SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended JANUARY 2, 1998 Commission File No. 0-4466
COMPUTER PRODUCTS, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-1205269
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
7900 GLADES ROAD, SUITE 500, BOCA RATON, FL 33434-4105
- ----------------------------------------- -------------
(Address of principal executive offices) (ZIP CODE)
(561) 451-1000
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
COMMON STOCK PURCHASE RIGHTS
----------------------------
(Title of each class)
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 periods 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 13, 1998 was approximately $784 million.
As of March 13, 1998, 38,521,952 shares of the Registrant's $.01 par value
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's annual shareholders' report for the year ended January
2, 1998 (the "Annual Report") are incorporated by reference into Parts I and II.
Portions of the Company's proxy statement for the annual meeting of shareholders
to be held May 6, 1998 are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
Computer Products, Inc. (the "Company") was incorporated under the laws of the
State of Florida in 1968. Unless the context indicates otherwise, as used herein
the term "Company" means Computer Products, Inc. and its consolidated
subsidiaries.
The Company has begun doing business under the name Artesyn Technologies.
Management will request shareholder approval at its next annual shareholders'
meeting in May 1998 to legally change the Company's corporate name to Artesyn
Technologies, Inc. Pending shareholder approval, the Company's legal name will
remain Computer Products, Inc. and trade under The Nasdaq National Market symbol
CPRD.
The Company designs, develops, manufactures and markets (1) power conversion
products for electronic equipment used in commercial and industrial applications
requiring a precise and constant voltage level for proper operation, (2) high
performance single-board computers, systems and subsystems for real-time
applications, and (3) provides repair services and logistics for a variety of
products primarily for a significant customer.
POWER CONVERSION
INDUSTRY OVERVIEW
The Company is one of the leading providers of power supplies, power converters
and distributed power systems to the communications industry. According to
independent industry sources, the Company ranks among the top ten worldwide
independent power supply manufacturers in sales volume.
Power supplies, power converters and distributed powers systems perform many
essential functions relating to the supply, regulation, and distribution of
electrical power within electronic equipment. Electronic systems require a
steady supply of electrical power at one or more voltage levels. AC-to-DC power
supplies convert alternating electric current (`AC") (the form in which
virtually all electric current is delivered by utility companies) from a primary
power source into the direct current ("DC") required to operate virtually all
solid state electronic equipment. DC-to-DC power supplies are used to convert a
particular direct current voltage into another (higher or lower) direct current
voltage that is required by the electronic device to which it is connected.
Power supplies can also be designed to perform diagnostic functions that prevent
electronic equipment from being damaged by such equipment's own malfunction, as
well as provide power through use of a short-term battery back-up system when
the electronic equipment's primary power source fails.
The dominant technology now used in power supplies is switching technology.
Before the development of switching power supplies, power supply technology was
fairly simple, and power supplies consisted of a transformer and some related
components to rectify and control power surges. As the complexity of electronic
equipment has increased, power supplies and their underlying technology have
become more advanced. Switching power supplies, such as those manufactured by
the Company, have hundreds of components, provide advanced diagnostic and power
management functions, can be designed to provide battery back-up power, and are
smaller and more efficient than older power supplies using simpler technology.
<PAGE>
SWITCHING POWER SUPPLIES
[GRAPHIC SHOWING FROM AC WALL POWER IN TO AC TO DC POWER SUPPLY TO A DISK
DRIVE OR MEMORY OR INTEGRATED CIRCUITS OR MOTORS OR MONITORS]
A further enhancement of AC/DC power supplies utilizing a newer more flexible
switching technology is emerging which the Company refers to as "distributed
power architecture" ("DPA"). Most electronic systems have a number of
subsystems, each of which may require a different operating voltage or level of
power. As a result, power supplies can be designed to have multiple outputs that
can provide varying voltage levels to all subsystems of an electronic system. In
such power supplies, power is "distributed" throughout the system so that in
addition to the system's main AC/DC power supply, DC/DC converters located on or
near the subsystem or component being powered change the DC voltage to the
specific level of DC voltage needed for that particular subsystem or component.
Distributed power permits greater flexibility to meet the power supply
requirements of electronic systems if components or subsystems are added or
upgraded.
DISTRIBUTED POWER ARCHITECTURE
[GRAPHIC SHOWING FROM INPUT TO AC TO DC
FRONT END TO OUTPUT TO VARIOUS SUB SYSTEMS]
MARKET OVERVIEW
The overall market for power supplies can be classified as follows:
Merchant/Captive. Merchant power supply manufacturers design and
manufacture power supplies for use by other third parties. Captive power supply
manufacturers design and manufacture power supplies for use within their own
products. Currently, the merchant segment of the market is approximately 55%.
According to independent industry sources, the merchant segment of the market is
projected to grow to 60% of the overall market in the year 2000 as Original
Equipment Manufacturers ("OEMs") demand product options and features and high
quality levels that make power supplies increasingly difficult to design and
manufacture in-house.
<PAGE>
Power Range. The power supply market is also segmented by power supply output
range, as follows:
<TABLE>
<CAPTION>
Typical Representative
Power Range Characteristics End Users Applications
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOW o Less than 150 Watts o PC Companies o Personal Computers
o Lower Technology o Consumer Electronics o Consumer Electronics
o Higher Volume o Desk Top Printers
o Lower Margin
MID o 150-750 Watts o Internetwork Companies o Routers, Hubs
o High Technology o Computer Companies o Workstations, Fault
o Moderate Volume o Medical Companies o Tolerant Computers
o Higher Margin o Blood Analyzers
HIGH o More than 750 Watts o Computer Companies o Main-frame Computers
o High Technology o Industrial Companies o Industrial Process Control
o Lower Volume o Internetworking Companies o High-end Routers/Switches
o Higher Margin
</TABLE>
Custom/Standard. Custom power supplies are designed and manufactured to
meet the form, fit, and functional requirements of an OEM's unique and specific
application. They are attractive to OEMs because they present maximum design
flexibility, provide the lowest cost, and allow the use of special features.
Standard, "off-the-shelf" power supplies are not design-specific but also do not
require substantial up-front engineering design costs. Once a product has
reached the stage of development where the OEM is confident that there will be a
market demand for the product, it is typically cost-effective to custom design a
unique power supply to meet that product's specific requirements. The OEM is
then able to utilize a moderately high-volume, customized solution at the lowest
cost per watt of power without paying for unnecessary features or capabilities.
The Company currently offers standard power products in over 1,000
configurations and accommodates a wide variety of customer applications. In
addition to its standard power supply products, the Company pursues the custom
power supply business because it capitalizes on its strengths in the areas of
sophisticated design, volume manufacturing, and customer service. It has been
the Company's experience that competition among qualified design and
manufacturing outsourcing companies providing these customized solutions is
intense. The competition causes downward pressure on gross margins, which is
only partially offset by lower selling and distribution costs.
The Company believes a number of important trends affecting its customers will
continue to shape the power supply marketplace. The applications markets that
are growing rapidly, such as workstations and data communications hardware
(e.g., hubs, routers and file servers), need mid-range power supplies. In
addition, OEMs face pressure from end-users to improve the price and performance
of products, bring new products to market quickly, provide more product options
and features, reduce product size, and meet increasingly complex safety and
regulatory agency standards. The Company believes that these pressures will
support the need for and encourage a modest migration from captive manufacturers
to merchant-provided, custom-designed power supply manufacturers such as the
Company particularly the mid-range segment of the market.
The Company's Power Conversion products are manufactured in Redwood Falls,
Minnesota; Broomfield, Colorado; Huntington Beach, California; Kindberg,
Austria; Tatabanya, Hungary; Chomutov, Czech Republic; Youghal, Ireland;
Oberhausen and Ensiedel, Germany; and in Hong Kong and Zhongshan, China. Power
Conversion activities are also carried on in Vienna, Austria; Etten-Leur,
Netherlands; Eden Prairie, Minnesota; Boston, Massachusetts and Fremont,
California.
COMPUTER SYSTEMS
The Company's Computer Systems division designs and manufactures high
performance board-level computers and communication controllers, integrating
them with real-time operating system and protocol software to form complete
subsystems for communications and other real-time applications.
The products are designed around and incorporate industry standards which permit
easy portability to a variety of applications. The technology relies on popular
and powerful microprocessors from sources such as Motorola, Intel and MIPS. The
primary product line combines both the worldwide industry standard VMEbus, which
defines physical board size and signal characteristics for the interconnection
of microprocessors. Application requirements for these products usually include
environments requiring rapid computer response time with high quality processing
capabilities, such as telecommunications or data communications.
The Company's Computer Systems' customers are primarily OEMs who use the
products for high-speed telecommunications applications. They are also used in
other areas such as medical instrumentation, airplane and weapons training
simulators, process control, industrial automation and traffic control systems.
Management believes that the market for VMEbus and real-time products will
expand as communications companies move from proprietary to open systems in
order to speed time to market and enhance upgrade capability.
The Company's Computer Systems' products are manufactured in Madison, Wisconsin.
SERVICES AND LOGISTICS
The Company's Services and Logistics division provides repair services for a
variety of products primarily manufactured by Hewlett-Packard Company. The
process to repair products that fail in the field involves the logistics of
arranging for return of products and, when they have been repaired, arranging
for delivery of products to their customers. This function has traditionally
been accomplished as part of the OEM's business. In the 1980s and 1990s, as
companies have focused their energies on core competencies, electronics
manufacturers have often outsourced many activities that they do not consider
essential to their business. In the case of the Company's Services and Logistics
operation, the Company was retained by Hewlett-Packard ("HP") in 1992 to manage
inbound and outbound logistics for some of HP's computer products and to repair
certain products. This business has grown rapidly since 1992 as HP has
transferred repairs of more products to the Company. Since 1992, the Company has
taken over repair of laserjet and deskjet printers, faxes, scanners and to
service other products. Through 1997, nearly all of the Company's Services and
Logistics' sales were to HP.
It is the Company's strategy to expand its Services and Logistics facilities
within the value chain of manufacturer distribution and repair. For this
purpose, the Company has established a Foreign Trade Zone ("FTZ"), which allows
reduced or delayed customs duties on products returned from foreign locations
for repair or on component parts shipped to the United States and assembled in
the FTZ. The FTZ, together with existing repair processes, allows the Company to
service both domestic and foreign products and, in combination with its process
design capability, to perform assembly or light manufacturing operations.
Another expansion of the value chain involves network services operations, which
plan to target configuration and installation of hardware, as well as provide
follow-on maintenance.
The Company's Services and Logistics division is located in Lincoln, California.
STRATEGY
The Company's objective is to be the supplier of choice to multinational OEM
customers who require sophisticated power supply solutions and who are likely to
have substantial volume requirements. To achieve this objective, the Company's
strategy is to differentiate itself from its competition through utilization of
new and advanced technology and design, fastest time-to-market and superior
product performance, quality, service and the lowest total cost of ownership.
The Company's primary target market for the last several years has been OEMs in
the communications, networking, computer and other electronic equipment
marketplaces. These OEMs manufacture hubs, routers, high availability file
servers and disk arrays which typically have complex technical needs, high
product reliability standards, short product development cycles and variable
production needs. The Company implements its strategy by combining the following
key elements:
Deliver High-Quality Products and Services
The Company believes that quality and responsiveness to the customer's
needs are of critical importance in its efforts to compete successfully. The
Company actively involves its employees in implementing techniques to measure,
monitor and improve performance and provides its employees with education and
training, including courses in statistical process control and related
techniques. Also, employees participate in the Company's planning sessions and
monitor adherence to their annual plans on a monthly basis. Through its
commitment to customer service and quality, the Company believes it is able to
provide superior value to its customers.
Provide Leading-Edge Engineering and Time-to-Market
The Company's target markets and customers are characterized by high growth
rates and continually evolving technology. As a result, its customers typically
require leading-edge technology designed in a relatively short period. The
Company has been working to enhance time-to-market through two initiatives:
concurrent engineering and design-ready platforms. Concurrent engineering
creates a process allowing all functional disciplines to take part in a
product's design from the very beginning. With design-ready platforms, the
Company can modify standard platforms to meet specific customers' needs for a
customized product, a fast fulfillment schedule and an affordable price. These
initiatives have contributed to a reduction of time-to-market from 72 weeks in
1994 to 24 weeks in 1997.
Develop and Expand Collaborative Relationships
Through the development and expansion of collaborative relationships with its
customers, the Company attempts to satisfy their needs by offering a full range
of value-added services, including design expertise, process development and
control, testing, inventory management, and rapid response to volume and design
changes. Some custom-designed projects are priced based on agreed-to gross
margins and allow for a sharing of the costs, risks and rewards of the
manufacturing process with the customer. These relationships also provide the
Company with increased knowledge regarding the customer's products. The Company
focuses its efforts on customers with which it believes the opportunity exists
to develop long-term business collaborations.
Offer Customers the Lowest Total Cost of Ownership
The Company strives to create value for its customers by offering them the
lowest total cost of ownership. Through manufacturing flexibility, reduced
time-to-market, world-wide procurement, design for manufacturability, and
unmatched customer service, the Company is able to complement each customer's
unique set of needs. The Company has built long-standing relationships with
industry leaders by providing a high level of consultation at the earliest
stages of design development. This hands-on approach enables the Company to
design all its products for manufacturability to maximinze quality and minimize
unit cost.
Leverage Advanced Manufacturing and Management Techniques
The Company's strategy focuses on the quality of all elements of the production
process, rather than merely the quality of the end product. To implement this
strategy, the Company uses sophisticated design and manufacturing techniques
(such as computer integrated design and manufacture, computer aided design, and
automated testing and assembly of printed circuit boards), combined with
advanced management techniques, including just-in-time manufacturing,
statistical process control and total quality commitment. These techniques allow
the Company to decrease production costs by improving the efficiency of
production processes.
Expand Complementary Businesses
The Company believes that providing a wide range of services affords the Company
a competitive advantage, as it further addresses customer needs and therefore
increases the likelihood that the Company will make continuing sales to its
customers. For example, at a customer's request, the Company may build
assemblies by adding cables, harnesses, frames, and other components to its
power supply unit. In addition, it offers power supply repair services for power
supplies manufactured by others.
PRODUCTS AND SERVICES
The following table sets forth sales of the Company's product lines (after
elimination of intercompany transactions) during the fiscal years indicated
($000s): <TABLE> <CAPTION>
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
Power Conversion $474,116 $395,322 $314,422
Computer Systems 26,771 18,953 19,026
Services and Logistics 26,349 21,456 11,521
------------- -------------- --------------
Total $527,236 $435,731 $344,969
============= ============== ==============
</TABLE>
For further information on sales, particularly with respect to foreign and
intercompany sales, refer to Note 18 of the Notes to Consolidated Financial
Statements in the Company's Annual Report, which is incorporated herein by
reference.
MARKETING AND DISTRIBUTION
The Company's distribution channels consist of distributors, independent
manufacturers' representatives, and a direct sales team. The Company's business
is not seasonal in nature. Power Conversion products are sold directly to OEMs,
private-label customers and distributors. In addition, the Company's sales and
engineering personnel supervise and provide technical assistance to independent
domestic sales representatives and to domestic and foreign distributors.
Computer Systems products are marketed domestically through independent sales
representative organizations. Substantially all foreign sales are made through
independent foreign distributors and foreign trading companies. Computer Systems
manages some sales on a direct basis.
Sales representatives are responsible for marketing the Company's repair
business in North America.
Although the Company seeks to diversify both its customer and market application
base, sales to one customer (Hewlett-Packard Company) amounted to $79.2 million
or 15% of 1997 sales.
The Company has derived a significant portion of its sales in recent years from
its international operations. Thus, the Company's future operations and
financial results could be significantly affected by international factors, such
as changes in foreign currency exchange rates or political instability. The
Company's operating strategy and pricing take into account changes in exchange
rates over time. However, the Company's future results of operations may be
significantly affected in the short term by fluctuations in foreign currency
exchange rates. See Note 17 of the Notes to Consolidated Financial Statements,
incorporated herein by reference, for additional information.
MATERIALS AND COMPONENTS
The manufacture of the Company's products requires a wide variety of materials
and components. The Company has multiple external sources for most of the
materials and components used in its production processes, and it manufactures
certain of these components. Although the Company has from time to time
experienced shortages of certain supplies, such shortages have not resulted in
any significant disruptions in production. The Company believes that there are
adequate alternative sources of supply to meet its requirements.
INTELLECTUAL PROPERTY MATTERS
The Company believes that its future success is primarily dependent upon the
technical competence and creative skills of its personnel, rather than upon any
patent or other proprietary rights. However, the Company has protected certain
of its products with patents where appropriate and has defended, and will
continue to defend, its rights under these patents.
BACKLOG
Sales are made pursuant to purchase orders rather than long-term contracts.
Backlog consists of purchase orders on hand generally having delivery dates
scheduled within the next six months. Order backlog from continuing operations
at January 2, 1998 was $102.1 million as compared to $100.1 million at January
3, 1997. Historically, the effects of changes and cancellations have not been
significant to the Company's operations. The Company expects to ship
substantially all of its January 2, 1998 backlog in the first six months of
fiscal 1998.
COMPETITION
The industries in which the Company competes are highly competitive and
characterized by increasing customer demands for product performance, shorter
manufacturing cycles and lower prices. These trends result in frequent
introductions of new products with added capabilities and features and
continuous improvements in the relative price/performance of the products.
Increased competition could result in price reductions, reduced profit margins
and loss of market share, each of which could adversely affect the Company's
results of operations and financial condition. The Company's principal
competitors include Lucent Technologies, Delta Product and Astec (BSR) plc.
Certain of the Company's major competitors have also been engaged in merger and
acquisition transactions. Such consolidations by competitors are likely to
create entities with increased market share, customer bases, technology and
marketing expertise, sales force size, and/or proprietary technology. These
developments may adversely affect the Company's ability to compete in such
markets.
RESEARCH AND DEVELOPMENT
The Company maintains active research and development departments which are
engaged in the modification and improvement of existing products and the
development of new products. Expenditures for research and development during
the 1997, 1996, and 1995 fiscal years were approximately $30.0 million, $23.6
million, and $21.1 million, respectively. As a percentage of total sales,
research and development accounted for 5.7%, 5.4%, and 6.1% in 1997, 1996 and
1995, respectively. Research and development spending has increased in each of
the past three years as the Company invested in new product platforms to service
the communications industry. The Company believes that the timely introduction
of new technology and products is an important component of its competitive
strategy.
EMPLOYEES
The Company presently employs approximately 4,200 full-time people. In addition,
the Company presently has approximately 2,700 temporary employees and
contractors primarily in its China facility. The Company's ability to conduct
its present and proposed activities would be impaired if the Company lost the
services of a significant number of its engineers and technicians and could not
readily replace them with comparable personnel. Although there is demand for
qualified technical personnel, the Company has not, to date, experienced
difficulty in attracting and retaining sufficient engineering and technical
personnel to meet its needs.
None of the Company's domestic employees is covered by collective bargaining
agreements. The Company considers its relations with its employees to be
satisfactory.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local laws and regulations regulating the
discharge of materials into the environment has not had, and, under present
conditions the Company does not anticipate that such laws and regulations will
have, a material effect on the results of operations, capital expenditures or
competitive position of the Company.
ACQUISITIONS AND DIVESTITURE; RECENT DEVELOPMENTS
ZYTEC -- On December 29, 1997, shareholders of the Company and Zytec
Corporation, a Minnesota corporation ("Zytec"), approved the merger of CPI
Acquisition Corp, a Minnesota corporation and a wholly-owned subsidiary of the
Company with and into Zytec, pursuant to an Agreement and Plan of Merger dated
September 2, 1997, with Zytec surviving as a wholly-owned subsidiary of the
Company (the "Merger"). As a result of the Merger, each outstanding share of
Zytec's common stock, no par value, was converted into the right to receive 1.33
shares of the Company's common stock, $0.01 par value. Approximately 14.1
million shares of the Company's stock were exchanged for Zytec shares. The
Merger constituted a tax-free reorganization and has been accounted for as a
pooling-of-interests.
THE ELBA GROUP - - On July 22, 1997, pursuant to an Agreement on the Sale,
Purchase and Transfer of Shares, the Company acquired for a purchase price of 52
million Deutsche marks (approximately $28.5 million) all the outstanding capital
stock of the following affiliated companies: Elba Electric GmbH, Elba Modul
GmbH, Elba Elektronik AG, Elba Electronics Ltd., Elba Electric-Produktion
s.r.o., Elba Electronique S.A.R.L., and KRP Power Source B.V. (collectively
referred to as the Elba Group). Such acquisition has been accounted for as a
purchase transaction.
The Elba Group is engaged in the design, manufacture and marketing of a wide
range of both AC to DC and DC to DC power conversion products in Europe. Elba's
fastest growing product segment is its medium power AC to DC converters (150-750
watts) sold to OEM communications customers under the Elba and KRP Power Source
labels. The Elba Group's customers include major multinational corporations such
as Ericsson, Kodak, Krone AG and Siemens among others.
RTP CORP. - - On July 5, 1997, the Company sold substantially all the assets of
its Industrial Automation Division, RTP Corp. ("RTP") to RT Acquisition Florida
Corp. The sales price, as subsequently adjusted on January 6, 1998, included
$3.0 million in cash, a subordinated unsecured promissory note due July 1998 in
the aggregate principal amount of approximately $1.1 million bearing interest at
the prime rate, and the assumption of certain of RTP's liabilities.
ITEM 2. PROPERTIES
The Company currently occupies approximately 1,180,000 square feet of office and
manufacturing space worldwide. Approximately 47% of the space utilized by the
Company is owned while the remainder is leased. Certain of the facilities owned
by the Company are subject to liens, which are described in Note 8 to the Notes
to Consolidated Financial Statements, incorporated herein by reference.
The Company maintains the following facilities:
<TABLE>
<CAPTION>
APPROXIMATE OWNED VS.
FACILITY PRIMARY ACTIVITY SQUARE FOOTAGE LEASED
-------- ---------------- -------------- ------
<S> <C> <C> <C>
Boca Raton, FL Corporate Headquarters 7,000 Leased
Eden Prairie, MN Engineering, Administration 28,000 Leased
Redwood Falls, MN Manufacturing 103,000 Owned
Redwood Falls, MN Manufacturing 87,000 Leased
Broomfield, CO Manufacturing 81,000 Leased
Vienna, Austria Engineering, Administration 17,200 Leased
Kindberg, Austria Manufacturing 64,000 Leased
Tatabanya, Hungary Magnetics Manufacturing 49,000 Owned
Lincoln, CA Repair, Logistics 210,000 Leased
Madison, WI Manufacturing 45,586 Owned
Fremont, CA Engineering, Administration 44,565 Leased
Boston, MA Engineering, Administration 40,000 Leased
Hong Kong Manufacturing 144,900 Owned
Youghal, Ireland Manufacturing 86,000 Owned
Huntington Beach, CA Manufacturing 45,315 Owned
Oberhausen, Germany Manufacturing 64,450 Owned
Ensiedel, Germany Manufacturing 29,300 Owned
Chomutov, Czech Republic Manufacturing 12,750 Owned
Etten-Leur, Netherlands Administration 19,550 Leased
</TABLE>
In addition to the above locations, the Company has leased sales offices located
in or near London and Chesterfield, England; Paris and Vaulx-Milieu, France;
Pfaffikon, Switzerland and Munich, Germany. The Company considers the facilities
described in this Item to be generally well-maintained, adequate for its current
needs and capable of supporting a reasonably higher level of demand for its
products.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 29, 1997, a special meeting of the stockholders of each of the
Company and Zytec was held whereby shareholders of the Company voted on the
following proposal:
Proposal to approve the issuance of shares of common stock, $.01 par
value per share of the Company, pursuant to an Agreement and Plan of
Merger, dated as of September 2, 1997, between the Company, CPI
Acquisition Corp. and Zytec (the "Merger Agreement");
while shareholders of Zytec voted on the following proposal:
Proposal for the approval and adoption of the Merger Agreement pursuant
to which CPI Acquisition Corp. would be merged with and into Zytec,
with Zytec surviving as a wholly-owned subsidiary of the Company.
The shareholders of the Company and Zytec voted to approve their
respective proposals by the following vote:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
Computer Products 17,271,652 60,232 38,719 0
Zytec Corporation 6,874,820 119,231 158,347 0
<PAGE>
<TABLE>
<CAPTION>
ITEM 4A. EXECUTIVE OFFICERS
<S> <C> <C>
Name Age Position(s) with the Company
- ---- --- ----------------------------
Joseph M. O'Donnell 51 Co-Chairman of the Board, President and Chief Executive Officer, Director
Richard J. Thompson 48 Vice President - Finance, Chief Financial Officer, and
Secretary
Hartmut Liebel 35 Corporate Treasurer
John M. Steel 53 Vice President
Robert J. Aebli 62 President - Communication Products
Louis R. DeBartelo 57 President - Power Conversion North America
Harvey Dewan 58 President, North America and Asia Manufacturing
Gary J. Duffy 45 Managing Director - Power Conversion Europe
Ervin F. Kamm, Jr. 58 President, Systems and Services Group
Thomas J. Kent 49 President, Services and Logistics
Joseph J. Matz 58 Managing Director - Zytec Austria
</TABLE>
Joseph M. O'Donnell was appointed as Chairman of the Board of Directors in
February 1997 and as Co-Chairman of the Board following the Merger in December
1997. Mr. O'Donnell has served as President and Chief Executive Officer of the
Company since July 1994. Mr. O'Donnell served as Managing Director of O'Donnell
Associates, a consulting firm, from March 1994 to June 1994 and from October
1992 to September 1993; as Chief Executive Officer of Savin Corporation, an
office products distributor, from October 1993 to February 1994; and as
President and Chief Executive Officer of Go/Dan Industries, a manufacturer of
automotive parts, from June 1990 to September 1992. He is a Director of Boca
Research, Inc., a manufacturer of data communications, multimedia and networking
products, and a Director of V-Band Corporation, a manufacturer of computer
systems.
Richard J. Thompson has served as Vice President - Finance, Chief Financial
Officer, and Secretary of the Company since June 1990. Prior to joining the
Company, Mr. Thompson served as Group Controller - Technical Services and
Controller - Pan Am/Asia Pacific at Control Data Corporation, a multi-national
computer company.
Hartmut Liebel was appointed in February 1998 to the position of Corporate
Treasurer. Prior to joining the Company, Mr. Liebel had been employed by W.R.
Grace & Co., a global specialty chemical supplier. Mr. Liebel served as
Assistant Treasurer from 1995 to 1997 and Director of Financial Risk Management
during 1993 and 1994.
John M. Steel was appointed in December 1997 to the position of Vice President -
Marketing and New Product Development and Director. Mr. Steel was a co-founder
of Zytec and had been an officer and a director of Zytec since 1984.
Robert J. Aebli was appointed in November 1993 to the position of President of
Communication Products. From 1991 to 1993 Mr. Aebli served as Vice President
Operations of Contraves, Inc., a manufacturer of testing and simulation systems.
Louis R. DeBartelo was appointed President of the Company's Power Conversion
North America Division in 1993. From 1992 to 1994 he served as President - Power
Conversion National Accounts Division and from 1990 to 1992 as President - Power
Conversion America.
Harvey Dewan was appointed President of North America and Asia Manufacturing in
December 1997. From February to December 1997, Mr. Dewan was Vice President of
Operations for the Company's Communication Products division. From 1969 to April
1996, Mr. Dewan held various positions with General Instrument Corporation, most
recently as Vice President of Quality and General Manager.
Gary J. Duffy has served as Managing Director of the Company's European Power
Conversion Division since 1987, having held various manufacturing and general
management positions since joining the Company in 1982.
Ervin F. Kamm, Jr. was appointed President of the Systems and Services Group in
December 1997. Mr. Kamm was previously President of Zytec's Power Conversion
division since 1997 and a director of Zytec since 1996. From 1994 to 1997, Mr.
Kamm served as President and Chief Executive Officer of Digi International,
Inc., a provider of data communications hardware and software. From 1988 to
1993, Mr. Kamm was President and Chief Executive Officer of Norstan, Inc., a
telecommunications company. Mr. Kamm is also a director of the Institute for
Advanced Technology and MicroMedics, Inc.
Thomas J. Kent was appointed President of the Services and Logistics division in
December 1997. Mr. Kent had been General Manager of Zytec's Services and
Logistics operations since 1994 and was named Vice President of Services and
Logistics as well as a director of Zytec in 1996. From 1990 to 1994, Mr. Kent
was employed by US Windpower, most recently as its Director of Customer and Site
Support.
Joseph J. Matz joined Zytec in November 1991 as Managing Director of its
Austrian division. From October 1990 to November 1991, he was Vice President
European Operations for Modular Computer Systems, a computer manufacturer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of Computer Products, Inc. is traded on the NASDAQ National
Stock Market under the symbol CPRD. High and low sales prices of such stock and
the information pertaining to the number of record holders on page 40 of the
Annual Report for the fiscal year ended January 2, 1998 is incorporated herein
by reference.
The Registrant has not paid cash dividends in the past and no change in such
policy is anticipated. Future dividends, if any, will be determined by the Board
of Directors in light of the circumstances then existing, including the
Company's earnings and financial requirements and general business conditions.
The Company's term loans and $20 million revolving credit facility contain
certain restrictive covenants that, among other things, require the Company to
maintain certain financial ratios and limit the purchase, redemption or
retirement of capital stock and other assets. To date, no funds have been drawn
on the revolving credit facility.
ITEM 6. SELECTED FINANCIAL DATA
The Consolidated Five-Year Financial History on page 13 of the Annual Report for
the fiscal year ended January 2, 1998 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Annual Report for the fiscal year ended January 2,
1998 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company (including Note 19,
Selected Consolidated Quarterly Data) and the independent certified public
accountants' report thereon contained in the 1997 Annual Report to Stockholders
are incorporated in this Item 8 by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
The information called for by that portion of Item 10 which relates to the
Directors of the Company, by Item 11 (Executive Compensation), Item 12 (Security
Ownership of Certain Beneficial Owners and Management) and Item 13 (Certain
Relationships and Related Transactions) is incorporated herein by reference from
the Company's definitive proxy statement for the Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission not later than 120 days
after the close of the fiscal year ended January 2, 1998. That portion of Item
10 which relates to Executive Officers of the Company appears as Item 4A of Part
I of this Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. FINANCIAL STATEMENTS
The following consolidated financial statements of Computer Products, Inc. and
subsidiaries included in the Company's Annual Report for the fiscal year ended
January 2, 1998 are incorporated herein by reference in Item 8:
Consolidated Statements of Operations -- Years Ended on the Friday
nearest December 31, 1997, 1996 and 1995
Consolidated Statements of Financial Condition -- as of the Friday
nearest December 31, 1997 and 1996
Consolidated Statements of Cash Flows -- Years Ended on the Friday
nearest December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -- Years Ended on the
Friday nearest December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
2. FINANCIAL STATEMENT SCHEDULE
The following information is filed as part of this Form 10-K and should be read
in conjunction with the financial statements contained in the 1997 Annual Report
to Stockholders.
Report of Independent Certified Public Accountants On Schedule
Report of Independent Accountants
Schedule for Computer Products Inc. and Subsidiaries:
Schedule II - Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted because they are either
not required or not applicable, or because the required information has been
included in the consolidated financial statements or notes thereto.
3. EXHIBITS
EXHIBIT # DESCRIPTION
2.1 Agreement and Plan of Merger by and between Zytec Corporation,
Computer Products Inc. and CPI Acquisition Corp. dated as of September
2, 1997 - incorporated by reference to Exhibit 2.1 of Registrant's
Registration Statement on Form S-4 filed on September 25, 1997.
2.2 Agreement on the Sale, Purchase and Transfer of Shares dated as of
July 22, 1997 - incorporated by reference to Exhibit 2 of Registrant's
Registration Statement on Form 8-K filed on August 6, 1997.
3.1 Articles of Incorporation of the Company, as amended, on May 15, 1989
- incorporated by reference to Exhibit 3.1 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1989.
3.2 By-laws of the Company, as amended, effective October 16, 1990
incorporated by reference to Exhibit 3.2 of Registrant's Registration
Statement on Form S-4, filed with the Commission on September 25,
1997, as amended.
4.1 Rights Agreement, dated as of November 9, 1988, by and between
Computer Products, Inc. and The Bank of New York, as amended
incorporated by reference to Exhibit 4.1 of Registrant's Current
Report on Form 8-K filed with the Commission on June 15, 1990.
10.1 Grant Agreement, dated June 19, 1981, as supplemented, by and among
the Industrial Development Authority of Ireland, Power Products Ltd.
and Computer Products, Inc. - incorporated by reference to Exhibit
10.2 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1982.
10.2 Indenture between Industrial Development Authority of Ireland and
Power Products Ltd. - incorporated by reference to Exhibit 10.3 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1982.
10.3 Lease for facilities of Boschert, Incorporated located in Milpitas,
California - incorporated by reference to Exhibit 10.14 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 3, 1986.
10.4 Letter Amendment to Lease for facilities of Boschert, Incorporated,
dated January 9, 1991 located in Milpitas, California - incorporated
by reference to Exhibit 10.8 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 28, 1990.
10.5 Sublease for facilities of Boschert, Incorporated located in Milpitas,
California - incorporated by reference to Exhibit 10.8 of Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1988.
10.6 Sublessee Estoppel Certificate to Sublease for facilities of Boschert,
Incorporated, dated February 4, 1991, located in Milpitas, California
- incorporated by reference to Exhibit 10.10 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1990.
10.7 1981 Stock Option Plan, as amended, effective as of October 16, 1990
incorporated by reference to Exhibit 10.10 of Registrant's Current
Report on Form 8-K, filed with the Commission on November 30, 1990.
10.8 Computer Products, Inc. 1986 Outside Directors' Stock Option Plan,
amended as of February 22, 1988 - incorporated by reference to Exhibit
10.12 of Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1988.
10.9 Asset Purchase Agreement, dated as of January 1, 1992, by and among
Computer Products, Inc., HC Holding Corp. and Heurikon Corporation
including exhibits and schedules thereto - incorporated by reference
to Exhibit 2 of Registrant's Current Report on Form 8-K, filed with
the Commission on January 20, 1992.
10.10Contract to Purchase between Computer Products, Inc. and Sauk
Enterprises dated December 23, 1991 for the premises located at 8310
Excelsior Drive, Madison, Wisconsin - incorporated by reference to
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 3, 1992.
10.11Lease for facilities of the executive offices located in Boca Raton,
Florida - incorporated by reference to Exhibit 10.23 of Registrant's
Annual Report on Form 10-K for the fiscal year ended December 30,
1988.
10.12Outside Directors' Retirement Plan, effective October 17, 1989
incorporated by reference to Exhibit 10.22 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 29, 1989.
10.131990 Performance Equity Plan - incorporated by reference to Exhibit
10.26 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 28, 1990.
10.141990 Outside Directors' Stock Option Plan - incorporated by reference
to Exhibit 10.27 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1990.
10.15Manufacturing and Development Agreement dated March 16, 1992, between
Computer Products, Inc. and Analogic Corporation - incorporated by
reference to Exhibit 10.30 of Registrant's Annual Report on Form 10-K
for the fiscal year ended January 3, 1992.
10.16License Agreement dated March 16, 1992, between Computer Products,
Inc. and Analogic Corporation - incorporated by reference to Exhibit
10.31 of Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1992.
10.17Asset Purchase Agreement between Computer Products, Inc., Tecnetics
Incorporated, Miller Acquisition Corporation and certain former
managers of Tecnetics Incorporated - incorporated by reference to
Exhibit 10.29 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended April 3, 1992.
10.18 Manufacturing License and Technical Assistance Agreement between
Heurikon Corporation and Lockheed Sanders, Inc. dated January 31,
1992 - incorporated by reference to Exhibit 10.34 of Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended July 3,
1992.
10.19 Star MVP Domestic Terms and Conditions of Sale Between Heurikon
Corporation and Lockhead Sanders, Inc. dated March 18, 1992
incorporated by reference to Exhibit 10.35 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 3, 1992.
10.20 DSP32C VME Board License Agreement between Heurikon Corporation and
American Telephone and Telegraph Company dated October 28, 1991
incorporated by reference to Exhibit 10.36 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 3, 1992.
10.21 Software License agreement between Heurikon Corporation and American
Telephone and Telegraph Company dated October 28, 1991 - incorporated
by reference to Exhibit 10.37 of Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended July 3, 1992.
10.22 Employment Agreement, dated June 29, 1994, by and between Computer
Products, Inc. and Joseph M. O'Donnell - incorporated by reference to
Exhibit 10.41 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended July 1, 1994.
10.23 (a) Credit Agreement, dated as of June 28, 1994, by and between
Heurikon Corporation and Firstar Bank Madison, N.A.; (b) Guaranty of
Payment, dated as of June 28, 1994, by and between Computer Products,
Inc. and Firstar Bank Madison, N.A. (c) Term Note, as of June 28,
1994, by and between Heurikon Corporation and Firstar Bank Madison,
N.A.; (d) Mortgage, Security Agreement, and Fixture Financing
Statement, dated as of June 28, 1994, by and between Heurikon
Corporation and Firstar Bank Madison, N.A. - incorporated by
reference to Exhibit 10.42 of Registrant's Quarterly Report on Form
10-Q for the quarterly period ended July 1, 1994.
10.24 Grant Agreement, dated October 26, 1994, by and among the Industrial
Development Authority of Ireland, Power Products Ltd. and Computer
Products, Inc. - incorporated by reference to Exhibit 10.43 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 30, 1994.
10.25 1996 Employee Stock Purchase Plan - incorporated by reference to
Exhibit 10.45 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1995.
10.26 1990 Performance Equity Plan as amended - incorporated by reference
to Exhibit 10.46 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1995.
10.27 1990 Outside Directors Stock Option Plan, restated as of January 25,
1996 - incorporated by reference to Exhibit 10.47 of Registrant's
Annual Report on Form 10-K for the fiscal year ended December 29,
1995.
10.28 1996 Executive Incentive Plan - incorporated by reference to Exhibit
10.48 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 1995.
10.29 Executive Stock Ownership plan - incorporated by reference to Exhibit
10.49 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 1995.
10.30 Agreement and Plan of Merger, dated August 23, 1996, by and among
Computer Products, Inc., JPS Acquisition Corp, Jeta Power Systems
Inc. and Jagdish C. Chopra - incorporated by reference to Exhibit
10.50 of Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 27, 1996.
10.31 Asset Purchase Agreement among RT Acquisition Florida Corp., RTP
Corp. and Computer Products Inc. dated as of July 5, 1997
incorporated by reference to Exhibit 10.33 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 4, 1997.
10.32 Amendment to Installment or Single Payment Note by and between
Firstar Bank Madison, N.A., Heurikon Corporation and Computer
Products Inc. dated as of May 23, 1997- incorporated by reference to
Exhibit 10.34 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended July 4, 1997.
10.33 Agreement by and between Oates Business Park and the Company dated
May 1, 1995 regarding the leasing of certain premises and real
property located in Lincoln, California - Incorporated by reference
to Exhibit 10.26 to Form 10-K of Zytec Corporation for the year ended
December 31, 1995 (File No. 0-22428).
10.34 Agreement and Addendum by and between Buzz Oates Enterprise and the
Company dated September 15, 1995, as amended December 8, 1995, and as
second amended March 8, 1996, and as third amended May 14, 1996, and
as fourth amended November 8, 1996, regarding the leasing of certain
premises and real property located in Lincoln, California
Incorporated by reference to Exhibit 10.19 to Form 10-K of Zytec
Corporation for the year ended December 31, 1996.
10.35 Agreement by and between Superior Investments I, Inc. and the Company
dated January 22, 1996 regarding the leasing of certain premises and
real property located in Broomfield, Colorado - Incorporated by
reference to Exhibit 10.27 to Form 10-K of Zytec Corporation for the
year ended December 31, 1995. (File No. 0-22428).
10.36 Rental Agreement by and between Schrack Elektronik Aktiengesellschaft
and IMMORENT-Weiko Grundverwertungsge- sellschaft m.b.H. dated March
14, 1985 (English translation) regarding the leasing of certain real
property located in Kindberg, Austria - Incorporated by reference to
Exhibit 10.70 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.37 Real Estate Lease Agreement by and between IMMORENT - Weiko
Grundverwertungsge-sellschaft m.b.H. and Schrack Elektronik
Aktiengesellschaft dated December 16, 1984 Aktiengesellschaft dated
December 16, 1984 (English translation) regarding the leasing of
certain real property located in Kindberg, Austria - Incorporated by
reference to Exhibit 10.71 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.38 Lease (Rental) Agreement by and between Schrack Telecom AG and
Schrack Power Supply Gesellschaft m.b.H. dated February 19, 1991
(English translation) regarding the leasing of certain property
located in Kindberg, Austria - Incorporated by reference to Exhibit
10.72 to Zytec Corporation's Registration Statement on Form S-1 (File
No. 33-68822).
10.39 Sublease (Subrental) Agreement by and between Schrack Power Supply
Gesellschaft m.b.H. and Schrack Power Supply Gesellschaft m.b.H.
dated February 14, 1991 (English translation) regarding the leasing
of certain property located in Kindberg, Austria - Incorporated by
reference to Exhibit 10.73 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.40 Sublease (Subrental) Agreement by and between Schrack Power Supply
Gesellschaft m.b.H. and Schrack Telecom AG dated February 14, 1991
(English translation) regarding the leasing of certain property
located in Kindberg, Austria - Incorporated by reference to Exhibit
10.74 to Zytec Corporation's Registration Statement on Form S-1 (File
No. 33-68822).
10.41 Third Addendum to Lease Agreement between Zytec Corporation and
Superior Investments I, Inc. dated May 23, 1997 - Incorporated by
reference to Exhibit 10.2 to Form 10-Q of Zytec Corporation for the
quarter ended June 29, 1997.
10.42 Fourth Addendum to Lease Agreement between Zytec Corporation and
Superior Investments I, Inc. dated June 27, 1997- Incorporated by
reference to Exhibit 10.3 to Form 10-Q of Zytec Corporation for the
quarter ended June 29, 1997.
10.43 Loan agreement between Herbert Elektronische Gerate GmbH & Co. KG and
First Union National Bank, London Branch dated as of July 15, 1997.
10.44 Loan agreement between Computer Products, Inc. and First Union
National Bank, London Branch dated as of July 15, 1997.
10.45 Amended and restated loan agreement between Computer Products, Inc.,
First Union National Bank and First Union National Bank, London
Branch dated as of July 15, 1997.
13 Annual Report of Computer Products, Inc. for the fiscal year ended
January 2, 1998.
21 List of subsidiaries of Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
27 Financial data schedule
(b) Reports on Form 8-K
During the thirteen-week period ended January 2, 1998, the Company filed the
following reports on Form 8-K:
On October 30, 1997, the Company filed a Current Report on Form 8-K to file
restated audited historical financial statements pursuant to its discontinued
operations plan for RTP Corp. adopted during 1997.
On January 13, 1998, the Company filed a Current Report on Form 8-K announcing
that on December 29, 1997 it completed its merger transaction with Zytec
Corporation.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of
Computer Products, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Computer Products, Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 23, 1998. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, based on our audits and the
report of other auditors, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 23, 1998.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors of
Computer Products, Inc.:
We have audited the consolidated balance sheet of Zytec Corporation as of
December 31, 1996, and the related consolidated statements of operations, cash
flows and stockholders' equity for each of the two years in the period ended
December 31, 1996 (not shown separately in Computer Products, Inc. Annual Report
on Form 10-K for the year ended January 2, 1998). In connection with our audits
of such financial statements, we have also audited the related financial
statement schedule II, valuation and qualifying accounts for each of the two
years in the period ended December 31, 1996 (not shown separately in Computer
Products, Inc. Annual Report on Form 10-K for the year ended, January 2, 1998).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Zytec Corporation
as of December 31, 1996, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
February 18, 1997
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended on the Friday Nearest December 31 ($000s)
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------- ------------------------ ----------------------- -----------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------- ----------- ------------------------ ----------------------- -----------
-----------------------
Additions
----------- ------------ ---------- ---------------------- ----------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs & Other ----------- ---------- End of
Description of Period Expenses Accounts Description Amount Period
- ---------------------------------------------------------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C>
Fiscal Year 1997:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,312 $ 426 $ - (1) $ 2 $ 1,736
Inventory 7,076 4,963 (3) 941 11,098
Deferred tax asset valuation allowance 8,926 (2,332) (2) 1,743 4,851
Fiscal Year 1996:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,223 $ 89 (1) $ - $ 1,312
Inventory 6,728 1,990 (3) 1,642 7,076
Deferred tax asset valuation allowance 9,890 982 (2) 1,946 8,926
Other 292 (1) 292 -
Fiscal Year 1995:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,114 $ 183 (3) $ 74 $ 1,223
Inventory 4,013 4,422 (3) 1,707 6,728
Deferred tax asset valuation allowance 10,453 74 (2) 637 9,890
Other 292 292
</TABLE>
(1) This amount relates to recoveries.
(2) The reduction relates to utilization of tax loss carryforwards.
(3) The reduction relates to charge-offs.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMPUTER PRODUCTS, INC.
-----------------------
(Registrant)
Dated: March 27, 1998 By: Joseph M. O'Donnell
-------------------
Joseph M. O'Donnell
Co-Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Joseph M. O'Donnell Co-Chairman of the Board, 03/27/98
- ------------------- President and Chief Executive
Joseph M. O'Donnell Officer, Director
Ronald D. Schmidt Co-Chairman of the Board 03/27/98
- -------------------
Ronald D. Schmidt
Richard J. Thompson Vice President-Finance, 03/27/98
- ------------------- Chief Financial Officer,
Richard J. Thompson and Secretary
Edward S. Croft, III Director 03/27/98
- --------------------
Edward S. Croft, III
Dr. Fred C. Lee Director 03/27/98
- ---------------
Dr. Fred C. Lee
Lawrence J. Matthews Director 03/27/98
- --------------------
Lawrence J. Matthews
Stephen A. Ollendorff Director 03/27/98
- ---------------------
Stephen A. Ollendorff
Phillip A. O'Reilly Director 03/27/98
- -------------------
Phillip A. O'Reilly
Bert Sager Director 03/27/98
- ----------
Bert Sager
A. Eugene Sapp, Jr. Director 03/27/98
- -------------------
A. Eugene Sapp, Jr.
Lewis Solomon Director 03/27/98
- -------------
Lewis Solomon
John M. Steel Director 03/27/98
- -------------
John M. Steel
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
10.43 Loan agreement between Herbert Elektronische Gerate GmbH & Co. KG
and First Union National Bank, London Branch dated as of July 15,
1997.
10.44 Loan agreement between Computer Products, Inc. and First Union
National Bank, London Branch dated as of July 15, 1997.
10.45 Amended and restated loan agreement between Computer Products, Inc.,
First Union National Bank and First Union National Bank, London
Branch dated as of July 15, 1997.
13 Annual Report of Computer Products, Inc. for the fiscal year ended
January 2, 1998
21 List of subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
Exhibit No. 10.43
LOAN AGREEMENT
BETWEEN
HERBERT ELEKTRONISCHE GERATE GMBH & CO. KG
AND
FIRST UNION NATIONAL BANK, LONDON BRANCH
DATED AS OF JULY 15, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................1
ARTICLE II CREDIT FACILITY ..................................3
Section 2.1 The Credit Facility........................3
Section 2.2 Note.......................................4
Section 2.3 Option to Elect Interest Periods on the
Loans......................................4
Section 2.4 Interest Rates.............................5
Section 2.5 Mandatory Prepayments......................9
Section 2.6 Fees......................................10
Section 2.7 Business Days.............................10
Section 2.8 Guarantees................................10
Section 2.9 Mode of Payment...........................10
Section 2.10Prepayment................................10
Section 2.11Use of Proceeds...........................11
Section 2.12Payment...................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES..................12
Section 3.1 Organization, Powers, Etc.................12
Section 3.2 Authorization of Loan, Etc................13
Section 3.3 Litigation, Administrative and
Regulatory Proceedings....................13
Section 3.4 Payment of Taxes and Other Charges........14
Section 3.5 Federal Reserve Regulations...............14
Section 3.6 Subsidiaries..............................14
Section 3.7 Consents, Etc.............................15
Section 3.8 Properties................................15
Section 3.9 Ownership.................................15
Section 3.10 Intentionally Left Blank..................15
Section 3.11 Agreements...............................15
Section 3.12 Enforceability of the Loan Documents.....16
Section 3.13 Guaranty.................................16
Section 3.14 Relationship of the Borrower and
Subsidiaries.............................16
Section 3.15 Public Utility Holding Company Act.......17
Section 3.16 Survival of Representations and
Warranties...............................17
ARTICLE IV CONDITIONS OF LENDING............................17
Section 4.1 Representations and Warranties............17
Section 4.2 No Default................................17
Section 4.3 Supporting Documents and Other
Conditions................................17
Section 4.4 Loan Fees.................................18
Section 4.5 Closing...................................19
Section 4.6 Approval of Counsel for Bank..............19
Section 4.7 Conditions Precedent to the Advance.......19
ARTICLE V AFFIRMATIVE COVENANTS.............................20
Section 5.1 Notice....................................20
Section 5.2 Accounts and Reports......................21
Section 5.3 Maintain Insurance........................22
Section 5.4 Future Taxes..............................23
Section 5.5 Legal Existence, Properties, Stock
Ownership and Solvency....................23
Section 5.6 Warranties and Conditions.................23
Section 5.7 Further Agreements........................23
Section 5.8 Environmental Matters.....................24
Section 5.9 Guarantors................................24
ARTICLE VI NEGATIVE COVENANTS...............................24
ARTICLE VII EVENTS OF DEFAULT...............................25
Section 7.1 Events of Default........................25
ARTICLE VIII MISCELLANEOUS..................................28
Section 8.1 Cost of Loan..............................28
Section 8.2 Survival of Representations...............28
Section 8.3 Termination of Loan.......................28
Section 8.4 Applicable Law............................28
Section 8.5 Modification..............................29
Section 8.6 No Waiver of Rights by Bank...............29
Section 8.7 Interest..................................29
Section 8.8 Severability..............................30
Section 8.9 Successors and Assigns....................30
Section 8.10 Notices..................................30
Section 8.11 Incorporation of Terms...................32
Section 8.12 Counterparts.............................32
ARTICLE IX INDEMNIFICATION..................................32
Section 9.1 Net Payments..............................32
ARTICLE X WAIVER OF JURY TRIAL AND VENUE....................33
Section 10.1 Arbitration.............................33
Section 10.2 Preservation and Limitation of
Remedies................................34
Section 10.3 Waiver of Plea of Jurisdiction
or Venue...............................35
Schedules
Schedule 2.8 List of Guarantors
Schedule 3.1 Jurisdictions in which Transacting Business
Schedule 3.8 Property Leased from Others
Schedule 3.9 Capital Stock Issued by each Subsidiary
Schedule 6.3 Permitted Encumbrances
Exhibits
Exhibit A Promissory Note
Exhibit B Unconditional Guaranty
Exhibit C Indemnification Agreement
Exhibit D Advance Request
<PAGE>
LOAN AGREEMENT
This Loan Agreement, (the "Agreement") is made and entered into at with an
effective date of July 15, 1997, by and between First Union National Bank,
London Branch, located at One Bishopsgate, London EC2N 3AB England (variously,
the "Bank" or the "Lender"), and Herbert Elektronische Gerate GmbH & Co. KG., a
German partnership (the "Borrower"), having a place of business c/o Wessing
Berenberg-Gossler Zimmermann Lange, Frankfurt am Main, Germany.
