; or
(8) in the case of an acquisition of assets (including for the avoidance
of doubt stock) any financial indebtedness acquired in connection
therewith provided that (i) such indebtedness is not created in
contemplation of such acquisition and (ii) the acquisition is at fair
market value and on an arms' length basis and (iii) the aggregate
amount of such financial indebtedness does at any time not exceed an
amount of DM 10,000,000 and the Borrower shall in any case following
such acquisition give notice to the Agent about the amount of the
Acquired Financial Indebtedness;
(9) the shareholder loans to WGMH as of September 1998 in the amount of DM
19,658,235;
(10) a certain additional amount to be agreed upon with the Banks in a
separate agreement.
(J) each member of the Group shall ensure that adequate contributions are
made to pension insurance schemes (including but not limited to ERISA
requirements) in respect of employees of the Group where such pension
insurance schemes are required in the Relevant Jurisdiction of such Group
members.
(K) as soon as it becomes aware thereof promptly to notify in writing the
Agent of any Event of Early Repayment or any event which with the giving of
notice, lapse of time or fulfilment of any other condition would or might
constitute an Event of Early Repayment.
(L) to ensure that at all times the claims of the Agent, the Arrangers,
the Banks and Deutsche Bank AG, Reutlingen Branch against the Obligors under
this Agreement and the Ancillary Facilities rank at least PARI PASSU with the
claims of all its other unsecured and unsubordinated creditors save those
whose claims are preferred by any bankruptcy, insolvency, liquidation or
other similar laws of general application.
(M) it maintains insurances on and in relation to its business and assets
with reputable underwriters or insurance companies against such risks and to
such extent as is usual for companies carrying on a business comparable to
its business.
(N) the Borrower will provide the Agent within a period of ten Business
Days following the date hereof with a confirmation of Commerzbank
Aktiengesellschaft, Reutlingen Branch that the existing security pooling
agreement between Commerzbank Aktiengesellschaft, Baden-
<PAGE>
Wurttembergische Bank AG, Deutsche Bank AG, Kreissparkasse Reutlingen,
Landesgirokasse Stuttgart and Stuttgarter Bank AG was cancelled and that all
collateral provided thereunder or in connection therewith was released.
(O) the Borrower undertakes that it will repay or refinance with
guarantees provided under the Ancillary Facilities (or, as the case may be
cancel) all Bilateral Facilities by the end of January 1999 and the Borrower
will provide the Agent immediately thereafter with a confirmation of
Commerzbank Aktiengesellschaft, Reutlingen Branch, that all Bilateral
Facilities were repaid, refinanced or cancelled respectively.
20. FINANCIAL COVENANTS
(A) The Borrower shall ensure that the consolidated financial condition of
the Group to be tested quarterly by reference to the Borrower's consolidated
financial statements shall be such that:
(1) the Gearing Ratio is always not more than 2.2 before September 30,
1999 and not more than 1.9 at September 30, 1999 and thereafter, to be
reduced following an initial public offering of the Borrower.
(2) the Interest Coverage Ratio (to be tested on a Rolling Basis) in
respect of any Relevant Period calculated shall be not less than 2.3:1
for testing at December 31, 1998 and not less than 2.6:1 thereafter
and before September 30, 1999 and not less than 3.0 : 1 for the fiscal
year ended September 30, 1999 and thereafter.
(B) In this Article 20 the following terms have the following meanings:
"EBITDA" means, in respect of any Relevant Period, the consolidated operating
income of the Borrower plus (i) depreciation expenses, (ii) amortisation
expenses and (iii) acquired in-process research and development and
provisions for restructuring operations and other non-recurring charges
resulting from the transactions contemplated in the September 30, 1998
financial statements, in each case for the Relevant Period.
"GEARING RATIO" means the ratio of Net Financial Indebtedness to Net Worth.
"INTEREST COVERAGE RATIO" means the ratio of the sum of EBITDA of the
Borrower and its subsidiaries on a consolidated basis for the four
fiscal-quarter period most recently ended to Net Financial Result for the
same period.
<PAGE>
"LIQUID ASSETS" means cash, cash equivalents and short-term investments as
reflected on the consolidated balance sheet of the Borrower.
"NET FINANCIAL INDEBTEDNESS" means (i) all of the Borrower's consolidated
obligations for borrowed money, (ii) all obligations evidenced by debentures,
notes or similar instruments, (iii) all obligations to pay a deferred
purchase price for property, which appear as a liability in the consolidated
balance sheet of the Borrower prepared in accordance with GAAP, except trade
accounts payable, (iv) all obligations as lessee which are capitalized in
accordance with GAAP, (v) all financial indebtedness of third parties which
are secured by a security interest on any of its assets, (vi) all its
contingent liabilities to the extent required to be included as debt in the
balance sheet in accordance with GAAP, and (vii) the net amount of all of its
payment obligations under financial derivative transactions, which appear as
a liability in the consolidated balance sheet of the Borrower prepared in
accordance with GAAP, less (viii) Liquid Assets, less (ix) the Wavetek Bond,
less (x) the other subordinated debt permitted under Article 19 (I) (10) and
less (xi) any loans made by stockholders.
