<PAGE> 1
UNITED STATES
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, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _____________________
Commission file number 1-6016
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ALLEN TELECOM INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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
------------------- ------------------------
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
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 3, 1999, there were 27,504,546 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 3, 1999 of $4.813) of the Registrant's Common Stock held
by nonaffiliates of the Registrant was $124,423,505.
Exhibit Index is on pages 17 to 24 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended December 31, 1998
incorporated by reference into Parts I, II and IV hereof.
Proxy Statement dated March 19, 1999 for Annual Meeting of Stockholders to be
held April 30, 1999 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, 1998)
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1 - Business 3
Item 2 - Properties 8
Item 3 - Legal Proceedings 8
Item 4 - Submission of Matters to a Vote of Security Holders 8
Executive Officers of The Registrant 9
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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<PAGE> 3
ALLEN TELECOM INC.
FORM 10-K
PART I
------
ITEM 1 - BUSINESS
-----------------
OVERALL
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.
The Company is a major supplier of telecommunications equipment,
including site management products, system expansion and optimization products,
mobile and base station antennas, test and measurement equipment, and wireless
engineering services to the worldwide wireless communications market.
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.
On March 1, 1999, the Company sold its MARTA Technologies, Inc.
("Marta") subsidiary, which operated its discontinued centralized automotive
emissions testing programs, to a subsidiary of Environmental Systems Products,
Inc. 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 22 and 23, and to the "Discontinued
Operations" section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 29 of Allen Telecom's 1998 Annual
Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual
Report.
TELECOMMUNICATIONS EQUIPMENT MANUFACTURING
GENERAL
- -------
The Company's Telecommunications Equipment Manufacturing business
segment consists of three product lines: Systems Products, Site Management and
Other Non-Antenna Products, and Mobile and Base Station Antennas.
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 generally using 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 its
CableStar(TM) product. The Company also has developed a range of test equipment
and software to test and optimize wireless networks, such as its I.Q.
Analyzer(TM), Surveyor(TM) and Illuminator(TM) products.
Many of the major wireless system infrastructure vendors incorporate
components or subsystems from Allen Telecom's Site Management and Other
Non-Antenna Products. 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 Management 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.
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<PAGE> 4
Allen Telecom is a leading North American supplier of base station
antennas to the global wireless OEMs and wireless service providers through its
Mobile and Base Station Antennas product line. 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.
The Federal Communications Commission ("FCC") has mandated that by
October 2001 all providers of wireless phone services will provide the location
where an emergency 911 call originates. The Company has been developing a
geolocation technology solution to provide carriers with the equipment and
software to locate subscribers in their system. This geolocation technology is
currently in its testing phase. Although further engineering work is needed to
bring this product to market, the Company feels this is a viable technology
which will meet the FCC's requirements.
In 1998, the Company initiated a number of cost reduction efforts
within the Telecommunications Equipment Manufacturing segment to improve and
adjust operations to existing market conditions. These actions include, among
others, the discontinuance of product development and marketing efforts on
certain products, the formation of a worldwide Systems business, the
consolidation of two manufacturing operations of the Systems product line, and
the reorganization of the Company's North American-based sales force. As a
result of asset write-offs, severance and other costs associated with such
actions, this segment incurred before-tax charges for the year of $16.8 million.
PRODUCTION, RAW MATERIALS, AND SUPPLIES
- ---------------------------------------
Allen Telecom's telecommunications equipment 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,
Australia, China and Brazil. Allen Telecom's European operations outsource a
substantial portion of product manufacturing labor to third parties. Products
are sold directly through salaried and commissioned sales employees or through
distributors and sales representatives to OEMs, common carriers and other large
users of telecommunications products.
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 purchased electronic components and subassemblies,
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 1999 will be adequate.
SEASONAL TRENDS
- ---------------
Generally, sales and earnings for telecommunications equipment
manufacturing tend to be slightly lower in the first fiscal quarter due to lower
outdoor installations of its products in the northern climates. Due to the
unsettled climate for the global wireless telecommunications market, such
seasonal variability was not evident in 1997 and 1998.
WORKING CAPITAL
- ---------------
The Company's products consist of manufactured products for which
inventory levels are generally based on product demand. The Company produces
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. As
previously indicated, a significant portion of the segment's revenues is derived
from international sales, which has generally resulted in extended collection
periods as compared to its domestic business.
-4-
<PAGE> 5
In 1996, the Company entered into an agreement and made an equity
investment in Nextwave Telecom Inc. ("Nextwave") in the amount of $5,000,000.
Nextwave had 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 would
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. In 1998, NextWave and
certain of its subsidiaries filed for relief under Chapter 11 of the United
States bankruptcy code; accordingly, the status of this commitment is unlikely
at this time. The Company believes that its existing credit lines provide
sufficient flexibility for this arrangement, should it be necessary.
MAJOR CUSTOMERS
- ---------------
Within the Telecommunications Equipment Manufacturing segment, 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 20% (none individually greater than 10%) of segment sales in
1998. The balance of the segment's sales were widely distributed among many
customers.
WIRELESS ENGINEERING SERVICES
GENERAL
- -------
Allen Telecom's Wireless Engineering Services is a leading supplier of
frequency planning and coordinating services as well as system design and field
engineering services 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, 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. Engineering services are distributed primarily through in-house
salaried sales employees to telecom service providers.
In 1998, the Company incurred a one-time charge of $2.6 million due to
realigning the Wireless Engineering Services segment to reduce engineering and
general and administrative costs. In addition, product offerings have been
reorganized to focus on expected future business opportunities once the
worldwide wireless market recovers. The full impact of such changes will not
affect segment operating results until early 1999.
SEASONAL TRENDS
- ---------------
Generally, sales and earnings for wireless engineering services are not
subject to significant seasonal variations.
MAJOR CUSTOMERS
- ---------------
Within wireless engineering services, there is no single customer the
loss of which would have a material adverse effect on the Company. However, one
customer accounted for 9.5% of the wireless engineering services segment, and
four customers accounted for approximately 30% of segment sales in 1998. The
balance of the segment's sales was widely distributed among many customers.
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,
-5-
<PAGE> 6
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 16 and 17 of Allen Telecom's 1998 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 1998 Annual
Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual
Report.
EMPLOYEES
- ---------
As of January 31, 1999, Allen Telecom's continuing operations had
approximately 2,300 employees.
BUSINESS SEGMENTS, FOREIGN OPERATIONS AND EXPORT SALES
- ------------------------------------------------------
Information relating to the Company's business segments, 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
page 22, and the information presented in the charts on page 27, of Allen
Telecom's 1998 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 had seen extensive
growth in international markets. The Company's export sales were $71.6 million
in 1998, $103.9 million in 1997, and $86.5 million in 1996. In 1998,
international sales constituted 61% of total Telecommunications Equipment
Manufacturing sales, and 16% of total Wireless Engineering Services sales. The
international opportunities for the Company's products has encouraged the
Company to continue to expand the size and number of its international sales and
service offices. As seen in Item 2, "Properties," the Company's foreign
manufacturing operations are located mainly in Europe. In the opinion of
management, any financial risks inherent in Allen Telecom's existing foreign
operations are not substantially different than the financial risks inherent in
its domestic operations.
In 1998, economic dislocations in Asia became more widespread and were
followed by economic disruption in South America, notably Brazil. The
instability in these markets impacted the Company's shipment of product to those
countries and also contributed to a major excess inventory situation at some of
its customers, particularly in Europe. The Company currently sees no significant
change in its market in the near term, but hopes to see gradual improvement as
the uncertainties in Asia and South America are resolved.
PATENTS, LICENSES, AND FRANCHISES
- ---------------------------------
The Company's Telecommunications Equipment Manufacturing and Wireless
Engineering Services segments own a number of patents, trademarks and copyrights
and conduct certain operations under licenses granted by others. Although the
Company does not believe that the expiration or loss of any one 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.
BACKLOG
- -------
The approximate order backlog as of December 31, 1998 and 1997 are as
follows (amounts in thousands):
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<PAGE> 7
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Telecommunications equipment manufacturing $51,900 $112,500
Wireless engineering services 900 2,500
Backlog not expected to be filled within one year - (500)
------ -----
Backlog expected to be filled within one year $52,800 $114,500
========= ========
</TABLE>
In 1996, the Company entered into an agreement and made an equity
investment in Nextwave. Nextwave had agreed to purchase from the Company
$50,000,000 of equipment and services through December 31, 2001. In 1998,
Nextwave and certain of its subsidiaries filed for relief under Chapter 11 of
the United States bankruptcy code; accordingly, this commitment is unlikely to
be filled at this time. This purchase commitment has been excluded from the
above-mentioned order backlog amounts.
COMPETITION
- -----------
Competition is vigorous for both the telecommunications equipment
manufacturing and wireless engineering services segments. The Company believes
that it is among the major manufacturers in its product lines, 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.
-7-
<PAGE> 8
ITEM 2 - PROPERTIES
-------------------
At December 31, 1998, Allen Telecom's continuing operations were
conducted in 42 facilities in 10 states and 18 foreign countries. Allen
Telecom's Telecommunications Equipment Manufacturing segment occupies
approximately 944,000 square feet of space for manufacturing, assembly,
warehousing, research and development, sales and administrative offices. Of this
amount, approximately 596,000 square feet are rented under operating leases. The
Company's principal manufacturing and service facilities for Telecommunications
Equipment Manufacturing are located in Ohio, Texas, Virginia, Italy, Germany,
France, and Mexico. The Company's Wireless Engineering Services are provided
principally at one leased facility in Virginia and at customer locations.
Information concerning the square footage of the Company's continuing
operations by segment at December 31, 1998 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
Domestic Foreign
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Owned Leased Owned Leased Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Telecommunications equipment manufacturing 166 459 182 137 944
Wireless engineering services - 87 - - 87
Other 164 10 - - 174
--- --- --- --- -----
Total 330 556 182 137 1,205
=== === === === =====
</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. Due to the economic uncertainty in the global wireless
telecommunications markets, the Company's facilities are generally not fully
utilized at December 31, 1998.
Included in "Other" above consists of a manufacturing facility of
84,000 square feet owned by the Company relating to a previously-owned operation
(which is leased to a third party), a manufacturing facility of 80,000 square
feet owned by the Company which is not in use and is held for sale, and a lease
for its Corporate office space.
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 seventh paragraph of Note 9, "Acquisitions and Dispositions,"
on page 23, of the Notes to Consolidated Financial Statements of Allen Telecom's
1998 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to
this Annual Report.
On December 21, 1998, the Company's then wholly-owned subsidiary, Marta
Technologies, Inc., which operated its discontinued centralized automotive
emissions testing business, entered into a Settlement Agreement with the State
of Ohio for the complete and final settlement of their claims and causes of
action. On December 31, 1997, Marta filed a lawsuit against Ohio EPA and its
Director claiming damages for Ohio EPA's unilateral and illegal suspension of
the program and numerous other actions which would, 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 liquidated damages,
contract damages and/or civil penalties as a result of Marta's alleged failure
to meet the terms of the contract. Pursuant to the Settlement Agreement, Marta
and the State entered into a Change Order to amend its contract for the
operation of the centralized vehicle emissions testing program in the Cincinnati
region of Ohio. The cost of the Change Order will be funded by the State.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
Not applicable.
-8-
<PAGE> 9
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 57.
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 (a division of the Company) 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 in 1976, its Vice President-Operations in 1977 and its
President in 1978, while continuing as a Vice President of the Company.
ROBERT A. YOUDELMAN - Executive Vice President, Chief Financial Officer and
Assistant Secretary; age 57.
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 45.
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 and Controller; age 44.
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 served as Treasurer of the Company
from September 1995 to February 1999.
MCDARA P. FOLAN, III - Vice President, Secretary and General Counsel; age 40.
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.
ROGER L. SCHROEDER- Treasurer and Assistant Secretary; age 45.
Mr. Schroeder joined the Company in 1981 as an Internal Auditor. In
1984, he was appointed Manager of Financial Analysis. He was promoted to
Director of Financial Analysis in 1988 and named Director of Financial Analysis
and Insurance in 1993. Mr. Schroeder was elected Assistant Secretary of the
Company in December 1992 and Assistant Treasurer in April 1997, and was promoted
to Treasurer and Assistant Secretary of the Company in February 1999.
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.
-9-
<PAGE> 10
PART II
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 1998 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 1998
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 27 to 31 of the Registrant's 1998 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
Inc.'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 successful discovery and correction of potential "Year 2000" computer
sensitive problems by both the Company and its key suppliers and customers, the
size and scope of the geolocation services market, the timing of governmental
requirements and the success of the respective companies in the geolocation
services market, and other transactions.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------
The information required by this Item is incorporated herein by
reference to page 31 of the Registrant's 1998 Annual Report to Stockholders, a
copy of which is filed as Exhibit 13 to this Annual Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The information required by this Item is incorporated herein by
reference to the Consolidated Statements of Operations, 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 25, and to the "Report of Independent Accountants" on
page 26, of the Registrant's 1998 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.
-10-
<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 9 to 10 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 15 to 16 of the
Registrant's definitive proxy statement dated March 19, 1999 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, 1999
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 6 to
18, of the Registrant's definitive proxy statement dated March 19, 1999 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, 1999 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, 1999 and filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
-11-
<PAGE> 12
PART IV
-------
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 16,
1999, except as to paragraph five of Note 9, which is as of March 1, 1999,
are incorporated herein by reference to pages 12 to 26 of the Registrant's
1998 Annual Report to Stockholders, a copy of which is filed as Exhibit 13
to this Annual Report.
Consolidated Statements of Operations for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996
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 24 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.
-12-
<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
26 of the 1998 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.
PricewaterhouseCoopers LLP
Cleveland, Ohio
February 16, 1999,
except as to paragraph five of Note 9,
which is as March 1, 1999
-13-
<PAGE> 14
<TABLE>
<CAPTION>
ALLEN TELECOM INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
Column A Column B Column C Column D Column E
- -------------------------------------- -------- ------------------------------------ -------- --------
Additions
Balance ------------------------------------ Balance
At Charged to Charged Deductions at End
Beginning Costs and to Other from of
Description of Period Expenses Accounts Reserves Period
- -------------------------------------- --------------- ----------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
1998 $1,934 1,170 - (85)(1) $ 3,189
====== ====== ======== ===== ========
1997 $1,610 796 - 472 (1) $ 1,934
====== ====== ======== ===== ========
1996 $1,232 825 - 447 (1) $ 1,610
====== ====== ======== ===== ========
Inventory reserves:
1998 $7,607 14,718 - 6,885 (2) $ 15,440
====== ====== ======== ===== ========
1997 $7,362 8,646 - 8,401 (2) $ 7,607
====== ====== ======== ===== ========
1996 $7,758 8,913 - 9,309 (2) $ 7,362
====== ====== ======== ===== ========
</TABLE>
(1) Represents the net amount of the write-off of uncollectible accounts (less
recoveries), and foreign currency translation changes.
(2) Represents the net amount of the write-off of inventory (less recoveries)
and foreign currency translation changes.
-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.
ALLEN TELECOM INC.
------------------
(Registrant)
By: /s/ Robert A. Youdelman
-----------------------------
Robert A. Youdelman
Executive Vice President
Chief Financial Officer and Assistant Secretary
Date: March 26, 1999
------------------
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.
/s/ Robert G. Paul March 26, 1999
---------------------------------------------
Robert G. Paul, President, Chief Executive
Officer and Director (Principal Executive Officer)
/s/ Robert A. Youdelman March 26, 1999
---------------------------------------------
Robert A. Youdelman, Executive Vice President
Chief Financial Officer (Principal Financial Officer)
/s/ James L. LePorte March 26, 1999
---------------------------------------------
James L. LePorte, Vice President, Treasurer
and Controller (Principal Accounting Officer)
/s/ Philip W. Colburn March 26, 1999
---------------------------------------------
Philip W. Colburn, Chairman of the Board
and Director
-15-
<PAGE> 16
/s/ Jill K. Conway March 26, 1999
---------------------------------------------
Jill K. Conway, Director
March 26, 1999
---------------------------------------------
Albert H. Gordon, Director
March 26, 1999
---------------------------------------------
William O. Hunt, Director
/s/ J. Chisholm Lyons March 26, 1999
---------------------------------------------
J. Chisholm Lyons, Director
/s/ John F. McNiff March 26, 1999
---------------------------------------------
John F. McNiff, Director
/s/ Charles W. Robinson March 26, 1999
---------------------------------------------
Charles W. Robinson, Director
/s/ Martyn F. Roetter March 26, 1999
---------------------------------------------
Martyn F. Roetter, Director
/s/ William M. Weaver, Jr. March 26, 1999
---------------------------------------------
William M. Weaver, Jr., Director
March 26, 1999
---------------------------------------------
Gary B. Smith, Director
-16-
<PAGE> 17
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Numbers Pages
- --------------- -----
<S> <C> <C>
(3) Certificate of Incorporation and By Laws -
(a) Second Restated Certificate of Incorporation (filed as Exhibit
Number 4(a) to Registrant's Registration Statement on
Form S-8, Registration No. 333-51739, filed on May 4, 1998
(Commission file number 1-6016) and incorporated herein by
reference).................................................................. -
(b) Certificate of Designation, Preferences and Rights of Series C
Junior Participating Preferred Stock (filed as Exhibit Number
4(c) to Registrant's Registration Statement on Form S-8
Registration No. 333-51739, filed on May 4, 1998 (Commission
file number 1-6-16) and incorporated herein by reference.................... -
(c) By-Laws, as amended through February 16, 1999............................... 18
(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
Registration Statement on Form 8-A, filed on January 9, 1998
(Commission file number 1-6016) and incorporated herein by
reference) ................................................................. -
(b) Credit Agreement, dated as of December 31, 1998, among the
Registrant, MARTA Technologies, Inc., the Banks signatories
thereto, NBD Bank, as Documentation Agent, and Key Bank
National Association, as Swing Line Lender, Syndication Agent
and Administrative Agent.................................................... 35
(c) Note Purchase Agreement, dated as of November 1, 1997, among
the Registrant and the insurance companies signatories thereto
(filed as Exhibit Number 4(c) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1997 (Commission
file number 1-6-16) and incorporated herein by reference)................... -
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
1998 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 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
</TABLE>
-17-
<PAGE> 18
<TABLE>
<S> <C> <C>
(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) 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) .......................................... -
(b) 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) ...................................... -
(c) 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) .......................................... -
(d) 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)........................................... -
(e) 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)........................................... -
(f) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as
of May 1, 1998 (filed as Exhibit Number 4(e) to Registrant's
Registration Statement on Form S-8, Registration No.
333-51739, filed on May 4, 1998 (Commission file number
1-6016) and incorporated herein by reference)............................... -
(g) 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)
............................................................................ -
(h) 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,
</TABLE>
-18-
<PAGE> 19
<TABLE>
<S> <C> <C>
1993 (Commission file number 1-6016) and incorporated herein
by reference)............................................................... -
(i) 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) .............................. -
(j) 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)....................................... -
(k) Amendment to 1992 Restricted Stock Agreements pursuant to 1992
Stock Plan (Salary Increase Deferral), dated February 17, 1998
(filed as Exhibit Number 10(q) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1997
(Commission file number 1-6016) and incorporated herein
reference).................................................................. -
(l) Form of Restricted Stock Agreement pursuant to Allen Telecom
Inc. 1992 Stock Plan (Salary Increase Deferral), dated January
12, 1999, entered into by the Registrant with certain
executive and divisional officers.......................................... 128
(m) 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) ...................................... -
(n) 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)............................... -
(o) 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) ................................................................. -
(p) 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)....... -
(q) Second amendment, dated as of February 17, 1998, to the Allen
Telecom Inc. 1994 Non-Employee Directors Stock Option Plan
(filed as Exhibit Number 10(r) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1997
(Commission file number 1-6016) and incorporated herein by reference)....... -
</TABLE>
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
(r) Form of Non-Qualified Option to Purchase Stock pursuant 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).................................................................. -
(s) 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)........................................... -
(t) 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)....... -
(u) 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).................. -
(v) Form of Severance Agreement, dated as of September 9, 1998,
entered into by the Registrant with certain executive officers,
officers and division presidents ........................................... 136
(w) 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)........................................... -
(x) 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)................... -
(y) 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)............................... -
(z) 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)........................................... -
</TABLE>
-20-
<PAGE> 21
<TABLE>
<S> <C>
(aa) 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)............................................................... -
(bb) 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)........................ -
(cc) 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).............................. -
(dd) 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)........................................... -
(ee) 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).................................................................. -
(ff) 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).................................................................. -
(gg) 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).................................................................. -
(hh) 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)....................................... -
(ii) 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
</TABLE>
-21-
<PAGE> 22
<TABLE>
<S> <C>
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)........................................... -
(jj) 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 (filed
as Exhibit Number 10(pp) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1997 (Commission
file number 1-6016) and incorporated herein by reference.................... -
(kk) 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)........................................... -
(ll) 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)....................................... -
(mm) 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)....................... -
(nn) 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 (filed as Exhibit No. 10(uu)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1997 (Commission file number
1-6016) and incorporated hereby reference.................................. -
(oo) 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)................... -
(pp) 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)....................................... -
(qq) 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
</TABLE>
-22-
<PAGE> 23
<TABLE>
<S> <C>
ended December 31, 1991 (Commission file number
1-6016) and incorporated herein by reference)............................... -
(rr) 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)................... -
(ss) 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 (filed as Exhibit
Number 10(zz) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1997 (Commission file number
1-6016) and incorporated herein by reference)............................... -
(tt) 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)........................................... -
(uu) 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)....................................... -
(vv) 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)................... -
(ww) 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)................................................................. -
(xx) 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).......................................... -
(yy) 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).......................................... -
(zz) First Amendment to the Comsearch Division Supplemental
Savings Plan, dated as of February 28, 1997 (filed as Exhibit
</TABLE>
-23-
<PAGE> 24
<TABLE>
<S> <C>
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)....................... -
(aaa) 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).............................. -
(bbb) 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 (filed as Exhibit Number
10(kkk) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1997 (Commission file number
1-6016) and incorporated herein by reference).............................. -
(ccc) Allen Telecom Inc. Executive Benefit Plan, as amended and
restated effective October 15, 1997 (filed as Exhibit Number 10(jjj) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1997 (Commission file number 1-6016) and incorporated
herein by reference)....................................................... -
(11) Statement re Computation of Earnings Per Common Share............................. 148
(13) 1998 Annual Report to Stockholders*............................................... 149
(21) Subsidiaries of the Registrant.................................................... 185
(23) Consent of Independent Accountants................................................ 187
(27) Financial Data Schedule........................................................... 188
</TABLE>
* 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 26 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.
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.
-24-
<PAGE> 1
Exhibit 3(c)
As amended and restated through
February 16, 1999
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.
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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.
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.
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Section 9. When a quorum is present at any meeting, the vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall decide any question brought before
such meeting, unless the question is one upon which by express provision of the
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.
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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.
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
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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.
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
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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 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.
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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
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.
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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.
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.
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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 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
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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 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
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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.
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.
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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 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
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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
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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 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.
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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.
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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 "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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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.
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<PAGE> 1
Exhibit 4(b)
===============================================================================
===============================================================================
ALLEN TELECOM INC.
as Borrower
And
THE LENDERS NAMED HEREIN
as Lenders
NBD BANK
as Documentation Agent
[GRAPHIC]
KeyBank National Association
as Swing Line Lender, as Syndication Agent and as
Administrative Agent
---------------------
CREDIT AGREEMENT
dated as of
December 31, 1998
---------------------
===============================================================================
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. DEFINITIONS AND TERMS...........................................................................1
1.1. Certain Defined Terms...........................................................................1
1.2. Computation of Time Periods....................................................................19
1.3. Accounting Terms...............................................................................19
1.4. Currency Equivalents...........................................................................19
SECTION 2. AMOUNT AND TERMS OF LOANS......................................................................19
2.1. Commitments for Loans..........................................................................19
2.2. Minimum Borrowing Amounts, etc.; Pro Rata Borrowings...........................................20
2.3. Borrowing Procedures...........................................................................20
2.4. Disbursement of Funds from Borrowings..........................................................22
2.5. Refunding of, or Participation in, Swing Line Revolving Loans..................................23
2.6. Notes; Loan Accounts...........................................................................24
2.7. Voluntary Conversion of Dollar Denominated General Revolving Loans;
Redenomination of General Revolving Loans.....................................................25
2.8. Interest.......................................................................................26
2.9. Selection and Continuation of Interest Periods.................................................28
2.10. Increased Costs, Illegality, etc...............................................................29
2.11. Breakage Compensation..........................................................................31
2.12. Change of Lending Office; Replacement of Lenders...............................................31
2.13. European Economic and Monetary Union...........................................................32
SECTION 3. LETTERS OF CREDIT..............................................................................34
3.1. Letters of Credit..............................................................................34
3.2. Letter of Credit Requests: Notices of Issuance.................................................35
3.3. Agreement to Repay Letter of Credit Drawings...................................................36
3.4. Letter of Credit Participations................................................................36
3.5. Increased Costs................................................................................38
3.6. Guaranty of Letter of Credit Obligations of Other Letter of Credit Obligors...................38
SECTION 4. FEES; COMMITMENTS..............................................................................40
4.1. Fees...........................................................................................40
4.2. Voluntary Termination/Reduction of Commitments.................................................41
4.3. Mandatory Termination of Commitments, etc......................................................42
4.4. Extension of Maturity Date.....................................................................42
SECTION 5. PAYMENTS.......................................................................................42
5.1. Voluntary Prepayments..........................................................................42
5.2. Mandatory Prepayments..........................................................................43
5.3. Method and Place of Payment....................................................................45
5.4. Net Payments...................................................................................45
SECTION 6. CONDITIONS PRECEDENT...........................................................................47
6.1. Conditions Precedent at Closing Date...........................................................47
6.2. Conditions Precedent to All Credit Events......................................................49
SECTION 7. REPRESENTATIONS AND WARRANTIES.................................................................49
7.1. Corporate Status, etc..........................................................................50
7.2. Subsidiaries...................................................................................50
7.3. Corporate Power and Authority, etc.............................................................50
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
7.4. No Violation...................................................................................50
7.5. Governmental Approvals.........................................................................50
7.6. Litigation.....................................................................................50
7.7. Use of Proceeds; Margin Regulations............................................................50
7.8. Financial Statements, etc......................................................................51
7.9. No Material Adverse Change.....................................................................51
7.10. Tax Returns and Payments.......................................................................52
7.11. Title to Properties, etc.......................................................................52
7.12. Lawful Operations, etc.........................................................................52
7.13. Environmental Matters..........................................................................52
7.14. Compliance with ERISA..........................................................................52
7.15. Intellectual Property, etc.....................................................................53
7.16. Burdensome Contracts; Labor Relations..........................................................53
7.17. Year 2000 Computer Matters.....................................................................53
7.18. Existing Indebtedness..........................................................................53
7.19. Investment Company.............................................................................54
7.20. Security Interests.............................................................................54
7.21. True and Complete Disclosure...................................................................54
SECTION 8. AFFIRMATIVE COVENANTS..........................................................................54
8.1. Reporting Requirements.........................................................................54
8.2. Books, Records and Inspections.................................................................57
8.3. Insurance......................................................................................57
8.4. Payment of Taxes and Claims....................................................................57
8.5. Corporate Franchises...........................................................................58
8.6. Good Repair....................................................................................58
8.7. Compliance with Statutes, etc..................................................................58
8.8. Compliance with Environmental Laws.............................................................58
8.9. Fiscal Years, Fiscal Quarters..................................................................58
8.10. Certain Subsidiaries to Guarantee Obligations..................................................59
8.11. Additional Collateral; Further Assurances......................................................59
8.12. Most Favored Covenant Status...................................................................60
8.13. Hedge Agreements, etc..........................................................................61
8.14. Casualty and Condemnation......................................................................61
8.15. Senior Debt....................................................................................61
SECTION 9. NEGATIVE COVENANTS.............................................................................61
9.1. Changes in Business............................................................................61
9.2. Consolidation, Merger, Acquisitions, Asset Sales, etc..........................................61
9.3. Liens..........................................................................................63
9.4. Indebtedness...................................................................................64
9.5. Advances, Investments, Loans and Guaranty Obligations..........................................65
9.6. Dividends, etc.................................................................................66
9.7. Minimum Consolidated Net Worth.................................................................66
9.8. Consolidated Total Debt/Consolidated EBITDA Ratio..............................................66
9.9. Minimum Consolidated EBITDA....................................................................66
9.10. Fixed Charge Coverage Ratio....................................................................66
9.11. Minimum Consolidated Adjusted Working Capital Ratio............................................67
9.12. Limitation on Certain Restrictive Agreements...................................................67
9.13. Transactions with Affiliates...................................................................67
9.14. Plan Terminations, Minimum Funding, etc........................................................68
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 10. EVENTS OF DEFAULT..............................................................................68
10.1. Events of Default..............................................................................68
10.2. Acceleration, etc..............................................................................70
10.3. Application of Liquidation Proceeds............................................................70
SECTION 11. THE ADMINISTRATIVE AGENT.......................................................................71
11.1. Appointment....................................................................................71
11.2. Delegation of Duties...........................................................................71
11.3. Exculpatory Provisions.........................................................................71
11.4. Reliance by Administrative Agent...............................................................72
11.5. Notice of Default..............................................................................72
11.6. Non-Reliance...................................................................................72
11.7. Indemnification................................................................................73
11.8. The Administrative Agent in Individual Capacity................................................73
11.9. Successor Administrative Agent.................................................................73
11.10. Other Agents...................................................................................73
SECTION 12. MISCELLANEOUS..................................................................................73
12.1. Payment of Expenses etc........................................................................73
12.2. Right of Setoff................................................................................75
12.3. Notices........................................................................................75
12.4. Benefit of Agreement...........................................................................75
12.5. No Waiver: Remedies Cumulative.................................................................77
12.6. Payments Pro Rata..............................................................................77
12.7. Calculations: Computations.....................................................................78
12.8. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial.........................78
12.9. Counterparts...................................................................................78
12.10. Effectiveness..................................................................................78
12.11. Headings Descriptive...........................................................................79
12.12. Amendment or Waiver............................................................................79
12.13. Survival of Indemnities........................................................................80
12.14. Domicile of Loans..............................................................................80
12.15. Confidentiality................................................................................80
12.16. Lender Register................................................................................80
12.17. Limitations on Liability of the Letter of Credit Issuers.......................................81
12.18. General Limitation of Liability................................................................81
12.19. No Duty........................................................................................81
12.20. Lenders and Agent Not Fiduciary to Borrower, etc...............................................81
12.21. Survival of Representations and Warranties.....................................................81
12.22. Release of Collateral..........................................................................82
12.23. Judgment Currency..............................................................................82
</TABLE>
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ANNEX I - INFORMATION AS TO LENDERS
ANNEX II - INFORMATION AS TO SUBSIDIARIES
ANNEX III - DESCRIPTION OF EXISTING INDEBTEDNESS
ANNEX IV - DESCRIPTION OF EXISTING LIENS
ANNEX V - DESCRIPTION OF EXISTING ADVANCES, LOANS,
INVESTMENTS AND GUARANTEES
ANNEX VI - DESCRIPTION OF LETTERS OF CREDIT DEEMED
ISSUED UNDER THE CREDIT AGREEMENT
EXHIBIT A-1 - FORM OF GENERAL REVOLVING NOTE
EXHIBIT A-2 - FORM OF SWING LINE REVOLVING NOTE
EXHIBIT B-1 - FORM OF NOTICE OF BORROWING
EXHIBIT B-2 - FORM OF NOTICE OF CONVERSION
EXHIBIT B-3 - FORM OF LETTER OF CREDIT REQUEST
EXHIBIT B-4 - FORM OF NOTICE OF REDENOMINATION
EXHIBIT C-1 - FORM OF PLEDGE AGREEMENT
EXHIBIT C-2 - FORM OF SECURITY AGREEMENT
EXHIBIT C-3 - FORM OF OHIO MORTGAGE
EXHIBIT C-4 - FORM OF VIRGINIA MORTGAGE
EXHIBIT D - FORM OF OPINION OF GENERAL COUNSEL OF THE BORROWER
EXHIBIT E - FORM OF ASSIGNMENT AGREEMENT
EXHIBIT F - FORM OF SECTION 5.4(b)(ii) CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 31, 1998, among the
following:
(i) ALLEN TELECOM INC., a Delaware corporation (herein,
together with its successors and assigns, the "BORROWER");
(ii) the lending institutions listed in Annex I hereto (each a
"LENDER" and collectively, the "LENDERS");
(iii) NBD BANK, as Documentation Agent (the "DOCUMENTATION
AGENT"); and
(iv) KEYBANK NATIONAL ASSOCIATION, a national banking
association, as the Swing Line Lender (defined below), as Syndication
Agent (the "SYNDICATION AGENT") and as administrative agent (the
"ADMINISTRATIVE AGENT"):
PRELIMINARY STATEMENTS:
(1) Unless otherwise defined herein, all capitalized terms used herein
and defined in section 1 are used herein as so defined.
(2) The Borrower has applied to the Lenders for credit facilities in
order to provide working capital and funds for other lawful purposes.
(3) Subject to and upon the terms and conditions set forth herein, the
Lenders are willing to make available to the Borrower the credit facilities
provided for herein.
NOW, THEREFORE, it is agreed:
SECTION 1. DEFINITIONS AND TERMS.
1.1. CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"ACQUISITION" shall mean and include (i) any acquisition on a going
concern basis (whether by purchase, lease or otherwise) of any business and/or
business unit operated by any person who is not a Subsidiary of the Borrower,
and (ii) acquisitions of a majority of the outstanding equity or other similar
interests in any such person (whether by merger, stock purchase or otherwise).
Acquisitions of a related series of businesses from the same or a related group
of sellers at the same time, or over a period of time pursuant to a series of
related transactions, shall be considered a single Acquisition for purposes of
this Agreement.
"ADJUSTED EUROCURRENCY RATE" shall mean with respect to each Interest
Period for a Eurocurrency Loan, (A) either (i) the rate per annum for deposits
in Dollars or in the relevant Alternative Currency for a maturity most nearly
comparable to such Interest Period which appears on page 3740 or 3750, as
applicable, of the Dow Jones Telerate Screen as of 11:00 A.M. (local time at the
Notice Office) on the date which is two Business Days prior to the commencement
of such Interest Period, or (ii) if such a rate does not appear on such a page,
an interest rate per annum equal to the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a multiple)
of the rate per annum at which deposits in Dollars or in the relevant
Alternative Currency are offered by each of the Reference Banks to prime banks
in the London interbank Eurocurrency market for deposits of amounts in same day
funds comparable to the outstanding principal amount of the Eurocurrency Loan
for which an interest rate is then being determined with maturities comparable
to the Interest Period to be applicable to such Eurocurrency Loan, determined as
of 11:00 A.M. (London time) on the date which is two Business Days prior to
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<PAGE> 7
the commencement of such Interest Period, in each case divided (and rounded
upward to the nearest whole multiple of 1/16th of 1%) by (B) a percentage equal
to 100% minus the then stated maximum rate of all reserve requirements
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) applicable to any member bank of the Federal Reserve System
in respect of Eurocurrency liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"ADMINISTRATIVE AGENT" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to section 11.9.
"AFFILIATE" shall mean, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such person. A person shall be deemed to control a second
person if such first person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors or managers of such second person or (ii) to direct or cause the
direction of the management and policies of such second person, whether through
the ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, (x) a director, officer or employee of a person shall not, solely
by reason of such status, be considered an Affiliate of such person; and (y)
neither the Administrative Agent nor any Lender shall in any event be considered
an Affiliate of the Borrower or any of its Subsidiaries.
"AGREEMENT" shall mean this Credit Agreement, as the same may be from
time to time further modified, amended and/or supplemented.
"ALTERNATIVE CURRENCY" shall mean and include
(i) German Marks, Pounds Sterling, French Francs,
Swiss Francs, Belgian Francs, Italian Lira, Norwegian Kroner,
Japanese Yen and European Currency Units (ECUs), if at the
time any such currency is readily and freely transferable and
convertible into Dollars;
(ii) after the commencement of the third stage of
EMU, the euro (as such terms are defined in section 2.13), if
at the time the euro is readily and freely transferable and
convertible into Dollars; and
(iii) any other lawful currency other than Dollars
which is readily and freely transferable and convertible into
Dollars and which (A) in the case of any General Revolving
Loans to be denominated in such Alternative Currency, is
acceptable to all of the Lenders with General Revolving
Commitments, or (B) in the case of any Letter of Credit which
is payable in such Alternative Currency, is acceptable to the
Required Lenders and any applicable Letter of Credit Issuer.
"ALTERNATIVE CURRENCY SUBLIMIT" shall have the meaning provided in
section 2.1(a).
"APPLICABLE EUROCURRENCY MARGIN" shall have the meaning provided in
section 2.8(h).
"APPLICABLE FACILITY FEE RATE" shall have the meaning provided in
section 4.1(a).
"APPLICABLE LENDING OFFICE" shall mean, (i) with respect to each Lender
with a General Revolving Commitment, (A) such Lender's Domestic Lending Office
in the case of Borrowings consisting of Prime Rate Loans, and (B) such Lender's
Eurocurrency Lending Office in the case of Borrowings consisting of Eurocurrency
Loans, and (ii) with respect to the Swing Line Lender, its Domestic Lending
Office.
"ASSET SALE" shall mean the sale, transfer or other disposition
(including by means of Sale and Lease-Back Transactions, and by means of
mergers, consolidations, and liquidations of a corporation, partnership or
limited liability company of the interests therein of the Borrower or any
Subsidiary) by the Borrower or any Subsidiary to any person other than the
Borrower or any Subsidiary of any of their respective assets, PROVIDED that the
term Asset
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Sale specifically excludes any sales, transfers or other dispositions of
inventory, or obsolete or excess furniture, fixtures, equipment or other
property, tangible or intangible, in each case in the ordinary course of
business.
"ASSIGNMENT AGREEMENT" shall mean an Assignment Agreement substantially
in the form of Exhibit E hereto.
"AUTHORIZED OFFICER" shall mean any officer or employee of the Borrower
designated as such in writing to the Administrative Agent by the Borrower.
"BANKRUPTCY CODE" shall have the meaning provided in section 10.1(h).
"BOND LETTER OF CREDIT" shall have the meaning provided in section
3.1(e).
"BOND LETTER OF CREDIT ISSUER" shall have the meaning provided in
section 3.1(e).
"BOND DOCUMENT" shall mean any document or instrument entered into in
connection with the IRB Debt identified in Annex III and any amendment or
supplement thereto (including, without limitation, all "Related Documents" as
defined in any Reimbursement Agreement related thereto to which reference is
made in section 3.1(e)).
"BORROWER" shall have the meaning provided in the first paragraph of
this Agreement.
"BORROWING" shall mean and include (i) the incurrence of General
Revolving Loans, denominated in a single currency, consisting of a single Type
of Loan, by the Borrower from all of the Lenders having Commitments in respect
thereof on a PRO RATA basis on a given date (or resulting from a Conversion,
Continuation or Redenomination on a given date), having in the case of
Eurocurrency Loans the same Interest Period; and (ii) the incurrence of a Swing
Line Revolving Loan, which shall consist of a single Type of Loan, by the
Borrower from the Swing Line Lender on a given date.
"BUSINESS DAY" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the city in which the applicable Payment Office is located a legal holiday or
a day on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurocurrency Loans,
any day which is a Business Day described in clause (i) and which is also a day
on which dealings are carried on in the London interbank market and banks are
open for business in London and in the country of issue of any Alternative
Currency in which any applicable Eurocurrency Loans are denominated.
"CAPITAL LEASE" as applied to any person shall mean any lease of any
property (whether real, personal or mixed) by that person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that person.
"CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"CASH EQUIVALENTS" shall mean any of the following:
(i) securities issued or directly and fully
guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full
faith and credit of the United States of America is pledged in
support thereof) having maturities of not more than five years
from the date of acquisition;
(ii) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (x) any
Lender or (y) any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent
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<PAGE> 9
thereof (any such bank, an "APPROVED BANK"), in each case with
maturities of not more than nine months from the date of
acquisition;
(iii) commercial paper issued by any Lender or
Approved Bank or by the parent company of any Lender or
Approved Bank and commercial paper issued by, or guaranteed
by, any industrial or financial company with a short- term
commercial paper rating of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long
term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody's, as the case
may be, and in each case maturing within 270 days after the
date of acquisition;
(iv) investments in money market funds substantially
all the assets of which are comprised of securities of the
types described in clauses (i) through (iii) above;
(v) investments in money market funds access to which
is provided as part of "sweep" accounts maintained with a
Lender or an Approved Bank;
(vi) investments in industrial development revenue
bonds which (i) "re-set" interest rates not less frequently
than quarterly, (ii) are entitled to the benefit of a
remarketing arrangement with an established broker dealer, and
(iii) are supported by a direct pay letter of credit covering
principal and accrued interest which is issued by an Approved
Bank;
(vii) investments in pooled funds or investment
accounts consisting of investments of the nature described in
the foregoing clause (vi); and
(viii) only in the case of any Foreign Subsidiary or
a foreign branch or permanent establishment of the Borrower or
any of its Subsidiaries, short term deposits, certificates of
deposit, repurchase agreements and similar financial
instruments, in any currency, with a maturity not longer than
one year from the date of acquisition, incident to normal
operations in any foreign jurisdiction outside the United
States, with or issued by any local or international financial
institution with undivided capital and surplus of at least
$500,000,000 (or the equivalent in any applicable currency),
not exceeding $10,000,000 (or the equivalent in any other
currency) in the case of any single financial institution.
"CASH PROCEEDS" shall mean, with respect to (i) any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale, and (ii) any Event of Loss, the aggregate cash payments, including all
insurance proceeds and proceeds of any award for condemnation or taking,
received in connection with such Event of Loss.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. ss. 9601 ET SEQ.
"CHANGE OF CONTROL" shall mean and include any of the following:
(i) during any period of two consecutive calendar
years, individuals who at the beginning of such period
constituted the Borrower's Board of Directors (together with
any new directors (x) whose election by the Borrower's Board
of Directors was, or (y) whose nomination for election by the
Borrower's shareholders was (prior to the date of the proxy or
consent solicitation relating to such nomination), approved by
a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such
period or whose election or nomination for election was
previously so approved), shall cease for any reason to
constitute a majority of the directors then in office;
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(ii) any person or group (as such term is defined in
section 13(d)(3) of the 1934 Act), other than the Borrower,
any trustee or other fiduciary holding securities under an
employee benefit plan of the Borrower, or any members of the
Current Holder Group, shall acquire, directly or indirectly,
beneficial ownership (within the meaning of Rule 13d-3 and
13d-5 of the 1934 Act) of more than 30%, on a fully diluted
basis, of the economic or voting interest in the Borrower's
capital stock;
(iii) the shareholders of the Borrower approve a
merger or consolidation of the Borrower with any other person,
OTHER than a merger or consolidation which would result in the
voting securities of the Borrower outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted or exchanged for voting
securities of the surviving or resulting entity) more than 75%
of the combined voting power of the voting securities of the
Borrower or such surviving or resulting entity outstanding
after such merger or consolidation;
(iv) the shareholders of the Borrower approve a plan
of complete liquidation of the Borrower or an agreement or
agreements for the sale or disposition by the Borrower of all
or substantially all of the Borrower's assets; and/or
(v) any "change in control" or any similar term as
defined in any of the indentures, credit agreements or other
instruments governing any Indebtedness of the Borrower or any
of its Subsidiaries with an outstanding principal amount, or
providing for commitments to lend in an outstanding principal
amount, of at least $5,000,000 (or the equivalent amount in
any other currency).
As used in this definition, the term "CURRENT HOLDER GROUP" shall mean (i) those
other persons who are officers and directors of the Borrower at the Effective
Date, (ii) the spouses, heirs, legatees, descendants and blood relatives to the
third degree of consanguinity of any such person, (iii) the executors and
administrators of the estate of any such person, and any court appointed
guardian of any such person, and (iv) any trust, family partnership or similar
investment entity for the benefit of any such person referred to in the
foregoing clauses (i) and (ii) or any other persons (and/or for charitable
purposes), so long as one or more members of the Current Holder Group has the
exclusive or a joint right to control the voting and disposition of securities
held by such trust, family partnership or other investment entity.
"CLOSING DATE" shall mean the date, on or after the Effective Date,
upon which the conditions specified in section 6.1 are satisfied.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"COLLATERAL" shall mean any collateral covered by any Security
Document.
"COLLATERAL AGENT" shall mean the Administrative Agent acting as
Collateral Agent for the Lenders and any other creditors pursuant to the
Security Documents.
"COLLATERAL RELEASE DATE" shall mean the date when (i) the
Administrative Agent shall be satisfied, based on its review of the financial
statements of the Borrower and its Subsidiaries delivered pursuant to section
8.1(a) and (b), and the certificates delivered pursuant to section 8.1(c), that
(1) the Borrower's ratio of Consolidated Total Debt to Consolidated EBITDA,
determined on an annualized basis, has been less than 2.50 to 1.00 for each of
the four consecutive fiscal quarters then most recently ended, and (2) the
Borrower's Fixed Charge Coverage Ratio, determined on an annualized basis, has
been greater than 2.25 to 1.00 for each of the four consecutive fiscal quarters
then most recently ended; and (ii) the Administrative Agent shall have notified
the Borrower and the Lenders in
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writing that the Collateral Release Date has occurred, specifying such
Collateral Release Date and the computations made by it of the ratios specified
above.
"COMMITMENT" shall mean, with respect to each Lender, its General
Revolving Commitment or its Swing Line Commitment, or both, if such Lender shall
have both a General Revolving Commitment or its Swing Line Loan Commitment.
"CONSOLIDATED ADJUSTED CURRENT ASSETS" shall mean at any time for the
determination thereof the net book value of all cash, Cash Equivalents, trade
receivables and inventory, and 50% of the net book value of all other
receivables (other than any owed by employees), in each which, in conformity
with GAAP, would be included and classified as current assets on a consolidated
balance sheet of the Borrower as at such date.
"CONSOLIDATED AMORTIZATION EXPENSE" shall mean, for any period, all
amortization expenses of the Borrower and its Subsidiaries, including
amortization of deferred financing costs and amortization of in-process research
and development costs, all as determined for the Borrower and its Subsidiaries
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events amounts expended or capitalized under Capital Leases
but excluding any amount representing capitalized interest) by the Borrower and
its Subsidiaries during that period that, in conformity with GAAP, are or are
required to be included in the property, plant and equipment, or in the
capitalized software development costs, reflected in the consolidated balance
sheet of the Borrower and its Subsidiaries.
"CONSOLIDATED DEPRECIATION EXPENSE" shall mean, for any period, all
depreciation expenses of the Borrower and its Subsidiaries, all as determined
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED EBIT" shall mean, for any period, Consolidated Net Income
for such period; PLUS (A) the sum of the amounts for such period included in
determining such Consolidated Net Income of (i) Consolidated Interest Expense,
and (ii) Consolidated Income Tax Expense; LESS (B) extraordinary gains; all as
determined for the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED EBITDA" shall mean, for any period, Consolidated EBIT for
such period; PLUS the sum (without duplication) of the amounts for such period
included in determining such Consolidated EBIT of (i) Consolidated Depreciation
Expense, (ii) Consolidated Amortization Expense, (iii) not more than $8,000,000
of Consolidated Obsolescence Expense, and (iv) if such period includes any
portion of the last fiscal quarter of 1997 or any fiscal quarter of 1998, the
restructuring charges (including restructuring reserves) taken during the fourth
quarter of 1997 and the second quarter of 1998, as well as other restructuring
charges and reserves (including MARTA) incurred during the third and fourth
quarters of 1998 up to an aggregate of not more than $13,000,000, all as
determined for the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP; PROVIDED that, notwithstanding anything to the contrary
contained herein, the Borrower's Consolidated EBITDA for any Testing Period
shall (x) include the appropriate financial items for any person or business
unit which has been acquired by the Borrower for any portion of such Testing
Period prior to the date of acquisition, and (y) exclude the appropriate
financial items for any person or business unit which has been disposed of by
the Borrower, for the portion of such Testing Period prior to the date of
disposition.
"CONSOLIDATED INCOME TAX EXPENSE" shall mean, for any period, all
provisions for taxes based on the net income of the Borrower or any of its
Subsidiaries (including, without limitation, any additions to such taxes, and
any penalties and interest with respect thereto), all as determined for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, (i) total
interest expense (including that which is capitalized and that which is
attributable to Capital Leases, in accordance with GAAP) of the Borrower and its
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<PAGE> 12
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries including, without limitation,
net costs under Hedge Agreements intended to protect against fluctuations in
interest rates, but excluding, however, bank fees, prepayment penalties and any
amortization of deferred financing costs, NET OF (ii) interest income of the
Borrower and its Subsidiaries on a consolidated basis, all as determined in
accordance with GAAP and the "net interest" method of accounting.
"CONSOLIDATED NET INCOME" shall mean for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP.
"CONSOLIDATED NET WORTH" shall mean at any time for the determination
thereof all amounts which, in conformity with GAAP, would be included under the
caption "total stockholders' equity" (or any like caption) on a consolidated
balance sheet of the Borrower as at such date, PROVIDED that in no event shall
Consolidated Net Worth include any amounts in respect of Redeemable Stock.
"CONSOLIDATED OBSOLESCENCE EXPENSE" shall mean, for any period, all
expenses and charges of the Borrower and its Subsidiaries for the obsolescence
of property and assets, all as determined for the Borrower and its Subsidiaries
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" shall mean with respect to any person at
any date of determination the net book value of all assets which would appear on
a consolidated balance sheet of such person and its consolidated Subsidiaries at
such date which is prepared in accordance with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" shall mean with respect to any person
at any date of determination the total amount of all liabilities which would
appear on a consolidated balance sheet of such person and its consolidated
Subsidiaries at such date which is prepared in accordance with GAAP.
"CONSOLIDATED TOTAL LONG TERM DEBT" shall mean at any time of
determination thereof the portion of Consolidated Total Debt which has a
remaining maturity of more than one year, or the maturity of which is extendible
at the option of the obligor for more than one year.
"CONSOLIDATED TOTAL DEBT" shall mean at any time of determination
thereof the sum (without duplication) of the principal amount (or Capitalized
Lease Obligation, in the case of a Capital Lease) of all Indebtedness and
Guaranty Obligations of the Borrower and of each of its Subsidiaries, all as
determined on a consolidated basis.
"CONTINUE", "CONTINUATION" and "CONTINUED" each refers to a
continuation of General Revolving Loans consisting of Eurocurrency Loans for an
additional Interest Period as provided in section 2.9.
"CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of
General Revolving Loans, denominated in Dollars, of one Type into General
Revolving Loans of another Type, pursuant to section 2.7, 2.9(b), 2.10 or 5.2.
"CREDIT DOCUMENTS" shall mean this Agreement, the Notes, any Security
Document, any Letter of Credit Document and any Guaranty entered into as
contemplated by section 8.10.
"CREDIT EVENT" shall mean the making of any Loans and/or the issuance
of any Letter of Credit.
"CREDIT PARTY" shall mean the Borrower and each Subsidiary or Affiliate
which is a party to any Credit Document.
"DEFAULT" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" shall mean any Lender with, respect to which a
Lender Default is in effect.
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"DIVIDENDS" shall have the meaning provided in section 9.6.
"DOLLARS", "U.S. DOLLARS", "U.S.DOLLARS" and the sign "$" each means
lawful money of the United States.
"DOMESTIC LENDING OFFICE" shall mean, with respect to any Lender, the
office of such Lender specified as its Domestic Lending Office in Annex I or in
the Assignment Agreement pursuant to which it became a Lender, or such other
office of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"DOMESTIC SUBSIDIARY" shall mean, with respect to any person, any
Subsidiary of such person other than a Foreign Subsidiary.
"EFFECTIVE DATE" shall have the meaning provided in section 12.10.
"ELIGIBLE TRANSFEREE" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in SEC
Regulation D), in each case which:
(i) is not disapproved in writing by the Borrower in
a notice given to a requesting Lender and the Administrative
Agent, specifying the reasons for such disapproval, within
five Business Days following the giving of notice to the
Borrower of the identity of any proposed transferee (any such
disapproval by the Borrower must be reasonable), PROVIDED that
the Borrower shall not be entitled to exercise the foregoing
right of disapproval if and so long as any Event of Default
shall have occurred and be continuing; and
(ii) is not a direct competitor of the Borrower or
engaged in the same or similar principal lines of business as
the Borrower and its Subsidiaries considered as a whole, or is
not an Affiliate of any such competitor of the Borrower and
its Subsidiaries.
"ENVIRONMENTAL CLAIMS" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings arising
under any Environmental Law or any permit issued under any such law (hereafter
"CLAIMS"), including, without limitation, (a) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the storage, treatment or Release (as defined in CERCLA) of any Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"ENVIRONMENTAL LAW" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy and rule of common
law now or hereafter in effect and in each case as amended, and any binding and
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment issued to or
rendered against the Borrower or any of its Subsidiaries relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. ss. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ.; the Safe
Drinking Water Act, 42 U.S.C. ss. 3803 ET SEQ.; the Oil Pollution Act of 1990,
33 U.S.C. ss. 2701 ET SEQ.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. ss. 11001 ET SEQ., the Hazardous Material
Transportation Act, 49 U.S.C. ss. 1801 ET SEQ. and the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 ET SEQ. (to the extent it regulates occupational
exposure to Hazardous Materials); and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the
Effective Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
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"ERISA AFFILIATE" shall mean each person (as defined in section 3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower would be
deemed to be a "single employer" (i) within the meaning of section 414(b),(c),
(m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of
the Borrower being or having been a general partner of such person.