R E C I T A L S
WHEREAS, the Borrower has requested that the Bank extend certain
acquisition financing to the Borrower and the Bank did so in accordance with the
terms and conditions set forth in that certain Loan Agreement dated as of July
15, 1997; and
WHEREAS, the parties have determined that certain corrections were
required, and desire to enter into this Agreement to reflect those corrections
and their agreement, but with an effective date of July 15, 1997.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"Advance" shall mean the funding of the entire amount of the Loan.
"Advance Request" shall mean the written request for the Advance as
identified in Section 2.4 hereof and shall among other things (i) specify the
date of the requested Advance, which shall be a Business Day; and (ii) specify
the initial Interest Period.
"Business Day" shall mean a weekday other than a day on which banks
are required or authorized to close in Jacksonville, Florida, and, London,
England and a money market city in the Federal Republic of Germany.
"Closing" shall have the meaning described in Section 4.1 hereof.
"CPI Loan Agreement" shall have the meaning specified in Article VI
hereof.
"Credit Facility" shall mean the loan described in Section 2.1
hereof.
"Credit Facility Maturity" or "Maturity" shall mean July 1, 2004 or
such earlier time, if any, at which the Loan shall become due.
"Credit Facility Note" or "Note" shall mean the note evidencing the
Credit Facility .
"Control" shall have the meaning set forth in Section 7.1 hereof.
"Default" or "Event of Default" shall have the meaning set forth in
Section 7.1 hereof.
"Default Rate" shall have the meaning set forth in Section 7.1
hereof.
"Direct Subsidiary" shall mean a Subsidiary in which the shares are
owned of record by the Borrower.
"DM" shall mean Deutschemarks issued by the Federal Republic of
Germany.
"Dollar" shall mean United States Dollars.
"Equivalent Amount" shall mean, in relation to the Advance, the
amount of Dollars converted from the relevant amount of Optional Currency at the
Bank's spot buying rates (based on the market rates then prevailing) for the
exchange of Dollars and Optional Currency on or about 11:00 a.m. (London,
England time) on the second Business Day immediately preceding the date on which
such calculation is made.
"Guaranty" shall mean the guaranty described in Section 2.8
hereof.
"Indebtedness" shall have the meaning given to such term in Section
6.5 hereof.
"Indirect Subsidiary" shall mean Subsidiary shares of which are
owned of record directly by a Subsidiary, and indirectly by the Borrower.
"Interest Period" shall have the meaning given to such term in
Section 2.4(a)(i) hereof.
"LIBOR-Based Rate" shall have the meaning given to such term in
Section 2.4 hereof.
"LIBOR Loan" shall have the meaning set forth in
Section 2.4(a)(i) hereof.
"Loan" or "Loans" refers to amounts outstanding under the Credit
Facility.
"LIBOR Reserve Percentage" shall mean the percentage which is in
effect from time to time under Regulation D of the Board of Governors of the
Federal Reserve System, as such regulation may be amended from time to time, as
the maximum reserve requirement applicable with respect to Eurocurrency
Liabilities (as that term is defined in Regulation D), whether or not any Lender
has any Eurocurrency Liabilities subject to such reserve requirement at that
time. The LIBOR-Based Rate for any Advance shall be adjusted as of the effective
date of any change in the LIBOR Reserve Percentage.
"Mandatory Prepayment" shall have the meaning set forth in
Section 6.1(e) hereof.
"Net Sale Price" shall have the meaning set forth in Section 6.1(e)
hereof.
"Optional Currency" shall mean Deutschemarks issued by the Federal
Republic of Germany, but excluding:
(a) any currency for which central bank or other governmental
authorization in the country of the currency is required to permit its use by
the Bank for lending under this Agreement (unless the authorization has been
obtained and is full force and effect at the relevant time); and
(b) any currency, the use of which is restricted or prohibited
by any request, directive regulation or guideline of any governmental body,
agency, department or regulatory or other authority (whether or not having the
force of law) in accordance with which any Bank is accustomed to act. As of the
date hereof, the above limitations do not apply to the above specifically
enumerated currency.
"Permitted Encumbrances" shall have the meaning set forth in
Section 6.3 hereof.
"Solvent" shall mean, as to the entity, or entities for which a
determination is being made, that: (i) its or their assets exceed its or their
liabilities (with the calculation of liabilities excluding debt among the
Borrower and its Subsidiaries or between the Subsidiaries); (ii) that it or they
will have sufficient capital to engage in its or their business on an on-going
basis; and (iii) that it or they have the ability to pay its obligations as they
mature.
"Subsidiary" shall have the meaning set forth in Section 3.6
hereof.
ARTICLE II
CREDIT FACILITY
2.1 THE CREDIT FACILITY.
(a) Credit Facility. Subject to the terms and conditions hereof, the
Bank agrees to extend to the Borrower the Credit Facility and make a loan
thereunder in one Advance in the aggregate amount of DM 30,400,000. The
principal amount of borrowings under the Credit Facility shall be repaid as
follows: (i) principal payments of DM 1,520,000.00 shall be due quarterly on
January 1, April 1, July 1 and October 1 of each year beginning July 1, 1999;
and (ii) the remaining outstanding principal balance together with all accrued
interest of borrowings under Credit Facility, if not paid earlier, shall be due
on July 1, 2004 ("Credit Facility Maturity").
(b) Credit Facility. The amount outstanding under the Credit
Facility is sometimes referred to herein as the "Loan" or "Loans". The
outstanding principal amounts of the Loans together with all accrued and unpaid
interest thereon, any amounts for which the Borrower may be directly or
indirectly liable to the Bank, all other amounts owed to the Bank by the
Borrower hereunder or under any instrument executed in connection herewith, plus
all amounts expended by the Bank or for which the Bank may have incurred direct
or contingent liability in connection with enforcement of this Agreement, as a
result of the Borrower's or any Subsidiary's breach of any agreement or for
which the Borrower or any Subsidiary may otherwise be liable under any of the
Loan Documents (as defined herein), including but not limited to all costs of
the Loans as provided in Section 8.1 shall be referred to sometimes hereafter as
the "Obligation."
2.2 NOTE. The obligation of the Borrower to repay the indebtedness
outstanding under the Credit Facility shall be further evidenced by a promissory
note in the form attached hereto as Exhibit A (the "Credit Facility Note"),
which shall be dated as of the date hereof and shall be executed and delivered
by the Borrower to the Bank simultaneously herewith. The Credit Facility Note
shall be deemed to reflect the aggregate unpaid principal amount of all
indebtedness outstanding under the Credit Facility whether or not the face
amount of such note is in excess of the amount actually outstanding from time to
time. The Credit Facility Note is sometimes referred to herein as the "Note".
2.3 OPTION TO ELECT INTEREST PERIODS ON THE LOANS. Subject to the terms
hereof, interest on the Loan shall accrue, at the LIBOR-Based Rate as such term
is defined herein and for an Interest Period as selected by Borrower. In the
event the Borrower has not selected an Interest Period initially or on a Reset
Date, or in the event the amount of the Credit Facility provides the notional
amount for swap agreement between the Bank and the Borrower, interest shall
accrue thereon at the LIBOR-Based Rate with an Interest Period of one month,
with each Interest Period beginning on the first day of a month, except that the
initial Interest Period shall begin on the date hereof and end on the last day
of July, 1997.
2.4 INTEREST RATES.
(a) LIBOR-Based Rate.
(i) Interest Payable. Interest accrues on the Loan at a
LIBOR-Based Rate (a "LIBOR Loan") and shall be payable (A) on the last day of
the applicable Interest Period (as defined below); (B) upon Maturity; (C) upon
acceleration of repayment of the Loan; (D) if the LIBOR Interest Period (as
defined herein) is six months, on the ninetieth (90th) day of that Interest
Period, as well as on the last day of the Interest Period; or (E) if the Loan is
subject to an interest rate swap agreement, on the dates payments are
contemplated under the interest rate swap agreement to which the Loan is
subject.
LIBOR shall mean the rate per annum for deposits of the Optional Currency
in question offered to the Bank in the London Interbank market two (2) Business
Days prior to the first day of such Interest Period for deposits of the Optional
Currency in question for a period of time comparable to the Interest Period for,
and in an amount comparable to the principal amount of, the Advance sought by
the Borrower. This determination of LIBOR is referred to herein as the "LIBOR
RATE."
(ii) Definitions. For purposes hereof, the following terms
shall have the meanings specified.
"LIBOR-Based Rate" shall mean the LIBOR Rate plus: .75%
"London Banking Day" means any Business Day on which
commercial banks, are in fact open for international business, including
dealings in dollar deposits on the London interbank market in London, England.
"Reset Date" means a date on which a Loan is made and each
date on which an Interest Period commences.
"Reference Banks" means four major banks in the London
interbank market, designated by the Bank.
"Interest Period" shall mean a period of one month, two
months, three months or six months, as chosen by Borrower as provided herein;
provided that:
(1) any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the next succeeding
London Banking Day unless such London Banking Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding London
Banking Day;
(2) any Interest Period which begins on the last
London Banking Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Interest Period) shall end on the last London Banking Day of a calendar month;
(3) Borrower may not select an Interest Period for
a Loan if the scheduled last day in the selected Interest Period would extend
beyond the stated maturity for that Loan; and
(4) The Borrower may not have more than three (3)
LIBOR Loans with different Interest Periods under the Credit Facility at any one
time.
(b) Interest Billing Procedures. Interest will be billed in
accordance with the customary practices of the Bank or as otherwise agreed
between Bank and the Borrower; provided, however, the failure of the Bank to
send a bill shall not excuse the duty of the Borrower to ascertain and pay the
correct amount on the date it is due. The Borrower's duty to pay interest
payments hereunder shall be absolute and not contingent.
(c) Interest Determined on 360 Day Year. All interest payable
hereunder shall be at a per annum rate computed by dividing the applicable per
annum interest rate by three hundred sixty (360) and multiplying the result by
the actual number of days elapsed; provided, however, that if as to the Optional
Currency the convention is to compute interest on an Advance thereunder on the
basis of a 365 day year, the Bank will compute such interest on the basis of a
365 day year.
(d) Selection of Applicable Interest Period. Subject to the
provisions hereof, Borrower shall elect the Interest Period applicable thereto
for the Loan at the time of the Advance and before the end of each Interest
Period as provided and subject to the limitations herein.
(e) Notice and Manner of Borrowing. Borrower shall have delivered to
the Bank the Request (as defined in Section 4.7(a) hereof) not later than 11:00
a.m. London, England time, at least 4 Business Days before the Loan is to be
made. The Request shall specify (A) the date of such Loan, and (B) and the
duration of any Interest Period applicable thereto. The Loan shall be for
DM21,600,000.00.
(f) Intentionally Left Blank.
(g) Notices. Borrower has elected to borrow in Optional Currency,
and the Loan repayment shall be in DM, subject to the terms hereof.
(h) Indemnity. Borrower hereby indemnifies Bank against any loss or
expense which may arise or be attributable to Bank's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any loan
(i) as a consequence of any failure by Borrower to make any payment when due of
any amount due hereunder, for whatever reason including acceleration, in
connection with any loan bearing interest at the LIBOR-Based Rate, (ii) due to
any failure of Borrower to borrow on a date specified therefor in a notice of
borrowing, (iii) due to any payment, prepayment or conversion of any loan
bearing interest at the LIBOR-Based Rate on a date other than the last day of
the Interest Period therefor, or (iv) due to a conversion pursuant to Section
2.4(i) (ii) hereof. The amount of such loss or expense shall be determined by
the Bank, as the amount actually incurred by the Bank as a result of the
foregoing. Bank's calculations of any such loss or expense shall be furnished to
Borrower and shall be prima facie evidence thereof.
(i) Changed Circumstances.
(i) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of such
governmental authority, central bank or comparable agency:
(1) shall subject Bank to any tax, duty or other
charge with respect to this Note or shall change the basis of taxation of
payments to Bank of the principal of or interest on this Note or any other
amounts due in respect thereof (except for changes in the rate of tax on the
overall net income of Bank imposed by any governmental authority); or
(2) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by the Federal
Reserve Board), special deposit or similar requirement against assets of Bank,
deposits with or for the account of or credit extended by Bank, or shall impose
on Bank or the foreign exchange and interbank markets any other condition
affecting the Note; and the result of any of the foregoing is to increase the
cost to Bank of maintaining any LIBOR-Based Rate or; to reduce the amount of any
sum received or receivable by Bank under the Note in respect of interest at the
LIBOR-Based Rate; then the Bank shall promptly notify Borrower of such fact and
demand compensation therefor and, within fifteen (15) days after such notice by
Bank, Borrower agrees to pay to Bank such additional amount or amounts as will
compensate Bank for such increased cost or reduction. Bank will promptly notify
Borrower of any event of which it has knowledge which will entitle Bank to
compensation pursuant to this Subparagraph 2.4 (i); provided, however, that Bank
shall incur no liability whatsoever to Borrower in the event it fails to do so.
The amount of such compensation shall be determined, by the Bank, as the amount
actually incurred by the Bank as a result of the foregoing. Bank's calculations
of any such loss or expense shall be furnished to Borrower and shall be prima
facie evidence thereof.
(ii) If, at any time, Bank shall determine in good faith that,
by reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Optional Currency in the applicable amounts are not being
offered to Bank, then Bank shall promptly give notice thereof to Borrower.
Thereafter, until Bank notifies Borrower that such circumstances no longer
exist, the obligation of Bank to make the LIBOR-Based Rate available to Borrower
shall be suspended, and Borrower shall subject to the following sentence hereof,
repay in full the then outstanding principal amount of the Loan together with
accrued interest thereon together with amounts owed under Section 2.4(h).
Notwithstanding the foregoing, in the event that the Bank determines that
Optional Currency is not available to it, the Bank will make a good faith effort
to convert the outstanding Advance to an Advance payable in Dollars, and the
Borrower shall be responsible for paying all costs or expenses arising from such
conversion, including those set forth in Section 2.4(h) hereof. In the event the
Bank is able to convert the Advance to an Advance payable in Dollars, the
Borrower will sign such amendments to the Loan Documents as the Bank may
reasonably request to make the Loan Documents consistent with the Bank's
standard terms for LIBOR-Based Loans payable in Dollars.
(iii) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, shall make it
unlawful or impossible for Bank to honor its obligations hereunder to make or
maintain any LIBOR-Based Rate or make an Optional Currency Advance, Bank shall
promptly give notice thereof to Borrower. Thereafter, until Bank notifies
Borrower that such circumstances no longer exists, (A) the obligations of Bank
to make available the LIBOR-Based Rate or Optional Currency Advances and the
right of Borrower to convert any rate to a LIBOR-Based Rate or receive Optional
Currency Advances shall be suspended, and (B) if Bank may not lawfully continue
to maintain a LIBOR-Based Rate or extend Optional Currency Advances, as the case
may be, to the end of the then current Interest Period applicable thereto, the
Loan shall, subject to the following sentence hereof, be immediately due in the
event of an Optional Currency Advance. Notwithstanding the foregoing, in the
event that the Bank determines that Optional Currency is not available to it,
the Bank will make a good faith effort to convert any outstanding Optional
Currency Advance to a Dollar Advance, and the Borrower shall be responsible for
paying all costs or expenses arising from such conversion, including those set
forth in Section 2.4(i) hereof. In the event the Bank is able to convert the
Advance to an Advance payable in Dollars, the Borrower will sign such amendments
to the Loan Documents as the Bank may reasonably request to make the Loan
Documents consistent with the Bank's standard terms for LIBOR-Based Loans
payable in Dollars.
(iv) The provisions of Sections 2.4 (h) and (i) shall
similarly inure to the benefit to any party to whom the Lender sells an
interest, or participates on interest herein, as authorized pursuant to Section
8.9 hereof.
(j) [Intentionally left blank]
(k) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section shall survive the payment in full of principal and interest
hereunder and under the Note.
2.5 MANDATORY PREPAYMENTS. In addition to the other repayment obligations
set forth herein, and subject to any prepayment penalties described in Section
2.4(h) hereof, the Borrower shall also pay to the Bank any amounts required to
be paid pursuant to Section 6.1 of that Loan Agreement of even date herewith
between the Bank and Computer Products, Inc. The Borrower shall simultaneously
reimburse the Lender for any loss or out-of-pocket expenses incurred by Lender
on account of such prepayment in the currency incurred, as set forth in Section
2.4(h) hereof.
2.6 FEES.
(a) Commitment Fee. In consideration for the commitment of the Bank
to make the Credit Facility available to the Borrower, the Borrower agrees to
pay to the Bank a commitment fee (the "Commitment Fee") of Forty Thousand
Dollars ($40,000.00).
(b) Fees Deemed Earned. The Commitment Fee paid is deemed earned at
Closing.
2.7 BUSINESS DAYS. If any scheduled date of repayment of any portion of a
Loan shall be due on a day which is not a Business Day, subject to the
provisions of Section 2.4 hereof, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment.
2.8 GUARANTEES. As a condition to the Bank making of the Loans to the
Borrower, the Borrower shall cause each of the entities described on Schedule
2.8 hereof (sometimes collectively referred as the "Guarantors") to execute and
deliver their joint and several unconditional guaranty of repayment of the
Loans, which guaranty shall be in the form attached hereto as Exhibit B (the
"Guaranty").
2.9 MODE OF PAYMENT. All funds payable to the Bank hereunder shall be paid
to the Bank at its office set out in Section 8.10 hereof, or at such place as
otherwise directed by the Bank, in actually and finally collected funds in the
currency required under Section 2.12 hereafter on or before 2:00 P.M. (local
time) on the date when due. Payments shall not be deemed made or received until
they are received by the Bank as actually and finally collected funds in the
currency required under Section 2.12 hereafter. Any payment received after 2:00
P.M. (local time) on any Business Day shall, for the purposes of determining
time of payment under this Agreement as between the Borrower and the Bank only,
be treated as received on the next following business day; provided, however,
that this treatment shall not postpone the time of receipt for any other purpose
or computation, such as preference periods applicable to bankruptcy laws, or
dates relative to priority between creditors, or the like.
2.10 PREPAYMENT. Subject to the provisions of Section 2.4(h) hereof, upon
giving the Bank thirty (30) days prior written notice, the Borrower shall have
the right to prepay any amounts owed under the Credit Facility in whole or in
part, in integral multiples of not less than Equivalent Amount of $100,000.00.
Prepayments applied to the Credit Facility shall be applied in inverse order of
the scheduled principal payments thereunder. Each notice of prepayment shall
specify the prepayment date and the principal amount to be prepaid. All
prepayments of any Loan hereunder shall include accrued interest upon the
principal amount being prepaid to the date of the payment, and any amounts owed
pursuant to Section 2.4(h) hereof. Amounts prepaid under the Credit Facility may
not be reborrowed. Prepayment shall be in the currency specified in Section 2.12
hereof.
2.11 USE OF PROCEEDS. The proceeds of the Credit Facility are to be used
to provide financing for the acquisition of certain computer manufacturing and
ancillary facilities in Europe, as disclosed to the Bank.
2.12 PAYMENT. All payments (including prepayments) shall be made in
Optional Currency.
(a) The specification herein that payment be made in Optional
Currency, is of the essence hereof. If payment is not made in the currency due
under this Agreement (the "Contractual Currency") or if any court or tribunal
shall render a judgment or order for the payment of amounts due hereunder or
under the Credit Facility Note and such judgment is expressed in a currency
other than the Contractual Currency, the Borrower shall indemnify and hold the
Bank harmless against any deficiency incurred by the Bank in terms of the amount
received by the Bank to the extent the rate of exchange at which the Contractual
Currency is convertible into the currency actually received or the currency in
which the judgment is expressed (the "Received Currency") is not the reciprocal
of the rate of exchange at which the Bank would be able to purchase the
Contractual Currency with the Received Currency, in each case on the Business
Day following receipt of the Received Currency in accordance with normal banking
procedures. If the court or tribunal has fixed the date on which the rate of
exchange is determined for the conversion of the judgment currency into the
Contractual Currency (the "Conversion Date") and if there is a change in the
rate of exchange prevailing between the Conversion Date and the date of receipt
by the Bank, then the Borrower will, notwithstanding such judgment or order, pay
such additional amount as may be necessary to ensure that the amount paid in the
Received Currency when converted at the rate of exchange prevailing on the date
of receipt will produce the amount then due to the Bank from the Borrower
hereunder in the Contractual Currency.
(b) If Borrower shall wind up, liquidate, dissolve or become a
debtor in bankruptcy while there remains outstanding (i) any amounts owing to
the Bank hereunder or under the Note, (ii) any damages owing to the Bank in
respect of a breach of any of the terms hereof or (iii) any judgment or order
rendered in respect of such amounts or damages, the Borrower shall indemnify and
hold the Bank harmless against any deficiency in terms of the Contractual
Currency in the amounts received by the Bank arising or resulting from any
variation as between (i) the rate of exchange at which the Contractual Currency
is converted into another currency (the "Liquidation Currency") for purposes of
such winding-up, liquidation, dissolution or bankruptcy with regard to the
amount in the Contractual Currency due or contingently due hereunder or under
the Note or under any judgment or order to which the relevant obligations
hereunder or under the Notes shall have been merged and (ii) the rate of
exchange at which the Bank could, in accordance with normal banking procedures,
be able to purchase the Contractual Currency with the Liquidation Currency at
the earlier of (A) the date of payment of such amounts or damages and (B) the
final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy. As used in the preceding sentence, the
"final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy" shall be the date fixed by the
liquidator under the applicable law as being the last practicable date as of
which the liabilities of the Borrower may be ascertained for such winding-up,
liquidation, dissolution or bankruptcy before payment by the liquidator or other
appropriate person in respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and extend the financing
contemplated hereby, the Borrower represents and warrants to the Bank as
follows:
3.1 ORGANIZATION, POWERS, ETC. The Borrower (a) is a partnership duly
organized, validly existing and its status is active or current under the laws
of each jurisdiction in which it is transacting business; (b) has all requisite
power and authority and all requisite licenses, permits and authorizations to
own, operate, lease, assign, mortgage, sell or otherwise hypothecate or dispose
of its assets and to carry on its business as now conducted and as proposed to
be conducted pursuant to this Agreement; (c) is duly qualified or licensed to
transact business and is in good standing in the every other jurisdiction in
which failure to so qualify or be licensed would have a material adverse effect
on its business or financial condition or its ability to perform its agreements
hereunder, which jurisdictions are set forth on Schedule 3.1 hereof, and (d) has
the full power and authority to enter into, execute and perform those Loan
Documents (as defined herein) to which it is a party. This Agreement, the Note,
the Guaranty, and any and all other documents, if any, required or contemplated
to be executed and/or performed by the Borrower or each Guarantor hereunder are
referred to collectively herein as the "Loan Documents".
3.2 AUTHORIZATION OF LOAN, ETC. The execution, delivery, and performance
of the Loan Documents to which it is a party or a signatory:
(a) have been duly authorized by all requisite partnership
action of the Borrower;
(b) do not require any consent or approval of the partners of the
Borrower which has not been obtained;
(c) will not, in any respect material to the financial condition of
the Borrower, violate or contravene;
(i) any provisions of law applicable to the Borrower;
(ii) any order, rule or regulation of any regulatory
authority, court or other agency of government applicable to the Borrower;
(iii) any provision of the organizational agreement or
instrument of the Borrower; or
(iv) any agreement or obligation to which the Borrower is a
party or by which the Borrower or any of its or their property is or may be
bound, or be in conflict with, result in a breach of or constitute (with or
without notice or lapse of time, or both) a default under, any such agreement or
other instrument; and
(d) shall not result in the creation of any lien of any nature
whatsoever upon any property or assets of the Borrower.
3.3 LITIGATION, ADMINISTRATIVE AND REGULATORY PROCEEDINGS. There are no
actions, suits, investigations or proceedings (whether or not purportedly on
behalf of the Borrower, or any of its respective partners or management
officials in their capacities as such), pending or, to the knowledge of the
Borrower of the above partners or management officials, threatened against or
affecting the Borrower or the above partners or management officials in their
capacities as such, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
regulatory agency or instrumentality, domestic or foreign, which are reasonably
expected to be determined adversely to the Borrower and which would result in
any material adverse change in the business or financial condition of the
Borrower taken as a whole nor are there any factual situations which might
reasonably be expected to result in any such action, suit, investigation or
proceeding which are known to the Borrower or the above officers, directors or
management officials, but unasserted at the present time which would result in a
material adverse change in the business or financial condition of the Borrower
taken as a whole. The Borrower is not in default of any law, rule, regulation,
ordinance or order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which would result in a material adverse change in the
business or financial condition of the Borrower.
3.4 PAYMENT OF TAXES AND OTHER CHARGES. The Borrower has duly filed, paid
and discharged, all federal, state and local tax returns and taxes, and other
governmental assessments and other charges, liens or claims levied or imposed,
which if unpaid would become a lien or charge for a material amount upon the
property, assets, earnings or business of the Borrower, or have an adverse
effect on its financial condition or its ability to perform its agreements
hereunder, as the case may be. The Borrower knows of no material tax or other
assessment against it which has not been properly reserved against as reflected
in the financial statements provided to the Bank in accordance with Section 5.2
hereof.
3.5 FEDERAL RESERVE REGULATIONS.
(a) The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Federal Reserve Board ("FRB"));
(b) No part of the proceeds of the Loans shall be used to purchase
or carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock; and
(c) No part of the proceeds of the Loans shall be used for any
purpose that violates, or which is inconsistent with, the provisions of
Regulations G, T, U or X of the FRB.
3.6 SUBSIDIARIES. A complete list of the subsidiaries of the Borrower as
of the date hereof, as well as the place of incorporation and a list of all
jurisdictions in which each is transacting business is set forth in Schedule 3.1
hereof. This Schedule and Schedule 3.9 hereof shall be updated by Borrower
promptly at the time any new Subsidiary is added in accordance with Section 6.8
hereof. "Subsidiary" shall mean any corporation, partnership, or any other
entity either properly classified as a subsidiary of the Borrower for purposes
of generally accepted accounting principles ("GAAP") or as to which the Borrower
or any of its Subsidiaries exercises or has the right, whether by contract or
otherwise, to exercise control of its business. Each Subsidiary is a corporation
duly incorporated and organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and principal place of business,
has all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
has full power and authority to enter into, execute and perform those Loan
Documents to which it is a party.
3.7 CONSENTS, ETC. No consent, approval, authorization of, or
registration, declaration or filing with any governmental authority (federal,
state or local, domestic or foreign) is required in connection with the
execution or delivery by the Borrower or any Subsidiary of any Loan Document to
which it is a party, or the performance of or compliance with the terms,
provisions and conditions hereof or thereof.
3.8 PROPERTIES. The Borrower has good and marketable legal and equitable
title to all of its properties and assets as of the date hereof necessary for
the conduct of its business, except property leased from others, with each lease
in which the annual rent is in excess of Fifty Thousand Dollars ($50,000) being
described in Schedule 3.8. As of the date of this Agreement, all properties and
assets of the Borrower shall be free and clear of all interests, claims,
reversionary rights or interests, mortgages, pledges, liens, restrictions,
forfeitures, charges, attachments, levies, encumbrances or other matters
adversely affecting the Borrower's title hereof except as permitted under the
Loan Agreement of even date herewith between the Bank and Computer Products,
Inc.
3.9 OWNERSHIP. The respective classes of capital stock of each Subsidiary,
and the number of issued and outstanding shares of each are as set forth in
Schedule 3.9 hereof.
3.10 [Intentionally Left Blank].
3.11 AGREEMENTS. The Borrower is not a party to any agreement or
instrument or subject to any charter or other corporate restriction materially
adversely affecting the business, properties or assets, operations or condition
(financial or other) of the Borrower, or its ability to perform its agreement
under the Loan Documents to which it is a party. The Borrower is not in default
in the performance, service or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party,
which may result in a material adverse change in the condition, financial or
otherwise of the Borrower or its ability to perform its agreements hereunder.
3.12 ENFORCEABILITY OF THE LOAN DOCUMENTS. The Loan Documents and the
performance of the Borrower's obligations under those Loan Documents to which it
is a party or a signatory, or under any other instrument executed or to be
executed by or on its behalf hereunder constitute, or upon execution and
delivery thereof shall constitute the legal, valid and binding obligations of
the Borrower enforceable against the Borrower as the case may be, in accordance
with their respective terms.
This representation is subject to the qualification that enforcement of
the foregoing described loan documents is subject to:
a. equitable remedies;
b. bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights generally;
c. any restrictions or constraints peculiarly applicable to
Bank; and
d. as to certain remedial, waiver and other provisions of the Loan
Documents, other provisions of general Florida law.
3.13 GUARANTY. All representations and warranties of each of the
Guarantors in the Guaranty are true and correct in all material respects.
3.14 RELATIONSHIP OF THE BORROWER AND SUBSIDIARIES. The Borrower and its
affiliates including the Guarantors are engaged as a globally integrated group
of designers and producers of electronic products and subsystems, providing the
required services, credit and other facilities for those integrated operations.
The Loan made under the Credit Facility is for the purpose of financing
acquisitions that will enhance the integrated operations of the Borrower and the
Subsidiaries, and the Borrower and its affiliates, including the Guarantors,
expect to derive benefit, directly or indirectly, from the Loans, both
individually and as a member of the integrated group, because the financial
success of the operations of the Borrower and its affiliates, including the
Guarantors, is dependent upon the continued successful performance of the
integrated group as a whole.
3.15 PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a "holding
company" or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
3.16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The foregoing
representations and warranties shall be true and correct as of the date hereof
and at all times during the term of the Loan.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of the Bank to extend the financing contemplated hereby is
subject to the terms of this Agreement and to the following conditions
precedent:
4.1 REPRESENTATIONS AND WARRANTIES. On the date of execution of this
Agreement, such date being sometimes referred to hereafter as the "Closing," the
representations and warranties of the Borrower and the Subsidiaries contained
herein or in any Loan Document shall be true and correct in all material
respects.
4.2 NO DEFAULT. On the date hereof, after giving effect to such borrowing
hereunder, the Borrower shall have observed and performed all the terms,
conditions and agreements set forth herein, or on its part to be observed or
performed in all material respects, and no Event of Default specified in Article
VII hereof, nor any other event which, upon notice or lapse of time or both,
would constitute an Event of Default shall have occurred.
4.3 SUPPORTING DOCUMENTS AND OTHER CONDITIONS. On the date hereof, and in
any event prior to the Advance hereunder, the Borrower shall have delivered to
the Bank the following:
(a) a certificate of the Secretary of State or other applicable
governmental authority of each state or country in which Borrower or a Guarantor
is transacting business, certifying:
(i) that attached thereto is a true and complete copy of the
charter documents of the Borrower and each Guarantor as of a date within ten
(10) days of the date hereof; and
(ii) that the Borrower and each Guarantor is in good standing,
or its status is active where the applicable jurisdiction is Florida, in that
State or other applicable jurisdiction;
(b) a certificate of a duly authorized representative of the
Borrower, dated the date of such borrowing, certifying:
(i) [intentionally left blank];
(ii) that the Borrower is in good standing in each
jurisdiction in which it is transacting business;
(iii) that attached thereto is a true and complete copy of
resolutions of the general partner of the Borrower directing the execution and
delivery by the Borrower of the Loan Documents to which it is a party,
indicating the representative of the Borrower, authorized to execute such
instruments and act on its behalf, which resolutions are in full force and
effect without modification on the date of such certification;
(iv) the incumbency and signatures of the representatives of
the Borrower executing the Loan Documents to which it is a party; and
(v) that the Articles of Association or other charter
documents of the Borrower described in Section 4.3(a)(i) or hereof have not been
amended and are true and complete as of the date hereof;
(c) a certificate of a duly authorized manager of the Borrower and
each Guarantor to the effect that after giving effect to the transaction
contemplated herein (i) the Obligation of the Borrower will not be greater than
the value of the consolidated property of the Borrower at a fair valuation; (ii)
the Borrower will have sufficient capital to engage in its business on an
ongoing basis; and (iii) the Borrower will have the ability to pay its
Obligations as they mature;
(d) the Credit Facility Note duly executed by the Borrower;
(e) Indemnification Agreement, substantially in the form attached
hereto as Exhibit C;
(f) the Guaranty duly executed by the Guarantors; which may be in
the form of multiple documents for the different Guarantors;
(g) the opinions of counsel to the Borrower, Computer Products,
Inc., Stevens-Arnold, Inc., JETA Power Systems, Inc., RT Holding Corp. and
Heurikon Corporation from attorney(s) licensed to practice law in the states of
such entities organizations in form attached reasonably acceptable to the Bank;
(h) the ISDA Master Agreement dated as of July 14, 1997 between
First Union National Bank and the Borrower (the "ISDA Master Agreement") and any
other documents required by the terms thereof to be delivered in connection
therewith;
(i) searches from each jurisdiction in which it is transacting
business demonstrating that there are no liens upon the Borrower's or any
Subsidiary's property except as permitted hereunder; and
(j) all other additional opinions, documents, certificates and other
assurances that the Bank or its counsel may reasonably require.
4.4 LOAN FEES. The Borrower shall pay at the time of execution hereof the
Commitment Fee and all costs of the Bank incurred through such dates as provided
in Section 8.1 hereof.
4.5 CLOSING. This Agreement, the Note, and the Guaranty shall by executed
by the Borrower or Guarantor, as the case may be, at the place set forth on the
signature page hereof and the execution of this Agreement by the Bank shall
occur in Charlotte, North Carolina, and the delivery of the originals of such
documents to the Bank shall occur at the office of the Bank's agent in
Charlotte, North Carolina, and the delivery of the balance of the documents
described in Article IV hereof shall be at a time agreed upon by the parties
hereto, at the offices of Holland & Knight LLP, Suite 3000, 701 Brickell Avenue,
Miami, Florida.
4.6 APPROVAL OF COUNSEL FOR BANK. All legal matters incident to this
Agreement shall be reasonably satisfactory to Messrs. Holland & Knight LLP,
counsel for the Bank.
4.7 CONDITIONS PRECEDENT TO THE ADVANCE. The following conditions, in
addition to any other requirements set forth in this Agreement, shall have been
met or performed on or prior to the date the Advance hereunder shall be made by
the Bank:
a. Request to Make the Advance. The Borrower shall have delivered to
the Bank a request to make an Advance which request shall be substantially in
the form attached hereto as Exhibit D (the "Request).
b. No Default. On the date of the Request the Borrower shall be in
compliance in all material respects with all the terms and provisions set forth
in the Loan Documents on its part to be observed or performed, and no Event of
Default shall have occurred or be continuing at such time, or will occur upon
the making of the Advance.
c. Correctness of Representations. All representations and
warranties made by the Borrower and any Guarantor herein or in the other Loan
Documents or otherwise in writing in connection herewith shall be true and
correct with the same effect as though the representations and warranties had
been made on an as of the proposed date of the Advance, except to the extent
such representation and warranty relates to an earlier date.
d. No Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, condition as it existed on the
date of the most recent financial statements of such person delivered prior to
the date hereof.
e. Further Assurances. The Borrower shall have delivered such
further documentation or assurances as the Bank may reasonably require.
f. Advance Limitations. The Request for an Advance shall be
irrevocable, made in the time frame as specified in Section 2.4 hereof, and
shall be for the amount of the Loan specified in Section 2.1 hereof.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower consents and agrees that, from the effective date and so long
as this Agreement shall remain in force and effect, and until payment in full of
the principal and interest due under the Note and until full satisfaction of the
Obligation described hereunder, it shall:
5.1 NOTICE. Give prompt written notice to the Bank of:
a. the institution, or threat of institution, or the occurrence of
facts known to it which might reasonably be expected to result in, any action,
suit, investigation or proceeding instituted by or against the Borrower or any
Subsidiary or the partners or management officials of the Borrower or any
Subsidiary in their capacity as such, at law or in equity, in any federal or
state court or before any federal, state, municipal or other governmental
department, commission, board, bureau agency, regulatory authority or
instrumentality, domestic or foreign, which seeks damages or other relief in
excess of One Million Dollars ($1,000.000.00) or the Equivalent Amount thereof
if such judgment is rendered in other than Dollars, or which if determined
adversely to the Borrower or any Subsidiary would have a material adverse effect
upon the business or financial condition of the Borrower; and
b. any other action, event or condition of any nature which, in the
reasonable opinion of the Borrower, with or without notice, or lapse of time, or
both, constitutes or would constitute an Event of Default under this Agreement.
Each notice required to be delivered pursuant to this Section 5.1
shall include a reasonably detailed description of the matter, the amount in
controversy (or other non-monetary relief sought or both), the title of the
applicable forum, style of the proceeding, case number, docket number and the
like, and the attorney or law firm (together with address) providing
representation on behalf of the Borrower, or officers, directors or management
officials of the Borrower, in their capacities as such, with respect to each
item of litigation listed.
5.2 ACCOUNTS AND REPORTS. Maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently applied,
and furnish or cause to be furnished to the Bank copies of each of the
following:
a. Within ninety (90) days after the end of its fiscal year, (i) an
annual consolidated financial statement of the Borrower and its Subsidiaries,
and related statements of income, shareholders' equity, and changes in position
for such fiscal year, all with accompanying notes, in reasonable detail and
stating in comparative form the figures as of the end of and for the previous
fiscal year, which may be prepared by the Borrower (the foregoing shall have
been certified by the Chief Financial Officer of the Borrower as presenting
fairly the financial position of the Borrower and its Subsidiaries, and the
results of operations and changes in financial position for the fiscal year,
without qualification, in conformity with GAAP consistently applied); (ii) a
compliance certificate executed by the Chief Financial Officer of the Borrower
certifying that as of the date thereof the Borrower is in compliance in all
material respects with the terms hereof, including Section 5.5(b) hereof.
b. Within forty-five (45) days of the end of each fiscal quarter, a
compliance certificate executed by the Chief Financial Officer of the Borrower,
certifying that as of the date thereof, the Borrower is in compliance in all
material respects with the terms hereof, including Section 5.5(b) hereof.
c. Promptly upon becoming available, copies of all financial
statements, reports and notices sent by Borrower to its stockholders or any
governmental authorities, except material filed with a governmental authority in
the ordinary course of business which does not relate to or disclose any
material adverse effect to the affairs of the Borrower.
d. Promptly, from time to time, such other information regarding the
operation, business affairs and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
5.3 MAINTAIN INSURANCE.
a. Keep the insurable properties of the Borrower and its
Subsidiaries adequately insured with sound and reputable insurers to the extent
and against such risks (including fire and other risks commonly insured against
by extended coverage) as is customary with companies in the same or similar
businesses.
b. Maintain in full force and effect public liability insurance
against claims for personal injury or death or property damage occurring upon,
in, or about or in connection with the use of any properties owned, occupied or
controlled by the Borrower or any of its Subsidiaries.
5.4 FUTURE TAXES. Pay all taxes and other governmental assessments as the
same shall become due, excepting only taxes and governmental assessments which
the Borrower or any Guarantor is contesting in good faith and for which the
Borrower or any Guarantor has set aside adequate reserves, including reserves
for interest with respect thereto in the manner provided hereafter.
5.5 LEGAL EXISTENCE, PROPERTIES, STOCK OWNERSHIP AND SOLVENCY.
a. Except as otherwise permitted by Section 6.2 of the Loan
Agreement of even date herewith between the Bank and Computer Products, Inc., do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect the Borrower's legal existence, and its rights, licenses,
permits and franchises and charters, and conduct and operate its and their
business in substantially the manner in which the business is presently
conducted and operated (subject to changes in the ordinary course of business);
and at all times maintain, preserve and protect all material franchises and
trade names; and comply in all material respects with all laws, statutes,
regulations and ordinances of any governmental entity or agency thereof,
applicable to the Borrower; and
b. the Borrower will remain Solvent at all times.
5.6 WARRANTIES AND CONDITIONS. Do all acts or refrain from action, as
necessary to cause all of the representations and warranties set forth in
Article III hereof to continue to be true in all material respects at all times
that this Agreement is in effect.
5.7 FURTHER AGREEMENTS. Comply with any and all procedures reasonably
established by the Bank for processing, handling and accounting for the Loans
and all payments involved, and the documents or instruments pertaining thereto.
The Borrower shall execute and deliver to the Bank all such additional
agreements, documents, instruments and affidavits necessary or as may reasonably
be required by the Bank to evidence and accurately account for and ratify all
amounts advanced or payable pursuant to this Agreement or any of the
Obligations. The Borrower shall pay all taxes (other than income or similar
taxes of the Lender), recording fees and other reasonable costs incurred by the
Bank in connection with such subsequent loans. At the option of the Bank, the
Note may be modified or renewed, an additional note may be executed, or
overdrafts may be allowed on any account of the Borrower with the Bank, or
advances made against uncollected funds under drafts presented by the Borrower
to the Bank for collection.
5.8 ENVIRONMENTAL MATTERS. Represents to the Bank that the places of
business operated by the Borrower have not in the past been used by Borrower or,
to its knowledge, any other party, are not presently being used, and will not in
the future be used for the handling, storage, transportation, or disposal of
hazardous or toxic materials in any manner not in compliance with applicable
law. The Borrower agrees to indemnify, defend, and hold the Bank harmless from
and against any loss to the Bank (including, without limitation, reasonable
attorneys' fees) incurred by the Bank as a result of such past, present or
future use, handling, storage, transportation, or disposal of hazardous or toxic
materials.
5.9 GUARANTORS. Promptly forward to the Guarantors any notices or
documents or information which it is required hereunder or under the Loan
Documents to forward to the Bank.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement,
it will not take any action in violation of Articles VI or VIA of the Loan
Agreement effective July 15, 1997 and executed of even date between Computer
Products, Inc. and the Bank (the "CPI Loan Agreement"). This covenant shall
remain in place even if the CPI Loan Agreement shall be satisfied while the
Obligations remain outstanding. The Borrower acknowledges that it is a
Significant Subsidiary for purposes of the CPI Loan Agreement.
ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Any of the below listed events happening to the
Borrower or any Subsidiary are sometimes referred to herein alternatively as
"Events of Default" or "Default":
a. Failure to pay, perform, or comply with any material obligation,
promise, covenant, agreement or provision under any of the Loan Documents, or
upon the occurrence of any other event of default and the continuation beyond
the expiration of any cure period relating thereto under any other agreement
between the Borrower, Computer Products, Inc., or any Subsidiary and the Bank;
b. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Subsidiary shall prove to have been
false or misleading in any material respect when made or furnished;
c. Dissolution or liquidation of the Borrower;
d. The Borrower shall fail to pay any additional monetary obligation
in excess of One Hundred Thousand Dollars ($100,000.00) when due, however
arising and to whomever owed, except in immaterial amounts through inadvertent
clerical error;
e. The Borrower should make a general assignment for the benefit of
creditors, or any proceeding of any other similar nature be instituted by or
against the Borrower or any Significant Subsidiary or any proceeding be
instituted against the Borrower or any Significant Subsidiary alleging that such
entity is insolvent, or a receiver be appointed for the Borrower or any
Significant Subsidiary or for any property of the Borrower or any Significant
Subsidiary, and such proceeding shall not be dismissed within ninety (90) days
after the date such action is commenced;
f. Any verdict or judgment in excess of Two Hundred Fifty Thousand
and No/Dollars ($250,000.00) or an Equivalent Amount if the judgment is not in
Dollars individually or in the aggregate in any twelve (12) month period during
the term hereof be obtained or entered against the Borrower or any property of
such entity, and remain unsatisfied or not stayed by court order upon posting a
bond, after thirty (30) days from the rendition of such judgment unless fully
covered by insurance less permitted deductible;
g. A decree or order shall be entered by a court for relief in
respect of the Borrower under Title 11 of the United States Code, as now or
hereafter constituted, or any other applicable foreign, federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or similar official) of
the Borrower or of any substantial part of either the Borrower's property, or
ordering the winding-up or liquidation of its affairs and the continuance of any
such decree or order unstayed and in effect for a period of ninety (90)
consecutive days;
h. Borrower shall file a petition or answer or consent seeking
relief under Title 11 of the United States Code, as now or hereafter
constituted, or any other applicable foreign, federal or state bankruptcy,
insolvency or other similar law, or consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or taking
possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Borrower or any substantial part of the
Borrower's property, or Borrower shall fail generally to pay their respective
debts as such debts become due, or take action in furtherance of any such
action;
i. The Borrower is in default under any agreement, mortgage or
security agreement with any person or corporation whatsoever which would
reasonably be expected to materially adversely affect the ability of the
Borrower by itself or the Borrower and the Subsidiaries, taken as a whole, to
perform any action or make any payment required by this or any other agreement
between the Borrower and the Bank;
j. The making of any levy, seizure, garnishment, or attachment of or
on any assets of the Borrower if the effect of such action may reasonably be
expected to have a material adverse affect on the ability of the Borrower or the
Borrower and the Subsidiaries taken as a whole to perform its obligations
hereunder;
k. In the event that control of the Borrower is transferred,
directly or indirectly, to any person other than another Subsidiary or Computer
Products, Inc.;
l. The Guarantors, or any of them, default in their obligations
under the Guaranty; or
m. The occurrence of an Event of Default under the CPI Loan
Agreement or under the Amended and Restated Loan Agreement effective as of July
15, 1997 and executed of even date herewith among the Bank, the First Union
National Bank and Computer Products, Inc.; or
n. The occurrence of any material adverse change to the financial
condition of the Borrower.
For purposes of the foregoing subsection (k), "control" shall be deemed to be
the ownership of a sufficient number of shares of the Borrower so that the
holder thereof holds the right to vote, directly or indirectly, in excess of
fifty percent (50%) of the voting stock of the Borrower, or can otherwise elect,
whether directly or indirectly, through stock ownership, proxy, shareholder
agreement or otherwise, one-half (1/2) or more of the members of the Board of
Directors of the Borrower.
The Bank agrees that if an Event of Default has occurred (i) pursuant to Section
6.1(a) of the CPI Loan Agreement because of the failure of the Borrower to make
a required payment thereunder, the Borrower shall have five (5) days to cure
such default prior to the Lender having the right to accelerate the payment of
all amounts owed hereunder; or (ii) pursuant to any other provision of Section
7.1 hereof, that is not due to the provisions of Sections 7.1 (e), (g), (h) or
(m) the Borrower shall have thirty (30) days to cure such default prior to the
Bank having the right to accelerate the payments of all amounts owed hereunder.
Upon the occurrence of an Event of Default and the continuation thereof beyond
any applicable cure period as set forth above or at any time thereafter during
the continuance of any such Event of Default, the Note, the Guaranty, the
Obligation and all other payments required to be made hereunder shall be
forthwith due and payable at the Bank's option, except that on Event of Default
under Sections 7.1(e), (g), (h), the Obligations and all other amounts hereunder
shall be automatically due and payable without further action by the Bank, both
as to principal and interest, without presentment, demand, protest or other
notice of nonpayment or default or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding. Upon the occurrence of an Event of Default, (i) the
principal amounts owed hereunder on the Loans shall bear interest at the highest
rate allowable under applicable law, or, if there is no such limit, at the
Default Rate, until such Event of Default is cured or until the amounts
outstanding hereunder are paid in full; and (ii) any money held as a result of a
transaction otherwise permitted pursuant to Section 6.1 of CPI Loan Agreement
shall be delivered to the Bank as collateral for the Obligations. Upon the
occurrence of an Event of Default, the Bank may exercise any rights given to it
by law, the Note, or given by this Agreement, and the Bank may apply any sums
received by the Bank to any of the Obligations or any portion thereof in such
order as the Bank in its sole discretion may determine, any request to the
contrary by the Borrower notwithstanding.
If the Borrower fails to pay any amount payable by it under this
Agreement, the Borrower shall forthwith on demand by the Bank pay interest on
the overdue amount from the due date, whether by maturity or acceleration, up to
the date of actual payment, as well after as before judgment, at the Default
Rate, which shall be the rate determined by the Bank to be 4 percent above the
rate which would otherwise be payable for the Advance for an Interest Period, or
Interest Periods, selected by the Bank.
Without limitation to any other rights under law, the Bank may at any time
while an Event of Default is outstanding set off any matured obligation owed by
the Borrower under this Agreement against any obligation (whether or not
matured) owed by the Bank to the Borrower or any Subsidiary, regardless of the
place of payment, booking branch or currency of either obligation. If the
obligations are in different currencies, the Bank may convert either obligation
at a market rate of exchange in its usual course of business for the purpose of
the set-off. If either obligation is unliquidated or unascertained, the Bank may
set off in an amount reasonably estimated by it in good faith to be the amount
of that obligation.
ARTICLE VIII
MISCELLANEOUS
8.1 COSTS OF LOAN. The Borrower shall pay all reasonable out-of-pocket
expenses incurred by the Bank in connection with the preparation and closing of
this Agreement, the making of each Funding or Advance, the administration of
this Agreement, and in the enforcement of the rights of the Bank under the Loan
Documents and under the Note and any other agreements between the Borrower and
the Bank, including the reasonable attorneys' fees incurred by the Bank in
preparing and closing this Agreement which attorneys' fees (exclusive of
out-of-pocket expenses) shall not exceed $______________, together with the
out-of-pocket fees of such counsel, whether in consultation or in judicial,
administrative, bankruptcy, conservatorship or receivership proceedings, through
all appeals. Such out-of-pocket expenses specifically include all filing fees,
the cost of all documentary tax stamps, if any, and other taxes, excluding
federal or Florida taxes on corporate income, which are or become payable by
reason of the transactions between the Borrower and the Bank which are
encompassed by this Agreement, as well as any penalties or additional taxes
which may become due by reason of the Borrower's instructions to the Bank
concerning the payment of such taxes, and at the Bank's option costs of tax,
judgment and lien searches, and recording fees, if any. Costs incurred to the
date of Closing shall be paid at Closing, by separate check payable to the order
of the Bank.
