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UNITED STATES
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 DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 1-8009
ROHN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
(FORMERLY, UNR INDUSTRIES, INC.)
<TABLE>
<S> <C>
DELAWARE 36-3060977
- ------------------------------ ----------------
(State of incorporation) (I.R.S. Employer
Identification
No.)
6718 WEST PLANK ROAD, PEORIA, 61604
ILLINOIS
(Address of principal (Zip Code)
executive office)
</TABLE>
Registrant's telephone number including area code: (309)-697-4400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH
- ------------------------------ EXCHANGE
ON WHICH
REGISTERED
----------------
Common Stock $.01 par value None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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, 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
On March 10, 1998, 52,581,009 shares of common stock were outstanding. The
aggregate market value of stock held by nonaffiliates is $122,210,685, based
upon the closing price of such stock on that date.
DOCUMENTS INCORPORATED BY REFERENCE:
Annual Report to Stockholders of Registrant for the fiscal year ended
December 31, 1997. Certain information therein is incorporated by reference into
Parts II and IV hereof.
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<PAGE>
PART I
MATTERS DISCUSSED IN THIS REPORT CONTAIN FORWARD-LOOKING STATEMENTS WHICH
REFLECT MANAGEMENT'S CURRENT JUDGMENT. BECAUSE SUCH STATEMENTS APPLY TO FUTURE
EVENTS, THEY ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE ACTUAL
RESULTS TO DIFFER MATERIALLY.
ITEM 1. BUSINESS.
GENERAL
ROHN Industries, Inc. ("ROHN" or the "Company") is a leading manufacturer of
infrastructure products used in the wireless communications markets. The
Company's principal products are towers, equipment enclosures/shelters, poles,
masts, mounts, and cabinets. ROHN's growth in recent years has been due in part
to the growth of the cellular phone and other types of wireless communications
systems, and the introduction and growth of its equipment enclosure product
line. The Company began to experience the strong favorable impact of the
build-out of a new wireless communication system in the United States, the
Personal Communications System ("PCS"), in the second half of 1996 and the first
half of 1997; however, the buildout of PCS systems slowed considerably during
the last half of 1997. The Company believes it should continue to benefit from
the eventual build-out of existing cellular and new PCS systems as well as other
wireless systems such as Enhanced Specialized Mobile Radio ("ESMR"), wireless
local loop and high definition television ("HDTV").
ROHN's product line is used by the cellular, PCS, ESMR, paging, radio and
television, wireless cable, private microwave and other telecommunications
markets. Its key products consist of self-supporting and guyed (cable-supported)
towers, equipment enclosures, steel and concrete poles, concrete and fiberglass
equipment shelters, equipment cabinets, antenna mounts and installation
services. The Company also manufactures galvanized steel agriculture products,
including horse stalls, cattle equipment, fencing and gates.
ROHN Industries, Inc., is a Delaware corporation, which changed its name
from UNR Industries, Inc., ("UNR") in December, 1997. UNR was organized in 1979
as a holding company. During 1996, the Company completed the sale of four of its
five operating divisions. In March, 1997, ROHN moved its principal executive
offices from Chicago, Illinois to Peoria, Illinois. The Company maintains its
executive offices and tower manufacturing facility at 6718 West Plank Road,
Peoria, IL 61604.
In 1982 UNR filed a voluntarily petition for reorganization under Chapter 11
of the Federal Bankruptcy Code, and, pursuant to a Plan of Reorganization
confirmed by the Bankruptcy Court in 1989 and accepted by the Company's
creditors and stockholders, 42,404,847 shares of common stock of the Company
were issued to the UNR Asbestos-Disease Claims Trust (the "Trust") and unsecured
creditors in full discharge of all claims. The Trust currently owns 29,348,051
shares of common stock of the Company, or 55.8% of the shares currently
outstanding. See Item 12.
TELECOMMUNICATIONS EQUIPMENT MARKET
The use of cellular telephones in the United States has shown rapid growth
in recent years, from about five million subscribers in 1990 to over 50 million
today. The number of cell sites has risen from about 6,000 in 1990 to over
20,000 today and is expected to grow to as many as 33,000 by the end of 2000.
Each site requires an expenditure of up to $100,000 for the tower and shelter,
thus providing a potential demand of as much as $1.0 billion for ROHN's products
from this market segment over this period.
PCS has successfully been used in Europe for several years, and is expanding
in the United States. PCS claims to have a number of advantages over cellular,
but most of these will not be realized until a greater number of cell sites is
built in each market. PCS is digital, while cellular, for the most part, is
analog. Thus, PCS has a clearer signal, without noise, and fewer dropped
signals. PCS can carry data and images as well as voice and is suitable for
computer to computer communication, paging, short messaging and fax, and offers
better privacy and security than analog. With increased competition, PCS is
expected to eventually decrease the cost of wireless service until it approaches
the cost of existing land line service. Industry estimates are for roughly
100,000 PCS cell sites by the end of the year 2000. Some of these cell sites may
use an existing tower or other structure, but a large number of new towers and
poles will be required and all sites will require a shelter or cabinet.
1
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The cost of shelters, towers and other mounting equipment for a PCS site is
expected to range from $10,000 to $100,000, depending on the location, providing
a potential demand in excess of $2.0 billion for ROHN's products from this
market segment over a three year period.
Cellular, perhaps contrary to certain expectations, is beginning its own
expensive conversion from analog to digital, and may eventually be very similar
to PCS, except that it will operate at a different frequency. Competition among
various carriers has heightened to offer the new digital services in each
market. This should also provide an increased potential demand for the Company's
participation in building the infrastructure.
Broadcast and ESMR are two other markets which ROHN supplies that provide
further opportunity for growth. ESMR operates on a specialized frequency and is
rapidly being developed both in the United States and internationally as an
alternative to cellular and PCS systems for dispatch applications involving
private mobile fleets. The introduction of HDTV should result in additional
opportunities for the Company, as new antenna support systems are required for
this new broadcasting system.
ROHN also plans to continue to develop overseas markets through its United
States customers and through the establishment of partnerships and facilities in
key developing countries. See "International."
PRODUCTS
TOWERS. ROHN manufactures many configurations of towers, from one that
reaches 1,500 feet in the air to a small antenna mount. Its principal tower
product is the self-supporting tower ranging to heights of 900 feet. ROHN towers
are used across the world for television broadcast, AM/FM radio broadcast,
microwave, cellular telephone, PCS, radar, surveillance camera mounts, solar
power stations and weather stations. Included within the towers class of
products are steel and concrete poles, generally used when there is not enough
space to erect a tower, such as an urban area where space is limited.
Approximately 50%, 56% and 57% of the Company's revenues were attributable to
sales of towers in 1997, 1996 and 1995, respectively.
ENCLOSURES/SHELTERS. The proper housing of highly valuable electronic
components and power systems is a major concern for communications companies.
ROHN's concrete enclosures/shelters are made of lightweight concrete with steel
reinforcements for added strength. The Company's fiberglass enclosures/shelters
are made of laminated fiberglass and are lightweight, portable, strong and
secure. The Company has recently developed a non-combustible enclosure/shelter
for roof top applications, manufactured with a steel frame to meet strict fire
codes. Equipment cabinets, made of lightweight concrete or molded fiberglass for
water and rust resistance, are designed as maintenance free structures for
compact equipment installations. The enclosures/shelters class of products
accounted for approximately 32%, 25%, and 29% of the Company's revenues in 1997,
1996 and 1995, respectively. Concrete structures/shelters represent the largest
part of the Company's shelter business, generating approximately 75% of shelter
revenues in each of the last three years.
SUPPORT STRUCTURES. ROHN's complete line of antenna mounts is hot-dipped
galvanized to prevent corrosion. They range from non-penetrating roof mounts
that spread the balanced weight over a large area to mounts that concentrate
weight for compact installation. The Company also provides tower mounts, wall
mounts for corners or flat walls, square pole mounts, and standard roof mounts
for flat or sloped roofs. Masts and mounts accounted for approximately 8%, 10%
and 9% of the Company's revenues in 1997, 1996 and 1995, respectively.
AGRICULTURAL AND OTHER. Less than 10% of ROHN's revenues in each of the
past three years was derived from agricultural products, custom hot-dip
galvanizing, custom fabrication and other products. The Company's agricultural
products include livestock handling products sold to farmers, ranchers,
equestrian facilities and fairs and expositions. The Company also manufactures
privacy fencing products sold to government facilities and other customers.
PATENTS AND TRADEMARKS
The Company has a number of patents and trademarks, none of which are
considered material to its operations.
2
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INTERNATIONAL
Foreign sales accounted for approximately $10.2 million, $8.0 million and
$8.3 million of the Company's revenues in 1997, 1996 and 1995, respectively. The
Company has sold towers and other equipment in more than 55 countries and
currently operates a sales office in Mexico City. In December 1997, the Company
and BrasilSat Herald S.A. of Curitiba, Brazil finalized an agreement to form a
joint venture to serve the growing telecommunications infrastructure industry in
Brazil and South America. ROHN plans to develop overseas markets through its
United States customers, who are investing in telecommunications on a global
basis, and through the establishment of partnerships and facilities in key
developing countries.
CUSTOMERS AND BACKLOG
The Company markets its products worldwide, through a variety of marketing
channels with different customer focuses. Domestically, the Company has 14
direct salespeople with the primary sales responsibility for towers, enclosures
and poles. ROHN also has two salespeople who concentrate on distributor or
home-based towers, mounts, masts, and antenna supports.
For international sales efforts, ROHN employs two sales people who
concentrate on Mexico and Latin America. In addition, the Company utilizes two
key distributors and a variety of agents to cover the remainder of the world.
The Company's backlog of firm orders was approximately $52.4 million, $53.0
million and $26.9 million at December 31, 1997, 1996 and 1995, respectively. In
1997, no one customer accounted for more than 10% of the Company's net sales.
COMPETITION
The telecommunications infrastructure industry is highly competitive. The
Company faces substantial competition in each of the markets it serves from
established competitors, some of which have greater financial, engineering,
manufacturing, and marketing resources than the Company. The Company's
competitors in each product area can be expected to continue to improve the
design of their products, to introduce new products with competitive prices and
performance characteristics and to improve customer service. Although the
Company has not historically been forced to reduce its prices significantly,
there can be no assurance that competitive pressures will not necessitate price
reductions, adversely affecting operating results in the future. Although the
Company believes that it has certain advantages over its competitors,
maintaining such advantages will require a continued high level of investment by
the Company in sales, marketing and other services. There can be no assurance
that the Company will have sufficient resources to continue to make other such
investments or that the Company will be able to maintain the competitive
advantages it currently enjoys.
RAW MATERIALS
The primary raw materials used by the Company to produce its products are
steel, zinc and concrete. All materials are currently readily available in the
marketplace. The Company is not dependent upon any single supplier for any
materials essential to its business or not otherwise commercially available. The
Company has been able to obtain an adequate supply of raw materials and no
shortage of raw materials is currently anticipated. The Company's ability to
continue to acquire steel, zinc and concrete on favorable terms may be adversely
affected by factors beyond its control. Because steel, zinc and concrete
constitute a significant portion of the Company's cost of goods sold, any
increase in price of such materials could have a material adverse impact on
ROHN's gross profit margin.
EMPLOYEES
As of December 31, 1997, the Company employed 759 people. Collective
bargaining agreements cover 321 employees at its facilities in Peoria and
Frankfort. The unions are the United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW) in Peoria and the Retail, Wholesale and
Department Store Union (RWDSU) in Frankfort. The Company considers its relations
with its employees to be good.
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales, marketing, customer
support, finance and manufacturing personnel, certain of whom would be difficult
to replace. The loss of the services of certain of these personnel could
3
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have a material adverse effect on the Company. There can be no assurance that
the services of such personnel will continue to be available to the Company. In
addition, the Company believes that its success depends on its ability to
attract and retain additional qualified employees and that the failure to
recruit such other skilled personnel could have a material adverse effect on the
Company.
ENVIRONMENTAL MATTERS
The Company employs some environmentally hazardous materials in its
manufacturing processes, including oils and solvents. The Company has made
expenditures to comply with environmental laws and regulations, including
investigation and remediation of ground and water contamination, and expects to
make such expenditures in the future to comply with existing and probable
requirements. While such expenditures to date have not materially affected the
Company's capital expenditures, competitive position, financial condition or
results of operations, there can be no assurance that more stringent regulations
or enforcement in the future will not have such effects.
In some cases, the Company has notified state or federal authorities of a
possible need to remedy sites it previously operated. The Company has also been
notified by various state and federal governmental authorities that they believe
it may be a "potentially responsible party" or otherwise have responsibility
with respect to clean-up obligations at certain hazardous and other waste
disposal sites which were not owned or operated by the Company. In some such
cases, the Company has effected settlements with the relevant authorities or
other parties for immaterial amounts. In other cases, the Company is
participating in negotiations for settlement with the relevant authorities or
other parties or has notified the authorities that it denies liability for
clean-up obligations. At all such sites, costs which may be incurred are
difficult to accurately predict until the level of contamination is determined.
The Company, after consultation with legal counsel and environmental experts,
believes that the ultimate outcome with respect to all of these sites will not
have a material effect on the Company's financial condition or on its results of
operations.
ITEM 2. PROPERTIES.
The Company has 847,000 square feet of manufacturing facilities located in
Peoria, Illinois, Bessemer, Alabama and Frankfort, Indiana.
The Company's headquarters are located in Peoria, Illinois. At this
location, the Company manufactures towers and steel poles and performs all of
its in-house hot-dip galvanizing processes.
The Company's modern manufacturing plant in Bessemer, Alabama is devoted
entirely to the production of equipment enclosures/shelters and cabinets.
In January, 1997, the Company completed a $6.9 million manufacturing
facility in Frankfort, Indiana, which consolidates its current operations into a
single factory, enhances production efficiency and increases capacities. The
Company will be updating machinery and equipment throughout the transition,
including a high rise storage rack system and a new 500-ton forming press for
tower components supplied to the Company's Peoria, Illinois facility.
Installation of a new, $5.3 million galvanizing facility, including a
51-foot galvanizing kettle, was completed at Peoria in August, 1997. This
expansion is designed to meet increasing demands for towers, poles and other
support structures. The facility, which began full operation in the third
quarter of 1997, not only increases capacity but allows for galvanizing larger
materials, resulting in improved turn-around and lower costs.
The Company is in the final phases of implementing a new Management
Information System which should improve customer response times, production
scheduling, inventory control and cost control capabilities. This $2.1 million
project should also generate improved management information and allow constant,
on-line communication among the Peoria, Bessemer and Frankfort facilities and
with the sales force in the field.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various pending legal proceedings and claims
arising in the normal course of business, as well as claims arising from the
Company's disposition of certain divisions in 1996.
4
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Although the outcome of such proceedings and claims cannot be determined with
certainty, the Company, after consultation with legal counsel, considers that
such matters, individually or in the aggregate, will not have a materially
adverse effect on the Company's operations or its financial condition. See
"Business--Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the postponed annual meeting held on December 17, 1997, the stockholders
of the Company voted to approve an Amended and Restated Certificate of
Incorporation, with a vote of 47,126,829 for, 57,075 against, 284,098 abstain,
and 142,714 broker non-votes. The following five nominees were elected as
directors, with the votes indicated:
<TABLE>
<CAPTION>
AUTHORITY
FOR WITHHELD
------------- -----------------
<S> <C> <C>
Charles M. Brennan III...................................................... 47,054,974 555,742
Darius W. Gaskins, Jr....................................................... 47,060,574 550,142
Gene Locks.................................................................. 47,058,452 552,264
Ruth R. McMullin............................................................ 47,059,372 551,344
Brian B. Pemberton.......................................................... 46,809,631 801,085
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ROHN's common stock is publicly traded in the over-the-counter market on the
NASDAQ National Market System. Its trading symbol is ROHN. The high and low
closing prices on NASDAQ, reported by Dow Jones, were:
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW PER SHARE
--------- -------- -----------
<S> <C> <C> <C>
1996
First Quarter......................... $ 9 $7 5/8 $ --
Second Quarter........................ 10 7 15/16 --
Third Quarter......................... 10 1/4 6 1/2 2.00
Fourth Quarter........................ 7 3/8 5 7/8 .60
1997
First Quarter......................... 8 5 7/8 --
Second Quarter........................ 7 7/8 5 1/4 --
Third Quarter......................... 6 7/8 4 1/4 --
Fourth Quarter........................ 6 4 7/16 .10
1998
First Quarter (through March 10)...... 6 3/16 4 11/16 --
</TABLE>
As of March 10, 1998, the Company had 2,879 record holders of its common
stock.
On September 27, 1996, the Company paid a $2.00 per share extraordinary cash
dividend to stockholders of record on September 17, 1996.
On December 23, 1996, the Company paid a $.25 per share regular cash
dividend and a $.35 per share extraordinary cash dividend to stockholders of
record on December 16, 1996.
On December 29, 1997, the Company paid a regular cash dividend of $.10 per
share to stockholders of record on December 15, 1997.
5
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- ------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FIVE YEAR SUMMARY OF OPERATIONS
Net sales....................................... $ 158,132 $ 154,434 $ 142,216 $ 107,026 $ 73,811
Cost of products sold........................... 111,124 106,847 98,996 73,060 51,846
----------- ----------- ----------- ----------- -----------
Gross profit.................................... 47,008 47,587 43,220 33,966 21,965
----------- ----------- ----------- ----------- -----------
Operating income................................ 26,459 32,498 29,862 18,580 9,710
----------- ----------- ----------- ----------- -----------
Interest (expense) income, net.................. (477) 884 1,839 1,174 551
Other income.................................... 4,088 -- -- -- --
----------- ----------- ----------- ----------- -----------
Income from continuing operations before income
taxes......................................... 30,070 33,382 31,701 19,754 10,261
Income tax provision............................ 11,151 13,100 12,700 7,900 4,100
----------- ----------- ----------- ----------- -----------
Income from continuing operations............... 18,919 20,282 19,001 11,854 6,161
Discontinued operations--
Income from operations, net of tax............ -- 3,859 10,275 21,971 12,623
Gain (loss) on dispositions, net of tax....... -- 21,900 -- (2,500) --
----------- ----------- ----------- ----------- -----------
Net Income...................................... $ 18,919 $ 46,041 $ 29,276 $ 31,325 $ 18,784
----------- ----------- ----------- ----------- -----------
Net income per share--basic
Continuing operations........................... $ 0.36 $ 0.39 $ 0.37 $ 0.24 $ 0.13
Discontinued operations--
Income from operations........................ -- 0.08 0.20 0.45 0.27
Gain (loss) on dispositions................... -- 0.42 -- (0.05) --
----------- ----------- ----------- ----------- -----------
Net income per share--basic..................... $ 0.36 $ 0.89 $ 0.57 $ 0.64 $ 0.40
----------- ----------- ----------- ----------- -----------
Net Income per share--diluted
Continuing operations........................... $ 0.36 $ 0.39 $ 0.37 $ 0.24 $ 0.13
Discontinued operations--
Income from operations........................ -- 0.08 0.20 0.44 0.26
Gain (loss) on dispositions................... -- 0.42 -- (0.05) --
----------- ----------- ----------- ----------- -----------
Net income per share--diluted................... $ 0.36 $ 0.89 $ 0.57 $ 0.63 $ 0.39
----------- ----------- ----------- ----------- -----------
Dividends declared per common share............. $ 0.10 $ 2.60 $ 2.55 $ 0.20 $ 1.20
Weighted average common shares
outstanding--Basic............................ 52,475 52,383 51,813 49,318 47,369
Weighted average common shares
outstanding--Diluted.......................... 52,558 52,566 52,056 49,581 48,273
FIVE-YEAR SUMMARY OF FINANCIAL DATA
Total assets.................................... $ 108,658 $ 93,372 $ 161,226 $ 258,106 $ 229,505
Stockholders' equity............................ 58,042 42,511 127,764 220,596 193,384
Dividends declared.............................. 5,245 136,368 132,274 9,738 57,691
Return on assets................................ 17.4% 49.3% 18.2% 12.1% 8.2%
Return on stockholders' equity.................. 32.6% 108.3% 22.9% 14.2% 9.7%
Capital expenditures............................ 8,307 11,658 2,303 3,335 781
Depreciation and amortization................... 2,634 1,672 1,433 1,358 1,353
Long-term liabilities........................... 11,271 12,191 4,671 4,867 2,949
</TABLE>
Prior year results have been restated to reflect the 1994 discontinuance of
Unarco Material Handling and the 1995 discontinuance of UNR Leavitt, Unarco
Commercial Products, UNR Home Products and Real Time Solutions, Inc.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis appearing on pages 15 through 17 of
ROHN Industries, Inc. 1997 Annual Report to Stockholders is incorporated herein
by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Statements of Income, Statements of Cash Flows, Balance Sheets, Statements
of Changes in Stockholders' Equity, Notes to Financial Statements and Report of
Independent Public Accountants appearing on pages 18 through 31 of ROHN
Industries, Inc. 1997 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVES OFFICERS OF THE REGISTRANT.
