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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, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6016
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ALLEN TELECOM INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-0290950
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25101 CHAGRIN BOULEVARD, BEACHWOOD, OHIO 44122
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 216/765-5818
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
Pacific Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Exchange
SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT: None
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. [ ]
As of March 1, 2000, there were 27,901,910 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 1, 2000 of $13.625, of the Registrant's Common Stock
held by nonaffiliates of the Registrant was $359,053,439.
Exhibit Index is on pages 19 to 27 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended December 31, 1999
incorporated by reference into Parts I, II and IV hereof.
Proxy Statement dated March 17, 2000 for Annual Meeting of Stockholders to be
held April 28, 2000 incorporated by reference into Part III hereof.
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ALLEN TELECOM INC.
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FORM 10-K
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(For the fiscal year ended December 31, 1999)
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <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 11
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11
PART III
Item 10 - Directors and Executive Officers of the Registrant 12
Item 11 - Executive Compensation 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management 12
Item 13 - Certain Relationships and Related Transactions 12
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13
SIGNATURES 17
EXHIBIT INDEX 19
</TABLE>
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ALLEN TELECOM INC.
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FORM 10-K
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PART I
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ITEM 1 - BUSINESS
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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, systems expansion and optimization products,
mobile and base station antennas, test and measurement equipment, and E911
geolocation products and services, 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.
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 24 and 25, and to the "Discontinued
Operations" section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 30 of Allen Telecom's 1999 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 analog 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. 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 one of the world's largest suppliers 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,
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<PAGE> 4
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 single carrier
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.
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 digital cellular and PCS networks, as well as the
analog networks. New base station antenna models include, for example, the
Decibel TripleTree(TM), which incorporates all six of the antennas required for
a three sector site in a single 12 inch diameter housing, MaxFill(TM), which
concentrates RF below the horizon and provides even radiation density, and
MaxGain(TM), which focuses radiation energy to maximize geographic coverage. The
Company is a leading supplier of mobile automobile antennas, which operate on
both cellular, PCS and dual-band frequencies, as well as antennas for Global
Positioning Systems ("GPS").
The Federal Communications Commission ("FCC") has mandated that by 2001
all providers of wireless phone services will begin to provide the location
where an emergency 911 call originates. The Company has developed a geolocation
technology solution, Geometrix(TM), to provide carriers with the equipment and
software to locate subscribers in their system. This geolocation technology has
been tested and is available for CDMA, TDMA, iDEN and analog systems. Further
field trials will be conducted before this product is brought to market, and the
Company is hopeful that this product and technology will achieve market
acceptance.
In 1999, 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 closure of a domestic manufacturing facility and the transfer of
most of manufacturing operations of the closed plant to Italy. This will result
in a reduction in force (and related termination costs) and the sale of this
domestic manufacturing plant (resulting in the non-cash loss of various assets).
In addition, the Company has discontinued several product lines at its Site
Management, Antenna and Systems divisions, and has closed a sales and
engineering office in Mexico City. 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 $11.9 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 and assembly 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
2000 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 1999.
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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.
In 1996, the Company entered into an agreement with Nextwave Telecom
Inc. ("Nextwave") whereby 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
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 was 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, this commitment is
unlikely to be fulfilled at this time.
If the Company is successful in developing its E-911 geolocation
business, it may be called upon to provide financing for a large equipment
network or to develop a service bureau for one or more carriers. The Company
believes that external financial resources should be available to support the
successful development of this business.
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 28% (none individually greater than 10%) of segment sales in
1999. 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.
SEASONAL TRENDS
Generally, sales and earnings for wireless engineering services are not
subject to significant seasonal variations.
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<PAGE> 6
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, four
customers accounted for approximately 24% of segment sales in 1999 (none
individually greater than 10%). 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, products
and software for the wireless telecommunications markets. Currently, these
development activities are not expected to require a material investment in
assets. For information concerning these expenditures, see "Research and
Development Costs" in Note 1 of Notes to Consolidated Financial Statements on
page 17 of Allen Telecom's 1999 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 21 of Allen Telecom's 1999 Annual
Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual
Report.
EMPLOYEES
As of December 31, 1999, Allen Telecom had approximately 2,200
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 24, and the information presented in the bar charts on page 28, of Allen
Telecom's 1999 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, international sales have become
a majority of the Company's revenue. The Company's export sales from the United
States were $39.6 in 1999, $71.6 million in 1998 and $103.9 million in 1997. In
1999, international sales constituted 62% of total Telecommunications Equipment
Manufacturing sales, and 23% of total Wireless Engineering Services sales. The
international opportunities for the Company's products have encouraged the
Company to continue to expand the size and scope of its international
operations. 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 1999, continued weakness in Asia and some parts of South America
contributed to the overall weakness in sales. In addition, the domestic wireless
market was weak for the company due to limited capital expenditures by certain
wireless carriers. The Company is encouraged, however, by the quarter-to-quarter
increases in sales throughout 1999, where second half 1999 sales were 18% higher
than first half 1999 sales.
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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, 1999 and 1998 are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Telecommunications equipment manufacturing $83,600 $51,900
Wireless engineering services 1,300 900
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Backlog (all expected to be filled within one year) $84,900 $52,800
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</TABLE>
In 1996, the Company entered into an agreement with Nextwave, whereby
Nextwave 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 fulfilled 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.
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ITEM 2 - PROPERTIES
At December 31, 1999, Allen Telecom's operations were conducted in 51
facilities in 11 states and 20 countries. Allen Telecom's Telecommunications
Equipment Manufacturing segment occupies approximately 850,000 square feet of
space for manufacturing, assembly, warehousing, research and development, sales
and administrative offices. Of this amount, approximately 632,000 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, Nevada, China, Brazil, Italy, Germany, France, and
Mexico. The Company's Wireless Engineering Services are provided primarily at
one leased facility in Virginia, as well as at customer locations.
Information concerning the square footage of the Company's operations
by segment at December 31, 1999 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
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OWNED LEASED OWNED LEASED TOTAL
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<S> <C> <C> <C> <C> <C>
Telecommunications equipment manufacturing 18 419 200 213 850
Wireless engineering services - 87 - - 87
Other 312 10 - - 322
--- --- --- --- -----
Total 330 516 200 213 1,259
=== === === === =====
</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, 1999.
The square footage of "other" properties 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), two manufacturing
facilities totalling 228,000 square feet owned by the Company which are not in
use and are 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 21 of the Notes to Consolidated Financial Statements of Allen Telecom's
1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to
this Annual Report.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
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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 58.
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 58.
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 46.
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 Allen Telecom Group, Inc. ("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 - Finance; age 45.
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. Mr. LePorte was elected Vice
President-Finance in April 1999.
LAURA C. MEAGHER - Secretary and General Counsel; age 40.
Ms. Meagher joined the Company in 1999 as Corporate Counsel and was
elected Secretary and General Counsel in September 1999. Prior to joining Allen
Telecom, Ms. Meagher was affiliated with the law firm of Benesch, Friedlander,
Coplan and Aronoff, Cleveland, Ohio, from September 1989 to August 1999. Ms.
Meagher is an attorney.
ROGER L. SCHROEDER- Treasurer and Assistant Secretary; age 46.
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.
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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,"
"Dividends Declared On Common Stock" and "Stockholders" on the inside back cover
of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed
as Exhibit 13 to this Annual Report. The following table presents the high and
low prices for the Company's Common Stock for the periods indicated (in dollars
per share):
<TABLE>
<CAPTION>
1999 1998
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HIGH LOW HIGH LOW
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<S> <C> <C> <C> <C>
1st Quarter 8 11/16 4 1/2 21 1/8 15 1/2
2nd Quarter 11 7/8 5 3/4 17 7/16 9 9/16
3rd Quarter 11 1/2 7 7/8 11 5/8 6 3/16
4th Quarter 12 3/8 8 8 3/8 4 11/16
</TABLE>
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 1999
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 "Safe Harbor Cautionary Statement" on page 1 and to "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 28 to 31 of the Registrant's 1999 Annual Report to Stockholders, a copy of
which is filed as Exhibit 13 to this Annual Report.
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 1999 Annual Report to Stockholders, a
copy of which is filed as Exhibit 13 to this Annual Report.
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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, the Notes to Consolidated Financial
Statements on pages 16 to 26, and to the "Report of Independent Accountants" on
page 27, of the Registrant's 1999 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
The information required by this item is incorporated herein by
reference to Allen Telecom's Current Report on Form 8-K dated September 28, 1999
reporting the engagement of Deloitte & Touche LLP as the Company's worldwide
independent accountants, and the dismissal of PricewaterhouseCoopers LLP as the
Company's principal independent accountants.
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<PAGE> 12
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item relating to the Company's
executive officers is included on page 9 hereof under "EXECUTIVE OFFICERS OF THE
REGISTRANT" and is incorporated herein by reference to "EXECUTIVE COMPENSATION
AND TRANSACTIONS WITH MANAGEMENT - Employment, Termination of Employment and
Change of Control Arrangements" on pages 14 to 16 of the Registrant's definitive
proxy statement dated March 17, 2000 and filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Act of 1934. Other
information required by this Item is incorporated herein by reference to
"ELECTION OF DIRECTORS - Information Regarding Nominees" on pages 1 to 3, and to
"Compliance with Section 16(a) of the Securities Exchange Act" on page 21,
Registrant's definitive proxy statement dated March 17, 2000 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 17, 2000 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 17, 2000 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 17, 2000 and filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
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<PAGE> 13
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,
2000, is incorporated herein by reference to pages 12 to 27 of the
Registrant's 1999 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, 1999, 1998 and 1997
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended December
31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997
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
Reports of Independent Accountants, on pages 14 and 15 of this Form
10-K Annual Report, relating to the financial statement schedule
Valuation and Qualifying Accounts Schedule, on page 16 of this Form
10-K Annual Report
Schedules other than the schedule listed above are omitted because they are
not required, are not applicable or are included elsewhere in the Notes to
Consolidated Financial Statement.
(3) EXHIBITS*
The information required by this Item relating to Exhibits to this Annual
Report is included in the Exhibit Index on pages 19 to 27 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.
-13-
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Allen Telecom Inc.:
We have audited the consolidated financial statements of Allen Telecom Inc.
and its subsidiaries (the "Company") as of December 31, 1999 and for the year
then ended, and have issued our report thereon dated February 16, 2000; such
financial statements and report are included in your 1999 Annual Report to
Stockholders and are incorporated herein by reference. Our audit also included
the financial statement schedule of Allen Telecom Inc. for the year ended
December 31, 1999, listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opnion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
February 16, 2000
-14-
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Allen Telecom Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 13 present fairly, in all material
respects, the financial position of Allen Telecom Inc. and its subsidiaries at
December 31, 1998, and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule for each of the two years in the period ended
December 31, 1998 listed in the index appearing under Item 14(a)(2) on page 13
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits 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
-15-
<PAGE> 16
ALLEN TELECOM INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------ -------------- -------------------------------- --------------- --------------
Balance Additions
-------------------------------- Balance
At Charged to Charged Deductions at End
Beginning Costs and to Other from Of
Description of Period Expenses Accounts Reserves Period
- ------------------------------------ -------------- ------------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
1999 $ 3,189 513 - 1,165 (1) $ 2,537
======== ========== ======== ======= ========
1998 $ 1,934 1,170 - (85) (1) $ 3,189
======== ========= ======== ========== ========
1997 $ 1,610 796 - 472 (1) $ 1,934
======== ========== ======== ======== ========
Inventory reserves:
1999 $15,440 14,562 - 9,280 (2) $20,722
======= ======== ======== ======= =======
1998 $ 7,607 14,718 - 6,885 (2) $15,440
======== ======== ======== ======== =======
1997 $ 7,362 8,646 - 8,401 (2) $ 7,607
======== ========= ======== ======== ========
</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.
-16-
<PAGE> 17
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 28, 2000
--------------
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 28, 2000
- ------------------------------------------------
Robert G. Paul, President, Chief Executive
Officer and Director (Principal Executive Officer)
/s/ Robert A. Youdelman March 28, 2000
- ------------------------------------------------
Robert A. Youdelman, Executive Vice President
Chief Financial Officer (Principal Financial Officer)
/s/ James L. LePorte March 28, 2000
- ------------------------------------------------
James L. LePorte, Vice President-Finance
(Principal Accounting Officer)
/s/ Philip W. Colburn March 28, 2000
- ------------------------------------------------
Philip W. Colburn, Chairman of the Board
and Director
/s/ Jill K. Conway March 28, 2000
- ------------------------------------------------
Jill K. Conway, Director
17
<PAGE> 18
/s/ J. Chisholm Lyons March 28, 2000
- ------------------------------------------------
J. Chisholm Lyons, Vice Chairman of the Board
and Director
/s/ John F. McNiff March 28, 2000
- ------------------------------------------------
John F. McNiff, Director
/s/ Charles W. Robinson March 28, 2000
- ------------------------------------------------
Charles W. Robinson, Director
/s/ Martyn F. Roetter March 28, 2000
- -------------------------------------------------
Martyn F. Roetter, Director
/s/ Gary B. Smith March 28, 2000
- -------------------------------------------------
Gary B. Smith, Director
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBERS PAGES
<S> <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 1-6016) and incorporated herein by
reference................................................................. -
(c) By-Laws, as amended through February 16, 1999, filed as
Exhibit Number 3(c) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1998 (Commission file
number 1-6016 and incorporated herein by
reference)................................................................ -
(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, the Banks signatories thereto, NBD Bank, as
Documentation Agent, and Key Bank National Association, as
Swing Line Lender, Syndication Agent and Administrative Agent
filed as Exhibit 4(b) to registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1998 (Commission file
number 1-6016 and incorporated herein by reference....................... -
(c) Amendment dated as of July 30, 1999 to the Credit Agreement
dated as of December 31, 1998 among Registrant, the Banks
signatories thereto, NBD Bank, as Documentation Agent, and Key
Bank National Association, as Swing Line Lender, Syndication
Agent and Administrative
Agent.................................................................... 28
(d) 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
1999 Annual
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C>
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.
(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
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C>
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, 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 filed as Exhibit Number
10(l) to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1998 (Commission file number 1-6016)
and incorporated herein by reference...................................... -
(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)......................................... -
</TABLE>
-21-
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
(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)................................................................ -
(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 8, 1999,
entered into by the Registrant with certain executive
officers, officers and division presidents................................ 34
(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)................................................................ -
</TABLE>
-22-
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
(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).......................................... -
(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
</TABLE>
-23-
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C>
(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
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) Change in Control Agreement dated as of September 8, 1999,
Between the Registrant and Philip Wm. Colburn............................... 45
(mm) 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)....................................... -
(nn) 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)....................... -
(oo) 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.................................. -
(pp) Post Employment Consulting Agreement, dated as of September
12, 1989, between the Registrant and J. Chisholm
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C>
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).................................................................. -
(qq) 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)................... -
(rr) Change in Control Agreement dated as of September 8, 1999
between the Registrant and J. Chisholm Lyons................................ 49
(ss) Employment Agreement, dated June 25, 1991, between the
Registrant and Robert G. Paul (filed as Exhibit Number 10(x)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1991 (Commission file number
1-6016) and incorporated herein by reference)............................... -
(tt) 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)................................................................... -
(uu) 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)................................ -
(vv) 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)............................................ -
(ww) 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)........................................ -
(xx) 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).................... -
(yy) Allen Telecom Inc. Restoration Plan, effective January 1, 1996
(filed as Exhibit Number 10(nn) to Registrant's Form 10-K
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C>
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 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)........................................... -
(aaa) 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).................................................................. -
(bbb) First Amendment to the Comsearch Division Supplemental
Savings Plan, dated as of February 28, 1997 (filed as Exhibit
Number 10(aaa) to Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1996 (Commission file
number 1-6016) and incorporated herein by reference)........................ -
(ccc) Amendment No. 2 to Comsearch Division Supplemental Savings
Plan, effective as of January 1, 2000....................................... 53
(ddd) 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)............................... -
(eee) 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)............................... -
(fff) 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 incor-
porated herein by reference)................................................ -
(ggg) Allen Telecom Inc. Executive Benefit Plan, as amended and restated
effective June 16, 1999..................................................... 54
(13) 1999 Annual Report to Stockholders*................................................ 72
(21) Subsidiaries of the Registrant..................................................... 119
(23) Consents of Independent Accountants................................................ 121
(27) Financial Data Schedule............................................................
</TABLE>
-26-
<PAGE> 27
* Furnished for the information of the Securities and Exchange
Commission and not to be deemed "Filed" as part of this Report
except for the Consolidated Financial Statements of the Registrant
and the Accountants' Report on pages 12 to 27 of said Annual Report
to Stockholders and the other information incorporated by
reference) in Items 1 and 3 of Part I hereof and Items 5 to 8 of
Part II hereof.
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.
-27-
<PAGE> 1
Exhibit 4(c)
================================================================================
================================================================================
ALLEN TELECOM INC.
AS BORROWER
THE LENDERS NAMED HEREIN
AS LENDERS
NBD BANK
AS DOCUMENTATION AGENT
AND
[KEYBANK LOGO]
KEYBANK NATIONAL ASSOCIATION
as a Lender,
the Swing Line Lender, a Letter of Credit Issuer
and as the Syndication Agent, the Administrative Agent and the Collateral Agent
---------------------
AMENDMENT NO. 1
dated as of
July 30, 1999
to
CREDIT AGREEMENT
dated as of
December 31, 1998
---------------------
================================================================================
================================================================================
<PAGE> 2
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of July 30, 1999
("THIS AMENDMENT"), among the following:
(i) ALLEN TELECOM INC., a Delaware corporation (herein,
together with its successors and assigns, the "BORROWER");
(ii) the Lenders party hereto;
(iii) NBD BANK as a Lender and as Documentation Agent (the
"DOCUMENTATION AGENT"); and
(iv) KEYBANK NATIONAL ASSOCIATION, a national banking
association, as a Lender, the Swing Line Lender, the Letter of Credit
Issuer, and as the Syndication Agent, the Administrative Agent and the
Collateral Agent under the Credit Agreement:
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders named therein, the Swing Line Lender, the
Letter of Credit Issuers, the Documentation Agent, the Syndication Agent and the
Administrative Agent entered into the Credit Agreement, dated as of December 31,
1998 (the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions
of which are incorporated therein, being used herein as so defined).
(2) The parties hereto desire to change certain of the terms and
provisions of the Credit Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
10 AMENDMENTS, ETC. The dollar amount "$25,000,000" which appears in
clause (x) of section 3.1(b) of the Credit Agreement is changed to
"$50,000,000", but such change is effective only during the period from July 30,
1999 through December 31, 2000. For the avoidance of doubt the parties confirm
that no Letter of Credit will be issued or increased in amount which could
result in Letter of Credit Outstandings at any time after December 31, 2000 in
excess of $25,000,000.
20 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Lenders, the Swing Line Lender, the Letter of Credit Issuer, the
Documentation Agent, the Administrative Agent and the Collateral Agent as
follows:
(a) AUTHORIZATION AND VALIDITY OF AMENDMENT, ETC. This
Amendment has been duly authorized by all necessary corporate action on
the part of the Borrower, has been duly executed and delivered by a
duly authorized officer of the Borrower, and constitutes the valid and
binding agreement of the Borrower, enforceable against the Borrower 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).