8.2 SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties by the Borrower and any Guarantor in the Loan
Documents or otherwise in writing in connection herewith shall survive the
execution and delivery to the Bank of this Agreement and the Note, and shall be
true and correct and continue in full force and effect so long as any portion of
any Obligation or the Note is outstanding or this Agreement has not been
terminated, except to the extent such representation and warranty relates to an
earlier date.
8.3 TERMINATION OF LOAN. This Agreement may not be terminated by the
Borrower until payment of the Obligation in full.
8.4 APPLICABLE LAW. The terms and performance of this Agreement and the
terms and payment of the Note shall be construed in accordance with and
controlled and governed by the laws of the State of Florida, and applicable
federal law, as amended from time to time. The Bank, the Borrower and each
Guarantor agree that the venue of any action brought to enforce any rights
created hereunder will be in Broward County, Florida.
8.5 MODIFICATION OF LOAN AGREEMENT. Unless otherwise specifically provided
for in this Agreement, no consent, modification, amendment or waiver of any
provision of this Agreement, the Note, or the other the Loan Documents executed
in conjunction herewith, nor any consent of the Bank to any variance therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Bank.
8.6 NO WAIVER OF RIGHTS BY Bank. Neither any failure nor any delay on the
part of the Bank in exercising any right, power or privilege under the Loan
Documents shall operate as a waiver thereof; nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of any
other right, power or privilege. It is further agreed between the parties that
no waiver of any duty or condition contained in any of the Loan Documents shall
at any time be held to be a waiver of the other duties or conditions of the
Borrower thereunder, or of the same duties or conditions upon a future occasion.
8.7 INTEREST. All interest payable hereunder shall be at a per annum rate
computed by dividing the applicable per annum interest rate by three hundred
sixty (360), except as otherwise provided herein, and multiplying the result by
the actual number of days elapsed. Notwithstanding any provision in the Notes or
in any other document executed in connection with this Agreement, the Borrower's
total liability during any payment period for payment of fees, charges or other
payments which may be deemed interest shall not exceed the higher of the limits
imposed by the usury laws of the State of Florida or of the United States, as
applicable. If, for any reason, total liability for payments which may be deemed
interest, should be greater than the limit imposed by the usury laws of the
State of Florida or of the United States (whichever results in the higher rate
of lawful interest), as applicable, for any interest payment period, then all
sums in excess of those lawfully collectible with interest for that period shall
be applied to the reduction of principal of the Loans, without further agreement
or notice. The Bank has agreed to accept, and the Borrower has agreed to apply,
such sums as a penalty-free prepayment of principal, unless the Bank at any time
elects, by notice to the Borrower in writing, to waive or limit the collection
of any sums in excess of those lawfully collectible as interest rather than
accept those sums as a prepayment of principal. Upon any demand for payment, all
unlawful interest (if any) shall be eliminated.
8.8 SEVERABILITY. In case all or any part of one or more of the provisions
contained in the Loan Document should be invalid, illegal or unenforceable in
any respect, the validity, legality or enforceability of the remaining
provisions contained herein or therein and the remainder of such provision shall
not in any way be affected or impaired thereby.
8.9 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the Bank and the
Borrower. The Bank shall have the right to syndicate its interests in the Loans,
or either of them, or to grant participation and transfer interests in the Note
to other persons and to furnish such information as is reasonably required to
induce such persons to enter into such arrangements and to satisfy any
regulatory requirements pertaining thereto; provided, however, that the Borrower
shall have the right to approve all such participants, which approval shall not
be unreasonably withheld; and provided, further, that the Bank shall not be
entitled to syndicate or transfer interests in more than fifty percent (50%) of
its interest in the Loans. In the event the Bank notifies the Borrower that the
Bank will grant such participation, or assign a portion of the Lender's rights
and obligations in the Loans, the Bank acknowledges that the Borrower will not
be deemed to be acting unreasonably if it denies such request because the entity
to whom the Bank proposes to grant a participation or assign such rights and
obligations will require payments under Section 2.4 hereof materially in excess
of those required to be paid to the Lender. The Borrower will take such actions
as the Bank may reasonably require to effect the grant and performance of such
participation or the assignment of an interest of its rights and obligations to
another entity.
8.10 NOTICES. All notices, demands, requests, consents or other
communications required or permitted to be given or made under this Agreement in
writing, shall be deemed given or made when delivered in person, five (5) days
after such communication is posted in the mails, or one (1) day after such
communication is sent by a nationally recognized overnight courier service.
Notice shall be given as follows:
First Union National Bank
200 East Broward Boulevard
Ft. Lauderdale, Florida 33301
ATTN: Corporate Banking,
Mr. M. Walker Duvall, Senior Vice President
AND
First Union National Bank
4299 N.W. 36th Street
Miami Springs, Florida 33166
ATTN: Ms. Missy Morgan, Senior Vice President
AND
First Union National Bank
London Branch
One Bishopgate
LONDON EC2N 3AB ENGLAND
ATTN: Ian G. Morrison, Vice President
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
ATTN: Douglas F. Darbut, Esq.
If to the Borrower:
c/o Herbert Elektronische Gerate GmbH & Co. Kg.
Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
ATTN: John D. Vaughan, Esq.
If to the Guarantors:
c/o Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
The foregoing addresses may be changed by either party by giving notice to the
other party in accordance with the above.
8.11 INCORPORATION OF TERMS. It is mutually understood and agreed by and
between the parties hereto on behalf of themselves, and their respective
representatives or successors in interest, that the Note and other agreements
between the Borrower and the Bank heretofore and hereinafter described and all
of the conditions, stipulations, agreements and covenants contained in said Note
and other agreements are hereby incorporated by reference to the same extent and
effect as if they were fully set forth verbatim herein, and made a part of this
Agreement, until this Agreement is terminated by the payment of the Obligation
in full. It is further mutually understood and agreed that the Borrower shall
perform, comply with, and abide by each and every warranty, stipulation,
agreement, condition and covenant in the Note, and other agreements, and the
provisions of this Agreement.
In the event of an ambiguity or conflict of terms between any of the
provisions of the foregoing documents, the terms of this Agreement shall be
deemed to amend and control all of the other documents; and, to the extent that
any of the agreements are silent, each shall supplement the others; provided,
however, in the event of any conflict between the terms of this Agreement and
any of the instruments referenced above, the terms which, in the Bank's sole
discretion, grant the Bank the greater protection with respect to its security
for the Note or in any other manner are of greater benefit to the Bank, shall
control. All provisions of contemporaneous or previous agreements and
understandings between the Borrower and the Bank in conflict with any expressed
provision hereof shall be merged into this Agreement and be extinguished and of
no further force and effect.
8.12 COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be considered an original.
ARTICLE IX
INDEMNIFICATION
9.1 NET PAYMENTS. All payments by the Borrower under this Agreement and
the Note shall be made without setoff or counterclaim and in such amounts as may
be necessary in order that all payments, after deduction or withholding for or
on account of any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof (collectively the "Taxes"), shall not be
less than the amounts otherwise specified to be paid under this Agreement and
the Note. Notwithstanding anything to the contrary contained in this Section
9.1, the Borrower shall not be liable for the payment of any tax on or measured
by net income imposed on or measured by the net income or portion thereof of the
Bank. The Borrower shall pay all Taxes when due (and indemnify the Bank against
any liability therefor) and shall promptly (and in any event not later than
thirty (30) days thereafter) furnish to the Bank any certificates, receipts and
other documents which may be required (in the judgment of the Bank) to establish
any tax credit to which the Bank may be entitled. The Bank shall promptly
reimburse the Borrower upon receipt by the Bank of any refund or credit paid to
the Bank for which and to the extent the Bank has previously been reimbursed by
Borrower under this Section. The obligations of the Borrower under this Section
9.1 shall survive the termination of this Agreement and the repayment of the
Notes.
The Bank will cooperate with reasonable requests of the Borrower to seek
refunds of amounts payable hereunder and to minimize amounts payable hereunder,
provided that Borrower shall pay the costs and expenses thereof and provided
that such request shall not require any action, in the opinion of the Bank,
which would or may adversely affect the Bank.
ARTICLE X
WAIVER OF JURY TRIAL AND VENUE
10.1 Arbitration. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Loan Agreement
and the other Loan Documents ("Disputes") between or among parties to this Loan
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by the Notes.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Miami, Florida. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
10.2 PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, Borrower and Bank agree to preserve,
without diminution, certain remedies that any party hereto may employ or
exercise freely, independently or in connection with an arbitration proceeding
or after an arbitration action is brought Borrower and Bank shall have the right
to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, applicable: (i) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (ii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment or receiver and filing an involuntary bankruptcy
proceeding; and (iii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
<PAGE>
In the event that the provisions of Section 10.1 or 10.2 hereof are found
to be unenforceable and a Dispute may not be resolved pursuant to those
Sections, the parties hereto agree that the following provision shall be
applicable:
WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER AND EACH GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOANS, THIS AGREEMENT AND ANY AGREEMENTS
CONTEMPLATED HEREBY TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EACH PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR Bank AND BORROWER
ENTERING INTO THIS AGREEMENT.
10.3 WAIVER OF PLEA OF JURISDICTIONS OR VENUE. The Borrower and each
Subsidiary hereby waives any plea of jurisdiction or venue as not having a place
of business in Broward County, Florida, and hereby specifically authorizes any
action brought upon the enforcement of the Loan Documents by Bank to be
instituted and prosecuted in either the Circuit Court of Broward County,
Florida, or in the United States District Court for the Southern District of
Florida, at the election of Bank.
IN WITNESS WHEREOF, the Bank and the Borrower have caused these presents
to be executed in their respective names by their duly authorized executive
officers, at the place first set forth herein, all as of this 15th day of July,
1997.
FIRST UNION NATIONAL BANK,
LONDON BRANCH
By:
Joseph M. Mayhew
Its: Senior Vice President
HERBERT ELEKTRONISCHE GERATE GMBH & CO. KG,
By: Herbert Zehnte Betelligungs
und-Verwaltungs-GmbH, as general partner
for Herbert Elektronische Gerate GmbH & Co. KG
Mr. Richard Thompson
Geschaftsfuhrer
Date of Execution: November _____, 1997
Place of Execution: Eden Prairie, Minnesota
(Corporate Seal)
Computer Products GmbH, as Partner and
future Limited Partner of Herbert GmbH & Co. KG
upon its registration in Commercial
Register A of Frankfurt am Main
Mr. Gary Duffy
Date of Execution: , 1997
Place of Execution: Youghal County Cork,Ireland
Mr. Siegfried Georg Kreuzer
Date of Execution: , 1997
Place of Execution: Amberg, Germany
<PAGE>
CHARLOTTE, NORTH CAROLINA
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this _7th__ day of November, 1997, by Joseph M. Mayhew, as Senior Vice
President of First Union National Bank, London Branch on behalf of the
corporation. He is personally known to me (YES) (NO) or who produced
______________________ as identification.
WITNESS my hand and seal this _7th_ day of November, 1997.
Carla Eaker
- -----------------------------------
NOTARY PUBLIC
My Commission Expires: August 21, 2002
Eden Prairie, Minnesota
Place of Execution
I, _Karen Scheldroup, a Notary Public within and for the State of
Minnesota duly commissioned and acting, do hereby certify that on this 6th_ day
of November, 1997, personally appeared RICHARD THOMPSON, as Geschaftsfuhrer of
Herbert Zehnte Betelligungs-undVerwaltungs GmbH, as general partner for
Elektronische Gerate GmbH & Co. KG, a German partnership, to me personally known
to be the person who signed the foregoing instrument, who being duly sworn and
being informed of the contents of said instrument, stated and acknowledged on
oath that he signed, executed, sealed and delivered same of his free and
voluntarily act and deed, for the uses, purposes and considerations therein
expressed and set forth.
WITNESS my hand and seal this __6th day of November, 1997.
Karen Scheldroup
- -----------------------------------
NOTARY PUBLIC
My Commission Expires: Jan. 31, 2000
<PAGE>
Youghal County Cork, Ireland
Place of Execution
I, Patrick lavan, a Notary Public within and for the Republic
of Ireland, duly commissioned and acting, do hereby certify that on this 13th
day of November, 1997, personally appeared GARY DUFFY, as Authorized Signatory
of Computer Products GmbH, acting as partner and future Limited Partner of
Herbert GmbH & Co. KG upon its registration in the Commercial Register A of
Frankfurt am Main, to me personally known to be the person who signed the
foregoing instrument, who being duly sworn and being informed of the contents of
said instrument, stated and acknowledged on oath that he signed, executed,
sealed and delivered same of his free and voluntarily act and deed, for the
uses, purposes and considerations therein expressed and set forth.
WITNESS my hand and seal this 13th day of November, 1997.
Patrick Lavan
- -----------------------------------
NOTARY PUBLIC
My Commission Expires:
Exhibit No. 10.44
LOAN AGREEMENT
BETWEEN
COMPUTER PRODUCTS, INC.,
AND
FIRST UNION NATIONAL BANK, LONDON BRANCH
DATED AS OF JULY 15, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................1
ARTICLE II CREDIT FACILITY ..................................4
Section 2.1 The Credit Facility........................4
Section 2.2 Note.......................................4
Section 2.3 Option to Elect Interest Periods on the
Loans......................................5
Section 2.4 Interest Rates.............................5
Section 2.5 Mandatory Prepayments.....................10
Section 2.6 Fees......................................10
Section 2.7 Business Days.............................10
Section 2.8 Guarantees................................10
Section 2.9 Mode of Payment...........................10
Section 2.10 Prepayment...............................11
Section 2.11 Use of Proceeds..........................11
Section 2.12 Payment..................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES..................12
Section 3.1 Organization, Powers, Etc.................12
Section 3.2 Authorization of Loan, Etc................13
Section 3.3 Litigation, Administrative and
Regulatory Proceedings....................13
Section 3.4 Payment of Taxes and Other Charges........14
Section 3.5 Federal Reserve Regulations...............14
Section 3.6 Subsidiaries..............................15
Section 3.7 Consents, Etc.............................15
Section 3.8 Properties................................15
Section 3.9 Ownership.................................16
Section 3.10 Intentionally Left Blank..................16
Section 3.11 Agreements...............................16
Section 3.12 Enforceability of the Loan Documents.....17
Section 3.13 Guaranty.................................17
Section 3.14 Relationship of the Borrower and
Subsidiaries.............................17
Section 3.15 Public Utility Holding Company Act.......18
Section 3.16 Survival of Representations and
Warranties...............................18
ARTICLE IV CONDITIONS OF LENDING............................18
Section 4.1 Representations and Warranties............18
Section 4.2 No Default................................18
Section 4.3 Supporting Documents and Other
Conditions................................18
Section 4.4 Loan Fees.................................20
Section 4.5 Closing...................................20
Section 4.6 Approval of Counsel for Bank..............20
Section 4.7 Conditions Precedent to the Advance.......20
ARTICLE V AFFIRMATIVE COVENANTS.............................21
Section 5.1 Notice....................................21
Section 5.2 Accounts and Reports......................22
Section 5.3 Maintain Insurance........................23
Section 5.4 Future Taxes..............................24
Section 5.5 Legal Existence, Properties, Stock
Ownership and Solvency....................24
Section 5.6 Warranties and Conditions.................24
Section 5.7 Further Agreements........................25
Section 5.8 Erisa.....................................25
Section 5.9 Environmental Matters.....................25
Section 5.10 Guarantors...............................26
ARTICLE VI NEGATIVE COVENANTS...............................26
Section 6.1 Sale of Assets............................26
Section 6.2 Reorganizations...........................28
Section 6.3 Liens.....................................28
Section 6.4 Guarantees................................28
Section 6.5 Indebtedness..............................29
Section 6.6 No Loans..................................29
Section 6.7 Investments...............................29
Section 6.8 Acquisitions..............................30
Section 6.9 Fiscal Year...............................30
ARTICLE VI A FINANCIAL COVENANTS............................30
Section 6A.1 EBITDA to Debt Service Coverage Ratio....30
Section 6A.2 Tangible Net Worth.......................30
Section 6A.3 Total Debt to EBITDA.....................31
ARTICLE VII EVENTS OF DEFAULT...............................31
Section 7.1 Events of Default........................31
ARTICLE VIII MISCELLANEOUS..................................34
Section 8.1 Cost of Loan..............................34
Section 8.2 Survival of Representations...............35
Section 8.3 Termination of Loan.......................35
Section 8.4 Applicable Law............................35
Section 8.5 Modification..............................35
Section 8.6 No Waiver of Rights by Bank...............35
Section 8.7 Interest..................................36
Section 8.8 Severability..............................36
Section 8.9 Successors and Assigns....................36
Section 8.10 Notices..................................37
Section 8.11 Incorporation of Terms...................38
Section 8.12 Counterparts.............................39
ARTICLE IX INDEMNIFICATION..................................39
Section 9.1 Net Payments......... ....................39
ARTICLE X WAIVER OF JURY TRIAL AND VENUE.. .................39
Section 10.1 Arbitration............ ................39
Section 10.2 Preservation and Limitation of
Remedies................ ...............40
Section 10.3 Waiver of Plea of Jurisdiction
or Venue................. ..............41
Schedules
Schedule 2.8 List of Guarantors
Schedule 3.1 Jurisdictions in which Transacting Business
Schedule 3.8 Property Leased from Others
Schedule 3.9 Capital Stock Issued by each Subsidiary
Schedule 6.3 Permitted Encumbrances
Exhibits
Exhibit A Promissory Note
Exhibit B Unconditional Guaranty
Exhibit C Indemnification Agreement
Exhibit D Advance Request
<PAGE>
LOAN AGREEMENT
This Loan Agreement, (the "Agreement") is made and entered into with an
effective date of July 15, 1997, by and between First Union National Bank,
London Branch, located at One Bishopsgate, London EC2N 3AB England (variously,
the "Bank" or the "Lender"), and Computer Products, Inc., a Florida corporation
(the "Borrower"), having a place of business at 7900
Glades Road, Boca Raton, Florida 33434.
R E C I T A L S
WHEREAS, the Borrower has requested that the Bank extend certain
acquisition financing to the Borrower and the Bank did so in accordance with the
terms and conditions set forth in a Loan Agreement entered into July 15, 1997;
and
WHEREAS, the parties have determined that certain corrections were
required to that earlier agreement, and desire to enter into this Agreement to
reflect these corrections and their agreement, but with an effective date as of
July 15, 1997;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"Advance" shall mean the funding of the entire amount of the Loan.
"Advance Request" shall mean the written request for the Advance as
identified in Section 2.4 hereof and shall among other things (i) specify the
date of the requested Advance, which shall be a Business Day; and (ii) specify
the initial Interest Period.
"Business Day" shall mean a weekday other than a day on which banks
are required or authorized to close in Jacksonville, Florida, and, London,
England and a money market city in the Federal Republic of Germany.
"Closing" shall have the meaning described in Section 4.1 hereof.
"Credit Facility" shall mean the loan described in Section 2.1
hereof.
"Credit Facility Maturity" or "Maturity" shall mean July 1, 2004 or
such earlier time, if any, at which the Loan shall become due.
"Credit Facility Note" shall mean the note evidencing the Credit
Facility .
"Control" shall have the meaning set forth in Section 7.1 hereof.
"Debt Service" shall mean scheduled principal repayment plus
interest expense for the period being measured.
"Default" or "Event of Default" shall have the meaning set forth in
Section 7.1 hereof.
"Default Rate" shall have the meaning set forth in Section 7.1
hereof.
"Direct Subsidiary" shall mean a Subsidiary in which the shares are
owned of record by the Borrower.
"DM" shall mean Deutschemarks issued by the Federal Republic of
Germany.
"Dollar" shall mean United States Dollars.
"EBITDA" shall mean net income plus interest plus taxes plus
depreciation plus amortization for the period being measured.
"Equivalent Amount" shall mean, in relation to the Advance, the
amount of Dollars converted from the relevant amount of Optional Currency at the
Bank's spot buying rates (based on the market rates then prevailing) for the
exchange of Dollars and Optional Currency on or about 11:00 a.m. (London,
England time) on the second Business Day immediately preceding the date on which
such calculation is made.
"Guaranty" shall mean the guaranty described in Section 2.8
hereof.
"Indebtedness" shall have the meaning given to such term in Section
6.5 hereof.
"Indirect Subsidiary" shall mean Subsidiary shares of which are
owned of record directly by a Subsidiary, and indirectly by the Borrower.
"Interest Period" shall have the meaning given to such term in
Section 2.4(a)(i) hereof.
"LIBOR-Based Rate" shall have the meaning given to such term in
Section 2.4 hereof.
"LIBOR Loan" shall have the meaning set forth in
Section 2.4(a)(i) hereof.
"Loan" or "Loans" refers to amounts outstanding under the Credit
Facility.
"LIBOR Reserve Percentage" shall mean the percentage which is in
effect from time to time under Regulation D of the Board of Governors of the
Federal Reserve System, as such regulation may be amended from time to time, as
the maximum reserve requirement applicable with respect to Eurocurrency
Liabilities (as that term is defined in Regulation D), whether or not any Lender
has any Eurocurrency Liabilities subject to such reserve requirement at that
time. The LIBOR-Based Rate for any Advance shall be adjusted as of the effective
date of any change in the LIBOR Reserve Percentage.
"Mandatory Prepayment" shall have the meaning set forth in
Section 6.1(e) hereof.
"Net Sale Price" shall have the meaning set forth in Section 6.1(e)
hereof.
"Optional Currency" shall mean Deutschemarks issued by the Federal
Republic of Germany, but excluding:
(a) any currency for which central bank or other governmental
authorization in the country of the currency is required to permit its use by
the Bank for lending under this Agreement (unless the authorization has been
obtained and is full force and effect at the relevant time); and
(b) any currency, the use of which is restricted or prohibited
by any request, directive regulation or guideline of any governmental body,
agency, department or regulatory or other authority (whether or not having the
force of law) in accordance with which any Bank is accustomed to act. As of the
date hereof, the above limitations do not apply to the above specifically
enumerated currency.
"Permitted Encumbrances" shall have the meaning set forth in
Section 6.3 hereof.
"Significant Subsidiary" shall have the meaning set forth in
Section 3.6 hereof.
"Solvent" shall mean, as to the entity, or entities for which a
determination is being made, that: (i) its or their assets exceed its or their
liabilities (with the calculation of liabilities excluding debt among the
Borrower and its Subsidiaries or between the Subsidiaries); (ii) that it or they
will have sufficient capital to engage in its or their business on an on-going
basis; and (iii) that it or they have the ability to pay its obligations as they
mature.
"Subsidiary" shall have the meaning set forth in Section 3.6
hereof.
"Tangible Net Worth" shall have the meaning set forth in Section
6A.2 hereof.
"Total Capitalization" shall have the meaning set forth in
Section 6.1(D) hereof.
"Total Debt" shall mean debt on payment obligation for borrowed
money plus leases required to be capitalized in accordance with GAAP.
ARTICLE II
CREDIT FACILITY
2.1 THE CREDIT FACILITY.
(a) Credit Facility A. Subject to the terms and conditions hereof,
the Bank agrees to extend to the Borrower the Credit Facility and make a loan
thereunder in one Advance in the aggregate amount of DM 21,600,000. The
principal amount of borrowings under the Credit Facility shall be repaid as
follows: (i) principal payments of DM 1,080,000.00 shall be due quarterly on
January 1, April 1, July 1 and October 1 of each year beginning October 1, 1999;
and (ii) the remaining outstanding principal balance together with all accrued
interest of borrowings under Credit Facility, if not paid earlier, shall be due
on July 1, 2004 ("Credit Facility Maturity").
(b) Credit Facility. The amount outstanding under the Credit
Facility is sometimes referred to herein as the "Loan" or "Loans". The
outstanding principal amounts of the Loans together with all accrued and unpaid
interest thereon, any amounts for which the Borrower may be directly or
indirectly liable to the Bank, all other amounts owed to the Bank by the
Borrower hereunder or under any instrument executed in connection herewith, plus
all amounts expended by the Bank or for which the Bank may have incurred direct
or contingent liability in connection with enforcement of this Agreement, as a
result of the Borrower's or any Subsidiary's breach of any agreement or for
which the Borrower or any Subsidiary may otherwise be liable under any of the
Loan Documents (as defined herein), including but not limited to all costs of
the Loans as provided in Section 8.1 shall be referred to sometimes hereafter as
the "Obligation."
2.2 NOTE. The obligation of the Borrower to repay the indebtedness
outstanding under the Credit Facility shall be further evidenced by a promissory
note in the form attached hereto as Exhibit A (the "Credit Facility Note"),
which shall be dated as of the date hereof and shall be executed and delivered
by the Borrower to the Bank simultaneously herewith. The Credit Facility Note
shall be deemed to reflect the aggregate unpaid principal amount of all
indebtedness outstanding under the Credit Facility whether or not the face
amount of such note is in excess of the amount actually outstanding from time to
time. The Credit Facility Note is sometimes referred to herein as the "Note".
2.3 OPTION TO ELECT INTEREST PERIODS ON THE LOANS. Subject to the terms
hereof, interest on the Loan shall accrue, at the LIBOR-Based Rate as such term
is defined herein and for an Interest Period as selected by Borrower. In the
event the Borrower has not selected an Interest Period initially or on a Reset
Date, or in the event the amount of the Credit Facility provides the notional
amount for a swap agreement between the Bank and the Borrower, interest shall
accrue thereon at the LIBOR-Based Rate with an Interest Period of one month,
with each Interest Period beginning on the first day of a month, except that the
initial Interest Period shall begin on the date hereof and end on the last day
of July, 1997.
2.4 INTEREST RATES.
(a) LIBOR-Based Rate.
(i) Interest Payable. Interest accrues on the Loan at a
LIBOR-Based Rate (a "LIBOR Loan") and shall be payable (A) on the last day of
the applicable Interest Period (as defined below); (B) upon Maturity; (C) upon
acceleration of repayment of the Loan; (D) if the LIBOR Interest Period (as
defined herein) is six months, on the ninetieth (90th) day of that Interest
Period, as well as on the last day of the Interest Period; or (E) while the Loan
is subject to an interest rate swap agreement, on the dates payments are
contemplated under the swap agreement to which the Loan is subject.
LIBOR shall mean the rate per annum for deposits of the Optional Currency
in question offered to the Bank in the London Interbank market two (2) Business
Days prior to the first day of such Interest Period for deposits of the Optional
Currency in question for a period of time comparable to the Interest Period for,
and in an amount comparable to the principal amount of, the Advance sought by
the Borrower. This determination of LIBOR is referred to herein as the "LIBOR
RATE."
(ii) Definitions. For purposes hereof, the following terms
shall have the meanings specified.
"LIBOR-Based Rate" shall mean the LIBOR Rate plus .75%
"London Banking Day" means any Business Day on which
commercial banks, are in fact open for international business, including
dealings in dollar deposits on the London interbank market in London, England.
"Reset Date" means a date on which a Loan is made and each
date on which an Interest Period commences.
"Reference Banks" means four major banks in the London
interbank market, designated by the Bank.
"Interest Period" shall mean a period of one month, two
months, three months or six months, as chosen by Borrower as provided herein;
provided that:
(1) any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the next succeeding
London Banking Day unless such London Banking Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding London
Banking Day;
(2) any Interest Period which begins on the last
London Banking Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Interest Period) shall end on the last London Banking Day of a calendar month;
(3) Borrower may not select an Interest Period for
a Loan if the scheduled last day in the selected Interest Period would extend
beyond the stated maturity for that Loan; and
(4) The Borrower may not have more than three (3)
LIBOR Loans with different Interest Periods under the Credit Facility at any one
time.
(b) Interest Billing Procedures. Interest will be billed in
accordance with the customary practices of the Bank or as otherwise agreed
between Bank and the Borrower; provided, however, the failure of the Bank to
send a bill shall not excuse the duty of the Borrower to ascertain and pay the
correct amount on the date it is due. The Borrower's duty to pay interest
payments hereunder shall be absolute and not contingent.
(c) Interest Determined on 360 Day Year. All interest payable
hereunder shall be at a per annum rate computed by dividing the applicable per
annum interest rate by three hundred sixty (360) and multiplying the result by
the actual number of days elapsed; provided, however, that if as to the Optional
Currency the convention is to compute interest on an Advance thereunder on the
basis of a 365 day year, the Bank will compute such interest on the basis of a
365 day year.
(d) Selection of Applicable Interest Period. Subject to the
provisions hereof, Borrower shall elect the Interest Period applicable thereto
for the Loan at the time of the Advance and before the end of each Interest
Period as provided and subject to the limitations herein.
(e) Notice and Manner of Borrowing. Borrower shall have delivered to
the Bank the Request (as defined in Section 4.7(a) hereof) not later than 11:00
a.m. London, England time, at least 4 Business Days before the Loan is to be
made. The Request shall specify (A) the date of such Loan, and (B) and the
duration of any Interest Period applicable thereto. The Loan shall be for
DM21,600,000.00.
(f) Intentionally Left Blank.
(g) Notices. Borrower has elected to borrow in Optional Currency,
and the Loan repayment shall be in DM, subject to the terms hereof.
(h) Indemnity. Borrower hereby indemnifies Bank against any loss or
expense which may arise or be attributable to Bank's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any loan
(i) as a consequence of any failure by Borrower to make any payment when due of
any amount due hereunder, for whatever reason including acceleration, in
connection with any loan bearing interest at the LIBOR-Based Rate, (ii) due to
any failure of Borrower to borrow on a date specified therefor in a notice of
borrowing, (iii) due to any payment, prepayment or conversion of any loan
bearing interest at the LIBOR-Based Rate on a date other than the last day of
the Interest Period therefor, or (iv) due to a conversion pursuant to Section
2.4(j) (ii) hereof. The amount of such loss or expense shall be determined by
the Bank, as the amount actually incurred by the Bank as a result of the
foregoing. Bank's calculations of any such loss or expense shall be furnished to
Borrower and shall be prima facie evidence thereof.
(i) Changed Circumstances.
(i) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of such
governmental authority, central bank or comparable agency:
(1) shall subject Bank to any tax, duty or other
charge with respect to this Note or shall change the basis of taxation of
payments to Bank of the principal of or interest on this Note or any other
amounts due in respect thereof (except for changes in the rate of tax on the
overall net income of Bank imposed by any governmental authority); or
(2) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by the Federal
Reserve Board), special deposit or similar requirement against assets of the
Bank, deposits with or for the account of the Bank, or credit extended by Bank,
or shall impose on Bank or the foreign exchange and interbank markets any other
condition affecting the Note; and the result of any of the foregoing is to
increase the cost to Bank of maintaining any LIBOR-Based Rate or; to reduce the
amount of any sum received or receivable by Bank under the Note in respect of
interest at the LIBOR-Based Rate; then the Bank shall promptly notify Borrower
of such fact and demand compensation therefor and, within fifteen (15) days
after such notice by Bank, Borrower agrees to pay to Bank such additional amount
or amounts as will compensate Bank for such increased cost or reduction. Bank
will promptly notify Borrower of any event of which it has knowledge which will
entitle Bank to compensation pursuant to this Subparagraph 2.4 (i); provided,
however, that Bank shall incur no liability whatsoever to Borrower in the event
it fails to do so. The amount of such compensation shall be determined, by the
Bank, as the amount actually incurred by the Bank as a result of the foregoing.
Bank's calculations of any such loss or expense shall be furnished to Borrower
and shall be prima facie evidence thereof.
(ii) If, at any time, Bank shall determine in good faith that,
by reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Optional Currency in the applicable amounts are not being
offered to Bank, then Bank shall promptly give notice thereof to Borrower.
Thereafter, until Bank notifies Borrower that such circumstances no longer
exist, the obligation of Bank to make the LIBOR-Based Rate available to Borrower
shall be suspended, and Borrower shall subject to the following sentence hereof,
repay in full the then outstanding principal amount of the Loan together with
accrued interest thereon together with amounts owed under Section 2.4(h).
Notwithstanding the foregoing, in the event that the Bank determines that
Optional Currency is not available to it, the Bank will make a good faith effort
to convert the outstanding Advance to an Advance payable in Dollars and the
Borrower shall be responsible for paying all costs or expenses arising from such
conversion, including those set forth in Section 2.4(h) hereof. In the event the
Bank is able to convert the Advance to an Advance payable in Dollars, the
Borrower will sign such amendments to the Loan Documents as the Bank may
reasonably request to make the Loan Documents consistent with the Bank's
standard terms for LIBOR-Based Loans payable in Dollars.
(iii) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, shall make it
unlawful or impossible for Bank to honor its obligations hereunder to make or
maintain any LIBOR-Based Rate or make an Optional Currency Advance, Bank shall
promptly give notice thereof to Borrower. Thereafter, until Bank notifies
Borrower that such circumstances no longer exists, (A) the obligations of Bank
to make available the LIBOR-Based Rate or Optional Currency Advances and the
right of Borrower to convert any rate to a LIBOR-Based Rate or receive Optional
Currency Advances shall be suspended, and (B) if Bank may not lawfully continue
to maintain a LIBOR-Based Rate or extend Optional Currency Advances, as the case
may be, to the end of the then current Interest Period applicable thereto, the
Loan shall, subject to the following sentence hereof, be immediately due in the
event of an Optional Currency Advance. Notwithstanding the foregoing, in the
event that the Bank determines that Optional Currency is not available to it,
the Bank will make a good faith effort to convert any outstanding Optional
Currency Advance to a Dollar Advance, and the Borrower shall be responsible for
paying all costs or expenses arising from such conversion, including those set
forth in Section 2.4(h) hereof. In the event the Bank is able to convert the
Advance to an Advance payable in Dollars, the Borrower will sign such amendments
to the Loan Documents as the Bank may reasonably request to make the Loan
Documents consistent with the Bank's standard terms for LIBOR-Based Loans
payable in Dollars.
(iv) The provisions of Sections 2.4 (h) and (i) shall
similarly inure to the benefit to any party to whom the Lender sells an
interest, or participates on interest herein, as authorized pursuant to Section
8.9 hereof.
(j) [Intentionally left blank]
(k) Survival of Agreement. Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section shall survive the payment in full of
principal and interest hereunder and under the Note.
2.5 MANDATORY PREPAYMENTS. In addition to the other repayment obligations
set forth herein, and subject to any prepayment penalties described in Section
2.4(h) hereof, the Borrower shall also pay to the Bank the amounts required to
be paid pursuant to Section 6.1 hereof. The Borrower shall simultaneously
reimburse the Lender for any loss or out-of-pocket expenses incurred by Lender
on account of such prepayment in the currency incurred, as set forth in Section
(h) hereof.
2.6 FEES. [Intentionally left blank]
2.7 BUSINESS DAYS. If any scheduled date of repayment of any portion of a
Loan shall be due on a day which is not a Business Day, subject to the
provisions of Section 2.4 hereof, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment.
2.8 GUARANTEES. As a condition to the Bank making of the Loans to the
Borrower, the Borrower shall cause each of the Subsidiaries described on
Schedule 2.8 hereof (sometimes collectively referred as the "Guarantors") to
execute and deliver their joint and several unconditional guaranty of repayment
of the Loans, which guaranty shall be in the form attached hereto as Exhibit B
(the "Guaranty").
2.9 MODE OF PAYMENT. All funds payable to the Bank hereunder shall be paid
to the Bank at its office set out in Section 8.10 hereof, or at such place as
otherwise directed by the Bank, in actually and finally collected funds in the
currency required under Section 2.12 hereafter on or before 2:00 P.M. (local
time) on the date when due. Payments shall not be deemed made or received until
they are received by the Bank as actually and finally collected funds in the
currency required under Section 2.12 hereafter. Any payment received after 2:00
P.M. (local time) on any Business Day shall, for the purposes of determining
time of payment under this Agreement as between the Borrower and the Bank only,
be treated as received on the next following business day; provided, however,
that this treatment shall not postpone the time of receipt for any other purpose
or computation, such as preference periods applicable to bankruptcy laws, or
dates relative to priority between creditors, or the like.
2.10 PREPAYMENT. Subject to the provisions of Section 2.4(i) hereof, upon
giving the Bank thirty (30) days prior written notice, the Borrower shall have
the right to prepay any amounts owed under the Credit Facility in whole or in
part, in integral multiples of not less than Equivalent Amount of $100,000.00.
Prepayments applied to the Credit Facility shall be applied in inverse order of
the scheduled principal payments thereunder. Each notice of prepayment shall
specify the prepayment date and the principal amount to be prepaid. All
prepayments of any Loan hereunder shall include accrued interest upon the
principal amount being prepaid to the date of the payment, and any amounts owed
pursuant to Section 2.4(i) hereof. Amounts prepaid under the Credit Facility may
not be reborrowed. Prepayment shall be in the currency specified in Section 2.12
hereof.
2.11 USE OF PROCEEDS. The proceeds of the Credit Facility are to be used
to provide financing for the acquisition of certain computer manufacturing and
ancillary facilities in Europe, as disclosed to the Bank.
2.12 PAYMENT. All payments (including prepayments) shall be made in the
Optional Currency in which advanced.
(a) The specification herein that payment be made in Optional
Currency, is of the essence hereof. If payment is not made in the currency due
under this Agreement (the "Contractual Currency") or if any court or tribunal
shall render a judgment or order for the payment of amounts due hereunder or
under the Credit Facility Note and such judgment is expressed in a currency
other than the Contractual Currency, the Borrower shall indemnify and hold the
Bank harmless against any deficiency incurred by the Bank in terms of the amount
received by the Bank to the extent the rate of exchange at which the Contractual
Currency is convertible into the currency actually received or the currency in
which the judgment is expressed (the "Received Currency") is not the reciprocal
of the rate of exchange at which the Bank would be able to purchase the
Contractual Currency with the Received Currency, in each case on the Business
Day following receipt of the Received Currency in accordance with normal banking
procedures. If the court or tribunal has fixed the date on which the rate of
exchange is determined for the conversion of the judgment currency into the
Contractual Currency (the "Conversion Date") and if there is a change in the
rate of exchange prevailing between the Conversion Date and the date of receipt
by the Bank, then the Borrower will, notwithstanding such judgment or order, pay
such additional amount as may be necessary to ensure that the amount paid in the
Received Currency when converted at the rate of exchange prevailing on the date
of receipt will produce the amount then due to the Bank from the Borrower
hereunder in the Contractual Currency.
(b) If Borrower shall wind up, liquidate, dissolve or become a
debtor in bankruptcy while there remains outstanding (i) any amounts owing to
the Bank hereunder or under the Note, (ii) any damages owing to the Bank in
respect of a breach of any of the terms hereof or (iii) any judgment or order
rendered in respect of such amounts or damages, the Borrower shall indemnify and
hold the Bank harmless against any deficiency in terms of the Contractual
Currency in the amounts received by the Bank arising or resulting from any
variation as between (i) the rate of exchange at which the Contractual Currency
is converted into another currency (the "Liquidation Currency") for purposes of
such winding-up, liquidation, dissolution or bankruptcy with regard to the
amount in the Contractual Currency due or contingently due hereunder or under
the Note or under any judgment or order to which the relevant obligations
hereunder or under the Notes shall have been merged and (ii) the rate of
exchange at which the Bank could, in accordance with normal banking procedures,
be able to purchase the Contractual Currency with the Liquidation Currency at
the earlier of (A) the date of payment of such amounts or damages and (B) the
final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy. As used in the preceding sentence, the
"final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy" shall be the date fixed by the
liquidator under the applicable law as being the last practicable date as of
which the liabilities of the Borrower may be ascertained for such winding-up,
liquidation, dissolution or bankruptcy before payment by the liquidator or other
appropriate person in respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and extend the financing
contemplated hereby, the Borrower represents and warrants to the Bank as
follows:
3.1 ORGANIZATION, POWERS, ETC. The Borrower (a) is a corporation duly
incorporated and organized, validly existing and its status is active or current
under the laws of each jurisdiction in which it is transacting business; (b) has
all requisite corporate power and authority and all requisite licenses, permits
and authorizations to own, operate, lease, assign, mortgage, sell or otherwise
hypothecate or dispose of its assets and to carry on its business as now
conducted and as proposed to be conducted pursuant to this Agreement; (c) is
duly qualified or licensed to transact business and is in good standing in the
every other jurisdiction in which failure to so qualify or be licensed would
have a material adverse effect on its business or financial condition or its
ability to perform its agreements hereunder, which jurisdictions are set forth
on Schedule 3.1 hereof, and (d) has the full power and authority to enter into,
execute and perform those Loan Documents (as defined herein) to which it is a
party. This Agreement, the Note, the Guaranty, and any and all other documents,
if any, required or contemplated to be executed and/or performed by the Borrower
or each Guarantor hereunder are referred to collectively herein as the "Loan
Documents".
3.2 AUTHORIZATION OF LOAN, ETC. The execution, delivery, and performance
of the Loan Documents to which it is a party or a signatory:
(a) have been duly authorized by all requisite corporate action of
the Borrower and each Subsidiary (as defined herein);
(b) do not require any consent or approval of shareholders of the
Borrower or any Subsidiary which has not been obtained;
(c) will not, in any respect material to the financial condition of
the Borrower and the Subsidiaries taken as a whole, violate or contravene
(i) any provisions of law applicable to the Borrower or
any Subsidiary;
(ii) any order, rule or regulation of any regulatory
authority, court or other agency of government applicable to the Borrower or any
Subsidiary;
(iii) any provision of the Articles of Incorporation or the
Bylaws of the Borrower or any Subsidiary; or
(iv) any agreement or obligation to which the Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or any of its
or their property is or may be bound, or be in conflict with, result in a breach
of or constitute (with or without notice or lapse of time, or both) a default
under, any such agreement or other instrument; and
(d) shall not result in the creation of any lien of any nature
whatsoever upon any property or assets of the Borrower or any Subsidiary.
3.3 LITIGATION, ADMINISTRATIVE AND REGULATORY PROCEEDINGS. There are no
actions, suits, investigations or proceedings (whether or not purportedly on
behalf of the Borrower or any Subsidiary, or any of its or their respective
officers, directors or management officials in their capacities as such),
pending or, to the knowledge of the Borrower or any Subsidiary or any of the
above officers, directors or management officials, threatened against or
affecting the Borrower or any Subsidiary or the above officers, directors or
management officials in their capacities as such, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, regulatory agency or instrumentality, domestic or
foreign, which are reasonably expected to be determined adversely to the
Borrower or any Subsidiary and which would result in any material adverse change
in the business or financial condition of the Borrower and the Subsidiaries
taken as a whole nor are there any factual situations which might reasonably be
expected to result in any such action, suit, investigation or proceeding which
are known to the Borrower or any Subsidiary or the above officers, directors or
management officials, but unasserted at the present time which would result in a
material adverse change in the business or financial condition of the Borrower
and the Subsidiaries taken as a whole. Neither is the Borrower nor any
Subsidiary in default of any law, rule, regulation, ordinance or order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which would result
in a material adverse change in the business or financial condition of the
Borrower and the Subsidiaries taken as a whole.
3.4 PAYMENT OF TAXES AND OTHER CHARGES. The Borrower and each Subsidiary
has duly filed, paid and discharged, all federal, state and local tax returns
and taxes, and other governmental assessments and other charges, liens or claims
levied or imposed, which if unpaid would become a lien or charge for a material
amount upon the property, assets, earnings or business of the Borrower or any
Significant Subsidiary, or have an adverse effect on its financial condition or
its ability to perform its agreements hereunder, as the case may be. The
Borrower knows of no material tax or other assessment against it or any
Significant Subsidiary, which has not been properly reserved against as
reflected in the financial statements provided to the Bank in accordance with
Section 5.2 hereof.
3.5 FEDERAL RESERVE REGULATIONS.
(a) Neither the Borrower nor any Subsidiary is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation G of the Federal Reserve Board ("FRB"));
(b) No part of the proceeds of the Loans shall be used to purchase
or carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock; and
(c) No part of the proceeds of the Loans shall be used for any
purpose that violates, or which is inconsistent with, the provisions of
Regulations G, T, U or X of the FRB.
3.6 SUBSIDIARIES. A complete list of the subsidiaries of the Borrower as
of the date hereof, as well as the place of incorporation and a list of all
jurisdictions in which each is transacting business is set forth in Schedule 3.1
hereof. This Schedule and Schedule 3.9 hereof shall be updated by Borrower
promptly of the time any new Subsidiary is added in accordance with Section 6.8
hereof. "Subsidiary" shall mean any corporation, partnership, or any other
entity either properly classified as a subsidiary of the Borrower for purposes
of generally accepted accounting principles ("GAAP") or as to which the Borrower
or any of its Subsidiaries exercises or has the right, whether by contract or
otherwise, to exercise control of its business. Each Subsidiary is a corporation
duly incorporated and organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and principal place of business,
has all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
has full power and authority to enter into, execute and perform those Loan
Documents to which it is a party. "Significant Subsidiary" shall for all
purposes hereunder except as further limited in Section 5.5(c) hereof, mean
those Subsidiaries selected by Borrower owning sufficient assets which when
aggregated with the assets of the Borrower equal at least 95% of the aggregate
amount of the consolidated assets of the Borrower and all Subsidiaries;
provided, however, that any Subsidiary which borrows money from the Bank shall
be a Significant Subsidiary.
3.7 CONSENTS, ETC. No consent, approval, authorization of, or
registration, declaration or filing with any governmental authority (federal,
state or local, domestic or foreign) is required in connection with the
execution or delivery by the Borrower or any Subsidiary of any Loan Document to
which it is a party, or the performance of or compliance with the terms,
provisions and conditions hereof or thereof.
3.8 PROPERTIES. The Borrower and each Subsidiary has good and marketable
legal and equitable title to all of its properties and assets as of the date
hereof necessary for the conduct of its business, except property leased from
others, with each lease in which the annual rent is in excess of Fifty Thousand
Dollars ($50,000) being described in Schedule 3.8. As of the date of this
Agreement, all properties and assets of the Borrower and each Significant
Subsidiary shall be free and clear of all interests, claims, reversionary rights
or interests, mortgages, pledges, liens, restrictions, forfeitures, charges,
attachments, levies, encumbrances or other matters adversely affecting the
Borrower's title hereof except (i) as contemplated herein; (ii) for Permitted
Encumbrances (as defined in Section 6.3 hereof), and (iii) Liens securing
obligations on the date hereof which are not obligations for borrowed money in
excess of $250,000 individually or $1,000,000 aggregate and there have not been
filed or executed any UCC financing statements, amendments or continuations
naming the Borrower as debtor, except for lease filings and those filed in
connection with the indebtedness described above.
3.9 OWNERSHIP. The respective classes of capital stock of each Subsidiary,
and the number of issued and outstanding shares of each are as set forth in
Schedule 3.9 hereof. The Borrower owns directly or indirectly, as reflected on
Schedule 3.9 hereof, all of the issued and outstanding stock of each Subsidiary,
except for stock held by other persons as set forth on Schedule 3.9 hereof,
which ownership is required by law, or is non-voting, and in either case none of
which vests control of any Subsidiary in any person other than Borrower. There
are no rights, warrants, options or similar agreements or understandings in
existence pursuant to which any other person may acquire any capital stock, or
the right to vote such stock, of any Subsidiary, or otherwise acquire control of
any Subsidiary. "Control" shall have the meaning ascribed to such term in
Section 7.1 hereof.
3.10 ERISA.
(a) The Borrower and each Subsidiary is in compliance in all
material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations and
interpretations thereunder. With respect to any of the pension or employee
benefit plans maintained by the Borrower, each Subsidiary or other affiliates
(hereinafter called a "Plan") subject to Title IV of ERISA, no Accumulated
Funding Deficiency (as defined in Section 302(a)(2) of ERISA and Section 412(a)
of the Code) has occurred. No Reportable Event (as defined in Section 4043(b) of
ERISA) exists in connection with any such Plan which presents a material risk
for the termination of such Plan by the Pension Benefit Guaranty Corporation
("PBGC") or for the appointment of a trustee to administer such Plan or which
would cause a Borrower or any Subsidiary to incur any material liability to the
PBGC. "Plan" for purposes of this Agreement includes any Plan maintained by a
member of a Controlled Group (as defined in Section 1563 of the Code) of which
Borrower or any Subsidiary is part, or any such Plan to which Borrower or any
Subsidiary, or any member of the Controlled Group, is required to contribute on
behalf of any of its employees.
(b) Neither the Borrower nor any Subsidiary is a member of any
multi-employer Plan.
3.11 AGREEMENTS. Neither the Borrower nor any Subsidiary is a party to any
agreement or instrument or subject to any charter or other corporate restriction
materially adversely affecting the business, properties or assets, operations or
condition (financial or other) of the Borrower and the Subsidiaries, taken as a
whole, or its ability to perform its agreement under the Loan Documents to which
it is a party. Neither the Borrower nor any Significant Subsidiary is in default
in the performance, service or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party,
which may result in a material adverse change in the condition, financial or
otherwise of the Borrower and its Subsidiaries taken as a whole, or its ability
to perform its agreements hereunder.
3.12 ENFORCEABILITY OF THE LOAN DOCUMENTS. The Loan Documents and the
performance of the Borrower's and each Subsidiary's obligations under those Loan
Documents to which it is a party or a signatory, or under any other instrument
executed or to be executed by or on its behalf hereunder constitute, or upon
execution and delivery thereof shall constitute the legal, valid and binding
obligations of the Borrower or such Subsidiary, enforceable against the Borrower
or such Subsidiary, as the case may be, in accordance with their respective
terms.
This representation is subject to the qualification that enforcement of
the foregoing described loan documents is subject to:
a. equitable remedies;
b. bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights generally;
c. any restrictions or constraints peculiarly applicable to
Bank; and
d. as to certain remedial, waiver and other provisions of the Loan
Documents, other provisions of general Florida law.
3.13 GUARANTY. All representations and warranties of each of the
Guarantors in the Guaranty are true and correct in all material respects.
3.14 RELATIONSHIP OF THE BORROWER AND SUBSIDIARIES. The Borrower and the
Subsidiaries are engaged as a globally integrated group of designers and
producers of electronic products and subsystems, providing the required
services, credit and other facilities for those integrated operations. The Loan
made under the Credit Facility is for the purpose of financing acquisitions that
will enhance the integrated operations of the Borrower and the Subsidiaries, and
the Borrower and Subsidiaries expect to derive benefit, directly or indirectly,
from the Loans, both individually and as a member of the integrated group,
because the financial success of the operations of the Borrower and each
Subsidiary is dependent upon the continued successful performance of the
integrated group as a whole.