The directors of ROHN are as follows:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS,
NAME SINCE AGE OTHER DIRECTORSHIPS AND COMMITTEE ASSIGNMENTS
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<S> <C> <C> <C>
Charles M. Brennan III.......... 1989 56 Chairman and Chief Executive Officer of MYR Group Inc., an electrical and
telecommunications contracting firm (October 1989 to present). Other
directorships: MYR Group Inc.; Control Devices, Inc., a supplier of sensor
controls; Holbrook-Patterson, Inc., an educational equipment manufacturer.
Chair of ROHN's Audit Committee and member of the Executive Committee.
Darius W. Gaskins, Jr........... 1990 58 Co-Founding Partner, Carlisle, Fagan, Gaskins & Wise Inc., a management
consulting firm (May 1993 to present); Partner, High Street Associates, a
management and investment firm (June 1991 to present); Chairman, Leaseway
Transportation Corp., a distribution services provider (December 1994 to
April 1995). Other directorships: Northwestern Steel and Wire Company, a
producer of steel and wire products; Sapient Corporation, a software
company; Anacomp Incorporated, a micrographics supplier. Chair of ROHN's
Compensation Committee and member of the Executive and Audit Committees.
Gene Locks...................... 1989 60 Chairman of the Board of ROHN Industries, Inc. (May 1991 to present); Founding
partner, Greitzer & Locks, attorneys. Member of Trustees Advisory Committee
to UNR Asbestos-Disease Claims Trust (June 1989 to present). Other
directorships: Celotex Corporation. Member of ROHN's Executive and
Compensation Committees.
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS,
NAME SINCE AGE OTHER DIRECTORSHIPS AND COMMITTEE ASSIGNMENTS
- -------------------------------- -------- --- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Ruth R. McMullin................ 1990 56 Chair, Trustees of the Eagle-Picher Personal Injury Settlement Trust (November
1996 to present); Management Fellow (faculty member), Yale School of
Management (August 1994 to 1995); President and Chief Executive Officer,
Harvard Business School Publishing Corporation (November 1991 to April
1994). Other directorships: Bausch & Lomb, Inc., a vision care company;
Middlesex Mutual Assurance Company, a property and casualty insurance
company; Secure Technologies, Inc., a distance monitoring company. Member of
ROHN's Executive, Compensation and Audit Committees.
Brian B. Pemberton.............. 1997 53 President and Chief Executive Officer of ROHN Industries, Inc. (commencing
April 14, 1997); President, Skycell Services, a division of American Mobile
Satellite Corporation, a common carrier providing satellite-based mobile
voice and data services to North America ("AMSC") (August 1996 to December
1996); President and Chief Executive Officer, AMSC (April 1995 to August
1996); President, AMSC (April 1990 to April 1995). Other directorships: AC
Nielsen Corporation, provider of market research. Chair of ROHN's Executive
Committee.
</TABLE>
The executive officers of ROHN are as follows:
<TABLE>
<CAPTION>
NAME AGE EXPERIENCE (TENURE)
- -------------------------------- --- ------------------------------------------------------------------------------
<S> <C> <C>
Brian B. Pemberton.............. 53 See above.
David V. LaRusso................ 44 Vice President and Chief Financial Officer of the Company (commencing
September 1, 1997); President and Chief Executive Officer, Allied HealthCare
Products, Inc. (1994-1996); Vice President and Chief Financial Officer
(1988-1996).
Richard L. Rohn................. 53 Vice President-Shelters of the Company (commencing September 1, 1997);
President Shelter Operations, ROHN Division of UNR Industries, Inc.
(1962-1997).
James R. Cote................... 48 Vice President Marketing and Sales of the Company (commencing September 1,
1997); Vice President Sales and Marketing, ROHN Division of UNR Industries,
Inc. (1993-1997).
Jay R. Buehler.................. 55 Vice President Operations of the Company (commencing September 1, 1997); Vice
President Manufacturing Operations, Gardner Denver Machinery, Inc.
(1995-1997); General Manager, Horizontal Wrapper Products, FMC Corporation
(1988-1995).
</TABLE>
All of the executive officers are elected by the Board of the Directors of
the Company at the Annual Meeting of Stockholders for one-year terms and serve
until such time as their respective successors are duly elected and qualified.
8
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ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth the total cash and non-cash compensation in
each of the last three years for the Company's executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------
OTHER ------------------------
ANNUAL RESTRICTED SECURITIES
COMPEN- STOCK UNDERLYING
SALARY BONUS SATION AWARDS OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($)(3) (#) COMPENSATION ($)
- -------------------------------- --------- --------- --------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas A. Gildehaus(1) ......... 1997 106,534 -- 18,034 -- -- 1,125,000(7)
Former President and Chief 1996 375,000 300,000 205,079 -- -- 22,298(7)
Executive Officer 1995 375,000 300,000 324,091 -- -- 71,107(7)
Henry Grey(1) .................. 1997 170,432 -- 10,075 -- -- 920,150(8)
Former Senior Vice-President 1996 190,700 135,000 113,933 -- -- 12,033(8)
and 1995 190,100 130,000 180,051 48,491 -- 32,763(8)
Chief Financial Officer
Brian B. Pemberton(4) .......... 1997 207,230 200,000 -- 750,000 100,000 56,315(9)
President and 1996 -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- --
Richard Rohn ................... 1997 174,785 90,000 -- 187,500 -- 2,375(10)
Vice President--Shelters 1996 172,046 172,000 -- 212,500 -- 2,375(10)
1995 200,436 172,000 -- 22,613 -- 2,310(10)
James R. Cote .................. 1997 134,200 30,000 -- -- -- 2,278(10)
Vice President--Sales & 1996 128,575 60,392 -- 61,250 -- 1,989(10)
Marketing 1995 122,050 43,050 -- -- -- 1,924(10)
Jay R. Buehler(5) .............. 1997 54,615 30,000 -- -- 50,000 49,964(11)
Vice President--Operations 1996 -- -- -- -- --
1995 -- -- -- -- --
David V. LaRusso(6) ............ 1997 49,231 20,000 -- -- 50,000 5,435(9)
Vice President and 1996 -- -- -- -- --
Chief Financial Officer 1995 -- -- -- -- --
</TABLE>
- ------------------------------
(1) Messrs. Gildehaus and Grey resigned their positions as executive officers,
and in the case of Mr. Gildehaus as a director, on the termination of their
employment on April 11, 1997 and June 30, 1997, respectively.
(2) Represents imputed annual interest at 7% (the prime rate on the date of the
loans) on interest-free loans to purchase stock under the 1994 Executive
Stock Purchase Plan described in Item 13 below.
(3) Restricted Stock Awards are made pursuant to the terms of the ROHN
Industries, Inc. 1992 Restricted Stock Plan. The stock is valued at the
closing price of the stock on the National Association of Securities
Dealers, Inc.'s Automated Quotation/National Market System ("NASDAQ/NMS") on
the date of the award. The restricted stock held by Messrs. Gildehaus and
Grey became vested on the termination of their employment. On December 31,
1997, Mr. Pemberton held 100,000 shares of restricted stock valued at
$515,600. On December 31, 1997, Mr. Rohn held 56,024 shares of restricted
stock valued at $288,860. During 1997, Messrs. Pemberton and Rohn were
awarded 100,000 and 25,000 shares of restricted stock, respectively. The
shares of restricted stock awarded to Messrs. Pemberton and Rohn in 1997
will vest 25% per year over a four-year period from the date of the grant.
On December 31, 1997, Mr. Cote held 10,000 shares of restricted stock valued
at $51,560. During 1996, Mr. Cote was awarded 10,000 shares of restricted
stock. The shares of restricted stock awarded to Mr. Cote will vest 100% in
five years. Messrs. Pemberton, Rohn and Cote were entitled to receive all
dividends on restricted stock held by them.
(4) Mr. Pemberton's employment with ROHN commenced on April 14, 1997.
(5) Mr. Buehler's employment with ROHN commenced on July 28, 1997.
(6) Mr. LaRusso's employment with ROHN commenced on September 2, 1997.
(7) The amounts shown for 1995 and 1996 include the Company's contributions to
Mr. Gildehaus' 401(k) plan of $3,234 and $3,325 in 1995 and 1996,
respectively; contributions to Mr. Gildehaus' account in the ROHN Employees
Profit Sharing Plan of $13,500 and $6,000 in 1995 and 1996, respectively;
contributions to Mr. Gildehaus' account in the ROHN Industries, Inc.
Supplemental Executive Retirement Plan of $50,400 and $9,000 in 1995 and
1996, respectively; and annual life insurance premiums of $3,973 and $3,973
in 1995 and 1996, respectively. Mr. Gildehaus' employment was terminated on
April 11, 1997, and the amount shown for 1997 constitutes the severance
payment made to Mr. Gildehaus pursuant to a Change of Control Agreement
which is described in Item 13 below.
(8) The amounts shown for 1995 and 1996 include the Company's contributions to
Mr. Grey's 401(k) plan of $3,234 and $3,325 respectively; contributions to
Mr. Grey's Profit Sharing Plan of $13,500 and $6,000 for the years 1995 and
1996, respectively;
9
<PAGE>
and contributions to the Supplemental Executive Retirement Plan of $16,029
and $2,708 for 1995 and 1996, respectively. Mr. Grey's employment was
terminated on June 30, 1997, and the amounts shown for 1997 include a
severance payment of $889,650 made to Mr. Grey pursuant to a Change of
Control Agreement, which is described in Item 13 below, and $30,500 of
personal property that was transferred to him.
(9) The amounts shown are for relocation expenses incurred by Messrs. Pemberton
and LaRusso.
(10) The amounts shown for 1995, 1996 and 1997 include the Company's
contributions to the 401(k) plan for these employees. For Mr. Rohn, the
Company contributions were $2,310, $2,375 and $2,375 for 1995, 1996 and
1997, respectively. For Mr. Cote, the Company contributions were $1,924,
$1,989 and $2,278 for 1995, 1996 and 1997, respectively.
(11) The amount shown is for relocation expenses of $29,964 and a signing bonus
of $20,000 that was negotiated with Mr. Buehler.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------- STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION TERM
UNDERLYING GRANTED TO EXERCISE OR --------------------
OPTIONS EMPLOYEES BASE PRICE EXPIRATION 5% ($) 10% ($)
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE (2) (2)
- ---------------------------------- ----------- ----------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Brian B. Pemberton................ 100,000 48% $ 7.75 04/14/02 214,118 487,393
Jay R. Buehler.................... 50,000 24% $ 5.13 07/28/02 70,866 161,311
David V. LaRusso.................. 50,000 24% $ 4.37 09/02/02 60,368 137,413
</TABLE>
- ------------------------
(1) ROHN stock option plans are administered by the Compensation Committee of
the Board of Directors, which has authority to determine the employees to
whom, and the terms at which, options will be granted. Under the terms of
the Company's plan, the Compensation Committee retains discretion, subject
to plan limits, to modify the terms of outstanding options.
The per share option prices are the fair market value of the Company's
common stock on the date of the grant less any extraordinary dividends paid
after the grant date. Mr. Pemberton's options are exercisable twelve months
from the date of the grant, and the options granted to Messrs. Buehler and
LaRusso are exercisable at the rate of one-third per year over a three year
period. In each case, the options were granted for a term of five years. In
addition, options become exercisable upon a change of control of the Company
as defined in the plans.
(2) The amounts shown in these columns are calculated at the 5% and 10% rates
set by the Securities and Exchange Commission and are not intended to
forecast future appreciation of the Company's stock price.
OPTIONS/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE FY-END (#) FY-END ($)(1)
EXERCISE REALIZED ------------------------------ ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- --------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian B. Pemberton.......... -0- -0- -0- 100,000 -0- -0-
Jay R. Buehler.............. -0- -0- -0- 50,000 -0- $ 1,300
David V. LaRusso............ -0- -0- -0- 50,000 -0- $ 39,300
Richard Rohn................ 50,000 267,500 -0- -0- -0- -0-
</TABLE>
- ------------------------
(1) On December 31, 1997, the market value of ROHN stock was $5.156 per share.
Mr. Pemberton's options were granted at $7.75 per share, Mr. Buehler's at
$5.13 per share, and Mr. LaRusso's at $4.37 per share.
10
<PAGE>
EMPLOYMENT AGREEMENT--BRIAN B. PEMBERTON
Brian B. Pemberton was elected President and Chief Executive Officer of ROHN
effective April 14, 1997. The Company has entered into an employment agreement
with Mr. Pemberton which provides for a base salary of $325,000, subject to
annual review and adjustment by the Compensation Committee. Mr. Pemberton will
be eligible for an annual bonus under the Company's Incentive Bonus Plan which
provides a maximum bonus opportunity of 100% of base salary. In addition, Mr.
Pemberton was awarded 100,000 shares of restricted stock under the Restricted
Stock Plan and options to purchase an additional 100,000 shares under the
Company's Stock Option Plan. Restricted stock will vest at the rate of 25% per
year during a four-year period of continuous employment or in the event of
death, disability or a change of control of the Company, as provided in the
Restricted Stock Plan. Stock options are exercisable after one year of
employment at the market price of the stock as of April 1, 1997, and expire in
five years. Mr. Pemberton is covered by the Company's health, disability and
life insurance program and other benefits generally provided to Company
executives. Mr. Pemberton's employment may be terminated by either party at any
time for any reason, but in the event his employment is terminated by the
Company without cause, as defined in the agreement, Mr. Pemberton will be
entitled to a severance payment equal to one year's base salary then in effect
plus the amount of the target bonus under the Incentive Bonus Plan for the year
in which termination occurs.
CHANGE OF CONTROL AGREEMENTS
At various times, the Company has entered into Change of Control Agreements
("Control Agreements") with various executive officers. On March 5, 1993, ROHN
entered into a Control Agreement with Henry Grey. On July 1, 1995, the Company
entered into a Control Agreement with Thomas A. Gildehaus. On November 30, 1996,
the Company entered into a Control Agreement with James Cote. On September 2,
1997, the Company entered into a Control Agreement with David V. LaRusso. These
Agreements were for a term of three years, subject to renewal for additional
three year terms. On March 5, 1996, the Control Agreement of Mr. Grey was
renewed for an additional three-year term.
A Change of Control includes (i) the acquisition by any person or group
acting in concert of beneficial ownership of 50% or more of the Company's
outstanding shares, with certain exceptions, (ii) a change in the composition of
the Company's Board of Directors in any 24-month or less period such that a
majority of the directors serving at the end of the period were not serving at
the beginning of the period, unless at the end of the period the majority of the
directors in office were nominated upon the recommendation of a majority of the
Board at the beginning of the period, or (iii) approval by stockholders of a
merger, consolidation or similar transaction (as to which those stockholders
immediately prior to such transaction are not the owners of more than 50% of the
resulting corporation's outstanding voting stock after such event) or the sale
of all or substantially all of the Company's consolidated assets. The
Compensation Committee recognized that the sale of four of the Company's five
operating divisions in 1996 constituted a change of control for purposes of the
Control Agreements.
If, during the term of these Control Agreements, a Change of Control occurs,
and within a two year period from the date of such Change of Control, either (i)
the executive's employment with the Company is terminated by the Company other
than for cause or on account of the executive's death, permanent disability or
retirement, or (ii) the executive resigns for good reason, then the Company is
required to pay to the executive a severance payment. The severance payments are
amounts equal to three times base salary for Mr. Gildehaus, three times base
salary plus target bonus for Mr. Grey, and one and one-third times base salary
for Messrs. Cote and LaRusso, for the year in which termination occurs; provided
that in no event may the total amount of the severance payment exceed 2.99 times
the five year average W-2 income of the executive. The severance payment is
payable in a single lump sum payable within 30 days of the termination of
employment or resignation.
In addition to the severance payment, the Company is required to provide
health, disability and life insurance in accordance with the plans maintained by
the Company for executives for a period of three years (one year for Messrs.
Cote and LaRusso) from the date of termination of the executive's employment,
provided that health, disability and life insurance benefits cease if the
executive becomes employed during such period and receives similar benefits in
connection with such employment.
11
<PAGE>
During employment and for a period of one year after the termination of
employment for any reason, the executive may not enter into, be connected with,
or work for an individual, firm or corporation which is then in substantial
competition with the Company in the United States.
On April 11, 1997 and June 30, 1997, respectively, the employment of Messrs.
Gildehaus and Grey was terminated, triggering severance benefits under their
Control Agreements.
DIRECTORS' COMPENSATION
ROHN employees who serve as directors of ROHN receive no compensation for
such services. Non-employee directors of ROHN are paid compensation at an annual
rate of $30,000 (the Chairman receives $50,000), payable in quarterly
installments. Non-employee directors have the right to receive all or part of
their annual compensation in shares of restricted Common Stock of the Company.
Non-employee directors receive $1,000 for each Board meeting or meeting of a
committee of the Board which they attend in person or by telephone. Directors
are also reimbursed for their out-of-pocket expenses incurred in connection with
such meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of March 10, 1998 regarding
beneficial ownership of common stock of the Company by: (i) each person or group
that has reported beneficial ownership of more than five percent of the Common
Stock outstanding, (ii) all directors, (iii) the executive officers included in
the Summary Compensation Table under Item 11 hereof, and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
- -------------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
PRINCIPAL STOCKHOLDER:
UNR Asbestos-Disease Claims Trust(3) ................................................. 29,348,051 55.8%
100 North Lincolnway
North Aurora, IL 60542
DIRECTORS AND EXECUTIVE OFFICERS:
Charles M. Brennan III................................................................ 25,690 --
Jay R. Buehler........................................................................ 14,200 --
James R. Cote......................................................................... 10,000 --
Darius W. Gaskins, Jr................................................................. 57,190 --
Thomas A. Gildehaus(4)................................................................ 859,105 1.6%
Henry Grey(4)......................................................................... 423,601 --
David V. LaRusso...................................................................... -0- --
Gene Locks............................................................................ 28,650 --
Ruth R. McMullin...................................................................... 46,235 --
Brian B. Pemberton(5)................................................................. 205,000 --
Richard Rohn.......................................................................... 175,694 --
All directors and executive officers as a group(5).................................... 1,845,365 3.5%
</TABLE>
- ------------------------
(1) Unless otherwise noted, the persons listed beneficially own all shares set
forth opposite their respective names with sole power to vote and dispose of
such shares, except Mr. Pemberton (5,000 shares) wherein voting or
investment power is shared with others. Ms. McMullin's total includes 3,700
shares held by her spouse.