"NET FINANCIAL RESULT" means, in respect of any Relevant Period, the
difference (if positive) between any interest expense and any interest income.
"NET WORTH" means (i) the consolidated equity of the common stockholders and
any preferred stockholders of the Borrower and its consolidated subsidiaries
as of such date (for the avoidance of doubt as defined in the consolidated
balance sheets of the Borrower included in the 10_K-filing within the
Securities Exchange Commission for the fiscal year ended September 30, 1998
as stockholders equity: common stock, additional paid-in capital, retained
earnings/accumulated deficit and foreign currency translation adjustments/,
less (ii) the amount of any writing up the book value of any assets of any
member of the Group and the amount of any writing back of provisions after
the date hereof (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business), less (iii) any
amount attributable to minority interests in the consolidated accounts of the
Group, less (iv) any amounts attributable to goodwill after the date hereof
but not making any adjustments for any amounts positive or negative
attributable to goodwill resulting from the transactions contemplated in the
September 30, 1998 financial statements plus (v) the Wavetek Bond, plus (vi)
the other subordinated debt permitted under Article 19 (I) (10) and plus
(vii) any loans made by stockholders.
"RELEVANT PERIOD" means each calendar quarter.
<PAGE>
"ROLLING BASIS" refers to the calculation of a ratio for the preceding twelve
months.
(C) The Borrower shall deliver to the Agent within a period of 45 days
after the end of each Relevant Period other than the end of a fiscal year,
there within 90 days after the end of a fiscal year, a compliance certificate
("COMPLIANCE CERTIFICATE") setting out in reasonable detail the Borrower's
compliance with its obligations set out under paragraph (A).
Each Compliance Certificate shall be executed by the Chief Financial Officer
and another authorised signatory of the Borrower (in case of a Compliance
Certificate delivered in conjunction with the Borrower's audited annual
financial statements certified by the Borrower's auditors).
(D) In case the accounting policies, practices and procedures applied in
preparing any financial statements delivered after the date hereof pursuant
to paragraph (A) are different from the accounting policies, practices and
procedures applied in the preparation of the Borrower's Original Financial
Statements then
(1) The Borrower shall procure that its auditors provide to the Agent a
description of such changes and the adjustments necessary in order to
determine the Borrower's compliance with its obligations set out in
paragraph (A) as if such change to the Borrower's accounting policies,
practices and/or procedures would not have occurred; and
(2) The Borrower's compliance with its obligations set out in paragraph
(A) will be determined as if such change to the Borrower's accounting
policies, practices and/or procedures would not have occurred unless
the Borrower and the Agent have agreed that such changes are
irrelevant in the context of this Article 20 or are sufficiently
compensated by amendments to paragraph (A) agreed upon by the Borrower
and the Agent.
21. EVENTS OF EARLY REPAYMENT
If:
(A) the Borrower fails to pay when due any sum which shall have become due
hereunder and (in case the non-payment is solely due to technical problems or
administrative failures) the non-payment continues unremedied for three
Business Days after notice thereof has been given by the Agent to the
Borrower; or
<PAGE>
(B) any representation, warranty or statement made or repeated by any of
the Obligors in this Agreement or any notice or other document, certificate
or statement delivered by it pursuant hereto or in connection herewith is or
proves to have been incorrect or inaccurate or misleading in a material
respect when made or repeated and such incorrectness or inaccuracy is, if
capable of remedy, not remedied within fifteen Business Days after notice
thereof has been given by the Agent to such Obligor; or
(C) The Obligors fail to comply with the provisions of Article 19 and such
failure should continue to be unremedied (if capable to remedy) for fifteen
Business Days or the Borrower fails to comply with the provisions of Article
20 (A); or
(D) any of the Obligors fails duly to perform or observe any other
provision of this Agreement and such failure shall continue unremedied for
fifteen Business Days (if capable of remedy, otherwise immediately) after the
Agent has given notice of such failure to such Obligor; or
(E) any financial indebtedness of the Borrower or any member of the Group
incurred otherwise than hereunder is not paid when due or after any
applicable grace period or any financial indebtedness of the Borrower or any
member of the Group is declared to be or otherwise becomes due and payable
prior to its specified maturity pursuant to the occurrence of an event of
default (howsoever described) or any creditor of the Borrower or any member
of the Group becomes entitled to declare any financial indebtedness of the
Borrower or any member of the Group due and payable prior to its specified
maturity, unless the aggregate amount of all such financial indebtedness is
less than DM 5 million (or, following its introduction, Euro 2,5 million) (or
its equivalent in any other currency or currencies); or
(F) the Borrower or any other member of the Group shall enter into
voluntary or involuntary bankruptcy or shall become insolvent or is unable to
pay its debts as they fall due, commences negotiations with any one or more
of its creditors with a view to the general readjustment or rescheduling of
its indebtedness or makes a general assignment for the benefit of or a
composition with its creditors, or a receiver or liquidator shall be
appointed for all or any part of the undertaking or assets of the Borrower or
of any member of the Group or proceedings (other than proceedings which are