3.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
3.16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The foregoing
representations and warranties shall be true and correct as of the date hereof
and at all times during the term of the Loan.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of the Bank to extend the financing contemplated hereby is
subject to the terms of this Agreement and to the following conditions
precedent:
4.1 REPRESENTATIONS AND WARRANTIES. On the date of execution of this
Agreement, such date being sometimes referred to hereafter as the "Closing," the
representations and warranties of the Borrower and the Subsidiaries contained
herein or in any Loan Document shall be true and correct in all material
respects.
4.2 NO DEFAULT. On the date hereof, after giving effect to such borrowing
hereunder, the Borrower shall have observed and performed all the terms,
conditions and agreements set forth herein, or on its part to be observed or
performed in all material respects, and no Event of Default specified in Article
VII hereof, nor any other event which, upon notice or lapse of time or both,
would constitute an Event of Default shall have occurred.
4.3 SUPPORTING DOCUMENTS AND OTHER CONDITIONS. On the date hereof, and in
any event prior to the Advance hereunder, the Borrower shall have delivered to
the Bank the following:
(a) a certificate of the Secretary of State or other applicable
governmental authority of each state or country in which Borrower or a Guarantor
is transacting business, certifying:
(i) that attached thereto is a true and complete copy of the
Articles of Incorporation or other charter documents of the Borrower and each
Guarantor as of a date within ten (10) days of the date hereof; and
(ii) that the Borrower and each Guarantor is in good standing,
or its status is active where the applicable jurisdiction is Florida, in that
State or other applicable jurisdiction;
(b) a certificate of a duly authorized officer of the Borrower and
each Subsidiary, dated the date of such borrowing, certifying:
(i) that attached thereto is a true and complete copy of the
Bylaws of the Borrower or Subsidiary, and the articles of incorporation for each
Subsidiary other than a Guarantor, as applicable, as in effect on the date of
such certification;
(ii) that the Borrower or Subsidiary is in good standing, or
its status is active where the applicable jurisdiction is Florida, in each
jurisdiction in which it is transacting business;
(iii) that attached thereto is a true and complete copy of
resolutions of the Board of Directors of the Borrower or Subsidiary, as
applicable, directing the execution and delivery by the Borrower of the Loan
Documents to which it is a party, indicating the officers of the Borrower or
Subsidiary, as applicable, authorized to execute such instruments and act on its
behalf, which resolutions are in full force and effect without modification on
the date of such certification;
(iv) the incumbency and signatures of the officers of the
Borrower or each Subsidiary executing the Loan Documents to which it is a party;
and
(v) that the Articles of Incorporation or other charter
documents of the Borrower or Subsidiary, as applicable, described in Section
4.3(a)(i) or Section 4.3(b) hereof have not been amended and are true and
complete as of the date hereof;
(c) a certificate of a duly authorized officer of the Borrower and
each Guarantor to the effect that after giving effect to the transaction
contemplated herein (i) the Obligation of the Borrower will not be greater than
the value of the consolidated property of the Borrower at a fair valuation; (ii)
the Borrower will have sufficient capital to engage in its business on an
ongoing basis; (iii) the Borrower will have the ability to pay its Obligations
as they mature;
(d) the Credit Facility Note duly executed by the Borrower;
(e) Indemnification Agreement, substantially in the form attached
hereto as Exhibit C;
(f) the Guaranty duly executed by the Guarantors;
(g) the opinions of counsel to the Borrower, Stevens-Arnold, Inc.,
JETA Power Systems, Inc., RT Holding Corp. and Heurikon Corp. from attorney(s)
licensed to practice law in the states of such entities organizations in form
attached reasonably acceptable to the Bank;
(h) the ISDA Master Agreement dated as of July 14, 1997 between
First Union National Bank and the Borrower (the "ISDA Master Agreement") and any
other documents required by the terms thereof to be delivered in connection
therewith;
(i) searches from each jurisdiction in which it and each Subsidiary
is transacting business within the State of Florida, Wisconsin, California and
Massachusetts demonstrating that there are no liens upon the Borrower's or any
Subsidiary's property except as permitted hereunder; and
(j) all other additional opinions, documents, certificates and other
assurances that the Bank or its counsel may reasonably require.
4.4 LOAN FEES. The Borrower shall pay at the time of execution hereof all
costs of the Bank incurred through such dates as provided in Section 8.1 hereof.
4.5 CLOSING. This Agreement, the Note, and the Guaranty shall by executed
by the Borrower or Guarantor, as the case may be, at the place set forth on the
signature page hereof and the execution of this Agreement by the Bank shall
occur in Charlotte, North Carolina, and the delivery of the originals of such
documents to the Bank shall occur at the office of Bank's agent in Charlotte,
North Carolina, and the delivery of the balance of the documents described in
Article IV hereof shall be at a time agreed upon by the parties hereto, at the
offices of Holland & Knight LLP, Suite 3000, 701 Brickell Avenue, Miami,
Florida.
4.6 APPROVAL OF COUNSEL FOR BANK. All legal matters incident to this
Agreement shall be reasonably satisfactory to Messrs. Holland & Knight LLP,
counsel for the Bank.
4.7 CONDITIONS PRECEDENT TO THE ADVANCE. The following conditions, in
addition to any other requirements set forth in this Agreement, shall have been
met or performed on or prior to the date the Advance hereunder shall be made by
the Bank:
a. Request to Make the Advance. The Borrower shall have delivered to
the Bank a request to make an Advance which request shall be substantially in
the form attached hereto as Exhibit D (the "Request).
b. No Default. On the date of the Request the Borrower and each
Subsidiary shall be in compliance in all material respects with all the terms
and provisions set forth in the Loan Documents on its part to be observed or
performed, and no Event of Default shall have occurred or be continuing at such
time, or will occur upon the making of the Advance.
c. Correctness of Representations. All representations and
warranties made by the Borrower and any Guarantor herein or in the other Loan
Documents or otherwise in writing in connection herewith shall be true and
correct with the same effect as though the representations and warranties had
been made on an as of the proposed date of the Advance, except to the extent
such representation and warranty relates to an earlier date.
d. No Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as whole, from such condition as it existed on the date of
the most recent financial statements of such person delivered prior to the date
hereof.
e. Further Assurances. The Borrower shall have delivered such
further documentation or assurances as the Bank may reasonably require.
f. Advance Limitations. The Request for an Advance shall be
irrevocable, made in the time frame as specified in Section 2.4 hereof, and
shall be for the amount of the Loan specified in Section 2.1 hereof.
ARTICLE V
AFFIRMATIVE COVENANTS
Each of the Borrower and the Subsidiaries consents and agrees that, from
the effective date and so long as this Agreement shall remain in force and
effect, and until payment in full of the principal and interest due under the
Notes and until full satisfaction of the Obligation described hereunder, it
shall:
5.1 NOTICE. Give prompt written notice to the Bank of:
a. the institution, or threat of institution, or the occurrence of
facts known to it which might reasonably be expected to result in, any action,
suit, investigation or proceeding instituted by or against the Borrower or any
Subsidiary or the officers, directors or management officials of the Borrower or
any Subsidiary in their capacity as such, at law or in equity, in any federal or
state court or before any federal, state, municipal or other governmental
department, commission, board, bureau agency, regulatory authority or
instrumentality, domestic or foreign, which seeks damages or other relief in
excess of One Million Dollars ($1,000.000.00) or the Equivalent Amount thereof
if such judgment is rendered in other than Dollars, or which if determined
adversely to the Borrower or any Subsidiary would have a material adverse effect
upon the business or financial condition of the Borrower and the Subsidiaries,
taken as a whole; and
b. any other action, event or condition of any nature which, in the
reasonable opinion of the Borrower, with or without notice, or lapse of time, or
both, constitutes or would constitute an Event of Default under this Agreement.
Each notice required to be delivered pursuant to this Section 5.1
shall include a reasonably detailed description of the matter, the amount in
controversy (or other non-monetary relief sought or both), the title of the
applicable forum, style of the proceeding, case number, docket number and the
like, and the attorney or law firm (together with address) providing
representation on behalf of the Borrower, or officers, directors or management
officials of the Borrower, in their capacities as such, with respect to each
item of litigation listed.
5.2 ACCOUNTS AND REPORTS. Maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently applied,
and furnish or cause to be furnished to the Bank copies of each of the
following:
a. Within ninety (90) days after the end of its fiscal year, (i) an
annual consolidated financial statement of the Borrower and its Subsidiaries,
and related statements of income, shareholders' equity, and changes in position
for such fiscal year, all with accompanying notes, in reasonable detail and
stating in comparative form the figures as of the end of and for the previous
fiscal year, audited without scope limitations by an independent certified
public accountants of recognized standing selected by the Borrower and
acceptable to the Bank (the foregoing shall have been certified pursuant to an
audit as presenting fairly the financial position of the Borrower and its
Subsidiaries, and the results of operations and changes in financial position
for the fiscal year, without qualification, in conformity with GAAP consistently
applied together with a copy of the management letter or a statement that none
was issued); provided, however, that the delivery of the Borrower's Form 10-K
for that fiscal year shall satisfy this requirement, so long as the financial
statement was prepared by either Arthur Anderson or by an accounting firm
reasonably satisfactory to the Bank; (ii) a compliance certificate executed by
the Chief Financial Officer certifying that as of the date thereof the Borrower
is in compliance in all material respects with the terms hereof and itemizing
the computations performed to test such compliance as to Sections 6.1 or 6.8 or
Article 6A hereof, in sufficient detail (including the aggregate amount of all
sales required to be considered in determining if any amounts are required to be
paid under Section 6.1 hereof) to permit the Bank to relate the items involved
in the computation to the figures shown on the financial statements; and (iii) a
copy of accountants' management letter or statement that none was prepared.
b. Within 120 days after the end of its fiscal year, a consolidating
financial statement of the Borrower and its Subsidiaries, which may be
unaudited.
c. Within forty-five (45) days of the end of each fiscal quarter,
(i) a detailed profit and loss statement and balance sheet of the Borrower and
its Subsidiaries, each of which may be compiled by the Borrower, and need not be
audited or reviewed by an independent accountant (each of the foregoing must
reflect GAAP, applied consistently with the annual financial statements);
provided, however, that the delivery of the Borrower's Form 10-Q for the fiscal
quarter then ending shall satisfy this requirement; (ii) a compliance
certificate executed by the Chief Financial Officer of the Borrower, certifying
that as of the date thereof, the Borrower is in compliance in all material
respects with the terms hereof and itemizing the computations performed to test
such compliance as to Sections 6.1 or 6.8 or Article 6A hereof in sufficient
detail (including the aggregate amount of all sales required to be considered in
determining if any amounts are required to be paid under Section 6.1 hereof) to
permit the Bank to relate the items involved in the computation to the figures
shown on the financial statements; and (iii) a certification by the Chief
Financial Officer as to compliance with Section 5.5(c) hereof.
d. Promptly upon becoming available, (but no later than ninety (90)
days after the end of Borrowers fiscal year in the case of the delivery of Form
10-K and forty-five (45) days after the end of Borrower's fiscal quarter in the
case of the delivery of Form 10-Q), copies of all financial statements, reports,
and notices sent by the Borrower to its stockholders, and of all regular and
periodic reports and other material (including copies of all registration
statements and reports under the Securities Act of 1934, as amended) filed by
the Borrower and any securities exchange or any governmental authority or
commission, except material filed with governmental authorities or commissions
in the ordinary course of the business of the Borrower and which does not relate
to or disclose any material adverse effect to the affairs of the Borrower.
e. Promptly, from time to time, such other information regarding the
operation, business affairs and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
5.3 MAINTAIN INSURANCE.
a. Keep the insurable properties of the Borrower and its
Subsidiaries adequately insured with sound and reputable insurers to the extent
and against such risks (including fire and other risks commonly insured against
by extended coverage) as is customary with companies in the same or similar
businesses.
b. Maintain in full force and effect public liability insurance
against claims for personal injury or death or property damage occurring upon,
in, or about or in connection with the use of any properties owned, occupied or
controlled by the Borrower or any of its Subsidiaries.
5.4 FUTURE TAXES. Pay all taxes and other governmental assessments as the
same shall become due, excepting only taxes and governmental assessments which
the Borrower or any Significant Subsidiary is contesting in good faith and for
which the Borrower or any Significant Subsidiary has set aside adequate
reserves, including reserves for interest with respect thereto in the manner
provided hereafter.
5.5 CORPORATE EXISTENCE, PROPERTIES, STOCK OWNERSHIP AND SOLVENCY.
a. Except as otherwise permitted by Section 6.2 hereof, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect the Borrower's and the Significant Subsidiaries' corporate existence, and
its and their rights, licenses, permits and franchises and charters, and conduct
and operate its and their business in substantially the manner in which the
business is presently conducted and operated (subject to changes in the ordinary
course of business); and at all times maintain, preserve and protect all
material franchises and trade names; and comply in all material respects with
all laws, statutes, regulations and ordinances of any governmental entity or
agency thereof, applicable to the Borrower or any Significant Subsidiary;
b. maintain the percentage share ownership of each Subsidiary as in
effect on the day hereof, as well as control of the right to vote such stock,
and to own and control 100% of the title, and control the right to vote, the
stock of any Subsidiary created after the date hereof;
c. the Borrower and each Significant Subsidiary, and the Borrower
and all Subsidiaries on a consolidated basis, will remain Solvent at all times;
provided, however, that for purposes of the foregoing, a Significant Subsidiary
will mean each Subsidiary selected by the Borrower having assets which, when
aggregated with the assets of the Borrower, equal or exceed 80% of the
consolidated assets of the Borrower and all Subsidiaries, except that each
Subsidiary borrowing money from the Bank shall be a Significant Subsidiary; and
d. each Subsidiary other than a Significant Subsidiary will also be
Solvent at all times except to the extent it is not Solvent because of other
indebtedness permitted hereunder.
5.6 WARRANTIES AND CONDITIONS. Do all acts or refrain from action, as
necessary to cause all of the representations and warranties set forth in
Article III hereof to continue to be true in all material respects at all times
that this Agreement is in effect.
5.7 FURTHER AGREEMENTS. Comply with any and all procedures reasonably
established by the Bank for processing, handling and accounting for the Loans
and all payments involved, and the documents or instruments pertaining thereto.
The Borrower and each Subsidiary shall execute and deliver to the Bank all such
additional agreements, documents, instruments and affidavits necessary or as may
reasonably be required by the Bank to evidence and accurately account for and
ratify all amounts advanced or payable pursuant to this Agreement or any of the
Obligations. The Borrower and each Subsidiary shall pay all taxes (other than
income or similar taxes of the Lender), recording fees and other reasonable
costs incurred by the Bank in connection with such subsequent loans. At the
option of the Bank, the Note may be modified or renewed, an additional note may
be executed, or overdrafts may be allowed on any account of the Borrower or any
Subsidiary with the Bank, or advances made against uncollected funds under
drafts presented by the Borrower or any Subsidiary to the Bank for collection.
5.8 ERISA. Comply in all material respects with the provisions of ERISA to
the extent applicable to any pension or welfare benefit plan maintained for any
of its or their employees, not incur any material accumulated funding
deficiency, as defined in Section 302(a)(2), or any material liability to the
Pension Benefit Guarantee Corporation ("PBGC"); not permit any Reportable Event,
as defined in Section 403(b) of ERISA, or other event to occur which may
indicate that its plan is not sound, which constitutes grounds for termination
of a plan by the PBGC, which would be the basis for the PBGC to assert a
material liability against the Borrower or any Subsidiary, or which may result
in the imposition of a lien on any of the Borrower's or any Subsidiary's assets
or which constitutes grounds for the appointment by the appropriate United
States District Court of a trustee to administer any Plan; and notify the Bank
in writing promptly after it has come to the attention of the officers of the
Borrower or any Subsidiary of the assertion or threat of any Reportable Event,
the existence of any Reportable Event or other event which may give rise to any
of the foregoing events.
5.9 ENVIRONMENTAL MATTERS. Represents to the Bank that the places of
business operated by the Borrower and its Significant Subsidiaries have not in
the past been used by Borrower, any Significant Subsidiary, or, to its
knowledge, any other party, are not presently being used, and will not in the
future be used for the handling, storage, transportation, or disposal of
hazardous or toxic materials in any manner not in compliance with applicable
law. The Borrower agrees to indemnify, defend, and hold the Bank harmless from
and against any loss to the Bank (including, without limitation, reasonable
attorneys' fees) incurred by the Bank as a result of such past, present or
future use, handling, storage, transportation, or disposal of hazardous or toxic
materials.
5.10 GUARANTORS. The Borrower agrees that it will promptly forward to the
Guarantors any notices or documents or information which it is required
hereunder or under the Loan Documents to forward to the Bank.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower and the Subsidiaries covenant and agree that, during the term
of this Agreement, neither the Borrower nor the Subsidiaries will:
6.1 SALE OF ASSETS. Sell, lease or otherwise dispose of any shares of
stock or other interest in any Significant Subsidiary, or of any other assets of
the Borrower, or allow any of its Significant Subsidiaries to do so, in a single
transaction or series of transactions, without the prior written consent of the
Bank, which may be withheld at the Bank's sole discretion; provided, however,
that the Borrower may sell, lease or dispose of assets in the ordinary course of
business and provided, further, that the foregoing by itself shall not act to
prevent the Borrower or any Subsidiary, so long as there does not then exist an
Event of Default or so long as no Event of Default is created as a result of
such sale, lease or disposition, from selling, leasing or otherwise disposing
of, or engaging in:
(a) subject to the restriction set forth in Section 6.1(d) hereof, a
sale and leaseback involving assets (x) in an amount not to exceed, in the
aggregate for each such twelve month period ten percent (10%) of the Borrower's
consolidated Net Tangible Assets measured on a quarterly basis based on the
twelve (12) month period then ending, with the first twelve (12) month period
being the period of July 1, 1996 through June 30, 1997; or (y) in transactions
in which the resulting lease is less than one year or the proceeds of the sale
of which shall be used to purchase new assets or retire existing indebtedness.
"Net Tangible Assets" shall mean such amount as computed in accordance with
GAAP;
(b) the real property and facilities of Stevens - Arnold, Inc.,
located at 7 Elkin Street, South Boston, Massachusetts;
(c) subject to the restriction set forth in Section 6.1(d) hereof,
the real property and facilities located at 13-15 Shing Wan Road, Hong Kong (the
"Hong Kong Property"); and
(d) any other sale not otherwise described in (a) and (b) above in
which (A) the aggregate amount of the sale of assets in a calendar year does not
exceed ten percent (10%) of the total Capitalization or (B) there is paid to the
Bank, together with amounts owed under Section 2.4(i) hereof, within twenty-four
(24) months after the sale of such assets, an amount equal to fifty percent
(50%) of the Net Sale Price (which payment is referred to herein as a "Mandatory
Prepayment"), if the Net Sale Price therefore, together with the Net Sales Price
for any other item sold in that calendar year, including, sale price of assets
sold under (a) above, is for an aggregate amount in excess of ten percent of the
Total Capitalization; provided, however, that the foregoing shall not permit any
sale or other disposition not otherwise permitted hereunder where the aggregate
amount of the Net Sale Price of assets sold or disposed of under this subsection
or Subsection 6.1(a) hereof over the term of this Agreement including the
expected Net Sale Price of the intended sale or disposition, exceeds twenty
percent of the Total Capitalization as calculated at the time of the proposed
sale or disposition; provided, further, however, that the Net Sale Price shall
not include and the Mandatory Prepayment shall not be required in respect
thereof to the extent proceeds received by the Borrower or any Subsidiary from
the sale of assets to the extent such moneys are reinvested by the Borrower or a
Subsidiary in making an acquisition permitted by Section 6.8 hereof or acquiring
other capital assets within twenty-four (24) months from the date of sale
provided, however, pending such reinvestment, such proceeds are to be maintained
for a period not to exceed twenty-four (24) months, in short term investments
(as defined under GAAP) pending such reinvestment described above. The amounts
required to be paid to the Bank under this subsection (e) are referred to herein
as a Mandatory Prepayment. The cash proceeds from the sale of the Hong Kong
Property will also be treated as subject to the requirement that 50% of the Net
Sale Price be paid to the Bank as a Mandatory Prepayment and the requirement
that the Net Sales Price be invested for the period and in the investments
specified above, all as if the sale had been a sale permitted only pursuant to
Section 6.1(d) hereof, provided that the proceeds from the sale of the Hong Kong
Property shall not be included in calculating whether the aggregate amount of
sales of assets is in excess of 20% of Total Capitalization. Borrower agrees
that (i) all sales proceeds invested as provided herein if not previously
reinvested in acquisitions permitted under Section 6.8 hereof or acquisition of
capital assets, or [(ii) at the option of the Borrower, an equivalent amount of
cash] will become subject to a lien in favor of the Bank if there occurs an
Event of Default and will promptly enter into a security agreement with the Bank
in form acceptable to the Bank upon the occurrence of an Event of Default.
Mandatory Prepayments made hereunder shall be applied to installments of
principal of indebtedness owed by Borrower or any Subsidiary to the Bank in the
inverse order of scheduled monthly maturity of such indebtedness. "Total
Capitalization" shall mean debt or payment obligations for borrowed money with a
stated maturity longer than 365 days plus Net Worth (as such term is computed
under GAAP) determined for the Borrower and its Subsidiaries on a consolidated
basis. "Net Sale Price" shall mean the aggregate cash consideration paid to the
Borrower and Subsidiaries as result of the sale, less the expenses involved in
selling the assets, including any taxes payable as a result of such transaction.
6.2 REORGANIZATIONS. Dissolve, liquidate or discontinue its normal
operations, or merge, consolidate or enter into any syndicate or other
combination with any corporation, firm or partnership, or transfer any of its
accounts receivable or enter into a joint venture or partnership, or offer or
enter into any agreement or memorandum of intent or understanding or the like to
do any of the above, without the prior written consent of the Bank, unless one
Subsidiary merges or consolidated with another Subsidiary in a transaction where
the assets and liabilities of one of the Subsidiaries become the assets and
liabilities of another Subsidiary.
6.3 LIENS. Attempt to create, incur, assume or suffer to be created,
incurred or assumed, or permit, any claims, interest, mortgage, lien, charge,
security interest, pledge or encumbrance on any of the Borrower's or any
Significant Subsidiary's assets; provided, however, that this Section shall not
apply to (i) such claims, interests, mortgages, liens, charges, security
interests, pledges or encumbrances upon the Borrower's and Subsidiaries'
Property, Plant and Equipment which in the aggregate secure indebtedness owed to
persons or entities other than the Bank in an amount not to exceed fifteen
percent (15%) of the consolidated Tangible Net Worth of the Borrower and its
Subsidiaries or (ii) other liens or mortgages approved in writing by the Bank or
set forth on Schedule 6.3 hereof (the "Permitted Encumbrances") or (iii) a lien
upon the Hong Kong Property (as defined in Section 6.1(d) hereof) in an amount
not to exceed Ten Million Dollars. The foregoing shall not be deemed to
authorize the foregoing transactions, if there then exists an Event of Default
or there would then exist an Event of Default after giving effect to such
transaction. "Property, Plant and Equipment" shall mean any assets that would be
classified and accounted for as property, plant and equipment in accordance with
GAAP.
Notwithstanding the foregoing, neither Borrower nor any Subsidiary will
grant any lien, pledge, security interest or encumbrances on the stock of any
Subsidiary.
6.4 GUARANTEES. Guarantee or otherwise in any way become or be responsible
for the obligations of any other person (whether by agreement to purchase the
indebtedness of any other person, or agreement for the furnishing of funds to
any other person through the purchase of goods, supplies or services (or by way
of stock purchase, capital contribution, advance or loan) for the purpose of
paying or discharging indebtedness of any other person, or otherwise) unless the
Borrower has received the prior written consent of the Bank or with respect to
the Guaranty or any other guaranty in favor of the Bank or Guaranty in favor of
a third party lender secured solely by the Hong Kong Property, provided such
Guaranty does not exceed Ten Million Dollars or provided there does not then
exist an Event of Default or provided an Event of Default is not created as a
result of such Guaranty.
6.5 INDEBTEDNESS. Create, incur, assume or suffer to exist any
indebtedness, except for (i) the Obligation; (ii) accounts payable arising in
the ordinary course of business; (iii) other indebtedness permitted hereunder;
(iv) indebtedness secured by mortgages described in Schedule 6.3 and any
renewals or extensions (but not any increases thereof) and (v) indebtedness
permitted by the Bank in writing. "Indebtedness" shall mean all of the
Borrower's and the Subsidiaries' obligation and liabilities to any person or
entity, including, without limitation, all debts, claims and indebtedness,
contingent, fixed or otherwise, heretofore, now or from time to time hereafter
due or payable, however evidenced and however arising, and any leases required
to be capitalized under GAAP.
6.6 NO LOANS. Make any loans, advances or extensions of credit except that
the Borrower may have trade receivables and may make advances and deposit in the
ordinary course of business not to exceed $2,000,000 in the aggregate. The
Borrower may also make advances to its officers, directors and employees from
time to time in the ordinary course, provided that the maximum aggregate amount
of all such advances will not exceed One Million Dollars ($1,000,000.00) at any
time.
6.7 INVESTMENTS. Make or suffer to exist any investments other than:
1. in direct obligations of the United States of America, or any
agency thereof or obligations guaranteed by the United States of America;
provided, that such obligations mature within one year from the date of
acquisition thereof;
2. in certificates of deposit maturing within one year from the date
of acquisition issued by the Bank, or by any other bank or trust company
organized under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating at least $100 million and not
known by the Borrower to be having financial difficulties;
3. commercial paper rated P-1 and P-2 by Moody's Investors
Service, Inc. (Commercial Paper Record) and rated A-1 or A-2 by Standard and
Poor Corporation (Commercial Paper Ratings Guide);
4. private placements with daily maturities;
5. other investments (after consultation with the Bank) of up to an
aggregate amount of $500,000.00 outstanding at any one time(s); and
6. the Borrower's ownership of the Subsidiaries as of the date of
this Agreement, and as permitted pursuant to Section 6.8 hereof.
6.8 ACQUISITIONS. Acquire all or a substantial portion of another
business, whether by purchase of stock, assets or otherwise, for an aggregate
purchase price in excess of (i) Ten Million and 00/100 Dollars ($10,000,000.00)
plus (ii) forty percent (40%) of EBITDA for the most recent four (4) fiscal
quarters plus (iii) one hundred percent (100%) of such acquired business' EBITDA
(excluding compensation of officers and distributions paid out by closely held
entities), for the most recent four (4) fiscal quarter without the Bank's prior
written consent. Any such business, if not made a part of Borrower or an
existing Subsidiary, shall be deemed to be a Subsidiary for purposes of this
Agreement, and shall be subject to this Agreement. Notwithstanding the
foregoing, the acquisition of Elba Electric GmbH and affiliated entities
("Elba") as described in that certain letter of intent dated June 3, 1997 and
July 2, 1997, from Borrower to Elba is a permitted acquisition under this
Section 6.8.
6.9 FISCAL YEAR. Change its fiscal year from its present fiscal year.
ARTICLE VI A
FINANCIAL COVENANTS
6A.1 EBITDA TO DEBT SERVICE COVERAGE RATIO. Each of the Borrower and the
Subsidiaries agree so long as this Agreement shall remain in place that it shall
maintain on a consolidated basis, a minimum EBITDA to Debt Service Coverage
Ratio of 1.75 to 1.0 through June 30, 1997, measured for the period of July 1,
1996 through June 30, 1997, and 2.50 to 1.0 at all times thereafter, measured on
the last day of each fiscal quarter thereafter beginning September 30, 1997 for
the twelve (12) month period then ending for the twelve (12) month period ending
September 30, 1997.
6A.2 TANGIBLE NET WORTH. (a) Each of the Borrower and the Subsidiaries
agree that it shall maintain on a consolidated basis until December 31, 1997, a
minimum Tangible Net Worth at all times in the total amount of $20,060,000.00
plus fifty percent (50%) of the Borrower's consolidated cumulative net income
April 4, 1995, (b) a minimum tangible Net Worth of $50,000,000 on December 31,
1997, and (c) at all times maintain on a consolidated basis after December 31,
1997, a minimum Tangible Net Worth of at least $50,000,000 plus fifty percent
(50%) of the Borrower's consolidated cumulative net income after December 31,
1997, plus 100% of the amount of the proceeds from any issuance of stock by
Borrower and its Subsidiaries after payment of all expenses associated with the
issuance of such stock. In calculating the amount under (c) above, there shall
not be subtracted cumulative net income for any 12 month period if that number
is a negative number. "Tangible Net Worth" shall mean the total of (the assets
of the Borrower and Subsidiaries on a consolidated basis, less assets properly
classified under GAAP as intangible assets, including goodwill and the value of
intellectual property) minus the liabilities of the Borrower and Subsidiaries on
a consolidated basis.
6A.3 TOTAL DEBT TO EBITDA. Each of the Borrower and the Subsidiaries agree
that it will not permit on a consolidated basis the ratio of Total Debt to
EBITDA to exceed (i) 3.00 to 1.00 through June 30, 1997 measured for the period
of July 1, 1996 through June 30, 1997, or (ii) 2.25 to 1.0 at any time after
June 30, 1997, measured on the last day of each fiscal quarter hereafter for the
twelve (12) month period then ended, with the first such twelve (12) month
period being the period of October 1, 1996 through September 30, 1997.
ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Any of the below listed events happening to the
Borrower or any Subsidiary are sometimes referred to herein alternatively as
"Events of Default" or "Default":
a. Failure to pay, perform, or comply with any material obligation,
promise, covenant, agreement or provision under any of the Loan Documents, or
upon the occurrence of any other event of default and the continuation beyond
the expiration of any cure period relating thereto under any other agreement
between the Borrower or any Subsidiary and the Bank;
b. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Subsidiary shall prove to have been
false or misleading in any material respect when made or furnished;
c. Dissolution or liquidation of the Borrower or any
Significant Subsidiary;
d. The Borrower or any Significant Subsidiary shall fail to pay any
additional monetary obligation in excess of One Hundred Thousand Dollars
($100,000.00) when due, however arising and to whomever owed, except in
immaterial amounts through inadvertent clerical error;
e. The Borrower or any Significant Subsidiary should make a general
assignment for the benefit of creditors, or any proceeding of any other similar
nature be instituted by or against the Borrower or any Significant Subsidiary or
any proceeding be instituted against the Borrower or any Significant Subsidiary
alleging that such entity is insolvent, or a receiver be appointed for the
Borrower or any Significant Subsidiary or for any property of the Borrower or
any Significant Subsidiary, and such proceeding shall not be dismissed within
ninety (90) days after the date such action is commenced;
f. Any verdict or judgment in excess of Two Hundred Fifty Thousand
and No/Dollars ($250,000.00) or an Equivalent Amount if the judgment is not in
Dollars individually or in the aggregate in any twelve (12) month period during
the term hereof be obtained or entered against the Borrower or any Significant
Subsidiary, or any property of such entity, and remain unsatisfied or not stayed
by court order upon posting a bond, after thirty (30) days from the rendition of
such judgment unless fully covered by insurance less permitted deductible;
g. A decree or order shall be entered by a court for relief in
respect of the Borrower or any Significant Subsidiary under Title 11 of the
United States Code, as now or hereafter constituted, or any other applicable
foreign, federal or state bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or similar official) of the Borrower or any Significant Subsidiary or of any
substantial part of either the Borrower's or any Significant Subsidiary's
property, or ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a period of
ninety (90) consecutive days;
h. Borrower or any Significant Subsidiary shall file a petition or
answer or consent seeking relief under Title 11 of the United States Code, as
now or hereafter constituted, or any other applicable foreign, federal or state
bankruptcy, insolvency or other similar law, or consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking possession of a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Borrower or any
Significant Subsidiary or any substantial part of the Borrower's or any
Significant Subsidiary's property, or Borrower or any Significant Subsidiary
shall fail generally to pay their respective debts as such debts become due, or
take action in furtherance of any such action;
i. The Borrower or any Significant Subsidiary is in default under
any agreement, mortgage or security agreement with any person or corporation
whatsoever which would reasonably be expected to materially adversely affect the
ability of the Borrower by itself or the Borrower and the Subsidiaries, taken as
a whole, to perform any action or make any payment required by this or any other
agreement between the Borrower or any Significant Subsidiary and the Bank;
j. The making of any levy, seizure, garnishment, or attachment of or
on any assets of the Borrower or any Significant Subsidiary if the effect of
such action may reasonably be expected to have a material adverse affect on the
ability of the Borrower or the Borrower and the Subsidiaries taken as a whole to
perform its obligations hereunder;
k. In the event that control of the Borrower or any Significant
Subsidiary is transferred, directly or indirectly, to any person other than
another Subsidiary;
l. The Guarantors, or any of them, default in their obligations
under the Guaranty; or
m. The occurrence of any material adverse change to the financial
condition of the Borrower, or the Borrower and the Subsidiaries taken as a
whole.
For purposes of the foregoing subsection (k), "control" shall be deemed to be
the ownership of a sufficient number of shares of the Borrower so that the
holder thereof holds the right to vote, directly or indirectly, in excess of
fifty percent (50%) of the voting stock of the Borrower, or can otherwise elect,
whether directly or indirectly, through stock ownership, proxy, shareholder
agreement or otherwise, one-half (1/2) or more of the members of the Board of
Directors of the Borrower.
The Bank agrees that if an Event of Default has occurred (i) pursuant to Section
6.1(a) hereof because of the failure of the Borrower to make a required payment
hereunder, the Borrower shall have five (5) days to cure such default prior to
the Lender having the right to accelerate the payment of all amounts owed
hereunder; or (ii) pursuant to any other provision of Section 7.1 hereof, that
is not due to (a) the Borrower's failure to make a required payment under
Section 6.1(a); (b) the Borrower's failure to comply with the provisions of
Sections 6.3, 6A.1 or 6A.2 or 6A.3 hereof; or (c) the provisions of Sections 7.1
(e), (g) or (h), the Borrower shall have thirty (30) days to cure such default
prior to the Bank having the right to accelerate the payments of all amounts
owed hereunder.
Upon the occurrence of an Event of Default and the continuation thereof beyond
any applicable cure period as set forth above or at any time thereafter during
the continuance of any such Event of Default, the Note, the Guaranty, the
Obligation and all other payments required to be made hereunder shall be
forthwith due and payable at the Bank's option, except that on Event of Default
under Sections 7.1(e), (g) or (h),the Obligations and all other amounts
hereunder shall be automatically due and payable without further action by the
Bank, both as to principal and interest, without presentment, demand, protest or
other notice of nonpayment or default or other notice of any kind, all of which
are hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding. Upon the occurrence of an Event of Default, (i) the
principal amounts owed hereunder on the Loans shall bear interest at the highest
rate allowable under applicable law, or, if there is no such limit, at the
Default Rate, until such Event of Default is cured or until the amounts
outstanding hereunder are paid in full; and (ii) any money held as a result of a
transaction otherwise permitted pursuant to Section 6.1 hereof shall be
delivered to the Bank as collateral for the Obligations. Upon the occurrence of
an Event of Default, the Bank may exercise any rights given to it by law, the
Note, or given by this Agreement, and the Bank may apply any sums received by
the Bank to any of the Obligations or any portion thereof in such order as the
Bank in its sole discretion may determine, any request to the contrary by the
Borrower notwithstanding.
If the Borrower fails to pay any amount payable by it under this
Agreement, the Borrower shall forthwith on demand by the Bank pay interest on
the overdue amount from the due date, whether by maturity or acceleration, up to
the date of actual payment, as well after as before judgment, at the Default
Rate, which shall be the rate determined by the Bank to be 4 percent above the
rate which would otherwise be payable for the Advance for an Interest Period, or
Interest Periods, selected by the Bank.
Without limitation to any other rights under law, the Bank may at any time
while an Event of Default is outstanding set off any matured obligation owed by
the Borrower or any Subsidiary under this Agreement against any obligation
(whether or not matured) owed by the Bank to the Borrower or any Subsidiary,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Bank may convert
either obligation at a market rate of exchange in its usual course of business
for the purpose of the set-off. If either obligation is unliquidated or
unascertained, the Bank may set off in an amount reasonably estimated by it in
good faith to be the amount of that obligation.
ARTICLE VIII
MISCELLANEOUS
8.1 COSTS OF LOAN. The Borrower shall pay all reasonable out-of-pocket
expenses incurred by the Bank in connection with the preparation and closing of
this Agreement, the making of each Funding or Advance, the administration of
this Agreement, and in the enforcement of the rights of the Bank under the Loan
Documents and under the Note and any other agreements between the Borrower and
the Bank, including the reasonable attorneys' fees incurred by the Bank in
preparing and closing this Agreement which attorneys' fees (exclusive of
out-of-pocket expenses) shall not exceed $___________, together with the
out-of-pocket fees of such counsel, whether in consultation or in judicial,
administrative, bankruptcy, conservatorship or receivership proceedings, through
all appeals. Such out-of-pocket expenses specifically include all filing fees,
the cost of all documentary tax stamps, if any, and other taxes, excluding
federal or Florida taxes on corporate income, which are or become payable by
reason of the transactions between the Borrower and the Bank which are
encompassed by this Agreement, as well as any penalties or additional taxes
which may become due by reason of the Borrower's instructions to the Bank
concerning the payment of such taxes, and at the Bank's option costs of tax,
judgment and lien searches, and recording fees, if any. Costs incurred to the
date of Closing shall be paid at Closing, by separate check payable to the order
of the Bank.
8.2 SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties by the Borrower and any Guarantor in the Loan
Documents or otherwise in writing in connection herewith shall survive the
execution and delivery to the Bank of this Agreement and the Note, and shall be
true and correct and continue in full force and effect so long as any portion of
any Obligation or the Note is outstanding or this Agreement has not been
terminated, except to the extent such representation and warranty relates to an
earlier date.
8.3 TERMINATION OF LOAN. This Agreement may not be terminated by the
Borrower until payment of the Obligation in full.
8.4 APPLICABLE LAW. The terms and performance of this Agreement and the
terms and payment of Note shall be construed in accordance with and controlled
and governed by the laws of the State of Florida, and applicable federal law, as
amended from time to time. The Bank, the Borrower and each Guarantor agree that
the venue of any action brought to enforce any rights created hereunder will be
in Dade County, Florida.
8.5 MODIFICATION OF LOAN AGREEMENT. Unless otherwise specifically provided
for in this Agreement, no consent, modification, amendment or waiver of any
provision of this Agreement, the Notes, or the other the Loan Documents executed
in conjunction herewith, nor any consent of the Bank to any variance therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Bank.
8.6 NO WAIVER OF RIGHTS BY Bank. Neither any failure nor any delay on the
part of the Bank in exercising any right, power or privilege under the Loan
Documents shall operate as a waiver thereof; nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of any
other right, power or privilege. It is further agreed between the parties that
no waiver of any duty or condition contained in any of the Loan Documents shall
at any time be held to be a waiver of the other duties or conditions of the
Borrower thereunder, or of the same duties or conditions upon a future occasion.
8.7 INTEREST. All interest payable hereunder shall be at a per annum rate
computed by dividing the applicable per annum interest rate by three hundred
sixty (360), except as otherwise provided herein, and multiplying the result by
the actual number of days elapsed. Notwithstanding any provision in the Notes or
in any other document executed in connection with this Agreement, the Borrower's
total liability during any payment period for payment of fees, charges or other
payments which may be deemed interest shall not exceed the higher of the limits
imposed by the usury laws of the State of Florida or of the United States, as
applicable. If, for any reason, total liability for payments which may be deemed
interest, should be greater than the limit imposed by the usury laws of the
State of Florida or of the United States (whichever results in the higher rate
of lawful interest), as applicable, for any interest payment period, then all
sums in excess of those lawfully collectible with interest for that period shall
be applied to the reduction of principal of the Loans, without further agreement
or notice. The Bank has agreed to accept, and the Borrower has agreed to apply,
such sums as a penalty-free prepayment of principal, unless the Bank at any time
elects, by notice to the Borrower in writing, to waive or limit the collection
of any sums in excess of those lawfully collectible as interest rather than
accept those sums as a prepayment of principal. Upon any demand for payment, all
unlawful interest (if any) shall be eliminated.
8.8 SEVERABILITY. In case all or any part of one or more of the provisions
contained in the Loan Document should be invalid, illegal or unenforceable in
any respect, the validity, legality or enforceability of the remaining
provisions contained herein or therein and the remainder of such provision shall
not in any way be affected or impaired thereby.
8.9 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the Bank and the
Borrower. The Bank shall have the right to syndicate its interests in the Loans,
or either of them, or to grant participation and transfer interests in the Note
to other persons and to furnish such information as is reasonably required to
induce such persons to enter into such arrangements and to satisfy any
regulatory requirements pertaining thereto; provided, however, that the Borrower
shall have the right to approve all such participants, which approval shall not
be unreasonably withheld; and provided, further, that the Bank shall not be
entitled to syndicate or transfer interests in more than fifty percent (50%) of
its interest in the Loans. In the event the Bank notifies the Borrower that the
Bank will grant such participation, or assign a portion of the Lender's rights
and obligations in the Loans, the Bank acknowledges that the Borrower will not
be deemed to be acting unreasonably if it denies such request because the entity
to whom the Bank proposes to grant a participation or assign such rights and
obligations will require payments under Section 2.4 hereof materially in excess
of those required to be paid to the Lender. The Borrower will take such actions
as the Bank may reasonably require to effect the grant and performance of such
participation or the assignment of an interest of its rights and obligations to
another entity.
8.10 NOTICES. All notices, demands, requests, consents or other
communications required or permitted to be given or made under this Agreement in
writing, shall be deemed given or made when delivered in person, five (5) days
after such communication is posted in the mails, or one (1) day after such
communication is sent by a nationally recognized overnight courier service.
Notice shall be given as follows:
First Union National Bank
200 East Broward Boulevard
Ft. Lauderdale, Florida 33301
ATTN: Corporate Banking,
Mr. M. Walker Duvall, Senior Vice President
AND
First Union National Bank
4299 N.W. 36th Street
Miami Springs, Florida 33166
ATTN: Ms. Missy Morgan, Senior Vice President
AND
First Union National Bank
London Branch
One Bishopgate
LONDON EC2N 3AB ENGLAND
ATTN: Ian G. Morrison, Vice President
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
ATTN: Douglas F. Darbut, Esq.
If to the Borrower:
Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
ATTN: John D. Vaughan, Esq.
If to the Guarantors:
c/o Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
The foregoing addresses may be changed by either party by giving notice to the
other party in accordance with the above.
8.11 INCORPORATION OF TERMS. It is mutually understood and agreed by and
between the parties hereto on behalf of themselves, and their respective
representatives or successors in interest, that the Note and other agreements
between the Borrower and the Bank heretofore and hereinafter described and all
of the conditions, stipulations, agreements and covenants contained in said Note
and other agreements are hereby incorporated by reference to the same extent and
effect as if they were fully set forth verbatim herein, and made a part of this
Agreement, until this Agreement is terminated by the payment of the Obligation
in full. It is further mutually understood and agreed that the Borrower shall
perform, comply with, and abide by each and every warranty, stipulation,
agreement, condition and covenant in the Note, and other agreements, and the
provisions of this Agreement.
In the event of an ambiguity or conflict of terms between any of the
provisions of the foregoing documents, the terms of this Agreement shall be
deemed to amend and control all of the other documents; and, to the extent that
any of the agreements are silent, each shall supplement the others; provided,
however, in the event of any conflict between the terms of this Agreement and
any of the instruments referenced above, the terms which, in the Bank's sole
discretion, grant the Bank the greater protection with respect to its security
for the Note or in any other manner are of greater benefit to the Bank, shall
control. All provisions of contemporaneous or previous agreements and
understandings between the Borrower and the Bank in conflict with any expressed
provision hereof shall be merged into this Agreement and be extinguished and of
no further force and effect.
8.12 COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be considered an original.
ARTICLE IX
INDEMNIFICATION
9.1 NET PAYMENTS. All payments by the Borrower under this Agreement and
the Note shall be made without setoff or counterclaim and in such amounts as may
be necessary in order that all payments, after deduction or withholding for or
on account of any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof (collectively the "Taxes"), shall not be
less than the amounts otherwise specified to be paid under this Agreement and
the Note. Notwithstanding anything to the contrary contained in this Section
9.1, the Borrower shall not be liable for the payment of any tax on or measured
by net income imposed on or measured by the net income or portion thereof of the
Bank. The Borrower shall pay all Taxes when due (and indemnify the Bank against
any liability therefor) and shall promptly (and in any event not later than
thirty (30) days thereafter) furnish to the Bank any certificates, receipts and
other documents which may be required (in the judgment of the Bank) to establish
any tax credit to which the Bank may be entitled. The Bank shall promptly
reimburse the Borrower upon receipt by the Bank of any refund or credit paid to
the Bank for which and to the extent the Bank has previously been reimbursed by
Borrower under this Section. The obligations of the Borrower under this Section
9.1 shall survive the termination of this Agreement and the repayment of the
Notes.
The Bank will cooperate with reasonable requests of the Borrower to seek
refunds of amounts payable hereunder and to minimize amounts payable hereunder,
provided that Borrower shall pay the costs and expenses thereof and provided
that such request shall not require any action, in the opinion of the Bank,
which would or may adversely affect the Bank.
ARTICLE X
WAIVER OF JURY TRIAL AND VENUE
10.1 Arbitration. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Loan Agreement
and the other Loan Documents ("Disputes") between or among parties to this Loan
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by the Notes.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Miami, Florida. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
10.2 PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, Borrower and Bank agree to preserve,
without diminution, certain remedies that any party hereto may employ or
exercise freely, independently or in connection with an arbitration proceeding
or after an arbitration action is brought Borrower and Bank shall have the right
to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, applicable: (i) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (ii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment or receiver and filing an involuntary bankruptcy
proceeding; and (iii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
<PAGE>
In the event that the provisions of Section 10.1 or 10.2 hereof are found
to be unenforceable and a Dispute may not be resolved pursuant to those
Sections, the parties hereto agree that the following provision shall be
applicable:
WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER AND EACH GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOANS, THIS AGREEMENT AND ANY AGREEMENTS
CONTEMPLATED HEREBY TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EACH PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR Bank AND BORROWER
ENTERING INTO THIS AGREEMENT.
10.3 WAIVER OF PLEA OF JURISDICTIONS OR VENUE. The Borrower and each
Subsidiary hereby waives any plea of jurisdiction or venue as not having a place
of business in Broward County, Florida, and hereby specifically authorizes any
action brought upon the enforcement of the Loan Documents by Bank to be
instituted and prosecuted in either the Circuit Court of Broward County,
Florida, or in the United States District Court for the Southern District of
Florida, at the election of Bank.
IN WITNESS WHEREOF, the Bank and the Borrower have caused these presents
to be executed in their respective names by their duly authorized executive
officers, at the places and on the dates set forth below effective nonetheless,
as of this 15th day of July, 1997.
FIRST UNION NATIONAL BANK,
LONDON BRANCH
By: Joseph M. Mayhew
Its: Senior Vice President
Date Executed November 7, 1997
Place of Execution: Charlotte, North Carolina
Signed, sealed and delivered COMPUTER PRODUCTS, INC.
in the presence of as to all:
By: Richard Thompson
Its: Vice President
Date Executed: November 6, 1997
Place of Execution: Eden Prairie, Minnesota
Each of the undersigned acknowledges that it has received a copy of the Loan
Agreement is familiar with the terms and conditions of the Loan Agreement. The
undersigned hereby jointly and severally (i) represent and warrant to you that
each representation and warranty contained in the Loan Agreement is true and
correct to the extent it relates to the undersigned; and (ii) agree that each
will act in compliance with the covenants set forth in the Loan Agreement to the
extent the covenants contemplate that the undersigned will act or refrain from
acting. The undersigned (i) recognize that the foregoing representations,
warranties and covenants are an integral part of the decision by you to make the
Loans (as defined in the Loan Agreement); (ii) represent and warrant to you that
the undersigned, each of which is a wholly-owned subsidiary of the Borrower,
will receive substantial benefit from the making of the Loans to the Borrower;
and (iii) acknowledge that you have relied upon the foregoing in making your
decision to make the Loans and enter into the Loan Agreement. All of the
signatures below are made on the date and at the place set forth under the
signatures of Computer Products, Inc. appearing immediately above.
Computer Products GmbH
By:
Gary Duffy
Its:
By:
Siegfried Georg Kreuzer
Its:
Computer Products S.A.R.L.
By: Richard Thompson
Its: Director
Computer Products Power Conversion Limited
By:Richard Thompson
Its:
RTP Foreign Sales Corp.
By:Richard Thompson
Its:
Power Products Ltd.
By:Richard Thompson
Its:
Stevens-Arnold, Inc.
By:Richard Thompson
Its:
JETA Power Systems, Inc.
By:Richard Thompson
Its:
C.P. Power Products Co., Ltd.(Zhong Shan)
By:Richard Thompson
Its:
Heurikon Corporation
By:Richard Thompson
Its:
Computer Products Asia - Pacific Limited
By:Richard Thompson
Its:
Power Products (Ireland) Ltd.
By:Richard Thompson
Its:
RT Holding Corp.
By:Richard Thompson
Its:
Dutor Holding N.V.
By:Richard Thompson
Its:
Elba Electronics Limited
By:Richard Thompson
Its:
<PAGE>
Herbert Zehnte Betelligungs-undVerwaltungs GmbH & Co.
By:Richard Thompson
Its:
El-BA Electric-Bauelemente AG
By:Richard Thompson
Its:
Elba s.r.o.
By:Richard Thompson
Its:
Eden Prairie, Minnesota
Place of Execution
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this ____6____day of November, 1997, by Richard Thompson, as Vice President of
Computer Products, Inc., a Florida corporation, on behalf of the corporation and
or Authorized Signatory on behalf of the other corporations described above
other than First Union National Bank, London Branch and Computer Products GmbH.
He is personally known to me (YES) (NO) or who produced his drivers license
as identification.
