<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[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
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Commission file number 1-6016
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ALLEN TELECOM INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 38-0290950
- ------------------------------- ----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25101 Chagrin Boulevard, Beachwood, Ohio 44122
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 216/765-5818
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
Pacific Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
</TABLE>
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 ]
As of March 4, 1998, there were 27,291,743 shares of the Registrant's Common
Stock issued and outstanding, and the aggregate market value (based upon the
last sale price of the Registrant's Common Stock on the New York Stock Exchange
Composite Tape on March 4, 1998) of the Registrant's Common Stock held by
nonaffiliates of the Registrant was $443,306,634.
Exhibit Index is on pages 17 to 25 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended December 31, 1997
incorporated by reference into Parts I, II and IV hereof.
Proxy Statement dated March 19, 1998 for Annual Meeting of Stockholders to be
held May 1, 1998 incorporated by reference into Part III hereof.
<PAGE> 2
ALLEN TELECOM INC.
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FORM 10-K
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(For the fiscal year ended December 31, 1997)
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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PART I
<S> <C>
Item 1 - Business 3
Item 2 - Properties 7
Item 3 - Legal Proceedings 7
Item 4 - Submission of Matters to a Vote of Security Holders 7
Executive Officers of The Registrant 8
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 10
Item 6 - Selected Financial Data 10
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 7A - Quantitative and Qualitative Disclosures about Market Risk 10
Item 8 - Financial Statements and Supplementary Data 10
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 10
PART III
Item 10 - Directors and Executive Officers of the Registrant 11
Item 11 - Executive Compensation 11
Item 12 - Security Ownership of Certain Beneficial Owners and Management 11
Item 13 - Certain Relationships and Related Transactions 11
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 12
SIGNATURES 15
EXHIBIT INDEX 17
</TABLE>
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ALLEN TELECOM INC.
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FORM 10-K
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PART I
------
ITEM 1 - BUSINESS
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GENERAL
- -------
Allen Telecom Inc. ("Allen Telecom", the "Company" or the "Registrant")
was incorporated under the laws of the State of Delaware on February 3, 1969.
Its predecessor was Allen Electric and Equipment Company, incorporated under the
laws of the State of Michigan on January 13, 1928, which merged into the
Delaware corporation on May 1, 1969. On February 28, 1997, the name of the
Company was changed from The Allen Group Inc. to Allen Telecom Inc., upon the
merger of its wholly owned subsidiary, Allen Telecom Group, Inc. with and into
the Company.
There have been no significant changes in the business, kinds of
products produced or services rendered or in the markets or methods of
distribution since the beginning of the last fiscal year.
The Company is a major supplier of site management products, system
expansion and optimization products, mobile and base station antennas, and
engineering services to the worldwide wireless communications market.
Many of the major wireless system infrastructure vendors incorporate
components or subsystems from Allen Telecom's Worldwide Site Products division.
The Company is the world's largest supplier of cell site subsystems, supplying
many different customized modules that are incorporated in original equipment
manufacturer ("OEM") cell sites. Site products include sophisticated filters
which ensure that incoming signals are received and outgoing signals are
transmitted clearly and without interference, duplexers, which are stationed at
most cell site transceivers to allow one antenna to be used for both
transmission and reception of radio signals simultaneously, and low noise, tower
mounted, multicarrier and power amplifiers which enhance the reception of weak
signals or boost outgoing signals. Allen Telecom also manufacturers auto-tune
combiners, which adjust instantly and automatically to new frequencies as the
system is modified, among other products.
The Company's Systems products support both coverage and capacity
enhancement for GSM, TDMA, CDMA and analogue wireless carriers. Products include
high power and low power repeaters to fill coverage gaps caused by obstructions
such as mountains, tunnels, and buildings, and fiber optic-based radio frequency
distribution systems such as its Britecell(TM) product. Indoor coverage systems
are provided using coaxial cable or fiber as a means of distribution, including
its Distributed Indoor Coverage Extension System ("DICE(TM)"), as well as a
cable-based indoor system for smaller, lower cost installations such as in its
CableStar(TM) product. The Company also has developed a range of test equipment
and post processing software to test and optimize wireless networks such as its
Analyzer(TM), Surveyor(TM) and Illuminator(TM) products. Allen Telecom has also
increased its investment to develop and bring to market a geolocation technology
to provide carriers with the equipment and software to locate subscribers in
their system who dial 911 in emergency situations.
Allen Telecom is the leading North American supplier of base station
antennas to the global wireless OEMs and wireless service providers. Products
include antennas in frequency bands to cover all of the traditional analogue
cellular networks as well as the newer digital services and PCS. New models for
the PCS market include, for example, the Decibel TripleTree(TM) which
incorporates all six of the antennas required for a three sector site all in a
single 12 inch diameter housing. The Company is a leading supplier of mobile
automobile antennas, which operate on both cellular and PCS frequencies, as well
as antennas for Global Positioning System ("GPS") mapping.
Allen Telecom's Frequency Planning, Systems Design and Related Services
product line is a leading supplier of frequency planning and coordinating
services as well as system design and field engineering services
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<PAGE> 4
for the wireless and PCS markets. The Company provides consulting services to
assist with determining the appropriate system in light of the coverage
required, topography, and area demographics. Allen Telecom's engineering
expertise in spectrum sharing, microwave interconnectivity, microwave migration
and cell system design has enabled it to obtain orders from most major PCS
carriers. The Company's spectrum sharing software, comprised of IQ.Clear(R),
currently is licensed in most major domestic PCS markets, and its IQ.Link(TM)
software for microwave interconnection is operational in several European PCS
systems. The Company's IQ.Analyzer(TM) product allows carriers to optimize
networks as a PC-based post-processing and field data analysis tool.
International sales of the Company are approximately 60% of its total
sales. The Company's export sales from the United States are primarily to major
wireless telecommunications companies and are typically payable in U.S. dollars.
European-based sales are primarily to major European OEMs and cellular or PCS
operators in local currencies. The Company has sales/engineering offices in
sixteen countries around the world. The Company sees no significantly greater
financial risk as a result of the greater proportion of its international
business than that of its domestic operations.
Allen Telecom's wireless products generally are manufactured or
assembled by the Company. Outside of the United States, the Company's
manufacturing operations are in Italy, Germany, France, Mexico and Australia.
Allen Telecom's European operations outsource a substantial portion of product
manufacturing labor to third parties. Wireless telecommunications engineering
services are provided principally at one central facility and at customer
locations. Products are sold directly through commissioned sales employees or
through distributors and sales representatives to OEMs, common carriers and
other large users of telecommunications products.
In 1996, the Company decided to exit the centralized automotive
emissions testing business operated by its MARTA Technologies, Inc. subsidiary.
The Company determined that the disposition of this business will allow it to
fully devote management and financial resources to its expanding wireless
communications product lines. Additional information regarding this development
is incorporated herein by reference to Note 9 "Acquisitions and Dispositions,"
of the Notes to Consolidated Financial Statements" on pages 24 and 25, and to
the "Discontinued Operations" section of "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on page 30 of Allen Telecom's
1997 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to
this Annual Report.
WORKING CAPITAL
- ---------------
The Company's products consist of manufactured products for which
inventory levels are generally based on product demand. As previously indicated,
the increase in international export sales generally resulted in extended
collection periods as such receivables make up a greater proportion of trade
receivables. This factor, in conjunction with the general increase in sales, has
increased the working capital needs of the Company's business.
In 1996, the Company entered into an agreement and made an equity
investment in Nextwave Inc. ("Nextwave") in the amount of $5,000,000. Nextwave
has agreed to purchase from the Company $50,000,000 of equipment and services
through December 31, 2001. In connection with this purchase commitment, subject
to certain preconditions that have not yet occurred, the Company will make
available up to $50,000,000 of product financing in the form of secured,
interest-bearing loans to be used solely to finance the purchase price of the
equipment and services supplied by the Company, of which approximately
$2,000,000 has been purchased and financed to date. The Company believes that
its existing credit lines and continued positive cash flow from operations
provide sufficient flexibility for this arrangement. Additional information
regarding this agreement is incorporated herein by reference to the third
paragraph of Note 5 "Commitment and Contingencies" of the Notes to the
Consolidated Financial Statements on Page 20 of Allen Telecom's 1997 Annual
Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual
Report.
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<PAGE> 5
COMPETITION
- -----------
In each of Allen Telecom's product lines, competition is vigorous. The
Company believes that it has established a major market position in the United
States for mobile cellular telephone antennas, where competition is distributed
among many manufacturers and importers. In its other product lines, the Company
believes that it is among the major manufacturers and that competition is widely
distributed. Allen Telecom's principal methods of competition include
performance, service, warranty, market availability, product research and
development, innovation and price. In certain of its product lines, the Company
has augmented its own resources through licensing agreements with companies
possessing complementary resources and technologies. The demand for equipment
and services is primarily a function of the development of new and expanded
wireless communications systems throughout the world, and Allen Telecom's
ability to develop new products and technologies related to system coverage and
capacity and components for other manufacturers' wireless communications
systems.
MAJOR CUSTOMERS
- ---------------
There is no single customer the loss of which would have a material
adverse effect on the Company. However, four major telecommunications equipment
companies accounted for approximately 22% (none individually greater than 10%)
of sales in 1997. The balance of the Company's sales were widely distributed
among many customers.
BACKLOG
- -------
The approximate order backlog as of December 31, 1997 and 1996 are as
follows (amounts in thousands):
<TABLE>
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1997 1996
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<S> <C> <C>
Wireless Communications Backlog ................. $115,176 $108,741
Backlog not expected to be filled within one year (489) (1,935)
-------- --------
Backlog expected to be filled in 1998 fiscal year $114,687 $106,806
======== ========
</TABLE>
As previously noted, the Company entered into an agreement and made an
equity investment in Nextwave in the amount of $5,000,000. Nextwave has agreed
to purchase from the Company $50,000,000 of equipment and services through
December 31, 2001. This purchase commitment has been excluded from the
above-mentioned order backlog amounts.
As previously noted, the Company has decided to exit the centralized
automotive emissions testing business. Total backlog for this business was
approximately $119,000,000 at December 31, 1997, of which approximately
$23,000,000 is expected to be filled within one year.
PRODUCTION, RAW MATERIALS AND SUPPLIES
- --------------------------------------
In addition to manufacturing certain products, Allen Telecom also
assembles at its facilities certain components manufactured for it by
non-affiliated companies. The principal materials used in the production of
Allen Telecom's products are electronic components, steel, aluminum, copper and
plastics. These materials are purchased regularly from several producers and
have been generally available in sufficient quantities to meet Allen Telecom's
requirements, although occasionally shortages have occurred. The Company
believes that the supplies of materials through the end of 1998 will be
adequate.
PATENTS, LICENSES AND FRANCHISES
- --------------------------------
The Company owns a number of patents, trademarks and copyrights and
conducts certain operations under licenses granted by others. Although the
Company does not believe that the expiration or loss of any one
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<PAGE> 6
of these items would materially affect its business considered as a whole, it
does consider certain of them to be important to the conduct of its business in
certain product lines. Business franchises and concessions are not of material
importance to Allen Telecom.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company engages in research and development activities
(substantially all of which are Company-sponsored) as part of its ongoing
business. The Company emphasizes the development of new technologies, products
and software for the wireless telecommunications markets. Currently, these
development activities are not expected to require a material investment in
assets. For information concerning these expenditures, see "Research and
Development Costs" in Note 1 of Notes to Consolidated Financial Statements on
page 17 of Allen Telecom's 1997 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this Annual Report.
ENVIRONMENTAL CONTROLS
- ----------------------
The Company is subject to federal, state and local laws designed to
protect the environment and believes that, as a general matter, its policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and financial liability to the Company. Additional
information regarding environmental issues is incorporated herein by reference
to the last paragraph of Note 5, "Commitments and Contingencies," of the Notes
to Consolidated Financial Statements on page 20 of Allen Telecom's 1997 Annual
Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual
Report.
EMPLOYEES
- ---------
As of December 31, 1997, Allen Telecom had a total of approximately
3,300 employees.
SEASONAL TRENDS
- ---------------
Generally, the Company's sales are not subject to significant seasonal
variations; however, its sales and earnings tend to be lower in the first fiscal
quarter due to lower outdoor installations of its products in the northern
climates.
INDUSTRY SEGMENTS, CLASSES OF PRODUCTS, FOREIGN OPERATIONS AND EXPORT SALES
- ---------------------------------------------------------------------------
Information relating to the Company's classes of similar products or
services, foreign and domestic operations and export sales is incorporated
herein by reference to "Geographic Data" in Note 8 of the Notes to Consolidated
Financial Statements on pages 22 and 23, and the information presented in the
charts on pages 28 and 29, of Allen Telecom's 1997 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report.
With the opportunities presented by the rapid deployment of wireless
telecommunications systems throughout the world, the Company has seen extensive
growth in international markets. The Company's export sales have increased to
$104 million in 1997. This growth and the growth in non-European opportunities
for our European produced products have encouraged the Company to continue to
expand the size and number of its international sales and service offices. In
the opinion of management, any financial risks inherent in Allen Telecom's
existing foreign operations and sales are not substantially different than the
financial risks inherent in its domestic operations.
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<PAGE> 7
ITEM 2 - PROPERTIES
-------------------
At December 31, 1997, Allen Telecom's continuing operations were
conducted in 37 facilities in 15 states and 18 foreign countries. Allen
Telecom's wireless communications operations occupy approximately 999,000 square
feet of space for manufacturing, assembly, warehousing, research and
development, sales and administrative offices. Approximately 649,000 square feet
are rented under operating leases. The Company's principal manufacturing
facilities are located in Ohio, Texas, Virginia, Italy, Germany, France,
Australia and Mexico.
Information concerning the square footage of the Company's properties
at December 31, 1997 is as follows (amounts in thousands):
<TABLE>
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Domestic Foreign
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Owned Leased Owned Leased Total
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<S> <C> <C> <C> <C> <C>
Wireless communications 168 544 182 105 999
Discontinued centralized automotive emissions
testing business 26 127 -- -- 153
--- --- --- --- -----
Total 194 671 182 105 1,152
=== === === === =====
</TABLE>
Allen Telecom's machinery, plants, warehouses and offices are in good
condition, and are reasonably suited and adequate for the purposes for which
they are presently used and generally are fully utilized.
Domestic leased facilities for the discontinued centralized automotive
emissions testing business include approximately 100,000 square feet under a
capital lease arrangement. In addition to the above, the Company owns a
manufacturing facility of 84,000 square feet relating to a previously
discontinued operation (which is leased to a third party), along with a
manufacturing facility of 80,000 square feet which is not in use and is held for
sale.
ITEM 3 - LEGAL PROCEEDINGS
--------------------------
The information required by this Item is incorporated herein by
reference to the fourth paragraph of Note 5, "Commitments and Contingencies", on
page 20, and the tenth and eleventh paragraphs of Note 9, "Acquisitions and
Dispositions" on page 24, of the Notes to Consolidated Financial Statements of
Allen Telecom's 1997 Annual Report to Stockholders, a copy of which is filed as
Exhibit 13 to this Annual Report.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
Not applicable.
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<PAGE> 8
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The following list sets forth the names of the executive officers (as
defined under rules promulgated by the Securities and Exchange Commission) of
Allen Telecom, their ages and business experience during at least the last five
years.
ROBERT G. PAUL - President and Chief Executive Officer; age 56.
Mr. Paul has been President and Chief Executive Officer of the Company
since February 1991. He was President and Chief Operating Officer of the Company
from December 1989 to February 1991, Senior Vice President Finance from April
1987 to December 1989, Vice President-Finance from January 1987 to April 1987
and a Vice President from 1974 to January 1987. He also was President of the
Antenna Specialists Company division of the Company's former subsidiary, Orion
Industries, Inc. (a predecessor of the Company's wholly owned subsidiary, Allen
Telecom Group, Inc. ("ATG"), which was merged into the Company in February
1997), from 1978 to June 1990. Mr. Paul joined the Company in 1970 as an
Assistant to the President and also served as Assistant Treasurer from 1970 to
1972. He was elected Treasurer in 1972 and Vice President and Treasurer of the
Company in 1974. Mr. Paul was appointed Vice President-Finance and
Administration of the Antenna Specialists Company division of Allen Telecom's
former subsidiary, Orion Industries, Inc. in 1976, its Vice President-Operations
in 1977 and its President in 1978, while continuing as a Vice President of the
Company.
ERIK H. VAN DER KAAY - Executive Vice President; age 57.
Mr. van der Kaay joined the Company in 1990 as President of the Antenna
Specialists Company division of the Company's former subsidiary, Orion
Industries, Inc., and was President of ATG from June 1993 until its merger into
the Company in February 1997. He was elected Vice President of the Company in
February 1993 and was promoted to Executive Vice President in February 1997.
Prior to joining Allen Telecom, Mr. van der Kaay was the Chief Executive Officer
of Millitech Corporation, a developer and manufacturer of millimeter
communication components and systems, South Deerfield, Massachusetts, from 1988
to 1990, and Group Vice President of Telecommunications at Avantek Inc., a
developer and manufacturer of microwave radios and CATV systems, Santa Clara,
California, from 1984 to 1988.
ROBERT A. YOUDELMAN - Executive Vice President, Chief Financial Officer and
Assistant Secretary; age 56.
Mr. Youdelman joined the Company in 1977 as Director of Taxes and was
elected Vice President-Taxation in February 1980. In December 1989, he was
elected Senior Vice President-Finance, Chief Financial Officer and Assistant
Secretary of the Company and was promoted to Executive Vice President in
February 1997. Mr. Youdelman is an attorney.
PETER G. DEVILLIERS - Vice President; age 44.
Mr. deVilliers joined the Company in July 1992 upon the acquisition by
the Company of Alliance Telecommunications Corporation ("Alliance"), Dallas,
Texas, where he served as Vice President-Marketing and Sales since joining
Alliance in March 1991. Mr. deVilliers served as Vice President-Strategic
Planning for ATG upon the merger of Alliance into ATG in June 1993 until
February 1997. In February 1997, he was elected Vice President of Allen Telecom.
JAMES L. LEPORTE, III - Vice President, Treasurer and Controller; age 43.
Mr. LePorte joined the Company in 1981 as Senior Financial Analyst. In
1983, he was appointed Manager of Financial Analysis, and, in 1984, was named
Assistant Controller. Mr. LePorte was elected Controller of the Company in April
1988; a Vice President in December 1990; and Treasurer of the Company in
September 1995.
-8-
<PAGE> 9
MCDARA P. FOLAN, III - Vice President, Secretary and General Counsel; age 39.
Mr. Folan joined the Company in August 1992 as Corporate Counsel and
was elected Secretary and General Counsel in September 1992 and Vice President
in December 1994. Prior to joining Allen Telecom, Mr. Folan was affiliated with
the law firm of Jones, Day, Reavis and Pogue, Cleveland, Ohio, from September
1987 to August 1992. Mr. Folan is an attorney.
There is no family relationship between any of the foregoing officers. All
officers of Allen Telecom hold office until the first meeting of directors
following the annual meeting of stockholders and until their successors have
been elected and qualified.
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<PAGE> 10
PART II
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ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------
The information required by this Item is incorporated herein by
reference to the last paragraph of Note 2, "Financing," of the Notes to
Consolidated Financial Statements on page 18, and to "Exchange Listings,"
"Market Price Range of Common Stock," "Dividends Declared On Common Stock" and
"Stockholders" on the inside back cover of the Registrant's 1997 Annual Report
to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report.
ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------
The information required by this Item is incorporated herein by
reference to "Five Year Summary of Operations" on page 32, and to "Dividends
Declared on Common Stock" on the inside back cover, of the Registrant's 1997
Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this
Annual Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The information required by this Item is incorporated herein by
reference to pages 28 to 31 of the Registrant's 1997 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report.
Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical in nature
are forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
regarding the Company's future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. Allen
Telecom's 1997 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
contain certain detailed factors that could cause the Company's actual results
to materially differ from forward-looking statements by the Company, including,
among others, the costs and timetable for new product development, the health
and economic stability of the world and national markets, the uncertain level of
purchases by current and prospective customers of the Company's products and
services, the impact of competitive products and pricing, the potential impacts
of the Company's attempts to sell its discontinued operations in the automotive
vehicle emissions testing business, the pace and success of development of
geolocation systems and the ultimate market value of the Company's investments
in telecommunications ventures.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------
This Item is not applicable for the fiscal year ending December 31,
1997 as the Company's total market capitalization is less than $2.5 billion.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The information required by this Item is incorporated herein by
reference to the Consolidated Statements of Income, Consolidated Balance Sheets,
Consolidated Statements of Cash Flows and Consolidated Statements of
Stockholders' Equity on pages 12 to 15, to the Notes to Consolidated Financial
Statements on pages 16 to 26, and to the "Report of Independent Accountants" on
page 27, of the Registrant's 1997 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not applicable.
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<PAGE> 11
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------------------------------
The information required by this Item relating to the Company's
executive officers is included on pages 8 to 9 hereof under "EXECUTIVE OFFICERS
OF THE REGISTRANT" and is incorporated herein by reference to "EXECUTIVE
COMPENSATION AND TRANSACTIONS WITH MANAGEMENT - Employment, Termination of
Employment and Change of Control Arrangements" on pages 14 to 16 of the
Registrant's definitive proxy statement dated March 19, 1998 and filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the Securities
Act of 1934. The other information required by this Item is incorporated herein
by reference to "ELECTION OF DIRECTORS - Information Regarding Nominees" on
pages 1 to 3 of the Registrant's definitive proxy statement dated March 19, 1998
and filed with the Securities and Exchange Commission pursuant to Section 14(a)
of the Securities Exchange Act of 1934.
ITEM 11 - EXECUTIVE COMPENSATION
--------------------------------
The information required by this Item is incorporated herein by
reference to "ELECTION OF DIRECTORS Compensation of Directors" on pages 4 to 5,
and to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT" on pages 5 to
18, of the Registrant's definitive proxy statement dated March 19, 1998 and
filed with the Securities and Exchange Commission pursuant to Section 14(a) of
the Securities Exchange Act of 1934.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
The information required by this Item is incorporated herein by
reference to "STOCK OWNERSHIP" on pages 18 to 20 of the Registrant's definitive
proxy statement dated March 19, 1998 and filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The information required by this Item is incorporated herein by
reference to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT -
Transactions with Executive Officers and Directors" on page 18 of the
Registrant's definitive proxy statement dated March 19, 1998 and filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
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<PAGE> 12
PART IV
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ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------
(a)(1) FINANCIAL STATEMENTS OF THE REGISTRANT
--------------------------------------
The Consolidated Financial Statements of the Registrant listed below,
together with the Report of Independent Accountants, dated February 13,
1998, are incorporated herein by reference to pages 12 to 27 of the
Registrant's 1997 Annual Report to Stockholders, a copy of which is filed
as Exhibit 13 to this Annual Report.
Consolidated Statements of Income for the Years Ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) FINANCIAL STATEMENT SCHEDULES
-----------------------------
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Registrant described in Item
14(a)(1) above:
FINANCIAL STATEMENT SCHEDULES OF THE REGISTRANT
-----------------------------------------------
Report of Independent Accountants, on page 13 of this Annual Report,
relating to the financial statement schedule
Valuation and Qualifying Accounts Schedule, on page 14 of this Annual
Report
Schedules other than the schedule listed above are omitted because they are
not required or are not applicable.
(3) EXHIBITS*
--------
The information required by this Item relating to Exhibits to this Annual
Report is included in the Exhibit Index on pages 17 to 25 hereof.
(b) REPORTS ON FORM 8-K
-------------------
None.
- --------
*A copy of any of the Exhibits to this Annual Report will be furnished to
persons who request a copy upon the payment of a fee of $.25 per page to cover
the Company's duplication and handling expenses.
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<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of Allen Telecom Inc.:
Our report on the consolidated financial statements of Allen Telecom Inc.
has been incorporated by reference in this Annual Report on Form 10-K from page
27 of the 1997 Annual Report to Stockholders of Allen Telecom Inc. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in the Index on page 12 of this Form 10-K
Annual Report.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
February 13, 1998
-13-
<PAGE> 14
ALLEN TELECOM INC.
------------------
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
---------------------------------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
-------------------------------------------
(AMOUNTS IN THOUSANDS)
----------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------- --------------- ------------------------------------------- ---------------- -----------
Balance Additions
------------------------------------------ Balance
at Charged to Charged Deductions at End
Beginning Costs and to Other from of
Description of Period Expenses Accounts Reserves Period
- -------------------------------- ---------------- ----------------------- ------------------ ------------------ -----------
Allowance for doubtful accounts:
<S> <C> <C> <C> <C> <C>
1997 $1,610 796 - 472 (1) $1,934
====== === = ======== ======
1996 $1,232 825 - 447 (1) $1,610
====== === = ======== ======
1995 $1,684 592 - 1,044 (1)(2) $1,232
====== === = ======= ======
Inventory Reserves:
1997 $7,362 8,646 - 8,401 (3) $7,607
====== ===== = ======= ======
1996 $7,758 8,913 - 9,309 (3) $7,362
====== ===== = ======= ======
1995 $7,979 7,738 - 7,959 (3) $7,758
====== ===== = ======= ======
</TABLE>
(1) Represents the write-off of uncollectible accounts, less recoveries.
(2) Includes the elimination of related balances for its Truck Products Business
spun off in 1995.
(3) Represents the write-off of inventory, less recoveries.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE ALLEN GROUP INC.
--------------------
(Registrant)
By /s/ Robert A. Youdelman
---------------------------
Robert A. Youdelman
Senior Vice President-Finance
Date: March 19, 1998
--------------
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>
<CAPTION>
<S> <C>
/s/ Robert G. Paul March 19, 1998
---------------------------------------------
Robert G. Paul, President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Robert A. Youdelman March 19, 1998
---------------------------------------------
Robert A. Youdelman, Senior Vice President-
Finance (Principal Financial Officer)
/s/ James L. LePorte March 19, 1998
---------------------------------------------
James L. LePorte, Vice President, Treasurer
and Controller (Principal Accounting Officer)
/s/ Philip W. Colburn March 19, 1998
---------------------------------------------
Philip W. Colburn, Chairman of the Board
and Director
/s/ Jill K. Conway March 19, 1998
---------------------------------------------
Jill K. Conway, Director
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C>
/s/ Albert H. Gordon March 19, 1998
---------------------------------------------
Albert H. Gordon, Director
/s/ William O. Hunt March 19, 1998
---------------------------------------------
William O. Hunt, Director
/s/ J. Chisholm Lyons March 19, 1998
---------------------------------------------
J. Chisholm Lyons, Director
/s/ John F. McNiff March 19, 1998
---------------------------------------------
John F. McNiff, Director
/s/ Charles W. Robinson March 19, 1998
---------------------------------------------
Charles W. Robinson, Director
/s/ William M. Weaver, Jr. March 19, 1998
---------------------------------------------
William M. Weaver, Jr., Director
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Numbers Pages
- --------------- -----
<S> <C>
(3) Certificate of Incorporation and By Laws -
(a) Restated Certificate of Incorporation (filed as Exhibit Number 3(a)
to Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1984 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(b) Certificate of Amendment of Restated Certificate of Incorporation
(filed as Exhibit Number 3(c) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1987 (Commission
file number 1-6016) and incorporated herein by reference).................. -
(c) Certificate of Amendment of Restated Certificate of Incorporation
(filed as Exhibit Number 3(g) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1993 (Commission
file number 1-6016) and incorporated herein by reference) ................. -
(d) Certificate of Ownership and Merger Merging Allen Telecom Group,
Inc. into The Allen Group Inc. (filed as Exhibit Number 3(i) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1996 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(e) Certificate of Designation, Preferences and Rights of Series C
Junior Participating Preferred Stock ...................................... -
(f) By-Laws, as amended through December 4, 1997............................... 26
(4) Instruments defining the rights of security holders -
(a) Rights Agreement, dated as of January 20, 1998, between the
Registrant and Harris Trust Company of New York, as Rights
Agent (filed as Exhibit Number 4.1 to Registrant's Form 8-K
Current Report dated January 5, 1998 (Commission file number
1-6016) and incorporated herein by reference) ............................. -
(b) Amended and Restated Credit Agreement, dated as of November 11,
1996, among the Registrant, MARTA Technologies, Inc., the Banks
signatories thereto, and Bank of Montreal, as agent (filed as
Exhibit Number 4 to Registrant's Form 10-Q Quarterly Report for
the quarterly period ended September 30, 1996 (Commission file
number 1-6016) and incorporated herein by reference)........................ -
(c) Note Purchase Agreement, dated as of November 1, 1997, among
the Registrant and the insurance companies signatories thereto.............. 42
Additional information concerning Registrant's long-term
debt is set forth in Note 2, "Financing," of the Notes to
Consolidated Financial Statements on page 17 of Registrant's
1997 Annual Report to Stockholders, a copy of which is filed
as Exhibit 13 to this Report. Other than the Credit
Agreement and Note Purchase Agreement
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C> <C> <C>
referred to above, no instrument defining the rights of
holders of such long-term debt relates to securities having
an aggregate principal amount in excess of 10% of the
consolidated assets of Registrant and its subsidiaries;
therefore, in accordance with paragraph (iii) of Item 4 of
Item 601(b) of Regulation S-K, the other instruments
defining the rights of holders of long-term debt are not
filed herewith. Registrant hereby agrees to furnish a copy
of any such other instrument to the Securities and Exchange
Commission upon request.
(10) Material contracts (Other than Exhibit 10(a), all of the
exhibits listed as material contracts hereunder are
management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Report pursuant to
Item 14(c) of this Report.). -
(a) Contribution Agreement, dated September 29, 1995, between
Registrant and TransPro, Inc. (filed as Exhibit Number 2.1
to Registrant's Form 8-K dated October 12, 1995) (Commission
file number 1-6016) and incorporated herein by reference) ...................... -
(b) Allen Telecom Inc. 1982 Stock Plan, as amended through
November 3, 1987 (filed as Exhibit Number 10(c) to Registrant's
Form 10-K Annual Report for the fiscal year ended December 31,
1987 (Commission file number 1-6016) and incorporated
herein by reference) ........................................................... -
(c) Amendment, dated as of December 4, 1990, to the Allen Telecom Inc.
1982 Stock Plan, as amended (filed as Exhibit Number 10(d)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1990 (Commission file number 1-6016) and
incorporated herein by reference) .............................................. -
(d) Amendment, dated as of June 14, 1995, to the Allen Telecom Inc.
1982 Stock Plan, as amended (filed as Exhibit Number 10.1 to
Registrant's Form 10-Q Quarterly Report for the quarterly period
ended June 30, 1995 (Commission file number 1-6016)
and incorporated herein by reference) .......................................... -
(e) Amendment, dated as of February 28, 1997, to the Allen Telecom Inc.
1982 Stock Plan, as amended (filed as Exhibit Number 10(e) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1996 (Commission file number 1-6016) and incorporated
herein by reference)............................................................ -
(f) Form of Restricted Stock Agreement pursuant to the Allen Telecom
Inc. 1982 Stock Plan, as amended (filed as Exhibit Number 10(e)
to Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1990 (Commission file number 1-6016) and
incorporated herein by reference)............................................... -
(g) Allen Telecom Inc. 1992 Stock Plan (filed as Exhibit Number 10(f) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1992 (Commission file number 1-6016) and incorporated
herein by reference)............................................................ -
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C> <C>
(h) Amendment to the Allen Telecom Inc. 1992 Stock Plan, dated
September 13, 1994 (filed as Exhibit Number 10 to the Registrant's
Form 10-Q Quarterly Report for the quarterly period ended
September 30, 1994 (Commission file number 1-6016) and incorporated
herein by reference).............................................................. -
(i) Second Amendment to the Allen Telecom Inc. 1992 Stock Plan,
dated February 23, 1994 (filed as Exhibit Number 10(h) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1994 (Commission file number 1-6016) and
incorporated herein by reference).. -
(j) Third Amendment to the Allen Telecom Inc. 1992 Stock Plan, dated
February 23, 1994 (filed as Exhibit Number 10(i) to Registrant's
Form 10-K Annual Report for the fiscal year ended December 31,
1994 (Commission file number 1-6016) and incorporated herein by
reference) ....................................................................... -
(k) Fourth Amendment to the Allen Telecom Inc. 1992 Stock Plan, dated
as of June 14, 1995 (filed as Exhibit Number 10.2 to Registrant's
Form 10-Q Quarterly Report for the quarterly period ended June 30,
1995 (Commission file number 1-6016) and incorporated herein by
reference)........................................................................ -
(l) Fifth Amendment to the Allen Telecom Inc. 1992 Stock Plan,
dated as of February 28, 1997 (filed as Exhibit Number 10(l)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996 (Commission File number 1-6016) and
incorporated herein by reference)................................................. -
(m) Form of Restricted Stock Agreement pursuant to Allen Telecom Inc.
1992 Stock Plan (Salary Increase Deferral), dated April 28, 1992,
entered into by the Registrant with certain executive and divisional
officers (filed as Exhibit Number 10(g) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1992 (Commission file
number 1-6016) and incorporated herein by reference) ............................. -
(n) Form of Restricted Stock Agreement pursuant to Allen Telecom
Inc. 1992 Stock Plan (Salary Increase Deferral), dated
November 30, 1993, entered into by the Registrant with
certain executive and divisional officers (filed as Exhibit
Number 10(g) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1993 (Commission file number 1-6016)
and incorporated herein by reference)............................................. -
(o) Amendment to Restricted Stock Agreements pursuant to 1992 Stock
Plan (Salary Increase Deferral), dated February 22, 1995 (filed as
Exhibit Number 10(l) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1994 (Commission file number 1-6016)
and incorporated herein by reference) ............................................ -
(p) Amendment to Restricted Stock Agreements pursuant to 1992
Stock Plan (Salary Increase Deferral), dated April 25, 1997
(filed as Exhibit Number 10 to Registrant's Form 10-Q
Quarterly Report for the quarter ended March 31, 1997
(Commission file number 1-6016) and incorporated herein by
reference)........................................................................ -
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
(q) Amendment to 1992 Restricted Stock Agreements pursuant to
1992 Stock Plan (Salary Increase Deferral), dated February
17, 1998........................................................................... 141
(r) Form of Non-Qualified Option to Purchase Stock granted to certain
directors of the Registrant on September 12, 1989 (filed as Exhibit
Number 10(e) to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1989 (Commission file number 1-6016)
and incorporated herein by reference) ............................................. -
(s) Form of Non-Qualified Option to Purchase Stock granted to certain
directors of the Registrant on February 19, 1997 (filed as Exhibit
Number 10(q) to Registrant's Form 10-K Annual Report for the
Fiscal year ended December 31, 1996 (Commission filed number
1-6016) and incorporated herein by reference)...................................... -
(t) Allen Telecom Inc. 1994 Non-Employee Directors Stock Option Plan
(filed as Exhibit A to Registrant's Proxy Statement dated March 17,
1994 (Commission file number 1-6016) and incorporated herein by
reference) ........................................................................ -
(u) First Amendment, dated as of February 28, 1997, to the Allen
Telecom Inc. 1994 Non-Employee Directors Stock Option Plan
(filed as Exhibit Number 10(s) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1996
(Commission file number 1-6016) and incorporated herein by reference).............. -
(v) Second amendment, dated as of February 17, 1998, to the Allen
Telecom Inc. 1994 Non-Employee Directors Stock Option Plan......................... 142
(w) Form of Non-Qualified Option to Purchase Stock pursunt to the Allen
Telecom Inc. 1994 Non-Employee Directors Stock Option Plan (filed
as Exhibit Number 10(o) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1994 (Commission file
number 1-6016) and incorporated herein by reference................................ -
(x) Allen Telecom Inc. Amended and Restated Key Management
Deferred Bonus Plan (incorporating all amendments through
February 27, 1992) (filed as Exhibit Number 10(i) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1992 (Commission file
number 1-6016) and incorporated herein by reference) .............................. -
(y) Amendment, dated as of February 28, 1997, to the Allen
Telecom Inc. Amended and Restated Key Management Deferred
Bonus Plan (filed as Exhibit Number 10(v) to Registrant's
Form 10-K Annual Report for the fiscal year ended December
31, 1996 (Commission file number 1-6016) and incorporated
herein by reference)............................................................... -
(z) Form of Restricted Stock Agreement pursuant to the Allen Telecom Inc.
1992 Stock Plan and Key Management Deferred Bonus Plan
(filed as Exhibit Number 10(j) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1992 (Commission
file number 1-6016) and incorporated herein by reference).......................... -
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C>
(aa) Form of Severance Agreement, dated as of November 3, 1987,
entered into by the Registrant with certain executive officers, officers
and division presidents (filed as Exhibit Number 10(g) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1987 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(bb) Form of Amendment, dated December 5, 1989, to Severance
Agreement entered into by the registrant with certain
executive officers, officers and division presidents (filed
as Exhibit Number 10(j) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1989
(Commission file number 1-6016) and incorporated herein by
reference).................................................................
-
(cc) Allen Telecom Inc. Master Discretionary Severance Pay Plan,
effective January 1, 1993 (filed as Exhibit Number 10(t) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1994 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(dd) First Amendment, dated as of February 28, 1997, to the Allen
Telecom Inc. Master Discretionary Severance Pay Plan (filed
as Exhibit Number 10(aa) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1996 (Commission
file number 1-6016) and incorporated herein by reference).................. -
(ee) Allen Telecom Inc. Key Employee Severance Policy adopted
by the Registrant on November 3, 1987 (filed as Exhibit Number
10(h) to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference).............................. -
(ff) Amendment, dated May 14, 1991, to the Allen Telecom Inc. Key
Employee Severance Policy adopted by the Registrant on
November 3, 1987 (filed as Exhibit Number 10(n) to
Registrant's Form 1-K Annual Report for the fiscal year
ended December 31, 1992 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(gg) Amendment No. 2, dated February 22, 1996, to the Allen
Telecom Inc. Key Employee Severance Policy (filed as
Exhibit Number 10(x) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995 (Commission
file number 1-6016) and incorporated herein by reference).................. -
(hh) Amendment No. 3, dated as of September 12, 1996, to the
Allen Telecom Inc. Key Employee Severance Policy (filed as
Exhibit Number 10 to Registrant's Form 10-Q Quarterly Report
for the quarter ended September 30, 1996 (Commission file
Number 1-6016) and incorporated herein by reference)....................... -
(ii) Amendment No. 4, dated as of February 28, 1997, to the Allen
Telecom Inc. Key Employee Severance Policy (filed as Exhibit
Number 10(ff) to Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1996 (Commission file
number 1-6016) and incorporated herein by reference)....................... -
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C>
(jj) Employment Agreement, dated June 28, 1998, between the
Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(m) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1988 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(kk) Amendment, dated as of February 27, 1992, of Employment
Agreement, dated June 28, 1988, between the Registrant and
Philip Wm. Colburn (filed as Exhibit Number 10(p) to Registrant's
Form 10-K Annual Report for the fiscal year ended December
31, 1992 (Commission file number 1-6016) and incorporated
herein by reference)....................................................... -
(ll) Amendment, dated as of February 26, 1991, of Employment
Agreement, dated June 28, 1998, between the Registrant and
Philip Wm. Colburn (filed as Exhibit Number 10(n) to Registrant's
Form 10-K Annual Report for the fiscal year ended December
31, 1990 (Commission file number 1-6016) and incorporated
herein by reference)....................................................... -
(mm) Amendment and Restated Post Employment Consulting Agreement,
dated as of December 20, 1990, between the Registrant and
Philip Wm. Colburn (filed as Exhibit Number 10(o) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1990 (Commission file number 1-6016)
and incorporated herein by reference)...................................... -
(nn) First Amendment to Amended and Restated Post Employment
Consulting Agreement, dated as of February 19, 1997, between
the Registrant and Philip Wm. Colburn (filed as Exhibit
Number 10(kk) to Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1996 (Commission file
number 1-6016) and incorporated herein by reference)....................... -
(oo) Amended and Restated Supplemental Pension Benefit Agreement,
dated as of December 20, 1990, between the Registrant and
Philip Wm. Colburn (filed as Exhibit Number 10(p) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31 1990 (Commission file number 1-6016) and
incorporated herein by reference).......................................... -
(pp) Amendment, dated as of August 1, 1997, of Amended and Restated
Supplemental Pension Benefit Agreement, dated as of December 20,
1990, between the Registrant and Philip Wm. Colburn........................ 143
(qq) Insured Supplemental Retirement Benefit Agreement, dated as of
September 4, 1985, between the Registrant and Philip Wm. Colburn
(filed as Exhibit Number 10(l) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1987 (Commission
file number 106016) and incorporated herein by reference).................. -
(rr) Split Dollar Insurance Agreement, dated as of July 1, 1991, between
the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(u)
to Registrant's Form 10-`K Annual Report for the fiscal year ended
December 31, 1992 (Commission file number 1-6016) and incorporated
herein by reference)....................................................... -
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
(ss) Supplemental Pension Benefit Agreement, dated as of December 6,
1983, between the Registrant and J. Chisholm Lyons (filed as
Exhibit Number 10 (r) to Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1983 (Commission file
number 1-6016) and incorporated herein by reference)....................... -
(tt) Amendment, dated as of December 20, 1990, of Supplemental
Pension Benefit Agreement, dated as of December 6, 1983,
between the Registrant and J. Chisholm Lyons (filed as
Exhibit Number 10(s) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1990 (Commission file
number 1-6016) and incorporated herein by reference)....................... -
(uu) Amendment, dated as of August 1, 1997 of Supplemental
Pension Benefit Agreement, dated as of December 6, 1983
between the Registrant and J. Chisholm Lyons............................... 146
(vv) Post Employment Consulting Agreement, dated as of
September 12, 1989, between the Registrant and J. Chisholm
Lyons (filed as Exhibit Number 10(s) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1989
(Commission file number 1-6016) and incorporated herein by
reference)................................................................. -
(ww) Amendment, dated as of December 20, 1990, of Post Employment
Consulting Agreement, dated as of September 12, 1989 between
the Registrant and J. Chisholm Lyons (filed as Exhibit
Number 10(u) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1990 (Commission
file number 1-6016) and incorporated herein by reference).................. -
(xx) Employment Agreement, dated June 25, 1991, between the
Registrant and Robert G. Paul (filed as Exhibit Number 10(x)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1991 (Commission file number
1-6016) and incorporated herein by reference).............................. -
(yy) Supplemental Target Pension Benefit Agreement, dated as
of January 1, 1996, between the Registrant and Robert G.