"EUROCURRENCY LENDING OFFICE" shall mean, with respect to any Lender,
the office (including the office of any branch, subsidiary, affiliate or
correspondent bank of such Lender) of such Lender specified as its Eurocurrency
Lending Office in Annex I or in the Assignment Agreement pursuant to which it
became a Lender, or such other office (including the office of any branch,
subsidiary, affiliate or correspondent bank of such Lender), for Eurocurrency
Loans denominated in Dollars or particular Alternative Currencies, of such
Lender as such Lender may from time to time specify to the Borrower and the
Administrative Agent.
"EUROCURRENCY LOANS" shall mean each Loan, denominated in U.S. Dollars
or in an Alternative Currency, bearing interest at the rates provided in section
2.8(b).
"EVENT OF DEFAULT" shall have the meaning provided in section 10.1.
"EVENT OF LOSS" shall mean, with respect to any property constituting
Collateral, (i) the actual or constructive total loss of such property or the
use thereof, resulting from destruction, damage beyond repair, or the rendition
of such property permanently unfit for normal use from any casualty or similar
occurrence whatsoever, (ii) the destruction or damage of a portion of such
property from any casualty or similar occurrence whatsoever under circumstances
in which such damage cannot reasonably be expected to be repaired, or such
property cannot reasonably be expected to be restored to its condition
immediately prior to such destruction or damage, within 90 days after the
occurrence of such destruction or damage, (iii) the condemnation, confiscation
or seizure of, or requisition of title to or use of, any property, or (iv) in
the case of any property located upon a Leasehold, the termination or expiration
of such Leasehold.
"EXISTING INDEBTEDNESS" shall have the meaning provided in section
7.18.
"EXISTING INDEBTEDNESS AGREEMENTS" shall have the meaning provided in
section 7.18.
"EXISTING LETTER OF CREDIT" shall have the meaning provided in section
3.1(d).
"FACILITY" shall mean either the General Revolving Facility or the
Swing Line Revolving Facility, or both, if the context so requires.
"FACILITY FEE" shall have the meaning provided in section 4.1(a).
"FACING FEE" shall have the meaning provided in section 4.1(c).
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the Administrative Agent.
"FEES" shall mean all amounts payable pursuant to, or referred to in,
section 4.1.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary (i) which is not
incorporated in the United States and substantially all of whose assets and
properties are located, or substantially all of whose business is carried on,
outside the United States, or (ii) substantially all of whose assets consist of
Subsidiaries that are Foreign Subsidiaries as defined in clause (i) of this
definition.
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"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of section 9,
including defined terms as used therein, are subject (to the extent provided
therein) to sections 1.3 and 12.7(a).
"GENERAL REVOLVING FACILITY" shall mean the Facility evidenced by the
Total General Revolving Commitment.
"GENERAL REVOLVING FACILITY PERCENTAGE" shall mean at any time for any
Lender with a General Revolving Commitment, the percentage obtained by dividing
such Lender's General Revolving Commitment by the Total General Revolving
Commitment, PROVIDED, that if the Total General Revolving Commitment has been
terminated, the General Revolving Facility Percentage for each Lender shall be
determined by dividing such Lender's General Revolving Commitment immediately
prior to such termination by the Total General Revolving Commitment immediately
prior to such termination.
"GENERAL REVOLVING LOAN" shall have the meaning provided in section
2.1(a).
"GENERAL REVOLVING COMMITMENT" shall mean, with respect to each Lender,
the amount, if any, set forth opposite such Lender's name in Annex I as its
"General Revolving Commitment" as the same may be reduced from time to time
pursuant to section 4.2, adjusted from time to time as a result of assignments
to or from such Lender pursuant to section 12.4(c), or terminated pursuant to
section 4.2, 4.3 or 10.2.
"GENERAL REVOLVING NOTE" shall have the meaning provided in section
2.6(a).
"GUARANTY" shall have the meaning provided in section 8.10.
"GUARANTY OBLIGATIONS" shall mean as to any person (without
duplication) any obligation of such person guaranteeing any Indebtedness
("PRIMARY INDEBTEDNESS") of any other person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such person, whether or not contingent, (a) to purchase any such
primary Indebtedness or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary Indebtedness or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary Indebtedness of the
ability of the primary obligor to make payment of such primary Indebtedness, or
(d) otherwise to assure or hold harmless the owner of such primary Indebtedness
against loss in respect thereof, PROVIDED, HOWEVER, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary Indebtedness in respect of which such Guaranty Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such person is required to perform
thereunder) as determined by such person in good faith.
"HAZARDOUS MATERIALS" shall mean (i) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (ii) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "restricted hazardous materials", "extremely hazardous
wastes", "restrictive hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar meaning and regulatory
effect under any applicable Environmental Law.
"HEDGE AGREEMENT" shall mean (i) any interest rate swap agreement, any
interest rate cap agreement, any interest rate collar agreement or other similar
agreement or arrangement designed to protect against fluctuations in interest
rates, and (ii) any currency swap agreement, forward currency purchase agreement
or similar agreement or arrangement designed to protect against fluctuations in
currency exchange rates.
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"IDB DEBT" shall mean the Indebtedness of the Borrower and its
Subsidiaries in respect of industrial development revenue bonds.
"INDEBTEDNESS" of any person shall mean without duplication:
(i) all indebtedness of such person for borrowed
money;
(ii) all bonds, notes, debentures and similar debt
securities of such person;
(iii) the deferred purchase price of capital assets
or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such person;
(iv) the face amount of all letters of credit issued
for the account of such person and, without duplication, all
drafts drawn thereunder;
(v) all obligations, contingent or otherwise, of such
person in respect of bankers' acceptances;
(vi) all Indebtedness of a second person secured by
any Lien on any property owned by such first person, whether
or not such indebtedness has been assumed;
(vii) all Capitalized Lease Obligations of such
person;
(viii) the present value, determined on the basis of
the implicit interest rate, of all basic rental obligations
under all "synthetic" leases (I.E. leases accounted for by the
lessee as operating leases under which the lessee is the
"owner" of the leased property for Federal income tax
purposes);
(ix) all obligations of such person to pay a
specified purchase price for goods or services whether or not
delivered or accepted, I.E., take-or-pay and similar
obligations;
(x) all net obligations of such person under Hedge
Agreements;
(xi) the full outstanding balance of trade
receivables, notes or other instruments sold with full
recourse (and the portion thereof subject to potential
recourse, if sold with limited recourse), other than in any
such case any thereof sold solely for purposes of collection
of delinquent accounts;
(xii) the stated value, or liquidation value if
higher, of all Redeemable Stock of such person; and
(xiii) all Guaranty Obligations of such person;
PROVIDED that (x) neither trade payables nor other similar accrued expenses, in
each case arising in the ordinary course of business, nor obligations in respect
of insurance policies or performance or surety bonds which themselves are not
guarantees of Indebtedness (nor drafts, acceptances or similar instruments
evidencing the same nor obligations in respect of letters of credit supporting
the payment of the same), shall constitute Indebtedness; and (y) the
Indebtedness of any person shall in any event include (without duplication) the
Indebtedness of any other entity (including any general partnership in which
such person is a general partner) to the extent such person is liable thereon as
a result of such person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide expressly
that such person is not liable thereon.
"INTEREST PERIOD" with respect to any Eurocurrency Loan shall mean the
interest period applicable thereto, as determined pursuant to section 2.9.
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<PAGE> 17
"KEYBANK" shall mean KeyBank National Association, a national banking
association, together with its successors and assigns.
"LEASEHOLDS" of any person means all the right, title and interest of
such person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"LENDER" shall have the meaning provided in the first paragraph of this
Agreement.
"LENDER DEFAULT" shall mean (i) the refusal (which has not been
retracted) of a Lender in violation of the requirements of this Agreement to
make available its portion of any incurrence of Loans or to fund its portion of
any unreimbursed payment under section 3.4(c) or (ii) a Lender having notified
the Administrative Agent and/or the Borrower that it does not intend to comply
with the obligations under section 2.1 and/or section 3.4(c), in the case of
either (i) or (ii) as a result of the appointment of a receiver or conservator
with respect to such Lender at the direction or request of any regulatory agency
or authority.
"LENDER REGISTER" shall have the meaning provided in section 12.16.
"LETTER OF CREDIT" shall have the meaning provided in section 3.1(a).
"LETTER OF CREDIT DOCUMENTS" shall have the meaning specified in
section 3.2(a).
"LETTER OF CREDIT FEE" shall have the meaning provided in section
4.1(b).
"LETTER OF CREDIT ISSUER" shall mean (i) in respect of each Existing
Letter of Credit and any subsequent Letter of Credit issued in renewal or
replacement thereof, the Lender that has issued such Existing Letter of Credit
as of the Effective Date; and/or (ii) any other Lender that is requested, and
agrees, to so act by the Borrower, and is approved by the Administrative Agent
and the Required Lenders; PROVIDED, that unless otherwise agreed by the Borrower
and KeyBank, KeyBank will act as the Letter of Credit Issuer for any Letters of
Credit issued after the Effective Date except in the circumstances contemplated
by the foregoing clause (i).
"LETTER OF CREDIT OBLIGATION" shall mean any Obligation of a Credit
Party under any Letter of Credit Document.
"LETTER OF CREDIT OBLIGOR" shall have the meaning provided in section
3.1(a).
"LETTER OF CREDIT OUTSTANDINGS" shall mean, at anytime, the sum,
without duplication, of (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings.
"LETTER OF CREDIT REQUEST" shall have the meaning provided in section
3.2(a).
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"LOAN" shall have the meaning provided in section 2.1. As provided
herein, (i) Loans under the General Revolving Facility are General Revolving
Loans, and General Revolving Loans may be Eurocurrency Loans or Prime Rate
Loans, which are the only Types of General Revolving Loans which can be
outstanding hereunder; and (ii) Loans under the Swing Line Revolving Facility
are Swing Line Revolving Loans, and Swing Line Revolving Loans may be Money
Market Rate Loans or Prime Rate Loans, which are the only Types of Swing Line
Revolving Loans which can be outstanding hereunder.
"MARGIN STOCK" shall have the meaning provided in Regulation U.
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<PAGE> 18
"MATERIAL ADVERSE EFFECT" shall mean (i) when used with reference to
the Borrower or any of its Subsidiaries, a material adverse effect on the
business, operations, property, assets, liabilities or financial condition of,
the Borrower and its Subsidiaries, taken as a whole, or a material adverse
effect on the ability of the Borrower to perform its obligations under the
Credit Documents, or (ii) when used with reference to any other person, a
material adverse effect on the business, operations, property, assets,
liabilities or financial condition of such person and its Subsidiaries, taken as
a whole, as the case may be.
"MATERIAL SUBSIDIARY" shall mean, at any time, with reference to any
person, any Subsidiary of such person (i) that has assets at such time
comprising 5% or more of the consolidated assets of such person and its
Subsidiaries, or (ii) whose operations in the current fiscal year are expected
to, or whose operations in the most recent fiscal year did (or would have if
such person had been a Subsidiary for such entire fiscal year), represent 5% or
more of the consolidated earnings before interest, taxes, depreciation and
amortization of such person and its Subsidiaries for such fiscal year.
"MATURITY DATE" shall mean December 31, 2001 (or such later date as may
be provided in any extension pursuant to section 4.4 hereof), or such earlier
date of termination of the Total General Revolving Commitment.
"MINIMUM BORROWING AMOUNT" shall mean:
(i) for General Revolving Loans which are Prime Rate
Loans, $1,000,000, with minimum increments thereafter of
$100,000;
(ii) for General Revolving Loans which are
Eurocurrency Loans denominated in Dollars, $5,000,000, with
minimum increments thereafter of $500,000;
(iii) for General Revolving Loans which are
Eurocurrency Loans denominated in an Alternative Currency, the
substantial equivalent in such Alternative Currency of
$5,000,000, with minimum increments thereafter of the
substantial equivalent of $500,000 in such Alternative
Currency); and
(iv) for Swing Line Revolving Loans, $100,000, with
minimum increments thereafter of $50,000.
"MONEY MARKET RATE LOANS" shall mean Swing Line Revolving Loans,
denominated in U.S. Dollars, bearing interest at a Quoted Rate.
"MOODY'S" shall mean Moody's Investors Service, Inc. and its
successors.
"MORTGAGE" shall have the meaning provided in section 6.1(c).
"MORTGAGE POLICY" shall have the meaning provided in section 6.1(k).
"MORTGAGE PROPERTY" shall have the meaning provided in section 6.1(k).
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan, as defined in
section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions or has within any of the
preceding three plan years made or accrued an obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" shall mean an employee benefit plan, other
than a Multiemployer Plan, to which the Borrower or any ERISA Affiliate, and one
or more employers other than the Borrower or an ERISA Affiliate, is making or
accruing an obligation to make contributions or, in the event that any such plan
has been terminated, to which the Borrower or an ERISA Affiliate made or accrued
an obligation to make contributions during any of the five plan years preceding
the date of termination of such plan.
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<PAGE> 19
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"NON-DEFAULTING LENDER" shall mean each Lender other than a Defaulting
Lender.
"NOTE" shall mean a General Revolving Note or a Swing Line Revolving
Note, as the case may be.
"NOTICE OF BORROWING" shall have the meaning provided in section
2.3(a).
"NOTICE OF CONTINUATION" shall have the meaning provided in section
2.9(a).
"NOTICE OF CONVERSION" shall have the meaning provided in section
2.7(a).
"NOTICE OFFICE" shall mean the office of the Administrative Agent at
Key Center, 127 Public Square, Cleveland, Ohio 44114 (facsimile: (216)
689-4981), or such other office, located in a city in the United States Eastern
Time Zone, as the Administrative Agent may designate to the Borrower from time
to time.
"NOTICE OF REDENOMINATION" shall have the meaning provided in section
2.7(b).
"NOTICE OF SWING LINE REFUNDING" shall have the meaning provided in
section 2.5(a).
"OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing by the
Borrower or any other Credit Party to the Administrative Agent or any Lender
pursuant to the terms of this Agreement or any other Credit Document.
"PARTICIPANT" shall have the meaning provided in section 3.4(a).
"PAYMENT OFFICE" shall mean (i) in the case of all payments to be made
in Dollars, the office of the Administrative Agent at Key Center, 127 Public
Square, Cleveland, Ohio 44114 (facsimile: (216) 689-4981), or such other office,
located in a city in the United States Eastern Time Zone, as the Administrative
Agent may designate to the Borrower from time to time, and (ii) in the case of
all payments to be made in an Alternative Currency, such office of the
Administrative Agent, one of its Affiliate banks or branches, or such
correspondent bank, as is specified in Annex I or as the Administrative Agent
may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to section 4002 of ERISA, or any successor thereto.
"PERMITTED ACQUISITION" shall mean and include any Acquisition which:
(i) is not actively opposed by the Board of Directors (or
similar governing body) of the selling person or the person whose
equity interests are to be acquired, UNLESS all of the Lenders
specifically approve or consent to such Acquisition in writing;
(ii) if such Acquisition involves cash consideration
(including cash consideration to be used to prepay or otherwise retire
any Indebtedness of the business being acquired), the aggregate cash
consideration for such Acquisition, payable immediately or on a
deferred or contingent basis, does not and will not aggregate in excess
of $20,000,000, UNLESS the Required Lenders specifically approve or
consent to such Acquisition in writing;
(iii) if it results in any new Subsidiary or Subsidiaries of
the Borrower, there are no holder or holders of minority equity
interests therein; and
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<PAGE> 20
(iv) after giving effect thereto, the Borrower would be in
compliance, on a PRO FORMA basis, with the financial covenants
contained in sections 9.8, 9.9, 9.10 and 9.11.
The term Permitted Acquisition does not include any loans, advances or minority
investments otherwise permitted pursuant to section 9.5.
"PERMITTED LIENS" shall mean Liens described in section 9.3.
"PERSON" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"PLAN" shall mean any multiemployer or single-employer plan as defined
in section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute by) the Borrower or a Subsidiary of the
Borrower or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"PLEDGE AGREEMENT" shall have the meaning provided in section 6.1(c).
"PRIME RATE" shall mean, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the greater of (i) the rate of interest established by
KeyBank in Cleveland, Ohio, from time to time, as its prime rate, whether or not
publicly announced, which interest rate may or may not be the lowest rate
charged by it for commercial loans or other extensions of credit; and (ii) the
Federal Funds Effective Rate in effect from time to time PLUS 1/2 of 1% per
annum.
"PRIME RATE LOAN" shall mean each Loan, denominated in U. S. Dollars,
bearing interest at the rates provided in section 2.8(a).
"PROHIBITED TRANSACTION" shall mean a transaction with respect to a
Plan that is prohibited under section 4975 of the Code or section 406 of ERISA
and not exempt under section 4975 of the Code or section 408 of ERISA.
"QUOTED RATE" shall have the meaning provided in section 2.3(c).
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. ss. 6901 ET SEQ.
"REAL PROPERTY" of any person shall mean all of the right, title and
interest of such person in and to land, improvements and fixtures, including
Leaseholds.
"REDEEMABLE STOCK" shall mean with respect to any person any capital
stock or similar equity interests of such person that (i) is by its terms
subject to mandatory redemption, in whole or in part, pursuant to a sinking
fund, scheduled redemption or similar provisions, at any time prior to the
Maturity Date; or (ii) otherwise is required to be repurchased or retired on a
scheduled date or dates, upon the occurrence of any event or circumstance, at
the option of the holder or holders thereof, or otherwise, at any time prior to
the Maturity Date, other than any such repurchase or retirement occasioned by a
"change of control" or similar event.
"REFERENCE BANKS" shall mean (i) KeyBank and (ii) any other Lender or
Lenders selected as a Reference Bank by the Administrative Agent and the
Required Lenders, PROVIDED, that if any of such Reference Banks is no longer a
Lender, such other Lender or Lenders as may be selected by the Administrative
Agent acting on instructions from the Required Lenders.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
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<PAGE> 21
"REGULATION U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"REPORTABLE EVENT" shall mean an event described in section 4043 of
ERISA or the regulations thereunder with respect to a Plan, other than those
events as to which the notice requirement is waived under subsections .22, .23,
.25, .27, .28, .29, .30, .31, .32, .34, .35, .62, .63, .64, .65 or .67 of PBGC
Regulation section 4043.
"REQUIRED LENDERS" shall mean Non-Defaulting Lenders whose outstanding
General Revolving Loans and Unutilized General Revolving Commitments constitute
more than 51% of the sum of the total outstanding General Revolving Loans and
Unutilized General Revolving Commitments of Non-Defaulting Lenders (PROVIDED
that, for purposes hereof, neither the Borrower, nor any of its Affiliates,
shall be included in (i) the Lenders holding such amount of the General
Revolving Loans or having such amount of the Unutilized General Revolving
Commitments, or (ii) determining the aggregate unpaid principal amount of the
General Revolving Loans or Unutilized General Revolving Commitments).
"SALE AND LEASE-BACK TRANSACTION" shall mean any arrangement with any
person providing for the leasing by the Borrower or any Subsidiary of the
Borrower of any property (except for temporary leases for a term, including any
renewal thereof, of not more than one year and except for leases between the
Borrower and a Subsidiary or between Subsidiaries), which property has been or
is to be sold or transferred by the Borrower or such Subsidiary to such person.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., and its successors.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC REGULATION D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"SECTION 5.4(b)(ii) CERTIFICATE" shall have the meaning provided in
section 5.4(b)(ii).
"SECURITY AGREEMENT" shall have the meaning specified in section
6.1(c).
"SECURITY DOCUMENTS" shall mean the Pledge Agreement, the Security
Agreement, each of the Mortgages and each other document pursuant to which any
Lien or security interest is granted by any Credit Party to the Collateral Agent
as security for any of the Obligations.
"SENIOR NOTES" shall mean and include (i) $9,000,000 aggregate original
principal amount of the Borrower's 6.60% Senior Notes, Series 1997-A due
November 14, 2003, (ii) $47,000,000 aggregate original principal amount of the
Borrower's 6.65% Senior Notes, Series 1997-B due November 14, 2007, and (iii)
$9,000,000 aggregate original principal amount of the Borrower's 6.74% Senior
Notes, Series 1997-C due November 14, 2007, in each case as issued pursuant to
Note Purchase Agreements, dated as of November 1, 1997.
"STANDARD PERMITTED LIENS" shall mean the following:
(i) Liens for taxes not yet delinquent or Liens for
taxes being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith
judgment of the management of the Borrower) have been
established;
(ii) Liens in respect of property or assets imposed
by law which were incurred in the ordinary course of business,
such as carriers', warehousemen's, materialmen's and
mechanics' Liens and other similar Liens arising in the
ordinary course of business, which do not in the aggregate
materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the
business of the Borrower or any Subsidiary;
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<PAGE> 22
(iii) Liens created by this Agreement or the other
Credit Documents;
(iv) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of
Default under section 10.1(g);
(v) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment
insurance and other types of social security; and mechanic's
Liens, carrier's Liens, and other Liens to secure the
performance of tenders, statutory obligations, contract bids,
government contracts, performance and return-of-money bonds
and other similar obligations, incurred in the ordinary course
of business (exclusive of obligations in respect of the
payment for borrowed money) whether pursuant to statutory
requirements, common law or consensual arrangements;
(vi) Leases or subleases granted to others not
interfering in any material respect with the business of the
Borrower or any of its Subsidiaries and any interest or title
of a lessor under any lease not in violation of this
Agreement;
(vii) easements, rights-of-way, zoning or deed
restrictions, minor defects or irregularities in title and
other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of
the Borrower or any of its Subsidiaries considered as an
entirety; and
(viii) Liens arising from financing statements
regarding property subject to leases not in violation of the
requirements of this Agreement, PROVIDED that such Liens are
only in respect of the property subject to, and secure only,
the respective lease (and any other lease with the same or an
affiliated lessor).
"STATED AMOUNT" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions or other
requirements for drawing could then be met).
"STOCK REPURCHASES" shall have the meaning provided in section 9.6.
"SUBSIDIARY" of any person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"SUBORDINATED INDEBTEDNESS" shall mean any Indebtedness which has been
subordinated to the Obligations in such manner and to such extent as the
Required Lenders may require.
"SWING LINE COMMITMENT" shall mean, with respect to the Swing Line
Lender, the amount set forth opposite such Lender's name in Annex I as its
"Swing Line Commitment" as the same may be reduced from time to time pursuant to
section 4.2, adjusted from time to time as a result of assignments to or from
such Lender pursuant to section 12.4(c), or terminated pursuant to section 4.2,
4.3 or 10.2.
"SWING LINE LENDER" shall mean the Lender which has the Swing Line
Revolving Commitment.
"SWING LINE REVOLVING FACILITY" shall mean the credit facility
evidenced by the Swing Line Revolving Commitment.
"SWING LINE PARTICIPATION AMOUNT" shall have the meaning provided in
section 2.5(b).
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"SWING LINE REVOLVING LOAN" shall have the meaning provided in section
2.1(b).
"SWING LINE REVOLVING NOTE" shall have the meaning provided in section
2.5(a).
"TESTING PERIOD" shall mean for any determination, a single period
consisting of the four consecutive fiscal quarters of the Borrower then last
ended (whether or not such quarters are all within the same fiscal year), EXCEPT
that if a particular provision of this Agreement indicates that a Testing Period
shall be of a different specified duration, such Testing Period shall consist of
the particular fiscal quarter or quarters of the Borrower then last ended which
are so indicated in such provision.
"TITLE COMPANY" shall have the meaning provided in section 6.1(k).
"TITLE POLICY" shall have the meaning provided in section 6.1(k).
"TOTAL COMMITMENT" shall mean all Commitments of all Lenders hereunder.
"TOTAL GENERAL REVOLVING COMMITMENT" shall mean the sum of the General
Revolving Commitments of the Lenders.
"TYPE" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., (i) in the case of General Revolving
Loans, a Prime Rate Loan or a Eurocurrency Loan, and (ii) in the case of Swing
Line Revolving Loans, a Prime Rate Loan or a Money Market Rate Loan.
"UCC" shall mean the Uniform Commercial Code.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if any,
by which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"UNITED STATES" and "U.S." each means United States of America.
"UNPAID DRAWING" shall have the meaning provided in section 3.3(a).
"UNUTILIZED GENERAL REVOLVING COMMITMENT" shall mean at any time for
any Lender with a General Revolving Commitment, the excess of (i) such Lender's
General Revolving Commitment at such time over (ii) the sum of (x) the aggregate
principal amount of all General Revolving Loans made by such Lender which are
outstanding at such time plus (y) such Lender's General Revolving Facility
Percentage of the Letter of Credit Outstandings at such time.
"UNUTILIZED SWING LINE REVOLVING COMMITMENT" shall mean, at any time,
the excess of (i) the Swing Line Revolving Commitment at such time over (ii) the
aggregate principal amount of all Swing Line Revolving Loans then outstanding.
"UNUTILIZED TOTAL GENERAL REVOLVING COMMITMENT" shall mean, at any
time, the excess of (i) the Total General Revolving Commitment at such time over
(ii) the sum of (x) the aggregate principal amount of all General Revolving
Loans then outstanding plus (y) the aggregate Letter of Credit Outstandings at
such time.
"WHOLLY-OWNED SUBSIDIARY" shall mean each Subsidiary of the Borrower at
least 95% of whose capital stock, equity interests and partnership interests,
other than director's qualifying shares or similar interests, are owned directly
or indirectly by the Borrower.
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<PAGE> 24
"WRITTEN", "WRITTEN" or "IN WRITING" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
1.2. COMPUTATION OF TIME PERIODS. In this Agreement in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding".
1.3. ACCOUNTING TERMS. Except as otherwise specifically provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; PROVIDED that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision of section 8 or 9 hereof to eliminate the effect of
any change occurring after the Effective Date in GAAP or in the application
thereof to such provision (or if the Administrative Agent notifies the Borrower
that the Required Lenders request an amendment to any such provision hereof for
such purposes), regardless of whether any such notice is given before or after
such change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance with the requirements of this
Agreement.
1.4. CURRENCY EQUIVALENTS. For purposes of this Agreement, except as
otherwise specified herein, (i) the equivalent in Dollars of any Alternative
Currency shall be determined by using the quoted spot rate at which the
Administrative Agent offers to exchange Dollars for such Alternative Currency at
its Payment Office at 9:00 A.M. (local time at the Payment Office) two Business
Days prior to the date on which such equivalent is to be determined, (ii) the
equivalent in any Alternative Currency of any other Alternative Currency shall
be determined by using the quoted spot rate at which the Administrative Agent's
Payment Office offers to exchange such Alternative Currency for the equivalent
in Dollars of such other Alternative Currency at such Payment Office at 9:00
A.M. (local time at the Payment Office) two Business Days prior to the date on
which such equivalent is to be determined, and (iii) the equivalent in any
Alternative Currency of Dollars shall be determined by using the quoted spot
rate at which the Administrative Agent's Payment Office offers to exchange such
Alternative Currency for Dollars at the Payment Office at 9:00 A.M. (local time
at the Payment Office) two Business Days prior to the date on which such
equivalent is to be determined; PROVIDED, that (A) the equivalent in Dollars of
each Eurocurrency Loan made in an Alternative Currency shall be recalculated
hereunder on each date that it shall be necessary (or the Administrative Agent
shall elect) to determine the unused portion of each Lender's General Revolving
Commitment, or any or all Loan or Loans outstanding on such date; (B) the
equivalent in Dollars of any Unpaid Drawing in respect of any Letter of Credit
denominated in an Alternative Currency shall be determined at the time the
drawing under such Letter of Credit was paid or disbursed by the applicable
Letter of Credit Issuer; (C) for purposes of sections 2.1(a), 3.1(b) and 5.2,
the equivalent in Dollars of the Stated Amount of any Letter of Credit
denominated in an Alternative Currency shall be calculated (x) on the date of
the issuance of the respective Letter of Credit, (y) on the first Business Day
of each calendar month thereafter and (z) in any other case where the same is
required or permitted to be calculated, on such other day as the Administrative
Agent may, in its sole discretion, consider appropriate; and (D) for purposes of
sections 4.1(b) and (c), the equivalent in Dollars of the Stated Amount of any
Letter of Credit denominated in an Alternative Currency shall be calculated on
the first day of each calendar month in the quarterly period in which the
respective payment is due pursuant to said sections.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1. COMMITMENTS FOR LOANS. Subject to and upon the terms and
conditions herein set forth, each Lender severally agrees to make a loan or
loans (each a "LOAN" and, collectively, the "LOANS") to the Borrower, which
Loans shall be drawn, to the extent such Lender has a commitment under a
Facility for the Borrower, under the applicable Facility, as set forth below:
(A) GENERAL REVOLVING FACILITY. Loans to the Borrower under
the General Revolving Facility (each a "GENERAL REVOLVING LOAN" and,
collectively, the "GENERAL REVOLVING LOANS"): (i) may be made at any
time and from time to time on and after the Closing Date and prior to
the Maturity Date; (ii) except as otherwise provided, may, at the
option of the Borrower, be incurred and maintained as, or Converted or
Redenominated into, General Revolving Loans which are Prime Rate Loans
denominated in Dollars, or
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Eurocurrency Loans denominated in Dollars or in an Alternative
Currency, PROVIDED that all General Revolving Loans made as part of the
same Borrowing shall, unless otherwise specifically provided herein,
consist of General Revolving Loans of the same currency and Type (and
if such Loans are Eurocurrency Loans, there shall be a single Interest
Period applicable thereto); (iii) may not be incurred in an Alternative
Currency if after giving effect thereto the equivalent in Dollars of
the aggregate outstanding principal amount of all General Revolving
Loans denominated in any Alternative Currency would exceed $50,000,000
(the "ALTERNATIVE CURRENCY SUBLIMIT"); (iv) may be repaid or prepaid
and reborrowed in accordance with the provisions hereof; (v) may only
be made if after giving effect thereto the Unutilized Total General
Revolving Commitment exceeds the outstanding Swing Line Revolving
Loans; and (vi) shall not exceed for any Lender at any time outstanding
that aggregate principal amount which, when added to the product at
such time of (A) such Lender's General Revolving Facility Percentage,
TIMES (B) the aggregate Letter of Credit Outstandings, equals the
General Revolving Commitment of such Lender at such time.
(B) SWING LINE REVOLVING FACILITY. Loans to the Borrower under
the Swing Line Revolving Facility (each a "SWING LINE REVOLVING LOAN"
and, collectively, the "SWING LINE REVOLVING LOANS") (i) shall be made
only by the Swing Line Lender, (ii) may be made at any time and from
time to time on and after the Closing Date and prior to the Maturity
Date; (iii) shall be made only in U.S. Dollars; (iv) shall have a
maturity of less than 30 days; (v) shall be incurred only for working
capital requirements of the Borrower and its Subsidiaries; (vi) may
only be incurred as Prime Rate Loans or as Money Market Rate Loans;
(vii) may be repaid or prepaid and reborrowed in accordance with the
provisions hereof; (viii) may only be made if after giving effect
thereto the Unutilized Total General Revolving Commitment exceeds the
outstanding Swing Line Revolving Loans; and (ix) shall not exceed for
the Swing Line Lender at any time outstanding its Swing Line Commitment
at such time.
2.2. MINIMUM BORROWING AMOUNTS, ETC.; PRO RATA BORROWINGS. (a) The
aggregate principal amount of each Borrowing by the Borrower under a Facility
shall not be less than the Minimum Borrowing Amount for such Borrowing. More
than one Borrowing may be incurred by the Borrower on any day, PROVIDED that if
there are two or more Borrowings on a single day under the General Revolving
Facility which consist of Eurocurrency Loans denominated in the same currency,
each such Borrowing shall have a different initial Interest Period. There shall
be no more than 10 Borrowings comprised of Eurocurrency Loans outstanding at any
time (including any such Borrowings resulting from the incurrence of Loans or
Continuations, Conversions or Redenominations) and only one Borrowing may be
made on any day under the Swing Line Revolving Facility.
(b) All Borrowings of Loans under a Facility shall be made by the
Lenders having Commitments under such Facility PRO RATA on the basis of their
respective Commitments under such Facility. It is understood that no Lender
shall be responsible for any default by any other Lender in its obligation to
make Loans hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it hereunder, regardless of the failure of any other
Lender to fulfill its Commitments hereunder.
2.3. BORROWING PROCEDURES. (a) NOTICE OF BORROWING. Whenever the
Borrower desires to incur Loans, the Borrower shall give the Administrative
Agent at its Notice Office,
(A) BORROWINGS UNDER THE GENERAL REVOLVING FACILITY OF
EUROCURRENCY LOANS DENOMINATED IN DOLLARS: in the case of any Borrowing
under the General Revolving Facility of Eurocurrency Loans denominated
in Dollars to be made hereunder, prior to 1:00 P.M. (local time at its
Notice Office), at least three Business Days' prior written or
telephonic notice thereof (in the case of telephonic notice, promptly
confirmed in writing if so requested by the Administrative Agent),
(B) BORROWINGS UNDER THE GENERAL REVOLVING FACILITY OF
EUROCURRENCY LOANS DENOMINATED IN AN ALTERNATIVE CURRENCY: in the case
of any Borrowing under the General Revolving Facility of Eurocurrency
Loans denominated in an Alternative Currency to be made hereunder,
prior to 1:00 P.M. (local time at its Notice Office), at least four
Business Days' prior written or telephonic notice thereof (in the case
of telephonic notice, promptly confirmed in writing if so requested by
the Administrative Agent),
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(C) BORROWINGS UNDER ANY FACILITY OF PRIME RATE LOANS: in the
case of any Borrowing under any Facility of Prime Rate Loans to be made
hereunder, prior to 11:00 A.M. (local time at its Notice Office) on the
proposed date thereof written or telephonic notice thereof (in the case
of telephonic notice, promptly confirmed in writing if so requested by
the Administrative Agent), or
(D) BORROWINGS UNDER THE SWING LINE FACILITY OF MONEY MARKET
RATE LOANS: in the case of any Borrowing under the Swing Line Revolving
Facility of Money Market Rate Loans to be made hereunder, if the
Administrative Agent shall have furnished the Borrower with a Quoted
Rate therefor, prior to 11:00 A.M. (local time at its Notice Office) on
the proposed date thereof (which shall be within such period as the
Administrative Agent shall have specified for such Quoted Rate) written
or telephonic notice thereof (in the case of telephonic notice,
promptly confirmed in writing if so requested by the Administrative
Agent).
Each such notice (each such notice, a "NOTICE OF BORROWING") shall (if requested
by the Administrative Agent to be confirmed in writing), be substantially in the
form of Exhibit B-1, and in any event shall be irrevocable and shall specify:
(i) the Facility under which the Borrowing is to be incurred, (ii) the aggregate
principal amount of the Loans to be made pursuant to such Borrowing; (iii) the
date of the Borrowing (which shall be a Business Day); (iv) whether the
Borrowing shall consist of Prime Rate Loans, Eurocurrency Loans or Money Market
Rate Loans; (v) if the requested Borrowing consists of Eurocurrency Loans, the
Interest Period to be initially applicable thereto; (vi) in the case of a
requested Borrowing consisting of Loans which are Eurocurrency Loans, the
currency, if other than Dollars, in which such Loans are requested; and (vii) if
the Borrowing consists of Swing Line Revolving Loans, the maturity date thereof
(which shall be less than 30 days), and if such Swing Line Revolving Loans are
Money Market Rate Loans, the Quoted Rate therefor. If the Borrower fails to
specify in a Notice of Borrowing the maturity date of any Swing Line Revolving
Loans, such maturity date shall be deemed to be 29 days. The Administrative
Agent shall promptly give each Lender which has a Commitment under any
applicable Facility written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing under the applicable Facility, of such
Lender's proportionate share thereof and of the other matters covered by the
Notice of Borrowing relating thereto.
(b) CONDITIONS TO BORROWING OF EUROCURRENCY LOANS DENOMINATED IN AN
ALTERNATIVE CURRENCY. In the case of a proposed Borrowing comprised of General
Revolving Loans which are Eurocurrency Loans denominated in an Alternative
Currency, the obligation of each affected Lender to make its Eurocurrency Loan
in the requested Alternative Currency as part of such Borrowing is subject to:
(A) if such requested Alternative Currency is an Alternative
Currency described in clause (i) or (ii) of the definition of the term
Alternative Currency, the confirmation by the Administrative Agent to
the Borrower not later than the third Business Day before the requested
date of such Borrowing that such Alternative Currency is readily and
freely transferable and convertible into Dollars, or
(B) if such requested Alternative Currency is not an
Alternative Currency described in clause (i) or (ii) of the definition
of the term Alternative Currency, such requested Alternative Currency
shall be acceptable to such Lender (which acceptability shall be
presumed if such Lender fails to notify the Administrative Agent in
writing not later than the third Business Day before the requested date
of such Borrowing that such Alternative Currency is not acceptable to
such Lender); and any such notice of unacceptability of an Alternative
Currency shall be notified immediately by the Administrative Agent to
the Borrower.
If the Administrative Agent shall not have provided the confirmation referred to
in clause (A) above, or any affected Lender shall have so notified the
Administrative Agent that a particular Alternative Currency is not acceptable to
it as provided in clause (B) above, the Administrative Agent shall promptly
notify the Borrower and each affected Lender thereof, whereupon the Borrower
may, by notice to the Administrative Agent not later than the third Business Day
before the requested date of such Borrowing, withdraw the Notice of Borrowing
relating to such requested Borrowing. If the Borrower does so withdraw such
Notice of Borrowing, the Borrowing requested in such Notice of Borrowing shall
not occur and the Administrative Agent shall promptly so notify each affected
Lender. If the Borrower does not so withdraw such Notice of Borrowing, the
Administrative Agent shall promptly so notify each
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affected Lender and such Notice of Borrowing shall be deemed to be a Notice of
Borrowing which requests a Borrowing of General Revolving Loans comprised of
Eurocurrency Loans in an aggregate amount in Dollars equivalent, on the date the
Administrative Agent so notifies each affected Lender, to the amount of the
originally requested Borrowing in an Alternative Currency; and in such notice by
the Administrative Agent to each affected Lender the Administrative Agent shall
state such aggregate equivalent amount of such Borrowing in Dollars and such
Lender's ratable portion of such Borrowing.
(c) BORROWINGS OF MONEY MARKET RATE LOANS. Whenever the Borrower
proposes to submit a Notice of Borrowing with respect to Swing Line Revolving
Loans which will be Money Market Rate Loans, it will prior to submitting such
Notice of Borrowing notify the Administrative Agent of its intention and request
the Administrative Agent to quote a fixed or floating interest rate (the "QUOTED
RATE") to be applicable thereto prior to the proposed maturity thereof. The
Administrative Agent will immediately so notify the Swing Line Lender, and if
the Swing Line Lender is agreeable to a particular interest rate for the
proposed maturity of such Money Market Rate Loans if such Loans are made on or
prior to a specified date, the Administrative Agent shall quote such interest
rate to the Borrower as the Quoted Rate applicable to such proposed Money Market
Rate Loans if made on or before such specified date for a maturity as so
proposed by the Borrower. The Swing Line Lender contemplates that any Quoted
Rate will be a rate of interest which reflects a margin corresponding to the sum
of (x) the Applicable Eurocurrency Margin in effect at the time of quotation of
any Quoted Rate, PLUS (y) the Applicable Facility Fee Rate in effect at such
time, over the then prevailing Federal Funds Effective Rate, commercial paper,
call money, overnite repurchase or other commonly quoted interest rate, or the
Swing Line Lender's average cost of short term funds, in each case as selected
and determined by the Swing Line Lender. Nothing herein shall be deemed to
permit any Lender other than the Swing Line Lender any right of approval with
respect to a Quoted Rate.
(d) ACTIONS BY ADMINISTRATIVE AGENT ON TELEPHONIC NOTICE. Without in
any way limiting the obligation of the Borrower to confirm in writing any
telephonic notice permitted to be given hereunder, the Administrative Agent may
act prior to receipt of written confirmation without liability upon the basis of
such telephonic notice believed by the Administrative Agent in good faith to be
from an Authorized Officer of the Borrower entitled to give telephonic notices
under this Agreement on behalf of the Borrower. In each such case, the
Administrative Agent's record of the terms of such telephonic notice shall be
conclusive absent manifest error.
2.4. DISBURSEMENT OF FUNDS FROM BORROWINGS. (a) No later than 2:00 P.M.
(local time at the Payment Office of the Administrative Agent) on the date
specified in each Notice of Borrowing, each Lender with a Commitment under the
applicable Facility relating to such Loans will make available its PRO RATA
share, if any, of each Borrowing under such Facility requested to be made on
such date in the manner provided below. All amounts relating to any Borrowing by
the Borrower shall be made available to the Administrative Agent in U.S. dollars
or the applicable Alternative Currency and immediately available funds at the
Administrative Agent's Payment Office and the Administrative Agent promptly will
make available to the Borrower by depositing to its account at such Payment
Office, or at such other account in another financial institution designated by
the Borrower to the Administrative Agent, the aggregate of the amounts so made
available in the currency and type of funds received. Unless the Administrative
Agent shall have been notified by any Lender prior to the date of a Borrowing
that such Lender does not intend to make available to the Administrative Agent
its portion of the Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Lender and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent at a rate per annum equal to (x) if paid
by such Lender, at the overnight Federal Funds Effective Rate, in the case of
any Loan denominated in Dollars, or at the weighted average overnite or weekend
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borrowing rate for immediately available and freely transferrable funds in the
applicable Alternative Currency which is offered to the Administrative Agent in
the international markets, in the case of any General Revolving Loan denominated
in an Alternative Currency, or (y) if paid by the Borrower, the then applicable
rate of interest, calculated in accordance with section 2.8, for the respective
Loan (but without any requirement to pay any amounts in respect thereof pursuant
to section 2.11).
(b) Nothing herein and no subsequent termination of the Commitments
pursuant to section 4.2 or 4.3 shall be deemed to relieve any Lender from its
obligation to fulfill its commitments hereunder and in existence from time to
time or to prejudice any rights which the Borrower may have against any Lender
as a result of any default by such Lender hereunder.
2.5. REFUNDING OF, OR PARTICIPATION IN, SWING LINE REVOLVING LOANS. (a)
If any Event of Default exists, the Swing Line Lender may, in its sole and
absolute discretion, direct that the Swing Line Revolving Loans owing to it be
refunded by delivering a notice to such effect to the Administrative Agent,
specifying the aggregate principal amount thereof (a "NOTICE OF SWING LINE
REFUNDING"). Promptly upon receipt of a Notice of Swing Line Refunding, the
Administrative Agent shall give notice of the contents thereof to the Lenders
with General Revolving Commitments and, unless an Event of Default specified in
section 10.1(h) in respect of the Borrower has occurred, also to the Borrower.
Each such Notice of Swing Line Refunding shall be deemed to constitute delivery
by the Borrower of a Notice of Borrowing requesting General Revolving Loans
consisting of Prime Rate Loans in the amount of the Swing Line Revolving Loans
to which it relates. Each Lender with a General Revolving Commitment (including
the Swing Line Lender, in its capacity as a Lender) hereby unconditionally
agrees (notwithstanding that any of the conditions specified in section 6.2
hereof or elsewhere in this Agreement shall not have been satisfied, but subject
to the provisions of paragraph (b) below) to make a General Revolving Loan to
the Borrower in an amount equal to such Lender's General Revolving Facility
Percentage of the aggregate amount of the Swing Line Revolving Loans to which
such Notice of Swing Line Refunding relates. Each such Lender shall make the
amount of such General Revolving Loan available to the Administrative Agent in
immediately available funds at the Payment Office not later than 2:00 P.M.
(local time at the Payment Office), if such notice is received by such Lender
prior to 11:00 A.M. (local time at its Domestic Lending Office), or not later
than 2:00 P.M. (local time at the Payment Office) on the next Business Day, if
such notice is received by such Lender after such time. The proceeds of such
General Revolving Loans shall be made immediately available to the Swing Line
Lender and applied by it to repay the principal amount of the Swing Line
Revolving Loans to which such Notice of Swing Line Refunding related. The
Borrower irrevocably and unconditionally agrees that, notwithstanding anything
to the contrary contained in this Agreement, General Revolving Loans made as
herein provided in response to a Notice of Swing Line Refunding shall constitute
General Revolving Loans hereunder consisting of Prime Rate Loans.
(b) If prior to the time a General Revolving Loan would otherwise have
been made as provided above as a consequence of a Notice of Swing Line
Refunding, any of the events specified in section 10.1(h) shall have occurred in
respect of the Borrower or one or more of the Lenders with General Revolving
Commitments shall determine that it is legally prohibited from making a General
Revolving Loan under such circumstances, each Lender (other than the Swing Line
Lender), or each Lender (other than the Swing Line Lender) so prohibited, as the
case may be, shall, on the date such General Revolving Loan would have been made
by it (the "PURCHASE DATE"), purchase an undivided participating interest in the
outstanding Swing Line Revolving Loans to which such Notice of Swing Line
Refunding related, in an amount (the "SWING LINE PARTICIPATION AMOUNT") equal to
such Lender's General Revolving Facility Percentage of such Swing Line Revolving
Loans. On the Purchase Date, each such Lender or each such Lender so prohibited,
as the case may be, shall pay to the Swing Line Lender, in immediately available
funds, such Lender's Swing Line Participation Amount, and promptly upon receipt
thereof the Swing Line Lender shall, if requested by such other Lender, deliver
to such Lender a participation certificate, dated the date of the Swing Line
Lender's receipt of the funds from, and evidencing such Lender's participating
interest in such Swing Line Revolving Loans and its Swing Line Participation
Amount in respect thereof. If any amount required to be paid by a Lender to the
Swing Line Lender pursuant to the above provisions in respect of any Swing Line
Participation Amount is not paid on the date such payment is due, such Lender
shall pay to the Swing Line Lender on demand interest on the amount not so paid
at the overnight Federal Funds Effective Rate from the due date until such
amount is paid in full.
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(c) Whenever, at any time after the Swing Line Lender has received from
any other Lender such Lender's Swing Line Participation Amount, the Swing Line
Lender receives any payment from or on behalf of the Borrower on account of the
related Swing Line Revolving Loans, the Swing Line Lender will promptly
distribute to such Lender its General Revolving Facility Percentage of such
payment on account of its Swing Line Participation Amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender's participating interest was outstanding and funded);
PROVIDED, HOWEVER, that in the event such payment received by the Swing Line
Lender is required to be returned, such Lender will return to the Swing Line
Lender any portion thereof previously distributed to it by the Swing Line
Lender.
(d) Each Lender's obligation to make General Revolving Loans and/or to
purchase participations in connection with a Notice of Swing Line Refunding
(which shall in all events be within such Lender's Unutilized General Revolving
Commitment, taking into account all outstanding participations in connection
with Swing Line Refundings) shall be subject to the conditions that:
(i) such Lender shall have received a Notice of Swing Line
Refunding complying with the provisions hereof, and
(ii) at the time the Swing Line Revolving Loans which are the
subject of such Notice of Swing Line Refunding were made, the Swing
Line Lender had (x) no knowledge that any Default under section 10.1(a)
involving the payment of principal of or interest on any of the Loans
had occurred and was continuing, and (y) no actual written notice from
another Lender that an Event of Default had occurred and was
continuing,
but otherwise shall be absolute and unconditional, shall be solely for the
benefit of the Swing Line Lender, and shall not be affected by any circumstance,
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against any other Lender, any
Credit Party, or any other person, or any Credit Party may have against any
Lender or other person, as the case may be, for any reason whatsoever; (B) the
occurrence or continuance of a Default or Event of Default; (C) any event or
circumstance involving a Material Adverse Effect upon the Borrower; (D) any
breach of any Credit Document by any party thereto; or (E) any other
circumstance, happening or event, whether or not similar to any of the
foregoing.
2.6. NOTES; LOAN ACCOUNTS. (A) FORMS OF NOTES. The Borrower's
obligation to pay the principal of, and interest on, the General Revolving Loans
made to it by each Lender with a General Revolving Commitment shall be evidenced
by a promissory note of the Borrower substantially in the form of Exhibit A-1
(each a "GENERAL REVOLVING NOTE" and, collectively, the "GENERAL REVOLVING
NOTES"). The Borrower's obligation to pay the principal of, and interest on, the
Swing Line Revolving Loans made to it by the Swing Line Lender shall be
evidenced by a promissory note of the Borrower substantially in the form of
Exhibit A-2 with blanks appropriately completed in conformity herewith (the
"SWING LINE REVOLVING NOTE").
(b) GENERAL REVOLVING NOTES. The General Revolving Note issued by the
Borrower to a Lender with a General Revolving Commitment shall: (i) be executed
by the Borrower; (ii) be payable to the order of such Lender and be dated on or
prior to the date of any General Revolving Loan evidenced thereby; (iii) be
payable in the principal amount of General Revolving Loans evidenced thereby;
(iv) mature on the Maturity Date; (v) bear interest as provided in section 2.8
in respect of the Prime Rate Loans or Eurocurrency Loans, as the case may be,
evidenced thereby; (vi) be subject to mandatory prepayment as provided in
section 5.2; and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(c) SWING LINE REVOLVING NOTE. The Swing Line Revolving Note issued by
the Borrower to the Swing Line Lender shall: (i) be executed by the Borrower;
(ii) be payable to the order of the Swing Line Lender and be dated on or prior
to the date of any Swing Line Revolving Loan evidenced thereby; (iii) be in a
stated principal amount equal to the Swing Line Revolving Commitment of the
Swing Line Lender; (iv) be payable in the principal amount of Swing Line
Revolving Loans evidenced thereby; (v) mature as to any Swing Line Revolving
Loan evidenced thereby on the maturity date, less than 30 days following the
date such Swing Line Revolving Loan was made, specified in the applicable Notice
of Borrowing; (vi) bear interest as provided in section 2.8 in respect of the
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Prime Rate Loans or Money Market Rate Loans, as the case may be, evidenced
thereby; (vii) be subject to mandatory prepayment as provided in section 5.2;
and (viii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(d) LOAN ACCOUNTS OF LENDERS. Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
(e) LOAN ACCOUNTS OF ADMINISTRATIVE AGENT. The Administrative Agent
shall maintain accounts in which it shall record (i) the amount of each Loan
made hereunder, the Type thereof, the particular Facility under which such Loan
was made, and (to the extent applicable) the Interest Period if such Loan is a
Eurodollar Loan, or the Quoted Rate and maturity thereof if such Loan is a Money
Market Rate Loan, (ii) the amount of any principal due and payable or to become
due and payable from the Borrower to each Lender hereunder, and (iii) the amount
of any sum received by the Administrative Agent hereunder for the account of the
Lenders and each Lender's share thereof.
(f) EFFECT OF LOAN ACCOUNTS, ETC. The entries made in the accounts
maintained pursuant to section 2.6(d) and (e) shall be PRIMA FACIE evidence of
the existence and amounts and amounts of the obligations recorded therein;
provided, that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay or prepay the Loans in accordance with the terms of
this Agreement.
(g) ENDORSEMENTS OF AMOUNTS ON NOTES PRIOR TO TRANSFER. Each Lender
will, prior to any transfer of any of the Notes issued to it by the Borrower,
endorse on the reverse side thereof or the grid attached thereto the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation shall not affect the Borrower's obligations in
respect of such Loans.
2.7. VOLUNTARY CONVERSION OF DOLLAR DENOMINATED GENERAL REVOLVING
LOANS; REDENOMINATION OF GENERAL REVOLVING LOANS. (a) The Borrower shall have
the option to Convert on any Business Day all or a portion at least equal to the
applicable Minimum Borrowing Amount of the outstanding principal amount of its
General Revolving Loans denominated in Dollars of one Type owing by it pursuant
to the General Revolving Facility into a Borrowing or Borrowings pursuant to the
same Facility of the other Type of Loans denominated in Dollars which can be
made pursuant to such Facility, PROVIDED that: (i) no partial Conversion of a
Borrowing of Eurocurrency Loans shall reduce the outstanding principal amount of
the Eurocurrency Loans made pursuant to such Borrowing to less than the Minimum
Borrowing Amount applicable thereto; (ii) any Conversion of Eurocurrency Loans
into Prime Rate Loans shall be made on, and only on, the last day of an Interest
Period for such Eurocurrency Loans; (iii) Prime Rate Loans may only be Converted
into Eurocurrency Loans if no Default under section 10.1(a) or Event of Default
is in existence on the date of the Conversion unless the Required Lenders
otherwise agree; (iv) Prime Rate Loans may not be Converted into Eurocurrency
Loans during any period when such Conversion is not permitted under section
2.10; and (v) Borrowings of Eurocurrency Loans resulting from this section 2.7
shall conform to the requirements of section 2.2. Each such Conversion shall be
effected by the Borrower giving the Administrative Agent at its Notice Office,
prior to 1:00 P.M. (local time at such Notice Office), at least three Business
Days', in the case of Conversion into Eurodollar Loans (or prior to 1:00 P.M.