<PAGE> 3
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Credit Parties contained in the Credit Agreement or
in the other Credit Documents are true and correct in all material
respects on and as of the date hereof as though made on and as of the
date hereof, except to the extent that such representations and
warranties expressly relate to an earlier specified date, in which case
such representations and warranties are hereby reaffirmed as true and
correct in all material respects as of the date when made.
(c) NO EVENT OF DEFAULT. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or
both, would constitute an Event of Default.
(d) COMPLIANCE. The Borrower is in full compliance with all
covenants and agreements contained in the Credit Agreement, as amended
hereby, and the other Credit Documents to which it is a party; and
without limitation of the foregoing, each Subsidiary of the Borrower
which, as of the date hereof, is required to be a Subsidiary Guarantor,
has as on or prior to the date hereof become a Subsidiary Guarantor
under the Subsidiary Guaranty.
(e) FINANCIAL STATEMENTS, ETC. 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, 1998, and the related audited
consolidated statements of income, stockholders' equity, and
cash flows for the fiscal years then ended, accompanied by the
unqualified report thereon of the Borrower's independent
accountants; and
(ii) the unaudited condensed consolidated balance
sheets of the Borrower and its consolidated subsidiaries as of
March 31, 1999, and the related unaudited condensed
consolidated statements of income and of cash flows of the
Borrower and its consolidated subsidiaries for the fiscal
quarter or quarters then ended, as contained in the Form 10-Q
Quarterly Report of the Borrower 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 the absence of footnotes and to normal audit
adjustments which the Borrower reasonably believes will not involve a
Material Adverse Effect.
30 RATIFICATIONS. Except as expressly modified and superseded by this
Amendment, the terms and provisions of the Credit Agreement are ratified and
confirmed and shall continue in full force and effect.
40 BINDING EFFECT. This Amendment shall become effective on a date (the
"EFFECTIVE DATE"), on or before July 30, 1999, if the following conditions shall
have been satisfied on and as of such date:
(a) this Amendment shall have been executed by the Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent; and
2
<PAGE> 4
(b) the Administrative Agent shall have been notified by the
Required Lenders that such Lenders have executed this Amendment (which
notification may be by facsimile or other written confirmation of such
execution);
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrower, each Lender, the Swing Line Lender, the Letter of Credit Issuers,
the Documentation Agent, the Syndication Agent, the Administrative Agent and the
Collateral Agent and their respective successors and assigns. After this
Amendment becomes effective, the Administrative Agent will promptly furnish a
copy of this Amendment to each Lender and the Borrower and advise them of the
Effective Date.
50 MISCELLANEOUS. 5.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment, and no investigation by the
Administrative Agent or any Lender or any subsequent Loan or other Credit Event
shall affect the representations and warranties or the right of the
Administrative Agent or any Lender to rely upon them.
5.2. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and
all other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
5.3. EXPENSES. As provided in the Credit Agreement, but without
limiting any terms or provisions thereof, the Borrower shall pay on demand all
reasonable costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the reasonable costs and fees of the Administrative Agent's
special legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
5.4. SEVERABILITY. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
5.5. APPLICABLE LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Ohio.
5.6. HEADINGS. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.7. ENTIRE AGREEMENT. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.8. JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
3
<PAGE> 5
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO
HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
4
<PAGE> 6
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
<TABLE>
<CAPTION>
<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:_______________________________ THE ADMINISTRATIVE AGENT
VICE PRESIDENT--FINANCE
BY:_______________________________
SENIOR VICE PRESIDENT
BANK ONE, MICHIGAN FIRSTAR BANK, NATIONAL
(SUCCESSOR TO NBD BANK), ASSOCIATION (FORMERLY STAR BANK,
INDIVIDUALLY AS A LENDER AND NATIONAL ASSOCIATION)
AS DOCUMENTATION AGENT
BY:_______________________________
BY:_______________________________ TITLE:
TITLE:
DRESDNER BANK AG, SANPAOLO IMI, S. p. A.,
NEW YORK AND GRAND CAYMAN BRANCHES, NEW YORK BRANCH
INDIVIDUALLY AS A LENDER AND AS
A LETTER OF CREDIT ISSUER
BY:_______________________________
TITLE:
BY:_______________________________
TITLE:
BY:_______________________________
TITLE:
FIFTH THIRD BANK, NORTHEASTERN LaSALLE NATIONAL BANK
OHIO
BY:_______________________________
BY:_______________________________ TITLE:
TITLE:
</TABLE>
5
<PAGE> 1
Exhibit 10(v)
ALLEN TELECOM INC.
25101 Chagrin Boulevard
Beachwood, Ohio 44122
September 8, 1999
- -----------------------
- -----------------------
- -----------------------
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 (this "Agreement") in the event your employment with the
Corporation is terminated under the circumstances described below.
1. TERM OF AGREEMENT. This term of this Agreement (the "Term") shall
commence on September 8, 1999, and shall continue through December 31, 2002;
PROVIDED, HOWEVER, that commencing on January 1, 2000, 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, the term of 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.
<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) during the Term, 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.
(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
2
<PAGE> 3
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 during the Term, 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;
(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)
3
<PAGE> 4
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 during
the Term, 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 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
4
<PAGE> 5
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
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;
5
<PAGE> 6
(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 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
6
<PAGE> 7
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 during the
Term, 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:
(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; (3) if the Board in its sole discretion shall
determine, an additional discretionary bonus payment; and (4) fifteen
percent of the sum 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;
7
<PAGE> 8
(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 422 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
(e) for a period of months after such termination
that is equal in number to the sum of (1) twelve, plus (2) the product
of (x) 0.15, multiplied by (y) the number of your completed years of
full-time employment with the Corporation as of the Date of
Termination, multiplied by (z) 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 affiliated
(or which, as a result of the completion of the transactions causing a change in
control will become affiliated) (an "Affiliate") 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
8
<PAGE> 9
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 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.
(vii) NONCOMPETITION. Benefits payable under this Section 5
shall be forfeitable and shall be discontinued in the event that during the
one-year period following the Date of Termination you (A) engage in a
Competitive Activity (as defined in Section 2(iii)) or (B) engage in conduct
which is materially injurious to the Corporation, monetarily 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
9
<PAGE> 10
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 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 net of any applicable withholding required
under federal, state or local law. The obligations of the Corporation under
Sections 2 and 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
10
<PAGE> 11
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.
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 as of the date first above written.
- ----------------------------------
[Employee's Name]
11
<PAGE> 1
Exhibit 10(ll)
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (this "Agreement"), dated as of
September 8, 1999, is by and between Allen Telecom Inc., a Delaware corporation
(the "Corporation"), and Philip William Colburn ("Colburn").
RECITALS:
A. The Board of Directors of the Corporation (the "Board") has
recognized that the Corporation may be vulnerable to a change in control
transaction.
B. In order to induce Colburn to remain as a consultant to the
Corporation, the Corporation agrees to pay to Colburn a Change in Control
Payment (as defined in Section 2(a)) in the event that a Change in Control (as
defined in Section 2(b)) of the Corporation occurs during the Term (as defined
in Section 1) as described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Colburn and the Corporation agree as follows:
1. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall
commence on September 8, 1999, and shall continue through December 31, 2002;
PROVIDED, HOWEVER, that commencing on January 1, 2000, 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 this Agreement shall automatically
terminate in the event that Colburn ceases to be a consultant to the Corporation
for any reason.
2. CHANGE IN CONTROL PAYMENT. (a) AMOUNT. If a Change in Control of the
Corporation shall occur during the Term, the Corporation shall pay to Colburn
$1,000,000.00 (or such higher amount as the Board may determine in its sole
discretion) (the "Change in Control Payment"), subject to the conditions and
pursuant to the terms set forth in this Section 2.
(b) CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation during the Term 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
<PAGE> 2
representing 30% 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 2(b)) whose
election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds 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;
(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%
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 defined in Section 2(b)(i))
acquires more than 30% 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.
(c) REDUCTION. Notwithstanding anything to the contrary contained in
this Agreement, in the event that, by reason of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), any payment or benefit received
or to be received by Colburn in connection with a change in control of the
Corporation whether payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Corporation, its successors, any person
whose actions result in a change in control or any corporation affiliated (or
which, as a result of the completion of the transactions causing a change in
control will become affiliated) (an "Affiliate") with the Corporation within the
meaning or Section 1504 of the Code (collectively, "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 Change in Control
Payment shall be reduced until no portion of the Total Payments is not
deductible by reason of Section 280G of the Code.
(d) TIME OF PAYMENT. The payments provided for in this Section 2 shall
be made not later than the fifth business day following the date that the Change
in Control is consummated (the "Closing Date").
3. SUCCESSORS; BINDING AGREEMENT. (a) 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
2
<PAGE> 3
be required to perform it if no such succession had taken place. 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.
(b) This Agreement shall inure to the benefit of and be
enforceable by Colburn and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees or legatees. If
Colburn should die after the occurrence of a Change in Control while any amount
would still be payable to him hereunder had he continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Colburn's devisee, legatee or other designee or, if
there is no such designee, to his estate.
4. 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 Colburn 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 net of any applicable withholding required
under federal, state or local law. The obligations of the Corporation under
Section 2 shall survive the expiration of the term of this Agreement.
5. 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.
6. 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.
7. ARBITRATION. Following a Change in Control of the Corporation, any
dispute or controversy between the Corporation and Colburn 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.
3
<PAGE> 4
IN WITNESS WHEREOF, Colburn has executed, and the Corporation has
caused its duly authorized representative to execute, this Agreement as of the
date first above written.
ALLEN TELECOM INC.
By: /s/ Robert G. Paul
--------------------------------
Name: Robert G. Paul
Title: President
PHILIP WILLIAM COLBURN
/s/ Philip Wm. Colburn
----------------------------------
4
<PAGE> 1
Exhibit 10(rr)
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (this "Agreement"), dated as of
September 8, 1999, is by and between Allen Telecom Inc., a Delaware corporation
(the "Corporation"), and J. Chisholm Lyons ("Lyons").
RECITALS:
A. The Board of Directors of the Corporation (the "Board") has
recognized that the Corporation may be vulnerable to a change in control
transaction.
B. In order to induce Lyons to remain as a consultant to the
Corporation, the Corporation agrees to pay to Lyons a Change in Control Payment
(as defined in Section 2(a)) in the event that a Change in Control (as defined
in Section 2(b)) of the Corporation occurs during the Term (as defined in
Section 1) as described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Lyons and the Corporation agree as follows:
1. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall
commence on September 8, 1999, and shall continue through December 31, 2002;
PROVIDED, HOWEVER, that commencing on January 1, 2000, 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 this Agreement shall automatically
terminate in the event that Lyons ceases to be a consultant to the Corporation
for any reason.
2. CHANGE IN CONTROL PAYMENT. (a) AMOUNT. If a Change in Control of the
Corporation shall occur during the Term, the Corporation shall pay to Lyons
$250,000.00 (or such higher amount as the Board may determine in its sole
discretion) (the "Change in Control Payment"), subject to the conditions and
pursuant to the terms set forth in this Section 2.
(b) CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation during the Term 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
<PAGE> 2
representing 30% 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 2(b)) whose
election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds 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;
(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%
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 defined in Section 2(b)(i))
acquires more than 30% 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.
(c) REDUCTION. Notwithstanding anything to the contrary contained in
this Agreement, in the event that, by reason of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), any payment or benefit received
or to be received by Lyons in connection with a change in control of the
Corporation whether payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Corporation, its successors, any person
whose actions result in a change in control or any corporation affiliated (or
which, as a result of the completion of the transactions causing a change in
control will become affiliated) (an "Affiliate") with the Corporation within the
meaning or Section 1504 of the Code (collectively, "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 Change in Control
Payment shall be reduced until no portion of the Total Payments is not
deductible by reason of Section 280G of the Code.
(d) TIME OF PAYMENT. The payments provided for in this Section 2 shall
be made not later than the fifth business day following the date that the Change
in Control is consummated (the "Closing Date").
3. SUCCESSORS; BINDING AGREEMENT. (a) 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
2
<PAGE> 3
be required to perform it if no such succession had taken place. 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.
(b) This Agreement shall inure to the benefit of and be
enforceable by Lyons and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees or legatees. If Lyons
should die after the occurrence of a Change in Control while any amount would
still be payable to him hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Lyons's devisee, legatee or other designee or, if there is no
such designee, to his estate.
4. 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 Lyons 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 net of any applicable withholding required
under federal, state or local law. The obligations of the Corporation under
Section 2 shall survive the expiration of the term of this Agreement.
5. 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.
6. 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.
7. ARBITRATION. Following a Change in Control of the Corporation, any
dispute or controversy between the Corporation and Lyons 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.
3
<PAGE> 4
IN WITNESS WHEREOF, Lyons has executed, and the Corporation has caused
its duly authorized representative to execute, this Agreement as of the date
first above written.
ALLEN TELECOM INC.
By: /s/ Robert G. Paul
-------------------------------
Name: Robert G. Paul
Title: President
J. CHISHOLM LYONS
/s/ J. Chisholm Lyons
----------------------------------
4
<PAGE> 1
Exhibit 10(ccc)
AMENDMENT NO. 2
TO
COMSEARCH DIVISION
SUPPLEMENTAL SAVINGS PLAN
(EFFECTIVE JANUARY 1, 1996)
WHEREAS, Allen Telecom Inc. sponsors the Comsearch Division Supplemental
Savings Plan (the "Plan");
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective
as of January 1, 2000:
I.
Section 2.8 of the Plan is hereby amended to provide as follows:
SECTION 2.8. EXECUTIVE shall mean, for a particular Plan Year,
either:
(i) an Employee of the Comsearch Division of the Company, or
(ii) effective for the 1999 Plan Year, a Northern Virginia
Participant
(a) for whom Additional Employer Contributions under the Savings Plan
are limited by Section 401(a)(17) or 415 of the Code, or (b) who elects
to make "Executive Deferrals" under the Allen Telecom Inc. Deferred
Compensation Plan.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to be
executed this day _______ of ___________________, 2000.
ALLEN TELECOM INC.
By__________________________
Its_________________________
<PAGE> 1
Exhibit 10(ggg)
ALLEN TELECOM INC.
EXECUTIVE BENEFIT PLAN
AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS........................................................................1
ARTICLE 2 SELECTION, ENROLLMENT AND ELIGIBILITY
2.1 SELECTION BY COMMITTEE.....................................................5
2.2 ENROLLMENT REQUIREMENTS....................................................5
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION.................................5
ARTICLE 3 VESTING; ACCOUNT BALANCE
3.1 VESTING IN CHANGE IN CONTROL BENEFIT.......................................5
3.2 FORFEITURE.................................................................6
3.3 ACCOUNT BALANCE............................................................6
ARTICLE 4 BENEFITS
4.1 CHANGE IN CONTROL BENEFIT..................................................6
4.2 EMPLOYER BENEFIT...........................................................7
4.3 WITHHOLDING AND PAYROLL TAXES..............................................7
ARTICLE 5 BENEFICIARY
5.1 BENEFICIARY................................................................7
5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT...........................7
5.3 ACKNOWLEDGMENT.............................................................7
5.4 NO BENEFICIARY DESIGNATION.................................................8
5.5 DOUBT AS TO BENEFICIARY....................................................8
5.6 DISCHARGE OF OBLIGATIONS...................................................8
ARTICLE 6 TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN
6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR
BEFORE CHANGE IN CONTROL...................................................8
6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE
IN CONTROL OR FOLLOWING CHANGE IN CONTROL..................................8
6.3 TERMINATION OF PLAN AGREEMENT..............................................9
ARTICLE 7 OTHER BENEFITS AND AGREEMENTS
7.1 COORDINATION WITH OTHER BENEFITS...........................................9
ARTICLE 8 TRUST
8.1 ESTABLISHMENT OF THE TRUST.................................................9
8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST................................9
8.3 ACCOUNTS...................................................................9
ARTICLE 9 INSURANCE POLICIES
9.1 POLICIES..................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
9.2 DOCUMENTS REQUIRED BY INSURER............................................11
ARTICLE 10 ADMINISTRATION
10.1 COMMITTEE DUTIES.........................................................11
10.2 AGENTS...................................................................11
10.3 BINDING EFFECT OF DECISIONS..............................................11
10.4 INDEMNITY OF COMMITTEE...................................................11
10.5 EMPLOYER INFORMATION.....................................................12
ARTICLE 11 CLAIMS PROCEDURES
11.1 PRESENTATION OF CLAIM....................................................12
11.2 NOTIFICATION OF DECISION.................................................12
11.3 REVIEW OF A DENIED CLAIM.................................................12
11.4 DECISION ON REVIEW.......................................................13
11.5 LEGAL ACTION.............................................................13
ARTICLE 12 MISCELLANEOUS
12.1 UNSECURED GENERAL CREDITOR...............................................13
12.2 EMPLOYER'S LIABILITY.....................................................13
12.3 NONASSIGNABILITY.........................................................13
12.4 NOT A CONTRACT OF EMPLOYMENT.............................................14
12.5 FURNISHING INFORMATION...................................................14
12.6 TERMS....................................................................14
12.7 CAPTIONS.................................................................14
12.8 GOVERNING LAW............................................................14
12.9 VALIDITY.................................................................14
12.10 NOTICE...................................................................14
12.11 SUCCESSORS...............................................................15
12.12 SPOUSE'S INTEREST........................................................15
12.13 INCOMPETENT..............................................................15
12.14 DISTRIBUTION IN THE EVENT OF TAXATION....................................15
</TABLE>
ii
<PAGE> 4
ALLEN TELECOM INC.
EXECUTIVE BENEFIT PLAN
As Amended and Restated Effective June 16, 1999
Allen Telecom Inc. hereby amends and restates the Allen Telecom Inc.
Executive Benefit Plan, effective June 16, 1999, on the terms hereinafter set
forth.
PURPOSE
The purpose of this Plan is to provide specified benefits for the
purpose of motivating and retention of a select group of management and highly
compensated employees who contribute materially to the continued growth,
development, and future success of Allen Telecom Inc., a Delaware corporation
(the "Company"). The Plan generally is intended to provide benefits to covered
employees in the event of a "Change of Control" of the Company (as defined
herein) and is not intended to constitute an "employee pension benefit plan"
within the meaning of Section (3)(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Benefits, if payable under the Plan,
generally will be payable prior to termination of employment.
ARTICLE 1
DEFINITIONS
-----------
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meaning:
1.1 "Administrative Account" shall mean an account established in
accordance with Section 8.3(a)(ii) below.
1.2 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 5 below, that are
entitled to receive benefits under this Plan upon the death of a
Participant.
1.3 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.4 "Board" shall mean the Board of Directors of the Company.