Paul (filed as Exhibit Number (kk) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1995
(Commission file number 1-6016) and incorporated herein by
reference)................................................................. -
(zz) Amendment, dated as of August 1, 1997, of Supplemental
Target Pension Benefit Agreement, dated as of January 1, 1996,
between the Registrant and Robert G. Paul.................................. 148
(aaa) Form of Split Dollar Insurance Agreement, dated as of November
1, 1991, entered into by the registrant with certain executive and
divisional officers (filed as Exhibit Number 10(bb) to Registrant's
Form 10-K Annual Report for the fiscal year ended December
31, 1992 (Commission file number 1-6016) and incorporated
herein by reference)....................................................... -
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
(bbb) Allen Telecom Inc. Deferred Compensation Plan, effective
December 1, 1995 (filed as Exhibit Number 10(mm) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1995 (Commission file number 1-6016)
and incorporated herein by reference)...................................... -
(ccc) First Amendment to the Allen Telecom Inc. Deferred
Compensation Plan dated as of February 28, 1997 (filed as
Exhibit Number 10(ww) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1996 (Commission
file number 1-6016) and incorporated herein by reference).................. -
(ddd) Allen Telecom Inc. Restoration Plan, effective January 1, 1996
(filed as Exhibit Number 10(nn) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1995
(Commission file number 1-6016) and incorporated herein by
reference)................................................................. -
(eee) First Amendment to the Allen Telecom Inc. Restoration Plan,
dated as of February 28, 1997 (filed as Exhibit Number
10(yy) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1996 (Commission file number
1-6016) and incorporated herein by reference).............................. -
(fff) Comsearch Division Supplemental Savings Plan, effective
January 1, 1995 (filed as Exhibit Number 10(oo) to Registrant's
Form 10-K Annual Report for the fiscal year ended December 31,
1995 (Commission file number 1-6016) and incorporated herein
by reference).............................................................. -
(ggg) First Amendment to the Comsearch Division Supplemental
Savings Plan, dated as of February 28, 1997 (filed as
Exhibit Number 10(aaa) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1996
(Commission file number 1-6016) and incorporated herein by reference)...... -
(hhh) Form of Supplemental Target Pension Benefit Agreement, dated
as of January 1, 1996, entered into by the Registrant with
certain executive and divisional officers (filed as Exhibit Number
10(pp) to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1995 (Commission file number 1-6016)
and incorporated herein by reference)...................................... -
(iii) Form of Amendment, dated as of August 1, 1997, of Supplemental
Target Pension Benefit Agreement, dated as of January 1, 1996,
entered into by the Registrant with certain executive and divisional
officers................................................................... 151
(jjj) Allen Telecom Inc. Executive Benefit Plan, as amended and
restated effective October 15, 1997........................................ 154
(11) Statement re Computation of Earnings Per Common Share............................... 175
(13) 1997 Annual Report to Stockholders*................................................. 176
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C>
(21) Subsidiaries of the Registrant...................................................... 212
(23) Consent of Independent Accountants.................................................. 214
(27) Financial Data Schedule............................................................. 215
<FN>
* Furnished for the information of the Securities and Exchange
Commission and not to be deemed "Filed" as part of this Report except
for the Consolidated Financial Statements of the Registrant and the
Accountants' Report on pages 12 to 27 of said Annual Report to
Stockholders and the other information incorporated by reference) in
Items 1 and 3 of Part I hereof and Items 5 to 8 of Part II hereof.
</TABLE>
A copy of any of these Exhibits will be furnished to persons who request a copy
upon the payment of a fee of $.25 per page to cover the Company's duplication
and handling expenses.
25
<PAGE> 1
As amended and restated through Exhibit 3(f)
December 4, 1997
ALLEN TELECOM INC.
* * * * * * *
B Y - L A W S
* * * * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the offices of the corporation in Beachwood, Ohio, or
at such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1974, shall be held on the fourth Tuesday in April if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 10:00 A.M., or at
such other date and time as shall be designated from time to time by the board
of directors and stated in the notice of the meeting, at which they shall elect
a board of directors by a plurality vote, which may or may not be by written
ballot as determined by the board of directors, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting at least ten (10) days before the date of the meeting.
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Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or president and shall
be called by the chairman of the board, president or secretary at the request in
writing of a majority of the board of directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be given at least ten (10) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the
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statutes or of the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 10. Each stockholder shall at every meeting of the stockholders
be entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, by any provision of the statutes, the meeting and vote of stockholders
may be dispensed with if all of the stockholders who would have been entitled to
vote upon the action if such meeting were held shall consent in writing to such
corporate action being taken; or if the certificate of incorporation authorizes
the action to be taken with the written consent of the holders of less than all
of the stock who would have been entitled to vote upon the action if a meeting
were held, then on the written consent of the stockholders having not less than
such percentage of the number of votes as may be authorized in the certificate
of incorporation; provided that in no case shall the written consent be by the
holders of stock having less than the minimum percentage of the vote required by
statute for the proposed corporate action, and provided that prompt notice must
be given to all stockholders of the taking of corporate action without a meeting
and by less than unanimous written consent.
Section 12. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the board of directors. Any stockholders of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the secretary, request the board of directors to fix a record
date. The board of directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the board of
directors within ten (10) days following the receipt of such a request, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of stockholders meetings are
recorded, to the attention of the secretary of the corporation. Delivery shall
be by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the board of directors and prior action by the
board of directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
board of directors adopts the resolution taking such prior action.
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Section 13. In advance of any meeting of stockholders, the board of
directors may appoint three or more inspectors of election, who need not be
stockholders, as to the matters to be submitted to a vote at any such meeting.
The inspectors of election shall (i) determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and effect of proxies, (ii)
receive votes or ballots, (iii) hear and determine all challenges and questions
arising in any way in connection with the right to vote, (iv) count and tabulate
all votes and (v) determine and report to the meeting the results. The
inspectors shall take an oath that they will perform their duties impartially,
in good faith, and to the best of their ability and as expeditiously as is
practical. In the absence of appointment by the board of directors, the
inspectors may be appointed by the chairman of the board or the president.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than three (3) nor more than fifteen (15), as may be
designated from time to time by the board of directors. The directors shall be
elected at the annual meeting of stockholders, except as provided in Section 2
of this Article, and each director elected shall hold office until his successor
is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
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THE CHAIRMAN OF THE BOARD
Section 4. The board of directors may choose a chairman of the board
who shall hold the position until his or her successor is chosen and qualifies
and who may be removed at any time by the affirmative vote of a majority of the
board of directors. Any vacancy occurring in the position of chairman of the
board may be filled by the board of directors. The chairman of the board shall
preside at all meetings of the board of directors and stockholders, and shall
have such other powers and duties as may from time to time be prescribed by the
board of directors, upon written directions given to him or her pursuant to
resolutions duly adopted by the board of directors. The chairman of the board
shall not be an officer of the corporation.
THE VICE CHAIRMAN OF THE BOARD
Section 5. The board of directors may choose a vice chairman of the
board who shall hold the position until his or her successor is chosen and
qualifies and who may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in the position of
vice chairman of the board may be filled by the board of directors. The vice
chairman of the board shall perform the duties of the chairman of the board in
the absence of the chairman or in the event of his or her inability or refusal
to act, and also shall perform such other duties as the board of directors may
from time to time prescribe. The vice chairman of the board shall not be an
officer of the corporation.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 7. The first meeting of each newly elected board of directors
shall be held without other notice than this by-law immediately after and at the
same place as the annual meeting of stockholders. In the event such meeting is
not held at said time and place, the meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors or as shall be specified in a written waiver
signed by all the directors.
Section 8. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 9. Special meetings of the board of directors for any purpose
or purposes may be called by the chairman of the board or president, and the
chairman of the board, president or the secretary shall call a special meeting
upon request of two directors. If given personally, by telephone or by telegram,
the notice shall be given at least the day prior to the meeting. Notice may be
given by mail if it is mailed at least five days before the meeting. In the
event of an emergency which in the judgment of the chairman of the board or
president requires immediate action, a special meeting may
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be convened without notice, consisting of those directors who are immediately
available by telephone and can be joined in the meeting by conference telephone.
The actions taken at such a meeting shall be valid if at least a quorum of the
directors participates either personally or by conference telephone.
Section 10. At all meetings of the board, a majority of the total
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 11. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may, by resolution passed by a
majority of the whole board, designate one (1) or more committees, each
committee to consist of one (1) or more of the directors of the corporation. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise the powers of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it;
provided, however, that in the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the board of directors.
Section 13. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 14. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
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corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary, a
treasurer and a controller. The board of directors may also choose a chief
executive officer, a chief operating officer, a chief financial officer,
additional vice-presidents, including senior vice-presidents, group
vice-presidents and assistant vice-presidents, and one (1) or more assistant
secretaries, assistant treasurers and assistant controllers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one (1) or more
vice-presidents, a secretary, a treasurer and a controller.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
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Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall have general and active management of
the business of the corporation and shall see that all orders and resolutions of
the board of directors are carried into effect, and in the absence of the
chairman of the board and the vice chairman of the board or in the event of
their inability or refusal to act shall preside at all meetings of the
stockholders and the board of directors.
Section 7. He shall possess the power to sign all certificates,
contracts and other instruments which may be authorized by the board of
directors, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
corporation.
CHIEF EXECUTIVE OFFICER
Section 8. The board of directors may from time to time appoint a chief
executive officer who shall, subject to the control of the board of directors,
have responsibility for the general supervision of all aspects of the business
of the corporation and corporate development, expansion and contraction and
long-range planning of the corporation, including, without limitation, the
acquisition, development and disposition of facilities necessary to implement
the foregoing. The chief executive officer shall have and exercise such further
powers and duties as may be specifically delegated or vested in him from time to
time by these by-laws or by the board of directors. He shall possess the power
to sign all certificates, contracts and other instruments which may be
authorized by the board of directors, except where required or permitted by law
to be otherwise signed and executed and except where
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the signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. The chief executive
officer may combine his duties with those of any other office assigned to him by
the board of directors.
CHIEF OPERATING OFFICER
Section 9. The board of directors may from time to time appoint a chief
operating officer who shall, subject to the control of the board of directors,
have responsibility for the operations and functioning of the corporation=s
operating units and programs and the allocation among the corporation=s
operating units and programs of other officers and principal executive personnel
of the corporation. The chief operating officer shall also perform such other
duties and have such other powers as may be assigned to him by the board of
directors. He shall possess the power to sign all certificates, contracts and
other instruments which may be authorized by the board of directors, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
chief operating officer may combine his duties with those of any other office
assigned to him by the board of directors.
CHIEF FINANCIAL OFFICER
Section 10. The board of directors may from time to time appoint a
chief financial officer who shall, subject to the control of the board of
directors, have responsibility for the corporation=s finances and financial
planning, the allocation among the corporation=s operating units and programs of
the corporation=s financial resources and the corporation=s internal accounting,
auditing and financial controls. The chief financial officer shall also perform
such other duties and have such other powers as may be assigned to him by the
board of directors. He shall possess the power to sign all certificates,
contracts and other instruments which may be authorized by the board of
directors, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
corporation. The chief financial officer may combine his duties with those of
any other office assigned to him by the board of directors.
THE SENIOR VICE-PRESIDENTS AND VICE-PRESIDENTS
Section 11. In the absence of the president or in the event of his
inability or refusal to act, the senior vice-president or vice-president (or in
the event there be more than one (1) senior vice-president or vice-president,
the senior vice-presidents or vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. They shall possess
the power to sign all certificates, contracts and other instruments which may be
authorized by the board of directors, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the corporation. The senior vice-presidents and
vice-presidents shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 12. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give
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general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his signature.
Section 13. The assistant secretary, or if there be more than one (1),
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 14. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 15. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 16. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 17. The assistant treasurer, or if there shall be more than one
(1), the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE CONTROLLER AND ASSISTANT CONTROLLERS
Section 18. The controller shall have the custody of the accounting
records of the corporation and shall keep full and accurate accounts of the
financial condition and results of operations of the corporation in books
belonging to the corporation and shall maintain the accounting and internal
control systems of the corporation and implement the corporation=s policies and
procedures with respect to internal accounting and auditing and financial
controls.
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Section 19. The controller shall render to the president and the board
of directors, at its regular meetings, or when the board of directors so
requires, financial statements reflecting the results of operations and
financial condition of the corporation.
Section 20. The assistant controller, or if there shall be more than
one (1), the assistant controllers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the controller or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
controller and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION
Section 1. INDEMNIFICATION IN ACTIONS OTHER THAN IN AN ACTION BY OR IN
THE RIGHT OF THE CORPORATION. To the full extent permitted by Delaware law from
time to time in effect and subject to the provisions of Section 3 of this
Article, the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys= fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. To the full extent permitted by Delaware law from time to time in
effect and subject to the provisions of Section 3 of this Article, the
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys= fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and
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except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. DETERMINATION OF CONDUCT. Any indemnification under Sections
1 and 2 of this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections 1 and 2. Such determination shall be made (1) by a majority of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel (compensated by the corporation) in a
written opinion, or (3) by the stockholders.
Section 4. RIGHT TO PAYMENT OF EXPENSES. To the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys= fees)
actually and reasonably incurred by him in connection therewith.
Section 5. PAYMENT OF EXPENSES IN ADVANCE. Expenses (including
attorneys' fees) incurred by an officer or director in defending a civil,
criminal, administrative or investigative action, suit or proceeding, or threat
thereof, may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article. Such expenses (including attorneys= fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
Section 6. NON-EXCLUSIVITY. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. The term corporation as used in this Article shall include the
Michigan predecessor of the corporation.
Section 7. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the
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corporation would have the power to indemnify him against such liability under
the provisions of this Article or of Section 145 of the General Corporation Law.
Section 8. RIGHTS TO CONTINUE. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 9. CONDITIONAL INDEMNIFICATION FOR CERTAIN PROCEEDINGS.
Notwithstanding anything in this Article to the contrary, (i) no director,
officer, employee or agent shall be entitled to indemnification pursuant to this
Article in connection with any action, suit or proceeding initiated by such
person unless the board of directors has authorized or consented to the
initiation of such action, suit or proceeding, and (ii) in the event that the
corporation has entered into an indemnification agreement with a director or
officer, approved by the board of directors, and the terms of any provision of
such agreement conflict with any terms set forth in this Article VI, the
provision set forth in such agreement shall govern..
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 2. Where a certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or (2) by a registrar other than the
corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
<PAGE> 14
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at the
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
14
<PAGE> 15
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation begins on the first day
of January and ends on the thirty-first day of December in each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words ACorporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
15
<PAGE> 16
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
16
<PAGE> 1
CONFORMED COPY
Exhibit 4(c)
------------
================================================================================
ALLEN TELECOM INC.
$150,000,000
Senior Notes Issuable In Series
$9,000,000
6.60% Senior Notes, Series 1997-A
due November 14, 2003
$47,000,000
6.65% Senior Notes, Series 1997-B
due November 14, 2007
$9,000,000
6.74% Senior Notes, Series 1997-C
due November 14, 2007
---------
NOTE PURCHASE AGREEMENT
---------
Dated as of November 1, 1997
================================================================================
Series 1997-A PPN: 018091 A* 9
Series 1997-B PPN: 018091 A@ 7
Series 1997-C PPN: 018091 A# 5
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
1. AUTHORIZATION OF NOTES...................................................................................1
1.1. Amount; Establishment of Series.................................................................1
1.2. The Series 1997 Notes...........................................................................2
2. SALE AND PURCHASE OF SERIES 1997 NOTES...................................................................3
3. CLOSING..................................................................................................3
4. CONDITIONS TO CLOSING....................................................................................3
4.1. Representations and Warranties..................................................................3
4.2. Performance; No Default.........................................................................3
4.3. Compliance Certificates.........................................................................4
4.4. Opinions of Counsel.............................................................................4
4.5. Purchase Permitted By Applicable Law, etc.......................................................4
4.6. Sale of Other Series 1997 Notes.................................................................4
4.7. Payment of Special Counsel Fees.................................................................5
4.8. Private Placement Number........................................................................5
4.9. Changes in Corporate Structure..................................................................5
4.10. Proceedings and Documents.......................................................................5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................5
5.1. Organization; Power and Authority...............................................................5
5.2. Authorization, etc..............................................................................6
5.3. Disclosure......................................................................................6
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates................................6
5.5. Financial Statements............................................................................7
5.6. Compliance with Laws, Other Instruments, etc....................................................7
5.7. Governmental Authorizations, etc................................................................8
5.8. Litigation; Observance of Agreements, Statutes and Orders.......................................8
5.9. Taxes...........................................................................................8
5.10. Title to Property; Leases.......................................................................9
5.11. Licenses, Permits, etc..........................................................................9
5.12. Compliance with ERISA...........................................................................9
5.13. Private Offering by the Company................................................................10
5.14. Use of Proceeds; Margin Regulations............................................................10
5.15. Existing Indebtedness; Future Liens............................................................11
5.16. Foreign Assets Control Regulations, etc........................................................11
5.17. Status under Certain Statutes..................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.18. Environmental Matters..........................................................................12
6. REPRESENTATIONS OF THE PURCHASERS.......................................................................12
6.1. Purchase for Investment........................................................................12
6.2. Source of Funds................................................................................13
7. INFORMATION AS TO COMPANY...............................................................................14
7.1. Financial and Business Information.............................................................14
7.2. Officer's Certificate..........................................................................17
7.3. Inspection.....................................................................................17
8. PREPAYMENT OF THE SERIES 1997 NOTES.....................................................................18
8.1. Required Prepayments...........................................................................18
8.2. Optional Prepayments with Make-Whole Amount....................................................18
8.3. Allocation of Partial Prepayments..............................................................19
8.4. Maturity; Surrender, etc.......................................................................19
8.5. Purchase of Series 1997 Notes..................................................................19
8.6. Make-Whole Amount..............................................................................19
9. AFFIRMATIVE COVENANTS...................................................................................21
9.1. Compliance with Law............................................................................21
9.2. Insurance......................................................................................21
9.3. Maintenance of Properties......................................................................21
9.4. Payment of Taxes and Claims....................................................................22
9.5. Corporate Existence, etc.......................................................................22
10. NEGATIVE COVENANTS......................................................................................22
10.1. Consolidated Indebtedness; Indebtedness of Restricted Subsidiaries.............................22
10.2. Liens..........................................................................................23
10.3. Sale of Assets.................................................................................24
10.4. Mergers, Consolidations, etc...................................................................25
10.5. Disposition of Stock of Restricted Subsidiaries................................................26
10.6. Designation of Unrestricted and Restricted Subsidiaries........................................26
10.7. Nature of Business.............................................................................26
10.8. Transactions with Affiliates...................................................................27
11. EVENTS OF DEFAULT.......................................................................................27
12. REMEDIES ON DEFAULT, ETC................................................................................29
12.1. Acceleration...................................................................................29
12.2. Other Remedies.................................................................................30
12.3. Rescission.....................................................................................30
12.4. No Waivers or Election of Remedies, Expenses, etc..............................................30
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...........................................................30
13.1. Registration of Notes..........................................................................30
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
13.2. Transfer and Exchange of Notes.................................................................31
13.3. Replacement of Notes...........................................................................31
14. PAYMENTS ON SERIES 1997 NOTES...........................................................................32
14.1. Place of Payment...............................................................................32
14.2. Home Office Payment............................................................................32
15. EXPENSES, ETC...........................................................................................32
15.1. Transaction Expenses...........................................................................32
15.2. Survival.......................................................................................33
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............................................33
17. AMENDMENT AND WAIVER....................................................................................33
17.1. Requirements...................................................................................33
17.2. Solicitation of Holders of Series 1997 Notes...................................................34
17.3. Binding Effect, etc............................................................................34
17.4. Series 1997 Notes held by Company, etc.........................................................34
18. NOTICES.................................................................................................35
19. REPRODUCTION OF DOCUMENTS...............................................................................35
20. CONFIDENTIAL INFORMATION................................................................................36
21. SUBSTITUTION OF PURCHASER...............................................................................37
22. MISCELLANEOUS...........................................................................................37
22.1. Successors and Assigns.........................................................................37
22.2. Payments Due on Non-Business Days..............................................................37
22.3. Severability...................................................................................37
22.4. Construction...................................................................................37
22.5. Counterparts...................................................................................38
22.6. Governing Law..................................................................................38
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE B-1 -- Existing Investments
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Licenses, Permits, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 10.2 -- Existing Liens
EXHIBIT 1.1-A -- Form of Senior Note
EXHIBIT 1.1-B -- Form of Supplement
EXHIBIT 1.2(a) -- Form of Series 1997-A Senior Note
EXHIBIT 1.2(b) -- Form of Series 1997-B Senior Note
EXHIBIT 1.2(c) -- Form of Series 1997-C Senior Note
EXHIBIT 4.4(a) -- Form of Opinion of Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
</TABLE>
iv
<PAGE> 6
ALLEN TELECOM INC.
25101 Chagrin Boulevard #350
Beachwood, Ohio 44122-5619
(216) 765-5800
Fax: (216) 765-0410
$150,000,000
Senior Notes Issuable In Series
$9,000,000
6.60% Senior Notes, Series 1997-A,
due November 14, 2003
$47,000,000
6.65% Senior Notes, Series 1997-B
due November 14, 2007
$9,000,000
6.74% Senior Notes, Series 1997-C
due November 14, 2007
Dated as of November 1, 1997
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
ALLEN TELECOM INC., a Delaware corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
1.1. AMOUNT; ESTABLISHMENT OF SERIES.
The Company is contemplating the issue and sale of up to
$150,000,000 aggregate principal amount of its Senior Notes issuable in series
(THE "NOTES", such term to include any such Notes issued in substitution
therefor pursuant to Section 13 of this Agreement). The Notes will be
substantially in the form set out in Exhibit 1.1-A, with such changes therefrom,
if any, as may be approved by the purchasers of such Notes, or series thereof,
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B;
<PAGE> 7
references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement. The Notes may be issued in
one or more series. Each series of Notes, other than the initial series, will be
issued pursuant to a supplement to this Agreement (a "SUPPLEMENT") in
substantially the form of Exhibit 1.1-B, and will be subject to the following
terms and conditions:
(a) the designation of each series of Notes shall distinguish
the Notes of one series from the Notes of all other series;
(b) the Notes of each series shall rank pari passu with each
other series of the Notes and with the Company's other outstanding
unsecured Indebtedness that has not been expressly subordinated to any
other Indebtedness of the Company;
(c) each series of Notes shall be dated the date of issue,
bear interest at such rate or rates, mature on such date or dates, be
subject to such mandatory prepayments on the dates and with the
Make-Whole Amounts, if any, as are provided in the Supplement under
which such Notes are issued, and shall have such additional or
different conditions precedent to closing and such additional or
different representations and warranties or other terms and provisions
as shall be specified in such Supplement;
(d) except to the extent provided in foregoing clauses (a)
through (c), all of the provisions of this Agreement shall apply to the
Notes of each series; and
(e) the issuance of any subsequent series of Notes shall not
dilute or otherwise affect the relative priority or other rights of the
holders of the Series 1997 Notes or in any way affect the percentages
of Series 1997 Notes required to approve an amendment or effectuate a
waiver under the provisions of Section 17 or the percentages of Series
1997 Notes required to accelerate the Series 1997 Notes or rescind such
an acceleration under the provisions of Section 12.1 or 12.3.
The Purchasers of the Series 1997 Notes need not purchase subsequent series of
Notes.
1.2. THE SERIES 1997 NOTES.
The Company has authorized, as the initial series of Notes
hereunder, the issue and sale of $9,000,000 aggregate principal amount of Notes
to be designated as its 6.60% Senior Notes, Series 1997-A, due November 14, 2003
(the "SERIES 1997-A NOTES"), $47,000,000 aggregate principal amount of Notes to
be designated as its 6.65% Senior Notes, Series 1997-B, due November 14, 2007
(the "SERIES 1997-B NOTES"), and $9,000,000 aggregate principal amount of Notes
to be designated as its 6.74% Senior Notes, Series 1997-C, due November 14, 2007
(the "SERIES 1997-C NOTES") (the Series 1997-A Notes, the Series 1997-B Notes
and the Series 1997-C Notes are collectively referred to as the "SERIES 1997
NOTES", such term to include any such Notes issued in substitution therefor
pursuant to Section 13 of this Agreement). The Series 1997 Notes shall be
substantially in the forms set out in Exhibits 1.2(a), (b) and (c),
respectively, with such changes therefrom, if any, as may be approved by you and
the Company.
2
<PAGE> 8
2. SALE AND PURCHASE OF SERIES 1997 NOTES.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), and you and the Other Purchasers will
purchase from the Company, at the Closing provided for in Section 3, Series 1997
Notes in the series and principal amount specified opposite your names in
Schedule A at the purchase price of 100% of the principal amount thereof. Your
obligation hereunder and the obligations of the Other Purchasers are several and
not joint obligations and you shall have no liability to any Person for the
performance or non-performance by any Other Purchaser hereunder.
3. CLOSING.
The sale and purchase of the Series 1997 Notes to be purchased
by you and the Other Purchasers shall occur at the offices of Gardner, Carton &
Douglas, Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois
60610 at 9:00 a.m., Chicago time, at a closing (the "CLOSING") on November 10,
1997 or on such other Business Day thereafter on or prior to November 30, 1997
as may be agreed upon by the Company and you and the Other Purchasers. At the
Closing the Company will deliver to you the Series 1997 Notes to be purchased by
you in the form of a single Series 1997 Note (or such greater number of Series
1997 Notes in denominations of at least $500,000 as you may request) dated the
date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
1663327 at Harris Bank, 115 South LaSalle Street, Chicago, Illinois, ABA No.
071000288. If at the Closing the Company shall fail to tender such Series 1997
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Series 1997
Notes to be sold to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to
3
<PAGE> 9
or at the Closing and after giving effect to the issue and sale of the Series
1997 Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Sections 10.1 through 10.8 had such Sections applied since such date.
4.3. COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered
to you a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization,
execution and delivery of the Series 1997 Notes and the Agreement.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from McDara P. Folan III,
Vice President, Secretary and General Counsel, of the Company, covering the
matters set forth in Exhibit 4.4(a) and covering such other matters incident to
the transactions contemplated hereby as you or your counsel may reasonably
request (and the Company instructs its counsel to deliver such opinion to you)
and (b) from Gardner, Carton & Douglas, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Series 1997 Notes
shall (i) be permitted by the laws and regulations of each jurisdiction to which
you are subject, without recourse to provisions (such as Section 1405(a)(8) of
the New York Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the particular investment,
(ii) not violate any applicable law or regulation (including, without
limitation, Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and (iii) not subject you to any tax, penalty or liability under
or pursuant to any applicable law or regulation, which law or regulation was not
in effect on the date hereof. If requested by you, you shall have received an
Officer's Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such purchase is so
permitted.
4.6. SALE OF OTHER SERIES 1997 NOTES.
Contemporaneously with the Closing the Company shall sell to
the Other Purchasers and the Other Purchasers shall purchase the Series 1997
Notes to be purchased by them at the Closing as specified in Schedule A.
4
<PAGE> 10
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the fees, charges and disbursements of
your special counsel referred to in Section 4.4, to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Series 1997 Notes by Gardner, Carton & Douglas.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not
have changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Series 1997 Notes and to perform the provisions
hereof and thereof.
5
<PAGE> 11
5.2. AUTHORIZATION, ETC.
This Agreement and the Series 1997 Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Series
1997 Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company, through its agent, BancAmerica Robertson
Stephens, has delivered to you and each Other Purchaser a copy of a Private
Placement Memorandum, dated October 1997 (the "MEMORANDUM"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in Schedule
5.5, taken as a whole, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as
disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one
of the documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since December 31, 1996, there has
been no change in the financial condition, operations, business or properties of
the Company or any Restricted Subsidiary except changes that individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists (i) of the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary, (ii) of the Company's Affiliates, other than
Subsidiaries, and (iii) of the Company's directors and senior officers.
Each Subsidiary listed in Schedule 5.4 is designated a Restricted
Subsidiary by the Company.
6
<PAGE> 12
(b) All of the outstanding shares of capital stock or similar
equity interests of each Restricted Subsidiary shown in Schedule 5.4 as
being owned by the Company and its Restricted Subsidiaries have been
validly issued, are fully paid and nonassessable and are owned by the
Company or another Restricted Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Restricted Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Restricted Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise
subject to any legal restriction or any agreement (other than this
Agreement, the agreements listed on Schedule 5.4 and customary
limitations imposed by corporate law statutes) restricting the ability
of such Restricted Subsidiary to pay dividends out of profits or make
any other similar distributions of profits to the Company or any of its
Restricted Subsidiaries that owns outstanding shares of capital stock
or similar equity interests of such Restricted Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you and each Other Purchaser
copies of the financial statements of the Company and its Subsidiaries listed on
Schedule 5.5. All of said financial statements (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Series 1997 Notes will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien
in respect of any property of the Company or any Restricted Subsidiary under,
any Material agreement, or corporate charter or by-laws, to which the Company or
any Restricted Subsidiary is bound or by which the Company or any Restricted
Subsidiary or any of their respective properties may be bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Company or any
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<PAGE> 13
Restricted Subsidiary or (iii) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to the Company or
any Restricted Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in connection
with the execution, delivery or performance by the Company of this Agreement or
the Series 1997 Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Restricted
Subsidiary or any property of the Company or any Restricted Subsidiary
in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary is in
default under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or ruling
of any court, arbitrator or Governmental Authority or is in violation
of any applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Restricted Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Restricted
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Restricted
Subsidiaries in respect of Federal, state or other taxes for all fiscal periods
are adequate under GAAP. The Federal income tax liabilities of the Company and
its Subsidiaries have been determined by the Internal Revenue Service and paid
for all fiscal years up to and including the fiscal year ended December 31,
1995.
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5.10. TITLE TO PROPERTY; LEASES.
The Company and its Restricted Subsidiaries have good and
sufficient title to the properties that they own or purport to own and that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Restricted Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course
of business), in each case free and clear of Liens prohibited by this Agreement.
All leases that individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Restricted Subsidiaries own or possess
all licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known material
conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the
Company infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Restricted Subsidiaries with respect to any patent, copyright, service
mark, trademark, trade name or other right owned or used by the Company
or any of its Restricted Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
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<PAGE> 15
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as
of the end of such Plan's most recently ended plan year on the basis of
the actuarial assumptions used to determine the actuarial accrued
liability on an on-going funding basis in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value
of the assets of such Plan allocable to such benefit liabilities by a
Material amount. The term "BENEFIT LIABILITIES" has the meaning
specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that have not been paid, or if contingent, that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its
Subsidiaries is not Material or has been disclosed in the most recent
audited consolidated financial statements of the Company and its
Subsidiaries.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Series 1997 Notes hereunder will not involve
any transaction that is subject to the prohibitions of section 406 of
ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the Code. The representation by the
Company in the first sentence of this Section 5.12(e) is made in
reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase
price of the Series 1997 Notes to be purchased by you.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has
offered the Series 1997 Notes or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than you, the Other
Purchasers and not more than 54 other Institutional Investors, each of which has
been offered the Series 1997 Notes at a private sale for investment. Neither the
Company nor anyone acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Series 1997 Notes to the registration
requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Series
1997 Notes as set forth in Schedule 5.14. No part of the proceeds from the sale
of the Series 1997 Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for
the purpose of buying or carrying or trading in any securities under such
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<PAGE> 16
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 1.0% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 1.0% of the value of such assets. As used in
this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall
have the meanings assigned to them in said Regulation G. For purposes of the
foregoing, margin stock shall not include common stock of the Company held in
its treasury.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the
Company and its Restricted Subsidiaries as of September 30, 1997, since
which date there has been no Material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Restricted Subsidiaries. Neither the
Company nor any Restricted Subsidiary is in default and no waiver of
default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Company or such Restricted
Subsidiary that is outstanding in an aggregate principal amount in
excess of $5,000,000 and no event or condition exists with respect to
any Indebtedness of the Company or any Restricted Subsidiary that is
outstanding in an aggregate principal amount in excess of $5,000,000
and that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to
become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company
nor any Restricted Subsidiary has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 10.2.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Series 1997 Notes by the Company
hereunder nor its use of the proceeds thereof will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Restricted Subsidiary is subject
to regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as
amended by the ICC Termination Act, as amended, or the Federal Power Act, as
amended.
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<PAGE> 17
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Restricted Subsidiary has
knowledge of any liability or has received any notice of any liability, and no
proceeding has been instituted asserting any liability against the Company or
any of its Restricted Subsidiaries or any of their respective real properties
now owned, leased or operated by any of them or other assets nor, to the
knowledge of the Company or any Restricted Subsidiary, has any such proceeding
been instituted against any of their respective real properties formerly owned,
for damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to you in writing,
(a) neither the Company nor any Restricted Subsidiary has
knowledge of any facts that would give rise to any liability for
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or, to
the Company's or such Restricted Subsidiary's knowledge, formerly
owned, leased or operated by any of them or to other assets or their
use, except, in each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(b) neither the Company nor any of its Restricted Subsidiaries
has stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Restricted Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material Adverse
Effect.
6. REPRESENTATIONS OF THE PURCHASERS.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Series 1997 Notes to
be purchased by you for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Series 1997 Notes to be purchased by you have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Series 1997 Notes.
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<PAGE> 18
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Series 1997 Notes to be purchased by you
hereunder:
(a) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in
which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely in
connection with your fixed contractual obligations under which the
amounts payable, or credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not affected in
any manner by the investment performance of the separate account; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction
Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA; or
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(g) the Source is an "insurance company general account" as
such term is defined in the Department of Labor Prohibited Transaction
Class Exemption 95-60 (issued July 12, 1995) ("PTE 95-60") and there is
no "employee benefit plan" with respect to which the aggregate amount
of such general account's reserves and liabilities for the contracts
held by or on behalf of such employee benefit plan and all other
employee benefit plans maintained by the same employer (and affiliates
thereof as defined in Section V(a)(1) of PTE 95-60) or by the same
employee organization (in each case determined in accordance with the
provisions of PTE 95-60) exceeds 10% of the total reserves and
liabilities of such general account (as determined under PTE 95-60)
(exclusive of separate account liabilities) plus surplus as set forth
in the National Association of Insurance Commissioners Annual Statement
filed with the state of domicile of such Purchaser.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
stockholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
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(b) ANNUAL STATEMENTS -- within 120 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
stockholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which
opinion shall state that such financial statements present fairly, in
all material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, provided that the delivery within the time period
specified above of the Company's Annual Report on Form 10-K for such
fiscal year (together with the Company's annual report to shareholders,
if any, prepared pursuant to Rule 14a-3 under the Exchange Act)
prepared in accordance with the requirements therefor and filed with
the Securities and Exchange Commission, together with such accountant's
opinion, shall be deemed to satisfy the requirements of this Section
7.1(b);
(c) UNRESTRICTED SUBSIDIARIES -- if, at the time of delivery
of any financial statements pursuant to Section 7.1(a) or (b),
Unrestricted Subsidiaries (other than MARTA Technologies, Inc.) account
for more than 10% of (i) the consolidated total assets of the Company
and its Subsidiaries reflected in the balance sheet included in such
financial statements or (ii) the consolidated revenues of the Company
and its Subsidiaries reflected in the consolidated statement of income
included in such financial statements, an unaudited balance sheet for
all Unrestricted Subsidiaries taken as whole as at the end of the
fiscal period included in such financial statements and the related
unaudited statements of income, stockholders' equity and cash flows for
such Unrestricted Subsidiaries for such period, together with
consolidating statements reflecting all eliminations or adjustments
necessary to reconcile such group financial statements to the
consolidated financial statements of the Company and its Subsidiaries;
(d) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Restricted Subsidiary to
public securities holders generally, and (ii) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Restricted Subsidiary
with the Securities and Exchange Commission and of all press releases
and other statements made available generally by
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<PAGE> 21
the Company or any Restricted Subsidiary to the public concerning
developments that are Material;
(e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five days after a Responsible Officer obtains actual
knowledge of the existence of any Default or Event of Default or that
any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type referred
to in Section 11(f), a written notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes
to take with respect thereto;
(f) ERISA MATTERS -- promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(g) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Restricted Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect;
(h) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the
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<PAGE> 22
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes; and
(i) SUPPLEMENTS TO AGREEMENT -- in the event an additional
series of Notes is, or is proposed to be, issued under this Agreement,
promptly, and in any event within 10 Business Days after execution and
delivery thereof, a true copy of the Supplement pursuant to which such
Notes are to be, or were, issued.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or (b) shall be accompanied by a certificate of
a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.5,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Restricted Subsidiaries from the
beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists (including any
such event or condition resulting from the failure of the Company or
any Restricted Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action
the Company shall have taken or proposes to take with respect thereto.
7.3. INSPECTION.
The Company will permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Restricted Subsidiaries with the Company's officers and (with the
consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and
each Restricted Subsidiary, all at such reasonable times and as often
as may be reasonably requested in writing; and
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<PAGE> 23
(b) DEFAULT -- if a Default or Event of Default then exists,
at the expense of the Company and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Restricted Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of
the Company, which consent will not be unreasonably withheld) to visit
the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing.
8. PREPAYMENT OF THE SERIES 1997 NOTES.
8.1. REQUIRED PREPAYMENTS.
The Series 1997-A Notes are subject to required prepayment on
November 14, 2001 and on each November 14 thereafter to and including November
14, 2002, on which dates the Company will prepay $3,000,000 principal amount (or
such lesser principal amount as shall then be outstanding) of the Series 1997-A
Notes, at par, without payment of the Make-Whole Amount or any premium. The
Series 1997-B Notes are subject to required prepayment on November 14, 2002 and
on each November 14 thereafter to and including November 14, 2006, on which
dates the Company will prepay $7,833,333 principal amount (or such lesser
principal amount as shall then be outstanding) of the Series 1997-B Notes, at
par, without payment of the Make-Whole Amount or any premium. The Series 1997-C
Notes are not subject to required prepayment.
