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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9078
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THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1620387
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1790 BROADWAY 10019-1412
NEW YORK, NEW YORK (ZIP CODE)
(Address of principal executive offices)
Registrant's telephone number, including area code 212-757-3333
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Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $.10 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
At July 26, 1999, the registrant had 15,445,129 shares of common stock, par
value $.10 per share, outstanding, and the aggregate market value of the
outstanding shares of voting stock held by non-affiliates of the registrant on
such date was approximately $216.2 million based on the closing price of
$17.1875 per share of such common stock on such date.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Company's Annual Meeting of Stockholders in Part III
of this Form 10-K.
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PART I
ITEM 1. BUSINESS
The Alpine Group, Inc. (together with its subsidiaries, unless the context
otherwise requires, "Alpine" or the "Company") is an industrial holding company
which, through its 51.7% owned subsidiary, Superior TeleCom Inc. (together with
its subsidiaries, unless the context otherwise requires, "Superior"), is
principally engaged in the manufacture and sale of wire and cable products,
including communications, electrical and magnet wire and cable. Alpine also owns
83.4% of Premier Refractories International Inc. ("Premier"), a major
refractories products and services company. On May 28, 1999, Alpine, Premier,
Cookson Group plc, a London Stock Exchange listed company ("Cookson"), and PRI
Acquisition, Inc., Cookson's wholly owned subsidiary, entered into an Agreement
and Plan of Merger (the "Premier Merger Agreement") providing for the
acquisition by Cookson of 100% of the capital stock and business operations of
Premier through the merger of PRI Acquisition, Inc. into Premier. As a result of
this transaction, which is expected to close during the second quarter of the
Company's fiscal year 2000, the Company has classified Premier as a discontinued
operation.
Alpine was incorporated in New Jersey on May 7, 1957 and reincorporated in
Delaware on February 3, 1987. Its principal executive offices are located at
1790 Broadway, New York, New York 10019-1417 and its telephone number is (212)
757-3333.
SUPERIOR TELECOM INC.
GENERAL
Superior is the largest wire and cable manufacturer in the United States and
the fourth-largest in the world. Superior manufactures a broad portfolio of wire
and cable products with primary applications in the communications, original
equipment manufacturer ("OEM") and electrical markets. Superior is a leading
manufacturer and supplier of communications wire and cable products to telephone
companies, distributors and system integrators; magnet wire and insulation
materials for motors, transformers and electrical controls as well as automotive
and specialty wiring assemblies for automobiles and trucks; and building and
industrial wire for applications in commercial and residential construction and
industrial facilities. Superior operates 43 manufacturing facilities in the
United States, Canada, United Kingdom and Israel.
On October 2, 1996, the Company completed a reorganization (the
"Reorganization") whereby all of the issued and outstanding common stock of two
of the Company's wholly-owned subsidiaries, Superior Telecommunications Inc.
("STI") and DNE Systems, Inc. ("DNE"), were contributed to Superior. On October
17, 1996, Superior completed an initial public offering (the "Offering") of
approximately 49.9% of its common stock. Superior used the net proceeds to
reduce outstanding bank debt and to pay to the Company certain previously
declared dividends. As a result of the Offering and subsequent stock
transactions, the Company's common stock ownership position in Superior was
reduced to its current ownership position of approximately 51.7%.
RECENT SIGNIFICANT GROWTH
Over the past four years, Superior (including its predecessors) has led a
consolidation of the North American copper wire and cable industry. In May 1995,
STI acquired the North American copper telecommunications wire and cable
operations of Alcatel N.A. With this acquisition, the Company became the largest
North American manufacturer of copper telephone wire and cable.
On November 27, 1998, a newly formed wholly-owned subsidiary of Superior
acquired approximately 81% of the outstanding shares of common stock of Essex
International Inc. (together with its subsidiaries, unless the context otherwise
requires, "Essex") through a cash tender offer for an aggregate price of
approximately $770 million (the "Essex Acquisition"). On March 31, 1999, as a
result of a merger of that newly formed wholly-owned subsidiary of Superior into
Essex, Essex became a wholly-owned subsidiary of Superior. In the merger,
holders of the remaining 19% of the outstanding shares of common stock of Essex
each received shares (in the aggregate $167 million liquidation value) of an
8 1/2% trust convertible
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preferred security of Superior Trust I, a Delaware business trust in which
Superior owns all the common equity interests.
Essex manufactures and distributes wire and cable and insulation products,
including magnet wire and insulation materials for electromechanical devices,
building wire for commercial and residential construction applications, copper
communications wire and cable, industrial wire, and automotive wire. As a result
of the acquisition of Essex, Superior is now a diversified supplier of a variety
of wire and cable products and, based on current annualized sales levels, is the
largest wire and cable manufacturer in North America and the fourth largest wire
and cable manufacturer in the world.
During 1998, Superior also expanded its presence in international markets.
On May 5, 1998, Superior acquired 51% of the issued and outstanding shares of
common stock of Cables of Zion United Works Ltd., now known as Superior Cables
Ltd. ("Cables of Zion"), for approximately $25.0 million in cash. Cables of Zion
is an Israeli-based cable and wire manufacturer whose primary products include
fiber and copper communications wire and cable and power cable. Cables of Zion
products are sold primarily into the Israeli and European markets.
On December 31, 1998, Superior, through Cables of Zion, acquired the
business and certain operating assets of Cvalim--The Electric Wire & Cable
Company of Israel Ltd. ("Cvalim") and its wholly-owned subsidiary, Dash Cable
Industries (Israel) Ltd., for approximately $41.2 million in cash. Cvalim is the
leading Israeli manufacturer of electrical, communications and industrial wire
and cable products. As a result of these acquisitions, Cables of Zion is the
dominant wire and cable manufacturer in Israel with an approximate 70% market
share. The Company believes that expanding its operational presence in Israel
will enable it to participate further in the growing wire and cable markets in
Europe and the Middle East. The operations of Cables of Zion (including the
acquired operations of Cvalim) are hereinafter referred to as "Superior Israel".
BUSINESS LINES
Prior to the acquisitions of Essex and Superior Israel, Superior's product
sales were comprised almost entirely of communications wire and cable. With the
Essex Acquisition, Superior broadened its product lines into the OEM segment
(principally magnet wire, automotive wire and related products) and into
electrical wire (low voltage building wire and industrial wire). With the
Superior Israel acquisition, Superior added additional communications wire and
cable product sales on an international basis (including fiber optic cable),
along with low, medium and high voltage power cable, as well as other wire and
cable product lines.
The following table sets forth dollar amounts and percentages of sales of
each of Superior's major business lines on a historic basis for the fiscal years
ended April 30, 1998 and 1999, and on a pro forma basis for the fiscal year
ended April 30, 1999, assuming Essex and Superior Israel were acquired on May 1,
1998:
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ACTUAL ACTUAL PRO FORMA
FISCAL 1998 FISCAL 1999 FISCAL 1999
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SALES % SALES % SALES %
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(DOLLARS IN MILLIONS)
Communications.................... $ 516.6 100% $ 626.8 55% $ 802.3 39%
OEM............................... -- -- 269.2 23 635.8 30
Electrical........................ -- -- 247.2 22 648.5 31
--------- --- --------- --- --------- ---
$ 516.6 100% $ 1,143.2 100% $ 2,086.6 100%
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For more detailed financial information relating to the Company's business
segments, see "Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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COMMUNICATIONS GROUP
Superior's Communications Group focuses on two areas of the North American
communications wire and cable market: (i) outside plant ("OSP") wire and cable
for voice and data transmission in the local loop portion of the
telecommunications infrastructure and (ii) datacom, or premise, wire and cable
used within homes and offices for local area networks ("LANs"), Internet
connectivity and other applications. Through six geographically dispersed plants
Superior has annual production capacity in North America of 170 billion
conductor feet ("bcf") for OSP and datacom copper wire and cable. Additionally,
through Superior Israel, Superior has an additional seven bcf of production
capacity for OSP and datacom products. Superior is currently the largest
manufacturer of copper communications cable in North America (which is
Superior's primary market) and the largest worldwide manufacturer of copper OSP
wire and cable products.
The Communications Group also includes the operations of DNE. DNE designs
and manufactures data communications equipment, integrated access devices and
other electronic equipment for defense, government and commercial applications.
DNE's net sales are not significant in relation to the total net sales of the
Communications Group.
OSP PRODUCTS
Copper wire and cable are the most widely-used media for voice and data
transmission in the local loop portion of the telecommunications infrastructure
operated by the local exchange carriers ("LECs"), which include the regional
Bell operating companies ("RBOCs") and the independent telephone operating
companies. The local loop is the segment of the telecommunications network that
connects the customer's premises to the nearest telephone company switching
center or central office. The Company believes that copper will continue to be
the leading transmission medium in the local loop due to factors such as: the
installed base of copper cable and associated switches, connectors and other
accessory components represents an investment of over $150 billion that must be
maintained by the LECs; the lower installation and maintenance costs of copper
compared to optical fiber and other media; technological advances, such as
integrated services digital networks ("ISDN") and various digital subscriber
line ("xDSL") technologies that increase the bandwidth of the installed local
loop copper network; the increasing demand by consumers for affordable enhanced
services, which, because of technological advances, can be supported by the
copper-based local loop; and the increasing demand for affordable multiple
residential access lines.
Demand for copper communications wire and cable is dependent on several
factors, including: the rate at which new access lines are installed in homes
and businesses; the level of infrastructure spending for items such as
road-widenings and bridges, which generally necessitates replacement of existing
utilities, including telephone cable; and the level of general maintenance
spending by the LECs. The installation of new access lines is, in turn,
partially dependent on the level of new home construction and expansion of
business and, increasingly in recent years, on demand for additional telephone
lines and lines dedicated to facsimile machines and computer modems which are
used for, among other purposes, business communications and access to the
Internet.
The local loop comprises approximately 173 million residential and business
access lines in the United States. The installed base of copper wire and cable
and associated switches and other components utilized in the local loop
represents an investment of over $150 billion that must be maintained by the
LECs. Although other media, such as fiber optic cable, are used for trunk lines
between central offices and for feeder lines connecting central offices to the
local loop, substantially all local loop lines and systems continue to be
copper-based. Superior believes that in the local loop, copper-based networks
require significantly lower installation and maintenance costs than other
alternative networks (such as fiber optics). Installation of fiber optic systems
is both capital and labor intensive, and deployment of fiber optic systems
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generally has been limited to trunk and feeder lines and wide area network
configurations, where the density of voice and data traffic make such systems
cost efficient.
Copper usage in the local loop continues to be supported by technological
advances that expand the use and bandwidth of the installed local loop copper
network. These advances include ISDN and xDSL technologies. These technologies,
together with regulatory developments and increased competition among service
providers, have accelerated the demand for and the introduction of new high
speed and bandwidth-intensive telecommunications services, such as integrated
voice and data, broadcast and conference quality video, Internet, high speed LAN
to LAN connectivity, and other specialized, bandwidth-intensive applications.
The most recent technological advance is xDSL technology. xDSL technology,
which includes ADSL and HDSL, has increased the bandwidth capacity of copper
networks in the local loop through sophisticated digital multiplexing and
modulation techniques. xDSL technology currently expands the bandwidth
transmission capacity over twisted pair copper wire in the local loop from
56,000 bps to over 8 million bps, depending on distance.
ADSL transmits interactive video and data services, including video on
demand, on-line shopping, banking and other data services, as well as Internet
access, over the existing copper-based local loop, requiring substantially less
investment of capital and labor than alternative technologies such as fiber
optics. ADSL is asymmetric in that it is high bandwidth in one direction and
lower bandwidth in the other. This arrangement is intended primarily to support
one-way high bandwidth applications, such as the provision of broadcast quality
video into the home. HDSL, as opposed to ADSL, provides high bandwidth
transmission in both directions over the copper-based network. In contrast to
fiber optic cable systems, HDSL uses a minimal amount of power on the remote end
of the line, making the traditional power supplied by copper communications wire
sufficient for its use. ISDN is a set of digital transmission signaling
protocols and interfaces that provides end-to-end digital connectivity to
support a wide range of services. ISDN service over the existing copper local
loop is expanding due to the increased demand for digital telecommunications
applications such as remote office connectivity and Internet access.
While these rapid and significant technological advances continue to
increase the use and bandwidth of the copper local loop network, optical fiber
is gradually being deployed in the feeder network as a funnel to support the
emerging high bandwidth digital copper loops. Superior has developed an optical
fiber cable product line that includes local loop feeder cables for OSP
applications. Superior has expanded its manufacturing capability for fiber optic
cables for these applications, although sales of these products are not yet
significant.
Superior manufactures a wide variety of OSP wire and cable products.
Superior's copper-based OSP products include distribution cable and service wire
products, ranging in size from a single twisted pair wire to a 4,200-pair cable.
To a much lesser extent, Superior also manufactures fiber optic cable for OSP
applications.
The basic unit of virtually all copper OSP wire and cable is the "twisted
pair," a pair of insulated conductors twisted around each other. Twisted pairs
are bundled together to form communications wire and cable. Superior's copper
OSP wire and cable products are differentiated by design variations, depending
on where the cable is to be installed. Wire and cable products used for direct
underground burial are designed to be water resistant and are filled with
compounds to prevent moisture from penetrating the cable structure. The
individual copper wires utilize either polyethylene or polypropylene insulation.
Wire and cable products used for underground duct or aerial applications, where
water penetration is not a major concern, are designed with polyethylene
insulation and no filling compound. The copper communications wire and cable
products normally have metallic shields for mechanical protection and
electromagnetic shielding, as well as an outer polyethylene jacket.
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One element of Superior's strategy in the Communications Group is to
continue to expand into performance enhanced wire and cable products that
provide opportunities for growth both within and outside Superior's basic
market. Superior has acquired or developed, or is in the process of developing,
a number of new products, including (i) hybrid products combining twisted-pair
copper wires with coaxial or fiber optic cable for distribution service, (ii) a
broad band "extra terrestrial" cable to support new technologies within the OSP
segment and (iii) fiber optic cables used for trunking and feeder applications
in the local loop and for trunking and distribution applications in LANs. The
fiber optic OSP cables can be used in a variety of installations such as aerial,
buried and underground conduit and can be configured with two to over 400
fibers, which are typically single-mode fibers. These cables are sold to
traditional customers, such as LECs, as well as new customers, such as
competitive local exchange carriers ("CLECs"), inter-exchange carriers ("IXCs")
and competitive access providers ("CAPs").
Superior has historically been a key supplier of OSP wire and cable to the
RBOCs and the two major independent telephone companies (GTE Corporation and
Sprint Corporation). It is estimated that the RBOCs, GTE and Sprint comprise
approximately 80% of the approximate $1.4 billion North American copper OSP
market. The remaining 20% of the North American market is comprised of more than
1,200 smaller independent telephone companies. In recent years, Superior has not
been a major supplier to the smaller independent telephone companies due to
capacity constraints and lack of established distributor relationships. However,
the recent Essex Acquisition provides Superior both the capacity and the
established distributor network to address this market.
On a pro-forma basis for the fiscal year ended April 30, 1999 (including a
full year impact from the Essex Acquisition), 74% of Superior's OSP net sales
were to the RBOCs and the two major independent telephone companies, 24% of net
sales were primarily to other telephone companies and data product distributors
in North America and 2% of net sales (excluding sales of Superior Israel) were
made outside of North America.
Superior sells to the RBOCs and the two major independent telephone
companies on a direct basis through a sales force of six salespersons. With the
Essex Acquisition, Superior's OSP wire and cable products are increasingly being
sold through original equipment manufacturers, as well as domestic and
international distributors and sales representatives. Superior, through Superior
Israel, also sells its fiber optic, OSP and datacom copper wire and cable
products to Bezeq, the Israeli telephone company, and other customers and
distributors in Israel, the United Kingdom, Europe and South America.
Superior's sales to the major telephone operating companies are generally
pursuant to multi-year supply agreements in which the customer agrees to have
Superior supply a certain percentage of the customer's OSP wire or cable needs
during the term of the agreement. Typically customers are not required to
purchase any minimum quantities of product under these agreements. Superior
currently has multi-year agreements with four of the five RBOCs and with the two
major independent telephone companies. During the fiscal year ended April 30,
1999, sales to Sprint Corporation, Bell Atlantic Corporation, Southwestern Bell
Telephone Company and GTE Corporation accounted for 14.6%, 13.8%, 13.3% and
12.4% of the Communications Group net sales, respectively. No other single
customer accounted for more than 10% of net sales.
DATACOM PRODUCTS
Datacom wire and cable is used within buildings to connect
telecommunications devices (telephones, facsimile machines and computer modems)
to the telecommunications network and in commercial buildings to provide
connectivity for LANs. Rapid technological advances in communication and
computer systems have created increasing demand for greater bandwidth
capabilities in wire and cable products. The Company expects demand for datacom
wire and cable products to increase significantly in the future, particularly as
new office buildings are constructed, existing office buildings are upgraded to
accommodate advanced network requirements and multiple residential access lines
for facsimile machines, home offices and access to the Internet are installed.
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There are two primary applications for communications wiring systems within
buildings: voice applications (estimated at 15% of new wiring system investment)
and data applications (estimated at 85% of new wiring system investment). The
primary voice application consists of networking telephone stations. The primary
data application is LANs, which require the wired interconnection of
workstations and peripherals (printers, file servers, etc.) to form a network.
Four major types of cables are currently deployed in datacom applications:
(i) LAN copper twisted pair (unshielded twisted pair ("UTP") and shielded
twisted pair ("STP")), (ii) LAN fiber optic cable, (iii) LAN coaxial cable and
(iv) voice twisted copper pair. Superior anticipates that UTP and fiber optic
cable will provide the most significant growth opportunities due to increasing
demands in the datacom market for cost-effective, high bandwidth solutions.
Continued high growth for new LAN installations, as well as voice system
upgrades, has resulted in increased demand for LAN twisted pair UTP cables,
particularly Category 5 cables. Category 5 cables have made it possible for UTP
to compete with fiber and LAN twisted pair STP for high-speed LAN applications.
The other large component of the datacom segment is fiber optic cable, which
meets the needs of communications services requiring bandwidth capabilities
greater than can be provided by Category 5 cable.
Superior's current datacom wire and cable product offerings include voice
grade twisted pair, UTP and LAN fiber optic cable. Superior's UTP product
offerings include Category 5 cables ranging in size from four pair to 25-pair
cable. These cables are designed and manufactured for use in both plenum
(vertical) and riser (horizontal) applications. Superior has recently developed
and has begun marketing and sales of LAN fiber optic cables. These cables, which
may be used for LAN trunking or distribution applications, contain from one to
144 fibers (typically multi-mode fiber) and are used in plenum and riser
applications within buildings.
Superior's datacom wire and cable products are sold primarily through major
national and international distributors, smaller regional distributors and
representatives who in turn resell to contractors, international and domestic
telephone companies and private overseas contractors for installation in the
industrial, commercial and residential markets.
The datacom wire and cable market is fragmented, with nearly 25 datacom wire
and cable manufacturers in North America and more than 75 worldwide. Major
suppliers in North America include Lucent Technologies Inc. and Cable Design
Technologies Corporation, which companies offer a turnkey system. Other
manufacturers such as Superior, Berk-Tek (an Alcatel Company), Belden Inc.,
CommScope Inc. and General Cable Corporation offer an engineering specification
oriented approach to the market. The remaining manufacturers employ a high
volume, low cost approach through well established distributor relationships.
Superior estimates the North American market for datacom wire and cable
products, similar to those manufactured by Superior, to be approximately $1.7
billion.
Superior is also proceeding with an expansion of its manufacturing
capabilities for both copper UTP and fiber optic cable products. During July
1999, Superior commenced construction of an approximately 100,000 square foot
addition to its Brownwood, Texas plant to house a new state of the art fiber
optic cable manufacturing facility which it expects to become fully operational
within twelve months. This increase in Superior's manufacturing capabilities for
Superior's fiber optic products is anticipated to result in an increase in sales
and market share.
DNE
DNE designs and manufactures data communications equipment, integrated
access devices and other electronic equipment for defense, government and
commercial applications. It is the largest supplier to the U.S. defense forces
of data and voice multiplexers used in tactical secure military applications.
Multiplexers are integrated access devices that combine several
information-carrying channels into one line, thereby
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permitting simultaneous multiple voice and data communications over a single
line. DNE also produces military avionic products, including switches, dimmers,
relays and other electronic controllers, sensors and aerial refueling
amplifiers. DNE net sales comprise 3% of the Communications Group net sales.
OEM GROUP
Superior's OEM Group manufactures and sells magnet wire, automotive wiring
and other related products to major OEM's for use in motors, transformers,
electrical controls and automobile and truck harnesses. Through its Essex
Brownell distribution business, Superior also distributes its magnet wire and
related insulation and purchased products to smaller OEM's and repair and
refurbishing contractors.
The OEM Group operates 15 manufacturing plants and 18 warehousing and
distribution locations in North America. Additionally, in 1998 Essex (prior to
its acquisition by Superior) acquired BICC's UK-based magnet wire operations
("Essex/Connellys"). The Essex/Connellys acquisition provides Superior with
European magnet wire capacity to service certain of Superior's existing North
American customers which have major European operations. This acquisition also
provides Superior an opportunity to participate in growth through an anticipated
consolidation of magnet wire manufacturers in the European market.
MAGNET WIRE
The Company believes that Superior is the leading supplier of magnet wire in
the North American market. On a pro forma basis (including a full year impact
from the Essex Acquisition), net sales of magnet wire for the fiscal year ended
April 30, 1999 were $417 million.
The North American market demand for magnet wire has experienced continued
growth since 1990. Sales growth in the magnet wire industry is driven by
increasing demand for electrical devices containing motors for, among other
things, home appliances and automobiles. Additionally, continuing consumer
pressure and federal government mandates for higher energy efficiency are
resulting in increased utilization of magnet wire within individual motors or
electrical converter devices. Strong consumer demand for greater numbers of
electrical convenience items in homes, offices and vehicles has resulted in
increased sales of household appliances and increased use of electric motors and
coils in cars and trucks.
Due to the substantial initial capital costs associated with magnet wire
production, the importance of consistent quality, stringent technological
requirements and the cost efficiencies achieved by larger magnet wire producers,
significant industry consolidation has occurred during the past ten years in the
North American magnet wire industry. In addition, the percentage of domestic
magnet wire produced by independent magnet wire manufacturers, such as Superior,
has grown as the manufacturing capacity of captive magnet wire producers
(electrical equipment manufacturers who internally produce their own magnet
wire) has declined as a result of outsourcing over the last several years.
Superior offers a comprehensive line of magnet wire products, including over
500 types of magnet wire used in a wide variety of applications. Magnet wire is
the wire that is wound into coils of electromagnetic devices, including motors,
alternators, coils, transformers, control devices and power generators.
Electromagnetic devices are found in numerous industrial, household and
automotive applications.
New magnet wire products have been introduced recently that the Company
believes will further enhance Superior's position as one of the technological
and development leaders in the industry. Specifically, Superior has recently
introduced the Ultra Shield-TM- Plus wire which is a superior rated magnet wire
now used by many global motor manufacturers in inverter drive applications where
high voltage spikes are encountered. Other new products include
Soderon-Registered Trademark-/180 and Soderex-Registered Trademark-/180, two new
magnet wires that are used in automotive and appliance controls in higher
temperature applications. These products allow for increased throughput with
faster soldering times than conventional high temperature
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type products. In addition, Superior has also introduced a new DuPont
Nemon-Registered Trademark-/910 wrapped magnet wire conductor for liquid-filled
transformer applications as a replacement for low temperature paper wrap.
Superior is also a leader in product palletizing and packaging with a focus on
ease of handling, reduced freight damage, environmental disposal issues and cost
reduction.
Superior's magnet wire products are sold to OEM's, aftermarket repair
facilities, coil manufacturers and distributors. Products are marketed
nationally through an internal sales force and through Superior's Essex Brownell
distribution business, along with an external distribution network. Products are
also marketed internationally through authorized distributors.
As previously mentioned, the magnet wire market in North America is
concentrated, with a small number of large manufactures. The Company believes it
is the largest supplier of magnet wire in the North American market.
AUTOMOTIVE WIRE
Superior's automotive wire products include primary wire for use in engine
and body harnesses, ignition wire, battery cable and specialty wiring
assemblies. On a pro forma basis, (including a full year impact from the Essex
Acquisition), net sales of automotive wire products for the fiscal year ended
April 30, 1999 amounted to $74 million. The automotive primary wire market has
experienced growth over the last decade due to steady production levels of new
vehicles and an increase in the installation of electrical options in vehicles,
which deliver increased safety, convenience and engine performance to the
consumer. These electrical options include power windows, supplemental restraint
systems, digital displays, keyless entry, traction control, electronic
suspension, and anti-lock brakes. The Company expects the trend of additional
electronic features to grow, thereby increasing demand for automotive wire.
Further, the increasing demand for copper wire content in vehicles has made it
essential to use finer-gauge, thinner wall, higher temperature insulation coated
wire, which requires significant advanced product development and manufacturing
technologies.
Superior sells automotive wire products primarily to tier-one motor vehicle
manufacturer suppliers. Automotive wire products are marketed through an
internal sales force and manufacturers' representatives.
INSULATION AND PURCHASED PRODUCTS
Superior's insulation products consist of various electrical insulations
used in a wide variety of applications by OEM's and repair and refurbishing
contractors. These insulation products include electrical grade tubing and
sleeving marketed under the Suflex brand, mica sheet and mica electrical tapes
marketed under the U.S. Samica brand, fabricated mica segments marketed under
the Macallen brand, as well as engineered electrical insulation materials,
manufactured and marketed under the Active Industries business.
Superior's insulation products are sold directly to OEM's, to various
authorized distributors for resale or through Superior's internal distribution
group (Essex Brownell). Generally, insulation products are sold to the same
customers that use magnet wire. Superior has a distinct competitive advantage in
that it is the only major North American producer of magnet wire that also
manufactures and distributes high quality electrical insulations. On a pro forma
basis (including a full year impact from the Essex Acquisition), net sales of
insulation and purchased product for the fiscal year ended April 30, 1999
amounted to $144 million.
These products and all products within the OEM business are supported by an
internal distribution organization, Essex Brownell. Essex Brownell was formed
when the Brownell distribution business was acquired by Essex in 1995. Essex
Brownell focuses on selling Superior manufactured products into the
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motor repair and secondary OEM markets. This distribution organization also
distributes many purchased materials from other insulation manufacturers.
ELECTRICAL GROUP
Superior's Electrical Group manufactures and distributes a complete line of
building wire products as well as a line of industrial wire products. On a pro
forma basis (including a full year impact from the Essex Acquisition), net sales
of building wire and industrial wire products for the fiscal year ended April
30, 1999 were $544 million and $103 million, respectively. The Electrical Group
operates ten manufacturing plants in the United States with annual production
capacity of approximately 510 million copper equivalent pounds.
Building wire products include a wide variety of thermoplastic and thermoset
insulated wires for the commercial and industrial construction markets and
service entrance cable, underground feeder wire and nonmetallic jacketed wire
and cable for the residential construction market. These products are generally
installed behind walls, in ceilings and underground. Industrial wire products
include appliance wire, motor lead wire, submersible pump cable, power cable,
bulk flexible cord, power supply cord sets, welding cable and recreational
vehicle wire.
Superior is the leading manufacturer in North America of copper building
wire products used in commercial and residential applications. Superior
estimates that the building wire market has grown, on average, approximately
3-5% per annum over the past five years. Sales growth in the building wire
industry has resulted primarily from renovation activity, as well as new
nonresidential and residential construction. Both new construction and
renovation growth are being affected by the increased number of circuits and
amperage handling capacity needed to support the increasing demand for
electrical services. In addition, there has been a greater wiring density
required in new construction and renovation projects to provide for the
electrical needs of appliances such as trash compactors, microwave ovens, air
conditioners, entertainment centers, lighting and climate controls, specialty
and task lighting, electric garages and outdoor lighting systems. New home
automation and computer systems contribute to the cable and wire increased
density requirements in new and renovation construction as well. The average new
home is also increasing in size and thus influencing sales growth in this
industry.
The building wire industry has experienced significant consolidation in
recent years, declining from approximately 28 manufacturers in 1980 to eight
primary manufacturers in 1999. Superior believes this consolidation is due
primarily to cost efficiencies achieved by the larger building wire producers as
they capitalize on the benefits of vertical integration and of manufacturing,
purchasing and distribution economies of scale.
In the industrial wire market, Superior has a significantly smaller market
position than in the building wire industry. Factors impacting sales growth in
this market include the construction and expansion of manufacturing plants, mine
expansion and consumer spending for hard goods. Due to the diversity of product
offerings within this industry, Superior's competition is fragmented across
product lines and markets served.
Superior sells its electrical wire and cable products nationally through an
internal sales force and through manufacturers' representatives. Its customer
base is large and diverse, consisting primarily of wholesale electrical and
specialty distributors, consumer product retailers and hardware wholesalers. No
single customer accounts for more than 10% of Superior's net sales in the
Electrical Group.
Prior to 1998, Essex served the wholesale electrical and specialty
distributors through a network of over 30 service centers and stocking locations
in the United States. In 1998, Essex (prior to its acquisition by Superior)
began an initiative to consolidate the service centers and stocking locations
into a smaller number of strategically located regional distribution centers
("RDCs"). These RDCs provide for centralized stocking of "off-the-shelf"
products, including substantially all of Superior's building and industrial
9
<PAGE>
wire products. To a lesser degree, these RDCs will provide regionally
centralized distribution for communication wire and cable and magnet wire (and
related insulation) products. Two RDCs have been opened to date. Superior
intends to establish additional RDCs over the next 18-month period in order to
be in the position to virtually eliminate all of its remaining remote stocking
locations. Superior believes that implementation of the RDC approach will
improve customer service through shorter lead times and improved order fill
rates, and will result in overall reductions in inventory carrying costs as well
as reductions in freight costs and warehousing and distribution expense.
RAW MATERIALS AND MANUFACTURING
The principal raw materials used by Superior in the manufacture of its wire
and cable products are copper, aluminum, bronze, steel, optical fibers and
plastics, such as polyethylene and polyvinyl chloride. Copper rod is the most
significant raw material used in Superior's manufacturing process. Superior
estimates it is the largest North American consumer of copper rod with over 900
million pounds used annually in its production process. Due to the importance of
copper to its business, Superior maintains a centralized metals operations that
manages copper procurement and provides vertical integration in the production
of copper rod and in scrap recycling.
Superior maintains five copper rod continuous casting units, strategically
located in proximity to many of its major wire producing plants to minimize
freight costs. These facilities convert copper cathode into copper rod which is
then shipped and utilized directly in Superior's manufacturing operations.
Through these continuous casting units, Superior is able to produce
approximately 65% of its copper rod requirements.
In addition to converting copper cathode into copper rod, Superior's metal
processing center also processes copper scrap (both internally generated scrap
as well as scrap purchased from other copper wire producers). Copper scrap is
processed in rotary furnaces, which also have refining capability to remove
impurities. Superior uses a continuous casting process to convert scrap material
directly into copper rod. Management believes that internal reclamation of scrap
copper provides greater control over the cost to recover Superior's principal
manufacturing by-product.
Superior purchases copper cathode and, to the extent not provided
internally, copper rod from a number of copper producers and metals merchants.
Generally, copper cathode and rod purchases are pursuant to contracts which
extend for a one-year period and are normally based on the COMEX price, plus a
premium to cover transportation and payment terms. Additionally, Superior, to a
limited extent, utilizes COMEX fixed price futures contracts to manage its
commodity price risk. Superior does not hold or issue such contracts for trading
purposes.
Historically, Superior has had adequate supplies of copper and other raw
materials available to it from producers and merchants, both foreign and
domestic. In addition, competition from other users of copper has not affected
Superior's ability to meet its copper procurement requirements. Although
Superior has not experienced any shortages in the recent past, no assurance can
be given that Superior will be able to procure adequate supplies of its
essential raw materials to meet its future needs.
The cost of copper has been subject to considerable volatility over the past
several years. Fluctuations in the cost of copper have not had a material impact
on profitability due to the ability of Superior in most cases to adjust product
pricing in order to properly match the price of copper billed with the copper
cost component of its inventory shipped.
Superior's manufacturing strategy is primarily focused on maximizing product
quality and production efficiencies while maintaining a high level of vertical
integration through internal production of its principal raw materials. In
addition to copper rod, Superior is also vertically integrated in the production
of magnet wire enamels and extrudable polymeric compounds. The Company believes
one of its primary cost and quality advantages in the magnet wire business is
the ability to produce most of its enamel and
10
<PAGE>
copper rod requirements internally. Similarly, the Company believes its ability
to develop and produce PVC and rubber compounds, which are used as insulation
and jacketing materials for many of its building wire, communication wire,
automotive and industrial wire products, provides competitive advantages because
greater control over the cost and quality of essential compounds used in
production can be achieved. These operations are supported by Superior's
metallurgical, chemical and polymer development laboratories.
Superior's export sales during the fiscal year ended April 30, 1999 and 1998
were $41.1 million and $10.9 million, respectively. Export sales on a pro forma
basis (assuming a full year impact from the Essex and Cvalim acquisitions) for
the fiscal year ended April 30, 1999 were $65 million. Superior's primary
markets for export sales are Latin America and Europe.
Backlog in the communications wire and cable segment typically consists of
3-6 weeks of sales depending on seasonal issues. Superior's other product lines
have no significant order backlog because they follow the industry practice of
manufacturing products on an ongoing basis to meet customer demand on a
just-in-time basis. The Company believes that the ability to supply orders in a
timely fashion is a competitive factor in the markets in which it operates.
Historically, sales returns have not had a material adverse effect on Superior's
results of operations.
The market for wire and cable products is highly competitive. Each of
Superior's businesses competes with at least one major competitor. However, due
to the diversity of Superior's product lines as a whole, no single competitor
competes with Superior across the entire spectrum of Superior's product lines.
Superior's diversity of products and diversity of end users insulates it from
adverse conditions in any one business unit or any one product line.
Many of Superior's products are made to industry specifications, and
therefore, may be interchangeable with competitors' products. Superior is
subject to competition in many markets on the basis of price, delivery time,
customer service and its ability to meet specialty needs. The Company believes
it enjoys strong customer relations resulting from its long participation in the
industry, emphasis on customer service, commitment to quality control,
reliability and substantial production resources. Furthermore, Superior's
distribution networks enable it to compete effectively with respect to delivery
time.
In response to the changing requirements of the communications industry,
Superior established a product development center during the fourth quarter of
fiscal 1997. This 60,000 square foot facility is located in Kennesaw, Georgia
and is dedicated to defining and creating new wire and cable systems that meet
the needs of the evolving communications networks. Recent projects include the
development of single mode and multimode fiber optic cable products for use in
LANs as well as telephone networks. Initial sales and shipments of these
products began in 1998, although they are not yet material to consolidated
sales.
Superior also has development projects underway for performance enhanced
copper-based communications wire products that are designed to meet the existing
and future needs of the telephone companies. Several of these projects have been
undertaken in conjunction with Superior's telephone company customers and
include the development of composite cables that incorporate copper twisted pair
wire and coaxial cable or optical fibers in a single cable construction.
Superior is also developing extensions of its UTP product line for certain LAN
datacom applications, including the development of enhanced Category 5 and
Category 6 UTP products.
Superior also operates research and development facilities in Lafayette and
Fort Wayne, Indiana. Research activities at the Lafayette facility are focused
on development of improved PVC and rubber compounds, which are used as
insulation and jacketing materials for many communication, automotive, building
and industrial wire products. At the Fort Wayne facility, Superior's
metallurgical and chemical labs are focused on the development of magnet wire
metal properties and processing qualities, as well as enhancement of enamels and
their application in the magnet wire manufacturing process.
11
<PAGE>
Aggregate research and development expenses of Superior during the fiscal
years ended April 30, 1997, 1998 and 1999 amounted to $2.2 million, $3.0 million
and $5.1 million, respectively. On a pro forma basis, research and development
expenses for the fiscal year ended April 30, 1999 amounted to $7 million.