Notary Public
(NOTARIAL SEAL) Karen Scheldroup
Printed Name of Notary
My Commission Expires: Jan. 31, 2000
CHARLOTTE, NORTH CAROLINA
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this 7th_ day of November, 1997, by Joseph M. Mayhew, as Senior Vice
President of First Union National Bank, London Branch on behalf of the
corporation. He is personally known to me (YES) (NO) or who produced
______________________ as identification.
Notary Public
(NOTARIAL SEAL) Carla Eaker
Printed Name of Notary
My Commission Expires:August 21, 2002
Youghal County Cork, Ireland
Place of Execution
I, Patrick J. Lavan, a Notary Public within and for the Republic
of Ireland, duly commissioned and acting, do hereby certify that on this 13th
day of November, 1997, personally appeared GARY DUFFY, as Authorized Signatory
of Computer Products GmbH, acting as partner and future Limited Partner of
Herbert GmbH & Co. KG upon its registration in the Commercial Register A of
Frankfurt am Main, to me personally known to be the person who signed the
foregoing instrument, who being duly sworn and being informed of the contents of
said instrument, stated and acknowledged on oath that he signed, executed,
sealed and delivered same of his free and voluntarily act and deed, for the
uses, purposes and considerations therein expressed and set forth.
WITNESS my hand and seal this 13th day of November, 1997.
Patrick Lavan
- -----------------------------------
NOTARY PUBLIC
My Commission Expires:
Exhibit No, 10.45
AMENDED AND RESTATED
LOAN AGREEMENT
BETWEEN
COMPUTER PRODUCTS, INC.,
FIRST UNION NATIONAL BANK
AND
FIRST UNION NATIONAL BANK, LONDON BRANCH
DATED AS OF JULY 15, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS....................................... 1
ARTICLE II CREDIT FACILITY ..................................5
Section 2.1 The Credit Facility........................5
Section 2.2 Note.......................................7
Section 2.3 Option to Elect Interest Rate on the
Loans......................................7
Section 2.4 Interest Rates.............................7
Section 2.5 Mandatory Prepayments.....................15
Section 2.6 Fees......................................16
Section 2.7 Business Days.............................16
Section 2.8 Guarantees................................16
Section 2.9 Mode of Payment...........................16
Section 2.10 Prepayment...............................16
Section 2.11 Use of Proceeds..........................17
Section 2.12 Payment..................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES..................18
Section 3.1 Organization, Powers, Etc.................19
Section 3.2 Authorization of Loan, Etc................19
Section 3.3 Litigation, Administrative and
Regulatory Proceedings....................20
Section 3.4 Payment of Taxes and Other Charges........20
Section 3.5 Federal Reserve Regulations...............20
Section 3.6 Subsidiaries..............................21
Section 3.7 Consents, Etc.............................21
Section 3.8 Properties................................21
Section 3.9 Ownership.................................22
Section 3.10 Intentionally Left Blank..................22
Section 3.11 Agreements..........................23
Section 3.12 Enforceability of the Loan Documents23
Section 3.13 Guaranty............................23
Section 3.14 Relationship of the Borrower and
Subsidiaries........................23
Section 3.15 Public Utility Holding Company Act..24
Section 3.16 Survival of Representations and
Warranties..........................24
ARTICLE IV CONDITIONS OF LENDING............................24
Section 4.1 Representations and Warranties............24
Section 4.2 No Default................................24
Section 4.3 Supporting Documents and Other
Conditions................................24
Section 4.4 Loan Fees.................................26
Section 4.5 Closing...................................26
Section 4.6 Approval of Counsel for Bank..............27
Section 4.7 Conditions Precedent to the Advance.......27
ARTICLE V AFFIRMATIVE COVENANTS.............................28
Section 5.1 Notice....................................28
Section 5.2 Accounts and Reports......................28
Section 5.3 Maintain Insurance........................30
Section 5.4 Future Taxes..............................30
Section 5.5 Legal Existence, Properties, Stock
Ownership and Solvency....................30
Section 5.6 Warranties and Conditions.................31
Section 5.7 Further Agreements........................31
Section 5.8 Erisa.....................................32
Section 5.9 Environmental Matters.....................32
Section 5.10Guarantors................................32
ARTICLE VI NEGATIVE COVENANTS...............................32
Section 6.1 Sale of Assets............................32
Section 6.2 Reorganizations...........................34
Section 6.3 Liens.....................................34
Section 6.4 Guarantees................................35
Section 6.5 Indebtedness..............................35
Section 6.6 No Loans..................................35
Section 6.7 Investments...............................36
Section 6.8 Acquisitions..............................36
Section 6.9 Fiscal Year...............................37
ARTICLE VI A FINANCIAL COVENANTS............................37
Section 6A.1 EBITDA to Debt Service Coverage Ratio....37
Section 6A.2 Tangible Net Worth.......................37
Section 6A.3 Total Debt to EBITDA.....................37
ARTICLE VII EVENTS OF DEFAULT...............................38
Section 7.1 Events of Default.........................38
ARTICLE VIII MISCELLANEOUS..................................41
Section 8.1 Cost of Loan..............................41
Section 8.2 Survival of Representations...............42
Section 8.3 Termination of Loan.......................42
Section 8.4 Applicable Law............................42
Section 8.5 Modification..............................42
Section 8.6 No Waiver of Rights by Bank...............42
Section 8.7 Interest..................................42
Section 8.8 Severability..............................43
Section 8.9 Successors and Assigns....................43
Section 8.10 Notices..................................43
Section 8.11 Incorporation of Terms...................45
Section 8.12 Counterparts.............................45
ARTICLE IX INDEMNIFICATION..................................46
Section 9.1 Net Payments........ .....................46
ARTICLE X WAIVER OF JURY TRIAL AND VENUE. ..................46
Section 10.1 Arbitration........... ..................46
Section 10.2 Preservation and Limitation of
Remedies............... .................47
Section 10.3 Waiver of Plea of Jurisdiction
or Venue................ ................47
Schedules
Schedule 2.8 List of Guarantors
Schedule 3.1 Jurisdictions in which Transacting Business
Schedule 3.8 Property Leased from Others
Schedule 3.9 Capital Stock Issued by each Subsidiary
Schedule 6.3 Permitted Encumbrances
Exhibits
Exhibit A Credit Facility A Note
Exhibit B Credit Facility B Note
Exhibit C Unconditional Guaranty
Exhibit D Indemnification Agreement
Exhibit E Advance Request
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement, (the "Agreement") is made and entered
into with an effective date of July 15, 1997, by and among First Union National
Bank, London Branch, located at One Bishopsgate, London EC2N 3AB England (the
"Branch") and First Union National Bank, with an address at 200 East Broward
Boulevard, Ft. Lauderdale, Florida 33301 ("FUNB", and collectively with the
Branch referred to herein as the "Bank" or the "Lender"), and Computer Products,
Inc., a Florida corporation (the "Borrower"), having a place of business at 7900
Glades Road, Boca Raton, Florida 33434.
R E C I T A L S
WHEREAS, the Borrower and FUNB have entered into that certain Loan
Agreement dated as of April 4, 1995 (the "Prior Loan Agreement");
WHEREAS, the Borrower has requested certain amendments to the Prior Loan
Agreement, including the ability to borrow in currencies other than Dollars, and
the Bank is willing to do so in accordance with the terms and conditions set
forth herein; and
WHEREAS, in order to facilitate the making of Loans other than Prime-Based
Loans (as defined herein), the Bank desires to utilize the Branch, so that the
Branch will also become a party to this Agreement, and the Branch is willing to
do so;
WHEREAS, the parties hereto executed that certain Amended and Restated
Loan Agreement as of July 15, 1997, and have determined that certain corrections
were required, and desire to enter into this Agreement to reflect those
corrections and their agreement, but with an effective date of July 15, 1997;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"Advance" shall mean an advance of proceeds of Credit Facility
B to the Borrower pursuant to this Agreement and shall include any Dollar
Advance or any Optional Currency Advance. All Advances must be in a principal
amount of at least $100,000.00. or an Equivalent Amount thereof for Optional
Currency Advances.
"Advance Request" shall mean the written request for an
Advance under Credit Facility B as identified in Section 2.4(f) hereof and shall
among other things (i) specify the date of the requested Advance, which shall be
a Business Day; (ii) specify the amount of the Advance and; (iii) specify the
currency in which the Advance is to be made.
"Application" shall mean the application required to be
submitted for the issuance of a letter of credit pursuant to Section 2.1(d)
hereof.
"Business Day" shall mean a weekday other than a day on which
banks are required or authorized to close in Jacksonville, Florida, and, in
respect of a transaction relating to either a LIBOR-Based Loan or Optional
Currency, in (i) London, England and (ii) if the transaction involves Option
Currency, in a money market city in the country issuing the Optional Currency
selected.
"Closing" shall mean the meaning described in Section 4.1
-------
hereof.
"Credit Facilities" shall mean Credit Facility A and Credit
Facility B.
"Credit Facility A" shall mean the loan facility described in
Section 2.1(a) hereof.
"Credit Facility A Maturity" shall have the meaning set forth
in Section 2.1(a) hereof.
"Credit Facility A Note" shall mean the note evidencing Credit
Facility A.
"Credit Facility B" shall mean the loan facility described in
Section 2.1(b) hereof.
"Credit Facility B Maturity" shall have the meaning set forth
in Section 2.1(b) hereof.
"Credit Facility B Note" shall mean the note evidencing Credit
Facility B.
"Control" shall have the meaning set forth in Section 7.1
-------
hereof.
"Debt Service" shall mean scheduled principal repayment plus
interest expense for the period being measured.
"Default" or "Event of Default" shall have the meaning set
forth in Section 7.1 hereof.
"Default Rate" shall have the meaning set forth in Section
7.1 hereof.
"Direct Subsidiary" shall mean a Subsidiary in which the
shares are owned of record by the Borrower.
"Dollar" shall mean United States Dollars.
"Dollar Advance" shall mean an Advance which the Borrower
requests to be made (or is deemed to have requested to be made) in Dollars, in
accordance with the provisions of Section 2.4(h) hereof.
"EBITDA" shall mean net income plus interest plus taxes plus
depreciation plus amortization for the period being measured.
"Equivalent Amount" shall mean, in relation to any Optional
Currency Advance or FX Calculation Date, the amount of Dollars converted from
the relevant amount of Optional Currency at the Bank's spot buying rates (based
on the market rates then prevailing) for the exchange of Dollars and Optional
Currency on or about 11:00 a.m. (London, England time) on (a) the second
Business Day immediately preceding the Optional Currency Advance in relation to
such Advance or (b) the second Business Day immediately preceding a FX
Calculation Date in relation to such date.
"FX Calculation Date" shall mean any date on which the Bank
makes a determination of the Equivalent Amount of Optional Currency Advances,
which shall include, without limitation, the second day succeeding the date on
which an Optional Currency Advance is requested, the last day of an Interest
Period, and, in the event that an Interest Period is six months, the last day of
the third month of such Interest Period and the last day of such Interest
Period.
"Guaranty" shall mean the guaranty described in Section 2.8
--------
hereof.
"Indebtedness" shall have the meaning given to such term in
Section 6.5 hereof.
"Indirect Subsidiary" shall mean Subsidiary shares of which
are owned of record directly by a Subsidiary, and indirectly by the Borrower.
"Interest Period" shall have the meaning given to such term in
Section 2.4(a)(i) hereof.
"LIBOR-Based Rate" shall have the meaning given to such term
in Section 2.4 hereof.
"LIBOR Loan" shall have the meaning set forth in Section
2.4(a)(i) hereof.
"Loan" or "Loans" refers to amounts outstanding under Credit
Facility A or Credit Facility B.
"LIBOR Reserve Percentage" shall mean either (i) the
percentage which is in effect from time to time under Regulation D of the Board
of Governors of the Federal Reserve System, as such regulation may be amended
from time to time, as the maximum reserve requirement applicable with respect to
Eurocurrency Liabilities (as that term is defined in Regulation D), whether or
not any Lender has any Eurocurrency Liabilities subject to such reserve
requirement at that time; or (ii) any reserve imposed by the Bank of England for
loans made by Bank in British Pound Sterling. The LIBOR-Based Rate for any
Advance shall be adjusted as of the effective date of any change in the LIBOR
Reserve Percentage.
"Mandatory Prepayment" shall have the meaning set forth in
Section 6.1(e) hereof.
"Maximum Loan Amount" shall have the meaning given such term in
Section 2.1(b) hereof.
"Net Sale Price" shall have the meaning set forth in 6.1(e)
--------------
hereof.
"Optional Currency" shall mean any currency which is freely
transferable and convertible into Dollars in the London foreign exchange market
as agreed to by the parties hereto including initially British Pounds Sterling,
Japanese Yen, German Deutschemarks and European Currency Units but excluding:
(i) any currency for which central bank or other governmental
authorization in the country of the currency is required to permit its use by
the Bank for lending under this Agreement (unless the authorization has been
obtained and is full force and effect at the relevant time); and
(ii) any currency, the use of which is restricted or prohibited by
any request, directive regulation or guideline of any governmental body, agency,
department or regulatory or other authority (whether or not having the force of
law) in accordance with which any Bank is accustomed to act. As of the date
hereof, the above limitations do not apply to the above specifically enumerated
currencies.
"Optional Currency Advance" shall mean an Advance which the
Borrower requests to be made in Optional Currency, in accordance with the
provisions of Section 2.4(h) hereof.
"Permitted Encumbrances" shall have the meaning set forth
in Section 6.3 hereof.
"Prime-Based Loan" shall have the meaning set forth in
Section 2.4(b) hereof.
"Prime-Based Rate" shall have the meaning set forth in
Section 2.4(b) hereof.
"Significant Subsidiary" shall have the meaning set forth
in Section 3.6 hereof.
"Solvent" shall mean, as to the entity, or entities for which
a determination is being made, that: (i) its or their assets exceed its or their
liabilities (with the calculation of liabilities excluding debt among the
Borrower and its Subsidiaries or between the Subsidiaries); (ii) that it or they
will have sufficient capital to engage in its or their business on an on-going
basis; and (iii) that it or they have the ability to pay its obligations as they
mature.
"Subsidiary" shall have the meaning set forth in Section
3.6 hereof.
"Tangible Net Worth" shall have the meaning set forth in
Section 6A.2 hereof.
"Total Capitalization" shall have the meaning set forth in
Section 6.1(D) hereof.
"Total Debt" shall mean debt on payment obligation for
borrowed money plus leases required to be capitalized in accordance with GAAP.
ARTICLE II
CREDIT FACILITIES
2.1 THE CREDIT FACILITIES.
(a) Credit Facility A. Pursuant to the Prior Loan Agreement, FUNB
has extended to the Borrower a credit facility referred to under the Prior Loan
Agreement as Credit Facility A. There is presently outstanding under Credit
Facility A the principal sum of Twenty-Two Million Dollars ($22,000,000.00), and
accrued interest thereon of $75,625.00 through July 16, 1997 and if such date is
prior to the Closing, the sum of $5,041.67 per each day thereafter through the
date of Closing. That loan remains outstanding and shall be governed hereafter
by the terms of this Agreement, and shall continue to be referred to as Credit
Facility A. The principal amount of borrowings under Credit Facility A shall be
repaid as follows: (i) principal payments of $2,200,000.00 shall be due on April
1 and October 1 of each year beginning October 1, 1997; and (ii) the remaining
outstanding principal balance together with all accrued interest of borrowings
under Credit Facility A, if not paid earlier, shall be due on April 1, 2002
("Credit Facility A Maturity"); provided, however, that at such time after July
15, 1997 as the outstanding principal balance under Credit Facility A is less
than $2,200,000, the remaining outstanding principal balance together with all
accrued interest thereon shall be due on the next succeeding April 1 or October
1, as the case may be.
(b) Credit Facility B. Subject to the terms and conditions hereof,
the Bank agrees to extend to the Borrower Credit Facility B and make loans
thereunder, in one or more Advances in an aggregate amount not to exceed, taking
into account the outstanding undrawn amount of any Letter of Credit issued
hereunder as provided in Section 2.1(d) hereof, at any one time the lesser of
(1) Twenty Million and 00/100 Dollars ($20,000,000.00); or, (ii) in respect of
aggregate Optional Currency Advances, Five Million Dollars plus the Equivalent
Amount of $15,000,000.00, provided, however, that if on an FX Calculation Date
the Equivalent Amount of all Optional Currency Advances exceeds $15,000,000.00,
but the sum of all (A) Dollar Advances under Credit Facility B plus (B) the
available amount of any letters of credit issued under Section 2.1(d) hereof
plus (C) the Equivalent Amount of Optional Currency Advances under Credit
Facility B does not exceed $20,000,000, the Borrower shall not be required to
make the prepayment required by Section 2.5 hereof. The amounts described in the
preceding subsections (i) and (ii) are referred to herein as the Maximum Loan
Amount. The outstanding balance of Credit Facility B may increase and decrease
from time to time, and the Advances thereunder may be repaid and reborrowed, but
the total of Advances outstanding at any one time under Credit Facility B shall
never exceed the limitation set forth hereinabove. The principal amount of
Credit Facility B plus all accrued interest thereon shall mature and be due and
payable in full on July 17, 2000 (the "Credit Facility B Maturity"), and no
Advance may be requested after July 14, 2000.
(c) Credit Facilities. Credit Facility A and the Credit Facility B
are singularly referred to herein as a Credit Facility and are collectively
referred to in this Agreement variously as the "Loans" or "Credit Facilities."
The outstanding principal amounts of the Loans together with all accrued and
unpaid interest thereon, any amounts for which the Borrower may be directly or
indirectly liable with respect to any letter of credit, all other amounts owed
to the Bank by the Borrower hereunder or under any instrument executed in
connection herewith, plus all amounts expended by the Bank or for which the Bank
may have incurred direct or contingent liability in connection with enforcement
of this Agreement, as a result of the Borrower's or any Subsidiary's breach of
any agreement or for which the Borrower or any Subsidiary may otherwise be
liable under any of the Loan Documents (as defined herein), including but not
limited to all costs of the Loans as provided in Section 8.1 shall be referred
to sometimes hereafter as the "Obligation."
(d) Letters of Credit. The Borrower may request, and the Bank shall
from time to time issue, create, extend or renew letters of credit for the
account of the Borrower or its Subsidiaries, subject to the terms and conditions
hereof or of any application or agreement signed or entered into in connection
with the issuance of any Letter of Credit, and subject to a limit that the face
amount of the Letters of Credit does not exceed Five Million Dollars
($5,000,000) or an Equivalent Amount thereof. The availability of Advances under
Credit Facility B shall be reduced by the amount of any then outstanding letters
of credit issued by the Bank. All payments made by the Bank under any such
letters of credit (whether or not the Borrower is the account party) and all
fees, commissions, discounts and other amounts owed or to be owed to the Bank in
connection therewith, if not repaid upon demand, shall be deemed to be Advances
under Credit Facility B. The Borrower shall complete and sign such Applications
and supplemental agreements and provide such other documentation as the Bank
may, reasonably require as a condition to the issuance of a letter of credit
hereunder.
2.2 NOTES. The obligation of the Borrower to repay the indebtedness
outstanding under Credit Facility A shall be further evidenced by a promissory
note in the form attached hereto as Exhibit A (the "Credit Facility A Note") and
the obligation of the Borrower to repay indebtedness outstanding under Credit
Facility B shall be further evidenced by a promissory note in the form attached
hereto as Exhibit B (the "Credit Facility B Note"), each of which shall be dated
as of the date hereof and shall be executed and delivered by the Borrower to the
Bank simultaneously herewith. Each of the Credit Facility A Note and Credit
Facility B Note shall be deemed to reflect the aggregate unpaid principal amount
of all indebtedness outstanding under Credit Facility A or Credit Facility B, as
the case may be, whether or not the face amount of such note is in excess of the
amount actually outstanding from time to time. The Credit Facility A Note and
Credit Facility B Note are collectively referred to herein as the "Notes".
2.3 OPTION TO ELECT INTEREST RATE ON THE LOANS. Interest on a Loan shall
accrue, subject to the terms hereof, at the Prime-Based Rate or the LIBOR-Based
Rate as each such term is defined herein with the Borrower having the right to
elect which such rate will apply. In the event the Borrower has not selected an
interest rate initially or on a Reset Date for (i) a Dollar Advance, interest
shall accrue thereon at the Prime-Based Rate; and (ii) an Optional Currency
Advance, interest shall accrue thereon at the LIBOR-Based Rate with an Interest
Period of one month.
2.4 INTEREST RATES.
(a) LIBOR-Based Rate.
(i) Interest Payable. Interest accruing on a Loan at a
LIBOR-Based Rate (a "LIBOR Loan") shall be payable (A) on the last day of the
applicable Interest Period (as defined below); (B) upon maturity of the
particular Credit Facility; (C) upon acceleration of repayment of the Loan; (D)
if the LIBOR Interest Period (as defined herein) is six months, on the ninetieth
(90th) day of that Interest Period, as well as on the last day of the Interest
Period; or (E) if the Loan is subject to an interest rate swap agreement, on the
dates payments are contemplated under the interest rate swap agreement to which
the Loan is subject.
In the case of an Optional Currency Advance, LIBOR shall mean the rate per
annum for deposits of the Optional Currency in question offered to the Bank in
the London Interbank market two (2) Business Days prior to the first day of such
Interest Period for deposits of the Optional Currency in question for a period
of time comparable to the Interest Period for, and in an amount comparable to
the principal amount of, the Advance sought by the Borrower. This determination
of LIBOR is referred to herein as the "Optional Currency LIBOR."
(ii) Definitions. For purposes hereof, the following terms
shall have the meanings specified.
"LIBOR-Based Rate" shall mean the LIBOR Rate plus: (a) .75%
in the case of Credit Facility A, and (b) .50% in the case of Credit Facility
B.
"LIBOR Rate" shall mean USD-LIBOR BBA or USD-LIBOR Reference
Banks, as applicable, in the case of Dollar Advances, or Optional Currency
LIBOR, in the case of Optional Currency Advances.
"USD-LIBOR-BBA" means that the rate for a Reset Date will be
the rate for deposits in U.S. Dollars for a period equal to the Interest Period
for such Loan selected by the Borrower in accordance with the terms hereof,
which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the
day that is two London Banking Days preceding that Reset Date. If such rate does
not appear on the Telerate Page 3750, the rate for the Reset Date will be
determined as if the parties had specified "USD-LIBOR-Reference Banks" as the
applicable LIBOR-Rate.
"USD-LIBOR-Reference Banks" means that the rate for a Reset
Date for a Loan will be determined on the basis of the rates at which deposits
in U.S. Dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on the day that is two London Banking Days preceding that Reset
Date to prime banks in the London interbank market for a period equal to the
Interest Period for such Loan selected by the Borrower in accordance with the
terms hereof. The Bank will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for the Reset Date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that Reset Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Bank, at approximately 11:00 a.m.,
New York City time, on that Reset Date for loans in U.S. Dollars to leading
European banks for a period equal to the Interest Period commencing on that
Reset Date.
"Optional Currency LIBOR" shall have the meaning given to such
term in the second paragraph of Section 2.4(a)(i) hereof.
"London Banking Day" means any Business Day on which
commercial banks, are in fact open for international business, including
dealings in dollar deposits on the London interbank market in London, England.
"Reset Date" means a date on which a Loan is made and each
date on which an Interest Period commences.
"Reference Banks" means four major banks in the London
interbank market, designated by the Bank.
"Interest Period" shall mean a period of one month, two
months, three months or six months, as chosen by Borrower as provided herein;
provided that:
1. any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding London
Banking Day unless such London Banking Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding London Banking
Day;
2. any Interest Period which begins on the last London Banking
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Interest
Period) shall end on the last London Banking Day of a calendar month;
3. Borrower may not select an Interest Period for a Loan if
the scheduled last day in the selected Interest Period would extend beyond the
stated maturity for that Loan; and
4. The Borrower may not have more than three (3) LIBOR Loans
with different Interest Periods under either Credit Facility existing at any one
time.
(b) Prime-Based Rate.
(i) Interest Payable. Interest accruing on a Loan
at the Prime-Based Rate (a "Prime-Based Loan") shall be payable (A) quarterly in
arrears on the first day of each January, April, July and October hereafter,
commencing October 1, 1997; (B) upon maturity of the respective Credit Facility;
and (C) upon acceleration of repayment of such Loan; or (D) if the Loan is
subject to an interest rate swap agreement, on the dates payments are
contemplated under the interest rate swap agreements to which the Loan is
subject.
(ii) Definitions. For purposes hereof, the
following terms shall have the meanings specified:
"Prime-Based Rate" shall mean with respect to Credit
Facility A, the Prime Rate minus .25% and with respect to Credit Facility B, the
Prime Rate minus .75%.
"Prime Rate" shall mean the rate announced by the
Bank from time to time as its Prime Rate, which rate is one of several interest
rate bases used by Bank. Bank lends at rates both above and below Bank's Prime
Rate, and Borrower acknowledges and agrees that Bank's Prime Rate is not
represented or intended to be the lower or most favorable rate of interest
offered by Bank. Each change of the rate of interest due to a change in the
Prime Rate shall be effective as of, and such new rate of interest shall
commence to accrue on, the opening of business on the effective date of such
change in the Prime Rate.
(c) Interest Billing Procedures. Interest will be billed in
accordance with the customary practices of the Bank or as otherwise agreed
between Bank and the Borrower; provided, however, the failure of the Bank to
send a bill shall not excuse the duty of the Borrower to ascertain and pay the
correct amount on the date it is due. The Borrower's duty to pay interest
payments hereunder shall be absolute and not contingent.
(d) Interest Determined on 360 Day Year. All interest payable
hereunder shall be at a per annum rate computed by dividing the applicable per
annum interest rate by three hundred sixty (360) and multiplying the result by
the actual number of days elapsed; provided, however, that if as to any Optional
Currency the convention is to compute interest on an Advance thereunder on the
basis of a 365 day year, the Bank will compute such interest on the basis of a
365 day year.
(e) Selection of Applicable Interest Rates and Period. Subject to
the provisions hereof, at the election of Borrower, Loans under either Credit
Facility shall bear interest at either the Prime-Based Rate or the LIBOR-Based
Rate (each, an "Interest Rate"), provided, that Borrower may not select a
LIBOR-Based Interest Rate if there has occurred and is continuing an Event of
Default or if prior to the commencement of an Interest Period the Bank in good
faith determines that adequate and fair means do not exist for determining the
LIBOR-Based Rate. If a LIBOR-Based Rate is unavailable, then Bank shall promptly
transmit notice thereof to Borrower. Borrower shall elect the Interest Rates and
in case of a LIBOR-Based Rate, the Interest Period applicable thereto for each
Loan bearing interest at a LIBOR-Based Rate at the time of each borrowing and
each conversion as provided and subject to the limitations herein.
(f) Notice and Manner of Borrowing. Borrower shall give FUNB
irrevocable telephonic notice (confirmed in writing) of each proposed borrowing
not later than 10:00 a.m. Miami, Florida time (i) on the same Business Day as
each proposed Prime-Based Loan is to be made and (ii) at least two (2) Business
Days prior to the date a LIBOR-Based Rate Loan is to be made, unless such Loan
is to be a Loan of Optional Currency, in which case such notice shall be given
by 11:00 a.m. London, England time, at least 4 Business Days before the Loan is
to be made. The notice for a LIBOR-Based Rate Loan and an Optional Currency
Advance shall also be given to the Branch simultaneously with delivery of the
notice to FUNB. Each such notice shall specify (A) the date of such Loan, (B)
the amount to be borrowed, which, with respect to an Advance shall be in a
minimum amount as provided in the definition of the particular type of Advance,
(C) the interest rate option selected by Borrower, and (D) in the case of
LIBOR-Based Rate, the duration of any Interest Period applicable thereto.
Notices received after 10:00 a.m. (Miami, Florida time) shall be deemed received
on the next business day. A request for an Advance involving an Optional
Currency is also subject to the terms of Section 2.4(h) hereof.
(g) Notice of Conversion. Once a Loan has been made it shall bear
interest at the rate selected by the Borrower in its loan request made in
Section 2.4(f) above. If such rate shall be a Prime-Based Rate, interest shall
accrue thereat until the Loan is repaid or the rate converted in accordance
herewith. If such rate shall be a LIBOR-Based Rate, interest shall accrue
thereat until the earlier of the end of the Interest Period selected in
accordance herewith or the date on which such Loan is repaid. The Borrower may,
with respect to all or any portion of any Loan, but subject to the restrictions
set forth herein, convert a rate from a Prime-Based Rate to a LIBOR-Based Rate
and may continue a LIBOR-Based Rate Loan by providing Bank telephonic notice
(which shall be irrevocable and shall be confirmed in writing) not later than
10:00 a.m. Miami, Florida time two Business Days prior to the date of the
proposed conversion or continuance of each such rate conversion date or end of
the then current Interest Period for the subject Loan, as the case may be;
provided, however, if such continuance or conversion shall also involve a
request for an Optional Currency Advances, such request shall be made on or
before 1:00 p.m. London, England time at least four (4) Business Days prior to
the date of such conversion. Each notice to convert to or continue in a
LIBOR-Based Rate shall specify (i) the date of such rate conversion or
continuance, which shall be a London Banking Day, (ii) the amount of the Loan or
portion thereof with respect to which the notice applies and (iii) the duration
of the Interest Period applicable thereto. If by the second London Banking Day
before the end of the Interest Period during which a LIBOR-Based Rate is in
effect, the Borrower has not provided the foregoing notice, the Loan shall, in
the case of a Dollar Advance, at the end of the Interest Period accrue interest
at a Prime-Based Rate and, in the case of an Optional Currency Advance, shall at
the end of the Interest Period accrue interest at the LIBOR-Based Rate with an
Interest Period of one month. In the event of a conversion of Interest Rates,
such notice shall also make provision for payment of accrued interest on the
Loan so converted.
(h) Choice of Currency; Notices. Borrower may, in accordance with
and subject to the terms and conditions of this Agreement, including in
particular, but not by limitation, Article II hereof, including Section 2.1(b)
and hereof request Advances as Dollar Advances or Optional Currency Advances, or
elect to convert a Dollar Advance to an Optional Currency Advance, or to convert
an Optional Currency Advance to a Dollar Advances, or convert an Optional
Currency Advances from one Optional Currency to another Optional Currency. The
Bank shall not make an Optional Currency Advance if the Equivalent Amount of all
Optional Currency Advances, including the Optional Currency Advance being
requested, and the amount of any Dollar Advances exceeds the amounts specified
in Section 2.1(b) hereof. Notice of a request for an Optional Currency Advance
shall be made by the Borrower to FUNB and the Branch on or before 1:00 p.m.
London, England time at least (4) Business Days before each Optional Currency
Advance. All such notices shall be in writing or by facsimile (effective upon
receipt). Each notice of an Advance Request shall be irrevocable and binding on
Borrower and shall be given not later than 11:00 a.m. Jacksonville, Florida time
on the day which is not less than the number of Business Days specified above
for such notice. In the event that the Borrower has not provided notice to the
Bank on or before 4 Business Days prior to the end of an Interest Period of
whether it elects to maintain an Optional Currency Advance in an Optional
Currency or as to the Interest Period therefor, the Advance shall at the end of
the duration of the next Interest Period remain in the currency in which the
Optional Currency Advance was made with an Interest Period of one month.
(i) Indemnity. Borrower hereby indemnifies Bank against any loss or
expense which may arise or be attributable to Bank's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any loan
(i) as a consequence of any failure by Borrower to make any payment when due of
any amount due hereunder, for whatever reason including acceleration, in
connection with any loan bearing interest at the LIBOR-Based Rate, (ii) due to
any failure of Borrower to borrow on a date specified therefor in a notice of
borrowing, (iii) due to any payment, prepayment or conversion of any loan
bearing interest at the LIBOR-Based Rate on a date other than the last day of
the Interest Period therefor, or (iv) due to a conversion of an Optional
Currency Advance pursuant to Section 2.4(j) (ii) hereof. The amount of such loss
or expense shall be determined by the Bank, as the amount actually incurred by
the Bank as a result of the foregoing. Bank's calculations of any such loss or
expense shall be furnished to Borrower and shall be prima facie evidence
thereof.
(j) Changed Circumstances.
(i) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of such
governmental authority, central bank or comparable agency:
1. shall subject Bank to any tax, duty or other
charge with respect to this Note or shall change the basis of taxation of
payments to Bank of the principal of or interest on this Note or any other
amounts due in respect thereof (except for changes in the rate of tax on the
overall net income of Bank imposed by any governmental authority); or
2. shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by the Federal
Reserve Board), special deposit or similar requirement against assets of the
Bank, deposits with or for the account of Bank, or credit extended by Bank, or
shall impose on Bank or the foreign exchange and interbank markets any other
condition affecting the Note; and the result of any of the foregoing is to
increase the cost to Bank of maintaining any LIBOR-Based Rate or; to reduce the
amount of any sum received or receivable by Bank under this Note in respect of
interest at the LIBOR-Based Rate; then the Bank shall promptly notify Borrower
of such fact and demand compensation therefor and, within fifteen (15) days
after such notice by Bank, Borrower agrees to pay to Bank such additional amount
or amounts as will compensate Bank for such increased cost or reduction. Bank
will promptly notify Borrower of any event of which it has knowledge which will
entitle Bank to compensation pursuant to this Subparagraph 2.4 (j); provided,
however, that Bank shall incur no liability whatsoever to Borrower in the event
it fails to do so. The amount of such compensation shall be determined, by the
Bank, as the amount actually incurred by the Bank as a result of the foregoing.
Bank's calculations of any such loss or expense shall be furnished to Borrower
and shall be prima evidence thereof.
(ii) If, at any time, Bank shall determine in good faith that,
by reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Dollars or Optional Currency in the applicable amounts
are not being offered to Bank, then Bank shall promptly give notice thereof to
Borrower. Thereafter, until Bank notifies Borrower that such circumstances no
longer exist, the obligation of Bank to make the LIBOR-Based Rate available to
Borrower shall be suspended, and Borrower shall subject to the following
sentence hereof, repay in full the then outstanding principal amount of each
portion of an Optional Currency Advance together with accrued interest thereon
or in the case of a Dollar Advance bearing interest at a LIBOR Rate repay the
Loan in full, together with interest accrued therein and amounts owed under
Section 2.4(i), or convert such LIBOR-Based Rate to a Prime-Based Rate in the
case of a Dollar Advance. Notwithstanding the foregoing, in the event that the
Bank determines that Optional Currency is not available to it, the Bank will
make a good faith effort to convert any outstanding Optional Currency Advance to
a Dollar Advance, and the Borrower shall be responsible for paying all costs or
expenses arising from such conversion, including those set forth in Section
2.4(i) hereof.
(iii) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, shall make it
unlawful or impossible for Bank to honor its obligations hereunder to make or
maintain any LIBOR-Based Rate or make an Optional Currency Advance, Bank shall
promptly give notice thereof to Borrower. Thereafter, until Bank notifies
Borrower that such circumstances no longer exists, (A) the obligations of Bank
to make available the LIBOR-Based Rate or Optional Currency Advances and the
right of Borrower to convert any rate to a LIBOR-Based Rate or receive Optional
Currency Advances shall be suspended, and (B) if Bank may not lawfully continue
to maintain a LIBOR-Based Rate or extend Optional Currency Advances, as the case
may be, to the end of the then current Interest Period applicable thereto, the
applicable LIBOR-Based Rate in the case of a Dollar Advance shall immediately be
converted to a Prime-Based Rate for the remainder of such Interest Period, and
the Loan shall, subject to the following sentence hereof, be immediately due in
the event of an Optional Currency Advance. Notwithstanding the foregoing, in the
event that the Bank determines that Optional Currency is not available to it,
the Bank will make a good faith effort to convert any outstanding Optional
Currency Advance to a Dollar Advance, and the Borrower shall be responsible for
paying all costs or expenses arising from such conversion, including those set
forth in Section 2.4(i) hereof.
(iv) The provisions of Sections 2.4 (i) and (j) shall
similarly inure to the benefit to any party to whom the Lender sells an
interest, or participates on interest herein, as authorized pursuant to Section
8.9 hereof.
(k) [Intentionally left blank]
(l) SURVIVAL OF CERTAIN AGREEMENTS. Without prejudice to the
survival of any other agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section shall survive the payment
in full of principal and interest hereunder and under the Notes.
2.5 MANDATORY PREPAYMENTS. In addition to the other repayment obligations
set forth herein, and subject to any prepayment penalties described in Section
2.4(i) hereof, the Borrower shall also pay to the Bank the amounts required to
be paid pursuant to Section 6.1 hereof. If on any FX Calculation Date the
Equivalent Amount of outstanding Optional Currency Advances shall have increased
such that the outstanding principal balance of Loans under Credit Facility B,
including such Equivalent Amount of outstanding Optional Currency Advances, and
the amount of Dollar Advances plus the undrawn portion of each outstanding
letter of credit issued hereunder exceeds the Maximum Loan Amount, then
immediately upon notice from Bank to Borrower, Borrower shall prepay a portion
of the Loans Credit Facility B, in an amount sufficient to reduce the
outstanding principal balance of the Loans under Credit Facility B, plus the
undrawn portion of each outstanding letter of credit to an amount equal to or
less than the Maximum Loan Amount. In the event a payment is required hereunder,
and if there are then outstanding both Dollar Advances and Optional Currency
Advances, the prepayment to the particular type of Advance shall be in order of
priority selected by the Borrower. The Borrower shall simultaneously reimburse
the Lender for any loss or out-of-pocket expenses incurred by Lender on account
of such prepayment, as set forth in Section 2.4(i) hereof.
2.6 FEES
(a) Unused Fee. In consideration for making Credit Facility B
available to the Borrower, the Borrower agrees to pay to the Bank an Unused Fee
(defined below), payable (i) quarterly in arrears on the first day of each
January, April, July and October during the term of Credit Facility B beginning
October 1, 1997; (ii) upon Credit Facility B Maturity; and (iii) upon
acceleration of repayment of Credit Facility B. "Unused Fee" shall mean the
amount calculated by (1) subtracting (x) the average daily outstanding principal
amount of Credit Facility B over the applicable period from (y) the Maximum Loan
Amount, and multiplying that resulting amount by (2) the amount calculated by
(x) dividing one-quarter of one percent (.25%) by three hundred sixty (360) and
(y) multiplying the result by the number of days elapsed.
(b) Fees Deemed Earned. All fees paid hereunder will be deemed
earned at the time of payment.
2.7 BUSINESS DAYS. If any scheduled date of repayment of any portion of a
Loan shall be due on a day which is not a Business Day, subject to the
provisions of Section 2.4 hereof, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment.
2.8 GUARANTEES. As a condition to the Bank making of the Loans to the
Borrower, the Borrower shall cause each of the Subsidiaries described on
Schedule 2.8 hereof (sometimes collectively referred as the "Guarantors") to
execute and deliver their joint and several unconditional guaranty of repayment
of the Loans, which guaranty shall be in the form attached hereto as Exhibit C
(the "Guaranty").
2.9 MODE OF PAYMENT. All funds payable to the Bank hereunder shall be paid
to the Bank at its office set out in Section 8.10 hereof, or at such place as
otherwise directed by the Bank, in actually and finally collected funds in the
currency required under in Section 2.12 hereafter on or before 2:00 P.M. (local
time) on the date when due. Payments shall not be deemed made or received until
they are received by the Bank as actually and finally collected funds in the
currency required under Section 2.12 hereafter. Any payment received after 2:00
P.M. (local time) on any business day shall, for the purposes of determining
time of payment under this Agreement as between the Borrower and the Bank only,
be treated as received on the next following business day; provided, however,
that this treatment shall not postpone the time of receipt for any other purpose
or computation, such as preference periods applicable to bankruptcy laws, or
dates relative to priority between creditors, or the like.
2.10 PREPAYMENT. Subject to the provisions of Section 2.4(i) hereof, upon
giving the Bank thirty (30) days prior written notice, the Borrower shall have
the right to prepay any amounts owed under Credit Facility A or reduce the
maximum amount available under Credit Facility B, in whole or in part, in
integral multiples of not less than One Hundred Thousand Dollars (U.S.
$100,000.00), or Equivalent Amount of Optional Currency Advances provided,
however, that any notice to permanently reduce the Maximum Loan Amount available
under Credit Facility B shall be accompanied by that amount of money, if any,
sufficient so that after giving effect to such payment the aggregate amount
outstanding under Credit Facility B does not exceed the Maximum Loan Amount
available under Credit Facility B and accrued interest thereon. Prepayments
applied to Credit Facility A shall be applied in inverse order of the scheduled
principal payments thereunder. Each notice of prepayment shall specify the
prepayment date and the principal amount to be prepaid. All prepayments of any
Loan hereunder shall include accrued interest upon the principal amount being
prepaid to the date of the payment, and any amounts owed pursuant to Section
2.4(i) hereof. Amounts prepaid under Credit Facility A may not be reborrowed.
Prepayment shall be in the currency specified in Section 2.12 hereof.
2.11 USE OF PROCEEDS. The proceeds of Credit Facility A were used by the
Borrower to redeem the outstanding convertible subordinated debentures (the
"Debentures") issued by the Borrower pursuant to that certain trust indenture
dated as of May 15, 1987, between the Borrower and the LaSalle National Bank and
(ii) to acquire shares of its common stock in open market purchases in a manner
consistent with applicable Federal or state law. Proceeds under Credit Facility
B shall be used (i) to provide funding for working capital and general corporate
purposes of the Borrower, and (ii) to issue letters of credit in accordance with
Section 2.1(d) hereof.
2.12 PAYMENT. All payments (including prepayments) of Dollar Advances
shall be made in Dollars, and all payments (including prepayments) of Optional
Currency Advances shall be made in the currency in which Optional Currency
Advance is then outstanding.
(a) The specification herein that payment be made in Dollars
or an Optional Currency, as the case may be, is of the essence hereof. If
payment is not made in the currency due under this Agreement (the "Contractual
Currency") or if any court or tribunal shall render a judgment or order for the
payment of amounts due hereunder or under the Credit Facility B Note and such
judgment is expressed in a currency other than the Contractual Currency, the
Borrower shall indemnify and hold the Bank harmless against any deficiency
incurred by the Bank in terms of the amount received by the Bank to the extent
the rate of exchange at which the Contractual Currency is convertible into the
currency actually received or the currency in which the judgment is expressed
(the "Received Currency") is not the reciprocal of the rate of exchange at which
the Bank would be able to purchase the Contractual Currency with the Received
Currency, in each case on the Business Day following receipt of the Received
Currency in accordance with normal banking procedures. If the court or tribunal
has fixed the date on which the rate of exchange is determined for the
conversion of the judgment currency into the Contractual Currency (the
"Conversion Date") and if there is a change in the rate of exchange prevailing
between the Conversion Date and the date of receipt by the Bank, then the
Borrower will, notwithstanding such judgment or order, pay such additional
amount as may be necessary to ensure that the amount paid in the Received
Currency when converted at the rate of exchange prevailing on the date of
receipt will produce the amount then due to the Bank from the Borrower hereunder
in the Contractual Currency.
(b) If any Borrower shall wind up, liquidate, dissolve or
become a debtor in bankruptcy while there remains outstanding (i) any amounts
owing to the Bank hereunder or under the Notes, (ii) any damages owing to the
Bank in respect of a breach of any of the terms hereof or (iii) any judgment or
order rendered in respect of such amounts or damages, the Borrower shall
indemnify and hold the Bank harmless against any deficiency in terms of the
Contractual Currency in the amounts received by the Bank arising or resulting
from any variation as between (i) the rate of exchange at which the Contractual
Currency is converted into another currency (the "Liquidation Currency") for
purposes of such winding-up, liquidation, dissolution or bankruptcy with regard
to the amount in the Contractual Currency due or contingently due hereunder or
under the Notes or under any judgment or order to which the relevant obligations
hereunder or under the Notes shall have been merged and (ii) the rate of
exchange at which the Bank could, in accordance with normal banking procedures,
be able to purchase the Contractual Currency with the Liquidation Currency at
the earlier of (A) the date of payment of such amounts or damages and (B) the
final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy. As used in the preceding sentence, the
"final date or dates for the filing of proofs of a claim in a winding-up,
liquidation, dissolution or bankruptcy" shall be the date fixed by the
liquidator under the applicable law as being the last practicable date as of
which the liabilities of the applicable Borrower may be ascertained for such
winding-up, liquidation, dissolution or bankruptcy before payment by the
liquidator or other appropriate person in respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and extend the financing
contemplated hereby, the Borrower represents and warrants to the Bank as
follows:
3.1 ORGANIZATION, POWERS, ETC. The Borrower (a) is a corporation duly
incorporated and organized, validly existing and its status is active or current
under the laws of each jurisdiction in which it is transacting business; (b) has
all requisite corporate power and authority and all requisite licenses, permits
and authorizations to own, operate, lease, assign, mortgage, sell or otherwise
hypothecate or dispose of its assets and to carry on its business as now
conducted and as proposed to be conducted pursuant to this Agreement; (c) is
duly qualified or licensed to transact business and is in good standing in the
every other jurisdiction in which failure to so qualify or be licensed would
have a material adverse effect on its business or financial condition or its
ability to perform its agreements hereunder, which jurisdictions are set forth
on Schedule 3.1 hereof, and (d) has the full power and authority to enter into,
execute and perform those Loan Documents (as defined herein) to which it is a
party. This Agreement, the Notes, the Guaranty, and any and all other documents,
if any, required or contemplated to be executed and/or performed by the Borrower
or each Guarantor hereunder are referred to collectively herein as the "Loan
Documents".
3.2 AUTHORIZATION OF LOAN, ETC. The execution, delivery, and performance
of the Loan Documents to which it is a party or a signatory:
(a) have been duly authorized by all requisite corporate action of
the Borrower and each Subsidiary (as defined herein);
(b) do not require any consent or approval of shareholders of the
Borrower or any Subsidiary which has not been obtained;
(c) will not, in any respect material to the financial condition of
the Borrower and the Subsidiaries taken as a whole, violate or contravene
(i) any provisions of law applicable to the Borrower or
any Subsidiary;
(ii) any order, rule or regulation of any regulatory
authority, court or other agency of government applicable to the Borrower or any
Subsidiary;
(iii) any provision of the Articles of Incorporation or the
Bylaws of the Borrower or any Subsidiary; or
(iv) any agreement or obligation to which the Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or any of its
or their property is or may be bound, or be in conflict with, result in a breach
of or constitute (with or without notice or lapse of time, or both) a default
under, any such agreement or other instrument; and
(d) shall not result in the creation of any lien of any nature
whatsoever upon any property or assets of the Borrower or any Subsidiary.
3.3 LITIGATION, ADMINISTRATIVE AND REGULATORY PROCEEDINGS. There are no
actions, suits, investigations or proceedings (whether or not purportedly on
behalf of the Borrower or any Subsidiary, or any of its or their respective
officers, directors or management officials in their capacities as such),
pending or, to the knowledge of the Borrower or any Subsidiary or any of the
above officers, directors or management officials, threatened against or
affecting the Borrower or any Subsidiary or the above officers, directors or
management officials in their capacities as such, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, regulatory agency or instrumentality, domestic or
foreign, which are reasonably expected to be determined adversely to the
Borrower or any Subsidiary and which would result in any material adverse change
in the business or financial condition of the Borrower and the Subsidiaries
taken as a whole nor are there any factual situations which might reasonably be
expected to result in any such action, suit, investigation or proceeding which
are known to the Borrower or any Subsidiary or the above officers, directors or
management officials, but unasserted at the present time which would result in a
material adverse change in the business or financial condition of the Borrower
and the Subsidiaries taken as a whole. Neither is the Borrower nor any
Subsidiary in default of any law, rule, regulation, ordinance or order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which would result
in a material adverse change in the business or financial condition of the
Borrower and the Subsidiaries taken as a whole.
3.4 PAYMENT OF TAXES AND OTHER CHARGES. The Borrower and each Subsidiary
has duly filed, paid and discharged, all federal, state and local tax returns
and taxes, and other governmental assessments and other charges, liens or claims
levied or imposed, which if unpaid would become a lien or charge for a material
amount upon the property, assets, earnings or business of the Borrower or any
Significant Subsidiary, or have an adverse effect on its financial condition or
its ability to perform its agreements hereunder, as the case may be. The
Borrower knows of no material tax or other assessment against it or any
Significant Subsidiary, which has not been properly reserved against as
reflected in the financial statements provided to the Bank in accordance with
Section 5.2 hereof.
3.5 FEDERAL RESERVE REGULATIONS.
1. Neither the Borrower nor any Subsidiary is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation G of the Federal Reserve Board ("FRB"));
2. No part of the proceeds of the Loans shall be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock; and
3. No part of the proceeds of the Loans shall be used for any
purpose that violates, or which is inconsistent with, the provisions of
Regulations G, T, U or X of the FRB.
3.6 SUBSIDIARIES. A complete list of the subsidiaries of the Borrower as
of the date hereof, as well as the place of incorporation and a list of all
jurisdictions in which each is transacting business is set forth in Schedule 3.1
hereof. This Schedule and Schedule 3.9 hereof shall be updated by Borrower
promptly of the time any new Subsidiary is added in accordance with Section 6.8
hereof. "Subsidiary" shall mean any corporation, partnership, or any other
entity either properly classified as a subsidiary of the Borrower for purposes
of generally accepted accounting principles ("GAAP") or as to which the Borrower
or any of its Subsidiaries exercises or has the right, whether by contract or
otherwise, to exercise control of its business. Each Subsidiary is a corporation
duly incorporated and organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and principal place of business,
has all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
has full power and authority to enter into, execute and perform those Loan
Documents to which it is a party. "Significant Subsidiary" shall for all
purposes hereunder except as further limited in Section 5.5(c) hereof, mean
those Subsidiaries selected by Borrower owning sufficient assets which when
aggregated with the assets of the Borrower equal at least 95% of the aggregate
amount of the consolidated assets of the Borrower and all Subsidiaries;
provided, however, that any Subsidiary which borrows money from the Bank shall
be a Significant Subsidiary.
3.7 CONSENTS, ETC. No consent, approval, authorization of, or
registration, declaration or filing with any governmental authority (federal,
state or local, domestic or foreign) is required in connection with the
execution or delivery by the Borrower or any Subsidiary of any Loan Document to
which it is a party, or the performance of or compliance with the terms,
provisions and conditions hereof or thereof.
3.8 PROPERTIES. The Borrower and each Subsidiary has good and marketable
legal and equitable title to all of its properties and assets as of the date
hereof necessary for the conduct of its business, except property leased from
others, with each lease in which the annual rent is in excess of Fifty Thousand
Dollars ($50,000) being described in Schedule 3.8. As of the date of this
Agreement, all properties and assets of the Borrower and each Significant
Subsidiary shall be free and clear of all interests, claims, reversionary rights
or interests, mortgages, pledges, liens, restrictions, forfeitures, charges,
attachments, levies, encumbrances or other matters adversely affecting the
Borrower's title hereof except (i) as contemplated herein; (ii) for Permitted
Encumbrances (as defined in Section 6.3 hereof), and (iii) Liens securing
obligations on the date hereof which are not obligations for borrowed money in
excess of $250,000 individually or $1,000,000 aggregate and there have not been
filed or executed any UCC financing statements, amendments or continuations
naming the Borrower as debtor, except for lease filings and those filed in
connection with the indebtedness described above.