8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Series 1997 Notes,
in an amount not less than $2,000,000 in the aggregate in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Series 1997 Notes written notice of each
optional prepayment under this Section 8.2 not less than 30 days and not more
than 60 days prior to the date fixed for such prepayment. Each such notice shall
specify such date, the aggregate principal amount of the Series 1997 Notes to be
prepaid on such date, the principal amount of each Series 1997 Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Series
1997 Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
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8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Series 1997
Notes, the principal amount of the Series 1997 Notes to be prepaid shall be
allocated among all of the Series 1997 Notes at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal amounts
thereof not theretofore called for prepayment. Each such partial prepayment
pursuant to Section 8.2 shall be applied first to the payment due on such Series
1997 Notes at final maturity and thereafter to any required prepayments on such
Series 1997 Notes, in inverse order of maturity.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Series 1997 Notes pursuant
to this Section 8, the principal amount of each Series 1997 Note to be prepaid
shall mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and the
applicable Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Series 1997 Note paid or
prepaid in full shall be surrendered to the Company and canceled and shall not
be reissued, and no Series 1997 Note shall be issued in lieu of any prepaid
principal amount of any Series 1997 Note.
8.5. PURCHASE OF SERIES 1997 NOTES.
The Company will not, and will not permit any Affiliate to,
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Series 1997 Notes except upon the payment or prepayment of the
Series 1997 Notes in accordance with the terms of this Agreement and the Series
1997 Notes. The Company will promptly cancel all Series 1997 Notes acquired by
it or any Affiliate pursuant to any payment, prepayment or purchase of Series
1997 Notes pursuant to any provision of this Agreement and no Series 1997 Notes
may be issued in substitution or exchange for any such Series 1997 Notes.
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Series
1997 Note, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Series
1997 Note over the amount of such Called Principal, provided that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Series 1997
Note, the principal of such Series 1997 Note that is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
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"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Series 1997 Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal from
their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic basis
as that on which interest on the Series 1997 Notes is payable) equal to
the Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Series 1997 Note, .50% over the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New York City
time) on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as the "PX1
Screen" on the Bloomberg Financial Market Service (or such other
display as may replace the PX1 Screen on Bloomberg Financial Market
Service) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such
time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day
for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied
yield will be determined, if necessary, by (a) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Series 1997 Note, all payments of such Called
Principal and interest thereon that would be due after the Settlement
Date with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, PROVIDED that if
such
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Settlement Date is not a date on which interest payments are due to be
made under the terms of the Series 1997 Notes in question, then the
amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Series 1997 Note, the date on which such Called Principal is to
be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will, and will cause each Subsidiary to, comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including Environmental Laws, and will obtain and maintain in
effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.2. INSURANCE.
The Company will, and will cause each Restricted Subsidiary
to, maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each Restricted Subsidiary to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Subsidiary to, file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
Subject to Section 10.4, the Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Sections 10.3 and 10.4, the Company will at all times preserve and keep in full
force and effect the corporate existence of each Restricted Subsidiary (unless
merged into the Company or a Restricted Subsidiary) and all rights and
franchises of the Company and its Restricted Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Series 1997
Notes are outstanding:
10.1. CONSOLIDATED INDEBTEDNESS; INDEBTEDNESS OF RESTRICTED SUBSIDIARIES.
The Company will not permit:
(a) Consolidated Indebtedness to exceed 65% of Consolidated
Total Capitalization at any time; and
(b) Any Restricted Subsidiary to incur any Indebtedness if,
after giving effect thereto and to the application of the proceeds
therefrom, Priority Debt outstanding would exceed 20% of Consolidated
Total Capitalization.
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10.2. LIENS.
The Company will not, and will not permit any Restricted
Subsidiary to, permit to exist, create, assume or incur, directly or indirectly,
any Lien on its properties or assets, whether now owned or hereafter acquired
(unless, concurrently with the incurrence, assumption or creation of such Lien,
the Company makes, or causes to be made, effective provision whereby the Series
1997 Notes are equally and ratably secured by a Lien on the same property or
assets), except:
(a) Liens existing on property or assets of the Company or any
Restricted Subsidiary as of the date of this Agreement that are
described in Schedule 10.2;
(b) Liens for taxes, assessments or governmental charges not
then due and delinquent or the nonpayment of which is permitted by
Section 9.4;
(c) encumbrances in the nature of leases, subleases, zoning
restrictions, easements, rights of way and other rights and
restrictions of record on the use of real property and defects in title
arising or incurred in the ordinary course of business, which,
individually and in the aggregate, do not materially impair the use or
value of the property or assets subject thereto;
(d) Liens incidental to the conduct of business or the
ownership of properties and assets (including landlords', lessors',
carriers', warehousemen's, mechanics', materialmen's and other similar
liens) and Liens to secure the performance of bids, tenders, leases or
trade contracts, or to secure statutory obligations (including
obligations under workers compensation, unemployment insurance and
other social security legislation), surety or appeal bonds or other
Liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money;
(e) any attachment or judgment Lien, unless the judgment it
secures has not, within 60 days after the entry thereof, been
discharged or execution thereof stayed pending appeal, or has not been
discharged within 60 days after the expiration of any such stay;
(f) Liens securing Indebtedness of a Restricted Subsidiary to
the Company or to another Restricted Subsidiary and Liens securing
Indebtedness of the Company to a Restricted Subsidiary;
(g) Liens (i) existing on property at the time of its
acquisition by the Company or a Restricted Subsidiary and not created
in contemplation thereof, whether or not the Indebtedness secured by
such Lien is assumed by the Company or a Restricted Subsidiary; or (ii)
on property created contemporaneously with its acquisition or within
180 days of the acquisition or completion of construction thereof to
secure or provide for all or a portion of the purchase price or cost of
construction of such property after the date of Closing; or (iii)
existing on property of a Person at the time such Person is merged or
consolidated with, or becomes a Restricted Subsidiary of, or
substantially all of its assets
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are acquired by, the Company or a Restricted Subsidiary and not created
in contemplation thereof; PROVIDED that in the case of clauses (i),
(ii) and (iii) such Liens do not extend to additional property of the
Company or any Restricted Subsidiary and that the aggregate principal
amount of Indebtedness secured by each such Lien does not exceed the
cost of acquisition or construction of the property subject thereto;
(h) Liens resulting from extensions, renewals or replacements
of Liens permitted by paragraphs (a), (f) and (g), PROVIDED that (i)
there is no increase in the principal amount or decrease in maturity of
the Indebtedness secured thereby at the time of such extension, renewal
or replacement, (ii) any new Lien attaches only to the same property
theretofore subject to such earlier Lien and (iii) immediately after
such extension, renewal or replacement no Default or Event of Default
would exist; and
(i) Additional Liens securing Indebtedness not otherwise
permitted by paragraphs (a) through (h) above, provided that, at the
time of creation, assumption or incurrence thereof and immediately
after giving effect thereto and to the application of the proceeds
therefrom, Priority Debt outstanding does not exceed 20% of
Consolidated Total Capitalization.
Notwithstanding the foregoing, this Section 10.2 shall not apply to the
discontinued operations of the Company related to MARTA Technologies, Inc., as
shown on the Company's balance sheet dated as of June 30, 1997.
10.3. SALE OF ASSETS.
Except as permitted by Section 10.4, the Company will not, and
will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise
dispose of, including by way of merger (collectively a "DISPOSITION"), any
assets, including capital stock of Restricted Subsidiaries, in one or more
transactions, to any Person, other than (a) Dispositions in the ordinary course
of business, (b) Dispositions by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or another Restricted Subsidiary or (c)
other Dispositions not otherwise permitted by this Section 10.3, provided that
the aggregate net book value of all assets so disposed of in any fiscal year
pursuant to this Section 10.3(c) does not exceed 15% of Consolidated Total
Assets as of the end of the immediately preceding fiscal year. Notwithstanding
the foregoing, the Company may, or may permit any Restricted Subsidiary to, make
a Disposition and the assets subject to such Disposition shall not be subject to
or included in the foregoing limitation and computation contained in clause (c)
of the preceding sentence to the extent that (x) such assets are leased back by
the Company or any Restricted Subsidiary, as lessee, within 180 days of the
Disposition thereof, or (y) the net proceeds from such Disposition are within
one year of such Disposition (A) reinvested in productive assets by the Company
or a Restricted Subsidiary consistent with Section 10.7 (and in no event in
assets relating to a discontinued operation at the time of reinvestment) or (B)
applied to the payment or prepayment of any outstanding Indebtedness of the
Company or any Restricted Subsidiary that is not subordinated to the Series 1997
Notes. Any prepayment of Series 1997 Notes pursuant to this Section 10.3 shall
be in accordance with Sections 8.2 and 8.3, without regard to the minimum
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prepayment requirements of Section 8.2. Furthermore, this Section 10.3 shall not
apply to the discontinued operations of the Company related to MARTA
Technologies, Inc., as shown on the Company's balance sheet dated as of June 30,
1997.
10.4. MERGERS, CONSOLIDATIONS, ETC.
The Company will not, and will not permit any Restricted
Subsidiary to, consolidate with or merge with any other Person or convey,
transfer, sell or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person except that:
(a) The Company may consolidate or merge with any other Person
or convey, transfer, sell or lease all or substantially all of its
assets in a single transaction or series of transactions to any Person,
provided that:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by
conveyance, transfer, sale or lease of all or substantially
all of the assets of the Company as an entirety, as the case
may be, shall be a solvent corporation organized and existing
under the laws of the United States, any State thereof
(including the District of Columbia) or Canada or any province
thereof, and, if the Company is not such corporation, such
corporation (x) shall have executed and delivered to each
holder of any Series 1997 Notes its assumption of the due and
punctual performance and observance of each covenant and
condition of this Agreement and the Series 1997 Notes and (y)
shall have caused to be delivered to each holder of any Series
1997 Notes an opinion of independent counsel reasonably
satisfactory to the Required Holders, to the effect that all
agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the
terms hereof;
(ii) the successor formed by such consolidation or
the survivor of such merger or the Person that acquires by
conveyance, transfer, sale or lease all or substantially all
of the assets of the Company as an entirety, as the case may
be, could incur immediately thereafter $1.00 of additional
Indebtedness without violating Section 10.1;
(iii) immediately before and after giving effect to
such transaction, no Default or Event of Default shall exist;
and
(b) Any Restricted Subsidiary may (x) merge into the Company
(provided that the Company is the surviving corporation) or another
Restricted Subsidiary or (y) sell, transfer or lease all or any part of
its assets to the Company or another Restricted Subsidiary, or (z)
merge or consolidate with, or sell, transfer or lease all or
substantially all of its assets to, any Person in a transaction that is
permitted by Section 10.3 or, as a result of which, such Person becomes
an Restricted Subsidiary; PROVIDED in each instance
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set forth in clauses (x) through (z) that, immediately before and after
giving effect thereto, there shall exist no Default or Event of
Default;
No such conveyance, transfer, sale or lease of all or substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.4 from its liability under this Agreement or the
Series 1997 Notes.
10.5. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES.
The Company (i) will not permit any Restricted Subsidiary to
issue its capital stock, or any warrants, rights or options to purchase, or
securities convertible into or exchangeable for, such capital stock, to any
Person other than the Company or another Restricted Subsidiary, and (ii) will
not, and will not permit any Restricted Subsidiary to, sell, transfer or
otherwise dispose of any shares of capital stock of a Restricted Subsidiary if
such sale would be prohibited by Section 10.3. If a Restricted Subsidiary at any
time ceases to be such as a result of a sale or issuance of its capital stock,
any Liens on property of the Company or any other Restricted Subsidiary securing
Indebtedness owed to such Restricted Subsidiary, which is not contemporaneously
repaid, together with such Indebtedness, shall be deemed to have been incurred
by the Company or such other Restricted Subsidiary, as the case may be, at the
time such Restricted Subsidiary ceases to be a Restricted Subsidiary.
10.6. DESIGNATION OF UNRESTRICTED AND RESTRICTED SUBSIDIARIES.
The Company may designate any Restricted Subsidiary as an
Unrestricted Subsidiary and any Unrestricted Subsidiary as a Restricted
Subsidiary; provided that, (a) if such Subsidiary initially is a Restricted
Subsidiary, then such Restricted Subsidiary may be subsequently designated as an
Unrestricted Subsidiary and such Unrestricted Subsidiary may be subsequently
designated as a Restricted Subsidiary, but no further changes in designation may
be made, (b) if such Subsidiary initially is an Unrestricted Subsidiary, then
such Unrestricted Subsidiary may be subsequently designated as a Restricted
Subsidiary and such Restricted Subsidiary may be subsequently designated as an
Unrestricted Subsidiary, but no further changes in designation may be made, and
(c) immediately before and after designation of a Restricted Subsidiary as an
Unrestricted Subsidiary there exists no Default or Event of Default.
10.7. NATURE OF BUSINESS.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business if, as a result, the general nature of the
business in which the Company and its Restricted Subsidiaries, taken as a whole,
would then be engaged would be substantially changed from the general nature of
the business in which the Company and its Restricted Subsidiaries, taken as a
whole, are engaged on the date of this Agreement. As of the date of this
Agreement, the Company and its Restricted Subsidiaries manufacture and sell
wireless telecommunications equipment, products and services as described in the
Memorandum.
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10.8. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Restricted
Subsidiary to enter into directly or indirectly any Material transaction or
Material group of related transactions (including the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Restricted Subsidiary), except upon
fair and reasonable terms no less favorable to the Company or such Restricted
Subsidiary than would be obtainable in a comparable arm's-length transaction
with a Person not an Affiliate.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Series 1997 Note when the same
becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any
Series 1997 Note for more than five Business Days after the same
becomes due and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Section 7.1(e) or Sections 10.1 through
10.8; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Series
1997 Note; or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in default
(as principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount in
excess of 5% of Adjusted Consolidated Net Worth (as of the end of the
most recently completed fiscal period of the Company) beyond any period
of grace provided with respect thereto or (ii) the Company or any
Restricted Subsidiary is in default in the performance of or compliance
with any term of any evidence of any Indebtedness that is outstanding
in an aggregate principal amount in excess of 5% of Adjusted
Consolidated Net Worth (as of the end of the most recently completed
fiscal period of the Company) or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a
consequence of such default or condition such
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Indebtedness has become, or has been declared, due and payable before
its stated maturity or before its regularly scheduled dates of payment;
or
(g) the Company or any Material Restricted Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to
be liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any Material Restricted Subsidiary, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any Material
Restricted Subsidiary, or any such petition shall be filed against the
Company or any Material Restricted Subsidiary and such petition shall
not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of 5% of Adjusted Consolidated Net Worth (as of
the end of the most recently completed fiscal period of the Company)
are rendered against one or more of the Company and its Material
Restricted Subsidiaries, which judgments are not, within 60 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall
exceed 5% of Adjusted Consolidated Net Worth (as of the end of the most
recently completed fiscal period of the Company), (iv) the Company or
any ERISA Affiliate shall have incurred or is reasonably expected to
incur any liability pursuant to Title I or IV of ERISA or the penalty
or excise tax provisions of the Code relating to employee benefit
plans, (v) the Company or any ERISA Affiliate withdraws
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from any Multiemployer Plan, or (vi) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause
(vi) of paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Series
1997 Notes then outstanding shall automatically become immediately due
and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 33% in principal amount
of the Series 1997 Notes at the time outstanding may at any time at its
or their option, by notice or notices to the Company, declare all the
Series 1997 Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b)
of Section 11 has occurred and is continuing, any holder or holders of
Series 1997 Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Series 1997 Notes held by it or them to
be immediately due and payable.
Upon any Series 1997 Notes becoming due and payable under this
Section 12.1, whether automatically or by declaration, such Series 1997 Notes
will forthwith mature and the entire unpaid principal amount of such Series 1997
Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole
Amount determined in respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties hereto agree,
that each holder of a Series 1997 Note has the right to maintain its investment
in the Series 1997 Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of a Make-Whole
Amount by the Company in the event that the Series 1997 Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
29
<PAGE> 35
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
12.3. RESCISSION.
At any time after any Series 1997 Notes have been declared due
and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not
less than 68% in principal amount of the Series 1997 Notes then outstanding, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Series
1997 Notes, all principal of and Make-Whole Amount, if any, on any Series 1997
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Series 1997 Notes, at the Default Rate, (b) all Events of Default
and Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Series 1997 Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more
31
<PAGE> 36
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor, promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office
of the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) of the same series in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable to
such Person as such holder may request and shall be substantially in the form of
the Note established for such series. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than $500,000,
PROVIDED that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$500,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED that if the holder of such Note
is, or is a nominee for, an original Purchaser or another Institutional
Investor holder of a Note with a minimum net worth of at least
$50,000,000, such Person's own unsecured agreement of indemnity shall
be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on
31
<PAGE> 37
such lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
14. PAYMENTS ON SERIES 1997 NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Series 1997 Notes
shall be made in Chicago, Illinois at the principal office of Bank of America
National Trust & Savings Association in such jurisdiction. The Company may at
any time, by notice to each holder of a Series 1997 Note, change the place of
payment of the Series 1997 Notes so long as such place of payment shall be
either the principal office of the Company in such jurisdiction or the principal
office of a bank or trust company in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any
Series 1997 Note, and notwithstanding anything contained in Section 14.1 or in
such Series 1997 Note to the contrary, the Company will pay all sums becoming
due on such Series 1997 Note for principal, Make-Whole Amount, if any, and
interest by the method and at the address specified for such purpose below your
name in Schedule A, or by such other method or at such other address as you
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Series 1997 Note or the
making of any notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or prepayment in
full of any Series 1997 Note, you shall surrender such Series 1997 Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Series 1997 Note held by you or your nominee you will, at your election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Series 1997 Note to the
Company in exchange for a new Series 1997 Note or Series 1997 Notes pursuant to
Section 13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Series
1997 Note purchased by you under this Agreement and that has made the same
agreement relating to such Series 1997 Note as you have made in this Section
14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all reasonable costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by you and each Other Purchaser or holder of a
Series 1997 Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement or
32
<PAGE> 38
the Series 1997 Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the reasonable costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or the Series 1997 Notes or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the Series 1997 Notes, or by
reason of being a holder of any Series 1997 Note, and (b) the reasonable costs
and expenses, including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby and
by the Series 1997 Notes. The Company will pay, and will save you and each other
holder of a Series 1997 Note harmless from, all claims in respect of any fees,
costs or expenses if any, of brokers and finders (other than those retained by
you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will
survive the payment or transfer of any Series 1997 Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Series 1997 Notes,
and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Notes, the purchase
or transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Series 1997 Notes may be amended, and
the observance of any term hereof or of the Series 1997 Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Series 1997 Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
33
<PAGE> 39
Series 1997 Notes, (ii) change the percentage of the principal amount of the
Series 1997 Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. SOLICITATION OF HOLDERS OF SERIES 1997 NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Series 1997 Notes (irrespective of the amount of Series 1997 Notes then
owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an
informed and considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the provisions hereof
or of the Series 1997 Notes. The Company will deliver executed or true
and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 17 to each holder of
outstanding Series 1997 Notes promptly following the date on which it
is executed and delivered by, or receives the consent or approval of,
the requisite holders of Series 1997 Notes.
(b) PAYMENT. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Series 1997 Notes as consideration for or as an inducement to
the entering into by any holder of Series 1997 Notes or any waiver or
amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted,
on the same terms, ratably to each holder of Series 1997 Notes then
outstanding even if such holder did not consent to such waiver or
amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Series 1997 Notes and is binding
upon them and upon each future holder of any Series 1997 Note and upon the
Company without regard to whether such Series 1997 Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will extend to or
affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between the Company and the holder of any Series 1997 Note nor any delay
in exercising any rights hereunder or under any Series 1997 Note shall operate
as a waiver of any rights of any holder of such Series 1997 Note. As used
herein, the term "THIS AGREEMENT" or "THE AGREEMENT" and references thereto
shall mean this Agreement as it may from time to time be amended or
supplemented.
17.4. SERIES 1997 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of
the requisite percentage of the aggregate principal amount of Series 1997 Notes
then outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Series
34
<PAGE> 40
1997 Notes, or have directed the taking of any action provided herein or in the
Series 1997 Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Series 1997 Notes then
outstanding, Series 1997 Notes directly or indirectly owned by the Company or
any of its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be
in writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at
such other address as you or it shall have specified to the
Company in writing,
(ii) if to any other holder of any Note, to such
holder at such address as such other holder shall have
specified to the Company in writing, or
(iii) if to the Company, to the Company at its
address set forth at the beginning hereof to the attention of
the General Counsel or Treasurer, or at such other address as
the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
35
<PAGE> 41
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL
INFORMATION" means information delivered to you by or on behalf of the Company
or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified (in writing with
respect to Confidential Information delivered subsequent to the date of Closing)
when received by you as being confidential information of the Company or such
Subsidiary, PROVIDED that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or any
person acting on your behalf, (c) otherwise becomes known to you other than
through disclosure by the Company or any Subsidiary or (d) constitutes financial
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (i) your directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you sell or offer
to sell such Note or any part thereof or any participation therein (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v) any Person
from which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
36
<PAGE> 42
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your
affiliates as the purchaser of the Series 1997 Notes that you have agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both you and such affiliate, shall contain such affiliate's agreement
to be bound by this Agreement and shall contain a confirmation by such affiliate
of the accuracy with respect to it of the representations set forth in Section
6. Upon receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall be deemed to refer to
such affiliate in lieu of you. In the event that such affiliate is so
substituted as a purchaser hereunder and such affiliate thereafter transfers to
you all of the Series 1997 Notes then held by such affiliate, upon receipt by
the Company of notice of such transfer, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall no longer be deemed
to refer to such affiliate, but shall refer to you, and you shall have all the
rights of an original holder of the Series 1997 Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Series 1997 Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Series 1997 Notes to the
contrary notwithstanding, any payment of principal of or Make-Whole Amount or
interest on any Series 1997 Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse
37
<PAGE> 43
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of Illinois excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
* * * * *
38
<PAGE> 44
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
ALLEN TELECOM INC.
By: /s/ James L. LePorte III
---------------------------------
Name: James L. LePorte III
Title: Vice President
39
<PAGE> 45
<TABLE>
<S> <C>
The foregoing is agreed
to as of the date thereof.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ A. Kipp Koester
-------------------------------------------
Name: A. Kipp Koester
Title: Vice President
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By: /s/ Wayne T. Hoffmann By: /s/ James G. Lowery
------------------------------------------- ------------------------------------------
Name: Wayne T. Hoffmann Name: James G. Lowery
Title: Vice President, Investments Title: Assistant Vice President, Investments
AMERICAN FAMILY LIFE
INSURANCE COMPANY
By: /s/ Phillip Hannifan
-------------------------------------------
Name: Phillip Hannifan
Title: Investment Director
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By: /s/ James R. Kuzemchak
-------------------------------------------
Name: James R. Kuzemchak
Title: Managing Director
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, on behalf of one
or more separate accounts
By CIGNA Investments, Inc.
By: /s/ James R. Kuzemchak
-------------------------------------------
Name: James R. Kuzemchak
Title: Managing Director
</TABLE>
40
<PAGE> 46
PAN-AMERICAN LIFE INSURANCE COMPANY
By: /s/ F. Anderson Stone
-------------------------------------------
Name: F. Anderson Stone
Title: Vice President, Corporate Securities
BERKSHIRE LIFE INSURANCE
COMPANY
By: /s/ Ellen I. Whittaker
-------------------------------------------
Name: Ellen I. Whittaker
Title: Investment Officer
41
<PAGE> 47
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
---------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
THE NORTHWESTERN MUTUAL $22,000,000 $9,000,000
LIFE INSURANCE COMPANY
(1) All payments by wire transfer of immediately available federal funds to:
Bankers Trust Company
16 Wall Street
Insurance Unit - 4th Floor
New York, NY 10005
ABA #0210-0103-3
For the account of:
The Northwestern Mutual Life Insurance Company
Account No. 00-000-027
with sufficient information to identify the source of the transfer, the
amount of interest, principal or premium, the series of Notes and the
PPN
(2) All notices of payments and written confirmations of such wire transfers:
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Investment Operations
Facsimile: (414) 299-5714
(3) All other communications:
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
Facsimile: (414) 299-7124
Schedule A
<PAGE> 48
(4) Address for delivery of Notes:
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: John E. Dunn
Tax Identification Number: 39-0509570
2
Schedule A
<PAGE> 49
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
-------------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
GREAT-WEST LIFE & ANNUITY $10,000,000
INSURANCE COMPANY
(1) All payments by wire transfer of immediately available federal funds to:
ABA #091-000-019 NW MPLS/TRUST CLEARING
ACCT #08-40-245
ATTN: Acct #12468800
Special Instructions:
(a) security description (PPN #),
(b) allocation of payment between principal and interest, and
(c) confirmation of principal balance.
(2) All notices of payments and written confirmations of such wire transfers:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue, Investors Bldg., 5th Floor
Minneapolis, Minnesota 55479-0047
Telecopier: (612) 667-4187
Attention: Income Collections
(3) All other communications:
Great-West Life & Annuity Insurance Company
8515 East orchard road
3rd Floor, Tower 2
Englewood, Colorado 80111
Attention: Corporate Finance Investments
Telecopier: (303) 689-6193
3
Schedule A
<PAGE> 50
(4) Address for delivery of Notes:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue, 5th Floor
Minneapolis, Minnesota 55479-0047
Attention: Security Clearance
Tax Identification Number: 84-0467907
4
Schedule A
<PAGE> 51
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
------------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
AMERICAN FAMILY LIFE $7,000,000
INSURANCE COMPANY
Nominee Name in which Notes are to be issued: BAND & Co.
(1) All payments by wire transfer of immediately available federal funds to:
Firstar Bank Milwaukee, N.A.
Account of Firstar Trust Company
ABA #075000022
For Credit to Account #112-950-027
Trust Account #000018012500 for Life Portfolio
Attn: Accounting Department
Each such wire transfer shall set forth the name of the Company, the
full title (including the coupon rate and final maturity date) of the
Notes, the due date, and application among principal and interest of
the payment being made.
(2) All notices of payments and written confirmations of such wire transfers:
American Family Life Insurance Company
6000 American Parkway
Madison, WI 53783-0001
Attn: Investment Division - Private Placements
(3) All other communications:
American Family Life Insurance Company
6000 American Parkway
Madison, WI 53783-0001
Attn: Investment Division - Private Placements
5
Schedule A
<PAGE> 52
(4) Address for delivery of Notes:
Firstar Bank of Madison
1 South Pinckney Street
Madison, WI 53703
Attn: Business Custody
Tax Identification Number: 39-6040365
6
Schedule A
<PAGE> 53
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
----------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
CONNECTICUT GENERAL LIFE $2,500,000
INSURANCE COMPANY 2,500,000
2,000,000
Nominee Name in which Notes are to be issued: CIG & Co.
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
with the following accompanying information:
OBI=[name of company; description of security; interest rate;
maturity date; PPN; due date and application (as among
principal, premium and interest of the payment being made);
contact name and phone]
(2) Notices related to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing - S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: (860) 726-7203
7
Schedule A
<PAGE> 54
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
(3) All other communications:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
James R. Kuzemchak
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: (860) 726-7203
Tax Identification Number: 13-3574027
8
Schedule A
<PAGE> 55
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
CONNECTICUT GENERAL LIFE $2,000,000
INSURANCE COMPANY, on behalf
of one or more separate accounts
Nominee Name in which Notes are to be issued: CIG & Co.
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
with the following accompanying information:
OBI=[name of company; description of security; interest rate;
maturity date; PPN; due date and application (as among
principal, premium and interest of the payment being made);
contact name and phone]
(2) Notices related to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing - S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: (860) 726-7203
9
Schedule A
<PAGE> 56
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
(3) All other communications:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
James R. Kuzemchak
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: (860) 726-7203
Tax Identification Number: 13-3574027
10
Schedule A
<PAGE> 57
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
----------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
PAN-AMERICAN LIFE INSURANCE $5,000,000
COMPANY
(1) All payments by wire transfer of immediately available federal funds to:
PAN-AMERICAN LIFE INSURANCE COMPANY
Account #1100-29496
First National Bank of Commerce
ABA #065000029
210 Barone Street New
Orleans, LA 70112
identifying the issue by PPN and description of security, and providing
complete details, including breakdown of interest and principal.
(2) All notices of payments and written confirmations of such wire transfers:
Pan-American Life Insurance Company
Attn: Bond & Stock Accounting - 28th Floor
601 Poydras Street
New Orleans, LA 70130
Fax: (504) 566-3459
(3) All other communications:
Pan-American Life Insurance Company
Attn: Investment Department - 28th Floor
601 Poydras Street
New Orleans, LA 70130
11
Schedule A
<PAGE> 58
(4) Address for delivery of Notes:
Pan-American Life Insurance Company
Attn: Marylyn Andree - 28th Floor
601 Poydras Street
New Orleans, LA 70130
Tax Identification Number: 72-0281240
12
Schedule A
<PAGE> 59
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Notes to be Purchased
------------------------------------------------
Name of Purchaser Series 1997-A Series 1997-B Series 1997-C
- ----------------- ------------- ------------- -------------
BERKSHIRE LIFE INSURANCE $3,000,000
COMPANY
(1) All payments by wire transfer of immediately available federal funds to:
Berkshire Life Insurance Company
Account Number 002-4-020877
The Chase Manhattan Bank, N.A.
ABA #021000021
with sufficient information (including issuer, PPN, interest rate,
maturity and whether payment is of principal, premium or interest) to
identify the source and application of such funds.
(2) All notices of payments and written confirmations of such wire transfers:
Berkshire Life Insurance Company
Attention: Securities Department
700 South Street
Pittsfield, MA 01201
Facsimile: (413) 443-9397
Telephone: (413) 499-4321
(3) All other communications:
Berkshire Life Insurance Company
Attention: Securities Department
700 South Street
Pittsfield, MA 01201
Facsimile: (413) 443-9397
Telephone: (413) 499-4321
Taxpayer Identification Number: 04-1083480
13
Schedule A
<PAGE> 60
SCHEDULE B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
"ADJUSTED CONSOLIDATED NET WORTH" means, as of any date,
consolidated stockholders' equity of the Company and its Restricted Subsidiaries
on such date, determined in accordance with GAAP, less the amount by which
outstanding Restricted Investments on such date exceed 20% of the sum on such
date of Consolidated Indebtedness and consolidated stockholders equity of the
Company and its Restricted Subsidiaries determined in accordance with GAAP.
"AFFILIATE" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly or indirectly through
one or more intermediaries Controls, or is Controlled by, or is under common
Control with, such first Person, and (b) any Person beneficially owning or
holding, directly or indirectly, 20% or more of any class of voting or equity
interests of the Company or any Subsidiary or any corporation of which the
Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 20% or more of any class of voting or equity interests.
As used in this definition, "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only,
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York City are required or authorized to be closed, and (b) for the purposes
of any other provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in Chicago, Illinois or New York City
are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
"COMPANY" means Allen Telecom Inc., a Delaware corporation.
Schedule B
<PAGE> 61
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED INDEBTEDNESS" means, as of any date,
Indebtedness of the Company and its Restricted Subsidiaries as of such date
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" means, as of any date, the assets
and properties of the Company and its Restricted Subsidiaries as of such date
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means, as of any date, the
sum of Consolidated Indebtedness and Adjusted Consolidated Net Worth as of such
date.
"DEFAULT" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater
of (i) 2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2% over the rate of interest publicly announced
by Bank of America National Trust & Savings Association in Chicago, Illinois as
its "base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
2
Schedule B
<PAGE> 62
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage,
3
Schedule B
<PAGE> 63
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company pursuant
to Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable and other
accrued liabilities arising in the ordinary course of business, but
including all liabilities created or arising under any conditional sale
or other title retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities); and
(e) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (d) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (e) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP. Indebtedness of the Company or a
Restricted Subsidiary shall not include Indebtedness of the Company to a
Restricted Subsidiary or Indebtedness of a Restricted Subsidiary to the Company
or to another Restricted Subsidiary.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note, (b) any holder of a Note holding more than $2,000,000 in aggregate
principal amount of the Notes, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"INVESTMENTS" means all investments made, in cash or by
delivery of property, directly or indirectly, by any Person, in any other Person
or property, whether by acquisition of
4
Schedule B
<PAGE> 64
shares of capital stock, indebtedness or other obligations or securities or by
loan, advance, capital contribution or otherwise.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets or properties of the Company
and its Restricted Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or properties
of the Company and its Restricted Subsidiaries taken as a whole, or (b) the
ability of the Company to perform its obligations under this Agreement and the
Series 1997 Notes, or (c) the validity or enforceability of this Agreement or
the Series 1997 Notes.
"MATERIAL RESTRICTED SUBSIDIARY" means, as of the date of
determination, any Restricted Subsidiary the assets or revenues of which account
for more than 5% of Consolidated Total Assets at the end of the most recently
ended fiscal period or more than 5% of the consolidated revenues of the Company
and its Restricted Subsidiaries for the most recently completed four fiscal
quarters.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
5
Schedule B
<PAGE> 65
"PERSON" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may have
any liability.
"PRIORITY DEBT" means, as of any date, the sum (without
duplication) of (a) Indebtedness of Restricted Subsidiaries on such date and (b)
Indebtedness of the Company and its Restricted Subsidiaries secured by Liens
permitted by Section 10.2(i) on such date.
"PROPERTY" or "PROPERTIES" means, unless otherwise
specifically limited, real or personal property of any kind, tangible or
intangible, choate or inchoate.
"PURCHASER" means each purchaser listed in Schedule A.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least
a majority in principal amount of the Series 1997 Notes at the time outstanding
(exclusive of Series 1997 Notes then owned by the Company or any of its
Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and
any other officer of the Company with responsibility for the administration of
the relevant portion of this agreement.
"RESTRICTED INVESTMENTS" means all Investments of the Company
and its Restricted Subsidiaries, other than:
(a) property or assets to be used or consumed in the ordinary
course of business;
(b) assets arising from the sale of goods or services in the
ordinary course of business;
(c) Investments in Restricted Subsidiaries or in any Person
that, as a result thereof, becomes a Restricted Subsidiary;
6
Schedule B
<PAGE> 66
(d) Investments existing as of the date of this Agreement that
are listed in the attached Schedule B-1;
(e) Investments in treasury stock;
(f) Investments in:
(i) obligations, maturing within five years from the
date of acquisition, of or fully guaranteed by (A) the United
States of America or an agency thereof or (B) Canada or a
province thereof;
(ii) state or municipal securities (including auction
rate floaters and variable rate demand Notes), having an
effective maturity within one year from the date of
acquisition, which are rated in one of the top two rating
classifications by at least one nationally recognized rating
agency;
(iii) certificates of deposit or banker's acceptances
maturing within one year from the date of acquisition of or
issued by Bank of America National Trust & Savings Association
or other commercial banks whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of
the bank holding company owning all of the capital stock of
such bank) are rated in one of the top two rating
classifications by at least one nationally recognized rating
agency;
(iv) commercial paper maturing within 270 days from
the date of issuance which, at the time of acquisition, is
rated in one of the top two rating classifications by at least
one credit rating agency of recognized national standing;
(v) repurchase agreements, having a term of not more
than 90 days and fully collateralized with obligations of the
type described in clause (i), with a bank satisfying the
requirements of clause (iii);
(vi) money market instrument programs that are
properly classified as current assets in accordance with GAAP;
and
(vii) loans or advances not in excess of .5% of
Adjusted Consolidated Net Worth made in the ordinary course of
business to officers, directors and employees for incidental
expenses;
For purposes of this Agreement, an Investment shall be valued in accordance with
GAAP.
"RESTRICTED SUBSIDIARY" means any Subsidiary (a) of which at
least a majority of the voting securities are owned by the Company and/or one or
more Wholly-Owned Restricted Subsidiaries and of which the Company has
management control and (b) that the Company has
7
<PAGE> 67
designated a Restricted Subsidiary by notice in writing (including designation
in Section 5.4) given to the holders of the Notes.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SERIES 1997 NOTES" is defined in Section 1.2.
"SERIES 1997-A NOTES" is defined in Section 1.2.
"SERIES 1997-B NOTES" is defined in Section 1.2.
"SERIES 1997-C NOTES" is defined in Section 1.2.
"SOURCE" is defined in Section 6.2
"SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"SUPPLEMENT" is defined in Section 1.1.
"THIS AGREEMENT" OR "THE AGREEMENT" is defined in Section
17.3.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company
that is not designated a Restricted Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary
100% of all of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
8
Schedule B
<PAGE> 68
SCHEDULE B-1
------------
<TABLE>
EXISTING INVESTMENTS
<S> <C>
RF Micro Devices, Inc. $18,310,580
Nextwave 6,600,290
Windata 3,129,493
National Rubber 4,344,220
Telecom Wireless Solutions, Inc. Under 100K
C-Com, spol. s.r.o. Under 100K
</TABLE>
Schedule B-1
<PAGE> 69
SCHEDULE 4.9
------------
CHANGES IN CORPORATE STRUCTURE
None
Schedule 4.9
<PAGE> 70
SCHEDULE 5.3
------------
DISCLOSURE MATERIALS
None
Schedule 5.3
<PAGE> 71
SCHEDULE 5.4(i,ii)
------------------
SUBSIDIARIES AND OWNERSHIP
--------------------------
OF SUBSIDIARY STOCK
-------------------
The following is a list of the subsidiaries of Allen Telecom Inc. (Delaware,
02-03-69), and indented, subsidiaries of such subsidiaries, including in each
case the state or other jurisdiction in which each subsidiary was incorporated
or organized, and indicating in each case the percentage of voting securities
owned by the immediate parent.
<TABLE>
<CAPTION>
STATE/COUNTRY OF
NAME OF CORPORATION INCORPORATION DATE %
- ------------------- ------------- ---- -
<S> <C> <C> <C>
The Allen Group Canada Limited Ontario, Canada 04-19-72 100
The Allen Group Internat'l Sales Corp. Barbados 09-15-94 100
The Allen Group International, Inc. Delaware 07-19-73 100
The Allen Group GmbH Germany 09-29-70 100
Allen Telecom Canada, Inc. Ontario 04-14-93 100
Allen Telecom (France) S.A. (2) France 04-09-97 100
Telia S.A. (3) France 10-19-90 62
FOREM S.r.l. Italy 11-14-94 100
FOREM France S.a.r.l. (4) France 1993 99
FOREM (UK) Limited U.K. 1988 100
Mikom G.m.b.H. (5) Germany 05-07-85 62
Mikom Vertriebs und Austria 10-18-96 60
Service GmbH (6)
Mitras Ltd. (7) Hungary 1992 60
C-com, spol. s.r.o. Czeckoslovakia 02-26-96 25
Allen Telecom Group Limited (1) U.K. 05-08-72 100
Allen Telecom (Holdings) Pty Limited Australia 07-18-96 100
Allen Telecom (Australia) Pty Limited Australia 07-23-96 100
Allen Telecom (Hong Kong) Limited (8) Hong Kong 04-25-97 100
Allen Telecom Investments, Inc. Delaware 04-01-97 100
Allen Telecom (Singapore) Pte Limited Singapore 06-03-97 100
Allen Telecomunicadoes do Brasil Ltda (9) Brazil 11-95 100
Antenna Specialists Co., Inc. Delaware 10-07-88 100
Antespec, S.A. de C.V. Mexico 11-14-88 100
Comsearch Holdings Inc. Delaware 08-22-97 100
Decibel Mobilcom GmbH (1) Germany 07-28-90 100
Decibel Mobilcom Limited (1) England 01-31-91 100
MARTA Technologies, Inc. Delaware 10-14-92 100
Orion Far East Management Inc. (1) Delaware 07-16-81 100
Orion Industries, Inc., Limited (1) Hong Kong 06-01-71 100
Orion Imports & Exports Limited (1) Hong Kong 09-07-73 100
Orion Industries, Inc. Japan (1) Japan 09-73 100
Orion Industries Taiwan Limited (1) Taiwan 10-73 100
Signal Science, Incorporated California 09-25-74 100
Tekmar Sistemi S.r.l. (10) Italy 09-20-80 64.3
</TABLE>
Schedule 5.4(i,ii)
<PAGE> 72
(1) These subsidiaries are not significant in the aggregate and are no
longer active.
(2) Of the 2,500 shares issued and outstanding, 2,494 shares are owned by
Allen Telecom Inc., 1 share is owned by Allen Telecom Investments, Inc.
and the remaining 5 shares are owned in name only by Allen employees.
(3) Of the 10,000 shares issued and outstanding, 6,196 shares are owned by
Allen Telecom (France) S.A., 4 shares are owned by Allen employees, and
Allen Telecom (France) SA. owns options to acquire the remaining 3,800
shares.
(4) 99% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.r.l. and the remaining 1% is owned by senior management of
FOREM France S.a.r.l.
(5) 62% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.r.l. and the remaining 38% is owned by the managing director
of Mikom G.m.b.H.