(2) Percentage ownership is not shown for directors or executive officers owning
less than one percent of the outstanding Common Stock.
(3) The Trustees of the Trust are John H. Laeri, Jr., Chairman, Michael E.
Levine and David S. Schrager. The Trustees are deemed to share beneficial
ownership of the 29,348,051 Trust shares because they collectively possess
the power to vote and dispose of the Trust shares on behalf of the Trust,
except that the United States Bankruptcy Court for the Northern Division of
Illinois must approve sales of Trust shares.
(4) Messrs. Gildehaus and Grey resigned their positions as Executive Officers,
and in the case of Mr. Gildehaus as a director, on the termination of their
employment on April 11, 1997 and June 30, 1997, respectively.
12
<PAGE>
(5) Includes 100,000 shares subject to stock options exercisable within 60 days
of March 10, 1998.
The UNR Asbestos-Disease Claims Trust informed ROHN that it has recently
reviewed its investment in ROHN and has decided to seek a sale of its shares, a
merger or a like transaction that would involve liquidating its entire
investment in ROHN, and that it has retained an investment banker to assist it
in soliciting proposals which might achieve its objective. The Company has
agreed to pay the fees of the investment banker (one percent of the
consideration received, plus debt assumed) and to indemnify the investment
banker against certain liabilities if a transaction involving a disposition of
all of the common stock of the Company is effected.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to the ROHN Industries, Inc. 1994 Executive Stock Purchase Plan,
Thomas A. Gildehaus and Henry Grey purchased a total of 1,400,000 shares of
Common Stock of the Company on September 9, 1994 at a price of $5.525 per share.
The purchase price was the average of the average of the reported high and low
prices for the Company's Common Stock on the NASDAQ/NMS on each of the five
trading days preceding the purchase. Shares were paid for in cash in the amount
of the par value of the shares ($.01 per share) and the balance in promissory
notes due in three years. The notes were interest free (although for tax
purposes interest is imputed), except that in the event that a participant
resigned from the Company or was terminated for cause, the notes would become
due and interest at the applicable Federal rate under Section 1274 of the
Internal Revenue Code would be applied retroactively from the date of the notes.
If the shares were sold prior to the expiration of three years other than in
connection with a Change in Control (as defined under "Change of Control
Agreements" in Item 11 above), interest would be applied retroactively from the
date of the note at the applicable Federal rate. Dividends and distributions on
the shares, after reduction for Federal and state taxes, would be paid to the
Company to be applied to the principal of the notes. The notes were limited
recourse in that, if the stock was insufficient to satisfy the loan balance at
maturity, the participant could tender the shares in partial payment of the
notes and would be personally liable for that portion of the deficiency that
exceeded 25% of the loan balance (before applying the security). The Company's
recourse was limited to the shares if the participant died, became disabled or
was terminated without cause, if there was a Change in Control of the Company or
if the Company exercised its option to apply the shares to the notes upon the
participant's resigning or being terminated for cause. The amounts of the
promissory notes executed by Messrs. Gildehaus and Grey on the date of the
foregoing transactions were $4,963,500 and $2,757,500, respectively. On March
31, 1997 the Company applied shares held under the plan for Messrs. Gildehaus
and Grey sufficient to satisfy the unpaid principal of their notes.
At a Board of Directors meeting on December 5, 1996, the Board determined
that it was in the best interests of the Company to transfer certain contingent
liabilities associated with discontinued operations (the "Liabilities") to
Folding Carrier Corporation, a wholly owned subsidiary of the Company ("Folding
Carrier"). The Liabilities, estimated at $6,975,000, and an equal amount of cash
were transferred to Folding Carrier, and Folding Carrier issued to ROHN 18
shares of Class B (non-voting) common stock, par value $10 per share. This Class
B stock represents approximately 15% of the outstanding common stock of Folding
Carrier. The ROHN Board has also determined that it was in the best interests of
the Company to provide a financial incentive in the form of stock to the
management of Folding Carrier to efficiently manage and satisfy the Liabilities
at the lowest possible cost. Accordingly, pursuant to a Stock Purchase and Sale
Agreement (the "Agreement") ROHN sold nine shares of Class B stock of Folding
Carrier (the "Shares") to each of Henry Grey and Michael F. Boyle for the sum of
$90, or an amount equal to the par value of the shares purchased. Mr. Grey was
Senior Vice President and Chief Financial Officer of ROHN and was a Vice
President of Folding Carrier; Mr. Boyle was also a Vice President of Folding
Carrier and a former Vice President of ROHN. Under the terms of the Agreement,
at such time as the Liabilities of Folding Carrier are discharged, or if either
Mr. Grey or Mr. Boyle ceases to provide services to Folding Carrier, ROHN was
required to buy (and the stockholder is required to sell) his Shares at their
book value. Messrs. Grey and Boyle resigned their positions with Folding Carrier
and their nine shares of Class B stock were repurchased by the Company for
$155,006 each on December 31, 1997 in accordance with the Agreement.
See also the last paragraph of Item 12 above.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The information required by this item is incorporated by reference in Item 8
of this Report.
2. The following financial schedule for the years 1997, 1996 and 1995 is
submitted herewith: Schedule II--Allowance for Doubtful Accounts.
3. Exhibits:
The following list sets forth the exhibits to this Form 10-K as required by
Item 601 of Regulation S-K. Certain exhibits are filed herewith, while the
balance are incorporated by this reference to documents previously filed with
the Securities and Exchange Commission. Exhibits incorporated by reference are
indicated by an asterisk.
EXHIBIT NO.
<TABLE>
<C> <S>
(2) *Plan of Reorganization, incorporated herein by reference from Exhibit A of the
1989 first quarter Form 10-Q.
(3) *Amended and Restated Certificate of Incorporation dated December 17, 1997,
filed as an exhibit to December, 1997 Form 8-K.
*Amended and Restated By-Laws dated May 5, 1994, filed as an exhibit to the 1993
Form 10-K.
(4) Loan Agreement dated March 9, 1998 by and among LaSalle National Bank and ROHN
Industries, Inc.
(10) Material Contracts:
*UNR Industries, Inc. 1992 Restricted Stock Plan, filed as an exhibit to the
1992 Form 10-K.
*Employment Agreement entered into between the Company and Brian B. Pemberton,
President and Chief Executive Officer, effective April 14, 1997, filed as an
exhibit to the 1997 first quarter Form 10-Q.
*1994 Stock Option Plan, filed as Exhibit A to Proxy Statement dated October 11,
1994.
*1994 Executive Stock Purchase Plan, filed as Exhibit B to Proxy Statement dated
October 11, 1994.
(10.1) Form of Change of Control Agreements between the Company and (i) David V.
LaRusso dated September 2, 1997 and (ii) James R. Cote dated November 30, 1996.
(10.2) *Letter agreement dated as of March 27, 1998 between the UNR Asbestos--Disease
Claims Trust, Donaldson, Lufkin & Jenrette and the Registrant, filed as Exhibit
11 to Amendment No. 11 to the Trust's Schedule 13D.
(11) The computation can be determined from report.
(13) Portions of Registrant's 1997 Annual Report to Stockholders incorporated herein
by reference.
(21) *Subsidiaries of Registrant, filed as an exhibit to the 1996 Form 10-K.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.
</TABLE>
(b) A Form 8-K was filed on December 18, 1997, reporting stockholder approval of
an Amended and Restated Certificate of Incorporation of the Company,
changing its name to ROHN Industries, Inc. and modernizing and simplifying
the Company's charter.
(c) Exhibits--See above.
(d) None.
14
<PAGE>
Report of Independent Public Accountants on Supplemental Schedule
To the Stockholders and Board of Directors of ROHN Industries, Inc.
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in ROHN Industries, Inc.'s Annual
Report to Stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated March 12, 1998. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The supplemental schedule included in Part IV, Item 14(d)
(Allowance for Doubtful Accounts) 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 consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 12, 1998
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
ROHN INDUSTRIES, INC.
/s/ BRIAN B. PEMBERTON
------------------------------------------
Brian B. Pemberton
CHIEF EXECUTIVE OFFICER, PRESIDENT &
DIRECTOR
March 30, 1998
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
BRIAN B. PEMBERTON
------------------------------------------------------- March 30, 1998
Brian B. Pemberton
CHIEF EXECUTIVE OFFICER, PRESIDENT & DIRECTOR
DAVID V. LARUSSO
------------------------------------------------------- March 30, 1998
David LaRusso
VICE PRESIDENT & CHIEF FINANCIAL AND ACCOUNTING OFFICER
CHARLES M. BRENNAN III
------------------------------------------------------- March 30, 1998
Charles M. Brennan III
DIRECTOR
DARIUS W. GASKINS, JR.
------------------------------------------------------- March 30, 1998
Darius W. Gaskins, Jr.
DIRECTOR
GENE LOCKS
------------------------------------------------------- March 30, 1998
Gene Locks
DIRECTOR, CHAIRMAN OF THE BOARD
RUTH R. McMULLIN
------------------------------------------------------- March 30, 1998
Ruth R. McMullin
DIRECTOR
</TABLE>
16
<PAGE>
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS (IN THOUSANDS)
Changes in the allowance for doubtful accounts for the three years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- ------
<S> <C> <C> <C>
Balance--beginning of year......... $2,300 $ 2,185 $1,136
Add (deduct)
- --Provision charged to income...... 4 186 1,233
- --Bad debts written-off............ (119) (1,235)* (918)
------ ------- ------
Balance--end of year............... $2,185 $ 1,136 $1,451
------ ------- ------
------ ------- ------
</TABLE>
- ------------------------
* The 1996 bad debts written-off include $1,009 related to the ancillary hot
dip galvanizing services, and are not related to the registrant's operations
in the telecommunications markets.
17
<PAGE>
Exhibit 4
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into this 9th
day of March, 1998, by and among LaSALLE NATIONAL BANK, a national banking
association (the "Lender"), and ROHN INDUSTRIES, INC., a Delaware corporation
("Borrower").
THE PARTIES HERETO agree as follows:
ARTICLE ONE. DEFINITIONS
SECTION 1.1. DEFINED TERMS. In addition to the terms defined elsewhere in
this Agreement or any Exhibit hereto, the following terms shall have the
following meanings:
(A) "ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of an Account
Receivable.
(B) "ACCOUNTS RECEIVABLE" shall mean any and all accounts (as such term is
defined in the UCC) of Borrower and each and every right of Borrower to: (i) the
payment of money; or (ii) the receipt or disbursement of products, goods,
services or other valuable consideration, whether such right now exists or
hereafter arises, whether such right arises out of a sale, lease or other
disposition of inventory, or out of a rendering of services, or any other
transaction or event, whether such right is created, generated or earned by
Borrower or by some other Person who subsequently transfers its interest to
Borrower, whether such right is or is not already earned by performance, and
howsoever such right maybe evidenced, together with all other rights and
interests (including all liens and security interests) which Borrower may at any
time have by law or agreement against any Account Debtor or other Person
obligated to make any such payment or against any property of such Account
Debtor or other Person.
(C) "AFFILIATE" shall mean any Person which, directly or indirectly, owns
or controls, on an aggregate basis, at least a 5% interest in any other Person,
or which is controlled by or is under common control with any other Person. For
purposes of this definition, "control" shall mean the possession, directly or
indirectly, of the power to direct or to cause the direction of management and
policies, whether through ownership of voting securities, by contract or
otherwise.
(D) "CODE" shall mean the Internal Revenue Code of 1986, along with the
regulations issued pursuant thereto, as amended from time to time.
(E) "DOCUMENTS" shall mean this Agreement, the Revolving Note, and any
other instrument or document required or contemplated hereunder or thereunder,
whether now existing or at any time hereafter arising.
(F) "ENVIRONMENTAL LAWS" shall mean all federal, state and local laws,
rules, regulations, ordinances, orders and consent decrees relating to
environmental matters, including, without limitation, the Resource Conservation
and Recovery Act, the Comprehensive Environmental
<PAGE>
Response, Compensation and Liability Act of 1980, the Toxic Substances
Control Act, the Clean Water Act, the Clean Air Act, and the Superfund
Amendments and Reauthorization Act of 1986, State and Federal Superlien and
Environmental Cleanup Programs and Laws, and U.S. Department of
Transportation Regulations.
(G) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, along with the regulations issued pursuant thereto, as amended from time
to time.
(H) "EVENT OF DEFAULT" or "EVENTS OF DEFAULT" shall have the meaning set
forth in Section 7.1 of this Agreement.
(I) "LIABILITIES" shall mean all liabilities, indebtedness and obligations
of Borrower to Lender, howsoever created, arising or evidenced, whether now
existing or hereafter arising, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, primary
or secondary, joint or several, whether existing or arising through discount,
overdraft, purchase, direct loan, participation, operation of law, or otherwise,
including, without limitation, all liabilities, indebtedness and obligations of
Borrower to the Lender pursuant to any letter of credit, any standby letter of
credit or any of the Documents, and reasonable outside attorneys' and
paralegals' fees or charges relating to the preparation of the Documents and the
enforcement of Lender's rights, remedies, powers and security interests under
this Agreement, including, without limitation, the drafting of any documents in
the preparation and enforcement of the Loans.
(J) "LOANS" shall mean collectively, the Revolving Loans and each Letter
of Credit.
(K) "NET WORTH" shall mean the Borrower's total amount of issued and
outstanding capital stock, plus paid in capital and retained earnings, less
treasury stock, all as defined by generally accepted accounting principles.
(L) "NOTE" shall mean the Revolving Note.
(M) "PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, limited
liability company, corporation, institution, entity, party or government
(whether national, federal, state, county, city, municipal or otherwise
including, without limitation, any instrumentality, division, agency, body or
department thereof).
(N) "PRIME RATE" shall mean, as of the date of any determination, the rate
per annum then most recently announced publicly by the Lender as its prime rate
of interest in Chicago, Illinois. The Prime Rate is the interest rate charged
by the Lender on commercial loans to a substantial number of the Lender's good
business customers, but it is not necessarily the Lender's lowest interest rate
charged to any customer. The Prime Rate is subject to change by the Lender
without notice of any kind.
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(O) "REVOLVING LOAN" or "REVOLVING LOANS" shall mean the loans being made
by the Lender on a revolving basis pursuant to Section 2.1 of this Agreement.
(P) "REVOLVING NOTE" shall mean the revolving note given to the Lender by
Borrower pursuant to Section 2.3 of this Agreement.
(Q) "TANGIBLE NET WORTH" shall mean Borrower's Net Worth minus the
aggregate amount of any asset that would be treated as an intangible under
generally accepted accounting principles.
(R) "UCC" shall mean the Uniform Commercial Code as enacted and amended in
the State of Illinois.
SECTION 1.2. OTHER TERMS. Accounting terms used in this Agreement that
are not specifically defined shall have the meanings customarily given them in
accordance with generally accepted accounting principles. Terms used in this
Agreement that are defined in the UCC, shall, unless the context indicates
otherwise or are otherwise defined in this Agreement, have the meanings provided
for by the UCC.
ARTICLE TWO. LOANS
SECTION 2.1. LOAN AMOUNT.
(A) Subject to the terms and conditions of this Agreement, on the date
upon which all of the terms and conditions of the Documents have been met or
fulfilled to Lender's satisfaction (the "Closing Date"), Lender agrees to make
loans to Borrower on a revolving basis (such loans being herein called
individually, a "Revolving Loan," and collectively, the "Revolving Loans") from
time to time in such amounts as Borrower may from time to time request up to an
aggregate amount outstanding of $15,000,000.00; provided, however, that: (i)
each borrowing by Borrower hereunder with respect to any Revolving Loan shall be
in the aggregate principal amount of at least $10,000.00; (ii) Lender's
commitment to make Revolving Loans shall remain in effect for a 364 day period
to and including March 8, 1999 (the "Revolver Termination Date"); (iii)
notwithstanding any provision herein to the contrary (1) upon the occurrence
and continuance of any Event of Default, and in each such event, the Lender
may, in its sole discretion, immediately cease to make Revolving Loans; and
(2) on the Revolver Termination Date, Borrower shall repay to the Lender all
Revolving Loans, plus interest accrued to the date of payment; and (iv) for a
period of at least 30 consecutive days at any time from the date hereof to the
Revolver Termination Date, the amount of Revolving Loans outstanding shall be
zero.
(B) The Lender agrees to issue letters of credit (individually, a "Letter
of Credit," and collectively, the "Letters of Credit") at the Borrower's request
on a revolving basis from time to time; provided, however, that: (a) in no event
shall total amount of Letters of Credit and Revolving Loans issued and
outstanding exceed $15,000,000.00; (b) all Letters of Credit shall expire prior
to the
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Revolver Termination Date; (c) Borrower shall immediately pay to Lender an
amount equal to all amounts drawn on a Letter of Credit, without notice or
demand by Lender, on the day such draw is paid by Lender; (d) all Letters of
Credit shall be in form and substance and in favor of beneficiaries
satisfactory to Lender; (e) no Letter of Credit shall be issued until
Borrower executes a properly completed application and agreement for such
Letter of Credit, in form satisfactory to Lender; (f) Borrower shall pay a
nonrefundable fee to Lender for each Letter of Credit in an amount equal to
the Letter of Credit amount multiplied by 75 basis points; and (g) no Letters
of Credit shall be issued upon the occurrence and continuance of any Event of
Default. Interest on any amount owed by Borrower to Lender pursuant to this
Section 2.1(B) shall be paid upon demand, and shall accrue at the Prime Rate.
Upon the occurrence and continuance of an Event of Default, interest shall
accrue and be payable of the Prime Rate plus 2%.
SECTION 2.2. USE OF LOAN PROCEEDS. The proceeds of any borrowing by
Borrower pursuant to the Loans shall be used by Borrower solely to refinance
existing bank debt, provide working capital for joint venture investments, and
provide ongoing working capital support in the form of direct borrowings and
standby and trade letters of credit.