either vexatious or frivolous and being contested by appropriate means) are
commenced by or against the Borrower or any member of the Group (other than
Immaterial Subsidiaries) under any reorganization, arrangement, re-adjustment
of debts, or liquidation law or regulation, or if any event shall occur
which, under the law of the country of incorporation of the relevant entity,
shall have an equivalent effect and not discharged within a period of thirty
days; or
<PAGE>
(G) any governmental or other consent, licence or authority required to
make this Agreement legal, valid, binding, enforceable and admissible in
evidence or required to enable any of the Obligors to perform its obligations
under the Facility Documents is withdrawn or ceases to be in full force and
effect; or
(H) it becomes unlawful for any of the Obligors to perform all or any of
its obligations hereunder; or
(I) any Material Member of the Group shall cease or suspend or threaten to
cease or suspend all or a material part of its operations or business; or
(J) the Borrower or any of its subsidiaries (other than Immaterial
Subsidiaries) takes any corporate action or legal proceedings (which
proceedings are not discharged of within thirty Business Days provided such
proceedings are contested in good faith by the relevant company(ies)) are
started for its winding-up, dissolution or administration (or its equivalent
in any other applicable jurisdiction) (other than any solvent reorganisation
previously approved in writing by the Majority Banks) or for the appointment
of a liquidator, receiver, administrator, administrative receiver, trustee or
similar officer of it or of any or all of its revenues and assets or any
application is made or petition is lodged for the making of an administration
order in relation to any subsidiary (other than Immaterial Subsidiaries) and
not discharge within thirty Business Days (provided such proceedings are
contested in good faith by the relevant company(ies)) or any analogous
proceedings shall be commenced against any subsidiary (other than Immaterial
Subsidiaries) under the laws of any jurisdictions; or
(K) any execution or distress with respect to an amount of or exceeding DM
5 million (and following its introduction EURO 2,5 million) is levied
against, or encumbrances takes possession of the whole or any part other than
a wholly immaterial part of, the property, undertaking or assets of the
Borrower or any subsidiary (other than Immaterial Subsidiaries) or any
analogous proceedings shall be commenced against the Borrower or any
subsidiary (other than Immaterial Subsidiaries) under the laws of any
jurisdiction and not discharged within fifteen Business Days provided such
proceedings are contested in good faith; or
(L) WGMH ceases to be a (direct or indirect) wholly-owned subsidiary of
the Borrower or if any person, or group of persons acting together which does
not or doe not have control at the date hereof acquires control over 50 per
cent of the voting rights and/or the capital stock of the Borrower; or
<PAGE>
(M) the Borrower's auditors qualify their annual audited report to the
consolidated financial statements of the Borrower in a manner which is, in
the reasonable opinion of the Majority Banks, material in the context of the
Facilities; or
(N) any situation or material adverse change in the business, assets or
financial condition of the Borrower or the Group taken as a whole occurs,
which situation or change of circumstance gives reasonable grounds to
conclude that the Borrower may likely not, or will be unable to, perform or
observe in the normal course its financial obligations under this agreement;
or
(O) the Wavetek Bond is repaid or shall become due and payable, or the
Borrower makes or will be under the obligation to make a Change of Control
Offer (as defined under Section 4.06 of the indenture relating to the Wavetek
Bond) to the holders of the Wavetek Bond or the shareholders of the Borrower
take any action or enter into any agreement that would result in an
obligation of the Borrower to make such offer, before the Final Maturity Date
save to, following the cancellation of the Revolving Credit Commitments in an
amount of DM 100,000,000 any repayment of the Wavetek Bond in the maximum
amount of one third of the principal amount of the Wavetek Bond if such
repayment is made out of the free funds (meaning all funds raised by such a
public offering minus all costs accrued in connection therewith) raised by an
initial public offering of share in the Borrower; or
(P) there shall occur any of the following events which have a Material
Adverse Effect:
(1) the happening of a Reportable Event (as defined in Section 4043 of
ERISA) with respect to any Plan;
(2) the disqualification or involuntary termination of a Plan for any reason;
(3) the voluntary termination of any plan while such plan has a funding
deficiency (as determined under Section 412 of the Code);
(4) the institution of any proceedings by the PBGC to terminate any such
Plan or to appoint a trustee to administer any such Plan;
(5) the failure of any of the Obligors to notify the Agent and the Banks
promptly upon the receipt by such Obligor or any of its affiliates of
any notice of the institution of any proceeding or other actions which
may result in the termination of any such Plan
<PAGE>
then, and in any such event and at any time thereafter, if any such event
shall be continuing, the Agent may (and, if so instructed by the Majority
Banks, shall) take either or both of the following actions:
(1) by notice to the Borrower declare the Loan immediately due and payable
whereupon the same shall become so payable together with interest
accrued thereon and all other amounts payable hereunder; or
(2) by notice to the Borrower declare that the Revolving Facility
Commitments of all the Banks shall be cancelled, whereupon the same
shall be cancelled and all amounts payable hereunder shall become due
and payable.