Although Superior holds certain trademarks, licenses and patents, none is
considered to be material to its business.
RECENT DEVELOPMENTS--DISCONTINUED OPERATIONS
On May 28, 1999, Alpine, Premier, Alpine's 83.4% owned subsidiary engaged in
the refractories manufacture and installation business, Cookson, and PRI
Acquisition, Inc., Cookson's wholly owned subsidiary, entered into the Premier
Merger Agreement providing for the acquisition by Cookson of 100% of the capital
stock and business operations of Premier through the merger of PRI Acquisition,
Inc. into Premier (the "Premier Disposition"). The closing of the Premier
Disposition is subject to customary conditions and regulatory approvals and is
anticipated to occur during the second quarter of fiscal 2000. In connection
with the Premier Disposition, Cookson will assume or repay all of Premier's
existing indebtedness and will issue approximately 33.4 million ordinary shares
of Cookson and pay approximately $15.6 million in cash to Premier's stockholders
(subject to adjustment based on the working capital and indebtedness levels of
Premier at the time of the closing of the merger). In connection with the
Premier Disposition, Alpine also received from Premier the right to receive from
Minerals Trading, Inc. in the year 2001 a contingent payment based upon the
earnings through 2000 of the American Minerals business, which was spun-off to
Mineral's Trading, Inc. by American Premier Holdings, Inc. concurrently with
Alpine's acquisition of American Premier Holdings, Inc. in January 1998. Premier
has 16 manufacturing facilities throughout North America, five in the U.K. and
four in continental Europe.
The Company has accounted for Premier as a discontinued operation.
Accordingly, the operating results of Premier have been segregated from the
Company's continuing operations and are reported as a separate line item on the
statements of operations as discontinued operations. The Company has restated
its prior period consolidated financial statements to present Premier as a
discontinued operation. In fiscal 1997, 1998 and 1999, the Company recognized a
loss from the discontinued operations of Premier totaling $2.3 million, or $0.12
per diluted share, $194,000, or $0.01 per diluted share and $2.7 million, or
$0.15 per diluted share, respectively.
EMPLOYEES
As of April 30, 1999, Alpine employed 7,390 people, including 7,365 at
Superior and 25 at Alpine's corporate offices.
Approximately 3,975 persons employed at Superior are represented by unions.
Collective bargaining agreements expire at various times between 1999 and 2003,
with contracts covering 39% of Superior's unionized work force due to expire at
various times during the next fiscal year. The Company considers relations with
its employees to be satisfactory.
ENVIRONMENTAL MATTERS
Alpine's manufacturing operations are subject to extensive federal, foreign,
state and local environmental and land use laws and regulations relating to,
among other things, the storage, handling, disposal, emission, transportation
and discharge of hazardous substances, materials and waste products and
stringent permitting requirements. The Company does not believe that compliance
with environmental laws and regulations will have a material effect on the level
of capital expenditures of the Company or its businesses, financial condition,
liquidity or results of operations. No material expenditures relating to these
matters were made in fiscal 1997, 1998 or 1999. However, violation of, or
non-compliance with, such laws, regulations or permit requirements, even if
inadvertent, could result in an adverse impact on the operations, business,
financial condition, liquidity or results of operations of Alpine.
12
<PAGE>
Operations of Alpine, certain of its predecessors or certain of the
companies it has acquired have resulted in releases of hazardous substances or
wastes at sites currently or formerly owned or operated by the Company or at
sites to which wastes may have been sent for disposal. The Company is presently
involved in investigatory and remedial activities at certain sites, some of
which are being conducted under the oversight of governmental authorities. If it
is determined that past disposal practices or facility operations at other
currently or formerly owned, operated or used sites have resulted in releases of
regulated contaminants to soil or groundwater, investigation and remediation of
such contamination may be required, and if the contamination is found to be
substantial, it could have a material adverse effect on the operations, business
and financial results of Alpine.
In connection with certain acquisitions and divestitures, Alpine has also
assumed responsibility for and indemnified purchasers against certain
obligations and liabilities associated with contamination, if any, existing at
certain of its or its predecessors' current and former facilities and for
certain obligations and liabilities associated with contamination, if any, at
off-site locations to which the Company or its predecessors sent waste. For
example, in the Premier Merger Agreement (see Recent Developments-- Discontinued
Operations), the Company, subject to certain time and dollar limits, agreed to
indemnify Cookson and certain related parties for claims made pursuant to
environmental laws, which claims relate to real property formerly owned, leased
or operated by Premier or the off-site transportation, treatment, storage, or
disposal prior to the closing date of the Premier Disposition of hazardous
substances generated by Premier.
13
<PAGE>
ITEM 2. PROPERTIES
Alpine conducts its principal operations at the facilities set forth below:
<TABLE>
<CAPTION>
SQUARE
OPERATION LOCATION FOOTAGE LEASED/OWNED
- ------------------------------------------ -------------------------------- --------- ------------------------
<S> <C> <C> <C>
COMMUNICATIONS
OSP/Datacom............................. Chester, South Carolina 218,000 Owned
Hoisington, Kansas 257,000 Owned
Brownwood, Texas 328,000 Leased (expires 2013)
Tarboro, North Carolina 295,000 Owned
Winnipeg, Manitoba 190,000 Owned
Elizabethtown, Kentucky 163,000 Owned
Kennesaw, Georgia 58,000 Leased (expires 2002)
DNE..................................... Wallingford, Connecticut 65,000 Leased (expires 2007)
Superior Israel......................... Shaar Hanegav, Israel 240,000 Owned
Eilat, Israel 131,000 Owned
Haifa, Israel 155,000 Leased (expires 2003)
Carmiel, Israel 66,000 Leased (expires 1999)
Bet-Shean, Israel 183,000 Leased (expires 2002)
Maalot, Israel 35,000 Leased (expires 2003)
Nazareth, Israel 88,000 Leased (expires 2003)
OEM
Magnet Wire............................. Charlotte, North Carolina 26,000 Leased (expires 2001)
Fort Wayne, Indiana 181,000 Owned
Franklin, Indiana 35,000 (a)
Franklin, Tennessee 289,000 Leased (expires 2008)
Kendallville, Indiana 88,000 Owned
Rockford, Illinois 319,000 Owned
Vincennes, Indiana 267,000 Owned
Automotive Wire......................... Kosciusko, Mississippi 90,000 (b)
Orleans, Indiana 425,000 Owned
Athens, Georgia 30,000 Leased (expires 2016)
Insulation/Purchased Products........... Clifton Park, New York 22,000 Leased (expires 2016)
Newmarket, New Hampshire (two
facilities) 132,000 Owned
Rutland, Vermont 61,000 Owned
Willowbrook, Illinois 60,000 Leased (expires 2016)
United Kingdom.......................... Huyton, Quarry, U.K. 146,000 Owned
ELECTRICAL
Building Wire........................... Anaheim, California 174,000 Owned
Columbia City, Indiana 400,000 Owned
Pauline, Kansas 501,000 Owned
Sikeston, Missouri 189,000 Owned
Tiffin, Ohio 260,000 Owned
Industrial Wire......................... Florence, Alabama 129,000 Owned
Lafayette, Indiana 350,000 Owned
Pawtucket, Rhode Island 412,000 Owned
Phoenix, Arizona 34,000 Owned
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SQUARE
OPERATION LOCATION FOOTAGE LEASED/OWNED
- ------------------------------------------ -------------------------------- --------- ------------------------
<S> <C> <C> <C>
METALS PROCESSING......................... Columbia City, Indiana 75,000 Owned
Jonesboro, Indiana 56,000 Owned
THERMOPLASTICS FABRICATION................ Marion, Indiana 50,000 Owned
ADMINISTRATIVE OFFICES.................... New York, New York 5,400 Leased (expires 2002)
Atlanta, Georgia 31,000 Leased (expires 2001)
Fort Wayne, Indiana 295,000 Owned
Rishon Lezion, Israel 8,700 Leased (expires 1999)
</TABLE>
- ------------------------
(a) The Franklin, Indiana facility is approximately 70,000 square feet, of which
35,000 square feet is leased to Femco as a joint venture between the Company
and the Furukawa Electric Company, LTD., Tokyo, Japan ("Femco"). Femco
manufactures and markets magnet wire with special emphasis on products
required by Japanese manufacturers with production facilities in the United
States.
(b) Approximately 30,000 square feet is leased. The lease is renewed
automatically each year, not to exceed 99 years, from 1980.
In addition to the facilities described in the table above, Superior owns or
leases 32 warehousing and distribution facilities throughout the United States,
Canada and United Kingdom to facilitate the sale and distribution of its
products.
The Company believes that its plants are generally suitable and adequate for
the business being conducted and to service the requirements of its customers.
Capital spending plans are primarily designed to keep up with current
technology, to increase capacity in existing product lines and for cost
reduction initiatives. The extent of current utilization is generally consistent
with historical patterns and, in the view of management, is satisfactory. The
Company does not view any of its plants as being underutilized.
Most Superior plants operate on 24 hour-a-day schedules, on either a five
day or seven day per week basis. During fiscal 1999, Superior's facilities
operated at approximately 90% capacity.
ITEM 3. LEGAL PROCEEDINGS
The Company's operations are subject to environmental laws and regulations
governing, among other things, emissions into the air, discharges to water, the
use, handling and disposal of hazardous substances and the investigation and
remediation of soil and groundwater contamination both on-site at Company
facilities and at off-site disposal locations. Liabilities under these laws and
regulations for on-site contamination at certain Company facilities are the
result of historic disposal activities, including activities attributable to
Company operations and those occurring prior to the use of a facility by the
Company. Off-site liability includes clean-up responsibilities at various sites,
to be remedied under federal or state statutes, for which the Company has been
identified by the United States Environmental Protection Agency (the "EPA") (or
the equivalent state agency) as a Potentially Responsible Party ("PRP").
Superior's wholly owned subsidiary, Essex, has been named as a PRP at a
number of sites. Most of the sites for which Essex is currently named as a PRP
are covered by an indemnity from United Technologies Corporation ("UTC")
provided in connection with the February 1988 sale of Essex by UTC to Essex's
previous stockholders. The sites covered by the indemnity are handled directly
by UTC and all payments required to be made are paid directly by UTC. Almost
exclusively, these sites are mature sites where allocations have been settled
and remediation is well underway or has been completed. UTC also provided an
additional environmental indemnity relating to liabilities arising from
environmental events, conditions or circumstances existing at or prior to
February 29, 1988, that only became known to UTC in the five-year period
commencing February 29, 1988. As to such liabilities, Essex is responsible for
the first $4.0 million incurred. To date Essex has incurred approximately $0.2
million in the basket. Apart from the indemnified sites and those subject to the
basket, Essex has been named as a PRP or a defendant in a civil lawsuit at
15
<PAGE>
five sites, Superior's wholly owned subsidiary, Superior Telecommunications,
Inc. has been named as a PRP at one site, and Premier is a PRP at one site. The
Company has provided a reserve in the amount of $1.8 million to cover its
environmental contingencies as of April 30, 1999. This accrual is based on
management's best estimate of the Company's exposure in light of relevant
available information. The Company does not believe that any of the
environmental proceedings in which it is involved, and for which it may be
liable, will individually, or in the aggregate, have a material adverse effect
upon its business, financial condition, liquidity or results of operations,
although there can be no assurance that future developments will not alter this
conclusion.
Since approximately 1990, Essex has been named as a defendant in a number of
product liability lawsuits brought by electricians and other skilled tradesmen
claiming injury from exposure to asbestos found in electrical wire products
produced many years ago. At July 1, 1999, the number of cases pending against
Essex was 104, involving approximately 2,274 claims. The Company's strategy is
to defend these cases vigorously. The Company believes that its liability, if
any, in these matters and the related defense costs will not have a material
adverse effect either individually, or in the aggregate, upon its business,
financial condition, liquidity or results of operations. There can be no
assurance, however, that future developments will not alter this conclusion.
The Company and certain of its subsidiaries are defendants in other
lawsuits, certain of which lawsuits are insured claims arising in the ordinary
course of the operations of the Company and such subsidiaries and, while the
outcome of litigation can never be predicted with certainty, management believes
that none of these lawsuits, either individually or in the aggregate, will have
a material adverse effect on the Company's financial condition, liquidity or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Alpine did not submit any matter to a vote of security holders during the
fourth quarter of the fiscal year ended April 30, 1999.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
(a) Market Information
Alpine's Common Stock, $0.10 par value (the "Alpine Common Stock"), is
listed on the New York Stock Exchange (the "NYSE") under the symbol AGI. The
following table sets forth the range of high and low daily closing sales prices
for the Alpine Common Stock for the last two fiscal years.
<TABLE>
<CAPTION>
HIGH LOW
------------ ------------
<S> <C> <C>
Fiscal 1998:
First Quarter............................................................... $ 1211/16 $ 91/8
Second Quarter.............................................................. 155/16 11
Third Quarter............................................................... 207/8 1413/16
Fourth Quarter.............................................................. 213/4 183/16
Fiscal 1999:
First Quarter............................................................... $ 217/8 $ 161/2
Second Quarter.............................................................. 181/4 133/16
Third Quarter............................................................... 183/4 131/8
Fourth Quarter.............................................................. 141/4 93/8
</TABLE>
(b) Holders
The Company's transfer agent is American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005.
At July 26, 1999, 15,445,129 shares of Alpine Common Stock were issued and
outstanding, and there were approximately 6,000 record holders thereof.
(c) Dividends
Alpine has no recent history of paying cash dividends and does not currently
intend to declare cash dividends on the Alpine Common Stock in the foreseeable
future. Any payment of future cash dividends and the amounts thereof will be
dependent upon the Company's earnings, financial requirements and other factors,
including contractual obligations.
On February 17, 1999, the Board of Directors of the Company declared a
dividend distribution of one preferred stock purchase right (a "Right") for each
outstanding share of Alpine Common Stock, payable to the stockholders of record
on March 1, 1999. The Board of Directors also authorized and directed the
issuance of one Right with respect to each share of Alpine Common Stock issued
thereafter until the date of distribution of separate certificates evidencing
the Rights (or the earlier redemption or expiration of the Rights).
Subject to certain exceptions, each Right, when it becomes exercisable,
entitles the registered holder to purchase one one-hundredth of a share of
Series A Junior Participating Preferred Stock, $1.00 par value, at a price of
$75, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement, dated as of February 17, 1999, between the Company
and American Stock Transfer & Trust Company, as Rights Agent.
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL FINANCIAL DATA
Set forth below are certain selected historical consolidated financial data
of Alpine. This information should be read in conjunction with the Consolidated
Financial Statements of Alpine and related notes thereto appearing elsewhere
herein and "Item 7. Management's Discussion and Analysis of Financial
17
<PAGE>
Condition and Results of Operations." The selected historical consolidated
financial data for, and as of the end of, each of the fiscal years in the
five-year period ended April 30, 1999 are derived from the audited consolidated
financial statements of Alpine.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, (1)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................................... $ 164.5 $ 410.4 $ 463.8 $ 516.6 $ 1,143.2
Cost of goods sold............................................. 142.1 362.9 384.3 417.4 910.7
--------- --------- --------- --------- ---------
Gross profit................................................. 22.4 47.6 79.6 99.2 232.6
Selling, general and administrative expenses................... 14.7 20.2 25.3 28.8 93.9
Nonrecurring and unusual charges............................... -- -- -- -- 7.3
Amortization of goodwill....................................... 1.0 1.4 1.7 1.7 8.4
--------- --------- --------- --------- ---------
Operating income............................................. 6.6 26.0 52.5 68.7 123.1
Interest (expense)............................................. (5.4) (19.3) (13.8) (10.8) (60.1)
Gain on sale of subsidiary stock............................... -- -- 80.4 -- --
Other income, net.............................................. 0.1 1.7 2.0 4.1 1.9
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes,
minority interest and extraordinary (loss)................. 1.3 8.3 121.2 62.0 64.8
Provision for income taxes................................... (0.3) (1.3) (53.9) (24.8) (28.0)
--------- --------- --------- --------- ---------
Income from continuing operations before distributions on
preferred securities of subsidiary trust, minority interest
and extraordinary (loss)..................................... 1.0 7.0 67.3 37.2 36.9
Distributions on preferred securites of subsidiary trust....... -- -- -- -- (1.3)
--------- --------- --------- --------- ---------
Income from continuing operations before minority interest and
extraordinary (loss)......................................... 1.0 7.0 67.3 37.2 35.6
Minority interest in earnings of subsidiaries, net............. -- -- (8.1) (20.3) (18.7)
--------- --------- --------- --------- ---------
Income from continuing operations before extraordinary
(loss)....................................................... 1.0 7.0 59.2 16.9 16.9
(Loss) from discontinued operations(2)......................... (7.1) (4.0) (2.3) (0.2) (2.7)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary (loss)...................... (6.0) 3.0 56.8 16.7 14.2
Extraordinary (loss) on early extinguishment of debt, net of
tax.......................................................... -- (4.9) (20.1) (1.5) (0.6)
--------- --------- --------- --------- ---------
Net income (loss).............................................. $ (6.0) $ (1.9) $ 36.7 $ 15.3 $ 13.6
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, (1)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) PER SHARE OF COMMON STOCK:
BASIC
Income from continuing operations............................... $ 0.01 $ 0.33 $ 3.28 $ 0.99 $ 1.03
(Loss) from discontinued operations............................. (0.39) (0.22) (0.13) (0.01) (0.17)
Extraordinary (loss) on early extinguishment of debt............ -- (0.27) (1.12) (0.09) (0.04)
Preferred stock redemption premium.............................. -- -- (0.29) -- --
--------- --------- --------- --------- ---------
Net income (loss) per share of common stock..................... $ (0.38) $ (0.16) $ 1.73 $ 0.90 $ 0.82
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DILUTED
Income from continuing operations............................... $ 0.01 $ 0.33 $ 2.98 $ 0.90 $ 0.91
(Loss) from discontinued operations............................. (0.39) (0.22) (0.12) (0.01) (0.15)
Extraordinary (loss) on early extinguishment of debt............ -- (0.27) (1.01) (0.08) (0.04)
Preferred stock redemption premium.............................. -- -- (0.26) -- --
--------- --------- --------- --------- ---------
Net income (loss) per share of common stock..................... $ (0.38) $ (0.16) $ 1.59 $ 0.81 $ 0.72
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................................. $ 27.1 $ 103.8 $ 99.0 $ 64.8 $ 247.4
Total assets.................................................... 140.2 318.7 303.8 320.4 2,109.0
Total debt...................................................... 56.9 202.7 140.8 97.1 1,445.1
Preferred stock................................................. 17.3 11.8 1.9 0.4 0.4
Total stockholders' equity...................................... 44.7 43.1 54.4 77.5 56.4
</TABLE>
- ------------------------
(1) Alpine's results of operations have been significantly impacted by
acquisitions. On May 11, 1995, Superior completed the acquisition of Alcatel
N.A. for $103.4 million in cash. On May 5, 1998, Superior acquired 51% of
Cables of Zion for approximately $25 million in cash. On November 27, 1998,
Superior acquired 81% of Essex for $770 million in cash and on March 31,
1999 the remaining 19% through the issuance of $167 million of 8 1/2% trust
convertible preferred securities of Superior Trust I. On December 31, 1998,
Cables of Zion acquired Cvalim for $41.2 million in cash.
(2) On May 28, 1999, the Company entered into a merger agreement providing for
the disposition by merger of Premier, its 83.4% owned refractories business
segment. In July 1995, Alpine completed the spin-off of its information
display segment, PolyVision Corporation, which consisted of Alpine
PolyVision Inc., Posterloid Corporation and Information Display
Technologies, Inc. The results of operations for these segments have been
reflected as (loss) from discontinued operations for the periods presented.
(See Note 7 to Alpine's Consolidated Financial Statements).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Alpine Group, Inc. (together with its subsidiaries, unless the context
otherwise requires, "Alpine" or the "Company") is an industrial holding company
which, through its 51.7% owned subsidiary, Superior TeleCom Inc. (together with
its subsidiaries, unless the context otherwise requires, "Superior"), is
principally engaged in the manufacture and sale of wire and cable products,
including communications, electrical and magnet wire and cable. Superior
conducts its operations through three operating groups covering the following
primary industry segments: (i) communications; (ii) original equipment
manufacturer ("OEM"); and (iii) electrical. The communications segment includes
communications wire and cable products sold to telephone companies, distributors
and systems integrators. The OEM segment includes magnet wire and insulation
materials for motors, transformers and electrical controls sold primarily to
OEM's, as well as automotive and specialty wiring assemblies for automobiles and
trucks The electrical
19
<PAGE>
segment includes building and industrial wire for application in commercial and
residential construction and industrial facilities.
Prior to the acquisitions of Essex and Cables of Zion (see Note 6 to the
consolidated financial statements), Superior's operations consisted principally
of its North American communications wire and cable business. The Essex
Acquisition, which occurred on November 27, 1998, resulted in the addition of
the OEM and electrical segment product lines as well as incremental sales of
communications wire and cable. The May 1998 acquisition of 51% of Cables of Zion
and Cables of Zion's subsequent acquisition of its major Israeli competitor,
Cvalim, on December 31, 1998 resulted in the addition to the Company's operating
results of its Israeli operations ("Superior Israel"), which operations are
included in the communications segment.
The aforementioned acquisitions were accounted for under the purchase method
of accounting; accordingly, the results of operations included herein (including
the related segment data) reflect (i) the impact of the Essex operations for the
five month period ended April 30, 1999 and (ii) the impact of the Superior
Israel operations during the fiscal 1999 period.
Alpine also owns 83.4% of Premier Refractories International Inc.
("Premier"), a major refractories products and services company. On May 28,
1999, Alpine and Premier entered into an Agreement and Plan of Merger with
Cookson Group plc ("Cookson") and PRI Acquisition, Inc., Cookson's wholly-owned
subsidiary, providing for the acquisition by Cookson of 100% of the capital
stock and business operations of Premier through the merger of PRI Acquisition,
Inc. into Premier (the "Premier Disposition"). As a result of this transaction,
which is anticipated to close during the second quarter of the Company's fiscal
year 2000, the Company has classified Premier as a discontinued operation (see
Note 5 to the consolidated financial statements).
RESULTS OF CONTINUING OPERATIONS
The following comparative table includes sales and operating income data for
Alpine on a segment basis. Such segment data is presented on an historical
reporting basis for the fiscal years ended April 30, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Communications............................................... $ 463.8 $ 516.6 $ 626.8
OEM.......................................................... -- -- 269.2
Electrical................................................... -- -- 247.2
--------- --------- ---------
Combined net sales......................................... $ 463.8 $ 516.6 $ 1,143.2
--------- --------- ---------
--------- --------- ---------
Operating income (loss):
Communications............................................... $ 64.1 $ 81.0 $ 111.9
OEM.......................................................... -- -- 32.4
Electrical................................................... -- -- 15.4
Corporate and other.......................................... (9.9) (10.6) (20.9)
Nonrecurring and unusual charges............................. -- -- (7.3)
Amortization of goodwill..................................... (1.7) (1.7) (8.4)
--------- --------- ---------
Combined operating income.................................. $ 52.5 $ 68.7 $ 123.1
--------- --------- ---------
--------- --------- ---------
</TABLE>
20
<PAGE>
IMPACT OF COPPER PRICE FLUCTUATIONS ON OPERATING RESULTS
Copper is one of the principal raw materials used in Superior's wire and
cable product manufacturing. Fluctuations in the price of copper do affect per
unit product pricing and related revenues. However, the cost of copper has not
had a material impact on Superior's profitability due to the ability of
Superior, in most cases, to adjust prices billed for its products in order to
properly match the price of copper billed with the copper cost component of its
inventory shipped.
RESULTS OF OPERATIONS
Net sales for the fiscal year ended April 30, 1999 reflected the revenue
contribution from the Superior Israel acquisitions in May 1998 and December 1998
and the Essex Acquisition in November 1998. Excluding the impact of these
acquisitions, both revenue and profitability during fiscal 1999 continued to
improve, reflecting strong demand and improving margins as Superior continues to
focus on (i) reducing manufacturing costs by lowering raw material prices and
improving manufacturing production efficiencies, (ii) controlling selling,
general and administrative expenses and (iii) managing working capital to
enhance operating cash flow and capital available for business expansion and
debt reduction.
In fiscal 1999, net sales were $1,143.2 million, representing an increase of
$626.6 million, or 121%, as compared to fiscal 1998 net sales of $516.6 million.
The increase in net sales in fiscal 1999 resulted from a number of factors
including: (1) net sales from the acquired operations of Essex and Superior
Israel and (2) the continued growing demand for copper communications wire and
cable products within Superior's existing communications segment, which growth
is attributable to the increase in copper-based telephone and data access lines
and increased maintenance requirements by Superior's major telephone company
customers, offset partially by the impact of lower copper prices in fiscal 1999.
In fiscal 1998, net sales (which consisted entirely of sales within the
communications segment) were $516.6 million, representing an increase of $52.8
million, or 11.4%, as compared to fiscal 1997 net sales of $463.8 million. The
increase in net sales in fiscal 1998 resulted from: (1) increased demand due to
the growth in telephone and data access lines and increased maintenance spending
by major telephone company customers; (2) an increase in market share resulting
from multi-year supply agreements entered into with several of Superior's major
telephone company customers during fiscal 1997 and 1998; and (3) the impact of
price increases instituted on substantially all of Superior's long-term supply
agreements with its major telephone company customers.
Along with the comparative increase in net sales in fiscal 1999 and 1998,
the Company also achieved substantial growth in gross profit and an expansion of
its gross margin percentage during such fiscal periods. In fiscal 1999, gross
profit increased $133.4 million, or 134%, to $232.6 million, as compared to
fiscal 1998. In fiscal 1998, the gross profit was $99.2 million, representing a
comparative increase in gross profit of $19.7 million, or 24.7%, as compared to
fiscal 1997.
The comparative increase in gross profit for fiscal 1999 included $114.8
million in gross profit contribution from the acquired Essex and Superior Israel
operations as well as an increase in gross profit contribution from Superior's
existing communications segment operations of $18.8 million. In fiscal 1998 the
comparative increase in gross profit of $19.7 million, or 24.7%, was wholly
attributable to Superior's existing communications segment operations.
The increase in the gross margin percentage from 17.2% in 1997 to 19.2% in
1998 and to 20.3% in 1999 was attributable to the communications segment, where
the impact of substantial manufacturing cost reductions and efficiencies coupled
with copper adjusted price increases have given rise to an approximate 5.8%
increase in this segment's gross margin percentage from the fiscal 1997 period
to the fiscal 1999 period. The overall gross margin percentage was negatively
impacted in fiscal 1999 as a result of lower margins associated with the
acquired OEM and Electrical segments of Essex and lower margins in the acquired
Superior Israel operations.
21
<PAGE>
Selling, general and administrative expenses ("SG&A expenses") increased
from $25.3 million in fiscal 1997 to $28.8 million in fiscal 1998 and to $93.9
million in fiscal 1999. The comparative increase in SG&A expenses of $65.1
million during fiscal 1999 was primarily due to incremental SG&A expenses
associated with the acquired operations of Essex and Superior Israel. In
connection with these acquisitions, Superior has recently initiated significant
cost reduction actions which are expected to result in significant SG&A expense
savings in future periods. The increase in SG&A expenses in fiscal 1998 was
attributable to costs associated with incremental sales, marketing and
administrative staff to support the increased level of sales activity and the
expansion of product development activities, including the establishment and
staffing of a product development facility in the fourth quarter of fiscal 1997.
The Company incurred nonrecurring and unusual charges during fiscal 1999 of
$7.3 million, consisting of (i) a $2.9 million restructuring charge recorded by
Superior Israel relating to planned manufacturing plant consolidations and
overhead rationalization associated with the acquisition of Cvalim and (ii) $4.4
million in charges associated with the review and evaluation of an information
system at Essex.
As a result of the Essex Acquisition, amortization of goodwill increased to
$8.4 million in fiscal 1999 from $1.7 million in both fiscal 1998 and 1997.
Commensurate with the growth in net sales and gross profit, the Company's
operating income increased substantially in both fiscal 1999 and fiscal 1998.
Excluding the impact of nonrecurring and unusual charges, operating income in
fiscal 1999 was $130.4 million, representing an increase of 90%, as compared to
fiscal 1998 operating income of $68.7 million. The increase in fiscal 1999
operating income resulted from: (i) the Essex and Superior Israel acquisitions,
which acquired operations contributed $38.6 million in operating income; (ii) a
7% comparative increase in acquired net sales of Superior's existing
communications segment; and (iii) a strong comparative improvement in the
existing communications segment's gross margin percentage resulting from cost
reductions and other manufacturing and operating efficiencies achieved during
the year. The increase in operating income in fiscal 1998, as compared to fiscal
1997, was $16.2 million, or 30.8%, which increase was attributable to the
comparative increase in the communications segment's net sales in fiscal 1998
coupled with an expansion in the gross margin percentage resulting from copper
adjusted price increases and manufacturing cost reductions.
Interest expense in fiscal 1999 was $60.1 million, representing an increase
of $49.4 million, as compared to fiscal 1998 interest expense of $10.8 million.
This comparative increase was directly attributable to acquisition-related debt
associated with the acquisition of Essex and Superior Israel. Interest expense
in fiscal 1998 was $10.8 million, representing a decrease of $3.0 million, or
21.8%, as compared to fiscal 1997 interest expense of $13.8 million. The
comparative decline is attributable to debt reduction achieved through the
application of operating cash flow during such period.
In fiscal 1999, the provision for income tax expense was $28.0 million,
representing an effective tax rate of 43.1%. This compares with fiscal 1998 and
1997 income tax expense of $24.8 million and $53.9 million, respectively,
representing effective tax rates of 40.0% and 44.5%, respectively. The increase
in effective tax rate in fiscal 1999 was the result of the increase in
nondeductible goodwill associated with the Essex Acquisition.
The minority interest charge of $18.7 million in fiscal 1999 represented (i)
the approximate 49% minority stockholders' interest in Superior's net income,
(ii) the approximate 49% minority stockholders' interest in Superior Israel's
net income from the date of acquisition and (iii) the approximate 19% minority
interest in Essex's net income from November 27, 1998 until the final completion
of the Essex merger on March 31, 1999. The minority interest charge of $8.1
million in fiscal 1997 and $20.3 million in fiscal 1998 represented the
approximate 49% minority stockholders' interest in Superior's net income from
October 17, 1996 (the date of its initial public offering) through the end of
fiscal 1997 and for the full fiscal year 1998, respectively.
Loss from discontinued operations, net of tax, for fiscal 1999 was $2.7
million, or $0.15 per diluted share. This compares to a net loss for fiscal 1998
of $0.2 million, or $0.01 per diluted share, and to a net loss for fiscal 1997
of $2.3 million, or $0.12 per diluted share.
22
<PAGE>
Net income before extraordinary loss was $14.2 million in fiscal 1999, $16.7
million in fiscal 1998 and $56.8 million in fiscal 1997. Excluding the effect of
discontinued operations and nonrecurring and unusual items, net income per
diluted share was $1.00 in fiscal 1999, $0.90 in fiscal 1998 and $0.80 in fiscal
1997.
In fiscal 1999, fiscal 1998 and fiscal 1997, the Company incurred an after
tax extraordinary loss on early extinguishment of debt of $0.6 million, $1.5
million and $20.1 million, respectively (See Note 10 to Alpine's Consolidated
Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
For the twelve months ended April 30, 1999, the Company generated $68.6
million in cash flow from continuing operating activities, consisting of $64.9
million in income generated from operations (net income plus non-cash charges)
reduced by $3.7 million in cash flow used for net working capital changes. The
major working capital changes included a $19.7 million increase in accounts
receivable and a $17.0 million increase in inventories, offset by a $16.2
million decrease in other current assets and a $23.8 million increase in
accounts payable and accrued expenses. Cash used by investing activities for
continuing operations amounted to $1.2 billion, consisting principally of $1.1
billion in cash paid for the acquisitions of Essex, Cables of Zion and Cvalim
and $43.9 million in capital expenditures. Cash provided by financing activities
for continuing operations amounted to $1.1 billion, consisting principally of
$1.2 billion in acquisition-related borrowings under various term loans, offset
by $31.7 million used for debt issuance costs, $32.5 million used for treasury
share repurchases and $15.9 million used for subsidiary stock purchases.
SUPERIOR TELECOM
As discussed in Note 6 to the accompanying consolidated financial
statements, Superior completed the acquisition of all of the outstanding common
stock of Essex on March 31, 1999. The acquisition consisted of a cash tender
offer for 81% of the outstanding Essex common stock, completed in November 1998,
and an exchange of $167 million in 8 1/2% Company-obligated Mandatorily
Redeemable Trust Convertible Preferred Securities (the "Superior Trust
Preferred") for the remaining 19% of Essex common stock outstanding in March
1999. In connection with the Essex Acquisition, Superior entered into a $1.15
billion amended and restated credit agreement (the "Credit Agreement") and a
$200 million senior subordinated credit agreement (the "Sub Notes"). Proceeds
from these financing arrangements, amounting to approximately $1.15 billion,
were used to (i) pay $770 million, representing the cash portion of the Essex
Acquisition purchase price, (ii) refinance approximately $84 million under
Superior's existing credit facility, (iii) refinance approximately $275 million
of Essex's existing debt, and (iv) pay related transaction expenses. Obligations
under the Credit Agreement and the Sub Notes are secured by substantially all of
the assets of Superior and its domestic subsidiaries, and by the common stock of
Superior's domestic subsidiaries and 65% of the common stock of its foreign
subsidiaries. The Credit Agreement and Sub Notes contain customary performance
and financial covenants. At April 30, 1999, the Company had $176.5 million in
excess availability under the Credit Agreement.
In addition to financing provided by the Credit Agreement and Sub Notes,
Superior, through Essex, has financing availability under a receivable
securitization program providing for up to $160 million in short-term financing
through the issuance of secured commercial paper. The receivable securitization
program expires on November 30, 1999, although it may be extended for successive
one-year periods, subject to agreement. At April 30, 1999, $127.6 million was
outstanding under this program bearing an interest rate of 5.32%.
As discussed in Note 6 to the accompanying consolidated financial
statements, Superior acquired 51% of Cables of Zion on May 5, 1998 and financed
the $25.0 million cash purchase price through borrowings under its existing
revolving credit facility. On December 31, 1998, Cables of Zion completed the
23
<PAGE>
acquisition of all of the business and certain operating assets of Cvalim for
$41.2 million in cash. In connection with this acquisition, Cables of Zion
entered into a $83.0 million U.S. dollar equivalent credit facility, consisting
of a $53.0 million term loan and a $30.0 million revolving credit facility.
Proceeds from this financing were used to finance the acquisition, pay related
expenses and provide for working capital requirements of Cables of Zion.
Obligations under this credit facility are secured by all of the assets of
Cables of Zion. The credit facility contains customary performance and financial
covenants. At April 30, 1999, Cables of Zion had $29.9 million in excess
availability under its term loan and revolving credit facility.
Superior's principal debt service commitments for the next 12 months amount
to $65.1 million and capital expenditures are expected to approximate $75-$85
million. Management anticipates that Superior will generate sufficient cash
flows from its operating activities to meet its annual principal debt service
and capital expenditure commitments. However, should any shortfall arise due to
working capital fluctuations or other factors, excess funds available under
Superior's credit facilities should be sufficient to cover such shortfall.
ALPINE CORPORATE
As of April 30, 1999, Alpine had corporate cash, cash equivalents and
marketable securities (excluding its investment in Superior common stock) of
$32.2 million. Alpine also owns approximately 10.2 million common shares
(representing 51.7% common share ownership) of Superior (NYSE:SUT), which, based
on the closing price on July 26, 1999, had a market value of approximately
$288.2 million and a consolidated carrying value as recorded by the Company (net
of minority interest) of approximately $47.4 million. Superior common stock
owned by Alpine with a market value of approximately $87.1 million is pledged as
collateral to secure certain debt of Alpine. Additionally, upon completion of
the Premier Disposition (including payments for related expenses and other
items), Alpine expects to own approximately 33.4 million ordinary shares of
Cookson, which, based on current trading values on the London Stock Exchange,
have a fair market value of $113 million. Further, as a result of the Premier
Disposition, Cookson will assume or repay all existing indebtedness of Premier
($300.3 million at April 30, 1999), including $60 million in Premier bank debt
which is currently guaranteed by Alpine and secured by Superior common stock
owned by Alpine.