SECTION 2.3. REVOLVING NOTE. The Revolving Loans shall be evidenced by a
promissory note (herein called the "Revolving Note") in the form attached
hereto, and made a part hereof, as Exhibit 2.3, dated the date first above
written, payable to the order of Lender, in the principal amount of
$15,000,000.00. The date and amount of each Revolving Loan made by Lender and
of each repayment of principal thereon received by Lender shall be recorded by
Lender in its records and the aggregate unpaid principal amount shown on such
records shall be rebuttable, presumptive evidence of the principal owing and
unpaid on such Revolving Note. The failure to record any such amount on such
records shall not, however, limit or otherwise affect the obligations of
Borrower hereunder or under the Revolving Note to repay the principal amount of
the Revolving Loans together with all interest accruing thereon. The unpaid
principal amount from time to time outstanding on the Revolving Note shall, at
Borrower's choice, bear interest at either: (a) the Prime Rate, adjusted as of
each change of the Prime Rate (each Revolving Loan bearing interest at such rate
a "Prime Rate Loan"); or (b) provided that an Event of Default has not occurred
and is not continuing, a rate per annum that shall be 75 basis points in excess
of the per annum rate of interest at which U.S. dollar deposits of an amount
comparable to the amount of the Revolving Loan and for a period equal to the
relevant Interest Period (as hereinafter defined) are offered generally to
Lender (rounded upward if necessary, to the nearest 1/16 of 1.0%) in the London
Interbank Eurodollar market at 10:00 a.m. (London time) two Business Days prior
to the commencement of each Interest Period ("LIBOR" and each Revolving Loan
bearing interest at such rate a "LIBOR Loan"), such rate to remain fixed for
such Interest Period. "Interest Period" shall mean 30, 60, 90, or 180 day
periods as selected from time to time by the Borrower by irrevocable notice (in
writing, by telex, telegram or cable) given to Lender not less than two Business
Days prior to the first day of each respective Interest Period commencing on the
date hereof; provided that: (i) each such Interest Period may be continued upon
its expiration by Borrower by irrevocable notice (in writing, by telex, telegram
or cable) given to Lender not less than two Business Days prior to the
expiration thereof, which notice shall specify that such Interest Period shall
continue for a one-month, two month or three month
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period; (ii) the final Interest Period shall be such that its expiration
occurs on or before the stated maturity date hereof; (iii) if for any reason
the Borrower shall fail to select time a period, then interest on such LIBOR
Loan shall accrue and be payable at the Prime Rate; and (iv) each such LIBOR
Loan shall be in an amount of at least $500,000.00, and shall be in
$100,000.00 increments. "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banks in London, England, and Chicago,
Illinois, are required or permitted by law to close.
Lender's determination of LIBOR as provided above shall be conclusive,
absent manifest error. Further, if Lender determines in good faith (which
determination shall be conclusive, absent manifest error), prior to the
commencement of any Interest Period that: (a) U.S. dollar deposits of
sufficient amount and maturity for funding the Revolving Loan are not available
to Lender in the London Interbank Eurodollar market in the ordinary course of
business; or (b) by reason of circumstances that affect the London Interbank
Eurodollar market, adequate and fair means do not exist to ascertain the rate of
interest to be applicable to the Revolving Loan, Lender may, at its sole and
absolute option, promptly notify the Borrower that interest on the Revolving
Loan shall be determined using the Prime Rate.
If, after the date hereof, the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over Lender or its
lending office (a "Regulatory Change"), shall, in the opinion of counsel to
Lender, make it unlawful for Lender to make or maintain the Revolving Loan
evidenced hereby, then Lender may, at its sole and absolute option, promptly
notify the Borrower that interest on the Revolving Loan shall be determined
using the Prime Rate. If, for any reason, the Revolving Loan is paid prior to
the last Business Day of any Interest Period, the Borrower agrees to indemnify
Lender against any loss, including any loss on redeployment of the funds repaid,
cost or expense incurred by Lender as a result of such prepayment. If any
Regulatory Change, whether or not having the force of law, shall (a) impose,
modify or deem applicable any assessment, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account of or
loans by, or any other acquisition of funds or disbursements by, Lender; (b)
subject Lender or the Revolving Loan to any tax, duty, charge, stamp tax, or fee
or change the basis of taxation of payments to Lender of principal or interest
due from the Borrower to Lender hereunder (other than a change in the taxation
of the overall net income of Lender); or (c) impose on Lender any other
condition regarding the Revolving Loan or Lender's funding thereof, and Lender
shall determine (which determination shall be conclusive absent manifest error)
that the result of the foregoing is to increase the cost to Lender of making or
maintaining the Revolving Loan or to reduce the amount of principal and interest
received by Lender hereunder, then the Borrower shall pay to Lender, on demand,
such additional amounts as Lender shall, from time to time, determine are
sufficient to compensate and indemnify Lender for such increased costs or
reduced amount.
Notwithstanding any provision in this Section 2.3 to the contrary, upon the
occurrence and continuance of an Event of Default, the Revolving Note shall bear
interest at a rate 2% in excess of the rate on Prime Rate Loans. The accrued
interest on: (i) Prime Rate Loans shall be payable
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monthly on the first day of each month commencing with the first day of the
month while such Prime Rate Loan is outstanding; and (ii) LIBOR Loans shall
be payable the earlier to occur of 90 days or the maturity thereof; and in
all events on the basis of a year that consists of 360 days.
SECTION 2.4. OPTIONAL PREPAYMENT. Borrower may from time to time, prepay
the Note in whole or in any part. Prepayments of LIBOR Loans shall be made only
with payment of a penalty; provided, however, any partial prepayment shall be:
(a) applied to the unpaid installments thereof in the inverse order of maturity;
and (b) accompanied by accrued interest to the date of prepayment on the
principal amount being prepaid.
ARTICLE THREE. NEGATIVE PLEDGE AND CONVEYANCE
Borrower agrees that it will at all times neither: (a) sell, transfer,
convey, assign, hypothecate or dispose, whether by gift or otherwise, unless
such is made on an arm's length basis for fair market value; nor (b) create or
permit to exist any mortgage, pledge, title retention lien, or any other lien,
encumbrance or security interest, in and to its assets and properties, except as
provided in Article 4(E) and Section 5.1(E) hereof, whether such assets and
properties are now owned or existing, or hereafter existing or acquired.
Further, Borrower agrees not to grant a negative pledge obligation similar to
that provided in this Article Three to any individual or entity whatsoever,
other than to Lender as herein provided.
ARTICLE FOUR. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that as of the date hereof:
(A) ORGANIZATION, ETC. Borrower is duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
and in good standing or has applied for qualification as foreign corporation
authorized to do business in each jurisdiction where, because of the nature of
its activities or properties such qualification is required.
(B) AUTHORIZATION; NO CONFLICT. The execution and delivery of the
Documents are all within its corporate powers and have been duly authorized by
all necessary action. Borrower has, or by the time of the execution and
delivery of the Documents shall have, received all necessary governmental or
regulatory approval for the execution and delivery of the Documents (if any
shall be required), and said execution and delivery does not and will not
contravene or conflict with any provision of: (i) law, rule, regulation or
ordinance; (ii) its articles of incorporation or by-laws; or (iii) any agreement
binding upon it or any of its properties, as the case may be.
(C) VALIDITY AND BINDING NATURE. The Documents are the legal, valid and
binding obligations of it, enforceable against it, in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization and other similar laws of general application
affecting the rights and remedies of creditors and except as the availability of
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specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
(D) TITLE TO ASSETS. Except as set forth in Section (E) of this Article
Four, it has good and marketable title to all its assets free and clear of all:
(i) liens, encumbrances, security interests or mortgages; (ii) zoning, building,
fire, health or environmental code violations of any governmental authority; and
(iii) violations of any covenants, conditions or restrictions of record.
(E) LIENS. None of its assets are subject to any mortgage, pledge, title
retention lien, or other lien, encumbrance or security interest, except: (i)
for current taxes not delinquent or taxes being contested in good faith and by
appropriate proceedings and for which adequate reserves have been established;
(ii) liens arising in the ordinary course of business for sums not due or sums
being contested in good faith and by appropriate proceedings and for which
adequate reserves have been established, but not involving any deposits,
advances or borrowed money or the deferred purchase price of property or
services; and (iii) liens specifically permitted pursuant to this Agreement,
which are set forth on Exhibit 4(E), attached hereto and made a part hereof.
(F) FINANCIAL STATEMENTS. Its financial statement dated December 31,
1997, and for the fiscal year then ended, and unaudited and unreviewed financial
statement dated January 31, 1998 (the "Last Statement Date"), and for the fiscal
period then ended, copies of which have been previously delivered to Lender,
have been prepared on a basis and in conformity with generally accepted
accounting principles applied on a basis consistent with that of the preceding
fiscal year are true and correct, and fairly present its consolidated financial
condition on such dates and the results of its operations for the periods then
ended, and since the Last Statement Date there has been no material adverse
change in such financial condition or operations.
(G) LITIGATION. No litigation (including, without limitation, derivative
actions), arbitration proceedings, administrative proceedings or governmental
proceedings are pending or threatened against it which would, if adversely
determined, materially and adversely affect its financial condition or continued
operations, except: (i) for litigation for which it is fully insured against
any loss; and (ii) as set forth on Exhibit 4(G) attached hereto and made a part
hereof, including estimates of the dollar amounts involved. Except for any
liability incident to such litigation or proceeding, it has no contingent
liabilities.
(H) NO VIOLATIONS OF LAWS. It is not in material violation of any law,
statute, ordinance, rule, regulation, judgment, decree, order, writ or
injunction of any federal, state or local authority, court, agency, bureau,
board, commission, department or governmental body, and it has not received any
notice, letter or other communication that concerns such.
(I) BURDENSOME OBLIGATIONS. Except for indentures, agreements, leases,
contracts, deeds or other instruments entered into in the ordinary course of
business that are not otherwise precluded or prohibited pursuant to the
Documents, it is not a party to any indenture, agreement, lease, contract, deed
or other instrument, or subject to any partnership restrictions or has any
knowledge of anything
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which would materially and adversely affect or impair its business, assets,
operations, properties, prospects or condition, financial or otherwise.
(J) TAXES. Except as set forth on Exhibit 4(J) attached hereto and made a
part hereof: (i) federal, state and local tax returns, reports and statements
(including, without limitation, for personal property taxes), required to be
filed by it which, if not so filed, could have an adverse affect on its
business, operations, assets, properties, prospects or condition, financial or
otherwise, have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports or statements are required to be
filed, and all taxes due and payable by it have been timely paid; (ii) it has
neither given nor been requested to give a waiver of any statute of limitations
relating to the payment of federal, state or local taxes; and (iii) periodic
payments of sales and use taxes required by any applicable state or local law,
statute, ordinance, rule or regulation have been made by it.
(K) NO DEFAULT OR EVENT OF DEFAULT. Except as described on Exhibit 4(K)
attached hereto and made a part hereof, there exists no event or condition under
any mortgage, indenture, lease, contract, agreement, instrument, judgment,
decree or order to which it is a party or may be subject, or by which it or any
of its properties may be bound, which constitutes a material default or an Event
of Default thereunder, or will, with the passage of time, constitute a material
default or event of default thereunder, which has any reasonable likelihood of
resulting in an adverse change in its business, assets, operations, properties,
prospects or condition, financial or otherwise.
(L) EMPLOYEE BENEFIT PLANS. Each employee benefit plan, if any (as defined
in Section 3(3) of ERISA), maintained by Borrower is described on Exhibit 4(L)
attached hereto, complies in all material respects with all applicable
requirements of law and regulations and: (i) no Reportable Event (as defined in
Section 4043 of ERISA) for which the report has not been waived by regulation
has occurred with respect to any such plan; (ii) no steps have been taken to
terminate any such plan; (iii) no accumulated funding deficiency (as defined in
Section 412(a) of the Code) exists with respect to any such plan, whether or not
waived; (iv) no transaction prohibited by Section 406 of ERISA or Section 4975
of the Code has occurred with respect to any such plan which could result in
liability to it; and (v) each such plan which is a stock bonus, pension or
profit sharing plan described in Section 401(a) of the Code has been determined
by the Internal Revenue Service to meet the requirements for qualification under
Section 401(a) of the Code, and each such plan meets the requirements for
qualification under Section 401(a) of the Code, and each trust established to
fund any such plan meets all requirements for tax exemption under Section 501(a)
of the Code, except for amendments to such plans required to comply with new
legislation and any other laws, regulations or rulings, including Section 401(a)
and 501(a) of the Code, and with respect to which the remedial amendment period
provided in Section 401(b) of the Code has not yet expired, which amendments
will be adopted in a timely manner or such plan will be terminated. It has not
withdrawn or initiated any steps to withdraw from any multi-employer pension
plan (as defined in Section 3(37) of ERISA) contributed to by it.
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(M) FEDERAL LAWS AND REGULATIONS. It is not: (i) an "investment company"
or a company "controlled", whether directly or indirectly, by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended;
(ii) 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; or (iii) 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 U of the Board of Governors of
the Federal Reserve System).
(N) FISCAL YEAR. Its fiscal year ends on December 31 of each year.
(O) OPERATION. It has obtained all required permits, certificates,
licenses, approvals and other authorizations from governmental agencies and
entities (whether federal, state or local) necessary to carry on its operation.
(P) GENUINENESS OF ACCOUNTS RECEIVABLE. All the Accounts Receivable are
genuine and were incurred in the ordinary course of business and are not in
default.
(Q) OFFICERS OF BORROWER. Each Person listed on Exhibit 4(Q), attached
hereto and made a part hereof, holds the respective office or offices in it set
forth next to his or her name on such Exhibit.
(R) INSURANCE. Borrower's insurance policies described on Exhibit 4(R),
attached hereto and made a part hereof, which Exhibit summarizes the property
and casualty insurance program carried by Borrower, are complete and accurate.
Exhibit 4(R) includes the insurer's(s') name(s), policy number(s), expiration
date(s), amount(s) of coverage, type(s) of coverage, the annual premium(s),
Best's policyholder's and financial size ratings of the insurers, exclusions,
deductibles and self-insured retention and describes in detail any retrospective
rating plan, fronting arrangement or any other self-insurance or risk assumption
agreed to by the Borrower or imposed upon the Borrower by such insurer. this
summary also includes any self-insurance program that is in effect.
(S) SOLVENCY. Borrower is now and, after giving effect to the Loans to be
made hereunder, and the pledges to be made pursuant to the Documents will be,
solvent in that it: (i) owns property whose fair saleable value is greater than
the amounts required to pay all of its debts, liabilities, and obligations,
including contingent debts; (ii) is able to pay all of its indebtedness as such
indebtedness matures; and (iii) has sufficient capital to carry on its business
and transactions and all business and transactions in which it is about to
engage.
ARTICLE FIVE. COVENANTS
SECTION 5.1. BORROWER. Until all the Liabilities are paid in full, or
unless otherwise agreed to by Lender in writing, Borrower covenants and agrees
that:
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(A) FINANCIAL STATEMENTS AND CERTIFICATES. It will furnish to Lender: (i)
within 120 days after the close of each its fiscal years, a copy of its annual
audited report prepared on a consolidating and consolidated basis and in
conformity with generally accepted accounting principles, duly audited by
certified public accountants of recognized standing selected by it and approved
by Lender, together with a certificate from such accountants to the effect that,
in making the examination necessary for the signing of such annual audit report
by such accountants, they have not become aware of any Event of Default that has
occurred and is continuing, or if they have become aware of any such event,
describing it and the steps, if any taken or being taken to cure it; (ii) within
30 days after the close of each calendar month, a copy of its unaudited internal
financial statements on a consolidated and consolidating basis; (iii) within 30
days after the close of each calendar quarter, a certificate signed by an
officer of the Borrower certifying that except as described therein, (1) no
Event of Default has occurred and is continuing, (2) no litigation, arbitration
proceeding or governmental or regulatory proceeding has been instituted or
adversely determined, or is threatened which is materially adverse to it on a
consolidated basis, all as of the date of such certificate, and (3) that
Borrower is in compliance with the terms and financial covenants of this Loan
Agreement; (iv) copies of all publicly released or filed statements or documents
including, without limitation, 10-K reports, 10-Q reports, press releases and
financial statements; (v) annual business plan including forecast and
projections; and (vi) such other information as Lender from time to time
reasonably requests.
(B) BOOKS, RECORDS AND INSPECTIONS. It will: (i) maintain complete and
accurate books and records; (ii) permit reasonable access by Lender to its books
and records; and (iii) permit Lender, upon reasonable notice, to inspect its
properties, whether real or personal, and operations.
(C) INSURANCE. It will maintain such insurance as may be required by law
and such other insurance to the extent and against such hazards and liabilities
as is customarily maintained by companies similarly situated, and as are
reasonably acceptable to Lender.
(D) TAXES AND LIABILITIES. It will pay when due all taxes, assessments
and other liabilities except as contested in good faith and by appropriate
proceedings and for which adequate reserves have been established.
(E) LIENS. It will not create or permit to exist any mortgage, pledge,
title retention lien, or other lien, encumbrance or security interest with
respect to any assets now owned or hereafter acquired, except: (i) liens for
current taxes not delinquent or for taxes being contested in good faith and by
appropriate proceedings and for which adequate reserves have been established;
(ii) liens arising in the ordinary course of business for sums not due or sums
being contested in good faith and by appropriate proceedings and for which
adequate reserves shall have been established and not involving any advances or
borrowed money or the deferred purchase price of property or services; and (iii)
those described in Article 4(E) of this Agreement.
(F) GUARANTIES, LOANS OR ADVANCES. It will not become or be a guarantor or
surety of, or otherwise become or be responsible in any manner (whether by
agreement to purchase any
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obligations, stock, assets, goods, services, or to supply or advance any
funds, assets, goods or services or otherwise) with respect to any
undertaking of any other Person, or make or permit to exist any loans or
advances to any other Person, except for the endorsement, in the ordinary
course of collection, of instruments payable to it or to its order.
(G) MERGERS, CONSOLIDATIONS AND SALES. It will not sell, transfer, convey
or lease all or any material part of its assets or business, or sell or assign,
with or without recourse, any Accounts Receivable, except with Lender's prior
written consent.
(H) SELF-DEALING. It will not purchase, acquire or lease any property
from, or sell, transfer or lease any property to: (a) any Affiliate; or (b) any
officer, director or shareholder of it or any Affiliate, except on terms
reasonably comparable to the terms which would prevail in an arms-length
transaction between unaffiliated third parties.
(I) VIOLATION OF LAW. It will not materially violate any law, statute,
ordinance, rule, regulation, judgment, decree, order, writ or injunction of any
federal, state or local authority, court, agency, bureau, board, commission,
department or governmental body, including, without limitation, Environmental
Laws, and maintain and keep in force any and all licenses, permits, franchises,
or other governmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation or failure to
obtain would materially and adversely effect its business, profits, properties
or financial condition.
(J) UNCONDITIONAL PURCHASE OBLIGATIONS. It will neither enter into nor be
a party to any contract for the purchase of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether delivery is ever made of such materials, supplies or other
property or services.
(K) MAINTENANCE OF BUSINESS. It will preserve its corporate existences in
the jurisdictions of establishment as may be required by law, and will provide
written notice to Lender of material changes in its business operations.
(L) EMPLOYEE BENEFIT PLANS. It will maintain each employee benefit plan as
to which it may have any liability in compliance with all applicable
requirements of law and regulations, and will not cause or permit any event to
occur, or fail to take any action required, which would result in a violation of
any of the representations set forth in Section 4(L) of this Agreement as of any
date during the terms of this Agreement that would cause an adverse effect on
its financial condition.
(M) LIMITATIONS ON NEW PENSION PLANS. It will neither establish any new
employee pension benefit plan, agree to contribute to any multi-employer plan
(other than contributions to any such plan in existence as of the date hereof)
as defined in Section 3(37) of ERISA nor amend any existing employee pension
benefit plan in a manner which would materially increase its obligation to
contribute to such plan.