(local time at such Notice Office) same Business Day's, in the case of a
Conversion into Prime Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing if so requested by the Administrative Agent) (each
a "NOTICE OF CONVERSION"), substantially in the form of Exhibit B-2, specifying
the Loans to be so Converted, the Type of Loans to be Converted into and, if to
be Converted into a Borrowing of Eurocurrency Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall give each Lender
prompt notice of any such proposed Conversion affecting any of its Loans. For
the avoidance of doubt, the prepayment or repayment of any General Revolving
Loans out of the proceeds of other General Revolving Loans by the Borrower is
not considered a Conversion of such General Revolving Loans into other General
Revolving Loans.
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(b) The Borrower may, upon notice given to the Administrative Agent at
least four Business Days prior to the date of the proposed Redenomination,
request that all General Revolving Loans comprising the same Borrowing by the
Borrower be Redenominated from Dollars into an Alternative Currency or from an
Alternative Currency into Dollars or another Alternative Currency; PROVIDED,
HOWEVER, that any Redenomination of Eurocurrency Loans shall be made on, and
only on, the last day of an Interest Period for such Loans; and PROVIDED,
FURTHER, that no Redenomination shall be made if at the time thereof a Default
under section 10.1(a) or Event of Default shall have occurred and be continuing
unless the Required Lenders otherwise agree. Each such notice of request of a
Redenomination (a "NOTICE OF REDENOMINATION") shall be by telecopier, telex or
cable (confirmed immediately in writing if so requested by the Administrative
Agent), in substantially the form of Exhibit B-4 hereto, specifying (i) the
amount and currency of the General Revolving Loans comprising the specific
Borrowing to be Redenominated, (ii) the date of the proposed Redenomination,
(iii) the currency into which such Loans are to be Redenominated, and (iv) if
such Loans as so Redenominated are to be Eurocurrency Loans, the duration of the
Interest Period for such Loans upon being so Redenominated. The Administrative
Agent shall promptly notify each affected Lender of any such requested
Redenomination. In the case of a Notice of Redenomination which requests a
Redenomination of Loans into an Alternative Currency, such Redenomination is
subject to (x) if it involves a Redenomination into an Alternative Currency
described in clause (i) or (ii) of the definition of the term Alternative
Currency, the confirmation by the Administrative Agent to the Borrower that such
Alternative Currency is readily and freely transferable and convertible into
Dollars, or (y) if it involves a Redenomination into an Alternative Currency
described in clause (iii) of the definition of the term Alternative Currency,
the willingness of each Lender which has a General Revolving Commitment to
effect such Redenomination. If any affected Lender has not, by 2:00 P.M. (local
time at the Notice Office) on the third Business Day before the requested date
of such Redenomination, notified the Administrative Agent that a particular
requested Redenomination is not acceptable to it, such requested Redenomination
shall be conclusively presumed to be acceptable to it. Any objection by a Lender
to a requested Redenomination shall be notified immediately by the
Administrative Agent to the Borrower. If any affected Lender shall have so
notified the Administrative Agent of its objection to a requested
Redenomination, or if the Administrative Agent shall have confirmed to the
Borrower that the Alternative Currency involved in such Redenomination is not
readily and freely transferable and convertible into Dollars, the requested
Redenomination will not occur and the Administrative Agent shall promptly notify
the Borrower and each affected Lender that a Lender is unwilling to make such
requested Redenomination and that the requested Redenomination will not occur.
If no affected Lender shall have so provided to the Administrative Agent notice
of its unwillingness to effect a requested Redenomination or if such Notice of
Redenomination requests a Redenomination of Loans into Dollars, each General
Revolving Loan so requested to be Redenominated will be Redenominated, on the
date specified therefor in such Notice of Redenomination, into an equivalent
amount thereof in the currency requested in such Notice of Redenomination, such
equivalent amount to be determined on such date by the Administrative Agent in
accordance with section 1.4, and in the case of any such General Revolving Loan
being so Redenominated which will be a Eurocurrency Loan, such Eurocurrency Loan
will have an initial Interest Period as requested in such Notice of
Redenomination.
2.8. INTEREST. (a) INTEREST ON PRIME RATE LOANS. The unpaid principal
amount of each General Revolving Loan or Swing Line Revolving Loan which is a
Prime Rate Loan shall bear interest from the date of the Borrowing thereof
(including any date of Conversion or Redenomination thereof) until maturity
(whether by acceleration or otherwise) at a fluctuating rate per annum which
shall at all times be equal to the Prime Rate in effect from time to time.
(b) INTEREST ON EUROCURRENCY LOANS. The unpaid principal amount of each
General Revolving Loan which is a Eurocurrency Loan shall bear interest from the
date of the Borrowing thereof (including any Continuttion, Conversion or
Redenomination thereof) until maturity (whether by acceleration or otherwise) at
a rate per annum which shall at all times during the Interest Period applicable
thereto be the Applicable Eurocurrency Margin (as defined below) for such
Eurocurrency Loan PLUS the relevant Adjusted Eurocurrency Rate for such Interest
Period.
(c) INTEREST ON MONEY MARKET RATE LOANS. The unpaid principal amount of
each Swing Line Revolving Loan which is a Money Market Rate Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at the rate per annum which shall be equal to the
Quoted Rate therefor.
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(d) DEFAULT INTEREST. Notwithstanding the above provisions, if a
Default under section 10.1(a) or Event of Default is in existence, all
outstanding amounts of principal and, to the extent permitted by law, all
overdue interest, in respect of each and every Loan shall bear interest, payable
on demand, at a rate per annum equal to 2% per annum above the rate otherwise
applicable thereto pursuant to section 2.8(a), (b) or (c). If any amount (other
than the principal of and interest on the Loans) payable by the Borrower under
the Credit Documents is not paid when due, such amount shall bear interest,
payable on demand, at a rate per annum equal to the Prime Rate in effect from
time to time PLUS 2% per annum.
(e) ACCRUAL AND PAYMENT OF INTEREST. Interest shall accrue from and
including the date of any Borrowing to but excluding the date of any prepayment
or repayment thereof and shall be payable:
(i) in the case of any Swing Line Revolving Loan, (A) at the
maturity date thereof, which shall in any event be less than 30 days,
(B) on any prepayment (on the amount prepaid), and (C) after maturity
(whether by acceleration or otherwise), on demand; and
(ii) in the case of any General Revolving Loan, (A) which is a
Prime Rate Loan, quarterly in arrears on the last Business Day of
March, June, September and December, (B) which is a Eurodollar Loan, on
the last day of each Interest Period applicable thereto and, in the
case of an Interest Period in excess of three months, on the dates
which are successively three months after the commencement of such
Interest Period, and (C) on any repayment, prepayment, Conversion or
Redenomination (on the amount repaid, prepaid, Converted or
Redenominated), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.
(f) COMPUTATIONS OF INTEREST. All computations of interest hereunder
shall be made in accordance with section 12.7(b).
(g) INFORMATION AS TO INTEREST RATES. Each Reference Bank agrees to
furnish the Administrative Agent timely information for the purpose of
determining the Adjusted Eurocurrency Rate for any Borrowing consisting of
Eurocurrency Loans. If any one or more of the Reference Banks shall not timely
furnish such information, the Administrative Agent shall determine the Adjusted
Eurocurrency Rate on the basis of timely information furnished by the remaining
Reference Banks. The Administrative Agent upon determining the interest rate for
any Borrowing shall promptly notify the Borrower and the affected Lenders
thereof.
(h) APPLICABLE EUROCURRENCY MARGIN. As used herein, the term
"APPLICABLE EUROCURRENCY MARGIN", as applied to any General Revolving Loan which
is a Eurocurrency Loan, means the particular rate per annum determined by the
Administrative Agent in accordance with the Pricing Grid Table which appears
below, based on the Borrower's ratio of Consolidated Total Debt to Consolidated
EBITDA and such Pricing Grid Table, and the following provisions:
(i) Initially, until changed hereunder in accordance with the
following provisions, the Applicable Eurocurrency Margin for General
Revolving Loans will be 185.00 basis points per annum.
(ii) Commencing with the fiscal quarter of the Borrower ended
on or nearest to March 31, 1999, and continuing with each fiscal
quarter thereafter, the Administrative Agent will determine the
Applicable Eurocurrency Margin for any Eurocurrency Loan in accordance
with the Pricing Grid Table, based on the Borrower's ratio of (x)
Consolidated Total Debt as of the end of the fiscal quarter, to (y)
Consolidated EBITDA for the Testing Period ended on the last day of the
fiscal quarter, and identified in such Table. Changes in the Applicable
Eurocurrency Margin based upon changes in such ratio shall become
effective on the first day of the month following the receipt by the
Administrative Agent pursuant to section 8.1(a) or (b) of the financial
statements of the Borrower, accompanied by the certificate and
calculations referred to in section 8.1(c), demonstrating the
computation of such ratio, based upon the ratio in effect at the end of
the applicable period covered (in whole or in part) by such financial
statements.
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<PAGE> 33
(iii) Notwithstanding the above provisions, during any period
when (A) the Borrower has failed to timely deliver its consolidated
financial statements referred to in section 8.1(a) or (b), accompanied
by the certificate and calculations referred to in section 8.1(c), (B)
a Default under section 10.1(a) has occurred and is continuing, or (C)
an Event of Default has occurred and is continuing, the Applicable
Eurocurrency Margin shall be the highest rate per annum indicated
therefor in the Pricing Grid Table, regardless of the Borrower's ratio
of Consolidated Total Debt to Consolidated EBITDA at such time.
(iv) Any changes in the Applicable Eurocurrency Margin shall
be determined by the Administrative Agent in accordance with the above
provisions and the Administrative Agent will promptly provide notice of
such determinations to the Borrower and the Lenders. Any such
determination by the Administrative Agent pursuant to this section
2.8(h) shall be conclusive and binding absent manifest error.
PRICING GRID TABLE
(EXPRESSED IN BASIS POINTS)
<TABLE>
<CAPTION>
=================================================================================================================
RATIO OF APPLICABLE
CONSOLIDATED TOTAL DEBT EUROCURRENCY MARGIN
TO FOR APPLICABLE
TIER CONSOLIDATED EBITDA GENERAL REVOLVING LOANS FACILITY FEE RATE
=================================================================================================================
<S> <C> <C> <C>
V greater than or equal to 3.00 to 1.00 185.00 40.00
- -----------------------------------------------------------------------------------------------------------------
IV greater than or equal to 2.50 to 1.00
but less than 3.00 to 1.00 150.00 37.50
- -----------------------------------------------------------------------------------------------------------------
III greater than or equal to 2.00 to 1.00
but less than 2.50 to 1.00 127.50 35.00
- -----------------------------------------------------------------------------------------------------------------
II greater than or equal to 1.50 to 1.00
but less than 2.00 to 1.00 107.50 30.00
- -----------------------------------------------------------------------------------------------------------------
I less than 1.50 to 1.00 80.00 20.00
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
2.9. SELECTION AND CONTINUATION OF INTEREST PERIODS. (a) The Borrower
shall have the right
(x) at the time it gives a Notice of Borrowing, Notice of
Conversion or Notice of Redenomination in respect of the making of,
Conversion into, or Redenomination of, a Borrowing of General Revolving
Loans consisting of Eurocurrency Loans, to select in such Notice the
Interest Period to be applicable to such Borrowing, and
(y) prior to 1:00 P.M. (local time at the Notice Office) on
the third Business Day prior to the expiration of an Interest Period
applicable to a Borrowing of General Revolving Loans consisting of
Eurocurrency Loans, to elect by giving the Administrative Agent written
or telephonic notice (in the case of telephonic notice, promptly
confirmed in writing if so requested by the Administrative Agent) to
Continue all or the Minimum Borrowing Amount of the principal amount of
such Loans as one or more Borrowings of Eurocurrency Loans and to
select the Interest Period to be applicable to any such Borrowing (any
such notice, a "NOTICE OF CONTINUATION"),
which Interest Period shall, at the option of the Borrower, be a one, two,
three, four, five or six month period (or if each Lender confirms to the
Administrative Agent the availability of funding for Eurodollar Loans for a
period
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<PAGE> 34
of 9 or 12 months, such 9 or 12 month period); PROVIDED, that notwithstanding
anything to the contrary contained above, the Borrower's right to select an
Interest Period or to effect any Continuation shall be subject to the applicable
provisions of section 2.10 and to the following:
(i) the initial Interest Period for any Borrowing of
Eurocurrency Loans shall commence on the date of such Borrowing (the
date of a Borrowing resulting from a Conversion, Continuation or
Redenomination shall be the date of such Conversion, Continuation or
Redenomination) and each Interest Period occurring thereafter in
respect of such Borrowing shall commence on the day on which the next
preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, PROVIDED that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(iv) no Interest Period for any Eurocurrency Loan may be
selected which would end after the Maturity Date; and
(v) no Interest Period may be elected at any time when a
Default under section 10.1(a) or an Event of Default is then in
existence unless the Required Lenders otherwise agree.
(b) If upon the expiration of any Interest Period the Borrower has
failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurocurrency Loans as provided above, (i) in the case of
any such Eurocurrency Loans which are denominated in Dollars, the Borrower shall
be deemed to have elected to Convert such Borrowing to Prime Rate Loans
effective as of the expiration date of such current Interest Period, and (ii) in
the case of any such Eurocurrency Loans which are denominated in an Alternative
Currency, the Borrower shall be deemed to have elected, effective as of the
expiration date of such current Interest Period, to Redenominate such Loans from
the applicable Alternative Currency into an equivalent amount thereof in
Dollars, such equivalent amount to be determined on such date by the
Administrative Agent in accordance with section 1.5, and to treat such Loans as
so Redenominated as Prime Rate Loans.
2.10. INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender, shall have determined on a reasonable
basis (which determination shall, absent manifest error, be final and conclusive
and binding upon all parties hereto):
(i) on any date for determining the Adjusted Eurocurrency Rate
for Eurocurrency Loans denominated in Dollars or in an Alternative
Currency for any Interest Period that, by reason of any changes arising
after the Effective Date affecting the interbank Eurocurrency market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Adjusted
Eurocurrency Rate; or
(ii) at any time, that such Lender shall incur increased costs
or reductions in the amounts received or receivable hereunder in an
amount which such Lender deems material with respect to any
Eurocurrency Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a
change in the rate of taxes or similar charges) because of (x) any
change since the Effective Date in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having
the force of law), or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline, order or request (such as, for example, but not
limited to, a change in official reserve requirements, but, in all
events,
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<PAGE> 35
excluding reserves includable in the Adjusted Eurocurrency Rate
pursuant to the definition thereof), and/or (y) other circumstances
adversely affecting the interbank Eurocurrency market or the position
of such Lender in such market; or
(iii) at any time, that the making or continuance of any
Eurocurrency Loan denominated in Dollars or in an Alternative Currency
has become unlawful by compliance by such Lender in good faith with any
change since the Effective Date in any law, governmental rule,
regulation, guideline or order, or the interpretation or application
thereof, or would conflict with any thereof not having the force of law
but with which such Lender customarily complies or has become
impracticable as a result of a contingency occurring after the
Effective Date which materially adversely affects the interbank
Eurocurrency market;
THEN, and in any such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (x) on or promptly following such date or time
and (y) within 10 Business Days of the date on which such event no longer exists
give notice (by telephone confirmed in writing) to the Borrower and to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other applicable Lenders).
Thereafter (x) in the case of clause (i) above, Eurocurrency Loans shall no
longer be available in the applicable currency until such time as the
Administrative Agent notifies the Borrower and the applicable Lenders that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Notice of Borrowing, Notice of Continuation, Notice of Conversion
or Notice of Redenomination given by the Borrower with respect to Eurocurrency
Loans denominated in such currency which have not yet been incurred, Continued,
Converted or Redenominated shall be deemed rescinded by the Borrower or, in the
case of a Notice of Borrowing, shall, at the option of the Borrower, be deemed
converted into a Notice of Borrowing for Prime Rate Loans to be made on the date
of Borrowing contained in such Notice of Borrowing, (y) in the case of clause
(ii) above, the Borrower shall pay to such Lender, upon written demand therefor,
such additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as such Lender shall determine) as
shall be required to compensate such Lender, for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Lender, showing the basis for the calculation
thereof, which basis must be reasonable, submitted to the Borrower by such
Lender shall, absent manifest error, be final and conclusive and binding upon
all parties hereto) and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in section 2.10(b) as promptly as
possible and, in any event, within the time period required by law.
(b) At any time that any Eurocurrency Loan denominated in Dollars or an
Alternative Currency is affected by the circumstances described in section
2.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurocurrency Loan
affected pursuant to section 2.10(a)(iii) the Borrower shall) either (i) if the
affected Eurocurrency Loan is then being made pursuant to a Borrowing, by giving
the Administrative Agent telephonic notice (confirmed promptly in writing if
requested) thereof on the same date that the Borrower was notified by a Lender
pursuant to section 2.10(a)(ii) or (iii), cancel said Borrowing, convert the
related Notice of Borrowing into one requesting a Borrowing of Prime Rate Loans
or require the affected Lender to make its requested Loan as a Prime Rate Loan,
or (ii) if the affected Eurocurrency Loan is then outstanding, upon at least one
Business Day's notice to the Administrative Agent, require the affected Lender
to Convert each such Eurocurrency Loan denominated in Dollars into a Prime Rate
Loan, or require the affected Lender to Redenominate and Convert each such
Eurocurrency Loan denominated in an Alternative Currency into a Prime Rate Loan
denominated in Dollars, PROVIDED that if more than one Lender is affected at any
time, then all affected Lenders must be treated the same pursuant to this
section 2.10(b).
(c) If any Lender shall have determined that after the Effective Date,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged by law with the interpretation or administration thereof, or
compliance by such Lender or its parent corporation with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank, or comparable agency, in each case made
subsequent to the Effective Date, has or would have the effect of reducing by an
amount reasonably deemed by such Lender to be material the rate of return on
such Lender's or its parent corporation's capital or assets as a consequence of
such Lender's commitments or obligations hereunder to a level below that which
such Lender or its parent corporation could have achieved but for such adoption,
effectiveness,
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<PAGE> 36
change or compliance (taking into consideration such Lender's or its parent
corporation's policies with respect to capital adequacy), THEN from time to
time, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or its parent corporation for
such reduction. Each Lender, upon determining in good faith that any additional
amounts will be payable pursuant to this section 2.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth, in
reasonable detail, the basis of the calculation of such additional amounts,
which basis must be reasonable, although the failure to give any such notice
shall not release or diminish the Borrower's obligations to pay additional
amounts pursuant to this section 2.10(c) upon the subsequent receipt of such
notice.
(d) Notwithstanding anything in this Agreement to the contrary, (i) no
Lender shall be entitled to compensation or payment or reimbursement of other
amounts under section 2.10, 3.5 or 5.4 for any amounts incurred or accruing more
than 180 days prior to the giving of notice to the Borrower of additional costs
or other amounts of the nature described in such sections, and (ii) no Lender
shall demand compensation for any reduction referred to in section 2.10(c) or
payment or reimbursement of other amounts under section 3.5 or 5.4 if it shall
not at the time be the general policy or practice of such Lender to demand such
compensation, payment or reimbursement in similar circumstances under comparable
provisions of other syndicated credit agreements.
2.11. BREAKAGE COMPENSATION. The Borrower shall compensate each
applicable Lender, upon its written request (which request shall set forth the
detailed basis for requesting and the method of calculating such compensation),
for all reasonable losses (including loss of profits), expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Lender to fund its Eurocurrency Loans or Money Market Rate Loans) which
such Lender may sustain: (i) if for any reason (other than a default by such
Lender or the Administrative Agent), (A) a Borrowing of Eurocurrency Loans by
the Borrower does not occur on a date specified therefor in a Notice of
Borrowing, Notice of Continuation, Notice of Conversion or Notice of
Redenomination (whether or not rescinded or withdrawn by or on behalf of the
Borrower or deemed rescinded or withdrawn pursuant to section 2.10(a)), or (B) a
Borrowing of Money Market Rate Loans by the Borrower does not occur on a date
specified therefor in a Notice of Borrowing; (ii) if any repayment, prepayment,
Continuation, Conversion or Redenomination of any of its Eurocurrency Loans
occurs on a date which is not the last day of an Interest Period applicable
thereto; (iii) if any repayment or prepayment of any of the Borrower's Money
Market Rate Loans occurs on a date which is not the maturity date thereof; (iv)
if any prepayment of any of its Eurocurrency Loans or Money Market Rate Loans,
as the case may be, is not made on any date specified in a notice of prepayment
given by the Borrower; (v) if such Lender transfers its Eurocurrency Loans
pursuant to a request by the Borrower under section 2.12(b) hereof; or (vi) as a
consequence of (x) any other default by the Borrower to repay its Eurocurrency
Loans or Money Market Rate Loans, as the case may be, when required by the terms
of this Agreement or (y) an election made pursuant to section 2.10(b).
2.12. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a) Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
section 2.10(a)(ii) or (iii), 2.10(c), 3.5 or 5.4 with respect to such Lender,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another Applicable
Lending Office for any Loans or Commitment affected by such event, PROVIDED that
such designation is made on such terms that such Lender and its Applicable
Lending Office suffer no material economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giving rise to the
operation of any such section. All terms of this Agreement shall apply to any
Applicable Lending Office and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of its Applicable Lending Office.
(b) If any Lender requests any compensation, reimbursement or other
payment under section 2.10(a)(ii) or (iii), 2.10(c) or 3.5 with respect to such
Lender, or if the Borrower is required to pay any additional amount to any
Lender or governmental authority pursuant to section 5.4, or if any Lender is a
Defaulting Lender, or if any Lender notifies the Administrative Agent that it is
exercising any right under this Agreement not to fund or maintain a Eurocurrency
Loan denominated in Dollars or in an Alternative Currency which the other
Lenders are willing or prepared to fund or maintain, THEN the Borrower may, at
its sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with the
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restrictions contained in section 12.4(c)), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); PROVIDED that (i) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld, (ii) such Lender shall have received payment of an amount
equal to the outstanding principal of its Loans, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts, including any breakage
compensation under section 2.11 hereof), and (iii) in the case of any such
assignment resulting from a claim for compensation, reimbursement or other
payments required to be made under section 2.10(a)(ii) or (iii), 2.10(c) or 3.5
with respect to such Lender, or resulting from any required payments to any
Lender or governmental authority pursuant to section 5.4, such assignment will
result in a reduction in such compensation, reimbursement or payments. A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to apply.
(c) Nothing in this section 2.12 shall affect or postpone any of the
obligations of any Borrower or the right of any Lender provided in section 2.10,
3.5 or 5.4.
2.13. EUROPEAN ECONOMIC AND MONETARY UNION. The applicable provisions
of the foregoing section 2 and the other provisions of this Agreement which
relate to Alternative Currencies are subject to the following provisions:
(a) DEFINITIONS. In this section 2.13 and in each other provision of
this Agreement to which reference is made expressly or impliedly, the following
terms have the meanings given to them in this section 2.13:
"COMMENCEMENT OF THE THIRD STAGE OF EMU" shall mean the date
of commencement of the third stage of EMU (at the date hereof expected
to be January 1, 1999) or the date on which circumstances arise which
(in the opinion of the Administrative Agent) have substantially the
same effect and result in substantially the same consequences as
commencement of the third stage of EMU as contemplated by the Treaty on
European Union.
"EMU" shall mean the economic and monetary union as
contemplated by the Treaty on European Union.
"EMU LEGISLATION" shall mean legislative measures of the
European Council for the introduction of, changeover to or operation of
a single or unified European currency (whether known as the euro or
otherwise), being in part the implementation of the third stage of EMU.
"EURO" shall mean the single currency of participating member
states of the European Union.
"EURO UNIT" shall mean the currency unit of one euro.
"NATIONAL CURRENCY UNIT" shall mean the unit of currency
(other than a euro unit) of a participating member state.
"PARTICIPATING MEMBER STATE" shall mean each state so
described in any EMU legislation.
"TREATY ON EUROPEAN UNION" shall mean the Treaty of Rome of
March 25, 1957, as amended by the Single European Act 1986 and the
Maastricht Treaty (which was signed in Maastricht on February 7, 1992,
and came into force on November 1, 1993), as amended from time to time.
(b) EFFECTIVENESS OF PROVISIONS. The provisions of paragraphs (c) to
(j) below (inclusive) shall be effective at and from the time commencement of
the third stage of EMU, PROVIDED, that, if and to the extent that any such
provision relates to any state (or currency of such state) that is not a
participating member state on the
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<PAGE> 38
commencement of the third stage of EMU, such provision shall become effective in
relation to such state (and the currency of such state) at and from the date on
which such state becomes a participating member state.
(c) REDENOMINATION AND ALTERNATIVE CURRENCIES. Each obligation under
this Agreement of a party to this Agreement which has been denominated in the
national currency unit or a participating member state shall be Redenominated
into the euro unit in accordance with the EMU legislation, PROVIDED, that if and
to the extent that any EMU legislation provides that following the commencement
of the third stage of EMU an amount denominated either in the euro or in the
national currency unit of a participating member state and payable within that
participating member state by crediting an account of the creditor can be paid
by the debtor either in the euro unit or in that national currency unit, each
party to this Agreement shall be entitled to pay or repay such amount either in
the euro unit or in such national currency unit.
(d) LOANS. Any Loan in the currency of a participating member state
shall be made in the euro unit, PROVIDED, that if and to the extent that any EMU
legislation provides that following the commencement of the third stage of EMU
an amount denominated either in the euro or in the national currency unit of a
participating member state and payable within that participating member state by
crediting an account of the creditor can be paid by the debtor either in the
euro unit or in that national currency unit, such Loan shall be made either in
the euro unit or in such national currency unit, as selected by the Borrower.
(e) BUSINESS DAYS. With respect to any amount denominated or to be
denominated in the euro or a national currency unit, any reference to a
"Business Day" shall be construed as a reference to a day (other than a Saturday
or a Sunday) on which banks are generally open for business in (i) Cleveland,
Ohio; and (ii) on which prime banks in the London, England interbank market will
provide quotations for deposits in the relevant currency.
(f) PAYMENTS TO THE ADMINISTRATIVE AGENT. Sections 5.3 and 5.4 shall be
construed so that, in relation to the payment of any amount of euro units or
national currency units, such amount shall be made available to the
Administrative Agent in immediately available, freely transferable, cleared
funds to the Payment Office, or such account with such bank in Frankfurt am
Main, Germany (or such principal financial center in such participating member
state or states as the Administrative Agent may from time to time nominate for
this purpose), as the Administrative Agent shall from time to time nominate for
this purpose.
(g) PAYMENTS MADE BY THE ADMINISTRATIVE AGENT TO THE LENDERS. Any
amount payable by the Administrative Agent to the Lenders under this Agreement
in the currency of a participating member state shall be paid in the euro unit.
(h) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY. With respect to the
payment of any amount denominated in the euro or in a national currency unit,
the Administrative Agent shall not be liable to the Borrower or any of the
Lenders in any way whatsoever for any delay, or the consequences of any delay,
in the crediting to any account of any amount required by this Agreement to be
paid by the Administrative Agent if the Administrative Agent shall have taken
all relevant steps to achieve, on the date required by this Agreement, the
payment of such amount in immediately available, freely transferable, cleared
funds (in the euro unit or, as the case may be, in a national currency unit) to
the account of the bank in the principal financial center in the participating
member state which the Borrower or, as the case may be, any Lender shall have
specified for such purpose. In this paragraph (h), "all relevant steps" means
all such steps as may be prescribed from time to time by the regulations or
operating procedures of such clearing or settlement system as the Administrative
Agent may from time to time determine for the purpose of clearing or settling
payments of the euro.
(i) BASIS OF ACCRUAL. If the basis of accrual of interest or Fees
expressed in this Agreement with respect to the currency of any state that
becomes a participating member state shall be inconsistent with any convention
or practice in the London Interbank Market or otherwise provided in this
Agreement for the basis of accrual of interest or fees in respect of the euro,
such convention or practice shall replace such expressed basis effective as of
and from the date on which such state becomes a participating member state;
PROVIDED, that if any Loan in the currency of such state is outstanding
immediately prior to such date, such replacement shall take effect, with respect
to such Loan, at the end of the then current Interest Period.
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(j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES. Without prejudice and in
addition to any method of conversion or rounding prescribed by EMU legislation
and without prejudice to the respective liabilities for indebtedness of the
Borrower to the Lenders and the Lenders to the Borrower under or pursuant to
this Agreement:
(i) each reference in this Agreement to a minimum amount (or
an integral multiple thereof) in a national currency unit to be paid to
or by the Administrative Agent shall be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Administrative Agent may from time to
time specify; and
(ii) except as expressly provided in this section 2.13, each
provision of this Agreement shall be subject to such reasonable changes
of construction as the Administrative Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of
or changeover to the euro in participating member states.
(k) INCREASED COSTS. If (i) any Lender shall incur any amount of any
cost or increased cost, or suffer any reduction in any amount payable to or in
the effective return on its capital to, such Lender or any holding company of
such Lender directly in connection with this Agreement, which such Lender
considers material, as a result of the introduction of, changeover to or
operation of the euro in any participating member state, other than any such
cost or reduction or amount foregone reflected in the Adjusted Eurocurrency
Rate, and (ii) at the time it shall be the general policy or practice of a
reasonable number of major financial institutions based in the United States to
provide under comparable provisions of other syndicated credit agreements for
the reimbursement, compensation or payment by other borrowers of such amounts in
similar circumstances, the Borrower will negotiate in good faith with the
Administrative Agent for an amendment to this Agreement providing for the
inclusion herein of provisions of the nature so included in such other
syndicated credit agreements.
SECTION 3. LETTERS OF CREDIT.
3.1. LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Closing Date and prior to the
date that is 15 Business Days prior to the Maturity Date to issue, for the
account of the Borrower or any of its Subsidiaries (the Borrower or any such
Subsidiary, a "LETTER OF CREDIT OBLIGOR"), and in support of industrial
development revenue bonds, pollution control bonds, worker compensation,
liability insurance, releases of contract retention obligations, contract
performance guarantee requirements and other bonding obligations of the Borrower
or any such other Letter of Credit Obligor incurred in the ordinary course of
its business, and such other standby obligations of the Borrower and the other
Letter of Credit Obligors that are acceptable to the Letter of Credit Issuer,
and subject to and upon the terms and conditions herein set forth, such Letter
of Credit Issuer agrees to issue from time to time, irrevocable standby letters
of credit denominated and payable in Dollars or an Alternative Currency in such
form as may be approved by such Letter of Credit Issuer and the Administrative
Agent (each such letter of credit (and each Existing Letter of Credit described
in section 3.1(d)), a "LETTER OF CREDIT" and collectively, the "LETTERS OF
CREDIT").
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings at such time, would exceed either (x) $25,000,000 or (y) when added
to the aggregate principal amount of all General Revolving Loans and Swing Line
Revolving Loans then outstanding, an amount equal to the Total General Revolving
Commitment at such time; and (ii) each Letter of Credit shall have an expiry
date (including any renewal periods) occurring not later than 15 Business Days
prior to the Maturity Date, in each case on terms acceptable to the
Administrative Agent and the relevant Letter of Credit Issuer.
(c) Notwithstanding the foregoing, in the event a Lender Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless either (i) such Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Lender or Lenders, including by cash collateralizing such
Defaulting Lender's or Lenders' General Revolving Facility Percentage of the
Letter of Credit Outstandings; or (ii) the issuance of such
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Letter of Credit, taking into account the potential failure of the Defaulting
Lender or Lenders to risk participate therein, will not cause the Letter of
Credit Issuer to incur aggregate credit exposure hereunder with respect to
General Revolving Loans and Letter of Credit Outstandings in excess of its
General Revolving Commitment, and the Borrower has undertaken, for the benefit
of such Letter of Credit Issuer, pursuant to an instrument satisfactory in form
and substance to such Letter of Credit Issuer, not to thereafter incur Loans or
Letter of Credit Outstandings hereunder which would cause the Letter of Credit
Issuer to incur aggregate credit exposure hereunder with respect to General
Revolving Loans and Letter of Credit Outstandings in excess of its General
Revolving Commitment.
(d) Annex VII hereto contains a description of all letters of credit
outstanding on, and to continue in effect after, the Effective Date. Each such
letter of credit issued by a bank that is or becomes a Lender under this
Agreement on the Effective Date (each, an "EXISTING LETTER OF CREDIT") shall
constitute a "Letter of Credit" for all purposes of this Agreement, issued, for
purposes of section 3.4(a), on the Effective Date, and the Borrower, the
Administrative Agent and the applicable Lenders hereby agree that, from and
after such date, the terms of this Agreement shall apply to such Letters of
Credit, superseding any other agreement theretofore applicable to them to the
extent inconsistent with the terms hereof.
(e) Without limitation of section 3.1(d):
(i) The Existing Letters of Credit include four letters of
credit (the "BOND LETTERS OF CREDIT", and individually a "BOND LETTER
OF CREDIT") issued by Dresdner Bank AG, New York Branch (in such
capacity, the "BOND LETTER OF CREDIT ISSUER"), in the aggregate face
amount of $15,912,603 to support payments on certain IDB Debt, as more
fully identified on Annex VII hereto.
(ii) Each Lender agrees to risk participate in such
outstanding Bond Letters of Credit as provided herein. Except to the
extent relating to fees and inconsistent with the terms hereof (in
which case the inconsistent terms herein shall govern), the provisions
of the four Reimbursement Agreements applicable to such Bond Letters of
Credit, as identified in Annex VII hereto, shall continue to govern
such Bond Letters of Credit.
(iii) Notwithstanding anything to the contrary in any such
Reimbursement Agreement, the fees payable in connection with each Bond
Letter of Credit to be shared with the Lenders shall accrue from the
Effective Date at the rate provided in section 4.1(b).
3.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative Agent and the Letter of Credit Issuer written or telephonic
notice (in the case of telephonic notice, promptly confirmed in writing if so
requested by the Administrative Agent) which, if in the form of written notice
shall be substantially in the form of Exhibit B-3, or transmit by electronic
communication (if arrangements for doing so have been approved by the Letter of
Credit Issuer), prior to 12:00 noon (local time at its Notice Office) at least
three Business Days (or such shorter period as may be acceptable to the relevant
Letter of Credit Issuer) prior to the proposed date of issuance (which shall be
a Business Day) (each a "LETTER OF CREDIT REQUEST"), which Letter of Credit
Request shall include such supporting documents that such Letter of Credit
Issuer customarily requires in connection therewith (including, in the case of a
Letter of Credit for an account party other than the Borrower, an application
for, and if applicable a reimbursement agreement with respect to, such Letter of
Credit). Any such documents executed in connection with the issuance of a Letter
of Credit, including the Letter of Credit itself, are herein referred to as
"LETTER OF CREDIT DOCUMENTS". In the event of any inconsistency between any of
the terms or provisions of any Letter of Credit Document and the terms and
provisions of this Agreement respecting Letters of Credit, the terms and
provisions of this Agreement shall control. The Administrative Agent shall
promptly notify each Lender of each Letter of Credit Request.
(b) Each Letter of Credit Issuer shall, on the date of each issuance of
a Letter of Credit by it, give the Administrative Agent, each applicable Lender
and the Borrower written notice of the issuance of such Letter of Credit,
accompanied by a copy to the Administrative Agent of the Letter of Credit or
Letters of Credit issued by it. Each Letter of Credit Issuer shall provide to
the Administrative Agent a quarterly (or monthly if requested by any applicable
Lender) summary describing each Letter of Credit issued by such Letter of Credit
Issuer and then
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outstanding and an identification for the relevant period of the daily aggregate
Letter of Credit Outstandings represented by Letters of Credit issued by such
Letter of Credit Issuer.
3.3. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse (or cause any Letter of Credit Obligor for whose
account a Letter of Credit was issued to reimburse) each Letter of Credit
Issuer, by making payment directly to such Letter of Credit Issuer in
immediately available funds at the payment office of such Letter of Credit
Issuer, for any payment or disbursement made by such Letter of Credit Issuer
under any Letter of Credit (each such amount so paid or disbursed until
reimbursed, an "UNPAID DRAWING") immediately after, and in any event on the date
on which, such Letter of Credit Issuer notifies the Borrower (or any such other
Letter of Credit Obligor for whose account such Letter of Credit was issued) of
such payment or disbursement (which notice to the Borrower (or such other Letter
of Credit Obligor) shall be delivered reasonably promptly after any such payment
or disbursement), such payment to be made in Dollars (and in the amount which is
the Dollar equivalent of any such payment or disbursement made or denominated in
an Alternative Currency), with interest on the amount so paid or disbursed by
such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M.
(local time at the payment office of the Letter of Credit Issuer) on the date of
such payment or disbursement, from and including the date paid or disbursed to
but not including the date such Letter of Credit Issuer is reimbursed therefor
at a rate per annum which shall be the rate then applicable to General Revolving
Loans which are Prime Rate Loans plus an additional 2% per annum, any such
interest also to be payable on demand.
(b) The Borrower's obligation under this section 3.3 to reimburse, or
cause another Letter of Credit Obligor to reimburse, each Letter of Credit
Issuer with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower or any other Letter of Credit Obligor may have or have had against such
Letter of Credit Issuer, the Administrative Agent, any other Letter of Credit
Issuer or any Lender, including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit to conform to the terms of the
Letter of Credit or any non-application or misapplication by the beneficiary of
the proceeds of such drawing, PROVIDED, HOWEVER that the Borrower shall not be
obligated to reimburse, or cause another Letter of Credit Obligor to reimburse,
a Letter of Credit Issuer for any wrongful payment made by such Letter of Credit
Issuer under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of such Letter of Credit
Issuer.
3.4. LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the issuance
by a Letter of Credit Issuer of any Letter of Credit (and on the Closing Date
with respect to any Existing Letter of Credit), such Letter of Credit Issuer
shall be deemed to have sold and transferred to each Lender with a Commitment
under the General Revolving Facility, and each such Lender (each a
"PARTICIPANT") shall be deemed irrevocably and unconditionally to have purchased
and received from such Letter of Credit Issuer, without recourse or warranty, an
undivided interest and participation, to the extent of such Lender's General
Revolving Facility Percentage, in such Letter of Credit, each substitute letter
of credit, each drawing made thereunder, the obligations of the Borrower under
this Agreement with respect thereto (although Letter of Credit Fees shall be
payable directly to the Administrative Agent for the account of the Lenders as
provided in section 4.1(b) and the Participants shall have no right to receive
any portion of any fees of the nature contemplated by section 4.1(c)), the
obligations of any Letter of Credit Obligor under any Letter of Credit Documents
pertaining thereto, and any security for, or guaranty pertaining to, any of the
foregoing. Upon any change in the General Revolving Commitments of the Lenders
pursuant to section 12.4(c), it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this section 3.4 to reflect the new
General Revolving Facility Percentages of the assigning and assignee Lender.
(b) In determining whether to pay under any Letter of Credit, a Letter
of Credit Issuer shall not have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by a Letter of Credit Issuer under or in connection with any Letter
of Credit if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Letter of Credit Issuer any resulting
liability.
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(c) In the event that a Letter of Credit Issuer makes any payment under
any Letter of Credit and the Borrower shall not have reimbursed (or caused any
applicable Letter of Credit Obligor to reimburse) such amount in full to such
Letter of Credit Issuer pursuant to section 3.3(a), such Letter of Credit Issuer
shall promptly notify the Administrative Agent, and the Administrative Agent
shall promptly notify each Participant of such failure, and each Participant
shall promptly and unconditionally pay to the Administrative Agent for the
account of such Letter of Credit Issuer, the amount of such Participant's
General Revolving Facility Percentage of such payment in U.S. Dollars (the
Administrative Agent having determined in the case of any payment by a Letter of
Credit Issuer made in an Alternative Currency the equivalent thereof in Dollars)
and in same day funds, PROVIDED, HOWEVER, that no Participant shall be obligated
to pay to the Administrative Agent its General Revolving Facility Percentage of
such unreimbursed amount for any wrongful payment made by such Letter of Credit
Issuer under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of such Letter of Credit
Issuer. If the Administrative Agent so notifies any Participant required to fund
a payment under a Letter of Credit prior to 11:00 A.M. (local time at its Notice
Office) on any Business Day, such Participant shall make available to the
Administrative Agent for the account of the relevant Letter of Credit Issuer
such Participant's General Revolving Facility Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its General Revolving Facility Percentage of
the amount of such payment available to the Administrative Agent for the account
of the relevant Letter of Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of such Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of such Letter of Credit Issuer at the Federal Funds Effective Rate. The
failure of any Participant to make available to the Administrative Agent for the
account of the relevant Letter of Credit Issuer its General Revolving Facility
Percentage of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Administrative
Agent for the account of such Letter of Credit Issuer its General Revolving
Facility Percentage of any payment under any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Administrative Agent
for the account of such Letter of Credit Issuer such other Participant's General
Revolving Facility Percentage of any such payment.
(d) Whenever a Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of such Letter of Credit Issuer any payments from the Participants
pursuant to section 3.4(c) above, such Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its General Revolving Facility Percentage thereof, in
U.S. dollars and in same day funds, an amount equal to such Participant's
General Revolving Facility Percentage of the principal amount thereof and
interest thereon accruing after the purchase of the respective participations,
as and to the extent so received.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of each Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off defense or other
right which the Borrower (or any other Letter of Credit Obligor) may
have at any time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any person for whom any such
transferee may be acting), the Administrative Agent, any Letter of
Credit Issuer, any Lender, or other person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transaction between the Borrower (or any other Letter of Credit
Obligor) and the beneficiary named in any such Letter of Credit), other
than any claim which the Borrower (or any other Letter of Credit
Obligor which is the account party with respect to a Letter of Credit)
may have against any
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applicable Letter of Credit Issuer for gross negligence or wilful
misconduct of such Letter of Credit Issuer in making payment under any
applicable Letter of Credit;
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents: or
(v) the occurrence of any Default or Event of Default.
(f) To the extent the Letter of Credit Issuer is not indemnified by the
Borrower, the Participants will reimburse and indemnify the Letter of Credit
Issuer, in proportion to their respective General Revolving Facility
Percentages, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Letter of Credit Issuer in performing its respective duties in
any way related to or arising out of its issuance of Letters of Credit, PROVIDED
that no Participants shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements resulting from the Letter of Credit Issuer's gross
negligence or willful misconduct.
3.5. INCREASED COSTS. If after the Effective Date, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Letter of Credit Issuer or any Lender with any
request or directive (whether or not having the force of law) by any such
authority, central bank or comparable agency (in each case made subsequent to
the Effective Date) shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by such Letter of Credit Issuer or such Lender's participation
therein, or (ii) shall impose on such Letter of Credit Issuer or any Lender any
other conditions affecting this Agreement, any Letter of Credit or such Lender's
participation therein; and the result of any of the foregoing is to increase the
cost to such Letter of Credit Issuer or such Lender of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by such Letter of Credit Issuer or such Lender hereunder
(other than any increased cost or reduction in the amount received or receivable
resulting from the imposition of or a change in the rate of taxes or similar
charges), then, upon demand to the Borrower by such Letter of Credit Issuer or
such Lender (a copy of which notice shall be sent by such Letter of Credit
Issuer or such Lender to the Administrative Agent), the Borrower shall pay to
such Letter of Credit Issuer or such Lender such additional amount or amounts as
will compensate any such Letter of Credit Issuer or such Lender for such
increased cost or reduction. A certificate submitted to the Borrower by any
Letter of Credit Issuer or any Lender, as the case may be (a copy of which
certificate shall be sent by such Letter of Credit Issuer or such Lender to the
Administrative Agent), setting forth, in reasonable detail, the basis for the
determination of such additional amount or amounts necessary to compensate any
Letter of Credit Issuer or such Lender as aforesaid shall be conclusive and
binding on the Borrower absent manifest error, although the failure to deliver
any such certificate shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this section 3.5. Reference is
hereby made to the provisions of section 2.10(d) for certain limitations upon
the rights of a Letter of Credit Issuer or Lender under this section.
3.6. GUARANTY OF LETTER OF CREDIT OBLIGATIONS OF OTHER LETTER OF CREDIT
OBLIGORS. (a) The Borrower hereby unconditionally guarantees, for the benefit of
the Administrative Agent and the Lenders, the full and punctual payment of the
Obligations of each other Letter of Credit Obligor under each Letter of Credit
Document to which such other Letter of Credit Obligor is now or hereafter
becomes a party. Upon failure by any such other Letter of Credit Obligor to pay
punctually any such amount, the Borrower shall forthwith on demand by the
Administrative Agent pay the amount not so paid at the place and in the currency
and otherwise in the manner specified in this Agreement or any applicable Letter
of Credit Document.
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(b) As a separate, additional and continuing obligation, the Borrower
unconditionally and irrevocably undertakes and agrees, for the benefit of the
Administrative Agent and the Lenders, that, should any amounts not be
recoverable from the Borrower under section 3.6(a) for any reason whatsoever
(including, without limitation, by reason of any provision of any Credit
Document or any other agreement or instrument executed in connection therewith
being or becoming void, unenforceable, or otherwise invalid under any applicable
law) then, notwithstanding any notice or knowledge thereof by any Lender, the
Administrative Agent, any of their respective Affiliates, or any other person,
at any time, the Borrower as sole, original and independent obligor, upon demand
by the Administrative Agent, will make payment to the Administrative Agent, for
the account of the Lenders and the Administrative Agent, of all such obligations
not so recoverable by way of full indemnity, in such currency and otherwise in
such manner as is provided in the Credit Documents.
(c) The obligations of the Borrower under this section shall be
unconditional and absolute and, without limiting the generality of the foregoing
shall not be released, discharged or otherwise affected by the occurrence, one
or more times, of any of the following:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect to any obligation of any other Letter of Credit
Obligor under any Letter of Credit Document, by operation of law or
otherwise;
(ii) any modification or amendment of or supplement to this
Agreement, any Note or any other Credit Document;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for any obligation of the Borrower under this
Agreement, any Note or any other Credit Document or of any other Letter
of Credit Obligor under any Letter of Credit Document;
(iv) any change in the corporate existence, structure or
ownership of any other Letter of Credit Obligor or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any
other Letter of Credit Obligor or its assets or any resulting release
or discharge of any obligation of any other Letter of Credit Obligor
contained in any Letter of Credit Document;
(v) the existence of any claim, set-off or other rights which
the Borrower may have at any time against any other Letter of Credit
Obligor, the Administrative Agent, any Lender or any other person,
whether in connection herewith or any unrelated transactions;
(vi) any invalidity or unenforceability relating to or against
any other Letter of Credit Obligor for any reason of any Letter of
Credit Document, or any provision of applicable law or regulation
purporting to prohibit the payment by any other Letter of Credit
Obligor of any Obligations in respect of any Letter of Credit; or
(vii) any other act or omission to act or delay of any kind by
any other Letter of Credit Obligor, the Administrative Agent, any
Lender or any other person or any other circumstance whatsoever which
might, but for the provisions of this section, constitute a legal or
equitable discharge of the Borrower's obligations under this section.
(d) The Borrower's obligations under this section shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Borrower under
the Credit Documents and by any other Letter of Credit Obligor under the Letter
of Credit Documents shall have been paid in full. If at any time any payment of
any of the Obligations of any other Letter of Credit Obligor in respect of any
Letter of Credit Documents is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of such other Letter
of Credit Obligor, the Borrower's obligations under this section with respect to
such payment shall be reinstated at such time as though such payment had been
due but not made at such time.
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(e) The Borrower irrevocably waives acceptance hereof, presentment,
demand, protest and any notice not provided for herein, as well as any
requirement that at any time any action be taken by any person against any other
Letter of Credit Obligor or any other person, or against any collateral or
guaranty of any other person.
(f) Until the indefeasible payment in full of all of the Obligations
and the termination of the Commitments of the Lenders hereunder, the Borrower
shall have no rights, by operation of law or otherwise, upon making any payment
under this section to be subrogated to the rights of the payee against any other
Letter of Credit Obligor with respect to such payment or otherwise to be
reimbursed, indemnified or exonerated by any other Letter of Credit Obligor in
respect thereof.
(g) In the event that acceleration of the time for payment of any
amount payable by any other Letter of Credit Obligor under any Letter of Credit
Document is stayed upon insolvency, bankruptcy or reorganization of such other
Letter of Credit Obligor, all such amounts otherwise subject to acceleration
under the terms of any applicable Letter of Credit Document shall nonetheless be
payable by the Borrower under this section forthwith on demand by the
Administrative Agent.
SECTION 4. FEES; COMMITMENTS.
4.1. FEES. (a) FACILITY FEE. (i) The Borrower agrees to pay to the
Administrative Agent a Facility Fee ("FACILITY FEE") for the account of each
Non-Defaulting Lender which has a General Revolving Commitment for the period
from and including the Effective Date to but not including the date the Total
General Revolving Commitment has been terminated, which, for any such Lender,
shall be computed on the daily amount of the General Revolving Commitment of
such Lender, whether used or unused, at the Applicable Facility Fee Rate,
payable quarterly in arrears on the last Business Day of each March, June,
September and December and on the Maturity Date, commencing with the last
Business Day of December 1998 for the period from the Effective Date to such
date.
(ii) As used herein, the term "APPLICABLE FACILITY FEE RATE" means the
particular rate per annum determined by the Administrative Agent in accordance
with the Pricing Grid Table which appears in section 2.8(h), based on the
Borrower's ratio of Consolidated Total Debt to Consolidated EBITDA and such
Pricing Grid Table, and the following provisions:
(A) Initially, until changed hereunder in accordance with the
following provisions, the Applicable Facility Fee Rate will be 40 basis
points per annum.
(B) Commencing with the fiscal quarter of the Borrower ended
on or nearest to March 31, 1999, and continuing with each fiscal
quarter thereafter, the Administrative Agent will determine the
Applicable Facility Fee Rate in accordance with the Pricing Grid Table,
based on the Borrower's ratio of (x) Consolidated Total Debt as of the
end of the fiscal quarter, to (y) Consolidated EBITDA for the Testing
Period ended on the last day of the fiscal quarter, and identified in
such Table. Changes in the Applicable Facility Fee Rate based upon
changes in such ratio shall become effective on the first day of the
month following the receipt by the Administrative Agent pursuant to
section 8.1(a) or (b) of the financial statements of the Borrower,
accompanied by the certificate and calculations referred to in section
8.1(c), demonstrating the computation of such ratio, based upon the
ratio in effect at the end of the applicable period covered (in whole
or in part) by such financial statements.
(C) Notwithstanding the above provisions, during any period
when (1) the Borrower has failed to timely deliver its consolidated
financial statements referred to in section 8.1(a) or (b), accompanied
by the certificate and calculations referred to in section 8.1(c), (2)
a Default under section 10.1(a) has occurred and is continuing, or (3)
an Event of Default has occurred and is continuing, the Applicable
Facility Fee Rate shall be the highest rate per annum indicated
therefor in the Pricing Grid Table, regardless of the Borrower's ratio
of Consolidated Total Debt to Consolidated EBITDA at such time.
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(D) Any changes in the Applicable Facility Fee Rate shall be
determined by the Administrative Agent in accordance with the above
provisions and the Administrative Agent will promptly provide notice of
such determinations to the Borrower and the Lenders. Any such
determination by the Administrative Agent pursuant to this section
4.1(a) shall be conclusive and binding absent manifest error.
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay to the
Administrative Agent, for the account of each Non-Defaulting Lender which has a
General Revolving Commitment, PRO RATA on the basis of its General Revolving
Facility Percentage, a fee in respect of each Letter of Credit (the "LETTER OF
CREDIT FEE"), computed for each day at the rate per annum equal to the
Applicable Eurocurrency Margin then in effect, on the Stated Amount of all
Letters of Credit outstanding on such day. Accrued Letter of Credit Fees shall
be payable on the last Business Day of each March, June, September and December
and on the date on which the Total General Revolving Commitment is terminated.
Notwithstanding the above provisions, if a Default under section 10.1(a) or
Event of Default is in existence, the Borrower will pay to the Administrative
Agent, on demand, for the account of each Non- Defaulting Lender which has a
General Revolving Commitment, PRO RATA on the basis of its General Revolving
Facility Percentage, an additional Letter of Credit Fee for each outstanding
Letter of Credit, computed at 2% per annum above the then prevailing rate for
the Letter of Credit Fee on the Stated Amount of such outstanding Letter of
Credit for the period such Default or Event of Default is in existence.
(c) FACING FEE. The Borrower agrees to pay directly to each Letter of
Credit Issuer, for its own account, a fee in respect of all Letters of Credit
issued by it (a "FACING FEE"), at such rate and computed and payable on such
basis as may from time to time be agreed in writing between the Borrower and
such Letter of Credit Issuer.
(d) ADDITIONAL CHARGES OF LETTER OF CREDIT ISSUER. The Borrower agrees
to pay directly to each Letter of Credit Issuer upon each issuance of, drawing
under, and/or amendment, extension, renewal or transfer of, a Letter of Credit
issued by it such amount as shall at the time of such issuance, drawing,
amendment, extension, renewal or transfer be the administrative or processing
charge which such Letter of Credit Issuer is customarily charging for issuances
of, drawings under or amendments, extensions, renewals or transfers of, letters
of credit issued by it.
(e) OTHER FEES. The Borrower shall pay to the Administrative Agent on
the Effective Date and thereafter for its own account and/or for distribution to
the Lenders such fees as heretofore agreed by the Borrower and the
Administrative Agent.