Alpine's primary commitments over the next 12-month period include funding
of corporate overhead expenses and interest payments on approximately $60
million in Alpine debt, which debt was incurred principally to finance treasury
stock repurchases. Total annual funding for Alpine corporate overhead and
interest expense is expected to approximate $11-$13 million.
The Superior credit arrangements include limitations on dividends or other
payments made by its subsidiaries to Alpine. For the next 12-month period,
Alpine expects to fund its aforementioned annual commitments from allowable
management fees payable by Superior to Alpine, from cash dividends from Superior
and Cookson and from interest income, with any shortfall funded from Alpine's
existing corporate cash, cash equivalents and marketable securities reserves.
DERIVATIVE FINANCIAL INSTRUMENTS
To a limited extent, the Company uses forward fixed price contracts and
derivative financial instruments to manage foreign currency exchange and
commodity price risks. To protect the Company's anticipated cash flows from the
risk of adverse foreign currency exchange fluctuations for firm sales and
purchase commitments, the Company enters into foreign currency forward exchange
contracts. Superior's principal raw material, copper, experiences marked
fluctuations in market prices, thereby subjecting the Company to copper price
risk with respect to copper purchases on fixed customer sales contracts. Forward
fixed price contracts and derivative financial instruments in the form of copper
futures contracts are utilized by the Company to reduce those risks. The Company
does not hold or issue financial instruments
24
<PAGE>
for financial or trading purposes. The Company is exposed to credit risk in the
event of nonperformance by counterparties for foreign exchange forward
contracts, metal forward price contracts and metals futures contracts; however,
the Company does not anticipate nonperformance by any of these counterparties.
The amount of such exposure is generally the unrealized gains with respect to
the underlying contracts.
YEAR 2000
OVERVIEW
The Year 2000 problem is the result of computer programs having been written
using two digits (rather than four) to define the applicable year, thus not
properly recognizing dates after December 31, 1999. The six-digit date (YYMMDD)
has become the standard for date representations and is embedded in a multitude
of computer programs and computer chips. Information Technology (IT) hardware,
"embedded" technology, such as microprocessors, or software that is
date-sensitive may recognize a date using "00" as the year 1900 rather than the
Year 2000, which could result in miscalculations or system and mechanical
failures. The Company does not manufacture or sell products with embedded
technology.
During fiscal 1997 and 1998, the Company established project teams
responsible for identifying and resolving Year 2000 issues. These efforts
include identification and review of internal operating systems and
applications, and customer projects and services, as well as discussions with
information providers and other key suppliers to the business. At this time,
based upon the efforts taken to date and those yet to be taken, the Company does
not expect any serious disruptions in its business operations and, therefore,
does not anticipate any material negative effect upon its revenues or earnings
as a result of the Year 2000 issue. Remediation costs for problems identified
thus far are not expected to be material to the Company's consolidated financial
position, liquidity or results of operations. The Company has established a
timetable for resolving Year 2000 issues so as not to interrupt ongoing
operations.
THE COMPANY'S STATE OF READINESS
The Year 2000 project plan, including assessment, improvement, testing and
implementation, has been established. The assessment phase is 99% complete and
should be completed by August 1999 upon receipt of all remaining vendor and
supplier Year 2000 readiness inquiries.
Assessment of the Year 2000 compliance of third parties with whom the
Company has material relationships is in process. The Company's material third
party relationships include the following:
(1) Raw material vendors: The Company's raw material purchases are through
third party raw material vendors. All mission critical raw material
vendors have responded favorably to the Company's Year 2000 readiness
inquiry;
(2) Equipment vendors: The response to the Year 2000 readiness inquiries
from equipment vendors, which include vendors of all embedded chip
equipment, is at 95%;
(3) Service providers: The response to the Year 2000 readiness inquiries
from third party service providers, which include utilities, phone
service and all facility related services, is at 95%; and
(4) Software vendors: The Company has upgraded all purchased software to
Year 2000 compliant versions and is in the testing phase.
The responses received, thus far, from the Company's third party vendors and
suppliers indicate compliance on or before August 1999. The preliminary
assessment of internal IT and non-IT systems has been completed. Internal
non-compliant items have been identified and prioritization of internal
non-compliant items is in process. A system for tracking remediation has been
established and non-compliant items identified are expected to be completed by
August 1999. Based on the findings of the planning and assessment phases
completed to date, the Company does not believe independent verification or
validation processes will be necessary.
25
<PAGE>
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
The current estimate of the cost of remediation and equipment and software
replacement ranges between $7.00 million and $7.25 million, of which
approximately 50% has been incurred to date, and is summarized below.
Approximately one-half of the remaining $3.5 million is to be paid to external
parties for purchases of new systems and equipment.
<TABLE>
<S> <C>
Code modification and testing: $5.95--$6.16 million
Personal computer, software and other $1.05--$1.09 million
upgrades:
</TABLE>
Approximately 12% of the total IT budget for 1998 and 1999 has been
allocated for code modification. Such costs are funded through cash flows from
operations and are expensed as incurred. The personal computer and purchased
software upgrades are costs incurred in the ordinary course of business and are,
therefore, typically capitalized costs.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES AND THE COMPANY'S CONTINGENCY PLANS
A most reasonably likely worst case Year 2000 scenario is not known at this
time. This determination will be made after the receipt of the remaining
material third party questionnaires. However, the shipment of product to
customers is expected to continue with minimal interruption and no material loss
of revenues is anticipated. The Year 2000 project has had minimal impact on the
schedule of other major IT projects.
The Company has not completed a contingency plan, but will by August 31,
1999. Each manufacturing facility will incorporate Year 2000 into their existing
disaster contingency plan. The contingency plan will ensure that: (i) adequate
levels of inventory will be on hand to mitigate the impact of any potential
short-term disruptions in production; (ii) adequate supply of raw materials will
be available from alternate sources; and (iii) the necessary backup measures for
computer processing are identified.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk primarily relates to interest rates on
long-term debt. For example, a one percent increase in interest rates affecting
the Company's $1.15 billion Credit Agreement and its $200 million Sub Notes
would increase annual interest expense by approximately 11.5%, or $9.8 million.
In addition, the Company has interest rate swaps on $400 million principal
amount, with a fixed LIBOR rate of 4.97%, expiring December 10, 1999 and on $200
million principal amount, with a fixed LIBOR rate of 5.07%, expiring December
10, 2001.
EXCEPT FOR THE HISTORICAL INFORMATION HEREIN, THE MATTERS DISCUSSED IN THIS
ANNUAL REPORT ON FORM 10-K INCLUDE FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE A
NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY SIGNIFICANTLY BASED
ON A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO, RISKS IN PRODUCT AND
TECHNOLOGY DEVELOPMENT, MARKET ACCEPTANCE OF NEW PRODUCTS AND CONTINUING PRODUCT
DEMAND, THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING, CHANGING ECONOMIC
CONDITIONS, INCLUDING CHANGES IN SHORT-TERM INTEREST RATES, AND FOREIGN EXCHANGE
RATES AND OTHER RISK FACTORS DETAILED IN THE COMPANY'S MOST RECENT FILINGS WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Alpine's Consolidated Financial Statements at April 30, 1998 and 1999 and
for each of the three years in the period ended April 30, 1999 and the report of
the independent accountants thereon and financial statement schedules required
under Regulation S-X are submitted herein as a separate section following Item
14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item is incorporated herein by reference to
Alpine's definitive Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this report ("Alpine's Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
Alpine's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to
Alpine's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to
Alpine's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1), (a)(2) See the separate section of this report following Item 14 for
a list of financial statements and schedules filed herewith.
(a)(3) Exhibits as required by Item 601 of Regulation S-K are listed in Item
14(c) below.
None.
ITEM 14(B) REPORTS ON FORM 8-K
(a) During the fourth quarter of fiscal 1999, the Company filed two Current
Reports on Form 8-K. The first report, filed February 10, 1999, which was
supplemented by Amendment No. 1 thereto filed March 15, 1999, contained
financial statements required by Item 7 with respect to the Essex Acquisition,
including financial statements of the business acquired and unaudited pro forma
condensed combined financial statements of the Company. On February 18, 1999,
the Company filed a report with respect to Item 5, which reported the
declaration by the Board of Directors of the Company of a dividend distribution
of one preferred stock purchase right for each outstanding share of Alpine
Common Stock.
ITEM 14(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
2(a) Stock Purchase Agreement, dated February 14, 1992, by and between Alpine and Dataproducts
Corporation, relating to the purchase of shares of capital stock of DNE Systems, Inc.
(incorporated herein by reference to Exhibit 1 to the Current Report on Form 8-K of Alpine dated
March 2, 1992).
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
2(b) Agreement and Plan of Merger, dated as of June 17, 1993 and amended on September 24, 1993, by and
between Alpine and Superior TeleTec Inc. (incorporated herein by reference to Exhibit 2 to the
Registration Statement on Form S-4 (Registration No. 33-9978) of Alpine, as filed with the
Securities and Exchange Commission (the "Commission") on October 5, 1993).
2(c) Amended and Restated Stock Purchase Agreement, dated as of October 11, 1994, by and among Alpine
and certain stockholders of Adience, Inc. ("Adience") as listed therein, as amended (incorporated
herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated January 5,
1995).
2(d) Agreement and Plan of Merger, dated as of December 21, 1994, as amended, by and among Information
Display Technology, Inc., IDT PolyVision Acquisition Corp., IDT Posterloid Acquisition Corp.,
Alpine, Alpine/PolyVision, Inc. and Posterloid Corporation (incorporated herein by reference to
Exhibit 2 to Amendment No. 1 to Alpine's Statement on Schedule 13D relating to its beneficial
ownership of equity securities of Information Display Technology, Inc. dated December 28, 1994).
2(e) Amendment to the Agreement and Plan of Merger, dated as of December 21, 1994, by and among
Information Display Technology, Inc., IDT PolyVision Acquisition Corp., IDT Posterloid Acquisition
Corp., Alpine, Alpine/PolyVision, Inc. and Posterloid Corporation (incorporated herein by
reference to Exhibit 1 to Amendment No. 2 to Alpine's Statement on Schedule 13D relating to its
beneficial ownership of equity securities of Information Display Technology, Inc. dated May 5,
1995).
2(f) Asset Purchase Agreement, dated as of March 17, 1995, by and among Alcatel NA Cable Systems, Inc.,
Alcatel Canada Wire, Inc. Superior Cable Corporation and Superior TeleTec Inc. (the "Alcatel
Acquisition Agreement") (incorporated herein by reference to Exhibit 1 to the Current Report on
Form 8-K of Alpine dated May 24, 1995).
2(g) Amendment, dated May 11, 1995, to Asset Purchase Agreement by and among Alcatel NA Cable Systems,
Inc., Alcatel Canada Wire, Inc., Superior Cable Corporation and Superior TeleTec Inc.
(incorporated herein by reference to Exhibit 2 to the Current Report on Form 8-K of Alpine dated
May 24, 1995).
2(h) Agreement Regarding Certain Employee Benefit Plans, amending the Alcatel Acquisition Agreement,
dated June 10, 1996 (incorporated herein by reference to Exhibit 2(b) to the Annual Report on Form
10-K of Alpine for the fiscal year ended April 30, 1996 (the "1996 10-K")).
2(i) Share Purchase Agreement, dated April 15, 1997, between Hepworth R. and M. Holdings Limited,
Hepworth P.L.C., Refraco Holdings Limited and Alpine (incorporated herein by reference to Exhibit
1 to the Company's Current Report on Form 8-K dated April 15, 1997 (the "April 1997 8-K")).
2(j) Agreement and Plan of Merger, dated as of January 18, 1998, among Alpine, Refraco Inc., American
Premier Holdings, Inc. and the stockholders of American Premier Holdings, Inc. listed therein
(incorporated herein by reference to Exhibit 1 to the Current Report on Form 8-K of Alpine dated
January 30, 1998 (the "January 1998 8-K")).
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
2(k) Share Purchase Agreement, dated as of May 5, 1998, among CLAL Industries and Investments Ltd.,
ISAL Holland B.V. and Halachoh Hane'eman Hashivim Veshmona Ltd. (incorporated herein by reference
to Exhibit 1 to the Current Report on Form 8-K of the Company dated May 5, 1998).
2(l) Agreement and Plan of Merger, dated as of October 21, 1998, by and among Superior TeleCom Inc.
("Superior TeleCom"), SUT Acquisition Corp. and Essex International Inc. (incorporated herein by
reference to Exhibit (c)(1) to the Tender Offer Statement on Schedule 14D-1 of Superior TeleCom
and SUT Acquisition Corp., as filed with the Commission on October 28, 1998).
2(m) Asset Purchase Agreement, dated October 2, 1998, among Cables of Zion United Works Ltd.,
Cvalim-The Electric Wire and Cable Company of Israel Ltd. and Dash Cable Industries (Israel) Ltd.
(incorporated herein by reference to Exhibit 1 to the Current Report on Form 8-K of the Company
dated December 31, 1998).
2(n) Amendment No. 1 to Asset Purchase Agreement, dated December 31, 1998, among Cables of Zion United
Works Ltd., Cvalim-The Electric Wire and Cable Company of Israel Ltd. and Dash Cable Industries
(Israel) Ltd. (incorporated herein by reference to Exhibit 2 to the Current Report on Form 8-K of
the Company dated December 31, 1998).
2(o)* Agreement and Plan of Merger, dated as of May 28, 1999, among Cookson Group plc, PRI Acquisition,
Inc., Alpine and Premier Refractories International Inc.
3(a) Certificate of Incorporation of Alpine (incorporated herein by reference to Exhibit 3(a) to the
Annual Report on Form 10-K of Alpine for the fiscal year ended April 30, 1995 (the "1995 10-K")).
3(b) Amendment to the Certificate of Incorporation of Alpine (incorporated herein by reference to
Exhibit 3(aa) of Post-Effective Amendment No. 1 to the Registration Statement on Form S-3
(Registration No. 33-53434) of Alpine, as filed with the Commission on May 12, 1993).
3(c) Certificate of the Powers, Designations, Preferences and Rights of the 9% Cumulative Convertible
Preferred Stock of Alpine (incorporated herein by reference to Exhibit 1 to the Quarterly Report
on Form 10-Q of Alpine for the quarter ended January 31, 1989).
3(d) Certificate of the Powers, Designations, Preferences and Rights of the 9% Cumulative Convertible
Senior Preferred Stock of Alpine (incorporated herein by reference to Exhibit 3(c) to the Annual
Report on Form 10-K of Alpine for the fiscal year ended April 30, 1992 ("1992 10-K")).
3(e) Certificate of the Powers, Designations, Preferences and Rights of the 8.5% Cumulative Convertible
Senior Preferred Stock of Alpine (incorporated herein by reference to Exhibit 3(e) to the Annual
Report on Form 10-K of Alpine for the fiscal year ended April 30, 1994).
3(f) Certificate of the Powers, Designations, Preferences and Rights of the 8% Cumulative Convertible
Senior Preferred Stock of Alpine (incorporated herein by reference to Exhibit 3(f) to the 1995
10-K).
3(g) By-laws of Alpine (incorporated herein by reference to Exhibit 3(g) to the 1995 10-K).
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
4(a) Indenture, dated as of July 15, 1995, by and among Alpine, Adience, Superior Telecommunications
Inc. ("Superior"), Superior Cable Corporation and Marine Midland Bank ("Marine Midland"), as
trustee (incorporated herein by reference to Exhibit 10(ee) to the 1995 10-K).
4(b) Supplemental Indenture to the above Indenture, dated as of October 2, 1996, among Alpine,
Superior, Adience, Superior Cable Corporation and Marine Midland, as trustee (incorporated herein
by reference to Exhibit 4(b) to the Annual Report on Form 10-K of Alpine for the fiscal year ended
April 30, 1997 (the "1997 10-K")).
4(c) Second Supplemental Indenture to the above Indenture, dated as of January 31, 1997, among Alpine,
Superior, Adience, Superior Cable Corporation and Marine Midland, as trustee (incorporated herein
by reference to Exhibit 4(c) to the 1997 10-K).
4(d) Pledge Agreement, dated as of July 21, 1995, by and between Alpine and Marine Midland
(incorporated herein by reference to Exhibit 10(ff) to the 1995 10-K).
4(e) Amendment, dated as of October 2, 1996, between Alpine and Marine Midland, as trustee, to the
above Pledge Agreement (incorporated herein by reference to Exhibit 4(e) to the 1997 10-K).
4(f) Amendment No. 2, dated as of January 27, 1997, between Alpine and Marine Midland, as trustee, to
the above Pledge Agreement (incorporated herein by reference to Exhibit 4(f) to the 1997 10-K).
4(g) Rights Agreement, dated as of February 17, 1999, between Alpine and American Stock Transfer &
Trust Company, as Rights Agent (incorporated herein by reference to Exhibit 4.1 to the Form 8-A of
Alpine, as filed with the Commission on February 18, 1999).
10(a) Amended and Restated 1984 Restricted Stock Plan of Alpine (incorporated herein by reference to
Exhibit 10.5 to the Registration Statement on Form S-4 (Registration No. 33-9978) of Alpine, as
filed with the Commission on October 5, 1993 (the "S-4 Registration Statement")).
10(b) Amended and Restated 1987 Long-Term Equity Incentive Plan of Alpine (incorporated herein by
reference to Exhibit 10.4 to the S-4 Registration Statement).
10(c) Employee Stock Purchase Plan of Alpine (incorporated herein by reference to Exhibit B to the proxy
statement of Alpine dated August 22, 1997).
10(d) 1997 Stock Option Plan (incorporated herein by reference to Exhibit 10(tt) to the 1997 10-K).
10(e) Stock Compensation Plan for Non-Employee Directors of Alpine (incorporated herein by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q of Alpine for the quarter ended January 30,
1999).
10(f) Lease Agreement, dated as of December 16, 1993, by and between ALP(TX) QRS 11-28, Inc. and
Superior TeleTec Inc. (incorporated herein by reference to Exhibit (i) to the Quarterly Report on
Form 10-Q of Alpine for the quarter ended January 31, 1994).
10(g) First Amendment to Lease Agreement, dated as of May 10, 1995, by and between ALP (TX) QRS 11-28,
Inc. and Superior TeleTec Inc. (incorporated herein by reference to Exhibit 10(o) to the 1995
10-K).
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
10(h) Second Amendment to Lease Agreement, dated as of July 21, 1995, by and between ALP(TX) QRS 11-28,
Inc. and Superior (incorporated herein by reference to Exhibit 10(x) to the 1995 10-K).
10(i) Third Amendment to Lease Agreement, dated as of October 2, 1996, by and between ALP(TX) QRS 11-28,
Inc. and Superior (incorporated herein by reference to Exhibit 10.8 to the Registration Statement
on Form S-1 (Registration No. 333-09933) of Superior TeleCom, as filed with the Commission on
August 9, 1996, as amended (the "TeleCom S-1")).
10(j) First Amendment to Guaranty and Surety Agreement, dated as of October 2, 1996, among the Company,
Superior TeleCom and ALP (TX) QRS 11-28, Inc. (incorporated herein by reference to Exhibit 10.12
to the TeleCom S-1).
10(k) Employment Agreement, dated as of April 26, 1996, by and between Alpine and Steven S. Elbaum
(incorporated herein by reference to Exhibit 10(q) to the 1996 10-K).
10(l) Employment Agreement, dated as of April 26, 1996, by and between Alpine and Stewart H. Wahrsager
(incorporated herein by reference to Exhibit 10(r) to the 1996 10-K).
10(m) Employment Agreement, dated as of April 26, 1996, by and between Alpine and Bragi F. Schut
(incorporated herein by reference to Exhibit 10(s) to the 1996 10-K).
10(n) Employment Agreement, dated as of April 26, 1996, by and between Alpine and Stephen M. Johnson
(incorporated herein by reference to Exhibit 10(t) to the 1996 10-K).
10(o) Employment Agreement, dated as of April 26, 1996, by and between Alpine and David S. Aldridge
(incorporated herein by reference to Exhibit 10(u) to the 1996 10-K).
10(p) Employment Agreement, dated as of April 26, 1996, between Superior and Justin F. Deedy, Jr.
(incorporated herein by reference to Exhibit 10.3 to the TeleCom S-1).
10(q) Employment Agreement, dated as of October 17, 1996, between Superior TeleCom and Steven S. Elbaum
(incorporated herein by reference to Exhibit 10(14) to the Quarterly Report on Form 10-Q of
Superior TeleCom for the quarter ended January 31, 1997).
10(r) Alpine Pledge Agreement, dated as of April 15, 1997, made by Alpine in favor of Bankers Trust
Company, as Collateral Agent for the benefit of the Secured Creditors (as defined therein)
(incorporated herein by reference to Exhibit 4 to Amendment No. 1 to Alpine's Current Report on
Form 8-K/A dated June 27, 1997 (the "June 1997 8-K/ A")).
10(s) First Amendment, dated as of June 11, 1997, to the Alpine Pledge Agreement (incorporated herein by
reference to Exhibit 5 to the June 1997 8-K/A).
10(t) Guaranty, dated as of April 15, 1997, made by Alpine for the benefit of the Secured Creditors (as
defined therein) (incorporated herein by reference to Exhibit 6 to the June 1997 8- K/A).
10(u) First Amendment, dated as of June 11, 1997, to the Guaranty (incorporated herein by reference to
Exhibit 7 to the June 1997 8-K/A).
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
10(v) Amended and Restated Credit Agreement, dated as of January 30, 1998, among Refraco Inc., Adience,
Refraco Holdings Limited, Refraco (U.K.) Limited, various banks and Bankers Trust Company, as
Administrative Agent (incorporated herein by reference to Exhibit 2 to the January 1998 8-K).
10(w) Term Loan Agreement, dated as of April 15, 1997, among Refraco Inc., various banks and Bankers
Trust Company, as Administrative Agent (incorporated herein by reference to Exhibit 3 to the April
1997 8-K).
10(x) First Amendment, dated as of June 11, 1997, to the Term Loan Agreement (incorporated herein by
reference to Exhibit 10 to the June 1997 8-K/A).
10(y) Second Amendment, dated as of June 12, 1997, to the Term Loan Agreement (incorporated herein by
reference to Exhibit 11 to the June 1997 8-K/A).
10(z) Third Amendment, dated as of January 30, 1998, to the Term Loan Agreement (incorporated herein by
reference to Exhibit 3 to the January 1998 8-K).
10(aa) Amended and Restated Credit Agreement, dated as of November 27, 1998, among Superior/Essex Corp.,
Essex Group, Inc., the guarantors named therein, various lenders, Merrill Lynch & Co., as
Documentation Agent, Fleet National Bank, as Syndication Agent, and Bankers Trust Company, as
Administrative Agent (incorporated herein by reference to Exhibit 99.7 to the Schedule 13D/A of
Alpine, Superior TeleCom, Superior/ Essex Corp. and SUT Acquisition Corp., as filed with the
Commission on December 7, 1998).
10(bb)* Senior Subordinated Credit Agreement, dated as of May 26, 1999, among Superior/ Essex Corp., as
Borrower, Superior TeleCom, as Parent, the Subsidiary Guarantors listed therein, the Lending
Institutions listed therein, Fleet Corporate Finance, Inc., as Syndication Agent, and Bankers
Trust Company, as Administrative Agent.
10(cc) Addendum No. 1 to the Application to Open an Account, dated December 29, 1998, between Cables of
Zion United Works Ltd. and Bank Hapoalim B.M. (incorporated herein by reference to Exhibit 3 to
the Current Report on Form 8-K of the Company dated December 31, 1998).
10(dd) Letter Agreement, dated October 8, 1996, between the Company and Superior TeleCom, relating to a
capital contribution by the Company to Superior TeleCom (incorporated herein by reference to
Exhibit 10.2 to the TeleCom S-1).
10(ee) Letter Agreement, dated October 2, 1996, between the Company and Superior TeleCom, relating to tax
indemnification (incorporated herein by reference to Exhibit 10.5 to the TeleCom S-1).
10(ff) Tax Allocation Agreement, dated as of October 2, 1996, among the Company, Superior TeleCom and its
subsidiaries (incorporated herein by reference to Exhibit 10.9 to the TeleCom S-1).
10(gg) Exchange Agreement, dated October 2, 1996, between the Company and Superior TeleCom (incorporated
herein by reference to Exhibit 10.10 to the TeleCom S-1).
10(hh) Registration Rights Agreement, dated October 2, 1996, between the Company and Superior TeleCom
(incorporated herein by reference to Exhibit 10.11 to the TeleCom S-1).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------
<C> <S>
10(ii) Services Agreement, dated October 2, 1996, between the Company and Superior TeleCom (incorporated
herein by reference to Exhibit 10.4 to the TeleCom S-1).
10(jj) Amendment No. 1, dated as of May 1, 1997, to the Services Agreement (incorporated herein by
reference to Exhibit 10(pp) to the 1997 10-K).
10(kk) Amendment No. 2, dated as of May 1, 1998, to the Services Agreement (incorporated herein by
reference to Exhibit 10(uu) to the Annual Report on Form 10-K of Alpine for the fiscal year ended
April 30, 1998).
10(ll)* Amendment No. 1, dated as of March 15, 1999, to The Alpine Group, Inc. 1997 Stock Option Plan.
10(mm)* Amendment No. 2, dated as of April 1, 1999, to The Alpine Group, Inc. 1997 Stock Option Plan.
10(nn)* Amendment No. 3, dated as of May 14, 1999, to The Alpine Group, Inc. 1997 Stock Option Plan.
21* List of Subsidiaries
23(a)* Consent of Arthur Andersen LLP
27* Financial Data Schedule
</TABLE>
- ------------------------
* filed herewith
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 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.
<TABLE>
<CAPTION>
Dated: July 29, 1999
<S> <C> <C>
THE ALPINE GROUP, INC.
By: /s/ STEVEN S. ELBAUM
----------------------------------------
Steven S. Elbaum
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
34
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ STEVEN S. ELBAUM Chief Executive Officer
- ------------------------------ (principal executive July 29, 1999
Steven S. Elbaum officer)
Chief Financial Officer
/s/ DAVID S. ALDRIDGE and Treasurer (principal
- ------------------------------ financial and accounting July 29, 1999
David S. Aldridge officer)
/s/ KENNETH G. BYERS, JR.
- ------------------------------ Director July 29, 1999
Kenneth G. Byers, Jr.
/s/ RANDOLPH HARRISON
- ------------------------------ Director July 29, 1999
Randolph Harrison
/s/ JOHN C. JANSING
- ------------------------------ Director July 29, 1999
John C. Jansing
/s/ ERNEST C. JANSON, JR.
- ------------------------------ Director July 29, 1999
Ernest C. Janson, Jr.
/s/ JAMES R. KANELY
- ------------------------------ Director July 29, 1999
James R. Kanely
/s/ BRAGI F. SCHUT
- ------------------------------ Director July 29, 1999
Bragi F. Schut
</TABLE>
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of independent public accountants.................................................................. F-2
Consolidated balance sheets at April 30, 1998 and 1999.................................................... F-3
Consolidated statements of operations for the years ended April 30, 1997, 1998 and 1999................... F-4
Consolidated statements of stockholders' equity for the years ended April 30, 1997, 1998 and 1999......... F-6
Consolidated statements of cash flows for the years ended April 30, 1997, 1998 and 1999................... F-9
Notes to consolidated financial statements................................................................ F-12
SCHEDULES:
Schedule I--Condensed Financial Information of Registrant (Parent Company)................................ F-42
Schedule II--Valuation and Qualifying Accounts............................................................ F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Alpine Group, Inc.:
We have audited the accompanying consolidated balance sheets of The Alpine
Group, Inc. (a Delaware corporation) and subsidiaries as of April 30, 1998 and
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended April 30,
1999. These financial statements and the financial statement schedules referred
to below are the responsibility of Alpine's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Alpine Group, Inc. and
subsidiaries as of April 30, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
1999 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements are presented for the purpose of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. The schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Atlanta, Georgia
June 29, 1999
F-2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
APRIL 30,
------------------------
1998 1999
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 15,670 $ 33,000
Marketable securities................................................................. 15,672 14,957
Accounts receivable................................................................... 41,108 261,318
Inventories........................................................................... 43,190 337,122
Net assets of discontinued operation.................................................. -- 34,557
Other current assets.................................................................. 15,880 42,464
---------- ------------
Total current assets................................................................ 131,520 723,418
Property, plant and equipment, net...................................................... 84,348 511,577
Long-term investments and other assets.................................................. 22,404 67,695
Net assets of discontinued operation.................................................... 41,480 --
Goodwill, net........................................................................... 40,657 806,343
---------- ------------
Total assets........................................................................ $ 320,409 $ 2,109,033
---------- ------------
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings................................................................. $ -- $ 142,645
Current portion of long-term debt..................................................... 172 65,080
Accounts payable...................................................................... 44,554 138,665
Accrued expenses...................................................................... 21,999 129,584
---------- ------------
Total current liabilities........................................................... 66,725 475,974
Long-term debt, less current portion.................................................... 96,894 1,237,353
Minority interest in subsidiary......................................................... 41,043 58,980
Other long-term liabilities............................................................. 38,232 146,981
---------- ------------
Total liabilities................................................................... 242,894 1,919,288
---------- ------------
Subsidiary-obligated Manditorily Redeemable Trust Convertible Preferred Securities of
Superior Trust I holding solely convertible debentures of Superior (net of
discount)............................................................................. -- 133,362
---------- ------------
Commitments and contingencies
Stockholders' equity:
9% cumulative convertible preferred stock at liquidation value........................ 427 427
Common stock, $.10 par value; 25,000,000 shares authorized; 19,865,990 shares and
20,096,479 shares issued at April 30, 1998 and 1999, respectively................... 1,986 2,009
Capital in excess of par value........................................................ 136,598 138,860
Accumulated other comprehensive deficit............................................... (814) (5,222)
Accumulated deficit................................................................... (32,834) (19,304)
---------- ------------
105,363 116,770
Shares of common stock in treasury, at cost; 1998, 2,704,732 shares;
1999, 4,923,932 shares.............................................................. (26,890) (59,398)
Receivable from stockholders.......................................................... (958) (989)
---------- ------------
Total stockholders' equity.......................................................... 77,515 56,383
---------- ------------
Total liabilities and stockholders' equity........................................ $ 320,409 $ 2,109,033
---------- ------------
---------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ------------
Net sales.................................................................. $ 463,840 $ 516,599 $ 1,143,245
Cost of goods sold......................................................... 384,271 417,358 910,651
---------- ---------- ------------
Gross profit............................................................. 79,569 99,241 232,594
Selling, general and administrative expenses............................... 25,320 28,832 93,888
Nonrecurring and unusual charges........................................... -- -- 7,282
Amortization of goodwill................................................... 1,726 1,715 8,369
---------- ---------- ------------
Operating income......................................................... 52,523 68,694 123,055
Interest expense........................................................... (13,753) (10,755) (60,119)
Gain on sale of subsidiary stock........................................... 80,397 -- --
Other income, net.......................................................... 1,989 4,094 1,874
---------- ---------- ------------
Income from continuing operations before income taxes, distributions on
preferred securities of subsidiary trust, minority interest and
extraordinary (loss)................................................... 121,156 62,033 64,810
Provision for income taxes................................................. (53,877) (24,796) (27,955)
---------- ---------- ------------
Income from continuing operations before distributions on preferred
securities of subsidiary trust, minority interest and extraordinary
(loss)................................................................. 67,279 37,237 36,855
Distributions on preferred securities of subsidiary trust.................. -- -- (1,252)
---------- ---------- ------------
Income from continuing operations before minority interest and
extraordinary (loss)................................................... 67,279 37,237 35,603
Minority interest in earnings of subsidiaries.............................. (8,097) (20,296) (18,693)
---------- ---------- ------------
Income from continuing operations before extraordinary (loss)............ 59,182 16,941 16,910
(Loss) from discontinued operations, net of tax............................ (2,336) (194) (2,707)
---------- ---------- ------------
Income before extraordinary (loss)....................................... 56,846 16,747 14,203
Extraordinary (loss) on early extinguishment of debt, net of tax........... (20,126) (1,464) (634)
---------- ---------- ------------
Net income............................................................... 36,720 15,283 13,569
Preferred stock dividends.................................................. (575) (69) (39)
Preferred stock redemption premium......................................... (5,195) -- --
---------- ---------- ------------
Net income applicable to common stock.................................... $ 30,950 $ 15,214 $ 13,530
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
Net income per share of common stock:
Basic:
Income from continuing operations.................................................... $ 3.28 $ 1.00 $ 1.03
(Loss) from discontinued operations.................................................. (0.13) (0.01) (0.17)
Extraordinary (loss) on early extinguishment of debt................................. (1.12) (0.09) (0.04)
Preferred stock redemption premium................................................... (0.29) -- --
--------- --------- ---------
Net income per basic share of common stock........................................... $ 1.73 $ 0.90 $ 0.82
--------- --------- ---------
--------- --------- ---------
Diluted:
Income from continuing operations.................................................... $ 2.98 $ 0.90 $ 0.91
(Loss) from discontinued operations.................................................. (0.12) (0.01) (0.15)
Extraordinary (loss) on early extinguishment of debt................................. (1.01) (0.08) (0.04)
Preferred stock redemption premium................................................... (0.26) -- --
--------- --------- ---------
Net income per diluted share of common stock....................................... $ 1.59 $ 0.81 $ 0.72
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL 9% CUMULATIVE 8% CUMULATIVE
IN CONVERTIBLE CONVERTIBLE
COMMON STOCK EXCESS PREFERRED STOCK PREFERRED STOCK
COMPREHENSIVE ---------------------- OF PAR ------------------------ ----------------------
INCOME SHARES AMOUNT VALUE SHARES AMOUNT SHARES AMOUNT
--------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30,
1996.............. 19,307,012 $ 1,931 $ 113,843 1,927 $ 1,927 196,649 $ 9,831
Compensation expense
related to stock
options and
grants............ 113,651 11 2,220
Loans to
stockholders......
Dividends on
preferred stock...
Redemption of
preferred stock... (196,649) (9,831)
Preferred stock
redemption
premium...........
Exercise of stock
options........... 405,254 40 1,918
Employee stock
purchase plan..... 8,339 1 48
Purchase of treasury
stock.............
Retirement of
treasury stock.... (1,000,000) (100) (4,570)
Comprehensive
income:
Net income........ $ 36,720
Foreign currency
translation
adjustment...... (1,234)
Unrealized loss on
securities
available for
sale............ (716)
-------
Total comprehensive
income............ $ 34,770
------- --------- ----------- --------- ----- ----------- --------- -----------
-------
Balance at April 30,
1997.............. 18,834,256 $ 1,883 $ 113,459 1,927 $ 1,927 -- $ --
--------- ----------- --------- ----- ----------- --------- -----------
--------- ----------- --------- ----- ----------- --------- -----------
The accompanying notes are an integral part of these consolidated financial statements.
<CAPTION>
ACCUMULATED RECEIVABLE
OTHER TREASURY STOCK FROM
ACCUMULATED COMPREHENSIVE -------------------- STOCK-
DEFICIT DEFICIT SHARES AMOUNT HOLDERS TOTAL
------------ --------------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30,
1996.............. $ (78,998) $ (82) (1,025,496) $ (4,806) $ (510) $ 43,136
Compensation expense
related to stock
options and
grants............ 2,231
Loans to
stockholders...... (123) (123)
Dividends on
preferred stock... (575) (575)
Redemption of
preferred stock... (9,831)
Preferred stock
redemption
premium........... (5,195) (5,195)
Exercise of stock
options........... 1,958
Employee stock
purchase plan..... 49
Purchase of treasury
stock............. (1,586,551) (11,994) (11,994)
Retirement of
treasury stock.... 1,000,000 4,670 --
Comprehensive
income:
Net income........ 36,720 36,720
Foreign currency
translation
adjustment...... (1,234) (1,234)
Unrealized loss on
securities
available for
sale............ (716) (716)
Total comprehensive
income............