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(N) USE OF PROCEEDS. It will not permit any proceeds of the Loans to be
used either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended from time to time.
(O) GOOD TITLE. It will shall at all times maintain good and marketable
title to all of its assets.
(P) OFFICERS OF BORROWER. Borrower shall provide written notice to Lender
of changes in its officers from those listed on Exhibit 4(Q).
(Q) CERTIFICATION. All reports, certificates, schedules, notices and
financial information submitted by Borrower to Lender pursuant to this Agreement
shall be certified as materially correct by a proper accounting officer of
Borrower.
(R) ASSET LOCATIONS; MATERIAL ADVERSE CHANGE. It shall give Lender prompt
written notice of: (i) the location of any assets at any place other than the
locations previously disclosed to Lender; and (ii) any event, occurrence or
other matter which has resulted or may result in a material adverse change in
its financial condition or business operations.
(S) NO DEFAULT OR EVENT OF DEFAULT. Except as described on Exhibit 4(K)
attached hereto, it shall not permit to exist any event or condition under any
mortgage, indenture, lease, contract, agreement, instrument, judgment, decree or
order to which it is a party or may be subject, or by which it or any of its
properties may be bound, which constitutes a material default or an event of
default thereunder, or will, with the passage of time, constitute a material
default or event of default thereunder, and which Borrower reasonably believes
will result in a material adverse change in its business, assets, operations,
properties, prospects or financial condition.
(T) MAXIMUM LEVERAGE. Borrower, on a consolidated basis, shall not cause,
suffer or permit the ratio of (i) its liabilities, to (ii) its Tangible Net
Worth, to be greater than 1.65 to 1.0.
(U) NET WORTH. Borrower, on a consolidated basis, shall not cause, suffer
or permit its Net Worth (including adjustments for transactions with Affiliates)
to be less than $50,000,000.00 at any time.
(V) MINIMUM FIXED CHARGE COVERAGE. Borrower, on a consolidated basis,
shall not cause, suffer or permit the ratio of (i) its earnings from operations
before interest, income taxes, depreciation, and amortization, to (ii) interest
expense on all its liabilities, indebtedness and obligations, to be less than
5.00 to 1.0.
(W) MAXIMUM FUNDED DEBT COVERAGE. Borrower, on a consolidated basis, shall
not cause, suffer or permit the ratio of (i) the Loans, to (ii) its earnings
from operations before interest, income taxes, depreciation and amortization, to
be greater than 1.00 to 1.00.
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(X) PRIMARY BANKING RELATIONSHIP AND ADDITIONAL BANK DEBT. Borrower shall
utilize Lender as its primary treasury management bank to all receipts,
disbursements and related services, and Borrower shall be liable for all fees,
costs and expenses customarily charged by Lender in connection with such
relationship and accounts. Further, Borrower may not incur or obtain any
liability or debt from another lending institution without Lender's prior
written consent.
(Y) NONUSAGE. Borrower shall pay to Lender a nonrefundable nonusage fee
in the amount of 25 basis points multiplied by the average unused portion of the
Loans, payable quarterly in arrears. Such fee shall be prorated for any partial
year that the Loans are outstanding.
ARTICLE SIX. CONDITIONS PRECEDENT
SECTION 6.1. CONDITIONS PRECEDENT TO THE LOANS. Lender's obligation to
make the Loans, including, without limitation, its obligation to make the
Revolving Loans and issue Letters of Credit from time to time, are subject to
the fulfillment of each and every one of the following conditions prior to or
contemporaneously with the making of each and every such extension of credit:
(A) DELIVERY OF DOCUMENTS. Lender shall have received each of the
following, in form and substance satisfactory to Lender and its counsel:
(i) Certified copies of all corporate actions taken and consents
made by Borrower to authorize the obtaining of credit by Borrower pursuant
to this Agreement, the Revolving Loans, the Letters of Credit and the
transactions otherwise provided for or contemplated under this Agreement
and the execution and delivery of, and performance in accordance with the
respective terms of, the Documents;
(ii) Certificates of the Secretary of Borrower certifying the names
of the officer or officers of Borrower authorized to sign the Documents,
together with a sample of the true signature of each such officer. Lender
may conclusively rely on such certificates until formally advised by a like
certificate of any changes therein;
(iii) Certificates of insurance and loss payable clauses covering
Borrower's assets that meet the requirements of this Agreement;
(iv) The Revolving Note duly executed;
(v) Certified copies of all documents evidencing any and all
required consents and governmental or regulatory approvals, if any, with
respect to the Documents;
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(vi) Certified copies of the Articles of Incorporation and By-laws
of Borrower, as restated or amended as to the date of this Agreement;
(vii) Certificates of good standing for Borrower from the appropriate
governmental authority in the jurisdiction of its incorporation, in the
principal places in which Borrower conducts business; and
(viii) Such other instruments or documents as Lender may reasonably
request.
(B) NO EVENT OF DEFAULT. No Event of Default shall have occurred and be
continuing, may occur with the giving of notice, the passage of time, or both,
or shall result from the making of any Loan;
(C) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in Article Four of this Agreement shall be true and
correct as of the making of any Loan, with the same effect as though made on
such dates; and
(D) NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Borrower's business or Borrower's financial condition from the most
recent financial statement submitted by it to Lender.
ARTICLE SEVEN. EVENTS OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT. Each of the following acts, occurrences
or omissions shall constitute an event of default under this Agreement (herein
referred to as an "Event of Default"), whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment or order of any court or any order,
rule or regulation of any governmental or nongovernmental body or tribunal:
(A) Borrower shall default in the payment when due of any amount due and
owing by Borrower to Lender under the Revolving Note or Letters of Credit; or
(B) Except for and other than the Event of Default set forth in Section
7.1(A) of this Agreement, Borrower shall default in the payment of any other
amount owing by Borrower to Lender pursuant to the Documents or pursuant to any
other agreement, note, instrument or guarantee between Borrower and Lender, and
said default shall continue unremedied for five days after written notice
thereof from Lender to Borrower; or
(C) Any representation or warranty made by Borrower contained in the
Documents shall at any time prove to have been incorrect in any material respect
when made; or
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(D) Borrower shall default in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
the Documents (not constituting an Event of Default under any other clause of
this Section 7.1 of this Agreement) and such default shall continue unremedied
for five days after written notice thereof shall have been given by Lender to
Borrower; or
(E) Either: (i) the Borrower shall become insolvent or generally fail to
pay, or admit in writing its inability to pay, its debts as they become due, or
a proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed by or
against Borrower, or Borrower makes an assignment for the benefit of creditors;
provided, however, that no Event of Default shall exist pursuant to this
Subsection E, Clause (i) due to an involuntary bankruptcy case, proceeding or
petition filed against Borrower unless such involuntary case, proceeding or
petition shall not have been dismissed or withdrawn within 60 days after the
date of such involuntary filing; or (ii) corporate or other action shall be
taken by Borrower for the purpose of effectuating any of the foregoing; or
(F) If notice is given that Borrower's assets are subject to levy,
attachment, seizure or confiscation uninsured loss; or
(G) There shall occur any uninsured loss, theft, damage to or destruction
of Borrower's assets; provided, however, that the deductible amount on any
insurance policy currently in effect on such assets shall not be considered an
uninsured loss pursuant to this Subsection G; or
(H) Borrower shall be dissolved, whether voluntarily or involuntarily, and
Borrower has not taken all actions required to become reinstated; or
(I) Subject to any applicable cure period, (i) an event of default or
events of default (howsoever designated) as defined in any note, security
agreement, mortgage, indenture, loan agreement, agreement, document or
instrument pursuant to which there may be issued, secured or evidenced any
indebtedness for money borrowed by Borrower, whether such indebtedness now
exists or shall hereafter be created, shall occur; (ii) any event shall occur
which would permit such indebtedness to be declared due and payable prior to
its date of maturing or due dates; or (iii) Borrower shall default in the
payment when due of any principal of or interest on any indebtedness for money
borrowed or guaranteed by Borrower; or (iv) Borrower shall default in the
payment when due, or in the performance or observance of, any material
obligation of, or material condition agreed to by, Borrower with respect to any
purchase or lease of any real or personal property or services, or the purchase
of stock or other interest in any Person; or
(J) There shall occur a cessation of a substantial part of the business of
Borrower for a period which significantly effects Borrower's capacity to
continue its business, on a profitable basis; or Borrower shall suffer the loss
or revocation of any governmental license or permit now held or hereafter
acquired by Borrower which is necessary for the continued or lawful operation of
its business (and which has not been reinstated within 90 days of such loss or
revocation); or Borrower
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shall be enjoined, restrained or in any way prevented by court, governmental
or administrative order from conducting all or any material part of its
business affairs; or
(K) Borrower fails to meet its minimum funding requirements under ERISA,
with respect to any of its plans subject thereto; or
(L) There shall have occurred any material adverse change in the business
or financial condition of Borrower; or
(M) Except for the lawsuit described on Exhibit 4(G) hereof, there shall
be entered against the Borrower one or more judgment or decree which shall cause
the aggregate amount of judgments and decrees at any one time outstanding
against the Borrower to exceed $100,000, excluding those judgments or decrees:
(i) that shall have been outstanding less than 30 calendar days from the entry
thereof; (ii) for which an appeal has been taken in good faith by appropriate
proceedings to the extent adequate reserves have been established therefor; or
(iii) for and to the extent which the Borrower is insured and with respect to
which the insurer has assumed responsibility in writing or for and to the extent
which Borrower is otherwise indemnified if the terms of such indemnification are
satisfactory to Lender; or
(N) Lender, in good faith, deems itself reasonably insecure for any reason
whatsoever.
ARTICLE EIGHT. REMEDIES
SECTION 8.1. REMEDIES UPON DEFAULT. In addition to Lender's rights under
applicable law, upon the occurrence and continuance of any Event of Default, and
the expiration of any applicable cure period, and in every such event:
(A) Notwithstanding anything to the contrary in the Documents, Lender may,
in its sole and arbitrary discretion, declare the principal of and interest on
the Revolving Loans and the Revolving Note, and all other amounts owed under the
Documents, to be immediately due and payable (and Letters of Credit to be
canceled) without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived; and
(B) Lender may require Borrower to make its assets and the records
pertaining thereto, available to Lender for inspection and audit by Lender at
their then current location.
SECTION 8.2. REMEDIES ARE SEVERABLE AND CUMULATIVE. All provisions
contained herein pertaining to any remedy of Lender shall be and are severable
and cumulative. Any notification required pursuant to this Article Eight or
under applicable law shall be reasonably and properly given to Borrower at the
address and by any of the methods of giving such notice as set forth in Section
9.3 of this Agreement, at least 5 days before taking any action.
ARTICLE NINE. MISCELLANEOUS
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SECTION 9.1. NO WAIVER; MODIFICATIONS IN WRITING. Any failure or delay on
the part of Lender in exercising any right, power or remedy pursuant to the
Documents shall not operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification, supplement, termination or waiver of or to any
provision of the Documents, nor any consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
Lender. Any waiver of any provision of the Documents and any consent to any
departure by Borrower from the terms of any provision of the Documents shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances.
SECTION 9.2. SET-OFF. Lender shall have the right to set-off, appropriate
and apply toward payment of any of the Liabilities in such order of application
as Lender may from time to time and at any time elect, any cash, credit,
deposits, accounts, securities and any other property of Borrower which is in
transit to or in the possession, custody or control of Lender, or any agent or
bailee of Lender.
SECTION 9.3. NOTICES, ETC. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing personally delivered or sent by First Class Mail,
postage prepaid, or by facsimile machine, and shall be deemed to be given for
purposes of this Agreement on the day that such writing is delivered or sent by
facsimile machine (with proof of transmission) or three days after such notice
is sent by mail to the intended recipient thereof in accordance with the
provisions of this Section 9.3. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 9.3 of
this Agreement, notices, demands, instructions and other communications in
writing shall be given to or made upon the respective parties hereto at their
respective addresses indicated for such party below:
If to Borrower: ROHN Industries, Inc.
6718 West Plank Road
Box 2000
Peoria, Illinois 61656
Attention: David V. LaRusso
Phone: 309.697.4400
Fax No.: 309.697.5612
With copies to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Phone:
----------------------------------
Fax No.:
--------------------------------
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If to Lender: LaSalle National Bank
135 South LaSalle Street, Suite 302
Chicago, Illinois 60603
Attention: James J. Hess
Phone: 312.904.8130
Fax No.: 312.904.6242
With a copy to: Robert M. Mintz, Esq.
Fox and Grove, Chartered
311 South Wacker Drive, Suite 6200
Chicago, Illinois 60606
Phone: 312.876.0500
Fax No.: 312.362.0700
SECTION 9.4. COSTS, EXPENSES AND TAXES. Borrower agrees to pay all fees
plus out-of-pocket expenses of Lender (including, without limitation, field
audit expenses and costs of outside consultants, appraisers, counsel and
paralegals to Lender) in connection with the preparation, administration and
enforcement of the Documents and the administration and enforcement of the
Loans. If an Event of Default has occurred hereunder, Borrower shall pay any
and all stamp, transfer and other taxes payable or determined to be payable in
connection with the execution and delivery of the Documents and agrees to hold
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes. If any
action, suit or proceeding arising from any of the foregoing is brought against
Lender, Borrower, to the extent and in the manner directed by Lender, will
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by Borrower (which counsel shall be
subject to the approval of Lender). If Borrower shall fail to do any act or
thing which it has covenanted to do under this Agreement or any representation
or warranty on the part of Borrower contained in this Agreement shall be
breached, Lender may, in its sole and arbitrary discretion, after 10 days
written notice is sent to Borrower, do the same or cause it to be done or remedy
any such breach, and may expend its funds for such purpose; and any and all
amounts so expended by Lender shall be repayable to Lender by Borrower
immediately upon Lender's demand therefor, with interest at the Prime Rate
during the period from and including the date funds are so expended by Lender,
to the date of repayment, and any such amounts due and owing Lender shall be an
additional obligation of Borrower to Lender. The obligations of Borrower under
this Section 9.4 shall survive the termination of this Agreement and the
discharge of the other obligations of Borrower under the Documents. Any payment
required to be made pursuant to this Agreement not paid within five days of the
applicable due date shall be subject to a late charge which Borrower hereby
agrees to pay equal to the lesser of: (a) 5% of the overdue amount; or (b) the
maximum amount permitted by law.
SECTION 9.5. COMPUTATIONS. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or
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calculation shall, to the extent applicable and except as otherwise specified
in this Agreement, be made in accordance with generally accepted accounting
principles applied on a basis consistent with those at the time in effect.
SECTION 9.6. FURTHER ASSURANCES. Borrower agrees to do such further acts
and things and to execute and deliver to Lender such additional agreements,
documents and instruments as Lender may reasonably require or deem advisable to
carry into effect the purposes of the Documents, or to better assure and confirm
unto Lender its rights, powers and remedies under the Documents.
SECTION 9.7. COUNTERPARTS. This Agreement executed in any number of
counterparts, each of which counterparts, once they are executed and delivered,
shall be deemed to be an original and all of which counterparts, taken together
shall constitute but one and the same agreement.
SECTION 9.8. BINDING EFFECTS; ASSIGNMENTS. This Agreement shall be
binding upon, and inure to the benefit of Borrower and its successors and
assigns. Borrower shall not assign any of its rights nor delegate any of its
obligations under this Agreement without Lender's prior written consent and no
such consent by Lender shall, in any event, relieve Borrower of any of its
obligations under this Agreement. Lender may assign its rights hereunder.
SECTION 9.9. HEADINGS. Captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision of this Agreement and shall not
affect the construction of this Agreement.
SECTION 9.10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the transactions
contemplated herein and supersedes all prior agreements and understandings,
whether oral or written, related to the subject matter of the Agreement.
SECTION 9.11. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under and for all purposes shall be construed in accordance with
the internal laws, and not the choice of laws, of the State of Illinois.
SECTION 9.12. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.13. CONFLICT. In the event of any conflict between this
Agreement and any other instrument, document or agreement, including, but not
limited to, the Note, or any other
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instrument or document required or contemplated hereunder or thereunder, the
terms and provisions of this Agreement shall govern and control.
SECTION 9.14. JURISDICTION; WAIVERS. BORROWER ACKNOWLEDGES THAT THIS
AGREEMENT IS BEING SIGNED BY LENDER IN PARTIAL CONSIDERATION OF LENDER'S RIGHT
TO ENFORCE IN THE JURISDICTION STATED BELOW THE TERMS AND PROVISION OF THIS
AGREEMENT AND THE DOCUMENTS. BORROWER CONSENTS TO JURISDICTION IN THE STATE OF
ILLINOIS AND VENUE IN THE COUNTY OF COOK FOR SUCH PURPOSES AND THEY WAIVE ANY
AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE. LENDER AND BORROWER
HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY
WITH RESPECT TO ANY MATTER WHATSOEVER RELATING TO, ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THE LOANS, THE DOCUMENTS OR THE TRANSACTIONS WHICH ARE THE
SUBJECT OF THE DOCUMENTS.
SECTION 9.15. CAPITAL ADEQUACY INDEMNIFICATION. If Lender shall determine
at any time after the date hereof that the adoption of any law, rule or
regulation regarding capital adequacy, or any change therein 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 Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Lender's capital as a consequence of its obligations hereunder
to a level below that which Lender could have achieved but for such adoption,
change or compliance (taking into consideration Lender's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, then the
Borrower shall pay to Lender upon demand such amount or amounts, in addition to
the amounts payable under the other provisions of this Agreement or under the
Note, as will compensate Lender for such reduction. Determinations by Lender
for purposes of this Section 9.15 of the additional amount or amounts required
to compensate lender in respect of the foregoing shall be conclusive in the
absence of manifest error. In determining such amount or amounts, Lender may
use any reasonable averaging and attribution methods. Lender represents that as
of the date of this Agreement it is not aware of any claim it may have under
this Section 9.15.
SECTION 9.16. APPLICATION OF PAYMENTS. Borrower waives the right to
direct the application of any and all payments at any time or times hereafter
received by lender on account of any obligations owed by Borrower to Lender and
Borrower agrees that Lender shall have the right to apply the proceeds of
payments received by Lender to the obligations in any order or manner as Lender
may deem advisable, including, without limitation, the continuing exclusive
right to apply and reapply such proceeds and payments in any order or manner as
lender may deem advisable.
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SECTION 9.17. INDEMNIFICATION. Except for any Indemnified Liabilities (as
hereinafter defined) resulting from, arising out of, or relating to Lender's
acts or omissions, and in consideration of the execution and delivery of the
Documents by Lender and agreement of Lender to make the Loans hereunder,
Borrower hereby agrees to indemnify, exonerate and hold Lender and each of its
officers, directors, employees, attorneys and agents (collectively, the "Bank
Parties"), free and harmless from any against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Bank Parties, or
any of them, as a result of, or arising out of, or relating to: (a) any
transaction financed or to be financed in whole or in part directly or
indirectly with the proceeds of any Revolving Loan; (b) the execution and
delivery of the Documents by Borrower; (c) Borrower's possession, use, operation
or control of any of its assets. If and to the extent that the foregoing
undertakings may be unenforceable for any reason, Borrower jointly and severally
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law. All
obligations of Borrower under this Section 9.17 shall survive any termination of
this Agreement.