(f) COMPUTATIONS OF FEES. All computations of Fees shall be made in
accordance with section 12.7(b).
4.2. VOLUNTARY TERMINATION/REDUCTION OF COMMITMENTS. Upon at least
three Business Days' prior written notice (or telephonic notice confirmed in
writing) to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the affected Lenders),
the Borrower shall have the right, without premium or penalty, to:
(a) terminate the Total Commitment, PROVIDED that (i) all
outstanding Loans are contemporaneously prepaid in accordance with
section 5.1, and (ii) either (A) no Letters of Credit remain
outstanding, or (B) the Borrower shall contemporaneously either (x)
cause all outstanding Letters of Credit to be surrendered for
cancellation, or (y) if all of the Lenders with General Revolving
Commitments are, in their discretion, willing to permit Letters of
Credit to remain outstanding if supported by letters of credit issued
by other financial institutions, cause one or more financial
institutions, acceptable to the Required Lenders, to issue letters of
credit, satisfactory to the Administrative Agent, in favor of the
Administrative Agent, supporting the Letters of Credit remaining
outstanding hereunder, or (z) the Borrower shall pay to the
Administrative Agent an amount in cash and/or Cash Equivalents equal to
100% of the Letter of Credit Outstandings and the Administrative Agent
shall hold such payment as security for the reimbursement obligations
of the Borrower hereunder in respect of Letters of Credit pursuant to a
cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent, each Letter of
Credit Issuer and the Borrower (which shall permit certain investments
in Cash Equivalents satisfactory
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to the Administrative Agent, each Letter of Credit Issuer and the
Borrower until the proceeds are applied to the secured obligations);
(b) terminate the Swing Line Revolving Commitment, PROVIDED
that all outstanding Swing Line Revolving Loans are contemporaneously
prepaid in accordance with section 5.1;
(c) partially and permanently reduce the Unutilized Total
General Revolving Commitment, PROVIDED that (i) any such reduction
shall apply to proportionately and permanently reduce the General
Revolving Commitment of each of the Lenders; (ii) any partial reduction
of the Unutilized Total General Revolving Commitment pursuant to this
section 4.2(c) shall be in the amount of at least $5,000,000 (or, if
greater, in integral multiples of $1,000,000); and (iii) after giving
effect to any such partial reduction of the Unutilized Total General
Revolving Commitment, the Total General Revolving Commitment then in
effect shall exceed the Swing Line Revolving Commitment then in effect
by at least $10,000,000; and/or
(d) partially and permanently reduce the Unutilized Swing Line
Revolving Commitment, PROVIDED that any partial reduction of the
Unutilized Swing Line Revolving Commitment pursuant to this section
4.2(d) shall be in the amount of at least $1,000,000 (or, if greater,
in integral multiples of $1,000,000).
4.3. MANDATORY TERMINATION OF COMMITMENTS, ETC. (a) The Total
Commitment (and the Commitment of each Lender) shall terminate on the one month
anniversary of the date hereof, unless the Closing Date has occurred on or prior
to such date.
(b) The Total Commitment shall terminate (and the Commitment of each
Lender shall terminate) on the date on which a Change of Control occurs.
4.4. EXTENSION OF MATURITY DATE. At any time after January 1, 2000, and
during the 30 day period following delivery by the Borrower pursuant to section
8.1(a) of its consolidated financial statements for its fiscal year most
recently ended, and annually thereafter during the 30 day period following
delivery by the Borrower of its consolidated financial statements pursuant to
section 8.1(a), the Borrower may request the Administrative Agent to determine
if all of the Lenders are then willing to extend the Maturity Date for a single
additional year. If the Borrower so requests, the Administrative Agent will so
advise such Lenders. If all of such Lenders in their sole discretion are all
willing to so extend the Maturity Date, after taking into account such
considerations as any such Lender may deem relevant, the Borrower, the
Administrative Agent and all of such Lenders shall execute and deliver a
definitive written instrument so extending the Maturity Date. No such extension
of the Maturity Date shall be valid or effective for any purpose unless such
definitive written instrument is so signed and delivered within 60 days
following the giving by the Administrative Agent of notice to the Lenders that
the Borrower has requested such an extension.
SECTION 5. PAYMENTS.
5.1. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay
any of its Loans, in whole or in part, without premium or penalty, from time to
time on the following terms and conditions:
(a) the Borrower shall give the Administrative Agent at the
Notice Office written or telephonic notice (in the case of telephonic
notice, promptly confirmed in writing if so requested by the
Administrative Agent) of its intent to prepay the Loans, the amount of
such prepayment and (in the case of Eurocurrency Loans) the specific
Borrowing(s) pursuant to which made, which notice shall be received by
the Administrative Agent by
(x) 1:00 P.M. (local time at the Notice Office) three
Business Days prior to the date of such prepayment, in the
case of any prepayment of Eurocurrency Loans, or
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(y) 1:00 P.M. (local time at the Notice Office) on
the date of such prepayment, in the case of any prepayment of
Prime Rate Loans or Money Market Rate Loans,
and which notice shall promptly be transmitted by the Administrative
Agent to each of the affected Lenders;
(b) in the case of prepayment of any Borrowings under the
General Revolving Facility, each partial prepayment of any such
Borrowing shall be in an aggregate principal of at least:
(i) $1,000,000 or an integral multiple of $100,000 in
excess thereof, in the case of Prime Rate Loans,
(ii) $5,000,000 or an integral multiple of $500,000
in excess thereof, in the case of Eurocurrency Loans
denominated in Dollars, and
(iii) the substantial equivalent of $5,000,000 or an
integral multiple of the substantial equivalent of $500,000 in
excess thereof, in the case of Eurocurrency Loans denominated
in an Alternative Currency;
(c) in the case of prepayment of any Borrowings under the
Swing Line Revolving Facility, each partial prepayment of any such
Borrowing shall be in an aggregate principal of at least $100,000 or an
integral multiple of $50,000 in excess thereof;
(d) no partial prepayment of any Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of such Loans
outstanding pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount applicable thereto;
(e) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied PRO RATA among such Loans; and
(f) each prepayment of Eurocurrency Loans or Money Market Rate
Loans pursuant to this section 5.1 on any date other than the last day
of the Interest Period applicable thereto, in the case of Eurocurrency
Loans, or the maturity date thereof, in the case of Money Market Rate
Loans, shall be accompanied by any amounts payable in respect thereof
under section 2.11.
5.2. MANDATORY PREPAYMENTS. The Loans shall be subject to mandatory
prepayment in accordance with the following provisions:
(a) IF OUTSTANDING GENERAL REVOLVING LOANS AND LETTER OF
CREDIT OUTSTANDINGS EXCEED TOTAL GENERAL REVOLVING COMMITMENT. If on
any date (after giving effect to any other payments on such date) the
sum of (i) the aggregate outstanding principal amount of General
Revolving Loans PLUS (ii) the aggregate amount of Letter of Credit
Outstandings, exceeds the Total General Revolving Commitment as then in
effect, the Borrower shall prepay on such date that principal amount of
General Revolving Loans and, after General Revolving Loans have been
paid in full, Unpaid Drawings, in an aggregate amount at least equal to
such excess and conforming in the case of partial prepayments of
General Revolving Loans to the requirements as to the amounts of
partial prepayments of General Revolving Loans which are contained in
section 5.1. If, after giving effect to the prepayment of General
Revolving Loans and Unpaid Drawings, the aggregate amount of Letter of
Credit Outstandings exceeds the Total General Revolving Commitment as
then in effect, the Borrower shall pay to the Administrative Agent an
amount in cash and/or Cash Equivalents equal to such excess and the
Administrative Agent shall hold such payment as security for the
reimbursement obligations of the Borrower hereunder in respect of
Letters of Credit pursuant to a cash collateral agreement to be entered
into in form and substance reasonably satisfactory to the
Administrative Agent, each Letter of Credit Issuer and the Borrower
(which shall permit certain investments in Cash Equivalents
satisfactory to the Administrative Agent, each Letter of Credit Issuer
and the Borrower until the proceeds are applied to the secured
obligations).
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(b) IF OUTSTANDING SWING LINE REVOLVING LOANS EXCEED
UNUTILIZED TOTAL GENERAL REVOLVING COMMITMENT. If on any date (after
giving effect to any other payments on such date) the aggregate
outstanding principal amount of Swing Line Revolving Loans exceeds the
Unutilized Total General Revolving Commitment as then in effect, the
Borrower shall prepay on such date Swing Line Revolving Loans in an
aggregate amount at least equal to such excess and conforming in the
case of partial prepayments of Swing Line Revolving Loans to the
requirements as to the amounts of partial prepayments of Swing Line
Revolving Loans which are contained in section 5.1.
(c) IF OUTSTANDING SWING LINE REVOLVING LOANS EXCEED SWING
LINE REVOLVING COMMITMENT. If on any date (after giving effect to any
other payments on such date) the aggregate outstanding principal amount
of Swing Line Revolving Loans exceeds the Swing Line Revolving
Commitment at such time, the Borrower shall prepay on such date Swing
Line Revolving Loans in an aggregate amount at least equal to such
excess and conforming in the case of partial prepayments of Swing Line
Revolving Loans to the requirements as to the amounts of partial
prepayments of Swing Line Revolving Loans which are contained in
section 5.1.
(d) IF OUTSTANDING GENERAL REVOLVING LOANS DENOMINATED IN
ALTERNATIVE CURRENCIES EXCEED ALTERNATIVE CURRENCY SUBLIMIT. If on any
date (after giving effect to any other payments on such date) the U.S.
Dollar equivalent of the aggregate outstanding principal amount of
General Revolving Loans denominated in Alternative Currencies exceeds
the Alternative Currency Sublimit, the Borrower shall prepay on such
date General Revolving Loans denominated in Alternative Currencies in
an aggregate amount at least equal to such excess and conforming in the
case of partial prepayments of General Revolving Loans to the
requirements as to the amounts of partial prepayments of General
Revolving Loans which are contained in section 5.1.
(e) CERTAIN PROCEEDS OF AN EVENT OF LOSS. If during any fiscal
year of the Borrower, the Borrower and its Subsidiaries have received
cumulative Cash Proceeds during such fiscal year from one or more
Events of Loss involving any of the Collateral of at least $5,000,000,
not later than the third Business Day following the date of receipt of
any Cash Proceeds in excess of such amount, an amount, conforming to
the requirements as to the amount of partial prepayments contained in
section 5.1, at least equal to 100% of the Net Cash Proceeds then
received in excess of such amount from any Event of Loss, shall be
applied as a mandatory prepayment of principal of the outstanding
General Revolving Loans.
(f) CHANGE OF CONTROL. On the date of which a Change of
Control occurs, notwithstanding anything to the contrary contained in
this Agreement, no further Borrowings shall be made and the then
outstanding principal amount of all Loans, if any, shall become due and
payable and shall be prepaid in full, and the Borrower shall
contemporaneously either (i) cause all outstanding Letters of Credit to
be surrendered for cancellation, or (ii) if all of the Lenders with
General Revolving Commitments are, in their discretion, willing to
permit Letters of Credit to remain outstanding if supported by letters
of credit issued by other financial institutions, cause one or more
financial institutions, acceptable to the Required Lenders, to issue
letters of credit, satisfactory to the Administrative Agent, in favor
of the Administrative Agent, supporting the Letters of Credit remaining
outstanding hereunder, or (iii) the Borrower shall pay to the
Administrative Agent an amount in cash and/or Cash Equivalents equal to
100% of the Letter of Credit Outstandings and the Administrative Agent
shall hold such payment as security for the reimbursement obligations
of the Borrower hereunder in respect of Letters of Credit pursuant to a
cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent, each Letter of
Credit Issuer and the Borrower (which shall permit certain investments
in Cash Equivalents satisfactory to the Administrative Agent, each
Letter of Credit Issuer and the Borrower until the proceeds are applied
to the secured obligations).
(g) PARTICULAR LOANS TO BE PREPAID. With respect to each
repayment or prepayment of Loans required by this section 5.2, the
Borrower shall designate the Types of Loans which are to be prepaid and
the specific Borrowing(s) pursuant to which such repayment or
prepayment is to be made, PROVIDED that (i) the Borrower shall first so
designate all Loans that are Prime Rate Loans and Eurocurrency Loans
with
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Interest Periods ending on the date of repayment or prepayment prior to
designating any other Eurocurrency Loans for repayment or prepayment,
(ii) if the outstanding principal amount of Eurocurrency Loans made
pursuant to a Borrowing is reduced below the applicable Minimum
Borrowing Amount as a result of any such repayment or prepayment, then
all the Loans outstanding pursuant to such Borrowing shall be Converted
into Prime Rate Loans, and (iii) each repayment and prepayment of any
Loans made pursuant to a Borrowing shall be applied PRO RATA among such
Loans. In the absence of a designation by the Borrower as described in
the preceding sentence, the Administrative Agent shall, subject to the
above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under section 2.11. Any
repayment or prepayment of Eurocurrency Loans or Money Market Rate
Loans pursuant to this section 5.2 shall in all events be accompanied
by such compensation as is required by section 2.11.
5.3. METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the
Administrative Agent for the ratable (based on its PRO RATA share) account of
the Lenders entitled thereto, not later than 1:00 P.M. (local time at the
Payment Office) on the date when due and shall be made at the Payment Office in
immediately available funds and (i) in the case of payments of principal or
interest relating to General Revolving Loans denominated in an Alternative
Currency, in that Alternative Currency, and (ii) in all other cases, in lawful
money of the United States of America, it being understood that written notice
by the Borrower to the Administrative Agent to make a payment from the funds in
the Borrower's account at the Payment Office shall constitute the making of such
payment to the extent of such funds held in such account. Any payments under
this Agreement which are made later than 1:00 P.M. (local time at the Payment
Office) shall be deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
5.4. NET PAYMENTS. (a) All payments made by the Borrower hereunder,
under any Note or any other Credit Document, will be made without setoff,
counterclaim or other defense. Except as provided for in section 5.4(b), all
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax, imposed on or measured by the net income or
net profits of a Lender pursuant to the laws of the jurisdiction under which
such Lender is organized or the jurisdiction in which the principal office or
Applicable Lending Office of such Lender is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect to
such non excluded taxes, levies imposts, duties, fees, assessments or other
charges (all such non-excluded taxes levies, imposts, duties, fees assessments
or other charges being referred to collectively as "TAXES"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes and
such additional amounts as may be necessary so that every payment by it of all
amounts due hereunder, under any Note or under any other Credit Document, after
withholding or deduction for or on account of any Taxes will not be less than
the amount provided for herein or in such Note or in such other Credit Document.
If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse each Lender, upon the written request
of such Lender for taxes imposed on or measured by the net income or profits of
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or Applicable Lending Office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or Applicable
Lending Office of such Lender is located and for any withholding of income or
similar taxes imposed by the United States of America as such Lender shall
determine are payable by, or withheld from, such Lender in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence, which request shall be accompanied by a statement
from such Lender setting forth, in reasonable detail, the computations used in
determining such amounts. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes, or any withholding or
deduction on account thereof, is due pursuant to applicable law certified copies
of tax receipts, or other evidence satisfactory to the Lender, evidencing such
payment by the Borrower. The Borrower will indemnify and hold harmless the
Administrative Agent and each Lender, and reimburse the Administrative Agent or
such Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid or withheld by such Lender.
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(b) Each Lender that is not a United States person (as such term is
defined in section 7701(a)(30) of the Code) for Federal income tax purposes
agrees to provide to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the cases of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to section 12.4 (unless
the respective Lender was already a Lender hereunder immediately prior to such
assignment or transfer and such Lender is in compliance with the provisions of
this section 5.4(b)), on the date of such assignment or transfer to such Lender,
(i) two accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement
to a complete exemption from United States withholding tax with respect to
payments to be made under this Agreement, any Note or any other Credit Document,
or (ii) if the Lender is not a "bank" within the meaning of section 881(c)(3)(A)
of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit F (any such certificate, a "SECTION 5.4(B)(II) CERTIFICATE") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement, any Note or any other Credit Document.
In addition, each Lender agrees that from time to time after the Effective Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will deliver to
the Borrower and the Administrative Agent two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a
Section 5.4(b)(ii) Certificate, as the case may be, and such other forms as may
be required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement, any Note or any other Credit Document,
or it shall immediately notify the Borrower and the Administrative Agent of its
inability to deliver any such Form or Certificate, in which case such Lender
shall not be required to deliver any such Form or Certificate pursuant to this
section 5.4(b). Notwithstanding anything to the contrary contained in section
5.4(a), but subject to section 12.4(c) and the immediately succeeding sentence,
(x) the Borrower shall be entitled, to the extent it is required to do so by
law, to deduct or withhold income or other similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Lender which is not a United States person (as such term is defined in section
7701(a)(30) of the Code) for United States federal income tax purposes and which
has not provided to the Borrower such forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to section 5.4(a) hereof to gross-up payments to be made to a Lender in
respect of income or similar taxes imposed by the United States or any
additional amounts with respect thereto (I) if such Lender has not provided to
the Borrower the Internal Revenue Service forms required to be provided to the
Borrower pursuant to this section 5.4(b) or (II) in the case of a payment other
than interest, to a Lender described in clause (ii) above, to the extent that
such forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this section 5.4 and except as specifically provided for in section
12.4(c), the Borrower agrees to pay additional amounts and indemnify each Lender
in the manner set forth in section 5.4(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the previous sentence as a result of
any changes after the Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of income or similar Taxes.
(c) If any Lender, in its sole opinion, determines that it has finally
and irrevocably received or been granted a refund in respect of any Taxes paid
as to which indemnification has been paid by the Borrower pursuant to this
section, it shall promptly remit such refund (including any interest received in
respect thereof), net of all out-of-pocket costs and expenses; PROVIDED, that
the Borrower agrees to promptly return any such refund (plus interest) to such
Lender in the event such Lender is required to repay such refund to the relevant
taxing authority. Any such Lender shall provide the Borrower with a copy of any
notice of assessment from the relevant taxing authority (redacting any unrelated
confidential information contained therein) requiring repayment of such refund.
Nothing contained herein shall impose an obligation on any Lender to apply for
any such refund.
(d) Reference is hereby made to the provisions of section 2.10(d) for
certain limitations upon the rights of a Lender under this section.
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SECTION 6. CONDITIONS PRECEDENT.
6.1. CONDITIONS PRECEDENT AT CLOSING DATE. The obligation of the
Lenders to make Loans, and of any Letter of Credit Issuer to issue Letters of
Credit, is subject to the satisfaction of each of the following conditions on
the Closing Date:
(a) EFFECTIVENESS; NOTES. On or prior to the Closing Date, (i)
the Effective Date shall have occurred and (ii) there shall have been
delivered to the Administrative Agent for the account of each Lender
each appropriate Note executed by the Borrower, in each case, in the
amount, maturity and as otherwise provided herein.
(b) FEES, ETC. The Borrower shall have paid or caused to be
paid all fees required to be paid by it on or prior to such date
pursuant to section 4.1 hereof and all reasonable fees and expenses of
the Administrative Agent and of special counsel to the Administrative
Agent which have been invoiced on or prior to such date in connection
with the preparation, execution and delivery of this Agreement and the
other Credit Documents and the consummation of the transactions
contemplated hereby and thereby.
(c) OTHER CREDIT DOCUMENTS. The Credit Parties named therein
shall have duly executed and delivered and there shall be in full force
and effect, and original counterparts shall have been delivered to the
Administrative Agent, in sufficient quantities for the Administrative
Agent and the Lenders, of, (i) the Pledge Agreement (as modified,
amended or supplemented from time to time in accordance with the terms
thereof and hereof, the "PLEDGE AGREEMENT"), substantially in the form
attached hereto as Exhibit C-1; (ii) the Security Agreement (as
modified, amended or supplemented from time to time in accordance with
the terms thereof and hereof, the "SECURITY AGREEMENT"), substantially
in the form attached hereto as Exhibit C-2; and (iii) the mortgages,
deeds of trust or similar documents (each as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, a "MORTGAGE"), substantially in the respective forms attached
hereto as Exhibits C-3 and C-4, covering certain properties of the
Borrower located in the State of Ohio and the Commonwealth of Virginia.
(d) CORPORATE RESOLUTIONS AND APPROVALS. The Administrative
Agent shall have received, in sufficient quantity for the
Administrative Agent and the Lenders, certified copies of the
resolutions of the Board of Directors of the Borrower and each other
Credit Party, approving the Credit Documents to which the Borrower or
any such other Credit Party, as the case may be, is or may become a
party, and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the execution,
delivery and performance by the Borrower or any such other Credit Party
of the Credit Documents to which it is or may become a party.
(e) INCUMBENCY CERTIFICATES. The Administrative Agent shall
have received, in sufficient quantity for the Administrative Agent and
the Lenders, a certificate of the Secretary or an Assistant Secretary
of the Borrower and of each other Credit Party, certifying the names
and true signatures of the officers of the Borrower or such other
Credit Party, as the case may be, authorized to sign the Credit
Documents to which the Borrower or such other Credit Party is a party
and any other documents to which the Borrower or any such other Credit
Party is a party which may be executed and delivered in connection
herewith.
(f) OPINION OF COUNSEL. On the Closing Date, the
Administrative Agent shall have received an opinion, addressed to the
Administrative Agent and each of the Lenders and dated the Closing
Date, from the General Counsel of the Borrower, substantially in the
form of Exhibit D hereto and covering such other matters incident to
the transactions contemplated hereby as the Administrative Agent may
reasonably request, such opinion to be in form and substance
satisfactory to the Administrative Agent.
(g) EXISTING CREDIT FACILITY. Contemporaneously with the
Closing Date, the Borrower shall have terminated its existing credit
agreement, dated as of November 11, 1996, and prepaid any borrowings
thereunder.
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(h) RECORDATION OF SECURITY DOCUMENTS, DELIVERY OF COLLATERAL,
TAXES, ETC. The Security Documents (or proper notices or financing
statements in respect thereof) shall have been duly recorded, published
and filed in such manner and in such places as is required by law to
establish, perfect, preserve and protect the rights and security
interests of the parties thereto and their respective successors and
assigns, all collateral items required to be physically delivered to
the Collateral Agent thereunder shall have been so delivered,
accompanied by any appropriate instruments of transfer, and all taxes,
fees and other charges then due and payable in connection with the
execution, delivery, recording, publishing and filing of such
instruments and the issue and delivery of the Notes shall have been
paid in full.
(i) EVIDENCE OF INSURANCE. The Collateral Agent shall have
received certificates of insurance and other evidence, satisfactory to
it, of compliance with the insurance requirements of this Agreement and
the Security Documents.
(j) SEARCH REPORTS. The Administrative Agent shall have
received completed requests for information on Form UCC-11, or search
reports from one or more commercial search firms acceptable to the
Administrative Agent, listing all of the effective financing statements
filed against any Credit Party which is a party to any Security
Document in any jurisdiction in which such Credit Party maintains an
office or in which any Collateral of such Credit Party is located,
together with copies of such financing statements.
(k) TITLE POLICIES AND OTHER DOCUMENTS RELATING TO MORTGAGED
PROPERTIES. As to each Real Property subjected to the Lien of a
Mortgage (a "MORTGAGED PROPERTY"), the Collateral Agent shall have
received:
(i) an American Land Title Association ( ALTA)
mortgagee title insurance policy or policies, or unconditional
commitments therefor (a "MORTGAGE POLICY") issued by a title
insurance company satisfactory to the Collateral Agent (a
"TITLE COMPANY"), in an amount not less than the amount
required therefor by the Collateral Agent, insuring fee simple
title to, or a valid leasehold interest in, such Mortgaged
Property vested in the Borrower and assuring the Collateral
Agent that the applicable Mortgage creates a valid and
enforceable first priority mortgage lien on the respective
Mortgaged Property encumbered thereby, subject only to a
standard survey exception, which Mortgage Policy (1) shall
include an endorsement for mechanics' liens, for revolving,
"variable rate" and future advances under this Agreement and
for any other matters reasonably requested by the Collateral
Agent and (2) shall provide for affirmative insurance and such
reinsurance as the Collateral Agent may reasonably request,
all of the foregoing in form and substance reasonably
satisfactory to the Collateral Agent;
(ii) a title report issued by the Title Company with
respect thereto, dated not more than 30 days prior to the
Closing Date and satisfactory in form and substance to the
Collateral Agent;
(iii) copies of all recorded documents listed as
exceptions to title or otherwise referred to in the Mortgage
Policy or in such title report;
(iv) evidence, which may be in the form of a letter
from the Title Company or from an insurance broker, surveyor
or engineer, as to whether (1) such Mortgaged Property is a
Flood Hazard Property, and (2) the community in which such
Flood Hazard Property is located is participating in the
National Flood Insurance Program, and if such Mortgaged
Property is a Flood Hazard Property, evidence that the
Borrower has obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable
regulations of the Board of Governors of the Federal Reserve
System; and
(v) a certificate of the Borrower identifying any
Phase I, Phase II or other environmental report received in
draft or final form by any Credit Party during the five year
period prior to the Closing Date with respect to such
Mortgaged Property and/or the operations conducted
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therefrom, or stating that no such draft or final form reports
have been requested or received by any Credit Party (or its
counsel), together with true and correct copies of all such
environmental reports so listed (in draft form, if not
finalized); and all such environmental reports shall be
satisfactory in form and substance to the Collateral Agent and
each of the Lenders.
In addition, the Borrower shall have paid or caused to be paid all
costs and expenses payable in connection with all of such actions,
including but not limited to (x) all mortgage, intangibles or similar
taxes or fees, however characterized, payable in respect of this
Agreement, the execution and delivery of the Notes, any of the
Mortgages or any of the other Credit Documents or the recording of any
of the same or any other documents related thereto; and (y) all
expenses and premiums of the Title Company in connection with the
issuance of such policy or policies of title insurance and to all costs
and expenses required for the recording of the Mortgages or any other
Credit Documents or any other related documents in the appropriate
public records. If and to the extent that any of the requirements
contained in this section 6.1(k) is not satisfied at and as of the
Closing Date and the Lenders nevertheless actually fund one or more
Borrowings on the Closing Date, the Borrower shall have delivered to
the Administrative Agent its irrevocable undertaking to cause the
requirements contained in this section 6.1(k) to be satisfied within 30
days following the Closing Date.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and all documents incidental to the transactions
contemplated hereby shall be satisfactory in substance and form to the
Administrative Agent and the Lenders and the Administrative Agent and
its special counsel and the Lenders shall have received all such
counterpart originals or certified or other copies of such documents as
the Administrative Agent or its special counsel or any Lender may
reasonably request.
6.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligations of the
Lenders to make each Loan and/or of a Letter of Credit Issuer to issue each
Letter of Credit is subject, at the time thereof, to the satisfaction of the
following conditions:
(a) NOTICE OF BORROWING, ETC. The Administrative Agent shall
have received a Notice of Borrowing meeting the requirements of section
2.3 with respect to the incurrence of Loans or a Letter of Credit
Request meeting the requirement of section 3.2 with respect to the
issuance of a Letter of Credit.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
each Credit Event and also after giving effect thereto, (i) there shall
exist no Default or Event of Default and (ii) all representations and
warranties of the Credit Parties contained herein or in the other
Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had
been made on and as of the date of such Credit Event, except to the
extent that such representations and warranties expressly relate to an
earlier specified date, in which case such representations and
warranties shall have been true and correct in all material respects as
of the date when made.
The acceptance of the benefits of each Loan or issuance of a Letter of Credit
shall constitute a representation and warranty by the Borrower to each of the
Lenders that all of the applicable conditions specified in section 6.1 and/or
6.2, as the case may be, exist as of that time. All of the certificates, legal
opinions and other documents and papers referred to in section 6.1 or this
section 6.2, unless otherwise specified, shall be delivered to the
Administrative Agent for the account of each of the Lenders and, except for the
Notes, in sufficient counterparts for each of the Lenders, and the
Administrative Agent will promptly distribute to the Lenders their respective
Notes and the copies of such other certificates, legal opinions and documents.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to make
the Loans, and/or to issue and/or to participate in the Letters of Credit
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and each Credit Event:
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7.1. CORPORATE STATUS, ETC. Each of the Borrower and its Subsidiaries
(i) is a duly organized or formed and validly existing corporation, partnership
or limited liability company, as the case may be, in good standing under the
laws of the jurisdiction of its formation and has the corporate, partnership or
limited liability company power and authority, as applicable, to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage, and (ii) has duly qualified and is authorized to
do business in all jurisdictions where it is required to be so qualified except
where the failure to be so qualified would not have a Material Adverse Effect.
7.2. SUBSIDIARIES. Annex II hereto lists, as of the date hereof, each
Subsidiary of the Borrower (and the direct and indirect ownership interest of
the Borrower therein).
7.3. CORPORATE POWER AND AUTHORITY, ETC. Each Credit Party has the
corporate or other organizational power and authority to execute, deliver and
carry out the terms and provisions of the Credit Documents to which it is party
and has taken all necessary corporate or other organizational action to
authorize the execution, delivery and performance of the Credit Documents to
which it is party. Each Credit Party has duly executed and delivered each Credit
Document to which it is party and each Credit Document to which it is party
constitutes the legal, valid and binding agreement or obligation of such Credit
Party enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law).
7.4. NO VIOLATION. Neither the execution, delivery and performance by
any Credit Party of the Credit Documents to which it is party nor compliance
with the terms and provisions thereof, nor the consummation of the loan
transactions contemplated therein (i) will contravene any provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality applicable to such Credit Party or its properties
and assets, (ii) will conflict with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien (other than the Lien of any Security Document) upon any of the property
or assets of such Credit Party or any of its Subsidiaries pursuant to the terms
of any promissory note, bond, debenture, indenture, mortgage, deed of trust,
credit or loan agreement, or any other material agreement or other instrument,
to which such Credit Party or any of its Subsidiaries is a party or by which it
or any of its property or assets are bound or to which it may be subject, or
(iii) will violate any provision of the articles or certificate of
incorporation, code of regulations, by-laws or other organizational document of
such Credit Party.
7.5. GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required as a
condition to (i) the execution, delivery and performance by any Credit Party of
any Credit Document to which it is a party, or (ii) the legality, validity,
binding effect or enforceability of any Credit Document to which any Credit
Party is a party, EXCEPT for any filings or recordings necessary to perfect any
Lien provided for in any Security Document.
7.6. LITIGATION. There are no actions, suits or proceedings pending or,
to, the knowledge of the Borrower, threatened with respect to the Borrower or
any of its Subsidiaries (i) that have, or could reasonably be expected to have,
a Material Adverse Effect, or (ii) which question the validity or enforceability
of any of the Credit Documents, or of any action to be taken by the Borrower or
any of the other Credit Parties pursuant to any of the Credit Documents.
7.7. USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Loans
shall be utilized for lawful purposes not inconsistent with the requirements of
this Agreement.
(b) No part of the proceeds of any Credit Event will be used directly
or indirectly to purchase or carry Margin Stock, or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock, in violation of any
of the provisions of Regulation T, U or X of the Board of Governors of the
Federal Reserve System. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. At no time
would more than 25% of the value of the assets of the Borrower or of the
Borrower and its
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consolidated Subsidiaries that are subject to any "arrangement" (as such term is
used in section 221.2(g) of such Regulation U) hereunder be represented by
Margin Stock.
7.8. FINANCIAL STATEMENTS, ETC. (a) The Borrower has furnished to the
Lenders and the Administrative Agent complete and correct copies of (i) the
audited consolidated balance sheets of the Borrower and its consolidated
subsidiaries as of December 31, 1997 and December 31, 1996 and the related
audited consolidated statements of income, shareholders' equity, and cash flows
of the Borrower and its consolidated subsidiaries for the fiscal years then
ended, accompanied by the report thereon of the Borrower's independent public
accountants; and (ii) the condensed consolidated balance sheets of the Borrower
and its consolidated subsidiaries as of September 30, 1998, and the related
condensed consolidated statements of income and of cash flows of the Borrower
and its consolidated subsidiaries for the nine months then ended, as included in
the Borrower's Report on Form 10-Q filed with the SEC. All such financial
statements have been prepared in accordance with GAAP, consistently applied
(except as stated therein), and fairly present the financial position of the
Borrower and its consolidated subsidiaries as of the respective dates indicated
and the consolidated results of their operations and cash flows for the
respective periods indicated, subject in the case of any such financial
statements which are unaudited, to normal audit adjustments, none of which will
involve a Material Adverse Effect.
(b) The Borrower has received consideration which is the reasonable
equivalent value of the obligations and liabilities that the Borrower has
incurred to the Administrative Agent and the Lenders. The Borrower now has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage and is now solvent and able to
pay its debts as they mature and the Borrower, as of the Closing Date, owns
property having a value, both at fair valuation and at present fair salable
value, greater than the amount required to pay the Borrower's debts; and the
Borrower is not entering into the Credit Documents with the intent to hinder,
delay or defraud its creditors. For purposes of this section 7.8(b), "DEBT"
means any liability on a claim, and "CLAIM" means (x) right to payment whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (y) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(c) The Borrower has delivered or caused to be delivered to the Lenders
prior to the execution and delivery of this Agreement (i) a copy of the
Borrower's Report on Form 10-K as filed (without Exhibits) with the SEC for its
fiscal year ended on or nearest to December 31, 1997, which contains a general
description of the business and affairs of the Borrower and its Subsidiaries,
and (ii) a Confidential Information Memorandum dated October/November 1998 (the
"INFORMATION MEMORANDUM") prepared by the Administrative Agent with the
assistance of the Borrower, which Information Memorandum includes, among other
things, financial projections prepared by management of the Borrower for the
Borrower and its Subsidiaries for the fiscal years 1998-2001 (the "FINANCIAL
PROJECTIONS"). The Financial Projections were prepared on behalf of the Borrower
in good faith after taking into account the existing and historical levels of
business activity of the Borrower and its Subsidiaries, known trends, including
general economic trends, and all other information, assumptions and estimates
considered by management of the Borrower and its Subsidiaries to be pertinent
thereto. The Financial Projections were considered by management of the
Borrower, as of such date of preparation, to be realistically achievable;
PROVIDED, that no representation or warranty is made as to the impact of future
general economic conditions or as to whether the Borrower's projected
consolidated results as set forth in the Financial Projections will actually be
realized. No facts are known to the Borrower at the date hereof which, if
reflected in the Financial Projections, would result in a material adverse
change in the assets, liabilities, results of operations or cash flows reflected
therein, other than those disclosed as contemplated by section 7.9.
7.9. NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has
been no change in the financial condition, results of operations, cash flows,
business or affairs of the Borrower and its Subsidiaries taken as a whole, or
their properties and assets considered as an entirety, which, individually or in
the aggregate, has had or could reasonably be expected to have, a Material
Adverse Effect, EXCEPT for those changes disclosed in (i) the Borrower's
Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, June 30,
and September 30, 1998, as filed with the SEC (copies of which have been
delivered to the Lenders), or (ii) the Information Memorandum.
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7.10. TAX RETURNS AND PAYMENTS. Each of the Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, other than
those not yet delinquent and except for those contested in good faith. The
Borrower and each of its Subsidiaries has established on its books such charges,
accruals and reserves in respect of taxes, assessments, fees and other
governmental charges for all fiscal periods as are required by GAAP. The
Borrower knows of no proposed assessment for additional federal, foreign or
state taxes for any period, or of any basis therefor, which, individually or in
the aggregate, taking into account such charges, accruals and reserves in
respect thereof as the Borrower and its Subsidiaries have made, could reasonably
be expected to have a Material Adverse Effect.
7.11. TITLE TO PROPERTIES, ETC. The Borrower and each of its
Subsidiaries has good and marketable title, in the case of real property, and
good title (or valid Leaseholds, in the case of any leased property), in the
case of all other property, to all of its properties and assets free and clear
of Liens other than Liens permitted by section 9.3. The interests of the
Borrower and each of its Subsidiaries in the properties reflected in the most
recent balance sheet referred to in section 7.8, taken as a whole, were
sufficient, in the judgment of the Borrower, as of the date of such balance
sheet for purposes of the ownership and operation of the businesses conducted by
the Borrower and such Subsidiaries.
7.12. LAWFUL OPERATIONS, ETC. Except for known situations or incidents
which are reserved for on the most recent consolidated balance sheet referred to
in section 7.8 or which, if not so reserved, could not reasonably be expected to
have a Material Adverse Effect, the Borrower and each of its Subsidiaries is in
full compliance with all material requirements imposed by law, whether federal
or state, including (without limitation) Environmental Laws and zoning
ordinances.
7.13. ENVIRONMENTAL MATTERS. (a) The Borrower and each of its
Subsidiaries is in compliance with all Environmental Laws governing its
business, except to the extent that any such failure to comply (together with
any resulting penalties, fines or forfeitures) would not reasonably be expected
to have a Material Adverse Effect. All licenses, permits, registrations or
approvals required for the business of the Borrower and each of its Subsidiaries
under any Environmental Law have been secured and the Borrower and each of its
Subsidiaries is in substantial compliance therewith, except for such licenses,
permits, registrations or approvals the failure to secure or to comply therewith
is not reasonably likely to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries has received written notice, or otherwise knows,
that it is in any respect in noncompliance with, breach of or default under any
Environmental Laws, and no event has occurred and is continuing which, with the
passage of time or the giving of notice or both, would constitute noncompliance,
breach of or default thereunder, except in each such case, such noncompliance,
breaches or defaults as would not reasonably be expected to, in the aggregate,
have a Material Adverse Effect. There are no Environmental Claims pending or, to
the best knowledge of the Borrower, threatened wherein an unfavorable decision,
ruling or finding would reasonably be expected to have a Material Adverse
Effect.
(b) Hazardous Materials have not at any time been (i) generated, used,
treated or stored on, or transported to or from, any Real Property of the
Borrower or any of its Subsidiaries or (ii) released on any such Real Property,
in each case where such occurrence or event is not in compliance with
Environmental Laws and is reasonably likely to have a Material Adverse Effect.
7.14. COMPLIANCE WITH ERISA. Compliance by the Borrower and the other
Credit Parties with the provisions hereof and Credit Events contemplated hereby
will not involve any prohibited transaction within the meaning of ERISA or
section 4975 of the Code. The Borrower and each of its Subsidiaries, (i) has
fulfilled all obligations under minimum funding standards of ERISA and the Code
with respect to each Plan that is not a Multiemployer Plan or a Multiple
Employer Plan, (ii) has satisfied all respective contribution obligations in
respect of each Multiemployer Plan and each Multiple Employer Plan, (iii) is in
compliance in all material respects with all other applicable provisions of
ERISA and the Code with respect to each Plan, each Multiemployer Plan and each
Multiple Employer Plan, and (iv) has not incurred any liability under the Title
IV of ERISA to the PBGC with respect to any Plan, any Multiemployer Plan, any
Multiple Employer Plan, or any trust established thereunder. No Plan or trust
created thereunder has been terminated, and there have been no Reportable
Events, with respect to any Plan or trust created thereunder or with respect to
any Multiemployer Plan or Multiple Employer Plan, which termination
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or Reportable Event will or could result in the termination of such Plan,
Multiemployer Plan or Multiple Employer Plan and give rise to a material
liability of the Borrower or any ERISA Affiliate in respect thereof. Neither the
Borrower nor any ERISA Affiliate is at the date hereof, or has been at any time
within the two years preceding the date hereof, an employer required to
contribute to any Multiemployer Plan or Multiple Employer Plan, or a
"contributing sponsor" (as such term is defined in section 4001 of ERISA) in any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Lenders in writing.
7.15. INTELLECTUAL PROPERTY, ETC. The Borrower and each of its
Subsidiaries has obtained or has the right to use all material patents,
trademarks, service marks, trade names, copyrights, licenses and other rights
with respect to the foregoing necessary for the present and planned future
conduct of its business, without any known conflict with the rights of others,
EXCEPT for such patents, trademarks, service marks, trade names, copyrights,
licenses and rights, the loss of which, and such conflicts, which in any such
case individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
7.16. BURDENSOME CONTRACTS; LABOR RELATIONS. Neither the Borrower nor
any of its Subsidiaries (i) is subject to any unduly burdensome contract,
agreement, corporate restriction, judgment, decree or order, (ii) is a party to
any labor dispute affecting any bargaining unit or other group of employees
generally, (iii) is subject to any material strike, slow down, workout or other
concerted interruptions of operations by employees of the Borrower or any
Subsidiary, whether or not relating to any labor contracts, (iv) is subject to
any significant pending or, to the knowledge of the Borrower, threatened, unfair
labor practice complaint, before the National Labor Relations Board, and (v) is
subject to any significant pending or, to the knowledge of the Borrower,
threatened, grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement, (vi) is subject to any significant
pending or, to the knowledge of the Borrower, threatened, significant strike,
labor dispute, slowdown or stoppage, or (vii) is, to the knowledge of the
Borrower, involved or subject to any union representation organizing or
certification matter with respect to the employees of the Borrower or any of its
Subsidiaries, EXCEPT (with respect to any matter specified in any of the above
clauses), for such matters as, individually or in the aggregate, would not
reasonably be likely to have a Material Adverse Effect.
7.17. YEAR 2000 COMPUTER MATTERS. (a) The Borrower and its Subsidiaries
(i) have conducted a comprehensive review and are conducting an assessment of
all areas of their business that could be adversely affected by the "Y2K ISSUE"
(that is, the risk that computer applications used by the Borrower and its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), which review and assessment has included written inquiry of (to the date
hereof, many, and within a reasonable period of time thereafter, most and,
ultimately, all) of the Borrower's and its Subsidiaries' key suppliers and
vendors with whom there is regular electronic communication via access to
computer networks or systems, (ii) have developed a detailed plan and timeline
for addressing the Y2K issue, including linkages with, and programming changes
to be made by, key suppliers, vendors and customers, on a timely basis, and
(iii) have implemented that plan substantially in accordance with that
timetable.
(b) Based on such review and program, (i) the Borrower reasonably
believes that the Y2K issue is not reasonably likely to have a Material Adverse
Effect, (ii) the Borrower reasonably anticipates that all computer applications
that are material to its business and the business of its Subsidiaries will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (I.E., be "Y2K COMPLIANT"), and (iii) the
Borrower reasonably believes that each of such key suppliers, vendors and
customers will on a timely basis be Y2K compliant in all material respects which
affect the Borrower or any of its Subsidiaries.
7.18. EXISTING INDEBTEDNESS. Annex III sets forth a true and complete
list, as of the date or dates set forth therein, of all Indebtedness of the
Borrower and each of its Subsidiaries, on a consolidated basis, which (i) has an
outstanding principal amount of at least $500,000, or may be incurred pursuant
to existing commitments or lines of credit, or (ii) is secured by any Lien on
any property of the Borrower or any Subsidiary, and which will be outstanding on
the Closing Date after giving effect to any Borrowing hereunder which is
expected to be made on the Closing Date, other than the Indebtedness created
under the Credit Documents (all such Indebtedness, whether or
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not in a principal amount meeting such threshold and required to be so listed on
Annex III, herein the "EXISTING INDEBTEDNESS"). The Borrower has provided to the
Administrative Agent prior to the date of execution hereof true and complete
copies (or summary descriptions contained in Annex III in the case of Existing
Indebtedness of Foreign Subsidiaries) of all agreements and instruments
governing the Indebtedness listed on Annex III (the "EXISTING INDEBTEDNESS
AGREEMENTS").
7.19. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of its
Subsidiaries is subject to regulation with respect to the creation or incurrence
of Indebtedness under the Investment Borrower Act of 1940, as amended, the
Interstate Commerce Act, as amended, the Federal Power Act, as amended, the
Public Utility Holding Company Act of 1935, as amended, or any applicable state
public utility law.
7.20. SECURITY INTERESTS. Once executed and delivered, and until
terminated in accordance with the terms thereof, each of the Security Documents
creates, as security for the obligations purported to be secured thereby, a
valid and enforceable perfected security interest in and Lien on all of the
Collateral subject thereto from time to time, in favor of the Collateral Agent
for the benefit of the Secured Creditors referred to in the Security Documents,
superior to and prior to the rights of all third persons and subject to no other
Liens (except that the Collateral under the Security Agreement may be subject to
Permitted Liens). No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document which shall
have been made, or for which satisfactory arrangements have been made, upon or
prior to the execution and delivery thereof. All recording, stamp, intangible or
other similar taxes required to be paid by any person under applicable legal
requirements or other laws applicable to the property encumbered by the Security
Documents in connection with the execution, delivery, recordation, filing,
registration, perfection or enforcement thereof have been paid.
7.21. TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
or any of its Subsidiaries in writing to the Administrative Agent or any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated herein, other than the Financial Projections (as to which
representations are made only as provided in section 7.8), is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of such person in writing to any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided, except that any such
future information consisting of financial projections prepared by management of
the Borrower is only represented herein as being based on good faith estimates
and assumptions believed by such persons to be reasonable at the time made. The
Lenders recognize that such projections as to future events are not to be viewed
as facts and that actual results during the period or periods covered by any
such projections may differ materially from the projected results. As of the
Effective Date, there is no fact known to the Borrower or any of its
Subsidiaries which has, or could reasonably be expected to have, a Material
Adverse Effect which has not theretofore been disclosed in writing to the
Lenders.
SECTION 8. AFFIRMATIVE COVENANTS.
The Borrower hereby covenants and agrees that so long as this Agreement
is in effect and until such time as the Total Commitment has been terminated, no
Notes or Letters of Credit are outstanding and the Loans, together with
interest, Fees and all other Obligations hereunder, have been paid in full:
8.1. REPORTING REQUIREMENTS. The Borrower will furnish to each Lender
and the Administrative Agent:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within 100 days after the close of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income,
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of stockholders' equity and of cash flows for such fiscal year, in each
case setting forth comparative figures for the preceding fiscal year,
all in reasonable detail and accompanied by the opinion with respect to
such consolidated financial statements of independent public
accountants of recognized national standing selected by the Borrower,
which opinion shall be unqualified and shall (i) state that such
accountants audited such consolidated financial statements in
accordance with generally accepted auditing standards, that such
accountants believe that such audit provides a reasonable basis for
their opinion, and that in their opinion such consolidated financial
statements present fairly, in all material respects, the consolidated
financial position of the Borrower and its consolidated subsidiaries as
at the end of such fiscal year and the consolidated results of their
operations and cash flows for such fiscal year in conformity with
generally accepted accounting principles, or (ii) contain such
statements as are customarily included in unqualified reports of
independent accountants in conformity with the recommendations and
requirements of the American Institute of Certified Public Accountants
(or any successor organization).
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within 60 days after the close of each of the quarterly
accounting periods in each fiscal year of the Borrower, the unaudited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarterly period and the related
unaudited consolidated statements of income and of cash flows for such
quarterly period and/or for the fiscal year to date, and setting forth,
in the case of such unaudited consolidated statements of income and of
cash flows, comparative figures for the related periods in the prior
fiscal year, and which shall be certified on behalf of the Borrower by
its chief financial or accounting officer or other Authorized Officer
of the Borrower, subject to changes resulting from normal year-end
audit adjustments.
(c) OFFICER'S COMPLIANCE CERTIFICATES. At the time of the
delivery of the financial statements provided for in sections 8.1(a)
and (b), a certificate on behalf of the Borrower by its chief financial
or accounting officer or other Authorized Officer of the Borrower to
the effect that, to the best knowledge of the Borrower, no Default or
Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof and the actions the
Borrower proposes to take with respect thereto, which certificate shall
set forth the calculations required to establish compliance with the
provisions of sections 9.7, 9.8, 9.9, 9.10 and 9.11 of this Agreement.
(d) BUDGETS AND FORECASTS. Promptly following the preparation
and approval thereof by senior management of the Borrower and in any
event not later than 30 days prior to the commencement of each fiscal
year, a consolidated forecasted budget in reasonable detail for such
fiscal year, and (if and to the extent prepared by management of the
Borrower) for any subsequent fiscal years, in the form customarily
prepared by management of the Borrower for its internal use.
(e) NOTICE OF DEFAULT, LITIGATION OR CERTAIN MATTERS INVOLVING
MAJOR CUSTOMERS OR SUPPLIERS. Promptly, and in any event within three
Business Days, in the case of clause (i) below, or five Business Days,
in the case of clause (ii) or (iii) below, after the Borrower or any of
its Subsidiaries obtains knowledge thereof, notice of
(i) the occurrence of any event which constitutes a
Default or Event of Default, which notice shall specify the
nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto,
(ii) any litigation or governmental or regulatory
proceeding pending against the Borrower or any of its
Subsidiaries which is likely to have a Material Adverse
Effect, and
(iii) any significant adverse change (in the
Borrower's reasonable judgment) in the Borrower's or any
Subsidiary's relationship with, or any significant event or
circumstance which is in the Borrower's reasonable judgment
likely to adversely affect the Borrower's or any Subsidiary's
relationship with, (A) any customer (or related group of
customers) representing more than 10% of the Borrower's
consolidated revenues during its most recent fiscal year, or
(B) any
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supplier which is material to the operations of the Borrower
and its Subsidiaries considered as an entirety.
(f) ERISA. Promptly, and in any event within 10 days after the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows
of the occurrence of any of the following, the Borrower will deliver to
each of the Lenders a certificate on behalf of the Borrower of an
Authorized Officer of the Borrower setting forth the full details as to
such occurrence and the action, if any, that the Borrower, such
Subsidiary or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed
with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC,
a Plan participant or the Plan administrator with respect thereto:
(i) that a Reportable Event has occurred with respect
to any Plan;
(ii) the institution of any steps by the Borrower,
any ERISA Affiliate, the PBGC or any other person to terminate
any Plan;
(iii) the institution of any steps by the Borrower or
any ERISA Affiliate to withdraw from any Plan;
(iv) the institution of any steps by the Borrower or
any Subsidiary to withdraw from any Multiemployer Plan or
Multiple Employer Plan, if such withdrawal could result in
withdrawal liability (as described in Part 1 of Subtitle E of
Title IV of ERISA) in excess of $2,000,000;
(v) a non-exempt "prohibited transaction" within the
meaning of section 406 of ERISA in connection with any Plan;
(vi) that a Plan which is subject to the minimum
funding requirements of ERISA has an Unfunded Current
Liability exceeding $5,000,000;
(vii) any material increase in the contingent
liability of the Borrower or any Subsidiary with respect to
any post-retirement welfare liability; or
(viii) the taking of any action by, or the
threatening of the taking of any action by, the Internal
Revenue Service, the Department of Labor or the PBGC with
respect to any of the foregoing.
(g) ENVIRONMENTAL MATTERS. Promptly upon, and in any event
within 10 Business Days after, an officer of the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of one or more of the
following environmental matters: (i) any pending or threatened material
Environmental Claim against the Borrower or any of its Subsidiaries or
any Real Property owned or operated by the Borrower or any of its
Subsidiaries; (ii) any condition or occurrence on or arising from any
Real Property owned or operated by the Borrower or any of its
Subsidiaries that (A) results in material noncompliance by the Borrower
or any of its Subsidiaries with any applicable Environmental Law or (B)
would reasonably be expected to form the basis of a material
Environmental Claim against the Borrower or any of its Subsidiaries or
any such Real Property; (iii) any condition or occurrence on any Real
Property owned, leased or operated by the Borrower or any of its
Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any material restrictions on the ownership,
occupancy, use or transferability by the Borrower or any of its
Subsidiaries of such Real Property under any Environmental Law; and
(iv) the taking of any material removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any Real
Property owned, leased or operated by the Borrower or any of its
Subsidiaries as required by any Environmental Law or any governmental
or other administrative agency. All such notices shall describe in
reasonable detail the nature of the Environmental Claim and the
Borrower's or such Subsidiary's response thereto.
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(h) SEC REPORTS AND REGISTRATION STATEMENTS. Promptly upon
transmission thereof or other filing with the SEC, copies of all
registration statements (other than the exhibits thereto and any
registration statement on Form S-8 or its equivalent) and annual,
quarterly or current reports that the Borrower or any of its
Subsidiaries files with the SEC.
(i) OTHER INFORMATION. With reasonable promptness, such other
information or documents (financial or otherwise) relating to the
Borrower or any of its Subsidiaries as any Lender may reasonably
request from time to time.
8.2. BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause
each of its Subsidiaries to, (i) keep proper books of record and account, in
which full and correct entries shall be made of all financial transactions and
the assets and business of the Borrower or such Subsidiaries, as the case may
be, in accordance with GAAP; and (ii) permit, upon at least three Business Days'
notice (or upon at least one Business Days' notice, if an Event of Default is
then continuing) to the chief financial officer of the Borrower, officers and
designated representatives of the Administrative Agent or any of the Lenders to
visit and inspect any of the properties or assets of the Borrower and any of its
Subsidiaries in whomsoever's possession (but only to the extent the Borrower or
such Subsidiary has the right to do so to the extent in the possession of
another person), to examine the books of account of the Borrower and any of its
Subsidiaries, and make copies thereof and take extracts therefrom, and to
discuss the affairs, finances and accounts of the Borrower and of any of its
Subsidiaries with, and be advised as to the same by, its and their officers and
independent accountants and independent actuaries, if any, all at such
reasonable times and intervals and to such reasonable extent as the
Administrative Agent or any of the Lenders may request.