22. FEES
(A) The Borrower shall pay (i) to the Agent for account of the Banks a
commitment fee in Deutsche Mark (and, following its introduction, Euro)
computed on a daily basis on the undrawn part of the Revolving Credit
Facility Commitments and (ii) to each relevant Bank and Deutsche Bank AG,
Reutlingen Branch, a commitment fee in Deutsche Marks (and, following its
introduction, Euro) computed on a daily basis on the undrawn part of such
Bank's (and Deutsche Bank AG's, Reutlingen Branch respectively) commitment
with respect to the Ancillary Facilities as set forth in the Sixth Schedule,
in either case calculated at the rate of 0.25 per cent. per annum. Accrued
commitment fee shall be payable in arrears on the last day of each successive
period of three months which ends during the period commencing on the date
hereof and ending on the Final Maturity Date and shall be calculated on the
basis of a year of 360 days and for the actual number of days elapsed.
(B) The Borrower shall pay to the Agent and the Arrangers the fees
specified in the letter of even date from the Agent to the Borrower
countersigned by the Borrower on the dates and in the amounts specified in
such letter.
23. EXPENSES AND STAMP DUTIES
(A) Each Obligor shall reimburse the Agent and the Banks on demand for all
reasonable costs and expenses (including reasonable legal fees and value
added tax or similar tax) incurred by them or any of them in, or in
connection with, the enforcement of or preservation of its or their rights
against such Obligor under the Facility Documents or in connection with any
amendments, waivers or consents required during the term of this Agreement in
respect thereof.
<PAGE>
(B) Each Obligor shall pay any and all stamp, registration and similar
taxes and charges of whatsoever nature (other than any tax referred to in
Article 13 (A)) which may be payable or determined to be payable on, or in
connection with, the execution or performance of the Facility Documents, by
such Obligor, the enforcement of the Facility Documents against such Obligor
or any registration or notarization of this Agreement with respect to such
Obligor and shall, from time to time on demand of the Agent, indemnify the
Agent and the Banks against any and all liabilities with respect to or
resulting from delay or omission on its part to pay any such taxes.
24. THE AGENT, THE ARRANGERS AND THE BANKS
(A) Each Bank hereby appoints the Agent to act as its agent in connection
herewith and authorizes the Agent to exercise such rights, powers and
discretions as are specifically delegated to the Agent by the terms hereof
together with all such rights, powers and discretions as are reasonably
incidental thereto.
(B) When acting in connection with this Agreement, the Agent may:
(1) assume that no Event of Early Repayment and no event which with the
giving of notice, lapse of time or fulfilment of any other condition
would or might constitute an Event of Early Repayment has occurred and
that none of the Obligors is in breach of or default under its
respective obligations hereunder unless it has received express notice
thereof from any party hereto or (in the case of a payment default
hereunder) gained actual knowledge thereof;
(2) assume that each Bank's Lending Office is that identified with its
signature below until it has received from such Bank notice
designating any other office of such Bank as its Lending Office and
act upon any such notice until the same is superseded by a further
such notice;
(3) engage and pay for the advice or services of any experienced lawyers,
accountants, surveyors or other experts whose advice or services may
to it seem necessary, expedient or desirable and rely upon any advice
so obtained;
(4) rely as to any matters of fact which might reasonably be expected to
be within the knowledge of any of the Obligors upon a certificate
signed by or on behalf of such Obligor;
<PAGE>
(5) rely upon any communication or document believed by it to be genuine;
(6) refrain from exercising any right, power or discretion vested in it
hereunder unless and until instructed by the Majority Banks as to the
manner in which such right, power or discretion should be exercised;
(7) refrain from acting in accordance with any instructions of the
Majority Banks to begin any legal action or proceeding arising out of
or in connection with this Agreement until it shall have received such
security as it may require (whether by way of payment in advance or
otherwise) for all costs, claims, expenses (including legal fees) and
liabilities together with any value added tax or similar tax thereon
which it will or may expend or incur in complying with such
instructions;
(8) if it is unable to obtain instructions or communicate with a Bank
after making reasonable attempts to do so, either refrain from acting
as Agent on behalf of such Bank or take such action on behalf of such
Bank as it in its absolute discretion deems appropriate and shall not
be liable to such Bank as a result of any such action or inaction
(save in the case of gross negligence or wilful misconduct); and
(9) refrain from acting in accordance with any instructions of the
Majority Banks if in its reasonable opinion they are contrary to
applicable law.
(C) The Agent shall:
(1) promptly inform each Bank of the contents of any notice or document
received by it from any of the Obligors hereunder or from any Bank
where such notice or document concerns the rights, interest and/or
obligations of all the Banks hereunder;
(2) promptly notify each Bank of the occurrence of any Event of Early
Repayment or any event which with the giving of notice or lapse of
time or fulfilment of any other condition would or might constitute an
Event of Early Repayment or any failure of any of the Obligors duly to
perform its respective obligations under this Agreement of which the
Agent has received express notice from any party hereto or (in the
case of a payment default hereunder) gained actual knowledge;
(3) subject as herein provided, act in accordance with any instructions
given to it by the Majority Banks and, if so instructed by the
Majority Banks, refrain from exercising a right, power or discretion
vested in it hereunder.