SECTION 9.18. ENVIRONMENTAL WARRANTY AND INDEMNITY. Borrower hereby
represents and warrants to Lender that it, occupies the property(ies) more fully
described on Exhibit 9.18 attached hereto and made a part hereof (collectively,
the "Property"). Borrower hereby represents and warrants to Lender that
collectively, no hazardous or toxic substances, within the meaning of any
applicable statute or regulation, whether federal, state or local, are presently
stored or otherwise located on the Property in violation of Environmental Laws.
Borrower covenants and agrees with Lender that while any Liabilities are
outstanding, all toxic substances within the definition of Environmental Laws,
which may be used by any person for any purpose upon the Property, shall be used
or stored thereon in accordance with all laws, regulations, and requirements for
such storage promulgated by any governmental authority, and that the Property
will not be used for the principal purpose of storing such substances.
Borrower hereby agrees to give Lender immediate notice of any violation or
suspected violation of any federal, state, or local statute, rule, or regulation
dealing with the presence or suspected presence of any hazardous, toxic, or
environmentally dangerous substances or condition affecting the Property.
Borrower hereby unconditionally gives Lender the right, but not the obligation,
and Lender does not so obligate itself, to undertake to contain and clean up
releases of hazardous substances on the Property before the costs of doing so
exceeds the value of the Property. Upon the written request of Lender to
Borrower, Lender, its attorneys, employees, agents or other persons or entities
designated by Lender, shall, from time to time and at any time, be allowed to
enter upon the Property and conduct environmental examinations and environmental
audits of the Property, all in form, manner and type as Lender may then require
in its sole discretion. Borrower shall fully cooperate and make the Property,
all improvements on the Property and the land which is the subject of the
Property available to Lender at such times as Lender may request in order to
conduct such environmental examinations and environmental audits.
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Borrower hereby indemnifies and saves Lender harmless of and from any and
all loss, costs (including reasonable attorneys' fees), liability and damage
whatsoever incurred by Lender, by reason of any violation by Borrower of any
applicable statute, rule or regulation for the protection of the environment
which occurs upon the Property or any adjacent parcels of real estate that
affect the Property or by reason of the imposition of any governmental lien for
the recovery of environmental cleanup costs expended by reason of such
violation; provided however, that to the extent Lender is strictly liable under
any such statute, Borrower's obligation to Lender under this indemnity shall
likewise be without regard to fault on the part of the undersigned with respect
to the violation of law which results in liability to Lender. Borrower further
agrees that this indemnity and the representations and warranties contained
herein shall continue and remain in full force and effect beyond the term of the
Liabilities and shall be terminated only when there is no further obligation of
any kind whether in law or equity or otherwise of Lender in connection with any
such environmental clean-up costs, environmental liens, or environmental matters
involving the Property.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered at Chicago, Illinois, as of the date first above
written.
BORROWER: ROHN INDUSTRIES, INC.
By:
----------------------------------------
Title:
-------------------------------------
ATTEST: By:
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Title:
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LENDER: LaSALLE NATIONAL BANK
By:
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Title:
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<PAGE>
EXHIBIT 10.1
CHANGE OF CONTROL AGREEMENT
AGREEMENT made at Chicago, Illinois, on __________, 199__, by and between
UNR Industries, Inc. (the "Company")and ________ ________ (the "Executive").
RECITALS
A. The Executive is currently employed by the Company as
_________________________________.
B. The Executive and the Company agree that it is desirable that the
Company provide greater employment security to the Executive, and,
to that end, the parties hereby enter into this Agreement.
In consideration of the mutual agreements herein set forth and for good
and valuable consideration receipt of which is hereby acknowledged, the
parties agree as follows:
1. TERM OF AGREEMENT. Subject to the provisions of paragraphs 2 and 3
of this Agreement, the term of this Agreement shall be for a three-year term
(the "Three-Year Term") commencing on the date hereof.
2. DEFINITIONS. For purposes of this Agreement, the following
definitions apply:
(a) "Cause" shall mean (i) an act or acts of personal dishonesty by
Executive which results in personal enrichment of Executive at the expense of
the Company, (ii) violation by Executive of Executive's obligations under
paragraphs 5 or 6 of this Agreement which are willful on the Executive's part
and which are not remedied to the reasonable satisfaction of the Company in a
reasonable period of time after receipt of written notice from the Company,
or (iii) the conviction of the Executive of a felony. Any termination of
this Agreement for Cause shall be communicated by the Company to the
Executive in a notice of termination which shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of this Agreement.
(b) "Change of Control" shall mean the occurrence of any of the
following events:
(i) The "acquisition" after the date hereof by any "Person" (as
such term is defined below) of "Beneficial Ownership"
<PAGE>
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), as in effect on the date hereof) of
any securities of the Company which generally entitles the holder thereof to
vote for the election of directors of the Company (the "Voting Securities")
which, when added to the Voting Securities then "Beneficially Owned" by such
Person, would result in such Person "Beneficially owning" 50% or more (the
"Requisite Percentage") of the combined voting power of the Company's then
outstanding Voting Securities, PROVIDED, HOWEVER, that for purposes of this
paragraph (a) a Person shall not be deemed to have made an acquisition of
Voting Securities if such Person: (i) acquires Voting Securities as a result
of a stock split, stock dividend or other corporate restructuring in which
all securityholders of the class of such Voting Securities are treated on a
pro rata basis; (ii) acquires the Voting Securities directly from the
Company; (iii) becomes the Beneficial Owner of more than the Requisite
Percentage of Voting Securities solely as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares
Beneficially Owned by such Person; (iv) is the Company or any corporation or
other Person of which a majority of its voting power or its equity securities
or equity interest is owned directly or indirectly by the Company
(a "Subsidiary"), (v) acquires Voting Securities in connection with a
"Non-Control Transaction" (as defined in paragraph (iii) below) or
(vi) acquires Voting Securities upon the exercise or conversion of Voting
Securities of another class which does not increase the percentage of Voting
Securities Beneficially Owned by such Person; and PROVIDED FURTHER that the
UNR Asbestos Disease Claims Trust (the "Trust") may acquire the Beneficial
Ownership of additional Voting Securities to the extent that immediately
prior to such acquisition the Trust Beneficially Owned at least 50% of the
outstanding Voting Securities; or
(ii) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; PROVIDED, HOWEVER, that if
either the election of any new director or the nomination for election of any
new director by the Company's stockholders was approved by (i) a vote of at
least two-thirds of the Incumbent Board or (ii) the Trust at such time as the
Trust Beneficially Owned at least 50% of the Voting Securities, such new
director shall be considered as a member of the Incumbent Board; PROVIDED
FURTHER, HOWEVER, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "Election
<PAGE>
Contest" (as described in Rule 14a-11 promulgated under the 1934 Act, as in
effect on the date hereof) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board of
Directors (a "Proxy Contest"), including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(iii) Approval by securityholders of the Company of:
(a) A merger, consolidation or reorganization involving the
Company (a "Business Combination"), unless
(i) the securityholders of the Company, immedately
before the Business Combination, own, directly or indirectly immediately
following the Business Combination, at least 75% of the combined voting power
for the election of directors generally of the outstanding securities of the
corporation resulting from the Business Combination (the "Surviving
Corporation") in substantially the same proportion as their ownership of the
Voting Securities immediately before the Business Combination, and
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for the
Business Combination constitute at least two-thirds of the members of the
Board of Directors of the Surviving Corporation, and
(iii) no Person (other than the Company or any
Subsidiary, a trustee or other fiduciary holding securities under one or more
employee benefit plans or arrangements (or any trust forming a part thereof
maintained by the Company, the Surviving Corporation or any Subsidiary, or
any Person who, immediately prior to the Business Combination, had Beneficial
Ownership of the Requisite Percentage of the then outstanding Voting
Securities) upon consummation of the Business Combination is the Beneficial
Owner of the Requisite Percentage of the combined voting power for the
election of directors generally of the Surviving Corporation's then
outstanding securities (a transaction described in clauses (i) through (iii)
shall be referred to as a "Non-Control Transaction");
(b) A complete liquidation or dissolution of the Company; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidary).
<PAGE>
If any of the foregoing transactions are approved by securityholders and
not consummated within thirty (30) days after such approval is obtained (or
such longer period as may be determined by the then members of the Incumbent
Board), then the "Change of Control" shall be deemed void AB INITIO.
Voting Securities acquired by a Person that is not deemed to
constitute an "acquisition" of such Voting Securities by such Person by
reason of either of the provisos to paragraph (i) above shall nevertheless be
deemed to be Beneficially Owned by such Person for purposes of determining
whether the "acquisition" of any additional Voting Securities by such Person
(which subsequent "acquisition" is not covered by either proviso to paragraph
(i) and, therefore, is considered to be an "acquisition" of Voting Securities
for purposes of paragraph (i)) would result in such Person exceeding the
Requisite Percentage of Voting Securities. The term "Person" shall mean any
individual, firm, corporation, partnership, joint venture, association, trust
or other entity as well as any "Affiliate" or "Associate" thereof (as such
terms are defined in the 1934 Act).
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur solely because the Requisite Percentage of the then outstanding
Voting Securities is Beneficially Owned by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans or arrangements
(or any trust forming a part thereof) maintained by the Company or any
Subsidiary or (ii) any corporation which, immediately prior to its
acquisition of such interest, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of
stock in the Company immediately prior to such acquisition. Furthermore, if
the Executive's employment is terminated and the Executive reasonably
demonstrates that such termination (i) was at the request of a third party
who has indicated an intention or taken steps reasonably calculated to effect
a Change of Control and who effectuates a Change of Control or (ii) otherwise
occurred in connection with, or in anticipation of, a Change of Control which
actually occurs, then for all purposes hereof, a Change of Control shall be
deemed to have occurred and the date of a Change of Control with respect to
the employment shall mean the date immediately prior to the termination date.
(c) A resignation for "Good Reason" shall mean the resignation of the
Executive from employment by the Company after (i) a material reduction or
adverse alteration in the nature of the Executive's position,
responsibilities or authorities, (ii) the
<PAGE>
Executive becoming the holder of a lesser office or title than that held by
him immediately prior to such change, (iii) any material reduction of the
Executive's compensation or benefits, (iv) the relocation of the Executive's
job more than thirty miles from his present location or (v) any other
material adverse change to the terms and conditions of the Executive's
employment or benefits, provided that, if the Executive shall consent in
writing to any event described in clauses (i) through (v) of this sentence,
the Executive's subsequent resignation shall not be treated as a resignation
for Good Reason, unless a subsequent event described in such clauses to which
Executive did not consent occurs.
(d) "Permanent Disability" shall mean any physical or mental disability
which shall have rendered Executive unable to perform his duties hereunder
for 120 consecutive days, or which, in the opinion of a licensed physician
reasonably satisfactory to the Company, is likely to render Executive unable
to perform his duties hereunder for such period.
(e) "Retirement" shall mean a termination of the Executive's employment
other than for Cause on or after the Executive's attainment of age 65.
3. SEVERANCE BENEFIT
If, during the term of this Agreement, (a) a Change of Control occurs,
and (b) within a two-year period from the date of such Change of Control,
either (i) the Executive's employment with the Company and its subsidiaries
is terminated by the Company other than for Cause or on account of the
Executive's death, Permanent Disability or Retirement, or (ii) the Executive
resigns for Good Reason, then the Company shall pay to the Executive a
Severance Payment in an amount equal to one and one-third (1-1/3) times the
Executive's annual salary for the year in which termination occurs. The
Severance Payment shall be payable in a single lump sum which shall be paid
within thirty (30) days of the termination of employment or resignation.
In addition to the Severance Payment, the Company shall provide health,
disability and life insurance in accordance with the plans maintained by the
Company for executives for a period of one (l) year from the date of
termination of the Executive's employment, provided that health, disability
and life insurance benefits shall cease if Executive becomes employed during
such period and receives similar benefits in connection with such employment.
<PAGE>
Notwithstanding the foregoing, if there shall be a sale or disposition
of all or substantially all the assets of the Company and the Executive shall
be offered employment (at substantially the same level of executive's
authority, responsibility, compensation and benefits with the Company before
such sale), with the purchaser or any of its affiliates ("Buyer") following
such sale or disposition, then the Executive shall not be entitled to a
Severance Payment as provided above. In that event, however, the Executive
shall be entitled to a Severance Payment if, within a twelve (12)-month
period, either (1) the Executive's employment with the Buyer shall be
terminated by the Buyer other than for Cause or on account of the Executive's
death, Permanent Disability or Retirement, or (2) the Executive shall resign
from the Buyer for Good Reason. Such Severance Payment shall be computed on
the basis of the Executive's salary at the Company in the year in which
Executive was last employed by the Company. For purposes of this paragraph,
the time of a termination of employment or resignation and the definitions of
"Permanent Disability", "Retirement", and the definitions of "Permanent
Disability", "Retirement", resignation for "Good Reason" and "Cause" shall be
construed with reference to the Buyer instead of with reference to the
Company.
4. NO REDUCTIONS OR MITIGATION. The amounts payable pursuant to
paragraph 3 of this Agreement shall be paid without reduction, other than as
provided in said paragraph, regardless of any amounts of salary, compensation
or other amounts which may be paid or payable to the Executive from any
source or which the Executive could have obtained upon seeking other
employment; provided that the Company shall be permitted to make all such
payments net of any legally required tax withholdings.
5. NON-COMPETITION. The Executive agrees that during his employment
and for a period of one (1) year after the termination of his employment for
any reason, he shall not enter into or engage in or be connected with, or
engage to work for an individual, firm or corporation which is engaged in or
connected with, any business which is then in substantial competition with
the Company in the United States. The provisions of the last preceding
sentence shall not apply to the ownership of less than ten percent (10%) of
the shares of any corporation listed on any recognized exchange or traded
over-the-counter. The provisions of this paragraph shall survive a
termination of the Agreement.
6. NON-DISCLOSURE. The Executive agrees not to disclose either
during the period of his employment or at any time thereafter to any person,
firm, or corporation any information
<PAGE>
concerning the business or affairs of the Company which he may have acquired
in the course of, or as incident to, his employment with the Company for his
own benefit or to the detriment or intended detriment of the Company. The
provisions of this paragraph shall survive a termination of this Agreement.
7. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and the Executive's
heirs and legal representatives and the Company's successors and assigns.
This Agreement is assignable by the Company to any corporate or other entity
which acquires, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Company. Upon any
such assignment, and the assumption by the assignee of all obligations
hereunder, the Company shall be released from all liability hereunder. This
Agreement shall not be assignable by the Executive.
8. NONALIENATION OF BENEFITS. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, prior to actually being
received by the Executive; and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge, garnish, execute on, levy or
otherwise dispose of any right to benefits payable hereunder, shall be void.
9. SEVERABILITY. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of this
Agreement not declared to be unlawful or invalid. Any paragraph or part of a
paragraph so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such paragraph
or part of a paragraph to the fullest extent possible while remaining lawful
and valid.
10. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement represents
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes all prior or contemporaneous oral or written
negotiations, understandings and agreements between the parties hereto. This
Agreement shall not be altered, amended or modified except by written
instrument executed by the Company and Executive. A waiver of any term,
covenant, agreement or condition contained in this Agreement shall not be
<PAGE>
deemed a waiver of any other term, covenant, agreement or condition, and any
waiver of any default in any such term, covenant, agreement or condition
shall not be deemed a waiver of any later default thereof or of any other
term, covenant, agreement or condition.
11. NOTICES. All notices required by this Agreement shall be in
writing and delivered by hand or by first class registered or certified mail,
postage prepaid.
12. LEGAL FEES AND EXPENSES. In the event that Executive undertakes
legal action against the Company to enforce its rights under the terms of
this Agreement and judgment is entered against the Company, the Company shall
pay legal fees and expenses incurred by the Executive.
13. APPLICABLE LAW. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the State of
Illinois, without regard to its choice of law principles.
14. EXTENSION. This Agreement shall be automatically extended for
additional Three-Year Terms if the Company does not give Executive written
notice of termination of this Agreement on or before 120 days prior to the
expiration of the Three-Year Term then in effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
UNR INDUSTRIES, INC.
By:______________________________
President
EXECUTIVE: _____________________
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of ROHN Industries,
Inc. and subsidiaries ("ROHN" or "the Company") for the twelve months ended
December 31, 1997. On December 17, 1997, the stockholders voted to change the
name of the company from UNR Industries, Inc. ("UNR") to ROHN Industries,
Inc. This discussion should be read in conjunction with the consolidated
financial statements and notes to the consolidated financial statements.
In 1996, the Company completed the sale of four of its five operating
divisions while maintaining ownership of ROHN. This has allowed the Company
to focus on the strategic growth and development of ROHN, a leading
manufacturer and installer of wireless infrastructure equipment for the
communications industry. The following table summarizes the four
divestitures:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
- ----------------------------------------------------------
SALES
DATE BUSINESS PURCHASER PRICE
- ----------------------------------------------------------
<S> <C> <C> <C>
July 1996 Unarco Commercial Richards Capital
Products Fund, L.P. $41.0
Aug. 1996 UNR Leavitt Division Chase Brass
Industries, Inc. 95.0
Sept. 1996 UNR Home Products Franke, Inc. 21.4
Dec. 1996 Real Time Pinnacle
Solutions, Inc. Automation 4.0
</TABLE>
The sale of these divisions in 1996 resulted in a gain of $21.9 million,
net of $14.6 million of taxes, which was recorded in the third quarter of
1996. The final sales price of these operations was subject to the normal
closing adjustments. Total sales of these operations were $157 million and
$242 million for the years ended December 31, 1996 and 1995, respectively.
RESULTS OF OPERATIONS
ROHN Industries, Inc., is a leading manufacturer and installer of wireless
infrastructure equipment for the communications industry including cellular,
PCS, radio and television broadcast markets. The Company's products include
towers, enclosures/shelters, cabinets, poles and antenna mounts. The
following table sets forth, for the fiscal periods indicated, the percentage
of net sales represented by certain items reflected in the Company's
consolidated statements of income.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100%
Cost of sales 70.3 69.2 69.6
- ------------------------------------------------------------
Gross profit 29.7 30.8 30.4
Selling, general and
administrative expense 10.8 9.8 9.4
Restructuring 2.2 -- --
- ------------------------------------------------------------
Total operating expenses 13.0 9.8 9.4
- ------------------------------------------------------------
Operating income 16.7 21.0 21.0
Interest expense (income), net .3 (.6) (1.3)
Other income (2.6) -- --
- ------------------------------------------------------------
Income before income taxes 19.0 21.6 22.3
Income tax provision 7.0 8.5 8.9
- ------------------------------------------------------------
Income from continuing
operations 12.0% 13.1% 13.4%
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
1997 COMPARED TO 1996
Net sales for 1997 were $158.1 million in comparison to $154.4 million in
1996, an increase of 2.4%. The increase in sales was in the equipment
enclosure/shelter product line as the Company benefited from a wider range of
applications for these products within the communications industry. At the
same time, the sales of towers decreased in 1997 due to a slow down in the
buildout of PCS systems. Despite this slow down, the 1997 sales were the
highest in the Company's history and 1997 is the fifth consecutive year of
record sales.
Gross profit for 1997 was $47.0 million versus $47.6 million in 1996, a
decrease of 1.3%. As a percentage to sales, gross margin was 29.7% for 1997
in comparison to 30.8% for 1996. The 1.1 percentage point decrease was
primarily due to a change in sales mix as equipment enclosures accounted for
a higher percentage of sales in 1997 than the tower product line.