8.3. INSURANCE. (a) The Borrower will, and will cause each of its
Subsidiaries to, (i) maintain insurance coverage by such insurers and in such
forms and amounts and against such risks as are generally consistent with the
insurance coverage maintained by the Borrower and its Subsidiaries at the date
hereof, and (ii) forthwith upon any Lender's written request, furnish to such
Lender such information about such insurance as such Lender may from time to
time reasonably request, which information shall be prepared in form and detail
satisfactory to such Lender and certified by an Authorized Officer of the
Borrower.
(b) The Borrower will, and will cause each of its Subsidiaries which is
a Credit Party to, at all times keep their respective property which is subject
to the Lien of any Security Document insured in favor of the Collateral Agent,
and all policies or certificates (or certified copies thereof) with respect to
such insurance (and any other insurance maintained by the Borrower or any such
Subsidiary) (i) shall be endorsed to the Collateral Agent's satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as loss payee (with respect to Collateral) or, to the extent
permitted by applicable law, as an additional insured), (ii) shall state that
such insurance policies shall not be canceled without 30 days' prior written
notice thereof (or 10 days' prior written notice in the case of cancellation for
the non-payment of premiums) by the respective insurer to the Collateral Agent,
(iii) shall provide that the respective insurers irrevocably waive any and all
rights of subrogation with respect to the Collateral Agent and the Lenders, and
(iv) shall in the case of any such certificates or endorsements in favor of the
Collateral Agent, be delivered to or deposited with the Collateral Agent. In no
event shall the Borrower be required to deposit the actual insurance policies
with the Collateral Agent. The Administrative Agent shall deliver copies of any
certificates of insurance to a Lender upon such Lender's request.
(c) If the Borrower or any of its Subsidiaries shall fail to maintain
all insurance in accordance with this section 8.3, or if the Borrower or any of
its Subsidiaries shall fail to so endorse and deliver or deposit all
endorsements or certificates with respect thereto, the Administrative Agent
and/or the Collateral Agent shall have the right (but shall be under no
obligation), upon prior notice to the Borrower, to procure such insurance and
the Borrower agrees to reimburse the Administrative Agent or the Collateral
Agent, as the case may be, on demand, for all costs and expenses of procuring
such insurance.
8.4. PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien or charge upon any properties of the Borrower or any of
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its Subsidiaries; PROVIDED that neither the Borrower nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP; and PROVIDED,
FURTHER, that the Borrower will not be considered to be in default of any of the
provisions of this sentence if the Borrower or any Subsidiary fails to pay any
such amount which, individually or in the aggregate, is immaterial. Without
limiting the generality of the foregoing, the Borrower will, and will cause each
of its Subsidiaries to, pay in full all of its wage obligations to its employees
in accordance with the Fair Labor Standards Act (29 U.S.C. sections 206-207) and
any comparable provisions of applicable law.
8.5. CORPORATE FRANCHISES. The Borrower will do, and will cause each of
its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, rights and authority,
PROVIDED that any transaction permitted by section 9.2 will not constitute a
breach of this section 8.5.
8.6. GOOD REPAIR. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements, thereto, to the extent and in the manner customary for
companies in similar businesses.
8.7. COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause
each of its Subsidiaries to, comply, in all material respects, with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property, other than those the
noncompliance with which would not have, and which would not be reasonably
expected to have, a Material Adverse Effect.
8.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. Without limitation of the
covenants contained in section 8.7, the Borrower will comply, and will cause
each of its Subsidiaries to comply, in all material respects, with all
Environmental Laws applicable to the ownership, lease or use of all Real
Property now or hereafter owned, leased or operated by the Borrower or any of
its Subsidiaries, will promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, and will keep or cause to be kept
all such Real Property free and clear of any Liens imposed pursuant to such
Environmental Laws which are not permitted under section 9.3. Neither the
Borrower nor any of its Subsidiaries will generate, use, treat, store, release
or dispose of, or permit the generation, use, treatment, storage, release or
disposal of, Hazardous Materials on any Real Property now or hereafter owned,
leased or operated by the Borrower or any of its Subsidiaries or transport or
permit the transportation of Hazardous Materials to or from any such Real
Property other than in compliance with applicable Environmental Laws and in the
ordinary course of business, except for such noncompliance as would not have,
and which would not be reasonably expected to have, a Material Adverse Effect.
If required to do so under any applicable order of any governmental agency, the
Borrower will undertake, and cause each of its Subsidiaries to undertake, any
clean up, removal, remedial or other action necessary to remove and clean up any
Hazardous Materials from any Real Property owned, leased or operated by the
Borrower or any of its Subsidiaries in accordance with, in all material
respects, the requirements of all applicable Environmental Laws and in
accordance with, in all material respects, such orders of all governmental
authorities, except to the extent that the Borrower or such Subsidiary is
contesting such order in good faith and by appropriate proceedings and for which
adequate reserves have been established to the extent required by GAAP.
8.9. FISCAL YEARS, FISCAL QUARTERS. If the Borrower shall change any of
its or any of its Subsidiaries' fiscal years or fiscal quarters (other than the
fiscal year or fiscal quarters of a person which becomes a Subsidiary, made at
the time such person becomes a Subsidiary to conform to the Borrower's (or such
Subsidiary's immediate parent's) fiscal year and fiscal quarters), the Borrower
will promptly, and in any event within 30 days following any such change,
deliver a notice to the Administrative Agent and the Lenders describing such
change and any material accounting entries made in connection therewith and
stating whether such change will have any impact upon any financial computations
to be made hereunder, and if any such impact is foreseen, describing in
reasonable detail the nature and extent of such impact; PROVIDED that the
Borrower may omit to give any such notice relating to a change
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in the fiscal year or fiscal quarters of a Foreign Subsidiary if such change
will not have any material impact upon any financial computations to be made
hereunder. If the Required Lenders determine that any such change notified by
the Borrower will have any impact upon any financial computations to be made
hereunder which is adverse to the Lenders, the Borrower will, if so requested by
the Administrative Agent, enter into an amendment to this Agreement, in form and
substance satisfactory to the Administrative Agent and the Required Lenders,
modifying any of the financial covenants or related provisions hereof in such
manner as the Required Lenders determine is necessary to eliminate such adverse
effect.
8.10. CERTAIN SUBSIDIARIES TO GUARANTEE OBLIGATIONS. (a) In the event
that at any time after the Effective Date, the Borrower has any Domestic
Subsidiary which is a Material Subsidiary (other than MARTA Technologies, Inc.,
UNLESS either (x) such Subsidiary shall continue as a Subsidiary but shall no
longer be treated under GAAP as a discontinued operation, or (y) the Required
Lenders require that such Subsidiary be subject to this section 8.10(a)), the
Borrower will promptly, and in any event within 30 days following any date when
such circumstances exist, notify the Administrative Agent in writing of such
circumstances, identifying the Domestic Subsidiary or Subsidiaries in question
and referring specifically to the rights of the Administrative Agent and the
Lenders under this section 8.10.
(b) The Borrower represents and warrants that as of the Effective Date
it has no Domestic Subsidiary which is a Material Subsidiary (other than MARTA
Technologies, Inc.).
(c) If at any time when the circumstances described in section 8.10(a)
exist, the Administrative Agent requests the Borrower in writing to do so (the
Administrative Agent may give such request on its own initiative or upon request
by the Required Lenders), the Borrower will promptly and in any event within 10
days following receipt by it of such request from the Administrative Agent,
cause each such Domestic Subsidiary which is a Material Subsidiary to deliver to
the Administrative Agent, in sufficient quantities for the Lenders, (i) a
guaranty (a "GUARANTY") of all of the Obligations (and, if required by the terms
thereof or any consents, waivers or amendments obtained in connection therewith,
any other Indebtedness of the Borrower and its Domestic Subsidiaries on a PARI
PASSU basis), satisfactory in form and substance to the Administrative Agent and
the Required Lenders, duly executed by each such Subsidiary, and (ii) if such
Subsidiary is a corporation, resolutions of the Board of Directors of such
Subsidiary, certified by the Secretary or an Assistant Secretary of such
Subsidiary as duly adopted and in full force and effect, authorizing the
execution and delivery of such guaranty, or if such Subsidiary is not a
corporation, such other evidence of the authority of such Subsidiary to execute
such guaranty as the Administrative Agent may reasonably request; PROVIDED,
HOWEVER, that the Borrower may, upon prior written notice to the Administrative
Agent, defer compliance with the foregoing requirement for a period of up to 30
days to the extent necessary in order to
(A) obtain any consents, waivers or amendments of any
documents evidencing or governing any Indebtedness of the Borrower or
any of its Subsidiaries (other than the Obligations) which may be
required in order for any Domestic Subsidiary which is a Material
Subsidiary to guarantee the Obligations (and, if required, any other
Indebtedness of the Borrower and its Domestic Subsidiaries on a PARI
PASSU basis) without causing an event of default under such
Indebtedness; and/or
(B) prepay in full all Indebtedness as to which such consents,
waivers or amendments have not been so obtained, so as to eliminate any
necessity for obtaining same in order to provide the guaranty referred
to above and avoid an event of default under any such Indebtedness.
8.11. ADDITIONAL COLLATERAL; FURTHER ASSURANCES. (a) In the event that
at any time after the Closing Date the Borrower or any of its Subsidiaries has
any Material Subsidiary (other than MARTA Technologies, Inc., UNLESS either (x)
such Subsidiary shall continue as a Subsidiary but shall no longer be treated
under GAAP as a discontinued operation, or (y) the Required Lenders require that
such Subsidiary be subject to this section 8.11(a)), the Borrower will promptly,
and in any event within 30 days after the person becomes such a Material
Subsidiary, notify the Administrative Agent thereof and of the rights of the
Administrative Agent and the Lenders under this section 8.11(a). If requested by
the Administrative Agent or the Required Lenders, the Borrower will, or will
cause the Subsidiary which owns the capital stock or other equity interests in
such person which has become such a
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Subsidiary to, join in the Pledge Agreement, or in the case of a person which is
a Foreign Subsidiary, enter into a pledge agreement, acceptable in form and
substance to the Collateral Agent and conforming to the requirements of law of
the jurisdiction in which such Foreign Subsidiary is organized, and pledge or
cause to be pledged to the Collateral Agent all (or at least 65%, in the case of
any such person which is a Foreign Subsidiary) of the capital stock and other
equity interests in such person (and any other Collateral of the nature
described in the Pledge Agreement) which are owned by the Borrower or any
Subsidiary, as the case may be, to the Collateral Agent, for the benefit of the
Secured Creditors (as defined in the Pledge Agreement). Notwithstanding the
foregoing, the Borrower shall not be required to cause to be pledged any of the
stock or other equity interests in any Foreign Subsidiary which is not a first
tier Foreign Subsidiary of the Borrower.
(b) In the event that at any time after the Closing Date the Borrower
or any of its Subsidiaries has any Domestic Subsidiary which is a Material
Subsidiary (other than MARTA Technologies, Inc., UNLESS either (x) such
Subsidiary shall continue as a Subsidiary but shall no longer be treated under
GAAP as a discontinued operation, or (y) the Required Lenders require that such
Subsidiary be subject to this section 8.11(b)), which is not a party to the
Security Agreement, the Borrower will promptly, and in any event within 30 days
after the person becomes such a Subsidiary, notify the Administrative Agent
thereof and of the rights of the Administrative Agent and the Lenders under this
section 8.11(b). If requested by the Administrative Agent or the Required
Lenders, the Borrower will cause such Subsidiary to join in the Security
Agreement as an Assignor thereunder.
(c) The Borrower will if requested by any Lender at any time, in order
to meet any legal requirement applicable to such Lender, provide to the
Collateral Agent and the Lenders, at the sole cost and expense of the Borrower,
appraisals and other supporting documentation relating to any Mortgage, as
specified by any Lender, meeting the appraisal and other documentation
requirements of the Real Estate Reform Amendments of the Financial Institution
Reform, Recovery and Enforcement Act of 1989, as amended, or any other legal
requirements applicable to any Lender, which in the case of any such appraisal
shall be prepared by one or more valuation firms of national standing,
acceptable to the Required Lenders, utilizing appraisal standards satisfying
such Amendments, Act or other legal requirements.
(d) The Borrower will, and will cause each of its Subsidiaries to, at
the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such conveyances, financing
statements, transfer endorsements, stock powers, powers of attorney,
certificates, and other assurances or instruments and take such further steps
relating to the Collateral covered by any of the Security Documents as the
Collateral Agent may reasonably require. Furthermore, the Borrower shall cause
to be delivered to the Collateral Agent such opinions of local counsel as may be
reasonably requested by the Administrative Agent or the Collateral Agent in
connection with the perfection of the Liens of any Security Documents in any
jurisdiction outside the United States.
8.12. MOST FAVORED COVENANT STATUS. Should the Borrower at any time
after the Effective Date, issue or guarantee any unsecured Indebtedness
denominated in U.S. dollars for money borrowed or represented by bonds, notes,
debentures or similar securities in an aggregate amount exceeding $10,000,000,
to any lender or group of lenders acting in concert with one another, or one or
more institutional investors, pursuant to a loan agreement, credit agreement,
note purchase agreement, indenture, guaranty or other similar instrument, which
agreement, indenture, guaranty or instrument, includes affirmative or negative
business or financial covenants (or any events of default or other type of
restriction which would have the practical effect of any affirmative or negative
business or financial covenant, including, without limitation, any "put" or
mandatory prepayment of such Indebtedness upon the occurrence of a "change of
control") which are applicable to the Borrower, other than those set forth
herein or in any of the other Credit Documents, the Borrower shall promptly so
notify the Administrative Agent and the Lenders and, if the Administrative Agent
shall so request by written notice to the Borrower (after a determination has
been made by the Required Lenders that any of the above-referenced documents or
instruments contain any such provisions, which either individually or in the
aggregate, are more favorable to the holders of such unsecured Indebtedness than
any of the provisions set forth herein), the Borrower, the Administrative Agent
and the Lenders shall promptly amend this Agreement to incorporate some or all
of such provisions, in the discretion of the Administrative Agent and the
Required Lenders, into this Agreement and, to the extent necessary and
reasonably
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desirable to the Administrative Agent and the Required Lenders, into any of the
other Credit Documents, all at the election of the Administrative Agent and the
Required Lenders.
8.13. HEDGE AGREEMENTS, ETC. The Borrower will, and will cause each of
its Subsidiaries to, enter into Hedge Agreements (i) in order to provide
protection to the Borrower or any such Subsidiary from fluctuations and other
changes in interest rates and currency exchange rates, as and to the extent
considered reasonably necessary by the Borrower, but without exposing the
Borrower or its Subsidiaries to predominantly speculative risks unrelated to the
amount of assets, Indebtedness or other liabilities intended to be subject to
coverage on a notional basis under all such Hedge Agreements; and (ii) in the
case of any Hedge Agreement entered into after the Effective Date, only if the
proposed form thereof (including any proposed pricing or other material terms)
has been provided to the Administrative Agent contemporaneously with the entry
into such Hedge Agreement.
8.14. CASUALTY AND CONDEMNATION. (a) The Borrower will promptly (and in
any event within 10 days) furnish to the Administrative Agent and the Lenders
written notice of any Event of Loss involving any property included in the
Collateral which is reasonably believed to be in excess of $5,000,000.
(b) If any Event of Loss results in Net Proceeds (whether in the form
of insurance proceeds, a condemnation award or otherwise), a portion or all of
which is required to be applied as a prepayment of the Loans pursuant to section
5.2, the Collateral Agent is authorized to collect such Net Proceeds and, if
received by any Credit Party, the Borrower will, or will cause any applicable
Credit Party, to pay over such Net Proceeds to the Collateral Agent.
8.15. SENIOR DEBT. The Borrower will at all times ensure that (a) the
claims of the Lenders in respect of the Obligations of the Borrower will not be
subordinate to, and will in all respects rank PARI PASSU with, the claims of the
holders of the Senior Notes, and (b) any Indebtedness subordinated in any manner
to the claims of any other senior unsecured creditor of the Borrower will be
subordinated in like manner to such claims of the Lenders.
SECTION 9. NEGATIVE COVENANTS.
The Borrower hereby covenants and agrees that on the Effective Date and
thereafter for so long as this Agreement is in effect and until such time as the
Total Commitment has been terminated, no Notes or Letters of Credit remain
outstanding and the Loans, together with interest, Fees and all other
Obligations incurred hereunder are paid in full:
9.1. CHANGES IN BUSINESS. Neither the Borrower nor any of its
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries, would be substantially changed from the
general nature of the business engaged in by the Borrower and its Subsidiaries
on the date hereof.
9.2. CONSOLIDATION, MERGER, ACQUISITIONS, ASSET SALES, ETC. The
Borrower will not, and will not permit any Subsidiary to, (1) wind up, liquidate
or dissolve its affairs, (2) enter into any transaction of merger or
consolidation, (3) make or otherwise effect any Acquisition, (4) sell or
otherwise dispose of any of its property or assets outside the ordinary course
of business, or otherwise make or otherwise effect any Asset Sale, or (5) agree
to do any of the foregoing at any future time, EXCEPT that the following shall
be permitted:
(a) CERTAIN INTERCOMPANY MERGERS, ETC. If no Default or Event
of Default shall have occurred and be continuing or would result
therefrom, (i) the merger, consolidation or amalgamation of any
Wholly-Owned Subsidiary with or into the Borrower or another
Wholly-Owned Subsidiary, so long as in any merger, consolidation or
amalgamation involving the Borrower, the Borrower is the surviving or
continuing or resulting corporation, (ii) the liquidation or
dissolution of any Wholly-Owned Subsidiary of the Borrower, and (iii)
the transfer or other disposition of any property by the Borrower to
any Wholly-Owned Subsidiary or by any Wholly-Owned Subsidiary to the
Borrower or any other Wholly-Owned Subsidiary of the Borrower, shall
each be permitted.
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(b) OTHER MERGERS, ETC. INVOLVING THE BORROWER. The Borrower
may consolidate or merge with any other corporation, or sell, transfer
or otherwise dispose of all or substantially all of the property and
assets of the Borrower and its Subsidiaries to any person, if (i) the
surviving, continuing or resulting corporation of such merger or
consolidation (if other than the Borrower) or the acquiring person
unconditionally assumes the obligations of the Borrower under the
Credit Documents pursuant to an assumption agreement in form and
substance reasonably satisfactory to the Required Lenders, (ii) no
Event of Default has occurred and is continuing or would result
therefrom, and (iii) no Change of Control would be occasioned thereby.
(c) PERMITTED ACQUISITIONS. If no Default or Event of Default
shall have occurred and be continuing or would result therefrom, the
Borrower or any Subsidiary may make any Acquisition which is a
Permitted Acquisition, PROVIDED that all of the requirements contained
in the definition of the term Permitted Acquisition are satisfied.
(d) PERMITTED DISPOSITIONS. If no Default or Event of Default
shall have occurred and be continuing or would result therefrom, the
Borrower or any of its Subsidiaries may (i) sell any property, land or
building (including any related receivables or other intangible assets)
to any person which is not a Subsidiary of the Borrower, or (ii) sell
the entire capital stock (or other equity interests) and Indebtedness
of any Subsidiary owned by the Borrower or any other Subsidiary to any
person which is not a Subsidiary of the Borrower, or (iii) permit any
Subsidiary to be merged or consolidated with a person which is not an
Affiliate of the Borrower, or (iv) consummate any other Asset Sale with
a person who is not a Subsidiary of the Borrower; PROVIDED that:
(A) the consideration for such transaction represents
fair value (as determined by management of the Borrower);
(B) both (1) the cumulative aggregate consideration
for all such transactions completed after September 30, 1998
does not exceed an amount equal to 15% of the Borrower's
Consolidated Total Assets as of the end of the most recent
fiscal year prior thereto for which financial statements have
been delivered to the Lenders hereunder; and (2) the aggregate
consideration for all such transactions completed during the
then current fiscal year does not exceed an amount equal to
10% of the Borrower's Consolidated Total Assets as of the
commencement of such fiscal year; PROVIDED, HOWEVER, that
there shall be excluded from computations under this clause
(B) the aggregate consideration for any disposition of MARTA
Technologies, Inc. (or its assets);
(C) in the case of any such transaction involving
consideration in excess of $10,000,000, at least five Business
Days prior to the date of completion of such transaction the
Borrower shall have delivered to the Administrative Agent an
officer's certificate executed on behalf of the Borrower by an
Authorized Officer of the Borrower, which certificate shall
contain (1) a description of the proposed transaction, the
date such transaction is scheduled to be consummated, the
estimated purchase price or other consideration for such
transaction, (2) financial information pertaining to
compliance with the preceding clauses (A) and (B), (3) a
certification that no Default or Event of Default has occurred
and is continuing, or would result from consummation of such
transaction, and (4) which shall (if requested by the
Administrative Agent) include a certified copy of the draft or
definitive documentation pertaining thereto; and
(D) no sale or other disposition of any Mortgaged
Property shall be made to any person under any circumstances,
UNLESS all of the Lenders otherwise agree in writing.
(e) LEASES. The Borrower or any of its Subsidiaries may enter
into leases of property or assets not constituting Acquisitions or
Asset Sales, PROVIDED such leases are not otherwise in violation of
this Agreement.
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(f) CAPITAL EXPENDITURES: The Borrower and it Subsidiaries
shall be permitted to make any Consolidated Capital Expenditures which
will not result in a violation of this Agreement.
(g) PERMITTED INVESTMENTS. The Borrower and it Subsidiaries
shall be permitted to make the investments permitted pursuant to
section 9.5.
To the extent the Required Lenders (or all of the Lenders as shall be required
by section 12.12) waive the provisions of this section 9.2 with respect to the
sale, transfer or other disposition of any Collateral, or any Collateral is
sold, transferred or disposed of as permitted by this section 9.2, (i) such
Collateral shall be sold, transferred or disposed of free and clear of the Liens
created by the respective Security Documents; (ii) if such Collateral includes
all of the capital stock of a Subsidiary which is a party to a Guaranty entered
into pursuant to section 8.10 or any Security Document, or whose capital stock
is pledged under a Security Document, such capital stock shall be released from
the Security Documents and such Subsidiary shall be released from such Guaranty;
and (iii) the Administrative Agent and the Collateral Agent are hereby
authorized to take actions deemed appropriate by them in order to effectuate the
foregoing.
9.3. LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with or without
recourse to the Borrower or any of its Subsidiaries, other than for purposes of
collection of delinquent accounts in the ordinary course of business) or assign
any right to receive income, or file or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute, EXCEPT that the foregoing restrictions shall not
apply to:
(a) STANDARD PERMITTED LIENS: the Standard Permitted Liens;
(b) EXISTING LIENS, ETC.: Liens (i) in existence on the
Effective Date which are listed, and the Indebtedness secured thereby
and the property subject thereto on the Effective Date described, in
Annex IV, or (ii) arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any such Liens, PROVIDED that
the principal amount of such Indebtedness is not increased and such
Indebtedness is not secured by any additional assets; and
(c) PURCHASE MONEY LIENS AND LIENS ON ACQUIRED PROPERTIES:
Liens which
(i) are placed upon equipment or machinery or
improvements to Real Property (including the associated Real
Property) used in the ordinary course of business of the
Borrower or any Subsidiary at the time of (or within 180 days
after) the acquisition of such equipment or machinery or the
completion of such improvements by the Borrower or any such
Subsidiary to secure Indebtedness incurred to pay or finance
all or a portion of the purchase price or other cost thereof,
PROVIDED that the Lien encumbering the equipment or machinery
so acquired or the Real Property so improved does not encumber
any other asset of the Borrower or any such Subsidiary; or
(ii) are existing on property or other assets at the
time acquired by the Borrower or any Subsidiary or on assets
of a person at the time such person first becomes a Subsidiary
of the Borrower; PROVIDED that (A) any such Liens were not
created at the time of or in contemplation of the acquisition
of such assets or person by the Borrower or any of its
Subsidiaries; (B) in the case of any such acquisition of a
person, any such Lien attaches only to the property and assets
of such person; and (C) in the case of any such acquisition of
property or assets by the Borrower or any Subsidiary, any such
Lien attaches only to the property and assets so acquired and
not to any other property or assets of the Borrower or any
Subsidiary;
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PROVIDED that (1) the Indebtedness secured by any such Lien does not
exceed 100% of the fair market value of the property and assets to
which such Lien attaches, determined at the time of the acquisition or
improvement of such property or asset or the time at which such person
becomes a Subsidiary of the Borrower (except in the circumstances
described in clause (ii) above to the extent such Liens constituted
customary purchase money Liens at the time of incurrence and were
entered into in the ordinary course of business), and (2) the
Indebtedness secured thereby is permitted by section 9.4(c).
9.4. INDEBTEDNESS. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness of the Borrower or any of its Subsidiaries, EXCEPT:
(a) CREDIT DOCUMENTS: Indebtedness incurred under this
Agreement and the other Credit Documents;
(b) EXISTING INDEBTEDNESS: Existing Indebtedness; and any
refinancing, extension, renewal or refunding of any such Existing
Indebtedness not involving an increase in the principal amount thereof
or a reduction of more than 10% in the remaining weighted average life
to maturity thereof (computed in accordance with standard financial
practice); PROVIDED that any Existing Indebtedness identified in Annex
III or otherwise referred to in section 6.1 as being intended to be
refinanced by Loans incurred hereunder or otherwise retired, may not be
otherwise refinanced;
(c) PRIORITY DEBT: the following Indebtedness (collectively,
"PRIORITY DEBT"):
(i) Indebtedness consisting of Capital Lease
Obligations of the Borrower and its Subsidiaries,
(ii) Indebtedness secured by a Lien on any property
of the Borrower or any Subsidiary, and
(iii) other Indebtedness of Subsidiaries of the
Borrower (exclusive of Indebtedness owed pursuant to any of
the Credit Documents or to the Borrower or a Wholly-Owned
Subsidiary of the Borrower);
PROVIDED that at the time of any incurrence thereof after the date
hereof, and after giving effect thereto, (A) the Borrower would be in
compliance with sections 9.8 and 9.9, and no Event of Default shall
have occurred and be continuing or would result therefrom; and (B) the
aggregate outstanding principal amount (using Capitalized Lease
Obligations in lieu of principal amount, in the case of any Capital
Lease) of Priority Debt permitted by this clause (c), exclusive of the
guarantees by Subsidiaries of the Borrower of the Borrower's Senior
Notes, does not exceed an amount equal to 20% of the Borrower's
Consolidated Net Worth as of the end of the most recent fiscal period
for which financial statements have been delivered to the Lenders
hereunder;
(d) INTERCOMPANY DEBT: Indebtedness of the Borrower to any of
its Subsidiaries, and Indebtedness of any of the Borrower's
Subsidiaries to the Borrower or to another Subsidiary of the Borrower;
(e) HEDGE AGREEMENTS: Indebtedness of the Borrower and its
Subsidiaries under Hedge Agreements;
(f) GUARANTY OBLIGATIONS: any Guaranty Obligations permitted
by section 9.5; and
(g) ADDITIONAL UNSECURED DEBT AND GUARANTY OBLIGATIONS:
additional unsecured Indebtedness of the Borrower (including additional
unsecured Guaranty Obligations of the Borrower), PROVIDED that at the
time of incurrence thereof, and after giving effect thereto, (i) the
Borrower would be
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in compliance with sections 9.8 and 9.9; and (ii) no Event of Default
shall have occurred and be continuing or would result therefrom.
9.5. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS. The
Borrower will not, and will not permit any of its Subsidiaries to, (1) lend
money or credit or make advances to any person, (2) purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, or other investment in, any person, (3) create, acquire
or hold any Subsidiary, (4) be or become a party to any joint venture or
partnership, or (5) be or become obligated under any Guaranty Obligations (other
than those which may be created in favor of the Lenders pursuant to the Credit
Documents), EXCEPT:
(a) the Borrower or any of its Subsidiaries may invest in cash
and Cash Equivalents;
(b) any endorsement of a check or other medium of payment for
deposit or collection, or any similar transaction in the normal course
of business;
(c) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(d) investments acquired by the Borrower or any of its
Subsidiaries (i) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer
of such other investment, or (ii) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
(e) loans and advances to employees for business-related
travel expenses, moving expenses, costs of replacement homes, business
machines or supplies, automobiles and other similar expenses, in each
case incurred in the ordinary course of business, shall be permitted;
(f) existing loans, advances and investments in any
Subsidiaries;
(g) to the extent not permitted by the foregoing clauses, the
existing loans, advances, investments and guarantees described on Annex
V hereto;
(h) investments of the Borrower and its Subsidiaries in Hedge
Agreements;
(i) loans and advances by any Subsidiary of the Borrower to
the Borrower, PROVIDED that the Indebtedness represented thereby
constitutes Subordinated Indebtedness;
(j) loans and advances by the Borrower or any Subsidiary to,
and investments by the Borrower or any Subsidiary in, any Wholly-Owned
Subsidiary;
(k) the Acquisitions permitted by section 9.2; and loans,
advances and investments of any person which are outstanding at the
time such person becomes a Subsidiary of the Borrower as a result of an
Acquisition permitted by section 9.2, but not any increase in the
amount thereof; and
(l) any unsecured Guaranty Obligation incurred by the Borrower
or any Subsidiary with respect to (i) Indebtedness of a Wholly-Owned
Subsidiary of the Borrower which is permitted under section 9.4, or
(ii) other obligations of a Wholly-Owned Subsidiary of the Borrower
which are not prohibited by this Agreement;
(m) guarantees by Subsidiaries of the Borrower of the
Borrower's Senior Notes, and any other Guaranty Obligations permitted
under section 9.4; and
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(n) any other equity investments (whether in the form of cash
or contribution of property, and if in the form of a contribution of
property, such property shall be valued for purposes of this clause at
the fair value thereof as reasonably determined by the Borrower),
including, without limitation, in or to Subsidiaries, Affiliates, joint
ventures, or other persons, not otherwise permitted by the foregoing
clauses, made after the end of the most recent fiscal quarter of the
Borrower for which financial statements were furnished to the Lenders
prior to the Effective Date, PROVIDED that (i) at the time of making
any such investment no Event of Default shall have occurred and be
continuing, or would result therefrom, and (ii) the aggregate cash
consideration used for all such equity investments made after September
30, 1998 does not exceed $10,000,000.
9.6. DIVIDENDS, ETC. The Borrower will not (x) directly or indirectly
declare, order, pay or make any dividend (other than dividends payable solely in
capital stock of the Borrower) or other distribution on or in respect of any
capital stock of any class of the Borrower, whether by reduction of capital or
otherwise (collectively "DIVIDENDS"), or (y) directly or indirectly make, or
permit any of its Subsidiaries to directly or indirectly make, any purchase,
redemption, retirement or other acquisition of any capital stock of any class of
the Borrower (other than for a consideration consisting solely of capital stock
of the same class of the Borrower) or of any warrants, rights or options to
acquire or any securities convertible into or exchangeable for any capital stock
of the Borrower (collectively, "STOCK REPURCHASES"), UNLESS, immediately prior
to and immediately after giving effect to any such action, (i) no Default under
section 10.1(a) or Event of Default shall have occurred and be continuing, and
(ii) the Borrower is in compliance with section 9.7.
9.7. MINIMUM CONSOLIDATED NET WORTH. The Borrower will not permit its
Consolidated Net Worth at any time to be less than $209,469,000, EXCEPT that (i)
effective as of the end of the Borrower's fiscal quarter ended on or nearest to
December 31, 1998, and as of the end of each fiscal quarter thereafter, the
foregoing amount (as it may from time to time be adjusted as herein provided),
shall be increased by 50% of the Consolidated Net Income of the Borrower for the
fiscal quarter ended on such date, if any (there being no reduction in the case
of any such Consolidated Net Income which reflects a deficit), (ii) the
foregoing amount (as it may from time to time be adjusted as herein provided),
shall be increased by an amount equal to 50% of the cash proceeds (net of
underwriting discounts and commissions and other customary fees and costs
associated therewith) from any sale or issuance of equity by the Borrower after
June 30, 1998 (other than any sale or issuance to management or employees or
employee benefit plans pursuant to employee benefit plans of general
application), (iii) the foregoing amount (as it may from time to time be
adjusted as herein provided), shall be increased by an amount equal to 50% of
the increase in Consolidated Net Worth attributable to the issuance of common
stock or other equity interests subsequent to June 30, 1998 as consideration in
any Acquisitions permitted under section 9.2, and (iv) the foregoing amount (as
it may from time to time be adjusted as herein provided), shall be decreased
(but not by more than a maximum of $50,000,000) by 100% of the aggregate value
of the consideration paid by the Borrower and its Subsidiaries in cash or
property for Stock Repurchases after December 31, 1999.
9.8. CONSOLIDATED TOTAL DEBT/CONSOLIDATED EBITDA RATIO. The Borrower
will not at any time permit the ratio of (x) the amount of its Consolidated
Total Debt at such time, TO (y) its Consolidated EBITDA for its Testing Period
most recently ended, to exceed (i) 3.50 to 1.00 for any Testing Period ended on
or prior to the Collateral Release Date, or (ii) 2.50 to 1.00, for any Testing
Period ended thereafter.
9.9. MINIMUM CONSOLIDATED EBITDA. The Borrower will not at any time
permit its Consolidated EBITDA for its Testing Period most recently ended to be
less than (i) $45,000,000, for any Testing Period ended on or prior to December
31, 1998, (ii) $36,000,000, for any Testing Period ended thereafter and on or
prior to September 30, 1999, (iii) $41,000,000, for its Testing Period ended
December 31, 1999, or (iv) $45,000,000, for any Testing Period ended thereafter.
9.10. FIXED CHARGE COVERAGE RATIO. The Borrower will not at any time
permit the ratio of
(x) its Consolidated EBITDA for any Testing Period, LESS its
Consolidated Capital Expenditures for such Testing Period, TO
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(y) the sum of its Consolidated Interest Expense, its
Consolidated Income Tax Expense and the aggregate amount expended in
cash or property (other than capital stock of the Borrower which is not
Redeemable Stock) for Dividends, for such Testing Period, PLUS the
amount representing the current portion (determined in accordance with
GAAP) of its Consolidated Total Long Term Debt as of the end of such
Testing Period,
to be less than (i) 2.00 to 1.00, for any Testing Period ended on or prior to
December 31, 1998, (ii) 1.50 to 1.00, for any Testing Period ended thereafter
and on or prior to December 31, 1999, or (iii) 2.00 to 1.00, for any Testing
Period ended thereafter; PROVIDED, that, notwithstanding the foregoing, if the
Collateral Release Date shall have occurred, the Borrower will not permit such
ratio to be less than 2.25 to 1.00 for any Testing Period ending after the
Collateral Release Date.
9.11. MINIMUM CONSOLIDATED ADJUSTED WORKING CAPITAL RATIO. The Borrower
will not at any time permit the ratio of (x) its Consolidated Adjusted Current
Assets, TO (y) the excess of its Consolidated Total Liabilities over the sum of
the aggregate outstanding principal amount of its Senior Notes and its IDB Debt,
to be less than 1.10 to 1.00.
9.12. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Borrower will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into, incur or permit to exist or become effective, any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or suffer to exist
any Lien upon any of its property or assets as security for Indebtedness, or (b)
the ability of any such Subsidiary to pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profits owned by the Borrower or any Subsidiary of the Borrower, or pay any
Indebtedness owed to the Borrower or a Subsidiary of the Borrower, or to make
loans or advances to the Borrower or any of the Borrower's other Subsidiaries,
or transfer any of its property or assets to the Borrower or any of the
Borrower's other Subsidiaries, EXCEPT for such restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest, (iv) customary provisions restricting
assignment of any licensing agreement entered into in the ordinary course of
business, (v) customary provisions restricting the transfer or further
encumbering of assets subject to Liens permitted under section 9.3(b) or (c),
(vi) restrictions contained in the Existing Indebtedness Agreements as in effect
on the Effective Date (and any similar restrictions contained in any agreement
governing any refinancing or refunding thereof not prohibited by this
Agreement), (vii) customary restrictions affecting only a Subsidiary of the
Borrower under any agreement or instrument governing any of the Indebtedness of
a Subsidiary permitted pursuant to 9.4, (viii) restrictions affecting any
Foreign Subsidiary of the Borrower under any agreement or instrument governing
any Indebtedness of such Foreign Subsidiary permitted pursuant to 9.4, and
customary restrictions contained in "comfort" letters and guarantees of any such
Indebtedness, (ix) any document relating to Indebtedness secured by a Lien
permitted by section 9.3, insofar as the provisions thereof limit grants of
junior liens on the assets securing such Indebtedness, and (x) any operating
lease or Capital Lease, insofar as the provisions thereof limit grants of a
security interest in, or other assignments of, the related leasehold interest to
any other person.
9.13. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions
with any Affiliate (other than, in the case of the Borrower, any Subsidiary, and
in the case of a Subsidiary, the Borrower or another Subsidiary) other than in
the ordinary course of business of and pursuant to the reasonable requirements
of the Borrower's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than would obtain in
a comparable arm's-length transaction with a person other than an Affiliate,
EXCEPT (i) sales of goods to an Affiliate for use or distribution outside the
United States which in the good faith judgment of the Borrower complies with any
applicable legal requirements of the Code, or (ii) agreements and transactions
with and payments to officers, directors and shareholders which are either (A)
entered into in the ordinary course of business and not prohibited by any of the
provisions of this Agreement, or (B) entered into outside the ordinary course of
business, approved by the directors or shareholders of the Borrower, and not
prohibited by any of the provisions of this Agreement.
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9.14. PLAN TERMINATIONS, MINIMUM FUNDING, ETC. The Borrower will not,
and will not permit any ERISA Affiliate to, (i) terminate any Plan or Plans so
as to result in liability of the Borrower or any ERISA Affiliate to the PBGC in
excess of, in the aggregate, the amount which is equal to the greater of (x)
$10,000,000, or (y) 5% of the Borrower's Consolidated Net Worth as of the date
of the then most recent financial statements furnished to the Lenders pursuant
to the provisions of this Agreement, (ii) permit to exist one or more events or
conditions which reasonably present a material risk of the termination by the
PBGC of any Plan or Plans with respect to which the Borrower or any ERISA
Affiliate would, in the event of such termination, incur liability to the PBGC
in excess of such amount in the aggregate, or (iii) fail to comply with the
minimum funding standards of ERISA and the Code with respect to any Plan.
SECTION 10. EVENTS OF DEFAULT.
10.1. EVENTS OF DEFAULT. Any of the following specified events shall
constitute an Event of Default (each an "EVENT OF DEFAULT"):
(a) PAYMENTS: the Borrower shall (i) default in the payment
when due of any principal of the Loans or any reimbursement obligation
in respect of any Unpaid Drawing; or (ii) default, and such default
shall continue for five or more Business Days, in the payment when due
of any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
(b) REPRESENTATIONS, ETC.: any representation, warranty or
statement made by the Borrower or any other Credit Party herein or in
any other Credit Document or in any statement or certificate delivered
or required to be delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or
deemed made; or
(c) CERTAIN AFFIRMATIVE AND NEGATIVE COVENANTS: the Borrower
shall default in the due performance or observance by it of any term,
covenant or agreement contained in sections 8.10 or 8.11, or in
sections 9.2 through 9.11, inclusive, of this Agreement; PROVIDED,
HOWEVER, that only in the case of a default under section 9.4(c) which
is attributable in whole or in part to the amount of Indebtedness of
Foreign Subsidiaries, such default under section 9.4(c) shall not
constitute an Event of Default hereunder unless it is not remedied
within 90 days, or if earlier, within 30 days after a financial or
accounting officer of the Borrower first obtains actual knowledge
thereof; or
(d) OTHER COVENANTS: the Borrower shall default in the due
performance or observance by it of any term, covenant or agreement
contained in this Agreement or any other Credit Document, other than
those referred to in section 10.1(a) or (b) or (c) above, and such
default is not remedied within 30 days after the earlier of (i) an
officer of the Borrower obtaining actual knowledge of such default and
(ii) the Borrower receiving written notice of such default from the
Administrative Agent or the Required Lenders (any such notice to be
identified as a "notice of default " and to refer specifically to this
paragraph); or
(e) CROSS DEFAULT UNDER OTHER AGREEMENTS: the Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to
any Indebtedness (other than the Obligations) owed to any Lender, or
having an unpaid principal amount of $5,000,000 or greater, and such
default shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness,
or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto (and
all grace periods applicable to such observance, performance or
condition shall have expired), or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its
stated maturity; or any such Indebtedness of the Borrower or any of its
Subsidiaries shall be declared to be due and payable, or shall be
required to be prepaid (other than by a regularly scheduled required
prepayment or redemption, prior to the stated maturity thereof); or
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(f) OTHER CREDIT DOCUMENTS: any Guaranty or any Security
Document (once executed and delivered) shall cease for any reason
(other than termination in accordance with its terms) to be in full
force and effect; or any Credit Party shall default in any payment
obligation thereunder; or any Credit Party shall default in any
material respect in the due performance and observance of any other
obligation thereunder and such default shall continue unremedied for a
period of at least 30 days after notice by the Administrative Agent or
the Required Lenders; or any Credit Party shall (or seek to) disaffirm
or otherwise limit its obligations thereunder otherwise than in strict
compliance with the terms thereof; or
(g) JUDGMENTS: one or more judgments or decrees shall be
entered against the Borrower and/or any of its Subsidiaries involving a
liability (other than a liability covered by insurance, as to which the
carrier has adequate claims paying ability and has not denied coverage
or reserved its rights) of $5,000,000 or more in the aggregate for all
such judgments and decrees for the Borrower and its Subsidiaries, and
any such judgments or decrees shall not have been vacated, discharged
or stayed or bonded pending appeal within 30 days (or such longer
period, not in excess of 60 days, during which enforcement thereof, and
the filing of any judgment lien, is effectively stayed or prohibited)
from the entry thereof; or
(h) BANKRUPTCY, ETC.: any of the following shall occur:
(i) the Borrower, any of its Material Subsidiaries or
any other Credit Party (the Borrower and each of such other
persons, each a "PRINCIPAL PARTY") shall commence a voluntary
case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "BANKRUPTCY CODE"); or
(ii) an involuntary case is commenced against any
Principal Party and the petition is not controverted within 10
days, or is not dismissed within 90 days, after commencement
of the case; or
(iii) a custodian (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or substantially all
of the property of any Principal Party; or
(iv) any Principal Party commences (including by way
of applying for or consenting to the appointment of, or the
taking of possession by, a rehabilitator, receiver, custodian,
trustee, conservator or liquidator (collectively, a
"CONSERVATOR") of itself or all or any substantial portion of
its property) any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency, liquidation, rehabilitation,
conservatorship or similar law of any jurisdiction whether now
or hereafter in effect relating to such Principal Party; or
(v) any such proceeding is commenced against any
Principal Party to the extent such proceeding is consented by
such person or remains undismissed for a period of 90 days; or
(vi) any Principal Party is adjudicated insolvent or
bankrupt; or
(vii) any order of relief or other order approving
any such case or proceeding is entered; or
(viii) any Principal Party suffers any appointment of
any conservator or the like for it or any substantial part of
its property which continues undischarged or unstayed for a
period of 90 days; or
(ix) any Principal Party makes a general assignment
for the benefit of creditors; or
(x) any corporate (or similar organizational) action
is taken by any Principal Party for the purpose of effecting
any of the foregoing; or
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(i) ERISA: (i) any of the events described in clauses (i)
through (viii) of section 8.1(f) shall have occurred; or (ii) there
shall result from any such event or events the imposition of a lien,
the granting of a security interest, or a liability or a material risk
of incurring a liability; and (iii) any such event or events or any
such lien, security interest or liability, individually, and/or in the
aggregate, in the opinion of the Required Lenders, has had, or could
reasonably be expected to have, a Material Adverse Effect; or
(j) MATERIAL ADVERSE EFFECT: any event or circumstance shall
occur or exist which has a Material Adverse Effect upon the Borrower,
as compared to the business, operations, property, assets, liabilities
or condition (financial or otherwise) of the Borrower and its
Subsidiaries as reflected in the financial statements and the Financial
Projections referred to in section 7.8.
10.2. ACCELERATION, ETC. Upon the occurrence of any Event of Default,
and at any time thereafter, if any Event of Default shall then be continuing,
the Administrative Agent shall, upon the written request of the Required
Lenders, by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of the Administrative Agent or any
Lender to enforce its claims against the Borrower in any manner permitted under
applicable law:
(a) declare the Total Commitment terminated, whereupon the
Commitment of each Lender shall forthwith terminate immediately without
any other notice of any kind;
(b) declare the principal of and any accrued interest in
respect of all Loans, all Unpaid Drawings and all other Obligations
owing hereunder and thereunder to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower;
(c) terminate any Letter of Credit which may be terminated in
accordance with its terms;
(d) direct the Borrower to pay (and the Borrower hereby agrees
that on receipt of such notice or upon the occurrence of an Event of
Default with respect to the Borrower under section 10.1(h), it will
pay) to the Administrative Agent an amount of cash equal to the
aggregate Stated Amount of all Letters of Credit then outstanding (such
amount to be held as security for the Borrower's (and any Subsidiary
which is an account party) reimbursement obligations in respect
thereof); and/or
(e) exercise any other right or remedy available under any of
the Credit Documents or applicable law;
PROVIDED that, if an Event of Default specified in section 10.1(h) shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (a) and/or
(b) above shall occur automatically without the giving of any such notice.
10.3. APPLICATION OF LIQUIDATION PROCEEDS. All monies received by the
Administrative Agent or any Lender from the exercise of remedies hereunder or
under the other Credit Documents or under any other documents relating to this
Agreement shall, unless otherwise required by the terms of the other Credit
Documents or by applicable law, be applied as follows:
(a) FIRST, to the payment of all expenses (to the extent not
paid by the Borrower) incurred by the Administrative Agent and the
Lenders in connection with the exercise of such remedies, including,
without limitation, all reasonable costs and expenses of collection,
attorneys' fees, court costs and any foreclosure expenses;
(b) SECOND, to the payment PRO RATA of interest then accrued
on the outstanding Loans;
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(c) THIRD, to the payment PRO RATA of any fees then accrued
and payable to the Administrative Agent, any Letter of Credit Issuer or
any Lender under this Agreement in respect of the Loans or the Letter
of Credit Outstandings;
(d) FOURTH, to the payment PRO RATA of (i) the principal
balance then owing on the outstanding Loans, and (ii) the Stated Amount
of the Letter of Credit Outstandings (to be held and applied by the
Administrative Agent as security for the reimbursement obligations in
respect thereof);
(e) FIFTH, to the payment to the Lenders of any amounts then
accrued and unpaid under sections 2.10, 2.11, 3.5 and 5.4 hereof, and
if such proceeds are insufficient to pay such amounts in full, to the
payment of such amounts PRO RATA;
(f) SIXTH, to the payment PRO RATA of all other amounts owed
by the Borrower to the Administrative Agent, to any Letter of Credit
Issuer or any Lender under this Agreement or any other Credit Document,
and if such proceeds are insufficient to pay such amounts in full, to
the payment of such amounts PRO RATA; and
(g) FINALLY, any remaining surplus after all of the
Obligations have been paid in full, to the Borrower or to whomsoever
shall be lawfully entitled thereto.
SECTION 11. THE ADMINISTRATIVE AGENT.
11.1. APPOINTMENT. Each Lender hereby irrevocably designates and
appoints KeyBank as Administrative Agent (such term to include, for the purposes
of this section 11, KeyBank acting as Collateral Agent) to act as specified
herein and in the other Credit Documents, and each such Lender hereby
irrevocably authorizes KeyBank as the Administrative Agent for such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated to the Administrative Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent agrees to act as such
upon the express conditions contained in this section 11. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, nor any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent. The provisions of this section 11 are solely
for the benefit of the Administrative Agent, and the Lenders, and the Borrower
and its Subsidiaries shall not have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and duties under this
Agreement, the Administrative Agent shall act solely as agent of the Lenders and
does not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for the Borrower or any of its
Subsidiaries.
11.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by section 11.3.
11.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such person under or in connection with this Agreement (except
for its or such person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or of its Subsidiaries or any
of their respective officers contained in this Agreement, any other Credit
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Credit Document or for any failure
of the Borrower or any Subsidiary of the Borrower or
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any of their respective officers to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries. The
Administrative Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Credit Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of the Borrower or any of its Subsidiaries to the Administrative Agent or any
Lender or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default.
11.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile transmission, telex or teletype message, statement, order or
other document or conversation believed by it, in good faith, to be genuine and
correct and to have been signed, sent or made by the proper person or persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Borrower or any of its Subsidiaries), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Lenders (or
all of the Lenders, as to any matter which, pursuant to section 12.12, can only
be effectuated with the consent of all Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders.
11.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder, other than a Default under section 10.1(a), UNLESS the Administrative
Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders, PROVIDED that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
11.6. NON-RELIANCE. Each Lender expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates have made any representations or warranties to
it and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Borrower or any of its Subsidiaries, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent, or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent, or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, assets, property, financial and other conditions, prospects or
creditworthiness of the Borrower or any of
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its Subsidiaries which may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
11.7. INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such ratably according to their
respective General Revolving Loans and Unutilized General Revolving Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against the Administrative Agent in its capacity as such
in any way relating to or arising out of this Agreement or any other Credit
Document, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Administrative Agent under or in connection with any of the foregoing, but
only to the extent that any of the foregoing is not paid by the Borrower,
PROVIDED that no Lender shall be liable to the Administrative Agent for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent resulting from the Administrative Agent's gross negligence or willful
misconduct. If any indemnity furnished to the Administrative Agent for any
purpose shall, in the opinion of the Administrative Agent, be insufficient or
become impaired, the Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this section 11.7 shall survive the
payment of all Obligations.
11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower, its Subsidiaries
and their Affiliates as though not acting as Administrative Agent hereunder.
With respect to the Loans made by it and all Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
11.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as the Administrative Agent upon 20 Business Days' notice to the Lenders
and the Borrower. The Required Lenders shall appoint from among the Lenders a
successor Administrative Agent for the Lenders, subject to (unless an Event of
Default shall have occurred and be continuing) prior approval by the Borrower of
such successor (such approval not to be unreasonably withheld or delayed),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall include such
successor agent effective upon its appointment, and the resigning Administrative
Agent's rights, powers and duties as the Administrative Agent shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the retiring
Administrative Agent's resignation hereunder as the Administrative Agent, the
provisions of this section 11 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement.
11.10. OTHER AGENTS. Any Lender identified herein as a Co-Agent,
Syndication Agent, Documentation Agent, Managing Agent, Manager or any other
corresponding title, other than "Administrative Agent", shall have no right,
power, obligation, liability, responsibility or duty under this Agreement or any
other Credit Document except those applicable to all Lenders as such. Each
Lender acknowledges that it has not relied, and will not rely, on any Lender so
identified in deciding to enter into this Agreement or in taking or not taking
any action hereunder.
SECTION 12. MISCELLANEOUS.
12.1. PAYMENT OF EXPENSES ETC. (a) Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to pay (or reimburse
the Administrative Agent for) all reasonable out-of-pocket costs and expenses of
the Administrative Agent in connection with the negotiation, preparation,
execution and delivery of the Credit Documents and the documents and instruments
referred to therein, and the syndication of the Commitments provided for herein,
including, without limitation, the reasonable fees and disbursements of Jones,
Day, Reavis & Pogue, special counsel to the Administrative Agent.
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(b) The Borrower agrees to pay (or reimburse the Administrative Agent
for) all reasonable out-of-pocket costs and expenses of the Administrative Agent
in connection with any amendment, waiver or consent relating to any of the
Credit Documents which is requested by any Credit Party, including, without
limitation, the reasonable fees and disbursements of Jones, Day, Reavis & Pogue,
special counsel to the Administrative Agent.
(c) The Borrower agrees to pay (or reimburse the Administrative Agent
and the Lenders for) all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Lenders in connection with the enforcement of any
of the Credit Documents or the other documents and instruments referred to
therein, including, without limitation, (i) the reasonable fees and
disbursements of Jones, Day, Reavis & Pogue, special counsel to the
Administrative Agent, and (ii) the reasonable fees and disbursements of any
individual counsel to any Lender (and any allocated costs of internal counsel).
(d) Without limitation of the preceding section 12.1(c), in the event
of the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of the Borrower or any of its Subsidiaries, the Borrower agrees to pay
all costs of collection and defense, including reasonable attorneys' fees in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
(e) The Borrower agrees to pay and hold the Administrative Agent and
each of the Lenders harmless from and against any and all present and future
stamp and other similar taxes with respect to the foregoing matters and save the
Administrative Agent and each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Lender) to pay such taxes.