1.5 "Change in Control" shall mean the occurrence of any of the following
with respect to the Company:
1
<PAGE> 5
(a) Any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing 30 percent or more of the combined
voting power of the Company's then outstanding securities;
(b) During any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board of Directors of
the Company (the "Board"), and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (a), (c) or (d) of this subsection) whose election
by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;
(c) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 80 percent of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 30 percent of the combined voting power of
the Company's then outstanding securities;
(d) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets;
(e) The Company voluntarily files a petition for bankruptcy under
federal bankruptcy law, or an involuntary bankruptcy petition
is filed against the Company under federal bankruptcy law,
which involuntary petition is not dismissed within 120 days of
the filing;
(f) The Company makes a general assignment for the benefit of
creditors; or
(g) The Company seeks or consents to the appointment of a trustee,
receiver, liquidator or similar person.
2
<PAGE> 6
1.6 "Change in Control Benefit" shall mean the benefit set forth in Section
4.1 below.
1.7 "Claimant" shall have the meaning set forth in Section 11.1 below.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.9 "Committee" shall mean the administrative committee appointed to manage
and administer the Plan in accordance with the provisions of Article 10
below.
1.10 "Company" shall mean Allen Telecom Inc., a Delaware corporation.
1.11 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Employer's long-term
disability program by which the Participant is covered.
1.12 "Effective Date" shall mean March 2, 1997. The effective date of this
amendment and restatement shall be June 16, 1999.
1.13 "Employer" shall mean the Company and any other subsidiary that adopts
the Plan with the consent of the Company.
1.14 "Employer Benefit" shall mean the benefit set forth in Section 4.2
below.
1.15 "Forfeiture" shall mean a forfeiture of a Participant's rights to
benefits under this Plan as set forth in Section 3.2 below.
1.16 "Insurer" shall mean the insurance company or companies that issue one
or more Policies.
1.17 "Participant" shall mean any employee of an Employer (a) who is
selected to participate in the Plan, (b) who elects to participate in
the Plan, (c) who signs a Plan Agreement and a Beneficiary Designation
Form, (d) whose signed Plan Agreement and Beneficiary Designation Form
are accepted by the Committee, and (e) whose Plan Agreement has not
terminated.
1.18 "Participant's Account" shall mean an account established in accordance
with Section 8.3(a)(i) below.
1.19 "Plan" shall mean the Allen Telecom Inc. Executive Benefit Plan, which
is defined by this instrument and by each Plan Agreement, all as may be
amended from time to time.
1.20 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant shall
provide for the entire benefit to which such Participant is entitled
under the Plan, and the Plan Agreement bearing the latest date of
acceptance by the Committee shall govern such entitlement.
3
<PAGE> 7
1.21 "Plan Year" shall begin on January 1 of each year and continue through
December 31 of that year. The first Plan Year began on March 2, 1997
and ended on December 31, 1997.
1.22 "Policy" or "Policies" shall mean the policy or policies issued in the
name of the Trustee in accordance with the terms and conditions of this
Plan and each respective Plan Agreement.
1.23 "Reserve Account" shall mean an account established in accordance with
Section 8.3(a)(iii) below.
1.24 "Retirement," "Retires" or "Retired" shall mean a Participant's
severance from employment from all Employers for any reason, other than
a leave of absence, death or Disability, on or after the later of
Participant's (a) attaining age 65, or (b) fifth anniversary of
participation in the Allen Telecom Inc. Corporate Retirement Plan.
1.25 "Supplemental Retirement Plan" or "Supplemental Retirement Plans" shall
mean, as the context requires, the Allen Telecom Inc. Restoration Plan,
each Supplemental Target Pension Benefit Agreement entered into between
the Company and a Participant and each other nonqualified deferred
compensation plan or arrangement designated by the Committee as a
Supplemental Retirement Plan for purposes of this Plan.
1.26 "Termination of Employment" shall mean the ceasing of employment with
all Employers, voluntarily or involuntarily, for any reason other than
Retirement, Disability, death or an authorized leave of absence.
1.27 "Trust" shall mean the trust established pursuant to that certain Trust
Agreement for the Allen Telecom Inc. Executive Benefit Plan, dated as
of August 1, 1997, between the Company and the Trustee, as may be
amended from time to time.
1.28 "Trustee" shall mean the trustee named in the Trust and any successor
trustee.
1.29 "Vesting Date" shall mean the date upon which a Participant becomes
100% vested in his or her Change in Control Benefit in accordance with
Section 3.1 below.
ARTICLE 2
SELECTION, ENROLLMENT AND ELIGIBILITY
-------------------------------------
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a
select group of management and highly compensated employees of the
Employers. From that group, the Committee shall select, in its sole
discretion, employees to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
employee shall complete, execute and return to the Committee a Plan
Agreement and a Beneficiary Designation Form. In addition, the
Committee, in its sole discretion, shall
4
<PAGE> 8
establish from time to time such other enrollment requirements as it
determines are necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee
selected to participate in the Plan has met all enrollment requirements
set forth in this Plan and required by the Committee, that employee
shall commence participation in the Plan on the date specified by the
Committee. If a selected employee fails to meet all such requirements
prior to that date, that employee shall not be eligible to participate
in the Plan until the completion of those requirements.
ARTICLE 3
VESTING; ACCOUNT BALANCE
------------------------
3.1 VESTING IN CHANGE IN CONTROL BENEFIT. Subject to Section 3.2 below:
(a) General Rule. If a Participant has not forfeited his or her
benefits pursuant to Section 3.2(a)(i) below, or experienced a
Termination of Employment, prior to 90 days prior to a Change
in Control, the Participant shall become 100% vested in his or
her Change in Control Benefit on the date six months following
the Change in Control (the "Vesting Date").
(b) Early Vesting. If at any time on or after 90 days prior to a
Change in Control and prior to the Vesting Date a Participant
Retires, dies, suffers a Disability or experiences an
involuntarily termination of employment with all Employers,
the Participant (or the Participant's Beneficiary in the event
of the Participant's death) shall become 100% vested in his or
her Change in Control Benefit on the later of (i) the date of
the Change in Control or (ii) the date of such Retirement,
death, Disability or involuntary termination of employment,
and such date (rather than the date six months following a
Change in Control) shall be considered the "Vesting Date" for
purposes of this Plan.
3.2 FORFEITURE. Notwithstanding Section 3.1 above, a Participant shall
forfeit any right to benefits under this Plan in accordance with this
Section 3.2:
(a) A Participant shall forfeit any right to benefits under this
Plan if he or she:
(i) Retires, dies, suffers a Disability, or experiences a
Termination of Employment, in each case prior to 90
days before a Change in Control, or receives lump sum
distributions from the Supplemental Retirement Plans
that permanently ends his or her participation in the
Supplemental Retirement Plans (a "Termination
Distribution") at any time; or
(ii) Voluntarily terminates his or her employment (other
than by Retirement or Disability) with all of his or
her Employers or receives a Termination Distribution
from the Supplemental Retirement Plans at any time on
or
5
<PAGE> 9
after the date of a Change in Control and prior to
the date six months following the Change in Control.
(b) A Participant receiving payments or other partial
distributions from the Supplemental Retirement Plans before
his or her Vesting Date described in Section 3.1(a) hereof
shall forfeit a portion of his or her Change in Control
Benefit which bears the same proportion to all of such benefit
as the payment or partial distribution bears to his or her
total interest in the Supplemental Retirement Plans.
3.3 ACCOUNT BALANCE. Each year, as soon as administratively practicable,
each Participant shall receive a statement setting forth the balance of
his or her Participant's Account as of the end of the preceding Plan
Year.
ARTICLE 4
BENEFITS
---------
4.1 CHANGE IN CONTROL BENEFIT.
(a) Eligibility. On the Vesting Date, the Participant or the
Participant's Beneficiary, as the case may be, shall become
entitled to the "Change in Control Benefit" described in
Section 4.1(b).
(b) Benefit and Payment. The "Change in Control Benefit" shall be
the dollar amount that is credited to the Participant's
Account as of the Vesting Date. This benefit shall be paid to
the Participant, or his or her Beneficiary, within 90 days of
the Vesting Date.
4.2 EMPLOYER BENEFIT.
(a) Eligibility. Subject to Section 4.4 below, the Participant's
Employer shall be entitled to the Employer Benefit if and to
the extent a Participant forfeits his or her Change in Control
Benefit under Section 3.2 above.
(b) Benefit and Payment. The "Employer Benefit" shall be (i) a
distribution of the dollar amount that is allocated to the
Participant's Account as of the date of the event described in
Section 3.2 above, after taking into account any distributions
made or to be made in accordance with Section 4.1 above, plus
any earnings allocated to that account from that date to the
date of payment of the Employer Benefit and (ii) a
distribution of any amount allocated to the Reserve Account in
accordance with Section 8.3(a)(iii) below. This benefit shall
be paid to the Participant's Employer by December 31 of the
Plan Year following that event.
4.3 WITHHOLDING AND PAYROLL TAXES. The Trustee shall withhold from any and
all benefit payments made under this Article 4, all federal, state and
local income, employment and other taxes required to be withheld in
connection with the payment of benefits
6
<PAGE> 10
hereunder, in amounts to be determined in the sole discretion of the
Participant's Employer.
ARTICLE 5
BENEFICIARY
-----------
5.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant.
5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules and
procedures, as in effect from time to time. If the Participant names
someone other than his or her spouse as a Beneficiary, a spousal
consent, in the form designated by the Committee, must be signed by
that Participant's spouse and returned to the Committee. Upon the
acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled. The
Committee shall be entitled to rely on the last Beneficiary Designation
Form filed by the Participant and accepted by the Committee before his
or her death.
5.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
5.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 5.1, 5.2 and 5.3 above, or if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the Participant's
estate.
5.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, before a
Change in Control, to cause the Trustee to withhold such payments until
this matter is resolved to the Committee's satisfaction.
5.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
ARTICLE 6
7
<PAGE> 11
TERMINATION, AMENDMENT OR
-------------------------
MODIFICATION OF THE PLAN
------------------------
6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE CHANGE
IN CONTROL. Subject to Section 6.2, each Employer reserves the right to
terminate, amend or modify the Plan or any related Plan Agreement, in
whole or in part, with respect to Participants whose services are
retained by that Employer. Notwithstanding the foregoing, no
termination, amendment or modification shall be effective to decrease
or reduce a Participant's potential benefits under this Plan below the
amount allocated to the Participant's Account as of the effective date
of the termination, amendment or modification.
6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE IN
CONTROL OR FOLLOWING CHANGE IN CONTROL. Within one year before a Change
in Control and thereafter, neither the Company, any subsidiary of the
Company nor any corporation, trust or other person that succeeds to all
or any substantial portion of the assets of the Company shall have the
right to terminate, amend or modify the Plan and/or any Plan Agreement
in effect prior to such Change in Control, and all benefits under the
Plan and any such Plan Agreement shall thereafter be paid in accordance
with the terms of the Plan and such Plan Agreement, as in effect
immediately prior to such Change in Control. If the Plan is terminated,
amended, or modified within one year before a Change in Control, such
termination, amendment or modification shall be considered void as of
the date of the termination, amendment or modification. Any provision
of this Plan or any Plan Agreement to the contrary shall be construed
in accordance with this Section 6.2.
6.3 TERMINATION OF PLAN AGREEMENT. Absent the earlier termination,
modification or amendment of the Plan, or a Participant's Forfeiture of
his or her benefits under this Plan, the Plan Agreement of any
Participant shall terminate upon the full payment of the applicable
benefit provided under Article 4.
ARTICLE 7
OTHER BENEFITS AND AGREEMENTS
-----------------------------
7.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any
other plan or program for employees. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or program
except as may otherwise be expressly provided.
ARTICLE 8
TRUST
---------
8.1 ESTABLISHMENT OF THE TRUST; PREMIUMS. The Company shall establish the
Trust and the Employers shall, at least annually, transfer over to the
Trust such assets, if any, as the Company determines, in its sole
discretion, to contribute or cause to be contributed
8
<PAGE> 12
to the Trust prior to a Change in Control. The Committee may direct,
prior to a Change in Control, payment of any and all Policy premiums
and other costs relating to insurance policies owned by the Trust. In
addition, if the Trust incurs any tax liability, the Employers shall
contribute to the Trust sufficient funds to allow the Trustee to pay
any such tax liability.
8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
and each Plan Agreement shall govern the rights of a Participant to
receive distributions pursuant to the Plan. The provisions of the Trust
shall govern the rights of the Trustee, Participant and a Participant's
Beneficiary as to the assets of the Trust. The Employers shall at all
times remain liable to carry out their obligations under the Plan. The
Employers and the Trustee shall cooperate with each other as is
necessary to minimize the Trust's tax liability.
8.3 ACCOUNTS.
--------
(a) The Trustee shall establish and maintain the following
separate accounts:
(i) A "Participant's Account" for each Participant (A) to
which the Employers' contributions, or a portion
thereof, may be allocated and held, and (B) to which
earnings on amounts allocated pursuant to (A) shall
be allocated, the assets of which are to be used to
pay the Change in Control Benefit or the Employer
Benefit in accordance with the Plan and Trust;
(ii) An "Administrative Account" for the administrative
expenses of the Trust to which a portion of the
Employers' contributions and earnings thereon may be
allocated and held, the assets of which are to be
used to pay the administrative expenses, including
all taxes, of the Trust in accordance with the terms
and provisions of this Plan and the Trust that are
not paid directly by the Employers; and
(iii) A "Reserve Account" to which shall be allocated all
gains described in this subsection. In the event of
the death of a Participant or former Participant
whose life is insured by a Policy, the excess of (a)
the life insurance proceeds received from such Policy
over (b) the cash value of such Policy as of the date
immediately preceding the Participant's death shall
constitute a gain allocable to the Reserve Account.
Any such gain allocated to the Reserve Account shall
be distributed as an Employer Benefit pursuant to
Section 4.2(b).
(b) Prior to a Change in Control, the Committee shall, in its sole
discretion, direct the Trustee in writing as to the allocation
of (i) the Employers' contributions to the Participant's
Accounts and the Administrative Account, (ii) the earnings on
the amounts held in the Participant's Accounts and the
Administrative Account, and (iii) the gains allocated to the
Reserve Account in accordance with Section 8.3(a)(iii). After
a Change in Control, the Trustee shall make such allocations
in accordance with the terms of the Plan and the Trust.
Notwithstanding the foregoing, and except for a payment of
benefits in accordance with Article 4 or a
9
<PAGE> 13
Forfeiture of benefits, a Participant's Account balance shall
not be reduced. Allocations of earnings shall be made as of
such date (at least annually) as is specified by the Committee
or the Trustee, but shall not be required to be made more
frequently than annually.
(c) All allocations shall be made in such manner so that the
accounts hereunder shall qualify for and be treated as a
separate share under Code Section 663(c).
ARTICLE 9
INSURANCE POLICIES
------------------
9.1 POLICIES. The Committee may direct the Trustee in writing to acquire
one or more Policies in the Trustee's name. The Trustee shall be the
sole and absolute owner and beneficiary of each Policy, with all rights
of an owner and beneficiary, including without limitation, the right to
surrender Policies for their cash surrender values and to take one or
more loans against one or more Policies. Notwithstanding the foregoing,
the Trustee shall exercise its ownership rights in each Policy only in
accordance with the terms of this Plan, the respective Plan Agreements
and the Trust.
9.2 DOCUMENTS REQUIRED BY INSURER. The Trustee, the Participant's Employer
and the Participant shall sign such documents and provide such
information as may be required from time to time by the Insurer.
ARTICLE 10
ADMINISTRATION
--------------
10.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of the Board or such committee as the Board shall
appoint. Members of the Committee may be Participants under this Plan.
The Committee shall also have the sole and absolute discretion and
authority to (i) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan, and (ii)
interpret where necessary all provisions of this Plan (including,
without limitation, by supplying omissions from, correcting
deficiencies in, or resolving inconsistencies in, the language of this
Plan), as may arise in connection with the Plan. Any individual serving
on the Committee who is a Participant shall not vote or act on any
matter relating solely to himself or herself. When making a
determination or calculation, the Committee shall be entitled to rely
on information furnished by a Participant or the Company.
10.2 AGENTS. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may
be counsel to any Employer.
10.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and
10
<PAGE> 14
application of the Plan and the rules and regulations promulgated
hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.
10.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless
the members of the Committee against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to
act with respect to this Plan, except in the case of willful misconduct
by the Committee or any of its members.
10.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee
on all matters relating to the compensation of its Participants, the
date and circumstances of the Retirement, Disability, death or
Termination of Employment of its Participants, and such other pertinent
information as the Committee may reasonably require.
ARTICLE 11
CLAIMS PROCEDURES
-----------------
11.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as
a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. All other claims must
be made within 180 days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
11.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within 60 days of receipt of that claim, and shall notify the
Claimant in writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) the specific reference(s) to pertinent provisions of
the Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect the
claim, and an explanation of why such material or
information is necessary; and
11
<PAGE> 15
(iv) an explanation of the claim review procedure set
forth in Section 11.3 below.
11.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
11.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
11.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 11 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights,
interest or claims in any property or assets of an Employer. Any and
all of an Employer's assets shall be, and remain, the general,
unpledged and unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.
12.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer
12
<PAGE> 16
and a Participant. An Employer shall have no obligation to a
Participant under the Plan except as expressly provided in the Plan
and his or her Plan Agreement.
12.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which
are expressly declared to be unassignable and non-transferable. No
part of the amounts payable shall, prior to actual payment, be
subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or
any other person, nor be transferable by operation of law in the
event of a Participant's or any other person's bankruptcy or
insolvency or be transferable to a spouse as a result of a property
settlement or otherwise.
12.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between
any Employer and the Participant. Such employment is hereby
acknowledged to be an "at will" employment relationship that can be
terminated at any time for any reason, with or without cause, unless
expressly provided in a written employment agreement. Nothing in this
Plan shall be deemed to give a Participant the right to be employed
in the service of any Employer, or to interfere with the right of any
Employer to discipline or discharge the Participant at any time.
12.5 FURNISHING INFORMATION. A Participant will cooperate with the
Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
12.6 TERMS. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they
would so apply.
12.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
12.8 GOVERNING LAW. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Ohio.
12.9 VALIDITY. In case any provision of this Plan shall be illegal,
invalid or ineffective for any reason, said illegality, invalidity or
ineffectiveness shall not affect the remaining parts hereof, but this
Plan shall be construed and enforced as if such illegal, invalid
and/or ineffective provision had never been inserted herein.
13
<PAGE> 17
12.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail or recognized
overnight courier, to the address below:
Allen Telecom Inc.
25101 Chagrin Boulevard
Beachwood, OH 44122-5169
Attention: General Counsel
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
12.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
12.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable
by such spouse in any manner, including but not limited to such
spouse's will, nor shall such interest pass under the laws of
intestate succession.
12.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the
care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Plan
for such payment amount.