Traditionally, the Company's tower product line has had higher gross margins
than its other primary products -- equipment enclosures. The difference in
gross margins between the product lines is due to the higher content in the
equipment enclosures of relatively sophisticated environmental and electrical
equipment which is purchased from third party suppliers. Another factor
affecting product margins is continuing competitive price pressure in the
tower market.
ROHN INDUSTRIES, INC. 1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
Selling, general and administrative ("SG&A") expenses were $17.1 million
in 1997 versus $15.1 million in 1996. In comparison to the prior year, SG&A
expenses increased by $2.0 million or by 13.2%. The increase in SG&A expenses
was attributable to salaries for the new senior management team during the
Company's transition from a holding company to a more narrowly focused
operating company, the costs associated with the Company's new enterprise
resource planning software system, and higher operating expenses at the
Company's enclosure manufacturing facility to support the 30.8% increase in
sales experienced during 1997.
During the third quarter of 1997, the Company's Board of Directors
approved a special charge of $3.4 million ($2.1 million after-tax or $0.04
per share) to cover the costs of a restructuring program. The restructuring
charge was related to cost cutting measures including early retirement costs,
other work force reductions, and expenses associated with the development and
implementation of this program. During 1997, cash expenditures of $1.9
million were charged against the reserve. The Company expects to spend the
remaining $1.5 million of the restructuring reserve in 1998.
Interest income for 1997 was $0.8 million in comparison to $1.9 million
in 1996. In 1996, excess cash generated by the sale of certain operating
divisions of the Company was invested before it was subsequently returned to
the stockholders in the form of extraordinary dividends.
Other income for 1997 was $4.1 million ($2.6 million after-tax or $0.05
per share). This income was generated from the sale of an investment in a
non-related business.
The Company's 1997 effective tax rate was 37.1% versus 39.2% in 1996.
This decrease in the effective tax rate was primarily due to adjustments
recorded by the Company when it finalized its 1996 tax return in late 1997.
In addition, the Company implemented a foreign sales corporation in 1997.
Earnings per share (basic and diluted) from continuing operations in
1997 was $0.36 versus $0.39 in 1996. The 1997 results included the $0.05 per
share favorable impact of the sale of an investment in a non-related business
and the $0.04 per share unfavorable impact of the restructuring charge. In
addition, the decrease in earnings per share was attributable to the decrease
in gross profit margin, the increase in SG&A expenses, and the reduction in
interest income.
1996 COMPARED TO 1995
Net sales from continuing operations in 1996 were $154.4 million versus $142.2
million in 1995 or an increase of 8.5%. The sales increase was due primarily to
the growth of wireless telecommunications, especially the growth of the
infrastructure for personal communications systems ("PCS"). Although the 1996
growth rate of 8.5% was smaller than the 1995 growth rate of 32.9%, 1995 sales
included $15.0 million of sales (recorded in the first half of 1995) from a
one-time stand alone communications network.
In 1996, gross profit increased to 30.8% from the 30.4% level achieved
during 1995. The increase was due to a greater mix of tower products compared
to 1995.
SG&A expenses in 1996 were 9.8% of sales compared with 9.4% of sales
during 1995. The percentages are actually comparable, since 1995 included a
$600,000 gain on the sale of real estate that reduced the 1995 percentage by
over .4%.
Interest expense increased during 1996 resulting from long-term
borrowings for the new Frankfort, Indiana, facility and for the management
information system being installed.
Interest income decreased due to generally lower levels of cash
available during 1996 compared to 1995 as a result of dividends paid to
shareholders.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the Company's
financial condition:
<TABLE>
<CAPTION>
- -------------------------------------------------
DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1997 1996
- -------------------------------------------------
<S> <C> <C>
Cash $ 5,994 $ 5,030
Working capital 39,260 30,218
Total debt 12,219 15,022
Current ratio 2.00:1 1.78:1
</TABLE>
The Company's working capital was $39.3 million at December 31, 1997
compared to $30.2 million at December 31, 1996, an increase of $9.1 million.
2 ROHN INDUSTRIES, INC.
<PAGE>
This increase in working capital primarily reflected a $3.0 million increase
in inventories and a $5.7 million increase in accounts receivable. The
increases in both inventory and accounts receivable are primarily
attributable to increased levels of sales activity experienced in December
and anticipated in January and February, and a slight lessening of working
capital management which has occurred as a result of the current
implementation of a new business software system.
At December 31, 1997, the Company had aggregate indebtedness of $12.2
million. The Company's outstanding indebtedness was related to mortgage notes
payable and capital leases.
The Company expects that it will meet its ongoing working capital and
capital expenditure requirements from operating cash flows. In addition, the
Company's strong balance sheet allows it substantial financial flexibility.
INFLATION
Inflation has not had a material effect on the Company's business or results
of operation.
SEASONALITY
The operations of the Company are generally not subject to seasonal
fluctuations. However, in the past, the Company has seen disruptions in its
customers' ability to accept shipments due to unusual and prolonged
weather-related construction delays.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," and No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise
and Related Information." These statements are effective for fiscal years
commencing after December 15, 1997. The Company has not assessed the effect
that these new standards will have on its consolidated financial statements
and/or disclosures.
RECENT DEVELOPMENTS
In November 1997, the Company signed a six-year collective bargaining
agreement with the United Automobile, Aerospace and Agriculture Implement
Workers of America ("UAW"). The UAW has been the bargaining agent for the
hourly production-related workers at its Peoria, Illinois, facility. The
Company expects that the terms of the agreement will provide enhanced
stability to its tower product line manufacturing capabilities and, at the
same time, the financial terms of the agreement will not have a material
adverse impact on the Company.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Company
believes that its internal systems are year 2000 compliant. However, the
Company is uncertain as to the extent its customers and vendors may be
affected by year 2000 issues that require commitment of significant resources
and may cause disruptions in the customers' and vendors' businesses.
FORWARD-LOOKING INFORMATION
From time to time, in written reports and oral statements, the Company
discusses the expectations regarding future performance. These
"forward-looking statements" are based on currently available competitive,
financial and economic data and operating plans. These statements are
inherently uncertain. Investors should recognize that actual results could
differ materially from those expressed or implied in forward-looking
statements.
ROHN INDUSTRIES, INC. 3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales $158,132 $154,434 $142,216
Cost of products sold 111,124 106,847 98,996
- -----------------------------------------------------------------------------
Gross profit 47,008 47,587 43,220
Operating expenses:
Selling expense 6,607 5,986 5,232
General and administrative 10,522 9,103 8,126
Restructuring 3,420 -- --
- -----------------------------------------------------------------------------
Operating income 26,459 32,498 29,862
Interest income 822 1,864 2,445
Interest expense (1,299) (980) (606)
Other income 4,088 -- --
- -----------------------------------------------------------------------------
Income from continuing operations
before income taxes 30,070 33,382 31,701
Income tax provision 11,151 13,100 12,700
- -----------------------------------------------------------------------------
Income from continuing operations 18,919 20,282 19,001
Discontinued operations:
Income from operations, net of
($2,400) and $7,000 taxes in
1996 and 1995, respectively -- 3,859 10,275
Gain on sales, net of $14,600 taxes
in 1996 -- 21,900 --
- -----------------------------------------------------------------------------
Net income $ 18,919 $ 46,041 $ 29,276
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Earnings per share -- basic and
diluted
Continuing operations $ 0.36 $ 0.39 $ 0.37
Discontinued operations --
Income from operations -- 0.08 0.20
Gain on sales -- 0.42 --
- -----------------------------------------------------------------------------
Earnings per share -- basic and
diluted $ 0.36 $ 0.89 $ 0.57
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Weighted average shares outstanding
-- basic 52,475 52,383 51,813
Weighted average shares outstanding
-- diluted 52,558 52,566 52,056
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4 ROHN INDUSTRIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $18,919 $ 46,041 $ 29,276
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities --
Depreciation and amortization 2,634 1,672 1,433
Provision for deferred employee compensation -- 261 183
Deferred income tax (450) 1,270 12,700
Gain on sale of investment in nonrelated
business (4,088) -- --
Discontinued operations (gain) loss -- (21,900) --
Operating requirements --
Accounts receivable (increase) decrease (5,700) (10,584) 2,311
Inventories (increase) (3,027) (3,168) (6,339)
Prepaid expenses decrease (increase) 424 (105) 162
Accounts payable and accrued
expenses increase (decrease) 11,081 (3,990) (3,322)
Discontinued operations (8,523) (26,329) 11,286
- -----------------------------------------------------------------------------------
Net cash (used in) provided by
operating activities $11,270 $ (16,832) $ 47,690
- -----------------------------------------------------------------------------------
Cash Flow from Investing Activities:
Purchase of plant and equipment,
net of retirements $(8,307) $ (11,658) $ (2,303)
Decrease (increase)in other assets 104 (2,093) (118)
Proceeds from the sale of discontinued
operations -- 157,669 13,820
Proceeds from the sale of an investment
in non-related business 4,088 -- --
- -----------------------------------------------------------------------------------
Net cash (used in) provided by
investing activities $(4,115) $ 143,918 $ 11,399
- -----------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt $ -- $ 8,418 $ --
Payment of long-term debt (803) (257) (195)
Proceeds from short-term borrowings 5,150 6,000 6,000
Payment of short-term borrowings (7,150) (10,000) --
Dividends paid (5,245) (136,368) (132,274)
Repayment of officers' loans 2,300 3,225 3,575
Common stock issued 1,858 1,048 692
Treasury stock purchases (2,301) -- --
- -----------------------------------------------------------------------------------
Net cash (used in) financing
activities $(6,191) $(127,934) $(122,202)
- -----------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents $ 964 $ (848) $ (63,113)
Cash and cash equivalents at beginning of period 5,030 5,878 68,991
- -----------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,994 $ 5,030 $ 5,878
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 1,299 $ 980 $ 606
Income taxes $ 5,143 $ 21,072 $ 1,792
Supplemental schedule of noncash investing
activities:
Equipment acquired through capital leases $ -- $ 2,348 $ --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
ROHN INDUSTRIES, INC. 5
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
DECEMBER 31, 1997 1996
- ---------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 5,994 $ 5,030
Accounts, notes and other
receivables, less allowance for
doubtful accounts of $1,451 in
1997 and $1,136 in 1996 33,748 28,048
Inventories 33,744 30,717
Deferred income taxes 4,450 4,000
Prepaid expenses 669 1,093
- ---------------------------------------------------------------
Total Current Assets 78,605 68,888
Plant and Equipment:
Land 1,804 1,008
Buildings 20,623 18,590
Machinery and equipment 24,169 21,493
- ---------------------------------------------------------------
46,596 41,091
Less -- Accumulated depreciation (19,101) (19,269)
- ---------------------------------------------------------------
Total Plant and Equipment 27,495 21,822
Other Assets 2,558 2,662
- ---------------------------------------------------------------
Total Assets $108,658 $ 93,372
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6 ROHN INDUSTRIES, INC.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
DECEMBER 31, 1997 1996
- ---------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term borrowings $ -- $ 2,000
Current portion of long-term
liabilities 948 831
Accounts payable 12,029 8,735
Accrued expenses --
Payroll related 4,721 2,974
Insurance related 4,427 4,104
Deferred revenue 6,327 4,725
Income taxes 5,709 10
Other 4,342 5,926
Net liabilities of discontinued
operations 842 9,365
- ---------------------------------------------------------------
Total Current Liabilities 39,345 38,670
Long-term Liabilities -- Notes and
Capital Leases 11,271 12,191
Stockholders' Equity:
Common stock, $0.01 par value,
authorized -- 60,000 shares,
issued -- 52,571 shares in
1997 and 52,838 shares in 1996 532 528
Capital surplus 11,602 9,837
Retained earnings 50,460 36,786
Less -- treasury shares of 635 in
1997 and 326 in 1996, at cost (3,896) (1,595)
-- Notes receivable from officers -- (2,300)
-- Unearned portion of restricted
stock (656) (745)
- ---------------------------------------------------------------
Total Stockholders' Equity 58,042 42,511
- ---------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $108,658 $93,372
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
ROHN INDUSTRIES, INC. 7
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCK
--------------- TREASURY STOCK N/R
SHARES CAPITAL RETAINED ---------------- RESTRICTED FROM
YEARS ENDED DECEMBER 31, ISSUED AMOUNT SURPLUS EARNINGS SHARES AMOUNT STOCK OFFICERS
- -------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 51,577 $516 $130,497 $102,023 (631) $(2,751) $ (589) $(9,100)
Net income -- -- -- 29,276 -- -- -- --
Issuance of restricted stock 19 -- -- -- -- -- -- --
Restricted stock canceled -- -- (72) -- -- -- 24 --
Amortization of restricted shares -- -- -- -- -- -- 183 --
Repayment of officers' loans -- -- -- -- -- -- -- 3,575
Cash dividends -- $2.55 per share -- -- (67,257) (65,017) -- -- -- --
Stock options exercised -- -- -- -- -- -- -- --
Stock options tax benefit -- -- -- -- -- -- -- --
Warrants exercised 868 9 2,820 1,377 305 1,156 -- --
Warrants canceled -- -- 726 184 -- -- -- --
Director's stock plan 31 -- 184 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 52,495 $525 $ 66,898 $ 67,843 (326) $(1,595) $ (382) $(5,525)
Net Income -- -- -- 46,041 -- -- -- --
Issuance of restricted stock 90 1 876 -- -- -- (877) --
Restricted stock canceled (13) -- (114) -- -- -- 114 --
Amortization of restricted shares -- -- -- -- -- -- 400 --
Repayment of officers' loans -- -- -- -- -- -- -- 3,225
Cash dividends -- $2.60 per share -- -- (59,270) (77,098) -- -- -- --
Stock options exercised 245 2 804 -- -- -- -- --
Stock options tax benefit -- -- 458 -- -- -- -- --
Director's stock plan 21 -- 185 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 52,838 $528 $ 9,837 $ 36,786 (326) $(1,595) $ (745) $(2,300)
Net income -- -- -- 18,919 -- -- -- --
Issuance of restricted stock 150 2 1,123 -- -- -- (1,125) --
Restricted stock canceled (10) -- (61) -- -- -- 61 --
Amortization of restricted shares -- -- -- -- -- -- 1,153 --
Repayment of officers' loans -- -- -- -- (309) (2,301) -- 2,300
Cash dividends -- $0.10 per share -- -- -- (5,245) -- -- -- --
Stock options exercised 200 2 165 -- -- -- -- --
Stock options tax benefit -- -- 398 -- -- -- -- --
Director's stock plan 28 -- 140 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 53,206 $532 $ 11,602 $ 50,460 (635) $(3,896) $ (656) $ --
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
8 ROHN INDUSTRIES, INC.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS
ROHN Industries, Inc. and subsidiaries ("ROHN" or the "Company") manufactures
towers, poles, mounts and related accessories used principally to support
telecommunications antennae for wireless communications, such as cellular
telephone, personal communications systems ("PCS"), private microwave,
commercial and amateur broadcasting, and home television. The Company also
produces equipment enclosures/shelters and cabinets of concrete and
fiberglass to house electronic telecommunications equipment. The Company has
manufacturing facilities in Peoria, Illinois (towers and poles), Bessemer,
Alabama (equipment enclosures), and Frankfort, Indiana (tower components and
mounts). The Company's products are sold direct to customers throughout the
United States and through distributors to international markets.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by ROHN are described below. The
policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles, and require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
PRINCIPLES OF CONSOLIDATION The financial statements include the
consolidated accounts of ROHN and its subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
CASH EQUIVALENTS The Company considers all highly liquid short-term
investments purchased with a maturity of three months or less and all treasury
bills to be cash equivalents. Cash equivalents are carried at cost which
approximates market value.
INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Inventory costs
include material, labor and factory overhead. Obsolete or unsalable
inventories are reflected at their estimated realizable values.
Total inventories in 1997 and 1996 included the following
classifications:
<TABLE>
<CAPTION>
- -------------------------------------------
(IN THOUSANDS) 1997 1996
- -------------------------------------------
<S> <C> <C>
Finished goods $12,181 $13,065
Work-in-progress 7,060 5,678
Raw materials 14,503 11,974
- -------------------------------------------
Total inventories $33,744 $30,717
- -------------------------------------------
- -------------------------------------------
</TABLE>
PLANT AND EQUIPMENT Land, buildings and equipment are carried at cost.
Expenditures for maintenance and repairs are charged directly against income
and major renewals/betterments are capitalized. When properties are retired
or otherwise disposed of, the original cost and accumulated depreciation are
removed from the respective accounts and the profit or loss resulting from
the disposal is reflected in income.
The Company provides for depreciation of plant and equipment over the
estimated useful lives of the assets (buildings -- 20 to 40 years; machinery
and equipment -- 3 to 15 years). Depreciation is generally provided on the
straight-line method for financial reporting purposes and on accelerated
methods for tax purposes.
INCOME TAXES Under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), the Company recognizes deferred tax
liabilities and assets for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns.
Total income tax expense for the years ended December 31, 1997, 1996,
and 1995, was allocated as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing
operations $11,151 $13,100 $12,700
Discontinued operations -- 12,200 7,000
Stockholders' equity, for
compensation expense
for tax purposes in excess
of amounts recognized
for financial reporting
purposes (398) (458) (155)
- ---------------------------------------------------------------
$10,753 $24,842 $19,545
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
ROHN INDUSTRIES, INC. 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Income tax expense attributable to income from continuing operations
consists of current provisions of $11.7 million, $17.0 million, and $1.6
million and deferred provisions of $(0.5) million, $(3.9) million, and $11.1
million for the years ended December 31, 1997, 1996, and 1995, respectively.
Income tax expense attributable to income from continuing operations was
$11.2 million, $13.1 million, and $12.7 million for the years ended December
31, 1997, 1996, and 1995, respectively, and differed from the U.S. federal
statutory income tax rate as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ------------------------------------------------------------------
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed
statutory
provision $10,500 35% $11,700 35% $11,100 35%
State taxes, net
of federal
effect 1,200 4 1,400 4 1,600 5
Other, net (549) (2) -- -- -- --
Total provision $11,151 37% $13,100 39% $12,700 40%
- ------------------------------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------
(IN THOUSANDS) 1997 1996
- -----------------------------------------------
<S> <C> <C>
Depreciation $ (642) $ (341)
Accrued insurance reserves 1,752 1,642
Other, net 3,340 2,699
- -----------------------------------------------
Net deferred tax assets $4,450 $4,000
- -----------------------------------------------
- -----------------------------------------------
</TABLE>
The Company's remaining NOL carry forwards, general business credit
carry forwards, and AMT credit carry forwards were fully utilized during 1996.
NET INCOME PER SHARE Basic earnings per share were computed by dividing net
income by the weighted average number of shares outstanding during the year.
Diluted earnings per share were calculated by including the effect of all
dilutive securities. For the years ended December 31,1997, 1996 and 1995, the
effect of potentially dilutive stock options was 83,000, 183,000 and 243,000,
respectively. The Company had additional outstanding stock options of 100,000
as of December 31, 1997, which were not included in the computation of
diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares.
In 1997, the Company adopted SFAS No. 128, "Earnings per Share,"
effective December 15, 1997. The effect of this accounting change had no
impact on the Company's previously reported earnings per share amounts.