(6) 60% of the outstanding capital stock is owned by Mikom G.m.b.H. and the
remaining 40% is owned by the partners of Mikom G.m.b.H. in the
venture.
(7) 60% of the outstanding capital stock of this subsidiary is owned by
MIKOM G.m.b.H. and the remaining 40% is owned by senior management of
Mitras Ltd.
(8) Of the 1,000 shares issued and outstanding, 999 shares are owned by
Allen Telecom Inc. and 1 share is owned by Allen Telecom Investments,
Inc.
(9) 99% of the outstanding capital stock of this subsidiary is owned by
Allen Telecom Inc. and the remaining 1% is owned by Allen Telecom
Investments, Inc.
(10) 64.3% of the outstanding capital stock of this subsidiary is owned by
Allen Telecom, Inc. which also owns options to acquire the remaining
35.7%.
<PAGE> 73
SCHEDULE 5.4(iii)
-----------------
SUBSIDIARIES AND OWNERSHIP
OF SUBSIDIARY STOCK
OFFICERS OF ALLEN TELECOM INC.
------------------------------
Philip Wm. Colburn Chairman of the Board*
J. Chisholm Lyons Vice Chairman of the Board*
Robert G. Paul President and Chief Executive Officer
Rober A. Youdelman Executive Vice President, Chief Financial Officer and
Assistant Secretary
Erik H. van der Kaay Executive Vice President
James L. LePorte, III Vice President, Treasurer
and Controller
McDara P. Folan, III Vice President, Secretary
and General Counsel
Peter G. deVilliers Vice President
Alan J. Amira Assistant Secretary
John K. Burk Assistant Controller
Dale W. Horn Assistant Secretary
Roger L. Schroeder Assistant Treasurer and Assistant Secretary
* Not officers or employees of the Company under the By-Laws
Schedule 5.4(iii)
<PAGE> 74
SCHEDULE 5.4(iii)
-----------------
SUBSIDIARIES AND OWNERSHIP
OF SUBSIDIARY STOCK
DIRECTORS OF ALLEN TELECOM INC.
-------------------------------
Philip Wm. Colburn
Jill K. Conway
Albert H. Gordon
William O. Hunt
J. Chisholm Lyons
John F. McNiff
Robert G. Paul
Charles W. Robinson
William M. Weaver, Jr.
Schedule 5.4(iii)
<PAGE> 75
SCHEDULE 5.5
------------
FINANCIAL STATEMENTS
December 31, 1992 Audited Annual Financial Statements
December 31, 1993 Audited Annual Financial Statements
December 31, 1994 Audited Annual Financial Statements
December 31, 1995 Audited Annual Financial Statements
December 31, 1996 Audited Annual Financial Statements
March 31, 1997 Unaudited Quarterly Financial Statements
June 30, 1997 Unaudited Quarterly Financial Statements
September 30, 1997 Unaudited Quarterly Financial Statements
Schedule 5.5
<PAGE> 76
SCHEDULE 5.8
------------
LITIGATION
None.
Schedule 5.8
<PAGE> 77
SCHEDULE 5.11
-------------
LICENSES, PERMITS, ETC.
None.
SCHEDULE 5.11
<PAGE> 78
SCHEDULE 5.14
-------------
USE OF PROCEEDS
1) Repayment of the Note Agreement in the amount of $15 million plus
Prepayment Premium between Allen and the Variable Annuity Life Insurance
Company (AMGEN).
2) Repayment of borrowings under the Company's domestic revoling credit
agreement of $30 million.
3) Payment of the final pay-out relating to the purchase agreement between
Allen and Forem S.P.A. expected to occur in January 1998 at an amount of
approximately $16-$20 million.
4) General Corporate Purposes
Schedule 5.14
<PAGE> 79
SCHEDULE 5.15
-------------
EXISTING INDEBTEDNESS
9/30/97
1. Variable Rate Industrial Revenue Bond in the amount of $4,000,000 entered
into with Dresdner Bank AG, Series 1985 of the Michigan Strategic Fund, due
2025.
2. Variable Rate Industrial Revenue Bond in the amount of $5,000,000 entered
into with Dresdner Bank AG, Series 1985 of the County of Cuyahoga, Ohio,
due 2015.
3. Variable Rate Industrial Revenue Bond in the amount of $3,000,000 entered
into with Dresdner Bank AG, Series 1987 of the County of Cuyahoga, Ohio,
due 2012.
4. Variable Rate Industrial Revenue Bond in the amount of $3,500,000 entered
into with Dresdner Bank AG, Series 1996 of the County of Bedford, Virginia,
due 2016.
5. Note Agreement dated February 16, 1993, for the $15,000,000 8.13%
Guaranteed Series B Senior Notes due February 16, 2003 between Allen and
The Variable Annuity Life Insurance Company.
6. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Interest rate fixed at 7.3%. Outstanding
balance at 7/31/97 was Lira 101 million, due 1998.
7. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Interest rate fixed at 4.5%. Outstanding
balance at 7/31/97 was Lira 1,089 million, due 2000.
8. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Interest rate fixed at 11.28%. Outstanding
balance at 7/31/97 was Lira 471 million, due 2000.
9. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Interest rate fixed at 8.46%. Outstanding
balance at 7/31/97 was Lira 1,145 million, due 2007.
10. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Interest rate fixed at 9.27%. Outstanding
balance at 7/31/97 was Lira 1,122 million, due 2008.
11. FOREM S.P.A. long term credit with Interbanca secured by a first mortgage
on building. Variable interest rate currently at 7.45%. Outstanding balance
at 7/31/97 was Lira 1,550 million, due 2000.
<PAGE> 80
12. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Fixed interest rate at 7.75%. Outstanding
balance at 7/31/97 was Lira 297 million, due 1998.
13. FOREM S.P.A. long term credit agreement with Industry Ministry of Italy for
research and development needs. Fixed interest rate at 3.70%. Outstanding
balance at 7/31/97 was Lira 2,640 million, due 2004.
14. Forem S.P.A. short term borrowings for working capital and foreign currency
hedges from various Italian banks. Outstanding balance at 7/31/97 was Lira
10,475 million.
15. Mikom GmbH long term credit agreement with Deutsche Bank, fixed interest
rate at 4.65%. Outstanding balance at 7/31/97 was DM 2,849 million, due
2002.
16. Mikom GmbH long term credit agreement with Bayerische Vereinsbank AG, fixed
interest rate at 9.50%. Outstanding balance at 7/31/97 was DM 307 thousand,
due 2000.
17. Mikom GmbH long term credit agreement with Dresdner Bank AG, fixed interest
rate at 6.80%. Outstanding balance at 7/31/97 was DM 113,286 thousand, due
1998.
18. Mikom GmbH long term credit agreement with Deutsche Bank, fixed interest
rate at 3.50%. Outstanding balance at 7/31/97 was DM 670 thousand, due
2003.
19. Allen guaranty in the amount of $16,611,025 in favor of Bayersiche
Vereinsbank, Milan, Italy branch resulting from the purchase agreement
between Allen and FOREM S.P.A. This guaranty relates to the remaining
pay-out to FOREM based on the financial performance of FOREM during fiscal
year 1997.
20. MARTA capitalized lease relating to the Ohio program with an aggregate
principal amount of $14,143,020 at September 30, 1997.
21. Allen's long-term domestic revolving credit agreement with Bank of Montreal
as the facility's agent dated November 11, 1996. Outstanding balance at
9/30/97 was $30,000,000.
<PAGE> 81
SCHEDULE 10.2
-------------
EXISTING LIENS
9/30/97
Liens securing the following Indebtedness:
1. Long term note in the amount of Lira 1,550,395,365 secured by a mortgage on
plant and equipment of FOREM in favor of InterBanca.
2. Long term note in the amount of DM 669,800 secured by a mortgage on the
original Mikom building in favor of Deutsche Bank.
3. Long term note in the amount of DM 2,848,631 secured by a mortgage on the
new Mikom building in favor of Deutsche Bank.
4. Second Amended and Restated Reimbursement and Security Agreement, dated as
of December 18, 1995, between Allen and Dresdner Bank AG, New York Branch,
relating to County of Cuyahoga, Ohio $3,000,000 Floating Rate Demand
Industrial Development Revenue Bonds (Series 1987).
5. Second Amended and Restated Reimbursement and Security Agreement, dated as
of December 18, 1995, between Allen and Dresdner Bank, New York Branch,
relating to County of Cuyahoga, Ohio $5,000,000 Floating Rate Demand
Industrial Development Revenue Bonds (Series 1985).
6. Reimbursement and Security Agreement, dated as of August 1, 1996, between
Allen and Dresdner Bank, New York Branch, relating to Industrial
Development Authority of The County of Bedford, Virginia $3,500,000 Revenue
Bonds (Series 1996).
7. Second Amended and Restated Reimbursement and Security Agreement, dated as
of December 18, 1995, between Allen and Dresdner Bank, New York Branch,
relating to Michigan Strategic Fund $4,000,000 Industrial Development
Revenue Bonds (Series 1985).
Schedule 10.2
<PAGE> 82
EXHIBIT 1.1-A
-------------
[FORM OF NOTE]
ALLEN TELECOM INC.
[____]% SENIOR NOTE, SERIES [___], DUE [__________, ____]
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ALLEN TELECOM INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on [ ], [ ], with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of [____]% per annum from the date hereof, payable semiannually, on
[______] [____] and [______][____] in each year, commencing with the [______]
[____] or [______] [____] next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) to the extent permitted by law
on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount (as
defined in the Note Purchase Agreement referred to below), payable semiannually
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the greater of (i) [_____]% or (ii)
2% over the rate of interest publicly announced by Bank of America National
Trust & Savings Association from time to time in Chicago, Illinois as its "base"
or "prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of Bank of America National Trust &
Savings Association in Chicago, Illinois or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to a Note Purchase Agreement dated as of November
1, 1997 [and a Supplement thereto dated as of [ ], [ ]](as from time to time
further amended and supplemented, the "Note Purchase Agreement"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.
Exhibit 1.1-A
<PAGE> 83
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
[The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase Agreement.] This
Note is [also] subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase Agreements
but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note will be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
Illinois excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
ALLEN TELECOM INC.
By:
-------------------------------
Title:
----------------------------
2
Exhibit 1.1-A
<PAGE> 84
EXHIBIT 1.1-B
-------------
[FORM OF SUPPLEMENT]
SUPPLEMENT TO NOTE PURCHASE AGREEMENT
THIS SUPPLEMENT is entered into as of [ ], [ ] (this "SUPPLEMENT")
between Allen Telecom Inc., a Delaware corporation (the "COMPANY"), and the
Purchasers listed in the attached Schedule A (the "PURCHASERS").
R E C I T A L S
---------------
A. The Company has entered into a Note Purchase Agreement dated as of
November 1, 1997 with the purchasers listed in Schedule A thereto [and one or
more supplements or amendments thereto] (as heretofore amended and supplemented,
the "NOTE PURCHASE AGREEMENT"); and
B. The Company desires to issue and sell, and the Purchasers desire to
purchase, an additional series of Notes (as defined in the Note Purchase
Agreement) pursuant to the Note Purchase Agreement and in accordance with the
terms set forth below;
NOW, THEREFORE, the Company and the Purchasers agree as follows:
1. AUTHORIZATION OF THE NEW SERIES OF NOTES. The Company has authorized
the issue and sale of $[ ] aggregate principal amount of Notes to be designated
as its [__]% Senior Notes, Series [ ], due [ ], [ ] (the "SERIES [ ] NOTES",
such term to include any such Notes issued in substitution therefor pursuant to
Section 13 of the Note Purchase Agreement). The Series [ ] Notes shall be
substantially in the form set out in Exhibit 1, with such changes therefrom, if
any, as may be approved by you and the Company.
2. SALE AND PURCHASE OF SERIES [ ] NOTES. Subject to the terms and
conditions of this Supplement and the Note Purchase Agreement, the Company will
issue and sell to each of the Purchasers, and the Purchasers will purchase from
the Company, at the Closing provided for in Section 3, Series [ ] Notes in the
principal amount specified opposite their respective names in Schedule A at the
purchase price of 100% of the principal amount thereof. The obligations of the
Purchasers hereunder are several and not joint obligations and no Purchaser
shall have any liability to any Person for the performance or non-performance by
any other Purchaser hereunder.
Exhibit 1.1-B
<PAGE> 85
3. CLOSING. The sale and purchase of the Series [ ] Notes to be
purchased by the Purchasers shall occur at the offices of Gardner, Carton &
Douglas, Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois
60610 at 9:00 a.m., Chicago time, at a closing (the "CLOSING") on [ ], [ ] or on
such other Business Day thereafter on or prior to [ ], [ ] as may be agreed upon
by the Company and the Purchasers. At the Closing the Company will deliver to
each Purchaser the Series [ ] Notes to be purchased by it in the form of a
single Note (or such greater number of Series [ ] Notes in denominations of at
least $500,000 as such Purchaser may request) dated the date of the Closing and
registered in its name (or in the name of its nominee), against delivery by such
Purchaser to the Company or its order of immediately available funds in the
amount of the purchase price therefor by wire transfer of immediately available
funds for the account of the Company to account number [__________] at
[_________________] Bank, [INSERT BANK ADDRESS, ABA NUMBER FOR WIRE TRANSFERS,
AND ANY OTHER RELEVANT WIRE TRANSFER INFORMATION]. If at the Closing the Company
shall fail to tender such Series [ ] Notes to a Purchaser as provided above in
this Section 3, or any of the conditions specified in Section 4 of the Note
Purchase Agreement, as modified or expanded by Section 4 hereof, shall not have
been fulfilled to such Purchaser's satisfaction, such Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights it may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING. Each Purchasers obligation to purchase and
pay for the Series [ ] Notes to be sold to it at the Closing is subject to the
fulfillment to its satisfaction, prior to or at the Closing, of the conditions
set forth in Section 4 of the Note Purchase Agreement, as hereafter modified,
and to the following additional conditions:
[Set forth any modifications and additional conditions.]
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchasers that each of the representations and
warranties contained in Section 5 of the Note Purchase Agreement is true and
correct as of the date hereof (i) except that all references to "Purchaser" and
"you" therein shall be deemed to refer to the Purchasers hereunder, all
references to "this Agreement" shall be deemed to refer to the Note Purchase
Agreement as supplemented by this Supplement, and all references to "Notes"
therein shall be deemed to include the Series [ ] Notes, and (ii) except for
changes to such representations and warranties or the Schedules referred to
therein, which changes are set forth in the attached Schedule 5.
6. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser confirms to the
Company that the representations set forth in Section 6 of the Note Purchase
Agreement are true and correct as to such Purchaser.
2
Exhibit 1.1-B
<PAGE> 86
7. MANDATORY PREPAYMENT OF THE SERIES [ ] NOTES. [The Series [ ] Notes
are not subject to mandatory prepayment by the Company.] [On [ ], [ ] and on
each [ ] thereafter to and including [ ], [ ] the Company will prepay $[ ]
principal amount (or such lesser principal amount as shall then be outstanding)
of the Series [ ] Notes at par and without payment of the Make-Whole Amount or
any premium.]
8. APPLICABILITY OF NOTE PURCHASE AGREEMENT. Except as otherwise
expressly provided herein (and expressly permitted by the Note Purchase
Agreement), all of the provisions of the Note Purchase Agreement are
incorporated by reference herein and shall apply to the Series [ ] Notes as if
expressly set forth in this Supplement.
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Supplement to be executed and delivered as of the date set forth above.
ALLEN TELECOM INC.
By:
---------------------
Title:
------------------
[ADD PURCHASER SIGNATURE BLOCKS]
3
Exhibit 1.1-B
<PAGE> 87
Schedule A
to Supplement
-------------
INFORMATION RELATING TO PURCHASERS
Principal Amount of Series
Name and Address of Purchaser [ ] Notes to be Purchased
- ----------------------------- ---------------------------
[NAME OF PURCHASER] $
(1) All payments by wire transfer
of immediately available
funds to:
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
(3) All other communications:
4
Exhibit 1.1-B
<PAGE> 88
Schedule 5
to Supplement
-------------
EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES
5
Exhibit 1.1-B
<PAGE> 89
Exhibit 1 to
Supplement
----------
[FORM OF SERIES [ ] NOTE]
6
Exhibit 1.1-B
<PAGE> 90
EXHIBIT 1.2(a)
--------------
[FORM OF SERIES 1997-A NOTE]
ALLEN TELECOM INC.
6.60% Senior Note,
Due November 14, 2003
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ALLEN TELECOM INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on November 14, 2003, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.60% per annum from the date hereof, payable
semiannually, on May 14 and November 14 in each year, commencing with the May 14
or November 14 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.60% or (ii) 2%
over the rate of interest publicly announced by Bank of America National Trust &
Savings Association from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of Bank of America National Trust &
Savings Association in Chicago, Illinois or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.
This Note is one of a series of Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of November 1,
1997 as from time to time amended and supplemented, the "Note Purchase
Agreement"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.
Exhibit 1.2(a)
<PAGE> 91
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreement. This Note is
also subject to optional prepayment, in whole or from time to time in part, at
the times and on the terms specified in the Note Purchase Agreement but not
otherwise.
If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note will be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
Illinois excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
ALLEN TELECOM INC.
By:
---------------------------
Title:
------------------------
2
Exhibit 1.2(a)
<PAGE> 92
EXHIBIT 1.2(b)
--------------
[FORM OF SERIES 1997-B NOTE]
ALLEN TELECOM INC.
6.65% Senior Note,
Due November 14, 2007
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ALLEN TELECOM INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on November 14, 2007, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.65% per annum from the date hereof, payable
semiannually, on May 14 and November 14 in each year, commencing with the May 14
or November 14 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.65% or (ii) 2%
over the rate of interest publicly announced by Bank of America National Trust &
Savings Association from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of Bank of America National Trust &
Savings Association in Chicago, Illinois or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.
This Note is one of a series of Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of November 1,
1997 as from time to time amended and supplemented, the "Note Purchase
Agreement"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.
Exhibit 1.2(b)
<PAGE> 93
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreement. This Note is
also subject to optional prepayment, in whole or from time to time in part, at
the times and on the terms specified in the Note Purchase Agreement but not
otherwise.
If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note will be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
Illinois excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
ALLEN TELECOM INC.
By:
----------------------------
Title:
-------------------------
2
Exhibit 1.2(b)
<PAGE> 94
EXHIBIT 1.2(c)
--------------
[FORM OF SERIES 1997-C NOTE]
ALLEN TELECOM INC.
6.74% Senior Note,
Due November 14, 2007
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ALLEN TELECOM INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on November 14, 2007, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.74% per annum from the date hereof, payable
semiannually, on May 14 and November 14 in each year, commencing with the May 14
or November 14 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.74% or (ii) 2%
over the rate of interest publicly announced by Bank of America National Trust &
Savings Association from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of Bank of America National Trust &
Savings Association in Chicago, Illinois or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.
This Note is one of a series of Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of November 1,
1997 as from time to time amended and supplemented, the "Note Purchase
Agreement"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.
Exhibit 1.2(c)
<PAGE> 95
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note will be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
Illinois excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
ALLEN TELECOM INC.
By:
------------------------------
Title:
---------------------------
2
Exhibit 1.2(c)
<PAGE> 96
EXHIBIT 4.4(a)
--------------
FORM OF OPINION OF COUNSEL
TO THE COMPANY
The opinion of McDara P. Folan III, Vice President, General Counsel, of
the Company, shall be to the effect that:
1. Each of the Company and each Subsidiary incorporated under the laws
of the United States or any state thereof, including the District of Columbia,
is a corporation duly incorporated, validly existing in good standing under the
laws of the state of its incorporation, and each has all requisite corporate
power and authority to own and operate its properties, to carry on its business
as now conducted, and, in the case of the Company, to enter into and perform the
Note Purchase Agreement and to issue and sell the Series 1997 Notes.
2. Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing as a foreign corporation authorized to do business
in each jurisdiction where the nature of its or their businesses or the
character of its or their properties makes such qualification or licensing
necessary, except where such failure to be so qualified or licensed would not
have a Material Adverse Effect.
3. The Note Purchase Agreement and the Series 1997 Notes have been duly
authorized by proper corporate action on the part of the Company, have been duly
executed and delivered by an authorized officer of the Company, constitute the
legal, valid and binding agreements of the Company, and, assuming Illinois law
is identical to Ohio law, are enforceable in accordance with their terms, except
to the extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
4. The offering, sale and delivery of the Series 1997 Notes do not
require the registration of the Series 1997 Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust Indenture
Act of 1939, as amended.
5. No authorization, approval or consent of, and no designation,
filing, declaration, registration and/or qualification with, any Governmental
Authority is necessary or required in connection with the execution, delivery
and performance by the Company of the Note Purchase Agreement or the offering,
issuance and sale by the Company of the Series 1997 Notes.
6. The issuance and sale of the Series 1997 Notes by the Company, the
performance of the terms and conditions of the Series 1997 Notes and the Note
Purchase Agreement and the
Exhibit 4.4(a)
<PAGE> 97
execution and delivery of the Note Purchase Agreement do not conflict with, or
result in any breach or violation of any of the provisions of, or constitute a
default under, or result in the creation or imposition of any Lien on, the
property of the Company or any Subsidiary pursuant to the provisions of (i) the
Restated Certificate of Incorporation, as amended, or Restated By-laws of the
Company, as amended, or the charter or by-laws of any Subsidiary, each as
amended, (ii) any loan agreement or evidence of Indebtedness known to such
counsel to which the Company or any Subsidiary is a party or by which any of
them or their property is bound or may be affected, (iii) any other agreement or
instrument known to such counsel to which the Company or any Subsidiary is a
party or by which any of them or their property is bound or may be affected,
(iv) any law (including usury laws) or regulation applicable to the Company, or
(v) any order, writ, injunction or decree known to such counsel of any court or
Governmental Authority applicable to the Company or any Subsidiary.
7. All of the issued and outstanding shares of capital stock of each
Subsidiary incorporated in the United States or any state thereof, including the
District of Columbia, have been duly and validly issued, are fully paid and
nonassessable and are owned of record by the Company free and clear of any
perfected pledge or, to the knowledge of such counsel, any other perfected Lien.
8. There are no actions, suits or proceedings pending, or, to such
counsel's knowledge, threatened against, or affecting the Company or any
Subsidiary, at law or in equity or before or by any Governmental Authority, that
are likely to result, individually or in the aggregate, in a Material Adverse
Effect.
9. Neither the Company nor any Subsidiary is (i) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"), (ii) a "public utility" as defined in the Federal Power Act,
as amended, or (iii) an "investment company" or an "affiliated person" thereof,
as such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
10. The issuance of the Series 1997 Notes and the intended use of the
proceeds of the sale of the Series 1997 Notes do not violate or conflict with
Regulation G, T or X of the Board of Governors of the Federal Reserve System.
The opinion of Mr. Folan shall cover such other matters relating to the sale of
the Series 1997 Notes as the Purchasers may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company and with respect to matters governed by the laws of any jurisdiction
other than the United States of America, the Delaware General Corporation Law
and the laws of the State of Ohio, such counsel may rely upon the opinions of
counsel deemed (and stated in their opinion to be deemed) by him to be competent
and reliable.
2
Exhibit 4.4(a)
<PAGE> 98
EXHIBIT 4.4(b)
--------------
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The opinion of Gardner, Carton & Douglas, special counsel to the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to enter into the Agreement and to issue and sell the Series
1997 Notes.
2. The Agreement and the Series 1997 Notes have been duly authorized by
proper corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Series 1997 Notes do not require the
registration of the Series 1997 Notes under the Securities Act of 1933, as
amended, nor the qualification of an indenture under the Trust Indenture Act of
1939, as amended.
4. The issuance and sale of the Series 1997 Notes and compliance with
the terms and provisions of the Series 1997 Notes and the Agreement will not
conflict with or result in any breach of any of the provisions of the
Certificate of Incorporation or By-Laws of the Company.
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Purchase Agreement or the Series 1997 Notes.
The opinion of Gardner, Carton & Douglas also shall state that the opinion of
McDara Folan, Vice President, General Counsel, of the Company, delivered to you
pursuant to the Agreement, is satisfactory in form and scope to Gardner, Carton
& Douglas, and, in its opinion, the Purchasers and it are justified in relying
thereon and shall cover such other matters relating to the sale of the Series
1997 Notes as the Purchasers may reasonably request.
Exhibit 4.4(b)
<PAGE> 1
EXHIBIT 10(q)
-------------
AMENDMENT TO RESTRICTED STOCK AGREEMENTS
PURSUANT TO 1992 STOCK PLAN
(SALARY INCREASE DEFERRAL)
RESOLVED, that the Agreements dated April 28, 1992, as subsequently
amended on February 22, 1995 and April 27, 1997, between the Corporation
and each of Robert G. Paul, Erik H. van der Kaay, Robert A. Youdelman and
James L. LePorte, III, be amended by deleting the current last three
Average Net Income targets of $.96, $1.08 and $1.20 set forth in paragraph
3(a)(iii) of such Agreements and inserting therefor the following Average
Net Income targets: $1.03, $1.15 and $1.27; and
FURTHER RESOLVED, that the officers of the Corporation, and each of
them, hereby are authorized to do and perform any and all acts and to
execute and deliver any and all documents, amendments, agreements or other
instruments as they may deem necessary or advisable to effectuate the
foregoing resolutions, and any actions taken by the officers of the
Corporation, or any of them, in furtherance of the foregoing resolutions
hereby are ratified and confirmed as the actions of the Corporation.
February 17, 1998
<PAGE> 1
EXHIBIT 10(v)
-------------
SECOND AMENDMENT TO
ALLEN TELECOM INC. 1994 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
ALLEN TELECOM INC., a Delaware corporation (the "Company"), hereby
adopts this Second Amendment to the Allen Telecom Inc. 1994 Non-Employee
Directors Stock Option Plan (the "Plan"), effective as of the close of business
on February 17, 1998.
WHEREAS, the Board of Directors of the Company has adopted a resolution
at its meeting held on February 17, 1998 to increase the number of options to
purchase shares of Common Stock granted under the Plan to each Non-Employee
Director each year as Formula Awards (as such terms are defined under the Plan)
from 1,000 to 3,000;
NOW, THEREFORE, Section 5(a) of the Plan hereby is amended by deleting
the number "1,000" and inserting therefor the number "3,000." All other
provisions of the Plan shall remain unchanged and in full force and effect.
EXECUTED on this 17th day of February, 1998.
ALLEN TELECOM INC.
By: /s/ McDara P. Folan, III
------------------------
McDara P. Folan, III
Vice President, Secretary and
General Counsel
<PAGE> 1
Exhibit 10(pp)
AMENDMENT OF
SUPPLEMENTAL PENSION BENEFIT AGREEMENT
--------------------------------------
THIS AMENDING AGREEMENT made as of the 1st day of August, 1997
by and between ALLEN TELECOM INC., a Delaware Corporation, ("Allen") having its
principal executive offices at Beachwood, Ohio, and PHILIP W. COLBURN, of Los
Angeles, California ("Colburn").
RECITALS
--------
A. Allen maintains a retirement plan for employees designated
as the Allen Telecom Inc. Corporate Retirement Plan (the "Pension Plan"), which
is intended to meet the requirements of a "qualified plan" under the Internal
Revenue Code of 1986, as amended (the "Code"); and
B. Allen and Colburn have heretofore entered into a
Supplemental Pension Benefit Agreement, dated as of December 6, 1983 as amended
by certain provisions of the Employment Agreement between Allen and Colburn,
dated as of June 28, 1988, and by an Amending Agreement, dated as of December 5,
1989, and as further amended and restated by an Amended and Restated
Supplemental Pension Benefit Agreement, dated as of December 20, 1990, and as
further amended and restated by an Amended and Restated Supplemental Pension
Benefit Agreement dated as of February 27, 1992 (such Supplemental Pension
Benefit Agreement, as amended hereinafter referred to as the "Pension
Agreement"), which is intended to provide an aggregate level of pension benefits
to Colburn which exceed the qualified benefits payable under the Pension Plan,
whether or not such Pension Plan benefits are limited in amount by provisions of
the Code affecting qualified plans only; and
C. Colburn's employment by Allen terminated on December 31,
1991 and he elected early retirement under the Pension Plan and an optional form
of payment under the Pension Plan.
NOW, THEREFORE, in consideration of the premises and of
Colburn's services and significant contributions to Allen, the parties hereto
agree as follows:
1
<PAGE> 2
I.
Paragraph 3 of the Pension Agreement is hereby amended by the
addition of the following new subsection at the end thereof:
"(d) Colburn may elect to receive his remaining Supplemental
Pension Benefit in a single cash lump sum payment. If Colburn so
elects, the amount to be paid to him shall be equal to the actuarial
present value of all remaining Supplemental Pension Benefit payments
calculated as of the date of such payment reduced by ten percent
(10%). The remaining ten percent (10%) of the actuarial present value
of all remaining Supplemental Pension Benefit payments shall be
forfeited."
II.
Paragraph 4 of the Pension Agreement is hereby amended in its
entirety to read as follows:
"4. Allen shall not be required to fund, or otherwise segregate
assets to be used for payment of the Supplemental Pension Benefits
hereunder. Allen may, in its sole discretion, establish a trust to
hold funds or other property to be used in payment of Supplemental
Pension Benefits hereunder; provided, however, that any funds or other
property contained therein shall remain liable for the claims of
Allen's general creditors. The obligations which Allen incurs
hereunder may be satisfied only out of its general corporate funds.
Nothing contained herein, and no action taken pursuant to the
provisions of this Pension Agreement, shall create or be construed to
create a trust of any kind or a fiduciary relationship between Allen
and Colburn, his designated beneficiary or any other person."
*.*.*.*.*
Except as herein specifically amended the Pension Agreement is
ratified and confirmed.
This Amending Agreement and the Pension Agreement as previously
amended and restated shall be read, interpreted and construed as a single
agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, Allen Telecom Inc. has caused this Amending
Agreement to be signed by its proper officer and Colburn has hereunto set his
hand this 1st day of August, 1997.
ATTEST ALLEN TELECOM INC.
By:
- ----------------------- -------------------------------
Secretary Title:
----------------------------
WITNESS: PHILIP W. COLBURN
/s/ /s/ Philip W. Colburn
- ----------------------- ----------------------------------
<PAGE> 1
Exhibit 10(uu)
--------------
AMENDMENT OF
SUPPLEMENTAL PENSION BENEFIT AGREEMENT
--------------------------------------
THIS AMENDING AGREEMENT made as of the 1st day of August, 1997
by and between ALLEN TELECOM INC., a Delaware Corporation, ("Allen") having its
principal executive offices at Beachwood, Ohio, and J. CHISHOLM LYONS, of
Burlington, Ontario, Canada ("Lyons").
RECITALS
--------
A. Allen maintains a retirement plan for employees designated
as the Allen Telecom Inc. Corporate Retirement Plan (the "Pension Plan"), which
is intended to meet the requirements of a "qualified plan" under the Internal
Revenue Code of 1986, as amended (the "Code"); and
B. Allen and Lyons have previously entered into a
Supplemental Pension Benefit Agreement, dated as of December 6, 1983 (the
"Pension Agreement") and amended as of December 20, 1990, intended to provide an
aggregate level of non-qualified and qualified pension benefits payable under
the Pension Plan, whether or not such Pension Plan benefits are limited in
amount by provisions of the Code affecting qualified plans only.
NOW, THEREFORE, in consideration of the premises and of
Lyons' services and significant contributions to Allen, the parties hereto
agree as follows:
I.
Paragraph 3 of the Pension Agreement is hereby amended by the
addition of a new paragraph following the first paragraph thereof as follows:
"Lyons may elect to receive his remaining Supplemental Pension
Benefit in a single cash lump sum payment. If Lyons so elects, the
amount to be paid to him shall be equal to the actuarial present value
of all remaining Supplemental Pension Benefit payments calulated as of
the date of such payment reduced by ten percent (10%). The remaining
ten percent (10%) of the actuarial present value of all remaining
Supplemental Pension Benfit payments shall be forfeited."
1
<PAGE> 2
II.
Paragraph 4 of the Pension Agreement is hereby amended in its
entirety to read as follows:
"4. Allen shall not be required to fund, or otherwise segregate
assets to be used for payment of the Supplemental Pension Benefits
hereunder. Allen may, in its sole discretion, establish a trust to
hold assets or other property to be used in payment of Supplemental
Pension Benefits hereunder; provided, however, that any funds or other
property contained therein shall remain liable for the claims of
Allen's general creditors. The obligations which Allen incurs
hereunder may be satisfied only out of its general corporate funds.
Nothing contained herein, and no action taken pursuant to the
provisions of this Pension Agreement, shall create or be construed to
create a trust of any kind or a fiduciary relationship between Allen
and Lyons, his designated beneficiary or any other person."
*.*.*.*.*
Except as herein specifically amended the Pension Agreement is
ratified and confirmed.
This Amending Agreement and the Pension Agreement as previously
amended shall be read, interpreted and construed as a single
agreement.
IN WITNESS WHEREOF, Allen Telecom Inc. has caused this Amending
Agreement to be signed by its proper officer and Lyons has hereunto set his
hand this 1st day of August, 1997.
ATTEST ALLEN TELECOM INC.
By:
- ----------------------- -------------------------------
Secretary Title:
----------------------------
WITNESS: J. Chisholm Lyons
/s/ /s/ J. Chisholm Lyons
- ----------------------- ----------------------------------
<PAGE> 1
Exhibit 10(zz)
--------------
AMENDMENT OF
SUPPLEMENTAL TARGET PENSION BENEFIT AGREEMENT
---------------------------------------------
THIS AMENDING AGREEMENT made as of the 1st day of
August, 1997 by and between ALLEN TELECOM INC., a Delaware
Corporation, (the "Company") having its principal executive offices at
Beachwood, Ohio, and Robert G. Paul, of Cleveland (the "Executive").
RECITALS
--------
A. The Executive has been and is employed by the Company in a
key executive capacity, and it is expected that he will continue to contribute
to the growth and success of the Company during his employment by it; and
B. The Company maintains a tax-qualified retirement plan for
employees designated as the Allen Telecom Inc. Corporate Retirement Plan (the
"Pension Plan"), which is intended to meet the requirements of a "qualified
plan" under the Internal Revenue Code of 1986, as amended (the "Code"), and a
nonqualified retirement plan for certain employees designated as The Allen Group
Inc. Restoration Plan (the "Restoration Plan"), which is intended to supplement
benefits payable under the Pension Plan by restoring benefits that cannot be
provided under the Pension Plan because of the limitations imposed under the
Internal Revenue Code and because of reductions in compensation pursuant to The
Allen Group Inc. Deferred Compensation Plan; and
C. The Company and the Executive previously entered into a
Supplemental Target Pension Benefit Agreement (the "Pension Agreement") intended
to provide an aggregate level of non-qualified and qualified pension benefits to
the Executive which exceed the benefits provided under the Pension Plan and the
Restoration Plan;
NOW, THEREFORE, in consideration of the premises and of the
Executive's services and significant contributions to the Company, the parties
hereto agree as follows:
I.
Article I of the Pension Agreement is hereby amended by the
addition of the following new Section thereto:
"SECTION 1.1(16.1). "EXECUTIVE BENEFIT PLAN" shall mean the
Allen Telecom Inc. Executive Benefit Plan."
II.
<PAGE> 2
Section 2.4 of the Pension Agreement is hereby amended in its
entirety to read as follows:
"SECTION 2.5. MAXIMUM BENEFIT. (a) In no event shall the
amount of the Executive's Supplemental Target Pension Benefit exceed an
annual amount of $250,000 reduced by four-twelfths of one percent
(4/12%) for each month (if any) by which the Executive's Supplemental
Target Pension Benefit commences before the Executive's attainment of
age 65.
(b) In the event the Executive receives or becomes entitled to
receive a benefit under the Executive Benefit Plan (the "EBP Benefit"),
the Executive's Supplemental Target Pension Benefit shall be offset and
reduced in accordance with this subsection to take into account the
value of the EBP Benefit received by the Executive. The offset
described in the preceding sentence shall be calculated as follows.
First, the EBP Benefit shall be increased by interest for the period
from the date of the payment of the EBP Benefit to the date of
commencement of benefit payments hereunder at the rate in effect under
the Pension Plan for determining Actuarial Equivalent values for lump
sum payment purposes at the time of the payment of the EBP Benefit. The
EBP Benefit, as so increased, is referred to below as the "Increased
EBP Benefit". Second, the Increased EBP Benefit shall be converted into
an annuity, payable in the same form and for the same duration as the
benefit payable to the Executive under the Pension Agreement before the
application of this subsection, that is the Actuarial Equivalent of the
Increased EBP Benefit amount, and such Actuarial Equivalent shall be
subtracted from the Executive's Supplemental Target Pension Benefit."
III.
Section 2.6 of the Pension Agreement is hereby amended by the
addition of the following new subsection at the end thereof:
"(c) Subsequent to the Executive's Benefit Commencement Date, the
Executive may elect to receive his remaining Supplemental Pension
Benefit in a single cash lump sum payment. If the Executive so elects,
the amount to be paid to him shall be equal to the actuarial
present value of all remaining Supplemental Pension Benefit
payments calculated as of the date of such payment reduced by ten
percent (10%). The remaining ten percent (10%) of the actuarial
present value of all remaining Supplemental Pension Benefit
payments shall be forfeited."
<PAGE> 3
IV.
Section 6.1 of the Pension Agreement is hereby amended in its
entirety to read as follows:
"SECTION 6.1. LIMITATION ON RIGHTS OF THE EXECUTIVE AND
BENEFICIARIES - NO LIEN. This Agreement is an unfunded, unsecured,
nonqualified plan and the entire cost of this Agreement shall be paid
from the general assets of the Company. The Company, in its sole
discretion, may establish a trust to hold funds or other property to be
used in payment of benefits under this Agreement; provided, however,
that any funds or other property contained therein shall remain liable
for the claims of the Company's general creditors. No liability for the
payment of benefits under this Agreement shall be imposed upon any
officer, director, employee, or stockholder of the Company. Nothing
contained herein shall be deemed to create a lien in favor of the
Executive or Beneficiary on any assets of the Company. The Company
shall have no obligation to purchase any assets that do not remain
subject to the claims of the creditors of the Company for use in
connection with this Agreement. Each Executive and Beneficiary shall
have the status of a general unsecured creditor of the Company and
shall have no right to, prior claim to, or security interest in, any
assets of the Company."
*.*.*.*.*
Except as herein specifically amended the Pension Agreement is
ratified and confirmed.
This Amending Agreement and the Pension Agreement shall be
read, interpreted and construed as a single agreement.
IN WITNESS WHEREOF, Allen Telecom Inc. has caused this
Amending Agreement to be signed by its proper officer and Executive has hereunto
set his hand this 1st day of August, 1997.
ATTEST ALLEN TELECOM INC.
By:
- ------------------------ -----------------------
Secretary Title:
---------------------
WITNESS:
- ------------------------ -----------------------
<PAGE> 1
Exhibit 10(iii)
---------------
AMENDMENT OF
SUPPLEMENTAL TARGET PENSION BENEFIT AGREEMENT
---------------------------------------------
THIS AMENDING AGREEMENT made as of the ___ day of
_________________ , 1997 by and between ALLEN TELECOM INC., a Delaware
Corporation, (the "Company") having its principal executive offices at
Beachwood, Ohio, and , of _____________________(the "Executive").
RECITALS
--------
A. The Executive has been and is employed by the Company in a
key executive capacity, and it is expected that he will continue to contribute
to the growth and success of the Company during his employment by it; and
B. The Company maintains a tax-qualified retirement plan for
employees designated as the Allen Telecom Inc. Corporate Retirement Plan (the
"Pension Plan"), which is intended to meet the requirements of a "qualified
plan" under the Internal Revenue Code of 1986, as amended (the "Code"), and a
nonqualified retirement plan for certain employees designated as The Allen Group
Inc. Restoration Plan (the "Restoration Plan"), which is intended to supplement
benefits payable under the Pension Plan by restoring benefits that cannot be
provided under the Pension Plan because of the limitations imposed under the
Internal Revenue Code and because of reductions in compensation pursuant to The
Allen Group Inc. Deferred Compensation Plan; and
C. The Company and the Executive previously entered into a
Supplemental Target Pension Benefit Agreement (the "Pension Agreement") intended
to provide an aggregate level of non-qualified and qualified pension benefits to
the Executive which exceed the benefits provided under the Pension Plan and the
Restoration Plan;
NOW, THEREFORE, in consideration of the premises and of the
Executive's services and significant contributions to the Company, the parties
hereto agree as follows:
Article I of the Pension Agreement is hereby amended by the
addition of the following new Section thereto:
"SECTION 1.1(16.1). "Executive Benefit Plan" shall mean the
Allen Telecom Inc. Executive Benefit Plan."