------------ ------- --------- --------- ----- ---------
Balance at April 30,
1997.............. $ (48,048) $ (2,032) (1,612,047) $ (12,130) $ (633) $ 54,426
------------ ------- --------- --------- ----- ---------
------------ ------- --------- --------- ----- ---------
The
</TABLE>
F-6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED APRIL 30, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL 9% CUMULATIVE
IN CONVERTIBLE
COMMON STOCK EXCESS PREFERRED STOCK
COMPREHENSIVE ---------------------- OF PAR ------------------------ ACCUMULATED
INCOME SHARES AMOUNT VALUE SHARES AMOUNT DEFICIT
--------------- --------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1997........ 18,834,256 $ 1,883 $ 113,459 1,927 $ 1,927 $ (48,048)
Compensation expense related to
stock options and grants....... 93,133 9 3,669
Loans to stockholders............
Dividends on preferred stock..... (69)
Issuance of minority equity
interest in subsidiary......... 15,222
Exercise of stock options........ 553,157 56 2,562
Employee stock purchase plan..... 23,241 2 222
Exercise of warrants............. 172,330 17 (17)
Conversion of convertible
preferred stock................ 189,873 19 1,481 (1,500) (1,500)
Purchase of treasury stock.......
Comprehensive income:
Net income..................... $ 15,283 15,283
Foreign currency translation
adjustment................... 502
Unrealized gain on securities
available for sale........... 716
-------
Total comprehensive income....... $ 16,501
------- --------- ----------- --------- ----------- ----------- ------------
-------
Balance at April 30, 1998........ 19,865,990 $ 1,986 $ 136,598 427 $ 427 $ (32,834)
--------- ----------- --------- ----------- ----------- ------------
--------- ----------- --------- ----------- ----------- ------------
The accompanying notes are an integral part of these consolidated financial statements.
<CAPTION>
ACCUMULATED
OTHER TREASURY STOCK RECEIVABLE
COMPREHENSIVE -------------------- FROM
DEFICIT SHARES AMOUNT STOCKHOLDERS TOTAL
--------------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1997........ $ (2,032) (1,612,047) $ (12,130) $ (633) $ 54,426
Compensation expense related to
stock options and grants....... 3,678
Loans to stockholders............ (325) (325)
Dividends on preferred stock..... (69)
Issuance of minority equity
interest in subsidiary......... 15,222
Exercise of stock options........ 2,618
Employee stock purchase plan..... 224
Exercise of warrants............. --
Conversion of convertible
preferred stock................ --
Purchase of treasury stock....... (1,092,685) (14,760) (14,760)
Comprehensive income:
Net income..................... 15,283
Foreign currency translation
adjustment................... 502 502
Unrealized gain on securities
available for sale........... 716 716
Total comprehensive income.......
------- --------- --------- ----- ---------
Balance at April 30, 1998........ $ (814) (2,704,732) $ (26,890) $ (958) $ 77,515
------- --------- --------- ----- ---------
------- --------- --------- ----- ---------
The accompanyi
</TABLE>
F-7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED APRIL 30, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL 9% CUMULATIVE
IN CONVERTIBLE
COMMON STOCK EXCESS PREFERRED STOCK
COMPREHENSIVE ---------------------- OF PAR ------------------------ ACCUMULATED
INCOME SHARES AMOUNT VALUE SHARES AMOUNT DEFICIT
--------------- --------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1998........ 19,865,990 $ 1,986 $ 136,598 427 $ 427 $ (32,834)
Effect of subsidiaries' equity
transactions................... 238
Recapitalization of equity method
investment..................... 9,509 1 189
Compensation expense related to
stock options and grants....... 27,675 3 947
Loans to stockholders............
Dividends on preferred stock..... (39)
Exercise of stock options........ 107,538 11 322
Employee stock purchase plan..... 53,389 5 569
Exercise of warrants............. 32,378 3 (3)
Purchase of treasury stock.......
Comprehensive income:
Net income..................... 13,569 13,569
Foreign currency translation
adjustment................... (3,579)
Pension plan additional minimum
liability.................... (829)
-------
Total comprehensive income....... $ 9,161
------- --------- ----------- --------- ----------- ----------- ------------
-------
Balance at April 30, 1999........ 20,096,479 $ 2,009 $ 138,860 427 $ 427 $ (19,304)
--------- ----------- --------- ----------- ----------- ------------
--------- ----------- --------- ----------- ----------- ------------
The accompanying notes are an integral part of these consolidated financial statements.
<CAPTION>
ACCUMULATED
OTHER TREASURY STOCK RECEIVABLE
COMPREHENSIVE -------------------- FROM
DEFICIT SHARES AMOUNT STOCKHOLDERS TOTAL
--------------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1998........ $ (814) (2,704,732) $ (26,890) $ (958) $ 77,515
Effect of subsidiaries' equity
transactions................... 238
Recapitalization of equity method
investment..................... 190
Compensation expense related to
stock options and grants....... 57 1,007
Loans to stockholders............ (88) (88)
Dividends on preferred stock..... (39)
Exercise of stock options........ 333
Employee stock purchase plan..... 574
Exercise of warrants............. --
Purchase of treasury stock....... (2,219,200) (32,508) (32,508)
Comprehensive income:
Net income..................... 13,569
Foreign currency translation
adjustment................... (3,579) (3,579)
Pension plan additional minimum
liability.................... (829) (829)
Total comprehensive income.......
------- --------- --------- ----- ---------
Balance at April 30, 1999........ $ (5,222) (4,923,932) $ (59,398) $ (989) $ 56,383
------- --------- --------- ----- ---------
------- --------- --------- ----- ---------
The accompanyi
</TABLE>
F-8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- -------------
Cash flows from operating activities:
Income from continuing operations........................................ $ 59,182 $ 16,941 $ 16,910
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization.......................................... 9,476 10,205 29,147
Amortization of deferred debt issuance costs and accretion of debt
discount............................................................. 1,996 1,441 3,221
Compensation expense related to stock options and grants............... 2,231 1,757 962
Provision (benefit) for deferred income taxes.......................... 15,862 (830) (2,758)
Minority interest in earnings of subsidiaries.......................... 8,097 20,296 18,693
Equity in earnings of unconsolidated subsidiaries...................... -- -- (1,544)
Gain on sale of subsidiary stock, net of income taxes.................. (41,427) -- --
Other, net............................................................. -- (655) 211
Change in assets and liabilities, net of effects from companies
acquired:
Accounts receivable.................................................. (4,612) 1,971 (19,702)
Inventories.......................................................... 1,464 12,998 (16,962)
Other current assets................................................. 985 (4,733) 16,189
Other assets......................................................... 404 (431) 399
Accounts payable and accrued expenses................................ (5,611) 8,452 23,801
Other long-term liabilities.......................................... (558) 275 (11)
---------- ---------- -------------
Cash flows provided by continuing operations............................... 47,489 67,687 68,556
Cash flows (used for) provided by discontinued operations.................. (9,615) (1,396) 6,412
---------- ---------- -------------
Cash flows provided by operating activities................................ 37,874 66,291 74,968
---------- ---------- -------------
Cash flows from investing activities:
Acquisitions, net of cash acquired....................................... -- -- (1,105,408)
Capital expenditures..................................................... (10,345) (19,508) (43,901)
(Investment in) proceeds from marketable securities...................... (8,094) 135 715
Purchase of subsidiary common stock...................................... -- -- (740)
Advances to PolyVision Corporation....................................... (2,467) (145) --
Investment in PolyVision Corporation..................................... -- -- (5,000)
Proceeds from sale of assets............................................. 2,534 5,361 2,033
Other.................................................................... 35 -- (948)
---------- ---------- -------------
Cash flows used for continuing operations.................................. (18,337) (14,157) (1,153,249)
Cash flows used for discontinued operations................................ (104,468) (109,034) (10,204)
---------- ---------- -------------
Cash flows used for investing activities................................... (122,805) (123,191) (1,163,453)
---------- ---------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------
<S> <C> <C> <C>
1997 1998 1999
----------- ---------- ------------
Cash flows from financing activities:
Short-term borrowings, net............................................... $ -- $ -- $ 9,640
Borrowings (repayments) under revolving credit facilities, net........... 63,004 (42,307) 20,965
Long-term borrowings..................................................... -- 10,665 1,154,715
Repayments of long-term borrowings....................................... (100,603) (13,803) --
Proceeds from sale of stock of subsidiary, net of income taxes........... 62,672 -- --
Proceeds from exercise of stock options.................................. 1,835 2,618 333
Debt issuance costs...................................................... (4,122) (400) (31,748)
Redemption of preferred stock............................................ (15,026) -- --
Dividends on preferred stock............................................. (575) (69) (39)
Dividends paid on subsidiary common stock................................ -- (504) (3,014)
Purchase of treasury stock............................................... (11,994) (14,760) (32,508)
Purchase of subsidiary common stock...................................... (8,055) -- (15,870)
Other.................................................................... (319) (151) (3,163)
----------- ---------- ------------
Cash flows (used for) provided by continuing operations.................... (13,183) (58,711) 1,099,311
Cash flows provided by discontinued operations............................. 118,601 111,846 10,393
----------- ---------- ------------
Cash flows provided by financing activities................................ 105,418 53,135 1,109,704
----------- ---------- ------------
Cash flows provided by discontinued operations............................. 4,518 1,416 6,601
Net (increase) decrease in discontinued operations cash and cash
equivalents.............................................................. (4,518) 2,759 (3,889)
Net increase (decrease) in continuing operations cash and cash
equivalents.............................................................. 15,969 (5,181) 14,618
Cash and cash equivalents at beginning of year............................. 707 16,676 15,670
----------- ---------- ------------
Cash and cash equivalents at end of year................................... $ 16,676 $ 15,670 $ 33,000
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ------------
Supplemental disclosures:
Cash paid for interest...................................................... $ 15,477 $ 9,923 $ 47,980
--------- --------- ------------
--------- --------- ------------
Cash paid for income taxes.................................................. $ 27,251 $ 25,840 $ 22,633
--------- --------- ------------
--------- --------- ------------
Noncash investing and financing activities:
Exchange of common stock for preferred stock:
Preferred stock acquired.................................................. $ 1,500
---------
---------
Common stock issued....................................................... $ 1,500
---------
---------
Capitalized lease obligation incurred....................................... $ 375
---------
---------
Acquisition of businesses:
Assets, net of cash acquired.............................................. $ 1,702,774
Liabilities assumed....................................................... (447,793)
Minority equity interest in subsidiaries.................................. (16,283)
Issuance of Subsidiary-obligated Manditorily Redeemable Trust Convertible
Preferred Securities of Superior Trust I holding solely convertible
debentures in exchange for subsidiary common stock held by minority
shareholders (net of discount of $33.2 million)........................... (133,290)
------------
Net cash paid............................................................. $ 1,105,408
------------
------------
PolyVision recapitalization:
Exchange of PolyVision series A preferred stock and a note receivable
including accrued and unpaid interest................................... $ (17,282)
------------
------------
For PolyVision series B cumulative preferred stock and PolyVision common
stock................................................................... $ 17,282
------------
------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying consolidated financial statements include the accounts of
The Alpine Group, Inc. and its majority-owned subsidiaries (collectively
"Alpine" or the "Company", unless the context otherwise requires). Alpine was
incorporated in Delaware in 1987. All significant intercompany accounts and
transactions have been eliminated.
Alpine's operations are carried out through Superior TeleCom Inc.
("Superior"), a 51.7% owned subsidiary, which manufactures a broad portfolio of
products with primary applications in the communications, original equipment
manufacturer ("OEM") and electrical markets. Superior is a manufacturer and
supplier of telecommunications wire and cable products to telephone companies,
distributors and system integrators; magnet wire and insulation materials for
motors, transformers and electrical controls, as well as automotive and
specialty wiring assemblies for automobiles and trucks; and building and
industrial wire for applications in commercial and residential construction and
industrial facilities. Superior operates manufacturing and distribution
facilities in the United States, Canada, the United Kingdom and Israel.
On November 27, 1998, Superior completed a cash tender offer for 81% of the
outstanding common shares of Essex International Inc. ("Essex"). Superior
acquired the remaining 19% of Essex common stock on March 31, 1999 through the
merger of a newly formed wholly-owned subsidiary of Superior into Essex, in
which $167 million of 8 1/2% trust convertible preferred securities of Superior
Trust I were issued to the remaining stockholders of Essex. (see Notes 6 and
20).
On May 28, 1999, Alpine, Premier Refractories International Inc., Alpine's
83.4% owned subsidiary engaged in the refractories manufacture and installation
business ("Premier"), Cookson Group plc, a London Stock Exchange listed company
("Cookson"), and PRI Acquisition, Inc., Cookson's wholly owned subsidiary ("PRI
Acquisition"), entered into an Agreement and Plan of Merger (the "Premier Merger
Agreement") providing for the acquisition by Cookson of 100% of the capital
stock and business operations of Premier through the merger of PRI Acquisition
into Premier (see Note 5). Accordingly, Premier has been accounted for as a
discontinued operation in the accompanying consolidated financial statements.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity at acquisition of 90
days or less are considered to be cash equivalents.
INVENTORIES
Inventories of the communications products are primarily stated at the lower
of cost or market, using the first-in, first-out ("FIFO") cost method.
Inventories of the OEM and the electrical products are stated at the lower of
cost or market, using the last-in, first-out ("LIFO") cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation and amortization. Leasehold improvements are amortized over the
lesser of the estimated useful lives of the assets or the
F-12
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
lease term. Depreciation and amortization are provided over the estimated useful
lives of the assets using the straight-line method. The estimated lives are as
follows:
<TABLE>
<S> <C>
Buildings and improvements.................................... 5 to 40
years
Machinery and equipment....................................... 3 to 15
years
Furniture and fixtures........................................ 3 to 10
years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Long-term
improvements are capitalized as additions to property, plant and equipment. Upon
retirement or other disposal, the asset cost and related accumulated
depreciation are removed from the accounts and the net amount, less any
proceeds, is charged or credited to income.
GOODWILL
The excess of the purchase price over the net identifiable assets of
businesses acquired is amortized ratably over periods not exceeding 40 years.
Accumulated amortization of goodwill at April 30, 1998 and 1999 was $6.6 million
and $15.0 million, respectively. The Company periodically reviews goodwill to
assess recoverability from future operations using undiscounted cash flows. If
the carrying amount exceeds undiscounted cash flows, an impairment loss would be
recognized for the difference between the carrying amount and its estimated fair
value.
DEFERRED FINANCING COSTS
Origination costs incurred in connection with outstanding debt financings
are included in the consolidated balance sheet in long-term investments and
other assets. These deferred financing costs are being amortized through the
relevant maturity dates of the related debt using the effective interest rate
method and are charged to operations as additional interest expense.
AMOUNTS DUE CUSTOMERS
Included in accrued expenses at April 30, 1998 and 1999 are certain amounts
due customers totaling $0.3 million and $8.9 million, respectively, representing
cash discount liabilities to customers who meet certain contractual sales volume
criteria. Such discounts are paid periodically to those qualifying customers.
REVENUE RECOGNITION
Substantially all revenue is recognized at the time the product is shipped,
except for limited product consignments which are not reflected in revenue until
sold to the end user.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of foreign subsidiaries are
measured using local currency as the functional currency. Assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at exchange
rates in effect at fiscal year-end. The resulting translation gains and losses
are charged directly to accumulated other comprehensive income, a component of
stockholders' equity, and are not included in net income until realized through
sale or liquidation of the investment. Revenues and expenses are translated at
average exchange rates prevailing during the fiscal year. Foreign currency
exchange gains and losses incurred on foreign currency transactions are included
in income as they occur.
F-13
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUBSIDIARY STOCK TRANSACTIONS
The Company's ownership percentage in subsidiary stock is impacted by the
Company's purchase of additional subsidiary stock, as well as subsidiary stock
transactions, including (i) the subsidiary's purchase of its own stock and (ii)
the subsidiary's issuance of its own stock under stock-based compensation plans.
The Company reflects these subsidiary stock transactions through adjustments to
the minority interest in the earnings or losses of the subsidiary on the
consolidated statements of operations and by recording charges to goodwill and
stockholders' equity on the consolidated balance sheets. The charges to
goodwill, totaling $6.9 million during fiscal 1999, are amortized ratably over
its estimated useful life.
EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income
applicable to common stock by the weighted average number of shares of common
stock outstanding for the period. Diluted earnings per common share is
determined assuming (i) the conversion of outstanding stock options, warrants
and grants under the treasury stock method, (ii) the conversion of convertible
preferred stock and (iii) the dilution in subsidiary earnings resulting from the
assumed conversion of subsidiary stock options.
CONCENTRATIONS OF CREDIT RISK AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
During fiscal 1997, 1998 and 1999, sales to the regional Bell operating
companies and major independent telephone companies represented 87%, 84%, and
36%, respectively, of net sales. At April 30, 1998 and 1999, accounts receivable
from these customers were $35.9 million and $30.6 million, respectively.
Accounts receivable includes allowances for doubtful accounts of $0.2
million and $5.0 million at April 30, 1998 and 1999, respectively.
USE OF ESTIMATES
The Company's consolidated financial statements are prepared in accordance
with generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the fiscal 1997 and 1998
consolidated financial statements to conform with the fiscal 1999 presentation.
NEW ACCOUNTING STANDARDS
During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." These
statements expanded or modified disclosures and had no impact on the Company's
consolidated financial position, results of operations or cash flows. SFAS No.
130 requires that all changes in equity during a period (except those resulting
from investments by stockholders and distributions to stockholders) be reported
in the Company's financial statements, and displayed with
F-14
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the same prominence as other financial statement presentations. Financial
statements for prior periods have been reclassified as required.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement,
which will be effective for the Company's fiscal year beginning May 1, 2001,
establishes accounting and reporting standards for derivative instruments and
requires recognition of all derivatives as either assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. SFAS No. 133 requires that changes in a derivative's fair value be
recognized currently in earnings, unless specific hedge accounting criteria are
met. The Company has not yet quantified the impact of adopting SFAS No. 133, nor
the timing of, or method of adoption; however, the Company believes the effect
of adoption will not be material.
2. MARKETABLE SECURITIES
The Company's short-term investments are comprised of marketable securities
which are all classified as trading securities and are stated at fair value. Net
unrealized holding gains and losses at fiscal year-end are included in other
income and net realized gains and losses are determined at the time of sale on
the specific identification cost basis.
3. INVENTORIES
At April 30, 1998 and 1999, the components of inventories are as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
Raw materials.......................................................... $ 8,672 $ 46,008
Work in process........................................................ 8,170 43,889
Finished goods......................................................... 26,348 241,275
--------- ----------
43,190 331,172
LIFO reserve........................................................... -- 5,950
--------- ----------
$ 43,190 $ 337,122
--------- ----------
--------- ----------
</TABLE>
Inventories valued using the LIFO method amounted to $224.7 million at April
30, 1999.
4. PROPERTY, PLANT AND EQUIPMENT
At April 30, 1998 and 1999, property, plant and equipment consist of the
following:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
Land................................................................... $ 2,851 $ 24,154
Buildings and improvements............................................. 17,246 125,252
Machinery and equipment................................................ 91,159 408,595
--------- ----------
111,256 558,001
Less accumulated depreciation.......................................... 26,908 46,424
--------- ----------
$ 84,348 $ 511,577
--------- ----------
--------- ----------
</TABLE>
F-15
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Depreciation expense for fiscal 1997, 1998 and 1999 was $7.8 million, $8.5
million and $20.8 million, respectively.
5. DISCONTINUED OPERATIONS
On May 28, 1999, Alpine, Premier, Cookson, and PRI Acquisition entered into
the Premier Merger Agreement providing for the acquisition by Cookson of 100% of
the capital stock and business operations of Premier through the merger of PRI
Acquisition into Premier (the "Premier Disposition"). The closing of the Premier
Disposition is subject to customary conditions and regulatory approvals and is
anticipated to occur during the second quarter of fiscal 2000. In connection
with the Premier Disposition, Cookson will assume or repay all of Premier's
existing indebtedness and will issue approximately 33.4 million ordinary shares
of Cookson and pay approximately $15.6 million in cash to Premier's stockholders
(subject to adjustment based on the working capital and indebtedness levels of
Premier at the time of the closing of the merger). In connection with the
Premier Disposition, Alpine also received from Premier the right to receive from
Minerals Trading, Inc. in the year 2001 a contingent cash payment based upon the
earnings through 2000 of the American Minerals business, which was spun-off to
Minerals Trading, Inc. by American Premier Holdings, Inc. concurrently with
Alpine's acquisition of American Premier Holdings, Inc. in January 1998. (See
also Note 17). Pursuant to an agreement with the minority stockholders of
Premier, Alpine has agreed to purchase the 16.6% interest of such stockholders
in Premier immediately prior to the effective time of the merger for a purchase
price of approximately $31.1 million, which is equivalent in value to the total
amount of cash and Cookson ordinary shares (as of the date of the Premier Merger
Agreement) that the holders of such an interest are entitled to receive under
the Premier Merger Agreement. The closing market value of an ordinary share of
Cookson on the London Stock Exchange as of June 29, 1999 was 213.5 pence or,
assuming an exchange rate of $1.58 per pound Sterling, $3.38 per share.
The Company has accounted for the proposed sale as a discontinued operation.
Accordingly, the operating results of Premier have been segregated from the
Company's continuing operations and are reported as a separate line item on the
statements of operations as discontinued operations. The Company anticipates
recognizing a gain upon the closing of the transaction. The net assets of
Premier totaling $41.5 million and $34.6 million, respectively, at April 30,
1998 and 1999 are included on the consolidated balance sheets and its results of
operations for fiscal 1997, 1998 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Sales.................................................................... $ 115,954 $ 402,480 $ 485,960
Loss before income tax (benefit) provision of ($0.8) million, ($0.1)
million and $1.6 million in fiscal 1997, 1998 and 1999, respectively... (3,110) (351) (1,691)
Loss before extraordinary loss........................................... (2,336) (194) (2,707)
</TABLE>
During fiscal 1997, the Company allocated interest expense to Premier in
relation to its daily borrowings outstanding under the Company's revolving
credit facility and the 12.25% senior secured notes at the rates incurred by the
Company on similar borrowings. During fiscal 1997, the total amount of interest
expense allocated to Premier, included in loss from discontinued operation on
the accompanying consolidated statement of operations, was $7.5 million.
F-16
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DISCONTINUED OPERATIONS (CONTINUED)
At April 30, 1999, net assets of the discontinued operation of $34.6
million, net of minority interest of $7.9 million, consisted primarily of $203.7
million of current assets, $481.7 million of total assets, $117.9 million of
current liabilities and $439.2 million of total liabilities. At April 30, 1998,
net assets of the discontinued operation of $41.5 million, net of minority
interest of $8.7 million, consisted primarily of $217.3 million of current
assets, $507.9 million of total assets, $142.0 million of current liabilities
and $457.7 million of total liabilities.
6. ACQUISITIONS
ESSEX ACQUISITION
On November 27, 1998, Superior completed a cash tender offer for 81% of the
outstanding common shares of Essex, at an aggregate cash tender value of $770
million (the "Essex Acquisition"). On March 31, 1999, Superior acquired the
remaining outstanding common shares of Essex through the merger of a newly
formed wholly-owned subsidiary of Superior into Essex and the resulting issuance
to the remaining stockholders of Essex of $167 million in 8 1/2%
Company-obligated Manditorily Redeemable Trust Convertible Preferred Securities
of Superior Trust I holding solely convertible debentures of Superior (see Note
20).
In connection with the Essex Acquisition, Superior entered into a $1.15
billion amended and restated credit facility and a $200 million senior
subordinated credit facility (the "Superior Credit Facilities"). Proceeds from
the Superior Credit Facilities were used to (i) pay the cash portion of the
purchase price, (ii) repay $275 million of Essex indebtedness, (iii) refinance
Superior's existing outstanding bank debt and (iv) pay related transaction
expenses (see Note 10 for a further description of the Superior Credit
Facilities).
The Essex Acquisition was accounted for using the purchase method and,
accordingly, the results of operations of Essex have been included in the
consolidated financial statements on a prospective basis from the date of
acquisition. The purchase price was allocated based upon preliminary assessments
of the fair values of assets and liabilities at the date of acquisition, which
includes accruals for planned consolidations, overhead rationalization and loss
contingencies. The allocation and related accruals are subject to adjustment.
The excess of the purchase price over the net assets acquired of approximately
$765 million is being amortized on a straight-line basis over 40 years.
Included in the allocated purchase price was a $29.7 million accrual for the
consolidation and integration of Essex manufacturing, corporate and distribution
functions. The accrual included $11.8 million for employee termination and
relocation costs, $11.9 million of facility consolidation costs, $4.4 million
for management information system project termination costs, and $1.6 million of
other miscellaneous costs. As of April 30, 1999, $2.9 million, $0.1 million and
$1.2 million have been paid related to employee termination (approximately 117
employees) and relocation costs, facility consolidation costs, and other
miscellaneous costs, respectively.
The provision for employee termination and relocation costs was primarily
associated with selling, general and administrative functions within Essex. The
provision for facility consolidation costs included both manufacturing and
distribution facility rationalization and the related costs associated with the
elimination of various manufacturing and administrative positions. The liability
was established in accordance with the provision of the Emerging Issues Task
Force ("EITF") No. 95-3 "Recognition of Liabilities in Connection with a
Purchase Business Combination," and contains estimates of costs under the
current
F-17
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITIONS (CONTINUED)
plan, which although continually being refined, is expected to be completed
within one year of the acquisition date.
In addition to the amounts discussed above, the Company wrote off $10.4
million of previously capitalized costs related to the discontinued Essex
management information system project. The project was being implemented by
Essex prior to the purchase by the Company and after an analysis of the project
by management, it was determined that the project would be discontinued. These
costs have been reflected as an increase to goodwill.
CABLES OF ZION AND CVALIM ACQUISITIONS
On May 5, 1998, Superior acquired 51% of the common stock of Cables of Zion
United Works Ltd., now known as Superior Cables Ltd. ("Cables of Zion"), an
Israeli-based cable and wire manufacturer whose common stock is traded on the
Tel Aviv Stock Exchange, for approximately $25 million in cash. Superior has an
option through May 5, 2000 to purchase an additional 19% ownership interest in
Cables of Zion at the same purchase price per share paid for its initial 51%
investment (as adjusted for inflation). This acquisition (the "Cables of Zion
Acquisition") was accounted for using the purchase method and, accordingly, the
results of operations of Cables of Zion are included in the Company's
consolidated financial statements on a prospective basis from the date of
acquisition. The purchase price was allocated based upon the estimated fair
values of assets and liabilities at the date of acquisition. The excess of the
purchase price over the net assets acquired was $2.2 million and is being
amortized on a straight-line basis over 30 years.
On December 31, 1998, Cables of Zion acquired the business and certain
operating assets of Cvalim-The Electric Wire and Cable Company of Israel Ltd.
("Cvalim") for an adjusted purchase price of $41.2 million in cash. In
connection with the acquisition, Cables of Zion entered into an $83.0 million
credit facility (the "Cables of Zion Credit Facility") consisting of a $53.0
million term loan and $30.0 million revolving line of credit (see Note 10 for a
further description of the Cables of Zion Credit Facility). Proceeds from the
Cables of Zion Credit Facility were used to finance the acquisition, pay related
fees and expenses and provide for working capital requirements. The purchase
price was allocated based upon the estimates of the fair value of assets
acquired and is subject to adjustment.
Included in the allocated purchase price was a $3.5 million provision for
the consolidation and integration of Cvalim's manufacturing and corporate
functions. The provision included $2.6 million of employee termination and
severance costs and $0.9 million of other miscellaneous costs. As of April 30,
1999, $0.3 million has been incurred related to employee termination and
severance costs.
The provision for employee termination and relocation costs was primarily
associated with the manufacturing, selling, general and administrative functions
within Cvalim, and included various manufacturing and administrative positions.
The liability was established in accordance with the provision of the EITF
No. 95-3 and contains estimates of costs under the current plan, which although
continually being refined, is expected to be completed within one year of the
acquisition date.
PRO FORMA FINANCIAL DATA (UNAUDITED)
Unaudited condensed pro forma results of operations for fiscal 1998 and
1999, which give effect to the Essex Acquisition, the Cables of Zion Acquisition
and the Cvalim acquisition as if the transactions had
F-18
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITIONS (CONTINUED)
occurred on May 1, 1997, are presented below. The pro forma amounts reflect
acquisition-related purchase accounting adjustments, including adjustments to
depreciation and amortization expense and interest expense on acquisition debt
and certain other adjustments, together with related income tax effects. The pro
forma financial information does not purport to be indicative of either the
results of operations that would have occurred had the acquisitions taken place
at the beginning of the periods presented or of future results of operations.
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
Net sales.................................................................................. $ 2,277.2 $ 2,008.2
Income from continuing operations before income taxes, distribution on preferred securities
of subsidiary trust, minority interest and extraordinary (loss).......................... 113.7 57.3
Income from continuing operations before extraordinary (loss).............................. 23.3 8.6
(Loss) from discontinued operations........................................................ (0.2) (2.7)
Extraordinary (loss) on early extinguishment of debt....................................... (1.5) (0.6)
Net income applicable to common stock...................................................... 21.6 5.2
Net income per diluted share of common stock:
Income from continuing operations before extraordinary (loss)............................ $ 1.24 $ 0.44
(Loss) from discontinued operations...................................................... (0.01) (0.15)
Extraordinary (loss) on early extinguishment of debt..................................... (0.08) (0.04)
--------- ---------
Net income per diluted share of common stock........................................... $ 1.15 $ 0.25
--------- ---------
--------- ---------
</TABLE>
7. LONG-TERM INVESTMENTS AND OTHER ASSETS
At April 30, 1998 and 1999, long-term investments and other assets consist
of the following:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Equity investment and advances to PolyVision (a)........................ $ 17,199 $ 24,280
Deferred financing charges (net of accumulated amortization)............ 3,371 30,576
Other assets............................................................ 1,834 12,839
--------- ---------
$ 22,404 $ 67,695
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(a) At April 30, 1998, Alpine's equity investment in PolyVision consisted of (i)
approximately $25.2 million in liquidation value of PolyVision 8% Series A
Preferred Stock (the "PolyVision Preferred") and (ii) approximately 1.4
million shares of PolyVision common stock (approximately 17% of PolyVision
outstanding shares). The net carrying value of Alpine's equity interests in
PolyVision was $11.5 million at April 30, 1998.
In November 1998, in connection with PolyVision's acquisition of Alliance
International Group Inc., Alpine exchanged approximately $25.2 million in
PolyVision Preferred (plus accrued dividends) and a loan receivable from
PolyVision of approximately $7.4 million for 5.3 million shares of
PolyVision's
F-19
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM INVESTMENTS AND OTHER ASSETS (CONTINUED)
common stock and approximately $12.4 million in liquidation value of
PolyVision's Series B Convertible Preferred Stock. As part of this
transaction, Alpine also acquired $5.0 million of PolyVision's Series C
Convertible Preferred Stock for cash and received a further $0.5 million
Series B Convertible Preferred Stock and 0.2 million shares of PolyVision
common stock for professional services rendered to PolyVision in connection
with its acquisition.
The aforementioned capitalization resulted in the Company's common share
equity ownership in PolyVision increasing to 48% from 17%, with such
recapitalization being accounted for by the Company as a step-acquisition. The
resulting excess of the fair value over the proportion of PolyVision net assets
acquired of approximately $4.1 million has been allocated to goodwill and is
being amortized ratably over 30 years. Following the recapitalization, the
Company is accounting for its investment in PolyVision under the equity method.
At April 30, 1999, the Company's equity investment in PolyVision consisted
of approximately $12.8 million face amount of PolyVision 9% series B cumulative
convertible preferred stock, $5.0 million face amount of PolyVision 9% series C
cumulative convertible preferred stock and approximately 6.8 million shares of
PolyVision common stock with a fair market value of approximately $15.3 million
based on PolyVision's (NYSE: PLI) closing stock price on April 30, 1999.
8. ACCRUED EXPENSES
At April 30, 1998 and 1999, accrued expenses consist of the following:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
Accrued wages, salaries and employee benefits.......................... $ 10,350 $ 29,280
Accrued insurance...................................................... 4,722 15,253
Other accrued expenses................................................. 6,927 85,051
--------- ----------
$ 21,999 $ 129,584
--------- ----------
--------- ----------
</TABLE>
9. SHORT-TERM BORROWINGS
At April 30, 1999, short-term borrowings consist principally of $127.6
million in borrowings under Superior's accounts receivable securitization
program which provides for up to $150.0 million in short-term financing through
the issuance of secured commercial paper through a limited purpose subsidiary.
Under the Superior receivable securitization program, Superior has granted a
security interest in certain of its trade accounts receivable to secure
borrowings under the facility. The Superior receivable securitization program
expires on November 30, 1999, although it may be extended for successive
one-year periods subject to agreement. Borrowings under this agreement bear
interest at the lender's commercial paper rate (which approximated 5.32% at
April 30, 1999) plus 0.35%.
F-20
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT
At April 30, 1998 and 1999, long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1999
--------- ------------
<S> <C> <C>
(IN THOUSANDS)
Superior revolving credit facility (a)............................... $ 69,350 $ 43,093
Superior term loan A (a)............................................. -- 489,500
Superior term loan B (a)............................................. -- 423,786
Superior senior subordinated notes (a)............................... -- 200,000
Cables of Zion credit facility (b)................................... -- 50,330
12.25% Senior Secured Notes (principal amount $12.2 at April 30, 1998
and 1999) (c)...................................................... 11,361 11,553
Alpine revolving credit facility (d)................................. -- 39,700
Alpine term loan (d)................................................. 10,000 10,000
Other................................................................ 6,355 34,471
--------- ------------
Total long-term debt............................................... 97,066 1,302,433
Less current portion of long-term debt............................... 172 65,080
--------- ------------
$ 96,894 $ 1,237,353
--------- ------------
--------- ------------
</TABLE>
At April 30, 1999, the fair value of Alpine's debt, based on the quoted
market prices for the same or similar issues or on the current rates offered to
Alpine for debt of the same remaining maturities, approximates its recorded
value. In order to limit the effect of changes in interest rates on several of
the Company's floating rate long-term obligations, the Company has entered into
a number of interest rate swap and interest rate cap agreements, which expire at
various dates through September 2001. Amounts currently due to or from interest
rate swap counterparties are recorded in interest expense in the period in which
they accrue. The Company does not enter into financial instruments for trading
or speculative purposes. The agreements protect $600 million of outstanding
floating rate debt at April 30, 1999, of which $400 million expire in 1999 and
$200 million expire in 2001. Under the agreements, the Company is reimbursed
when actual interest rates exceed a limit, as defined. The limit, based
primarily on the 90-day LIBOR, ranges from 4.97% to 5.07% over the protection
period, and certain of the agreements limit the reimbursement if actual LIBOR
exceeds a specified rate. The fair value of the interest rate cap agreements is
the amount at which they could be settled, based on estimates from brokers. The
fair market value of the interest rate caps and swaps was approximately $4.6
million at April 30, 1999.
F-21
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED)
The aggregate maturities of long-term debt for the five years subsequent to
April 30, 1999 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
(IN
THOUSANDS)
2000........................................................................... $ 65,080
2001........................................................................... 132,839
2002........................................................................... 87,632
2003........................................................................... 105,496
2004........................................................................... 240,671
Thereafter..................................................................... 670,715
-------------
$ 1,302,433
-------------
-------------
</TABLE>
- ------------------------
(a) In connection with the November 27, 1998 Essex Acquisition (see Note 6),
Superior amended and restated its existing credit facilities. Superior's
amended and restated credit facilities provide for total borrowing
availability of up to $1.35 billion, consisting of a $225.0 million
revolving credit facility, a $500.0 million term loan A facility, a $425.0
million term loan B facility and $200.0 million in senior subordinated
notes.