14
<PAGE> 18
12.14 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to
the Participant prior to the Vesting Date, a Participant may petition
the Committee, if prior to a Change in Control, or the Trustee, after
a Change in Control, for a distribution of assets sufficient to meet
the Participant's tax liability (including additions to tax,
penalties and interest). Upon the grant of such a petition, which
grant shall not be unreasonably withheld, the Trustee shall
distribute to the Participant from the Trust immediately available
funds in an amount equal to that Participant's federal, state and
local tax liability associated with such taxation, which liability
shall be measured by using that Participant's then current highest
federal, state and local marginal tax rate, plus the rates or amounts
for the applicable additions to tax, penalties and interest. If the
petition is granted, the tax liability distribution shall be made
within 90 days of the date when the Participant's petition is
granted.
IN WITNESS WHEREOF the Company has signed this Plan document as of
the ____ day of _________, 1999.
ALLEN TELECOM INC.
By:___________________________________
Its:______________________________
15
<PAGE> 1
ALLEN TELECOM 1999 ANNUAL REPORT
<PAGE> 2
ALLEN TELECOM IS . . .
Allen Telecom Inc.(http://www.allentele.com) is a leading supplier of wireless
equipment to the global telecommunications infrastructure market. FOREM supplies
sophisticated filters, duplexers, combiners, amplifiers and microwave radios to
an array of OEM customers. MIKOM focuses on providing repeaters, in-building
systems and other products that enhance both the coverage and the capacity of a
wireless system. Decibel Products and Antenna Specialists manufacture land based
and mobile antennas in frequency bands that cover all of the traditional
wireless networks. Grayson Wireless supplies state-of-the-art measurement and
signal processing systems for testing the overall performance of a wireless
network and providing geolocation services. Comsearch offers engineering and
consulting services for wireless operators. Tekmar Sistemi provides integrated
low power fiber optic and cable distributed antenna systems for indoor coverage
systems. Telia designs and manufactures single and multi-channel power
amplifiers for OEMs and carriers.
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
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
Management
Robert G. Paul
President and Chief Executive Officer
Robert A. Youdelman
Executive Vice President and Chief Financial Officer
James L. LePorte, III
Vice President - Finance
Peter de Villiers
Vice President, Strategic Development
Laura C. Meagher
Secretary and General Counsel
Roger Schroeder
Treasurer and Assistant Secretary
Andrea Casini
Managing Director, Tekmar Sistemi S.r.l.
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
Gianpiero Villa
President, FOREM
<PAGE> 3
The Year at a Glance
1999 1998
Financial Highlights
Sales $333,697,000 $388,004,000
Loss Before Income Taxes
and Minority Interests ($ 5,412,000) ($ 8,554,000)
Loss From Continuing Operations ($ 5,218,000) ($ 5,512,000)
Net Loss ($ 2,855,000) ($ 10,222,000)
Return On Equity (1.2%) (4.0%)
- --------------------------------------------------------------------------------
Financial position, year-end:
Stockholders' Equity $240,912,000 $250,081,000
Working Capital $128,062,000 $133,465,000
Shares Outstanding 27,882,000 27,473,000
Per common share:
Basic:
Loss From Continuing Operations ($ .19) ($ .21)
Net Loss ($ .10) ($ .38)
Diluted:
Loss From Continuing Operations ($ .19) ($ .21)
Net Loss ($ .10) ($ .38)
Book Value per share $8.64 $9.10
- --------------------------------------------------------------------------------
[PICTURE]
Table of Contents
The Year at a Glance 1
Letter to Shareholders 2
Business Review 5
Consolidated Financial Statements 12
Notes to Consolidated Financial Statements 16
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 28
Five-year Summary of Operations 32
Directors and Management Inside front cover
Shareholder Information Inside back cover
SAFE HARBOR CAUTIONARY STATEMENT
Statements included in this Annual Report, which are not historical in nature,
are forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
regarding the Company's future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. Allen Telecom
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 future utilization of the Company's tax loss carry forwards, the impact of
U.S. and foreign government legislative and regulatory actions, including, for
example, the scope and timing of E911 geolocation requirements and spectrum
availability for new wireless applications, the financing availability for
geolocation projects, and other transactions.
1
<PAGE> 4
LETTER TO SHAREHOLDERS
[picture]
Robert G. Paul (left) and Philip Wm. Colburn
Despite two very difficult years of reduced revenue and unacceptable profit
performance, we believe the upward trend of operating results in the latter half
of 1999 provides strong evidence that Allen Telecom has turned the corner. The
continuing improvement in quarterly operating performance throughout 1999 should
leave us well positioned in 2000 to improve results significantly over the prior
two years. Sales for 1999 were $333.7 million, down 14% from 1998 and down 23%
from the peak sales of $432.5 million in 1997. The net loss for 1999 was $2.9
million after-tax or $.10 per share, compared to a loss of $10.2 million
after-tax or $.38 per share in 1998.
While the results of the last two full years are not all that different, the
trends within each of these years could not be more disparate. The charts to the
right show Allen Telecom's quarterly sales and backlog for the last eight
quarters as well as the quarterly operating profit before restructuring charges,
discontinued operations and one-time gains or losses on telecom investments. As
can be seen from these charts, the trend in sales was downward through the first
quarter of 1999 and the trends of backlog and profit were lower through the
fourth and third quarters of 1998, respectively. The trends for all of these
indicators have moved continuously upward ever since. The attached charts also
illustrate how the major restructuring efforts have significantly lowered our
cost structure and breakeven point. This has allowed Allen Telecom to return to
profitability (excluding restructuring charges and one-time gains and losses) in
the third and fourth quarters of 1999 on significantly lower sales levels than
would have been possible in 1998.
While we are pleased with the improvement in the quarterly trend in revenues
during 1999, our sales levels were nevertheless disappointing. Of the major
geographic markets, only the GSM and DCS 1800 market in Europe provided the
sales levels that we expected and that were needed to make 1999 a more
successful year. Despite a robust overall economy in the United States, there
were only limited capital expenditures made by
2
<PAGE> 5
[Bar graph]
SALES BY QUARTER
(MILLIONS OF DOLLARS)
1998
First Quarter 113
Second Quarter 98
Third Quarter 91
Fourth Quarter 86
1999
First Quarter 76
Second Quarter 77
Third Quarter 90
Fourth Quarter 91
EARNINGS PER SHARE BY QUARTER
(EXCLUDING SPECIAL ITEMS)
1998
First Quarter $ .21
Second Quarter $ .05
Third Quarter ($ .12)
Fourth Quarter ($ .05)
1999
First Quarter ($ .05)
Second Quarter $ .00
Third Quarter $ .03
Fourth Quarter $ .06
BACKLOG
BY QUARTER
(MILLIONS OF DOLLARS)
1998
First Quarter 104
Second Quarter 83
Third Quarter 61
Fourth Quarter 53
1999
First Quarter 65
Second Quarter 70
Third Quarter 72
Fourth Quarter 85
wireless carriers to provide coverage improvements, quality enhancements and
capacity expansion for their wireless networks.
The South American markets, particularly Brazil where Allen Telecom has invested
in a new plant, were growing slower than we had expected despite the pent up
consumer demand for telecommunications in a number of countries. Many of the
Southeast Asian countries, which were so strongly battered economically in late
1997 and 1998, did begin to show some modest recovery in 1999, but nowhere near
the levels seen prior to their collapse in 1997. While we are expecting
improvement for the year 2000 in the South American and Southeast Asian markets,
and while there were already some signs of an increased build out of wireless
networks in the U.S. in the latter half of 1999, we are basing our expense
levels on the expectation that revenues will increase gradually, and we will not
recognize dramatic jumps in revenues from these markets.
As a result of this more conservative outlook, in the fourth quarter of 1999,
Allen Telecom announced that it will close its Solon, Ohio manufacturing
facility and discontinue certain product offerings in order to better match our
cost structure with projected revenues. This resulted in a restructuring charge
in the fourth quarter of approximately $8.0 million after-tax. An additional
charge of $.5 - $1.0 million after-tax is expected to be realized in the first
quarter of 2000 to complete this restructuring. The benefits of this
restructuring will reduce our costs by $1.5 million to $2.0 million per quarter
beginning in the second quarter of 2000.
In addition to the positive trend in quarterly results and a lower breakeven
point, other significant signs of progress were also evident in the Company. The
backlog improved 61% from $52.8 million at the beginning of the year to $84.9
million at the end of 1999. This backlog was stronger in all four of our product
lines. We were able to improve our gross profit margins through restructuring
and other efforts to 28.5% for 1999 as compared to 27.6% for 1998 (excluding
restructuring costs). In addition, we were able to reduce SG&A expenses
(excluding one-time restructuring costs) by 13%. Research and development
expenses were reduced more modestly while still maintaining sufficient resources
to pursue those opportunities we consider essential for Allen Telecom's future.
In a year without profits, the Company generated cash internally and reduced net
debt, primarily by limiting capital expenditures in 1999 to $11.4 million, which
is 48% below the prior year level and 46% of depreciation and amortization. We
also saw our share price increase 73% during the year as the success of our
turnaround became evident.
The Company announced many new products in all our
divisions in 1999, but perhaps none was more promising than Radio Link(TM). This
family of robust, low capacity microwave radios was announced in August 1999.
Its major use is for connecting cell sites to their Base Station Controllers
(BSC) and these radios have been well received in the market. We announced our
first commercial orders in November 1999, after initial field testing.
(Continued on next page.)
3
<PAGE> 6
During the year the company continued to invest in its existing businesses and
committed approximately $17.6 million to purchase the remaining minority
interests of MIKOM GmbH, along with the majority interests of two related
European companies.
In this year's Annual Report we have emphasized Allen Telecom's developing
geolocation business. This is due to both our continued progress in bringing
this product to market, and because the opening of this new market is one year
closer. We believe the opportunities are substantial for Geometrix(TM), our
network overlay solution that can locate cellular callers placing E911 calls. We
believe that our technology is better than the competition and hope that we will
be able to announce some specific contracts later in the year 2000. Allen
Telecom has invested approximately $14 million in this project since its
inception and established our own private network in the Washington, D.C. area
where we have been able to demonstrate its proficiency in providing accurate
geolocation information for AMPS, TDMA, CDMA, and iDEN technologies for a large
number of carriers.
Probably the most exciting part of Allen Telecom's longer-term future will be
with the rollout of some form of wide-band CDMA as the next major wireless
technology. This technology for broadband wireless telephony is sometimes
referred to as 3G, for Third
Generation, and sometimes as UMTS (Universal Mobile Telephone Service). 3G will
allow wireless users to utilize a mobile wireless handset for Internet
accessibility, video and other high volume data or digital services which
require high bandwidth.
Allen Telecom is presently engaged in development efforts to ensure that we have
the products and services available for this next generation of wireless
products. The opportunity that will be presented when these systems are launched
will be dramatic. We do not expect significant revenues from third generation
products until late 2001 or 2002. It should be noted, however, that an initial
3G system is up and operating in the Japanese market, licenses have been issued
in Finland, and auctions for licenses in the U.K. and Italy are expected to be
conducted in the first quarter of the year 2000. We expect to participate in the
growth of 3G, and plan to turn that revenue growth into much improved
profitability with our lower cost structure.
We would like to express our gratitude to our employees and management team
throughout the world who responded so well in the face of the disappointments
which we have had over the last 24 months. This team, which has remained
substantially intact over this period, has had to deal with some very difficult
business situations and take tough actions in order to protect the short-term
economic integrity and the long-term future of Allen Telecom. At a time when
most of their incentive plans are not going to give rise to any near term
benefit, their willingness to go the extra mile and get the job done has allowed
us to get to the more favorable position that we are in today.
/s/Philip Wm. Colburn
Philip Wm. Colburn
Chairman of the Board
/s/Robert G. Paul
Robert G. Paul
President and Chief Executive Officer
4
<PAGE> 7
WHAT WE DO: WIRELESS EVOLUTION
The road into the future is paved with technology. Terms such as geolocation,
microwave radio backbone, indoor coverage systems and 3G wireless (Third
Generation) inundate the everyday workplace in the wireless industry. Allen
Telecom is focused on creating the new products necessary to build a global
wireless network for the next century.
Since the first cellular system was installed in 1983, there has been
an incredible evolution in wireless technology. The first systems were analog
and covered only major metropolitan areas. The digital movement began in earnest
in 1987 with the implementation of GSM in Europe and was followed in the U.S.
several years later as cellular carriers began phasing in CDMA and TDMA. These
cellular systems were followed by DCS systems (predominantly GSM) in Europe and
PCS in the U.S. (CDMA, TDMA and GSM). Recently, we've seen the initial movement
to higher capacity EDGE technology. This rapidly changing environment for
wireless technology closely parallels the full-scale roll out of the Internet
and leads to the much proclaimed "convergence" which is driving the push to 3G.
3G technology is the next major step in wireless infrastructure and its
potential is greater than all previous technologies combined. The new 3G
technology will replace analog and digital cellular systems with expanded
capability and with features well beyond those offered today. In addition to
traditional voice, 3G cellular will provide wireless data services at a speed of
up to two megabits per second - fast enough to support several channels of
full-motion video and lightning-fast Internet access.
According to market research, the worldwide market for 3G cellular
terminals will total $1.5 billion in the year 2001 and grow to $9.2 billion in
2005, requiring similar increases in the infrastructure equipment necessary to
support this projected growth rate. 3G service will be available first in Japan,
followed by Europe and then by North America. The Finnish government granted the
first 3G licenses to four different operators in March 1999. Auctions for
licenses in other European countries are scheduled for the year 2000.
The future of the mobile wireless office, a workplace where data
communication, video and voice are available without wires, requires ubiquitous
RF coverage. However, the need for high quality voice and data is not limited to
office space. In fact, it is likely that all indoor and outdoor areas are
destined to be "unwired".
This continuing evolution of technology will benefit all of Allen
Telecom's divisions. In the following pages we explain where and how our
divisions are investing in cutting edge technology to ensure that we have the
necessary products to build the wireless systems of today and tomorrow.
[PICTURE]
5
<PAGE> 8
HOW IT WORKS: GEOLOCATION
NEW TECHNOLOGY
Every day close to 100,000 people dial 911 on their wireless phones to report
emergencies, yet no system exists today to determine the location of these
callers. In 1994, the Federal Communications Commission (FCC) issued a report
and order requiring that a wireless Enhanced 911 (E911) system be available by
October 1, 2001 to locate mobile handsets placing emergency calls in the United
States.
Responding to the FCC mandate, Allen Telecom's Grayson Wireless
division developed Geometrix(TM), a wireless location system that is a voice
channel based, technically scalable, cost effective solution for providing
location based E911 services. The system uses a network overlay model where
wireless location sensors situated at the carrier's base stations measure
certain characteristics of the wireless handset signal. Based on TDOA (Time
Difference of Arrival) and AOA (Angle of Arrival) triangulation techniques,
Geometrix exceeds the accuracy and reliability requirements set by the FCC in
any deployment area: urban, suburban or rural.
The voice channel approach used by Geometrix enables the caller to be
located repeatedly during the call. This capability can be used to enhance
location accuracy or adapted for moving vehicles and fleet management
applications.
TDOA triangulation works by measuring the time of arrival of a radio
signal at three or more separate cell sites. TDOA systems have the advantage of
using mature, high accuracy timing technology and connecting to the existing
cell site antennas. AOA uses antenna arrays to determine the angle of arrival of
the incoming signal. Geometrix can be
[PICTURE]
6
<PAGE> 9
configured using a combination of TDOA and AOA to provide accurate position
calculations from as few as two sites in the presence of multi-path signal
interference, challenging tower geometry or in areas of poor signal strength.
Geometrix provides E911 services to carriers utilizing almost all air
interfaces including AMPS, TDMA (IS-136), CDMA (IS-95), iDEN and
dual-mode/dual-band networks. The system can locate calls which transition
between analog and digital sites, and calls in which the caller is a subscriber,
roamer, or even a non-subscriber.
Geometrix equipment is a software-based, open architecture. The system
can be field upgraded to accept 3G and other future air interfaces, to increase
coverage or to increase capacity with maximum reuse of existing hardware. The
system was designed to accommodate a variety of location-based, value-added
services, including fleet management, concierge services, personal security and
other location dependent information.
Geometrix can also operate as a service bureau in which one network
supports multiple carriers using different air interfaces. Through shared
capital costs, service bureaus represent the lowest cost solution to the
geolocation mandate. The Geometrix solution can efficiently and effectively
serve multiple carriers in a service bureau environment due to the flexible,
non-invasive nature of the product design. The system's open architecture can
locate multiple users on multiple air interfaces with only software additions to
the equipment.
Allen Telecom's Geometrix system is backed by a large organization with
the proven ability to deliver products to market and to service and maintain
those products in the future. In addition to the manufacturing skill and
capacity necessary to supply geolocation equipment to multiple carriers, Allen
Telecom can deliver knowledgeable network planning (to determine the optimal
placement of geolocation equipment in the network), equipment installation
expertise, qualified test and measurement techniques and years of experience in
technical, systems operation, maintenance and data base support functions.
Geometrix technology has been field-tested in multiple environments
including testing with the Federal Highway Administration in northern Virginia.
Additional field trial activities are planned with several major carriers. These
trials, along with continuing private network tests and demonstrations, confirm
Geometrix' performance and value in providing the basis for location related
services.
Industry estimates of the market potential for geolocation equipment
range from $1-3 billion. Including ancillary location based services, the
estimates reach $2-8 billion. Geometrix is well positioned to take advantage of
this rapidly approaching market opportunity. Carriers are required by the FCC to
announce their technology choice by October 2000 and to begin offering E911
services in October 2001. This has created a sense of urgency in what had been a
slowly developing market.
Our system is easy to install, non-invasive, operates with all air
interfaces, is scalable, can be upgraded, offers value-added services and is
backed by the collective strengths of a company which has been in the wireless
business for nearly 50 years.
[PICTURE}
How geolocation works
1. The location process is initiated by a wireless phone user calling 911 for
emergency services.
2. While the call is being processed through to the emergency dispatch center,
the Geometrix(TM) cell site equipment is activated to find the caller.
3. Two or three cell sites perform time or angle of arrival calculations to
determine precise longitude and latitude of the emergency caller.
4. The location information is passed up to emergency dispatch and displayed
on maps.
5. Emergency dispatch center sends appropriate assistance to the specific
location determined by the Geometrix system.
7
<PAGE> 10
[PICTURE]
INNOVATION: RESEARCH & DEVELOPMENT
Antennas provide the critical link between handsets and the base station for all
wireless systems.
Decibel is currently engaged in the development of a new generation of
base station antennas. Decibel's years of experience, coupled with the carriers'
expertise in frequency management software and the improved communications
hardware lead to demands for a new standard of performance from base station
antennas. These new requirements include consistent radiation from antenna to
antenna and across the frequency spectrum, as well as radiation patterns that
favor communications with subscribers in a designated sector to the exclusion of
communications beyond these bounds.
Radiation patterns often need to be tailored to specific environments.
In urban and highly populated suburban areas, precise vertical radiation
patterns support several carrier goals, such as a high rate of frequency reuse
within a small geographic area, excellent coverage to the foot of the base
station and adequate levels of RF in targeted buildings. These exacting
requirements are met by Decibel's MaxFill(TM) family of antennas that
concentrate the RF below the horizon and provide even radiation density within
a designated sector by filling in the radiation "nulls" typically exhibited by
traditional antennas.