3.9 OWNERSHIP. The respective classes of capital stock of each Subsidiary,
and the number of issued and outstanding share of each are as set forth in
Schedule 3.9 hereof. The Borrower owns directly as indirectly, as reflected on
Schedule 3.9, all of the issued and outstanding stock of each Subsidiary, except
for stock held by other persons, as set forth on Schedule 3.9 hereof, which
ownership is required by law, or is non-voting, and in either case none of which
vests control of any Subsidiary in any person other than Borrower. There are no
rights, warrants, options or similar agreements or understandings in existence
pursuant to which any other person may acquire any capital stock, or the right
to vote such stock, of any Subsidiary, or otherwise acquire control of any
Subsidiary. "Control" shall have the meaning ascribed to such term in Section
7.1 hereof.
3.10 ERISA.
1. The Borrower and each Subsidiary is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the regulations and
interpretations thereunder. With respect to any of the pension or employee
benefit plans maintained by the Borrower, each Subsidiary or other affiliates
(hereinafter called a "Plan") subject to Title IV of ERISA, no Accumulated
Funding Deficiency (as defined in Section 302(a)(2) of ERISA and Section 412(a)
of the Code) has occurred. No Reportable Event (as defined in Section 4043(b) of
ERISA) exists in connection with any such Plan which presents a material risk
for the termination of such Plan by the Pension Benefit Guaranty Corporation
("PBGC") or for the appointment of a trustee to administer such Plan or which
would cause a Borrower or any Subsidiary to incur any material liability to the
PBGC. "Plan" for purposes of this Agreement includes any Plan maintained by a
member of a Controlled Group (as defined in Section 1563 of the Code) of which
Borrower or any Subsidiary is part, or any such Plan to which Borrower or any
Subsidiary, or any member of the Controlled Group, is required to contribute on
behalf of any of its employees.
2. Neither the Borrower nor any Subsidiary is a member of any
multi-employer Plan.
3.11 AGREEMENTS. Neither the Borrower nor any Subsidiary is a party to any
agreement or instrument or subject to any charter or other corporate restriction
materially adversely affecting the business, properties or assets, operations or
condition (financial or other) of the Borrower and the Subsidiaries, taken as a
whole, or its ability to perform its agreement under the Loan Documents to which
it is a party. Neither the Borrower nor any Significant Subsidiary is in default
in the performance, service or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party,
which may result in a material adverse change in the condition, financial or
otherwise of the Borrower and its Subsidiaries taken as a whole, or its ability
to perform its agreements hereunder.
3.12 ENFORCEABILITY OF THE LOAN DOCUMENTS. The Loan Documents and the
performance of the Borrower's and each Subsidiary's obligations under those Loan
Documents to which it is a party or a signatory, or under any other instrument
executed or to be executed by or on its behalf hereunder constitute, or upon
execution and delivery thereof shall constitute the legal, valid and binding
obligations of the Borrower or such Subsidiary, enforceable against the Borrower
or such Subsidiary, as the case may be, in accordance with their respective
terms.
This representation is subject to the qualification that enforcement of
the foregoing described loan documents is subject to:
a. equitable remedies;
b. bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights generally;
c. any restrictions or constraints peculiarly applicable to
Bank; and
d. as to certain remedial, waiver and other provisions of the Loan
Documents, other provisions of general Florida law.
3.13 GUARANTY. All representations and warranties of each of the
Guarantors in the Guaranty are true and correct in all material respects.
3.14 RELATIONSHIP OF THE BORROWER AND SUBSIDIARIES. The Borrower and the
Subsidiaries are engaged as a globally integrated group of designers and
producers of electronic products and subsystems, providing the required
services, credit and other facilities for those integrated operations. The
Borrower requires financing on such a basis that funds can be made available
from time to time to the extent required for the continued successful operation
of their integrated operations. The Advances made to the Borrower under this
Agreement and the Loans made under Credit Facility A are for the purpose of
financing the integrated operations of the Borrower, and the Subsidiaries and
the Borrower expect to derive benefit, directly or indirectly, from the Loans,
both individually and as a member of the integrated group, because the financial
success of the operations of the Borrower and each Subsidiary is dependent upon
the continued successful performance of the integrated group as a whole.
3.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
3.16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The foregoing
representations and warranties shall be true and correct as of the date hereof
and at all times during the term of the Loans.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of the Bank to extend the financing contemplated hereby is
subject to the terms of this Agreement and to the following conditions
precedent:
4.1 REPRESENTATIONS AND WARRANTIES. On the date of execution of this
Agreement, such date being sometimes referred to hereafter as the "Closing," the
representations and warranties of the Borrower and the Subsidiaries contained
herein or in any the Loan Document shall be true and correct in all material
respects.
4.2 NO DEFAULT. On the date hereof, after giving effect to such borrowing
hereunder, the Borrower shall have observed and performed all the terms,
conditions and agreements set forth herein, or on its part to be observed or
performed in all material respects, and no Event of Default specified in Article
VII hereof, nor any other event which, upon notice or lapse of time or both,
would constitute an Event of Default shall have occurred.
4.3 SUPPORTING DOCUMENTS AND OTHER CONDITIONS. On the date hereof, but in
any event prior to any further Advance hereunder or the issuance of a letter of
credit hereunder, the Borrower shall have delivered to the Bank the following:
(a) a certificate of the Secretary of State or other applicable
governmental authority of each state or country in which Borrower or a Guarantor
is transacting business, certifying:
(i) that attached thereto is a true and complete copy of the
Articles of Incorporation or other charter documents of the Borrower and each
Guarantor as of a date within ten (10) days of the date hereof; and
(ii) that the Borrower and each Guarantor is in good standing,
or its status is active where the applicable jurisdiction is Florida, in that
State or other applicable jurisdiction;
(b) a certificate of a duly authorized officer of the Borrower and
each Subsidiary, dated the date of such borrowing, certifying:
(i) that attached thereto is a true and complete copy of the
Bylaws of the Borrower or Subsidiary, and the articles of incorporation for each
Subsidiary other than a Guarantor, as applicable, as in effect on the date of
such certification;
(ii) that the Borrower or Subsidiary is in good standing, or
its status is active where the applicable jurisdiction is Florida, in each
jurisdiction in which it is transacting business;
(iii) that attached thereto is a true and complete copy of
resolutions of the Board of Directors of the Borrower or Subsidiary, as
applicable, directing the execution and delivery by the Borrower of the Loan
Documents to which it is a party, indicating the officers of the Borrower or
Subsidiary, as applicable, authorized to execute such instruments and act on its
behalf, which resolutions are in full force and effect without modification on
the date of such certification;
(iv) the incumbency and signatures of the officers
of the Borrower or each Subsidiary executing the Loan Documents to which it
is a party; and
(v) that the Articles of Incorporation or other charter
documents of the Borrower or Subsidiary, as applicable, described in Section
4.3(a)(i) or Section 4.3(b) hereof have not been amended and are true and
complete as of the date hereof;
(c) a certificate of a duly authorized officer of the Borrower and
each Guarantor to the effect that after giving effect to the transaction
contemplated herein (i) the Obligation of the Borrower will not be greater than
the value of the consolidated property of the Borrower at a fair valuation; (ii)
the Borrower will have sufficient capital to engage in its business on an
ongoing basis; (iii) the Borrower will have the ability to pay its Obligations
as they mature;
(d) Credit Facility A Note duly executed by the Borrower;
(e) Credit Facility B Note duly executed by the Borrower;
(f) Indemnification Agreement, substantially in the form attached
hereto as Exhibit D;
(g) the Guaranty duly executed by the Guarantors;
(h) the opinions of counsel to the Borrower, Stevens-Arnold, Inc.,
JETA Power Systems, Inc., RT Holding Corp., Heurikon Corp. from attorney(s)
licensed to practice law in the states of such entities organizations in form
attached reasonably acceptable to the Bank;
(i) the ISDA Master Agreement dated as of July 14, 1997 between the
Lender and the Borrower (the "ISDA Master Agreement") and any other documents
required by the terms thereof to be delivered in connection therewith;
(j) searches from each jurisdiction in which it and each Subsidiary
is transacting business within the State of Florida, Wisconsin, California and
Massachusetts demonstrating that there are no liens upon the Borrower's or any
Subsidiary's property except as permitted hereunder; and
(k) all other additional opinions, documents, certificates and other
assurances that the Bank or its counsel may reasonably require.
4.4 LOAN FEES. The Borrower shall pay at the time of execution hereof all
costs of the Bank incurred through such dates as provided in Section 8.1 hereof.
4.5 CLOSING. This Agreement, the Notes, and the Guaranty shall by executed
by the Borrower or Guarantor, as the case may be, at the place set forth on the
signature pages hereof, and the execution of this Agreement by the Branch and
the Bank shall occur in Charlotte, North Carolina, and the delivery of the
originals of such documents to the Bank shall occur at the office of Bank's
agent in Charlotte, North Carolina, and the delivery of the balance of the
documents described in Article IV hereof shall be at a time agreed upon by the
parties hereto, at the offices of Holland & Knight LLP, Suite 3000, 701 Brickell
Avenue, Miami, Florida.
4.6 APPROVAL OF COUNSEL FOR BANK. All legal matters incident to this
Agreement shall be reasonably satisfactory to Messrs. Holland & Knight LLP,
counsel for the Bank.
4.7 CONDITIONS PRECEDENT TO EACH ADVANCE AND ISSUANCE OF EACH LETTER OF
CREDIT. The following conditions, in addition to any other requirements set
forth in this Agreement, shall have been met or performed on or prior to the
date any Advance or issuance of any letter of credit hereunder shall be made by
the Bank:
a. Request to Make an Advance or Issue a Letter of Credit. The
Borrower shall have delivered to the Bank a request to make an Advance which
request shall be substantially in the form attached hereto as Exhibit E (the
"Request), or deliver such application (the "Application") to issue a letter of
credit in accordance with Section 2.4(d)(i) hereof.
b. No Default. On the date of the Request or Application as the case
may be, the Borrower and each Subsidiary shall be in compliance in all material
respects with all the terms and provisions set forth in the Loan Documents on
its part to be observed or performed, and no Event of Default shall have
occurred or be continuing at such time, or will occur upon the making of the
Advance or issuance of the Letter of Credit in question.
c. Correctness of Representations. All representations and
warranties made by the Borrower and any Guarantor herein or in the other Loan
Documents or otherwise in writing in connection herewith shall be true and
correct with the same effect as though the representations and warranties had
been made on an as of the proposed date of the Advance or issuance of the Letter
of Credit, except to the extent such representation and warranty relates to an
earlier date.
d. No Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as whole, from such condition as it existed on the date of
the most recent financial statements of such person delivered prior to the date
hereof.
e. Further Assurances. The Borrower shall have delivered such
further documentation or assurances as the Bank may reasonably require.
f. Advance Limitations. Any Request for an Advance or filing of any
Application shall be irrevocable, made in the time frame as specified in Section
2.4 hereof, in the case of an Advance, shall be in a minimum amount of $100,000
or a whole multiple of $100,000 in excess thereof, or Equivalent Amounts thereof
for Optional Currency Advances. No Request for an Advance may be made or
Application filed after the Credit Facility B Maturity.
g. Maximum Amount. The amount of the Advance sought in the Request
or the amount of the letter of credit requested in the Application, either by
itself or in the aggregate with other amounts outstanding under Credit Facility
B or the amount of other outstanding letters of credit, shall not exceed the
Maximum Amount.
ARTICLE V
AFFIRMATIVE COVENANTS
Each of the Borrower and the Subsidiaries consents and agrees that, from
the effective date and so long as this Agreement shall remain in force and
effect, and until payment in full of the principal and interest due under the
Notes and until full satisfaction of the Obligation described hereunder, it
shall:
5.1 NOTICE. Give prompt written notice to the Bank of:
a. the institution, or threat of institution, or the occurrence of
facts known to it which might reasonably be expected to result in, any action,
suit, investigation or proceeding instituted by or against the Borrower or any
Subsidiary or the officers, directors or management officials of the Borrower or
any Subsidiary in their capacity as such, at law or in equity, in any federal or
state court or before any federal, state, municipal or other governmental
department, commission, board, bureau agency, regulatory authority or
instrumentality, domestic or foreign, which seeks damages or other relief in
excess of One Million Dollars ($1,000.000.00) or the Equivalent Amount thereof
if such judgment is rendered in other than Dollars, or which if determined
adversely to the Borrower or any Subsidiary would have a material adverse effect
upon the business or financial condition of the Borrower and the Subsidiaries,
taken as a whole; and
b. any other action, event or condition of any nature which, in the
reasonable opinion of the Borrower, with or without notice, or lapse of time, or
both, constitutes or would constitute an Event of Default under this Agreement.
Each notice required to be delivered pursuant to this Section 5.1
shall include a reasonably detailed description of the matter, the amount in
controversy (or other non-monetary relief sought or both), the title of the
applicable forum, style of the proceeding, case number, docket number and the
like, and the attorney or law firm (together with address) providing
representation on behalf of the Borrower, or officers, directors or management
officials of the Borrower, in their capacities as such, with respect to each
item of litigation listed.
5.2 ACCOUNTS AND REPORTS. Maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently applied,
and furnish or cause to be furnished to the Bank copies of each of the
following:
a. Within ninety (90) days after the end of its fiscal year, (i) an
annual consolidated financial statement of the Borrower and its Subsidiaries,
and related statements of income, shareholders' equity, and changes in position
for such fiscal year, all with accompanying notes, in reasonable detail and
stating in comparative form the figures as of the end of and for the previous
fiscal year, audited without scope limitations by an independent certified
public accountants of recognized standing selected by the Borrower and
acceptable to the Bank (the foregoing shall have been certified pursuant to an
audit as presenting fairly the financial position of the Borrower and its
Subsidiaries, and the results of operations and changes in financial position
for the fiscal year, without qualification, in conformity with GAAP consistently
applied together with a copy of the management letter or a statement that none
was issued); provided, however, that the delivery of the Borrower's Form 10-K
for that fiscal year shall satisfy this requirement, so long as the financial
statement was prepared by either Arthur Anderson or by an accounting firm
reasonably satisfactory to the Bank; (ii) a compliance certificate executed by
the Chief Financial Officer certifying that as of the date thereof the Borrower
is in compliance in all material respects with the terms hereof and itemizing
the computations performed to test such compliance as to Sections 6.1 or 6.8 or
Article 6A hereof, in sufficient detail (including the aggregate amount of
previous sales required to be included in calculation of amounts due under
Section 6.1 hereof) to permit the Bank to relate the items involved in the
computation to the figures shown on the financial statements; and (iii) a copy
of accountants' management letter or statement that none was prepared.
b. Within 120 days after the end of its fiscal year, a consolidating
financial statement of the Borrower and its Subsidiaries, which may be
unaudited.
c. Within forty-five (45) days of the end of each fiscal quarter,
(i) a detailed profit and loss statement and balance sheet of the Borrower and
its Subsidiaries, each of which may be compiled by the Borrower, and need not be
audited or reviewed by an independent accountant (each of the foregoing must
reflect GAAP, applied consistently with the annual financial statements);
provided, however, that the delivery of the Borrower's Form 10-Q for the fiscal
quarter then ending shall satisfy this requirement; (ii) a compliance
certificate executed by the Chief Financial Officer of the Borrower, certifying
that as of the date thereof, the Borrower is in compliance in all material
respects with the terms hereof and itemizing the computations performed to test
such compliance as to Sections 6.1 or 6.8 or Article 6A hereof in sufficient
detail (including the aggregate amount of previous sales required to be included
in calculation of amounts due under Section 6.1 hereof) to permit the Bank to
relate the items involved in the computation to the figures shown on the
financial statements; and (iii) a certification by the Chief Financial Officer
as to compliance with Section 5.5(c) hereof.
d. Promptly upon becoming available, (but no later than ninety (90)
days after the end of Borrowers fiscal year in the case of the delivery of Form
10-K and forty-five (45) days after the end of Borrower's fiscal quarter in the
case of the delivery of Form 10-Q), copies of all financial statements, reports,
and notices sent by the Borrower to its stockholders, and of all regular and
periodic reports and other material (including copies of all registration
statements and reports under the Securities Act of 1934, as amended) filed by
the Borrower and any securities exchange or any governmental authority or
commission, except material filed with governmental authorities or commissions
in the ordinary course of the business of the Borrower and which does not relate
to or disclose any material adverse effect to the affairs of the Borrower.
e. Promptly, from time to time, such other information regarding the
operation, business affairs and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
5.3 MAINTAIN INSURANCE.
a. Keep the insurable properties of the Borrower and its
Subsidiaries adequately insured with sound and reputable insurers to the extent
and against such risks (including fire and other risks commonly insured against
by extended coverage) as is customary with companies in the same or similar
businesses.
b. Maintain in full force and effect public liability insurance
against claims for personal injury or death or property damage occurring upon,
in, or about or in connection with the use of any properties owned, occupied or
controlled by the Borrower or any of its Subsidiaries.
5.4 FUTURE TAXES. Pay all taxes and other governmental assessments as the
same shall become due, excepting only taxes and governmental assessments which
the Borrower or any Significant Subsidiary is contesting in good faith and for
which the Borrower or any Significant Subsidiary has set aside adequate
reserves, including reserves for interest with respect thereto in the manner
provided hereafter.
5.5 CORPORATE EXISTENCE, PROPERTIES, STOCK OWNERSHIP AND SOLVENCY.
a. Except as otherwise permitted by Section 6.2 hereof, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect the Borrower's and the Significant Subsidiaries' corporate existence, and
its and their rights, licenses, permits and franchises and charters, and conduct
and operate its and their business in substantially the manner in which the
business is presently conducted and operated (subject to changes in the ordinary
course of business); and at all times maintain, preserve and protect all
material franchises and trade names; and comply in all material respects with
all laws, statutes, regulations and ordinances of any governmental entity or
agency thereof, applicable to the Borrower or any Significant Subsidiary;
b. maintain the percentage share ownership of each Subsidiary as in
effect on the day hereof, as well as control of the right to vote such stock,
and to own and control 100% of the title, and control the right to vote, the
stock of any Subsidiary created after the date hereof;
c. the Borrower and each Significant Subsidiary, and the Borrower
and all Subsidiaries on a consolidated basis, will remain Solvent at all times;
provided, however, that for purposes of the foregoing, a Significant Subsidiary
will mean each Subsidiary selected by the Borrower having assets which, when
aggregated with the assets of the Borrower, equal or exceed 80% of the
consolidated assets of the Borrower and all Subsidiaries, except that each
Subsidiary borrowing money from the Bank shall be a Significant Subsidiary; and
d. each Subsidiary other than a Significant Subsidiary will also be
Solvent at all times except to the extent it is not Solvent because of other
indebtedness permitted hereunder.
5.6 WARRANTIES AND CONDITIONS. Do all acts or refrain from action, as
necessary to cause all of the representations and warranties set forth in
Article III hereof to continue to be true in all material respects at all times
that this Agreement is in effect.
5.7 FURTHER AGREEMENTS. Comply with any and all procedures reasonably
established by the Bank for processing, handling and accounting for the Loans
and all payments involved, and the documents or instruments pertaining thereto.
The Borrower and each Subsidiary shall execute and deliver to the Bank all such
additional agreements, documents, instruments and affidavits necessary or as may
reasonably be required by the Bank to evidence and accurately account for and
ratify all amounts advanced or payable pursuant to this Agreement or any of the
Obligations. The Borrower and each Subsidiary shall pay all taxes (other than
income or similar taxes of the Lender), recording fees and other reasonable
costs incurred by the Bank in connection with such subsequent loans. At the
option of the Bank, the Notes may be modified or renewed, an additional note may
be executed, or overdrafts may be allowed on any account of the Borrower or any
Subsidiary with the Bank, or advances made against uncollected funds under
drafts presented by the Borrower or any Subsidiary to the Bank for collection.
5.8 ERISA. Comply in all material respects with the provisions of ERISA to
the extent applicable to any pension or welfare benefit plan maintained for any
of its or their employees, not incur any material accumulated funding
deficiency, as defined in Section 302(a)(2), or any material liability to the
Pension Benefit Guarantee Corporation ("PBGC"); not permit any Reportable Event,
as defined in Section 403(b) of ERISA, or other event to occur which may
indicate that its plan is not sound, which constitutes grounds for termination
of a plan by the PBGC, which would be the basis for the PBGC to assert a
material liability against the Borrower or any Subsidiary, or which may result
in the imposition of a lien on any of the Borrower's or any Subsidiary's assets
or which constitutes grounds for the appointment by the appropriate United
States District Court of a trustee to administer any Plan; and notify the Bank
in writing promptly after it has come to the attention of the officers of the
Borrower or any Subsidiary of the assertion or threat of any Reportable Event,
the existence of any Reportable Event or other event which may give rise to any
of the foregoing events.
5.9 ENVIRONMENTAL MATTERS. Represents to the Bank that the places of
business operated by the Borrower and its Significant Subsidiaries have not in
the past been used by Borrower, any Significant Subsidiary, or, to its
knowledge, any other party, are not presently being used, and will not in the
future be used for the handling, storage, transportation, or disposal of
hazardous or toxic materials in any manner not in compliance with applicable
law. The Borrower agrees to indemnify, defend, and hold the Bank harmless from
and against any loss to the Bank (including, without limitation, reasonable
attorneys' fees) incurred by the Bank as a result of such past, present or
future use, handling, storage, transportation, or disposal of hazardous or toxic
materials.
5.10 GUARANTORS. The Borrower agrees that it will promptly forward to the
Guarantors any notices or documents or information which it is required
hereunder or under the Loan Documents to forward to the Bank.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower and the Subsidiaries covenant and agree that, during the term
of this Agreement, neither the Borrower nor the Subsidiaries will:
6.1 SALE OF ASSETS. Sell, lease or otherwise dispose of any shares of
stock or other interest in any Significant Subsidiary, or of any other assets of
the Borrower, or allow any of its Significant Subsidiaries to do so, in a single
transaction or series of transactions, without the prior written consent of the
Bank, which may be withheld at the Bank's sole discretion; provided, however,
that the Borrower may sell, lease or dispose of assets in the ordinary course of
business and provided, further, that the foregoing by itself shall not act to
prevent the Borrower or any Subsidiary, so long as there does not then exist an
Event of Default or so long as no Event of Default is created as a result of
such sale, lease or disposition, from selling, leasing or otherwise disposing
of, or engaging in:
(a) subject to the restriction set forth in Section 6.1(d) hereof, a sale
and leaseback involving assets (x) in an amount not to exceed, in the aggregate
for each such twelve month period ten percent (10%) of the Borrower's
consolidated Net Tangible Assets measured on a quarterly basis based on the
twelve (12) month period then ending, with the first twelve (12) month period
being the period of July 1, 1996 through June 30, 1997; or (y) in transactions
in which the resulting lease is less than one year or the proceeds of the sale
of which shall be used to purchase new assets or retire existing indebtedness.
"Net Tangible Assets" shall mean such amount as computed in accordance with
GAAP;
(b) the real property and facilities of Stevens - Arnold, Inc., located at
7 Elkin Street, South Boston, Massachusetts;
(c) subject to the restriction set forth in Section 6.1(d) hereof, the
real property and facilities located at 13-15 Shing Wan Road, Hong Kong (the
"Hong Kong Property"); and
(d) any other sale not otherwise described in (a) and (b) above in which
(A) the aggregate amount of the sale of assets in a calendar year does not
exceed ten percent (10%) of total Capitalization or (B) there is paid to the
Bank, together with amounts owed under Section 2.4(i) hereof, within twenty-four
(24) months after the sale of such assets, an amount equal to fifty percent
(50%) of the Net Sale Price (which payment is referred to herein as a "Mandatory
Prepayment"), if the Net Sale Price therefore, together with the Net Sales Price
for any other item sold in that calendar year, including, sale price of assets
sold under (a) above, is for an aggregate amount in excess of ten percent of the
Total Capitalization; provided, however, that the foregoing shall not permit any
sale or other disposition not otherwise permitted hereunder where the aggregate
amount of the Net Sale Price of assets sold or disposed of under this subsection
or Subsection 6.1(a) hereof over the term of this Agreement including the
expected Net Sale Price of the intended sale or disposition, exceeds twenty
percent of the Total Capitalization as calculated at the time of the proposed
sale or disposition; provided, further, however, that the Net Sale Price shall
not include and the Mandatory Prepayment shall not be required in respect
thereof to the extent proceeds received by the Borrower or any Subsidiary from
the sale of assets to the extent such moneys are reinvested by the Borrower or a
Subsidiary in making an acquisition permitted by Section 6.8 hereof or acquiring
other capital assets within twenty-four (24) months from the date of sale
provided, however, pending such reinvestment, such proceeds are to be maintained
for a period not to exceed twenty-four (24) months, in short term investments
(as defined under GAAP) pending such reinvestment described above. The amounts
required to be paid to the Bank under this subsection (e) are referred to herein
as a Mandatory Prepayment. The cash proceeds from the sale of the Hong Kong
Property will also be treated as subject to the requirement that 50% of the Net
Sale Price be paid to the Bank as a Mandatory Prepayment and the requirement
that the Net Sales Price be invested for the period and in the investments
specified above, all as if the sale had been a sale permitted only pursuant to
Section 6.1(d) hereof, provided that the proceeds from the sale of the Hong Kong
Property shall not be included in calculating whether the aggregate amount of
sales of assets is in excess of 20% of Total Capitalization. Borrower agrees
that (i) all sales proceeds invested as provided herein if not previously
reinvested in acquisitions permitted under Section 6.8 hereof or acquisition of
capital assets, or (ii) at the option of the Borrower, an equivalent amount of
cash will become subject to a lien in favor of the Bank if there occurs an Event
of Default and will promptly enter into a security agreement with the Bank in
form acceptable to the Bank upon the occurrence of an Event of Default.
Mandatory Prepayments made hereunder shall be applied to installments of
principal of indebtedness owed by Borrower or any Subsidiary to the Bank in the
inverse order of scheduled monthly maturity of such indebtedness. "Total
Capitalization" shall mean debt or payment obligations for borrowed money with a
stated maturity longer than 365 days plus Net Worth (as such term is computed
under GAAP) determined for the Borrower and its Subsidiaries on a consolidated
basis. "Net Sale Price" shall mean the aggregate cash consideration paid to the
Borrower and Subsidiaries as result of the sale, less the expenses involved in
selling the assets, including any taxes payable as a result of such transaction.
6.2 REORGANIZATIONS. Dissolve, liquidate or discontinue its normal
operations, or merge, consolidate or enter into any syndicate or other
combination with any corporation, firm or partnership, or transfer any of its
accounts receivable or enter into a joint venture or partnership, or offer or
enter into any agreement or memorandum of intent or understanding or the like to
do any of the above, without the prior written consent of the Bank, unless one
Subsidiary merges or consolidated with another Subsidiary in a transaction where
the assets and liabilities of one of the Subsidiaries become the assets and
liabilities of another Subsidiary.
6.3 LIENS. Attempt to create, incur, assume or suffer to be created,
incurred or assumed, or permit, any claims, interest, mortgage, lien, charge,
security interest, pledge or encumbrance on any of the Borrower's or any
Significant Subsidiary's assets; provided, however, that this Section shall not
apply to (i) such claims, interests, mortgages, liens, charges, security
interests, pledges or encumbrances upon the Borrower's and Subsidiaries'
Property, Plant and Equipment which in the aggregate secure indebtedness owed to
persons or entities other than the Bank in an amount not to exceed fifteen
percent (15%) of the consolidated Tangible Net Worth of the Borrower and its
Subsidiaries or (ii) other liens or mortgages approved in writing by the Bank or
set forth on Schedule 6.3 hereof (the "Permitted Encumbrances") or (iii) a lien
upon the Hong Kong Property (as defined in Section 6.1(d) hereof) in an amount
not to exceed Ten Million Dollars. The foregoing shall not be deemed to
authorize the foregoing transactions, if there then exists an Event of Default
or there would then exist an Event of Default after giving effect to such
transaction. "Property, Plant and Equipment" shall mean any assets that would be
classified and accounted for as property, plant and equipment in accordance with
GAAP.
Notwithstanding the foregoing, neither Borrower nor any Subsidiary will
grant any lien, pledge, security interest or encumbrances on the stock of any
Subsidiary.
6.4 GUARANTEES. Guarantee or otherwise in any way become or be responsible
for the obligations of any other person (whether by agreement to purchase the
indebtedness of any other person, or agreement for the furnishing of funds to
any other person through the purchase of goods, supplies or services (or by way
of stock purchase, capital contribution, advance or loan) for the purpose of
paying or discharging indebtedness of any other person, or otherwise) unless the
Borrower has received the prior written consent of the Bank or with respect to
the Guaranty or any other guaranty in favor of the Bank or Guaranty in favor of
a third party lender secured solely by the Hong Kong Property, provided such
Guaranty does not exceed Ten Million Dollars or provided there does not then
exist an Event of Default or provided an Event of Default is not created as a
result of such Guaranty.
6.5 INDEBTEDNESS. Create, incur, assume or suffer to exist any
indebtedness, except for (i) the Obligation; (ii) accounts payable arising in
the ordinary course of business; (iii) other indebtedness permitted hereunder;
(iv) indebtedness secured by mortgages described in Schedule 6.3 and any
renewals or extensions (but not any increases thereof); and (v) indebtedness
permitted by the Bank in writing. "Indebtedness" shall mean all of the
Borrower's and the Subsidiaries' obligation and liabilities to any person or
entity, including, without limitation, all debts, claims and indebtedness,
contingent, fixed or otherwise, heretofore, now or from time to time hereafter
due or payable, however evidenced and however arising, and any leases required
to be capitalized under GAAP.
6.6 NO LOANS. Make any loans, advances or extensions of credit except that
the Borrower may have trade receivables and may make advances and deposit in the
ordinary course of business not to exceed $2,000,000 in the aggregate. The
Borrower may also make advances to its officers, directors and employees from
time to time in the ordinary course, provided that the maximum aggregate amount
of all such advances will not exceed One Million Dollars ($1,000,000.00) at any
time.
6.7 INVESTMENTS. Make or suffer to exist any investments other than:
1. in direct obligations of the United States of America, or any
agency thereof or obligations guaranteed by the United States of America;
provided, that such obligations mature within one year from the date of
acquisition thereof;
2. in certificates of deposit maturing within one year from the date
of acquisition issued by the Bank, or by any other bank or trust company
organized under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating at least $100 million and not
known by the Borrower to be having financial difficulties;
3. commercial paper rated P-1 and P-2 by Moody's Investors
Service, Inc. (Commercial Paper Record) and rated A-1 or A-2 by Standard and
Poor Corporation (Commercial Paper Ratings Guide);
4. private placements with daily maturities;
5. other investments (after consultation with the Bank) of up to an
aggregate amount of $500,000.00 outstanding at any one time(s); and
6. the Borrower's ownership of the Subsidiaries as of the date of
this Agreement, and as permitted pursuant to Section 6.8 hereof.
6.8 ACQUISITIONS. Acquire all or a substantial portion of another
business, whether by purchase of stock, assets or otherwise, for an aggregate
purchase price in excess of (i) Ten Million and 00/100 Dollars ($10,000,000.00)
plus (ii) forty percent (40%) of EBITDA for the most recent four (4) fiscal
quarters plus (iii) one hundred percent (100%) of such acquired business' EBITDA
(excluding compensation of officers and distributions paid out by closely held
entities), for the most recent four (4) fiscal quarter without the Bank's prior
written consent. Any such business, if not made a part of Borrower or an
existing Subsidiary, shall be deemed to be a Subsidiary for purposes of this
Agreement, and shall be subject to this Agreement. Notwithstanding the
foregoing, the acquisition of Elba Electric GmbH and affiliated entities
("Elba") as described in that certain letter of intent dated June 3, 1997 and
July 2, 1997, from Borrower to Elba is a permitted acquisition under this
Section 6.8.
6.9 FISCAL YEAR. Change its fiscal year from its present fiscal year.
ARTICLE VI A
FINANCIAL COVENANTS
6A.1 EBITDA TO DEBT SERVICE COVERAGE RATIO. Each of the Borrower and the
Subsidiaries agree so long as this Agreement shall remain in place that it shall
maintain on a consolidated basis, a minimum EBITDA to Debt Service Coverage
Ratio of 1.75 to 1.0 through June 30, 1997, measured for the period of July 1,
1996 through June 30, 1997, and 2.50 to 1.0 at all times thereafter, measured on
the last day of each fiscal quarter thereafter beginning September 30, 1997 for
the twelve (12) month period then ending for the twelve (12) month period ending
September 30, 1997.
6A.2 TANGIBLE NET WORTH. (a) Each of the Borrower and the Subsidiaries
agree that it shall maintain on a consolidated basis until December 31, 1997, a
minimum Tangible Net Worth at all times in the total amount of $20,060,000.00
plus fifty percent (50%) of the Borrower's consolidated cumulative net income
April 4, 1995, (b) a minimum tangible Net Worth of $50,000,000 on December 31,
1997, and (c) at all times maintain on a consolidated basis after December 31,
1997, a minimum Tangible Net Worth of at least $50,000,000 plus fifty percent
(50%) of the Borrower's consolidated cumulative net income after December 31,
1997, plus 100% of the amount of the proceeds from any issuance of stock by
Borrower and its Subsidiaries after payment of all expenses associated with the
issuance of such stock. In calculating the amount under (c) above, there shall
not be subtracted cumulative net income for any 12 month period if that number
is a negative number. "Tangible Net Worth" shall mean the total of (the assets
of the Borrower and Subsidiaries on a consolidated basis less assets properly
classified under GAAP as intangible assets, including the value of goodwill and
intellectual property) minus the liabilities of the Borrower and the
Subsidiaries on a consolidated basis.
6A.3 TOTAL DEBT TO EBITDA. Each of the Borrower and the Subsidiaries agree
that it will not permit on a consolidated basis the ratio of Total Debt to
EBITDA to exceed (i) 3.00 to 1.00 through June 30, 1997 measured for the period
of July 1, 1996 through June 30, 1997, or (ii) 2.25 to 1.0 at any time after
June 30, 1997, measured on the last day of each fiscal quarter hereafter for the
twelve (12) month period then ended, with the first such twelve (12) month
period being the period of October 1, 1996 through September 30, 1997.
ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Any of the below listed events happening to the
Borrower or any Subsidiary are sometimes referred to herein alternatively as
"Events of Default" or "Default":
a. Failure to pay, perform, or comply with any material obligation,
promise, covenant, agreement or provision under any of the Loan Documents, or
upon the occurrence of any other event of default and the continuation beyond
the expiration of any cure period relating thereto under any other agreement
between the Borrower or any Subsidiary and the Bank;
b. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Subsidiary shall prove to have been
false or misleading in any material respect when made or furnished;
c. Dissolution or liquidation of the Borrower or any
Significant Subsidiary;
d. The Borrower or any Significant Subsidiary shall fail to pay any
additional monetary obligation in excess of One Hundred Thousand Dollars
($100,000.00) when due, however arising and to whomever owed, except in
immaterial amounts through inadvertent clerical error;
e. The Borrower or any Significant Subsidiary should make a general
assignment for the benefit of creditors, or any proceeding of any other similar
nature be instituted by or against the Borrower or any Significant Subsidiary or
any proceeding be instituted against the Borrower or any Significant Subsidiary
alleging that such entity is insolvent, or a receiver be appointed for the
Borrower or any Significant Subsidiary or for any property of the Borrower or
any Significant Subsidiary, and such proceeding shall not be dismissed within
ninety (90) days after the date such action is commenced;
f. Any verdict or judgment in excess of Two Hundred Fifty Thousand
and No/Dollars ($250,000.00) or an Equivalent Amount if the judgment is not in
Dollars individually or in the aggregate in any twelve (12) month period during
the term hereof be obtained or entered against the Borrower or any Significant
Subsidiary, or any property of such entity, and remain unsatisfied or not stayed
by court order upon posting a bond, after thirty (30) days from the rendition of
such judgment unless fully covered by insurance less permitted deductible;
g. A decree or order shall be entered by a court for relief in
respect of the Borrower or any Significant Subsidiary under Title 11 of the
United States Code, as now or hereafter constituted, or any other applicable
foreign, federal or state bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or similar official) of the Borrower or any Significant Subsidiary or of any
substantial part of either the Borrower's or any Significant Subsidiary's
property, or ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a period of
ninety (90) consecutive days;
h. Borrower or any Significant Subsidiary shall file a petition or
answer or consent seeking relief under Title 11 of the United States Code, as
now or hereafter constituted, or any other applicable foreign, federal or state
bankruptcy, insolvency or other similar law, or consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking possession of a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Borrower or any
Significant Subsidiary or any substantial part of the Borrower's or any
Significant Subsidiary's property, or Borrower or any Significant Subsidiary
shall fail generally to pay their respective debts as such debts become due, or
take action in furtherance of any such action;
i. The Borrower or any Significant Subsidiary is in default under
any agreement, mortgage or security agreement with any person or corporation
whatsoever which would reasonably be expected to materially adversely affect the
ability of the Borrower by itself or the Borrower and the Subsidiaries, taken as
a whole, to perform any action or make any payment required by this or any other
agreement between the Borrower or any Significant Subsidiary and the Bank;
j. The making of any levy, seizure, garnishment, or attachment of or
on any assets of the Borrower or any Significant Subsidiary if the effect of
such action may reasonably be expected to have a material adverse affect on the
ability of the Borrower or the Borrower and the Subsidiaries taken as a whole to
perform its obligations hereunder;
k. In the event that control of the Borrower or any Significant
Subsidiary is transferred, directly or indirectly, to any person other than
another Subsidiary;
l. The Guarantors, or any of them, default in their obligations
under the Guaranty; or
m. The occurrence of any material adverse change to the financial
condition of the Borrower, or the Borrower and the Subsidiaries taken as a
whole.
For purposes of the foregoing subsection (k), "control" shall be deemed to be
the ownership of a sufficient number of shares of the Borrower so that the
holder thereof holds the right to vote, directly or indirectly, in excess of
fifty percent (50%) of the voting stock of the Borrower, or can otherwise elect,
whether directly or indirectly, through stock ownership, proxy, shareholder
agreement or otherwise, one-half (1/2) or more of the members of the Board of
Directors of the Borrower.
The Bank agrees that if an Event of Default has occurred (i) pursuant to Section
6.1(a) hereof because of the failure of the Borrower to make a required payment
hereunder, the Borrower shall have five (5) days to cure such default prior to
the Lender having the right to accelerate the payment of all amounts owed
hereunder; or (ii) pursuant to any other provision of Section 7.1 hereof, that
is not due to (a) the Borrower's failure to make a required payment under
Section 6.1(a); (b) the Borrower's failure to comply with the provisions of
Sections 6.3, 6A.1 or 6A.2 or 6A.3 hereof; or (c) the provisions of Sections 7.1
(e), (g) or (h), the Borrower shall have thirty (30) days to cure such default
prior to the Bank having the right to accelerate the payments of all amounts
owed hereunder.
Upon the occurrence of an Event of Default and the continuation thereof beyond
any applicable cure period as set forth above or at any time thereafter during
the continuance of any such Event of Default, the Notes, the Guaranty, the
Obligation and all other payments required to be made hereunder shall be
forthwith due and payable at the Bank's option, except that on Event of Default
under Sections 7.1(e), (g) or (h), the Obligations and all other amounts
hereunder shall be automatically due and payable without further action by the
Bank, both as to principal and interest, without presentment, demand, protest or
other notice of nonpayment or default or other notice of any kind, all of which
are hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding. Upon the occurrence of an Event of Default, (i) the
principal amounts owed hereunder on the Loans shall bear interest at the highest
rate allowable under applicable law, or, if there is no such limit, at the
Default Rate, until such Event of Default is cured or until the amounts
outstanding hereunder are paid in full; and (ii) any money held as a result of a
transaction otherwise permitted pursuant to Section 6.1 hereof shall be
delivered to the Bank as collateral for the Obligations. Upon the occurrence of
an Event of Default, the Bank may exercise any rights given to it by law, the
Notes, or given by this Agreement, and the Bank may apply any sums received by
the Bank to any of the Obligations or any portion thereof in such order as the
Bank in its sole discretion may determine, any request to the contrary by the
Borrower notwithstanding.
If the Borrower fails to pay any amount payable by it under this
Agreement, the Borrower shall forthwith on demand by the Bank pay interest on
the overdue amount from the due date, whether by maturity or acceleration, up to
the date of actual payment, as well after as before judgment, at the Default
Rate, which for Prime Based Loans shall be the Prime Rate plus 4 percent per
annum and for all LIBOR-Based Rate Loans, a rate determined by the Bank to be 4
percent above the rate which would otherwise be payable for Advances in such
Currency, whether Dollars or an Optional Currency, under Credit Facility B for
an Interest Period, or Interest Periods, selected by the Bank; provided,
however, if failure to pay occurs upon acceleration, for LIBOR-Based Rate Loans
denominated in Dollars immediately prior to acceleration, the Bank may if it
chooses select for all such Dollar overdue amounts the Default Rate of the Prime
Rate plus 4 per cent per annum.
Without limitation to any other rights under law, the Bank may at any time
while an Event of Default is outstanding set off any matured obligation owed by
the Borrower or any Subsidiary under this Agreement against any obligation
(whether or not matured) owed by the Bank to the Borrower or any Subsidiary,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Bank may convert
either obligation at a market rate of exchange in its usual course of business
for the purpose of the set-off. If either obligation is unliquidated or
unascertained, the Bank may set off in an amount reasonably estimated by it in
good faith to be the amount of that obligation.
ARTICLE VIII
MISCELLANEOUS
8.1 COSTS OF LOAN. The Borrower shall pay all reasonable out-of-pocket
expenses incurred by the Bank in connection with the preparation and closing of
this Agreement, the making of each Funding or Advance, the administration of
this Agreement, and in the enforcement of the rights of the Bank under the Loan
Documents and under the Notes and any other agreements between the Borrower and
the Bank, including the reasonable attorneys' fees incurred by the Bank in
preparing and closing this Agreement which attorneys' fees (exclusive of
out-of-pocket expenses) shall not exceed $___________, together with the
out-of-pocket fees of such counsel, whether in consultation or in judicial,
administrative, bankruptcy, conservatorship or receivership proceedings, through
all appeals. Such out-of-pocket expenses specifically include all filing fees,
the cost of all documentary tax stamps, if any, and other taxes, excluding
federal or Florida taxes on corporate income, which are or become payable by
reason of the transactions between the Borrower and the Bank which are
encompassed by this Agreement, as well as any penalties or additional taxes
which may become due by reason of the Borrower's instructions to the Bank
concerning the payment of such taxes, and at the Bank's option costs of tax,
judgment and lien searches, and recording fees, if any. Costs incurred to the
date of Closing shall be paid at Closing, by separate check payable to the order
of the Bank.
8.2 SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties by the Borrower and any Guarantor in the Loan
Documents or otherwise in writing in connection herewith shall survive the
execution and delivery to the Bank of this Agreement and the Notes, and shall be
true and correct and continue in full force and effect so long as any portion of
any Obligation or the Notes is outstanding or this Agreement has not been
terminated, except to the extent such representation and warranty relates to an
earlier date.
8.3 TERMINATION OF LOAN. This Agreement may not be terminated by the
Borrower until payment of the Obligation in full.
8.4 APPLICABLE LAW. The terms and performance of this Agreement and the
terms and payment of Notes shall be construed in accordance with and controlled
and governed by the laws of the State of Florida, and applicable federal law, as
amended from time to time. The Bank, the Borrower and each Guarantor agree that
the venue of any action brought to enforce any rights created hereunder will be
in Dade County, Florida.
8.5 MODIFICATION OF LOAN AGREEMENT. Unless otherwise specifically provided
for in this Agreement, no consent, modification, amendment or waiver of any
provision of this Agreement, the Notes, or the other the Loan Documents executed
in conjunction herewith, nor any consent of the Bank to any variance therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Bank.
8.6 NO WAIVER OF RIGHTS BY Bank. Neither any failure nor any delay on the
part of the Bank in exercising any right, power or privilege under the Loan
Documents shall operate as a waiver thereof; nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of any
other right, power or privilege. It is further agreed between the parties that
no waiver of any duty or condition contained in any of the Loan Documents shall
at any time be held to be a waiver of the other duties or conditions of the
Borrower thereunder, or of the same duties or conditions upon a future occasion.
8.7 INTEREST. All interest payable hereunder shall be at a per annum rate
computed by dividing the applicable per annum interest rate by three hundred
sixty (360), except as otherwise provided herein, and multiplying the result by
the actual number of days elapsed. Notwithstanding any provision in the Notes or
in any other document executed in connection with this Agreement, the Borrower's
total liability during any payment period for payment of fees, charges or other
payments which may be deemed interest shall not exceed the higher of the limits
imposed by the usury laws of the State of Florida or of the United States, as
applicable. If, for any reason, total liability for payments which may be deemed
interest, should be greater than the limit imposed by the usury laws of the
State of Florida or of the United States (whichever results in the higher rate
of lawful interest), as applicable, for any interest payment period, then all
sums in excess of those lawfully collectible with interest for that period shall
be applied to the reduction of principal of either or both of the Loans, without
further agreement or notice. The Bank has agreed to accept, and the Borrower has
agreed to apply, such sums as a penalty-free prepayment of principal, unless the
Bank at any time elects, by notice to the Borrower in writing, to waive or limit
the collection of any sums in excess of those lawfully collectible as interest
rather than accept those sums as a prepayment of principal. Upon any demand for
payment, all unlawful interest (if any) shall be eliminated.
8.8 SEVERABILITY. In case all or any part of one or more of the provisions
contained in the Loan Document should be invalid, illegal or unenforceable in
any respect, the validity, legality or enforceability of the remaining
provisions contained herein or therein and the remainder of such provision shall
not in any way be affected or impaired thereby.
8.9 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the Bank and the
Borrower. The Bank shall have the right to syndicate its interests in the Loans,
or either of them, or to grant participation and transfer interests in the Notes
to other persons and to furnish such information as is reasonably required to
induce such persons to enter into such arrangements and to satisfy any
regulatory requirements pertaining thereto; provided, however, that the Borrower
shall have the right to approve all such participants, which approval shall not
be unreasonably withheld; and provided, further, that the Bank shall not be
entitled to syndicate or transfer interests in more than fifty percent (50%) of
its interest in the Loans. In the event the Bank notifies the Borrower that the
Bank will grant such participation, or assign a portion of the Lender's rights
and obligations in the Loans, the Bank acknowledges that the Borrower will not
be deemed to be acting unreasonably if it denies such request because the entity
to whom the Bank proposes to grant a participation or assign such rights and
obligations will require payments under Section 2.4 hereof materially in excess
of those required to be paid to the Lender. The Borrower will take such actions
as the Bank may reasonably require to effect the grant and performance of such
participation or the assignment of an interest of its rights and obligations to
another entity.
8.10 NOTICES. All notices, demands, requests, consents or other
communications required or permitted to be given or made under this Agreement in
writing, shall be deemed given or made when delivered in person, five (5) days
after such communication is posted in the mails, or one (1) day after such
communication is sent by a nationally recognized overnight courier service.
Notice shall be given as follows:
If to the Bank:
First Union National Bank
200 East Broward Boulevard
Ft. Lauderdale, Florida 33301
ATTN: Corporate Banking,
Mr. M. Walker Duvall, Senior Vice President
AND
First Union National Bank
4299 N.W. 36th Street
Miami Springs, Florida 33166
ATTN: Ms. Missy Morgan, Senior Vice President
AND
First Union National Bank
London Branch
One Bishopgate
LONDON EC2N 3AB ENGLAND
ATTN: Ian G. Morrison, Vice President
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
ATTN: Douglas F. Darbut, Esq.
If to the Borrower:
Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
ATTN: John D. Vaughan, Esq.
If to the Guarantors:
c/o Computer Products, Inc.
7900 Glades Road
Suite 500
Boca Raton, Florida 33434
ATTN: Richard Thompson
The foregoing addresses may be changed by either party by giving notice to the
other party in accordance with the above.
8.11 INCORPORATION OF TERMS. It is mutually understood and agreed by and
between the parties hereto on behalf of themselves, and their respective
representatives or successors in interest, that the Notes and other agreements
between the Borrower and the Bank heretofore and hereinafter described and all
of the conditions, stipulations, agreements and covenants contained in said Note
and other agreements are hereby incorporated by reference to the same extent and
effect as if they were fully set forth verbatim herein, and made a part of this
Agreement, until this Agreement is terminated by the payment of the Obligation
in full. It is further mutually understood and agreed that the Borrower shall
perform, comply with, and abide by each and every warranty, stipulation,
agreement, condition and covenant in the Notes, and other agreements, and the
provisions of this Agreement.
In the event of an ambiguity or conflict of terms between any of the
provisions of the foregoing documents, the terms of this Agreement shall be
deemed to amend and control all of the other documents; and, to the extent that
any of the agreements are silent, each shall supplement the others; provided,
however, in the event of any conflict between the terms of this Agreement and
any of the instruments referenced above, the terms which, in the Bank's sole
discretion, grant the Bank the greater protection with respect to its security
for the Notes or in any other manner are of greater benefit to the Bank, shall
control. All provisions of contemporaneous or previous agreements and
understandings between the Borrower and the Bank (including the Prior Loan
Agreement) in conflict with any expressed provision hereof shall be merged into
this Agreement and be extinguished and of no further force and effect.
8.12 COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be considered an original.
ARTICLE IX
INDEMNIFICATION
9.1 NET PAYMENTS. All payments by the Borrower under this Agreement and
the Notes shall be made without setoff or counterclaim and in such amounts as
may be necessary in order that all payments, after deduction or withholding for
or on account of any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof (collectively the "Taxes"), shall not be
less than the amounts otherwise specified to be paid under this Agreement and
the Note. Notwithstanding anything to the contrary contained in this Section
9.1, the Borrower shall not be liable for the payment of any tax on or measured
by net income imposed on or measured by the net income or portion thereof of the
Bank. The Borrower shall pay all Taxes when due (and indemnify the Bank against
any liability therefor) and shall promptly (and in any event not later than
thirty (30) days thereafter) furnish to the Bank any certificates, receipts and
other documents which may be required (in the judgment of the Bank) to establish
any tax credit to which the Bank may be entitled. The Bank shall promptly
reimburse the Borrower upon receipt by the Bank of any refund or credit paid to
the Bank for which and to the extent the Bank has previously been reimbursed by
Borrower under this Section. The obligations of the Borrower under this Section
9.1 shall survive the termination of this Agreement and the repayment of the
Notes. The Bank will cooperate with reasonable requests of the Borrower to seek
refund of amounts owed hereunder, or to minimize amounts owed hereunder,
provided that Borrower shall pay the costs thereof and provided that such
action, in the opinion of the Bank, will not or may not adversely affect the
Bank.