The Superior revolving credit facility is available to Superior's principal
subsidiaries. Borrowings under the facility are allowable up to $225 million
in the aggregate and mature May 27, 2004. Interest on the outstanding
balance is based upon LIBOR plus 3.0% or the base rate (prime) plus 2.0%
(7.94% at April 30, 1999) and is payable quarterly.
The Superior term loan A is repayable in varying installments over five and
one-half years, with interest payable quarterly based upon LIBOR plus 3.0%
or the base rate (prime) plus 2.0% (8.00% at April 30, 1999), and matures on
May 27, 2004.
The Superior term loan B is repayable in varying installments over seven
years, with interest payable quarterly based upon LIBOR plus 3.75% or the
base rate (prime) plus 2.75% (8.81% at April 30, 1999), and matures on
November 27, 2005.
On May 26, 1999, the Company refinanced the $200 million Superior senior
subordinated notes into a $120 million term loan A and an $80 million term
loan B, which are due May 26, 2007. Interest for the term loan A for the
first 270 days ranges from LIBOR plus 2.5% or base rate (prime) plus 1.5% to
LIBOR plus 4.0% or base rate (prime) plus 3.0%. Interest on the term loan B
for the first 270 days ranges from LIBOR plus 3.625% or base rate (prime)
plus 2.625% to LIBOR plus 4.0% or base rate (prime) plus 3.0%. After the
nine month anniversary of the borrowing date through maturity, interest on
term loan A and B is LIBOR plus 5.0% or base rate (prime) plus 4.0%. At
April 30, 1999 and prior to the refinancing, interest on the $200 million
Superior senior subordinated notes was 9.31% based on LIBOR plus 4.25% or
base rate (prime) plus 3.25%.
The common stock of all domestic subsidiaries of Superior and 65% of the
common stock of its foreign subsidiaries have been pledged to secure the
guarantees of the above described credit agreements. The obligations under
these Superior credit arrangements are secured by substantially all of the
assets of Superior and its domestic subsidiaries.
F-22
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED)
(b) In connection with the December 31, 1998 acquisition of the Cvalim assets
(see Note 6), Cables of Zion entered into an $83.0 million U.S. dollar
equivalent credit facility consisting of a $53.0 million term loan ("Cables
of Zion term loan") and a $30.0 million revolving credit facility ("Cables
of Zion revolving credit facility"). Proceeds from these facilities were
used to finance the acquisition of the Cvalim assets, pay related
transaction expenses and provide for ongoing working capital requirements.
The Cables of Zion term loan is repayable on December 31, 2008. Interest on
the Cables of Zion term loan is based upon LIBOR plus 1.0% or the average of
the gross yield to maturity of all the series of fixed rate bonds issued by
the State of Israel, listed on the Tel-Aviv stock exchange and having a
remaining maturity of 18 - 30 months, plus 1.3% or the lending bank's
wholesale rate of interest for credits linked to the Israeli consumer price
index plus 0.7% (5.23% at April 30, 1999).
The Cables of Zion revolving credit facility is available up to $30.0 million
in the aggregate. Interest on the outstanding balance is based upon either
LIBOR plus 0.40%, the lending bank's prime rate minus 1.1%, or a rate to be
agreed upon by the parties (8.52% at April 30, 1999). The Cables of Zion
credit facility terminates on December 31, 2003. Obligation under the Cables
of Zion credit facility are secured by all of the assets of Cables of Zion.
(c) The 12.25% Senior Secured Notes are due 2003 and pay interest semiannually
on January 15 and July 15 of each year. The Senior Notes were issued at a
price of 91.74% and the discount is being added to the recorded amount
through maturity utilizing the effective interest method.
(d) Alpine's $25.0 million senior secured credit agreement (the "Alpine Credit
Facility") was amended and restated in October 1998, increasing the facility
to $50.0 million, including a $40.0 million revolving credit facility and a
$10.0 million senior secured term loan. Proceeds from these facilities are
for ongoing general working capital and corporate needs of Alpine. Interest
on the revolving credit facility is based upon LIBOR plus 1.5% or the base
rate (prime) (6.94% at April 30, 1999) and interest on the term loan is
based upon LIBOR plus 2.0% or the base rate (prime) plus 0.5% (6.75% at
April 30, 1999). Borrowings under the Alpine Credit Facility are secured by
a pledge of certain shares of Superior common stock owned by Alpine.
The above credit agreements contain certain restrictive covenants,
including, among other things, requirements to maintain certain financial
ratios, limitations on the amount of dividends the Company is allowed to pay on
its common stock and restrictions on additional indebtedness.
During fiscal 1999, the Company recognized an extraordinary charge on the
early extinguishment of debt of $0.6 million, or $0.04 per diluted share,
associated with the amendment and restatement of Superior's credit facilities.
During fiscal 1998, the Company retired $9.0 million face amount ($8.3
million recorded amount) of its 12.25% Senior Secured Notes and $5.0 million
face amount ($4.7 million recorded amount) of Premier's 11% Senior Notes. In
connection with this early extinguishment of debt, the Company recognized an
after-tax extraordinary charge of $1.5 million, or $0.08 per diluted share.
F-23
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED)
During fiscal 1997, the Company refinanced a substantial portion of its
outstanding debt and entered into new credit facilities. In connection with such
refinancings, the Company recognized an after-tax extraordinary charge of $20.1
million, or $1.01 per diluted share, on the early extinguishment of debt. This
charge represents the premium paid on the redemption of $131.9 million face
amount ($122.3 million recorded amount) of the Company's 12.25% Senior Secured
Notes, prepayment penalties related to the termination of an existing Alpine
revolving credit facility and the associated write-off of the unamortized
portion of deferred loan fees related to the debt extinguished.
11. EARNINGS PER SHARE
The computation of basic and diluted earnings per share for fiscal 1997,
1998 and 1999 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------------------------------- --------------------------------- --------------------
PER PER
SHARE SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES
--------- --------- ----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Income attributable to common stock
from continuing operations before
extraordinary (loss)............. $ 59,182 $ 16,941 $ 16,910
Less: preferred stock dividends.... (575) (69) (39)
--------- --------- ---------
Basic earnings per common share
from continuing operations....... $ 58,607 17,891 $ 3.28 $ 16,872 16,986 $ 1.00 $ 16,871 16,405
----- -----
----- -----
Dilutive impact of stock options,
warrants
and grants....................... -- 604 -- 1,663 -- 1,431
Dilution in subsidiary earnings
from subsidiary stock options.... -- -- -- -- (669) --
Assumed conversion of preferred
stock............................ 575 1,362 69 125 39 51
--------- --------- --------- --------- --------- ---------
Diluted earnings per common share
from continuing operations....... $ 59,182 19,857 $ 2.98 $ 16,941 18,774 $ 0.90 $ 16,241 17,887
--------- --------- ----- --------- --------- ----- --------- ---------
--------- --------- ----- --------- --------- ----- --------- ---------
<CAPTION>
PER
SHARE
AMOUNT
-----------
<S> <C>
Income attributable to common stock
from continuing operations before
extraordinary (loss).............
Less: preferred stock dividends....
Basic earnings per common share
from continuing operations....... $ 1.03
-----
-----
Dilutive impact of stock options,
warrants
and grants.......................
Dilution in subsidiary earnings
from subsidiary stock options....
Assumed conversion of preferred
stock............................
Diluted earnings per common share
from continuing operations....... $ 0.91
-----
-----
</TABLE>
During fiscal 1999, the impact of Superior's Trust Convertible Preferred
Securities (Note 20) to the Company's earnings per share calculation was not
dilutive.
12. STOCK BASED COMPENSATION PLANS
The Company sponsors the Employee Stock Purchase Plan ("ESPP") which allows
eligible employees the right to purchase common stock of the Company on a
quarterly basis at the lower of 85% of the common stock's fair market value on
the day immediately prior to the first day of a calendar quarter or on the last
day of a calendar quarter. There are 500,000 shares of common stock reserved
under the ESPP, of
F-24
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BASED COMPENSATION PLANS (CONTINUED)
which 8,339 shares, 23,241 shares and 53,389 shares were purchased by employees
during fiscal 1997, 1998 and 1999, respectively.
Alpine has two long-term equity incentive plans: the 1987 Long-Term Equity
Incentive Plan (the "1987 Plan") and the 1997 Stock Option Plan (the "1997
Plan"). No further options may be granted under the 1987 Plan. The 1997 Plan has
1,500,000 shares of common stock reserved for issuance. There were 19,431 shares
of common stock available under the 1997 Plan for granting of options at April
30, 1999. Participation in the 1997 Plan is generally limited to key employees
and consultants of Alpine and its subsidiaries. The 1997 Plan provides for the
granting of incentive and non-qualified stock options and stock appreciation
rights. Under the 1997 Plan, options cannot be exercised after ten years from
the date of grant. In addition to the shares granted in fiscal 1999 under the
1997 Plan, in March 1999, the Company granted non-qualified stock options to
purchase 595,000 shares of the Company's common stock under individual option
agreements to certain key management employees, exercisable at the fair market
value of the common stock on the date of grant. Any shares issued upon exercise
of these options will be issued from the Company's treasury stock. The Company
also adopted the 1999 Stock Option Reload Program under the 1997 Plan, which
enables certain key management employees to receive a new reload stock option
equal to the total shares tendered by the employee to the Company in order to
pay the exercise price and related taxes on the exercise of certain vested stock
options. The reload stock option is priced at the fair market value of the
common stock on the exercise date.
In addition, the Company granted certain key management employees
non-qualified stock options to purchase 239,000 shares of the common stock of
PolyVision and 72,000 shares of the common stock of Superior at the fair market
value of the shares at the date of grant. Any shares issued upon exercise of
these options will be made available only from issued shares of the common stock
of PolyVision and shares of the common stock of Superior owned by the Company.
Statement No. 123, "Accounting for Stock-Based Compensation," was issued by
the FASB in fiscal 1997 and, if fully adopted, would change the method for
recognition of cost on stock-based plans. In accordance with the provisions of
SFAS No. 123, the Company elected to continue to apply APB Opinion No. 25 and
related Interpretations in accounting for its stock-based compensation plans
(including options issued under the plans). Application of the provisions of APB
No. 25 resulted in a charge to earnings of $1.4 million, $0.8 million, and $0.4
million in fiscal 1997, 1998 and 1999, respectively, for certain
performance-based stock options granted in prior years. However, had the Company
elected to recognize compensation expense based on the fair value at the grant
date for awards under its stock-based compensation plans as prescribed by SFAS
No. 123, Alpine's net income, net income applicable to common stock, basic net
income per share of common stock and diluted net income per share of common
stock for fiscal 1997, 1998 and 1999 would approximate the pro forma amounts
below:
<TABLE>
<CAPTION>
1997 1998 1999
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net income................................... $ 36,720 $ 35,688 $ 15,283 $ 13,315 $ 13,569 $ 9,282
Net income applicable to common stock........ 30,950 29,918 15,214 13,246 13,530 9,243
Basic net income per share of common stock... 1.73 1.67 0.90 0.78 0.82 0.56
Diluted net income per share of common
stock...................................... 1.59 1.53 0.81 0.71 0.72 0.48
</TABLE>
F-25
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BASED COMPENSATION PLANS (CONTINUED)
The effects of applying SFAS No. 123 in the pro forma disclosure are not
necessarily indicative of future amounts, since the estimated fair value of
stock options is amortized to expense over the vesting period and additional
options may be granted in future years. The fair value for these options was
estimated at the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions for fiscal 1997, 1998, and 1999,
respectively: dividend yield of 0% for each year; expected volatility of 50%,
45%; and 44%; risk-free interest rate of 6.42%, 5.53% and 4.92%; and expected
life of five years, four years and four years. The weighted average per share
fair value of options granted (using the Black-Scholes option-pricing model)
during fiscal 1997, 1998 and 1999 was $3.73, $5.70 and $6.29, respectively.
The Company also adopted the Stock Compensation Plan for Non-Employee
Directors (the "Stock Plan") in January, 1999. Under the Stock Plan, each
non-employee director of the Company automatically receives 50% of the annual
retainer in either restricted common stock or non-qualified stock options, as
elected by the director. In addition, each non-employee director may also elect
to receive all or a portion of the remaining amount of the annual retainer (in
excess of 50% of the annual retainer) and any meeting fees in the form of
restricted stock or stock options in lieu of cash payment. Any shares issued
pursuant to the Stock Plan will be issued from the Company's treasury stock.
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee and consultant stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimates, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
The following table summarizes stock option activity for fiscal 1997, 1998
and 1999:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
OUTSTANDING EXERCISE PRICE
----------- ---------------
<S> <C> <C>
Outstanding at April 30, 1996........................................................ 3,231,744 $ 4.82
Exercised.......................................................................... (419,545) 4.66
Canceled........................................................................... (419,576) 3.54
Granted............................................................................ 879,747 6.40
-----------
Outstanding at April 30, 1997........................................................ 3,272,370 5.38
Exercised.......................................................................... (559,880) 4.94
Canceled........................................................................... (56,466) 6.32
Granted............................................................................ 184,001 13.83
-----------
Outstanding at April 30, 1998........................................................ 2,840,025 5.93
Exercised.......................................................................... (111,741) 4.15
Canceled........................................................................... (32,545) 15.34
Granted............................................................................ 1,452,714 16.07
-----------
Outstanding at April 30, 1999........................................................ 4,148,453 9.38
-----------
-----------
</TABLE>
F-26
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BASED COMPENSATION PLANS (CONTINUED)
Information with respect to stock-based compensation plan stock options
outstanding and exercisable at April 30, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OF OPTIONS CONTRACTUAL EXERCISE OF OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ---------------------------------------------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$2.00-$6.00......................................... 1,767,900 5.47 years $ 4.23 1,643,497 $ 4.19
$6.05-$10.00........................................ 823,439 6.46 8.13 647,794 8.13
$10.05-$15.00....................................... 684,514 9.69 10.43 27,179 11.60
$15.05-$21.00....................................... 872,600 8.81 20.15 36,665 18.27
----------- ----------
4,148,453 7.07 9.38 2,355,135 5.58
----------- ----------
----------- ----------
</TABLE>
Alpine also has a Restricted Stock Plan under which a maximum of 600,000
shares of Alpine common stock have been reserved for issuance. At April 30,
1999, there are 79,931 shares available for issuance. During fiscal 1997, 1998
and 1999, noncash compensation expense of $0.9 million, $1.0 million and $0.6
million, respectively, was recorded representing the amortization, over the
applicable vesting period, of the fair market value of common stock issued under
the Restricted Stock Plan.
13. EMPLOYEE BENEFITS
Superior provides for postretirement employee health care and life insurance
benefits for a limited number of its employees. Superior established a maximum
amount it will pay per employee for such benefits; therefore, health care cost
trends do not affect the calculation of the postretirement benefit obligation or
its net periodic benefit cost.
The Company and Essex sponsor several defined benefit pension plans and
unfunded supplemental executive retirement plans (the "SERP"). The defined
benefit pension plans and the SERP generally provide for payment of benefits,
commencing at retirement (between the ages of 55 and 65), based on the
employee's length of service and earnings. Assets of the plans consist
principally of cash and cash equivalents, short-term investments, equities and
fixed income instruments.
Changes in the projected benefit obligation, plan assets and funded status
of the defined benefit pension plans and the postretirement health care benefit
plans during fiscal 1997, 1998 and 1999 are
F-27
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFITS (CONTINUED)
presented below, along with amounts recognized in the respective balance sheets
and statements of operations:
<TABLE>
<CAPTION>
DEFINED BENEFIT POSTRETIREMENT
PENSION PLANS HEALTH CARE BENEFITS
-------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1998 1999 1997 1998 1999
--------- --------- ---------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................ $ 3,228 $ 5,912 $ 7,997 $ 1,282 $ 1,265 $ 1,994
Impact of acquisitions and new plans................... 2,055 -- 99,364 -- -- --
Service cost........................................... 169 320 2,676 43 52 66
Interest cost.......................................... 295 461 3,280 96 129 137
Plan amendments........................................ 305 -- -- -- -- --
Actuarial (gain) loss.................................. -- 1,441 (6,175) -- 607 --
Benefits paid.......................................... (140) (137) (1,100) (156) (59) (66)
--------- --------- ---------- --------- --------- ---------
Benefit obligation at end of year...................... $ 5,912 $ 7,997 $ 106,042 $ 1,265 $ 1,994 $ 2,131
--------- --------- ---------- --------- --------- ---------
--------- --------- ---------- --------- --------- ---------
Change in plan assets:
Fair value of plan assets at beginning of year......... $ 3,263 $ 3,568 $ 4,360 $ -- $ -- $ --
Acquisitions........................................... -- -- 77,060 -- -- --
Actual return on plan assets........................... 233 751 3,445 -- -- --
Employer contribution.................................. 212 178 343 156 59 66
Benefits paid.......................................... (140) (137) (1,100) (156) (59) (66)
--------- --------- ---------- --------- --------- ---------
Fair value of plan assets at end of year............... $ 3,568 $ 4,360 $ 84,108 $ -- $ -- $ --
--------- --------- ---------- --------- --------- ---------
--------- --------- ---------- --------- --------- ---------
Funded status............................................ $ (2,344) $ (3,637) $ (21,934) $ (1,265) $ (1,994) $ (2,131)
Unrecognized actuarial (gain) loss....................... (148) 830 (5,430) (178) 424 411
Unrecognized prior service cost.......................... 2,404 2,235 2,056 -- -- --
--------- --------- ---------- --------- --------- ---------
Accrued benefit cost..................................... $ (88) $ (572) $ (25,308) $ (1,443) $ (1,570) $ (1,720)
--------- --------- ---------- --------- --------- ---------
--------- --------- ---------- --------- --------- ---------
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid benefit cost................................... $ 31 $ 35 $ -- $ -- $ -- $ --
Accrued benefit liability.............................. (1,371) (2,345) (28,829) (1,443) (1,570) (1,720)
Other comprehensive loss............................... -- -- 1,465 -- -- --
Intangible asset....................................... 1,252 1,738 2,056 -- -- --
--------- --------- ---------- --------- --------- ---------
Accrued benefit cost................................... $ (88) $ (572) $ (25,308) $ (1,443) $ (1,570) $ (1,720)
--------- --------- ---------- --------- --------- ---------
--------- --------- ---------- --------- --------- ---------
Components of net periodic benefit cost:
Service cost........................................... $ 169 $ 320 $ 2,676 $ 43 $ 52 $ 66
Interest cost.......................................... 295 461 3,280 96 129 137
Expected return on plan assets......................... (254) (281) (3,256) -- -- --
Amortization of prior service cost..................... 34 161 162 -- 5 --
Recognized net actuarial loss.......................... -- -- 56 -- -- 13
--------- --------- ---------- --------- --------- ---------
Net periodic benefit cost.............................. $ 244 $ 661 $ 2,918 $ 139 $ 186 $ 216
--------- --------- ---------- --------- --------- ---------
--------- --------- ---------- --------- --------- ---------
</TABLE>
F-28
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFITS (CONTINUED)
The actuarial present value of the projected pension benefit obligation and
the postretirement health care benefits obligation at April 30, 1997, 1998 and
1999 were determined based upon the following assumptions:
<TABLE>
<CAPTION>
DEFINED BENEFIT POST-RETIREMENT
PENSION PLANS HEALTH CARE BENEFITS
------------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1998 1999 1997 1998 1999
-------------- ------------ ------------ -------------- --------- ---------
Discount rate................................ 7.5%-8.0% 6.5%-7.0% 6.0%-7.0% 7.5%-7.75% 7.0% 7.0%
Expected return on plan assets............... 7.5%-8.0% 7.5%-9.5% 8.0%-9.0% N/A N/A N/A
Compensation rate............................ 4.0% 4.0% 4.0%-5.0% N/A N/A N/A
</TABLE>
During March 1999, the Company implemented unfunded deferred compensation
plans whereby certain key management employees are permitted to defer the
receipt of all, or a portion of, their salary or bonus and shares due upon stock
option exercises, as defined by the plans. Shares issued pursuant to the
deferred stock component of these plans are held in irrevocable grantor trusts
("rabbi trusts").
The Company and its subsidiaries sponsor several defined contribution plans
covering substantially all U.S. and Israeli employees. The plans provide for
limited company matching of participants' contributions. The Company's
contributions during fiscal 1997, 1998 and 1999 were $0.5 million, $0.9 million
and $3.2 million, respectively.
Essex also sponsored an unfunded, nonqualified deferred compensation plan
which permitted certain key management employees to annually elect to defer a
portion of their compensation and earn a guaranteed interest rate on the
deferred amounts. The total amount of participant deferrals and accrued
interest, which is reflected in other long-term liabilities, was $5.7 million at
April 30, 1999.
Israeli labor laws and agreements require the Company to pay severance pay
and/or pensions to retired employees and to terminated employees under certain
circumstances. This liability is covered mainly by regular deposits with
recognized Israeli pension and severance pay funds in the employees' names and
by purchase of insurance policies. The amounts funded are not reflected in the
consolidated balance sheet since they are not under the control and management
of the Company. The amount of liability for future Israeli employee benefits
upon retirement and the balance of liability not covered by the deposits and
insurance policies discussed above are in accordance with Israeli labor
agreements in force. These liabilities are funded by deposits in the name of the
Company with recognized Israeli severance pay funds. At April 30, 1999, accrued
Israeli employee benefits consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
1999
-------------
<S> <C>
(IN
THOUSANDS)
Funded employee benefits....................................................... $ 1,295
Accrued employee benefits...................................................... (1,932)
-------------
Net accrued.................................................................. $ (637)
-------------
-------------
</TABLE>
F-29
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES
The provision (benefit) for income taxes related to continuing operations
for fiscal 1997, 1998 and 1999 is comprised of the following:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal.................................................... $ 24,686 $ 19,315 $ 24,044
State...................................................... 2,128 2,959 3,048
Foreign.................................................... 232 2,484 3,210
--------- --------- ---------
Total current............................................ 27,046 24,758 30,302
--------- --------- ---------
Deferred:
Federal.................................................... 15,963 (1,123) (2,501)
State...................................................... (1,385) (162) (390)
Foreign.................................................... 1,284 455 133
--------- --------- ---------
Total deferred........................................... 15,862 (830) (2,758)
--------- --------- ---------
Total income tax expense............................... $ 42,908 $ 23,928 $ 27,544
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes related to continuing operations
differs from the amount computed by applying the U.S. federal income tax rate of
35% for fiscal 1997, 1998 and 1999 because of the effect of the following items:
<TABLE>
<CAPTION>
1997 1998 1999
---------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Continuing operations:
Expected income tax expense at U.S. federal statutory tax
rate.................................................... $ 42,405 $ 21,712 $ 22,245
State income taxes, net of U.S. federal income tax
benefit................................................. 400 2,717 2,630
Taxes on foreign income at rates which differ from the
U.S. federal statutory rate............................. 360 288 384
Gain on reorganization of subsidiary...................... 8,247 -- --
Nondeductible goodwill amortization....................... 385 382 2,706
Change in valuation allowance............................. 1,785 (738) --
Other, net................................................ 295 435 (10)
---------- --------- ---------
Provision for income taxes from continuing operations..... 53,877 24,796 27,955
Extraordinary loss.......................................... (10,969) (868) (411)
---------- --------- ---------
Total income tax expense................................ $ 42,908 $ 23,928 $ 27,544
---------- --------- ---------
---------- --------- ---------
</TABLE>
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for both
the expected future tax impact of temporary differences arising from assets and
liabilities whose tax bases are different from financial statement amounts and
for the expected future tax benefit to be derived from tax loss carryforwards. A
valuation allowance is established if it is more likely than not that all or a
portion of deferred tax assets will not be
F-30
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
realized. Realization of the future tax benefits of deferred tax assets
(including tax loss carryforwards) is dependent on Alpine's ability to generate
taxable income within the carryforward period and the periods in which net
temporary differences reverse. Although no assurance can be given that
sufficient taxable income will be generated for utilization of certain of the
Company's consolidated net operating loss carryforwards or for reversal of
certain temporary differences, the Company believes it is more likely than not
that all of the net deferred tax asset, after valuation allowance, will be
realized.
Items that result in deferred tax assets and liabilities and the related
valuation allowance at April 30, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax assets:
Inventory............................................................ $ 3,276 $ --
Sale/leaseback....................................................... 1,930 1,950
Accruals not currently deductible for tax............................ 2,347 23,939
Pension and postretirement benefits.................................. 1,195 9,945
Compensation expense related to unexercised stock options and stock
grants............................................................. 1,220 1,152
Net operating loss carryforwards..................................... 8,319 7,827
Alternative minimum tax credit carryforwards......................... 2,500 2,500
Other................................................................ 1,231 2,130
--------- ----------
Total deferred tax assets.......................................... 22,018 49,443
Less valuation allowance............................................. 8,319 6,595
--------- ----------
Net deferred tax assets............................................ 13,699 42,848
--------- ----------
Deferred tax liabilities:
Depreciation......................................................... 10,891 94,705
Inventory............................................................ -- 6,807
Long-term investments................................................ 20,757 22,920
Other................................................................ 9,574 13,220
--------- ----------
Total deferred tax liabilities..................................... 41,222 137,652
--------- ----------
Net deferred tax liability......................................... $ 27,523 $ 94,804
--------- ----------
--------- ----------
</TABLE>
At April 30, 1999, Alpine had unused net state operating loss carryforwards
of approximately $76.5 million that can be used to offset future taxable income.
The net operating loss carryforwards expire between 2002 and 2014. Alpine's tax
returns for years subsequent to 1980 have not been reviewed by the state taxing
authorities. Availability of the net operating loss carryforwards might be
challenged upon examination of such returns, which could affect the availability
of such carryforwards. Alpine believes, however, that any challenges that would
limit the utilization of net operating loss carryforwards would not have a
material adverse effect on Alpine's financial position.
15. NONRECURRING AND UNUSUAL CHARGES
During fiscal 1999, the Company recorded pre-tax nonrecurring and unusual
charges of $7.3 million, consisting of (i) a $2.9 million restructuring charge
recorded by Cables of Zion, the Company's 51% owned
F-31
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. NONRECURRING AND UNUSUAL CHARGES (CONTINUED)
Israeli wire and cable subsidiary, related to manufacturing and administrative
facility consolidated and overhead rationalization associated with the
acquisition of Cvalim and (ii) $4.4 million in unusual charges primarily
associated with the evaluation of management information systems at Essex.
The Cables of Zion restructuring charge includes a provision for the
consolidation of seven manufacturing facilities into five and two headquarters
facilities into one and the elimination of a number of manufacturing and
administrative positions. Management expects to complete all parts of the
restructuring plan by the end of fiscal 2000. As of April 30, 1999 approximately
$0.3 million has been spent and 38 positions have been eliminated related to the
restructuring plan.
The $4.4 million of unusual charges related primarily to the management
information system evaluation at Essex has all been paid as of April 30, 1999.
16. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION
The Company, to a limited extent, uses forward fixed price contracts and
derivative financial instruments to manage foreign currency exchange and
commodity price risks. The Company does not hold or issue financial instruments
for investment or trading purposes. The Company is exposed to credit risk in the
event of nonperformance by counterparties for foreign exchange forward
contracts, metal forward price contracts and metals futures contracts but the
Company does not anticipate nonperformance by any of these counterparties. The
amount of such exposure is generally the unrealized gains or losses within the
underlying contracts.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company engages in the sale and purchase of goods and services which
periodically require payment or receipt of amounts denominated in foreign
currencies. To protect the Company's related anticipated cash flows from the
risk of adverse foreign currency exchange fluctuations for firm sales and
purchase commitments, the Company enters into foreign currency forward exchange
contracts. At April 30, 1999, the Company had no forward exchange sales
contracts, but did have $0.6 million of Deutschemark purchase contracts whose
fair value approximated the contract amount. Foreign currency gains or losses
resulting from the Company's operating and hedging activities are recognized in
earnings in the period in which the hedged currency is collected or paid. The
related amounts due to or from counterparties are included in other liabilities
or other assets.
COMMODITY PRICE RISK MANAGEMENT
Copper, Superior's principal raw material, experiences marked fluctuations
in market prices, thereby subjecting the Company to copper price risk with
respect to copper purchases and to certain firm and anticipated customer sales
contracts. Derivative financial instruments in the form of copper futures
contracts are utilized by the Company to reduce those risks.
Purchases of "long" contracts are utilized by the Company to hedge certain
firm and anticipated sales contracts while sales of "short" contracts are
employed with respect to copper "carryover" purchases. Copper carryover
purchases represent that portion of the Company's current month's copper
purchase commitments priced at the current month's average New York Commodity
Exchange, Inc. ("COMEX") price, but not delivered until the following month.
F-32
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION (CONTINUED)
Purchase contracts at April 30, 1999 totaled 1.5 million copper pounds, with
contract amounts of $1.2 million and estimated fair values of $1.1 million.
Sales contracts at April 30, 1999 totaled 13.7 million copper pounds, with
contract amounts of $9.8 million and estimated fair values of $9.5 million.
Deferred and unrealized gains or losses on these futures contracts ($0.4 million
loss at April 30, 1999) are included within other assets and will be recognized
in earnings in the period in which the hedged copper is sold to customers and
the underlying contracts are liquidated, when a sale is no longer expected to
occur or when the carryover is received.
17. COMMITMENTS AND CONTINGENCIES
Total rent expense under cancelable and noncancelable operating leases was
$1.1 million, $1.6 million and $8.0 million during fiscal 1997, 1998, and 1999,
respectively.
At April 30, 1999, future minimum lease payments under noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
REAL AND PERSONAL
FISCAL YEAR PROPERTY
- --------------------------------------------------------------------------- -----------------
<S> <C>
(IN THOUSANDS)
2000....................................................................... $ 14,698
2001....................................................................... 13,152
2002....................................................................... 11,036
2003....................................................................... 8,050
2004....................................................................... 7,714
Thereafter................................................................. 8,416
-------
$ 63,066
-------
-------
</TABLE>
Approximately 54% of the Company's total labor force is covered by
collective bargaining agreements. Sixteen collective bargaining agreements,
representing 39% of Superior's unionized work force, will expire within one
year.
The Company is subject to routine lawsuits incidental to its business. In
the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse effect upon
Alpine's consolidated financial position, liquidity or results of operations.
In connection with Essex's 1988 acquisition of Essex Group, Inc., United
Technologies Corporation ("UTC"), Essex's former parent, has indemnified Essex
against all losses resulting from or in connection with damage or pollution to
the environment and arising from events, operations, or activities of Essex
prior to February 29, 1988 or from conditions or circumstances existing at
February 29, 1988 known to UTC prior to February 29, 1988. The sites covered by
this indemnity are handled directly by UTC and all payments required to be made
are paid directly by UTC. UTC also provided a second environmental indemnity
which deals with losses related to environmental events, conditions or
circumstances existing at or prior to February 29, 1988, which became known
prior to February 28, 1993. As to any such losses, the Company is responsible
for the first $4 million incurred. The Company accrues for these costs when it
is probable that a liability has been incurred and the amount of the loss can be
reasonably estimated.
F-33
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Essex has been named as a defendant in a limited number of product liability
lawsuits brought by electricians and other skilled tradesmen claiming injury
from exposure to asbestos found in electrical wire products produced a number of
years ago. At June 29, 1999, the number of cases pending against Essex was 104
involving approximately 2,274 claims. The Company's strategy is to defend these
cases vigorously.
Pursuant to the Premier Merger Agreement, Alpine agreed, subject to certain
limited exceptions, that for a period of five years following the date of the
Premier merger, it would not compete with Cookson in any business which is
competitive with Premier's business as of such date. Additionally, pursuant to
the Premier Merger Agreement, Alpine extended to Cookson certain customary
warranties and representations relating to Premier, its assets and operations
and indemnified Cookson and certain related parties (the "Cookson Parties")
against any losses the Cookson Parties might suffer or incur ("Losses") arising
out of any breach thereof, any breach of any covenant of Alpine and Premier or
certain taxes relating to the repayment of specified Premier indebtedness (the
"Alpine Indemnity"). Also, Alpine agreed to indemnify the Cookson Parties
against any Losses arising out of third-party environmental claims directly
relating to (i) off-site transportation, treatment, storage or disposal prior to
the merger date of "hazardous substances" generated by Premier or its
predecessors or (ii) any real property formerly owned, leased or operated by
Premier or its predecessors (collectively the "Environmental Indemnity").
Subject to certain exceptions set out in the Premier Merger Agreement, the
liabilities of Alpine under the Alpine Indemnity are subject to (i) with respect
to breaches of representations of warranties of Alpine, individual and aggregate
threshold amounts of $50,000 and $1,000,000, respectively, and (ii) a maximum
liability cap of $50 million. In addition, the Environmental Indemnity is
subject to a maximum liability cap of $10 million. No claim under the
Environmental Indemnity may be made after May 31, 2000 and no claim under the
Alpine Indemnity based upon any breach of warranty or representation of Alpine
made under the Premier Merger Agreement may be made after May 31, 2000, except
that claims based upon any alleged breach of Alpine's warranties and
representations relating to tax and specified employee benefits matters may be
asserted until the expiration of the respective periods set by applicable
statutes of limitation.
Certain executives of the Company have employment contracts which generally
provide minimum base salaries, cash bonuses based on the Company's achievement
of certain performance objectives, stock options and restricted stock grants and
certain retirement and other employee benefits. Further, in the event of
termination or voluntary resignation for "good reason" accompanied by a "change
in control", as defined, such employment agreements provide for severance
payments not in excess of two to three times annual cash compensation and bonus
and the continuation for stipulated periods of other benefits, as defined.
18. RELATED PARTY TRANSACTIONS
At April 30, 1999, Alpine has loaned certain officers $1.0 million relating
to the tax implications associated with the exercise in prior years of stock
options and restricted stock grants. The unpaid balance, which is deducted from
stockholders' equity, bears interest at prime plus 0.5%. During fiscal 1999, the
Company agreed to forgive a $300,000 loan made by the Company in June 1987 to an
executive of the Company to finance the exercise of certain stock options, with
such forgiveness to occur over a four year period, subject to certain employment
conditions.
F-34
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. PREFERRED STOCK
Alpine has authorized 500,000 shares of preferred stock with a par value of
$1.00 per share. The preferred stock may be issued at the discretion of the
Board of Directors in one or more series with differing terms, limitations and
rights.
At April 30, 1999, Alpine has outstanding 250 shares of 9% Cumulative
Convertible Senior Preferred Stock ("9% Senior Preferred Stock") and 177 shares
of 9% Cumulative Convertible Preferred Stock ("9% Preferred Stock").
The 9% Senior Preferred Stock is senior in ranking to holders of Alpine's
common stock and the 9% Preferred Stock. Each share is convertible at any time
into shares of Alpine common stock at a conversion price of $7.90 per share,
subject to customary adjustments, and is redeemable by Alpine under certain
conditions. The 9% Senior Preferred Stock carries 100 votes per share, votes as
a single class with Alpine's common stock on all matters submitted to
stockholders and is entitled to vote as a separate class in the event of any
proposal to (i) amend any of the principal terms of the preferred stock; (ii)
authorize, create, issue or sell any class of stock senior to or on a parity
with the 9% Senior Preferred Stock as to dividends or liquidation preference; or
(iii) merge into, consolidate with, or sell all or substantially all of the
assets of Alpine to another entity. The holders of not less than 66 2/3% of the
9% Senior Preferred Stock must approve any transaction subject to the class
voting rights.
The 9% Preferred Stock is convertible into 105 1/2 shares of common stock,
subject to customary adjustments. Alpine may redeem the stock at any time, in
whole or in part at a price equal to the liquidation value per share.
During fiscal 1998, 1,500 shares of 9% Senior Preferred Stock were converted
to 189,873 shares of Common Stock based on a conversion price of $7.90 per
share. During fiscal 1997, 36,649 shares of 8% Cumulative Convertible Senior
Preferred Stock ("8% Preferred Stock") plus accrued dividends were retired in
connection with Premier's acquisition of American Premier Holdings, Inc. Also
during fiscal 1997, 160,000 shares of 8% Preferred Stock with a par value of
$8.0 million were repurchased for $13.2 million. In accordance with generally
accepted accounting principles, the repurchase price paid in excess of the par
value of such preferred stock has been recorded as a redemption premium and,
therefore, as a reduction of net income attributable to common stockholders.