Section 2.5 of the Pension Agreement is hereby amended in its
entirety to read as follows:
<PAGE> 2
"SECTION 2.5. MAXIMUM BENEFIT. (a) In no event shall the
amount of the Executive's Supplemental Target Pension Benefit exceed an
annual amount of $250,000 reduced by four-twelfths of one percent
(4/12%) for each month (if any) by which the Executive's Supplemental
Target Pension Benefit commences before the Executive's attainment of
age 65.
(b) In the event the Executive receives or becomes entitled to
receive a benefit under the Executive Benefit Plan (the "EBP Benefit"),
the Executive's Supplemental Target Pension Benefit shall be offset and
reduced in accordance with this subsection to take into account the
value of the EBP Benefit received by the Executive. The offset
described in the preceding sentence shall be calculated as follows.
First, the EBP Benefit shall be increased by interest for the period
from the date of the payment of the EBP Benefit to the date of
commencement of benefit payments hereunder at the rate in effect under
the Pension Plan for determining Actuarial Equivalent values for lump
sum payment purposes at the time of the payment of the EBP Benefit. The
EBP Benefit, as so increased, is referred to below as the "Increased
EBP Benefit". Second, the Increased EBP Benefit shall be converted into
an annuity, payable in the same form and for the same duration as the
benefit payable to the Executive under the Pension Agreement before the
application of this subsection, that is the Actuarial Equivalent of the
Increased EBP Benefit amount. Third, such Actuarial Equivalent shall be
subtracted from the Executive's Supplemental Target Pension Benefit."
Section 2.7 of the Pension Agreement is hereby amended by the
addition of the following new subsection at the end thereof:
"(c) Subsequent to the Executive's Benefit Commencement Date, the
Executive may elect to receive his remaining Supplemental Pension
Benefit in a single cash lump sum payment. If the Executive so elects,
the amount to be paid to him shall be equal to the Actuarial
Equivalent present value of all remaining Supplemental Pension Benefit
payments calculated as of the date of such payment reduced by ten
percent (10%). The remaining ten percent (10%) of the Actuarial
Equivalent present value of all remaining Supplemental Pension Benefit
payments shall be forfeited."
Section 6.1 of the Pension Agreement is hereby amended in its
entirety to read as follows:
"SECTION 6.1. LIMITATION ON RIGHTS OF THE EXECUTIVE AND
BENEFICIARIES - NO LIEN. This Agreement is an unfunded, unsecured,
nonqualified plan and the entire cost of this Agreement shall be paid
from the general assets of the Company. The Company, in its sole
discretion, may establish a trust to hold funds or other property to be
used in payment of benefits under this Agreement; provided, however,
that any funds or other property contained therein shall remain liable
for the claims of the Company's general creditors. No liability for the
payment of benefits under this Agreement shall be imposed upon any
officer, director, employee, or stockholder of the Company. Nothing
-2-
<PAGE> 3
contained herein shall be deemed to create a lien in favor of the
Executive or Beneficiary on any assets of the Company. The Company
shall have no obligation to purchase any assets that do not remain
subject to the claims of the creditors of the Company for use in
connection with this Agreement. Each Executive and Beneficiary shall
have the status of a general unsecured creditor of the Company and
shall have no right to, prior claim to, or security interest in, any
assets of the Company."
*.*.*.*.*
Except as herein specifically amended the Pension Agreement is
ratified and confirmed.
This Amending Agreement and the Pension Agreement shall be
read, interpreted and construed as a single agreement.
IN WITNESS WHEREOF, Allen Telecom Inc. has caused this
Amending Agreement to be signed by its proper officer and Executive has hereunto
set his hand this _______day of ____________, 1997.
ATTEST ALLEN TELECOM INC.
By:
- ------------------------ -----------------------
Secretary Title:
---------------------
WITNESS:
- ------------------------ -----------------------
<PAGE> 1
Exhibit 10(jjj)
---------------
ALLEN TELECOM INC.
EXECUTIVE BENEFIT PLAN
AS AMENDED AND RESTATED EFFECTIVE OCTOBER 15, 1997
Copyright (C) 1996
By Compensation Resource Group, Inc.
All Rights Reserved
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Article Page
------- ----
ARTICLE 1
DEFINITIONS
-----------
ARTICLE 2
SELECTION, ENROLLMENT AND ELIGIBILITY
<S> <C>
2.1 SELECTION BY COMMITTEE ............................................... 5
2.2 ENROLLMENT REQUIREMENTS .............................................. 5
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION ........................... 5
ARTICLE 3
VESTING; ACCOUNT BALANCE
------------------------
3.1 VESTING IN CHANGE IN CONTROL BENEFIT ................................. 5
3.2 FORFEITURE ........................................................... 6
3.3 ACCOUNT BALANCE ...................................................... 6
ARTICLE 4
BENEFITS
--------
4.1 CHANGE IN CONTROL BENEFIT ............................................ 6
4.2 EMPLOYER BENEFIT ..................................................... 7
4.3 WITHHOLDING AND PAYROLL TAXES ........................................ 7
4.4 ALLOCATION OF CERTAIN FORFEITED BENEFITS TO RESERVE ACCOUNT .......... 7
ARTICLE 5
BENEFICIARY
-----------
5.1 BENEFICIARY .......................................................... 7
5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT ..................... 7
5.3 ACKNOWLEDGMENT ....................................................... 8
5.4 NO BENEFICIARY DESIGNATION ........................................... 8
5.5 DOUBT AS TO BENEFICIARY .............................................. 8
5.6 DISCHARGE OF OBLIGATIONS ............................................. 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 6
TERMINATION, AMENDMENT OR
-------------------------
MODIFICATION OF THE PLAN
------------------------
<S> <C>
6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE
CHANGE IN CONTROL .................................................... 8
6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE
CHANGE IN CONTROL OR FOLLOWING CHANGE IN CONTROL ..................... 9
6.3 TERMINATION OF PLAN AGREEMENT ........................................ 9
ARTICLE 7
OTHER BENEFITS AND AGREEMENTS
-----------------------------
7.1 COORDINATION WITH OTHER BENEFITS ...................................... 9
ARTICLE 8
TRUST
-----
8.1 ESTABLISHMENT OF THE TRUST ........................................... 9
8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST .......................... 9
8.3 ACCOUNTS ............................................................. 10
ARTICLE 9
INSURANCE POLICIES
------------------
9.1 POLICIES ............................................................. 11
9.2 DOCUMENTS REQUIRED BY INSURER ........................................ 11
ARTICLE 10
ADMINISTRATION
--------------
10.1 COMMITTEE DUTIES ..................................................... 12
10.2 AGENTS ............................................................... 12
10.3 BINDING EFFECT OF DECISIONS .......................................... 12
10.4 INDEMNITY OF COMMITTEE ............................................... 12
10.5 EMPLOYER INFORMATION ................................................. 12
ARTICLE 11
CLAIMS PROCEDURES
-----------------
11.1 PRESENTATION OF CLAIM ................................................ 12
11.2 NOTIFICATION OF DECISION ............................................. 13
11.3 REVIEW OF A DENIED CLAIM ............................................. 13
11.4 DECISION ON REVIEW ................................................... 13
11.5 LEGAL ACTION ......................................................... 14
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 12
MISCELLANEOUS
-------------
<S> <C>
12.1 UNSECURED GENERAL CREDITOR .......................................... 14
12.2 EMPLOYER'S LIABILITY ................................................ 14
12.3 NONASSIGNABILITY .................................................... 14
12.4 NOT A CONTRACT OF EMPLOYMENT ........................................ 14
12.5 FURNISHING INFORMATION .............................................. 15
12.6 TERMS ............................................................... 15
12.7 CAPTIONS ............................................................ 15
12.8 GOVERNING LAW ....................................................... 15
12.9 VALIDITY ............................................................ 15
12.10 NOTICE .............................................................. 15
12.11 SUCCESSORS .......................................................... 16
12.12 SPOUSE'S INTEREST ................................................... 16
12.13 INCOMPETENT ......................................................... 16
12.14 DISTRIBUTION IN THE EVENT OF TAXATION ............................... 16
</TABLE>
iii
<PAGE> 5
ALLEN TELECOM INC.
EXECUTIVE BENEFIT PLAN
As Amended and Restated Effective October 15, 1997
Allen Telecom Inc. hereby amends and restates the Allen Telecom Inc.
Executive Benefit Plan, effective October 15, 1997, on the terms hereinafter set
forth.
PURPOSE
The purpose of this Plan is to provide specified benefits for the
purpose of motivating and retention of a select group of management and highly
compensated employees who contribute materially to the continued growth,
development, and future success of Allen Telecom Inc., a Delaware corporation
(the "Company"). The Plan generally is intended to provide benefits to covered
employees in the event of a "Change of Control" of the Company (as defined
herein) and is not intended to constitute an "employee pension benefit plan"
within the meaning of Section (3)(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Benefits, if payable under the Plan,
generally will be payable prior to termination of employment.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meaning:
1.1 "Administrative Account" shall mean an account established in
accordance with Section 8.3(a)(ii) below.
1.2 "Beneficiary" shall mean one or more persons, trusts, estates or
other entities, designated in accordance with Article 5 below, that
are entitled to receive benefits under this Plan upon the death of a
Participant.
1.3 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.4 "Board" shall mean the Board of Directors of the Company.
1
<PAGE> 6
1.5 "Change in Control" shall mean the occurrence of any of the
following with respect to the Company:
(a) Any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing 30 percent or more of the combined
voting power of the Company's then outstanding securities;
(b) During any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board of Directors of
the Company (the "Board"), and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (a), (c) or (d) of this subsection) whose election
by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;
(c) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 80 percent of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 30 percent of the combined voting power of
the Company's then outstanding securities;
(d) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets;
(e) The Company voluntarily files a petition for bankruptcy under
federal bankruptcy law, or an involuntary bankruptcy petition
is filed against the
2
<PAGE> 7
Company under federal bankruptcy law, which involuntary
petition is not dismissed within 120 days of the filing;
(f) The Company makes a general assignment for the benefit of
creditors; or
(g) The Company seeks or consents to the appointment of a trustee,
receiver, liquidator or similar person.
1.6 "Change in Control Benefit" shall mean the benefit set forth in Section
4.1 below.
1.7 "Claimant" shall have the meaning set forth in Section 11.1 below.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.9 "Committee" shall mean the administrative committee appointed to manage
and administer the Plan in accordance with the provisions of Article 10
below.
1.10 "Company" shall mean Allen Telecom Inc., a Delaware corporation.
1.11 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Employer's long-term
disability program by which the Participant is covered.
1.12 "Effective Date" shall mean August 1, 1997.
1.13 "Employer" shall mean the Company and any other subsidiary that adopts
the Plan with the consent of the Company.
1.14 "Employer Benefit" shall mean the benefit set forth in Section 4.2 or
4.4 below.
1.15 "Forfeiture" shall mean a forfeiture of a Participant's rights to
benefits under this Plan as set forth in Section 3.2 below.
1.16 "Insurer" shall mean the insurance company or companies that issue one
or more Policies.
1.17 "Participant" shall mean any employee of an Employer (a) who is
selected to participate in the Plan, (b) who elects to participate in
the Plan, (c) who signs a Plan Agreement and a Beneficiary Designation
Form, (d) whose signed Plan Agreement and Beneficiary Designation Form
are accepted by the Committee, and (e) whose Plan Agreement has not
terminated.
1.18 "Participant's Account" shall mean an account established in accordance
with Section 8.3(a)(i) below.
3
<PAGE> 8
1.19 "Plan" shall mean the Allen Telecom Inc. Executive Benefit Plan, which
is defined by this instrument and by each Plan Agreement, all as may be
amended from time to time.
1.20 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant shall
provide for the entire benefit to which such Participant is entitled
under the Plan, and the Plan Agreement bearing the latest date of
acceptance by the Committee shall govern such entitlement.
1.21 "Plan Year" shall, for the first Plan Year, begin on August 1, 1997,
and end on December 31, 1997. For each Plan Year thereafter, the Plan
Year shall begin on January 1 of each year and continue through
December 31 of that year.
1.22 "Policy" or "Policies" shall mean the policy or policies issued in the
name of the Trustee in accordance with the terms and conditions of this
Plan and each respective Plan Agreement.
1.23 "Reserve Account" shall mean an account established in accordance with
Section 8.3(a)(iii) below.
1.24 "Retirement," "Retires" or "Retired" shall mean a Participant's
severance from employment from all Employers for any reason other than
a leave of absence, death or Disability on or after the later of
Participant's (a) attaining age 65, or (b) fifth anniversary of
participation in the Allen Telecom Inc. Corporate Retirement Plan.
1.25 "Supplemental Retirement Plan" or "Supplemental Retirement Plans" shall
mean, as the context requires, the Allen Telecom Inc. Restoration Plan,
each Supplemental Target Pension Benefit Agreement entered into between
the Company and a Participant and each other nonqualified deferred
compensation plan or arrangement designated by the Committee as a
Supplemental Retirement Plan for purposes of this Plan.
1.26 "Termination of Employment" shall mean the ceasing of employment with
all Employers, voluntarily or involuntarily, for any reason other than
Retirement, Disability, death or an authorized leave of absence.
1.27 "Trust" shall mean the trust established pursuant to that certain Trust
Agreement for the Allen Telecom Inc. Executive Benefit Plan, dated as
of August 1, 1997, between the Company and the Trustee, as may be
amended from time to time.
1.28 "Trustee" shall mean the trustee named in the Trust and any successor
trustee.
1.29 "Vesting Date" shall mean the date upon which a Participant becomes
100% vested in his or her Change in Control Benefit in accordance with
Section 3.1 below.
4
<PAGE> 9
ARTICLE 2
SELECTION, ENROLLMENT AND ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to
a select group of management and highly compensated employees of the
Employers. From that group, the Committee shall select, in its sole
discretion, employees to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each
selected employee shall complete, execute and return to the Committee
a Plan Agreement and a Beneficiary Designation Form. In addition, the
Committee, in its sole discretion, shall establish from time to time
such other enrollment requirements as it determines are necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee
selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
that employee shall commence participation in the Plan on the date
specified by the Committee. If a selected employee fails to meet all
such requirements prior to that date, that employee shall not be
eligible to participate in the Plan until the completion of those
requirements.
ARTICLE 3
VESTING; ACCOUNT BALANCE
3.1 VESTING IN CHANGE IN CONTROL BENEFIT. Subject to Section 3.2 below:
(a) General Rule. If a Participant has not forfeited his or her
benefits pursuant to Section 3.2(a)(i) below, or experienced
a Termination of Employment, prior to 90 days prior to a
Change in Control, the Participant shall become 100% vested
in his or her Change in Control Benefit on the date six
months following the Change in Control (the "Vesting Date").
(b) Early Vesting. If at any time on or after 90 days prior to a
Change in Control and prior to the Vesting Date a
Participant Retires, dies, suffers a Disability or
experiences an involuntarily termination of employment with
all Employers, the Participant (or the Participant's
Beneficiary in the event of the Participant's death) shall
become 100% vested in his or her Change in Control Benefit
on the later of (i) the date of the Change in Control or
(ii) the date of such Retirement, death, Disability or
involuntary termination of employment, and such date (rather
than the date six months following a Change in Control)
shall be considered the "Vesting Date" for purposes of this
Plan.
5
<PAGE> 10
3.2 FORFEITURE. Notwithstanding Section 3.1 above, a Participant shall
forfeit any right to benefits under this Plan in accordance with this
Section 3.2:
(a) A Participant shall forfeit any right to benefits under this Plan
if he or she:
(i) Retires, dies, suffers a Disability, or experiences a
Termination of Employment, in each case prior to 90
days before a Change in Control, or receives lump sum
distributions from the Supplemental Retirement Plans
that permanently ends his or her participation in the
Supplemental Retirement Plans (a "Termination
Distribution") at any time; or
(ii) Voluntarily terminates his or her employment (other
than by Retirement or Disability) with all of his or
her Employers or receives a Termination Distribution
from the Supplemental Retirement Plans at any time on
or after the date of a Change in Control and prior to
the date six months following the Change in Control.
(b) A Participant receiving payments or other partial
distributions from the Supplemental Retirement Plans before
his or her Vesting Date described in Section 3.1(a) hereof
shall forfeit a portion of his or her Change in Control
Benefit which bears the same proportion to all of such
benefit as the payment or partial distribution bears to his
or her total interest in the Supplemental Retirement Plans.
3.3 ACCOUNT BALANCE. Within 60 days of the end of each Plan Year, each
Participant shall receive a statement setting forth the balance of
his or her Participant's Account as of the end of that Plan Year.
ARTICLE 4
BENEFITS
4.1 CHANGE IN CONTROL BENEFIT.
(a) Eligibility. On the Vesting Date, the Participant or the
Participant's Beneficiary, as the case may be, shall become
entitled to the "Change in Control Benefit" described in
Section 4.1(b).
(b) Benefit and Payment. The "Change in Control Benefit" shall
be a dollar amount that is equal to the fair market value of
the assets allocated to and held in the Participant's
Account as of the Vesting Date. This benefit shall be paid
to the Participant, or his or her Beneficiary, within 90
days of the Vesting Date.
6
<PAGE> 11
4.2 EMPLOYER BENEFIT.
(a) Eligibility. Subject to Section 4.4 below, the Participant's
Employer shall be entitled to the Employer Benefit if and to
the extent a Participant forfeits his or her Change in
Control Benefit under Section 3.2 above.
(b) Benefit and Payment. Subject to Section 4.4 below, the
"Employer Benefit" shall be a distribution of the assets
allocated to and held in the Participant's Account as of the
date of the event described in Section 3.2 above after
taking in account any distributions made or to be made in
accordance with Section 4.1 above, plus any earnings
allocated to that account from that date to the date of
payment of the Employer Benefit. This benefit shall be paid
to the Participant's Employer within 120 days of January 1
of the Plan Year following that event.
4.3 WITHHOLDING AND PAYROLL TAXES. The Trustee shall withhold from any
and all benefit payments made under this Article 4, all federal,
state and local income, employment and other taxes required to be
withheld in connection with the payment of benefits hereunder, in
amounts to be determined in the sole discretion of the Participant's
Employer.
4.4 ALLOCATION OF CERTAIN FORFEITED BENEFITS TO RESERVE ACCOUNT.
Notwithstanding Section 4.2 above, if upon the occurrence of an event
described in Section 3.2 the Account of the Participant involved
holds a fractional interest in a Policy, such interest in such Policy
shall be reallocated to the Reserve Account rather than distributed
as an Employer Benefit. If at any time the Reserve Account holds 100%
of the interests in a Policy as a result of the application of the
preceding sentence, such Policy shall be distributed to the
appropriate Employers as an Employer Benefit as soon as reasonably
practical.
ARTICLE 5
BENEFICIARY
5.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant.
5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or
its designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names someone other than his or her spouse as a Beneficiary, a
spousal consent, in the form designated by
7
<PAGE> 12
the Committee, must be signed by that Participant's spouse and
returned to the Committee. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be canceled. The Committee shall be entitled
to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Committee before his or her death.
5.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
5.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 5.1, 5.2 and 5.3 above, or if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall
be payable to the executor or personal representative of the
Participant's estate.
5.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, before
a Change in Control, to cause the Trustee to withhold such payments
until this matter is resolved to the Committee's satisfaction.
5.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and
the Committee from all further obligations under this Plan with
respect to the Participant, and that Participant's Plan Agreement
shall terminate upon such full payment of benefits.
ARTICLE 6
TERMINATION, AMENDMENT OR
MODIFICATION OF THE PLAN
6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE
CHANGE IN CONTROL. Subject to Section 6.2, each Employer reserves the
right to terminate, amend or modify the Plan or any related Plan
Agreement, in whole or in part, with respect to Participants whose
services are retained by that Employer. Notwithstanding the
foregoing, no termination, amendment or modification shall be
effective to decrease or reduce a Participant's potential benefits
under this Plan below the balance in his or her Participant's Account
as of the effective date of the termination, amendment or
modification.
8
<PAGE> 13
6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE
IN CONTROL OR FOLLOWING CHANGE IN CONTROL. Within one year before a
Change in Control and thereafter, neither the Company, any subsidiary
of the Company nor any corporation, trust or other person that
succeeds to all or any substantial portion of the assets of the
Company shall have the right to terminate, amend or modify the Plan
and/or any Plan Agreement in effect prior to such Change in Control,
and all benefits under the Plan and any such Plan Agreement shall
thereafter be paid in accordance with the terms of the Plan and such
Plan Agreement, as in effect immediately prior to such Change in
Control. If the Plan is terminated, amended, or modified within one
year before a Change in Control, such termination, amendment or
modification shall be considered void as of the date of the
termination, amendment or modification. Any provision of this Plan or
any Plan Agreement to the contrary shall be construed in accordance
with this Section 6.2.
6.3 TERMINATION OF PLAN AGREEMENT. Absent the earlier termination,
modification or amendment of the Plan, or a Participant's Forfeiture
of his or her benefits under this Plan, the Plan Agreement of any
Participant shall terminate upon the full payment of the applicable
benefit provided under Article 4.
ARTICLE 7
OTHER BENEFITS AND AGREEMENTS
7.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under
any other plan or program for employees. The Plan shall supplement
and shall not supersede, modify or amend any other such plan or
program except as may otherwise be expressly provided.
ARTICLE 8
TRUST
8.1 ESTABLISHMENT OF THE TRUST; PREMIUMS. The Company shall establish the
Trust and the Employers shall, at least annually, transfer over to
the Trust such assets, if any, as the Company determines, in its sole
discretion, to contribute or cause to be contributed to the Trust
prior to a Change in Control. The Committee may direct, prior to a
Change in Control, payment of any and all Policy premiums and other
costs relating to insurance policies owned by the Trust. In addition,
if the Trust incurs any tax liability, the Employers shall contribute
to the Trust sufficient funds to allow the Trustee to pay any such
tax liability.
8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the
Plan and each Plan Agreement shall govern the rights of a Participant
to receive distributions pursuant to the Plan. The provisions of the
Trust shall govern the rights of the
9
<PAGE> 14
Trustee, Participant and a Participant's Beneficiary as to the assets
of the Trust. The Employers shall at all times remain liable to carry
out their obligations under the Plan. The Employers and the Trustee
shall cooperate with each other as is necessary to minimize the
Trust's tax liability.
8.3 ACCOUNTS.
(a) The Trustee shall establish and maintain the following
separate accounts:
(i) A "Participant's Account" for each Participant (A)
to which the Employers' contributions, or a portion
thereof, may be allocated and held, (B) to which the
earnings on amounts held pursuant to (A) shall be
allocated and held, (C) to which amounts from the
Reserve Account may be allocated and held, and (D)
to which the earnings on amounts held pursuant to
(C) shall be allocated and held, the assets of which
are to be used to pay the Change in Control Benefit
or the Employer Benefit in accordance with this Plan
and the Trust;
(ii) An "Administrative Account" for the administrative
expenses of the Trust to which a portion of the
Employers' contributions and earnings thereon and
the Reserve Account and earnings and gains thereon
may be allocated to and held, the assets of which
are to be used to pay the administrative expenses,
including all taxes, of the Trust in accordance with
the terms and provisions of this Plan and the Trust
that are not paid directly by the Employers; and
(iii) A "Reserve Account" to which shall be allocated (i)
the gains constituting, in the case of a Policy (or
a portion thereof) on the life of a Participant that
is allocated to the Participant's Account of another
Participant, the excess of the life insurance
proceeds of such Policy over the cash value thereof
(appropriately pro rated in the case of a Policy
fractional interests in which are allocated to more
than one Participant's Accounts) and (ii) fractional
interests in Policies pursuant to Section 4.4 above.
Assets so allocated to and held in the Reserve
Account shall be allocated or reallocated to other
Participant's Accounts or the Administrative
Account, or shall be distributed as an Employer
Benefit, in accordance with the terms of the Plan.
(b) Prior to a Change in Control, the Committee shall, in its
sole discretion, direct the Trustee in writing as to the
allocation of (i) the Employers' contributions to the
accounts described in Section 8.3(a) above, (ii) the
earnings on the Employer's contributions held in the
accounts described in Section 8.3(a) above, and (iii) gains
allocated to the Reserve Account in accordance with Section
8.3(d) below or fractional interests in Policies allocated
to the Reserve Account in accordance with Section 4.4. After
a
10
<PAGE> 15
Change in Control, the Trustee shall make such allocations
in accordance with the terms of the Plan and the Trust.
Notwithstanding the foregoing, and except for a payment of
benefits in accordance with Article 4 or a Forfeiture of
benefits, a Participant's Account balance shall not be
reduced.
(c) Each of the accounts described in Section 8.3(a) above shall
qualify for and be treated as a separate share under Code
Section 663(c).
(d) Notwithstanding the foregoing, for purposes of this Plan, in
the case of a Policy (or a portion thereof) on the life of a
Participant that is allocated to the Participant's Account
of another Participant:
(i) In the event of the death of the Participant whose
life is insured by such Policy, the excess of the
life insurance proceeds of the Policy over the cash
value thereof on the date of death of such
Participant (appropriately pro rated in the case of
a Policy fractional interests in which are allocated
to more than one Participant's Accounts) shall
constitute a gain allocable to the Reserve Account;
and
(ii) The additions to the cash value thereof
(appropriately pro rated in the case of a Policy
fractional interests in which are allocated to more
than one Participant's Accounts) shall constitute
income allocable to the Account to which such Policy
(or a portion thereof) has (except for the right to
such gain) been allocated.
ARTICLE 9
INSURANCE POLICIES
9.1 POLICIES. The Committee may direct the Trustee in writing to acquire
one or more Policies in the Trustee's name. The Trustee shall be the
sole and absolute owner and beneficiary of each Policy, with all
rights of an owner and beneficiary, including without limitation, the
right to surrender Policies for their cash surrender values and to
take one or more loans against one or more Policies. Notwithstanding
the foregoing, the Trustee shall exercise its ownership rights in
each Policy only in accordance with the terms of this Plan, the
respective Plan Agreements and the Trust.
9.2 DOCUMENTS REQUIRED BY INSURER. The Trustee, the Participant's
Employer and the Participant shall sign such documents and provide
such information as may be required from time to time by the Insurer.
11
<PAGE> 16
ARTICLE 10
ADMINISTRATION
10.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee
which shall consist of the Board or such committee as the Board shall
appoint. Members of the Committee may be Participants under this
Plan. The Committee shall also have the sole and absolute discretion
and authority to (i) make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this
Plan, and (ii) interpret where necessary all provisions of this Plan
(including, without limitation, by supplying omissions from,
correcting deficiencies in, or resolving inconsistencies in, the
language of this Plan), as may arise in connection with the Plan. Any
individual serving on the Committee who is a Participant shall not
vote or act on any matter relating solely to himself or herself. When
making a determination or calculation, the Committee shall be
entitled to rely on information furnished by a Participant or the
Company.
10.2 AGENTS. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who
may be counsel to any Employer.
10.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
10.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
10.5 EMPLOYER INFORMATION. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of its Participants,
and such other pertinent information as the Committee may reasonably
require.
ARTICLE 11
CLAIMS PROCEDURES
11.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts
12
<PAGE> 17
distributable to such Claimant from the Plan. If such a claim relates
to the contents of a notice received by the Claimant, the claim must
be made within 60 days after such notice was received by the
Claimant. All other claims must be made within 180 days of the date
on which the event that caused the claim to arise occurred. The claim
must state with particularity the determination desired by the
Claimant.
11.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within 60 days of receipt of that claim, and shall notify the
Claimant in writing:
(a) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant's requested determination,
and such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) the specific reference(s) to pertinent provisions of
the Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect
the claim, and an explanation of why such material
or information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 11.3 below.
11.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice
from the Committee that a claim has been denied, in whole or in part,
a Claimant (or the Claimant's duly authorized representative) may
file with the Committee a written request for a review of the denial
of the claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
11.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such
13
<PAGE> 18
date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
11.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions
of this Article 11 is a mandatory prerequisite to a Claimant's right
to commence any legal action with respect to any claim for benefits
under this Plan.
ARTICLE 12
MISCELLANEOUS
12.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of an Employer.
Any and all of an Employer's assets shall be, and remain, the
general, unpledged and unrestricted assets of the Employer. An
Employer's obligation under the Plan shall be merely that of an
unfunded and unsecured promise to pay money in the future.
12.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer
shall have no obligation to a Participant under the Plan except as
expressly provided in the Plan and his or her Plan Agreement.
12.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which
are expressly declared to be unassignable and non-transferable. No
part of the amounts payable shall, prior to actual payment, be
subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or
any other person, nor be transferable by operation of law in the
event of a Participant's or any other person's bankruptcy or
insolvency or be transferable to a spouse as a result of a property
settlement or otherwise.
12.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between
any Employer and the Participant. Such employment is hereby
acknowledged to be an "at will"
14
<PAGE> 19
employment relationship that can be terminated at any time for any
reason, with or without cause, unless expressly provided in a written
employment agreement. Nothing in this Plan shall be deemed to give a
Participant the right to be employed in the service of any Employer,
or to interfere with the right of any Employer to discipline or
discharge the Participant at any time.
12.5 FURNISHING INFORMATION. A Participant will cooperate with the
Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
12.6 TERMS. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they
would so apply.
12.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
12.8 GOVERNING LAW. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Ohio.
12.9 VALIDITY. In case any provision of this Plan shall be illegal,
invalid or ineffective for any reason, said illegality, invalidity or
ineffectiveness shall not affect the remaining parts hereof, but this
Plan shall be construed and enforced as if such illegal, invalid
and/or ineffective provision had never been inserted herein.
12.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail or recognized
overnight courier, to the address below:
Allen Telecom Inc.
25101 Chagrin Boulevard
Beachwood, OH 44122-5169
Attention: General Counsel
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
15
<PAGE> 20
12.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
12.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable
by such spouse in any manner, including but not limited to such
spouse's will, nor shall such interest pass under the laws of
intestate succession.
12.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the
care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Plan
for such payment amount.
12.14 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to
the Participant prior to the Vesting Date, a Participant may petition
the Committee, if prior to a Change in Control, or the Trustee, after
a Change in Control, for a distribution of assets sufficient to meet
the Participant's tax liability (including additions to tax,
penalties and interest). Upon the grant of such a petition, which
grant shall not be unreasonably withheld, the Trustee shall
distribute to the Participant from the Trust immediately available
funds in an amount equal to that Participant's federal, state and
local tax liability associated with such taxation, which liability
shall be measured by using that Participant's then current highest
federal, state and local marginal tax rate,
16
<PAGE> 21
plus the rates or amounts for the applicable additions to tax,
penalties and interest. If the petition is granted, the tax liability
distribution shall be made within 90 days of the date when the
Participant's petition is granted.
IN WITNESS WHEREOF the Company has signed this Plan document
as of the 24th day of November, 1997.
ALLEN TELECOM INC.
By: /s/ McDara P. Folan, III
------------------------------
Its: Vice President
-----------------------------
17
<PAGE> 1
EXHIBIT 11
----------
STATEMENT RE COMPUTATION OF EARNINGS PER COMMON SHARE
NET INCOME AND COMMON SHARES USED IN CALCULATION OF EARNINGS PER COMMON SHARE
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997 WERE COMPUTED AS FOLLOWS (AMOUNTS IN
THOUSANDS). THE 1993 THROUGH 1996 COMPUTATIONS HAVE BEEN RESTATED TO CONFORM TO
THE PROVISIONS OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS
PER SHARE".
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
- ---------
Net Income $ 24,127 $ 29,194 $ 32,639 $ 13,066 $ 23,349
Less preferred stock dividends (1) (2,180) -- -- -- --
-------- -------- -------- -------- --------
Net income applicable to common
stock - Basic $ 21,947 $ 29,194 $ 32,639 $ 13,066 $ 23,349
Add: Preferred stock dividends 2,180 -- -- -- --
Convertible debenture interest 693 296 -- -- --
-------- -------- -------- -------- --------
Net income applicable to
Common stock - Diluted $ 24,820 $ 29,490 $ 32,639 $ 13,066 $ 23,349
======== ======== ======== ======== ========
Common Shares:
- --------------
Weighted average common
Shares outstanding - Basic 22,302 25,574 26,166 26,470 26,920
Additional common shares issuable for:
Assumed exercise of stock options 638 496 754 590 420
Convertible securities 3,410 356 125 -- --
-------- -------- -------- -------- --------
Common shares - Diluted 26,350 26,426 27,045 27,060 27,340
======== ======== ======== ======== ========
</TABLE>
(1) In 1993, the Company exercised its redemption rights; however, prior to the
planned redemption date, 2,289,615 shares of convertible Preferred Stock
were converted into 4,579,230 shares of Common Stock of the Company.
<PAGE> 1
Exhibit 13
ALLEN TELECOM INC.
1997 ANNUAL REPORT
<PAGE> 2
BOARD OF DIRECTORS
PHILIP WM. COLBURN
Chairman of the Board,
Allen Telecom Inc.
J. CHISHOLM LYONS
Vice Chairman of the Board,
Allen Telecom Inc.,
Counsel to Smith Lyons,
Toronto, Ontario, Canada
JILL K. CONWAY
Visiting Scholar,
Program in Science,
Technology and Society,
Massachusetts Institute
of Technology,
Cambridge, Massachusetts
ALBERT H. GORDON
Advisor and Director,
Deltec, Inc.,
New York, New York
WILLIAM O. HUNT
Chairman of the Board,
Chief Executive Officer
and Director,
Intellicall Inc.
Dallas, Texas
JOHN F. MCNIFF
Vice President - Finance
and Director,
Dover Corporation,
New York, New York
ROBERT G. PAUL
President and
Chief Executive Officer,
Allen Telecom Inc.
CHARLES W. ROBINSON
Chairman,
Robinson & Associates Inc.,
Santa Fe, New Mexico
WILLIAM M. WEAVER, JR.
Limited Partner Emeritus,
Alex, Brown & Sons
Incorporated,
New York, New York
MANAGEMENT
ROBERT G. PAUL
President and
Chief Executive Officer
ERIK H. VAN DER KAAY
Executive Vice President
ROBERT A. YOUDELMAN
Executive Vice President and
Chief Financial Officer
MCDARA P. FOLAN, III
Vice President, Secretary
and General Counsel
JAMES L. LEPORTE, III
Vice President, Treasurer
and Controller
PETER DE VILLIERS
Vice President,
Strategic Development
ANDREA CASINI
Managing Director,
Tekmar Sistemi S.r.l.
KENTON S. DAY
President,
Signal Science, Incorporated
TERRY N. GARNER
President,
Grayson Wireless Division
F. KIM GORYANCE
President,
Antenna Specialists Division
PETER MAILANDT
President,
Decibel Products Division
JEAN-LOUIS MESPLE'-DUFOUR
Chairman,
Telia S.A.
GOFFREDO MODENA
Managing Director,
FOREM. S.r.l.
MICHAEL K. MORIN
President,
Comsearch
CHRISTOPHER H. MORTON
President,
Allen Telecom
Systems Division
KARL-HEINZ SCHMIDT
Managing Director,
Mikom G.m.b.H.
GIANPIERO VILLA
President,
Worldwide Site Products
<PAGE> 3
<TABLE>
<CAPTION>
THE YEAR AT A GLANCE
1997 1996
FINANCIAL HIGHLIGHTS
<S> <C> <C>
Sales $432,508,000 $369,498,000
Income Before
Income Taxes and
Minority Interests $ 46,713,000 $ 46,526,000
Income From
Continuing Operations $ 23,981,000 $ 20,556,000
Net Income $ 23,349,000 $ 13,066,000
Return On Equity 9.4% 6.0%
- --------------------------------------------------------------------------------
FINANCIAL POSITION, YEAR-END:
Stockholders' Equity $260,822,000 $225,951,000
Working Capital $111,015,000 $ 94,378,000
Shares Outstanding 27,298,000 26,763,000
- --------------------------------------------------------------------------------
PER COMMON SHARE:
Basic:
Income From
Continuing Operations $ .89 $ .78
Net Income $ .87 $ .50
Diluted:
Income From
Continuing Operations $ .88 $ .76
Net Income $ .86 $ .48
Book Value per share $ 9.55 $ 8.44
- --------------------------------------------------------------------------------
</TABLE>
TABLE OF CONTENTS
The Year at a Glance 1
Letter to Shareholders 2
Business Review 5
Consolidated Financial Statements 12
Notes to Consolidated Financial Statements 16
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 28
Five-year Summary of Operations 32
Directors and Management Inside front cover
Shareholder Information Inside back cover
SAFE HARBOR CAUTIONARY STATEMENT
Statements included in this Annual Report which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
regarding the Company's future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. Allen
Telecom's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain
certain detailed factors that could cause the Company's actual results to
materially differ from forward-looking statements made by the Company,
including, among others, the costs and timetable for new product development,
the health and economic stability of the world and national markets, the
uncertain level of purchases by current and prospective customers of the
Company's products and services, the impact of competitive products and pricing,
the potential impacts of the Company's attempts to sell its discontinued
operations in the vehicle emissions testing business, and the ultimate market
value of the Company's investments in telecommunications ventures.
<PAGE> 4
2
LETTER TO SHAREHOLDERS
The major focus of this year's annual report is on the products and services of
the Company. It describes products that have led to our success, products that
are expected to contribute to our future success, as well as when and how our
Company's products are utilized in the wireless communications industry.
Therefore, our comments in this letter will be focused on other aspects of the
Company that we feel are important to you.
We experienced another year of substantial growth in 1997. Worldwide revenues
for Allen Telecom in 1997 were $433 million, up 17% from the $369 million in
1996. The growth in Allen Telecom's total revenue is shown on the accompanying
chart. Our international growth rate was far stronger, growing from $207 to $258
million, or 25% as compared to domestic growth from $162 million to $175
million, or 8%. Since we are not always certain which of our products are
re-shipped by our domestic customers to their overseas customers, these figures
are conservative with regards to a final overseas destination of our products.
This pattern of growth is consistent with the fact that wireless
telecommunications systems outside the U.S. are being developed at a much faster
pace than in the U.S.
Income from continuing operations in 1997 was $30 million or $1.10 per common
share before the special charge related to the discontinuance of two products
($.22 per common share) and an extraordinary charge for refinancing our
long-term debt ($.02 per common share). Income from continuing operations in
1996 was $23 million ($.86 per common share) before a one time write-off of
acquired in-process research and development costs.
The special charge in 1997 covered the write-off of assets, severance pay and
expenses connected with our decision to discontinue the development and sale of
the Company's wireless PBX product and IQ. SignumTM RF planning tool, as well as
the rationalization of our domestic site management and systems businesses. In
the case of the product write-offs, we did not believe that the cost of their
continued development and support was warranted when compared to the prospects
for their future success.
The wireless system subscriber base is continuing to grow in the U.S. even
though the infrastructure is more mature than in most other parts of the world.
During 1997, approximately 10 million new subscribers (a growth rate of 23%)
were added to the U.S. subscriber base. Since we benefit most when new wireless
communications systems are built, or new infrastructure is added to provide
additional coverage, the growth of international markets is more important to us
than the adding of new subscribers in the U.S. The growth rate of international
subscribers, estimated to be 50% during 1997, is a much greater driver to Allen
Telecom's sales.
[Photo] Robert G. Paul (left)
and Philip Wm. Colburn
<PAGE> 5
3
<TABLE>
<CAPTION>
SALES FROM
CONTINUING OPERATIONS
amounts in millions of dollars
93 94 95 96 97
<S> <C> <C> <C> <C>
$183.6 $213.5 $306.6 $369.5 $432.5
</TABLE>
The growth in the international subscriber base varies from country to country,
but it is substantial. In many of the lesser developed countries, the wireless
telephone system is being used to expand significantly the total telecom
infrastructure that those countries require for their economic development. The
wireless system can often be deployed faster and at less cost in many geographic
regions as compared to laying and stringing the copper and fiber optic cable
necessary for wired telephone systems. In more developed countries, it is often
the desire for flexibility and immediate communications that fosters the growth
in wireless usage. Enhanced safety is another reason given, particularly among
U.S. consumers, for buying wireless telephones, although often it is convenience
that causes increased usage once it is purchased.