(f) The Borrower agrees to indemnify the Administrative Agent and each
Lender, its officers, directors, employees, representatives and agents
(collectively, the "INDEMNITEES") from and hold each of them harmless against
any and all losses, liabilities, claims, damages or expenses reasonably incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of
(i) any investigation, litigation or other proceeding (whether
or not the Administrative Agent or any Lender is a party thereto)
related to the entering into and/or performance of any Credit Document
or the use of the proceeds of any Loans hereunder or the consummation
of any transactions contemplated in any Credit Document, other than any
such investigation, litigation or proceeding arising out of
transactions solely between any of the Lenders or the Administrative
Agent, transactions solely involving the assignment by a Lender of all
or a portion of its Loans and Commitments, or the granting of
participations therein, as provided in this Agreement, or arising
solely out of any examination of a Lender by any regulatory or other
governmental authority having jurisdiction over it, or
(ii) the actual or alleged presence of Hazardous Materials in
the air, surface water or groundwater or on the surface or subsurface
of any Real Property owned, leased or at any time operated by the
Borrower or any of its Subsidiaries, the release, generation, storage,
transportation, handling or disposal of Hazardous Materials at any
location, whether or not owned or operated by the Borrower or any of
its Subsidiaries, if the Borrower or any such Subsidiary could have or
is alleged to have any responsibility in respect thereof, the
non-compliance of any such Real Property with foreign, federal, state
and local laws, regulations and ordinances (including applicable
permits thereunder) applicable thereto, or any Environmental Claim
asserted against the Borrower or any of its Subsidiaries, in respect of
any such Real Property,
including, in each case, without limitation, the reasonable documented fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the person to be indemnified or of any other
Indemnitee who is such person or an Affiliate of such person). To the extent
that the undertaking to indemnify, pay or hold harmless any person set forth in
the preceding sentence may be
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unenforceable because it is violative of any law or public policy, the Borrower
shall make the maximum contribution to the payment and satisfaction of each of
the indemnified liabilities which is permissible under applicable law.
12.2. RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Lender (including, without limitation, by
branches and agencies of such Lender wherever located) to or for the credit or
the account of the Borrower against and on account of the Obligations and
liabilities of the Borrower to such Lender under this Agreement or under any of
the other Credit Documents, including, without limitation, all interests in
Obligations of the Borrower purchased by such Lender pursuant to section
12.4(c), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not such Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
12.3. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile transmission or cable communication)
and mailed, telegraphed, telexed, transmitted, cabled or delivered, if to the
Borrower, at 25101 Chagrin Boulevard, Beachwood, Ohio 44122, attention: Vice
President, Treasurer & Controller (facsimile: (216) 765-0410); if to any Lender
at its address specified for such Lender on Annex I hereto; if to the
Administrative Agent, at its Notice Office; or at such other address as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
12.4. BENEFIT OF AGREEMENT. (a) GENERAL. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns, PROVIDED that the Borrower
may not assign or transfer any of its rights or obligations hereunder without
the prior written consent of all the Lenders, and, PROVIDED, FURTHER, that any
assignment by a Lender of its rights and obligations hereunder shall be effected
in accordance with section 12.4(c).
(b) PARTICIPATIONS. Notwithstanding the foregoing, each Lender may at
any time grant participations in any of its rights hereunder or under any of the
Notes to (x) another Lender that is not a Defaulting Lender or to an Affiliate
of such Lender which is a commercial bank, financial institution or other
"accredited investor" (as defined in SEC Regulation D), or (y) one or more
Eligible Transferees, PROVIDED that in the case of any such participation,
(i) the participant shall not have any rights under this
Agreement or any of the other Credit Documents, including rights of
consent, approval or waiver (the participant's rights against such
Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participant relating
thereto),
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment hereunder) shall remain
unchanged,
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations,
(iv) such Lender shall remain the holder of any Note for all
purposes of this Agreement, and
(v) the Borrower, the Administrative Agent, and the other
Lenders shall continue to deal solely and directly with the selling
Lender in connection with such Lender's rights and obligations under
this Agreement, and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation, except
that the participant shall be entitled to the benefits of sections 2.10
and
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2.11 of this Agreement to the extent that such Lender would be entitled
to such benefits if the participation had not been entered into or
sold,
and, PROVIDED FURTHER, that no Lender shall transfer, grant or sell any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (w) extend the final scheduled
maturity of the Loans in which such participant is participating, or reduce the
rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof, or increase such
participant's participating interest in any Commitment over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default shall not constitute a change in the terms of any such Commitment), (x)
release all or any substantial portion of the Collateral, (y) release any
guarantor from its guaranty of any of the Obligations, except strictly in
accordance with the terms of the Credit Documents, or (z) consent to the
assignment or transfer by the Borrower of any of its rights or obligations under
this Agreement.
(c) ASSIGNMENTS BY LENDERS. Notwithstanding the foregoing, (x) any
Lender may assign all or a fixed portion of its Loans and/or Commitment, and its
rights and obligations hereunder, which does not have to be PRO RATA among the
Facilities, to another Lender that is not a Defaulting Lender, or to an
Affiliate of any Lender (including itself) and which is not a Defaulting Lender
and which is a commercial bank, financial institution or other "accredited
investor" (as defined in SEC Regulation D), and (y) any Lender may assign all,
or if less than all, a fixed portion, equal to at least $5,000,000 in the
aggregate for the assigning Lender or assigning Lenders, of its Loans and/or
Commitment and its rights and obligations hereunder, which does not have to be
PRO RATA among the Facilities, to one or more Eligible Transferees, each of
which assignees shall become a party to this Agreement as a Lender by execution
of an Assignment Agreement, PROVIDED that
(i) the Swing Line Lender may only assign its Swing Line
Revolving Commitment and its Swing Line Revolving Loans as an entirety
and only if the assignee thereof is or becomes a Lender with a General
Revolving Commitment,
(ii) in the case of any assignment of a portion of any Loans
and/or Commitment of a Lender, such Lender shall retain a minimum fixed
portion of all Loans and Commitments equal to at least $5,000,000,
(iii) at the time of any such assignment Annex I shall be
deemed modified to reflect the Commitments of such new Lender and of
the existing Lenders,
(iv) upon surrender of the old Notes, new Notes will be issued
to such new Lender and to the assigning Lender, such new Notes to be in
conformity with the requirements of section 2.6 (with appropriate
modifications) to the extent needed to reflect the revised Commitments,
(v) in the case of clause (y) only, the consent of the
Administrative Agent and each Letter of Credit Issuer shall be required
in connection with any such assignment (which consent shall not be
unreasonably withheld or delayed), and
(vi) the Administrative Agent shall receive at the time of
each such assignment, from the assigning or assignee Lender, the
payment of a non-refundable assignment fee of $3,500,
and, PROVIDED FURTHER, that such transfer or assignment will not be effective
until the Assignment Agreement in respect thereof is recorded by the
Administrative Agent on the Lender Register maintained by it as provided herein.
To the extent of any assignment pursuant to this section 12.4(c) the
assigning Lender shall be relieved of its obligations hereunder with respect to
its assigned Commitments.
At the time of each assignment pursuant to this section 12.4(c) to a
person which is not already a Lender hereunder and which is not a United States
person (as such term is defined in section 7701(a)(30) of the Code) for
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Federal income tax purposes, the respective assignee Lender shall provide to the
Borrower and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable a Section 5.4(b)(ii) Certificate) described in section
5.4(b). To the extent that an assignment of all or any portion of a Lender's
Commitment and related outstanding Obligations pursuant to this section 12.4(c)
would, at the time of such assignment, result in increased costs under section
2.10 from those being charged by the respective assigning Lender prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
Nothing in this section 12.4(c) shall prevent or prohibit any Lender
from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
(d) NO SEC REGISTRATION OR BLUE SKY COMPLIANCE. Notwithstanding any
other provisions of this section 12.4, no transfer or assignment of the
interests or obligations of any Lender hereunder or any grant of participation
therein shall be permitted if such transfer, assignment or grant would require
the Borrower to file a registration statement with the SEC or to qualify the
Loans under the "Blue Sky" laws of any State.
(e) REPRESENTATIONS OF LENDERS. Each Lender initially party to this
Agreement hereby represents, and each person that became a Lender pursuant to an
assignment permitted by this section 12.4 will, upon its becoming party to this
Agreement, represent that it is a commercial lender, other financial institution
or other "accredited" investor (as defined in SEC Regulation D) which makes or
acquires loans in the ordinary course of its business and that it will make or
acquire Loans for its own account in the ordinary course of such business,
PROVIDED that subject to the preceding sections 12.4(b) and (c), the disposition
of any promissory notes or other evidences of or interests in Indebtedness held
by such Lender shall at all times be within its exclusive control.
12.5. NO WAIVER: REMEDIES CUMULATIVE. No failure or delay on the part
of the Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Administrative Agent or any Lender shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Administrative
Agent or any Lender would otherwise have. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
12.6. PAYMENTS PRO RATA. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of the Borrower in
respect of any Obligations, it shall distribute such payment to the Lenders
(other than any Lender that has expressly waived in writing its right to receive
its PRO RATA share thereof) PRO RATA based upon their respective shares, if any,
of the Obligations with respect to which such payment was received. As to any
such payment received by the Administrative Agent prior to 1:00 P.M. (local time
at the Payment Office) in funds which are immediately available on such day, the
Administrative Agent will use all reasonable efforts to distribute such payment
in immediately available funds on the same day to the Lenders as aforesaid.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total of such
Obligation then owed and due to such Lender bears to the total of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for cash
without recourse or warranty from the other Lenders an interest in the
Obligations to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, PROVIDED that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
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(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding sections 12.6(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Lenders which are not Defaulting Lenders, as opposed to
Defaulting Lenders.
12.7. CALCULATIONS: COMPUTATIONS. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); PROVIDED, that if at any time the computations
determining compliance with section 9 utilize accounting principles different
from those utilized in the financial statements furnished to the Lenders, such
computations shall set forth in reasonable detail a description of the
differences and the effect upon such computations.
(b) All computations of interest on Loans hereunder which are
denominated in Pounds Sterling shall be made on the actual number of days
elapsed over a year of 365 or 366 days, as applicable, and all computations of
interest on all other Loans hereunder and of Facility Fee, Letter of Credit Fees
and other Fees hereunder shall be made on the actual number of days elapsed over
a year of 360 days.
12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE
OF OHIO GOVERNS THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the Court of Common Pleas of Cuyahoga County, Ohio, or of the
United States for the Northern District of Ohio, and, by execution and delivery
of this Agreement, the Borrower hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Borrower hereby further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address for notices pursuant to section
12.3, such service to become effective 30 days after such mailing or at such
earlier time as may be provided under applicable law. Nothing herein shall
affect the right of the Administrative Agent or any Lender to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrower in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in section 12.8(a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
12.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same agreement. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
12.10. EFFECTIVENESS. This Agreement shall become effective on the date
(the "EFFECTIVE DATE") on which the Borrower and each of the Lenders shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Administrative Agent at the Notice Office of the
Administrative Agent or, in the
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case of the Lenders, shall have given to the Administrative Agent telephonic
(confirmed in writing), written telex or facsimile transmission notice (actually
received) at such office that the same has been signed and mailed to it.
12.11. HEADINGS DESCRIPTIVE. The headings of the several sections and
other portions of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
12.12. AMENDMENT OR WAIVER. Neither this Agreement, any of the other
Credit Documents, nor any terms hereof or thereof, may be amended, changed,
waived, discharged or terminated UNLESS such amendment, change, waiver,
discharge or termination is in writing signed by the Borrower (or other
appropriate Credit Party) and the Required Lenders, PROVIDED that no such
amendment, change, waiver, discharge or termination shall, without the consent
of each Lender (other than a Defaulting Lender) affected thereby,
(a) extend any maturity date provided for herein applicable to
a Loan or a Commitment, reduce the rate or extend the time of payment
of interest (other than as a result of waiving the applicability of any
post-default increase in interest rates) or Fees thereon, or reduce the
principal amount thereof, or increase the Commitment of any Lender over
the amount thereof then in effect (it being understood that a waiver of
any Default or Event of Default shall not constitute a change in the
terms of any Commitment of any Lender),
(b) release the Borrower from any obligations as a guarantor
of its Subsidiaries' obligations under any Credit Document,
(c) release any Subsidiary from its obligations as a guarantor
of any of the Obligations, except strictly in accordance with the terms
of the Credit Documents,
(d) release all or any substantial portion of the Collateral,
except strictly in accordance with the terms of the Credit Documents,
(e) change the definition of the term "Change of Control" or
any of the provisions of section 4.3 or 5.2 which are applicable upon a
Change of Control,
(f) amend, modify or waive any provision of this section
12.12, or section 11.7, 12.1, 12.4, 12.6 or 12.7(b), or any other
provision of any of the Credit Documents pursuant to which the consent
or approval of all Lenders is by the terms of such provision explicitly
required,
(g) reduce the percentage specified in, or otherwise modify,
the definition of Required Lenders, or
(h) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement; and
PROVIDED, FURTHER, that the Bond Letter of Credit Issuer may enter into any
amendment or modification of, or may waive compliance with the terms of any Bond
Document (other than an indenture), without the consent of any Lender, EXCEPT
that without the consent of all of the Lenders (other than a Defaulting Lender)
the Bond Letter of Credit Issuer shall not execute any instrument agreeing to
any amendment or modification of, or waiver of compliance with any Reimbursement
Agreement or Bond Document (i) which would (A) reduce the principal of, or
interest on any Letter of Credit Obligation, (B) postpone the due date for any
payment of principal of, or interest on, any Letter of Credit Obligation, (C)
extend the termination date of a Bond Letter of Credit beyond the Maturity Date,
(D) increase the amount of any Bond Letter of Credit or otherwise increase in
any material manner the obligations of the Participants, or (E) release or
otherwise adversely affect the interests of the Participants in any collateral
granted under any Reimbursement Agreement or Bond Document, or (ii) after the
occurrence of a Default or Event of Default of which it has written notice from
the Administrative Agent; PROVIDED, that (i) at least 30 days before extending
the termination date of any Bond Letter of Credit the Bond Letter of Credit
Issuer shall notify the
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Administrative Agent in writing, which will then notify each Lender, of such
proposed extension, and (ii) the Bond Letter of Credit Issuer will not waive any
"event of default" arising under any Reimbursement Agreement or Bond Document
without the consent of the Required Lenders.
No provision of section 3 or 11 may be amended without the consent of
(x) any Letter of Credit Issuer adversely affected thereby or (y) the
Administrative Agent, respectively.
12.13. SURVIVAL OF INDEMNITIES. All indemnities set forth herein
including, without limitation, in section 2.10, 2.11, 3.5, 5.4, 11.7 or 12.1
shall survive the execution and delivery of this Agreement and the making and
prepayment or repayment of the Loans.
12.14. DOMICILE OF LOANS. Each Lender may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or Affiliate of such
Lender, PROVIDED that the Borrower shall not be responsible for costs arising
under section 2.10 resulting from any such transfer (other than a transfer
pursuant to section 2.12) to the extent not otherwise applicable to such Lender
prior to such transfer.
12.15. CONFIDENTIALITY. Each Lender shall hold all non-public
information obtained pursuant to the requirements of this Agreement in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices.
Notwithstanding the foregoing, any Lender may in any event make disclosures of,
and furnish copies of such information (i) to another Lender; (ii) when
reasonably required by any BONA FIDE transferee or participant in connection
with the contemplated transfer of any Loans or Commitment or participation
therein (PROVIDED that each such prospective transferee and/or participant shall
execute an agreement for the benefit of the Borrower with such prospective
transferor Lender and/or participant containing provisions substantially
identical to those contained in this section 12.15); (iii) to its parent
corporation or corporations and its and their Affiliates, and to its and their
auditors and attorneys; and (iv) as required or requested by any governmental
agency or representative thereof or pursuant to legal process, PROVIDED that,
unless specifically prohibited by applicable law or court order, each Lender
shall notify the Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information. In no event shall any Lender be obligated or required to
return any materials furnished by or on behalf of the Borrower or any of its
Subsidiaries. The Borrower hereby agrees that the failure of a Lender to comply
with the provisions of this section 12.15 shall not relieve the Borrower of any
of the obligations to such Lender under this Agreement and the other Credit
Documents.
12.16. LENDER REGISTER. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this section
12.16, to maintain a register (the "LENDER REGISTER") on or in which it will
record the names and addresses of the Lenders, and the Commitments from time to
time of each of the Lenders, the Loans made to the Borrower by each of the
Lenders and each repayment and prepayment in respect of the principal amount of
such Loans of each such Lender. Failure to make any such recordation, or (absent
manifest error) any error in such recordation, shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Lender, the transfer
of the Commitment of such Lender and the rights to the principal of, and
interest on, any Loan made pursuant to such Commitment shall not be effective
until such transfer is recorded on the Lender Register maintained by the
Administrative Agent with respect to ownership of such Commitment and Loans and
prior to such recordation all amounts owing to the transferor with respect to
such Commitment and Loans shall remain owing to the transferor. The registration
of assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Administrative Agent on the Lender Register only upon the
acceptance by the Administrative Agent of a properly executed and delivered
Assignment Agreement pursuant to section 12.4(c). The Borrower agrees to
indemnify the Administrative Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Administrative Agent in performing its duties under
this section 12.16, except to the extent attributable to the gross negligence or
wilful misconduct of the Administrative Agent. The Lender Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
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12.17. LIMITATIONS ON LIABILITY OF THE LETTER OF CREDIT ISSUERS. The
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letters of
Credit. Neither any Letter of Credit Issuer nor any of its officers or directors
shall be liable or responsible for: (a) the use which may be made of any Letter
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by a
Letter of Credit Issuer against presentation of documents that do not comply
with the terms of a Letter of Credit, including failure of any documents to bear
any reference or adequate reference to such Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, EXCEPT that the Borrower (or a Subsidiary or Affiliate which is the
account party in respect of the Letter of Credit in question) shall have a claim
against a Letter of Credit Issuer, and a Letter of Credit Issuer shall be liable
to the Borrower (or such Subsidiary or Affiliate), to the extent of any direct,
but not consequential, damages suffered by the Borrower (or such Subsidiary or
Affiliate) which the Borrower (or such Subsidiary or Affiliate) proves were
caused by (i) such Letter of Credit Issuer's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit or (ii) such Letter of Credit
Issuer's willful failure to make lawful payment under any Letter of Credit after
the presentation to it of documentation strictly complying with the terms and
conditions of such Letter of Credit. In furtherance and not in limitation of the
foregoing, a Letter of Credit Issuer may accept documents that appear on their
face to be in order, without responsibility for further investigation.
12.18. GENERAL LIMITATION OF LIABILITY. No claim may be made by the
Borrower, any Lender, the Administrative Agent, any Letter of Credit Issuer or
any other person against the Administrative Agent, any Letter of Credit Issuer,
or any other Lender or the Affiliates, directors, officers, employees, attorneys
or agents of any of them for any damages other than actual compensatory damages
in respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement or
any of the other Credit Documents, or any act, omission or event occurring in
connection therewith; and each of the Borrower, each Lender, the Administrative
Agent and each Letter of Credit Issuer hereby, to the fullest extent permitted
under applicable law, waives, releases and agrees not to sue or counterclaim
upon any such claim for any special, consequential or punitive damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
12.19. NO DUTY. All attorneys, accountants, appraisers, consultants and
other professional persons (including the firms or other entities on behalf of
which any such person may act) retained by the Administrative Agent or any
Lender with respect to the transactions contemplated by the Credit Documents
shall have the right to act exclusively in the interest of the Administrative
Agent or such Lender, as the case may be, and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Borrower, to any of its Subsidiaries, or to any other person,
with respect to any matters within the scope of such representation or related
to their activities in connection with such representation.
12.20. LENDERS AND AGENT NOT FIDUCIARY TO BORROWER, ETC. The
relationship among the Borrower and its Subsidiaries, on the one hand, and the
Administrative Agent, each Letter of Credit Issuer and the Lenders, on the other
hand, is solely that of debtor and creditor, and the Administrative Agent, each
Letter of Credit Issuer and the Lenders have no fiduciary or other special
relationship with the Borrower and/or its Subsidiaries, and no term or provision
of any Credit Document, no course of dealing, no written or oral communication,
or other action, shall be construed so as to deem such relationship to be other
than that of debtor and creditor.
12.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties herein shall survive the making of Loans and the issuance of
Letters of Credit hereunder, the execution and delivery of this Agreement, the
Notes and the other documents the forms of which are attached as Exhibits
hereto, the issue and delivery of the Notes, any disposition thereof by any
holder thereof, and any investigation made by the Administrative Agent or any
Lender or any other holder of any of the Notes or on its behalf. All statements
contained in any certificate or other document delivered to the Administrative
Agent or any Lender or any holder of any Notes by or on behalf of the Borrower
or of its Subsidiaries pursuant hereto or otherwise specifically for use in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the
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Borrower hereunder, made as of the respective dates specified therein or, if no
date is specified, as of the respective dates furnished to the Administrative
Agent or any Lender
12.22. RELEASE OF COLLATERAL. If the Collateral Release Date has
occured and at such time no Default under section 10.1(a) or Event of Default
has occurred and is continuing, THEN promptly after receipt of written request
from the Borrower, the Collateral Agent shall release all Collateral and
discharge all Security Documents, pursuant to documents of release and discharge
prepared, filed and recorded at the expense of the Borrower and satisfactory in
form and substance to the Collateral Agent, and effective upon the execution of
such documents of release and discharge, (i) the Borrower shall have no
obligation under section 8.11 hereof to thereafter execute and deliver any
additional Security Document or otherwise provide Collateral for the
Obligations, and (ii) the provisions of section 5.2(e) hereof shall no longer be
of any further force or effect. .
12.23. JUDGMENT CURRENCY. (a) If for the purposes of obtaining judgment
in any court it is necessary to convert a sum due hereunder or under the Notes
in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER
CURRENCY") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the Original Currency with the Other Currency at the principal New York
office of a major United States financial institution selected by the
Administrative Agent on the Business Day immediately preceding the date on which
final judgment is rendered.
(b) The obligation of the Borrower in respect of any sum due in the
Original Currency from it to any Lender or the Administrative Agent hereunder or
under the Note held by such Lender shall, notwithstanding any judgment in any
Other Currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Administrative Agent (as the case may
be) of any sum adjudged to be so due in such Other Currency such Lender or the
Administrative Agent (as the case may be) may in accordance with normal banking
procedures purchase Dollars with such Other Currency; if the amount of the
Original Currency so purchased is less than the sum originally due to such
Lender or the Administrative Agent (as the case may be) in the Original
Currency, the Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender or the Administrative Agent (as the case
may be) against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Lender or the Administrative
Agent (as the case may be) in the Original Currency, such Lender or the
Administrative Agent (as the case may be) agrees to remit to the Borrower such
excess.
(c) For purposes of determining the equivalent in one currency of
another currency as provided in this section, such amount shall include any
premium and costs payable in connection with the conversion into or from any
currency.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
<TABLE>
<S> <C>
ALLEN TELECOM INC. KEYBANK NATIONAL ASSOCIATION,
INDIVIDUALLY AS THE SWING LINE LENDER,
A LENDER, A LETTER OF CREDIT ISSUER,
AND AS THE SYNDICATION AGENT AND
BY: /s/ James L. LePorte, III THE ADMINISTRATIVE AGENT
----------------------------------------
VICE PRESIDENT, TREASURER
& CONTROLLER
BY: /s/ Laurence J. Mack
------------------------------------------
SENIOR VICE PRESIDENT
NBD BANK, STAR BANK, NATIONAL ASSOCIATION
INDIVIDUALLY AS A LENDER AND
AS DOCUMENTATION AGENT
BY: /s/ David J. Dannemiller
------------------------------------------
TITLE: Vice President
BY: /s/ Glenn A. Currin
--------------------------------------
TITLE: VICE PRESIDENT
DRESDNER BANK AG, ISTITUTO BANCARIO SAN PAOLO DI TORINO ISTITUTO
NEW YORK AND GRAND CAYMAN BRANCHES, MOBILIARE ITALIANO S. P. A.,
INDIVIDUALLY AS A LENDER AND AS NEW YORK BRANCH
A LETTER OF CREDIT ISSUER
BY: /s/ Luca Sacchi
----------------------------------------------
TITLE: Vice President
BY:
--------------------------------------
TITLE:
BY:
---------------------------------------
TITLE:
FIFTH THIRD BANK, NORTHEASTERN OHIO LASALLE NATIONAL BANK
BY: /s/ James P. Byrnes BY: /s/ Mark T. Johnson
-------------------------------------- ----------------------------------------------
TITLE: Vice President TITLE: Vice President
</TABLE>
83
<PAGE> 1
EXHIBIT 10(l)
ALLEN TELECOM INC.
RESTRICTED STOCK AGREEMENT
PURSUANT TO 1992 STOCK PLAN
(Salary Increase Deferral)
Number of Restricted Shares January 12, 1999
-----
Allen Telecom Inc., a Delaware corporation (hereinafter called the
"Company"), pursuant to its 1992 Stock Plan, as amended (hereinafter called the
"Plan"), a copy of which is attached hereto as EXHIBIT A and is incorporated
herein by reference, hereby awards unto _________________ (hereinafter called
the "Employee") ________ shares of Common Stock of the Company, par value $1.00
per share (hereinafter called "Common Stock"), as additional compensation for
services rendered to the Company or a subsidiary thereof and in lieu of any
increase in the Employee's salary for a period of two years after the year in
which the Employee last received an increase in salary (except in unusual
circumstances as determined by the Management Compensation Committee, in its
sole discretion), on the terms and subject to the conditions hereinafter set
forth. These shares are referred to in this Agreement as "Restricted Shares"
during the applicable Restriction Period (as defined in paragraph 3(d) hereof).
Acceptance of the Restricted Shares shall be deemed to be agreement by the
Employee to the terms and conditions set forth in this Agreement and the Plan.
Certificates representing the Restricted Shares may not be sold or otherwise
transferred and must be held by the Employee until the end of the applicable
Restriction Period. Until such terms and conditions have lapsed with respect to
any Restricted Shares, the certificate for such shares will bear a legend to the
effect that they were issued or transferred subject to, and may be sold or
otherwise disposed of only in accordance with, the terms of this Agreement and
the Plan.
1. STOCKHOLDER STATUS. Effective upon the date of delivery to the Employee
of certificates for Restricted Shares registered in the Employee's name, the
Employee will be a holder of record of the Restricted Shares and will have all
rights of a stockholder with respect to such shares (including the right to vote
such shares at any meeting of stockholders of the Company and the right to
receive all dividends paid with respect to such shares), subject only to the
terms and conditions imposed by this Agreement and the Plan.
2. EFFECT OF CHANGES IN CAPITALIZATION. The number of Restricted Shares are
subject to adjustment as provided in Section 7 of the Plan. Any additional or
different shares or securities issued as the result of such an adjustment will
be delivered to the Employee and will be deemed to be included within the term
"Restricted Shares." The certificates or other instruments evidencing such
additional or different shares or securities shall bear the legend referred to
in the introductory paragraph; PROVIDED, HOWEVER, that any fractional shares and
any pre-emptive or other rights or warrants to purchase securities issued to the
Employee as a holder of Restricted Shares in connection with a public offering
will be issued to the Employee free and clear of all terms and conditions
imposed by this Agreement and the Plan.
3. LAPSE OF RESTRICTIONS. (a) The restrictions set forth in paragraph 4
below will lapse (i) in four equal consecutive annual installments, each equal
to one-fourth of the original number of Restricted Shares set forth in the first
paragraph of this Agreement, as such number may be adjusted pursuant to
paragraph 2 above (hereinafter called the "Original Number"), at the close of
business on December 31, 2005 and at the close of business on
<PAGE> 2
each December 31 thereafter, or (ii) with respect to one-eighth of the Original
Number at the end of the first period of ninety-one consecutive calendar days
commencing on or after December 31, 2001 during which the average daily Closing
Price (as defined below in this paragraph 3(a)) of the Company's Common Stock
equals or exceeds $15.00 per share, an additional one-eighth of the Original
Number at the end of the first such period during which such daily Closing Price
equals or exceeds $20.00 per share, an additional one-eighth of the Original
Number at the end of the first such period during which such daily Closing Price
equals or exceeds $25.00 per share and an additional one-eighth of the Original
Number at the end of the first such period during which such daily Closing Price
equals or exceeds $30.00 per share, or (iii) with respect to one-eighth of the
Original Number at the end of the first period of three consecutive fiscal years
of the Company commencing with the fiscal year 1999 during which the average net
income (excluding extraordinary and other non-operating gains and losses) per
share of Common Stock per year ("Average Net Income") equals or exceeds $1.03,
an additional one-eighth of the Original Number at the end of the first such
period during which Average Net Income equals or exceeds $1.13, an additional
one-eighth of the Original Number at the end of the first such period during
which Average Net Income equals or exceeds $1.27 and an additional one-eighth of
the Original Number at the end of the first such period during which Average Net
Income equals or exceeds $1.40, with any such Shares as to which restrictions
lapse pursuant to the preceding clause (ii) or (iii) prior to December 31, 2005
or any December 31 thereafter to be applied against the installments of the
Original Number set forth in clause (i) in the order in which the restrictions
would otherwise have lapsed with respect to such installments on December 31,
2005 and on each December 31 thereafter. The foregoing Closing Price and Average
Net Income amounts are subject to adjustment in the same manner as the price per
share of Options as provided in Section 7 of the Plan.
For purposes of this Agreement, "Closing Price" shall mean the
reported last sale price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way for Common Stock of the Company, in either case as reported on the
New York Stock Exchange Composite Tape, or, if at any time the Common Stock of
the Company is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock of the Company
is listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange, on the National Association of Securities Dealers
Automated Quotations National Market System or, if the Common Stock of the
Company is not listed or admitted to trading on any national securities exchange
or quoted on such National Market System, the average of the closing bid and
asked prices for Common Stock of the Company in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose.
(b) Notwithstanding paragraph 3(a) above, the restrictions set forth in
paragraph 4 below will lapse on all Restricted Shares at the close of business
on the date on which a Change in Control of the Company (as defined below in
this paragraph 3(b)) shall occur; PROVIDED, HOWEVER, that such restrictions will
not lapse on any Restricted Shares with respect to which any amount, as
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Internal Revenue Code of 1986,
as amended (the "Code"), when added to any other payment or benefit received or
to be received by the Employee in connection with a Change in Control of the
Company or the termination of the Employee's employment, would not be deductible
by the Company by
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<PAGE> 3
reason of section 280G of the Code; PROVIDED, FURTHER, that no portion of any
such amount with respect to any Restricted Shares and no portion of any such
other payment or benefit shall be taken into account which in the opinion of tax
counsel selected by the Company's independent auditors and acceptable to the
Employee does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code (without regard to subsection (A)(ii) thereof).
For purposes of this Agreement, a Change in Control of the Company shall
mean:
(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% or more of the combined
voting power of the Company's then outstanding securities;
(B) during any period of two consecutive years, individuals who at the
beginning of such period constitute 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 paragraph) 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% 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% of the
combined voting power of the Company's then outstanding securities; or
(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.
For purposes of this Agreement, the date on which a Change in Control
shall occur shall be the date on which public announcement of the acquisition of
such percentage described in clause (A) above shall have been made, or the date
on which the change in the
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<PAGE> 4
composition of the Board described in clause (B) above shall have occurred, or
the date of any such stockholder approval described in clauses (C) or (D) above.
(c) Notwithstanding paragraph 3(a) above, the restrictions set forth in
paragraph 4 below will not lapse on any Restricted Shares with respect to which
any amount (the "Cap Amount"), as determined by the Company's independent
auditors in accordance with the principles of section 162(m) of the Code, when
added to any other compensation received or to be received by the Employee in
any given fiscal year, would not be deductible by the Company by reason of
section 162(m) of the Code UNTIL such time as the Management Compensation
Committee determines, in its sole discretion using its best judgment, that such
Cap Amount (or portion thereof), when added to all other compensation received
or to be received by the Employee in such fiscal year, would be deductible by
the Company, as determined by the Company's independent auditors in accordance
with the principles of section 162(m) of the Code; PROVIDED, HOWEVER, that in
the event of the termination of Employee's employment by the Company or any
subsidiary thereof as a result of the death or permanent disability of Employee,
or the termination of Employee's employment and concurrent retirement pursuant
to normal or early retirement under a retirement plan of the Company or any
subsidiary thereof, or the involuntary termination of Employee's employment by
the Company or any subsidiary thereof, the restrictions set forth in paragraph 4
below will immediately lapse on any Restricted Shares comprising a Cap Amount;
and PROVIDED FURTHER, that in the event of the voluntary termination of
Employee's employment by the Company or any subsidiary thereof, the Restricted
Shares comprising a Cap Amount shall remain subject to the forfeiture provisions
set forth in paragraph 5 below.
(d) As soon as practicable after the restrictions with respect to any
installment of Restricted Shares lapse (i) at the end of the period applicable
to such installment set forth in paragraph 3(a) above (the "Restriction Period")
or (ii) pursuant to paragraphs 3(b), 3(c) or 5 hereof, the Company will deliver
to the Employee, or the Employee's legal representative in case of the
Employee's death, promptly after surrender of the Employee's certificate(s) for
the Restricted Shares to the Treasurer of the Company, the certificate or
certificates for such shares free of any legend or further restrictions together
with a new certificate representing any remaining Restricted Shares. It shall be
a condition to the obligation of the Company to issue or transfer shares of
Common Stock upon the lapse of restrictions with respect to any installment of
Restricted Shares that the Employee (or any person entitled to act under this
paragraph 3(d)) pay to the Company, or elect to relinquish to the Company a
portion of such Restricted Shares equal in value to, such amount as may be
required by the Company for the purpose of satisfying its liability to withhold
federal, state, local or foreign income or other taxes by reason of such
issuance or transfer. If the amount required is not paid or authorized to be
relinquished and withheld from such Restricted Shares, the Company may refuse to
issue or transfer shares of Common Stock. Furthermore, the Employee (or any
person entitled to act under this paragraph 3(d)) may likewise elect to
relinquish to the Company an additional portion of such Restricted Shares up to
an amount equal in value to the estimated amount of federal, state, local or
foreign income or other taxes to be paid in connection with the lapsing of
restrictions on such Restricted Shares with respect to which withholding by the
Company is not required based on the Employee's estimated maximum marginal tax
rates; PROVIDED, HOWEVER, that the maximum number of Shares that may be withheld
shall not exceed 47 percent of such Restricted Shares. The Company shall pay to
the governmental entities designated by the Employee (or any person entitled to
act under this paragraph 3(d))
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<PAGE> 5
the amounts designated by such Employee (or any person entitled to act under
this paragraph 3(d)) pursuant to this paragraph 3(d).
4. RESTRICTIONS. During the Restriction Period, neither the Restricted Shares
nor any right or privilege pertaining thereto may be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of or encumbered in any
way, by operation of law or otherwise, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of or encumber the Restricted Shares or any
right or privilege pertaining thereto, otherwise than by will or by the laws of
descent and distribution, or upon the levy of any execution, attachment or
similar process thereupon, the Restricted Shares and all rights and privileges
given hereby shall immediately terminate and the Restricted Shares shall be
forfeited to the Company pursuant to paragraph 5 hereof.
5. FORFEITURE. (a) All the Employee's rights to, and interest in, the Restricted
Shares shall terminate and be forfeited to the Company without payment of
consideration if either (i) the Employee's employment by the Company or any
subsidiary thereof terminates for any reason other than the Employee's death,
disability, retirement pursuant to normal or early retirement under any
retirement plan of the Company or any subsidiary of the Company or termination
by the Company or any subsidiary of the Company; PROVIDED, HOWEVER, that the
Employee's employment will not be deemed to have terminated for this purpose
while the Employee is on a leave of absence which has been approved by the
Company, or (ii) any action prohibited by paragraph 4 hereof is taken. In the
event of termination of employment as a result of death or permanent disability,
the restrictions set forth in paragraph 4 hereof will lapse with respect to the
Original Number multiplied by a fraction, the denominator of which shall be 120
and the numerator of which shall be the number of full months of employment of
the Employee by the Company or any subsidiary of the Company after December 31,
1998 (the "Pro Rata Number"), and the remaining Restricted Shares in excess of
the Pro Rata Number shall be forfeited in accordance with this paragraph 5(a)
or, if the Original Number with respect to which restrictions have lapsed
pursuant to paragraph 3 hereof prior to such termination of employment exceeds
the Pro Rata Number, all remaining Restricted Shares in excess of such Original
Number with respect to which restrictions have lapsed pursuant to paragraph 3
hereof shall be forfeited in accordance with this paragraph 5(a); in the event
of termination of employment and concurrent retirement pursuant to normal or
early retirement under a retirement plan of the Company or any subsidiary
thereof, the Pro Rata Number shall continue to be subject to the provisions of
paragraph 3 hereof (provided that the lapsing of restrictions for such Pro Rata
Number under paragraph 3(a) and 3(c) shall be determined based on the Original
Number) and the remaining Restricted Shares in excess of the Pro Rata Number
shall be forfeited in accordance with this paragraph 5(a) or, if the Original
Number with respect to which restrictions have lapsed pursuant to paragraph 3
hereof prior to such termination of employment and retirement exceeds the Pro
Rata Number, all remaining Restricted Shares in excess of such Original Number
with respect to which restrictions have lapsed pursuant to paragraph 3 hereof
shall be forfeited in accordance with this paragraph 5(a); and in the event of
termination by the Company or any subsidiary thereof of the Employee's
employment by the Company or any subsidiary thereof for any reason, the
restrictions set forth in paragraph 4 hereof will lapse with respect to the
lesser of the Pro Rata Number and the Pro Rata Number multiplied by a fraction,
the denominator of which shall be the Closing Price of the Company's Common
Stock on the date of such termination of employment and the numerator of which
shall be $8.00 (the
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<PAGE> 6
"Modified Pro Rata Number"), and the remaining Restricted Shares in excess of
the lesser of the Pro Rata Number and the Modified Pro Rata Number shall be
forfeited in accordance with this paragraph 5(a) or, if the Original Number with
respect to which restrictions have lapsed pursuant to paragraph 3 hereof prior
to such termination of employment exceeds the Pro Rata Number, all remaining
Restricted Shares in excess of such Original Number with respect to which
restrictions have lapsed pursuant to paragraph 3 hereof shall be forfeited in
accordance with this paragraph 5(a). For purposes of this Agreement, a transfer
of employment from the Company to a subsidiary or from a subsidiary to the
Company or between subsidiaries shall not be deemed a termination of employment.
(b) If Restricted Shares are forfeited for any of the reasons stated in
paragraph 5(a) hereof, such forfeiture shall be effective upon the occurrence of
the event giving rise to the forfeiture. The Employee agrees to repay to the
Company all dividends, if any, paid after such event with respect to the
Restricted Shares which have been forfeited.
(c) If at any time the Employee forfeits any Restricted Shares pursuant to
this Agreement, the Employee agrees to return the certificate or certificates
for such Restricted Shares to the Company duly endorsed in blank or accompanied
by a stock power duly executed in blank.
(d) Determination as to whether an event has occurred resulting in the
forfeiture of, or lapse of restrictions on, Restricted Shares, in accordance
with this Agreement, shall be made by the Company's Management Compensation
Committee, and all determinations of the Committee shall be final and
conclusive.
6. NOTICES. (a) Any notice to the Company pursuant to any provision of this
Agreement will be deemed to have been delivered when delivered in person to the
Secretary of the Company or when deposited in the United States mail as
certified or registered mail, return receipt requested, addressed to the
Secretary of the Company at the executive offices of Allen Telecom Inc., at
25101 Chagrin Boulevard, Beachwood, Ohio 44122, or such other address as the
Company may from time to time designate in writing by notice to the Employee
given pursuant to paragraph 6(b) below.
(b) Any notice or demand to the Employee pursuant to any provision of this
Agreement will be deemed to have been delivered to the Employee when delivered
to the Employee in person or when deposited in the United States mail as
certified or registered mail, return receipt requested, addressed to the
Employee at the Employee's address given at the end of this Agreement or the
Employee's address on the stockholder records of the Company or such other
address as the Employee may from time to time designate in writing by notice to
the Company given pursuant to paragraph 6(a) above.
7. COMPANY RIGHT TO TERMINATE EMPLOYMENT AND OTHER REMEDIES. Nothing provided
herein shall be construed to affect in any way the right or power of the
Company, subject to the provisions of any other written agreement between the
Employee and the Company relating to the subject matter, to terminate the
Employee's employment as an employee of or a consultant to the Company at any
time for any reason with or without cause, nor to preclude the Company from
taking any action or enforcing any remedy available to it with respect to any
action or conduct on the Employee's part.
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<PAGE> 7
8. ADDITIONAL DOCUMENTS. (a) It is the intention of the Company that this award
of Restricted Shares shall meet the requirements of, and result in the
application of, the rules prescribed by Section 83 of the Code and applicable
Regulations thereunder. Accordingly, each and every provision shall be construed
and interpreted in such manner as to conform with such intention and the Company
reserves the right to execute and to require the Employee to execute any further
agreements or other instruments, which may be effective as of the date of the
award of the Restricted Shares covered by this Agreement, including, but without
limitation, any instrument modifying or correcting any provision hereof, or any
action taken hereunder or contemporaneously herewith, and to take any other
action, which may be effective as of the date of the award of the Restricted
Shares covered by this Agreement, that, in the opinion of counsel for the
Company, may be necessary or desirable to carry out such intention.
(b) If the Employee fails, refuses or neglects to execute and deliver any
instrument or document or to take any action requested by the Company to be
executed or taken by the Employee pursuant to the provisions of paragraph 8(a)
above for a period of thirty (30) days after the date of such request, the
Company may require the Employee, within ten (10) days after delivery to the
Employee of a written demand by the Company, to forfeit all Restricted Shares
then held by the Employee.
9. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and
the Employee and, to the extent applicable, the Employee's legal representative.
10. GOVERNING LAW. The validity, interpretation, performance and enforcement of
this Agreement and the Employee's rights in, to and under the Restricted Shares
shall for all purposes be governed by the laws of the State of Delaware without
giving effect to the principles of conflicts of laws thereof.
11. 1992 STOCK PLAN. The provisions hereof shall be subject to all the terms,
provisions and conditions of the Plan (as amended from time to time by the Board
of Directors of the Company within the limitations permitted by the Plan) and
the rules and regulations relating to the Plan prescribed by the Management
Compensation Committee of the Company, and this Agreement and the Plan and said
rules and regulations relating thereto shall be construed as one instrument and
in the event of any inconsistency the provisions of the Plan as interpreted and
construed by the Management Compensation Committee shall control.
ALLEN TELECOM INC.
By /s/
-------------------------------------
Member
Management Compensation Committee
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<PAGE> 8
ACCEPTANCE. The Restricted Shares of Common Stock of Allen Telecom Inc. awarded
to the undersigned Employee under the foregoing Restricted Stock Agreement and
the 1992 Stock Plan are hereby accepted on the terms and subject to the
conditions of such Restricted Stock Agreement and 1992 Stock Plan.
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Employee's Signature
- -------------------------------
- ------------------------------- --------------------------
(Employee's Address) Employee's Social Security
Number
INSTRUCTION. Employee should sign and print his address and social security
number in the spaces provided above, which serves as the Employee's acceptance
of the Restricted Shares.
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<PAGE> 1
Exhibit 10(v)
ALLEN TELECOM INC.
25101 Chagrin Boulevard
Beachwood, Ohio 44122
September 9, 1998
- ------------------
- ------------------
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Dear :
------------
Allen Telecom Inc. (the "Corporation") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Corporation may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation. It is also the intention
of the Board to provide financial assistance to you in certain other
circumstances under which your employment with the Corporation terminates.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated under the circumstances described below.
1. TERM OF AGREEMENT. This Agreement shall commence on September 9, 1998,
and shall continue in effect through December 31, 2001; PROVIDED, HOWEVER, that
commencing on January 1, 1999, and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Corporation shall have given
notice that it does not wish to extend this Agreement; and PROVIDED, FURTHER,
that if a change in control of the Corporation, as defined in Section 3, shall
have occurred during the original or extended term of this Agreement, this
Agreement shall continue in effect for a period of not less than 24 months
beyond the month in which such change in control occurred. In no event, however,
shall the term of this Agreement extend beyond the end of the calendar month in
which your 65th birthday occurs.
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<PAGE> 2
2. COMPENSATION UPON TERMINATION PRIOR TO A CHANGE IN CONTROL. (i) Prior to
a change in control of the Corporation, if your employment by the Corporation
shall be terminated by the Corporation other than for Cause or Disability (as
these terms are defined in Subsections 4(iii) and 2(ii), respectively), then you
shall be entitled to the benefits provided below:
(a) the Corporation shall pay to you your full base salary through the
Date of Termination, at the rate in effect at the time Notice of Termination is
given (as these terms are defined in Subsections 4(vi) and 4(v), respectively),
no later than the fifth day following the Date of Termination, plus accrued
vacation pay and all other amounts to which you are entitled under any
compensation plan of the Corporation, at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as severance
pay to you, in regular pay periods until completely disbursed, total severance
pay equal to the sum of (1) six months of your monthly base salary as in effect
as of the Date of Termination and (2) the amount of such monthly base salary
multiplied by the number of your completed years of full-time employment with
the Corporation as of the Date of Termination; PROVIDED, HOWEVER, that in no
event shall the severance payments exceed 18 months' base salary; and
(c) during the period in which you are receiving the severance
payments the Corporation shall arrange to provide you with life, disability,
accident and group health insurance benefits substantially similar to those
which you were receiving immediately prior to the Notice of Termination;
PROVIDED, HOWEVER, that you will no longer be deemed to be an "employee" for
purposes of the Corporation's 1992 Stock Plan, 1982 Stock Plan, Employee
Before-Tax Savings Plan, Restricted Shares of common stock awarded under the
1992 Stock Plan or Corporate Retirement Plan or any successor plans thereto.
Benefits otherwise receivable by you pursuant to this paragraph (c) shall be
reduced to the extent comparable benefits are actually received by you from any
other source during such period, and any such benefits actually received by you
shall be reported to the Corporation. The use of any automobile furnished to you
by the Corporation shall continue until the earlier of (1) the date that is six
months after the Date of Termination or (2) the date you obtain employment with
another employer, and you agree that you will not remove such automobile from
the state in which you were last employed by the Corporation, and that upon any
such removal the Corporation shall be entitled to immediate possession of such
automobile and shall no longer furnish the use of such automobile to you.
(ii) DISABILITY. Your employment may be terminated for "Disability"
pursuant to this Section 2 (x) if, as a result of your incapacity due to
accident or physical or mental illness, you shall not have substantially
performed your duties with the Corporation on a full-time basis for six
consecutive months, or (y) if you become disabled in a manner that shall prevent
you from performing your duties with the Corporation, and within 30 days after
written notice of termination is given you shall not have returned to the
full-time performance of your duties.
2
<PAGE> 3
(iii) NONCOMPETITION. Benefits payable under this Section 2 shall be
forfeitable and shall be discontinued in the event that you engage in a
"Competitive Activity" or engage in conduct which is materially injurious to the
Corporation, monetarily or otherwise. A "Competitive Activity" shall mean
activity, without the written consent of an authorized officer of the
Corporation, consisting of your participation in the management of, or acting as
a consultant for or employee of, any business operation of any enterprise if
such operation (a "Competitive Operation") is then in substantial and direct
competition with a principal business operation of the Corporation, at the Date
of Termination. A "Competitive Activity" shall not include (a) the ownership of
securities in any enterprise or of not more than five percent of the outstanding
securities of a "Competitive Operation", or (b) the participation in the
management of, or acting as a consultant for or employee of, any enterprise or
any business operation thereof, other than in connection with a "Competitive
Operation" of such enterprise.
(iv) MITIGATION. Severance benefits payable under Section 2(i)(b) in
excess of six months' salary shall be reduced by any salary received by you from
another employer and any consulting compensation received by you from a
prospective employer (other than consulting compensation received by an
independent consulting business conducted by you) during the period during which
you are receiving benefits under Section 2(i)(b), and any such salary or
consulting compensation received by you shall be reported by you to the
Corporation.
3. CHANGE IN CONTROL. Except as provided in Section 2, no benefits shall be
payable hereunder unless there shall have been a change in control of the
Corporation, as set forth below. For purposes of this Agreement, a "change in
control of the Corporation" shall be deemed to have occurred if:
(i) 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 Corporation, any trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, or any corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 30 percent or more
of the combined voting power of the Corporation's then outstanding securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Corporation to effect a transaction described in clause (i), (iii) or (iv) of
this Section) whose election by the Board or nomination for election by the
Corporation'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;
3
<PAGE> 4
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than (a) a
merger or consolidation which would result in the voting securities of the
Corporation 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 Corporation or such surviving entity outstanding
immediately after such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Corporation (or similar
transaction) in which no "person" (as hereinabove defined) acquires more than 30
percent of the combined voting power of the Corporation's then outstanding
securities; or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all of the Corporation's assets.
4. TERMINATION FOLLOWING CHANGE IN CONTROL.
(i) GENERAL. If any of the events described in Section 3 constituting a
change in control of the Corporation shall have occurred, you shall be entitled
to the benefits provided in Section 5(iii) upon the subsequent termination of
your employment during the term of this Agreement unless such termination is (a)
because of your death or Disability (as such term is defined in Subsection 4(ii)
below), (b) by the Corporation for Cause, or (c) by you other than for Good
Reason.
(ii) DISABILITY. Notwithstanding Subsection 4(i), you may not be
terminated for "Disability" pursuant to this Section 4 unless, as a result of
your incapacity due to accident or physical or mental illness, you shall not
have substantially performed your duties with the Corporation on a full-time
basis for six consecutive months following the occurrence of a change of control
of the Corporation.
(iii) CAUSE. Termination by the Corporation of your employment for
"Cause" shall mean termination (a) upon the willful and continued failure by you
to substantially perform your duties with the Corporation (other than any such
failure resulting from your death or incapacity due to accident or physical or
mental illness or any such actual or anticipated failure after the issuance of a
Notice of Termination (as defined in Subsection 4(v)) by you for Good Reason (as
defined in Subsection 4(iv))), after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, (b) the willful engaging by you in an act
or acts of dishonesty constituting a felony under the laws of the United States
or any state thereof and resulting or intended to result directly or indirectly
in gain or personal enrichment at the expense of the Corporation, or your
conviction of a felony under the laws of the United States or any state thereof,
or (c) the willful engaging by you in conduct which is demonstrably and
materially injurious to the Corporation, monetarily or otherwise. For purposes
of this Subsection, no act, or failure to act, on your part shall be deemed
"willful" unless done, or
4
<PAGE> 5
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Corporation.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board (after reasonable
notice to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the Board you
were guilty of conduct set forth above in this Subsection and specifying the
particulars thereof in detail.
(iv) GOOD REASON. Termination by you of your employment for "Good
Reason" for purposes of Section 5(iii) shall mean, without your express written
consent, the occurrence after a change in control of the Corporation of any of
the following circumstances unless, in the case of paragraphs (a), (e), (f), (g)
or (h), such circumstances are fully corrected prior to the Date of Termination
(as defined in Section 4(vi)) given in respect thereof:
(a) the assignment to you of any duties inconsistent with the
position with the Corporation that you held immediately prior to the
change in control of the Corporation, or a significant adverse
alteration in the nature or status of your responsibilities or the
conditions of your employment from those in effect immediately prior to
such change in control;
(b) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as it may be increased from time to
time, except for across-the-board salary reductions similarly affecting
all management personnel of the Corporation and all management personnel
of any person in control of the Corporation;
(c) the relocation of the Corporation's offices at which you are
principally employed immediately prior to the date of the change in
control of the Corporation to a location more than 25 miles from such
location, or the Corporation's requiring you to be based anywhere other
than the Corporation's offices at such location, except for required
travel on the Corporation's business to an extent substantially
consistent with your business travel practices immediately prior to the
date of the change in control of the Corporation;
(d) the failure by the Corporation to pay to you any portion of
your current compensation or to pay to you any portion of an installment
of deferred compensation under any deferred compensation program of the
Corporation within seven days of the date such compensation is due;
(e) the failure by the Corporation to continue in effect any
material compensation or benefit plan in which you participate
immediately prior to the change in control of the Corporation, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Corporation to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits
5
<PAGE> 6
provided and the level of your participation relative to other
participants, as existed at the time of the change in control of the
Corporation;
(f) the failure by the Corporation to continue to provide you
with benefits substantially similar to those enjoyed by you under any of
the Corporation's life, medical, health and accident, or disability
insurance or plans in which you were participating at the time of the
change in control of the Corporation, the taking of any action by the
Corporation which would directly or indirectly materially reduce any of
such benefits, or the failure by the Corporation to provide you with the
number of paid vacation days to which you are entitled on the basis of
years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the time of the change
in control of the Corporation;
(g) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 6 hereof; or
(h) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements
of Subsection (v) hereof (and, if applicable, the requirements of
Subsection (iii) hereof), which purported termination shall not be
effective for purposes of this Agreement. Your right to terminate your
employment pursuant to this Subsection shall not be affected by your
incapacity due to accident or physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
(v) NOTICE OF TERMINATION. Any purported termination of your
employment by the Corporation or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean
(a) if your employment is terminated for Disability, 30 days after
Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day
period), and (b) if your employment is terminated pursuant to Subsection
(iii) or (iv) hereof, or pursuant to Section 2, or for any other reason
(other than Disability), the date specified in the Notice of Termination
( which, in the case of a termination for Cause shall not be less than
30 days from the date such Notice of Termination is given, and in the
case of a termination for Good Reason shall not be less than 15 nor more
than 60 days from the date such Notice of Termination is given);
PROVIDED, HOWEVER, that if within 30 days after any Notice of
Termination is given following a change in control of the Corporation,
the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally
determined, whether by
6
<PAGE> 7
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); and PROVIDED, FURTHER, that the Date
of Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, if the Notice of Termination is given following a change in control of
the Corporation, the Corporation will continue to pay you your full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection; PROVIDED, HOWEVER, that you will no
longer be deemed to be an "employee" for purposes of the Corporation's 1992
Stock Plan, 1982 Stock Plan, Employee Before-Tax Savings Plan, Restricted Shares
of common stock awarded under the 1992 Stock Plan or Corporate Retirement Plan
or any successor plans thereto. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement, and shall not be offset
against or reduce any other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of employment by another
employer.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY FOLLOWING A CHANGE IN
CONTROL. Following a change in control of the Corporation, you shall be entitled
to the following benefits during a period of disability, or upon termination of
your employment, as the case may be, provided that such period or termination
occurs during the term of this Agreement:
(i) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to accident or physical or
mental illness, you shall receive all compensation payable to you under the
Corporation's disability plan or program or other similar plan during such
period, until this Agreement is terminated pursuant to Section 4(ii) hereof.