In areas of medium to light subscriber density, another set of antennas
developed by Decibel meets the demand of carriers to provide optimum coverage
with the least number of base stations. These MaxGain(TM) antennas are designed
specifically to focus radiation energy onto the horizon with maximum gain to
achieve the greatest geographic coverage.
The introduction of 3G technology requires further technologically
advanced antennas. New 3G base stations will have higher bandwidth than existing
systems. To provide ultimate flexibility in the future, carriers will demand
dual-band, independently adjustable, remote control antennas, which help
carriers to optimize the coverage performance for their PCS and 3G customers
using a single antenna. These antennas are already under development at Decibel
Products.
Antenna Specialists recently introduced a family of dual-band "On
Glass" vehicular antennas with both cellular AMPS (800 MHz)/ PCS (1900 MHz) and
GSM (900 MHz)/ DCS (1800 MHz) capability in a common antenna feed configuration.
The advent of dual frequency mode portable phones (expected to be even
more common with 3G) and continuing pressures from state and local governments
to legislate "hands free" operation while driving has resulted in the
development of these state-of-the-art antennas. The antenna, when installed with
a car kit, facilitates "hands free" operation of the mobile phone and
significantly enhances signal quality inside the vehicle.
Cellular telephones operate at ultrahigh frequencies, especially those
using PCS and DCS 1800 and ultimately 3G frequencies, which make their
performance extremely sensitive to surrounding objects such as car roofs, doors
and window posts. The most efficient antenna placement is one that elevates the
signal above these obstacles and results in a circular or omnidirectional signal
pattern.
The unique dual-band design incorporates the latest in antenna
technology. A dual-band, two element, co-linear antenna ensures maximum
radiation in both frequency bands, provides proper phasing between the elements
and achieves the transfer of energy from the vehicle's antenna through the
windshield to the mobile phone. The flexibility of this new antenna provides
high reliability and optimal performance for dual-mode portable phone operation
within a vehicle anywhere in a base station's service area.
8
<PAGE> 11
WIDEBAND SOLUTIONS
As the world's major OEMs prepare to roll out the first 3G systems by
2001, FOREM is already designing new generation technology solutions and
manufacturing products with 3G-compatible technology.
Proprietary dual-mode filters and duplexers will facilitate higher
performance in a compact size for 3G applications, and reduce manufacturing
costs. New metal alloys have been created to reduce the cost of base station
component parts. Ceramic filters and combiners, based on special transmission
modes, were developed to enable the use of low cost ceramics where dual-mode
solutions are not usable. In addition, innovative low noise amplifiers with
advanced circuitry techniques have been developed which allow the base station
processing equipment to process signals more effectively.
FOREM is developing Tower Mounted Amplifiers, including both uplink (to
increase base station receive sensitivity) and downlink (to increase the
coverage area). These products are fully monitored and controlled by the BTS via
a powerful bidirectional communication link, which enables easy installation and
full control of the system during operation.
FOREM has also introduced a new product family of microwave radios in
the 2GHz to 40GHz range. These robust low to medium capacity digital microwave
radios are used for fixed wireless connections. The main application is to
connect the base station to the base station controller at speeds ranging from
2Mbits to 32Mbits. The high-tech system modulation scheme developed by FOREM
allows the product to compete with more sophisticated modulation schemes, but at
a significant advantage in terms of cost, power consumption and reliability. The
system is locally and remotely controlled with a simple network management
protocol that allows easy interfaces and low cost maintenance.
In the future, transmitting data using 3G technology will require a
higher number of channels for multiple data communications. To address this
demand, FOREM and Telia have been working together to produce a cost effective,
reliable, high powered, multi-channel amplifier for downlink (signal from the
base station to the mobile unit) applications. These solid state, ultra-linear
power amplifiers offer greater spectrum efficiency, higher network capacity,
less signal interference and lower system cost. FOREM's and Telia's designs are
compatible with all air interface standards, including 3G.
Given the 3G technology requirements, a number of OEMs are now
seriously considering outsourcing the development and manufacture of amplifiers
and other components to a much greater extent than they do currently. This
represents a major opportunity for FOREM to become a larger, more integrated OEM
supplier.
[PICTURE]
9
<PAGE> 12
INVESTING FOR THE FUTURE
Many of today's wireless subscribers utilize their mobile phones to call from
within buildings, tunnels, or other structures. Inside these structures, the
quality of wireless conversations is often degraded significantly or terminated
due to a lack of coverage. Places such as airports, subways, car and railway
tunnels, shopping malls, hotels, campuses, industrial plants and high-rise
office buildings all need effective indoor coverage solutions.
The availability and convenience of wireless communications has
resulted in an increase in both subscribers and subscriber usage, which in turn
is forcing wireless systems to better control their frequency utilization
through both higher frequency reuse patterns and reduced RF power, both indoors
and outside.
Outdoor "off the air" repeaters receive signals from mobile phone users
and then transmit those signals back to the base station. High signal strength
will be more important for 3G than any previous technology because of the high
data rate transmission. High data rates with low errors require strong signals,
which repeaters deliver economically. In addition, since 3G will be implemented
at frequencies even higher than PCS, propagation losses will be worse than those
experienced by networks today. As such, repeaters are likely to be used
extensively in 3G applications.
MIKOM has implemented a breakthrough feature that eliminates some
of the restrictions that currently exist with repeaters. I.C.E. (Interference
Cancellation Equipment) repeaters from MIKOM reduce the need for isolation by
more than 20dB, thus making installations universal and even more cost
effective. This feature, coupled with diversity and multiple power options,
makes MIKOM repeaters an ideal choice for all 3G networks.
[PICTURE]
10
<PAGE> 13
[PICTURE}
DIGITAL UBIQUITOUS COVERAGE
The most effective way to achieve both strong signal levels and well
controlled RF indoors is through the use of an RF distribution system. Allen
Telecom produces a number of products to meet this growing demand.
For simple, small area coverage enhancement, MIKOM provides DICETM
(Distributed Indoor Coverage Enhancement) products. These products are band
selective, low power, off-air, bidirectional amplifiers that may be connected to
several antennas via coaxial cable. It is typically used to cover a deep
storefront or a small office area.
As required coverage increases, a more powerful device may be required.
For this situation, MIKOM produces the MR (MIKOM Repeater) series of products.
This higher power, higher gain, off-air repeater may be connected to a larger
number of distributed antennas (4-10), again via coaxial cable. The MR units may
be channel or band selective and come in several power levels. Applications
include multiple offices, small manufacturing centers and hotel lobbies.
When both capacity and coverage are important, Tekmar Sistemi's
Brite-Cell(TM), an active, low power, fiber-optic distribution system, may be
an excellent alternative. This band selective product distributes the signal of
the donor base station (or Micro/Picocell) to which it is connected by fiber
optics to multiple, remote, low power antenna units that are placed throughout
a structure in a star configuration. This system efficiently manages increased
traffic capacity without degrading the signal. Typically, this system is
implemented in areas such as high-rise buildings, convention centers with
multiple rooms and hotels.
The largest, highest power, most flexible distribution product from
MIKOM is the MOR series of optical repeaters (MIKOM Optical Repeaters). These
optical products have a greater range and higher output power than any other
product and come in either band or channel selective variations with multiple
power options. They are comparable in performance to a microcell. The MOR system
is comprised of a master unit located at a base station and multiple remote
units located throughout a structure, and may be configured in either a daisy
chain or star configuration in order to maximize fiber usage and increase base
station trunking efficiency. All adjustments and alarms involving the remote
units may be made from the master unit. This product is used primarily for
covering large areas such as tunnels, airports, railroads, and convention
centers.
All systems are either 3G compliant or 3G upgradeable and are capable
of supporting all standards including GSM, CDMA, TDMA, Analog, Tetra and iDEN.
In addition, the systems are multi-band and multi-user ready for use in shared
systems operating from 100 MHz to 2.4 GHz.
The products are tied together in a state-of-the-art Operations and
Maintenance package (OMC), which allows remote control, alarming and monitoring
of the various repeaters from a single location. Wireless or wireline modems
complete the connection package. MIKOM and Tekmar Sistemi are well positioned to
connect the wireless offices of the future.
11
<PAGE> 14
CONSOLIDATED STATEMENTS OF OPERATIONS
ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 & 1997 1999 1998 1997
<S> <C> <C> <C>
SALES $ 333,697 $ 388,004 $ 432,508
Costs and Expenses:
Cost of sales 244,548 293,404 281,591
Selling, general and administrative expenses 61,839 71,672 72,671
Research and development and product engineering costs 27,946 30,742 30,367
Other Income, net 3,370 6,065 1,885
Interest and Financing Expenses:
Interest expense (9,632) (8,276) (4,505)
Interest income 1,486 1,471 1,454
- --------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES AND MINORITY INTERESTS (5,412) (8,554) 46,713
Benefit from (Provision for) Income Taxes 1,844 5,310 (17,723)
- --------------------------------------------------------------------------------------------------
Income (Loss) Before Minority Interests (3,568) (3,244) 28,990
Minority Interests (1,650) (2,268) (5,009)
- --------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (5,218) (5,512) 23,981
Discontinued Operations - gain (loss) from
discontinued emissions testing business 2,363 (4,710) --
- -------------------------------------------------------------------------------------------------
Income (Loss) Before Extraordinary Item (2,855) (10,222) 23,981
Extraordinary Item - Extinguishment of Debt -- -- (632)
- --------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (2,855) $ (10,222) $ 23,349
- --------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
Basic:
Income (loss) from continuing operations ($.19) ($.21) $.89
Discontinued emissions testing business .09 (.17) --
Extraordinary item - extinguishment of debt -- -- (.02)
-----------------------------------------------------------------------------------------
Net Income (Loss) ($.10) ($.38) $.87
-----------------------------------------------------------------------------------------
Diluted: Income (loss) from continuing operations ($.19) ($.21) $.88
Discontinued emissions testing business .09 (.17) --
Extraordinary item - extinguishment of debt -- -- (.02)
-----------------------------------------------------------------------------------------
Net Income (Loss) ($.10) ($.38) $.86
-----------------------------------------------------------------------------------------
Weighted average common shares outstanding:
Basic 27,480 27,220 26,920
Diluted 27,660 27,370 27,340
- --------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
12
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS)
AS OF DECEMBER 31, 1999 & 1998
<TABLE>
<CAPTION>
1999 1998
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents$ $ 22,085 $ 19,900
Accounts receivable, less allowance for doubtful accounts -
1999, $2,537; 1998, $3,189 87,394 83,739
Inventories 82,713 84,735
Current assets of discontinued emissions testing business - 848
Deferred income taxes 6,966 7,989
Other current assets 4,992 5,752
--------------------------------------------------------------------------------------------------
Total Current Assets 204,150 202,963
--------------------------------------------------------------------------------------------------
Property, Plant and Equipment, net 49,253 61,582
Excess of Cost Over Net Assets of Businesses Acquired 134,723 131,939
Assets of Discontinued Emissions Testing Business - 24,950
Deferred Income Taxes 30,281 16,186
Other Assets 33,023 27,965
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $451,430 $ 465,585
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of long-term obligations $ 2,181 $ 11,556
Accounts payable 41,139 25,501
Accrued expenses (including accrued wages and commissions -
1999, $10,951; 1998, $14,108) 27,943 29,998
Income taxes payable 2,464 837
Deferred income taxes 2,361 1,606
---------------------------------------------------------------------------------------------------
Total Current Liabilities 76,088 69,498
---------------------------------------------------------------------------------------------------
Long-Term Debt 120,905 128,677
Deferred Income Taxes 3,455 429
Other Liabilities 10,070 16,900
--------------------------------------------------------------------------------------------------
Total Liabilities 210,518 215,504
- -------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 5) - -
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, par value $1.00; authorized - 50,000 shares; issued -
1999, 30,010; 1998, 29,759; outstanding - 1999, 27,882; 1998, 27,473 30,010 29,759
Paid-in capital 181,335 180,604
Retained earnings 57,014 59,869
Accumulated other comprehensive loss (10,685) (2,255)
Less: Treasury stock - common shares, at cost,
1999, 2,128; 1998, 2,286 shares (14,978) (15,985)
Unearned compensation (1,784) (1,911)
--------------------------------------------------------------------------------------------------
Total Stockholders' Equity 240,912 250,081
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $451,430 $465,585
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
13
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 & 1997 1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Income (loss) from continuing operations $ (5,218) $ (5,512) $ 23,981
Extraordinary item - extinguishment of debt -- -- (632)
---------------------------------------
(5,218) (5,512) 23,349
Adjustments to reconcile income (loss) to operating cash flow:
Depreciation 14,914 15,615 12,808
Amortization of goodwill 7,020 6,295 3,404
Amortization of capitalized software 2,776 2,038 2,950
Other amortization 220 685 571
Deferred income taxes 172 (10,315) (8,157)
Non-cash loss on write-off of capital assets 3,983 17,010 6,337
Gain on sale of investments (3,378) (16,486)
Changes in operating assets and liabilities:
Receivables (10,350) 24,496 (14,309)
Inventories (1,370) 9,928 (23,954)
Accounts payable and accrued expenses 7,344 (26,902) 16,627
Income taxes payable (10,717) (19,287) (1,712)
Other, net (520) 169 1,814
- --------------------------------------------------------------------------------------------------------
Cash provided (used) by operating activities 4,876 (2,266) 18,032
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in telecommunications subsidiaries (9,042) (42,103) (46,135)
Capital expenditures (9,491) (18,094) (22,247)
Capitalized software product costs (1,927) (3,942) (5,307)
Sales of investments 9,686 16,833 1,709
Sale of discontinued emissions testing business 9,387 -- --
Sales and retirements of fixed assets 504 334 845
- --------------------------------------------------------------------------------------------------------
Cash used by investing activities (883) (46,972) (71,135)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) long-term borrowings (3,214) 36,676 65,381
Repayment of long-term notes -- -- (15,000)
Exercise of stock options 1,059 342 1,428
Treasury stock sold to employee benefit plans 871 1,531 1,651
- --------------------------------------------------------------------------------------------------------
Cash provided (used) by financing activities (1,284) 38,549 53,460
- --------------------------------------------------------------------------------------------------------
Net cash provided (used) by discontinued operations 1,810 (2,081) 7,808
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) 4,519 (12,770) 8,165
Effect of exchange rate changes on cash (2,334) 1,895 (1,269)
Cash and cash equivalents at beginning of year 19,900 30,775 23,879
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 22,085 $ 19,900 $ 30,775
- --------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
14
<PAGE> 17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPREHENSIVE ACCUMULATED
FOR THE YEARS ENDED COMMON PAID-IN INCOME RETAINED COMPREHENSIVE TREASURY UNEARNED
DECEMBER 31, 1999, 1998 & 1997: TOTAL STOCK CAPITAL (LOSS) EARNINGS INCOME (LOSS) STOCK COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $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)
Comprehensive loss:
Net loss (2,855) -- -- $ (2,855) (2,855) -- -- --
----------
Other comprehensive loss:
Minimum pension liability adjustment 240 -- -- 240 -- -- -- --
Foreign currency translation adjustments (8,670) -- -- (8,670) -- -- -- --
---------
Other comprehensive loss -- -- -- (8,430) -- (8,430) -- --
---------
Comprehensive loss -- -- -- $ (11,285) -- -- -- --
=========
Exercise of stock options 1,059 219 765 -- -- 75 --
Stock option tax benefits 414 -- 414 -- -- -- --
Treasury stock reissued, 131,285 common shares 871 -- (61 -- -- 932 --
Restricted stock, net (619) 32 (387) -- -- -- (264)
Amortization of unearned compensation 391 -- -- -- -- -- 391
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $240,912 $30,010 $181,335 $57,014 $(10,685) $(14,978) $(1,784)
===================================================================================================================================
</TABLE>
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies followed by the Company that materially affect the
determination of financial position and results of operations are described
below.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
BASIS OF CONSOLIDATION: The Company's consolidated financial statements include
the accounts of all wholly owned and majority owned subsidiaries. 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, 1999 and 1998 (amounts in
thousands):
1999 1998
Raw material $ 43,608 $ 45,936
Work-in-process 19,343 19,634
Finished goods 19,762 19,165
- -----------------------------------------------------------
$ 82,713 $ 84,735
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, 1999 and 1998 (amounts in thousands):
1999 1998
Land and improvements $ 2,729 $ 2,806
Buildings 25,684 27,447
Machinery and equipment 76,821 83,701
Leasehold improvements 6,148 6,921
- -----------------------------------------------------------
111,382 120,875
Less accumulated depreciation
and amortization (62,129) (59,293)
- -----------------------------------------------------------
$ 49,253 $ 61,582
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 1999, 1998 and 1997, approximately $1,927,000,
$3,658,000, and $5,307,000, respectively, of these costs were capitalized and
approximately $2,776,000, $1,630,000, and $2,950,000, respectively, were
amortized (excluding impairment writedowns of $5,359,000 in 1998 and $5,955,000
in 1997).
16
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
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 $24,896,000 and $18,057,000 as of
December 31, 1999 and 1998, 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 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 $26,317,000,
$28,812,000, and $26,137,000 in 1999, 1998, and 1997, respectively. In addition,
the Company incurred other engineering expenses relating to product development
(that do not meet the accounting definition of "Research and Development") in
the amount of $1,629,000, $1,930,000, and $4,230,000, in 1999, 1998, and 1997,
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 presents
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
on future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end.
EARNINGS PER COMMON SHARE: Basic earnings per share are based on the weighted
average number of common shares outstanding during the period. Diluted earnings
per common share are based on the weighted average number of common shares
outstanding during the period plus, if dilutive, the incremental number of
common shares issuable on a pro forma basis upon the exercise of employee stock
options, assuming the proceeds are used to repurchase outstanding shares at the
average market price during the year. A reconciliation of the Basic and Diluted
shares are provided below (in thousands):
1999 1998 1997
Weighted average common
shares outstanding - Basic 27,480 27,220 26,920
Additional common shares
issuable for stock options 180 150 420
- --------------------------------------------------------------------------------
Common shares - Diluted 27,660 27,370 27,340
DERIVATIVES FINANCIAL INSTRUMENTS: The Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," in June 1998, which will now
be effective for financial statements for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Accordingly, the Company will adopt the
provisions of the standard on January 1, 2001. The Company utilizes hedging
activities primarily in its foreign subsidiaries to limit foreign currency
exchange rate risk on receivables. The Company has not yet determined the
effect, if any, of the adoption of this Statement on results of operations and
financial position.