The building of Personal Communications Services (PCS) networks in the U.S. has
not had the expected impact on equipment suppliers (including Allen Telecom).
While the A and B Block licensees have built a significant portion of their
systems, they have used roaming agreements and partnerships to reduce the heavy
capital investments which would have resulted from more extensive systems of
their own. This trend, coupled with the very limited buildout thus far of the C,
D, E and F Block licensees, has meant fewer opportunities for Allen Telecom
equipment sales. Our PCS sales in 1997 increased approximately 9% from 1996.
During 1997, the Company's gross profit margins, before the special charge,
improved slightly over the prior year, despite decreasing unit prices in a
number of our product lines. To offset the price reductions, we have used
product redesigns and enhanced manufacturing efficiencies to maintain our profit
margins. The Company also was able to reduce its selling, general and
administrative expenses as a percent of sales before the special charge when
compared to 1996. These improvements, along with lower tax rates, have permitted
the Company to spend more on research and development and still increase net
income before the various charges.
Research and development and new product engineering continues to be the
lifeblood of a company like Allen Telecom. R&D spending has increased in almost
every product segment of the Company as we continue to find promising
opportunities for new products. Our R&D spending increased from $21 million and
5.7% of sales in 1996 to $30 million and 7.0% of sales in 1997, continuing a
trend as seen on the table to the right. 1997 represented our largest increase
due to the more technical nature of some of our recent products.
The project that received the largest research and development spending increase
over 1996 was the approximately $2.3 million spent during 1997 on the Company's
geolocation product. This product is being developed to meet the government
mandated requirements that by the year 2001 wireless carriers be able to
identify the specific location of a wireless user who is making an emergency
call (911). This product will make it possible to immediately and automatically
forward the location information to the emergency dispatcher network just as
happens now when a 911 call is placed on a wireline phone. At present, there is
no method to locate the cellular or wireless caller when making an emergency 911
call. In some locations, emergency networks have refused to take a 911 call from
a wireless telephone because of the confusion that can result. Our R&D efforts
on this product will increase further in 1998 as we prepare for field testing
during the year. We believe this will be a very large market, reaching $2.5
billion, and the technology we are developing should allow us to be a
participant in that market.
The Company continues to evaluate whether to develop internally or acquire those
new products and technologies which are necessary to properly service our OEM
and carrier customers. We continue to make key acquisitions to enhance our
product offerings and technologies. During 1997, the company acquired Telia
S.A., a small French based manufacturer of power amplifiers. Its technology
encompasses everything from Class A single channel power amplifiers to highly
linear, multi-channel,
<TABLE>
<CAPTION>
RESEARCH & DEVELOPMENT AND
NEW PRODUCT ENGINEERING COSTS
amounts in millions of dollars
93 94 95 96 97
<S> <C> <C> <C> <C>
$7.9 $8.9 $17.0 $21.0 $30.4
</TABLE>
<TABLE>
<CAPTION>
as a percent of sales
93 94 95 96 97
<S> <C> <C> <C> <C>
4.3% 4.2% 5.5% 5.7% 7.0%
</TABLE>
<PAGE> 6
4
power amplifiers with significant power handling capability. As with a number of
our other acquisitions, we believe that the marriage of its technology and Allen
Telecom's distribution organization can improve its revenues and image in the
international marketplace. To enhance our geolocation technology, we acquired
from Raytheon intellectual property and a small development team of engineers
who have had experience integrating geolocation with a cellular network. We also
acquired the assets and intellectual property pertaining to cable-based,
in-building, wireless communications systems. This product line, named "Cable
Star," has expanded our fiber-based, in-building coverage products to provide
for maximum flexibility in engineering solutions for our customers.
During the year, we purchased the remaining 20% of FOREM that we did not
previously own (which effectively also increased our ownership in its 62% owned
Mikom GmbH subsidiary), primarily for cash. The growth in sales and profits of
FOREM and Mikom since their acquisition in 1994, have been exceptional, and the
acquisition of this minority ownership will allow us to integrate FOREM with
other elements of Allen Telecom. We have promoted the general manager of FOREM
to be president of our Worldwide Site Products business. This will assist us in
the integration of our worldwide manufacturing, design and customer support
services, consistent with the worldwide nature of the customer base for this
product segment.
The Company's investment in RF Micro Devices (RFMD), originally made in 1992,
was enhanced significantly during 1997. The Company's total investment of
approximately $3 million has resulted in Allen Telecom owning approximately one
million shares of RFMD. RFMD went public in June of 1997 at $12 per share, and
has traded between $9 3/4 and $23 3/4 per share since the public offering.
While the economic dislocations in certain Southeast Asian countries may have
some impact on the speed of continued deployment of their wireless telephone
systems, we believe this is a short-term impact that will not alter the
longer-term trends. Allen Telecom's strategy is to continue to add both
internally and through acquisition the full range of products and services
necessary to become an essential partner with our customers, wireless
telecommunications OEMs and carriers. The obstacles that must be overcome by our
customers vary depending on whether carriers are in the deployment, expansion,
optimization or enhancement stages of their system development. It is Allen
Telecom's intent to ensure its product offering is essential to the carriers'
success at each of these different stages. The very real needs being filled by
the wireless communication industry give us every reason to believe this will
continue to be a growth industry and one in which we will maintain a vital and
successful role.
/s/ Philip Wm. Colburn
Philip Wm. Colburn
Chairman of the Board
/s/ Robert G. Paul
Robert G. Paul
President and Chief Executive Officer
<TABLE>
<CAPTION>
INCOME BEFORE TAXES AND
MINORITY INTERESTS
amounts in millions of dollars
93 94 95 96 97
<S> <C> <C> <C> <C>
$24.5 $31.5 $50.4 $46.5 $46.7
</TABLE>
<PAGE> 7
5
[Graphics] GRAYSON ILLUMINATOR(TM)
FOR NETWORK DRIVE TESTING
ALLEN TELECOM'S EVOLUTIONARY ROLE:
A PRODUCT TIMELINE
Allen Telecom supplies a variety of equipment and services to the worldwide
wireless infrastructure market. Through its various divisions and subsidiaries,
the Company participates in every stage in the evolution of a wireless service.
By conducting early research and development of products embracing emerging
technologies and future applications, by providing components to the original
equipment manufacturers (OEMs) and equipment and services to the carriers, and
through the supply of products for network performance engineering, Allen
Telecom participates in every level of a system life. To address this global
market, we have established manufacturing facilities in seven countries on four
continents. To serve our customers, the Company has created a network of 31
sales and engineering support offices around the world.
[Graphics] RESEARCH AND DEVELOPMENT FOR
FUTURE PRODUCT APPLICATIONS
<PAGE> 8
6
RESEARCH AND DEVELOPMENT - [Graphics] DESIGNING NEW WIRELESS
INVESTING IN THE FUTURE TELECOMMUNICATIONS SYSTEMS
The provision of new wireless services begins with a vision of how new
technologies can be applied to create voice and data services for the business
enterprise and consumer marketplace of the future. Well before Allen Telecom
ships products or provides services, the process begins with the development of
new technologies, products, and software for the market. This process may take
as long as two years or more for complex systems and as little as a few months
for more simple products. Time to market has become a critical factor with
development intervals being constantly compressed.
A good illustration of this pre-deployment research and development is our
current geolocation development project. Although many new cellular and PCS
users cite personal safety as the principal driver for the purchase of a
wireless telephone, today's systems are not able to determine where a call
originates. This situation contrasts sharply with wireline services, where
public safety organizations are immediately able to determine exact address
locations through a vast computer database. The Federal Communications
Commission recently mandated that by the year 2001 all providers of wireless
phone services will have to provide the exact location where an emergency 911
call originates within the network. In late 1996, Allen Telecom purchased Signal
Science, Incorporated (SSI), and during 1997 we stepped up investment in
geolocation technology to provide carriers with the equipment and software to
locate subscribers in their system who dial 911 in emergency situations. This
project involves developing new equipment to be placed at existing cell sites to
determine the triangulation location of an incoming signal at three cell sites,
a technique originally developed for the U.S. military. This information is then
routed to the appropriate public safety answering point. Our Grayson Wireless
division and SSI anticipate participating in this significant developing market.
When communities began objecting to new antenna towers, the PCS and cellular
carriers challenged our Decibel Products division to develop smaller, less
obtrusive, and more aesthetically pleasing antennas. In the original cellular
systems, at least two antennas separated by a physical space of about ten feet
were required to provide adequate reception of portable phone signals. The first
goal was to develop a single antenna to replace the two antennas while providing
similar performance. Through innovative engineering, Decibel Products perfected
a design that encompassed different polarizations within the same housing.
[Graphics] DECIBEL TRIPLETREE(TM) DUAL
POLARIZED BASE STATION ANTENNA
<PAGE> 9
7
These dual polarization diversity designs were then shrunk to fit three of these
antennas within a single fixture to provide the most unobtrusive antenna
possible. It is foreseen that this product will be used in most future PCS
installations.
With the drive for smaller equipment at cellular base stations, the Worldwide
Site Products division has embarked on a development to create ever smaller
components which the OEMs use in their cell sites. The ultimate goal is to
shrink the size of a base station from the original four or five filing cabinets
to about the profile of a personal computer.
Where previously the receive and transmit paths of signals were separated and
routed by a series of discrete components which each occupy a significant amount
of space, the formidable task is to merge and miniaturize them into a single
subsystem. Today the various filters, isolators, low noise amplifiers, and
control systems are integrated and are less than 10% of the size of previous
designs.
As wireless systems evolve, we are certain that the demands of our OEM and
carrier customers will constantly challenge our ingenuity, creativity, and
resourcefulness. A new third generation of digital wireless communications,
designated by the acronym 3G, is presently under consideration which will
provide voice and Internet Protocol data access. Although its deployment is
probably three years away, we are already developing products for these future
applications.
SYSTEM DESIGN AND PLANNING
New wireless systems around the world are now allocated frequencies either
through an auction or sealed bid process. In order to prepare for this process,
an aspirant new service provider has to generate a rough system design to
determine the cost of the overall infrastructure so that this can be considered
in the bid for the license. Our Comsearch division begins to play a role in this
process. They provide consulting services to assist with determining the
appropriate system in light of the coverage required, topography, and area
demographics. Upon license award to a new carrier, the task of actually
designing and planning the system commences. Comsearch has the tools and the
experienced engineering personnel to provide the new carrier with the design and
layout of the system to be built. Their expertise includes vast experience in
all of the air interface standards, including AMPS, ETACS, GSM, TDMA, CDMA, as
well as all the established PCS formats. With attention to the projected
capacity required by the carrier, the network is laid out and ideal locations
chosen for the cell sites. This process is an extremely complex task as multiple
variables such as interference, signal propagation, terrain, handoff from cell
to cell, and equipment selection need to be factored into the layout.
[Graphics] ENGINEERING MICROWAVE
NETWORKS WITH IQ-LINK (TM)
[Graphics] 9-1-1 GEOLOCATION TECHNOLOGY FOR
EMERGENCY 911 SYSTEMS
<PAGE> 10
8
[Graphics] TOWER MOUNTED AMPLIFIER
IMPROVES SYSTEM PERFORMANCE
The microwave paths to connect cell sites to the mobile switching system also
have to be designed in consideration of the available frequencies, the distance,
and interference with other existing paths. This design phase usually runs for
approximately six months prior to the commencement of system construction, and
endures through system activation. Although infrastructure construction
intervals have recently become highly compressed, it usually takes about one
year of build out before subscribers can be activated on a new system.
CELL SITE SUBSYSTEMS
When system construction commences, the first activity is to build the cell
sites which usually contain equipment manufactured by Allen Telecom. Almost all
of the major wireless system infrastructure vendors incorporate components or
subsystems from Allen Telecom companies in their designs. Since our customers
are now truly global in their operations, we have recently created a new
Worldwide Site Products division which is the combination of FOREM in Italy and
the Allen Telecom Site Products division in the U.S. Allen Telecom's Worldwide
Site Products division is the world's largest supplier of cell site subsystems,
supplying many different customized modules which are incorporated into OEM cell
site racks.
Sophisticated filters ensure that the incoming signals are received clearly and
without interference, and that outgoing signals are transmitted without
interference to the resident or any other system. Duplexers at each cell site
transceiver allow one antenna to be used for both transmission and reception of
radio signals simultaneously to reduce the number of antennas on the tower. Low
noise amplifiers and tower mounted amplifiers are included in the receive path
to enhance the reception of weak signals, and power dividers feed each receiver
in the base station. In the transmit path, combiners connect all of the
transmitters to a single output so that each transmitter does not require an
individual antenna.
Our FOREM and Decibel Products divisions supply large quantities of auto-tune
combiners, which adjust instantly and automatically to new frequencies as the
system is modified. The specifications and requirements for these products have
become most stringent as systems have transitioned from an analogue to a digital
air interface and the world's airwaves have become more congested.
Power amplifiers at the cell sites boost the outgoing signals. Traditionally the
technology has permitted only one signal to be amplified by a single amplifier.
Recent advances in semiconductor technology now allow more sophisticated
amplifiers to boost more than one signal economically and at high power levels.
These amplifiers, usually referred to as feed forward, for the specific
interference mitigation mechanism, require complex design technology to be
efficient and reliable. Allen Telecom's recently acquired Telia S.A. subsidiary
has developed a family of feed forward amplifiers and supplies them to some of
the leadingdigital system OEMs for incorporation into their base stations.
[Graphics] DB DIRECTOR(R) ADJUSTABLE
DOWNTILT ANTENNA
<PAGE> 11
9
[Graphics]DUAL BAND CELLULAR/PCS
VEHICULAR ANTENNA
CELL SITE ANTENNAS
Adjacent to the equipment shelter a tower is constructed to raise the antennas
so that they can provide adequate coverage. Our Decibel Products division is the
leading North American supplier of base station antennas to the global wireless
OEMs and wireless service providers. Where an OEM is providing a turnkey system
installation, antennas are usually supplied as part of the turnkey package. As
service providers become more sophisticated in their system engineering
expertise, they take on more of the expansion responsibility themselves, and
begin to purchase antennas directly from Decibel Products.
Decibel manufactures antennas in frequency bands to cover all of the traditional
analogue cellular networks (AMPS and ETACS), as well as the newer digital
services for iDEN, CDMA, TDMA, GSM, DCS1800, and PCS. Depending on the specific
system configuration, a cell site is usually divided into three sectors of 120
degrees. Traditional systems employ one individual transmit antenna and two
separate receive antennas for each sector. With recent innovations, this number
has been condensed to either two antennas or a single highly complex array which
provides the functionality of the previous traditional implementations. Many
different antenna models are required to address the wide variety of frequency
bands, cell radii, topologies, and interference characteristics.
Aesthetics and antenna size have become important considerations, with carriers
demanding the smallest possible profile with the best possible performance. To
achieve this result, new designs have been created which today allow antennas
half the physical size of predecessor products. Market pressure has resulted in
products which contain dramatically less parts, simpler assembly techniques, and
leading edge materials. Presently under consideration is the assembly of some of
these antennas in Europe, South America, and Asia to provide local support to
our global customers. New models for the PCS market include the Decibel
TripleTreeTM, which incorporates all six of the antennas required for a three
sector cell site into a single twelve-inch diameter housing. To further address
the requirement for fewer antennas on towers, dual frequency antennas have been
developed to allow multiple carriers to use a single antenna. The Diversity
MasterTM antenna has also been introduced for cellular carriers who wish to
install fewer antennas at their existing cell sites.
Many subscribers prefer to have a phone installed in the car for safe operation
while driving. Many of these installations use mobile antennas from our Antenna
Specialists division. Recent advances include antennas which operate on both
cellular and PCS frequencies, as well as antennas for Global Positioning System
(GPS) mapping and cellular.
SYSTEM OPTIMIZATION
Once a new system has been activated, there are a multitude of system
optimization activities which are required as subscribers are added onto the
network. In today's competitive environment, where generally at least two and
sometimes as many as eight systems compete, coverage is critical. Incomplete
network coverage quickly causes subscribers to transfer to another provider.
Allen Telecom's Mikom G.m.b.H. subsidiary and the U.S.-based Systems division
provide products which provide both coverage and capacity enhancement. Repeaters
fill coverage gaps caused by obstructions such as hills, mountains, tunnels, and
buildings.
[Graphics] PCS DUPLEXER/AMPLIFIER
FOR DIGITAL BASE STATIONS
[Graphics] HIGH POWER FEED
FORWARD LINEAR AMPLIFIER
<PAGE> 12
10
[Graphics] ANALYZER(TM) IMPROVES
WIRELESS NETWORK PERFORMANCE
Their function is to take signals from an area with coverage and
retransmit into areas where no coverage exists. They can also be linked to a
base station by means of fiber optic cable.
Mikom specializes in the GSM 900/1800/1900 services, and their customers are the
definitive list of GSM carriers worldwide. They have helped carriers provide
coverage in airports, underground parking garages, exhibition complexes,
tunnels, and valleys, as well as behind mountains and down city canyons.
Repeaters in GSM systems can be low power inexpensive units or higher power
models with complex functionality. A high level of engineering implementation
and design support is required to properly implement repeaters into a network.
To provide this service, Mikom maintains a team of skilled engineers to assist
GSM carriers. In certain cases, Mikom even installs coverage augmentation
systems on a turnkey basis for carriers. An illustration of how Mikom's products
have provided increased capacity is the Hannover Trade Fair complex in Germany
consisting of more than 25 separate halls. Instead of installing a base station
in each hall, a lesser number of base stations were installed in a central
location, and each hall covered by a repeater fed with fiber optic cable. Among
recent developments are repeaters that cover more than one band such as ETACS
and GSM or GSM 900 and 1800.
The Allen Telecom Systems division focuses on providing solutions for the
analogue, CDMA and TDMA carriers in the Americas and Asia. All of the existing
cellular carriers in the Americas have chosen either TDMA or CDMA for their
digital migration path, and in Asia CDMA has been embraced along with GSM. In
Korea all of the services will be CDMA, while in Hong Kong there is a mixture of
GSM and CDMA systems. Through dedicated engineering support personnel, the
Systems division has assisted many carriers with the provision of coverage
expansion products.
Once the outdoor environment is seamlessly covered, the focus of the carriers
then turns to indoor coverage. It is considered a key competitive issue for a
wireless service to operate in restaurants, hotels, hospitals, office buildings,
stores, and shopping malls. Within Allen Telecom, a family of products has been
developed to provide carriers with solutions to this unique challenge. The
BriteCellTM from Allen Telecom's Tekmar Sistemi S.r.l. subsidiary is a fiber
optic based radio frequency distribution system designed to provide indoor
[Graphics] MIKOM SOLAR-POWERED
GSM REPEATER
[Graphics] BRITECELL(TM) FIBEROPTIC
INDOOR COVERAGE SYSTEM
<PAGE> 13
11
coverage where multiple services and longer distances are involved. The
Distributed Indoor Coverage Extension (DICE) system from Mikom uses coaxial
cable, fiber, or off-air as a means of distribution within buildings, and the
Cable Star product from the Allen Systems division is cable based for smaller,
lower cost installations.
NETWORK PERFORMANCE ENGINEERING
Once a wireless network is up and running, it is imperative that the carrier
knows how the system is performing, and the level of service being provided to
the subscriber base. It is also important to determine the level of service in
relation to competitor networks. Our Grayson Wireless division has developed a
range of test equipment and post processing software to do precisely this
function. Using this equipment a carrier can gather many different data
parameters from the network off the air and then process it into meaningful
statistics to determine the performance of the system from the perspective of
the subscriber. The quality of the signal from and to the portable phone can be
measured as well as the coverage of, and handoff points between, cells. Busy
cells, incomplete calls, dropped calls, and interference from adjacent cells can
be quantified. These measurements can be made for all areas within the
geographic footprint of the system so that the carrier can engineer the capacity
and coverage for optimum performance. Similar measurements can also be made on
competitor's systems to decide which network has significant advantages.
THE FUTURE
In the realm of wireless jargon the early analogue AMPS, ETACS, and NMT systems
are considered to have been first generation. ETACS has subsequently migrated
toward the European GSM standard, and AMPS has moved toward the TDMA and CDMA
based digital protocols. The International Telecommunications Union, under the
United Nations umbrella, is hoping to establish 3G (third generation) as a new
single standard for the wireless networks of the future. If successful, this
migration will herald the next generation of wireless system that all existing
systems will migrate to. As we move into an increasingly wireless world the
future looks bright, and at Allen Telecom we are only bounded by our ingenuity
and determination to succeed.
GLOSSARY
NMT
Nordic Mobile Telephone System, an analogue system developed as a Scandinavian
standard in the late 1970s.
AMPS
Advanced Mobile Phone System, an analogue standard developed by Bell Labs in the
U.S. in the late 1970s.
ETACS
Enhanced Total Access Communication System, developed in Europe based upon the
American AMPS standard.
TDMA
Time Division Multiple Access, a digital technique where a number of time slots
are allocated on the same channel to provide greater capacity.
GSM
Global System for Mobile Communications, a European standard developed to
provide compatibility throughout Europe.
CDMA
Code Division Multiple Access, a digital spread spectrum system where
information is sent with attached codes.
PCS
Personal Communication Services, a wireless service for consumers.
iDEN(R) *
Integrated Digital Enhanced Network, a digital system developed by Motorola and
used by carriers such as Nextel.
DCS1800/1900
GSM service at higher frequencies, also referred to as Personal Communication
Networks.
3G
Third Generation wireless standard, presently being discussed at the
International Telecommunications Union (ITU)
* iDEN is a registered trade-mark of Motorola, Inc.
[Graphics] TWO CHANNEL EAC-850(TM)
CDMA REPEATER
<PAGE> 14
12
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
allen telecom inc. - (amounts in thousands, except per share data)
For the years ended December 31, 1997, 1996 & 1995 1997 1996 1995
<S> <C> <C> <C>
SALES $ 432,508 $ 369,498 $ 306,556
Costs and Expenses:
Cost of sales 281,591 238,401 189,103
Selling, general and administrative expenses 70,786 58,101 47,908
Research and development and product engineering costs 30,367 21,023 17,006
Write-off of acquired in-process research and development costs -- 2,662 --
Interest and Financing Expenses:
Interest expense (4,505) (3,773) (3,505)
Interest income 1,454 988 1,407
- ---------------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interests 46,713 46,526 50,441
Provision for Income Taxes (17,723) (19,665) (20,138)
- ---------------------------------------------------------------------------------------------------------
Income Before Minority Interests 28,990 26,861 30,303
Minority Interests (5,009) (6,305) (3,027)
- ---------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 23,981 20,556 27,276
=========================================================================================================
Discontinued Operations:
Income (loss) from discontinued operations:
Automotive and truck products business -- -- 7,119
Emissions testing business -- (3,766) (1,756)
Loss for disposal of emissions testing business -- (3,724) --
- ---------------------------------------------------------------------------------------------------------
Income Before Extraordinary Item 23,981 13,066 32,639
Extraordinary Item - Extinguishment of Debt (632) -- --
=========================================================================================================
NET INCOME $ 23,349 $ 13,066 $ 32,639
=========================================================================================================
EARNINGS PER COMMON SHARE
Basic: Income from continuing operations $ .89 $ .78 $ 1.05
Discontinued Operations:
Income (loss) from discontinued operations:
Automotive and truck products business -- -- .27
Emissions testing business -- (.14) (.07)
Loss for disposal of emissions testing business -- (.14) --
Extraordinary item - extinguishment of debt (.02) -- --
- ---------------------------------------------------------------------------------------------------------
Net Income $ .87 $ .50 $ 1.25
=========================================================================================================
Diluted:Income from continuing operations $ .88 $ .76 $ 1.02
Discontinued Operations:
Income (loss) from discontinued operations:
Automotive and truck products business -- -- .27
Emissions testing business -- (.14) (.07)
Loss for disposal of emissions testing business -- (.14) --
Extraordinary item - extinguishment of debt (.02) -- --
- ---------------------------------------------------------------------------------------------------------
Net Income $ .86 $ .48 $ 1.22
=========================================================================================================
Weighted average common shares outstanding:
Basic 26,920 26,470 26,170
- ---------------------------------------------------------------------------------------------------------
Diluted 27,340 27,060 27,040
- ---------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 15
13
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
allen telecom inc. - (amounts in thousands)
For the years ended December 31, 1997 & 1996 1997 1996
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 30,775 $ 23,879
Accounts receivable, less allowance for doubtful accounts 1997, $1,934,000; 1996, $1,610,000 105,714 93,409
Inventories 93,768 71,304
Current assets of discontinued emissions testing business 1,034 3,332
Other current assets 10,745 7,256
- ----------------------------------------------------------------------------------------------------------------------------
Total Current Assets 242,036 199,180
- ----------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, at cost, less accumulated depreciation and amortization 60,543 51,942
Other Assets:
Excess of cost over net assets of businesses acquired 126,923 75,502
Assets of discontinued emissions testing business 32,329 42,031
Other 52,602 41,857
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 514,433 $ 410,512
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of long-term obligations $ 6,119 $ 5,998
Accounts payable 75,195 36,639
Accrued expenses (including accrued wages and commissions -
1997, $13,980,000; 1996, $14,663,000) 35,261 37,991
Income taxes payable 13,197 19,830
Deferred income taxes 1,249 4,344
- ----------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 131,021 104,802
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 97,915 49,957
Deferred Income Taxes 6,818 8,872
Other Liabilities 17,857 20,930
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 253,611 184,561
============================================================================================================================
Commitments and Contingencies (Note 5) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, par value $1.00; authorized - 50,000,000 shares; issued -
1997, 29,746,000; 1996, 29,614,000; outstanding - 1997, 27,298,000; 1996, 26,763,000 29,746 29,614
Paid-in capital 180,538 170,945
Retained earnings 70,091 46,742
Translation adjustments (5,354) (304)
Unrealized appreciation on investment securities 5,561 --
Less: Treasury stock - common shares, at cost, 1997, 2,448,000 shares; 1996, 2,851,000 shares (16,992) (17,932)
Unearned compensation (2,768) (2,908)
Minimum pension liability adjustment -- (206)
- ----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 260,822 225,951
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 514,433 $ 410,512
============================================================================================================================
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 16
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
allen telecom inc. - (amounts in thousands)
For the years ended December 31, 1997, 1996 & 1995 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Income from continuing operations $23,981 $20,556 $27,276
Extraordinary item - extinguishment of debt (632) - -
- ----------------------------------------------------------------------------------------------------------------------------
23,349 20,556 27,276
Adjustments to reconcile income to net cash flow:
Depreciation 12,808 11,666 8,280
Amortization of goodwill 3,404 2,432 2,088
Amortization of capitalized software 2,950 2,383 2,659
Other amortization 571 2,006 1,015
Deferred income taxes (8,157) (2,849) 6,338
Non-cash charge for acquired in-process research and development - 2,662 -
Non-cash loss on write-off of capital assets 6,337 - -
Gain on sale of investment (1,696) - -
Changes in operating assets and liabilities:
Receivables (14,309) (13,362) (21,996)
Inventories (23,954) (85) (13,653)
Accounts payable and accrued expenses 16,627 7,879 1,016
Income taxes payable (1,712) 17,095 (2,812)
Other, net 1,814 3,229 (3,341)
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 18,032 53,612 6,870
=============================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (22,247) (17,457) (16,829)
Capitalized software product costs (5,307) (4,745) (4,386)
Sales and retirements of fixed assets 845 62 170
Investments in telecommunications companies (44,426) (16,909) (1,748)
- -----------------------------------------------------------------------------------------------------------------------------
Cash used by investing activities (71,135) (39,049) (22,793)
=============================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 65,381 (2,129) (4,882)
Repayment of long-term notes (15,000) - -
Dividends paid - - (3,942)
Exercise of stock options 1,428 239 566
Treasury stock sold to employee benefit plans 1,651 1,572 1,435
Cash reclassified to assets held for spin-off distribution - - (4,002)
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing activities 53,460 (318) (10,825)
=============================================================================================================================
Net cash provided (used) by discontinued operations 7,808 (6,072) (12,786)
=============================================================================================================================
NET CASH PROVIDED (USED) 8,165 8,173 (39,534)
Effect of exchange rate changes on cash (1,269) - -
Cash and cash equivalents at beginning of year 23,879 15,706 55,240
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $30,775 $23,879 $15,706
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 17
15
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
allen telecom, inc. - (amounts in thousands)
Unrealized
Appreciation
Common Paid-In Retained Translation on Investment
For the years ended December 31, 1997, 1996 & 1995 Stock Capital Earnings Adjustments Securities
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1994 $ 29,146 $ 161,644 $ 56,902 $ 23 $ --
Net income -- -- 32,639 -- --
Cash dividends -- -- (3,942) -- --
Net assets distributed in TransPro spin-off -- -- (50,651) -- --
Exercise of stock options 72 463 -- -- --
Conversion of convertible debentures 355 4,623 -- -- --
Treasury stock reissued, 61,781 common shares, at cost -- 998 -- -- --
Restricted shares issued, net 22 324 -- -- --
Remeasurement of restricted shares -- 18 -- -- --
Amortization of unearned compensation -- -- -- -- --
Stock option tax benefits -- 562 -- -- --
Minimum pension liability adjustment -- -- -- -- --
Adjustment from translating foreign
financial statements into U.S. dollars -- -- -- 79 --
==============================================================================================================================
Balance December 31, 1995 29,595 168,632 34,948 102 --
Net income -- -- 13,066 -- --
Exercise of stock options 36 293 -- -- --
Treasury stock reissued, 94,339 common shares, at cost -- 883 -- -- --
Restricted shares cancelled (17) (270) -- -- --
Amortization of unearned compensation -- -- -- -- --
Stock option tax benefits -- 82 -- -- --
Stock issued in acquisitions -- 1,325 -- -- --
TransPro dividend adjustment -- -- (1,272) -- --
Minimum pension liability adjustment -- -- -- -- --
Adjustment from translating foreign
financial statements into U.S. dollars -- -- -- (406) --
Other -- -- -- -- --
==============================================================================================================================
BALANCE DECEMBER 31, 1996 29,614 170,945 46,742 (304) --
Net income -- -- 23,349 -- --
Exercise of stock options 110 1,889 -- -- --
Treasury stock reissued, 92,268 common shares, at cost -- 969 -- -- --
Restricted shares issued, net 22 393 -- -- --
Amortization of unearned compensation -- -- -- -- --
Stock option tax benefits -- 653 -- -- --
Stock issued in acquisitions -- 5,716 -- -- --
Minimum pension liability adjustment -- -- -- -- --
Adjustment from translating foreign
financial statements into U.S. dollars -- -- -- (5,050) --
Unrealized appreciation on investment securities -- -- -- -- 5,561
Other -- (27) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 $ 29,746 $ 180,538 $ 70,091 ($ 5,354) $ 5,561
==============================================================================================================================
</TABLE>
The Notes are an integral part of these statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
allen telecom inc. - (amounts in thousands) Minimum
Pension
Treasury Unearned Liability
For the years ended December 31, 1997, 1996 & 1995 Stock Compensation Adjustment
- -----------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994
<S> <C> <C> <C>
Net income ($ 17,479) ($4,310) ($1,745)
Cash dividends -- -- --
Net assets distributed in TransPro spin-off -- -- --
Exercise of stock options 31 -- 822
Conversion of convertible debentures -- -- --
Treasury stock reissued, 61,781 common shares, at cost 437 -- --
Restricted shares issued, net -- --
Remeasurement of restricted shares (1,735) (346) --
Amortization of unearned compensation -- (18) --
Stock option tax benefits -- 880 --
Minimum pension liability adjustment -- -- --
Adjustment from translating foreign -- -- 563
financial statements into U.S. dollars
-- -- --
===============================================================================================
Balance December 31, 1995 (18,746) (3,794) (360)
Net income -- -- --
Exercise of stock options (90) -- --
Treasury stock reissued, 94,339 common shares, at cost 689 -- --
Restricted shares cancelled -- 271 --
Amortization of unearned compensation -- 615 --
Stock option tax benefits -- -- --
Stock issued in acquisitions 265 -- --
TransPro dividend adjustment -- -- --
Minimum pension liability adjustment -- -- 154
Adjustment from translating foreign
financial statements into U.S. dollars -- -- --
Other (50) -- --
===============================================================================================
BALANCE DECEMBER 31, 1996 (17,932) (2,908) (206)
Net income -- -- --
Exercise of stock options (571) -- --
Treasury stock reissued, 92,268 common shares, at cost 682 -- --
Restricted shares issued, net -- (541) --
Amortization of unearned compensation -- 681 --
Stock option tax benefits -- -- --
Stock issued in acquisitions 798 -- --
Minimum pension liability adjustment -- -- 206
Adjustment from translating foreign
financial statements into U.S. dollars -- -- --
Unrealized appreciation on investment securities -- -- --
Other 31 -- --
- -----------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1997 ($16,992) ($2,768) $ --
===============================================================================================
</TABLE>
The Notes are an integral part of these statements.
<PAGE> 18
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies followed by the Company that materially affect the
determination of financial position and results of operations are described
below.
Accounting Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Basis of Consolidation: The Company's consolidated financial statements include
the accounts of all wholly owned and majority owned subsidiaries. Other
investments (all of which are less than 20% owned) are accounted for using the
cost method. Intercompany accounts and transactions have been eliminated. To
facilitate preparation of financial statements, the Company's principal European
operations are included in the consolidated financial statements on a two-month
delayed basis.
Revenue Recognition: Revenues are recorded at the time products are shipped or
services are performed. Revenues from software licenses for the Company's
Frequency Planning, Systems Design and Related Services business are recognized
upon delivery of the software if vendor obligations are insignificant and if
collectibility is probable. Revenues from post-contract support that are
significant and/or unbundled with regards to the initial licensing fee are
recognized ratably over the post-contract period.
Cash and Cash Equivalents: Cash equivalents consist of temporary bank deposits
and money market instruments with an original maturity of three months or less
at the date of purchase. The Company invests its excess cash in bank deposits,
money market, and tax-exempt securities, which are afforded one of the two
highest ratings by nationally recognized ratings firms.
Valuation of Inventories: The Company values inventories including materials,
labor and overhead at the lower of cost (first-in, first-out) or market.
Inventories consisted of the following at December 31, 1997 and 1996 (amounts in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Raw material $49,583 $36,869
Work-in-process 24,505 19,256
Finished goods 19,680 15,179
- --------------------------------------------
$93,768 $71,304
</TABLE>
Certain of these inventories pertain to the production of sophisticated
equipment that could be subject to technological obsolescence. The Company
maintains and periodically revises reserves for excess inventory based on the
most current information available of anticipated usage requirements.
Investments: The Company owns common stock and warrants in RF Micro Devices,
Inc. ("RFMD"), which completed an initial public offering of its common stock on
June 3, 1997. The Company accounts for this investment using Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires certain debt and equity instruments
be adjusted to fair value at the end of each accounting period. Accordingly, at
December 31, 1997, the investment is carried at fair value of $12,668,000
(included in "Other assets") as determined by RFMD's published NASDAQ closing
price of $12.625. The Company's investment is currently subject to certain
trading restrictions. The Company has 954,278 common shares and 36,412 warrants
classified as available-for-sale. These common shares and warrants have an
aggregate fair value of $12,366,000 and a cost basis of $2,778,000, resulting in
an unrealized holding gain of $9,588,000. Unrealized appreciation in the amount
of $5,561,000, after related income tax effect, is included in Stockholders'
Equity as "Unrealized appreciation on investment securities" as it is the
Company's intent to treat the securities as a long-term investment.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost, less accumulated depreciation and amortization. Land improvements,
buildings and machinery and equipment are depreciated over their estimated
useful lives under the straight-line method. The provision for amortization of
leasehold improvements is based on the term of the related lease or the
estimated useful lives, whichever is shorter. Property, plant and equipment
consisted of the following at December 31, 1997 and 1996 (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land and improvements $ 2,702 $2,315
Buildings 26,658 22,843
Machinery and equipment 73,000 52,039
Leasehold improvements 4,904 4,465
- ---------------------------------------------
107,264 81,662
Less accumulated depreciation
and amortization (46,721) (29,720)
- ---------------------------------------------
$60,543 $51,942
</TABLE>
Computer Software Costs: The Company's policy is to capitalize costs incurred in
creating computer software products once technological feasibility is
established and to amortize such costs over periods ranging from two to ten
years. The Company also capitalizes costs incurred in the development of
computerized databases, which are amortized over periods of ten to twenty years.
The Company reviews the amounts capitalized for impairment whenever events or
changes in circumstances indicate that the carrying amounts of the assets may
not be recoverable. In 1997, 1996 and 1995, approximately $5,307,000,
$4,745,000, and $4,386,000, respectively, of these costs were capitalized and
approximately $ 2,950,000, $2,383,000, and $2,659,000, respectively, were
amortized (excluding impairment writedown in 1997 of $5,955,000).
Excess of Cost Over Net Assets of Businesses Acquired (Goodwill): The excess of
investments in consolidated subsidiaries over the net asset value at acquisition
is being amortized on a straight-line basis over periods not exceeding forty
years. The Company's policy is to evaluate goodwill for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss, if required, would be recorded in the period
such determination is made based on the fair value of the related businesses.
<PAGE> 19
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation: Assets and liabilities of the Company's foreign
subsidiaries are translated into U.S. dollars at the current rate of exchange,
while revenues and expenses are translated at the average exchange rate during
the year. Adjustments from translating foreign subsidiaries' financial
statements are excluded from the results of operations and are reported as a
separate component of stockholders' equity.
Research and Development Costs: Expenditures relating to the development of new
products and processes, including significant improvements to existing products,
are expensed as incurred. Research and development expenses were $26,137,000,
$18,059,000, and $13,453,000 in 1997, 1996, and 1995, respectively. In addition,
the Company incurred other engineering expenses relating to new product
development (that do not meet the accounting definition of "Research and
Development") in the amount of $4,230,000, $2,964,000, and $3,553,000 in 1997,
1996, and 1995, respectively.
Stock Based Compensation: The Company accounts for stock based compensation
awards pursuant to Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and its related interpretations which prescribe the
use of the intrinsic value based method. Accordingly, no compensation cost has
been recognized for its fixed stock option plans. However, the Company has
adopted the disclosure requirements of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation." See Note 4 for
additional information.
Income Taxes: The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." Under SFAS 109, deferred income taxes are
recorded to reflect the tax consequences on future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each year-end.
Earnings Per Common Share: In the fourth quarter of 1997, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings per Share," which specifies the computation, presentation, and
disclosure requirements of earnings per common share. Basic earnings per share
are based on the weighted average number of common shares outstanding during the
period. Diluted earnings per common share are based on the weighted average
number of common shares outstanding during the period plus, if dilutive, the
incremental number of common shares issuable on a pro forma basis upon the
exercise of employee stock options, assuming the proceeds are used to repurchase
outstanding shares at the average market price during the year. The 1996 and
1995 computations and presentation of earnings per common share have been
restated to conform to the provisions of this statement. A reconciliation of the
Basic and Diluted per share computations are provided below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
Common Shares:
Weighted average common
shares outstanding
<S> <C> <C> <C>
- Basic 26,920 26,470 26,170
Additional common shares
issuable for stock options 420 590 870
- -----------------------------------------------------------------
Common shares - Diluted 27,340 27,060 27,040
</TABLE>
<TABLE>
<CAPTION>
NOTE 2: FINANCING
Long-term obligations consisted of the following (amounts in thousands):
1997 1996
<S> <C> <C>
Credit agreement borrowings $ 7,081 $ 7,120
Floating rate industrial revenue
bonds due 2012 - 2025 15,500 15,500
Senior notes payable
due 2001 - 2007 65,000 -
8.13% fixed rate note payable
to insurance company - 15,000
Capital lease obligation 13,934 15,502
Other 564 223
Unamortized debt expense (1,137) (645)
- ------------------------------------------------------
100,942 52,700
Less current maturities (3,027) (2,743)
- ------------------------------------------------------
$ 97,915 $ 49,957
</TABLE>
In 1997, the Company issued $65,000,000 of unsecured notes in a private
placement transaction. These notes have a weighted average life of 7 1/2 years
and a weighted average interest rate of 6.65%. The notes rank equally with the
Company's other unsecured indebtedness. A portion of the proceeds was used to
prepay the $15,000,000 note payable to an insurance company. As a result of such
prepayment, the difference between the call premium and costs of reacquisition
and the net carrying amount of the debt in the amount of $996,000, or $.02 per
share after related tax benefit, has been reported as an "Extraordinary Item" in
the Consolidated Statements of Income.