<PAGE>
(D) The Agent shall not:
(1) be bound to enquire as to the occurrence or otherwise of any Event of
Early Repayment (unless a payment default has occurred hereunder or
the Agent has been informed in writing by a Bank describing in
reasonable detail an occurrence of an event which is expressly stated
to be an Event of Early Repayment) or any event which with the giving
of notice or lapse of time or fulfilment of any other condition would
or might constitute an Event of Early Repayment or as to any failure
of any of the Obligors duly to perform its respective obligations
hereunder;
(2) be bound to account to any Bank for any sum or the profit element of
any sum received by it for its own account;
(3) initiate any legal proceedings on behalf of any Bank unless
specifically authorized by such Bank to do so, but the failure of any
Bank to give such authorization shall not limit the right of the Agent
to do so on behalf of any other Bank;
(4) be bound to disclose to any other person any information relating to
any of the Obligors received by the Agent if such disclosure would or
might in the opinion of the Agent constitute a breach of any law or
regulation or be otherwise actionable by any person; or
(5) be under any fiduciary duty towards any Bank or under any obligations
other than those for which express provision is made herein.
(E) Each Bank shall indemnify the Agent in the proportion its share of the
Loan bears to the amount of the Loan or, as the case may be, the amount of
its Commitment bears to the Total Commitments at the time any such
instructions are given, against any and all costs, claims, expenses
(including legal fees) and liabilities which the Agent may incur in complying
with any instructions received by it from the Banks insofar as such expenses
are not punctually reimbursed by the Obligors pursuant to the terms hereof
except routine administrative costs and expenses of the Agent or to the
extent that these costs, claims, expenses and liabilities are sustained or
incurred as a result of the gross negligence or wilful misconduct of the
Agent or any of its personnel or agents.
(F) Each Bank agrees that neither the Agent nor the Arrangers shall be
responsible for the accuracy and completeness of any representations made
(whether orally or otherwise) herein or in connection herewith, for the
validity, effectiveness, adequacy or enforceability of this
<PAGE>
Agreement or for the creditworthiness of any of the Obligors, any other
member of the Group or the Group as a whole. Neither the Agent nor the
Arrangers nor any of their directors, officers or employees shall be under
any liability for or in respect of any action taken or omitted by any of them
in relation to this Agreement save for its or his gross negligence or wilful
misconduct.
(G) The Arrangers and the Agent may accept deposits from, lend money to
and generally engage in any kind of banking or other business with the
Borrower.
(H) It is understood and agreed by each Bank that it has been, and will
continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness and
affairs of each of the Obligors, each other member of the Group and the Group
as a whole and accordingly each Bank confirms to the Agent and the Arranges
that it has not relied, and will not hereafter rely, on the Agent or the
Arrangers:
(1) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by any of the Obligors in
connection with this Agreement or the transactions herein contemplated
whether or not such information has been or is hereafter circulated to
such Bank by the Agent or any of the Arrangers; or
(2) to assess or keep under review on its behalf the financial condition,
creditworthiness or affairs of any of the Obligors, any other member
of the Group or the Group as a whole.
(I) In acting as agent for the Banks under the Facility Documents the
Agent shall be regarded as acting through its agency division which shall be
treated as a separate entity from any other of its divisions or departments
and, notwithstanding the foregoing provisions of this Article 24, any
information received by some other division or department of the Agent may be
treated as confidential and shall not be regarded as having been given to the
Agent's agency division, unless the Agent had actual knowledge thereof or as
a matter of good faith (TREU UND GLAUBEN) the Banks could expect that such
information would have been passed on to them. Notwithstanding anything to
the contrary expressed or implied herein and without prejudice to the
provisions of this paragraph (I), the Agent shall not as between itself and
the Banks be bound to disclose to any Bank or any other person any
information which is supplied by the Obligors to the Agent other than in ist
capacity as agent hereunder.
(J) The Agent may (and if so instructed by the Majority Banks, shall) for
any reason at any time retire upon not less than forty-five days' written
notice to each of the parties hereto of its intention to do so and, if any
such notice is given by the Agent, the Agent shall upon the appointment of a
successor agent as hereinafter provided for cease to be under any further
<PAGE>
obligation as Agent hereunder. Following delivery of any such notice, the
Majority Banks may appoint a successor agent and if, before the expiry of
such notice, such successor agent notifies the parties hereto that it accepts
such appointment, (i) each reference herein to "the Agent" shall thereafter
be construed as a reference to the successor agent and (ii) the successor
agent and the parties hereto other than the retiring Agent shall thereafter
have such rights and obligations INTER SE as they would have had if the
successor agent had been a party hereto as the Agent. If no successor agent
appointed by the Majority Banks notifies the parties hereto, prior to the
expiry of the Agent's notice of its intention to retire giving rise to the
need to appoint the same, of its acceptance of such appointment, the Agent in
consultation with the Borrower may appoint any experienced and reputable bank
to be the successor agent and, if it does and such successor agent notifies
the parties hereto that it accepts such appointment, (a) each reference
herein to "the Agent" shall thereafter be construed as a reference to the
successor agent so appointed and (b) the successor agent so appointed and the
parties hereto other than the retiring Agent shall thereafter have such
rights and obligations INTER SE as they would have if the successor agent so
appointed had been named herein as the Agent.
(K) If any Reference Bank shall be prepaid under this Agreement or shall
cease to have any Commitment or after the first drawdown cease to have any
principal or interest owing to it hereunder, the Agent may in consultation
with the Borrower and the Majority Banks appoint a substitute Reference Bank.