NOTE 2: FINANCING
Long-term obligations consisted of the following (amounts in thousands):
1999 1998
Credit agreement borrowings $ 46,235 $ 39,282
Floating rate industrial revenue
bonds due 2012 - 2025 11,900 15,500
Senior notes payable due 2001 - 2007 65,000 65,000
Capital lease obligation -- 12,659
Other 350 706
Unamortized debt expense (1,070) (1,400)
- --------------------------------------------------------------------------------
122,415 131,747
Less current maturities (1,510) (3,070)
- --------------------------------------------------------------------------------
$ 120,905 $ 128,677
17
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
The Company has a domestic revolving credit agreement in the aggregate amount of
$100,000,000 expiring December 31, 2001. Of the total $100,000,000 commitment at
December 31, 1999, $19,300,000 has been utilized for the issuance of letters of
credit relating principally to the Company's industrial revenue bonds and a
deferred payment relating to the Company's acquisition of Mikom G.m.b.H.,
together with most of the shares of two related European entities. The
outstanding borrowings under this domestic revolving credit agreement totalled
$41,500,000 at December 31, 1999. The balance of funds available under the
revolving credit agreement may be utilized for borrowings or other letters of
credit; however, a maximum of $50,000,000 may be allocated to such letters of
credit. At December 31, 1999, $39,200,000 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 in
the range of .2% to .4% per annum on the total amount of the commitment. During
1999, the average interest rate for all domestic credit agreement borrowings was
7.5%.
The Company also has short-term credit lines utilized by its European
subsidiaries. At year-end, direct borrowings under these agreements totalled
$671,000; an additional $39,500,000 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 totalling
$1,192,000 (due 2000 - 2008), and variable rate borrowings with various
international banks of $3,799,000 (due 2000 - 2005).
Further, two of the aforementioned arrangements are mortgage notes, under which
the Company has pledged the respective land and buildings as collateral. These
facilities had an aggregate net book value of $8,551,000 at year-end 1999.
During 1999, the average interest rate for all foreign credit arrangements
approximated 5.3%. 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 5.6% at December 31, 1999. The average interest rate for all
industrial revenue borrowings approximated 3.3% during 1999.
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%. The notes are collateralized and rank
equally with the Company's other secured indebtedness. A portion of the proceeds
was used to prepay a $15,000,000 note payable. As a result of such prepayment,
the differences between the call premium and costs of reacquisition and net
carrying amount of the debt in the pretax amount of $996,000, or $.02 per basic
and diluted share after related income tax benefit, has been reported as an
"Extraordinary item" in the Consolidated Statement of Operations.
The aggregate maturities of long-term obligations for the years 2000 through
2004 are as follows (amounts in thousands):
2000 2001 2002 2003 2004
---------------------------------------
$1,510 $45,388 $11,502 $11,369 $8,206
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):
1999 1998
Capitalized computer software and database files $ 7,365 $ 8,894
Insurance deposits 7,765 5,850
Other 17,893 13,221
- ----------------------------------------------------------------------
$33,023 $27,965
Other liabilities consisted of the following (amounts in thousands):
1999 1998
Minority interests $ 563 $ 6,297
Long-term pension and postretirement benefits 5,973 6,212
Other 3,534 4,391
- ----------------------------------------------------------------------
$10,070 $16,900
18
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
The components of Other income, net pertains principally to gains and losses
from telecommunication investments and is comprised of the following (amounts in
thousands):
1999 1998 1997
RF Micro Devices Inc. $ (165) $ 14,400 $ 300
NextWave Telecom Inc. 3,500 (6,638) --
Other 35 (1,697) 1,585
- ---------------------------------------------------------------------
$ 3,370 $ 6,065 $ 1,885
In 1998, the Company sold its investment in RF Micro Devices. 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, and
included in Stockholders Equity as "Accumulated other comprehensive income
(loss)". Also, in 1998, the Company recognized an impairment in the entire
carrying value of its investment in and receivable from NextWave Inc. (a C-Block
wireless communications carrier) as certain subsidiaries of NextWave filed for
relief under Chapter 11 of the United States Bankruptcy Code. In 1999, the
Company sold its investment in NextWave and recognized the above noted gain.
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.
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, 500,000 shares of Series C Junior Participating
Preferred Stock are authorized for issuance under the Company's Stockholder
Rights Plan. The Company can fix the powers, designations, preferences and
rights of each of the preferred stock series. The Company has two active stock
option 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
shares 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 1999, 1998 and 1997.
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. 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 under the 1994 Stock Plan. Formula
awards and discretionary awards granted under the 1994 Stock 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.
In addition to the foregoing, certain Non-Employee Directors may receive
non-qualified discretionary awards of options to purchase shares of common stock
which are not pursuant to the 1994 Stock Plan. The options which are not
pursuant to the 1994 Stock Plan are awarded at a price not less than the fair
market value on the date the option is granted, have a ten-year term and either
vest ~33 1/3% on each of the first, second and third anniversaries of the grant
or vest in the same manner as the 1992 and 1994 Stock Plans, depending upon the
grant. Additionally, the non-qualified awards are subject to certain accelerated
vesting upon cessation of service.
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
The following table summarizes the status of outstanding options as of December
31, 1999:
STOCK OPTIONS OUTSTANDING
------------------------------------
WEIGHTED AVERAGE STOCK OPTIONS EXERCISABLE
---------------- -------------------------
RANGE OF CONTRACTUAL EXERCISE WEIGHTED AVERAGE
EXERCISE PRICES SHARES LIFE PRICE SHARES EXERCISE PRICE
$ 4.79 - $10.77 1,155,555 7.83 years $ 7.37 185,555 $ 6.58
$11.27 - $19.97 1,025,448 6.53 years $15.91 547,773 $15.59
$20.00 - $28.00 442,761 6.17 years $21.55 362,553 $21.59
- ---------------------------------------------------- --------- ------
$ 4.79 - $28.00 2,623,764 7.04 years $13.10 1,095,881 $16.05
Stock option activity for the three years ended December 31, 1999 is summarized
as follows:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
--------------------------
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
Granted (weighted average
fair value $4.63) 1,032,500
$ 7.58
Exercised (246,246) $ 4.30
Terminated and cancelled (280,589) $14.51
- --------------------------------------------------------------------------
Balance, December 31, 1999 2,623,764 $13.10
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 56%, 51% and
47%, risk free interest rates of 5.49%, 5.31% and 6.38%, and expected lives of
7.1 years, 6.3 years and 6.2 years for 1999, 1998 and 1997, respectively. The
calculations assume no future dividend payments for grants in 1999, 1998 and
1997.
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, 1999 is
summarized as follows:
SHARES
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
Granted (weighted average fair value $8.00) 50,000
Vested (2,517)
Terminated and cancelled (18,434)
- --------------------------------------------------------------------------------
Balance, December 31, 1999 234,299
Unearned compensation with respect to restricted shares, representing the fair
value of the restricted shares at the date of award, is charged to income over a
ten-year period or the period of actual vesting whichever is shorter.
Compensation expense with respect to restricted shares, net of forfeitures,
amounted to $193,000 in 1999, $26,000 in 1998, and $424,000 in 1997.
At December 31, 1999 and 1998, 3,773,797 and 3,823,344 common shares,
respectively, were reserved for outstanding stock options and for future grants
of stock options and restricted shares under all Stock Plans. 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 No. 123, net income and earnings per common share would
have been reduced to the pro forma amounts below (amounts in thousands, except
per share data):
1999 1998 1997
Net income (loss):
As reported ($2,855) ($10,222) $23,349
Pro forma ($5,035) ($12,042) $21,562
Earnings (loss) per common share:
Basic:
As reported ($.10) ($.38) $.87
Pro forma ($.18) ($.44) $.80
Diluted:
As reported ($.10) ($.38) $.86
Pro forma ($.18) ($.44) $.80
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
NOTE 5: COMMITMENTS AND CONTINGENCIES
The Company's leases consist primarily of facilities and equipment and expire
principally between 2000 and 2004. 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
approximated $4,400,000 in 1999, $3,900,000 in 1998 and $4,600,000 in 1997.
Future minimum payments under noncancelable operating leases as of December 31,
1999 were as follows (amounts in thousands):
2000 2001 2002 2003 2004 Total
---------------------------------------------------------
$3,051 $3,046 $2,818 $2,655 $1,365 $12,935
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 $1,045,000.
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, certain subsidiaries of NextWave filed for
relief under Chapter 11 of the United States Bankruptcy Code and in 1999 the
Company sold its equity investment in NextWave; accordingly, this commitment is,
at this time, unlikely to be fulfilled.
In the normal course of business the Company is subject to legal proceedings,
lawsuits and other claims involving such matters as product liability, casualty
claims and employment practices. In the opinion of management, after review and
consultation with counsel, the Company is not presently party to any such
litigation that would have a material adverse effect on its business,
consolidated financial position, results of operations or cash flow.
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices, and
procedures are properly designed to reasonably prevent risk of environmental
damage and financial liability to the Company.
The Company has identified potential environmental damage at one formerly
occupied manufacturing facility. In this regard, the Company engaged a
contractor to evaluate the site and determine the cost, if any, to resolve
environmental damage at this site. While the ultimate cost cannot yet be
specifically determined, the Company currently believes the
costs of remediation will not exceed $200,000. The Company also believes it is
reasonably possible that environmental related liabilities may exist with
respect to one industrial site formerly occupied by the Company. Based upon
environmental site assessments, the Company believes that the cost of any
potential remediation, for which the Company may ultimately be responsible, will
not have a material adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.
NOTE 6: PENSION AND POSTRETIREMENT 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 for hourly employees it typically provides benefits
based on specified amounts for each year of service. In 1999, the Company merged
its Corporate and Hourly pension plans. 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):
1999 1998 1997
Service cost benefits
earned during the year $ 1,413 $ 1,549 $ 1,204
Interest cost on the
projected benefit obligation 2,404 2,261 2,244
Actual income on plan assets (5,970) (1,779) (5,602)
Net settlement gain 13 (29) --
Net amortization and deferral 3,395 (880) 3,576
- -------------------------------------------------------------------------------
Net periodic pension cost $ 1,255 $ 1,122 $ 1,422
Plan assets consist principally of equity securities (including 92,000 common
shares of the Company).
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
A reconciliation of the plans' projected benefit obligation, fair value of plan
assets, and funding status is as follows (amounts in thousands):
1999 1998
Projected benefit obligation:
Balance, beginning of year $ 35,348 $ 31,341
Service cost 1,413 1,549
Interest cost 2,404 2,261
Benefits paid (2,241) (2,076)
(Gain)/Loss recognized (4,215) 2,856
Settlements and other 1,170 (583)
- -------------------------------------------------------------------------------
$ 33,879 $ 35,348
Fair value of plan assets:
Balance, beginning of year $ 28,312 $ 28,086
Return on assets 5,970 1,779
Employer contributions 485 523
Benefits paid and plan expenses (2,241) (2,076)
- -------------------------------------------------------------------------------
$ 32,526 $ 28,312
Funding Status:
Projected benefit obligation $(33,879) $(35,348)
Fair value of plan assets 32,526 28,312
- -------------------------------------------------------------------------------
Unfunded obligation (1,353) (7,036)
Unrecognized:
Net (gain)/loss (4,842) 2,190
Prior service cost 1,942 1,739
Transition assets (76) (135)
Additional minimum liability -- (694)
- -------------------------------------------------------------------------------
Accrued liability $ (4,329) $ (3,936)
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):
1999 1998
Accumulated benefit obligation $4,282 $7,502
Related fair value of plan assets - 2,767
The weighted average rates used in determining pension cost for the plans are:
1999 1998
Discount rate 7 3/4% 6 3/4%
Expected rate of increase in compensation 5% 5%
Expected long-term rate of return on plan assets 9 3/4% 9 3/4%
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):
1999 1998 1997
Service cost benefits
attributed to service during period $ 3 $ 4 $ 6
Interest cost on accumulated
postretirement benefit obligation 101 105 110
Amortization of (gain) loss (1) 2 (3)
- --------------------------------------------------------------------------------
Net postretirement health care cost $ 103 $ 111 $ 113
The components of the accumulated postretirement benefit obligations (all of
which are unfunded) are as follows (amounts in thousands):
1999 1998 1997
Retirees $1,409 $1,403 $1,319
Fully eligible active
plan participants 125 69 96
Other active plan
participants -- 72 87
Unrecognized net gain 110 60 74
- --------------------------------------------------------------------------------
Accumulated postretirement
benefit obligations $1,644 $1,604 $1,576
A reconciliation of the accumulated postretirement benefit obligation is as
follows (amounts in thousands):
1999 1998
Balance as of January 1 $ 1,604 $ 1,576
Net postretirement benefit cost:
Service cost 3 4
Interest Cost 101 105
Amortization of gains/(losses) (1) 2
Actual benefits paid (63) (83)
- --------------------------------------------------------------------------------
Balance as of December 31 $ 1,644 $ 1,604
The actuarial calculation assumed a health care cost trend rate of 8.4% for 1999
(9.2% in 1998 and 9.6% 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 2009 to 5.0% and remains constant beyond that point. Assumed health
care cost trend rates have an 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):
Plus 1% Point Minus 1% Point
Effect on total of service and
interest cost components $ 4 $ (4)
Effect of postretirement benefit obligation $ 47 $ (42)
The weighted average discount rate used in determining the accumulated
postretirement benefit obligations was 7.75% in 1999, 6.75% in 1998 and 7.25% in
1997.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
NOTE 7: INCOME TAXES
Information with respect to income taxes in continuing operations is as follows
(amounts in thousands):
1999 1998 1997
Income (loss) before taxes
and minority interests:
Domestic $(21,804) $(22,892) $ 5,351
Foreign 16,392 14,338 41,362
- --------------------------------------------------------------------------------
$ (5,412) $ (8,554) $ 46,713
(Benefit) Provision for
income taxes:
Current:
Federal $(11,779) $ (6,206) $ 2,247
Foreign 9,363 10,661 22,867
State and local 400 550 766
- --------------------------------------------------------------------------------
(2,016) 5,005 25,880
- --------------------------------------------------------------------------------
Deferred:
Federal (946) (5,472) (5,275)
Foreign 1,740 (4,571) (542)
State and local (622) (272) (2,340)
- --------------------------------------------------------------------------------
172 (10,315) (8,157)
- --------------------------------------------------------------------------------
$ (1,844) $ (5,310) $ 17,723
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):
1999 1998 1997
(Benefit) provision computed at
the U.S. Federal statutory rate $ (1,894) $ (2,994) $ 16,350
State and local income taxes,
net of Federal income tax effect 246 311 (1,023)
Net higher tax rates on foreign income 1,229 406 7,016
Benefit of foreign sales corporation
and other tax credits (1,025) (1,513) (2,115)
Impact of tax rate change on prior
undistributed foreign earnings (998) (3,670) --
Other, net 598 2,150 (2,505)
- --------------------------------------------------------------------------------
$ (1,844) $ (5,310) $ 17,723
The following table summarizes the Company's total provision (benefit) for
income taxes (amounts in thousands):
1999 1998 1997
Continuing operations $ (1,844) $ (5,310) $ 17,723
Discontinued operations 1,403 (2,640) --
Extraordinary item -- -- (364)
Tax benefit of carryforward
allocated to goodwill -- -- 6,085
Allocated to equity:
Unrealized appreciation
on investment securities -- -- 4,027
Stock options (415) (139) (653)
Pension gain (loss) 148 (148) 149
- --------------------------------------------------------------------------------
$ (708) $ (8,237) $ 26,967
The components of deferred tax assets (liabilities) are comprised of the
following as of December 31, 1999 and 1998 (amounts in thousands):
1999 1998
Gross deferred tax assets:
Inventory $ 7,108 $ 5,718
Bad debt reserves 802 3,506
Pensions and deferred
compensation 1,910 1,605
Tax credit carryforwards 3,280 2,546
Plant consolidation reserve 2,330 4,405
Net operating loss carryforwards 20,268 11,512
Unremitted foreign earnings 6,268 4,747
Other 941 1,724
- --------------------------------------------------------------------------------
42,907 35,763
Gross deferred tax liabilities:
Intangible assets (1,543) (1,808)
Depreciation (320) (1,370)
Deferred start-up costs -- (1,850)
Other (9,613) (8,595)
- --------------------------------------------------------------------------------
(11,476) (13,623)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 31,431 $ 22,140
During 1999, 1998, and 1997, general business tax credits of approximately
$600,000, $835,000 and $900,000 generated in the respective years were used to
reduce the provision for income taxes. At December 31, 1999, 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 $55,000,000 at December 31, 1999. 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 U.S. net operating loss carryforwards totalling approximately
$58,000,000 available to reduce future taxable income. Of such carryforwards,
$4,800,000 expires in 2011 and $53,200,000 in 2018 through 2019. At December 31,
1999, the Company has recorded a net U.S. deferred tax asset pertaining to the
recognition of the benefit on the aforementioned operating loss carryforwards,
net deductible temporary differences and tax credits in the amount of
approximately $31,200,000 and has not provided any valuation allowance with
respect thereto. The Company believes the realization of this asset is "more
likely than not."
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
NOTE 8: INDUSTRY SEGMENT AND GEOGRAPHIC DATA
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 Antennas.
The following shows the operating results and asset positions for each of the
reportable segments for the years ended December 31, 1999, 1998, and 1997
(amounts in thousands).
1999 1998 1997
Results of Operations:
Segment Results:
Telecommunications
equipment manufacturing $ 11,098 $ 12,256 $ 60,812
Wireless engineering services 1,034 (7,867) (2,573)
- --------------------------------------------------------------------------------
12,132 4,389 58,239
Other income, net 3,370 6,065 1,885
Goodwill amortization (7,020) (6,295) (3,404)
General corporate expenses (5,748) (5,908) (6,956)
Interest expense, net (8,146) (6,805) (3,051)
- --------------------------------------------------------------------------------
Income (loss) before taxes
and minority interests $ (5,412) $ (8,554) $ 46,713
Assets:
Segment Assets:
Telecommunications
equipment manufacturing $ 248,148 $ 244,487 $ 271,046
Wireless engineering services 14,579 16,527 20,918
- --------------------------------------------------------------------------------
262,727 261,014 291,964
Goodwill 134,723 131,939 126,923
Assets of discontinued
emissions testing business -- 25,799 33,363
Deferred income taxes 37,247 24,175 7,244
Other general corporate assets 16,733 22,658 54,939
- --------------------------------------------------------------------------------
Total assets $ 451,430 $ 465,585 $ 514,433
Sales to external customers:
Telecommunications equipment
manufacturing $ 311,137 $ 360,589 $ 396,828
Wireless engineering services 22,560 27,415 35,680
- --------------------------------------------------------------------------------
Total sales $ 333,697 $ 388,004 $ 432,508
Depreciation and
software amortization:
Telecommunications
equipment manufacturing $ 14,296 $ 13,990 $ 12,072
Wireless engineering services 3,264 3,510 3,532
Fixed asset and capitalized
software additions:
Telecommunications
equipment manufacturing $ 10,730 $ 18,361 $ 24,220
Wireless engineering services 643 3,635 3,296
The distribution of the Company's geographic sales and long-lived assets
(excluding deferred income tax) is as follows (amounts in thousands):
Sales: 1999 1998 1997
United States $ 177,256 $ 230,997 $ 272,346
Italy 110,701 113,401 117,607
Germany 55,055 50,905 48,622
Other 59,429 71,115 69,309
Intergeographic (68,744) (78,414) (75,376)
- --------------------------------------------------------------------------
$ 333,697 $ 388,004 $ 432,508
Long-lived assets: 1999 1998 1997
United States $ 190,950 $ 220,505 $ 249,071
Italy 12,650 13,347 12,484
Germany 8,181 7,487 7,014
Other 5,218 5,097 3,828
- --------------------------------------------------------------------------
$ 216,999 $ 246,436 $ 272,397
Sales by product line for the Telecommunications Equipment Manufacturing segment
are presented in the bar charts on page 28.