20. SUPERIOR TRUST CONVERTIBLE PREFERRED SECURITIES
On March 31 1999, Superior Trust I (the "Trust"), a trust in which Superior
owns all the common equity interests, issued 3,332,254 shares of 8 1/2% Trust
Convertible Preferred Securities (the "Trust Convertible Preferred Securities")
at a liquidation value of $50 per share. The sole assets of the Trust are
Superior's 8 1/2% Convertible Subordinated Debentures (the "Convertible
Debentures") due 2014 with an aggregate face amount equivalent to 103% of the
liquidation value of the Trust Convertible Preferred Securities issued.
Superior's obligations under the Convertible Debentures effectively constitute a
full and unconditional guarantee by Superior of the Trust's obligations under
the Trust Convertible Preferred Securities. After six months from the issuance
date, the Trust Convertible Preferred Securities are convertible into Superior
common stock at the rate of 1.1161 shares of Superior's common stock for each
Trust Convertible Preferred Security (equivalent to a conversion price of $44.80
per share of common stock). This conversion rate is subject to customary
anti-dilution adjustments. Dividends on the Trust Convertible Preferred
Securities are payable quarterly by the Trust. The Trust Convertible Preferred
Securities are subject to mandatory redemption on March 30, 2014, at a
redemption price of $50 per Trust Convertible Preferred Security. The Trust
Convertible Preferred Securities are not redeemable by the Trust
F-35
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. SUPERIOR TRUST CONVERTIBLE PREFERRED SECURITIES (CONTINUED)
before April 1, 2003. At any time on and after that date, Superior may cause the
Trust Convertible Preferred Securities to be redeemed at its option at a per
share redemption price of $52.55, periodically declining to $50.00 after April
2008. In addition, Superior has the option to call the Trust Convertible
Preferred Securities during the one-year period commencing on March 31, 2002, at
a per share cash redemption price of $52.975, plus accrued and unpaid dividends,
if any, provided the average closing price of Superior's common stock, for any
10 consecutive trading days preceding the date of the call, multiplied by the
then effective conversion rate, equals or exceeds $65.00 per share of Superior
common stock. Superior has reserved 3,719,211 shares of its common stock for
possible conversion of the Trust Convertible Preferred Securities.
Superior may cause the Trust to defer the payment of dividends for
successive periods of up to 20 consecutive quarters. During such periods,
accrued dividends on the Trust Convertible Preferred Securities will accrue
interest at the rate of 8 1/2 per annum and Superior may not declare or pay
dividends on its common stock. Also during such period, if holders of Trust
Convertible Preferred Securities convert such securities into Superior common
stock, the holders will not receive any cash related to the deferred dividends.
The estimated aggregate fair value of the Trust Convertible Preferred
Securities, when issued, was approximately $133.3 million based on initial per
share trading values on the New York Stock Exchange. The resulting discount of
$33.3 million is being amortized using the effective interest method over the
term of the Trust Convertible Preferred Securities.
21. STOCKHOLDER RIGHTS AGREEMENT
On February 17, 1999, the Board of Directors declared a dividend
distribution of one preferred stock purchase right (a "Right") for each
outstanding share of the Company's common stock (collectively, the "Common
Shares"), payable to the stockholders of record on March 1, 1999 (the "Record
Date"). The Board of Directors also authorized and directed the issuance of one
Right with respect to each Common Share issued thereafter until the Distribution
Date (as defined below) or the earlier redemption or expiration of the Rights.
Except as set forth below, each Right, when it becomes exercisable, entitles
the holder to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, $1.00 par value, 200,000 shares authorized (the
"Preferred Shares"), at a price of $75.00, subject to adjustment (the "Purchase
Price"). Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earliest
to occur of (i) the tenth day after a person or entity (a "Person") or group of
affiliated or associated Persons (a "Group") having acquired beneficial
ownership of 15% or more of the outstanding Common Shares (except pursuant to a
Permitted Offer, as hereinafter defined); or (ii) 10 business days (or such
later date as the Board of Directors may determine) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in a Person or Group becoming an
Acquiring Person (as hereinafter defined) (the earliest of such dates being
called the "Distribution Date"). A Person or Group whose acquisition of Common
Shares causes a Distribution Date pursuant to clause (i) above is an "Acquiring
Person". The date that a Person or Group becomes an Acquiring Person is the
"Stock Acquisition Date".
Notwithstanding the foregoing, stockholders who currently own in excess of
15% of the outstanding Common Shares and their affiliates, associates and
permitted transferees will not be deemed to be
F-36
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. STOCKHOLDER RIGHTS AGREEMENT (CONTINUED)
Acquiring Persons unless they acquire additional Common Shares equal to more
than 20% of the number of Common Shares owned by them on February 17, 1999.
In addition, a Person who acquires Common Shares pursuant to a tender or
exchange offer which is for all outstanding Common Shares at a price and on
terms which the Board of Directors determines to be adequate and in the best
interests of the Company and its stockholders (a "Permitted Offer") will not be
deemed to be an Acquiring Person.
The Preferred Shares purchasable upon exercise of the Rights will have a
minimum preferential quarterly dividend of $1.00 per share, but will be entitled
to receive, in the aggregate, a dividend of 100 times the dividend declared on
the Common Shares. In the event of liquidation, the holders of the Preferred
Shares will be entitled to receive a minimum liquidation payment of $100 per
share, but will be entitled to receive an aggregate liquidation payment equal to
100 times the payment made per Common Share. Each Preferred Share will have 100
votes, voting together with the Common Shares. In the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 times the amount and type of
consideration received per Common Share. The rights of the Preferred Shares are
subject to certain customary anti-dilution provisions.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 17, 2009, unless earlier redeemed by the
Company.
In the event that any person becomes an Acquiring Person, each holder of
Rights will thereafter have the right (the "Flip-In Right") to receive, upon
exercise of such Rights, the number of Common Shares (or, in certain
circumstances, other securities of the Company) having a value (immediately
prior to such triggering event) equal to two times the aggregate exercise price
of such Rights.
The Board, at its option, may at any time after any Person becomes an
Acquiring Person exchange all or part of the then issued and outstanding Rights
for Common Shares at an exchange ratio of one Common Share per Right in lieu of
the Flip-In Right, provided no Person is the beneficial owner of 50% or more of
the Common Shares at the time of such exchange.
22. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company's reportable segments are strategic businesses that offer
different products and services to different customers. These segments are
communications, OEM and electrical. The communications segment includes (i)
outside plant ("OSP") wire and cable for voice and data transmission in the
local loop portion of the telecommunications infrastructure and (ii) datacom or
premise wire and cable for use within homes and offices for local area networks
("LANs"), Internet connectivity and other applications. The communications
segment includes the Company's North American and Israeli operations. The OEM
segment is involved principally in the production and sale of magnet and
automotive wire products. The electrical segment includes the production and
sale of building and industrial wire and cable products.
The accounting policies of these businesses are the same as those described
in the summary of significant accounting policies (Note 1). The Company
evaluates segment performance based on a number of factors, with operating
income being the most critical. Intersegment sales are generally recorded at
cost and are not significant.
F-37
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22. BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)
Operating results for each of the Company's three reportable segments are
presented below. Corporate and other items shown below are provided to reconcile
to the Company's consolidated statements of operations, cash flows and balance
sheets.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales (a):
Communications....................................... $ 463,840 $ 516,599 $ 626,769
OEM.................................................. -- -- 269,267
Electrical........................................... -- -- 247,209
---------- ---------- ------------
$ 463,840 $ 516,599 $ 1,143,245
---------- ---------- ------------
---------- ---------- ------------
Depreciation and amortization expense:
Communications....................................... $ 7,569 $ 8,330 $ 14,100
OEM.................................................. -- -- 4,381
Electrical........................................... -- -- 2,895
Corporate and other.................................. 1,907 1,875 7,771
---------- ---------- ------------
$ 9,476 $ 10,205 $ 29,147
---------- ---------- ------------
---------- ---------- ------------
Nonrecurring and unusual charges:
Corporate and other.................................. $ -- $ -- $ 7,282
---------- ---------- ------------
---------- ---------- ------------
Operating income (loss):
Communications....................................... $ 64,061 $ 80,975 $ 111,866
OEM.................................................. -- -- 32,371
Electrical........................................... -- -- 15,428
Corporate and other.................................. (11,538) (12,281) (36,610)
---------- ---------- ------------
$ 52,523 $ 68,694 $ 123,055
---------- ---------- ------------
---------- ---------- ------------
Total assets:
Communications....................................... $ 239,711 $ 230,700 $ 488,247
OEM.................................................. -- -- 282,888
Electrical........................................... -- -- 275,392
Corporate and other.................................. 45,576 48,229 1,027,949
---------- ---------- ------------
285,287 278,929 2,074,476
Discontinued operations.............................. 18,552 41,480 34,557
$ 303,839 $ 320,409 $ 2,109,033
Capital expenditures:
Communications....................................... $ 9,807 $ 18,488 $ 23,072
OEM.................................................. -- -- 7,694
Electrical........................................... -- -- 7,564
Corporate and other.................................. 538 1,020 5,571
---------- ---------- ------------
$ 10,345 $ 19,508 $ 43,901
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
- ------------------------
(a) Five customers accounted for 19%, 17%, 16%, 14%, and 14% of sales in fiscal
1997; five customers accounted for 19%, 19%, 17%, 16% and 13% of net sales
in fiscal 1998; and no customers accounted for more than 10% of net sales in
fiscal 1999.
F-38
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22. BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)
The following provides information about domestic and foreign operations as
of, and for the fiscal years ended, April 30, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales:
United States....................................... $ 421,126 $ 472,019 $ 997,792
Canada.............................................. 42,714 44,580 43,757
Israel.............................................. -- -- 83,368
United Kingdom...................................... -- -- 18,328
---------- ---------- -------------
$ 463,840 $ 516,599 $ 1,143,245
Operating income:
United States....................................... $ 47,215 $ 60,071 $ 112,997
Canada.............................................. 5,308 8,623 9,626
Israel.............................................. -- -- 1,390
United Kingdom...................................... -- -- (958)
---------- ---------- -------------
$ 52,523 $ 68,694 $ 123,055
---------- ---------- -------------
---------- ---------- -------------
Identifiable assets at year-end:
United States....................................... $ 262,047 $ 253,071 $ 1,881,460
Canada.............................................. 23,240 25,858 21,451
Israel.............................................. -- -- 143,583
United Kingdom...................................... -- -- 27,982
---------- ---------- -------------
285,287 278,929 2,074,476
Discontinued operations............................. 18,552 41,480 34,557
---------- ---------- -------------
$ 303,839 $ 320,409 $ 2,109,033
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
F-39
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1998 QUARTER ENDED
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
---------- ----------- ----------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 131,233 $ 139,212 $ 113,661 $ 132,493 $ 516,599
Gross profit........................................ 24,342 25,342 21,680 27,877 99,241
Operating income.................................... 17,223 18,153 13,648 19,670 68,694
Minority interest................................... (4,854) (5,241) (4,212) (5,989) (20,296)
Income from continuing operations................... 3,844 4,421 3,533 5,143 16,941
Discontinued operations............................. 1,023 1,165 (2,211) (171) (194)
Extraordinary (loss) on early extinguishment of
debt.............................................. (389) (832) -- (243) (1,464)
---------- ----------- ----------- ---------- ----------
Net income.......................................... $ 4,478 $ 4,754 $ 1,322 $ 4,729 $ 15,283
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
Net income per diluted share of common stock:
Income from continuing operations................. $ 0.21 $ 0.24 $ 0.18 $ 0.27 $ 0.90
Discontinued operations........................... 0.05 0.06 (0.12) (0.01) (0.01)
Extraordinary (loss) on early extinguishment of
debt............................................ (0.02) (0.04) -- (0.01) (0.08)
---------- ----------- ----------- ---------- ----------
Net income per diluted share of common stock
(a)........................................... $ 0.24 $ 0.25 $ 0.07 $ 0.25 $ 0.81
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
</TABLE>
F-40
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1999 QUARTER ENDED
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
---------- ----------- ----------- ---------- ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 156,874 $ 146,097 $ 326,714 $ 513,560 $ 1,143,245
Gross profit...................................... 34,296 33,472 63,169 101,657 232,594
Operating income.................................. 23,874 23,923 22,920 52,338 123,055
Minority interest................................. (6,930) (7,086) 2,405 (7,082) (18,693)
Income from continuing operations................. 4,737 5,917 1,195 5,061 16,910
Discontinued operations........................... 1,503 (209) (170) (3,831) (2,707)
Extraordinary (loss) on early extinguishment of
debt............................................ -- -- (634) -- (634)
---------- ----------- ----------- ---------- ------------
Net income........................................ $ 6,240 $ 5,708 $ 391 $ 1,230 $ 13,569
---------- ----------- ----------- ---------- ------------
---------- ----------- ----------- ---------- ------------
Net income per diluted share of common stock:
Income from continuing operations............... $ 0.24 $ 0.31 $ 0.07 $ 0.29 $ 0.91
Discontinued operations......................... 0.08 (0.01) (0.01) (0.21) (0.15)
Extraordinary (loss) on early extinguishment of
debt.......................................... -- -- (0.04) -- (0.04)
---------- ----------- ----------- ---------- ------------
Net income per diluted share of common stock
(a)......................................... $ 0.32 $ 0.30 $ 0.02 $ 0.08 $ 0.72
---------- ----------- ----------- ---------- ------------
---------- ----------- ----------- ---------- ------------
</TABLE>
- ------------------------
(a) Net income per diluted share of common stock for the fiscal year is
determined by computing a year-to-date weighted average of the number of
incremental shares included in each quarterly diluted net income per share
calculation. As a result, the sum of net income per share for the four
quarters may not equal the net income per share for the twelve-months ended
April 30, 1998 and 1999.
F-41
<PAGE>
SCHEDULE I
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30,
----------------------
<S> <C> <C>
1998 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 5,804 $ 17,253
Marketable securities................................................................... 15,672 14,957
Other current assets.................................................................... 9,197 4,586
---------- ----------
Total current assets.................................................................. 30,673 36,796
Investment in consolidated subsidiaries................................................... 85,335 87,372
Property, plant and equipment, net........................................................ 1,227 1,277
Long-term investments and other assets.................................................... 14,764 30,561
---------- ----------
Total assets.......................................................................... $ 131,999 $ 156,006
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....................................................... $ 33 $ 39
Accounts payable........................................................................ 739 853
Accrued expenses........................................................................ 3,996 6,409
Advances and loans from subsidiaries.................................................... 2,410 4,272
---------- ----------
Total current liabilities............................................................. 7,178 11,573
Long-term debt, less current portion...................................................... 22,011 61,865
Other long-term liabilities............................................................... 25,295 26,185
---------- ----------
Total liabilities..................................................................... 54,484 99,623
---------- ----------
Stockholders' equity:
9% cumulative convertible preferred stock at liquidation value 427 427
Common stock, $.10 par value; authorized 25,000,000 shares; shares 19,865,990 shares
issued in 1998 and 20,096,479 shares issued in 1999................................... 1,986 2,009
Capital in excess of par value.......................................................... 136,598 138,860
Accumulated other comprehensive deficit................................................. (814) (5,222)
Accumulated deficit..................................................................... (32,834) (19,304)
---------- ----------
105,363 116,770
Shares of common stock in treasury, at cost; 1998, 2,704,732 shares;
1999, 4,923,932 shares.................................................................. (26,890) (59,398)
Receivable from stockholders.............................................................. (958) (989)
---------- ----------
Total stockholders' equity.............................................................. 77,515 56,383
---------- ----------
Total liabilities and stockholders' equity............................................ $ 131,999 $ 156,006
---------- ----------
---------- ----------
</TABLE>
F-42
<PAGE>
SCHEDULE I
(Continued)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- ---------
Revenues:
Interest income................................................................ $ 1,902 $ 3,808 $ 316
Intercompany interest.......................................................... 14,298 37 39
Gain on sale of subsidiary..................................................... 80,397 -- --
Other income................................................................... 73 43 10,686
--------- --------- ---------
96,670 3,888 11,041
--------- --------- ---------
Expenses:
General and administrative..................................................... 8,086 5,064 7,806
Interest expense............................................................... 14,825 2,665 4,037
--------- --------- ---------
22,911 7,729 11,843
--------- --------- ---------
73,759 (3,841) (802)
(Provision) benefit for income taxes............................................. (34,912) 1,435 73
--------- --------- ---------
38,847 (2,406) (729)
Equity in net income (loss) of subsidiaries, net, before extraordinary
(loss)....................................................................... 17,289 18,764 14,298
--------- --------- ---------
Income before extraordinary (loss)............................................... 56,136 16,358 13,569
Extraordinary (loss) on early extinguishment of debt............................. (19,416) (1,075) --
--------- --------- ---------
Net income..................................................................... $ 36,720 $ 15,283 $ 13,569
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-43
<PAGE>
SCHEDULE I
(Continued)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------------
<S> <C> <C> <C>
1997 1998 1999
----------- ---------- ----------
Cash flows provided by operating activities.................................. $ 5,298 $ 2,234 $ 7,600
----------- ---------- ----------
Cash flows from investing activities:
Capital expenditures....................................................... (538) (1,020) (311)
(Investment in) proceeds from marketable securities........................ (8,094) 135 715
Purchase of subsidiary common stock........................................ -- -- (740)
Payments received from subsidiary preferred stock.......................... 11,300 -- --
Dividends received from subsidiaries, net of tax........................... 78,159 507 1,525
Loan/advances to PolyVision Corporation.................................... (2,467) (145) --
Investment in PolyVision Corporation....................................... -- -- (5,000)
Other...................................................................... -- 248 --
----------- ---------- ----------
Cash flows provided by (used for) investing activities....................... 78,360 (275) (3,811)
----------- ---------- ----------
Cash flows from financing activities:
(Repayments) borrowings under revolving credit facility, net............... (48,654) -- 39,700
Long-term borrowings....................................................... -- 10,665 --
Repayments of long-term borrowings......................................... (135,535) (9,840) (32)
Debt issuance costs........................................................ -- (400) (280)
Dividends on preferred stock............................................... (575) (69) (39)
Proceeds from stock options exercised...................................... 1,835 2,618 333
Advances and loans to subsidiaries, net.................................... 141,232 108 --
Redemption of preferred stock.............................................. (15,026) -- --
Purchase of treasury shares................................................ (11,994) (14,760) (32,508)
Other...................................................................... -- (101) 486
----------- ---------- ----------
Cash flows (used for) provided by financing activities....................... (68,717) (11,779) 7,660
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents......................... 14,941 (9,820) 11,449
Cash and cash equivalents at beginning of year............................... 683 15,624 5,804
----------- ---------- ----------
Cash and cash equivalents at end of year..................................... $ 15,624 $ 5,804 $ 17,253
----------- ---------- ----------
----------- ---------- ----------
Supplemental cash flow disclosures:
Cash paid for interest..................................................... $ 18,134 $ 2,521 $ 3,194
----------- ---------- ----------
----------- ---------- ----------
Cash paid (refunded) for income taxes, net................................. $ 18,895 $ (3,592) $ (8,426)
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
F-44
<PAGE>
SCHEDULE I
(Continued)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
APPENDIX A
<TABLE>
<CAPTION>
APRIL 30,
----------------------------
<S> <C> <C>
1998 1999
------------- -------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Long-term debt consists of:
12.25% Senior Secured Notes (due 2003, principal amount $12.2 million
at April 30, 1998 and 1999, respectively)............................ $ 11,361 $ 11,553
Term loan (due 2001, interest at LIBOR plus 2.0%)...................... 10,000 10,000
Revolving credit facility.............................................. -- 39,700
Other.................................................................. 683 651
------------- -------------
22,044 61,904
Less current portion..................................................... 33 39
------------- -------------
$ 22,011 $ 61,865
------------- -------------
------------- -------------
</TABLE>
Minimum current maturities of long-term debt outstanding as of April 30,
1999 are as follows:
<TABLE>
<CAPTION>
AMOUNT
-------------
<S> <C> <C>
(IN
THOUSANDS)
FISCAL YEAR
2000................................................................... $ 39
2001................................................................... 49,751
2002................................................................... 33
2003................................................................... 531
2004................................................................... 11,550
-------------
$ 61,904
-------------
-------------
</TABLE>
F-45
<PAGE>
SCHEDULE II
THE ALPINE GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30,
1999
-------------
<S> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance at beginning of year..................................................................... $ 177
Provision........................................................................................ 14
Write-off........................................................................................ (460)
Recoveries....................................................................................... 251
Acquisition...................................................................................... 5,047
------
Balance at end of year........................................................................... $ 5,029
------
------
</TABLE>
F-46
<PAGE>
Exhibit 2(o)
AGREEMENT AND PLAN OF MERGER
Among
COOKSON GROUP PLC,
PRI ACQUISITION, INC.
THE ALPINE GROUP, INC.
AND
PREMIER REFRACTORIES INTERNATIONAL INC.
Dated as of May 28, 1999
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE ITHE MERGER...............................................................................................1
SECTION 1.1 THE MERGER...........................................................................................1
SECTION 1.2 EFFECTIVE TIME.......................................................................................2
SECTION 1.3 EFFECT OF THE MERGER.................................................................................2
SECTION 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.............................................................2
SECTION 1.5 DIRECTORS AND OFFICERS...............................................................................3
SECTION 1.6 EFFECT ON CAPITAL STOCK..............................................................................3
SECTION 1.7 CLOSING TRANSACTIONS; POST-CLOSING DELIVERY..........................................................5
SECTION 1.8 WORKING CAPITAL ADJUSTMENT...........................................................................8
SECTION 1.9 DETERMINATION OF AGGREGATE SHARE NUMBER..............................................................9
SECTION 1.10 PRE-CLOSING STEPS..................................................................................10
ARTICLE IIREPRESENTATIONS AND WARRANTIES OF ALPINE AND PREMIER...................................................10
SECTION 2.1 TITLE TO SHARES.....................................................................................11
SECTION 2.2 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES........................................................11
SECTION 2.3 AUTHORITY RELATIVE TO THIS AGREEMENT AND RELATED MATTERS............................................12
SECTION 2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS............................................................12
SECTION 2.5 CAPITALIZATION......................................................................................12
SECTION 2.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS..........................................................13
SECTION 2.7 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; PREMIER INDEBTEDNESS.................................14
SECTION 2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS................................................................15
SECTION 2.9 ABSENCE OF LITIGATION...............................................................................15
SECTION 2.10 EMPLOYEE BENEFIT PLANS.............................................................................15
SECTION 2.11 PERMITS AND LICENSES...............................................................................17
SECTION 2.12 PROPERTIES AND CONTRACTS...........................................................................17
SECTION 2.13 REAL PROPERTY AND EQUIPMENT........................................................................19
SECTION 2.14 COMPLIANCE WITH ENVIRONMENTAL LAWS.................................................................20
SECTION 2.15 COMPLIANCE WITH LAWS...............................................................................22
SECTION 2.16 EMPLOYMENT MATTERS.................................................................................22
SECTION 2.17 TAX RETURNS, AUDITS AND LIABILITIES................................................................23
SECTION 2.18 SECURITIES ACT COMPLIANCE..........................................................................25
SECTION 2.19 INSURANCE..........................................................................................25
SECTION 2.20 YEAR 2000 COMPLIANCE...............................................................................26
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF COOKSON.............................................................26
SECTION 3.1 ORGANIZATION AND QUALIFICATION......................................................................26
SECTION 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT AND RELATED MATTERS............................................27
SECTION 3.3 GOVERNING INSTRUMENTS...............................................................................27
SECTION 3.4 CAPITALIZATION......................................................................................27
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS..........................................................28
SECTION 3.6 PUBLIC FILINGS; FINANCIAL STATEMENTS; LIABILITIES...................................................29
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SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS................................................................29
SECTION 3.8 LITIGATION..........................................................................................29
ARTICLE IVCOVENANTS OF ALPINE AND PREMIER........................................................................29
SECTION 4.1 CONDUCT OF BUSINESS BY PREMIER AND ITS SUBSIDIARIES PENDING THE CLOSING.............................29
SECTION 4.2 NOTIFICATION OF CERTAIN EVENTS......................................................................31
SECTION 4.3 CONSENTS AND APPROVALS..............................................................................31
SECTION 4.4 CONSUMMATION OF AGREEMENT...........................................................................31
SECTION 4.5 NO TRANSFER OF SHARES...............................................................................32
SECTION 4.6 INTERCOMPANY INDEBTEDNESS...........................................................................32
SECTION 4.7 DEPOSIT.............................................................................................32
SECTION 4.8 AUDITED FINANCIAL STATEMENTS........................................................................32
ARTICLE VCOVENANTS OF COOKSON....................................................................................33
SECTION 5.1 STOCKHOLDERS MEETING................................................................................33
SECTION 5.2 REPRESENTATIONS AND WARRANTIES......................................................................33
SECTION 5.3 NOTIFICATION OF CERTAIN EVENTS......................................................................33
SECTION 5.4 CONSENTS AND APPROVALS..............................................................................33
SECTION 5.5 CONSUMMATION OF AGREEMENT...........................................................................34
SECTION 5.6 LISTING OF SECURITIES...............................................................................34
SECTION 5.7 RIGHTS UNDER EXCHANGE AGREEMENT.....................................................................34
ARTICLE VIADDITIONAL AGREEMENTS OF THE PARTIES...................................................................34
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY..............................................................34
SECTION 6.2 NOTIFICATION OF CERTAIN MATTERS.....................................................................35
SECTION 6.3 FURTHER ACTION......................................................................................35
SECTION 6.4 PUBLIC ANNOUNCEMENTS................................................................................35
SECTION 6.5 GOVERNMENT COMPLIANCE...............................................................................35
SECTION 6.6 RELEASES OF SECURITY INTERESTS......................................................................36
SECTION 6.7 EMPLOYEE BENEFITS...................................................................................36
SECTION 6.8 NOTIFICATION OF DISPOSITIONS; PROVISION OF INFORMATION..............................................37
SECTION 6.9 POST-CLOSING INCOME TAX MATTERS.....................................................................38
SECTION 6.10 ACCESS TO INSURANCE POLICIES.......................................................................40
SECTION 6.11 AVAILABILITY OF KEY EMPLOYEES......................................................................41
SECTION 6.12 STAY-PUT AGREEMENTS................................................................................41
ARTICLE VIICONDITIONS TO THE CLOSING.............................................................................41
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY.............................................................41
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COOKSON.....................................................42
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ALPINE AND PREMIER..........................................44
ARTICLE VIIITERMINATION..........................................................................................45
SECTION 8.1 TERMINATION.........................................................................................45
SECTION 8.2 EFFECT OF TERMINATION...............................................................................46
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ARTICLE IXINDEMNIFICATION PROVISIONS.............................................................................46
SECTION 9.1 ALPINE'S INDEMNIFICATION OBLIGATION.................................................................46
SECTION 9.2 CERTAIN ENVIRONMENTAL MATTERS.......................................................................47
SECTION 9.3 COOKSON INDEMNIFICATION OBLIGATION..................................................................47
SECTION 9.4 PROCEDURES FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS...............................................48
SECTION 9.5 INDEMNIFICATION DEDUCTIBLES AND CAPS................................................................49
SECTION 9.6 EXCLUSIVE REMEDY....................................................................................50
ARTICLE XSELLER'S NON-COMPETITION COVENANT.......................................................................50
SECTION 10.1 NON-COMPETITION....................................................................................50
SECTION 10.2 INJUNCTIVE RELIEF..................................................................................51
SECTION 10.3 ENFORCEMENT........................................................................................51
ARTICLE XISELLER'S NON-DISCLOSURE COVENANT.......................................................................52
SECTION 11.1 NON-DISCLOSURE OF INFORMATION BY ALPINE............................................................52
SECTION 11.2 DEFINITION OF CONFIDENTIAL INFORMATION.............................................................52
SECTION 11.3 INJUNCTIVE RELIEF..................................................................................52
ARTICLE XIIGENERAL PROVISIONS....................................................................................53
SECTION 12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................................................53
SECTION 12.2 NOTICES............................................................................................53
SECTION 12.3 CERTAIN DEFINITIONS................................................................................54
SECTION 12.4 HEADINGS...........................................................................................55
SECTION 12.5 ENTIRE AGREEMENT...................................................................................55
SECTION 12.6 ASSIGNMENT: PARTIES IN INTEREST....................................................................55
SECTION 12.7 GOVERNING LAW; CONSENT TO JURISDICTION.............................................................55
SECTION 12.8 COUNTERPARTS.......................................................................................56
SECTION 12.9 SEVERABILITY.......................................................................................56
SECTION 12.10 SPECIFIC PERFORMANCE..............................................................................56
SECTION 12.11 FEES AND EXPENSES.................................................................................56
SECTION 12.12 AMENDMENT.........................................................................................56
SECTION 12.13 WAIVER............................................................................................57
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 28, 1999 (this
"AGREEMENT"), by and among Cookson Group plc, a company organized under the laws
of England ("COOKSON"), PRI Acquisition, Inc., a Delaware corporation ("MERGER
SUB"), Premier Refractories International Inc., a Delaware corporation
("PREMIER"), and The Alpine Group, Inc., a Delaware corporation ("ALPINE");
WHEREAS, the parties hereto wish to enter into this Agreement to
provide for the merger of Merger Sub with and into Premier (the "MERGER"), in
accordance with the relevant provisions of the Delaware General Corporation Law
(the "DELAWARE LAW") and on the terms and subject to the conditions herein
provided;
WHEREAS, it is intended that for United States federal income tax
purposes the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "CODE"), that, for purposes of the Merger, the total valuation of Premier
is $410,000,000 U.S. Dollars, taking into account the Debt Repayment Amount (as
hereinafter defined), and that the difference between such amounts shall be
satisfied in the form of Cookson Ordinary Shares (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements herein contained and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
SECTION I.1 THE MERGER.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with Delaware Law, at the Effective Time (as
hereinafter defined), Merger Sub shall be merged with and into Premier, the
separate corporate existence of Merger Sub shall cease and Premier shall
continue as the surviving corporation of the Merger (in such capacity, the
"SURVIVING CORPORATION").
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1 and subject to the satisfaction or waiver of all of the conditions set forth
in Article VII, the closing of the Merger (the "CLOSING") will take place on
July 30, 1999 (or, if all of the conditions precedent set forth in Article VII
(other than those conditions that by their nature are to be fulfilled at the
Closing,
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but subject to the fulfillment or waiver of such conditions) have not been
satisfied or waived on or before that date, on the Business Day which is five
(5) Business Days after satisfaction or waiver of all of the conditions set
forth in Article VII), at the offices of Proskauer Rose LLP, 1585 Broadway, New
York, New York, unless another date, time or place is agreed to in writing by
the parties hereto (the "CLOSING DATE"). As used herein, "BUSINESS DAY" means
any day other than a Saturday, a Sunday or a day on which banking institutions
in the City of New York or in London, England are not required to be open.
SECTION I.2 EFFECTIVE TIME.
On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger in the form attached hereto as
EXHIBIT 1.2 (the "CERTIFICATE OF MERGER") with the Secretary of State of the
State of Delaware required by, and executed in accordance with the relevant
provisions of, Delaware Law (the date and time of such filing being the
"EFFECTIVE TIME") and shall make all other filings and recordings required under
Delaware Law.
SECTION I.3 EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Premier and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Premier and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION I.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of Premier, as in effect immediately prior to the
Effective Time, shall be amended and restated to read in its entirety as set
forth in EXHIBIT 1.4(a) attached hereto, and such certificate of incorporation,
as so amended and restated, shall be the Certificate of Incorporation of the
Surviving Corporation unless and until amended in accordance with Delaware Law
and such Certificate of Incorporation.
(b) BY-LAWS. At the Effective Time, the By-Laws of Premier, as in
effect immediately prior to the Effective Time, shall be amended and restated to
read in their entirety as set forth in EXHIBIT 1.4(b) attached hereto, and such
By-Laws, as so amended and restated, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by Delaware Law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
SECTION I.5 DIRECTORS AND OFFICERS.
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The directors of Merger Sub immediately prior to the Effective Time
shall be at the Effective Time the directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-Laws
of the Surviving Corporation, and the officers of Merger Sub immediately prior
to the Effective Time shall be at the Effective Time the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION I.6 EFFECT ON CAPITAL STOCK.
At the Effective Time, by virtue of the Merger and without any action
on the part of any party hereto or the holders of any of the following
securities:
(a) CANCELLATION. Each share of common stock, par value $0.01 per share
("ORDINARY COMMON STOCK"), of Premier and each share of class B common stock,
par value $0.01 per share ("CLASS B COMMON STOCK" and, together with the
Ordinary Common Stock, the "SHARES"), of Premier held in the treasury of Premier
immediately prior to the Effective Time shall, by virtue of the Merger, cease to
be outstanding, be canceled and retired without payment of any consideration
therefor and cease to exist.
(b) CONVERSION OF SHARES.
(i) Each share of Class B Common Stock outstanding immediately
prior to the Effective Time shall be converted into, and shall be canceled in
exchange for, the right to receive (A) $929.049 in cash (as may be adjusted, the
"CLASS B CASH AMOUNT") and (B) 311.9917 ordinary shares of 50 pence each of
Cookson (as may be adjusted, the "CLASS B PER SHARE AMOUNT"), which securities
shall be freely tradeable (subject to compliance with the Securities Act of 1933
(the "SECURITIES ACT") and the regulations thereunder) and shall rank PARI PASSU
with all other securities of the same class (the "SECURITIES"). The aggregate
Class B Cash Amount payable to the holders of the Class B Common Stock in the
Merger shall be $15,562,500, and the aggregate Class B Per Share Amount issuable
to the holders of the Class B Common Stock in the Merger shall be 5,226,173
shares of the Securities; PROVIDED, HOWEVER, that if and only if the product of
(x) the closing price of a share of the Securities on the London Stock Exchange
(the "LSE") on the last trading day prior to the Closing Date (the "CLOSING
PRICE") and (y) the exchange rate of pounds sterling to U.S. Dollars on such
date (the "EXCHANGE RATE") is less than $2.9778, then Alpine shall have the
right to elect to reduce the aggregate Class B Cash Amount and increase the
aggregate Class B Per Share Amount by a number of shares, determined by dividing
the amount of the reduction in the aggregate Class B Cash Amount by $2.9778, up
to that number as would cause the product (the "SHARE PRODUCT") of (A) the
aggregate number of Shares issued in the Merger, (B) the Closing Price and (C)
the Exchange Rate to equal 85% of the sum of the Share Product and the aggregate
Class B Cash Amount. In the event of such an election by Alpine, the Class B
Cash Amount and the Class B Per Share Amount shall be adjusted accordingly. For
the avoidance of doubt, the number of shares resulting from any such adjustment
multiplied by $2.9778 plus the resulting aggregate Class B Cash Amount shall be
equal to $31,125,000.
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(ii) The shares of Ordinary Common Stock outstanding
immediately prior to the Effective Time shall be converted into, and shall be
canceled in exchange for, the right to receive a number of Securities equal to
the Ordinary Share Amount (as hereinafter defined). For purposes of this
Agreement, the term "ORDINARY SHARE AMOUNT" shall mean a number equal to the
difference between the Aggregate Share Number, as defined and determined in
Section 1.9, and 10,452,348.
(iii) At the Closing, Premier shall assign to Alpine, without
recourse or liability to Premier or its Subsidiaries, the right to receive
directly, at Alpine's expense, the Adjustment (as defined in the Exchange
Agreement, dated as of January 30, 1998 (the "EXCHANGE AGREEMENT"), between
American Premier Holdings, Inc. and Minerals Trading, Inc. ("MTI")). The parties
shall use their best efforts to effect such assignment so as to avoid the
incurrence of any Taxes by Cookson and/or Premier.