PENSION AND PROFIT SHARING PLANS The Company and its subsidiaries have
defined benefit and/or defined contribution retirement plans covering
substantially all of their employees. Included in these plans are certain
union sponsored plans to which the Company makes annual contributions equal
to the amounts accrued. The total pension expense for union sponsored plans
for 1997, 1996, and 1995, was $740,000, $720,000, and $660,000, respectively.
The Company has one trustee-administered profit sharing plan covering all
eligible employees. Discretionary contributions of $240,000, $218,000, and
$96,000, were charged to expense in 1997, 1996, and 1995, respectively. Total
pension expense for Company-sponsored plans for 1997, 1996, and 1995 was
$300,000, $130,000, and $184,000, respectively.
Pension expense includes the following components:
<TABLE>
<CAPTION>
- ------------------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits
earned during the period $ 322 $ 237 $ 220
Interest on projected
benefit obligations 522 415 365
Actual return on plan assets (560) (538) (417)
Net amortization
and deferral 16 16 16
- ------------------------------------------------------
Net pension expense $ 300 $ 130 $ 184
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
The status of the plans at the respective year ends was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------
<S> <C> <C> <C>
Fair market value of
plan assets $8,473 $6,888 $6,043
- ---------------------------------------------------
- ---------------------------------------------------
</TABLE>
10 ROHN INDUSTRIES, INC.
<PAGE>
Actuarial present value of benefits for services rendered to date:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ----------------------------------------------------------
<S> <C> <C> <C>
Accumulated benefit
obligation based
on salaries to date,
including vested
benefits of $6,871,
$4,866, and $3,928 in
1997, 1996, and 1995,
respectively $6,899 $4,894 $3,952
Additional benefits based
on estimated future
salary levels 1,079 1,633 1,237
- ----------------------------------------------------------
Projected benefit
obligations $7,978 $6,527 $5,189
- ----------------------------------------------------------
- ----------------------------------------------------------
Excess of plan assets
over projected benefit
obligations $ 495 $ 361 $ 854
Unrecognized net
transitional asset 31 40 56
Unrecognized market
(gain) loss (323) 350 (391)
Unrecognized prior
service costs 57 67 84
- ----------------------------------------------------------
Prepaid pension asset $ 260 $ 818 $ 603
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
The expected long-term rate of return on plan assets was 8.0% for 1997,
1996, and 1995. The weighted average discount rate and rate of increase in
future compensation levels used in determining the actuarial present value of
accumulated benefit obligations were 8.0% and 4.0%, respectively, in 1997,
1996, and 1995.
NOTE 3: DISCONTINUED OPERATIONS
In 1996, the Company completed the sale of four of its five operating
divisions while maintaining ownership of ROHN. This has allowed the Company
to focus on the strategic growth and development of ROHN, a leading
manufacturer and installer of wireless infrastructure equipment for the
communications industry. The following table summarizes the four
divestitures:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
DATE OF SALE BUSINESS PURCHASER SALES PRICE
- ------------------------------------------------------------------
<S> <C> <C> <C>
July 1996 Unarco Commercial Richards Capital
Products Fund, L.P. $41.0
Aug. 1996 UNR Leavitt Chase Brass
Industries, Inc. 95.0
Sept. 1996 UNR Home Franke, Inc.
Products 21.4
Dec. 1996 Real Time Pinnacle
Solutions, Inc. Automation 4.0
</TABLE>
The sale of these divisions in 1996 resulted in a gain of $21.9 million,
net of $14.6 million of taxes, which was recorded in the third quarter of
1996. The final sales prices of these operations were subject to the normal
closing adjustment. Total sales of these operations were $157 million and
$242 million for the years ended December 31, 1996 and 1995, respectively.
NOTE 4: LITIGATION
The Company is involved in various pending legal proceedings and claims
arising in the normal course of its business. Although the outcome of such
proceedings and claims cannot be determined with certainty, the Company is of
the opinion, after consultation with counsel, that such proceedings and
claims, individually or in the aggregate, are not material to its business or
financial condition.
NOTE 5: LEASES
The Company leases certain of its facilities and equipment under operating
leases or capital leases, as defined by SFAS No. 13. The Company's property
under capital leases, which is included in plant and equipment,
ROHN INDUSTRIES, INC. 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
consists of $4,301,000 at December 31, 1997, and $4,919,000 at December 31,
1996 (see Note 6).
Future minimum payments for operating leases at December 31, 1997 are
$195,000 in 1998, $194,000 in 1999, $128,000 in 2000, $129,000 in 2001 and
$23,000 in 2002. Rental expense under operating leases was approximately
$469,000 in 1997, $1,220,000 in 1996, and $1,248,000 in 1995.
NOTE 6: LONG-TERM BORROWINGS
Total borrowings of the Company at December 31, 1997 and 1996, consisted of
the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------
<S> <C> <C>
Mortgage notes payable at
7.5% to 8.0% $ 7,918 $ 8,103
Capital leases 4,301 4,919
Short-term borrowings -- 2,000
- -------------------------------------------------------
Total $12,219 $15,022
- -------------------------------------------------------
- -------------------------------------------------------
Classified in the balance
sheet as follows:
Short-term borrowings $ -- $ 2,000
Current portion of
long-term liabilities 948 831
Notes and capital leases 11,271 12,191
- -------------------------------------------------------
Total $12,219 $15,022
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
Aggregate annual payments required on secured debt, including
capitalized leases, are $948,000 in 1998, $995,000 in 1999, $1,067,000 in
2000, $821,000 in 2001, and $8,388,000 thereafter.
NOTE 7: STOCK OPTION PLANS
The Company had two stock option plans at December 31, 1997 -- the Key
Executives' Stock Option Plan and the 1994 Stock Option Plan.
The Key Executives' Stock Option Plan was approved by the shareholders
of the Company on July 12, 1990. This Plan provides for granting of
non-qualified and incentive stock options, and reserves for the issuance of
up to 2,500,000 authorized but unissued shares of common stock. Options
granted under this Plan were exercisable at a price equal to the fair market
value at the date of grant and expired in ten years. At December 31, 1997,
943,000 common shares were available for granting under this plan. At
December 31, 1997, 210,000 options were outstanding under this plan.
The 1994 Stock Option Plan was approved by the shareholders of the
Company on November 1, 1994. This Plan provides for granting of non-qualified
options and reserves for the issuance of up to 500,000 shares. Outstanding
options granted under this Plan are exercisable at a price equal to the fair
market value at the date of grant, reduced by the amount of any
"Extraordinary Dividend" made after the date of grant, and expire in five
years. Each option is exercisable upon the attainment of certain stock price
thresholds, adjusted for extraordinary dividends, or fifty-four months,
whichever comes earlier. At December 31, 1997, 55,000 common shares were
available for granting under this Plan. There were no outstanding options
under this plan at December 31, 1997.
Information related to these plans is summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE
SHARES OPTION PRICE
(IN THOUSANDS, EXCEPT PER SHARE DATA) SUBJECT TO OPTIONS PER SHARE
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding
December 31, 1994 405 $5.525
Granted 40 6.780
Exercised -- --
Canceled -- --
- --------------------------------------------------------------------------
Outstanding
December 31, 1995,
adjusted for extraordinary
dividends 445 $3.288
Granted -- --
Exercised (245) 3.084
Canceled -- --
- --------------------------------------------------------------------------
Outstanding
December 31, 1996,
adjusted for extraordinary
dividends 200 $0.838
Granted 210 6.199
Exercised (200) 0.838
Canceled -- --
- --------------------------------------------------------------------------
Outstanding
December 31, 1997 210 $6.199
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
NOTE 8: STOCK-BASED COMPENSATION PLANS
The Company has two stock option plans, the Key Executives Stock Option Plan
("Executive Plan"), and the 1994 Stock Option Plan ("Option Plan"). The
Company accounts for both plans under APB Opinion No. 25, under which no
compensation cost has been
12 ROHN INDUSTRIES, INC.
<PAGE>
recognized. Had compensation cost for stock options awarded under the plans
been determined consistent with FASB Statement No. 123, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1997
- ---------------------------------------------------------
<S> <C>
Net income:
As reported $18,919
Pro forma 18,854
Basic EPS:
As reported .36
Pro forma .36
Diluted EPS:
As reported .36
Pro forma .36
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1996
- ---------------------------------------------------------
<S> <C>
Net income:
As reported $46,041
Pro forma 46,033
Basic EPS:
As reported .89
Pro forma .88
Diluted EPS:
As reported .89
Pro forma .88
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1995
- ---------------------------------------------------------
<S> <C>
Net income:
As reported $29,276
Pro forma 29,269
Basic EPS:
As reported .57
Pro forma .56
Diluted EPS:
As reported .57
Pro forma .56
</TABLE>
As of December 31, 1997, the Company may grant options in respect of 3
million shares in aggregate under the plans. At December 31, 1997, the
Company has options outstanding and not yet exercised of 210,000 shares under
the Executive Plan. The Option Plan allows the participants to vest 33.33%
per year beginning with the first year and expire after five years.
A summary of the status of the Company's option plans for the years
December 31, 1995 through December 31, 1997 and changes during the years then
ended is presented in the table and narrative below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1997
- ------------------------------------------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
- ------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning
of period $ .838 200
Granted 6.199 210
Exercised .838 (200)
Forfeited 0.0 0
Expired 0.0 0
Canceled 0.0 0
- ------------------------------------------------------------
Outstanding at end of period $6.199 210
Exercisable at end of year 0 0
Weighted average fair value of
options granted $2.322
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1996
- ------------------------------------------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
- ------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning
of period $3.288(1) 445
Granted 0.0 0
Exercised 3.084 (245)
Forfeited 0.0 0
Expired 0.0 0
Canceled 0.0 0
- ------------------------------------------------------------
Outstanding at end of period $ .838(2) 200
Exercisable at end of year $3.209(2) 200
Weighted average fair value of
options granted $ 0.00
</TABLE>
(1)Adjusted for 1995 extraordinary dividends of $2.35.
(2)Adjusted for 1996 extraordinary dividends of $2.40.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1995
- ------------------------------------------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
- ------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning
of period $5.525 405
Granted 6.78 40
Exercised 0.0 0
Forfeited 0.0 0
Expired 0.0 0
Canceled 0.0 0
- ------------------------------------------------------------
Outstanding at end of period $5.638 445
Exercisable at end of year $5.525 135
Weighted average fair value of
options granted $1.063
</TABLE>
ROHN INDUSTRIES, INC. 13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The 210,000 options outstanding at December 31, 1997 have an exercise
price between $4.38 and $7.75 with a weighted average exercise price of
$6.199 and a weighted average remaining contractual life of 4.5 years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for the option grants in 1995 and 1997,
respectively: risk-free interest rates of 7.88 percent and 6.45 percent;
expected dividend yield of 3.15 percent and 1.72 percent; expected life of
5.0 years; and expected volatility of 35.33 percent and 37.18 percent.
NOTE 9: RESTRICTED STOCK PLAN
The Restricted Stock Plan was approved by the shareholders of the Company on
July 30, 1992. The Plan provides for the granting of restricted stock to
certain key employees and reserves for issuance of 1,000,000 shares of common
stock.
The Company had 242,048 and 170,869 shares of restricted stock
outstanding at December 31, 1997 and 1996, respectively. Of the current
shares outstanding, 100,000 were awarded to the Company's President and CEO
in connection with his employment agreement and 142,048 share were issued to
certain key employees of the Company. These shares have the same dividend and
voting rights as other common stock. Restricted stock is considered to be
currently issued and outstanding. The cost of the restricted stock,
determined as the fair market value of the shares of the date of grant, is
expensed ratably over a three- to five-year vesting period. Such expense
amounted to $1,153,000 in 1997, $400,000 in 1996, and $183,000 in 1995.
NOTE 10: STOCKHOLDERS' EQUITY
On September 24, 1990, the Company announced that its Board of Directors had
authorized the acquisition, through both negotiated transactions involving
large blocks and open-market purchases, of up to 1.5 million shares of its
common stock to be held as treasury shares and be available to meet
requirements of its Key Executives' Stock Option Plan. As of December 31,
1997 and 1996, 1,133,565 shares have been purchased, respectively.
On December 29, 1997, the Company paid a regular dividend of $0.10 per
share to stockholders of record as of the close of business on December 15,
1997.
On December 23, 1996, the Company paid a regular dividend of $0.25 per
share and an extraordinary dividend of $0.35 per share to stockholders of
record as of the close of business on December 16, 1996.
On September 27, 1996, the Company paid an extraordinary dividend of
$2.00 per share to stockholders of record as of the close of business on
September 17, 1996.
On December 28, 1995, the Company paid an extraordinary dividend of
$1.00 per share to stockholders of record as of the close of business on
December 18, 1995.
On April 17, 1995, the Company paid a regular dividend of $0.25 per
share and an extraordinary dividend of $1.30 per share to stockholders of
record as of the close of business on April 3, 1995.
NOTE 11: RESTRUCTURING
During the third quarter of 1997, the Company recorded a restructuring charge
of $3.4 million related to cost-cutting measures including early retirement
costs, work force reductions, and expenses associated with the development
and implementation of this program. During 1997, cash expenditures of $1.9
million were charged against the reserve. The Company expects to spend the
remaining $1.5 million of the restructuring reserve in 1998.
The provision for the reduction in work force includes severance and
other benefits for approximately 25 employees, the majority of whom were
based in Peoria, Illinois, and Frankfort, Indiana.
NOTE 12: RELATED PARTY TRANSACTIONS
The Company held three notes receivable for a total of $2,300,000 from
executive officers of the Company which were paid in full by the executive
officers during 1997 by transferring 309,000 shares of common stock to the
Company. These notes were related to the 1994 Executive Stock Purchase Plan
approved by shareholders of the Company on November 1, 1994. Under the Plan,
executive officers purchased 1,650,000 shares of common stock from the
Company, at the then fair market value. Shares
14 ROHN INDUSTRIES, INC.
<PAGE>
were paid for in cash in the amount of the par value of the stock and the
balance in promissory notes due in three years. The notes were interest free
(although interest was imputed for tax purposes), except in the event a
participant resigned from the Company, was terminated for cause or, if the
stock was sold within three years, the notes would become due and interest at
the applicable federal rate was applied retroactively from the date of the
notes. Dividends, net of federal and state taxes, were applied to the
principal of the notes. In 1996, dividends reduced the outstanding balance
from $5,525,000 at December 31, 1995, to $2,300,000 at December 31, 1996. In
1995, dividends reduced the outstanding balance from $9,100,000 at December
31, 1994 to $5,525,000 at December 31, 1995.
NOTE 13: BUSINESS SEGMENT INFORMATION
The Company operates predominantly in a single industry as a manufacturer of
towers, poles and shelters for the telecommunications industry. This industry
is strongly influenced by the growth in demand for wireless telecommunication
services.
The Company's export sales are less than 10% of total revenues. Revenues
and identifiable assets are related to its U.S. operations and no one other
geographic area accounts for more than 10 percent of total revenues or 10
percent of total assets. In 1997, no one customer accounted for more than 10
percent of the Company's net sales. The Company has one customer to which it
sold towers and shelters for use in both the PCS and cellular markets that
provided approximately 11 percent of its 1996 net sales.
NOTE 14: EXPORT SALES
Export sales for the years ended December 31, 1997, 1996, and 1995 were $10.2
million, $8.0 million, and $8.3 million, respectively.
NOTE 15: COMMITMENTS AND CONTINGENCIES
From time to time, the Company becomes party to various claims and legal
actions arising during the ordinary course of business. Management believes
that the Company's cost and any potential judgments resulting from such
claims and actions would be covered by the Company's product liability
insurance, except for deductible limits and self-insured retention. The
Company intends to defend such claims and actions in cooperation with its
insurers. It is management's opinion that, in any event, their outcome would
not have a material effect on the Company's financial position or results of
operations.
ROHN INDUSTRIES, INC. 15
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
UNAUDITED FIRST SECOND THIRD FOURTH YEAR
- -----------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
Net sales $37,748 $38,867 $37,427 $44,090 $158,132
Gross profit 11,836 12,082 9,735 13,355 47,008
Operating income 7,819 7,651 2,084 8,905 26,459
Income from continuing
operations before
income taxes 7,640 7,416 1,910 13,104 30,070
Net income $ 4,740 $ 4,591 $ 1,185 $ 8,403 $ 18,919
Net income per share --
basic $ 0.09 $ 0.09 $ 0.02 $ 0.16 $ 0.36
Net income per share --
diluted $ 0.09 $ 0.09 $ 0.02 $ 0.16 $ 0.36
1996
Net sales $30,957 $37,857 $41,910 $43,710 $154,434
Gross profit 9,248 11,453 12,610 14,276 47,587
Operating income 5,815 7,659 8,786 10,238 32,498
Income from continuing
operations 3,514 4,603 5,780 6,385 20,282
Discontinued operations --
Income from operations,
net of tax 1,412 2,029 418 -- 3,859
Gain on sales, net of tax -- -- 21,900 -- 21,900
Net income $ 4,926 $ 6,632 $28,098 $ 6,385 46,041
Net income per share --
basic and diluted
Continuing operations $ 0.07 $ 0.09 $ 0.11 $ 0.12 $ 0.39
Discontinued operations --
Income from operations 0.03 0.04 0.01 -- 0.08
Gain on sales -- -- 0.42 -- 0.42
Net income per share --
basic and diluted $ 0.10 $ 0.13 $ 0.54 $ 0.12 $ 0.89
</TABLE>
16 ROHN INDUSTRIES, INC.
<PAGE>
REPORT OF INDEPENDANT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF ROHN INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheets of ROHN
Industries, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ROHN
Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
ArthurAndersen LLP
Chicago, Illinois
March 12, 1998
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of ROHN Industries, Inc.
and subsidiaries have been prepared by management, which is responsible for
their integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and include amounts
based on management's best estimates and judgments. Financial information
elsewhere in this annual report is consistent with that in the financial
statements.
Management has established and maintains a system of internal control
designed to provide reasonable assurance that assets are safeguarded and that
the financial records reflect the authorized transactions of the Company. The
system of internal control includes widely communicated statements of
policies and business practices that are standards in the conduct of Company
affairs. The internal controls are augmented by organizational arrangements
that provide for appropriate delegation of authority and division of
responsibility.
The consolidated financial statements have been audited by Arthur
Andersen LLP, independent public accountants. As part of their audit of the
Company's 1997 financial statements, Arthur Andersen LLP considered the
Company's system of internal controls to the extent they deemed necessary to
determine the nature, timing and extent of their audit tests.
The Board of Directors pursues its responsibility for the Company's
financial reporting through its Audit Committee, which is composed entirely
of outside directors. The Audit Committee meets periodically with Arthur
Andersen LLP and management. Arthur Andersen LLP has direct access to the
Audit Committee, with and without the presence of management representatives,
to discuss the results of their audit work and their comments on the adequacy
of internal accounting controls and the quality of financial reporting.
/s/ Brian B. Pemberton /s/ David V. LaRusso
BRIAN B. PEMBERTON DAVID V. LARUSSO
PRESIDENT VICE PRESIDENT, FINANCE
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
ROHN INDUSTRIES, INC. 17
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference in this
Form 10-K, into the Company's previously filed Registration Statement No.
33-51732.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 30, 1998
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