Thereafter, or in the event your employment shall be terminated by reason of
your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Corporation for
Cause or by you other than for Good Reason, the Corporation shall pay you your
full base salary through the Date of Termination, at the rate in effect at the
time Notice of Termination is given, no later than the fifth day following the
Date of Termination, plus accrued vacation pay and all other amounts to which
you are entitled under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations to you
under this Agreement.
(iii) If your employment by the Corporation shall be terminated by you
for Good Reason or by the Corporation other than for Cause or Disability, then
you shall be entitled to the benefits provided below:
7
<PAGE> 8
(a) the Corporation shall pay to you your full base salary through the
Date of Termination, at the rate in effect at the time Notice of Termination is
given, no later than the fifth day following the Date of Termination, plus
accrued vacation pay and all other amounts to which you are entitled under any
compensation plan of the Corporation at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as severance
pay to you, at the time specified in Subsection (v), a lump sum severance
payment (together with the payments provided in paragraph (c) below, the
"Severance Payments") equal to the sum of : (1) one year of your annual base
salary as in effect as of the Date of Termination or immediately prior to the
change in control of the Corporation, whichever is greater; (2) an amount equal
to the highest annual incentive compensation paid to you in the three years
prior to the Date of Termination; and (3) one tenth of the amounts set forth in
clauses (1) and (2), multiplied by the number of your completed years of
full-time employment with the Corporation as of the Date of Termination,
PROVIDED, that the amounts paid to you under this clause (b)(3) shall not exceed
two times the sum of the amounts set forth in clauses (1) and (2);
(c) in lieu of shares of common stock of the Corporation ("Common
Shares") issuable upon exercise of outstanding options, other than options
qualifying as incentive stock options ("ISOs") under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), which ISOs were granted
on or before the date hereof ("Options"), and stock appreciation rights
("SARs"), if any, granted to you under the Corporation's 1982 Stock Plan or 1992
Stock Plan, or any successor plan thereto (which Options shall be canceled upon
the making of the payment referred to below), the Corporation shall pay to you,
at the time specified in Subsection (v), an amount in cash equal to the product
of (1) the excess of, in the case of an ISO granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock Exchange on or
nearest the Date of Termination (or, if not listed on such exchange, on a
nationally recognized exchange or quotation system on which trading volume in
the Common Shares is highest) and, in the case of all other options, the higher
of such closing price or the highest per share price for Common Shares actually
paid in connection with any change in control of the Corporation, over the per
share option price of each Option held by you (whether or not then fully
exercisable), and (2) the number of Common Shares covered by each such Option;
(d) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provided
hereunder); and
8
<PAGE> 9
(e) for a period of months after such termination that is
equal in number to (1) twelve, plus (2) one-tenth of the number of
your completed years of full-time employment with the Corporation as
of the Date of Termination multiplied by 12, but in no event exceeding
36 months, the Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits substantially
similar to those which you were receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant
to this paragraph (e) shall be reduced to the extent comparable
benefits are actually received by you from any other source during
such period following your termination, and any such benefits actually
received by you shall be reported to the Corporation.
(iv) Notwithstanding anything to the contrary contained in this
Agreement, in the event that, by reason of Section 280G of the Code, any payment
or benefit received or to be received by you in connection with a change in
control of the Corporation or the termination of your employment whether payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement (the "Contract Payments") with the Corporation, its successors, any
person whose actions result in a change in control or any corporation
("Affiliate") affiliated (or which, as a result of the completion of the
transactions causing a change in control will become affiliated) with the
Corporation within the meaning or Section 1504 of the Code (collectively with
the Contract Payments, "Total Payments")), would not be deductible (in whole or
in part) by the Corporation, an Affiliate or other person making such payment or
providing such benefit, the Severance Payments shall be reduced (and, if
Severance Payments are reduced to zero, other Contract Payments shall first be
reduced and other Total Payments shall thereafter be reduced) until no portion
of the Total Payments is not deductible by reason of Section 280G of the Code.
For purposes of this limitation (a) no portion of the Total Payments the receipt
or enjoyment of which you shall have effectively waived in writing prior to the
date of payment of the Severance Payments shall be taken into account, (b) no
portion of the Total Payments shall be taken into account which in the opinion
of tax counsel selected by the Corporation's independent auditors and acceptable
to you does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code (without regard to Subsection (A)(ii) thereof), (c) the
Severance Payments (and, thereafter, other Contract Payments and other Total
Payments) shall be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clauses (a) and (b)), in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax
counsel referred to in clause (b), and (d) the value of any noncash benefit or
any deferred payment or benefit included in the Total Payments shall be
determined by the Corporation's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(v) The payments provided for in paragraphs (b) and (c) above shall be
made not later than the fifth day following the Date of Termination; PROVIDED,
HOWEVER, that if the amounts of such payments cannot be finally determined on or
before such day, the Corporation shall pay to you on such day an estimate, as
determined in good faith by the Corporation, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the 30th day after the Date
of Termination. In the
9
<PAGE> 10
event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Corporation to you, payable on the fifth day after
demand by the Corporation (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(vi) Except as provided in Subsection (iii)(e) hereof, you shall not
be required to mitigate the amount of any payment provided for in this Section 5
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by you to the Corporation, or
otherwise.
6. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms to which you would be
entitled hereunder if you terminate your employment for Good Reason following a
change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
7. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, or by
recognized overnight delivery service, in each case addressed to the respective
addresses set forth on the first page of this Agreement, provided that all
notices to the Corporation shall be directed to the attention of the Board with
a copy to the Secretary of the Corporation, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by
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<PAGE> 11
you and such officer as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the time or at any prior to subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of Ohio
without regard to its conflicts of law principles. All references to Sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
not of any applicable withholding required under federal, state or local law.
The obligations of the Corporation under Sections 2 or 5 shall survive the
expiration of the term of this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. ARBITRATION. Following a change in control of the Corporation, any
dispute or controversy between the Corporation and you arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Cleveland, Ohio, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
PROVIDED, HOWEVER, that you shall be entitled to seek specific performance of
your right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all other agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto including, without limitation, the
Corporation's Key Employee Severance Policy; and any other agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and canceled.
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<PAGE> 12
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
ALLEN TELECOM INC.
By: -------------------------------------
Robert G. Paul
President and Chief Executive Officer
Agreed to this day of , 1998
----- -----------------
- ------------------------------------------------
[Empoyee's Name]
12
<PAGE> 1
EXHIBIT 11
ALLEN TELECOM INC.
STATEMENT RE COMPUTATION OF EARNINGS PER COMMON SHARE
Net income (loss) and common shares used in the calculation of earnings per
common share for the five years ended December 31, 1998 were computed as follows
(amounts in thousands).
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS:
Net income (loss) applicable to common
stock - Basic $29,194 $32,639 $13,066 $23,349 ($10,222)
Add: Convertible debenture interest 296 - - - -
------- ------- ------- ------- --------
Net income (Loss) - Diluted $29,490 $32,639 $13,066 $23,349 ($10,222)
======= ======= ======= ======= =======
COMMON SHARES:
Weighted average common
Shares outstanding - Basic 25,574 26,166 26,470 26,920 27,220
Additional common shares issuable for:
Assumed exercise of stock options 496 754 590 420 150
Convertible securities 356 125 - - -
------- ------- ------- ------- --------
Common shares - Diluted 26,426 27,045 27,060 27,340 27,370
======= ======= ======= ======= ========
</TABLE>
<PAGE> 1
<PAGE> 2
Exhibit 13
ALLEN TELECOM INC.
ANNUAL REPORT 1998
<PAGE> 3
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,
Intellicall Inc.
Chairman of the Board,
Internet America, 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.
Martyn F. Roetter
Vice President,
Communications and Information Technology,
Arthur D. Little. Inc.,
Cambridge, Massachusetts
Charles W. Robinson
Chairman,
Robinson & Associates Inc.,
Santa Fe, New Mexico
Gary B. Smith
Management Consultant
Cornelius, North Carolina
William M. Weaver, Jr.
Limited Partner Emeritus,
Alex, Brown & Sons
Incorporated,
New York, New York
Management
Robert G. Paul
President and
Chief Executive Officer
Robert A. Youdelman
Executive Vice President,
Chief Financial Officer
McDara P. Folan, III
Vice President, Secretary
and General Counsel
James L. LePorte, III
Vice President and Controller
Peter de Villiers
Vice President, Strategic Development
Roger Schroeder
Treasurer and Assistant Secretary
Andrea Casini
Managing Director, Tekmar Sistemi S.r.l.
Kenton S. Day
President, Signal Science, Incorporated
Terry N. Garner
President,
Grayson Wireless
F. Kim Goryance
President,
Antenna Specialists
Peter Mailandt
President,
Decibel Products
Jack Powell
Chairman,
Telia S.A.
Douglass R. Hall
President,
Comsearch
Karl-Heinz Schmidt
President,
MIKOM Worldwide Systems
Gianpiero Villa
President,
Worldwide Site Products
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Year at a Glance. . . . . . . . . . . . . . . . . . . . . .1
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . 2
Business Review . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Financial Statements . . . . . . . . . . . . . . 12
Notes to Consolidated Financial Statements . . . . . . . . . .16
Management's Discussion and Analysis
of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . 27
Five-year Summary of Operations . . . . . . . . . . . . . . . 32
Directors and Management . . . . . . . . . . .Inside front cover
Shareholder Information . . . . . . . . . . . Inside back cover
</TABLE>
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
Inc.'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 successful discovery and correction of potential "Year 2000" computer
sensitive problems by both the Company and its key suppliers and customers, and
other transactions.
THE YEAR AT A GLANCE
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
FINANCIAL HIGHLIGHTS
Sales $ 388,004,000 $ 432,508,000
Income (Loss) Before
Income Taxes and
Minority Interests ($ 8,554,000) $ 46,713,000
Income (Loss) From
Continuing Operations ($ 5,512,000) $ 23,981,000
Net Income (Loss) ($ 10,222,000) $ 23,349,000
Return On Equity (4.0%) 9.4%
- --------------------------------------------------------------------------------
Financial position, year-end:
Stockholders' Equity $ 250,081,000 $ 260,822,000
Working Capital $ 133,465,000 $ 111,015,000
Shares Outstanding 27,473,000 27,298,000
PER COMMON SHARE:
Basic:
Income (Loss) From
Continuing Operations ($.21) $.89
Net Income (Loss) ($.38) $.87
Diluted:
Income (Loss) From
Continuing Operations ($.21) $.88
Net Income (Loss) ($.38) $.86
Book Value per share $9.10 $9.55
</TABLE>
1
<PAGE> 5
LETTER TO SHAREHOLDERS
After a long period of revenue growth as a wireless telecommunications equipment
supplier, Allen Telecom suffered diminished sales and its first loss from
telecom operations since 1983. The single largest impact on revenue for the year
was the dramatic weakening in the economies of a number of the Southeast Asian
countries. Southeast Asia has represented the fastest growing market for
wireless telecommunications equipment during the last few years. The sudden
disappearance of this market impacted our shipment of product to those countries
and also contributed to a major excess inventory situation at our wireless OEM
customers, particularly in Europe. They significantly reduced their 1998
purchases of components from our site products division as they worked through
their inventory. The second half of 1998 was considerably weaker than the first
half.
During the year, in reaction to the slowdown and significant pricing and
margin pressure resulting from industry overcapacity, the Company took major
actions to reduce costs. Employee levels were reduced to offset lower sales.
Certain products were discontinued during the year where insufficient sales or
prospects in those areas indicated that it was time to stop the development
efforts and accept the costs of that decision. As a result of these actions, the
Company took substantial restructuring write-offs during the year.
Sales for the year were $388 million, down 10% from $433 million in 1997.
The loss from continuing operations in 1998 was $5.5 million or $.21 per share.
The net loss for the year was $10.2 million, or $.38 per share, compared to a
$23.3 million profit and $.86 per share last year. In addition to the after-tax
restructuring charges of $12.6 million incurred during the year, earnings were
hurt most significantly by lower gross profit percentages which declined from
34.9% in 1997 to 24.4% in 1998, both of which include the appropriate
restructuring costs. The Company is hopeful of making a significant improvement
in these margins in 1999.
Operating costs were reduced during the year with the full impact being
realized in 1999. In addition to these cost reductions, the Company has
streamlined its organization structure for quicker response and decision making.
Because of the global nature of wireless telecommunications, we combined three
of our previously independent operating units with common, or in a few cases,
competing products, into a single global product offering. This business is now
headquartered in Germany and offers a unified family of products for our
worldwide customers.
We have announced, after year end, the sale of Marta, our discontinued
emissions testing business, and we expect to report a small gain when the
transaction is completed. This will end a major distraction for the Company. It
is anticipated that the restructuring actions taken during 1998, the sale of
Marta, and some expected growth in the marketplace in the second half of 1999
will all contribute to a welcome turnaround this year.
We are quite optimistic about the future of our industry, and we believe
that we will play a significant part in its growth. Cell phones have achieved
only a 24% penetration of the population in the U.S. - far lower than in many
other countries including Finland, Sweden, Italy, Japan, Israel and Hong Kong
where the penetration rates are from 35% to 50% and are rising rapidly. In
Finland, 53% of all residents are mobile phone customers. Furthermore, the
quality of voice transmission is spotty in the U.S. and will have to improve.
Local coverage is uneven because carriers have not deployed sufficient cell
sites to achieve optimum coverage. The industry claims that only 2% of calls do
not go through, but that equates to 92 million failed calls every month!
We believe that the incomplete cellular networks in a growing marketplace
and the many complaints of unacceptable service by users will eventually
translate into a renewed demand for our products in the U.S. Many other parts of
the world lag in wireless phone penetration far behind the U.S., not to mention
Finland, Italy, and others. The rapid or extensive deployment of wireless
communications systems in these lagging areas should lead to a greater growth
opportunity for Allen Telecom.
Beyond these opportunities for growth, in what is called narrow band
systems, the industry is in the early stages of development of 3G or the third
generation. The 3G technology will provide more spectrum so that mobile users
can send and receive e-mail, data, video, and other services. This will require
an overlay of equipment on the
2
<PAGE> 6
current network and presents many new opportunities for the deployment of Allen
Telecom equipment. Eventually, it could mean deployment of new equipment
everywhere that mobile systems now exist.
While technology standards are still being debated, work has begun at some
Allen Telecom businesses and at our OEM customers to design 3G product. 3G is
expected to start having a meaningful impact on the Company's revenues in 2001
or 2002.
Allen Telecom expects to benefit sooner from its Geo-location investments
than from 3G. Geolocation is the system necessary to meet the FCC requirement of
locating any mobile caller dialing 911 so as to know where to send help. The
"network solution" that we are developing involves the installation of equipment
at most every cell-site. The FCC mandate calls for this system to be deployed by
October 2001. If our technology is successful, we should begin recognizing
revenues in 2000 and booking orders in the latter part of 1999. Industry sources
predict the market for E911 equipment to be in the billions of dollars.
It would not be appropriate to end this letter without our personal thanks
to three individuals who have contributed immensely to Allen Telecom. The
retirement of Albert Gordon and William Weaver ends a combined 56 years of
service on the Allen Board and an immeasurable amount of career experience and
knowledge, which they have unstintingly shared. William Hunt is also retiring
from the Board after more than 5 years of service. We have always respected the
counsel of Mr. Gordon, Mr. Weaver and Mr. Hunt, appreciated their support and
enjoyed their company.
/s/ Philip Wm. Colburn
Philip Wm. Colburn
Chairman of the Board
/s/ Robert G. Paul
Robert G. Paul
President and
Chief Executive Officer
[PHOTO]
Robert G. Paul (left), and Philip Wm. Colburn
[BAR GRAPH]
<TABLE>
<CAPTION>
SALES FROM CONTINUING OPERATIONS
(MILLIONS OF DOLLARS)
<S> <C>
94 $213.5
95 $306.6
96 $369.5
97 $432.5
98 $388.0
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
RESEARCH & DEVELOPMENT AND NEW
PRODUCT ENGINEERING COSTS
(MILLIONS OF DOLLARS)
<S> <C>
94 $ 8.9
95 $17.0
96 $21.0
97 $30.4
98 $30.7
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
% OF SALES
<S> <C>
94 4.2%
95 5.5%
96 5.7%
97 7.0%
98 8.0%
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
INCOME BEFORE TAXES AND MINORTIY INTERESTS
(MILLIONS OF DOLLARS)
<S> <C>
94 $31.5
95 $50.4
96 $46.5
97 $46.7
98 $(8.6)
</TABLE>
3
<PAGE> 7
WORLDWIDE SITE PRODUCTS
Worldwide Site Products manufactures cell site subsystems and component parts,
and sells them to OEMs and cellular/PCS service providers. Our equipment can be
found in cell sites in almost every country where wireless systems are deployed.
I see our core expertise as the integration of filters, amplifiers and combiners
to allow a wireless system to coexist with other wireless services and not
interfere with or be interfered by other services. Our filters permit only
chosen frequencies to pass to the base station in order to enhance call clarity.
Combiners allow multiple radio frequency channels to efficiently employ fewer
antennas, while amplifiers magnify signals to and from portable phones.
During 1998, in recognition of the increasing globalization of our customers, we
merged the previously independent European and North American Worldwide Site
Products businesses under a single management. By integrating our research and
development activities and manufacturing facilities on both sides of the
Atlantic, we are able to address, we have come together as a single division
over the past year, showing a willingness to work together toward a common goal.
I believe the synergies and differences of our North American and European
operations bring significant value to our division.
The wireless electronic component market is constantly changing and
consolidating. Our goal is to remain the leading supplier of electronic base
station components and subsystems to the wireless industry. To achieve this
goal, we invest a significant amount of our net profit in research and
development.
The primary focus of our research and development effort is to develop new
products and techniques in order to better solve problems for our customers. We
emphasize research on new technologies and materials for competitive
state-of-the-art products that exceed the quality specifications of our
customers. We have developed new, flexible, manufacturing processes to improve
production schedules and product quality. We are testing new techniques for
reducing the cost of tuning and testing by utilizing full automation. To meet
our customers' future expectations, we have made extensive investments in
engineering and technical expertise to support the design and development of
highly integrated multi-function products. During the year, we also implemented
new production and logistic methods to provide prompt, cost efficient product
delivery for our customers.
Worldwide Site Products has a significant share of the global component market
for all protocols (AMPS, CDMA, GSM, DCS, and PCS). Although most OEMs over the
past several years have reduced the number of their suppliers, we continue to
supply most of the major OEMs, including Motorola, Nokia, Nortel, Alcatel,
Lucent and Siemens. Each of these OEM's has selected Allen Telecom's Worldwide
Site Products as a strategic supplier for present and future product
generations.
The product lines, which show the greatest potential for future growth, are
integrated combiners with very selective filters, and low noise and
multi-carrier power amplifiers (MCPA) with sophisticated control systems and
powerful software. The most exciting new business opportunity lies in the
introduction of the next generation of wireless systems for high data rate
Internet applications. In the future, we will work toward achieving three
critical goals: worldwide presence, strong market share and leading technology.
Born in Milan, Italy, Gianpiero Villa's career has focused on the electronics
industry. He worked with Forem for nine years prior to Allen Telecom's initial
purchase of FOREM S.p.A. in 1994. He was named President of Worldwide Site
Products in 1998. He resides in Milan, Italy.
5
<PAGE> 8
DECIBEL PRODUCTS DIVISION
Decibel Products participates in several complementary wireless component market
segments. From low band, VHF, UHF, cellular and PCS/DCS to trunking and paging,
we design and manufacture base station antennas, cable connectors and
accessories for public service providers, carriers and OEMs. Our equipment, when
combined with OEM base station and switching equipment, provides a total
wireless system solution.
Decibel Products, along with our sister mobile antenna company, Antenna
Specialists, has been a primary supplier to the wireless industry for over 50
years. Recently, our market has become highly competitive as many new, though
smaller companies, have entered the business in anticipation of a larger United
States and international market than has actually materialized. There are now at
least 28 base station antenna manufacturers and over 100 mobile antenna
manufacturers competing on a worldwide basis. As a result of this significant
increase in competition, the industry is suffering from overcapacity and unit
price declines.
My challenge for 1999 is to grow our business in this tough operating
environment. Over the years, we have established ourselves as a reliable, high
quality producer. Now our goal is to be among the lowest cost producers
worldwide. To achieve our goal of strenuously reducing costs, we have
streamlined our production process. We are working to maintain the current
volume level and focusing on global manufacturing in multiple locations.
The unit growth rate for base station antennas worldwide is projected to be
single digits over the next several years. However, in China and Latin America
demand is expected to grow between 20-25% during the same time frame. Our plants
in China and Brazil will provide for growth opportunities in our antenna
business over the next five years. Our production costs are lower at these
facilities, which allows us to provide local service with quick turnaround time
for our OEM customers, meet local content requirements and add value in the
local market. In addition, our manufacturing facilities in China and Brazil
provide distribution to neighboring countries in Asia and Latin America at a
reduced cost.
I am proud of the technology enhancements we've implemented to increase the
functionality of our products. The new advanced antennas - such as our new dual
band/dual pole antennas, which allow a single antenna to transmit and receive on
digital, cellular and PCS frequencies independently - have a higher utility
value to our customers particularly with the added field adjustable electrical
downtilt. Adding features and functions to our products gives us better pricing
flexibility. We have moved quickly to implement these changes. They are
important to what I believe is our greatest opportunity for growth over the next
three to five years, the new third generation wideband data services, which are
expected to be implemented in 2000 and beyond.
I strongly believe Decibel Products' greatest strength comes primarily from
our people and the quality reputation we have in the marketplace with carriers
and OEMs worldwide. Short term we anticipate a shakeout in our industry, and we
definitely will be a survivor. The framework is in place for us to be among the
lowest cost producers. Global manufacturing gives us the ability to offer our
customers high quality and reliable products at a reasonable price anywhere in
the world. We have the technology, the strategy, the vision and the drive to
prosper in this industry.
Dr. Peter Mailandt, born in Berlin, Germany, has been President of Decibel
Products for 15 years. He received his M.B.A. from the University of Minnesota
and a Ph.D. in Nuclear Physics in 1972. He currently lives in Dallas, TX.
6
<PAGE> 9
MIKOM
In wireless mobile systems, repeaters are an integral part of an efficient and
effective network. Outdoors they provide coverage for rural and isolated areas,
extend coverage or fill holes between sites. Indoors they provide excellent
coverage for large buildings and major facilities, such as subways and airports
at a fraction of the cost of new cell sites.
Our wireless in-building coverage systems are predominantly fiber-based. Fiber
offers a number of technical advantages over typical cable distribution systems,
such as simple network design, extremely high dynamic range, routing flexibility
and multiple frequency band options. Most importantly, our system is easy to
upgrade to support new technologies, regardless of what they are, because of
fiber's broadband characteristics. The need for sufficient capacity, seamless
coverage in indoor areas and limited frequency resources will trigger the growth
of more fiber-based active coverage systems.
For outdoor signal coverage, the implementation of any repeater requires a
minimum margin of antenna isolation. The most common method of achieving antenna
isolation today is physical separation. However, this solution has become more
difficult to implement as local zoning laws and smaller cell sites prohibit
towers tall enough to provide the required antenna isolation. To solve this
problem MIKOM developed Interference Cancellation Equipment (or ICE(TM))
equipped repeaters. These specially equipped repeaters are designed to provide
electronic isolation within the repeater. This feature allows our repeaters to
be installed at sites where it was previously not possible due to physical
constraints. ICE(TM) equipped repeaters make installation and operation easier
for our customers.
Product line and performance improvements are the main focus of our research and
development efforts. We will introduce a variety of new products over the next
several years, including equipment in TDMA, CDMA, GSM900 and 1800 specifically
designed for improved tunnel and subway coverage, new low power optical
distribution systems for base station integration and improved products for our
cable booster line.
Longer term we expect in-building coverage systems to grow faster than the
outdoor repeater market. We believe that the in-building market will become more
project oriented in the future, providing MIKOM with the opportunity to combine
our advanced repeater technology with our full-service capabilities. Our goal is
to provide customers with a complete wireless in-building communication system
from system design, planning and implementation to equipment, optimization and
installation. Additionally, the upcoming third generation technology (Wideband
CDMA), as well as current narrowband CDMA, offer excellent opportunities for our
outdoor repeaters because base stations will have very high capacity and
repeaters can increase the efficiency of each cell site.
Today there is no truly regional market left: repeaters have become a global
business. It's my job to ensure that we remain well positioned to take advantage
of this global opportunity. We have manufacturing facilities in the United
States and Europe. We presently have the expertise and research capability to
grow in this highly competitive environment, and we also plan to reduce
production costs each year for the next three years. We will continue our focus
on international sales through our own internal international sales
organization. My long-term goal is to build a global service network with
turnkey solutions for in-building and outdoor coverage systems with multiple
standards and frequency bands.
Karl-Heinz Schmidt started MIKOM G.m.b.H. in May 1985. Allen Telecom acquired
its first ownership position in MIKOM in 1994. Allen Telecom appointed
Karl-Heinz President of the Company's worldwide systems division and renamed it
MIKOM in 1998. Karl-Heinz was born and still resides in Nordlingen, Germany.
9
<PAGE> 10
TERRY N. GARNER
PRESIDENT
GRAYSON WIRELESS
Grayson Wireless operates in the Personal Communications Systems (PCS),
cellular, paging and the Specialized Mobile Radio (SMR) markets. We design,
develop and produce hardware platforms and software applications for data
collection and analysis in the planning, deployment, optimization and
maintenance of telecom networks. We are also working on completing the
development of our wireless network solution for the FCC's emergency calling
system (E911). Industry growth in the test and measurement business is driven
largely by technology issues and changes in technology, such as converting from
AMPS systems to CDMA systems, in addition to subscriber growth and network
expansion.
Our new 2700 Digital Platform is the most advanced testing technology to reach
the market. This platform contains dual-band receivers, digital signal
processing and accommodates decoding of all digital and analog standards.
Available applications, such as CellWatcher and MarketWatcher, allow users to
perform specialized network measurements, such as interference detection and
analysis and detailed network traffic statistics.
The overall strength of our E911 geolocation offering lies not just in our
technology or cost advantages but also in our total systems capability. We are
one of the few suppliers that can offer manufacturing, engineering, installation
and network planning. We can deliver superior quality, highly reliable products
with better cost control because we do the manufacturing in-house. We are
currently conducting engineering field trials for the analog AMPS standard and
the digital TDMA standard. Furthermore, we were the first company to announce
success in field trials with the CDMA standard. Industry estimates place the
cost of implementing E911 in excess of $2.0 billion, and we believe a large part
of this market will be available to us.
Excluding geolocation, our single greatest opportunity for immediate growth is
to take advantage of the international marketplace for test and measurement
equipment. The most significant change in direction for 1999 is the realignment
of our sales resources to better focus on the international market and to
improve our technical support resources.
Over the next five years, I expect to see significant changes in the test and
measurement business. Changes in the way data is collected and analyzed will
require us to develop autonomous products and more sophisticated analysis
packages. Continuously changing technologies will require new test and
measurement equipment to verify the integrity of systems, such as wideband CDMA
and satellite systems. These changes, along with geolocation, will provide
opportunities for Grayson Wireless. I know we will be ready to meet these
challenges.
Terry Garner started Grayson Wireless with three partners in 1986, after 15
years in the mobile radio industry with General Electric. Allen Telecom acquired
a majority interest in 1990. Terry has an electrical engineering degree from
Louisiana State University and lives in Lynchburg, VA.
<PAGE> 11
DOUGLASS HALL
PRESIDENT
COMSEARCH
1998 was a very disappointing year for Comsearch. The decline in the domestic
PCS market, following the initial build-out by A and B block licensees, caused
our consulting and engineering businesses to experience tough price competition
and reduced deployment rates. I believe 1999 will be different. We began a
significant restructuring program at the end of 1998, streamlining management
and our administrative infrastructure and placing the focus on leveraging our
unique strengths in the industry to improve profitability. Our reorganization
plan emphasized growth in our core businesses where we have significant market
share and higher margins, stressed improved flexibility, converted cost centers
into revenue generating businesses and focused on reducing our reaction time to
market changes.
Despite the problems we faced in 1998, Comsearch has maintained a strong
leadership position in our core frequency planning and protection services,
where our comprehensive database and engineering tools are key to this
profitable business. In the spectrum sharing and microwave relocation area, we
see additional opportunities in the new generation mobile satellite services. We
are migrating away from the traditional time and materials consulting in our RF
engineering services to packaging our services and selling solutions for the
design and optimization of mobile wireless networks. We also will continue to
provide software products for engineering design, spectrum sharing and RF
planning services. Finally, in addition to using direct and distributed means
for selling our products and services domestically and internationally, these
offerings will be packaged for access and sale through the Internet.
I intend to grow Comsearch over the next five years by packaging our strengths
in microwave frequency coordination and spectrum sharing to provide broader,
more effective solutions to the marketplace. We will focus on electronic
commerce, data provisioning and data warehousing to satisfy the need for
accurate and timely information, which is often the bottleneck to providing
effective solutions. Lastly, we will pursue relationships necessary to broaden
our portfolio of products and services, including international spectrum
management. Our future is limited only by our ability to be creative, to think
out of the box. These strategies will refocus Comsearch on our core strengths
and build a solid foundation for future growth.
Born in Atlantic City, NJ, Doug Hall started his career in the U.S. Air Force
where he specialized in microwave and troposcatter wideband communications
systems. Doug joined Comsearch in 1981, was named President in January 1999 and
resides in Manassas, VA.
<PAGE> 12
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the years ended December 31, 1998, 1997 & 1996 1998 1997 1996
<S> <C> <C> <C>
Sales $ 388,004 $ 432,508 $ 369,498
Costs and Expenses:
Cost of sales 293,404 281,591 238,401
Selling, general and administrative expenses 71,672 72,671 59,053
Research and development and product engineering costs 30,742 30,367 21,023
Write-off of acquired in-process research and development costs -- -- 2,662
Other Income, net 6,065 1,885 952
Interest and Financing Expenses:
Interest expense (8,276) (4,505) (3,773)
Interest income 1,471 1,454 988
- -----------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Taxes and Minority Interests (8,554) 46,713 46,526
Benefit (Provision) for Income Taxes 5,310 (17,723) (19,665)
- -----------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Minority Interests (3,244) 28,990 26,861
Minority Interests (2,268) (5,009) (6,305)
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (5,512) 23,981 20,556
=======================================================================================================================
Discontinued Operations:
Loss from discontinued emissions testing business -- -- (3,766)
Loss for disposal of emissions testing business (4,710) -- (3,724)
- -----------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Extraordinary Item (10,222) 23,981 13,066
Extraordinary Item - Extinguishment of Debt -- (632) --
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ($ 10,222) $ 23,349 $ 13,066
=======================================================================================================================
EARNINGS (LOSS) PER COMMON SHARE
Basic: Income (loss) from continuing operations ($ .21) $ .89 $ .78
Discontinued operations:
Loss from discontinued emissions testing business -- -- (.14)
Loss for disposal of emissions testing business (.17) -- (.14)
Extraordinary item - extinguishment of debt -- (.02) --
- -----------------------------------------------------------------------------------------------------------------------
Net Income (Loss) ($ .38 ) $ .87 $ .50
=======================================================================================================================
Diluted:Income (loss) from continuing operations ($ .21) $ .88 $ .76
Discontinued operations:
Loss from discontinued emissions testing business -- -- (.14)
Loss for disposal of emissions testing business (.17) -- (.14)
Extraordinary item - extinguishment of debt -- (.02) --
- -----------------------------------------------------------------------------------------------------------------------
Net Income (Loss) ($ .38) $ .86 $ .48
=======================================================================================================================
Weighted average common shares outstanding:
Basic 27,220 26,920 26,470
- -----------------------------------------------------------------------------------------------------------------------
Diluted 27,370 27,340 27,060
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
12
<PAGE> 13
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
As of December 31, 1998 & 1997 1998 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19,900 $ 30,775
Accounts receivable, less allowance for
doubtful accounts - 1998, $3,189; 1997, $1,934 83,739 105,714
Inventories 84,735 93,768
Current assets of discontinued emissions testing business 848 1,034
Deferred income taxes 7,989 7,244
Other current assets 5,752 3,501
- -------------------------------------------------------------------------------------------------------
Total Current Assets 202,963 242,036
- -------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, net 61,582 60,543
Other Assets:
Excess of cost over net assets of businesses acquired 131,939 126,923
Assets of discontinued emissions testing business 24,950 32,329
Deferred income taxes 16,186 --
Other 27,965 52,602
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 465,585 $ 514,433
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of long-term obligations $ 11,556 $ 6,119
Accounts payable 25,501 75,195
Accrued expenses (including accrued wages and commissions -
1998, $14,108; 1997, $13,980) 29,998 35,261
Income taxes payable 837 13,197
Deferred income taxes 1,606 1,249
- -------------------------------------------------------------------------------------------------------
Total Current Liabilities 69,498 131,021
- -------------------------------------------------------------------------------------------------------
Long-Term Debt 128,677 97,915
Deferred Income Taxes 429 6,818
Other Liabilities 16,900 17,857
- -------------------------------------------------------------------------------------------------------
Total Liabilities 215,504 253,611
- -------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 5) -- --
- -------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, par value $1.00; authorized - 50,000 shares;
issued - 1998, 29,759; 1997, 29,746; outstanding -
1998, 27,473; 1997, 27,298 29,759 29,746
Paid-in capital 180,604 180,538
Retained earnings 59,869 70,091
Accumulated other comprehensive income (loss) (2,255) 207
Less: Treasury stock - common shares, at cost,
1998, 2,286; 1997, 2,448 shares (15,985) (16,992)
Unearned compensation (1,911) (2,768)
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 250,081 260,822
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 465,585 $ 514,433
=======================================================================================================
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
13
<PAGE> 14
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
For the years ended December 31, 1998, 1997 & 1996
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations ($ 5,512) $ 23,981 $ 20,556
Extraordinary item - extinguishment of debt -- (632) --
- -----------------------------------------------------------------------------------------------------------------------
(5,512) 23,349 20,556
Adjustments to reconcile income (loss) to net cash flow:
Depreciation 15,615 12,808 11,666
Amortization of goodwill 6,295 3,404 2,432
Amortization of capitalized software 2,038 2,950 2,383
Other amortization 685 571 2,006
Deferred income taxes (10,315) (8,157) (2,849)
Non-cash charge for acquired in-process research and development -- --
Non-cash loss on write-off of capital assets 17,010 6,337 --
Gain on sale of investments (16,486) (1,696) --
Changes in operating assets and liabilities:
Receivables 24,496 (14,309) (13,362)
Inventories 9,928 (23,954) (85)
Accounts payable and accrued expenses (26,902) 16,627 7,879
Income taxes payable (19,287) (1,712) 17,095
Other, net 169 1,814 3,229
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by operating activities (2,266) 18,032 53,612
=======================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in telecommunications companies (42,103) (46,135) (16,909)
Capital expenditures (18,094) (22,247) (17,457)
Capitalized software product costs (3,942) (5,307) (4,745)
Sales and retirements of fixed assets 334 845 62
Sale of investments 16,833 1,709 --
- -----------------------------------------------------------------------------------------------------------------------
Cash used by investing activities (46,972) (71,135) (39,049)
=======================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) long-term borrowings 36,676 65,381 (2,129)
Repayment of long-term notes -- (15,000) --
Exercise of stock options 342 1,428 239
Treasury stock sold to employee benefit plans 1,531 1,651 1,572
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing activities 38,549 53,460 (318)
=======================================================================================================================
Net cash provided (used) by discontinued operations (2,081) 7,808 (6,072)
=======================================================================================================================
NET CASH PROVIDED (USED) (12,770) 8,165 8,173
Effect of exchange rate changes on cash 1,895 (1,269) --
Cash and cash equivalents at beginning of year 30,775 23,879 15,706
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 19,900 $ 30,775 $ 23,879
=======================================================================================================================
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE> 15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
FOR THE YEARS ENDED Common Paid-in Comprehensive Retained Comprehensive Treasury Unearned
DECEMBER 31, 1998, 1997 & 1996: Total Stock Capital Income(Loss) Earnings Income (Loss) Stock Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996: $ 210,377 $ 29,595 $ 168,632 $ 34,948 $ (258) $ (18,746) $(3,794)
Comprehensive income:
Net income 13,066 -- -- $ 13,066 13,066 -- -- --
--------
Other comprehensive loss:
Minimum pension liability adjustment 154 -- -- 154 -- -- -- --
Foreign currency translation adjustments (406) -- -- (406) -- -- -- --
--------
Other comprehensive loss -- -- -- (252) -- (252) -- --
--------
Comprehensive income -- -- -- $ 12,814 -- -- -- --
========
Exercise of stock options 239 36 293 -- -- (90) --
Treasury stock reissued, 94,339 common shares 1,572 -- 883 -- -- 689 --
Restricted stock, net (16) (17) (270) -- -- -- 271
Stock option tax benefits 82 -- 82 -- -- -- --
Common stock issued in acquisitions 1,590 -- 1,325 -- -- 265 --
TransPro dividend adjustment (1,272) -- -- (1,272) -- -- --
Other (50) -- -- -- -- (50) --
Amortization of unearned compensation 615 -- -- -- -- -- 615
===================================================================================================================================
BALANCE, DECEMBER 31, 1996 225,951 29,614 170,945 46,742 (510) (17,932) (2,908)
Comprehensive income:
Net income 23,349 -- -- $ 23,349 23,349 -- -- --
--------
Other comprehensive income:
Unrealized gain on securities 9,588 -- -- 9,588 -- -- -- --
Less tax on unrealized gain on securities (4,027) -- -- (4,027) -- -- -- --
--------
Net unrealized gain on securities -- -- -- 5,561 -- -- -- --
Minimum pension liability adjustment 206 -- -- 206 -- -- -- --
Foreign currency translation adjustments (5,050) -- -- (5,050) -- -- -- --
--------
Other comprehensive income -- -- -- 717 -- 717 -- --
--------
Comprehensive income -- -- -- $ 24,066 -- -- -- --
========
Exercise of stock options 1,428 110 1,889 -- -- (571) --
Stock option tax benefits 653 -- 653 -- -- -- --
Treasury stock reissued, 92,268 common shares 1,651 -- 969 -- -- 682 --
Restricted stock, net (126) 22 393 -- -- -- (541)
Amortization of unearned compensation 681 -- -- -- -- -- 681
Common stock issued in acquisitions 6,514 -- 5,716 -- -- 798 --
Other 4 -- (27) -- -- 31 --
===================================================================================================================================
BALANCE, DECEMBER 31, 1997 260,822 29,746 180,538 70,091 207 (16,992) (2,768)
Comprehensive loss:
Net loss (10,222) -- -- $(10,222) (10,222) -- -- --
--------
Other comprehensive loss:
Unrealized gain on securities in income (9,588) -- -- (9,588) -- -- -- --
Less tax on unrealized gain in income 4,027 -- -- 4,027 -- -- -- --
--------
Net unrealized gain on securities in income -- -- -- (5,561) -- -- -- --
Minimum pension liability adjustment (240) -- -- (240) -- -- -- --
Foreign currency translation adjustments 3,339 -- -- 3,339 -- -- -- --
--------
Other comprehensive loss -- -- -- (2,462) -- (2,462) -- --
--------
Comprehensive loss -- -- -- $(12,684) -- -- -- --
========
Exercise of stock options 342 56 286 -- -- -- --
Stock option tax benefits 138 -- 138 -- -- -- --
Treasury stock reissued, 163,073 common shares 1,531 -- 288 -- -- 1,243 --
Restricted stock, net (557) (43) (646) -- -- (236) 368
Amortization of unearned compensation 489 -- -- -- -- -- 489
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 250,081 $ 29,759 $ 180,604 $ 59,869 $ (2,255) $ (15,985) $(1,911)
===================================================================================================================================
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Accounting policies followed by the Company that materially affect the
determination of financial position, results of operations and cash flow 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. 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
Wireless Engineering 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 domestic 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. Cash held at the
Company's foreign subsidiaries is principally invested in bank deposits and
money market instruments with maturities less than one month.
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, 1998 and 1997 (amounts in
thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Raw material $45,936 $49,583
Work-in-process 19,634 24,505
Finished goods 19,165 19,680
--------------------------------
$84,735 $93,768
</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.
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, 1998 and 1997 (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Land and improvements $ 2,806 $ 2,702
Buildings 27,447 26,658
Machinery and equipment 83,701 73,000
Leasehold improvements 6,921 4,904
- ------------------------------------------------------
120,875 107,264
Less accumulated depreciation
and amortization (59,293) (46,721)
- ------------------------------------------------------
$ 61,582 $ 60,543
</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 three to ten
years. The Company also capitalizes costs incurred in the development of
computerized databases, which are amortized over periods of three 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 1998, 1997 and 1996, approximately $3,658,000,
$5,307,000, and $4,745,000, respectively, of these costs were capitalized and
approximately $1,630,000, $2,950,000, and $2,383,000, respectively, were
amortized (excluding impairment writedowns of $5,359,000 in 1998 and $5,955,000
in 1997). In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". This Statement provides guidance on the accounting treatment for
certain costs incurred in developing or purchasing software for internal use.
The Company will adopt the standard on January 1, 1999, requiring the Company to
expense certain costs and capitalize others incurred on a prospective basis. The
Company has determined the Statement will not have a material impact on results
of operations, financial position or cash flow.
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.
Goodwill is net of accumulated amortization of $18,057,000 and $11,747,000 as of
December 31, 1998 and 1997, respectively.
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
component of Accumulated other comprehensive income (loss).
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
16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$28,812,000, $26,137,000, and $18,059,000 in 1998, 1997, and 1996, 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 $1,930,000, $4,230,000, and $2,964,000, in 1998,
1997, and 1996, 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: Deferred income taxes are recorded to reflect the tax consequences
in 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: Basic earnings per share are based on the weighted
average number of common shares outstanding during the period. Diluted earnings
per 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. A reconciliation of the Basic and Diluted per
share computations are provided below (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Common Shares:
Weighted average common
shares outstanding - Basic 27,220 26,920 26,470
Additional common shares
issuable for stock options 150 420 590
- -------------------------------------------------------
Common shares - Diluted 27,370 27,340 27,060
</TABLE>
Derivatives Financial Instruments: The Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998. This Statement is
effective for financial statements issued for all fiscal quarters of fiscal
years beginning after June 15, 1999. Accordingly, the Company will adopt the
provisions of the standard on January 1, 2000. The Company utilizes hedging
activities primarily in its foreign subsidiaries to limit foreign currency
exchange rate risk. The Company's preliminary assessment is that the adoption of
this Statement will not have a significant impact on the Company's results of
operations, financial position or cash flow.
Other: The 1997 and 1996 consolidated financial statements have been
reclassified to conform to the 1998 presentation. In addition, the Company
adopted SFAS No. 130, "Reporting Comprehensive Income." Accordingly, prior year
financial statements have been reclassified to conform to the provisions of this
Statement.
<TABLE>
<CAPTION>
NOTE 2: FINANCING
Long-term obligations consisted of the following (amounts in thousands):
1998 1997
<S> <C> <C>
Credit agreement borrowings $ 39,282 $ 7,081
Floating rate industrial revenue
bonds due 2012 - 2025 15,500 15,500
Senior notes payable
due 2001 - 2007 65,000 65,000
Capital lease obligation 12,659 13,934
Other 706 564
Unamortized debt expense (1,400) (1,137)
- ---------------------------------------------------------
131,747 100,942
Less current maturities (3,070) (3,027)
- ---------------------------------------------------------
$ 128,677 $ 97,915
</TABLE>
In 1998, the Company entered into a new domestic revolving credit agreement in
the aggregate amount of $100,000,000 expiring December 31, 2001. This agreement
replaced the Company's domestic revolving credit agreement which was to expire
in December, 1999. Of the total $100,000,000 commitment, $17,200,000 has been
utilized for the issuance of letters of credit relating principally to the
Company's industrial revenue bonds. The outstanding borrowings under this
domestic revolving credit agreement totalled $33,500,000 at December 31, 1998.
The balance of funds available under the revolving credit agreement may be
utilized for borrowings or other letters of credit; however, a maximum of
$25,000,000 may be allocated to such letters of credit. At December 31, 1998,
$49,300,000 was available under this agreement. This obligation is
collateralized by substantially all domestic assets. The Company has also
pledged 65% of the stock of applicable foreign subsidiaries in support of this
obligation. Interest may be determined on a LIBOR or prime rate basis at the
Company's option. The Company has agreed to pay a facility fee of .4% per annum
on the total amount of the commitment. During 1998, the average interest rate
for all domestic credit agreement borrowings was 6.9%.
The Company also has short-term credit lines utilized by its European
subsidiaries. At year-end, direct borrowings under these agreements totaled
$8,486,000, an additional $37,614,000 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
$1,483,000 (due 1999 - 2008), and variable rate borrowings with various
international banks of $4,299,000 (due 1999 - 2005). Further, two of the
aforementioned arrangements are mortgage notes, under which the Company has
pledged the respective land and buildings as collateral. These collateralized
assets had an aggregate net book value of $9,781,000 at year-end 1998. During
1998, the average interest rate for all foreign credit arrangements approximated
5.89%.
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
3.99% at December 31, 1998. The average interest rate for all industrial revenue
borrowings approximated 3.59% during 1998.
In 1997, the Company issued $65,000,000 of 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%.
17
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes are collateralized and rank equally with the Company's other
collateralized indebtedness. A portion of the proceeds was used to prepay a
$15,000,000 note payable. 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 basic and diluted share after
related tax benefit, has been reported as an "Extraordinary Item" in the
Consolidated Statements of Operations.
In connection with one of its discontinued emissions testing business programs,
the Company had a lease agreement under which it leased the land and inspection
facilities for an initial lease term equal to the program life expiring on
December 31, 2005. For financial reporting purposes the lease has been
classified as a capital lease; accordingly, an obligation (and related asset
with a net book value of approximately $13,373,000) is recorded at December 31,
1998. See also Note 9 for information concerning the sale of this business.
The aggregate maturities of long-term obligations for the years 1999 through
2003 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
- ---------------------------------------------
<S> <C> <C> <C> <C>
$3,070 $3,224 $39,174 $13,279 $13,288
</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, working capital, earnings before interest, taxes, depreciation and
amortization, the purchase or redemption of the Company's shares and the
disposition of assets of the Company not in the ordinary course of business.
NOTE 3: OTHER ASSETS,
LIABILITIES AND INCOME
Other assets consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Capitalized computer software
and database files $ 8,894 $ 10,949
Investments in
telecommunication companies 501 23,337
Other 18,570 18,316
- --------------------------------------------------
$27,965 $ 52,602
</TABLE>
Other liabilities consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Minority interests $ 6,297 $ 7,253
Long-term pension and
post-retirement liabilities 6,212 5,879
Other 4,391 4,725
- --------------------------------------------------
$ 16,900 $ 17,857
</TABLE>
The components of Other income, net pertains principally to various
telecommunication investments and is comprised of the following (amounts in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
RF Micro Devices, Inc. $ 14,400 $ 300 $ --
NextWave Telecom Inc. (6,638) -- --
Other (1,697) 1,585 952
- --------------------------------------------------------
$ 6,065 $ 1,885 $ 952
</TABLE>
In 1998, the Company sold its investment in RF Micro Devices, Inc. This
investment was accounted for pursuant to Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Accordingly, in 1997, such investment was adjusted to fair value
with the resultant unrealized appreciation, net of related income tax effects
included in Stockholders Equity as "Accumulated other comprehensive income
(loss)."
In 1998, the Company recognized an impairment in the entire carrying value of
its investment in and receivable from NextWave (a C-Block wireless
communications carrier) as NextWave and certain of its subsidiaries filed for
relief under Chapter 11 of the United States Bankruptcy code. (See Note 5 for
additional information.) Also in 1998, the Company wrote off its investment in
Windata Inc. as a result of that company's decision to liquidate with no
recovery to the Company. Other income in 1997 relates primarily to a gain from
the sale of an investment in a telecommunications company. Other income in 1996
pertains principally to royalty payments received in connection with a
previously sold operation.
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 3,528,221 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 1998, 1997 and 1996.
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the 1994 Non-Employee Directors Stock Option Plan, the total number
of shares to be issued may not exceed 278,528 shares. Each Non-Employee Director
who previously had not been employed by the Company automatically receives an
option to purchase 3,000 shares of common stock per year ("Formula Awards"). 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.
Stock option activity for the three years ended December 31, 1998 is summarized
as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
<S> <C> <C>
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
Granted (weighted average
fair value $8.79) 558,600 $ 15.55
Exercised (56,094) $ 6.06
Terminated and cancelled (353,110) $ 18.02
- -----------------------------------------------------
Balance, December 31, 1998 2,118,099 $ 14.96
</TABLE>
The table below summarizes the status of outstanding options as of December 31,
1998.
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED AVERAGE STOCK OPTIONS EXERCISABLE
------------------------- -------------------------
Range of Contractual Exercise Weighted Average
Exercise Prices Shares Life Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
$ 4.18 - $10.77 459,301 2.03 years $5.38 431,801 $ 5.28
$11.27 - $19.97 1,158,127 7.66 years $15.94 423,787 $15.08
$20.00 - $28.00 500,671 7.15 years $21.45 281,641 $21.45
- -----------------------------------------------------------------------------------------------
$ 4.18 - $28.00 2,118,099 6.32 years $14.96 1,137,229 $12.94
</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 51% and 47%,
risk free interest rates of 5.31% and 6.38%, and expected lives of 6.3 years and
6.2 years for 1998 and 1997, respectively. The calculations assume no future
dividend payments for grants in 1998, 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, 1998 is
summarized as follows:
<TABLE>
<CAPTION>
Shares
<S> <C>
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
Granted (weighted average fair value $16.50) 20,000
Vested (37,365)
Terminated and cancelled (62,841)
- ----------------------------------------------------------------
Balance, December 31, 1998 205,250
</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 the
shorter of a ten-year period or the period of actual vesting. Compensation
expense with respect to restricted shares, net of forfeitures, amounted to
$26,000 in 1998, $424,000 in 1997, and $382,000 in 1996.
At December 31, 1998 and 1997, 4,209,933 and 2,962,027 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.
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 (loss) and earnings per
common share would have been reduced to the pro forma amounts below (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net income (loss):
As reported ($10,222) $23,349 $13,066
Pro forma ($12,042) $21,562 $11,794
Earnings (loss):
per common share,
Basic: As reported ($.38) $.87 $.50
Pro forma ($.44) $.80 $.45
Diluted: As reported ($.38) $.86 $.48
Pro forma ($.44) $.80 $.44
</TABLE>
19
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: COMMITMENTS AND CONTINGENCIES
The Company's leases consist primarily of facilities and equipment and expire
principally between 1999 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 $3,900,000 in 1998,
$4,600,000 in 1997, and $3,900,000 in 1996. Future minimum payments under
noncancelable leases as of December 31, 1998 were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Operating Capitalized
Leases Lease
<S> <C> <C>
1999 $ 4,019 $ 2,450
2000 3,350 2,450
2001 3,111 2,450
2002 2,830 2,450
2003 1,850 2,450
Thereafter 1,960 4,900
- -------------------------------------------------------------------------------
Total minimum
lease payments $17,120 17,150
- -------------------------------------------------------------------------------
Less: amount
representing interest (4,491)
- -------------------------------------------------------------------------------
Present value of future minimum
lease payments including current
maturities of $1,392 $12,659
</TABLE>
The Company is self-insured for health care and workers compensation up to
predetermined amounts above which third party insurance applies. The Company is
fully insured through third party insurance for general liability and product
liability. The Company is contingently liable to insurance carriers under its
workers compensation and liability policies and has provided letters of credit
in favor of these carriers in the amount of $1,172,000.
In 1996, the Company entered into an agreement to make an equity investment 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 agreed to provide secured product financing in
addition to its investment. In 1998, NextWave and certain of its subsidiaries
filed for relief under Chapter 11 of the United States bankruptcy code;
accordingly, the status of this commitment is, at this time, unlikely to be
filled.
Various legal actions are pending against or involve the Company and its
subsidiaries with respect to such matters as product liability, casualty claims
and employment practices. 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.
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 two formerly occupied manufacturing
facilities. In this regard, the Company has engaged a contractor to evaluate one
of the sites and determine the cost, if any, to resolve environmental damage.
While the ultimate cost cannot yet be specifically determined, the Company
currently believes the costs of remediation at this site will not exceed
$100,000. Based upon environmental assessments of the second site, 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 cash flow of the
Company.