(iv) Notwithstanding subparagraphs (i) and (ii) of this
paragraph (b), each Share held of record immediately prior to the Effective Time
by a stockholder of Premier that has not failed to perfect and has not
effectively withdrawn, surrendered or lost appraisal rights under Section 262 of
Delaware Law as to such Share(s) (to the extent, if any, that such appraisal
rights are available under Section 262 of Delaware Law) shall be canceled but
not be converted into the right to receive the consideration set forth in
subparagraph (i) or (ii), as the case may be, and such stockholder shall not be
entitled to receive such consideration and shall be entitled only to such
appraisal rights as to such Share(s), PROVIDED, HOWEVER, that if and when any
such stockholder shall have failed to perfect such appraisal rights or shall
have effectively withdrawn, surrendered or lost such appraisal rights as to such
Share(s) in accordance with Delaware Law, then such Share(s) shall be converted
(to the fullest extent permitted under Delaware Law, as of the Effective Time)
into, and shall be canceled in exchange for, the right to receive such
consideration, and such stockholder shall be entitled to receive such
consideration in exchange for and upon the surrender of the certificates(s)
evidencing such Share(s) in accordance with this Agreement.
(c) CAPITAL STOCK OF MERGER SUB. Each share of common stock, no par
value per share ("MERGER SUB COMMON STOCK"), of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and non-assessable share of common stock, no par
value per share, of the Surviving Corporation. Each stock certificate of Merger
Sub at and after the Effective Time that prior to the Effective Time evidenced
ownership of any such shares of Merger Sub Common Stock shall evidence ownership
of an equal number of shares of capital stock of the Surviving Corporation;
PROVIDED, HOWEVER, that each record holder of a stock certificate or
certificates that prior to the Effective Time represented a share or shares of
Merger Sub Common Stock shall receive, upon surrender of such certificate or
certificates, a new certificate or certificates evidencing and representing the
number of shares of stock of the Surviving Corporation to which such record
holder is entitled pursuant to the foregoing.
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(d) ISSUANCE OF SHARES TO COOKSON. At the Effective Time, the Surviving
Corporation shall issue to Cookson 10,000 shares of common stock, no par value
per share, of the Surviving Corporation in consideration for the issuance by
Cookson of the Securities to the holders of the Shares in connection with the
Merger. In consideration of the issuance to Cookson by the Surviving Corporation
of such shares of common stock, Cookson shall issue the Securities in accordance
with Section 1.7(a)(ii) and (iii).
(e) ADJUSTMENTS TO PER SHARE AMOUNT. The Ordinary Share Amount and the
Class B Per Share Amount shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into the Securities), reorganization,
recapitalization or other like change with respect to the Securities, the record
date (or the effective date, if no record date has been established) for which
shall occur after the date hereof and prior to the Effective Time. There shall
be no such adjustment as a result of a cash dividend with respect to the
Securities.
SECTION I.7 CLOSING TRANSACTIONS; POST-CLOSING DELIVERY.
(a) ACTIONS AND DELIVERIES BY COOKSON. Immediately after the Effective
Time (except with respect to clause (i) below, which shall occur immediately
prior thereto):
(i) Cookson shall cause the Certificate of Merger, duly
executed by Premier, to be filed with the Secretary of State of the State of
Delaware;
(ii) Cookson shall deliver, or cause to be delivered, to
Alpine, for the shares of Ordinary Common Stock owned by Alpine and outstanding
immediately prior to the Effective Time, a certificate for the Securities in the
amount of the Ordinary Share Amount, duly issued to and registered in the name
of Alpine;
(iii) Cookson shall deliver, or cause to be delivered, to each
holder of shares of Class B Common Stock outstanding immediately prior to the
Effective Time who or that has delivered certificates representing such shares
at the Closing, for each share of Class B Common Stock owned and so delivered by
such holder of Class B Common Stock, (x) cash in the amount of the Class B Cash
Amount by wire transfer of immediately available funds to an account designated
in writing by such holder at least two Business Days prior to the Closing Date
and (y) a certificate for the Securities in the amount of the Class B Per Share
Amount, duly issued to and registered in the name of such holder;
(iv) Cookson shall repay, or cause to be repaid, the Premier
Indebtedness (as hereinafter defined) listed on EXHIBIT 1.7(A)(III) hereto
outstanding as of the Closing and in the amounts outstanding immediately prior
to the Effective Time as confirmed by the holders of such indebtedness (the
"DEBT REPAYMENT AMOUNT"). Cookson shall deliver to Alpine evidence reasonably
satisfactory to Alpine of the repayment of the Debt Repayment Amount. For
purposes of this Agreement, the term "Premier Indebtedness" shall mean any
indebtedness of Premier or any of its Subsidiaries for or in respect of moneys
borrowed or raised by whatever
5
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means (including, without limitation, by means of acceptances, the issue of loan
stocks and finance leases and any liability by bonds, debentures, notes,
interest rate/FX swaps, forward FX contracts, commodity hedges, interest rate
caps or similar instruments or arrangements) and shall include principal,
interest, make-whole costs, break-up costs, prepayment penalties and costs of
obtaining releases of guarantees for Premier or its Subsidiaries, including any
Taxes directly incurred in respect thereof;
(v) Cookson shall deliver, or cause to be delivered, to Alpine
the certificates, documents, legal opinion and other instruments referred to in
Section 7.3; and
(vi) Cookson shall deliver, or cause to be delivered, to
Alpine all other agreements or instruments required under the terms of this
Agreement to be executed and delivered by Cookson.
(b) ACTIONS AND DELIVERIES BY ALPINE. At the Closing:
(i) Alpine shall cause Premier to execute and deliver to
Cookson the Certificate of Merger;
(ii) Alpine shall deliver, or cause to be delivered, to
Cookson (x) certificates representing the shares of Ordinary Common Stock
registered in the name of Alpine and (y) such of the certificates representing
the shares of Class B Common Stock registered in the name of any of the holders
thereof as have been delivered by such holders;
(iii) Alpine shall deliver, or cause to be delivered, to
Cookson the certificates as to the legal existence and good standing of Alpine
and Premier issued by, and copies of the Certificates of Incorporation, as
amended, of Alpine and Premier certified by, the Secretary of State of the State
of Delaware;
(iv) Alpine shall deliver, or cause to be delivered, to
Cookson all of the minute books for Premier;
(v) Alpine shall deliver, or cause to be delivered, to Cookson
written resignations from the directors and officers of Premier and its
Subsidiaries;
(vi) Alpine shall deliver, or cause to be delivered, payoff
letters from each of the holders of the Premier Indebtedness as to the amount
outstanding immediately prior to the Closing Date in a form mutually acceptable
to Alpine and Cookson; and
(vii) Alpine shall deliver a general release by it of all
claims (known or unknown, fixed or contingent, choate or inchoate, liquidated or
unliquidated, or otherwise) against Premier and its Subsidiaries in the form
annexed hereto as EXHIBIT 1.7(b)(VII) (except for any obligations specifically
set forth in this Agreement);
6
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(viii) Alpine shall deliver, or cause to be delivered, the
certificate of the Secretary or Assistant Secretary of Premier required under
Section 251(c) of Delaware Law (such certificate thereupon shall be attached to,
and shall be considered a part of, this Agreement);
(ix) Alpine shall deliver, or cause to be delivered, to
Cookson the certificates, documents, legal opinion and other instruments
referred to in Section 7.2; and
(x) Alpine shall deliver, or cause to be delivered, to Cookson
all other agreements or instruments required under the terms of this Agreement
to be executed and delivered by Alpine.
(c) SHAREHOLDER AGREEMENT. At the Closing, Alpine and Cookson shall
enter into the Shareholder Agreement in the form attached hereto as EXHIBIT
1.7(c) (the "SHAREHOLDER AGREEMENT").
(d) SURRENDER AND PAYMENT.
(i) Each holder of Shares that have been converted into the
right to receive the Securities and/or cash, upon surrender of a certificate or
certificates representing such Shares, together with a duly executed letter of
transmittal, will be entitled to receive the Securities and/or cash payable in
respect of such Shares, which Securities and/or cash shall be delivered upon
such surrender, whether at the Closing or at any time thereafter, subject to
applicable escheat laws.
(ii) All certificates representing Shares outstanding prior to
the Closing Date shall continue to evidence ownership of shares of Ordinary
Common Stock or Class B Common Stock, as the case may be, until the Effective
Time. At the Effective Time, each share of Ordinary Common Stock or Class B
Common Stock shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into, and shall be canceled in exchange for,
the right to receive Securities and/or cash in the amount provided for herein.
All certificates representing Shares outstanding immediately prior to the
Effective Time shall be presented and shall be canceled and exchanged for the
Securities and/or cash provided for, and in accordance with the procedures set
forth, in this Agreement. The Securities and/or cash delivered upon the
surrender for exchange of the Shares in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such Shares and, after the Effective Time, there shall be no further
registration or transfers of Shares outstanding prior to the Closing Date.
(iii) No fractional Securities shall be issued upon conversion
of Shares. In lieu of any fractional Security to which any holder of Shares
would otherwise be entitled, Cookson shall round upward to the nearest whole
Security or pay the cash equivalent of such fractional Security, at Cookson's
sole option.
SECTION I.8 WORKING CAPITAL ADJUSTMENT.
7
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(a) As promptly as practicable, but in any event not more than 30 days
following the Closing Date, Alpine, together with Arthur Andersen LLP, Alpine's
independent accounting firm ("ALPINE'S ACCOUNTANTS"), shall prepare, at Alpine's
expense, a statement of the Working Capital (as defined below) of Premier and
Premier's consolidated Subsidiaries as of the Closing Date in accordance with
U.S. generally accepted accounting principles, applied on a consistent basis
(the "PRELIMINARY WORKING CAPITAL STATEMENT").
(b) After the Closing Date and during the period of any dispute under
subsection (c) below, Cookson shall provide Alpine and Alpine's Accountants full
access, upon reasonable notice, to the books and records of Premier, and to its
officers and employees, and shall cooperate fully with Alpine and Alpine's
Accountants, in each case to the extent required in connection with the
preparation of the Preliminary Working Capital Statement and any investigation
of the basis for any dispute; PROVIDED, HOWEVER, that any such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operation of the business of Premier and its Subsidiaries.
(c) (i) Cookson may dispute the Preliminary Working Capital Statement
by notifying Alpine in writing setting forth, in reasonable detail, the basis
for such dispute, within 10 days after Cookson's receipt of the Preliminary
Working Capital Statement. In the event of such a dispute, Alpine's Accountants
and KPMG Peat Marwick, Cookson's independent accounting firm ("COOKSON'S
ACCOUNTANTS"), shall attempt to reconcile their differences and any resolution
by them as to any disputed amounts shall be final, binding and conclusive on
Alpine and Cookson.
(ii) If Alpine's Accountants and Cookson's Accountants are
unable to reach a resolution with such effect within 20 days after the date of
receipt of Cookson's written notice of dispute to Alpine, Alpine and Cookson
shall submit any items remaining in dispute that are contained in such notice
for resolution to an independent accounting firm of national reputation mutually
appointed by Alpine and Cookson (the "INDEPENDENT ACCOUNTING FIRM"), which
shall, within 30 days after such submission, determine and report to Alpine and
Cookson upon such remaining disputed items, and such report shall be final,
binding and conclusive on Alpine and Cookson. The fees and disbursements of the
Independent Accounting Firm shall be borne by Alpine and Cookson in the
proportion that the aggregate amount of disputed items submitted to the
Independent Accounting Firm that is unsuccessfully disputed by each such party
(as finally determined by the Independent Accounting Firm) bears to the total
amount of such remaining disputed items so submitted.
(iii) The Preliminary Working Capital Statement, adjusted for
the resolution of any and all disputes pursuant to subsection (i) or (ii) above,
will be deemed to be the "WORKING CAPITAL STATEMENT" for purposes of subsection
(d) below upon the earlier of (A) the lapse of the 10-day period referred to in
subsection (i) above, but only if Cookson has not notified Alpine within such
time period of any dispute, (B) the resolution of all disputes by Alpine's
Accountants and Cookson's Accountants pursuant to subsection (i) above or (iii)
the resolution of all disputes by the Independent Accounting Firm pursuant to
subsection (ii) above.
8
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(d) Upon the later of (i) two Business Days after the lapse of the
10-day period referred to in subsection (c)(i) or (ii) two Business Days after
resolution of all disputes pursuant to subsection (c)(i) or (ii):
(i) in the event that Working Capital shown on the Working
Capital Statement is less than 99% of Working Capital as reflected on the
Audited Balance Sheet (as defined in Section 4.8), Alpine shall pay to Cookson,
by way of adjustment to the consideration received by stockholders of Premier in
the Merger, the difference between such amount and the Working Capital shown on
the Working Capital Statement, plus interest on such difference at the prime
rate of Bankers Trust Company as in effect from time to time from the Closing
Date;
(ii) in the event that the Working Capital shown on the
Working Capital Statement is greater than 101% of Working Capital as reflected
on the Audited Balance Sheet, Premier shall pay to Alpine the difference between
the Working Capital shown on the Working Capital Statement and such amount, plus
interest on such difference at the prime rate of Bankers Trust Company as in
effect from time to time from the Closing Date.
(e) "WORKING CAPITAL" shall mean the net book value of the accounts
receivable (net of reserves for doubtful debts), plus inventories (net of
reserves), minus accounts payable as determined in accordance with U.S.
generally accepted accounting principles applied on a consistent basis. For the
purposes of this definition, Premier will not take or reverse any reserves or
provisions except in the ordinary course of operations from April 30, 1999 to
the Closing Date.
SECTION I.9 DETERMINATION OF AGGREGATE SHARE NUMBER.
The "Aggregate Share Number" shall mean the total number of shares of
Securities to be issued in respect of the rights to receive the same
hereinbefore mentioned. The Aggregate Share Number shall be based upon (i) the
Debt Repayment Amount as confirmed by payoff letters from the holders of the
Premier Indebtedness referenced in Section 1.7(a)(iii), and (ii) a good faith
estimate of Closing Cash (as defined below), as certified by the Chief Financial
Officer of Premier. The Aggregate Share Number shall be equal to the quotient
resulting from dividing (a) $410.0 million U.S. Dollars minus the actual Debt
Repayment Amount (as evidenced by such payoff letters) plus the estimated
Closing Cash by (b) $2.9778 U.S. Dollars. "Closing Cash" shall mean available
cash on hand as of the close of business on the last Business Day prior to the
Closing Date plus unrestricted cash on deposit plus cash deposited which is
subject to delayed availability due to clearing restrictions less an amount for
funds required to pay issued but unpresented drafts, checks or wire transfers or
similar items. As promptly as practicable, and in any event within 15 days after
the Closing Date, the parties shall mutually determine the final Closing Cash.
To the extent the final Closing Cash is greater or less than the estimated
Closing Cash, Premier shall pay Alpine or Alpine shall pay Cookson, as
appropriate, the amount of such difference. Such payment shall be made promptly,
in cash.
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SECTION I.10 PRE-CLOSING STEPS.
On the day before the Closing Date, at the request and instruction of
Cookson, Alpine shall cause the following transactions to occur:
(a) all indebtedness of any Subsidiary of Premier which is not resident
for tax purposes in a member state of the European Union or in the United States
shall be transferred to Premier or to a Subsidiary of Premier which is resident
for tax purposes in either the United Kingdom or the United States; and
(b) all of the share capital of any Premier Subsidiary which is not
resident for tax purposes in the United Kingdom or the United States shall be
transferred to any United Kingdom Subsidiary of Premier, subject to such
transfer being approved in advance by Cookson, the consideration for such
transfer to be satisfied by the issue of ordinary shares of that United Kingdom
Subsidiary;
PROVIDED, HOWEVER, that Cookson shall indemnify Alpine from and against all
Liabilities (as defined in Section 9.1), including any tax imposed on any
indemnity payments made pursuant to this Section 1.10, relating to or arising
out of the foregoing transactions or compliance with this Section 1.10. For the
avoidance of doubt, Cookson's indemnification obligation with respect to such
Liabilities is total and complete from the first dollar.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALPINE AND PREMIER
As of the date hereof, Alpine and Premier hereby jointly and severally
represent and warrant to Cookson that, except as set forth in the applicable
section of the disclosure schedule delivered by Alpine and Premier to Cookson
and attached hereto and made a part hereof (the "PREMIER DISCLOSURE SCHEDULE"):
SECTION II.1 TITLE TO SHARES.
Alpine is the record and beneficial owner of the number of shares of
Ordinary Common Stock set forth opposite its name on Section 2.1 of the Premier
Disclosure Schedule attached hereto, free and clear of all claims, liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
voting trusts and any other restrictions or imperfections of title, other than
the Stockholders Agreement, dated as of January 30, 1998, by and among Premier
(f/k/a Refraco Inc.), Alpine and the holders of Class B Common Stock (the
"STOCKHOLDERS AGREEMENT"), which shall automatically terminate upon the Closing,
and except as otherwise set forth in Section 2.1 of the Premier Disclosure
Schedule.
SECTION II.2 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
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Each of Premier and its Subsidiaries (as defined in Section 12.3) is a
corporation duly organized and validly existing and, where applicable and
required, duly registered with all appropriate authorities, and Premier is in
good standing, under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted. Each of Premier's Subsidiaries is in good
standing (with respect to the jurisdictions that recognize the concept of good
standing) under the laws of the jurisdiction of its incorporation, and each of
Premier and its Subsidiaries is duly qualified, licensed and authorized to do
business as a foreign corporation and is in good standing (with respect to the
jurisdictions that recognize the concept of good standing) in each jurisdiction
where the character of its properties owned, operated or leased or the nature of
its activities makes such qualification, licensing and authorization necessary,
other than those jurisdictions in which the failure to be in good standing, or
to so qualify or be licensed or authorized, would not have a Premier Material
Adverse Effect. "PREMIER MATERIAL ADVERSE EFFECT" means any change, effect,
event, situation or condition that is adverse to the business, results of
operations, properties or financial condition of Premier or any of its
Subsidiaries to an extent greater than $200,000 U.S. Dollars individually or
more than $350,000 U.S. Dollars (or, with respect to Section 2.14 only,
$1,000,000 U.S. Dollars) in the aggregate; PROVIDED, HOWEVER, that in
determining whether there has been a Premier Material Adverse Effect since any
date specified in any representation of Alpine and Premier, any adverse effect
attributable to the following shall be disregarded: (i) general economic,
business or financial market conditions; (ii) general industry conditions,
including, without limitation, conditions affecting the steel industry; (iii)
the announcement of this Agreement; (iv) the breach by Cookson of this
Agreement; or (v) any change in any law, rule or regulation or U.S. generally
accepted accounting principles or interpretations thereof that applies to Alpine
or Premier. In each case of a Premier Material Adverse Effect: (i) if an
individual adverse effect exceeds $200,000, the entire amount shall be
recognized and qualified for inclusion as a Liability for purposes of, and as
defined in, Article IX hereof; and (ii) if aggregate adverse effects (including
those both larger and smaller than $200,000) exceed $350,000 (or, with respect
to Section 2.14 only, $1,000,000 U.S. Dollars), the entire amount shall be
recognized and qualified for inclusion as a Liability for purposes of Article IX
hereof. Section 2.2 of the Premier Disclosure Schedule sets forth the name and
the jurisdiction of incorporation of each of Premier's Subsidiaries. Except as
set forth in Section 2.2 of the Premier Disclosure Schedule, all the outstanding
capital stock and other ownership interests or equity equivalents of each of the
Subsidiaries of Premier were issued in compliance with all applicable securities
laws and have been, and are, duly authorized, validly issued, fully paid and
non-assessable, and are wholly owned by Premier or another Subsidiary of Premier
free and clear of any claim, lien, security interest, pledge, charge,
encumbrance, stockholders' agreement, voting trust and any other restrictions or
imperfections of title. Except as disclosed in Section 2.2 of the Premier
Disclosure Schedule, neither Premier nor any of its Subsidiaries directly or
indirectly Controls or owns any interest in any other corporation, partnership,
joint venture or other business association or entity.
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SECTION II.3 AUTHORITY RELATIVE TO THIS AGREEMENT AND RELATED MATTERS.
Each of Alpine and Premier has all necessary corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery by each of Alpine and Premier of this
Agreement and the consummation by each of Alpine and Premier of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Alpine and Premier, including all necessary stockholder
action. This Agreement has been duly executed and delivered by each of Alpine
and Premier and, assuming the due authorization, execution and delivery hereof
by each of the other parties hereto, constitutes the legal, valid and binding
obligation of each of Alpine and Premier, enforceable against each of Alpine and
Premier in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). No representation is given with respect to the
Income Tax treatment or effect of the transactions contemplated hereby.
SECTION II.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.
Premier has heretofore furnished to Cookson a true, complete and
correct copy of the Certificate of Incorporation and By-Laws, as amended to
date, of Premier and the corresponding charter documents for each of its
Subsidiaries with total assets of U.S. $50,000 or more. Such Certificate of
Incorporation and By-Laws and charter documents of its Subsidiaries are in full
force and effect. Neither Premier nor any of Premier's Subsidiaries is in
violation of any of the provisions of the Certificate of Incorporation or
By-Laws of Premier or the charter documents of any of its Subsidiaries.
SECTION II.5 CAPITALIZATION.
(a) The authorized capital stock of Premier consists of 500,000 shares
of Ordinary Common Stock, 100,000 shares of Class B Common Stock and 400,000
shares of preferred stock, par value $.01 per share ("PREMIER PREFERRED STOCK").
As of the date hereof (i) 84,396 shares of Ordinary Common Stock are issued and
outstanding (all of which are owned by Alpine) and no shares are reserved for
issuance, (ii) 16,751 shares of Class B Common Stock are issued and outstanding
(all of which are owned of record as of the date hereof by the holders listed on
Section 2.5(a) of the Premier Disclosure Schedule attached hereto) and no shares
are reserved for issuance and (iii) no shares of Premier Preferred Stock are
issued or outstanding or are reserved for issuance. On the Closing Date
immediately prior to the Effective Time, Alpine will own beneficially and of
record all of the issued and outstanding shares of Class B Common Stock, free
and clear of all claims, liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, voting trusts and any other restrictions
or imperfections of title.
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(b) Except for this Agreement and other than as set forth in Section
2.5(b) of the Premier Disclosure Schedule, there are no securities convertible
into or exchangeable for capital stock or other ownership interests or equity
equivalents, options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock
of, or other ownership interests or equity equivalents in, Premier or any
Subsidiary thereof, nor are there any obligations of Premier or any Subsidiary
thereof to issue or sell any shares of capital stock of, or other ownership
interests or equity equivalents in, Premier or any Subsidiary thereof or any
agreement to issue any capital stock or any such convertible or exchangeable
securities, options, warrants, rights, agreements, arrangements or commitments.
All issued and outstanding shares of Ordinary Common Stock and Class B Common
Stock have been, and are, duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with all applicable securities
laws. There are no voting trusts or other agreements or understandings to which
Alpine, Premier or any Subsidiary thereof is a party with respect to the capital
stock of Premier or any Subsidiary thereof other than the Stockholders Agreement
and except as otherwise set forth in Section 2.5(b) of the Premier Disclosure
Schedule.
SECTION II.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
The execution and delivery of this Agreement by each of Alpine and
Premier do not, and the execution and delivery of the Shareholder Agreement by
Alpine will not, and neither the performance by each of Alpine and Premier of
this Agreement or the performance by Alpine of the Shareholder Agreement nor the
transactions contemplated hereby or thereby will, (a) conflict with or violate
the Certificate of Incorporation or By-Laws of Alpine, Premier or any of
Premier's Subsidiaries, (b) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Alpine, Premier or any of Premier's
Subsidiaries or by which any of them or their respective properties is bound or
affected, (c) result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, acceleration, cancellation of or other adverse
effect under, or result in the creation of a lien or encumbrance on any of the
properties or assets of Premier or any of Premier's Subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, joint venture, lease,
license, permit, franchise or other instrument or obligation to which Premier or
Premier's Subsidiaries is a party or by which Premier, Premier's Subsidiaries or
any of their properties is bound or affected, or (d) require Alpine, Premier or
any of Premier's Subsidiaries to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except in respect of any of clauses
(a) through (d) above (i) as set forth in Section 2.6 of the Premier Disclosure
Schedule, (ii) for the filing of the Certificate of Merger, (iii) for filings
required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the "HSR
ACT"), (iv) any required European Commission or other national competition
authorities consents or filings with any foreign governmental or regulatory
authority, or (v) with respect to clause (c) only, where such breaches, defaults
or other occurrences would not either (x) prevent or materially delay
consummation of the Merger and the other transactions
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contemplated by this Agreement or otherwise prevent Alpine or Premier from
performing its obligations under this Agreement or (y) have a Premier Material
Adverse Effect.
SECTION II.7 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; PREMIER
INDEBTEDNESS.
(a) Alpine has delivered to Cookson (i) the audited consolidated
balance sheet of Premier and its consolidated Subsidiaries as of April 30, 1998,
and the related audited consolidated statements of income and cash flows for the
year then ended, certified by Arthur Andersen LLP and attached hereto as Section
2.7(i) to the Premier Disclosure Schedule, and (ii) the unaudited consolidated
balance sheet of Premier and its consolidated Subsidiaries as of April 30, 1999,
and the related unaudited consolidated statements of income and cash flows for
the year then ended, certified by the principal financial and accounting officer
of Premier and attached hereto as Section 2.7(ii) to the Premier Disclosure
Schedule. All of the foregoing financial statements of Premier and its
Subsidiaries are collectively referred to herein as the "FINANCIAL STATEMENTS."
As used herein, the term "UNAUDITED BALANCE SHEET" shall mean the unaudited
consolidated balance sheet of Premier and its consolidated Subsidiaries as of
April 30, 1999 and the term "UNAUDITED FINANCIAL STATEMENTS" shall mean the
Unaudited Balance Sheet and the related unaudited consolidated statements of
income and cash flows of Premier and its consolidated Subsidiaries for the year
ended April 30, 1999.
(b) All of the Financial Statements: (i) present fairly in all material
respects the consolidated financial position of Premier and its consolidated
Subsidiaries as of the dates thereof and the results of operations and changes
in financial position for the respective periods covered by such statements;
(ii) are consistent with the books and records of Premier and its consolidated
Subsidiaries; and (iii) have been prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis with prior years
(except as may be indicated therein or in the notes thereto), except for
consolidating, tax and other normal year-end audit adjustments.
(c) Neither Premier nor any Subsidiary thereof has any liability or
obligation of any nature (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise) of the type required to be set forth in
the Financial Statements (including the notes thereto) in accordance with U.S.
generally accepted accounting principles, consistently applied, other than
liabilities and obligations (i) that are reflected in the Unaudited Balance
Sheet or reflected in the notes thereto, (ii) that arose in the ordinary course
of business since April 30, 1999 and would not have a Premier Material Adverse
Effect or (iii) that are set forth in Section 2.7(c) of the Premier Disclosure
Schedule.
(d) Since April 30, 1998, there have been no reserves or provisions
taken or reversed or assets written down or written up except in the ordinary
course of operations or as set forth in Section 2.7(d) of the Premier Disclosure
Schedule.
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(e) Section 2.7(e) of the Premier Disclosure Schedule sets forth, as of
the close of business on May 27, 1999, a list of the outstanding Premier
Indebtedness, which includes the names of the holders thereof and the principal
amounts thereof.
SECTION II.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as contemplated by this Agreement or disclosed in Section 2.8 of
the Premier Disclosure Schedule, since April 30, 1999, Premier and each of its
Subsidiaries have operated their business in the ordinary course of business as
theretofore conducted, and, since such date, (i) there has not been one or more
circumstances, events or conditions which collectively constitute a Premier
Material Adverse Change (as defined in Section 7.2(d)) and (ii) none of Premier
or any Premier Subsidiary has entered into any material transaction with any
third party or any of their respective Affiliates that will be in effect as of
the Closing.
SECTION II.9 ABSENCE OF LITIGATION.
Except as set forth in Section 2.9 of the Premier Disclosure Schedule,
(i) there is no claim, action, suit or legal or administrative proceeding
pending or, to the knowledge of Alpine or Premier, threatened against Premier or
Premier's Subsidiaries and (ii) no notice, order, writ, injunction, subpoena or
decree has been issued by or requested of any court or governmental agency or
department that would, if adversely determined, under subclauses (i) and (ii)
above, have a Premier Material Adverse Effect. As of the date hereof, there are
no actions, suits or proceedings pending or, to the knowledge of Alpine and
Premier, threatened against Premier or any of Premier's Subsidiaries that seek
to prevent or challenge, or seek damages in connection with, the transactions
contemplated by this Agreement or otherwise arising out of or in any way related
to this Agreement, the Shareholder Agreement or any of the transactions
contemplated hereby or thereby.
SECTION II.10 EMPLOYEE BENEFIT PLANS.
Section 2.10 of the Premier Disclosure Schedule sets forth a true and
complete list of the employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) currently
maintained, sponsored or contributed to (or with respect to which any obligation
to contribute has been undertaken) by Premier or its Subsidiaries or any entity
that would be deemed a "single employer" with Premier within the meaning of
Section 414(b), (c), (m) or (o) of the Code or similar legislation of foreign
jurisdictions, and all material bonus, stock option, stock purchase, stock
appreciation right, incentive, deferred compensation, supplemental retirement,
post-retirement or post-termination health or welfare benefit, severance,
welfare, medical, life, vacation, sickness, change in control, death benefit and
other similar fringe or employee benefit plans, programs, policies or
arrangements, all employment, consulting or executive compensation agreements,
in each case, whether domestic or foreign, for the benefit of, or relating to,
any employee, former employee or director of Premier or any Subsidiary of
Premier (including their beneficiaries) (collectively, the "PREMIER EMPLOYEE
PLANS"). For purposes of the preceding sentence, "material"means any program,
plan or benefit involving either more than five (5) persons or
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aggregate liability in excess of $100,000. Except as set forth in Section 2.10
of the Premier Disclosure Schedule and except as to those which would not have a
Premier Material Adverse Effect, with respect to any of the Premier Employee
Plans, (i) each Premier Employee Plan (other than a Multiemployer Plan (as
defined below) intended to qualify under Section 401(a) of the Code (or similar
provisions for tax-registered or tax-favored plans of foreign jurisdictions
("FOREIGN PLANS")) is so qualified and has received a favorable determination
letter from the Internal Revenue Service (the "IRS") (or, if applicable, any
required approvals of foreign governmental authorities for Foreign Plans), and
with respect to each such Premier Employee Plan, to the knowledge of Alpine and
Premier, no event has occurred or condition exists that could reasonably be
expected to disqualify such Premier Employee Plan; (ii) no such Premier Employee
Plan (other than a Foreign Plan) is a "multiemployer plan" within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code (a
"MULTIEMPLOYER PLAN") or a single employer pension plan within the meaning of
Section 4001(a)(15) of ERISA that is subject to Sections 4063 and 4064 of ERISA
(a "MULTIPLE EMPLOYER PLAN") and no withdrawal liability exists with respect to
any Multiemployer Plan or Multiple Employer Plan and, in relation to any Foreign
Plan, none of Alpine, Premier or Premier's Subsidiaries has any reason to
believe that withdrawal from or termination of any Foreign Plan will trigger or
increase any additional liability to such plan; (iii) there has been no
"prohibited transaction" within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, involving the assets of the Premier Employee Plans, which
could reasonably be expected to subject Premier or any Premier Subsidiary either
to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed
by Section 4975 of the Code; (iv) no "accumulated funding deficiency" (within
the meaning of Section 412 of the Code and Section 302 of ERISA) has been or
could reasonably be expected to be incurred, whether or not waived, and no
excise or other taxes have been or could be expected to be incurred or are due
and owing by Alpine, Premier or any of Premier's Subsidiaries with respect to
the Premier Employee Plans because of any failure to comply with the minimum
funding standards of the Code and ERISA or, in respect of any Foreign Plans, any
failure to comply with the minimum funding requirements in the jurisdiction
where that plan is in operation; (v) no claim, lawsuit, arbitration or other
action has been asserted or instituted, or to the knowledge of Alpine and
Premier is threatened or anticipated against the Premier Employee Plans (other
than non-material routine claims for benefits and appeals of such claims), any
trustee or fiduciaries thereof, Premier, any Subsidiary of Premier, any
director, officer or employee thereof, or any of the assets of any trust of the
Premier Employee Plans; (vi) each Premier Employee Plan (other than a
Multiemployer Plan) complies and has been maintained and operated in all
respects in accordance with its terms and applicable law, including, without
limitation, ERISA and the Code; (vii) no Premier Employee Plan (other than a
Multiemployer Plan) is or is expected to be under audit or investigation by the
IRS, U.S. Department of Labor, or, in respect of any Foreign Plan, any
equivalent body or authority, or any other governmental authority and no such
completed audit or investigation, if any, has resulted in the imposition of any
tax or penalty; (viii) except as required by Section 4980B(f) of the Code, no
Premier Employee Plan provides medical, death or welfare benefits (whether or
not insured) with respect to current or former employees of Premier or Premier's
Subsidiaries beyond their retirement or other termination of employment; and
(ix) no "reportable event" within the
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meaning of Section 4043(c) of ERISA and the regulations thereunder, other than
any such event for which the 30-day notice requirement under ERISA has been
waived (a "REPORTABLE EVENT"), has occurred or is expected to occur, and the
consummation of the transactions contemplated by this Agreement will not result
in a Reportable Event with respect to any Premier Employee Plan (other than a
Multiemployer Plan). Notwithstanding the foregoing, the representations and
warranties contained in this Section 2.10 (other than the representations and
warranties contained in subsections (ii), (iii) and (viii)) are qualified such
that to the extent that any such representation or warranty applies to a Premier
Employee Plan that is a Multiemployer Plan, such representation or warranty
shall be deemed to be to the best knowledge of Alpine and Premier.
SECTION II.11 PERMITS AND LICENSES.
Except as set forth in Section 2.11 of the Premier Disclosure Schedule
or as would not have a Premier Material Adverse Effect, (i) Premier and
Premier's Subsidiaries are now, and on the Closing Date will be, the holder of
all licenses, franchises, ordinances, authorizations, permits, certificates,
consents, orders and registrations, domestic or foreign, necessary to enable
them to continue to conduct their businesses as presently conducted
(collectively, the "PREMIER LICENSES") and (ii) all of the Premier Licenses are
in full force and effect, except, in each case, for those that lapse in
accordance with their terms for reasons other than any change in control of
Premier or any of Premier's Subsidiaries. Neither Alpine nor Premier has reason
to believe that Premier or any of its Subsidiaries will not be able to obtain or
retain all Premier Licenses. Neither Premier nor any of its Subsidiaries is
required to have any form of security clearance from any governmental agency in
order to conduct their business in the manner it is presently conducted. Except
as set forth in Section 2.11 of the Premier Disclosure Schedule, there is not
now pending or, to the knowledge of Alpine and Premier, threatened any
investigation before any foreign, federal, state or local governments or
agencies.
SECTION II.12 PROPERTIES AND CONTRACTS.
(a) Except as set forth in Section 2.12(a) of the Premier Disclosure
Schedule, Premier and Premier's Subsidiaries have good and marketable title to
or, in the case of leases and licenses, valid and subsisting leasehold interests
or licenses in, all of the tangible personal properties and assets and rights
reasonably necessary to operate or conduct the business as it is now being
operated and conducted by Premier and its Subsidiaries (collectively, the
"Premier Assets"), including, without limitation, all such properties and assets
that are shown on the Financial Statements attached as Sections 2.7(i) and (ii)
to the Premier Disclosure Schedule (except for such properties and assets sold
in the ordinary course of business since the dates of such statements), in each
case free and clear of all liens, pledges, security interests, restrictions,
prior assignments, claims, encumbrances and other defects and/or imperfections
of title, except as set forth in such Financial Statements and except for those:
(i) securing Taxes, assessments and other governmental charges or levies not yet
due and payable (excluding any imposed pursuant to any of the provisions of
ERISA) or the claims of materialmen, mechanics, carriers, warehousemen or
landlords for labor, materials, supplies or rentals incurred in the
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ordinary course of business not yet due and payable; and (ii) consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or under surety or performance bonds, in each
case arising in the ordinary course of business.