NOTE 9: ACQUISITIONS AND DISPOSITIONS
In 1999, the Company acquired the remaining outstanding 26% minority interest in
its Mikom G.m.b.H. ("Mikom") subsidiary, together with most of the shares in two
related European entities. Total consideration was approximately $17,556,000,
including $9,290,000 paid in cash in 1999 and $8,266,000 payable, in cash, in
the future (included in Accounts Payable).
In 1998, the Company acquired additional minority interests in several
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. In October 1998, the Company acquired an
additional 12% interest in Mikom, bringing its total interest 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 FOR.E.M.
S.r.l. ("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. The final cash payment in the amount of approximately $26,400,000 was 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
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
method of accounting. The remaining 28% ownership interests of Telia, which are
held by senior Telia management, is subject to put and call options, which
provide for a purchase price based upon future operating results.
On March 1, 1999, the Company sold its MARTA Technologies, Inc. ("Marta")
subsidiary, which operated its discontinued centralized automotive emissions
testing business, to a subsidiary of Environmental Systems Products, Inc. (ESP).
Pursuant to the terms of the agreement, the Company received cash of $9,387,000
and a three year, $3,000,000, 12% installment note in exchange for the
outstanding capital stock of Marta. Previously contingent purchase price in the
amount of $2,000,000 was earned, when, in February 2000, ESP was awarded an
emissions testing contract. The additional purchase price consideration is in
the form of a 12% installment note. Accordingly, the Company expects, in the
first quarter of 2000, to report additional gain from disposal of discontinued
operations, as finally determined, net of related income taxes. The gain on sale
of this discontinued operation, in the amount of $2,363,000 is net of related
income taxes in the amount of $1,403,000. In 1998, the Company recognized an
additional loss for this business in the pretax amount of $7,350,000, $4,710,000
after related income tax benefit of $2,640,000, relating principally to the
diminution in the estimated value of an emissions testing program.
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 including certain 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, 1999 and December
31, 1998 reflect the corresponding fair value.
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, insurance policies and payment obligations. The
letters of credit reflect fair value as a condition of their underlying purpose
and are subject to fees competitively determined. The Company enters into
foreign currency contracts to offset the impact of currency rate changes related
to accounts receivable and certain payment obligations. The fair value of such
contracts are based on quoted market prices of comparable contracts. The
carrying amounts and fair values of financial instruments at December 31, 1999
and 1998 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
Carrying Amount Fair Value
-----------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 22,085 $ 19,900 $ 22,085 $ 19,900
Non-current investments 4,334 5,195 4,334 5,195
Long-term debt 124,156 141,633 124,156 145,175
Off balance sheet financial instruments:
Letters of credit 6,933 1,220 6,933 1,220
Foreign currency net sales contracts 14,746 5,523 14,204 5,519
</TABLE>
NOTE 11: SUPPLEMENTAL CASH FLOW DISCLOSURE
The following non-cash items were effected and are not reflected in the
Consolidated Statement of Cash Flows:
As described in Note 9, the Company sold Marta assets of $22,958,000 and,
further, the purchaser assumed a $12,436,000 capital lease obligation.
In 1999, the Company purchased the remaining outstanding interest in Mikom and
two affiliated European companies. This acquisition resulted in additional
Goodwill of $9,608,000. This acquisition also increased Accounts Payables by
$8,266,000 and eliminated minority interest liability of $6,500,000.
There were no significant non-cash transactions in 1998.
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.
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)."
Information with respect to cash paid during the year for interest and taxes is
as follows:
1999 1998 1997
Interest paid $ 9,240,000 $ 8,020,000 $ 4,097,000
Interest capitalized -- 286,000 220,000
Income taxes paid, net 8,605,000 24,096,000 27,514,000
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLEN TELECOM INC.
NOTE 12: SPECIAL CHARGES
In 1999, 1998 and 1997, the Company incurred special charges pertaining to the
discontinuation of certain product lines, the closing and consolidation of
manufacturing facilities and other items. Such costs are included in the
Consolidated Statement of Operations as follows (amounts in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cost of sales $ 6,109 $12,539 $ 3,957
Selling, general and administrative expenses 5,877 6,886 5,693
Research and development and product engineering costs 325 -- --
- ------------------------------------------------------------------------------------
$12,311 $19,425 $ 9,650
</TABLE>
In 1999, such costs included provisions for the closure of a manufacturing
facility, the termination of substantially all employees (principally direct
labor) and for a loss on the sale of the facility and disposal of equipment. The
following is a summary of the exit costs incurred (amounts in thousands, except
employee data):
Severance
---------------------
Sale of
Number of Building
Accrual Employees And Equipment Other
Accrual $1,531 115 $3,764 $1,110
Charged against accrual (157) (22) (1,493) (593)
- --------------------------------------------------------------------------------
Balance,
December 31, 1999 $1,374 93 $2,271 $ 517
The Company's plans call for the complete discontinuance of operations for the
facility in early 2000.
NOTE 13: 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>
1999
Sales $ 75,913 $ 77,501 $ 89,536 $ 90,747
Gross profit 22,230 23,357 25,848 17,714
Income (loss) from continuing operations (1,436) 17 2,632 (6,431)
Gain from discontinued operations 2,363 -- -- --
Net income (loss) 927 17 2,632 (6,431)
- ----------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share
Basic and Diluted:
Continuing operations $ (.05) -- $ .10 $ (.23)
Discontinued operations .08 -- -- --
Net income .03 -- .10 (.23)
- ----------------------------------------------------------------------------------------------------------------
<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 (loss) .23 (.41) (.07) (.12)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Income (loss) from continuing operations in the third quarter of 1999 includes
net gains in the amount of $3,013,000 ($.07 per basic and diluted share)
pertaining principally to a gain on the sale of a telecommunications investment.
Net income for the three months ended December 31, 1999 includes a $998,000
deferred tax benefit, or $.04 per basic and diluted share, with respect to a
change in the applicable income tax rate on the undistributed earnings (prior to
1999) of a foreign subsidiary.
In the fourth quarter of 1999, the Company recorded a $12,311,000 before-tax
special charge to earnings, or $.29 per basic and diluted share after related
income taxes. (See Note 12 for additional information.)
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, $.17 per basic and diluted share after
related income taxes, from the sale of investments in telecommunication
companies and the recognition of losses in other telecommunication ventures.
Similar to that mentioned above, 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.
26
<PAGE> 29
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Allen Telecom Inc.
We have audited the accompanying consolidated balance sheet of Allen TeIecom
Inc. and its subsidiaries (the "Company") as of December 31,1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. 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 audit. The financial statements of Allen
Telecom Inc. and its subsidiaries as of December 31, 1998 and for the years
ended December 31, 1998 and 1997 were audited by other auditors whose report,
dated February 16, 1999 (except as to paragraph five of Note 9, which is as of
March 1, 1999), expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the financial position of Allen Telecom Inc.
and its subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cleveland, Ohio
February 16, 2000
REPORT OF MANAGEMENT
To the Board of Directors and
Stockholders of Allen Telecom Inc.
The Company maintains accounting and related internal control systems which are
intended to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records necessary for the preparation of
financial information. There are limits inherent in all systems of internal
control, and the cost of the systems should not exceed the expected benefits.
Through the use of a program of internal audits and discussions with and
recommendations from its independent accountants, the Company periodically
reviews these systems and controls and compliance therewith.
The Audit Committee of the Board of Directors, comprised entirely of
non-employee directors, meets regularly with management, the internal auditors
and the independent accountants to review the results of their work and to
satisfy itself that their responsibilities are being properly discharged. The
internal auditors and independent accountants have full and free access to the
Audit Committee and may have discussions regarding appropriate matters with and
without the presence of management.
The primary responsibility for the integrity of financial information rests with
management. Certain valuations contained herein result, of necessity, from
estimates and judgments of management. Actual results could differ from these
estimates. The accompanying consolidated financial statements, notes thereto and
other related information were prepared in conformity with generally accepted
accounting principles.
/s/ Robert G. Paul
Robert G. Paul
President and Chief Executive Officer
/s/ Robert A. Youdelman
Robert A. Youdelman
Executive Vice President and Chief Financial Officer
/s/ James L. LePorte
James L. LePorte, III
Vice President - Finance
27
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC.
<TABLE>
<CAPTION>
Results of Operations
OVERVIEW
($ millions) 1999 1998 1997
<S> <C> <C> <C>
Sales $ 333.7 $ 388.0 $ 432.5
Operating income (before financing costs,
special charges and credits discussed below) 12.0 11.6 57.1
Income (loss) before taxes and minority interests (5.4) (8.5) 46.7
</TABLE>
In 1999, sales declined by $54.3 million, or 14%, due primarily to decreases in
the sales of Site Management and Antenna products. Continued weakness in Asia
and some parts of South America contributed to the weakness in sales. In
addition, while the U.S. economy remained robust throughout 1999, the domestic
wireless market saw only limited capital expenditures by wireless carriers to
expand capacity, enhance quality, and increase coverage. These limited capital
expenditures contributed to soft domestic sales for the Company. The Company has
been encouraged by the quarter to quarter increases in sales throughout 1999.
Second half 1999 sales, at $180.3 million, were $26.9 million or 18% greater
than first half 1999. The Company's backlog of orders increased from $52.8
million at year-end 1998 to $84.9 million at year-end 1999. With the increase in
sales over the last six months, and the 61% improvement in year-over-year
backlog, the Company is optimistic of continued sales improvement in the year
2000.
The 10% decrease in sales in 1998 to $388.0 million from 1997 was due primarily
to the unsettled climate for the global wireless telecommunications market.
During 1998, economic dislocations in Asia were followed by economic disruption
in South America, notably Brazil. In addition, European original equipment
manufacturers ("OEMs") had excess inventory at a time when worldwide demand had
decreased. The development of wireless networks in the U.S. had also slowed,
affecting domestic sales.
In 1999, international sales constituted approximately 59% of total sales,
compared with 58% in 1998, and 60% in 1997. 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), increased from $11.6 million in 1998, or 3.1%
of sales, to $12.0 million in 1999, or 3.6% of sales. Results were impacted
by higher gross profit margins and reduction of costs attributable to the
restructuring efforts in 1998. Operating income for 1998 decreased
$45.5 million, or 80%, from 1997. This decline was attributable to lower gross
profit margins and the impact of fixed costs on lower sales (sales were down
$44.5 million from 1997 to 1998).
As discussed below, in the fourth quarter of 1999, the Company announced the
restructuring of certain operations. As a result, the Company incurred a $12.3
million before-tax special charge to earnings, or $.29 per basic and diluted
share after related income taxes. These costs were offset, in part, by net gains
from the sales of telecommunications investments in the amount of $3.0 million,
or $.07 per basic and diluted share after related income taxes.
In 1998, the Company initiated a number of cost reduction efforts to improve and
adjust operations to market conditions. These actions included, among others,
the discontinuation of product development and marketing efforts on certain
products, the consolidation of two manufacturing operations of the Systems
product line, the formation of a worldwide Systems business, and the
reorganization of the Company's North American-based sales force and Wireless
Engineering Services business. As a result of these 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 costs were offset, in part, by net gains from the sale of
telecommunication investments as well as the recognition of loss reserves on
other investments in the amount of $6.0 million, or $.14 per basic and diluted
share after related income taxes.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS BY SEGMENT
TELECOMMUNICATIONS EQUIPMENT MANUFACTURING
($ millions) 1999 1998 1997
<S> <C> <C> <C>
Sales $ 311.1 $ 360.6 $ 396.8
Gross profit, % of sales 26.7% 25.0% 36.4%
Operating expenses, % of sales 14.1% 13.3% 13.5%
Research and development and
product engineering, % of sales 9.0% 8.3% 7.6%
Operating income $ 11.1 $ 12.3 $ 60.8
</TABLE>
Sales of telecommunications equipment declined 14% in 1999 from 1998 to $311.1
million. This sales decline was due essentially to the decrease in sales of the
Site Management and Antenna Product lines. Sales of foreign operations were
negatively impacted by the strong U.S. dollar in relation to the Euro. As a
result of exchange differences, reported sales in the year ended December 31,
1999 were $2.8 million lower than the corresponding prior year period, assuming
the exchange rates had remained the same. In 1998, reported sales were $6.7
million lower, as compared with 1997, due to similar exchange differences. Sales
decreased 9% in 1998 to $360.6 million from 1997, due essentially to weakness in
international sales, which decreased approximately $32 million, or 13%. The Site
Management and Systems product lines were primarily affected by this decrease.
Sales of Systems products, which generally are comprised of booster and repeater
products for cellular and Personal Communication Systems (PCS), test and
measurement products, as well as indoor coverage products, increased 1% in 1999
to $93.4 million, as compared with $92.6 million in 1998. Systems products
benefited in 1999 from large installation contracts in Switzerland, Italy,
Brazil, and the United States.
(PRODUCT LINE SALES IN MILLIONS OF DOLLARS)
SYSTEMS
PRODUCTS
95 .................... $95.1
96 .................... $94.1
97 .................... $111.0
98 .................... $92.6
99 .................... $93.4
SITE MANAGEMENT
AND OTHER
NON-ANTENNA
PRODUCTS
95 .................... $112.9
96 .................... $159.3
97 .................... $197.3
98 .................... $184.5
99 .................... $143.3
MOBILE AND
BASE STATION
ANTENNAS
95 ................... $73.8
96 ................... $80.6
97 ................... $88.5
98 ................... $83.5
99 ................... $74.4
WIRELESS
ENGINEERING
SERVICES
95 ................... $24.8
96 ................... $35.5
97 ................... $35.7
98 ................... $27.4
99 ................... $22.6
28
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC.
These contracts substantially offset the 45% decrease in sales of the
Extend-A-Cell(R) frequency translating repeater product in 1999. The 17%
decrease in sales in 1998 to $92.6 million, as compared with $111.0 million in
1997, is primarily attributable to lower sales of the Extend-A-Cell(R) frequency
translating repeater and microcell products.
Sales of Site Management and Other Non-antenna products, which include tower
mounted amplifiers, filters, combiners and duplexers, decreased 22% to $143.3
million from 1998 sales of $184.6 million. Sales were adversely affected by the
slowdown in OEM's production levels, particularly in the first half of 1999, a
drop in sales of site management products to one specific wireless carrier, as
well as lower tower mounted amplifier sales. The 6% decrease in 1998 to $184.6
million, compared with $197.3 million in 1997, was due to the slowdown in OEM
production levels due to the Asian crisis as well as the OEMs having a high
level of inventory at a time of decreasing worldwide demand.
The sales of Mobile and Base Station Antennas decreased 11% from $83.5 million
in 1998 to $74.4 million in 1999. This decrease is primarily associated with
lower sales of base station antennas, which were down 13% from 1998 levels, in
both international and domestic markets. The 6% decrease in 1998 sales to $83.5
million, compared with $88.5 million in 1997, occurred mainly in the domestic
market, as sales of base station antennas and land mobile antennas slowed
significantly in the fourth quarter of 1998.
At December 31, 1999, the Company had an order backlog for the
Telecommunications Equipment segment of $83.6 million, up from approximately
$51.9 million at December 31, 1998, but below the $112.5 million backlog at
December 31, 1997.
Gross profit margins improved slightly in 1999 as compared with 1998. Excluding
the aforementioned special charges for the plant closing and discontinuance of
product development efforts of $5.7 million in 1999 and $12.5 million in 1998,
1999 gross profit margins would have been flat with 1998 levels at 28.5%.
Savings from previous restructuring efforts, as well as lower costs from
in-country production in China, Mexico, and Brazil, offset continued pricing
pressure during 1999. In 2000, the Company expects to see an improvement in
margins due to savings from restructuring efforts and increased in-country
production in China, Mexico, and Brazil. The 8.4 percentage point decline in
profit margins from 1997 to 1998 was due primarily to pricing pressure, product
mix, higher inventory obsolescence and warranty provisions.
Operating expenses, which consist of selling, general and administrative
expenses, but exclude amortization of goodwill, decreased $4.0 million in 1999,
due primarily to the aforementioned restructuring efforts during 1998 which
reduced expenses. Special charges associated with these restructuring efforts
were $5.9 million in 1999 and $4.3 million in 1998. Excluding these special
charges the operating expenses would have been 12% of sales in both 1999 and
1998.
In the past few years, the Company has significantly increased its research and
development (R&D) and product engineering costs in order to keep pace with the
technological advances in the industry. While 1999 R&D spending was slightly
lower than 1998, spending was maintained at a level which will provide
sufficient resources to pursue opportunities considered essential for the
Company's future. The Company anticipates that this trend of increased R&D
spending will continue as PCS and cellular systems are implemented and expanded
to encompass third generation broad band technology, and the Company strives to
develop ancillary products, including emergency 911 geolocation systems and
software products for the wireless telephony industry.
WIRELESS ENGINEERING SERVICES
($ millions) 1999 1998 1997
Sales $22.6 $27.4 $35.7
Gross profit, % of sales 27.4% 16.6% 17.6%
Operating expenses, % of sales 22.8% 42.3% 24.6%
Operating income (loss) $1.0 ($7.9) ($2.6)
Wireless Engineering Services provides engineering and consulting services to
major wireless operators. In 1999, sales decreased 18% from $27.4 million in
1998 to $22.6 million in 1999. This decline was due to the discontinuance of
certain products and services, as well as a general slowdown in the pace of
development of wireless networks.
Gross profit increased from 16.6% of sales in 1998 to 27.4% in 1999, due to
improved deployment of engineers and better software margins. In addition,
efficiencies gained from the year-end 1998 restructuring contributed to this
improvement. Gross profit decreased from 17.6% of sales in 1997 to 16.6% in
1998, due to fixed engineering costs on lower sales and pricing pressures.
Operating expenses as a percentage of sales was 22.8% in 1999, 42.3% in 1998 and
24.6% in 1997. The decrease in 1999 was attributable to the restructuring
actions taken at the end of 1998 and the focus of management on its core
business of engineering and microwave coordination services. In 1998, the
Company incurred a one-time charge of $2.6 million due to a realignment of the
business. Additionally, the Company incurred costs of $.7 million in 1997
related to the discontinuation of a software product line. Excluding these
one-time charges, operating costs as a percentage of sales were 22.8% in 1999,
32.7% in 1998 and 22.6% in 1997. The spending increase in 1998 over 1997 was due
to fixed costs on substantially lower sales.
Backlog for the Wireless engineering services segment was $1.3 million in 1999,
$.9 million in 1998 and $2.5 million in 1997.