The Company maintains a domestic revolving credit agreement in the aggregate
amount of $100,000,000 expiring December 18, 1999. Of this total, $17,500,000
has been utilized for the issuance of letters of credit relating principally to
the Company's industrial revenue bonds. The balance of funds available under the
revolving credit agreement may be utilized for borrowings or other letters of
credit; however, a maximum of $20,000,000 may be allocated to such letters of
credit. At December 31, 1997, $82,500,000 was available under this agreement.
Interest may be determined on a LIBOR or prime rate basis at the Company's
option. The Company has agreed to pay a commitment fee varying from 1/8 - 1/2 of
1% per annum on the unused portion of the commitment.
The Company also has short-term credit lines utilized by its European
subsidiaries. At year-end, direct borrowings under these agreements totaled
$3,092,000; an additional $22,708,000 remained unused. These credit lines bear
interest based on LIBOR. Foreign long-term debt includes long-term arrangements
at fixed and variable rates with the Industry Ministry of Italy totaling
$1,618,000 (due 1998 - 2008), and variable rate borrowings with various
international banks of $5,463,000 (due 1998 - 2004). Further, two of the
aforementioned arrangements are mortgage notes, under which the Company has
pledged the respective land and buildings as collateral. These facilities had an
aggregate net book value of $6,870,000 at year-end 1997. During 1997, the
average interest rate for all foreign credit arrangements approximated 6.89%.
<PAGE> 20
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
The floating rate industrial revenue bonds bear interest at rates based upon a
short-term tax exempt bond index, as defined in the bonds, which approximated
3.72% at December 31, 1997. The average interest rate for all industrial revenue
borrowings approximated 3.90% during 1997.
In connection with one of its discontinued emissions testing business programs,
the Company has a lease agreement under which it leases the land and inspection
facilities for an initial lease term equal to the program life expiring on
December 31, 2005. The lease agreement contains an extension provision such that
if the inspection program is extended, the lease is automatically extended to
run concurrently with the program life. For financial reporting purposes the
lease has been classified as a capital lease; accordingly, an obligation and
related asset of approximately $15,283,000 is recorded at December 31, 1997.
The aggregate maturities of long-term obligations for the years 1998 through
2002 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 1999 2000 2001 2002
- ----------------------------------------
$3,027 $2,409 $2,739 $5,020 $14,473
</TABLE>
The Company's borrowing agreements include various restrictive covenants as to
the amount and type of indebtedness, investments and guarantees, maintenance of
net worth, the purchase or redemption of the Company's shares and the
disposition of assets of the Company not in the ordinary course of business.
<TABLE>
<CAPTION>
NOTE 3: OTHER ASSETS AND LIABILITIES
Other assets consisted of the following (amounts in thousands):
1997 1996
Capitalized computer software
<S> <C> <C>
and database files $10,949 $14,550
Investments in telecommunication
companies 23,337 7,827
Investment in specialty rubber
products business 4,344 4,344
Assets held for sale 2,710 3,217
Prepaid pension costs 2,299 3,070
Other 8,963 8,849
- ------------------------------------------------------
$52,602 $41,857
</TABLE>
<TABLE>
<CAPTION>
Other liabilities consisted of the following (amounts in thousands):
1997 1996
<S> <C> <C>
Minority interests $ 7,253 $10,633
Long-term pension liabilities 4,891 4,382
Accrued post-retirement benefits 1,576 1,609
Other 4,137 4,306
- --------------------------------------------------------
$17,857 $20,930
</TABLE>
NOTE 4: CAPITAL STOCK AND STOCK COMPENSATION PLANS
The Company is authorized to issue up to 50,000,000 shares of common stock,
$1.00 par value, and 3,000,000 shares of preferred stock, without par value, in
one or more series. In addition, the Company can fix the powers, designations,
preferences and rights of each of the preferred stock series.
The Company has adopted the "disclosure-only" provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", ("SFAS No. 123") but applies Accounting Principles Board Opinion
No. 25 ("APB 25") and related interpretations for the accounting of its Stock
Plans. The Company has two active plans, the 1992 Stock Plan and the 1994
Non-Employee Directors Stock Option Plan. The 1982 Stock Plan, under which
options still remain outstanding, was terminated in 1992.
The Company's 1992 Stock Plan provides for the granting of options (and
restricted shares as discussed below) to key employees as determined by the
Management Compensation Committee of the Board of Directors. The total number of
options for which the Company may grant options and award restricted shares of
common stock under the 1992 Stock Plan cannot exceed 2,228,221 shares, subject
to certain adjustments. Options are awarded at a price not less than the fair
market value on the date the option is granted, have a ten-year term whereby 50%
of the option shares vest after two years and an additional 25% in each of years
three and four. Options may contain stock appreciation rights under which the
Company, upon request of the optionee, may, at its discretion, purchase the
exercisable portion of an option for cash and/or shares at a price equal to the
difference between the option price and the market price of the shares covered
by such portion of the option in lieu of issuing shares upon exercise. There
were no exercises of stock appreciation rights in 1997, 1996 and 1995.
Pursuant to the 1994 Non-Employee Directors Stock Option Plan, the total number
of shares to be issued may not exceed 278,528 shares. From 1994 through 1997,
each Non-Employee Director who previously had not been employed by the Company
automatically received an option to purchase 1,000 shares of common stock
("Formula Awards"). At its meeting held February 17, 1998, the Board of
Directors amended the plan to increase the number of options granted under the
Formula Awards to 3,000 per year. No Non-Employee Director who previously has
been employed by the Company is eligible to receive Formula Awards. Shares
granted under the 1994 Plan have a ten-year term and vest in the same manner as
the 1992 Stock Plan, subject to certain accelerated vesting upon the cessation
of service. Non-Employee Directors who have been previously employed by the
Company are eligible to receive discretionary awards of options to purchase
shares of common stock.
<PAGE> 21
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the status of outstanding stock options as of
December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING
-------------------------------------
WEIGHTED AVERAGE STOCK OPTION EXERCISABLE
---------------------- --------------------------------
RANGE OF CONTRACTUAL EXERCISE WEIGHTED AVERAGE
EXERCISE PRICES SHARES LIFE PRICE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
$ 4.18 to $10.77 496,808 2.5 years $ 5.47 496,808 $ 5.47
$11.28 to $19.97 838,139 7.8 years $16.01 329,230 $14.99
$20.00 to $28.00 633,756 8.1 years $21.39 107,936 $22.05
- ------------------------------------------------------------------------------------------------
$ 4.18 to $28.00 1,968,703 6.6 years $15.08 933,974 $10.72
</TABLE>
Stock option activity for the three years ended December 31, 1997 is summarized
as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
<S> <C> <C>
Balance, December 31, 1994 1,222,505 $ 9.95
Granted (weighted average
fair value $11.10) 331,762 $ 21.58
Exercised (85,766) $ 6.66
Terminated and canceled (80,575) $ 18.36
- ----------------------------------------------------
Balance, December 31, 1995 1,387,926 $ 12.44
Granted (weighted average
fair value $10.15) 391,400 $ 20.39
Exercised (37,545) $ 8.84
Terminated and canceled (32,317) $ 20.21
- ----------------------------------------------------
Balance, December 31, 1996 1,709,464 $ 14.19
Granted (weighted average
fair value $9.97) 498,500 $ 18.11
Exercised (146,872) $ 12.07
Terminated and cancelled (92,389) $ 19.61
- ----------------------------------------------------
Balance, December 31, 1997 1,968,703 $ 15.08
</TABLE>
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 stock option grants: expected volatility of 47% and 40%,
risk free interest rates of 6.38% and 6.42%, and expected lives of 6.2 years and
6.1 years for 1997 and 1996, respectively. The calculations assume no future
dividend payments for grants in both 1997 and 1996.
Restricted stock awards made to date under the 1992 Stock Plan were issued at no
cash cost to the recipients; however, such employees generally agreed to forego
salary increases and new stock option grants for a period of two years, other
than for exceptional promotions. The restricted shares generally vest in 25%
increments in the seventh, eight, ninth and tenth year from the year of award.
An accelerated vesting schedule may be triggered if certain performance targets
are achieved. Specifically, the vesting of 50% of such shares may be accelerated
(but not sooner than three years from the award year) based upon the average
sale price of the Company's stock price during a period of 91 consecutive
calendar days exceeding specified target levels. The remaining 50% of such
shares may be accelerated based on average earnings per common share over three
consecutive fiscal years exceeding specified target levels beginning with the
award year. Restricted shares are subject to forfeiture in certain circumstances
as defined in the 1992 Stock Plan.
Restricted stock activity for the three years ended December 31, 1997 is
summarized as follows:
<TABLE>
<CAPTION>
Shares
<S> <C>
Balance, December 31, 1994 557,869
Granted (weighted average
fair value $25.00) 35,783
Vested (211,794)
Terminated and canceled (61,253)
- ----------------------------------------------
Balance, December 31, 1995 320,605
Granted -
Vested (28,347)
Terminated and canceled (17,328)
- ----------------------------------------------
Balance, December 31, 1996 274,930
Granted (weighted average
fair value $18.94) 40,000
Vested (11,848)
Terminated and cancelled (17,626)
- ----------------------------------------------
Balance, December 31, 1997 285,456
</TABLE>
Unearned compensation with respect to restricted shares, representing the fair
value of the restricted shares at date of award, is charged to income over a
ten-year period or over the period of actual vesting whichever is shorter.
Compensation expense with respect to restricted shares amounted to $424,000 in
1997, $382,000 in 1996, and $391,000 in 1995.
At December 31, 1997 and 1996, 2,962,027 and 2,996,262 common shares,
respectively, were reserved for outstanding stock options and for future grants
of stock options and restricted shares under all Stock Plans. In addition,
500,000 shares of Series C Junior Participating Preferred Stock are authorized
for issuance under the Company's Stockholder Rights Plan at January 20, 1998.
If the Company had elected to recognize compensation cost for its stock based
compensation plans based on the fair value at the grant dates for awards under
those plans in accordance with SFAS 123, net income and earnings per common
share would have been reduced to the pro forma amounts below (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net income:
As reported $23,349 $13,066 $32,639
Pro forma $21,562 $11,794 $31,726
Earnings per common share,
Basic: $.87 $.50 $1.25
Pro forma $.80 $.45 $1.21
Diluted:
As reported $.86 $.48 $1.22
Pro forma $.80 $.44 $1.19
</TABLE>
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
NOTE 5: COMMITMENTS AND CONTINGENCIES
The Company's leases consist primarily of facilities and equipment and expire
principally between 1998 and 2005. A number of leases require that the Company
pay certain executory costs (taxes, insurance and maintenance) and contain
renewal and purchase options. Annual rental expense for operating leases
included in results from continuing operations approximated $4,600,000 in 1997,
$3,900,000 in 1996, and $4,200,000 in 1995. Future minimum payments under
noncancelable leases as of December 31, 1997 were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Operating Capitalized
Leases Lease
<S> <C> <C>
1998 $4,190 $2,246
1999 3,460 2,450
2000 3,150 2,450
2001 2,850 2,450
2002 2,110 2,450
Thereafter 3,100 7,350
- -----------------------------------------
Total minimum
lease payments $18,860 19,396
- -----------------------------------------
Less: amount
representing interest (5,462)
- -----------------------------------------
Present value of future
minimum lease payments
including current maturities
of $1,274 $13,934
</TABLE>
The Company is self-insured for health care and workers compensation up to
predetermined amounts above which third party insurance applies. For years 1996
and 1997, the Company is fully insured through third party insurance for general
liability and product liability and was, in 1995, self-insured up to
predetermined amounts above which third party insurance applies. The Company is
contingently liable to insurance carriers under its workers compensation and
liability policies and has provided a letter of credit in favor of these
carriers in the amount of $1,591,000.
In 1996, the Company entered into an agreement to make an equity investment of
$5,000,000 in Nextwave Telecom Inc. ("Nextwave"), and whereby Nextwave agreed to
purchase $50,000,000 of equipment and services over a five-year period from the
Company. In connection with this agreement, subject to certain preconditions
that have not yet occurred, the Company has agreed to provide secured product
financing in addition to its investment. At December 31, 1997, the Company had
outstanding approximately $2,000,000 of receivables with Nextwave. In early
1997, the U.S. Government suspended interest payments on license fees due from
certain companies, such as Nextwave, who were awarded telecommunications
licenses under a competitive auction bid process. Subsequently, the Federal
Communications Commission ("FCC") provided alternatives for these capital
constrained C Block licensees, which may enable these carriers to obtain the
financing needed to build out their systems or to return some, or all, of their
licenses to the FCC for re-auction. While it is not clear which alternative, or
alternatives, will be chosen by Nextwave, a decision is anticipated in 1998. At
this time, the Company believes that there has been no impairment in the
carrying value of its investment in and receivable from Nextwave.
Various legal actions are pending against or involve the Company and its
subsidiaries with respect to such matters as product liability and casualty
claims. In the opinion of management, after review and consultation with
counsel, the aggregate liability, if any, that ultimately may be incurred in
excess of amounts already provided should not have a material adverse effect on
the consolidated financial position, results of operations or cash flow of the
Company.
In connection with the sale of its former specialty rubber products operations
and spin-off of its Truck Products business, the Company remains as guarantor or
remains contingently liable under certain long-term leases or other obligations
assigned to the purchasing/spun-off company.
As more fully described in Note 9, "Acquisitions and Dispositions," the
Company's MARTA Technologies, Inc. subsidiary which operates its discontinued
centralized automotive emissions testing programs, is engaged in litigation with
the States of Ohio and Kentucky in connection with emissions testing programs.
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices, and
procedures are properly designed to reasonably prevent risk of environmental
damage and financial liability to the Company. The Company has identified
potential environmental damage at one formerly occupied manufacturing facility.
In this regard, the Company has engaged a contractor to evaluate the site and
determine the cost, if any, to resolve environmental damage at this site. While
the ultimate cost cannot yet be specifically determined, the Company currently
believes the costs of remediation will not exceed $100,000. In addition, the
Company had been named as a potentially responsible party under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA") with respect to alleged environmental conditions at one industrial
site. This action was settled in 1997 for approximately $3,000. The Company also
believes it is reasonably possible that environmental related liabilities may
exist with respect to one industrial site formerly occupied by the Company.
Based upon environmental site assessments, the Company believes that the cost of
any potential remediation, for which the Company may ultimately be responsible,
will not have a material adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: PENSION AND EMPLOYEE BENEFIT PLANS
The Company has noncontributory pension plans covering the majority of its
full-time domestic employees. Plans covering salaried employees provide benefits
that are based on years of service and compensation during the ten-year period
prior to retirement, while the plan covering hourly employees typically provides
benefits based on specified amounts for each year of service. Domestic pension
costs are funded in compliance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended, as employees become eligible to
participate, generally upon employment.
Net periodic pension cost of continuing operations for the Company's plans
included the following components (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
Service cost benefits
<S> <C> <C> <C>
earned during the year $1,204 $1,165 $ 926
Interest cost on the
projected benefit
obligation 2,051 2,143 2,487
Actual income on
plan assets (5,602) (3,474) (5,781)
Net settlement gain -- -- (2,135)
Net amortization
and deferral 3,576 1,509 3,193
- --------------------------------------------------------------------
Net periodic pension
cost (benefit) $ 1,229 $1,343 ($1,310)
</TABLE>
In 1995, the Company experienced a settlement gain in the amount of
approximately $2,208,000 ($1,325,000 after related deferred income taxes); this
net gain was credited to retained earnings in connection with a spin-off (see
Note 9).
Plan assets consist principally of equity securities (including 92,000 common
shares of the Company). The following tables set forth the plans' combined
funded status, at December 31, 1997 and 1996 (amounts in thousands):
<TABLE>
<CAPTION>
Assets Benefits
Exceed Exceed
Benefits Assets
<S> <C> <C>
1997:
Actuarial present value of
benefit obligations:
Vested benefits $ 20,654 $ 6,951
Nonvested benefits 1,099 260
- ----------------------------------------------------------
Accumulated benefit
obligations 21,753 7,211
Effect of projected future
compensation levels 1,942 435
- ----------------------------------------------------------
Projected benefit obligations 23,695 7,646
Plan assets at fair market value 25,331 2,755
- ----------------------------------------------------------
Projected benefit obligations
less than (in excess of)
plan assets 1,636 (4,891)
Gain due to actual experience
varying from actuarial
assumptions (73) (941)
Prior service cost not yet
recognized in pension cost (125) 1,992
Transition liability (asset)
on adoption of new accounting
standard to be recognized
in the future (194) 5
Adjustment required to recognize
minimum liability - (621)
- ----------------------------------------------------------
Prepaid (accrued) pension cost $ 1,244 ($4,456)
1996:
Actuarial present value of
benefit obligations:
Vested benefits $17,972 $7,301
Nonvested benefits 894 408
- ----------------------------------------------------------
Accumulated benefit
obligations 18,866 7,709
Effect of projected future
compensation levels 1,590 1,047
- ----------------------------------------------------------
Projected benefit obligations 20,456 8,756
Plan assets at fair market value 20,948 3,022
- ----------------------------------------------------------
Projected benefit obligations
less than (in excess of)
plan assets 492 (5,734)
Loss due to actual experience
varying from actuarial
assumptions 1,595 252
Prior service cost not yet
recognized in pension cost (133) 2,140
Transition liability (asset)
on adoption of new accounting
standard to be recognized
in the future (252) 10
Adjustment required to recognize
minimum liability - (1,355)
- ----------------------------------------------------------
Prepaid (accrued) pension cost $ 1,702 ($4,687)
</TABLE>
<TABLE>
<CAPTION>
Assumptions used in determining pension cost for the plan are:
1997 1996
<S> <C> <C>
Discount rate 7 1/4% 7 1/2%
Expected rate of increase
in compensation 5% 5 1/2%
Expected long-term rate of
return on plan assets 9 3/4% 9%
</TABLE>
The Company provides health care and life insurance benefits for certain retired
employees who reach retirement age while working for the Company. The components
of the expense for postretirement health care and life insurance benefits from
continuing operations are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net periodic cost:
Service cost benefits
attributed to service
during period $ 6 $ 15 $ 12
Interest cost on accumulated
post-retirement benefit
obligation 110 110 108
Amortization of gain (3) (2) (7)
- -----------------------------------------------------------------
Net postretirement
health care cost $ 113 $ 123 $ 113
</TABLE>
<TABLE>
<CAPTION>
The components of the accumulated postretirement benefit obligations (all of
which are unfunded) are as follows (in thousands):
1997 1996 1995
<S> <C> <C> <C>
Retirees $1,319 $1,103 $1,173
Fully eligible active
plan participants 96 102 78
Other active plan
participants 87 141 302
Unrecognized net gain 74 263 46
- -------------------------------------------------------
Accumulated postretirement
benefit obligations $1,576 $1,609 $1,599
</TABLE>
The actuarial calculation assumed a health care cost trend rate of 9.6% for 1997
(13.2% in 1996 and 13.7% in 1995). In 1997, the assumed trend rate was reduced
based on the most current data. The assumed rate decreases approximately .4% per
year through the year 2010 to 5.0% and remains constant beyond that point. The
health care cost trend rate has a significant effect on the amounts reported.
For example, a one percentage point increase in the health care cost trend rate
would increase the accumulated postretirement benefit obligation by $54,000 and
increase net periodic cost by $5,400. The weighted average discount rate used in
determining the accumulated postretirement benefit obligations was 7.25% in
1997, 7.50% in 1996, and 7.25% in 1995, respectively.
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
<TABLE>
<CAPTION>
NOTE 7: INCOME TAXES
Information with respect to income taxes
in continuing operations is as follows
(amounts in thousands):
1997 1996 1995
<S> <C> <C> <C>
Income before taxes
and minority interests:
Domestic $ 5,351 $ 9,472 $ 35,636
Foreign 41,362 37,054 14,805
- ------------------------------------------------------------------------
$ 46,713 $ 46,526 $ 50,441
Provision (Benefit) for income taxes:
Current:
Federal $ 2,247 $ 2,764 $ 5,550
Foreign 22,867 19,170 7,323
State and local 766 580 927
- ------------------------------------------------------------------------
25,880 22,514 13,800
- ------------------------------------------------------------------------
Deferred:
Federal (5,275) (2,054) 5,173
Foreign (542) 108 868
State and local (2,340) (903) 297
- ------------------------------------------------------------------------
(8,157) (2,849) 6,338
- ------------------------------------------------------------------------
$ 17,723 $ 19,665 $ 20,138
</TABLE>
A reconciliation of the provision for income taxes at the U.S. Federal statutory
rate of 35% to the reported tax provisions is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Provision computed
at the U.S. Federal
statutory rate $ 16,350 $ 16,284 $ 17,654
State and local income
taxes, net of Federal
income tax effect (1,023) (210) 796
Net higher tax rates
on foreign income 7,016 6,082 3,304
Benefit of foreign sales
corporation and other
tax credits (2,115) (2,055) (1,881)
Tax effect of write-off of
non-deductible acquired
in-process research
and development cost -- 932 --
Other, net (2,505) (1,368) 265
- --------------------------------------------------------------
$ 17,723 $ 19,665 $ 20,138
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes the Company's total provision (benefit) for
income taxes (amounts in thousands):
1997 1996 1995
<S> <C> <C> <C>
Continuing operations $ 17,723 $ 19,665 $ 20,138
Discontinued operations -- (3,780) 3,672
Extraordinary item (364) -- --
Tax benefit of carryforward
allocated to goodwill 6,085 -- --
Allocated to equity:
Unrealized appreciation
on investment securities 4,027 -- --
Stock options (653) (82) (509)
Pension gain (loss) from
business disposition and
other pension items 149 112 1,164
- --------------------------------------------------------------
$ 26,967 $ 15,915 $ 24,465
</TABLE>
<TABLE>
<CAPTION>
The components of deferred tax assets (liabilities) are comprised of the
following as of December 31, 1997 and 1996 (amounts in thousands):
1997 1996
<S> <C> <C>
Gross deferred tax assets:
Inventory $ 4,854 $ 3,599
Pensions and deferred
compensation 2,419 2,000
Tax credit carryforwards 1,575 1,480
Product warranty claims 1,735 1,108
Net operating loss carryforwards 3,116 --
Other 3,875 2,005
- ---------------------------------------------------------
17,574 10,192
- ---------------------------------------------------------
Gross deferred tax liabilities:
Intangible assets (3,455) (8,497)
Depreciation (2,686) (1,205)
Unremitted foreign earnings -- (1,500)
Unrealized appreciation on
investment securities (4,027) --
Deferred start-up costs (2,309) (2,924)
Other (5,920) (8,350)
- ----------------------------------------------------------
(18,397) (22,476)
- ----------------------------------------------------------
Net deferred tax liabilities ($ 823) ($12,284)
</TABLE>
<TABLE>
<CAPTION>
Deferred tax assets (liabilities) are recorded in the consolidated balance
sheets as follows (amounts in thousands):
1997 1996
<S> <C> <C>
Other current assets $ 7,244 $ 932
Current liabilities -
deferred income taxes (1,249) (4,344)
Long-term deferred
income taxes (6,818) (8,872)
- -----------------------------------------------
($ 823) ($12,284)
</TABLE>
During 1997, 1996, and 1995, general business tax credits of approximately
$700,000, $470,000, and $359,000 generated in the respective year were used to
reduce the provision for income taxes. At December 31, 1997, the Company has
available alternative minimum tax credits in the amount of $405,000 available to
reduce future Federal income tax liabilities.
United States income taxes are not provided on undistributed earnings of the
Company's foreign subsidiaries because of the intent to reinvest these earnings.
The amount of undistributed earnings which are considered to be indefinitely
reinvested is approximately $35,000,000 at December 31, 1997. While the amount
of federal income taxes, if such earnings are distributed in the future, cannot
now be determined, such taxes may be reduced by tax credits and other
deductions.
NOTE 8: INDUSTRY SEGMENT AND GEOGRAPHIC DATA
The distribution of the Company's geographic operations is as follows (amounts
in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
Sales:
<S> <C> <C> <C>
United States $ 272,346 $ 249,084 $ 251,322
Italy 117,607 92,284 37,806
Germany 48,622 43,013 21,702
Other 69,309 45,119 15,754
Less inter-
geographic sales (75,376) (60,002) (20,028)
- -----------------------------------------------------------------
$ 432,508 $ 369,498 $ 306,556
Operating Income:
United States$ 5,319 $ 11,850 $ 37,291
Italy 19,823 17,163 8,651
Germany 14,636 14,405 6,218
Other 9,986 5,893 379
- -----------------------------------------------------------------
49,764 49,311 52,539
Financing costs (3,051) (2,785) (2,098)
- -----------------------------------------------------------------
$ 46,713 $ 46,526 $ 50,441
Assets:
United States $ 305,740 $ 293,191 $ 282,439
Italy 143,618 72,794 52,718
Germany 31,291 24,163 14,458
Other 33,784 20,364 13,950
- ------------------------------------------------------------------
$ 514,433 $ 410,512 $ 363,565
</TABLE>
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
U.S. export sales of continuing operations were $103,855,000, $86,542,000, and
$98,205,000 in 1997, 1996, and 1995, respectively.
The aggregate net currency transaction and translation amounts in income from
continuing operations included gains of $126,000, $126,000, and $34,000 in 1997,
1996, and 1995, respectively.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Statement redefines the way publicly
held companies report information about segments and is effective for the fiscal
year ending December 31, 1998.
Based on the Company's initial assessment of this new accounting pronouncement
it has determined that it will likely have two segments - Wireless
Telecommunications Equipment (comprising its Systems, Site Management and Other
Non-antenna Products and Mobile and Base Antennas product lines) and Wireless
Telecommunications Engineering Services (comprising its Frequency Planning,
Systems Design and Related Services product line). However, the Wireless
Telecommunications Engineering Services segment is not expected to be a
"Reportable Segment" since the operating results and assets are anticipated to
be less than 10% of the total Company. The Company therefore does not believe
that the changes in disclosure as a result of this new Statement will
significantly change its financial statement disclosure presentation.
NOTE 9: ACQUISITIONS AND DISPOSITIONS
In June 1997, the Company acquired the remaining 20% minority interest in
FOR.E.M. S.p.A. ("FOREM"), and now owns 100% of FOREM. FOREM is a leading
manufacturer of filters, combiners, and tower mounted amplifiers for GSM
cellular and DCS 1800 wireless communications systems. This acquisition also
increased the effective ownership of FOREM's 62% owned subsidiary, Mikom
G.m.b.H. In a series of transactions to acquire this 20% minority interest, the
Company has paid $31,297,000 in cash through December 31, 1997 and 261,014
shares of the Company's common stock with an aggregate value of approximately
$6,000,000. The final purchase price was contingent upon the net income of
FOREM's 1997 fiscal year. At December 31, 1997, the Company has recorded the
estimated liability (included in accounts payable) for this final cash payment
in the amount of approximately $26,400,000 paid in 1998.
In April 1997, the Company acquired 62% of the stock of Telia S.A., ("Telia")
for a purchase price comprised of approximately $3,000,000 in cash and shares of
the Company's stock. This transaction was recorded under the purchase method of
accounting. Telia, located in France, is a manufacturer of highly linear power
amplifiers for the wireless communications industry with sales of approximately
$5,000,000. The final purchase price is contingent upon the net income of
Telia's 1997 fiscal year. At December 31, 1997, the Company has recorded the
estimated liability (included in accounts payable) for this final payment in the
amount of approximately $830,000. The remaining shares of Telia, which are held
by senior Telia management, are subject to put and call options, which provide
for a purchase price based upon future operating results.
In September 1996, the Company acquired, in exchange for 83,964 shares of its
common stock, 100% of Signal Science, Incorporated ("SSI"). In addition, the
selling shareholders may receive further contingent cash consideration based on
sales over an eight-year period (none of which has been earned). The Company
accounted for the acquisition under the purchase method. In addition, the
Company incurred a one-time non-cash charge relating to the write-off of
purchased in-process research and development costs of $2,662,000. SSI's primary
business is research and development projects involving special purpose radio
signal equipment for telecommunications applications.
In May 1996, the Company acquired a 64.3% interest in Tekmar Sistemi S.r.l.
("Tekmar"), an Italian company that produces fiber optic modules used
predominately in the wireless telecommunications and cable television markets
for cash and 9,783 shares of common stock. Senior management of Tekmar owns the
remaining 35.7% ownership interest. The Company has the right, pursuant to
certain put and call options, to acquire the remaining minority interest of
Tekmar over a five-year period.
Further, in May 1996, the Company acquired the remaining 20% minority interest
of its Grayson Wireless subsidiary for cash.
Pro forma results of operations for these acquisitions have not been presented
because the impact is not significant to results of operations.
Pro forma combined sales from continuing operations of the Company and FOREM for
1995 (assuming the acquisition was effected prior to 1995) would have been
approximately $330,000,000. Pro forma combined income from continuing operations
for 1995 would have been approximately $26,100,000 ($1.04 per share). However,
in management's opinion, the pro forma financial information is not necessarily
indicative of the results of operations that would have occurred had the
acquisition of FOREM taken place on an earlier date.
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
In 1996, the Company decided to exit the centralized automotive emissions
testing business operated by its MARTA Technologies, Inc. ("Marta") subsidiary.
The Company previously had entered into an agreement for sale of Marta's
centralized emissions testing program in Cincinnati, Ohio. However, in 1997, due
to the uncertainty of legislative and administrative actions in defining the
future direction of the program and other contractual matters the parties were
unable to reach agreement on the financial and other terms and jointly decided
to terminate the agreement. The Company will continue to endeavor to sell
Marta's operating programs, or operate them until termination of the respective
contracts, and will not bid upon, or seek new emissions testing programs.
The State of Maryland program currently runs through April 30, 1999, and the
State has an option for a one-year extension. The contract for the Jacksonville,
Florida program runs through March 31, 2000. Marta will continue to operate
these programs pursuant to its contractual commitments pending any disposal. In
1997, Marta settled its claims with the State of Texas for the terminated El
Paso, Texas program. As a result of the settlement and subsequent disposal of
the related equipment and facilities Marta no longer has any interest in the
Texas program.
As a result of the termination of the agreement for sale, Marta moved forward
with and reopened the Cincinnati, Ohio program for testing in early 1998. The
initial term of the Ohio program runs through December 31, 2005. In connection
with the initial suspension of the contract by the Ohio Environmental Protection
Agency ("Ohio EPA") and its Director, Marta was granted a preliminary injunction
on September 23, 1996 and a permanent injunction on November 19, 1997 against
Ohio EPA and its Director enjoining them from, (i) conducting a hearing
regarding termination of the contract (ii) terminating the Ohio contract and
(iii) prohibiting Marta from performing its obligations under the Ohio contract.
On December 31, 1997, Marta filed a lawsuit against Ohio EPA and its Director in
an amount not less than $40,000,000 claiming damages for Ohio EPA's unilateral
and illegal suspension of the program and numerous other actions which will, in
the future, increase costs to operate the program and/or reduce the amount of
revenues the State was contractually obligated to provide. Subsequent thereto,
the State counterclaimed, denied Marta's allegations and demanded $10,000,000 in
liquidated damages, contract damages and/or civil penalties as a result of
Marta's alleged failure to meet the terms of the contract. In the opinion of
management, based on the advice of counsel, it cannot predict the outcome of
these lawsuits, and the Company has not recorded any asset or liability with
respect thereto.
Marta is also in litigation with the State of Kentucky in connection with the
effective cancellation of a contract to operate the centralized automotive
testing program in Northern Kentucky. The recorded carrying amount of the
investment in the Kentucky program is approximately $900,000.
The Company has presented the centralized automotive emissions testing business
as a discontinued operation in the Consolidated Financial Statements. A summary
of the non-current assets of the business is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cincinnati, Ohio program:
Land and buildings
under capital lease $15,283 $15,283
Testing equipment and
other assets 14,188 14,100
Carrying value of El Paso,
Texas assets -- 7,892
Other, net 2,858 4,756
- --------------------------------------------------------------------------------
$32,329 $42,031
</TABLE>
Discontinued operations include management's best estimate of the loss for the
ultimate disposal of the emissions testing business. Actual results could differ
from these estimates and are dependent upon the continuing efforts to sell or
operate existing programs, and resolution of claims and litigation with the
States of Ohio and Kentucky.
In September 1995, the Company spun off 100% of the common shares of a newly
formed wholly owned subsidiary, TransPro, Inc. ("TransPro") to the Company's
common shareholders (the "Spin-off"). TransPro comprised the Company's Truck
Products Business. Following the distribution, TransPro became an independent,
publicly traded corporation. In connection with the Spin-off, the Company has
presented the Truck Products Business as a discontinued operation in the
Consolidated Financial Statements.
<PAGE> 27
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized income statement information relating to the results of discontinued
operations is as follows (amounts in thousands, except per share data):
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
---------------------
Marta Marta TransPro
<S> <C> <C> <C>
Sales $ 14,914 $ 8,821 $ 92,933
Operating Income
(loss) (5,627) (2,624) 9,726
Equity in earnings
of joint venture -- -- 2,219
Net income (loss) (3,766) (1,756) 7,852
Earnings (loss) per
common share
(Basic and Diluted) (.14) (.07) .30
</TABLE>
In 1997, the residual operations of Marta were not material in relation to the
continuing operations of the Company. The fiscal year 1995 results of operations
for TransPro are for the nine-month period ended September 30, 1995 and excludes
transaction costs of $733,000 (after related income taxes of $467,000). Further,
results of operations for TransPro are net of allocated interest of $205,000 and
$402,000 in 1996 and 1995, respectively. Results of operations for Marta are net
of allocated interest (income) of $1,243,000, and $(277,000) in 1996 and 1995,
respectively.
NOTE 10: FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board ("FASB") Statements No. 107, "Disclosure
about Fair Value of Financial Instruments," and No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," are
part of a continuing process by the FASB to improve information regarding
financial instruments. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for such financial instruments
as defined by the Statements.
Cash and Short-Term Investments: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Long-Term Investments: One of the Company's investments in telecommunications
companies is carried at fair market value, based on its quoted stock price at
December 31, 1997. It is not practicable to estimate the fair value of the
Company's 8% investment in the common stock of its former specialty rubber
products business or its other investments in telecommunications companies
because of the lack of quoted market prices and the inability to estimate fair
value without incurring excessive costs. However, management believes that the
carrying amounts recorded at December 31, 1997 were not impaired and reflect the
corresponding fair values.
Long-Term Debt: The fair values of the Company's long-term debt either
approximate fair value or are estimated using discounted cash flow analyses
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
Off-balance-sheet instruments: The Company utilizes letters of credit to back
certain financing instruments and insurance policies. The letters of credit
reflect fair value as a condition of their underlying purpose and are subject to
fees competitively determined in the market place. The Company enters into
foreign currency contracts to offset the impact of currency rate changes against
certain assets related to accounts receivable. The fair value of such contracts
are based on quoted market prices of comparable contracts. The carrying amounts
and fair values of the Company's financial instruments at December 31, 1997 and
1996 are as follows (amounts in thousands):
Carrying Fair
Amount Value
1997
Cash and cash equivalents $ 30,775 $ 30,775
Non-current investments 34,700 34,700
Long-term debt 105,171 106,732
Off balance sheet financial
instruments:
Letters of credit 1,591 1,591
Foreign currency net
sales contracts 6,889 6,909
1996
Cash and cash equivalents $ 23,879 $ 23,879
Non-current investments 12,171 14,054
Long-term debt 53,345 54,294
Off balance sheet financial
instruments:
Letters of credit 1,881 1,881
Foreign currency net
sales contracts 15,682 15,798
<PAGE> 28
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allen telecom inc.
NOTE 11: UNAUDITED QUARTERLY FINANCIAL DATA
In the fourth quarter of 1997, the Company recorded a special pre-tax charge in
the amount of $9,650,000, or $.22 per common share after related tax effects.
This charge relates to the discontinuance of product development and marketing
efforts on two products (wireless PBX equipment and RF cell site planning tool),
including the write-off of related assets, and the cost of employee severance
related to a reduction in its Cleveland based workforce.
Quarterly financial data are summarized as follows (amounts in thousands, except
per share amounts):
<TABLE>
<CAPTION>
March 31 June 30 Sept. 30 Dec. 31
1997
<S> <C> <C> <C> <C>
Sales $ 102,503 $ 108,859 $ 111,389 $ 109,757
- -----------------------------------------------------------------------------------------------------------------
Gross profit 36,541 38,182 40,533 35,661
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations 7,026 6,734 7,930 2,291
- -----------------------------------------------------------------------------------------------------------------
Extraordinary item -
extinguishment of debt -- -- -- (632)
- -----------------------------------------------------------------------------------------------------------------
Net income 7,026 6,734 7,930 1,659
- -----------------------------------------------------------------------------------------------------------------
Earnings per common share Basic and Diluted:
Continuing operations .26 .25 .29 .08
- -----------------------------------------------------------------------------------------------------------------
Extraordinary item -
extinguishment of debt -- -- -- (.02)
- -----------------------------------------------------------------------------------------------------------------
Net income .26 .25 .29 .06
- -----------------------------------------------------------------------------------------------------------------
1996
Sales $ 84,469 $ 88,459 $ 95,010 $ 101,560
- -----------------------------------------------------------------------------------------------------------------
Gross profit 28,928 31,559 32,206 38,404
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations 4,682 5,702 3,497 6,675
- -----------------------------------------------------------------------------------------------------------------
Loss from discontinued operations (437) (565) (6,488) --
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) 4,245 5,137 (2,991) 6,675
- -----------------------------------------------------------------------------------------------------------------
Earnings per common share
Basic and Diluted:
Continuing operations .18 .21 .13 .25
- -----------------------------------------------------------------------------------------------------------------
Discontinued operations (.02) (.02) (.24) --
- -----------------------------------------------------------------------------------------------------------------
Net income .16 .19 (.11) .25
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 12: SUPPLEMENTAL CASH FLOW DISCLOSURE
During 1997, the following non-cash transactions were effected and are not
reflected in the Consolidated Statement of Cash Flows:
As described in Note 9, in 1997 the Company acquired 62% of Telia and the
remaining 20% minority interest in FOREM, in exchange for, in part, 289,389
shares of its common stock.
As described in Note 1, the Company owns common stock and warrants in RF Micro
Devices, Inc., which completed an initial public offering of its common stock on
June 3, 1997. In accordance with the provisions of SFAS 115, the Company has
increased its investment value to reflect its current trading value on December
31, 1997 of $12,668,000. Unrealized appreciation in the pretax amount of
$9,588,000 ($5,561,000 after related income tax effect) is included in
Stockholders' Equity as "Unrealized appreciation on investment securities."
During 1996, the following non-cash transactions were effected and are not
reflected in the Consolidated Statement of Cash Flows:
As described in Note 9, in 1996 the Company acquired 100% of Signal Science,
Incorporated and 64.3% of Tekmar Sistemi S.r.l in exchange for, in part, 93,747
shares of its common stock.
During 1995, the following non-cash transactions were effected and are not
reflected in the Consolidated Statement of Cash Flows:
The Company recorded fixed assets and a related capital lease obligation in the
amount of $16,375,000 in connection with leasing land and facilities for one of
its now discontinued emissions testing programs.
On September 29, 1995, the Company completed the largely non-cash spin-off
distribution of 100% of the common shares of TransPro.
In May, 1995, the Company called for redemption the outstanding $4,917,000 of
its Convertible Subordinated Debentures issued in 1992 in connection with the
acquisition of Alliance Telecommunications Corporation. Subsequent thereto,
holders of these debentures converted such debentures into 351,834 shares of the
Company's common stock.
Information with respect to cash paid during the year for interest and taxes is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Interest Paid $ 4,097,000 $ 4,907,000 $ 3,840,000
Interest Capitalized 220,000 -- 440,000
Income taxes
paid, net 27,514,000 1,778,000 18,890,000
</TABLE>
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ALLEN TELECOM INC.
We have audited the accompanying consolidated balance sheets of Allen Telecom
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of income, 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Allen Telecom Inc.
as of December 31, 1997 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Cleveland, Ohio,
February 13, 1998
REPORT OF MANAGEMENT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ALLEN TELECOM INC.
The Company maintains accounting and related internal control systems which are
intended to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records necessary for the preparation of
financial information. There are limits inherent in all systems of internal
control, and the cost of the systems should not exceed the expected benefits.