ARTICLE X
WAIVER OF JURY TRIAL AND VENUE
10.1 Arbitration. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Loan Agreement
and the other Loan Documents ("Disputes") between or among parties to this Loan
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by the Notes.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Miami, Florida. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
10.2 PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, Borrower and Bank agree to preserve,
without diminution, certain remedies that any party hereto may employ or
exercise freely, independently or in connection with an arbitration proceeding
or after an arbitration action is brought Borrower and Bank shall have the right
to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, applicable: (i) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (ii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment or receiver and filing an involuntary bankruptcy
proceeding; and (iii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
In the event that the provisions of Section 10.1 or 10.2 hereof are found
to be unenforceable and a Dispute may not be resolved pursuant to those
Sections, the parties hereto agree that the following provision shall be
applicable:
<PAGE>
WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER AND EACH GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOANS, THIS AGREEMENT AND ANY AGREEMENTS
CONTEMPLATED HEREBY TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EACH PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR Bank AND BORROWER
ENTERING INTO THIS AGREEMENT.
10.3 WAIVER OF PLEA OF JURISDICTIONS OR VENUE. The Borrower and each
Subsidiary hereby waives any plea of jurisdiction or venue as not having a place
of business in Broward County, Florida, and hereby specifically authorizes any
action brought upon the enforcement of the Loan Documents by Bank to be
instituted and prosecuted in either the Circuit Court of Broward County,
Florida, or in the United States District Court for the Southern District of
Florida, at the election of Bank.
IN WITNESS WHEREOF, the Bank and the Borrower have caused these presents
to be executed in their respective names by their duly authorized executive
officers, at the places and on the dates set forth below effective as of the
15th day of July, 1997, and executed on the date set forth below.
FIRST UNION NATIONAL BANK
By:
Joseph M. Mayhew
Its: Senior Vice President
Date Executed: November 7, 1997
Place of Execution: Charlotte, North Carolina
FIRST UNION NATIONAL BANK,
LONDON BRANCH
By: Joseph M. Mayhew
Its: Senior Vice President
Date Executed: November 7, 1997
Place of Execution: Charlotte, North Carolina
<PAGE>
COMPUTER PRODUCTS, INC.
By:
Richard Thompson
Its: Vice President
Date Executed: November 7, 1997
Place of Execution: Eden Prairie,
Minnesota
Each of the undersigned acknowledges that it has received a copy of the Loan
Agreement is familiar with the terms and conditions of the Loan Agreement. The
undersigned hereby jointly and severally (i) represent and warrant to you that
each representation and warranty contained in the Loan Agreement is true and
correct to the extent it relates to the undersigned; and (ii) agree that each
will act in compliance with the covenants set forth in the Loan Agreement to the
extent the covenants contemplate that the undersigned will act or refrain from
acting. The undersigned (i) recognize that the foregoing representations,
warranties and covenants are an integral part of the decision by you to make the
Loans (as defined in the Loan Agreement); (ii) represent and warrant to you that
the undersigned, each of which is a wholly-owned subsidiary of the Borrower,
will receive substantial benefit from the making of the Loans to the Borrower;
and (iii) acknowledge that you have relied upon the foregoing in making your
decision to make the Loans and enter into the Loan Agreement. All of the
signatures below are made on the date and at the place set forth under the
signature of Computer Products, Inc. appearing immediately above.
Computer Products GmbH
By:
Gary Duffy
Its: Authorized Signatory
By:Siegfried Kreuzer
Its: Authorized Signatory
Computer Products S.A.R.L.
By:Richard Thompson
Its:
Computer Products Power Conversion Limited
By:Richard Thompson
Its:
RTP Foreign Sales Corp.
By:Richard Thompson
Its:
Power Products Ltd.
By:Richard Thompson
Its:
Stevens-Arnold, Inc.
By:Richard Thompson
Its:
JETA Power Systems, Inc.
By:Richard Thompson
Its:
Heurikon Corporation
By:Richard Thompson
Its:
Computer Products Asia - Pacific Limited
By:Richard Thompson
Its:
Power Products (Ireland) Ltd.
By:Richard Thompson
Its:
C.P. Power Products (Zhong Shan) Co.Ltd.
By:Richard Thompson
Its:
RT Holding Corp.
By:Richard Thompson
Its:
Dutor Holding N.V.
By:Richard Thompson
Its:
Elba Electronics Limited
By:Richard Thompson
Its:
Herbert Zehnte Betelligungs-undVerwaltungs GmbH & Co.
By:Richard Thompson
Its:
El-BA Electric-Bauelemente AG
By:Richard Thompson
Its:
Elba s.r.o.
By:Richard Thompson
Its:
<PAGE>
CHARLOTTE, NORTH CAROLINA
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this __7th__ day of November, 1997, by Joseph M. Mayhew as Senior Vice
President of First Union National Bank, a national banking association, on
behalf of the association. He is personally known to me (YES) (NO) or who
produced ______________________ as identification.
Notary Public
(NOTARIAL SEAL) Carla Eaker
Printed Name of Notary
My Commission Expires:
(Eden Prairie, Minnesota)
Place of Execution
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this _6th_ day of November, 1997, by Richard Thompson, as Vice President or
Authorized Signatory of Computer Products, Inc., a Florida corporation, on
behalf of the corporation and the other corporations above except First Union
National Bank, First Union National Bank, London Branch and Computer Products
GmbH. He is personally known to me (YES) (NO) or who produced
______________________ as identification.
Notary Public
(NOTARIAL SEAL) Karen Scheldroup
Printed Name of Notary
My Commission Expires:January 31, 2000
CHARLOTTE, NORTH CAROLINA
I HEREBY CERTIFY that the foregoing instrument was acknowledged before me
this _7th_ day of November, 1997, by Joseph M. Mayhew, as Senior Vice
President of First Union National Bank, London Branch on behalf of the
corporation. He is personally known to me (YES) (NO) or who produced
______________________ as identification.
Notary Public
(NOTARIAL SEAL) Carla Eaker
Printed Name of Notary
My Commission Expires: August 21, 2002
Youghal County Cork, Ireland
Place of Execution
I, Patrick Lavan, a Notary Public within and for the Republic
of Ireland duly commissioned and acting, do hereby certify that on this 13th day
of _November_, 1997, personally appeared GARY DUFFY, as Authorized Signatory
of Computer Products GmbH, acting as partner and future Limited Partner of
Herbert GmbH & Co. KG upon its registration in the Commercial Register A of
Frankfurt am Main, to me personally known to be the person who signed the
foregoing instrument, who being duly sworn and being informed of the contents of
said instrument, stated and acknowledged on oath that he signed, executed,
sealed and delivered same of his free and voluntarily act and deed, for the
uses, purposes and considerations therein expressed and set forth.
WITNESS my hand and seal this 13th day of November, 1997.
Patrick Lavan
- -----------------------------------
NOTARY PUBLIC
My Commission Expires:
<PAGE>
Youghal County Cork, Ireland
Place of Execution
I, Patrick Lavan, a Notary Public within and for the Federal
Republic of Germany, duly commissioned and acting, do hereby certify that on
this 13th day of November, 1997, personally appeared SIEGFRIED GEORG KREUZER,
as Authorized Signatory of Computer Products GmbH, acting as partner and future
Limited Partner of Herbert GmbH & Co. KG upon its registration in the Commercial
Register A of Frankfurt am Main, to me personally known to be the person who
signed the foregoing instrument, who being duly sworn and being informed of the
contents of said instrument, stated and acknowledged on oath that he signed,
executed, sealed and delivered same of his free and voluntarily act and deed,
for the uses, purposes and considerations therein expressed and set forth.
WITNESS my hand and seal this 13th day of November, 1997.
Patrick Lavan
- -----------------------------------
NOTARY PUBLIC
My Commission Expires:
<PAGE>
FIVE-YEAR FINANCIAL HISTORY
For the Years Ended on the Friday Nearest December 31
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ------------ ----------- -----------
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Sales $527,236 $435,731 $344,969 $264,334 $201,168
Income from continuing operations 31,882 29,555 16,483 7,658 3,636
Per share - basic 0.87 0.84 0.50 0.24 0.13
Per share - assuming dilution 0.80 0.78 0.49 0.23 0.12
Net income 29,820 30,059 17,598 9,423 5,537
Per share - basic 0.81 0.85 0.53 0.30 0.20
Per share - assuming dilution 0.75 0.79 0.52 0.28 0.18
FINANCIAL POSITION
Working capital $115,822 $ 92,029 $ 66,449 $ 54,526 $ 41,597
Property, plant & equipment, net 61,581 48,671 38,491 32,567 28,960
Total assets 322,177 239,487 202,858 159,871 134,303
Long-term debt and capital lease obligations 52,949 43,945 33,590 45,296 41,453
Total debt 68,547 57,097 50,251 53,928 47,436
Shareholders' equity 162,676 117,006 82,889 57,071 46,133
Total capital 231,223 174,103 133,140 110,999 93,569
FINANCIAL STATISTICS
Selling, general and administrative expenses $ 52,058 $ 42,232 $36,353 $35,485 $ 31,344
- as a % of sales 9.9% 9.7% 10.5% 13.4% 15.6%
Research and development expenses 30,032 23,612 21,085 14,950 11,238
- as a % of sales 5.7% 5.4% 6.1% 5.7% 5.6%
Operating income 52,443 41,077 26,776 15,865 10,211
- as a % of sales 9.9% 9.4% 7.8% 6.0% 5.1%
Total debt as a % of total capital 30% 33% 38% 49% 51%
Debt to equity ratio 42% 49% 61% 94% 103%
Interest coverage ratio 11.0 9.21 6.48 3.64 2.21
OTHER DATA
Capital expenditures $22,231 $ 9,387 $10,046 $ 7,300 $ 3,752
Depreciation and amortization $13,561 $10,287 $ 7,606 $ 6,768 $ 6,240
Common shares outstanding (000's) 38,381 36,042 34,607 31,581 30,874
Employees 4,219 3,519 2,870 2,628 2,365
Temporary employees and contractors 2,663 1,670 1,923 874 532
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BUSINESS COMBINATIONS
ZYTEC -- On December 29, 1997, shareholders of Computer Products, Inc. ("CPI")
and Zytec Corporation ("Zytec") approved the merger of CPI Acquisition Corp., a
Minnesota corporation and a wholly-owned subsidiary of CPI with and into Zytec,
pursuant to an Agreement and Plan of Merger, with Zytec becoming a wholly-owned
subsidiary of CPI. As a result of the merger, each share of Zytec's common
stock, no par value, outstanding immediately prior to the merger was converted
into 1.33 shares of CPI's common stock, $0.01 par value. The Zytec shares were
exchanged for a total of approximately 14.1 million shares of CPI common stock.
The acquisition was accounted for as a pooling-of-interests, and accordingly,
all prior period consolidated financial statements presented have been restated
to include the combined results of operations, financial position and cash flows
of Zytec as though it had always been a part of Computer Products. Hereafter the
merged entity will be collectively referred to as the Company.
The Company has begun doing business under the name Artesyn Technologies.
Management will request shareholder approval at its next annual shareholders'
meeting in May 1998 to legally change the Company's corporate name to Artesyn
Technologies, Inc. Pending shareholder approval, the Company's legal name will
remain Computer Products, Inc. and trade under the Nasdaq National Market symbol
CPRD.
The restatement of the consolidated financial information combines the financial
information of CPI and Zytec giving retroactive effect to the merger as if the
two companies had operated as a single company for all periods presented.
However, the two companies operated independently prior to the merger, and the
historical changes and trends in the financial condition and results of
operations of these two companies resulted from independent activities.
Nonetheless, the following management's discussion and analysis of financial
condition and results of operations attempts to relate the activities which
resulted in the changes in financial condition and results of operations of the
combined company, taking into consideration that a trend or change in the
historical results of the combined entity was caused by many events related to
each individual company operating independently as competitors. The financial
information presented on a historical restated basis is not indicative of the
financial condition and results of operations that may have been achieved in the
past or will be achieved in the future had the companies operated as a single
entity for the periods presented. The following discussion of the consolidated
operations and financial condition of the Company should be read in conjunction
with the Company's consolidated financial statements and related notes thereto
included elsewhere herein.
THE ELBA GROUP -- On July 22, 1997, pursuant to an Agreement on the Sale,
Purchase and Transfer of Shares, the Company acquired all the outstanding
capital stock of the following affiliated companies: Elba Electric GmbH, Elba
Modul GmbH, Elba Elektronik AG, Elba Electronics Ltd., Elba Electric-Produktion
s.r.o., Elba Electronique S.A.R.L., and KRP Power Source B.V., collectively
referred to as the Elba Group.
The Elba Group is engaged in the design, manufacture and marketing of a wide
range of both AC/DC and DC/DC power conversion products in Europe. Elba's
fastest growing product segment is its medium power AC/DC converters (150-750
watts) sold to OEM communications customers under the Elba and KRP Power Source
labels. The Elba Group's customers include major multinational corporations such
as Ericsson, Kodak, Krone AG and Siemens among others.
The purchase price of 52 million Deutsche marks (approximately $28.5 million)
was paid in cash with proceeds from two seven-year term loans from First Union
National Bank, London Branch. The loans bear interest at LIBOR plus .75%.
BUSINESS ENVIRONMENT AND RISK FACTORS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes as well as the section under the heading
"Risk Factors that May Affect Future Results." With the exception of historical
information, the matters discussed below may include "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainties. The Company wishes to caution
readers that a number of important factors, including those identified in the
section entitled "Risk Factors that May Affect Future Results" as well as
factors discussed in the Company's other reports filed with the Securities and
Exchange Commission, could affect the Company's actual results and cause them to
differ materially from those in the forward-looking statements.
RESULTS OF OPERATIONS
Operating performance in 1997showed consistent growth as net income from
continuing operations of $31.9 million, or $0.80 per share, exceeded the $29.6
million, or $0.78 per share, achieved in 1996. Sales from continuing operations
increased 21% from $435.7 million in 1996 to $527.2 million in 1997. Operating
income increased to $52.4 million, or 9.9% of sales in 1997, compared to $41.1
million, or 9.4% in 1996.
The following table summarizes the Company's sales performance by product
category ($000s):
1997 1996 1995
---------- ----------- ----------
Power Conversion $474,116 $395,322 $314,422
Computer Systems 26,771 18,953 19,026
Services and Logistics 26,349 21,456 11,521
---------- ----------- ----------
Total $527,236 $435,731 $344,969
========== =========== ==========
1997 COMPARED TO 1996
SALES increased from $435.7 million in 1996 to $527.2 million in 1997. The 21%
growth primarily resulted from a wider range of product offerings, continued
foreign expansion and the increase of service and support programs. Power
Conversion sales increased $78.8 million (20%). Computer Systems sales increased
41% from $18.9 million to $26.8 million. Services and Logistics sales increased
23% from $21.5 million to $26.3 million.
Computer Systems sales were 41% higher than in 1996 as this division
successfully transitioned from the computer industry to the communications
sector. Similar to the Power Conversion division, the Computer Systems division
has concentrated its marketing efforts on the high-growth communications
industry, where it provides networking, telecommunications and wireless
communications solutions for a variety of customers, including OEM's. With its
focus on developing new products aimed at customers in the communications
industry and a high backlog level entering 1998, management expects that this
division will continue to increase its sales volume in the upcoming year.
Services and Logistics sales increased from $21.5 million in 1996 to $26.3
million in 1997. Services and Logistics provides repair services and logistics
for a variety of products primarily for Hewlett-Packard Company. These products
include laser and ink jet printers, facsimile machines, computer, monitors and
other products. The 23% revenue growth was due to continued expansion of the
number of products repaired for Hewlett-Packard. Management anticipates a
significant growth in Services and Logistics sales in 1998 primarily consisting
of additional business from Hewlett-Packard as well as sales of similar services
to new OEMs.
GROSS PROFIT in 1997 increased by $30.6 million compared to 1996 on higher sales
volume and improved margins. The Company's gross margin increased to 26.1% of
sales in 1997 from 24.5% in 1996 due to cost reductions in both materials and
labor as well as higher overhead absorption due to increased production volume.
OPERATING EXPENSES increased to approximately 16.1% of sales in 1997 from the
15.1% reported in the prior year. In connection with the merger, in the fourth
quarter, the Company recorded a charge to operating expenses of $3.0 million for
direct merger transaction costs consisting primarily of fees for investment
bankers, attorneys, accountants, financial printing and other related charges.
OPERATING INCOME rose to 9.9% of sales from 9.4% in 1996, as a result of higher
gross profit partially offset by the increase in operating expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in 1997 increased to 9.9% of sales
versus 9.7% in the prior year. Sales and marketing expenses increased $5.4
million or 24% due to increased commission expense resulting from higher sales
levels, additional marketing programs to support the launch of new products,
entry into new markets worldwide and expansion of distribution channels. General
and administrative ("G&A") expenses increased $4.4 million, or 22%, as a result
of the Company's business development activities and the inclusion of the Elba
Group acquired in July 1997. As a percentage of sales, G&A expenses increased to
4.6% from 4.5% in 1996.
RESEARCH AND DEVELOPMENT (R&D) EXPENSES in 1997 increased $6.4 million or 27.2%
from the prior year. As a percentage of sales, R&D expenses were 5.7% in 1997
versus 5.4% in 1996. The higher expense level was primarily attributable to the
cost of developing new products consistent with the Company's ongoing commitment
to develop and produce high-quality, innovative products targeted to the
communications industry.
PROVISION FOR INCOME TAXES increased to 35.5% of pretax income in 1997 from
21.4% in 1996. The effective tax rate was lower in 1996 primarily due to the
recognition of an income tax benefit related to the net operating loss (NOL)
carryforwards in the Company's Austrian operations. For additional information
regarding income taxes, refer to pages 30 through 32 of the Notes to
Consolidated Financial Statements.
DISCONTINUED OPERATIONS On April 17, 1997, the Company announced its intention
to sell its Industrial Automation division, RTP Corp. ("RTP"), pursuant to a
plan of disposal approved by the Company's Board of Directors. Accordingly, the
Company classified RTP as a discontinued operation and recorded an after-tax
non-recurring charge of $2.1 million, or $0.05 per share, against 1997 earnings.
Effective July 5, 1997, the Company sold RTP Corp. to RT Acquisition Florida
Corp. Proceeds from the sale included $2.0 million cash, a subordinated
unsecured one-year note in the aggregate principal amount of approximately $2.2
million bearing interest at the prime rate, and the assumption of certain of
RTP's liabilities.
1996 COMPARED TO 1995
SALES increased from $345 million in 1995 to $435.7 million in 1996. The 26%
growth resulted primarily from a $80.9 million (26%) increase in Power
Conversion sales, including sales attributable to Jeta Power Systems (which was
acquired in July 1996), and a $9.9 million (86%) increase in Services and
Logistics sales. Computer Systems sales remained level with 1995 as this
division continued to transition its focus to the communications industry.
Although Computer Systems sales remained level with 1995, inroads were made in
the communications market as this division continued to transition from the
computer industry to the communications sector.
Service and Logistics sales increased from $11.5 million in 1995 to $21.5
million in 1996. The 86% revenue growth was due almost entirely to continued
expansion of the number of products repaired for Hewlett-Packard that made up
99% of the sales in this division in 1996.
GROSS PROFIT in 1996 increased by $22.7 million compared to 1995 on higher sales
volume while gross margin improved slightly from 24.4% in 1995 to 24.5% in 1996.
This performance improvement resulted from the Company's ongoing commitment to
reduce manufacturing costs and the favorable effect of higher production volume
on unit cost. These improvements were partially offset by the continued shift in
sales mix to the Company's high-volume, lower-margin OEM customers.
OPERATING EXPENSES declined to approximately 15% of sales in 1996 from the 17%
reported in 1995.
OPERATING INCOME rose to 9.4% of sales from 7.8% in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in 1996 declined to 9.7% of sales
versus 10.5% in the prior year due to higher sales volume and efficiencies
generated by information systems implementation and by continued management
focus on cost reduction. Sales and marketing expenses increased $1.0 million or
5% due to increased commission expense resulting from higher sales levels.
General and administrative spending increased $4.9 million, or 33%, primarily
due to the establishment of a separate administration function in the Services
and Logistics operation. As a percentage of sales, such expenses increased to
4.5% from 4.3% in 1995.
RESEARCH AND DEVELOPMENT EXPENSES in 1996 increased $2.5 million or 12% compared
to 1995 as the Company invested in new product platforms to serve the
communications industry.
PROVISION FOR INCOME TAXES decreased to 21% of pretax income in 1996 from 30% in
1995. The effective tax rate for 1996 decreased primarily as a result of a
reduction in the valuation allowance from utilization of deferred tax assets and
the recognition of an income tax benefit related to the net operating loss (NOL)
carryforwards in the Company's Austrian operations.
LIQUIDITY AND CAPITAL RESOURCES
As of January 2, 1998, the Company's cash balance increased to $55.4 million
from $34.7 million on January 3, 1997 despite significant use of cash for
capital expenditures and principal debt repayments. These activities were funded
with cash from operations, proceeds from exercises of stock options, proceeds
from the sale of the industrial automation division in July 1997, proceeds from
the sale of the Company's Boston facility, and cash acquired in the Elba Group
acquisition.
Cash provided from operations increased to $38.8 million in 1997 versus $30.2
million in 1996 and $18.3 million in 1995. The increase in 1997 is mainly the
result of a decrease in prepaid expenses and an increase in accounts payable and
accrued liabilities partially offset by increases in accounts receivable and
inventory.
Accounts receivable increased 36% in 1997 from 1996 due to sales growth,
including the continued expansion in international operations that typically
have longer collection cycles. Days sales outstanding in receivables remained
level at 51 days for both 1997 and 1996. The increase in inventory levels was
primarily attributable to production planning to meet manufacturing lead times
and anticipated demand for new product introductions.
Accounts payable increased $9.2 million, or 33%, from January 3, 1997 due to
increases in capital expenditures, operating expenses, and material purchases to
support the Company's growth in sales.
The Company used $44.7 million, $20.9 million and $8.1 million in investing
activities in fiscal 1997, 1996 and 1995, respectively. The use of cash in
fiscal 1997 was due mainly to the acquisition of the Elba Group for $26.2
million (net of cash acquired) and increased purchases of property, plant and
equipment in line with the continued upgrading of the Company's overseas
manufacturing facilities. The major investing activities for fiscal 1996 and
1995 were capital additions to support business operations and the acquisition
of Jeta for 9.6 million (net of cash acquired) in 1996.
Cash provided by financing activities in fiscal 1997 of $27.1 million reflects
borrowings under the 52 million Deutsche Mark term loans, net of debt issuance
costs, and $5.5 million proceeds from exercises of stock options partially
offset by $14.2 million long-term debt and capital lease principal repayments
including $3.7 million on the Company's seven-year term loan. Financing
activities used $1.5 million and $3.7 million in fiscal 1996 and 1995,
respectively. In 1996, cash was used for the repurchase of the Company's common
stock and for the repayment of long-term debt partially offset by proceeds from
issuance of debt and exercises of options. Cash used in 1995 related to the
repurchase of $24.3 million of the Company's Debentures, the repurchase of
1,138,000 shares of the Company's common stock and long-term debt principal
payments partially offset by borrowings under the $25 million seven-year term
loan, net of debt issuance costs, and the proceeds from exercises of stock
options.
The Company and one of its subsidiaries entered into two separate unsecured
seven-year term loans with a bank providing an aggregate of 52 million Deutsche
marks. The term loans bear interest at Libor plus .75%. Proceeds from the term
loans were used to finance the acquisition of the Elba Group. In addition, the
Company amended and restated its existing revolving and term loan agreement to
reprice its outstanding term loan and to provide for a new $20 million
three-year multi-currency revolving working capital line of credit.
The new multi-currency revolving facility, which expires in April 2000, replaces
the Company's previous $20 million credit line which would have expired on April
1, 1998. The interest rate on the revolver was reduced from Libor plus .75% to
Libor plus .50%. As of January 2, 1998, the Company had made no borrowings under
the existing line of credit, and management believes the Company was in
compliance with the agreement's covenants.
Effective July 15, 1997, the Company's 1995 seven-year term loan, which has an
outstanding balance of $19.8 million, was repriced to bear interest at Libor
plus .75% compared to the previous rate set at Libor plus 1.5%.
Based on current plans and business conditions, the Company believes that its
cash and equivalents, its available credit line, cash generated from operations,
and other financing activities are expected to be adequate to meet capital
expenditures, working capital requirements, debt and capital lease obligations
and operating lease commitments through 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
") and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is defined as the change in equity
during the financial reporting period of a business enterprise resulting from
non-owner sources. SFAS 131 establishes standards for the reporting of operating
segment information in both annual financial reports and interim financial
reports issued to shareholders. Operating segments are components of an entity
for which separate financial information is available and is evaluated regularly
by the entity's chief operating management. Both statements require adoption in
fiscal 1998.
YEAR 2000
The Company has several information system improvement initiatives under way
that will require increased expenditures during the next few years. These
initiatives include the conversion of certain Company computer systems to be
Year 2000 compliant.
The Year 2000 issue exists because many computer systems and applications
currently use two-digit date fields to designate a year. As the century date
change occurs, date-sensitive systems will recognize the year 2000 as 1900, or
not at all. This inability to recognize or properly treat the Year 2000 may
cause systems to process critical financial and operational information
incorrectly. Anticipated spending for this modification will be expensed as
incurred and is not expected to have a significant impact on the Company's
ongoing results of operations.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended on the Friday Nearest December 31
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- ----------- ------------
<S> <C> <C> <C>
SALES $527,236 $435,731 $344,969
COST OF SALES 389,703 328,810 260,755
-------------- ----------- ------------
GROSS PROFIT 137,533 106,921 84,214
-------------- ----------- ------------
EXPENSES
Selling, general and administrative 52,058 42,232 36,353
Research and development 30,032 23,612 21,085
Merger-related charges 3,000 - -
-------------- ----------- ------------
85,090 65,844 57,438
-------------- ----------- ------------
OPERATING INCOME 52,443 41,077 26,776
-------------- ----------- ------------
OTHER INCOME (EXPENSE)
Interest expense (4,945) (4,576) (4,306)
Interest income 1,943 1,087 1,116
-------------- ------------ ------------
(3,002) (3,489) (3,190)
-------------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 49,441 37,588 23,586
PROVISION FOR INCOME TAXES 17,559 8,033 7,103
-------------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM 31,882 29,555 16,483
DISCONTINUED OPERATIONS
Profit (loss) from operations, net of income taxes of $(222), 504 1,512
$177 and $588, respectively (333)
Loss on disposal of RTP (including provision of $1,000 for
operating losses during phase-out period) net of tax benefit of $1,152 (1,729) - -
EXTRAORDINARY ITEM, NET OF INCOME TAX BENEFIT OF $187 - - (397)
-------------- ----------- ------------
NET INCOME $ 29,820 $ 30,059 $ 17,598
============== =========== ============
EARNINGS PER SHARE
BASIC -
Income from Continuing Operations $ 0.87 $ 0.84 $ 0.50
Discontinued Operations (0.06) 0.01 0.04
Extraordinary Item - - (0.01)
-------------- ----------- ------------
Net Income $ 0.81 $ 0.85 $ 0.53
============== =========== ============
ASSUMING FULL DILUTION -
Income from Continuing Operations $ 0.80 $ 0.78 $ 0.49
Discontinued Operations (0.05) 0.01 0.04
Extraordinary Item - - (0.01)
-------------- ----------- -----------
Net Income $ 0.75 $ 0.79 $ 0.52
============== =========== ============
COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
Basic 36,650 35,375 33,267
Assuming full dilution 40,654 37,870 35,404
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
As of the Friday Nearest December 31
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
1997 1996
------------- --------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 55,392 $ 34,676
Accounts receivable, net of allowance for doubtful accounts of 62,202
$1,736 at January 2, 1998 and $1,300 at January 3, 1997 84,479
Inventories 59,663 49,502
Prepaid expenses and other 8,522 4,233
Deferred income taxes, net 5,293 1,952
Current assets of discontinued operations - 7,646
------------- --------------
Total current assets 213,349 160,211
------------- --------------
PROPERTY, PLANT & EQUIPMENT, NET 61,581 48,671
------------- --------------
OTHER ASSETS
Goodwill, net 40,704 20,022
Deferred income taxes, net 4,509 6,099
Other assets, net 2,034 2,890
Non-current assets of discontinued operations - 1,594
------------- --------------
Total other assets 47,247 30,605
------------- --------------
$322,177 $239,487
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital leases $ 15,598 $ 13,152
Accounts payable and accrued liabilities 81,929 52,975
Current liabilities of discontinued operations - 2,055
------------- --------------
Total current liabilities 97,527 68,182
LONG-TERM LIABILITIES
Long-term debt and capital leases 52,949 31,945
Convertible subordinated note - 12,000
Other long-term liabilities 5,785 6,772
Deferred tax liabilities 3,240 3,582
------------- --------------
Total long-term liabilities 61,974 54,299
------------- --------------
Total liabilities 159,501 122,481
------------- --------------
COMMITMENTS AND CONTINGENCIES (see Notes 8, 10 and 13)
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01; 1,000,000 shares authorized;
none issued - -
Common stock, par value $.01; 80,000,000 shares authorized;
38,380,964 shares issued and outstanding at January 2, 1998
(36,042,007 at January 3, 1997) 384 360
Additional paid-in capital 78,056 57,874
Retained earnings 88,769 58,949
Foreign currency translation adjustment (4,533) (177)
------------- -------------
Total shareholders' equity 162,676 117,006
------------- --------------
$322,177 $239,487
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended on the Friday Nearest December 31
(Amounts in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $29,820 $30,059 $17,598
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,561 10,287 7,606
Deferred income taxes (2,176) (2,088) 2,529
Provision for inventories 4,963 1,988 4,422
Other non-cash charges 1,254 (383) 669
Changes in operating assets and liabilities:
Increase in accounts receivable (22,264) (8,730) (13,172)
(Increase) decrease in inventories (14,489) 2,860 (21,836)
(Increase) decrease in prepaid expenses and other 8,683 24 (281)
Increase (decrease) in accounts payable and accrued liabilities 18,037 (2,617) 21,415
Net cash provided by (used in) discontinued operations 1,423 (1,220) (676)
------------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,812 30,180 18,274
------------- ------------ ------------
INVESTING ACTIVITIES
Purchases of property, plant & equipment (22,231) (9,387) (10,046)
Proceeds from sale of building 1,656 - 1,524
Purchase of the Elba Group, net of cash acquired (26,186) - -
Purchase of Jeta Power Systems, Inc., net of cash acquired - (9,577) -
Purchase of Zytec Hungary Elektronikai Kft. - (830) -
Proceeds from sale of RTP Corp. 2,000 - -
(Increase) decrease in other assets 96 (206) 830
Investing activities of discontinued operations (32) (897) (397)
------------- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (44,697) (20,897) (8,089)
------------- ------------ ------------
FINANCING ACTIVITIES
Proceeds from issuances of long-term debt 35,796 20,086 31,325
Principal payments on debt and capital leases (14,163) (14,899) (10,831)
Proceeds from revolving credit loans 14,726 144,806 139,050
Payments on revolving credit loans (14,726) (152,104) (134,474)
Decrease in bank overdrafts - (1,220) (307)
Repurchase of convertible subordinated debentures - - (24,505)
Proceeds from exercises of stock options 5,511 3,888 4,356
Repurchases of common stock - (2,032) (8,305)
------------- ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 27,144 (1,475) (3,691)
------------- ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS (543) 216 (55)
------------- ------------ ------------
INCREASE IN CASH AND EQUIVALENTS 20,716 8,024 6,439
CASH AND EQUIVALENTS, BEGINNING OF YEAR 34,676 26,652 20,213
------------- ------------- -------------
CASH AND EQUIVALENTS, END OF YEAR $55,392 $34,676 $26,652
============= ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES
CASH PAID DURING THE YEAR FOR:
Interest $ 4,754 $ 4,627 $ 4,328
Income taxes 9,213 5,139 2,080
NONCASH INVESTING AND FINANCING ACTIVITIES:
Fair value of assets acquired in connection with purchase acquisitions 35,000 14,055 -
Liabilities assumed in connection with purchase acquisitions 6,600 1,916 -
Goodwill reduction from utilization of loss carryforwards - 606 646
Common stock issued from conversion of note (including debt
issuance costs written off) 11,386 - -
Common stock issued from conversion of debentures - - 9,402
Tax benefit from exercises of stock options 3,163 1,934 2,141
Equipment acquired through issuance of debt 736 1,423 372
Property and equipment acquired through capital lease obligations 1,505 7,372 2,377
Note receivable from sale of RTP Corp. 2,150 - -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'EQUITY
For the Years Ended on the Friday Nearest December 31
(Amounts in Thousands)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
----------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 30, 1994 25,942 $259 $38,590 $19,328 $(1,106)
Issuance of common stock 33 100
Issuance of common stock under stock option
and employee purchase plans 2,021 20 4,101
Tax benefit from exercises of stock options 2,141
Repurchases and retirement of common stock (1,138) (11) (1,939) (6,355)
Conversion of convertible subordinated
debentures 1,972 20 9,382
Foreign currency translation adjustment 761
Net income 17,598
----------- ----------- ------------- ----------- ----------
BALANCE, DECEMBER 29, 1995 28,830 288 52,375 30,571 (345)
Additional shares issued in two-for-one stock
split 5,982 60 (60)
Issuance of common stock 8 100
Issuance of common stock under stock option
and employee purchase plans 1,419 14 3,874
Tax benefit from exercises of stock options 1,934
Repurchases and retirement of common stock (197) (2) (349) (1,681)
Foreign currency translation adjustment 168
Net income 30,059
----------- ----------- ------------- ----------- ---------
BALANCE, JANUARY 3, 1997 36,042 360 57,874 58,949 (177)
Issuance of common stock 21 146
Issuance of common stock under stock option
and employee purchase plans 1,151 12 5,499
Tax benefit from exercises of stock options 3,163
Conversion of convertible subordinated note
(including debt issuance costs written off) 1,167 12 11,374
Foreign currency translation adjustment (4,356)
Net income 29,820
----------- ----------- ------------- ----------- ----------
BALANCE, JANUARY 2, 1998 38,381 $384 $78,056 $88,769 $ (4,533)
=========== =========== ============= =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION On December 29, 1997, Computer Products, Inc. completed a
merger with Zytec Corporation ("Zytec") whereby Zytec became a wholly-owned
subsidiary of Computer Products. The consolidated financial statements include
the accounts of Computer Products and its subsidiaries (collectively referred to
as the "Company"). Intercompany accounts and transactions have been eliminated
in consolidation. The consolidated financial statements for all periods
presented prior to the merger have been restated as if the Company operated as
one entity since inception. The merger has been accounted for as a
pooling-of-interests as discussed in Note 5.
The merged company has begun doing business under the name Artesyn Technologies.
Management will request shareholder approval at its next annual shareholders'
meeting in May 1998 to legally change the Company's corporate name to Artesyn
Technologies, Inc. Pending shareholder approval, the Company's legal name will
remain Computer Products, Inc. and trade under The Nasdaq National Market symbol
CPRD.
FISCAL YEAR The Company's fiscal year ends on the Friday nearest December 31,
which results in a 52- or 53-week year. The fiscal years ended January 2, 1998,
January 3, 1997 and December 29, 1995 comprise 52, 53 and 52 weeks,
respectively.
CASH AND EQUIVALENTS Only highly liquid investments with original maturities of
90 days or less are classified as cash and equivalents. These investments are
carried at cost, which approximates market value.
INVENTORIES Inventories are stated at the lower of cost, on a first-in,
first-out basis, or market.
PROPERTY, PLANT & EQUIPMENT Property, plant and equipment is stated at cost.
Depreciation is provided for on the straight-line method over the estimated
useful lives of the assets ranging from three to 30 years or the lease terms, if
shorter. Leasehold improvements are recorded at cost and are amortized using the
straight-line method over the remaining lease term or the economic useful life,
whichever is shorter. Major renewals and improvements are capitalized, while
maintenance, repairs and minor renewals not expected to extend the life of an
asset beyond its normal useful lefe are expensed as incurred. In 1996, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." In accordance with SFAS 121, the Company periodically evaluates
its long-lived assets to determine whether an impairment has occurred. Adoption
did not have a material effect on the consolidated financial statements.
GOODWILL The excess of purchase price over net assets of acquired companies
(goodwill) is capitalized and amortized on a straight-line basis over periods
ranging from 20 to 40 years. Related accumulated amortization was $7,322,000 and
$5,779,000 at January 2, 1998 and January 3, 1997, respectively. Amortization
expense was $1,550,000, $837,000 and $733,000 in fiscal years 1997, 1996 and
1995, respectively. On a periodic basis, the Company estimates the future
undiscounted cash flows and operating income of the businesses to which goodwill
relates to ensure that the carrying value of such goodwill has not been impaired
under the provisions of SFAS 121.
STOCK-BASED COMPENSATION PLANS In 1995, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS
123 allows either adoption of a fair value based method of accounting for
stock-based compensation or continuation of accounting under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related Interpretations with supplemental disclosures. The
Company has chosen to continue to account for its stock option plans using the
intrinsic value based method prescribed in APB 25. Pro forma disclosures of net
income and earnings per share as if the fair value method had been adopted are
presented below (see Note 15).
FOREIGN CURRENCY TRANSLATION The functional currency of the Company's European
subsidiaries is the foreign subsidiary's local currency. Assets and liabilities
are translated from their functional currency into U.S. dollars using exchange
rates in effect at the balance sheet date. Income and expense items are
translated using average exchange rates for the period. The effect of exchange
rate fluctuations on translating foreign currency assets and liabilities into
U.S. dollars is included in shareholders' equity. Foreign exchange transaction
gains and losses are included in the results of operations. The functional
currency of the Company's Asian subsidiaries is the U.S. dollar, as their
transactions are substantially denominated in U.S. dollars. Financial exposure
may result from the timing of transactions and the movement of exchange rates.
REVENUE RECOGNITION The Company recognizes revenue as products are shipped or
services are rendered.
PRODUCT WARRANTY The Company records estimated product warranty costs in the
period in which the related sales are recognized.
INCOME TAXES Income taxes provided reflect the current and deferred tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. The realization of deferred tax assets is based on
historical tax positions and expectations about future taxable income.
EARNINGS PER SHARE In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share". This statement simplifies the standards for computing and presenting
earnings per share ("EPS") and makes them comparable to international EPS
standards. SFAS 128 replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
SFAS 128 became effective beginning with the fourth quarter of 1997 and requires
restatement of all prior periods presented. As a result, all prior years
presented have been restated to conform with SFAS 128. Basic earnings per share
is calculated by dividing income available to common shareholders by the
weighted-average number of common shares outstanding during each period. Diluted
earnings per share includes the potential impact of convertible securities and
dilutive common stock equivalents using the treasury stock method of accounting.
The reconciliation of the numerator and denominator of the EPS calculation is
presented below (see Note 12).
STOCK SPLIT In April 1996, Zytec's board of directors authorized a two-for-one
stock split in the form of a 100% stock dividend distributed on June 3, 1996 to
shareholders of record on May 20, 1996. Applicable per share and number of share
data have been retroactively restated to reflect the stock split, except for the
Consolidated Statements of Shareholders' Equity.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. The
more significant estimates made by management include the provision for doubtful
accounts receivable, inventory write-downs for potentially excess or obsolete
inventory, warranty reserves, the valuation allowance for the gross deferred tax
assets, and the amortization period for intangible assets. Actual results could
differ from those estimates. Management periodically evaluates estimates used in
the preparation of the financial statements for continued reasonableness.
Appropriate adjustments, if any, to the estimates used are made prospectively
based on such periodic evaluation.
ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" which is required to be adopted in fiscal 1998. This
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
This statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in financial statements and (b) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of statements of
financial position. Comprehensive income is defined as the change in equity
during the financial reporting period of a business enterprise resulting from
non-owner sources.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which is required to be adopted in fiscal
1998. This statement requires that a public business enterprise report financial
and descriptive information about its reportable operating segments including,
among other things, a measure of segment profit or loss, certain specific
revenue and expense items, and segment assets.
RECLASSIFICATIONS Certain prior years' amounts have been reclassified to conform
with the current year's presentation.
<PAGE>
2. INVENTORIES
The components of inventories are as follows($000s):
1997 1996
-------- --------
Raw materials $31,181 $29,606
Work in process 12,582 9,607
Finished goods 15,900 10,289
-------- --------
Inventories $59,663 $49,502
======== ========
3. PROPERTY, PLANT & EQUIPMENT
Property, plant & equipment is comprised of the following ($000s):
1997 1996
-------- --------
Land $ 2,423 $ 840
Buildings 18,227 20,890
Machinery and equipment 77,812 57,785
Leasehold improvements 1,763 1,591
Equipment, furniture and leasehold improvements
under capital leases 12,214 11,525
-------- --------
112,439 92,631
Less accumulated depreciation and amortization 50,858 43,960
-------- --------
Property, plant & equipment, net $61,581 $48,671
======== ========
Depreciation and amortization expense was $11,525,000, $8,840,000 and
$6,285,000 in fiscal years 1997, 1996 and 1995, respectively.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are as follows
($000s):
1997 1996
-------- --------
Accounts payable $36,790 $27,621
Accrued liabilities:
Compensation and benefits 14,875 11,195
Income taxes payable 14,071 5,104
Warranty reserve 3,457 1,609
Other 12,736 7,446
-------- --------
$81,929 $52,975
======== ========
At January 2, 1998 and January 3, 1997, other accrued liabilities primarily
consisted of accruals for commissions, advertising, accounting and legal fees,
and other taxes.
<PAGE>
5. BUSINESS COMBINATIONS
ZYTEC -- On December 29, 1997, Computer Products completed the Merger with Zytec
Corporation by exchanging approximately 14.1 million shares of its common stock
for all the outstanding common stock of Zytec. Each share of Zytec was exchanged
for 1.33 shares of the Company's common stock. In addition, outstanding Zytec
employee stock options were converted at the same exchange factor into options
to purchase approximately 3.9 million shares of the Company's common stock. All
applicable share data have been retroactively restated in the Consolidated
Financial Statements. The merger constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests under Accounting Principles Board
Opinion No. 16. Accordingly, all prior period consolidated financial statements
presented have been restated to include the combined results of operations,
financial position and cash flows of Zytec as though it had always been a part
of the Company.
There were no transactions between Computer Products and Zytec prior to the
combination and immaterial adjustments were recorded to conform Zytec's
accounting policies to the Company's accounting policies. Differences in these
practices in the past were deemed not to be material to the Company's financial
statements and therefore are being conformed only on a prospective basis.
Certain reclassifications were made to the Zytec financial statements to conform
to the Company's presentations.
Sales and earnings data for the separate companies and the combined amounts as
presented in the consolidated financial statements are displayed in the table
below ($000s). Since the merger was effective on December 29, 1997, the table
reflects sales and earnings data for the entire year 1997. Operations from
December 29, 1997 to year-end would not have had a material impact on the
datapresented.
1997 1996 1995
---------- ---------- -----------
SALES
Computer Products $262,774 $207,563 $174,451
Zytec 264,462 228,168 170,518
---------- ---------- -----------
Combined $527,236 $435,731 $344,969
========== ========== ===========
NET INCOME
Computer Products $20,089 $19,578 $13,720
Zytec 9,731 10,481 3,878
---------- ---------- -----------
Combined $29,820 $30,059 $17,598
========== ========== ===========
In connection with the merger, in the fourth quarter, the Company recorded a
charge to operating expenses of $3.0 million for direct transaction costs
consisting primarily of fees for investment bankers, attorneys, accountants,
financial printing and other related charges. In addition, as previously
disclosed in the Company's Registration Statement on Form S-4, the Company
expects to record a charge of approximately $8 million to $10 million during
1998 to eliminate duplicate facilities, functions and excess capacity.
THE ELBA GROUP -- On July 22, 1997, the Company acquired the Elba Group
("Elba"), a European designer, manufacturer and marketer of a wide range of both
AC/DC and DC/DC power conversion products. The Company purchased Elba for
approximately $28.5 million in cash provided by two seven-year term loans from a
financial institution. Elba has design, sales and manufacturing organizations in
Oberhausen and Einsiedel, Germany; Chomutov, Czech Republic and Etten-Leur,
Netherlands. Elba also has sales offices in Pfaffikon, Switzerland;
Vaulx-Milieu, France; and Chesterfield, United Kingdom.
The acquisition was accounted for under the purchase method of accounting.
Accordingly, the excess of the purchase price over the estimated fair value of
the net assets acquired, or approximately $21.5 million, was recorded as
goodwill which is being amortized on a straight-line basis over a period of 20
years. Elba's results of operations have been included in the Company's
consolidated financial statements from the date of acquisition. The following
unaudited pro forma information combines the consolidated results of operations
of the Company and Elba as if the acquisition had occurred at the beginning of
the periods presented.
<PAGE>
UNAUDITED COMBINED PRO FORMA INFORMATION
($000 EXCEPT PER SHARE DATA)
1997 1996
------------- -------------
Sales $540,545 $462,366
Income from continuing operations 32,556 31,312
Per share - basic 0.89 0.89
Per share - assuming full dilution 0.81 0.83
Net Income 30,494 31,816
Per share - basic 0.83 0.90
Per share - assuming full dilution 0.76 0.84
The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as additional amortization expense as a
result of goodwill, increased interest expense on the acquisition debt, and
related income tax effects. The pro forma results do not purport to be
indicative of results that would have occurred had the combination been in
effect for the periods presented, nor do they purport to be indicative of the
results that will be obtained in the future.
JETA POWER SYSTEMS -- Effective August 23, 1996, the Company acquired the
remaining 90% of the outstanding capital stock of Jeta Power Systems, Inc.
("Jeta") for approximately $11.25 million in cash. Jeta designs, manufactures
and markets medium-to-high power systems in the 400 watt to 4 kilowatt range for
applications in telecommunications, networking, computing and instrumentation
markets. The Company had purchased an initial 10% of Jeta's capital stock during
1984 for approximately $433,000. The Company used cash on hand to pay for the
acquisition.
The acquisition was accounted for under the purchase method of accounting.
Accordingly, $7.9 million, representing the excess of the purchase price over
the estimated fair value of the net assets acquired, has been recorded as
goodwill and is being amortized on a straight-line basis over a period of 20
years. Jeta's results of operations have been included in the Company's
consolidated financial statements from the date of acquisition and are not
significant in relation to the Company's consolidated financial statements;
accordingly, pro forma financial disclosures have not been presented.
ZYTEC HUNGARY ELEKTRONIKAI KFT.-- In March 1996, Zytec completed the acquisition
of the outstanding stock of BHG Tatabanya Alkatrezsgyarto Kft. (now known as
Zytec Hungary Elektronikai Kft.) located in Hungary. The $830,000 purchase price
was paid in cash. This acquisition has been recorded using the purchase method
of accounting. This acquisition was not significant to Zytec or the Company's
consolidated results of operations and financial position.
<PAGE>
6. DISCONTINUED OPERATIONS
On April 17, 1997, the Company announced its intention to sell its Industrial
Automation division, RTP Corp. ("RTP"), pursuant to a plan of disposal approved
by the Board of Directors. Effective July 5, 1997, the Company sold RTP to RT
Acquisition Florida Corp. Proceeds from the sale included $2.0 million cash, a
subordinated unsecured one-year note in the aggregate principal amount of
approximately $2.2 million bearing interest at the prime rate, and the
assumption of certain of RTP's liabilities. An estimated after-tax loss on the
sale of $1.7 million (net of income tax benefit of $1,152,000) was recorded in
the first quarter of 1997 representing the estimated loss on the disposal of
RTP's net assets and a pre-tax provision of $1,000,000 for expected operating
losses during the phase-out period. The actual loss on disposal approximated the
amount recorded in the first quarter.
RTP's sales from January 4, 1997 through its disposal date were $4,793,000. RTP
sales in fiscal years 1996 and 1995 were $14,922,000 and $16,926,000,
respectively. RTP's operating results are shown separately as discontinued
operations in the accompanying consolidated statements of operations.
Certain prior year amounts have been restated to give effect to the discontinued
operations treatment.
7. LINES OF CREDIT
Effective July 15, 1997, the Company amended and restated its existing revolving
and term loan agreement to reprice its outstanding term loan and to provide for
a new $20 million three-year, multi-currency revolving working capital line of
credit. The new multi-currency revolving facility, which expires in April 2000,
replaces the Company's previous $20 million credit line which would have expired
on April 1, 1998. The agreement provides for an interest rate on the revolver at
the London Interbank Offering Rate "Libor" plus .50% and includes a fee of .25%
on the unused balance. The agreement contains certain restrictive covenants
that, among other things, require the Company to maintain certain financial
ratios and limit the purchase, redemption or retirement of capital stock and
other assets. As of January 2, 1998, the Company had made no borrowings under
the revolving credit facility and was in compliance with the agreement's
covenants.
In May 1996, Zytec replaced its revolving credit facility with a bank. The
agreement provided up to $23 million in borrowings through May 1999. Pursuant to
the merger with the Computer Products, credit availability under the revolving
facility was reduced to $865,833 to cover the letter of credit required under
certain Industrial Development Revenue Bonds (see Note 8). At the Company's
option, advances from the revolving credit agreement may be made at either a
floating rate which is approximately equal to the bank's prime rate or at a
LIBOR rate which is based on the British Bankers Association LIBOR setting rate.
Zytec is obligated to pay a fee of .25% of the unused portion of the revolving
credit balance. The agreement requires Zytec to maintain certain leverage,
interest coverage, current and funded debt ratios. At January 2, 1998, no
amounts were outstanding under this facility.