SPECIAL CHARGES
The Company announced on October 26, 1999, a restructuring of certain domestic
operations, including the consolidation of manufacturing operations for its Site
Management Products division with its facility in Italy. This will result in a
reduction in force and the sale of the Company's Site Management Products
domestic manufacturing plant which operated at a substantial loss for the last
two years. The Company will continue to maintain its U.S. Site Management
Products sales and customer service operations, as well as a research and
development facility to support its domestic OEM customer base. The Company
plans to sell its manufacturing plant within the next year and relocate
continuing employees in April 2000. In addition, the Company has discontinued
several product lines at its Site Management, Antenna and Systems divisions, and
has closed a sales and engineering office in Mexico City.
As a result of these actions, the Company has taken a before-tax charge of $12.3
million in the fourth quarter 1999. (See Note 12 for additional information.) In
addition, the Company expects to incur an incremental pretax charge of
approximately $1.0 to $1.5 million in the first quarter 2000 for certain
expenses that were not accruable at December 31, 1999. These charges include
termination costs of employees notified subsequent to December 31, 1999,
relocation costs, and other termination-related benefits.
Of the $12.3 million charge, $4.0 million relates to a non-cash write-off of
capital assets, $4.9 million to other non-cash losses, primarily on inventory,
and $3.4 million are cash related charges. Approximately $.7 million was
expended in the fourth quarter 1999, approximately
29
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC.
$.6 million is estimated to be spent in the first quarter 2000, an additional
$1.4 million later in the year 2000, and $.7 million in 2001.
The Company has estimated cost savings resulting from these restructuring
actions to be in the pretax range of $6.0 to $8.0 million on an annual basis.
These savings are expected to be realized beginning in the second quarter 2000,
coincident with the closedown of its domestic manufacturing facility. Of the
projected cost savings, approximately $4.4 million relate to cost of sales, $1.9
million to selling, general and administrative costs, and $.7 million to R&D
costs.
FINANCING COSTS
($ millions) 1999 1998 1997
Financing expenses:
Interest expense $(9.6) $(8.3) $(4.5)
Interest income 1.5 1.5 1.5
The increase in interest expense in 1999, as compared with 1998, is due to the
higher cost of borrowings as well as higher outstanding borrowings incurred in
connection with the acquisitions of minority interests in subsidiaries (See
Liquidity and Capital Resources) during 1999 and 1998 offset, in part, by
proceeds from the sale of investments and discontinued operations. The increase
in interest expense in 1998 over 1997 was similarly due to higher outstanding
borrowings for acquisitions of minority interests in subsidiaries.
INCOME TAXES
($ millions) 1999 1998 1997
Benefit from (provision for) income taxes $1.8 $5.3 $(17.7)
Effective tax rate 34.1% 62.1% 37.9%
The effective tax benefit rate in 1999 includes the impact of a $1.0 million
deferred tax benefit ($.04 per basic and diluted share) with respect to a change
in the applicable income tax rate on the Company's pro rata share of
undistributed earnings (prior to 1999) 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 earnings (when distributed) of
this foreign subsidiary to be taxed at a lower rate.
The significantly higher effective tax benefit rate in 1998, is due, in large
part, to the impact of a similar $3.7 million deferred tax benefit ($.13 per
basic and diluted share) with respect to the then change in the applicable
income tax rate on the Company's pro rata share of undistributed earnings (prior
to 1998) of such foreign subsidiary as a result of the Company's acquisition of
an additional interest in the same subsidiary.
Through December 31, 1999, 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
$31.2 million and has not provided a valuation allowance with respect thereto.
The Company believes the realization of this asset is "more likely than not".
This determination is based upon anticipated future U.S. taxable income as well
as available tax planning strategies, should they be necessary, to utilize such
losses in the future. This asset is not necessarily assured and could be subject
to future valuation allowances if circumstances change. The taxable losses may
be carried forward principally over a twenty year period.
DISCONTINUED OPERATIONS
As described in Note 9 of the Notes to Consolidated Financial Statements, the
Company sold its Marta Technologies Inc. ("Marta") subsidiary which operated its
discontinued automotive emissions testing programs. Pursuant to the sale
agreement, the Company received cash of $9.4 million and a $3.0 million three
year 12% installment note. In addition, the purchaser assumed (among other
liabilities) $12.4 million in long-term capital lease debt, in exchange for the
outstanding capital stock of Marta. See Note 9 for information concerning
additional purchase price consideration earned in February 2000. The sale of
Marta is the reason for the reduction in "Assets of discontinued emissions
testing business" in the Consolidated Balance Sheets.
ENVIRONMENTAL
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and financial liability. (See also Note 5 of Notes to Consolidated
Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
($ millions) 1999 1998 1997
Cash flow from operations $4.9 $ (2.3) $18.0
Total debt $123.1 $140.2 $104.0
Stockholders' equity $240.9 $250.1 $260.8
Debt to equity ratio .51:1 .56:1 .40:1
The Company generated $4.9 million in cash flow from operations in 1999. The
decline in cash flow from operations from 1997 of $18.0 million to a cash usage
of $2.3 million in 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,
principally in receivables.
While the Company continued to make investments in the telecommunications
industry in 1999, it did so at a significantly reduced rate. Capital
expenditures (fixed assets and software) were $11.4 million in 1999 as compared
with $22.0 million and $27.6 million in 1998 and 1997, respectively. Cash
investments in telecommunication subsidiaries in 1999 was $9.0 million as
compared to $42.1 million and $46.1 million in 1998 and 1997, respectively. The
1998 amount included $26.4 million for the acquisition of the outstanding
minority interest of its Forem subsidiary. In addition to the cash payments made
in 1999, the Company is committed to additional payments of $8.3 million in
2000. This liability is included in accounts payable and is the primary reason
for the increase in that balance sheet item at December 31, 1999. These
investments increased goodwill by approximately $9.6 million and significantly
reduced the minority interest liability, the latter being the primary reason for
the decline in Other liabilities in the Consolidated Balance Sheets from 1998 to
1999.
As more fully described in Note 2 to the Consolidated Financial Statements, the
Company has a $100.0 million domestic revolving credit agreement expiring on
December 31, 2001. Borrowings under this facility 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, 1999,
$39.2 million is available for borrowings under this agreement and $39.5 million
is available under existing foreign lines of credit.
In 1996, the Company entered into an agreement with NextWave Telecom Inc.
("NextWave"), whereby 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 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.
30
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC.
Capital expenditures in 2000 are estimated at $17.0 million, of which $.7
million was committed at December 31, 1999.
The Company's working capital ratio remains strong at 2.7:1 and its debt to
equity ratio declined slightly in 1999 to .51:1 as compared to .56:1 in the
prior year despite the weak operating performance in 1999. 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. Improvements in operations and borrowings under available domestic
and European credit lines are expected to be the primary source of liquidity
throughout 2000.
If the Company is very successful in developing its E-911 geolocation business,
it may be called upon to provide financing for a large equipment network or to
develop a service bureau for one or more carriers. The Company has had
preliminary discussions and believes that external financial resources should be
available to support the successful development of this business.
YEAR 2000 STATUS REVIEW
The Company substantially achieved its Year 2000 (Y2K) remediation plan and did
not experience any significant malfunctions or errors in its operating or
business systems when the date changed from 1999 to 2000. Based on operations
since January 1, 2000, the Company does not expect any significant impact to its
on-going business as a result of the "Y2K issue." However, it is possible that
the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Y2K or similar issues
such as leap year related problems may occur. The Company believes that any such
problems are likely to be minor and correctable. In addition, the Company could
still be negatively impacted if its customers or suppliers are adversely
affected by the Y2K or similar issues. The Company currently is not aware of any
significant Y2K or similar problems that have arisen for its customers and
suppliers.
The Company expended $1.4 million on Y2K remediation efforts from 1997 to 1999.
These efforts included replacing some outdated noncompliant hardware and
software, as well as identifying and remediating Y2K problems.
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 assets related to accounts receivable. The contracts
entered into at year-end all expire within one year. The Company also entered
into two foreign currency forward contracts in October 1999 to offset the impact
of currency rate changes with regard to foreign denominated purchase obligations
relating to the Company's purchase of the remaining minority interest of certain
European companies. The Company does not enter into derivative instrument
transactions for trading or speculative purposes.
The Company's on-balance sheet instruments which are subject to interest rate
fluctuations are various components of its long-term debt. The Company believes
the risks are minimal. Approximately 57% 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 average contractual exchange rates by expected
maturity date as of December 31, 1999 and 1998. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates as of December 31, 1999.
ANTICIPATED TRANSACTIONS AND RELATED DERIVATIVES
<TABLE>
<CAPTION>
Carrying Value Fair Value
--------------------------- -----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
(US $ Equivalent in Thousands)
Lira Functional Currency
Foreign Exchange Agreements:
Receive Lira/Pay USD
Contract Amount $2,004.0 -- $2,050.0 --
Avg. Contractual Exchange Rate 1,810.6 -- 1,852.3 --
Receive Lira/Pay LST
Contract Amount $4,476.4 -- $4,496.5 --
Avg. Contractual Exchange Rate 2,817.5 -- 3,028.7 --
Receive Lira/Pay DM
Contract Amount -- $291.4 -- $291.1
Avg. Contractual Exchange Rate -- 990.0 -- 989.3
Receive Lira/Pay EURO
Contract Amount -- $3,667.2 -- $3,664.9
Avg. Contractual Exchange Rate -- 1,947.0 -- 1,945.8
Receive Lira/Pay FF
Contract Amount -- $1,564.5 -- $1,562.9
Avg. Contractual Exchange Rate -- 295.3 -- 295.0
Deutschmark Functional Currency
Foreign Exchange Agreements:
Receive DM/Pay USD
Contract Amount $8,265.7 -- $7,723.6 --
Avg. Contractual Exchange Rate 1.8148 -- 1.9421 --
<CAPTION>
DEBT OBLIGATIONS
Expected Maturity Date
------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
(US $ Equivalent in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Debt:
Fixed Rate (US) $ 6 $ 3,007 $10,841 $10,841 $ 7,841 $32,558 $65,094 $65,094
Avg. interest rate 9% 6% 6% 6% 6% 6% 6% 6%
Fixed Rate (Lira) 651 425 484 468 365 963 3,356 3,356
Avg. interest rate 5% 4% 4% 4% 5% 5% 5% 5%
Fixed Rate (DM) 472 420 177 60 -- -- 1,129 1,129
Avg. interest rate 4% 4% 4% 3% -- -- 4% 4%
Fixed Rate (FF) 90 36 -- -- -- -- 126 126
Avg. interest rate 9% 9% -- -- -- -- 9% 9%
Variable Rate (US) -- 41,500 -- -- -- 11,900 53,400 53,400
Avg. interest rate -- 7% -- -- -- 3% 6% 6%
Variable Rate (Lira) 290 -- -- -- -- -- 290 290
Avg. interest rate 5% -- -- -- -- -- 5% 5%
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF OPERATIONS
ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
FIVE YEARS ENDED DECEMBER 31, 1998 1999 1998 1997 1996 1995
OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
SALES $ 333,697 $ 388,004 $ 432,508 $ 369,498 $ 306,556
Cost of sales (244,548) (293,404) (281,591) (238,401) (189,103)
Selling, general and administrative expenses (61,839) (71,672) (72,671) (59,053) (49,464)
Research & development and product engineering (27,946) (30,742) (30,367) (21,023) (17,006)
Write-off of in-process research and development costs -- -- -- (2,662) --
Other income, net 3,370 6,065 1,885 952 1,556
Interest and financing expense (8,146) (6,805) (3,051) (2,785) (2,098)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes and minority interests (5,412) (8,554) 46,713 46,526 50,441
Benefit from (provision for) income taxes 1,844 5,310 (17,723) (19,665) (20,138)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest (3,568) (3,244) 28,990 26,861 30,303
Minority interests (1,650) (2,268) (5,009) (6,305) (3,027)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (5,218) (5,512) 23,981 20,556 27,276
Discontinued operations:
Income (loss) from discontinued operations -- -- -- (3,766) 5,363
Gain (loss) on disposal of emissions testing
business 2,363 (4,710) -- (3,724) --
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item (2,855) (10,222) 23,981 13,066 32,639
Extraordinary item - extinguishment of debt -- -- (632) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (2,855) $ (10,222) $ 23,349 $ 13,066 $ 32,639
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE:
Basic: Income (loss) from continuing operations ($.19) ($.21) $.89 $.78 $1.05
Discontinued operations:
Income (loss) from discontinued operations -- -- -- (.14) .20
Gain (loss) on disposal of emissions testing
business .09 (.17) -- (.14) --
Extraordinary item - extinguishment of debt -- -- (.02) -- --
--------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($.10) ($.38) $.87 $.50 $1.25
--------------------------------------------------------------------------------------------------------------------------
Diluted: Income (loss) from continuing operations ($.19) ($.21) $.88 $.76 $1.02
Discontinued operations:
Income (loss) from discontinued operations -- -- -- (.14) .20
Gain (loss) on disposal of emissions testing
business .09 (.17) -- (.14) --
Extraordinary item - extinguishment of debt -- -- (.02) -- --
--------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($.10) ($.38) $.86 $.48 $1.22
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Total assets $ 451,430 $ 465,585 $ 514,433 $ 410,512 $ 363,565
Working capital 128,062 133,465 111,015 94,378 93,371
Current ratio 2.68 2.92 1.85 1.90 2.11
Total debt 123,086 140,223 104,034 55,955 55,799
Stockholders' equity 240,912 250,081 260,822 225,951 210,377
Debt to equity ratio .51 .56 .40 .25 .27
Book value per common share 8.64 9.10 9.55 8.44 7.92
Shares outstanding at year end 27,882 27,473 27,298 26,763 26,570
Return on stockholders' equity (1.2%) (4.0%) 9.4% 6.0% 14.7%
Capital expenditures 9,491 18,094 22,247 20,992 24,498
Depreciation 14,914 15,615 12,808 12,231 8,896
Number of employees 2,200 3,000 3,300 2,900 2,800
</TABLE>
32
<PAGE> 35
SHAREHOLDER INFORMATION
EXCHANGE LISTINGS
Common Stock
(Ticker Symbol - ALN)
New York Stock Exchange
Pacific Exchange
TRANSFER AGENT AND REGISTRAR
Fifth Third Bank
MD 1090D2
38 Fountain Square Plaza
Cincinnati, Ohio 45263
(513) 744-8676
AUDITORS
Deloitte & Touche 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 1, 2000, Allen Telecom Inc. had 27,901,910 outstanding shares of
Common Stock owned by 1,708 holders of record.
ANNUAL STOCKHOLDERS' MEETING
The Annual Meeting of Stockholders will be held at the
Cleveland Marriott East at 3663 Park East Drive, Beachwood, Ohio 44122, on
Friday, April 28, 2000 at 9:30 AM.
DIVIDENDS DECLARED ON COMMON STOCK
(DOLLARS PER SHARE)
1999 1998 1997 1996 1995
1st Quarter - - - - $.05
2nd Quarter - - - - $.05
3rd Quarter - - - - $.05
4th Quarter - - - - -
STOCK PRICE
95 $21.25 $39.38
96 $14.00 $28.75
97 $16.00 $30.00
98 $4.69 $21.13
99 $5.75 $11.63
MARKET PRICE RANGE OF COMMON STOCK
(DOLLARS PER SHARE)
1999 1998 1997
High Low High Low High Low
------------------------------------------------------------------------------
1st Quarter 6 1/2 5 3/4 21 1/8 15 1/2 26 3/8 16
2nd Quarter 11 5/16 10 9/16 17 7/16 9 9/16 24 1/8 16 1/2
3rd Quarter 9 15/16 9 3/8 11 5/8 6 3/16 29 1/8 18 3/4
4th Quarter 11 5/8 10 1/2 8 3/8 4 11/16 30 16
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF 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
(Herkules Vierte Verwaltungs G.m.b.H.)
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
Mikom Schweiz AG (7) Switzerland 04-20-99 100
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. (8) Germany 05-07-85 100
Mikom Vertriebs und Service Austria 10-18-96 100
GmbH (9)
Mikom Slovakia, s.r.o. (10) Slovakia 05-30-97 60
Mitras Ltd. (1) Hungary 1992 100
C-com, spol. s.r.o. Czech Republic 02-26-96 80
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
Tekmar Sistemi S.r.l. Italy 09-20-80 100
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
Allen SSI, Inc. (12) 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) 95% of the outstanding capital stock of this subsidiary is owned by
Allen Telecom Inc. and the remaining 5% is owned by Allen Telecom
Investments, Inc.
(7) Option to purchase 100% of the shares of Mikom Schweiz AG entered on
October 21, 1999, letter of credit for purchase price placed in an
irrevocable escrow. Final transfer took place on March 8, 2000.
(8) 62% of the outstanding capital stock of this subsidiary is owned by
FOREM S.r.l., 12% is owned by Allen Telecom G.m.b.H., and the remaining
26% is owned by Herkules Vierte Verwaltungs G.m.b.H.
(9) 60% of the outstanding capital stock is owned by Mikom G.m.b.H. and the
remaining 40% is owned by Herkules Vierte Verwaltungs G.m.b.H.
(10) 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.
(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.
(12) Allen SSI, Inc. (fka Signal Science, Incorporated) sold substantially
all its assets to Condor Systems Inc. on October 15, 1999.
March 16, 2000
<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. 333-51969) and on the Registration Statements on Form S-8
(File Nos. 33-58951, 33-53499, 33-53487, 33-52420, 33-8658 (Amendment No. 1),
2-09919, 333-51739, 333-68369 and 333-80913) of Allen Telecom Inc. of our
report dated February 16, 2000, appearing in this Annual Report on Form 10-K for
the year ended December 31, 1999.
/s/DELOITTE & TOUCHE LLP
Cleveland, Ohio
March 27, 2000
<PAGE> 2
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 (File No. 333-51969) and on the Registration Statements on
Form S-8 (File Nos. 33-58951, 33-53499, 33-53487, 33-52420, 33-8658, 2-99919,
333-51739, 333-68369 and 333-80913) and the related Prospectuses of Allen
Telecom Inc. of 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 and financial statement schedule of Allen
Telecom Inc, which appears under Item 14 on page 13. We also consent to the
references to our firm in the above-mentioned Prospectuses under the caption
"EXPERTS".
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S DECEMBER 31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,085
<SECURITIES> 0
<RECEIVABLES> 89,931
<ALLOWANCES> (2,537)
<INVENTORY> 82,713
<CURRENT-ASSETS> 204,150
<PP&E> 111,382
<DEPRECIATION> (62,129)
<TOTAL-ASSETS> 451,430
<CURRENT-LIABILITIES> 76,088
<BONDS> 120,905
0
0
<COMMON> 30,010
<OTHER-SE> 210,902
<TOTAL-LIABILITY-AND-EQUITY> 451,430
<SALES> 333,697
<TOTAL-REVENUES> 333,697
<CGS> (244,548)
<TOTAL-COSTS> (244,548)
<OTHER-EXPENSES> (89,402)
<LOSS-PROVISION> (383)
<INTEREST-EXPENSE> (8,146)
<INCOME-PRETAX> (5,412)
<INCOME-TAX> 1,844
<INCOME-CONTINUING> (5,218)
<DISCONTINUED> 2,363
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,855)
<EPS-BASIC> (.10)<F1>
<EPS-DILUTED> (.10)<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".
</FN>
</TABLE>