(L) The Agent shall be released from the restrictions set out in paragraph
181 of the German Civil Code (BURGERLICHES GESETZBUCH).
25. CERTIFICATES
A Bank which makes a demand in respect of (i) the amount being necessary to
compensate such Bank under Article 7 (D) or (ii) its cost of funding as
referred to in Article 8 (C) or (iii) the amount necessary to compensate it
for any damages or losses referred to in Article 14 (D) or (iv) the amount
for the time being required to compensate it for any cost as mentioned in
Article 16 (A) or (v) to indemnify it against any such claim or liability as
is mentioned in Article 16 (B) shall deliver a certificate which sets out in
reasonable detail the calculation of such amount and the factual basis for
such calculation. Any such certificate shall constitute PRIMA FACIE evidence
for the purposes hereof save for manifest error.
<PAGE>
26. NO WAIVER
No failure to exercise and no delay in exercising on the part of the Agent or
any Bank any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or future exercise thereof, or the exercise of
any other right, power or privilege. The rights and remedies herein provided
are cumulative to any rights or remedies provided by law.
27. PARTIAL INVALIDITY
If at any time any provision of this Agreement is or becomes illegal, invalid
or unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions hereof
nor the legality, validity or enforceability of such provision under the law
of any other jurisdiction shall be affected or impaired thereby. Any
provision which is or becomes illegal, invalid or unenforceable shall be
deemed to be substituted by a provision which comes as close as possible to
purpose and spirit of the illegal, invalid or unenforceable provision.
28. AMENDMENTS AND WAIVERS
If authorised by the Majority Banks, the Agent may (except where any other
authority is required for the same by the provisions of this Agreement) grant
waivers or vary the terms of the provisions of this Agreement. Any such
waiver or variation so authorised and effected by the Agent shall be binding
on all the Banks and the Agent shall be under no liability whatsoever in
respect of any such waiver or variation, provided always that, except with
the prior consent of all the Banks, nothing in this Article 28 shall
authorise:
(1) any reduction in any rate at which interest or any fee is payable
under this Agreement;
(2) any extension of the date for, or alteration in the amount or currency
of, any payment of principal, interest, fees or any other amount
payable under this Agreement or any extension of the Final Maturity
Date;
(3) any increase in or decrease of (i) any Bank's Total Commitment and
(ii) the commitment of Deutsche Bank AG, Reutlingen Branch as set out
in the Sixth Schedule;
(4) any variation of a term of this Agreement which expressly provides for
the consent of all the Banks; and
<PAGE>
(5) any variation of Article 1 Definition of "Majority Banks" and
"EURIBOR", Article 2 (The Facilities), Article 15 (Set-off and
Redistribution of Payments), Article 17 (Guarantee), Article 20
(Financial Covenants), Article 29 (Change of Lending Office and
Assignments), or this Article 28;
provided that any such waiver or variation relating to Article 24 or
otherwise affecting the rights and/or obligations of the Agent shall also
require the consent of the Agent and provided further that any such variation
affecting the rights and/or obligations of an Obligor shall also require the
consent of such Obligor.
29. CHANGE OF LENDING OFFICE AND ASSIGNMENTS
(A) None of the Obligors may assign or transfer all or any of its rights,
benefits and obligations hereunder without the prior written consent of all
the Banks.
(B) Any Bank may at any time (i) change its Lending Office by notifying
such other office to the Agent or (ii) assign and transfer with the prior
consent of the Borrower (such consent not to be unreasonably withheld), any
of its rights or obligations under this Agreement to another bank or
financial institution provided (i) such assignment shall be made in minimum
amounts of DM 10 million (or following its introduction Euro 5 million) and
(ii) that no consent of the Borrower shall be required (a) if the transferee
is another Bank or an affiliate of the transferor or (b) following the
occurrence of an Event of Early Repayment.
(C) A Bank may neither assign or transfer any of its rights arising out of
an Advance separately from any corresponding share of its Revolving Credit
Facility Commitment under this Agreement (save for cases where such
assignment is made in order to avoid or mitigate any withholding tax on
account of which no payment would have to be made to such Bank pursuant to
Article 13 (A) (1)) nor assign or transfer any part of its Revolving Credit
Facility Commitment under this Agreement separately from its rights arising
out of its corresponding participation in any existing Advance(s).
A transfer and assignment may be effected only by the delivery to the Agent
of a duly completed and duly executed Transfer Certificate (subject to the
minimum transfer amount set out therein) in which event, on the transfer
date(s) specified in such Transfer Certificate:
(i) to the extent that in such Transfer Certificate the Bank party thereto
seeks to transfer its rights, benefits and obligations hereunder, each
of the Obligors and such Bank shall be
<PAGE>
released from further obligations towards one another hereunder and
their respective rights against one another shall be cancelled (such
rights, benefits and obligations being referred to in this paragraph (C)
as "DISCHARGED RIGHTS AND OBLIGATIONS");
(ii) each of the Obligors and the transferee party thereto shall assume
obligations towards one another and/or acquire rights against one
another which differ from such discharged rights and obligations only
insofar as such Obligor and such transferee have assumed and/or
acquired the same in place of such Obligor and such Bank; and
(iii) the Agent, the Arrangers, such transferee and the other Banks shall
acquire the same rights and benefits and assume the same obligations
between themselves as they would have acquired and assumed had such
transferee been an original party hereto as a Bank with the rights,
benefits and/or obligations acquired or assumed by it as a result of
such transfer
The Agent shall give notice of any such transfer and assignment to the
Borrower.