Through the use of a program of internal audits and discussions with and
recommendations from its independent accountants, the Company periodically
reviews these systems and controls and compliance therewith.
The Audit Committee of the Board of Directors, comprised entirely of
non-employee directors, meets regularly with management, the internal auditors
and the independent accountants to review the results of their work and to
satisfy itself that their responsibilities are being properly discharged. The
internal auditors and independent accountants have full and free access to the
Audit Committee and may have discussions regarding appropriate matters, with and
without the presence of management.
The primary responsibility for the integrity of financial information rests with
management. Certain valuations contained herein result, of necessity, from
estimates and judgments of management, actual results could differ from these
estimates. The accompanying consolidated financial statements, notes thereto and
other related information were prepared in conformity with generally accepted
accounting principles.
/s/ Robert G. Paul
Robert G. Paul
President and Chief Executive Officer
/s/ Robert A. Youdelman
Robert A. Youdelman
Executive Vice President and
Chief Financial Officer
/s/ James L. LePorte
James L. LePorte, III
Vice President, Treasurer & Controller, Chief Accounting Officer
<PAGE> 30
28
management's discussion and analysis
of financial condition and results of operation
RESULTS OF OPERATIONS
OVERVIEW
<TABLE>
<CAPTION>
($ millions) 1997 1996 1995
<S> <C> <C> <C>
Sales $432.5 $369.5 $306.6
Operating income
(before special charges
discussed below) 59.4 52.0 52.5
Income before taxes and
minority interests 46.7 46.5 50.4
Income from continuing
operations 24.0 20.6 27.3
Net income 23.3 13.1 32.6
Total assets 514.4 410.5 363.6
Capital expenditures 22.2 17.5 16.8
Depreciation 12.8 11.7 8.3
</TABLE>
The increase in sales in 1997 to $432.5 million, or 17% over 1996, was due
primarily to continued growth of international sales which increased
approximately $51 million, or 25%. The Site Management and Systems product lines
benefited particularly from this growth. The 21% increase in sales in 1996 to
$369.5 million was also due to the growth of international sales, increasing $54
million, or 35% compared to 1995. The balance was due primarily to domestic
sales.
Operating income, representing income before financing costs and special charges
(as discussed below) increased $7.4 million, or 14% over 1996. This is
attributable principally to the growth of the Site Management Products and Base
Station Antenna businesses, improved product margins and the spreading of fixed
costs on higher sales. In the fourth quarter of 1997, the Company recorded
special charges of $9.6 million ($6.0 million after related income taxes or $.22
per common share) relating to the discontinuance of product development and
marketing efforts on two products, wireless PBX equipment and an RF planning
tool, including the write-off of assets and the cost of employee severance.
Operating income in 1996, excludes the one-time non-cash charge for acquired
in-process research and development incurred in connection with an acquisition
in the amount of $2.7 million or $.10 per common share. The decline in operating
income of $.5 million from 1995 is due in large part to the cessation of royalty
payments made under a noncompetition agreement which expired in June 1996.
Income from continuing operations increased $3.4 million in 1997, as compared
with 1996; however, both 1997 and 1996 results included the aforementioned
special write-offs. Excluding these special charges, income from continuing
operations increased $6.7 million in 1997, and earnings per common share
increased from $.86 to $1.10 per share. These earnings increased due to the
higher margins noted above. In addition, the Company's tax provision was $1.9
million lower in 1997 versus 1996.
Net income increased from $13.1 million in 1996 to $23.3 million in 1997. This
increase is due primarily to the elimination of the $7.5 million of after tax
losses recorded in 1996 for the discontinued emissions testing business.
Income from continuing operations declined $6.7 million in 1996, as compared
with 1995, due to the aforementioned write-off of acquired in-process research
and development costs of $2.7 million and a $3.3 million increase in minority
interest expense relating to the then outstanding 20% minority interest in FOREM
and its 38% minority interest in Mikom G.m.b.H. Income from continuing
operations was also adversely affected in 1996 by a higher effective tax rate.
The decline in net income from $32.6 million in 1995 to $13.1 million in 1996
reflects both the $7.5 million of after tax losses for the discontinued
emissions testing business and the impact of the elimination of the spun off
automotive and truck products business, which earned $7.1 million in profits in
1995 through the September 29, 1995 spin-off date.
Sales
Sales of Systems Products (which generally are comprised of booster and repeater
products for cellular and PCS systems, test and measurement products, as well as
indoor coverage products) increased 18% in 1997 to $111.0 million, as compared
with $94.1 million in 1996. Sales were impacted primarily by higher shipments of
test and measurement products to domestic PCS and international markets. The
Systems business also continued to be successful with its non-frequency
translating repeaters in Europe and other international markets. The most
successful of these repeater products utilize GSM technology, which has gained
worldwide acceptance as a cellular standard. In addition, the Company was
positively affected by the April 1997 acquisition of Telia, S.A., a manufacturer
of highly linear power amplifiers which contributed $5.1 million in sales.
Offsetting these increases, in part, was a decrease in domestic Systems sales,
due to lower shipments of its Extend-A-Cell(R) frequency translating repeater
and microcell products.
Sales of Systems Products were down slightly at $94.1 million in 1996 compared
with $95.1 million in 1995. Sales were impacted primarily by significantly lower
shipments of the Company's Extend-A-Cell(R), principally in domestic markets.
Offsetting this decline, in part, was the success of non-frequency translating
repeaters in Europe and other international markets. In addition, sales of
system test and measurement products
<TABLE>
<CAPTION>
SALES OF SYSTEM PRODUCTS
($ millions)
<S> <C>
93 $ 62.4
94 $ 76.1
95 $ 95.1
96 $ 94.1
97 $111.0
</TABLE>
<TABLE>
<CAPTION>
SALES OF SITE MANAGEMENT AND OTHER NON-ANTENNA PRODUCTS
($ millions)
<S> <C>
93 $ 49.1
94 $ 53.0
95 $112.9
96 $159.3
97 $197.3
</TABLE>
<TABLE>
<CAPTION>
SALES OF MOBILE AND BASE ANTENNAS
($ millions)
<S> <C>
93 $ 57.2
94 $ 68.2
95 $ 73.8
96 $ 80.6
97 $ 88.5
</TABLE>
<TABLE>
<CAPTION>
SALES OF FREQUENCY PLANNING, SYSTEMS DESIGN AND RELATED SERVICES
($ millions)
<C> <S>
93 $14.9
94 $15.7
95 $24.8
96 $35.5
97 $35.7
</TABLE>
<PAGE> 31
29
management's discussion and analysis
of financial condition and results of operation
increased significantly in 1996 over 1995 as they obtained higher market share
with domestic PCS carriers.
Sales of Site Management and Other Non-antenna products (which include tower
mounted amplifiers, filters, combiners and duplexers) increased to $197.3
million, or 24% over 1996 sales of $159.3 million. This increase follows the
1996 sales increase of $46.4 million, or 41% over 1995. The continued large
increases in sales reflect strong market presence in Europe and the worldwide
acceptance of GSM technology, where the Company has a strong market share with
original equipment manufacturers ("OEMs").
Sales of Mobile and Base Antennas increased to $88.5 million in 1997, a 10%
increase over 1996. The increase resulted from sales of base station antennas.
However, this increase was partially offset by a decline in mobile antenna
sales, as consumers continue to shift purchases from mobile cellular telephones,
where the Company has significant market share, to portable cellular phones. The
Company does not manufacture portable antennas. Sales increased to $80.6 million
in 1996, or 9.2%, over 1995. The increase resulted from sales of base station
antennas in new PCS markets. However, as in 1997, this sales increase was
partially offset by a decline in mobile antenna sales.
Sales of the Frequency Planning, Systems Design and Related Services product
line increased only 1% in 1997 to $35.7 million, as compared with $35.5 million
in 1996 due to declining sales of engineering services for PCS systems. This
business provides engineering and consulting services with nearly all major PCS
operators. In 1996, sales increased to $35.5 million, or 43%, over 1995, due to
strong demand for engineering services to domestic PCS carriers.
In 1997, international sales constituted approximately 60% of total sales,
compared with 56% in 1996, and 50% in 1995. Export sales from the U.S. are
primarily to major wireless telephony companies, and are typically payable in
U.S. dollars. European sales are primarily to major OEMs and wireless operators
in European currencies. The Company sees no significantly greater risk in the
operation of its business as a result of this proportion of international
business.
In 1997, approximately 11% of direct sales were to Asian markets. However, only
about 3% of direct sales were to countries significantly affected by the recent
economic and currency rate crisis in certain Asian countries, notably Indonesia,
Korea, Thailand and the Philippines. In addition, to date, sales do not appear
to have been significantly affected in these Asian countries, although the
Company is aware of certain orders that have been deferred by prospective
customers. While direct sales of products to these countries is not significant,
it is difficult to discern how much of OEM sales ultimately end up in these
countries. Accordingly, it is difficult to assess the near term impact, although
the Company does expect its rate of sales growth to slow in 1998 due to the
ripple effect of the recent Asian fiscal problems.
At December 31, 1997, the Company had an order backlog of approximately $115
million, up from approximately $109 million at December 31, 1996.
<TABLE>
<CAPTION>
Operations
($ millions) 1997 1996 1995
<S> <C> <C> <C>
Gross profit margin, as a
percent of sales 34.9% 35.5% 38.3%
Operating expenses, as a
percent of sales 15.6% 15.1% 14.9%
Research and development
and new product
engineering costs:
Amount $30.4 $21.0 $17.0
As a percent of sales 7.0% 5.7% 5.5%
Amortization of goodwill 3.4 2.4 2.1
Minority interests 5.0 6.3 3.0
</TABLE>
Gross profit margins declined in 1997 as compared with 1996. However, excluding
the aforementioned special charges for the discontinuance of product development
efforts on two products, gross profit margin would have been 35.8%, a small
increase over 1996. This was due to slightly improved margins in the Base
Station Antenna and Systems businesses, offset by continuing pricing pressures,
particularly in the Frequency Planning and Site Management product lines. The
gross profit margin decrease in 1996 versus 1995 was due primarily to changes in
product mix and pricing pressure.
Operating expenses (which consist of selling, general and administrative
expenses, but exclude amortization of goodwill) increased in 1997, due primarily
to the aforementioned special charges. In addition, the Company realized a
before tax gain on the sale of a partial ownership interest in Columbia Spectrum
Management, L.P., in the amount of $1.6 million, or $.03 per common share after
related income tax effects. This gain is included in selling, general and
administrative expenses. Excluding the above-mentioned special charges and gain
on investment, operating expenses would have been 14.6% and are within normal
operating ranges. The decline in percentage of such expenses in 1997 represents
the spreading of fixed costs on higher sales.
The increase in operating expense percentage in 1996, as compared with 1995, is
due primarily to the cessation of royalty payments made under a prior
noncompetition agreement.
In the past few years, the Company has significantly increased its research and
development and new product engineering costs in order to keep pace with the
technological advances in the industry. The Company anticipates that this trend
will continue as PCS and cellular systems are implemented and expanded and the
Company strives to develop ancillary products, including software products, for
the wireless telephony industry.
The increase in amortization of goodwill, and corresponding decrease in minority
interest expense, as compared with 1996, is a result of the acquisition of the
remaining 20% minority interest in FOREM in May 1997 (see Note 9 of the Notes to
Consolidated Financial Statements and Liquidity and Capital Resources below).
Future results of operations will no longer include minority interest expense
relating to FOREM. However, the Company will continue to record minority
interest expense with respect to FOREM's 62% owned subsidiary, Mikom G.m.b.H.,
and other minority owned subsidiaries. In 1996, the increase in minority
interest expense related directly to the strong performance of the Company's
European subsidiaries.
<PAGE> 32
30
management's discussion and analysis
of financial condition and results of operations
FINANCING COSTS
<TABLE>
<CAPTION>
($ millions) 1997 1996 1995
Financing expenses:
<S> <C> <C> <C>
Interest expense $ (4.5) $ (3.8) $ (3.5)
Interest income 1.5 1.0 1.4
</TABLE>
The increase in interest expense in 1997 over 1996 is primarily related to
increased credit line borrowings as a result of significant investments made by
the Company (see Liquidity and Capital Resources). The increase in interest
expense in 1996, as compared with 1995, was due primarily to the acquisition and
inclusion of FOREM. Lower interest income in 1996, when compared with 1995,
reflects lower domestic investment income as a result of lower average cash
levels.
<TABLE>
<CAPTION>
INCOME TAXES
($ millions) 1997 1996 1995
<S> <C> <C> <C>
Provision for income taxes $ 17.7 $19.7 $20.1
Effective tax rate 37.9% 42.3% 39.9%
</TABLE>
The lower effective tax rate in 1997, as compared with 1996, is due to a higher
proportion of tax benefits attributable to the Company's foreign sales
corporation, which has reduced U.S. income taxes payable through favorable tax
treatment accorded certain export sales, and business tax and other credits
available to reduce U.S. income taxes payable. These benefits were offset, in
part, by higher tax rates on European source income.
The higher effective tax rate in 1996, as compared with 1995 is due to the
higher proportion of such European earnings, which carried a higher tax burden
than the U.S. statutory rate of 35%. These higher tax rates were offset, in
part, by the tax benefits attributable to the foreign sales corporation.
With the continued success of the European operations, which carry the higher
tax burden, it is possible that the effective tax rate in 1998 could exceed that
of 1997.
DISCONTINUED OPERATIONS
As more fully discussed in Note 9 of the Notes to Consolidated Financial
Statements, the Company decided in 1996 to exit the emissions testing business
operated by its MARTA Technologies, Inc. ("Marta") subsidiary. The Company
determined that this decision would allow it to fully devote management and
financial resources to its expanding wireless telecommunications product lines.
The Company previously had entered into an agreement for the sale of Marta's
centralized emissions testing program in Cincinnati, Ohio. However, in 1997, the
parties were unable to reach agreement on the terms and jointly decided to
terminate the agreement (including the possible sale of the Jacksonville,
Florida program). The Company will continue to endeavor to sell Marta's
programs, or operate them until termination of the respective contracts, and
will not bid upon, or seek new emissions testing programs.
In 1997, Marta settled its claims with the State of Texas for the terminated El
Paso, Texas program. As a result, Marta received $12.4 million from the
settlement and subsequent sale and disposal of the equipment and facilities.
This is the reason for the reduction in "Assets of discontinued emissions
testing business" on the Consolidated Balance Sheet.
On December 31, 1997, Marta filed a lawsuit against the Ohio Environmental
Protection Agency ("Ohio EPA") and its Director in an amount not less than $40
million claiming damages for Ohio EPA's suspension of the Cincinnati, Ohio
program in August 1996 and numerous other actions which will, in the future,
impact costs and revenues. On January 30, 1998, the State counterclaimed, denied
Marta's allegations and demanded $10 million in liquidated damages, contract
damages and/or civil penalties as a result of Marta's alleged failure to meet
the terms of the contract. In the opinion of management, based on the advice of
counsel, it is too early to predict the outcome of these lawsuits, and the
Company has not recorded any asset or liability with respect thereto.
Discontinued operations include management's best estimate of the loss from the
disposal of the Marta business. Actual results could differ from these estimates
and are dependent on, among other things, the continuing efforts to sell or
operate existing programs. In addition, it is not possible to predict the
outcome of the aforementioned Ohio litigation or litigation with the State of
Kentucky for the effective cancellation of Marta's contract in Northern
Kentucky.
IMPACT OF THE "YEAR 2000 ISSUE"
The "Year 2000 Issue" is the result of computer systems that were programmed in
prior years using a two-digit representation for the year. Consequently, in the
year 2000, date-sensitive computer programs may interpret the date "00" as 1900
rather than 2000. The Company's operating units have completed an initial
assessment of the systems affected by the Year 2000 Issue, and have formulated
action plans to correct or replace these programs by December 31, 1998.
The Company will be required to modify or replace several internally developed
software programs, along with purchased software packages used internally and in
some of its products. The Company has communicated with its significant
customers, and has determined that it has limited exposure for products it has
sold. The Company will use both internal and external resources to modify
programs, and will upgrade where necessary packaged programs. Estimates of the
total remaining cost of the year 2000 project have not yet been finalized, but
are not expected to have a material adverse effect on future operating results
or cash flows.
INFLATION
The overall impact of the low rate of inflation in recent years has had no
significant impact on the Company
ENVIRONMENTAL
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and financial liability. (See also Note 5 of Notes to Consolidated
Financial Statements.)
<PAGE> 33
31
management's discussion and analysis
of financial condition and results of operations
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
($ millions) 1997 1996 1995
<S> <C> <C> <C>
Cash flow from operations $ 18.0 $ 53.6 $ 6.9
Total debt 104.0 56.0 55.8
Stockholders' equity 260.8 226.0 210.4
Debt to equity ratio .4:1 .2:1 .3:1
</TABLE>
The significant decrease in cash flow from operations in 1997, as compared with
1996, is due primarily to an increased investment in working capital of
approximately $16.1 million and $24 million in tax payments made principally by
the Company's European subsidiaries.
In 1996, the Company generated cash of $53.6 million from continuing operations
as compared with $6.9 million in 1995. The significant increase during 1996, as
compared with 1995, despite lower income from continuing operations, was due in
large measure to a $29 million lower level of investment in working capital in
1996 (despite significantly higher sales) than experienced in 1995. In addition,
the Company received a refund of certain income taxes paid in 1995 in the amount
of $8.0 million.
The Company continued to make significant investments in the wireless
telecommunications industry both in capital improvements ($27.6, $22.2 and $21.2
million in 1997, 1996, and 1995, respectively) and investments in
telecommunications companies ($44.4, $16.9, and $1.7 million in 1997, 1996, and
1995, respectively). The large increase in investments in 1997, over the prior
two years, represents principally the purchase of the outstanding 20% minority
interest in FOREM and the acquisition of 62% of Telia. These purchases are also
the principal reason for the increase in "Excess of cost over net assets of
businesses acquired" in the Consolidated Balance Sheet.
In 1997, the Company borrowed $65.0 million in a private placement transaction.
These notes bear interest at a weighted average interest rate of approximately
6.65% and have an average outstanding life of 7.5 years. The Company believes
this longer term financing strategy is consistent with its investing activities
and also afforded it an opportunity to take advantage of lower interest rates.
In this connection, the Company decided to prepay certain borrowings with a
portion of the proceeds, in the amount of $15.0 million, which bore interest at
the rate of 8.13%. This resulted in a prepayment premium of $1.0 million, or
$.02 per common share after related income tax effects, and has been reported as
an "Extraordinary item" in the Consolidated Statement of Income.
The Company continues to maintain a $100 million domestic credit line. At
December 31, 1997, no amounts were borrowed under this agreement and, after
exclusion for amounts designated for letters of credit, approximately $82.5
million was available for use. This agreement expires in December 1999.
In 1996, the Company entered into an agreement to make an equity investment of
$5 million in Nextwave Telecom Inc. ("Nextwave"), and whereby Nextwave agreed to
purchase $50 million of equipment and services over a five-year period from the
Company. In connection with this agreement, subject to certain preconditions
that have not yet occurred, the Company has agreed to provide secured product
financing in addition to its $5.0 million investment. At December 31, 1997, the
Company had outstanding approximately $2.0 million of receivables with Nextwave.
In early 1997, the U.S. Government suspended interest payments on license fees
due from certain companies, such as Nextwave, who were awarded
telecommunications licenses under a competitive auction bid process.
Subsequently, the Federal Communications Commission ("FCC") provided
alternatives for these capital constrained C Block licensees, which may enable
these carriers to obtain the financing needed to build out their systems or to
return some, or all, of their licenses to the FCC for re-auction. While it is
not clear which alternative, or alternatives, will be chosen by Nextwave, a
decision is anticipated in 1998. At this time, the Company believes that there
has been no impairment in the aggregate carrying value of its investment in
Nextwave. The increase in other assets in the Consolidated Balance Sheet is due
primarily to common shares and warrants of RF Micro Devices, Inc. ("RFMD"). RFMD
completed an initial public offering of its common stock in 1997. At December
31, 1997, the value of these assets has been adjusted to reflect current market
value of approximately $12.4 million. Likewise, the unrealized appreciation in
the amount of $9.6 million ($5.6 million, after related income tax effect,) is
included in Stockholders' Equity as "Unrealized appreciation on investment
securities," as it is the Company's intent to treat the securities as a
long-term investment. The Company's investment is currently subject to certain
trading restrictions.
In 1997, the Company generated cash from its discontinued Marta operations in
the amount of $7.8 million as compared with cash usages of $6.1 and $12.8
million in 1996 and 1995, respectively. The cash generation in 1997 was due to
the settlement of claims with the State of Texas and subsequent sale and
disposal of the related assets, which generated $12.4 million in cash. The
Company anticipates future net cash usages from these operations subject to
disposal of programs or the settlement of outstanding litigation.
Future capital needs will be directed toward continued penetration and expansion
in the wireless communications industry, both internally and through strategic
alliances and acquisitions. In early 1998, the Company made a payment in
connection with the last 20% acquisition of FOREM in the amount of $26.4 million
(included in accounts payable in the Consolidated Balance Sheet which accounts
for the significant increase in that item over 1996). The cash needs of this
payment were met by utilization of available cash investments and lines of
credit. Capital expenditures in 1998 are estimated at $24 million, of which $1.4
million was committed at December 31, 1997. These proposed capital expenditures
reflect the increase in productive capacity necessitated by the increase in
sales volume, both domestically and in Europe.
The Company believes that continued profitability and available unused credit
lines provide sufficient liquidity to fund future growth, expansion, and
acquisitions.
<PAGE> 34
32
five year summary of operations
allen telecom inc.-(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Five years ended December 31, 1997 1997 1996 1995 1994 1993
OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
Sales $432,508 $369,498 $306,556 $213,517 $183,638
Cost of sales 281,591 238,401 189,103 127,160 109,040
Selling, general and administrative expenses 70,786 58,101 47,908 44,252 40,452
Research & development and new product engineering 30,367 21,023 17,006 8,865 7,886
Write-off of in-process research and development - 2,662 - - -
Net interest and financing expense 3,051 2,785 2,098 1,785 1,805
- -----------------------------------------------------------------------------------------------------------------------------
Income before taxes and minority interests 46,713 46,526 50,441 31,455 24,455
Provision for income taxes 17,723 19,665 20,138 11,191 671
- -----------------------------------------------------------------------------------------------------------------------------
Income before minority interest 28,990 26,861 30,303 20,264 23,784
Minority interests (5,009) (6,305) (3,027) (523) (518)
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 23,981 20,556 27,276 19,741 23,266
Discontinued operations:
Income (loss) from discontinued operations - (3,766) 5,363 9,453 1,695
Loss for disposal - (3,724) - - (2,936)
Cumulative effect of accounting change - - - - 2,102
Extraordinary item - extinguishment of debt (632) - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 23,349 $ 13,066 $ 32,639 $ 29,194 $ 24,127
- -----------------------------------------------------------------------------------------------------------------------------
Net income applicable to common stock $ 23,349 $ 13,066 $ 32,639 $ 29,194 $ 21,947
=============================================================================================================================
Earnings Per Common Share:
Basic: Income from continuing operations $ .89 $ .78 $1.05 $ .77 $ .94
Discontinued operations:
Income (loss) from discontinued operations - (.14) .20 .37 .08
Loss for disposal of discontinued businesses - (.14) - - (.13)
Cumulative effect of accounting change - - - - .09
Extraordinary item - extinguishment of debt (.02) - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Earnings per Common Share - Basic $ .87 $ .50 $1.25 $1.14 $ .98
=============================================================================================================================
Diluted: Income from continuing operations $ .88 $ .76 $1.02 $ .76 $ .91
Discontinued operations:
Income (loss) from discontinued operations - (.14) .20 .36 .06
Loss for disposal of discontinued businesses - (.14) - - (.11)
Cumulative effect of accounting change - - - - .08
Extraordinary item - extinguishment of debt (.02) - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Earnings per Common Share - Diluted $ .86 $ .48 $1.22 $1.12 $ .94
=============================================================================================================================
FINANCIAL CONDITION
Total assets $514,433 $410,512 $363,565 $357,716 $324,638
Working capital 111,015 94,378 93,371 107,940 71,808
Current ratio 1.85 1.90 2.11 2.54 2.22
Total debt 104,034 55,955 55,799 45,064 52,597
Stockholders' equity 260,822 225,951 210,377 224,181 195,161
Debt to equity ratio .40 .25 .27 .20 .27
Book value per common share 9.55 8.44 7.92 8.59 7.52
Shares outstanding at year end 27,298 26,763 26,570 26,107 25,964
Return on stockholders' equity 9.4% 6.0% 14.7% 14.1% 12.6%
Capital expenditures 22,247 20,992 24,498 14,833 11,360
Depreciation 12,808 12,231 8,896 7,477 6,611
Number of employees 3,300 2,900 2,800 2,700 2,500
</TABLE>
All per share data have been restated to reflect stock dividends and
stock spilts.
<PAGE> 35
Shareholder information
EXCHANGE LISTINGS
Common Stock (Ticker Symbol - ALN) New York Stock Exchange Pacific Exchange.
TRANSFER AGENT AND REGISTRAR
Harris Trust Company of New York
600 Superior Avenue
East, Suite 600
Cleveland, OH
44114-2650
(800)942-5909
AUDITORS
Coopers & Lybrand L.L.P.
Cleveland, Ohio
FORM 10-K OR ADDITIONAL INFORMATION ABOUT THE COMPANY
Stockholders and others interested in obtaining additional information about the
Company may do so by writing or calling Allen Telecom Inc., 25101 Chagrin Blvd.,
Beachwood, Ohio, 44122-5619, (216) 765-5822. The Form 10-K Annual Report,
including financial statements and schedules, will be furnished without charge.
Information concerning the Company can also be found on the Internet at
http://www.allentelecom.com.
AFFIRMATIVE ACTION POLICY
It is the policy of Allen Telecom Inc. that all employee will be judged on the
basis of qualifications and ability, without regard to age, sex, race, creed,
color or national origin, in all personnel actions. No employee or applicant
for employment will receive discriminatory treatment because of physical or
mental handicap in regard to any position for which the employee or applicant
for employment is qualified.
STOCKHOLDERS
As of March 4, 1998, Allen Telecom Inc. had outstanding 27,291,743 shares of
Common Stock owned by 1765 holders of record.
ANNUAL STOCKHOLDER'S MEETING
The Annual Meeting of Stockholders will be held at the Cleveland Marriott at Key
Center, 127 Public Square, Cleveland, Ohio on Friday, May 1, 1998 at 9:30 a.m.
<TABLE>
<CAPTION>
Stock Price Range
(dollars per share)
93 94 95 96 97
<S> <C> <C> <C> <C>
$12.94 $13.50 $21.25 $14.00 $16.00
$29.19 $25.63 $39.38 $28.75 $30.00
</TABLE>
MARKET PRICE RANGE OF COMMON STOCK (dollars per share)
<TABLE>
<CAPTION>
1997 1996 1995
High Low High Low High Low
- -----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1st Quarter 26 3/8 16 23 1/4 16 7/8 25 1/2 21 1/4
2nd Quarter 24 1/8 16 1/2 28 3/4 18 7/8 29 5/8 22
3rd Quarter 29 1/8 18 3/4 22 1/2 14 39 3/8 29 1/8
4th Quarter 30 16 23 3/4 14 3/4 35 21 7/8
</TABLE>
<TABLE>
<CAPTION>
DIVIDENDS DECLARED ON COMMON STOCK
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1st Quarter - - $.05 $.04 $.03
2nd Quarter - - $.05 $.04 $.03
3rd Quarter - - $.05 $.04 $.03
4th Quarter - - - $.04 $.03
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE ALLEN TELECOM INC.
--------------------------------------
The following is a list of the subsidiaries of Allen Telecom Inc. (Delaware,
02-03-69), and indented, subsidiaries of such subsidiaries, including in each
case the state or other jurisdiction in which each subsidiary was incorporated
or organized, and indicating in each case the percentage of voting securities
owned by the immediate parent.
<TABLE>
<CAPTION>
STATE/COUNTRY OF
NAME OF CORPORATION INCORPORATION DATE %
- ------------------- ------------- ---- -
<S> <C> <C> <C>
The Allen Group Canada Limited Ontario, Canada 04-19-72 100
The Allen Group Internat'l Sales Corp. Barbados 09-15-94 100
The Allen Group International, Inc. Delaware 07-19-73 100
The Allen Group GmbH Germany 09-29-70 100
Allen Telecom Canada, Inc. Ontario 04-14-93 100
Allen Telecom (France) S.A. (2) France 04-09-97 100
Telia S.A. (3) France 10-19-90 62
Allen Telecom GmbH Germany 07-28-90 100
Allen Telecom Group Limited (1) U.K. 05-08-72 100
Allen Telecom (Holdings) Pty Limited Australia 07-18-96 100
Allen Telecom (Australia) Pty Limited Australia 07-23-96 100
Allen Telecom (Hong Kong) Limited (4) Hong Kong 04-25-97 100
Allen Telecom Investments, Inc. Delaware 04-01-97 100
Allen Telecom (Mauritius) Holdings Ltd. Mauritius 11-25-97 100
Decibel Products (Guangzhou) Ltd. China 01-19-98 100
Allen Telecom (Singapore) Pte Limited Singapore 06-03-97 100
Allen Telecomunicadoes do Brasil Ltda (5) Brazil 11-95 100
Antenna Specialists Co., Inc. Delaware 10-07-88 100
Antespec, S.A. de C.V. Mexico 11-14-88 100
ATI International, Inc. Delaware 12-10-97 100
Comsearch Holdings Inc. Delaware 08-22-97 100
Telespectro de Mexico, S.A. de C.V. Mexico 11-97 100
Decibel Mobilcom Limited (1) England 01-31-91 100
FOREM S.r.l. Italy 11-14-94 100
FOREM France S.a.r.l. (6) France 1993 99
FOREM (UK) Limited U.K. 1988 100
Mikom G.m.b.H. (7) Germany 05-07-85 62
Mikom Vertriebs und Service GmbH Austria 10-18-96 60
(8)
Mitras Ltd. (9) Hungary 1992 60
C-com, spol. s.r.o. Czechoslovakia 02-26-96 25
MARTA Technologies, Inc. Delaware 10-14-92 100
Orion Far East Management Inc. (1) Delaware 07-16-81 100
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
STATE/COUNTRY OF
NAME OF CORPORATION INCORPORATION DATE %
- ------------------- ------------- ---- -
<S> <C> <C> <C>
Orion Industries, Inc., Limited (1) Hong Kong 06-01-71 100
Orion Imports & Exports Limited (1) Hong Kong 09-07-73 100
Orion Industries, Inc. Japan (1) Japan 09-73 100
Orion Industries Taiwan Limited (1) Taiwan 10-73 100
RF Micro Devices, Inc. North Carolina 02-27-92 8.2
Signal Science, Incorporated California 09-25-74 100
Tekmar Sistemi S.r.l. (10) Italy 09-20-80 64.3
Telecom Wireless Solutions, Inc. Delaware 10-31-94 19
WINDATA Inc. (11) Delaware 06-05-90 19.9
</TABLE>
(1) These subsidiaries are not significant in the aggregate and are no longer
active.
(2) Of the 2,500 shares issued and outstanding, 2,494 shares are owned by Allen
Telecom Inc., 1 share is owned by Allen Telecom Investments, Inc. and the
remaining 5 shares are owned in name only by Allen employees.
(3) Of the 10,000 shares issued and outstanding, 6,196 shares are owned by
Allen Telecom (France) S.A., 4 shares are owned by Allen employees, and
Allen Telecom (France) SA. owns options to acquire the remaining 3,800
shares.
(4) Of the 1,000 shares issued and outstanding, 999 shares are owned by Allen
Telecom Inc. and 1 share is owned by Allen Telecom Investments, Inc.
(5) 99% of the outstanding capital stock of this subsidiary is owned by Allen
Telecom Inc. and the remaining 1% is owned by Allen Telecom Investments,
Inc.
(6) 99% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.p.A. and the remaining 1% is owned by senior management of FOREM
France S.a.r.l.
(7) 62% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.p.A. and the remaining 38% is owned by the managing director of
Mikom G.m.b.H.
(8) 60% of the outstanding capital stock is owned by Mikom G.m.b.H. and the
remaining 40% is owned by the partners of Mikom G.m.b.H. in the venture.
(9) 60% of the outstanding capital stock of this subsidiary is owned by MIKOM
G.m.b.H. and the remaining 40% is owned by senior management of Mitras Ltd.
(10) 64.3% of the outstanding capital stock of this subsidiary is owned by Allen
Telecom, Inc. which also owns options to acquire the remaining 35.7%.
(11) Allen Telecom Inc. has subscribed to a 19.9% interest in WINDATA Inc. and
also owns an option to acquire the remaining 80.1%.
17-Mar-98
<PAGE> 1
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 (File No. 33-13467) and on the Registration Statements on
Form S-8 (File Nos. 33-58951, 33-53499, 33-53487, 33-5240, 33-8658 and 2-99919)
and the related Prospectuses of Allen Telecom Inc. of (a) our report dated
February 13, 1998 on our audits of the consolidated financial statements of
Allen Telecom Inc. as of December 31, 1997 and 1996 and for the years ended
December 31, 1997, 1996 and 1995, which report has been incorporated by
reference in this Annual Report on Form 10-K from the 1997 Annual Report to
Stockholders of Allen Telecom Inc. (a copy of which is filed as Exhibit 13 to
this Report) and appears on page 27 therein, and (b) our report dated February
13, 1998 on our audits of the financial statement schedule for the years ended
December 31, 1997, 1996 and 1995 of Allen Telecom Inc., which report appears on
page 13 in this Annual Report on Form 10-K. We also consent to the references to
our firm in the above-mentioned Prospectuses under the caption "EXPERTS".
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S DECEMBER 31, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 30,775
<SECURITIES> 0
<RECEIVABLES> 107,648
<ALLOWANCES> (1,934)
<INVENTORY> 93,768
<CURRENT-ASSETS> 242,036
<PP&E> 107,264
<DEPRECIATION> (46,721)
<TOTAL-ASSETS> 514,433
<CURRENT-LIABILITIES> 131,021
<BONDS> 97,915
0
0
<COMMON> 29,746
<OTHER-SE> 231,076
<TOTAL-LIABILITY-AND-EQUITY> 514,433
<SALES> 432,508
<TOTAL-REVENUES> 432,508
<CGS> (281,591)
<TOTAL-COSTS> (281,591)
<OTHER-EXPENSES> (100,357)
<LOSS-PROVISION> (796)
<INTEREST-EXPENSE> (3,051)
<INCOME-PRETAX> 46,713
<INCOME-TAX> (17,723)
<INCOME-CONTINUING> 23,981
<DISCONTINUED> 0
<EXTRAORDINARY> (632)
<CHANGES> 0
<NET-INCOME> 23,349
<EPS-PRIMARY> .87<F1>
<EPS-DILUTED> .86<F1>
<FN>
<F1>The Earnings per Share amounts have been restated to conform to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share".
We have replaced primary and fully diluted amounts with basic and diluted
per share amounts, respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S MARCH 31, 1997, JUNE 30, 1997, AND SEPTEMBER 30, 1997 CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 18,628 22,586 16,081
<SECURITIES> 0 0 0
<RECEIVABLES> 100,393 106,845 108,615
<ALLOWANCES> (1,610) (1,680) (1,726)
<INVENTORY> 74,831 81,186 85,119
<CURRENT-ASSETS> 202,345 216,041 218,899
<PP&E> 84,338 90,561 102,695
<DEPRECIATION> (31,973) (34,838) (44,567)
<TOTAL-ASSETS> 414,791 471,279 474,737
<CURRENT-LIABILITIES> 103,574 112,972 108,363
<BONDS> 48,769 78,376 77,442
0 0 0
0 0 0
<COMMON> 29,662 29,663 29,701
<OTHER-SE> 202,007 223,920 231,129
<TOTAL-LIABILITY-AND-EQUITY> 414,791 471,279 474,737
<SALES> 102,503 211,362 322,751
<TOTAL-REVENUES> 102,503 211,362 322,751
<CGS> (65,962) (136,639) (207,495)
<TOTAL-COSTS> (65,962) (136,639) (207,495)
<OTHER-EXPENSES> (21,314) (45,258) (70,002)
<LOSS-PROVISION> (131) (169) (219)
<INTEREST-EXPENSE> 520 (1,269) (2,176)
<INCOME-PRETAX> 14,707 28,363 26,109
<INCOME-TAX> (6,180) (11,300) (16,750)
<INCOME-CONTINUING> 7,026 13,760 21,690
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 7,026 13,760 21,690
<EPS-PRIMARY> .26<F1> .51<F1> .80<F1>
<EPS-DILUTED> .26<F1> .51<F1> .80<F1>
<FN>
<F1>The Earnings per Share amounts have been restated to conform to the provisions
of Statement of Financial Standards No. 128, "Earnings per Share". We have
replaced primary and fully diluted amounts with basic and diluted per share ammounts,
respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S MARCH 31, 1996, JUNE 30, 1996, SEPTEMBER 30, 1996, AND DECEMBER 31,
1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 21,307 11,707 19,577 23,879
<SECURITIES> 0 0 0 0
<RECEIVABLES> 89,410 97,640 89,639 95,019
<ALLOWANCES> (1,477) (1,724) (1,840) (1,610)
<INVENTORY> 73,028 74,547 73,953 71,304
<CURRENT-ASSETS> 185,974 185,471 186,763 199,180
<PP&E> 96,362 101,382 76,122 81,662
<DEPRECIATION> (23,906) (27,242) (26,160) (29,720)
<TOTAL-ASSETS> 373,728 380,344 384,938 410,512
<CURRENT-LIABILITIES> 84,536 91,703 92,970 104,802
<BONDS> 52,712 47,419 51,326 49,957
0 0 0 0
0 0 0 0
<COMMON> 29,598 29,611 29,614 29,614
<OTHER-SE> 184,391 190,349 189,818 196,337
<TOTAL-LIABILITY-AND-EQUITY> 373,728 380,344 384,938 410,512
<SALES> 89,870 183,417 267,938 369,498
<TOTAL-REVENUES> 89,870 183,417 267,938 369,498
<CGS> (60,185) (121,747) (175,245) (238,401)
<TOTAL-COSTS> (60,185) (121,747) (175,245) (238,401)
<OTHER-EXPENSES> (19,149) (39,252) (59,628) (81,786)
<LOSS-PROVISION> (60) (145) (290) (825)
<INTEREST-EXPENSE> (1,242) (2,359) (2,336) (2,785)
<INCOME-PRETAX> 9,234 19,914 30,439 46,526
<INCOME-TAX> (3,917) (8,318) (12,742) (19,665)
<INCOME-CONTINUING> 4,245 9,382 13,881 20,556
<DISCONTINUED> 0 0 (7,490) (7,550)
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 4,245 9,382 6,391 13,066
<EPS-PRIMARY> .16<F1> .35<F1> .24<F1> .50<F1>
<EPS-DILUTED> .16<F1> .35<F1> .24<F1> .48<F1>
<FN>
<F1>The Earnings per Share amounts have been restated to conform to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share". We have
replaced primary and fully diluted amounts with basic and diluted per share
amounts, respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S DECEMBER 31, 1995 CONSOLIDATED FINANCIAL STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,706
<SECURITIES> 0
<RECEIVABLES> 83,247
<ALLOWANCES> (1,232)
<INVENTORY> 70,152
<CURRENT-ASSETS> 177,814
<PP&E> 98,036
<DEPRECIATION> (20,912)
<TOTAL-ASSETS> 363,565
<CURRENT-LIABILITIES> 84,443
<BONDS> 47,058
0
0
<COMMON> 29,595
<OTHER-SE> 180,782
<TOTAL-LIABILITY-AND-EQUITY> 363,565
<SALES> 315,377
<TOTAL-REVENUES> 315,377
<CGS> (196,119)
<TOTAL-COSTS> (196,119)
<OTHER-EXPENSES> (69,540)
<LOSS-PROVISION> (80)
<INTEREST-EXPENSE> (1,821)
<INCOME-PRETAX> 47,817
<INCOME-TAX> (19,270)
<INCOME-CONTINUING> 25,520
<DISCONTINUED> 7,119
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,639
<EPS-PRIMARY> 1.25<F1>
<EPS-DILUTED> 1.22<F1>
<FN>
<F1>The Earnings per Share amounts have been restated to conform to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share".
We have replaced primary and fully diluted amounts with basic and diluted per
share amounts, respectively.
</FN>
</TABLE>