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>
1998 1997 1996
<S> <C> <C> <C>
Service cost benefits
earned during the year $ 1,549 $ 1,204 $ 1,165
Interest cost on the projected
benefit obligation 2,261 2,244 2,354
Actual income on plan assets (1,779) (5,602) (3,474)
Net settlement gain (29) -- --
Net amortization and deferral (880) 3,576 1,509
- --------------------------------------------------------------
Net periodic pension cost $ 1,122 $ 1,422 $ 1,554
</TABLE>
Plan assets consist principally of equity securities (including 92,000 common
shares of the Company).
A reconciliation of the plans' projected benefit obligation, fair value of plan
assets, and funding status is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Projected benefit obligation:
Balance, beginning of year $ 31,341 $ 29,212
Service cost 1,549 1,204
Interest cost 2,261 2,244
Benefits paid (2,076) (1,781)
Loss recognized 2,856 462
Settlements (583) --
- --------------------------------------------------------
$ 35,348 $ 31,341
Fair value of plan assets:
Balance, beginning of year $ 28,086 $ 23,970
Return on assets 1,779 $ 5,602
Employer contributions 216 206
Benefits paid and plan expenses (1,769) (1,692)
- --------------------------------------------------------
$ 28,312 $ 28,086
Funding Status:
Projected benefit obligation $(35,348) $(31,341)
Fair value of plan assets 28,312 28,086
- --------------------------------------------------------
Unfunded obligation (7,036) (3,255)
Unrecognized:
Net (gain)/loss 2,190 (1,014)
Prior service cost 1,739 1,867
Transition assets (135) (189)
Additional minimum liability (694) (621)
- --------------------------------------------------------
Accrued liability $ (3,936) $ (3,212)
</TABLE>
20
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
With respect to certain of the Company's pension plans, the accumulated pension
obligation exceeds the fair value of the plan assets, as follows (amounts in
thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accumulated benefit obligation $7,502 $7,211
Fair value of plan assets 2,767 2,755
</TABLE>
The weighted average rates used in determining pension cost for the plans' are:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Discount rate 6 3/4% 7 1/4%
Expected rate of increase
in compensation 5% 5%
Expected long-term rate of
return on plan assets 9 3/4% 9 3/4%
</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>
1998 1997 1996
<S> <C> <C> <C>
Service cost benefits attributed
to service during period $ 4 $ 6 $ 15
Interest cost on accumulated
post-retirement
benefit obligation 105 110 110
Amortization of (gain) loss 2 (3) (2)
- ----------------------------------------------------------
Net postretirement
health care cost $ 111 $ 113 $ 123
</TABLE>
The components of the accumulated postretirement benefit obligations (all of
which are unfunded) are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Retirees $1,403 $1,319 $1,103
Fully eligible active
plan participants 69 96 102
Other active plan
participants 72 87 141
Unrecognized net gain 60 74 263
- --------------------------------------------------------
Accumulated postretirement
benefit obligations $1,604 $1,576 $1,609
</TABLE>
A reconciliation of the accumulated postretirement benefit cost is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Balance as of January 1, $ 1,576 $ 1,609
Net postretirement benefit cost:
Service cost 4 7
Interest Cost 105 110
Amortization of gains/(losses) 2 (4)
Actual benefits paid (83) (146)
- ------------------------------------------------------------
Balance as of December 31, $ 1,604 $ 1,576
</TABLE>
The actuarial calculation assumed a health care cost trend rate of 9.2% for 1998
(9.6% in 1997 and 13.2% in 1996). 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.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change (plus or
minus) in the assumed health care cost trend rules would have the following
effects (amounts in thousands):
<TABLE>
<CAPTION>
Plus Minus
1% Point 1% Point
<S> <C> <C>
Effect on total of service
and interest cost components $ 5 $ (4)
Effect of postretirement
benefit obligation $ 51 $(46)
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligations was 6.75% in 1998, 7.25% in 1997 and 7.50% in
1996. The amount of unrecognized net gain related to the Company's
postretirement health benefits was $60,000 at December 31, 1998.
NOTE 7: INCOME TAXES
Information with respect to income taxes in continuing operations is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Income (loss) before taxes
and minority interests:
Domestic $(22,892) $ 5,351 $ 9,472
Foreign 14,338 41,362 37,054
- ----------------------------------------------------------------------
$ (8,554) $ 46,713 $ 46,526
(Benefit) Provision
for income taxes:
Current:
Federal $ (6,206) $ 2,247 $ 2,764
Foreign 10,661 22,867 19,170
State and local 550 766 580
- ----------------------------------------------------------------------
5,005 25,880 22,514
- ----------------------------------------------------------------------
Deferred:
Federal (5,472) (5,275) (2,054)
Foreign (4,571) (542) 108
State and local (272) (2,340) (903)
(10,315) (8,157) (2,849)
- ----------------------------------------------------------------------
$ (5,310) $ 17,723 $ 19,665
- ----------------------------------------------------------------------
</TABLE>
A reconciliation of the (benefit) provision for income taxes at the U.S. Federal
statutory rate of 35% to the reported tax is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
(Benefit) provision computed
at the U.S. Federal
statutory rate $ (2,994) $ 16,350 $ 16,284
State and local income
taxes, net of Federal
income tax effect 311 (1,023) (210)
Net higher tax rates
on foreign income 406 7,016 6,082
Benefit of foreign sales
corporation and other
tax credits (1,513) (2,115) (2,055)
Impact of tax rate change
on prior undistributed
foreign earnings (3,670) -- --
Tax effect of write-off of
non-deductible acquired
in-process research
and development costs -- -- 932
Other, net 2,150 (2,505) (1,368)
- ------------------------------------------------------------------------
$ (5,310) $ 17,723 $ 19,665
</TABLE>
21
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company's total provision (benefit) for
income taxes (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Continuing operations $ (5,310) $ 17,723 $ 19,665
Discontinued operations (2,640) -- (3,780)
Extraordinary item -- (364) --
Tax benefit of carryforward
allocated to goodwill -- 6,085 --
Allocated to equity:
Unrealized appreciation
on investment securities -- 4,027 --
Stock options (139) (653) (82)
Pension gain (loss) (148) 149 112
- ------------------------------------------------------------------------
$ (8,237) $ 26,967 $ 15,915
</TABLE>
The components of deferred tax assets (liabilities) are comprised of the
following as of December 31, 1998 and 1997 (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Gross deferred tax assets:
Inventory $ 5,718 $ 4,854
Bad debt reserves 3,506 1,448
Pensions and deferred
compensation 1,605 2,419
Tax credit carryforwards 2,546 1,575
Plant consolidation reserve 4,405 1,095
Product warranty claims 543 1,735
Net operating loss carryforwards 11,512 3,116
Unremitted foreign earnings 4,747 --
Other 1,181 1,332
- ------------------------------------------------------------------
35,763 17,574
- ------------------------------------------------------------------
Gross deferred tax liabilities:
Intangible assets (1,808) (3,455)
Depreciation (1,370) (2,686)
Unrealized appreciation on
investment securities -- (4,027)
Deferred start-up costs (1,850) (2,309)
Other (8,595) (5,920)
- ------------------------------------------------------------------
(13,623) (18,397)
- ------------------------------------------------------------------
Net deferred tax assets (liabilities) $ 22,140 $ (823)
</TABLE>
During 1998, 1997, and 1996, general business tax credits of approximately
$600,000, $900,000 and $470,000, generated in the respective years were used to
reduce the provision for income taxes. At December 31, 1998, the Company has
available alternative minimum tax credits in the amount of $476,000 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 $42,000,000 at December 31, 1998. 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.
The Company has a U.S. net operating loss carryforward in the amount of
approximately $33,000,000 (generated principally in 1998) available to reduce
future taxable income and may be carried forward for twenty years. The Company
has not provided any valuation allowance with respect thereto as it believes the
realization of this asset is "more likely than not."
NOTE 8: INDUSTRY SEGMENT
AND GEOGRAPHIC DATA
In 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 1998 fiscal year.
Management has determined that the Company conducts its business through two
segments, based on products provided and services rendered: Telecommunications
Equipment Manufacturing and Wireless Engineering Services. Telecommunications
Equipment Manufacturing consists of three product lines: Systems Products, Site
Management and Other Non-Antenna Products, and Mobile and Base Station Antennas.
The following shows the operating results and asset positions for each of the
reportable segments for the years ended December 31, 1998, 1997, and 1996
(amounts in thousands).
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Results of Operations:
Segment results:
Telecommunications
equipment
manufacturing $ 12,256 $ 60,812 $ 53,382
Wireless engineering
services (7,867) (2,573) 3,408
- -----------------------------------------------------------------------------
4,389 58,239 56,790
Other income, net 6,065 1,885 952
Goodwill amortization (6,295) (3,404) (2,432)
General corporate
expenses (5,908) (6,956) (5,999)
Financing costs (6,805) (3,051) (2,785)
- -----------------------------------------------------------------------------
Income (loss) before taxes
and minority interests $ (8,554) $ 46,713 $ 46,526
Assets:
Segment assets:
Telecommunications
equipment
manufacturing $ 244,487 $ 271,046 $ 226,035
Wireless engineering
services 16,527 20,918 23,915
- -----------------------------------------------------------------------------
261,014 291,964 249,950
Goodwill 131,939 126,923 75,502
Assets of discontinued
emissions testing
business 25,799 33,363 48,619
Deferred income taxes 24,175 7,244 932
Other general
corporate assets 22,658 54,939 35,509
- -----------------------------------------------------------------------------
Total assets $ 465,585 $ 514,433 $ 410,512
Sales from external customers:
Telecommunications
equipment
manufacturing $ 360,589 $ 396,828 $ 334,029
Wireless engineering
services 27,415 35,680 35,469
- -----------------------------------------------------------------------------
Total sales $ 388,004 $ 432,508 $ 369,498
Depreciation and
software amortization:
Telecommunications
equipment
manufacturing $ 13,990 $ 12,072 $ 10,888
Wireless engineering
services $ 3,510 $ 3,532 $ 3,007
Fixed asset and
capitalized software
additions:
Telecommunications
equipment
manufacturing $ 18,361 $ 24,220 $ 17,547
Wireless engineering
services $ 3,635 $ 3,296 $ 4,615
</TABLE>
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The distribution of the Company's geographic sales and long-lived assets
(excluding deferred income taxes) is as follows (amounts in thousands):
<TABLE>
<S> <C> <C> <C>
Sales: 1998 1997 1996
United States $230,997 $272,346 $249,084
Italy 113,401 117,607 92,284
Germany 50,905 48,622 43,013
Other 71,115 69,309 45,119
Intergeographic (78,414) (75,376) (60,002)
- ------------------------------------------------------------
Total $388,004 $432,508 $369,498
Long-lived assets: 1998 1997 1996
United States $220,505 $249,071 $193,626
Italy 13,347 12,484 11,419
Germany 7,487 7,014 4,708
Other 5,097 3,828 1,580
- ------------------------------------------------------------
Total $246,436 $272,397 $211,333
</TABLE>
Sales by product line for the Telecommunications Equipment Manufacturing segment
are presented in the bar charts on page 27.
NOTE 9: ACQUISITIONS AND DISPOSITIONS
In 1998, the Company acquired additional minority interests in several of its
subsidiaries. In June 1998, the Company acquired an additional 10% of Telia S.A.
("Telia") in France bringing its ownership interest to 72%. In July 1998, the
Company acquired the remaining 40% minority interest of Mikom Vertriebs und
Service G.m.b.H., in Austria. The remaining 60% interest is owned by the
Company's Mikom G.m.b.H. ("MIKOM") subsidiary in Germany. In October 1998, the
Company acquired an additional 12% interest in MIKOM, bringing its total
interest in MIKOM to 74%. In November 1998, the Company acquired the remaining
outstanding 35.7% minority interest in Tekmar Sistemi S.r.l. in Italy. All such
transactions were in cash and aggregated approximately $15,400,000.
In 1997, the Company acquired the remaining 20% minority interest in FOREM
S.r.l. ("FOREM"), and now owns 100% of FOREM. In a series of transactions to
acquire this 20% minority interest, the Company paid $31,297,000 in cash 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 had
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 1997,
the Company acquired 62% of the stock of 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. The final
purchase price was contingent upon the net income of Telia's 1997 fiscal year.
At December 31, 1997, the Company had recorded the estimated liability (included
in accounts payable) for this final payment in the amount of approximately
$830,000. The remaining 28% ownership interest of Telia, which is held by senior
Telia management, is subject to put and call options, which provide for a
purchase price based upon future operating results.
In 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 1996, the Company also acquired a 64.3%
interest in Tekmar for cash and 9,783 shares of common stock. Further, in 1996,
the Company acquired the remaining 20% minority interest of its Grayson Wireless
subsidiary for cash.
Pro forma results of operations for the acquisitions in 1997 and 1996 have not
been presented because the impact is not significant to results of operations.
On March 1, 1999, the Company sold its MARTA Technologies, Inc. ("Marta")
subsidiary, which operated its discontinued centralized automotive emissions
testing programs, to a subsidiary of Environmental Systems Products, Inc.
Pursuant to the terms of the agreement, the Company received cash and notes in
exchange for the outstanding capital stock of Marta. Additional purchase price
consideration may be earned and is contingent on future events. The net book
value of the assets to be sold (including a capitalized lease obligation in the
amount of $12,659,000) amounts to approximately $9,000,000, before accrual for
any costs of disposal.
In December 1998, Marta and the State of Ohio entered into agreements to modify
the vehicle emissions testing program in Cincinnati and to settle pending
litigation between Marta and the State of Ohio. Pursuant to the settlement
agreement, Marta entered into a change order with the State for the conversion
of the current vehicle emissions testing process to a simpler lower speed test.
The cost of the change order will be funded by the State.
On February 16, 1999, Marta settled 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.
In 1998, the Company recognized an additional loss for the discontinued
emissions testing business in the pretax amount of $7,350,000 or $4,710,000
after related income tax benefit of $2,640,000 ($.17 per basic and diluted
common share) relating principally to the diminution in the estimated value of
its Cincinnati, Ohio emissions testing program. The Company believes that the
aforementioned sale of Marta will not result in the need for an additional loss
provision.
23
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized income statement information relating to the results of discontinued
operations of Marta for 1996 is as follows (amounts in thousands, except per
share data):
Sales $ 14,914
Operating loss (5,627)
Net loss (3,766)
Loss per common share (basic and diluted) (.14)
In 1997 and 1998, the residual operations of Marta were not material in relation
to the continuing operations of the Company. Results of operations for Marta are
net of allocated interest of $1,243,000 in 1996.
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: 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, 1998 reflects the corresponding fair
value. In 1997, one of the Company's investments in telecommunications companies
was carried at fair market value, based on its quoted stock price at December
31, 1997. This investment was sold in 1998.
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 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, 1998 and 1997 are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
<S> <C> <C>
1998
Cash and cash equivalents $ 19,900 $ 19,900
Non-current investments 5,195 5,195
Long-term debt 141,633 145,175
Off balance sheet financial
instruments:
Letters of credit 1,220 1,220
Foreign currency net
sales contracts 5,523 5,519
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
</TABLE>
NOTE 11: SUPPLEMENTAL
CASH FLOW DISCLOSURE
There were no significant non-cash transactions in 1998.
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 3, in 1997 the Company owned common stock and warrants in
RF Micro Devices, Inc. On December 31, 1997, the Company increased its
investment value to reflect its current trading value on that date of
$12,668,000, and recorded the related unrealized appreciation in the pretax
amount of $9,588,000 ($5,561,000 after related income tax effect) to
Stockholders' Equity as "Accumulated other comprehensive income (loss)."
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.
Information with respect to cash paid during the year for interest and taxes is
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Interest paid $ 8,020,000 $ 4,097,000 $ 4,907,000
Interest
capitalized 286,000 220,000 --
Income taxes
paid, net 24,096,000 27,514,000 1,778,000
</TABLE>
24
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly financial data are summarized as follows (amounts in thousands, except
per share amounts):
<TABLE>
<CAPTION>
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1998
Sales $ 113,369 $ 98,013 $ 90,955 $ 85,667
Gross profit 35,748 17,662 21,928 19,262
Income (loss) from continuing operations 6,338 (11,134) 2,598 (3,314)
Loss from discontinued operations -- -- (4,710) --
Net income (loss) 6,338 (11,134) (2,112) (3,314)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share
Basic and Diluted:
Continuing operations .23 (.41) .10 (.12)
Discontinued operations -- -- (.17) --
Net income .23 (.41) (.07) (.12)
- -------------------------------------------------------------------------------------------------------------
1997
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
- -------------------------------------------------------------------------------------------------------------
</TABLE>
In the second quarter of 1998, the Company recorded a $15,800,000 before-tax
special charge to earnings, or $.38 per basic and diluted share after related
income taxes. Of this amount, $12,200,000 is recorded in cost of sales, and
$3,600,000 in selling, general and administrative expenses. In the fourth
quarter of 1998, the Company recorded a $3,600,000 before-tax special charge to
earnings, or $.09 per basic and diluted share after related income taxes; of
this amount, $300,000 is recorded in cost of sales, and $3,300,000 in selling,
general and administrative expenses. Such charges relate to inventory, other
asset write-off and employee terminations.
Income (loss) from continuing operations in the third quarter of 1998, includes
net gains in the amount of $7,797,000 from the sale of common stock investments
in telecommunications companies and the recognition of a loss reserve relating
to investments in certain other telecommunications ventures. The aggregate
impact of these was $.17 per basic and diluted share after related income taxes.
Net income for the three months ended September 30, 1998, includes a $3,700,000
deferred tax benefit, or $.13 per basic and diluted share, with respect to a
change in the applicable income tax rate on the undistributed earnings (prior to
1998) of a foreign subsidiary as a result of the Company's acquisition of an
additional interest in such subsidiary. The acquisition allows for earnings
(when distributed) to be taxed at a lower rate.
In the fourth quarter of 1997, the Company recorded a special pre-tax charge in
the amount of $9,650,000, or $.22 per basic and diluted common share after
related tax effects. This charge relates to the discontinuance of product
development and marketing efforts on two products, including the write-off of
related assets, and the cost of employee severance related to a reduction in its
Cleveland based workforce.
25
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Allen Telecom Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity, and of cash flows
present fairly, in all material respects, the financial position of Allen
Telecom Inc. and its subsidiaries at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
CLEVELAND, OHIO
FEBRUARY 16, 1999,
except as to paragraph five of Note 9, which is as of March 1, 1999
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.
Allen Telecom
/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, III
JAMES L. LEPORTE, III
VICE PRESIDENT
AND CONTROLLER, CHIEF
ACCOUNTING OFFICER
26
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
<TABLE>
<CAPTION>
($ millions) 1998 1997 1996
<S> <C> <C> <C>
Sales $ 388.0 $ 432.5 $ 369.5
Operating income
(before special charges and
credits, discussed below) $ 11.6 $ 57.1 $ 49.4
Income (loss) before taxes
and minority interests $ (8.5) $ 46.7 $ 46.5
</TABLE>
In 1998, sales declined by $44.5 million, or 10%, driven by the unsettled
climate for the global wireless telecommunications market. During 1998, economic
dislocations in Asia became more widespread and were followed by economic
disruption in South America, notably Brazil. In addition, European original
equipment manufacturers ("OEM's") had excess inventory at a time when worldwide
demand was decreasing. The development of wireless networks in the U.S. has not
increased as anticipated, affecting domestic sales. The Company currently sees
no significant change in its market in the near term, but hopes to see gradual
improvement as the uncertainties in Asia and South America are resolved.
The increase in sales in 1997 to $432.5 million, or 17% over 1996, was due
primarily to growth of international sales, which increased approximately $51
million. The Site Management and Other Non-antenna and Systems product lines
were the beneficiaries of this growth.
In 1998, international sales constituted approximately 58% of total sales,
compared with 60% in 1997, and 56% in 1996. 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.
Operating income, representing income before financing costs and special charges
and credits (as discussed below), decreased from $57.1 million in 1997, or 13%
of sales to $11.6 million in 1998, or 3% of sales. Results were impacted by
lower gross profit margins and the impact of fixed costs on lower sales. In
addition, cost reductions in selling, general and administrative expenses did
not significantly impact the Company's results until the fourth quarter of 1998.
Operating income for 1997 increased $7.4 million or 14% over 1996. This is
attributable principally to the growth of the Site Management and Base Station
Antenna businesses, improved product margins and the spreading of fixed costs on
higher sales.
In 1998, the Company initiated a number of cost reduction efforts to improve and
adjust operations to existing market conditions. These actions include, among
others, the discontinuance of product development and marketing efforts on
certain products, the formation of a worldwide Systems business, the
consolidation of two manufacturing operations of the Systems product line, and
the reorganization of the Company's North American-based sales force and
Wireless Engineering Services business. As a result of asset write-offs,
severance and other costs associated with such actions, the Company incurred
before-tax charges for the year of $19.4 million, or $.47 per basic and diluted
share after related taxes. Such cost reduction efforts were offset, in part, by
net gains from the sale of telecommunications investments as well as the
recognition of loss reserves on other investments in the amount of $6.0 million,
or $.14 per basic and diluted share after related income taxes.
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 basic and diluted
share) relating to the discontinuance of product development and marketing
efforts on two products, including the write-off of assets and the cost of
employee severance. These charges were offset, in part, by a $2.2 million gain
from telecommunications investments. 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
$.10 per basic and diluted share.
RESULTS OF OPERATIONS BY SEGMENT
TELECOMMUNICATIONS
EQUIPMENT MANUFACTURING:
<TABLE>
<CAPTION>
($ millions) 1998 1997 1996
<S> <C> <C> <C>
Sales $ 360.6 $ 396.8 $ 334.0
Gross profit, % of sales 25.0% 36.4% 36.0%
Operating expenses,
% of sales 13.3% 13.5% 13.8%
Research and development
and new product
engineering, % of sales 8.3% 7.6% 6.3%
Operating income $ 12.3 $ 60.8 $ 53.4
</TABLE>
The decrease in sales in 1998 to $360.6 million, or 9% below 1997, was due
essentially to weakness in international sales which decreased approximately $32
million, or 13%. Sales of foreign operations were negatively impacted by the
strong U.S. dollar relative to certain European currencies in fiscal 1997. As a
result of exchange differences, reported sales in the year ended December 31,
1998 were $6.7 million lower as compared with the corresponding prior year
period, assuming the exchange rates stayed the same. The Site Management and
Systems product lines were primarily affected by this decrease. The 19% increase
in sales in 1997 to $396.8 million was due to the growth in international sales
increasing $49.6 million, or 25% compared to 1996.
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, decreased 17% in 1998 to $92.6 million, as compared
with $111.0 million in 1997.
[BAR GRAPH]
<TABLE>
<CAPTION>
SALES OF SYSTEMS PRODUCTS
(MILLIONS OF DOLLARS)
<S> <C>
94 $76.1
95 $95.1
96 $94.1
97 $111.0
98 $92.6
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
SALES OF SITE MANAGEMENT AND OTHER NON-ANTENNA PRODUCTS
(MILLIONS OF DOLLARS)
<S> <C>
94 $53.0
95 $112.9
96 $159.3
97 $197.3
98 $184.5
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
SALES OF MOBILE AND BASE STATION ANTENNAS
(MILLIONS OF DOLLARS)
<S> <C>
94 $68.7
95 $73.8
96 $80.6
97 $88.5
98 $83.5
</TABLE>
[BAR GRAPH]
<TABLE>
<CAPTION>
SALES OF WIRELESS ENGINEERING SERVICES
(MILLIONS OF DOLLARS)
<S> <C>
94 $15.7
95 $24.8
96 $35.5
97 $35.7
98 $27.4
</TABLE>
27
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Much of this decrease was due to lower sales of the Extend-A-Cell(R) frequency
translating repeater and microcell products. The 18% increase in 1997 to $111.0
million, as compared with $94.1 million in 1996, was primarily due to higher
shipments of test and measurement products to domestic PCS and international
markets.
Sales of Site Management and Other Non-antenna products, which includes tower
mounted amplifiers, filters, combiners and duplexers, decreased to $184.6
million or 6% below 1997 sales of $197.3 million. Sales were adversely affected
by slowdown in OEM production levels due to the Asian crisis and the high levels
of inventory mentioned previously. The 24% increase in 1997 to $197.3 million,
compared with $159.3 million in 1996, was due to the Company's strong market
presence in Europe and the worldwide acceptance of GSM technology.
The sales of Mobile and Base Station Antennas remained strong, though down
slightly, at $83.5 million. This $5.0 million decrease, or 6% under the 1997
levels of $88.5 million, occurred mainly in the domestic market as sales of base
station and land mobile antennas slowed significantly in the fourth quarter of
1998. The 10% increase in sales in 1997 to $88.5 million was due to an increase
in sales of base station antennas. However, this increase was partially offset
by a decline in mobile antenna sales.
At December 31, 1998, the Company had an order backlog for this segment of
approximately $51.9 million, down from approximately $112.5 million at December
31, 1997 and $109.0 million at December 31, 1996.
Gross profit margins declined in 1998 as compared with 1997. Excluding the
aforementioned special charges for severance and the write-off of certain assets
relating to the discontinuation of certain product development efforts of $12.5
million in 1998 and $2.0 million in 1997, the gross profit margins would have
been 28.5% in 1998 compared to 36.9% in 1997. This 8.4 percentage point decline
in profit margins is due primarily to the spreading of fixed costs over lower
sales, pricing pressure caused by excess capacity throughout the industry,
product mix and higher obsolescence and warranty provisions. In 1999, the
Company anticipates continued pricing pressure to be partially offset by savings
from restructuring efforts and lower in-country production costs in China,
Mexico and Brazil. In 1997, excluding restructuring, the small increase in
margins, 36.9% compared with 36.0% in 1996, was due to slightly improved margins
in the Base Station Antenna and Systems product lines, partially offset by
pricing pressures in the Site Management product line.
Operating expenses, which consist of selling, general and administrative
expenses, but exclude amortization of goodwill, decreased in 1998, due primarily
to the aforementioned restructuring efforts at the end of 1997 and during 1998
which reduced expenses. The special charges associated with these restructuring
efforts were $4.3 million in 1998 and $5.0 million in 1997. Excluding these
special charges the operating expenses would have been 12% of sales in both 1998
and 1997. With the savings from restructuring efforts, operating expenses are
anticipated to be lower in 1999. The decline in percentage in 1997 from 1996
represents the spreading of fixed costs on higher sales.
In the past few years, the Company has significantly increased its research and
development and new product engineering costs in order to keep pace with the
technological advances in the industry. The Company anticipates that this trend
will continue as PCS and cellular systems are implemented and expanded and the
Company strives to develop ancillary products, including emergency 911
geolocation systems and software products, for the wireless telephony industry.
<TABLE>
<CAPTION>
WIRELESS ENGINEERING SERVICES:
($ millions) 1998 1997 1996
<S> <C> <C> <C>
Sales $ 27.4 $ 35.7 $35.5
Gross profit,
% of sales 16.6% 17.6% 30.3%
Operating expenses,
% of sales 42.3% 24.6% 20.7%
Operating income (loss) ($ 7.9) ($ 2.6) $ 3.4
</TABLE>
Wireless Engineering Services provides engineering and consulting services to
major wireless operators. In 1998, sales for the segment decreased from $35.7
million in 1997 to $27.4 million in 1998, or 23%. This decline was due to a
general slowdown in the pace of development of wireless networks from prior
years.
Gross profit decreased from 17.6% in 1997 to 16.6% in 1998 due to fixed
engineering costs on lower sales and pricing pressures. Gross profit declined
12.7 percentage points from 1996 to 1997 primarily due to the discontinuance of
a software product line and a corresponding cost of sales charge of $2.0 million
for the write-off of certain software development costs.
Operating expenses, as a percentage of sales, was 42.3% in 1998, 24.6% in 1997,
and 20.7% in 1996. In 1998, the Company incurred a one-time charge of $2.6
million due to realigning the Wireless Engineering Services business.
Additionally, the Company incurred costs of $.7 million in 1997 related to the
discontinuance of a software product line. Excluding these one-time charges,
operating costs as a percentage of sales were 32.7% in 1998, 22.6% in 1997, and
20.7% in 1996. The increase in 1998 over 1997 was due to fixed costs on
substantially lower sales.
Backlog for the Wireless Engineering Services segment was $.9 million at
December 31, 1998, $2.5 million at December 31, 1997, and $.2 million at
December 31, 1996.
The Wireless Engineering Services Segment was realigned in the fourth quarter of
1998 to reduce engineering and general and administrative costs. In addition,
product offerings have been reorganized to focus on this segment's core business
of engineering and microwave coordination services. The full impact of such
changes will not benefit segment operating results until early 1999.
<TABLE>
<CAPTION>
FINANCING COSTS
($ millions) 1998 1997 1996
<S> <C> <C> <C>
Financing expenses:
Interest expense $ (8.3) $ (4.5) $ (3.8)
Interest income $ 1.5 $ 1.5 $ 1.0
</TABLE>
The increase in interest expense in 1998 over 1997 is due to higher outstanding
borrowings incurred in connection with the acquisitions of minority interests in
subsidiaries and to support lower cash flow from operations. (See Liquidity and
Capital Resources.) The increase in interest expense in 1997 over 1996 was
primarily related to increased credit line borrowings as a result of the
significant amount of investments ($44.4 million) made in telecommunications
companies.
28
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
INCOME TAXES
($ millions) 1998 1997 1996
<S> <C> <C> <C>
Benefit (provision) for
income taxes $ 5.3 $ (17.7) $ (19.7)
Effective tax rate 62.1% 37.9% 42.3%
</TABLE>
The significantly higher effective tax rate benefit in 1998, as compared with
1997, is due, in large part, to the impact of a $3.7 million deferred tax
benefit ($.13 per basic and diluted share) with respect to the change in the
applicable income tax rate on the undistributed earnings (prior to 1998) of a
foreign subsidiary as a result of the Company's acquisition of an additional
interest in such subsidiary. The acquisition allows for the Company's pro rata
share of earnings (when distributed) to be taxed at a lower rate.
Through December 31, 1998, the Company has recorded a net U.S. deferred tax
asset pertaining to the recognition of net operating loss carryforwards, related
temporary differences and tax credits in the amount of approximately $20.0
million and has not provided any valuation allowance with respect thereto. The
Company believes the realization of this asset is "more likely than not." This
determination is based upon, in part, that the significant U.S. pretax loss
incurred in 1998, which accounted for the majority of the recognized tax
benefit, included substantial one time net special charges which are not
expected to be recurring, anticipated future U.S. taxable income as well as
available tax planning strategies, should they be necessary, to utilize such
losses in the future. The taxable losses may be carried forward for a period of
twenty years.
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 sourced income.
DISCONTINUED OPERATIONS:
As described in Note 9 of the Notes to Consolidated Financial Statements, the
Company has sold its Marta Technologies Inc. ("Marta") subsidiary which operated
its discontinued centralized automotive emissions testing programs. Pursuant to
the agreement, the Company received cash and notes in exchange for the
outstanding capital stock of Marta.
In the third quarter of 1998, the Company recognized an additional loss for the
disposal of the Marta business in the pretax amount of $7.3 million ($4.7
million after related income tax benefit of $2.6 million), or $.17 per basic and
diluted common share. (This is the primary reason for the reduction in "Assets
of discontinued emissions testing business" on the Consolidated Balance Sheet.)
This loss provision was principally related to the estimated diminution in value
of the Cincinnati, Ohio program. Based on the aforementioned sale, the Company
believes that there will be no need for any additional loss provision.
ENVIRONMENTAL
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and financial liability. (See also Note 5 of Notes to Consolidated
Financial Statements.)
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
<S> <C> <C> <C>
($ millions) 1998 1997 1996
Cash flow from operations $ (2.3) $ 18.0 $ 53.6
Total debt $ 140.2 $ 104.0 $ 56.0
Stockholders' equity $ 250.1 $ 260.8 $ 226.0
Debt to equity ratio .6:1 .4:1 .2:1
</TABLE>
The decline in cash flow from operations from 1997 to 1998 was due primarily to
a decline of approximately $28.9 million in income from continuing operations.
The decline in income was offset, in part, by a lower level of investment in
working capital of $9.9 million, in particular, receivables and inventories. 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 $24.0 million in tax payments made principally
by the Company's European subsidiaries.
The Company continued to make significant investments in the wireless
telecommunications industry both in capital improvements ($22.0, $27.6 and $22.2
million in 1998, 1997 and 1996, respectively) and investments in
telecommunication companies ($42.1, $44.4 and $16.9 million in 1998, 1997 and
1996, respectively). The 1998 amount includes $26.4 million for the acquisition
of the remaining outstanding minority interest of FOREM. Such amount was
included in Accounts Payable in the Consolidated Balance Sheet in 1997, and such
payment is a principal reason for the decline in that caption from 1997 to 1998.
As more fully described in Note 2 to the Consolidated Financial Statements, the
Company entered into a new $100.0 million domestic revolving credit agreement in
1998, expiring on December 31, 2001. This facility replaced the Company's
existing domestic revolving credit agreement. Borrowings under this new
obligation are collateralized by substantially all domestic assets of the
Company as well as a pledge of 65% of the stock of applicable domestic and
foreign subsidiaries. At December 31, 1998, $49.3 million is available for
borrowing under this agreement and $37.6 million is available under existing
foreign lines of credit.
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 affords it an opportunity to take advantage of lower interest rates. In
this regard, the Company prepaid 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 basic
and diluted common share after related income tax effects, and has been reported
as an "Extraordinary item" in the Consolidated Statement of Operations.
29
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 1996, the Company entered into an agreement to make an equity investment in
NextWave Telecom Inc. ("NextWave"), and NextWave agreed to purchase $50.0
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 investment. In 1998, NextWave and certain of its subsidiaries
filed for relief under Chapter 11 of the U.S. bankruptcy code; accordingly, this
commitment is, at this time, unlikely to be filled.
The decrease in Other assets in the Consolidated Balance Sheet is due primarily
to the sale of the common stock investment in RF Micro Devices, Inc. in 1998,
which generated approximately $14.4 million in cash.
In 1998, the Company used cash of approximately $2.1 million in the operation of
its discontinued Marta business. In 1997, the Company generated cash from Marta
in the amount of $7.8 million as compared with a cash usage of $6.1 million in
1996. 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 does not expect that the sale of
Marta (as discussed above) will have a significant impact on future cash flow.
Capital expenditures in 1999 are estimated at $18.0 million, of which $1.5
million was committed at December 31, 1998.
The Company's working capital position remains strong at 2.9:1.0, as compared
with 1.9:1.0 at the end of each of the last two years. The Company believes it
has adequate cash liquidity resources (through available borrowing capacity both
domestically and in Europe) in the near term to fund operations and capital
expenditures. Borrowings under available domestic and European credit lines are
expected to be the primary source of liquidity throughout 1999.
YEAR 2000 STATUS REVIEW
Many computer systems and other equipment with software, embedded chips or
processors use only two digits to represent the year, and may be unable to
accurately process certain data before, during or after the year 2000. If not
corrected, these systems could cause date-related transaction failures. This is
commonly known as the Year 2000 ("Y2K") issue. This Y2K issue can arise at any
point in the Company's supply, manufacturing, distribution and financial chains.
The Company and each of its operating businesses are in the process of
implementing a Y2K readiness program with the objective of having all of its
business systems, including those that effect the Company's facilities and
manufacturing operations, functioning properly with respect to Y2K issues before
June 30, 1999.
Each operating business is at a different state in terms of Y2K readiness.
Generally, the Company's larger businesses are closer to Y2K readiness than its
smaller businesses and outlying sales offices. The Company's Y2K readiness
program has been divided into several broad areas, as follows:
1. Computer Hardware / Netware
2. Computer Software / Systems
3. Test Equipment
4. Other Factory Equipment
5. Miscellaneous Office / Building Systems
6. Vendor Compliance
7. Product Compliance
8. Customer Compliance and Interface issues
The first component of the Company's Y2K readiness program is to identify the
internal business systems of the Company that are susceptible to system failures
of processing errors as a result of this Y2K issue. The Company has
substantially completed its identification of computer hardware and netware
systems, computer software and related systems and test equipment that may be
susceptible to Y2K failures. The Company's principal operating businesses have
substantially completed their identification of other factory equipment, and
miscellaneous office/building equipment and systems that may be susceptible to
Y2K problems. Some of the Company's smaller offices, notably its international
sales offices, have not yet completed their assessments of miscellaneous
office/building equipment and systems. However, such assessments will be
completed early in the second quarter of 1999 and the potential risk at these
facilities is not estimated to be significant.
The second part of the Company's Y2K readiness program involves the actual
remediation and replacement of internal business systems and embedded chips by
June 30, 1999. The Company has substantially completed the actual remediation
and replacement of its computer hardware and netware that had potential Y2K
issues. The Company is in the process of remediating and/or replacing its
computer software and related systems that have potential Y2K issues. Such
remediation is on schedule to be completed by June 30, 1999. However, the
Company has developed contingency plans with respect to one such software system
that is not yet Y2K compliant. Testing with respect to most internal business
systems has been performed. Remediation and/or replacement efforts are ongoing
with respect to test equipment and other factory equipment that is likely to be
susceptible to Y2K failures. Such remediation and/or replacement of equipment
and embedded chips is on schedule to be completed by June 30, 1999. Remediation
efforts with respect to miscellaneous office/building systems have been slower
to develop as the identification of potential issues has been difficult in some
international locations. The Company plans to complete final testing by
September 30, 1999.
Independent verification of Y2K compliance of these internal software systems is
expected to be completed by September 30, 1999. The Company will develop other
contingency plans, as necessary, with respect to non-information technology
equipment and systems as the Company's readiness program develops further.
As part of the Company's Y2K readiness program, significant service providers,
vendors, suppliers and customers that the Company believes are critical to
business operations after January 1, 2000, are substantially identified and
steps are being taken to reasonably determine their stages of Y2K readiness.
Because of the significant number of business systems used by the Company and
the extent of the Company's foreign operations (including some third parties
that are not actively promoting Y2K issues), it is reasonably possible that the
Company may experience some disruption in its businesses due to the Y2K issue.
The Company currently believes that the greatest risk of disruption in its
businesses exists in certain international markets. Notwithstanding all of the
Company's efforts, there are still many uncertainties regarding the Y2K issue.
For example, if the Company is
30
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
unsuccessful in identifying or finding all Y2K problems in its critical
operations or if critical customers or suppliers are unsuccessful in resolving
Y2K issues, the Company's results of operations or financial condition could be
materially impacted.
The Company has developed a Y2K readiness disclosure statement and related
disclaimer for use by its divisions to help them comply with the Year 2000
Information and Readiness Disclosure Act. This Federal law precludes the use of
any statement made by a company regarding that company's Year 2000 readiness
against that company in any future litigation involving Y2K matters. The
Company's Y2K readiness disclosure statement is posted prominently on the Allen
Telecom website. In addition, The Company has developed a vendor survey with the
assistance of counsel and has carefully reviewed with counsel all of its
divisions' responses to our customers which cannot be answered simply by use of
the standard Y2K readiness disclosure statement. As a result of these actions,
the Company believes it has mitigated its exposure to Y2K related litigation.
The total costs that the Company expects to incur in connection with Y2K issues
is dependent on the Company's ability to identify Y2K problems, the nature of
remediation efforts involved and the ability of third parties (including the
Company's suppliers, vendors and customers) to successfully address their own
Y2K issues. The total cost associated with required Y2K remediation efforts is
approximately $2.0 million, of which approximately $1.0 million was spent
through December 31, 1998.
Euro
Effective January 1, 1999, member states of the European Economic and Monetary
Union adopted a common currency known as the Euro. Modifications to certain of
the Company's information systems software were required in connection with this
conversion. The Company's computer software for one of its European businesses
was not Euro compliant at year-end 1998, but is expected to be Euro compliant by
March 31, 1999. There is no material adverse effect to this European business
because its software is not Euro compliant, and alternate systems to accommodate
Euro conversions are currently being utilized. Expenses relating to
modifications to the Company's software that have been and will be made are
nominal. The Company believes that conversion to the Euro has not and will not
have any significant operational impact. In addition, the Company does not
believe the conversion to the Euro will have a material impact on the results of
operations, financial position or cash flow of its European businesses.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure relating to derivatives results from
the use of foreign currency forward contracts to offset the impact of currency
rates against certain accounts receivable. The contracts entered into at
year-end all expire within one year. This procedure of entering into currency
rate contracts will diminish significantly in 1999 and thereafter due to the
establishment of the European Monetary Union ("EMU") and its introduction of the
Euro currency in 1999. A significant portion of the foreign currency contracts
involve currencies which are now under the EMU and additional foreign currency
forward contracts will not be required as rates on these currencies will not
fluctuate or these transactions will be in the Euro currency. The Company does
not enter into derivative instrument transactions for trading or speculative
purposes.
The Company's on-balance sheet instruments which would be subject to interest
rate fluctuation are various components of its long-term debt. The Company
believes this fluctuation risk is minimal. Approximately 63% of the Company's
long-term debt is fixed rate debt and not subject to interest rate fluctuation.
The variable rate debt is primarily made up of the Company's domestic revolving
credit facility and industrial revenue bonds. The revolving credit debt interest
is determined on a LIBOR or prime rate basis, at the Company's option. The
industrial development bonds carry interest rates which are established based on
the low yield, tax free bond market.
The table below provides information about the Company's derivative financial
instruments and other financial instruments that are sensitive to changes in
exchange and interest rates. For derivative instruments, the table presents
contract amounts and related weighted average contractual exchange rates by
expected maturity date. For debt obligations, the table presents principal cash
flows and related weighted average interest rates by expected maturity dates.
ANTICIPATED TRANSACTIONS AND RELATED DERIVATIVES
December 31, 1998
<TABLE>
<CAPTION>
Expected Maturity Date
---------------------- Fair
1999 Total Value
- -------------------------------------------------------------
<S> <C> <C> <C>
Lira Functional Currency: (US $ Equivalent in Thousands)
Foreign Exchange
Agreements
(Receive Lira/Pay DM)
Contract Amount $ 291.4 $ 291.4 $ 291.1
Avg. Contractual
Exchange rate 990.0 990.0 989.3
(Receive Lira/Pay ECU)
Contract Amount $ 3,667.2 $ 3,667.2 $ 3,664.9
Avg. Contractual
Exchange rate 1,947.0 1,947.0 1,945.8
(Receive Lira/Pay FF)
Contract Amount $ 1,564.5 $ 1,564.5 $ 1,562.9
Avg. Contractual
Exchange rate 295.3 295.3 295.0
</TABLE>
LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Expected Maturity Date
--------------------------------------------------------------------------------------- Fair
1999 2000 2001 2002 2003 Thereafter Total Value
- -----------------------------------------------------------------------------------------------------------------------------
(US $ Equivalent in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Debt
Fixed Rate (US) $ 1,397.0 $ 1,525.0 $ 4,665.0 $ 12,651.0 $ 12,817.0 $ 43,307.0 $ 76,362.0 $ 81,203.0
Avg. interest rate 8.8% 8.8% 7.4% 7.0% 7.0% 6.8% 7.0% 7.0%
Fixed Rate (Lira) 708.0 745.0 425.0 411.0 404.0 905.0 3,598.0 3,598.0
Avg. interest rate 6.2% 6.3% 5.9% 5.6% 5.5% 8.2% 6.5% 6.5%
Fixed Rate (DM) 542.0 530.0 476.0 146.0 67.0 -- 1,761.0 1,761.0
Avg. interest rate 4.4% 4.5% 4.4% 4.1% 3.5% -- 4.4% 4.4%
Fixed Rate (FF) 108.0 108.0 108.0 71.0 -- -- 395.0 395.0
Avg. interest rate 8.5% 8.5% 8.5% 8.5% -- -- 8.5% 8.5%
Variable Rate (US) -- -- 33,500.0 -- -- 15,500.0 49,000.0 49,000.0
Avg. interest rate -- -- 7.8% -- -- 3.6% 6.4% 6.4%
Variable Rate (Lira) 315.0 316.0 -- -- -- -- 631.0 631.0
Avg. interest rate 4.7% 4.7% -- -- -- -- 4.7% 4.7%
</TABLE>
31
<PAGE> 32
Five Year Summary of Operations
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Five years ended December 31, 1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Sales $ 388,004 $ 432,508 $ 369,498 $ 306,556 $ 213,517
Cost of sales (293,404) (281,591) (238,401) (189,103) (127,160)
Selling, general and administrative expenses (71,672) (72,671) (59,053) (49,464) (43,943)
Research & development and product engineering (30,742) (30,367) (21,023) (17,006) (8,865)
Write-off of in-process research and development costs -- -- (2,662) -- --
Other income (loss), net 6,065 1,885 952 1,556 (309)
Net interest and financing expense (6,805) (3,051) (2,785) (2,098) (1,785)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes and minority interests (8,554) 46,713 46,526 50,441 31,455
Benefit (provision) for income taxes 5,310 (17,723) (19,665) (20,138) (11,191)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest (3,244) 28,990 26,861 30,303 20,264
Minority interests (2,268) (5,009) (6,305) (3,027) (523)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations (5,512) 23,981 20,556 27,276 19,741
Discontinued operations:
Loss from discontinued operations -- -- (3,766) 5,363 9,453
Loss for disposal of emissions testing business (4,710) -- (3,724) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item (10,222) 23,981 13,066 32,639 29,194
Extraordinary item - extinguishment of debt -- (632) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($ 10,222) $ 23,349 $ 13,066 $ 32,639 $ 29,194
==================================================================================================================================
Earnings (Loss) Per Common Share:
Basic: Income (loss) ($.21) $.89 $.78 $1.05 $.77
Discontinued operations:
Loss from discontinued operations -- -- (.14) .20 .37
Loss for disposal of emissions testing business (.17) -- (.14) -- --
Extraordinary item - extinguishment of debt -- (.02) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($.38) $.87 $.50 $1.25 $1.14
==================================================================================================================================
Diluted: Income (loss) from continuing operations ($.21) $.88 $.76 $1.02 $.76
Discontinued operations:
Loss from discontinued operations -- -- (.14) .20 .36
Loss for disposal of emissions testing business (.17) -- (.14) -- --
Extraordinary item - extinguishment of debt -- (.02) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($.38) $.86 $.48 $1.22 $1.12
==================================================================================================================================
FINANCIAL CONDITION
Total assets $ 465,585 $ 514,433 $ 410,512 $ 363,565 $ 357,716
Working capital 133,465 111,015 94,378 93,371 107,940
Current ratio 2.92 1.85 1.90 2.11 2.54
Total debt 140,223 104,034 55,955 55,799 45,064
Stockholders' equity 250,081 260,822 225,951 210,377 224,181
Debt to equity ratio .56 .40 .25 .27 .20
Book value per common share 9.10 9.55 8.44 7.92 8.59
Shares outstanding at year end 27,473 27,298 26,763 26,570 26,107
Return on stockholders' equity (4.0%) 9.4% 6.0% 14.7% 14.1%
Capital expenditures 18,094 22,247 20,992 24,498 14,833
Depreciation 15,615 12,808 12,231 8,896 7,477
Number of employees 3,000 3,300 2,900 2,800 2,700
</TABLE>
32
<PAGE> 33
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
PricewaterhouseCoopers LLP
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, 44122-5687, (216) 765-5855. 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.allentele.com.
AFFIRMATIVE ACTION POLICY
It is the policy of Allen Telecom Inc. that all employees 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 3, 1999, Allen Telecom Inc. had 27,504,546 outstanding shares of
Common Stock owned by 1,745 holders of record.
ANNUAL STOCKHOLDERS' MEETING
The Annual Meeting of Stockholders will be held at the Cleveland Marriott at Key
Center, 127 Public Square, Cleveland, Ohio on Friday, April 30, 1999 at 9:30
a.m.
<TABLE>
<CAPTION>
DIVIDENDS DECLARED ON COMMON STOCK
(dollars per share) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
1st Quarter - - - $.05 $.04
2nd Quarter - - - $.05 $.04
3rd Quarter - - - $.05 $.04
4th Quarter - - - - $.04
</TABLE>
<TABLE>
<CAPTION>
Stock price (dollars per share)
<S> <C> <C>
94 $13.50 $25.63
95 $21.25 $39.38
96 $14.00 $28.75
97 $16.00 $30.00
98 $4.69 $21.13
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICE RANGE OF COMMON STOCK
(dollars per share) 1998 1997 1996
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 21 1/8 15 1/2 26 3/8 16 23 1/4 16 7/8
2nd Quarter 17 7/16 9 9/16 24 1/8 16 1/2 28 3/4 18 7/8
3rd Quarter 11 5/8 6 3/16 29 1/8 18 3/4 22 1/2 14
4th Quarter 8 3/8 4 11/16 30 16 23 3/4 14 3/4
</TABLE>
33
<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
Allen Telecom Holdings G.m.b.H. Germany 100
Allen Telecom GmbH Germany 07-28-90 100
Allen Telecom Canada, Inc. Ontario 04-14-93 100
Allen Telecom Civil Law Partnership GbR(2) Germany 10-01-98 100
Allen Telecom (France) S.A. (3) France 04-09-97 100
Telia S.A. (4) France 10-19-90 72
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 (5) 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 Telecomunicacoes do Brasil Ltda (6) 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
Allen International (Netherlands) BV Netherlands 06-19-98 100
Allen Telecom (Netherlands) BV Netherlands 07-21-98 100
Allen Telecom Italia Europe S.r.l. Italy 10-10-97 100
FOREM S.r.l. Italy 11-14-94 100
FOREM France E.u.r.l. France 1993 100
FOREM (UK) Limited U.K. 1988 100
Mikom G.m.b.H. (7) Germany 05-07-85 74
Mikom Vertriebs und Service Austria 10-18-96 60
GmbH (8)
Mikom Slovakia, s.r.o. (9) Slovakia 05-30-97 60
Mitras Ltd. (10) Hungary 1992 60
C-com, spol. s.r.o. Czechoslovakia 02-26-96 25
Tekmar Sistemi S.r.l. Italy 09-20-80 100
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Comsearch Holdings Inc. Delaware 08-22-97 100
Comsearch UK Limited U.K. 03-06-98 100
Telespectro de Mexico, S.A. de C.V. (11) Mexico 11-97 100
Decibel Mobilcom Limited (1) England 01-31-91 100
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
</TABLE>
(1) These subsidiaries are not significant in the aggregate and are no
longer active.
(2) 90% of this partnership is owned by Allen Telecom Inc. and the
remaining 10% is owned by Allen Telecom investments, Inc.
(3) Of the 2,500 shares issued and outstanding, 2,494 shares are owned by
Allen Telecom Inc. and the remaining 6 shares are owned in name only by
Allen employees.
(4) Of the 10,000 shares issued and outstanding, 7,196 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 2,800
shares.
(5) 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.
(6) 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.
(7) 62% of the outstanding capital stock of this subsidiary is owned by
FOREM S.r.l., 12% is owned by Allen Telecom Holdings G.m.b.H., and the
remaining 26% 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 Allen Telecom Inc.
(9) 60% of the outstanding capital stock is owned by Mikom Vertreibs und
Service G.m.b.H. and the remaining 40% is owned by the partners of
Mikom Vertreibs und Service G.m.b.H. in the venture.
(10) 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.
(11) 98% of the outstanding capital stock of this subsidiary is owned by
Comsearch Holdings, Inc. and the remaining 2% is owned by Allen Telecom
Investments, Inc.
March 17, 1999
<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. 333-13467) 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 16, 1999, except as to paragraph five of Note 9, which is as of March
1, 1999, on our audits of the consolidated financial statements of Allen Telecom
Inc. as of December 31, 1998 and 1997 and for the years ended December 31, 1998,
1997 and 1996, which report has been incorporated by reference in this Annual
Report on Form 10-K from the 1998 Annual Report to Stockholders of Allen Telecom
Inc. (a copy of which is filed as Exhibit 13 to this Report) and appears on page
26 therein, and (b) our report dated February 16, 1999, except as to paragraph
five of Note 9, which is as of March 1, 1999, on our audits of the financial
statement schedule for the years ended December 31, 1998, 1997 and 1996 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".
PricewaterhouseCoopers LLP
Cleveland, Ohio
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S DECEMBER 31, 1998 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,900
<SECURITIES> 0
<RECEIVABLES> 86,928
<ALLOWANCES> (3,189)
<INVENTORY> 84,735
<CURRENT-ASSETS> 202,963
<PP&E> 120,870
<DEPRECIATION> (59,293)
<TOTAL-ASSETS> 465,585
<CURRENT-LIABILITIES> 69,498
<BONDS> 128,677
0
0
<COMMON> 29,759
<OTHER-SE> 220,332
<TOTAL-LIABILITY-AND-EQUITY> 465,585
<SALES> 388,004
<TOTAL-REVENUES> 388,004
<CGS> (293,404)
<TOTAL-COSTS> (293,404)
<OTHER-EXPENSES> (101,761)
<LOSS-PROVISION> (653)
<INTEREST-EXPENSE> (6,805)
<INCOME-PRETAX> (8,554)
<INCOME-TAX> 5,310
<INCOME-CONTINUING> (3,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,222)
<EPS-PRIMARY> (.38)<F1>
<EPS-DILUTED> (.38)<F1>
<FN>
<F1>The Earnings per Share amounts have been calculated in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share". The above captions for primary and fully diluted include the basic and
diluted EPS amounts, respectively.
</FN>
</TABLE>