(D) If as a direct or, on the basis of information which is in the public
domain, foreseeable result of any change of Lending Office or any assignment
and transfer as referred to in paragraph (B) at the time of such change of
Lending Office or such assignment and transfer or immediately thereafter any
Obligor would be liable to make a payment pursuant to Article 13 (A) (1) or
Article 16 (A) or to pay an indemnification pursuant to Article 16 (B), then
the obligation to make such payment or to pay such indemnification shall not
arise, unless such change of Lending Office or transfer and assignment was
made pursuant to Article 16 (D).
(E) Each transferee shall pay to the Agent for its own account on the
transfer date(s) (as set out in the Transfer Certificate) a registration fee
of DM 2,000 (EURO 1,000 following the commencement date), payable under
pre-advice.
(F) A Bank may disclose information relating to the Obligors and any other
member of the Group or this Agreement and the Facility to its auditors,
legal, tax and other professional advisers upon their request but in each
case only where the same are advising on matters relating to the Facility or
performing their auditing functions; or to any actual or potential assignee
or transferee or any person with whom it may in accordance with paragraph (A)
enter into a transfer, assignment or other agreement in relation to this
Agreement.
<PAGE>
(G) Each Bank (and Deutsche Bank AG, Reutlingen Branch) (the "ASSIGNOR")
may assign and transfer its commitment under the Ancillary Facility to which
it is party provided that the assignee accepts any relevant obligation
assumed by the Assignor hereunder.
30. LANGUAGE
Each document, instrument, certificate, statement or notice referred to
herein or to be delivered hereunder shall, if not in the English language, be
accompanied by an English translation thereof (certified to be true and
correct by a duly authorized officer of the person making or delivering the
same), provided that the documents delivered pursuant to the Second Schedule
and (with the consent of the Agent) any other documents originating from a
public register may be delivered in their respective original language.
31. APPOINTMENT OF WGMH AS REPRESENTATIVE
The Obligors hereby appoint WGMH as their representative with respect to any
declaration or notice or negotiation to be made hereunder or in connection
herewith (including, but not limited to a Notice of Borrowing) and authorize
WGMH to sign/or dispatch or receive on its behalf all documents and notices
to be signed and/or dispatched by it under or in connection with this
Agreement.
32. NOTICES
(A) Each communication to be made hereunder shall be made in writing but,
unless otherwise stated, may be made by telefax or letter save that any
Notice of Borrowing shall, if made by telefax, be confirmed by letter
(provided that failure to provide such letter shall not invalidate the
original communication) and save that the documents listed in the Second
Schedule shall be received by the Agent in the original version.
(B) Any communication or document to be made or delivered by one person to
another pursuant to this Agreement shall (unless that other person has by
fifteen days' written notice to the Agent specified another address) be made
or delivered to that other person at the address identified with its
signature below (or, in the case of a transferee, at the end of the Transfer
Certificate to which it is a party as transferee) and shall be deemed to have
been made or delivered when despatched (in the case of any communication made
by letter) when left at that address or (in the case of any communication by
telefax) when actually received, provided that
<PAGE>
any communication or document to be made or delivered to the Agent shall be
effective only when received by the Agent and then only if the same is
expressly marked for the attention of the department identified with the
Agent's signature below (or such other department as the Agent shall from
time to time specify for this purpose) and provided further that if the time
of receipt of any communication or document is not a business day in the
country of the addressee or is not within working hours, such communication
or document shall be deemed to have been received at the opening of business
on the next Business Day.
33. APPLICABLE LAW AND JURISDICTION
(A) This Agreement and all rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the Federal Republic
of Germany.
(B) For the benefit of the Agent, the Arrangers and each Bank, each of the
Obligors agrees that any legal action or proceedings arising out of or in
connection with this Agreement may be brought in the Regional Court
(LANDGERICHT) in Frankfurt am Main. The submission to such jurisdiction shall
not (and shall not be construed so as to) limit the right of the Agent and
the Banks or any of them to bring any legal action or proceedings with
respect to this Agreement in any other competent jurisdiction. The Obligors
hereby irrevocably authorize WGMH, Muhleweg 5, 72800 Eningen, Federal
Republic of Germany, as its agent for service of process relating to the
commencement of any proceedings or legal action out of or in respect to this
Agreement before the Regional Court (LANDGERICHT) in Frankfurt am Main.
Nothing herein contained shall affect the right of the Agent or the Banks or
any of them to serve process in any other manner permitted by law.