<PAGE>
8. LONG-TERM DEBT AND CAPITAL LEASES
Long-term obligations consist of the following ($000s):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
5.58% interest-bearing note maturing July 1, 2004 (a) $28,921 $
-
8.25% interest-bearing note maturing April 1, 2002 (b) 19,800 23,500
3.50% revolving credit loan due March 1998 (c) 3,562 4,098
6.9% mortgage note maturing July 1, 2001(d) 3,286 3,385
3.875% notes payable due 1998 (e) 2,414 2,260
Loan payable to bank due 1998 (f) 1,618 2,075
Variable rate demand industrial development revenue bonds due March
1998 (g) 820 980
4.875% long-term investment loan due July 1, 2002 (h) 713 -
Convertible subordinated promissory note (i) - 12,000
Non-interest-bearing note, due 1997, net of unamortized discount of
$80,000 based on an imputed interest rate of 10% (j) - 354
Other - 101
Capital lease obligations (see Note 10) 7,413 8,344
---------- ----------
68,547 57,097
Less current maturities 15,598 13,152
---------- ----------
Long-term debt and capital leases $52,949 $43,945
========== ==========
</TABLE>
(a)On July 15, 1997, the Company and one of its subsidiaries entered into
two separate unsecured seven-year term loans with a bank providing an
aggregate of 52 million Deutsche marks. The term loans bear interest at
LIBOR plus .75% (see Note 17). Principal payments are as follows:
2,600,000 Deutsche marks due quarterly on January 1, April 1, July 1
and October 1 of each year beginning October 1, 1999 until maturity,
with interest payable monthly. Proceeds from the term loans were used
to finance the Elba Group acquisition on July 22, 1997 (see Note 5).
The agreements contain certain restrictive covenants similar to those
discussed in Note 7.
(b)On April 4, 1995, the Company entered into an unsecured credit
agreement with a bank that provided for a $25 million seven-year term
loan. Remaining payments are as follows: $2,200,000 due on April 1 and
October 1 of each year until maturity, with interest payable monthly.
Proceeds from the term loan were used to redeem the Company's
Debentures (see Note 9). The agreement contains certain restrictive
covenants similar to those discussed in Note 7. In May 1995, the
Company entered into an Interest Rate Collar Agreement with a bank,
which set boundaries for the interest payment terms on its $25 million
term loan. The agreement placed a ceiling of 9.75% on the Company's
floating rate option in exchange for the bank's ability to elect a
fixed rate option of 8.25%. In June 1995, the bank exercised its option
to receive interest at the fixed rate for the remaining term of the
loan. Effective July 15, 1997, the Company amended and restated its
credit agreement to bear interest at LIBOR plus .75% compared to the
previous rate set at LIBOR plus 1.5%.
(c)Zytec's Austrian subsidiary ("Zytec GmbH") has a revolving credit loan
with a bank for financing export sales. The agreement is renewable
quarterly and bears interest at 3.5%. Zytec GmbH also has a line of
credit agreement that provides $1,979,000 of overdraft financing, which
bears interest ranging from 4.0% to 7.875%. These borrowings are
collateralized by export receivables.
(d)On June 28, 1994, the Company obtained a $3,600,000 seven-year
commercial mortgage loan from a bank at a fixed interest rate of 6.9%
for the first three years, repriced thereafter at 250 basis points over
the then prevailing four-year U.S. Treasury Index. The loan is secured
by a first mortgage on a subsidiary's facility in Wisconsin with a net
book value of approximately $3,893,000 at January 2, 1998 and by the
Company's guaranty. The loan proceeds were used to provide additional
working capital. Effective July 1, 1997, the loan agreement was amended
to extend the interest rate of 6.9% through June 30, 1998. The note is
due in monthly installments of $27,700, including interest.
(e)Notes payable include various notes which mature from January to April
1998. The interest rate on each of the notes was 3.875% at January 2,
1998. The notes are collateralized by accounts receivable of Zytec GmbH
totaling $6,134,000 and $3,728,000 at January 2, 1998 and January 3,
1997, respectively, which exclude the export receivables in (c) above.
(f)Interest is payable at rates ranging from 5% to 6.3%. The loan is
guaranteed by the Austrian government and is collateralized by certain
Austrian property, plant and equipment. As part of the agreement, the
Company is obligated to make capital contributions to Zytec GmbH up to
a maximum of $2,454,000, if Zytec GmbH's cumulative cash flow, as
defined in the loan agreement, becomes negative. Cumulative cash flow
was $17,879,000 at January 2, 1998; therefore no capital contribution
is required at January 2, 1998.
(g)The interest rate is established weekly according to market conditions
such that the market value of the bonds will remain equal to their
principal value; the maximum interest rate payable under the bonds is
10%. The interest rate at January 2, 1998 was 4.8%. The agreement
requires a bank letter of credit to be maintained in an amount
approximately equal to the outstanding principal balance of the bonds.
The letter of credit is collateralized by accounts receivable,
inventories and certain property, plant and equipment.
(h)Interest is payable at 4.875% through June 30, 1999 after which it will
be renegotiated. The loan is guaranteed by the Austrian government and
is collateralized by certain Austrian property, plant and equipment.
(i)On December 23, 1996, Zytec entered into a convertible subordinated
promissory note with a bank for $12,000,000. Pursuant to the merger,
the note was converted into shares of Zytec's common stock at a
conversion price of $13.68 per share for a total of 877,193 shares of
Zytec common stock which were exchanged for shares of the Company's
common stock in the merger at the 1.33 exchange ratio.
(j)On December 30, 1994, the Company purchased a building for
approximately $922,000 from the Industrial Development Authority
("IDA") of Ireland in exchange for a three year non-interest-bearing
note. The note specified repayment in three yearly installments due on
September 30, 1995, 1996 and 1997.
Maturities of long-term debt, excluding capital lease obligations, are as
follows: $13,064,000 in 1998, $7,551,000 in 1999, $10,454,000 in 2000,
$13,265,000 in 2001, $8,126,000 in 2002 and $8,674,000 thereafter.
The fair value of the debt and capital leases, based upon discounted cash flow
analysis using current market interest rates, approximates its carrying value at
January 2, 1998.
9. CONVERTIBLE SUBORDINATED DEBENTURES
The Company's 9.5% Convertible Subordinated Debentures (the "Debentures") due
1997 were issued pursuant to an underwritten public offering. The Debentures
were subordinated to all existing and future Senior Indebtedness of the Company
(as defined in the indenture), and were convertible into shares of common stock
at a conversion price of $4.625 per share, subject to adjustment as set forth in
the indenture.
In 1992, the Company repurchased $4.0 million in principal of the Debentures for
a purchase price of $3,874,000. Additionally, in 1994, the Company repurchased
$512,000 in principal of the Debentures for a purchase price of $520,000. The
respective gain and loss on repurchase, net of unamortized issuance costs, was
not material to the Company.
In May 1995, the Company called for redemption of all its outstanding
Debentures, which amounted to $33.4 million. The Debentures were redeemed for an
aggregate amount of $1,054.86 per $1,000 of principal amount (consisting of a
redemption payment of $1,010 plus accrued and unpaid interest of $44.86). As a
result of the redemption, holders of Debentures representing a principal amount
of $9.1 million elected to convert the Debentures into 1,972,085 shares of the
Company's common stock, pursuant to the terms of the Debentures, while the
balance of $24.3 million was redeemed. This transaction resulted in an increase
in shareholders' equity of approximately $9.4 million. The redemption resulted
in an extraordinary loss of approximately $397,000 (net of taxes of $187,000),
consisting of a 1% redemption premium of $165,000 and a write-off of unamortized
financing costs of $232,000.
10. LEASE OBLIGATIONS
Equipment under capital leases includes certain production and office equipment.
The Company is also obligated under noncancelable operating leases for
facilities and equipment that expire at various dates through 2005 and contain
renewal options at favorable terms. Future minimum annual rental obligations and
noncancelable sublease income are as follows ($000s):
Capital Operating Sublease
YEAR Leases Leases Income
-------- ---------- ----------- -----------
1998 $ 3,104 $ 5,802 $ 1,776
1999 2,589 5,426 2,322
2000 1,627 4,993 2,346
2001 1,165 4,539 2,617
2002 36 4,292 2,617
Thereafter 30 13,607 427
---------- ----------- -----------
$ 8,551 $38,659 $12,105
=========== ===========
Less amount representing interest (1,138)
----------
Present value of net minimum
lease payments $ 7,413
==========
Rental expense under operating leases amounted to $9,294,000, $6,395,000 and
$4,632,000 in fiscal 1997, 1996 and 1995, respectively. Sublease income was
$1,941,000 $1,941,000 and $1,710,000 for fiscal 1997, 1996 and 1995,
respectively.
Lease liabilities have been recorded for certain leased manufacturing facilities
no longer deployed in the Company's operations. Although the facilities are
being subleased, the future lease obligations exceed future sublease income,
thereby creating loss contracts. The aggregate minimum annual rental obligations
and sublease income under these leases have been included in the lease
commitments table presented above. Lease liabilities are estimated based on
contract provisions and historical and current market rates. These estimates can
be materially affected by changes in market conditions. These lease liabilities
are included in other liabilities in the Consolidated Statements of Financial
Condition and amounted to $4,377,000 and $5,994,000 as of January 2, 1998 and
January 3, 1997.
<PAGE>
11. INCOME TAXES
The components of the income from continuing operations provision for income
taxes consist of the following ($000s):
1997 1996 1995
-------- ------- -------
Currently payable:
Federal $12,979 $4,410 $2,205
State 2,129 2,424 964
Foreign 5,846 3,287 1,405
-------- ------- -------
Total current 20,954 10,121 4,574
-------- ------- -------
Deferred provision:
Federal (3,019) 612 2,276
State 140 134 186
Foreign (516) (2,834) 67
-------- ------- -------
Total deferred (3,395) (2,088) 2,529
-------- ------- -------
Total provision for income
taxes $17,559 $8,033 $7,103
========= ======= =======
The exercise of nonqualified stock options resulted in state and federal income
tax benefits to the Company related to the difference between the fair market
price of the stock at the date of exercise and the exercise price. In fiscal
1997, 1996 and 1995, the provision for income taxes excludes current tax
benefits of $3,163,000, $1,934,000 and $2,141,000, respectively, related to the
exercise of stock options credited directly to additional paid-in capital.
During fiscal 1996 and 1995, the Company utilized tax loss carryforwards
obtained in a prior business combination. The effect of utilizing these
carryforwards was to reduce goodwill by approximately $606,000 and $646,000 in
1996 and 1995, respectively.
Income taxes have not been provided on the undistributed earnings of the
Company's foreign subsidiaries, which approximated $45.4 million as of January
2, 1998, as the Company does not intend to repatriate such earnings.
The components of the Company's income from continuing operations before
provision for income taxes consist of the following ($000s):
1997 1996 1995
------- -------- -------
U.S. $28,626 $25,157 $16,922
Foreign 20,815 12,431 6,664
------- -------- -------
Total income before income
taxes $49,441 $37,588 $23,586
======= ======== =======
The Company's effective tax rate differs from the U.S. statutory federal income
tax rate due to the following:
1997 1996 1995
------- -------- -------
U.S.federal statutory tax rate 35.0% 35.0% 35.0%
Foreign tax effects (2.3) (1.8) (2.6)
Recognition of deferred tax
benefit of NOL carryforward - (8.4) -
Permanent items -non-deductible 2.7 0.3 1.6
Change in the valuation
allowance (5.2) (10.8) (9.8)
Effect of AMT and state
income taxes 5.1 6.9 6.9
Other 0.2 0.2 (1.0)
------- -------- -------
Effective income tax rate 35.5% 21.4% 30.1%
======= ======== =======
In May 1996, the Austrian government changed the treatment of NOL carryforwards
by (a) suspending the use of NOLs during the years 1996 and 1997 retroactively
to January 1, 1996 and (b) removing the time limitations on the use of the NOLs.
In light of this new statute and based on the Company's assessment of the
strong financial results of the Austrian operations, Zytec recognized the
deferred income tax benefit related to the Austrian NOL carryforwards. This
resulted in a $2,626,000 net reduction of income taxes in the second quarter of
1996, comprised of a tax benefit of $3,175,000 relating to recognition of the
deferred tax benefit offset by $549,000 in income tax expense resulting from the
retroactive application of this tax law change to first and second quarter
Austrian operations.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and deferred tax liabilities as of January 2,
1998 and January 3, 1997 are as follows ($000s):
1997 1996
--------- ---------
DEFERRED TAX ASSETS
Net operating loss carryforwards
(expiring 2003 through 2011) $1,118 $ 2,807
Tax credit carryforwards (expiring 1998
through 2001) 2,086 2,080
Foreign net operating loss carryforwards 2,665 3,067
Lease liabilities 1,799 2,395
Inventory reserves 2,558 2,341
Other accrued liabilities 3,430 2,634
Allowance for bad debt 595 778
Other 402 875
--------- ---------
Gross deferred tax assets 14,653 16,977
Valuation allowance (4,851) (8,926)
--------- ---------
Net deferred tax assets 9,802 8,051
--------- ---------
DEFERRED TAX LIABILITIES
Depreciation (1,300) (1,319)
Amortization of goodwill (412) (343)
Other (1,528) (1,920)
--------- ---------
Deferred tax liabilities (3,240) (3,582)
--------- ---------
Deferred income taxes, net $6,562 $ 4,469
========= =========
The valuation allowance at January 2, 1998 includes approximately $3.2 million
related to the exercise of stock options which, when recognized, will be
credited directly to additional paid-in capital. During the year ended January
2, 1998, the valuation allowance decreased by approximately $4.1 million mainly
due to the utilization of tax loss carryforwards. In assessing the likelihood of
utilization of existing deferred tax assets, management has considered the
historical results of operations and the current operating environment.
Management believes it is more likely than not, that future taxable income will
be sufficient to utilize deferred tax assets of $9.8 million.
<PAGE>
12. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and the
effects on income and the weighted-average number of shares of potential
dilutive common stock. The number of shares used in the calculations for 1996
and 1995 reflect a two-for-one stock split occurring on June 3, 1996. Also, the
number of shares used in the calculation for all periods presented was adjusted
to reflect the additional shares issued pursuant to the merger with Zytec at a
conversion ratio of 1.33. The reconciliation of the numerator and denominator of
the EPS calculation is presented below ($000s except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
=========================== =========================== ===========================
Income Shares Income Shares Income Shares
Numerator Denominator EPS Numerator Denominator EPS Numerator Denominator EPS
-------- ----------- ----- --------- ----------- ----- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from
continuing
operations $31,882 $29,555 $16,483
-------- -------- --------
BASIC EPS
Income available
to common
shareholders 31,882 36,650 $0.87 29,555 35,375 $0.84 16,483 33,267 $0.50
====== ====== ======
EFFECT OF
DILUTIVE
SECURITIES
Stock options 2,837 2,495 1,454
Convertible Debt 548 1,167 - - 788 683
-------- --------- -------- --------- -------- ---------
DILUTED EPS
Income available
to common
shareholders $32,430 40,654 $0.80 $29,555 37,870 $0.78 $17,271 35,404 $0.49
======== ========= ====== ======== ========= ====== ======== ========= ======
</TABLE>
Options to purchase 167,123, 432,668 and 431,834 shares of common stock were not
included in computing diluted EPS for fiscal 1997, 1996 and 1995, respectively,
because their effects were antidilutive for the respective periods.
13. CONTINGENCIES
In current and prior years, the Company received grant assistance, under grant
agreements, from the IDA in connection with the Company's establishment of its
Irish manufacturing operations. The funds received reduced the cost of the
facility and equipment and operating expenses. In October of 1997, the Company
entered into a new Grant Agreement whereby the IDA granted the sum of
approximately $3.3 million to the Company in consideration for the Company
providing employment for a given number of Irish citizens, over a three-year
period. As of January 2, 1998, the Company had not yet received any of the $3.3
million grant. The funds will reduce operating expenses incurred in connection
with the expansion of the Company's operations in Ireland. In the event of
noncompliance with certain terms and conditions of the above-mentioned grant
agreements, the Company may be required to repay approximately $2.6 million of
funds received to date from prior grants. Management believes that noncompliance
with the agreements is unlikely.
14. STOCK REPURCHASES
During fiscal 1996 and 1995, the Company repurchased and retired a total of
197,000 and 1,138,000 shares, respectively, of its common stock pursuant to a
share buy-back plan announced in May 1995. The Company did not repurchase any
shares during 1997. The excess of the cost of shares repurchased over par value
was allocated to additional paid-in capital based on the pro rata share amount
of additional paid-in capital for all shares with the difference charged to
retained earnings. In September 1997, the Company terminated the stock
repurchase program.
<PAGE>
15. STOCK-BASED COMPENSATION PLANS
EMPLOYEE STOCK OPTION PLANS Under the Company's 1981 Incentive Stock Option
Plan, options were granted to purchase up to 2,000,000 shares of the Company's
common stock at prices not less than the fair market value at date of grant. The
options generally vest at the rate of 25% per year beginning one year from the
date of grant. The options expire 10 years from the date of grant or three
months after termination of employment, if earlier. This plan was replaced by
the 1990 Performance Equity Plan ("PEP").
The Company established the PEP plan in 1990 under which it had reserved
3,000,000 shares of common stock for granting of either incentive or
nonqualified stock options to key employees and officers. The Company increased
authorized shares under the PEP plan to 5,950,000 in 1997. Both incentive or
nonqualified stock options have been granted at prices not less than the fair
market value on the date of grant as determined by the Company's Board of
Directors. The options maximum term is 10 years, although some options were
granted with a five-year term in 1995. Beginning with grants made in 1995, the
majority of the options become exercisable after the price of the Company's
common stock achieves certain levels for specified periods of time or upon the
passage of a certain number of years from the date of grant. For grants made
prior to 1995, options vest at the rate of 25% per year beginning one year from
the date of grant. As of January 2, 1998, 1,899,149 shares of common stock were
reserved for future grants.
The Zytec stock options outstanding at the date of the merger were converted to
the Company's stock options. The Zytec option activity and share prices have
been restated, for all years presented, to Company's equivalents using the
exchange ratio of 1.33 shares of the Company's common stock to one share of
Zytec common stock. Zytec existing options generally expire six years from the
date of grant, or three months after termination of employment, if earlier.
Options vest at the rate of 20% per year beginning one year from the date of
grant. Of the converted stock options, 424,590 were exercisable as of January 2,
1998. No additional options will be granted from the Zytec plans.
OUTSIDE DIRECTORS STOCK OPTION PLANS The Company established an Outside
Directors Stock Option Plan in 1986 under which it authorized and reserved
250,000 shares of common stock for granting of nonqualified stock options to
directors of the Company who are not employees of the Company at exercise prices
not less than the fair market value on the date of grant. The plan was replaced
by the 1990 Outside Directors Stock Option Plan under which the Company
initially authorized and reserved 250,000 shares. The Company increased
authorized shares under such plan to 500,000 in 1996. Effective in 1996, upon
initial election or appointment to the Board of Directors and each year
thereafter, outside directors shall receive an option to purchase 10,000 shares
of common stock provided that they own a given number of shares of common stock
of the Company based on a formula as defined in the plan. The options granted
under both Outside Directors plans fully vest on the one-year anniversary of the
date of grant. As of January 2, 1998, 130,000 shares of common stock were
reserved for future grants.
In accordance with APB 25, as the exercise price of the Company's stock options
equals the market price of the underlying stock on the date of grant, no
compensation cost has been recognized for its fixed stock option plans. Pro
forma information regarding net income and earnings per share is required by
SFAS 123 and has been determined as if the Company had accounted for its
employee and outside directors stock-based compensation plans under the fair
value method. The fair value of each option grant was estimated at the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1997 1996 1995
----------- ---------- -----------
Risk-free interest rate 6.2% 6.0% 6.4%
Dividend yield - - -
Expected volatility 63% 52% 56%
Expected life 3.2 YEARS 3.4 years 2.7 years
<PAGE>
The Company's pro forma information follows ($000s except per share data):
1997 1996 1995
--------- ---------- ----------
NET INCOME As reported $29,820 $30,059 $17,598
========= ========== ==========
Pro forma $24,028 $27,354 $16,733
========= ========== ==========
EPS - BASIC As reported $ 0.81 $ 0.85 $ 0.53
========= ========== ==========
Pro forma $ 0.66 $ 0.77 $ 0.50
========= ========== ==========
EPS-ASSUMING DILUTION
As reported $ 0.75 $ 0.79 $ 0.52
========= ========== ==========
Pro forma $ 0.61 $ 0.72 $ 0.49
========= ========== ==========
The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of future results. SFAS 123 does not apply to awards
prior to 1995.
The following table summarizes activity under all plans for the years ended
1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Options price Options price Options price
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of year 4,808,247 $ 6.50 4,163,603 $ 2.77 5,175,758 $2.12
Options granted 2,876,493 14.99 2,345,771 10.81 1,440,750 4.15
Options exercised (1,055,662) 4.43 (1,403,047) 2.70 (2,158,731) 2.09
Options canceled (450,274) 10.36 (298,080) 6.08 (294,174) 3.23
----------- ---------- ----------- ---------- ----------- ----------
Options outstanding, end of year 6,178,804 $10.53 4,808,247 $ 6.51 4,163,603 $2.77
========== ========== ===========
Options exercisable, end of year 1,947,762 1,787,520 2,536,281
========== =========== ===========
Weighted-average fair value of
options granted during the year $6.87 $4.42 $1.51
=========== =========== ===========
</TABLE>
The following table summarizes information about stock options outstanding at
January 2, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------- ----------------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Range of Number Contractual Life Average Number Average
Exercise Outstanding (Years) Exercise Price Exercisable Exercise Price
Prices at 1/2/98 at 1/2/98
- ------------------ ---------------- ----------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.56 - 3.57 1,240,278 3.43 $ 2.45 888,768 $ 2.40
3.62 - 9.30 1,258,792 3.99 5.91 409,161 5.33
9.59 - 10.39 1,395,284 5.19 9.80 18,620 9.59
11.25 - 18.00 1,649,462 7.81 15.82 594,213 14.96
18.25 - 29.56 634,988 6.38 23.32 37,000 18.33
---------------- --------------
$ 0.56 - 29.56 6,178,804 5.41 10.53 1,947,762 7.22
================ ==============
</TABLE>
<PAGE>
EMPLOYEE STOCK PURCHASE PLANS In May 1996, the Company's Board of Directors
established an employee stock purchase plan effective July 1, 1996 that allows
substantially all employees to purchase shares of the Company's common stock.
Under the terms of the plan, eligible employees may purchase shares of common
stock through the accumulation of payroll deductions of at least 2% and up to 6%
of their base salary. The purchase price is an amount equal to 85% of the market
price determined on the tenth trading day following each three-month offering
period. The Company's policy is to purchase these shares on the market rather
than issue them from treasury; therefore, the 15% employee discount is currently
being recognized as compensation expense. Such amount was not significant in
fiscal years 1997 and 1996. Employees purchased 17,864 and 8,707 shares in 1997
and 1996, respectively.
The 1989 Qualified Employee Stock Option Plan provided for employees to purchase
common stock of the Company at a purchase price equal to the lower of 85% of the
common stock market value as of the beginning of an offering period or at
various purchase dates extending over a two-year period. The plan expired in
1995 and was replaced by the 1996 Employee Stock Purchase Plan described above.
Employees purchased 22,475 and 102,570 shares in 1996 and 1995, respectively, at
a purchase price of $2.76. Under SFAS 123, compensation cost is recognized for
the fair value of the employees' purchase rights, which was estimated using the
Black-Scholes model with the following weighted-average assumptions for 1995:
risk-free interest rate of 6.48%, dividend yield of 0%, expected volatility of
52% and expected life of .84 year. The weighted-average fair value of the
purchase rights granted in 1995 was $.57.
On October 9, 1996, Zytec's shareholders approved a stock purchase plan allowing
substantially all employees to purchase, through payroll deductions, newly
issued shares of Zytec's common stock. The plan allows Zytec's employees to
purchase common stock on a quarterly basis at the lower of 85% of the market
price at the beginning or end of each calendar quarter. Employees purchased
71,742 shares in 1997 at purchase prices ranging from $9.03 to $22.41. No shares
were issued in 1996. Under SFAS 123, compensation cost is recognized for the
fair value of the employees' purchase rights, which was estimated using the
Black-Scholes model with the following weighted-average assumptions for 1997:
risk-free interest rate of 5.73%, dividend yield of 0%, expected volatility of
69% and expected life of .25 year. The weighted-average fair value of the
purchase rights granted in 1997 was
$5.03.
16. EMPLOYEE BENEFIT PLANS
The Company provides retirement benefits to its employees through the Computer
Products Inc. Employees' Thrift and Savings Plan (the "Plan"). As allowed under
Section 401(k) of the Internal Revenue Code, the Plan provides tax deferred
salary deductions for eligible employees. The Plan permits substantially all
United States employees to contribute up to 15% of their base compensation (as
defined) to the Plan, limited to a maximum amount as set by the Internal Revenue
Service. The Company may, at the discretion of the Board of Directors, make a
matching contribution to the Plan. Costs charged to operations for matching
contributions were $444,000, $400,000 and $489,000, respectively, for fiscal
1997, 1996 and 1995.
Zytec has a defined contribution 401(k) plan covering substantially all domestic
employees. Contributions to the plan by Zytec are based on employee
contributions to the plan. Costs charged to operations were $657,000, $424,000
and $370,000, respectively, for fiscal 1997, 1996 and 1995.
In April 1996, Zytec's board of directors established a noncontributory
profit-sharing plan covering substantially all Zytec employees. The plan was
effective July 1, 1996. Zytec contributed to such plan $1.3 million in 1997. No
contributions were made to such plan in 1996.
Substantially all employees of Zytec GmbH are entitled to benefit payments under
a severance plan. The benefit payments are based primarily on the employees'
salaries and the number of years of service and are paid upon the employees'
voluntary retirement. At January 2, 1998 and January 3, 1997, Zytec had recorded
a liability of $681,000 and $543,000, respectively, related to this severance
plan. Zytec recorded $260,000, $106,000 and $124,000 in severance expense during
1997, 1996 and 1995, respectively. Zytec has invested in Austrian bonds of
$294,000 and $301,000 at January 2, 1998 and January 3, 1997, respectively, to
partially fund the severance plan as required by Austrian law.
17. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE INSTRUMENTS --The Company enters into foreign currency forward
contracts to minimize its exposure to potentially adverse changes in foreign
currency exchange rates on anticipated but not firmly committed purchases or
sales denominated in foreign currencies made by its international subsidiaries.
The foreign exchange contracts on receivables require the Company to exchange
European ECU for Irish Punts and U.S. dollars for Austrian Shillings. The
foreign exchange contracts on payables require the Company to exchange Japanese
Yen to receive U.S. dollars. At January 2, 1998, the Company held $6.6 million
of forward currency exchange contracts on receivables maturing in one to three
months while no contracts on payables were outstanding. The Company held $8.8
million of forward currency exchange contracts on receivables maturing in one to
three months as of January 3, 1997. Gains and losses on these contracts are
included in the consolidated statement of operations as they arise. Costs
associated with entering into these contracts are amortized over the contract
lives, which typically mature within one year. The amount of any gain or loss on
these contracts during the period was not material. The Company does not hold or
issue financial instruments for trading purposes.
INTEREST RATE INSTRUMENTS -- On July 14, 1997, the Company entered into two
interest rate swap agreements with First Union National Bank pursuant to which
it exchanged its floating rate interest obligations on the aggregate 52 million
Deutsche marks notional principal loan amount for a fixed rate payment
obligation of 5.58% per annum for a seven-year period beginning August 1, 1997.
The fixing of the interest rates for these periods minimizes the Company's
exposure to the uncertainty of floating interest rates during this seven-year
period. The differential paid or received on these interest rate swaps is
recognized as an adjustment to interest expense.
The Company enters into various other types of financial instruments in the
normal course of business. Fair values for certain financial instruments are
based on quoted market prices. For other financial instruments, fair values are
based on the appropriate pricing models, using current market information. The
amounts ultimately realized upon settlement of these financial instruments will
depend on actual market conditions during the remaining life of the instruments.
Fair values of cash and equivalents, accounts receivable, accounts payable,
other current liabilities and debt reflected in the January 2, 1998 statement of
financial condition approximate carrying value at that date.
CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash and
equivalents and accounts receivable. The Company's cash management and
investment policies restrict investments to low-risk, highly liquid securities,
and the Company performs periodic evaluations of the credit standing of the
financial institutions with which it deals. The Company sells its products to
customers in various geographical areas. The Company performs ongoing credit
evaluations of its customers' financial condition and generally does not require
collateral. The Company maintains reserves for potential credit losses, and such
losses traditionally have been within management's expectations and have not
been material in any year. As of January 2, 1998 and January 3, 1997, management
believes the Company had no significant concentrations of credit risk.
<PAGE>
18. GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMER
The Company operates in a single industry segment encompassing the design,
development, manufacture and sale of electronic products and subsystems for
power conversion and other real-time systems applications. The Company's sales
are made through both direct and indirect sales channels to a wide customer base
in North America, Europe and Asia-Pacific. The principal markets served are
telecommunications, networking, wireless communications and computing.
Approximately 56% of the Company's products are manufactured in foreign
locations. Specifically, 30% of the Company's 1997 sales were from products
manufactured in Hong Kong and China, 26% from products manufactured in Europe
and the remaining 44% from domestic operations. Included in the Company's
consolidated statement of financial condition at January 2, 1998 are the net
assets of the Company's European and Asian subsidiaries, which total
approximately $58.2 million and $21.6 million, respectively.
Sales and marketing operations outside the United States are conducted
principally through Company sales representatives, independent manufacturer's
representatives and distributors in Canada, Europe and Asia-Pacific. Sales are
in U.S. dollars and certain European currencies. Intercompany sales are in U.S.
dollars and are based on cost plus a reasonable profit. There were no material
amounts of United States export sales.
Sales to one customer amounted to $79.2 million (15% of 1997 sales) and $62.8
million (14% of 1996 sales) in fiscal 1997 and 1996, respectively. No sales to
one customer accounted for 10% or more of 1995 sales.
Given the current economic situation in Asia, there is a risk that the current
pegging of the Hong Kong dollar to the U.S. dollar will be removed. The
Company's management has assessed the potential exposure in the event the peg is
removed/changed and there was a devaluation in the Hong Kong dollar. Since the
Company's sales are in U.S. dollars and purchases are either in U.S. dollars or
Hong Kong dollars, the major impact would be to the carrying value of the Hong
Kong fixed assets whose value currently approximates $7.0 million.
A summary of the Company's operations by geographic area is presented below
($000s):
1997 1996 1995
---------- --------- ----------
SALES
TO UNAFFILIATED CUSTOMERS:
United States $345,485 $299,122 $247,741
Europe 155,948 115,328 91,552
Asia-Pacific 25,803 21,281 5,676
INTERCOMPANY SALES:
United States 12,283 10,278 7,992
Europe 10,267 5,554 4,219
Asia-Pacific 112,043 92,275 79,191
Eliminations (134,593) (108,107) (91,402)
---------- --------- ----------
Total sales $527,236 $435,731 $344,969
========== ========= ==========
INCOME BEFORE INCOME TAXES
United States $32,411 $25,755 $21,072
Europe 16,243 9,006 6,322
Asia-Pacific 7,056 5,859 3,560
Other (a) (5,942) (4,027) (6,075)
Eliminations (327) 995 (1,293)
---------- --------- ----------
Income before income taxes $49,441 $37,588 $23,586
========== ========= ==========
IDENTIFIABLE ASSETS
United States $145,004 $132,648 $106,627
Europe 105,816 49,929 38,490
Asia-Pacific 40,474 37,675 33,058
Other (a) 38,050 23,024 22,262
Eliminations (7,167) (3,789) 2,421
---------- --------- ----------
Total assets $322,177 $239,487 $202,858
========== ========= ==========
(a)Other included in the table above represents interest, corporate general and
administrative expenses, and certain assets not allocable to other geographic
segments.
19. SELECTED CONSOLIDATED QUARTERLY DATA (UNAUDITED)
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
FISCAL 1997
<S> <C> <C> <C> <C>
Sales $114,463 $130,878 $133,744 $148,151
Gross profit 29,556 35,798 36,292 35,887
Income from continuing operations 7,076 10,437 10,383 3,986
Per share - Basic 0.20 0.29 0.28 0.11
- Assuming dilution 0.19 0.26 0.25 0.10
Net Income 5,014 10,437 10,383 3,986
Per share - Basic 0.14 0.29 0.28 0.11
- Assuming dilution 0.13 0.26 0.25 0.10
Stock price per common share:
High 18.75 25.25 33.44 30.88
Low 13.75 13.75 23.25 14.56
FISCAL 1996
Sales $108,452 $108,775 $107,630 $110,874
Gross profit 25,047 26,606 26,228 29,040
Income from continuing operations 6,285 9,107 6,728 7,435
Per share - Basic 0.18 0.26 0.19 0.21
- Assuming dilution 0.17 0.24 0.18 0.20
Net Income 6,019 9,271 6,905 7,864
Per share - Basic 0.17 0.26 0.19 0.22
- Assuming dilution 0.16 0.24 0.18 0.21
Stock price per common share:
High 14.50 23.00 21.75 21.88
Low 9.25 13.25 12.81 17.88
</TABLE>
Net income for the fourth quarter of 1997 includes direct merger costs of $3.0
million.
Quarterly sales and gross profit amounts exclude sales and gross profits of RTP
Corp., which the Company classified as discontinued operations in the first
quarter of 1997.
Data in the above table are presented on a 13-week period basis except for the
fourth quarter of 1996, which includes 14 weeks, as fiscal 1996 consisted of 53
weeks.
The sum of the quarterly earnings per share amounts differs from those reflected
in the Company'sconsolidated statements of operations due to the weighting of
common and common equivalent shares outstanding during each of the respective
periods.
The Company's common stock is traded on the Nasdaq National Stock Market under
the symbol CPRD. As of January 2, 1998, there were approximately 20,701
shareholders consisting of record holders and individual participants in
security position listings. To date, the Company has not paid any cash dividends
on its capital stock. The Board of Directors presently intends to retain all
earnings for use in the Company's business and does not anticipate paying cash
dividends in the foreseeable future.
<PAGE>
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
As noted above, the foregoing discussion and the letter to shareholders may
include forward-looking statements which involve risks and uncertainties. In
addition, Computer Products, Inc. identified the following risk factors that
could affect the Company's actual results and cause them to differ materially
from those in the forward-looking statements.
POTENTIAL PROBLEMS WITH INTEGRATION OF OPERATIONS The success of the merger will
depend in large part upon whether Computer Products ("CPI") and Zytec's
respective businesses are integrated in an efficient and effective manner. The
combination of the two companies will require, among other things, integration
of the companies' respective product offerings, technologies, management
information systems, and the coordination of their sales and marketing and
research and development efforts. In addition, the integration of CPI and Zytec
will require the dedication of management resources, which may temporarily
divert attention from the day-to-day business of the combined company, the
development or acquisition of new technologies, and the pursuit of other
business acquisition opportunities. Failure to successfully integrate the
combined Company's operations could have a material adverse effect on its
business, results of operations and financial condition.
NON-REALIZATION OF BENEFICIAL SYNERGIES Management of both CPI and Zytec pursued
the merger with the expectation that the merger will result in beneficial
synergies, including cost reductions from purchasing efficiencies and improved
market penetration. Achieving these anticipated synergies may be limited by a
number of factors including, without limitation, problems and delays in the
integration of CPI's and Zytec's operations and general and industry-specific
economic factors. No assurance can be given that the benefits expected from such
integration will be realized.
CUSTOMER RELATIONSHIPS There can be no assurance that the Company's customers
will continue their current and/or historical buying patterns in light of the
merger. Certain customers may defer purchasing decisions as they evaluate the
combined company's future product strategy and consider the product offerings of
competitors. If substantial numbers of customers determine to defer such
purchases or purchase products from competitors, such deferrals and purchases
could have a material adverse effect on the business, results of operations and
financial condition of the Company. In addition, Zytec has historically depended
upon a limited number of customers for a significant portion of its business.
Decisions by a relatively small number of these customers to defer their
purchasing decisions or to purchase products elsewhere could have a material
adverse effect on the business, results of operations and financial condition of
the Company.
MERGER RELATED OPERATING CHARGE The Company incurred $3.0 million in direct
merger costs for the period ending January 2, 1998. In addition, as previously
disclosed in the Company's Registration Statement on Form S-4, the Company
expects to record a charge of approximately $8 million to $10 million during
1998 to eliminate duplicate facilities, functions and excess capacity. Although
the Company expects that the elimination of duplicate expenses as well as
other efficiencies related to the integration of the operations of the combining
companies may offset additional expenses over time, there can be no assurance
that such net benefits will be achieved.
RISKS RELATED TO NEW PRODUCTS The markets for the Company's products are
characterized by rapidly changing technologies, increasing customer demands,
evolving industry standards, frequent new product introductions and, in some
cases, short product life cycles. The development of new, technologically
advanced products is a complex and uncertain process requiring high levels of
innovation and cost, as well as the accurate anticipation of technological and
market trends. There can be no assurance that the Company will successfully
develop, introduce or manage the transition of new products. The failure of or
the delay in anticipating technological advances or developing and marketing
product enhancements or new products that respond to any significant
technological change could have a material adverse effect on the business,
operating results and financial condition of the Company.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company has experienced recent
quarterly growth in sales principally due to increased sales in the
communications market, increased market acceptance of its products and the
expansion of its product lines and sales channels. Due to the rapidly changing
nature of the markets for its products, as well as the likelihood of increased
competition, there can be no assurance that the Company's growth rate in sales
and positive operating results will continue. If sales are below expectations in
any given quarter, the adverse impact of any shortfall on the operating results
of the Company may be magnified to the extent the Company is unable to adjust
spending to compensate for the shortfall. Accordingly, there can be no assurance
that the Company will be able to sustain profitability in the future,
particularly on a quarter-to-quarter basis.
COMPETITION; INCREASED COMPETITION DUE TO INDUSTRY CONSOLIDATION The industries
in which the Company competes are highly competitive and characterized by
increasing customer demands for product performance, shorter manufacturing
cycles and lower prices. These trends result in frequent introductions of new
products with added capabilities and features and continuous improvements in the
relative price/performance of the products. Increased competition could result
in price reductions, reduced profit margins and loss of market share, each of
which could adversely affect the Company's results of operations and financial
condition. The Company's principal competitors include Lucent Technologies,
Delta Product and Astec (BSR) plc. Certain of the Company's major competitors
have also been engaged in merger and acquisition transactions. Such
consolidations by competitors are likely to create entities with increased
market share, customer bases, technology and marketing expertise, sales force
size, and/or proprietary technology. These developments may adversely affect the
Company's ability to compete in such markets.
DEPENDENCE ON PERSONNEL The success of the Company will depend in part upon the
efforts of its employees and the retention of key employees of the Company.
Competition for qualified personnel in the power supply industry is very
intense. The loss of services of any of the key employees could materially and
adversely affect the combined company's business, financial condition and
results of operations
RISKS RELATED TO GROSS MARGIN The Company's gross margin percentage is a
function of the product mix sold in any period. Other factors such as unit
volumes, heightened price competition, changes in channels of distribution,
shortages in components due to timely supplies of parts from vendors or ability
to obtain items at reasonable prices, and availability of skilled labor, also
may continue to affect the cost of sales and the fluctuation in gross margin
percentages in future periods.
RISKS RELATED TO BACKLOG The Company has attempted to reduce its product
manufacturing lead times and its backlog of orders. To the extent that backlog
is reduced during any particular period, it could result in more variability and
less predictability in the Company's quarter-to-quarter sales and operating
results. If manufacturing lead times are not reduced, the Company's customers
may cancel, or not place, orders if shorter lead times are available from other
manufacturers
RISKS RELATED TO INTELLECTUAL PROPERTY RIGHTS The Company currently relies upon
a combination of patents, copyrights, trademarks and trade secret laws to
establish and protect its proprietary rights in its products. There can be no
assurance that the steps taken by the Company in this regard will be adequate to
prevent misappropriation of its technology or that the Company's competitors
will not independently develop technologies that are substantially equivalent or
superior to the Company's technology. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent, as
do the laws of the United States. Although the Company continues to evaluate and
implement protective measures, there can be no assurance that these efforts will
be successful or that third parties will not assert intellectual property
infringement claims against the Company.
RISKS RELATED TO ACQUISITIONS Acquisitions of complementary businesses and
technologies, including technologies and products under development, have been
an important part of the Company's business strategy. Acquisitions require
significant financial and management resources both at the time of the
transaction and during the process of integrating the newly acquired business
into the Company's operations. The Company's operating results could be
adversely affected if it is unable to successfully integrate such new companies
into its operations. Future acquisitions by the Company could also result in
issuances of equity securities or the rights associated with the equity
securities, which could potentially dilute earnings per share. In addition,
future acquisitions could result in the incurrence of additional debt, taxes, or
contingent liabilities, and amortization expenses related to goodwill and other
intangible assets. These factors could adversely affect the Company's future
operating results and financial position.
DEPENDENCE ON SOLE SOURCE SUPPLIERS As a result of the custom nature of certain
of the Company's manufactured products, components used in the manufacture of
these products are currently obtained from a limited number of suppliers.
Although there are a limited number of manufacturers of certain components,
management believes that other suppliers could provide similar components on
comparable terms. A change in suppliers, however, could cause a delay in
manufacturing and a possible loss of sales that could adversely affect the
Company's future operating results and financial position.
RISKS RELATED TO INTERNATIONAL SALES International sales have been, and are
expected to continue to be, an increasingly important contributor to sales of
the Company. International sales are subject to certain inherent risks,
including unexpected changes in regulatory requirements and tariffs,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable and potentially adverse tax
consequences. Other risks of international sales include changes in economic
conditions in the international markets in which the products are sold,
political and economic instability, fluctuations in currency exchange rates,
import and export controls, and the burden and expense of complying with foreign
laws. In addition, sales in developing nations may fluctuate to a greater extent
than sales to customers in developed nations, as those markets are only
beginning to adopt new technologies and establish purchasing practices. These
risks may adversely affect the operating results and financial condition of the
Company.
RISKS RELATED TO GOVERNMENT REGULATIONS AND PRODUCT CERTIFICATION The Company's
operations are subject to laws, regulations, government policies and product
certification requirements worldwide. Changes in such laws, regulations,
policies or requirements could affect the demand for the Company's products or
result in the need to modify products, which may involve substantial costs or
delays in sales and could have an adverse effect on the Company's future
operating results.
RISKS RELATED TO FOREIGN MANUFACTURING OPERATIONS The Company manufactures a
significant amount of its products in foreign locations. Specifically, 30% of
the Company's 1997 sales were from products manufactured in Hong Kong and China,
26% from products manufactured in Europe and the remaining 44% from domestic
operations.
The supply and cost of these products can be adversely affected, among other
reasons, by changes in foreign currency exchange rates, increased import duties,
imposition of tariffs, imposition of import quotas, interruptions in sea or air
transportation and political or economic changes. From time to time, the Company
explores opportunities to diversify its sourcing and/or production of certain
products to other low cost locations or with other third parties to reduce its
dependence on production in any one location. In addition, the Company has taken
necessary measures, including insuring against certain risks, to mitigate its
exposure to potential political and economic changes in Hong Kong and China. In
the event of confiscation, expropriation, nationalization, or governmental
restrictions in the above mentioned foreign or other locations, earnings could
be adversely affected from business disruption resulting in delays and/or
increased costs in the production and delivery of products.
VOLATILITY OF STOCK PRICE The market price of the Company's common stock has
been, and, may continue to be, relatively volatile. Factors such as new product
announcements by the Company, its customers or its competitors, quarterly
fluctuations in operating results, challenges associated with integration of
businesses and general conditions in the markets in which the Company competes,
such as a decline in industry growth rates, may have a significant impact on the
market price of the Company's common stock. These conditions, as well as factors
which generally affect the market for stocks of technology companies could cause
the price of the Company's common stock to significantly fluctuate over
relatively short periods.
In addition to the foregoing, the Company wishes to refer readers to the
Company's other reports filed with the Securities and Exchange Commission,
specifically the most recent reports on Form S-4, Form 10-K and Form 10-Q, for a
further discussion of risks and uncertainties that could cause actual results to
differ materially from those in forward-looking statements.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Computer Products, Inc. :
We have audited the accompanying consolidated statements of financial condition
of Computer Products, Inc. (a Florida corporation) and subsidiaries as of
January 2, 1998 and January 3, 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three fiscal
years in the fiscal period ended January 2, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the statement of financial condition as of January 3, 1997 and the related
statements of operations, shareholders' equity and cash flows for each of the
two fiscal years in the fiscal year ended January 3, 1997 of Zytec Corporation,
a company acquired on December 29, 1997 in a transaction accounted for under the
pooling-of-interests method of accounting, as discussed in Note 5. Such
statements are included in the consolidated financial statements of Computer
Products, Inc. and reflect total assets of 35 % in 1996 and total sales of 52%
and 49% in 1996 and 1995, respectively, of the related consolidated totals.
These statements were audited by other auditors whose report has been furnished
to us and our opinion, insofar as it relates to amounts included for Zytec
Corporation, is based solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Computer Products, Inc. and
subsidiaries as of January 2, 1998 and January 3, 1997, and the results of their
operations and their cash flows for each of the three fiscal years in the fiscal
period ended January 2, 1998 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 23, 1998.
STATEMENT OF MANAGEMENT RESPONSIBILITY
The Company's management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and other financial
information presented in this report. The accompanying financial statements have
been prepared in conformity with generally accepted accounting principles and
reflect the effects of certain estimates and judgments made by management.
The Company's management maintains an effective system of internal control that
is designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by direct management review
and by internal auditors who conduct an extensive program of audits throughout
the company. The Company selects and trains qualified people who are provided
with and expected to adhere to the Company's standards of business conduct.
These standards, which set forth the highest principles of business ethics and
conduct, are a key element of the Company's control system. Additionally, our
independent certified public accountants, Arthur Andersen LLP, obtain a
sufficient understanding of the internal control structure in order to plan and
complete the annual audit of the Company's financial statements.
The Audit Committee of the Board of Directors, which consists of six outside
directors, meets regularly with management, the internal auditors and the
independent certified public accountants to review accounting, reporting,
auditing and internal control matters. The Committee has direct and private
access to both internal and external auditors.
JOSEPH M. O'DONNELL
Co-Chairman of the Board, President and Chief Executive Officer
RICHARD J. THOMPSON
Vice President, Finance and Chief Financial Officer
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Subsidiaries of the Company, all of which are wholly-owned and are included in
the consolidated financial statements, are as follows:
Name State or Country of Incorporation
- ---- ---------------------------------
Artesyn Solutions Inc. Delaware
C.P. Power Products (Zhong Shan) Co., Ltd. People's Republic of China
Artesyn Asia-Pacific Ltd. Hong Kong
Computer Products (France) S.A.R.L. France
Computer Products GmbH Germany
Computer Products Power Conversion Limited England
Dutor Holding BV Netherlands
Elba Electric-Baulemente AG Switzerland
Elba Electric GmbH Germany
Elba Electronics Limited United Kingdom
Elba Electronique S.A.R.L France
Elba Modul GmbH Germany
Elba s.r.o. Czech Republic
Herbert Elektronische Gerate GmbH & Co. KG Germany
Herbert Zehnte Beteilungs-Und Verwaltungs GmbH Germany
Artesyn Communication Products, Inc. Wisconsin
Jeta Power Systems, Inc. California
KRP Power Source BV Netherlands
Power Products (Ireland), Ltd. Cayman Islands, B.W.I.
Power Products, Ltd. Cayman Islands, B.W.I.
RT Holding Corp. Florida
RTP Foreign Sales Corporation U.S. Virgin Islands
Stevens-Arnold, Inc. Massachusetts
Zytec Corporation Minnesota
Zytec FSC, Inc. Virgin Islands
Zytec GmbH Austria
Zytec HungaryElectronikai Kft. Hungary
Zytec Modular Power Systems, Inc. Texas
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in or incorporated by reference in this
Form 10-K, into the Company's previously filed Form S-3 (Registration Statement
File Nos. 33-70326 and 33-49176), Form S-4/A (Registration Statement File No.
333-36375) and Form S-8 (Registration Statement File Nos. 33-42516, 33-63501,
33-63503, 33-63499, 333-03937, 333-08475 and 333-45691).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 30, 1998.
EXHIBIT 23-2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Computer Products, Inc. on Form S-3 (File Nos. 33-70326 and 33-49176), Form
S-4/A (File No. 333-36375) and Form S-8 (File Nos. 33-42516, 33-63501, 33-63503,
33-63499, 333-03937, 333-08475 and 333-45691) of our report dated February 18,
1997, on our audits of the consolidated financial statements of Zytec
Corporation as of December 31, 1996, and for each of the two years in the period
ended December 31, 1996, and the financial statement schedule of Zytec
Corporation for each of the two years in the period ended December 31, 1996,
whixh report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
restated financials pursuant to merger accounted for as a pooling of interests.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JAN-02-1998 JAN-03-1997 DEC-29-1995
<PERIOD-END> JAN-02-1998 JAN-03-1997 DEC-29-1995
<CASH> 55,392 34,676 26,652
<SECURITIES> 0 0 0
<RECEIVABLES> 86,215 63,502 53,617
<ALLOWANCES> 1,736 1,300 1,214
<INVENTORY> 59,663 49,502 52,251
<CURRENT-ASSETS> 213,349 160,211 144,776
<PP&E> 112,439 92,631 74,195
<DEPRECIATION> 50,858 43,960 35,705
<TOTAL-ASSETS> 322,177 239,487 202,858
<CURRENT-LIABILITIES> 97,527 68,182 78,327
<BONDS> 52,949 43,945 39,774
0 0 0
0 0 0
<COMMON> 78,440 58,234 52,661
<OTHER-SE> 84,236 58,772 30,227
<TOTAL-LIABILITY-AND-EQUITY> 322,177 239,487 202,858
<SALES> 527,236 435,731 344,969
<TOTAL-REVENUES> 527,236 435,731 344,969
<CGS> 389,703 328,810 260,755
<TOTAL-COSTS> 389,703 328,810 260,755
<OTHER-EXPENSES> 85,090 65,844 57,438
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 4,945 4,576 4,306
<INCOME-PRETAX> 49,441 37,588 23,586
<INCOME-TAX> 17,559 8,033 7,103
<INCOME-CONTINUING> 31,882 29,555 16,483
<DISCONTINUED> (2,062) 504 1,512
<EXTRAORDINARY> 0 0 (397)
<CHANGES> 0 0 0
<NET-INCOME> 29,820 30,059 17,598
<EPS-PRIMARY> 0.81 0.85 0.53
<EPS-DILUTED> 0.75 0.79 0.52
</TABLE>