(C) Not withstanding the foregoing, for the benefit of the Agent, the
Arrangers and each Bank, the Obligors hereby submit to the non exclusive
jurisdiction of, agree that any legal action or proceeding arising out of
this Agreement may be brought in any United States Federal or State Court
sitting in the State of New York, and waive the defence of forum non
convenience on inconvenient forum and any all rights to trial by jury in any
legal proceeding (whether in New York or elsewhere) arising out of or
relating to any of the Finance Documents. The submission to such jurisdiction
and such waiver shall not (and shall not be construed so as to) limit the
right of the Agent, the Arrangers and the Banks any of them to bring any
legal action or proceedings with respect to this Agreement in other competent
court or jurisdiction.
<PAGE>
34. COUNTERPARTS
This Agreement shall be executed in any number of counterparts, each of which
shall constitute an original.
THE BORROWER
WAVETEK WANDEL & GOLTERMANN, INC.
11995 El Camino Real, # 301
San Diego, CA 92130
USA
Tel.: [001] 619 / 7932300
Fax: [001] 619 / 7932310
By: WAGNER EISEMANN
THE GUARANTOR
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
1030 Swabia Court
Research Triangle Park
North Carolina
USA
Tel.: [001] 919 / 941 5730
Fax: [001] 919 / 941 5751
By: WAGNER R. SCHMID
THE ARRANGERS
COMMERZBANK AKTIENGESELLSCHAFT
Kaiserplatz
60261 Frankfurt am Main
Tel.: [+49] 69 / 1362-4815
Fax: [+49] 69 / 1362-9556
By: BECKMANN SCHOPP
<PAGE>
DEUTSCHE BANK AG
Taunusanlage 12
D-60262 Frankfurt
Tel.: [+49] 69 / 910-33806
Fax: [+49] 69 / 910-38793
By: GAAB MURB
THE AGENT
COMMERZBANK INTERNATIONAL S.A.
11 Rue Notre Dame
L-2240 Luxembourg
Tel.: [+352] 477911-1
Fax: [+352] 477911-386
By: BECKMANN
THE BANKS
COMMERZBANK AKTIENGESELLSCHAFT, REUTLINGEN BRANCH
Unter den Linden 1
D-72762 Reutlingen
Tel.: [+49] 7121 / 304-0
Fax: [+49] 7121 / 304-182
By: SCHOPP BECKMANN
DEUTSCHE BANK LUXEMBOURG S.A.
2, boulevard Konrad Adenauer
L-1115 Luxembourg
Tel.: [+352] 42122-331 or -292
Fax: [+352] 42122-287
By: GAAB MURB
<PAGE>
BADEN-WURTTEMBERGISCHE BANK AG, REUTLINGEN BRANCH
Marktplatz 9
D-72764 Reutlingen
Tel.: [+49] 7121/ 3195-50
Fax: [+49] 7121 / 3195-93
By: K.-D. KOPKA ARNDT
LANDESGIROKASSE OFFENTLICHE BANK UND LANDESSPARKASSE
Kronenstrasse 20
D-70173 Stuttgart
Tel.: [+49] 711 / 129 2693
Fax: [+49] 711 / 129 3996
By: KOCH EISENMANN
ADDITIONAL LENDER
DEUTSCHE BANK AG, REUTLINGEN BRANCH
Kaiserpassage 1
D-72764 Reutlingen
Tel.: [+49] 7121 / 335 100
Fax: [+49] 7121 / 335 112
By: BEER T. HOSLE
For the purpose of the Protocol annexed to the Convention on Jurisdiction and
the Enforcement in Civil and Commercial Matters signed at Brussels on 27
September 1968 (as amended) we hereby expressly and specially confirm our
agreement with the provisions of Article 33 (B) hereof which provides for our
submission to the non- exclusive jurisdiction of the Regional Court in
Frankfurt am Main.
BECKMANN GAAB MURB
____________________________ ____________________________
COMMERZBANK INTERNATIONAL S.A. DEUTSCHE BANK LUXEMBOURG S.A.
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
SCHEDULE RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Income (loss) before provision for income taxes.............. $(3,159) $ 6,985
Interest expense............................................. 5,191 2,565
Interest portion of rental expense........................... 1,015 487
--------------- ---------------
Earnings..................................................... $ 3,047 $ 10,037
--------------- ---------------
--------------- ---------------
Interest expense............................................. $ 5,191 $ 2,565
Interest portion of rental expense........................... 1,015 487
--------------- ---------------
Fixed charges................................................ $ 6,206 $ 3,052
--------------- ---------------
--------------- ---------------
Ratio of earnings to fixed charges........................... 0.5x 3.3x
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 16,570
<SECURITIES> 0
<RECEIVABLES> 95,435
<ALLOWANCES> 4,368
<INVENTORY> 67,760
<CURRENT-ASSETS> 210,633
<PP&E> 166,778
<DEPRECIATION> 101,017
<TOTAL-ASSETS> 457,739
<CURRENT-LIABILITIES> 164,251
<BONDS> 199,003
0
0
<COMMON> 132
<OTHER-SE> 72,948
<TOTAL-LIABILITY-AND-EQUITY> 457,739
<SALES> 126,465
<TOTAL-REVENUES> 126,465
<CGS> 54,635
<TOTAL-COSTS> 124,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,191
<INCOME-PRETAX> (3,159)
<INCOME-TAX> (2,022)
<INCOME-CONTINUING> (1,137)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,137)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