(b) All patents, patent applications, trade names, registered
trademarks and service marks, trademark and service mark applications,
registered copyrights and registered design rights and applications therefor
owned by or licensed to or used by Premier or any of its Subsidiaries (i) are
listed and identified in Section 2.12(b) of the Premier Disclosure Schedule,
(ii) have been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of Copyrights or the
corresponding offices of other countries, states or other jurisdictions to the
extent set forth in Section 2.12(b) of the Premier Disclosure Schedule, (iii)
have been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations in the United States and each
such country, state or other jurisdiction, and (iv) to the knowledge of Alpine
and Premier, are valid, enforceable and in full force and effect. Except as set
forth in Section 2.12(b) of the Premier Disclosure Schedule, Premier and
Premier's Subsidiaries own, free and clear of all liens, pledges, security
interests, restrictions, prior assignments, claims, encumbrances and other
defects and/or imperfections of title, or are licensed to use, pursuant to
licenses disclosed on Section 2.12(b) of the Premier Disclosure Schedule, all
patents, trademarks, trade names, copyrights, trade secrets, customer lists,
technology, know-how, processes and any other confidential information used in
or reasonably necessary for the conduct of their businesses as currently
conducted. Except as set forth in Section 2.12(b) of the Premier Disclosure
Schedule, the use of such patents, trademarks, trade names, copyrights, trade
secrets, customer lists, technology, know-how, designs and registered design
rights, rights of extraction relating to databases, processes, confidential
information and all similar or equivalent rights, registered or unregistered,
including all applications for any of the foregoing ("PREMIER INTELLECTUAL
PROPERTY"), by Premier or Premier's Subsidiaries has not and does not infringe
the rights of any person and no claim in writing has been made by any person
that it does infringe. Except as described in Section 2.12(b) of the Premier
Disclosure Schedule, no person has a license to use any of the Premier
Intellectual Property. Except as set forth in Section 2.12(b) of the Premier
Disclosure Schedule, to the knowledge of Alpine and Premier, no person is
infringing upon the patents, trade names, trademarks, copyrights or applications
therefor set forth in Section 2.12(b) of the Premier Disclosure Schedule.
(c) Except for the contracts, commitments, plans, agreements and
licenses described in Section 2.12(c) of the Premier Disclosure Schedule
attached hereto, neither Premier nor any of its Subsidiaries is a party to, nor
is Premier or any of its Subsidiaries or any of the Premier Assets or the
Premier Intellectual Property subject to or otherwise bound by, any oral or
written contract, commitment, agreement or license which may involve an
aggregate monetary commitment in excess of U.S. $1,000,000 on the part of
Premier or any of its Subsidiaries. Except as set forth in Section 2.12(c) of
the Premier Disclosure Schedule, all of the contracts, commitments, leases or
other agreements of Premier and Premier's Subsidiaries are presently valid and
enforceable, and there is no violation, default or claim of
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violation or default by any party thereto, and no condition or event has
occurred which with notice or lapse of time or both would constitute a violation
or default thereunder, except for any such failure to be valid and existing and
in full force and effect, or any such violation, default or claim, that would
not have a Premier Material Adverse Effect. Cookson has been furnished with true
and complete copies of all material contracts, commitments, leases or other
agreements of Premier and its Subsidiaries.
SECTION II.13 REAL PROPERTY AND EQUIPMENT.
(a) Section 2.13(a) of the Premier Disclosure Schedule contains a
complete and correct list of all real property owned, occupied, leased or
otherwise used by Premier and Premier's Subsidiaries in the conduct of their
business. All of such real property is either owned or leased by Premier or one
of its Subsidiaries. All such real property, buildings and structures, and the
equipment therein, and the operations and maintenance thereof, comply with any
applicable agreements and restrictive covenants and conform to all applicable
legal requirements, including those relating to building use, land use and
zoning, except in each case where the failure so to comply or conform would not
have a Premier Material Adverse Effect. Premier and Premier's Subsidiaries'
buildings and other structures, equipment (including personal property) and
other assets (whether leased or owned) are in reasonably good operating
condition and repair, subject to ordinary wear and tear.
(b) None of Alpine, Premier or any of Premier's Subsidiaries has
received notice or other written communication of any proposed or contemplated
eminent domain or other proceeding that would result in the taking of all or any
part of such real property that would prevent or hinder the continued use of
such real property as heretofore used in the conduct of the business by Premier
or any of its Subsidiaries.
(c) There are no material encroachments onto such real property by any
improvements on any adjoining property.
(d) There are no material encroachments onto any adjoining property by
any improvements on such real property.
(e) With respect to any part of such real property owned by Premier or
any of its Subsidiaries, Premier or one of its Subsidiaries owns good and
marketable fee simple absolute title (or the equivalent) thereto, free and clear
of any and all mortgages, deeds of trust, liens, encumbrances, claims, charges,
security interests, equities covenants, conditions, restrictions, easements,
classifications as a monument, rights of way, leases, tenancies, rights of
occupation, wayleaves, licenses, third-party rights or other matters and other
defects and/or imperfections of title, whether or not of record, except for
those (i) securing Taxes, assessments and other governmental charges or levies
not yet due and payable (excluding any imposed pursuant to any of the provisions
of ERISA) or the claims of architects, builders, materialmen, mechanics,
carriers or warehousemen for services, works, labor, materials or supplies
incurred in the ordinary course of business not yet due and payable, (ii)
consisting of
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deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under surety or performance bonds, (iii)
constituting encumbrances in the nature of equities covenants, conditions,
restrictions, easements, rights of way, leases, tenancies, rights of occupation,
wayleaves, licenses, third-party rights or other matters and other defects
and/or imperfections of title, whether or not of record, on or with respect to
the use of Premier's or any of its Subsidiaries' real property, provided the
same (x) do not materially interfere with the present use or continued existence
of structures on the properties or (y) do not materially impair the value
thereof or (iv) set forth in Section 2.13(e) of the Premier Disclosure Schedule.
(f) Except as described in Section 2.13(f) of the Premier Disclosure
Schedule, all of the Premier Assets and all other assets and property of Premier
and its Subsidiaries are located on the premises owned or leased by Premier or
any of its Subsidiaries as set forth in Section 2.13(a) of the Premier
Disclosure Schedule.
SECTION II.14 COMPLIANCE WITH ENVIRONMENTAL LAWS.
The representations and warranties in this Section 2.14 are the
exclusive representations and warranties covering environmental matters made by
Alpine and Premier. As used in this Section 2.14, the reference to "Premier"
shall mean Premier or any of its Subsidiaries or any predecessor of Premier or
any of its Subsidiaries only to the extent Premier or any of its Subsidiaries is
liable for any Environmental Liabilities (as hereinafter defined) of such
predecessor.
For the purposes of this Section 2.14, the following terms shall have
the meanings set forth hereafter:
"ENVIRONMENT" shall mean any surface or subsurface physical
medium or natural resource, including air, land, soil, surface waters, ground
waters, stream and river sediments, biota and any indoor area, surface or
physical medium.
"ENVIRONMENTAL LAWS" shall mean any federal, state, local,
foreign or common law (including the law of the European Union), rule,
regulation, ordinance, code, order or judgment (including any written judicial
or administrative guidance) relating to the injury to, or the pollution or
protection of, human health and safety or the Environment effective prior to the
Closing Date or, solely with respect to Section 9.2(a), in effect at the time
that any claims are made under Section 9.2(a).
"ENVIRONMENTAL LIABILITIES" shall mean any claims, judgments,
damages (including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation, monitoring or defense of any
matter relating to human health, safety or the Environment of whatever kind or
nature by any party, entity or authority incurred as a result of (i) the
existence of Hazardous Substances in, on, under, at or emanating from any real
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property presently or formerly owned, operated or managed by Premier , (ii) the
off-site transportation, treatment, storage or disposal of Hazardous Substances
generated by Premier or (iii) the violation of any Environmental Laws.
"HAZARDOUS SUBSTANCES" shall mean petroleum, petroleum
products, petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead-based paint, radon, urea formaldehyde, friable
asbestos or any materials containing friable asbestos, and any materials or
substances regulated as "hazardous substances," "hazardous materials,"
"hazardous constituents," "toxic substances," "pollutants," "contaminants,"
"prescribed substances" or any similar denomination intended to classify or
regulate substances by reason of toxicity, carcinogenicity, ignitability,
corrosivity or reactivity under any Environmental Law.
Except for specific facts and environmental conditions set forth in
Section 2.14 of the Premier Disclosure Schedule, and without giving effect to
any speculative conclusions therein, and except as would not have a Premier
Material Adverse Effect:
(a) All of the operations of Premier comply with all
applicable Environmental Laws, and any real property presently owned, leased or
operated by Premier (collectively, the "PREMIER REAL PROPERTY") meets, and, to
the knowledge of Alpine and Premier, the real property formerly owned, leased or
operated by Premier met, at the time Premier owned, leased or operated it, the
requirements and standards of all Environmental Laws.
(b) The Premier Real Property does not contain, and, to the
knowledge of Alpine and Premier, the real property formerly owned, leased or
operated by Premier did not contain at the time Premier owned, leased or
operated it, any Hazardous Substances in, on, over, under or at it, in
concentrations which would violate any applicable Environmental Laws or have
resulted or would be reasonably likely to result in the imposition of liability
or obligations on Premier under any applicable Environmental Laws, including any
violation, liability or obligations for the investigation, corrective action,
remediation or monitoring of Hazardous Substances in, on, over, under or at the
Premier Real Property and the real property formerly owned, leased or operated
by Premier.
(c) None of the Premier Real Property is listed or, to the
knowledge of Alpine and Premier, proposed for listing, and, to the knowledge of
Alpine and Premier, the real property formerly owned, leased or operated by
Premier is not listed or proposed for listing, on the National Priorities List
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 ET SEQ., or any similar inventory of sites requiring
investigation or remediation maintained by any state, locality or foreign
governmental authority, department, agency, court or tribunal. Except as set
forth on Section 2.14 of the Premier Disclosure Schedule, Premier has not
received any written notice from any governmental entity or third party, of any
actual or threatened Environmental
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Liability that is outstanding, pending or unresolved with respect to the Premier
Real Property or any real property formerly owned, leased or operated by
Premier.
(d) Premier has all the permits, licenses, authorizations and
approvals necessary for the conduct of its business and for the operations on,
in or at the Premier Real Property which are required under applicable
Environmental Laws (the "PREMIER ENVIRONMENTAL PERMITS"). Premier is in
compliance with the terms and conditions of all such Environmental Permits, and,
to the knowledge of Alpine and Premier, no reason exists why Premier is not
capable of continued operation of its business in compliance with the Premier
Environmental Permits and the applicable Environmental Laws.
SECTION II.15 COMPLIANCE WITH LAWS.
Except for such violations as have not had (since May 31, 1997) and
would not have a Premier Material Adverse Effect or as set forth in Section 2.15
of the Premier Disclosure Schedule, Premier and each of its Subsidiaries has
been (since May 31, 1997) and is, and their business has been (since May 31,
1997) and is being conducted and operated, in compliance with all requirements
of all applicable statutes, laws, ordinances, regulations, rules, codes or
decrees, whether foreign or domestic, federal, state or local, which affect
Premier or any of its Subsidiaries, their business, the Premier Assets or any
other assets and property of Premier and its Subsidiaries, or to which Premier
or any of its Subsidiaries is subject, including, without limitation, those
relating to equal employment practices; occupational safety and health;
export/import licenses or controls; foreign exchange controls; restraint of
trade and unfair competition; immigration; and federal procurement. Except as
set forth in Section 2.15 of the Premier Disclosure Schedule, neither Premier
nor any of its Subsidiaries has received any written notice or other
communication from any governmental authority or local quasi-governmental entity
with respect to an alleged, actual or potential violation and/or failure to
comply with any of the foregoing.
SECTION II.16 EMPLOYMENT MATTERS.
Except as would not have a Premier Material Adverse Effect:
(a) Except as set forth in Section 2.16(a) of the Premier Disclosure
Schedule, each of Premier and its Subsidiaries: (i) is in compliance with all
applicable foreign, federal, state and provincial laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment,
pay equity and wages and hours, in each case, with respect to current, former or
retired employees or consultants of Premier or any of its Subsidiaries
(collectively "PREMIER EMPLOYEES"); (ii) has timely withheld and paid over to
the appropriate foreign, federal, state, provincial or local governmental
authorities all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Premier Employees; (iii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) (other than routine payments to be made in the
ordinary course of business and consistent with past practice) is not liable for
any
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payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits for Premier Employees.
(b) Except as set forth in Section 2.16(b) of the Premier Disclosure
Schedule, neither Premier nor any of its Subsidiaries is involved in or, to the
knowledge of Alpine and Premier, threatened with any labor dispute, grievance or
litigation relating to labor, safety or discrimination matters involving any
Premier Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints. Except as set forth in Section 2.16(b)
of the Premier Disclosure Schedule, neither Premier nor any of its Subsidiaries
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act, or in relation to dismissals, equal pay, sex, race or
disability discrimination, or similar such unfair labor practices legislation of
foreign jurisdictions. Except as set forth in Section 2.16(b) of the Premier
Disclosure Schedule, neither Premier nor any of its Subsidiaries is a party to,
or bound by, any collective bargaining agreement or union recognition agreement
with respect to Premier Employees and no collective bargaining agreement is
being negotiated by Premier or any of its Subsidiaries.
(c) Except as set forth in Section 2.16(c) of the Premier Disclosure
Schedule, each of Premier and Premier's Subsidiaries is in compliance with all
laws, regulations and orders relating to workers' compensation and the Worker
Adjustment and Retraining Notification Act or similar such legislation or
regulations of foreign jurisdictions.
SECTION II.17 TAX RETURNS, AUDITS AND LIABILITIES.
For purposes of this Agreement, except as otherwise expressly provided,
unless the context otherwise requires:
"INCOME TAXES" means any federal, state, local or foreign
income or franchise (or an excise tax based on income) Tax, including a Tax
assessed on a corporation by reference to its income, gains or profits, and
shall include, for the avoidance of doubt, any withholding tax and United
Kingdom corporation tax, and in each instance any interest, penalties or
additions to tax attributable to such Tax.
"RETURN" means any report, return, statement, estimate,
declaration, form or other information required to be supplied to a taxing
authority in connection with Taxes.
"TAX" or "TAXES" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes or
other governmental taxes imposed or payable to the United States, or any state,
county, local or
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foreign government or subdivision or agency thereof, and in each instance such
term shall include any interest, penalties or additions to tax attributable to
any such Tax.
"TAX SHARING ARRANGEMENT" means any written or unwritten
agreement or arrangement for the allocation or payment of or with respect to Tax
liabilities or Tax benefits.
Except as set forth in Section 2.17 of the Premier Disclosure Schedule,
with respect to each of Premier and Premier's Subsidiaries (or Alpine acting on
behalf of Premier and Premier's Subsidiaries) (i) Alpine has or will timely file
all Returns for periods ending on or prior to the Closing Date and will file all
Returns it files on a consolidated or combined basis with Premier or any of
Premier's Subsidiaries that would include the income of any of such corporations
for any Pre-Closing Date Period (as defined in Section 6.9); (ii) there is no
Tax liability of Premier or any of its Subsidiaries through April 30, 1999 that
has not been adequately provided for in the Financial Statements. All Income Tax
and other material Tax Returns described in subclause (i) of this paragraph with
respect to Taxes were true and correct in all material respects as of the date
on which they were filed or as subsequently amended to the date hereof.
Except as set forth in Section 2.17 of the Premier Disclosure Schedule,
(A) there are no proposed adjustments resulting from any audits that have been
or will be contested and there is no action, suit, proceeding, investigation,
audit, claim or assessment pending or, to the knowledge of Alpine and Premier,
threatened with respect to any liability for Tax that relates to Premier or any
of Premier's Subsidiaries for which a material amount of Tax is at issue, (B)
all material amounts required to be collected or withheld by Premier and each of
Premier's Subsidiaries with respect to Taxes have been duly collected or
withheld and any such amounts that are required to be remitted to any taxing
authority have been duly remitted and (C) there is no liability for Tax, whether
currently imposed or subsequently imposed, pursuant to United States Treasury
Regulations ("TREAS. REGS.") Section 1.1502-6 (or any comparable provision of
foreign, state or local law), on Premier or any of Premier's Subsidiaries by
reason of having been a member of any consolidated, unitary or combined group of
which Alpine is the common parent corporation. For the avoidance of doubt,
Alpine's indemnification obligation with respect to any such Section 1.1502-6
(or any comparable provision of foreign, state or local law) Tax liabilities is
total and complete from the first dollar.
Except as set forth in Section 2.17 of the Premier Disclosure Schedule,
neither Premier nor any of its Subsidiaries has any deferred gain or loss
arising from deferred intercompany transactions (as referred to in Treas. Regs.
Section 1.1502-13).
The Income Tax Returns of Premier and any of its Subsidiaries and the
consolidated or combined returns of Alpine on which their income is included
have been audited by an applicable taxing authority or are closed by the
applicable statute of limitations for periods through April 30, 1995.
Premier has heretofore provided Cookson with complete copies (or, if
oral, written descriptions) of any Tax Sharing Arrangement to which Premier or
any of its Subsidiaries is a
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party. Except as permitted pursuant to Section 6.9, Premier or any of its
Subsidiaries will have no liability following the Closing Date under any Tax
Sharing Agreement.
SECTION II.18 SECURITIES ACT COMPLIANCE.
(a) Alpine understands that the Securities have not been registered
under the Securities Act or any state law, rule or regulation and are being
offered and sold under an exemption from registration provided by, among other
provisions, Rule 506 of Regulation D promulgated under the Securities Act and,
therefore, the Securities cannot be resold without such registration under the
Securities Act or an exemption from such registration requirement.
(b) Alpine represents that it is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act. Alpine
has been given an opportunity to examine all documents, including this Agreement
and the Annual Report of Cookson on Form 20-F for the year ended December 31,
1998 as filed with the Securities and Exchange Commission, and to ask questions
of and to receive answers from Cookson concerning the terms and conditions of
matters contemplated in this Agreement, and to obtain any additional information
necessary to verify the accuracy of any information given to the extent Cookson
possesses such information or can acquire it without unreasonable effort or
expense.
(c) Alpine represents that it is acquiring the Securities solely for
its own account for investment purposes only and not with a view to or in
connection with any resale or distribution thereof, except in accordance with
the Securities Act. Neither Alpine nor any of its Affiliates has any intention
of participating in the formulation, determination or direction of the basic
business decisions of Cookson.
SECTION II.19 INSURANCE.
(a) The business of Premier and its Subsidiaries and the Premier assets
and real and personal property are and have been, during the periods indicated
on Section 2.19(i) of the Premier Disclosure Schedule, insured by such insurers
and under such policies as are listed on Section 2.19(i) of the Premier
Disclosure Schedule. Such insurance policies and arrangements have been in
effect without interruption during such period, are in full force and effect on
the Closing Date and are adequate and customary for the business engaged in by
Premier and its Subsidiaries as of the date hereof. To the knowledge of Alpine
and Premier, the continued coverage of Premier and its Subsidiaries after the
Closing Date under any insurance policies that provided occurrence-based
coverage for events occurring prior to the Closing Date that name Premier or any
of its Subsidiaries as an insured will not be adversely affected by the
consummation of the Merger.
(b) To the best knowledge of Alpine and Premier, the business of
Premier and its Subsidiaries and the Premier assets and real and personal
property are and have been, during the periods indicated on Section 2.19(ii) of
the Premier Disclosure Schedule, insured by such
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insurers and under such policies as are listed on Section 2.19(ii) of the
Premier Disclosure Schedule.
SECTION II.20 YEAR 2000 COMPLIANCE.
Premier and each of its Subsidiaries have conducted a review of all of
the hardware, software and other processing capability used in connection with
their business and included in the Premier Assets or any other assets and
property of Premier and its Subsidiaries to insure that all such capabilities
will be Year 2000 Compliant, and are currently implementing a compliance plan
that is intended to result in such capabilities being Year 2000 Compliant in all
material respects by no later than January 1, 2000. Each action to have been
taken prior to the date hereof under such plan has been substantially completed
and, as of the date hereof, Alpine and Premier have no knowledge indicating that
any action to be taken under such plan after the date hereof will be materially
delayed or will fail to accomplish its purpose under the plan. As used herein,
"YEAR 2000 COMPLIANT" shall mean that such capabilities will function accurately
and without interruption or ambiguity using date information before, during and
after January 1, 2000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COOKSON
Cookson hereby represents and warrants to Alpine and Premier that,
except as set forth in the disclosure schedule delivered by Cookson to Alpine
and attached hereto and made a part hereof (the "COOKSON DISCLOSURE SCHEDULE"):
SECTION III.1 ORGANIZATION AND QUALIFICATION.
Cookson is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to own, operate or lease the properties that it purports to
own, operate or lease and to carry on its business as it is now being conducted,
and is duly qualified, licensed and authorized to do business as a foreign
corporation and is in good standing (with respect to the jurisdictions that
recognize the concept of good standing) in each jurisdiction where the character
of its properties owned, operated or leased or the nature of its activities
makes such qualification, licensing and authorization necessary, other than
those jurisdictions in which the failure to so qualify or to be licensed or
authorized would not have a Cookson Material Adverse Change (as defined in
Section 7.3(d)). Merger Sub is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation.
SECTION III.2 AUTHORITY RELATIVE TO THIS AGREEMENT AND RELATED MATTERS.
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Each of Cookson and Merger Sub has all necessary corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery by each of Cookson and Merger Sub of this
Agreement and the consummation by each of Cookson and Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Cookson and Merger Sub. This Agreement has been
duly executed and delivered by each of Cookson and Merger Sub and, assuming the
due authorization, execution and delivery hereof by each of the other parties
hereto, constitutes the legal, valid and binding obligation of each of Cookson
and Merger Sub, enforceable against each of Cookson and Merger Sub in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). No representation is given with respect to the Income Tax
treatment or effect of the transactions contemplated hereby.
SECTION III.3 GOVERNING INSTRUMENTS.
Cookson has heretofore furnished to Alpine a true, complete and correct
copy of the Memorandum and Articles of Association, as amended to date, of
Cookson and the Certificate of Incorporation and By-Laws, as amended to date, of
Merger Sub (collectively, the "GOVERNING INSTRUMENTS"). Such Governing
Instruments are in full force and effect. Neither Cookson nor any of its
Subsidiaries is in violation of any of the provisions of its Governing
Instruments.
SECTION III.4 CAPITALIZATION.
(a) The authorized capital stock of Cookson consists of 952,000,000
ordinary shares, par value 50 pence per share ("COOKSON ORDINARY SHARES"). As of
the date hereof, 691,677,275 shares of Cookson Ordinary Shares are issued and
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of Merger Sub Common Stock. As of the date hereof, 100 shares of Merger Sub
Common Stock are issued and outstanding (all of which are directly owned by
Cookson) and no shares are reserved for issuance. As of the Closing Date,
Cookson will directly own all of the issued and outstanding shares of Merger Sub
Common Stock.
(b) Other than pursuant to this Agreement and as set forth in Section
3.4(b) of the Cookson Disclosure Schedule, there are no securities convertible
into or exchangeable for capital stock or other ownership interests or equity
equivalents, options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock
of, or other ownership interests or equity equivalents in, Cookson, nor are
there any obligations of Cookson to issue or sell any shares of capital stock
of, or other ownership interests or equity equivalents in, Cookson or any
agreement to issue any such capital stock or any such convertible or
exchangeable securities, options, warrants, rights, agreements, arrangements or
commitments. All issued and outstanding shares of capital stock
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of Cookson, have been, and are duly authorized, validly issued and fully paid,
and were issued in compliance with all applicable securities laws. Except as set
forth in Section 3.4(b) of the Cookson Disclosure Schedule, there are no voting
trusts or other agreements or understandings to which Cookson is a party with
respect to the voting of the capital stock of Cookson.
SECTION III.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
The execution and delivery of this Agreement by Cookson do not, and the
execution and delivery of the Shareholder Agreement by Cookson will not, and
neither the performance by Cookson of this Agreement or the Shareholder
Agreement nor the transactions contemplated hereby or thereby will, (a) conflict
with or violate the Governing Instruments of Cookson or any of its Subsidiaries,
(b) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Cookson or any of its Subsidiaries or by which any of them
or their respective properties is bound or affected, (c) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
acceleration, cancellation of or other adverse effect under, or result in the
creation of a lien or encumbrance on any of the properties or assets of Cookson
or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, joint venture, lease, license, permit, franchise or other
instrument or obligation to which Cookson or its Subsidiaries is a party or by
which Cookson, its Subsidiaries or any of their properties is bound or affected,
or (d) require Cookson to obtain any consent, approval, authorization or permit
of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except in respect of any of clauses
(a) through (d) above (i) as set forth in Section 3.5 of the Cookson Disclosure
Schedule, (ii) for the filing of the Certificate of Merger, (iii) for applicable
requirements of U.S. securities laws and Blue Sky Laws and for applicable
requirements of the rules and regulations of the LSE, (iv) for filings required
pursuant to the HSR Act, (v) any required European Commission or other national
competition authorities consents or filings with any foreign governmental or
regulatory authority as referenced in Section 7.2 hereof and (vi) where such
breaches, defaults or other occurrences would not either (x) prevent or
materially delay consummation of the Merger and the other transactions
contemplated by this Agreement or otherwise prevent Cookson from performing its
obligations under this Agreement or (y) have a Cookson Material Adverse Change.
SECTION III.6 PUBLIC FILINGS; FINANCIAL STATEMENTS; LIABILITIES.
Cookson has made available to Alpine copies of its Annual Report on
Form 20-F for the year ended December 31, 1998, in the form filed with the U.S.
Securities and Exchange Commission (the "COOKSON FORM 20-F"), and all circulars,
reports and other documents distributed by Cookson to its shareholders since
December 31, 1998. Except as described in Section 3.6 of the Cookson Disclosure
Schedule, the consolidated financial statements of Cookson and its Subsidiaries
included in the Cookson Form 20-F present fairly, in all material respects, the
financial position of Cookson and its Subsidiaries as of December 31, 1998 and
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the results of their operations in the year then ended in conformity with
generally accepted accounting principles in the United Kingdom, applied on a
consistent basis.
SECTION III.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as contemplated by this Agreement or disclosed in Section 3.7 of
the Cookson Disclosure Schedule, since December 31, 1998, Cookson has operated
its business in the ordinary course of business as theretofore conducted, and,
since such date, there has not been any Cookson Material Adverse Change.
SECTION III.8 LITIGATION.
As of the date hereof, there are no actions, suits or proceedings
pending or, to the knowledge of Cookson, threatened against Cookson or any of
Cookson's Subsidiaries that seek to prevent or challenge the transactions
contemplated by this Agreement or otherwise arising out of or in any way related
to this Agreement, the Shareholder Agreement or any of the transactions
contemplated hereby or thereby.
ARTICLE IV
COVENANTS OF ALPINE AND PREMIER
SECTION IV.1 CONDUCT OF BUSINESS BY PREMIER AND ITS SUBSIDIARIES PENDING THE
CLOSING.
Except as otherwise provided by this Agreement or as disclosed in
Section 2.10 of the Premier Disclosure Schedule, or unless Cookson shall give
its prior written consent (which consent shall not be unreasonably withheld or
delayed), between the date of this Agreement and the Closing Date, Alpine shall
cause Premier and Premier's Subsidiaries to, and Premier and its Subsidiaries
shall, (i) conduct their business in, and not enter into any material
transaction other than in accordance with, the ordinary course of business and
in a manner consistent with past practice and (ii) use commercially reasonable
efforts to preserve intact their current business, keep available the services
of their current officers and employees and maintain the goodwill of their
customers, suppliers and others having business relationships with them. Cookson
agrees to cooperate reasonably with Premier in connection with the foregoing.
Without limiting the generality of the foregoing, and except as contemplated by
this Agreement, neither Premier nor any of its Subsidiaries shall, between the
date of this Agreement and the Closing Date, do or agree to do any of the
following without the prior written consent of Cookson (which consent shall not
be unreasonably withheld or delayed):
(a) amend or otherwise change its Certificate of Incorporation
or By-Laws;
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(b) issue any additional shares of capital stock or issue,
sell or grant any option or right to acquire or otherwise dispose of any of its
authorized but unissued capital stock;
(c) declare or pay any dividends or make any other
distribution in cash, securities or property on its capital stock, except as
otherwise provided in Section 1.6(b)(iii);
(d) repurchase or redeem any shares of its capital stock;
(e) incur, or perform, pay or otherwise discharge, any
obligation or liability (absolute or contingent), except for current obligations
and current liabilities in the ordinary course of business consistent with past
practice;
(f) enter into any employment agreement with, or become liable
for any bonus, profit-sharing or incentive payment to, or increase the
compensation or benefits of, any of its officers or directors (other than
payments or increases in the ordinary course of business consistent with past
practices), except pursuant to presently existing plans, arrangements or
agreements disclosed in Section 2.10 of the Premier Disclosure Schedule or as
may be required by applicable law;
(g) change any of the accounting principles or practices used
by it, except as required by U.S. generally accepted accounting principles (in
which event, Premier promptly shall notify Cookson of such change);
(h) authorize any capital expenditure(s) (other than those
already subject to a commitment) which, individually, is in excess of $100,000
or, in the aggregate, are in excess of $500,000;
(i) modify, amend or cancel any of its existing contracts,
agreements or leases or enter into any contracts, agreements or leases other
than in the ordinary course of business or enter into any loan or guarantee
agreements;
(j) take or fail to take, or agree to take or fail to take,
any action which would make any representation or warranty made by Alpine or
Premier herein untrue or incorrect in any material respect;
(k) enter into any transaction with Alpine or any of its
Affiliates;
(l) sell, lease, transfer or otherwise dispose of all or any
portion of its assets including, without limitation, rights to patents,
know-how, intellectual property or other intangible assets, except sales of
inventory or obsolete equipment in the ordinary course of business consistent
with past practices;
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(m) effect any dissolution, winding up, liquidation or
termination of the business of Premier or any of its Subsidiaries;
(n) effect any merger or consolidation of Premier or any of
its Subsidiaries whether or not it is the survivor thereof or effect any
reorganization or recapitalization;
(o) make any investment in, or make any loan, advance or
credit to, any person, including, but not limited to, officers, directors,
stockholders or Affiliates of Premier or any of its Subsidiaries, other than
credits to customers in the ordinary course of business and travel advances to
officers, directors and employees of Premier or any of its Subsidiaries made in
the ordinary course of business in amounts consistent with past practices;
(p) assume, endorse, guarantee or otherwise become liable for
or upon the obligation of any person (other than endorsements for deposit in the
ordinary course of business);
(q) effect any agreement for the leasing or hire of any real
property; or
(r) enter into any transaction contemplated by numbers 3, 4 or
5 under the heading "Joint Ventures" in Section 2.2 of the Premier Disclosure
Schedule.
SECTION IV.2 NOTIFICATION OF CERTAIN EVENTS.
From the date hereof until the Closing Date, Alpine shall promptly
advise Cookson if any claim, suit, governmental proceeding or litigation is
commenced against Premier or any of its Subsidiaries or (to the knowledge of
Alpine and Premier) is threatened against Premier or any of its Subsidiaries
which either (a) arises out of or is in any way related to this Agreement or any
of the transactions contemplated hereby or (b) would, if adversely determined,
have a Premier Material Adverse Effect.
SECTION IV.3 CONSENTS AND APPROVALS.
Alpine and Premier shall use commercially reasonable efforts to obtain
the consents and approvals required for the consummation of the transactions
contemplated by this Agreement.
SECTION IV.4 CONSUMMATION OF AGREEMENT.
Alpine and Premier shall use their best efforts and due diligence to
satisfy all conditions to the Closing that are within their reasonable control
to the end that the transactions contemplated by this Agreement shall be fully
carried out. Without limiting the foregoing, Alpine agrees to vote its Shares
for the approval of this Agreement and the Merger.
SECTION IV.5 NO TRANSFER OF SHARES.
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Alpine agrees not to dispose of or transfer any of the Shares held by
Alpine, or any interest therein, prior to the Merger or directly or indirectly
cause or permit any such disposition or transfer, engage in any discussion
regarding such a transaction, or provide information to any person interested in
such a transaction.
SECTION IV.6 INTERCOMPANY INDEBTEDNESS.
All intercompany indebtedness (other than trade payables incurred in
the ordinary course of business) owed by Alpine or any of its Subsidiaries to
Premier or any of its Subsidiaries or owed by Premier or any of its Subsidiaries
to Alpine or any of its Subsidiaries shall be settled and paid as part of the
Debt Repayment Amount on or prior to the Closing Date and, in any event, prior
to the Effective Time.
SECTION IV.7 DEPOSIT.
Simultaneously with the execution of this Agreement, Alpine shall pay
to Cookson the Two Million ($2,000,000) U.S. Dollar deposit previously provided,
plus interest accruing thereon, as contemplated by the Agreement in Principle,
dated May 11, 1999, by and between Alpine and Cookson.
SECTION IV.8 AUDITED FINANCIAL STATEMENTS.
As promptly as practical after the date hereof, but not later than June
30, 1999, Alpine shall deliver to Cookson the audited consolidated balance sheet
of Premier and its consolidated Subsidiaries as of April 30, 1999 and the
related audited consolidated statements of income and cash flows for the year
then ended (collectively, the "AUDITED FINANCIAL STATEMENTS"), accompanied by
the unqualified audit opinion of Arthur Andersen LLP. If (i) net worth as
reflected in the Audited Financial Statements has decreased more than $2.5
million as compared to the Unaudited Financial Statements, (ii) earnings before
interest and taxes as reflected in the Audited Financial Statements has
decreased more than $1.0 million as compared to the Unaudited Financial
Statements or (iii) the audit opinion delivered by Arthur Andersen LLP is
qualified in any respect, then for all purposes under Article II, those
representations based on or measured by an amount as of April 30, 1999 shall
continue to refer to the amount reflected in the Unaudited Financial Statements.
If none of the above criteria are met, then the amounts reflected in the Audited
Financial Statements shall be deemed to apply with respect to such
representations.
ARTICLE V
COVENANTS OF COOKSON
SECTION V.1 STOCKHOLDERS MEETING.
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If required by applicable law based on the transactions contemplated by
this Agreement, Cookson shall, in accordance with its Governing Instruments and
applicable law, take all action necessary to convene a general meeting of its
stockholders as promptly as possible, including preparing, filing and delivering
to its stockholders a Class I Circular as soon as practicable following the date
of this Agreement, for the purpose of considering and voting upon (i) the
approval of this Agreement and the Merger and/or (ii) the approval of a
resolution increasing the authorized share capital of Cookson and authorizing
the directors of Cookson to allot the Securities as provided in Section 1.6.
Subject to fiduciary obligations under applicable law, the directors of Cookson
shall recommend such approval, shall not withdraw or modify such recommendation
and shall take all lawful action to solicit such approval.
SECTION V.2 REPRESENTATIONS AND WARRANTIES.
Cookson covenants and agrees that, except as otherwise contemplated by
this Agreement or unless Alpine shall give its prior written consent, Cookson
shall not, between the date of this Agreement and the Closing Date, take or fail
to take, or agree to take or fail to take, any action which would make any
representation or warranty made by Cookson herein untrue or incorrect in any
material respect.
SECTION V.3 NOTIFICATION OF CERTAIN EVENTS.
From the date hereof until the Closing Date, Cookson shall promptly
advise Alpine if any claim, suit, governmental proceeding or litigation is
commenced against Cookson or any of its Subsidiaries or (to the knowledge of
Cookson) is threatened against Cookson or any of its Subsidiaries which either
(a) arises out of or is in any way related to this Agreement or any of the
transactions contemplated hereby or (b) would, if adversely determined, have a
Cookson Material Adverse Change and would be required to be specifically
disclosed by Cookson to its shareholders under applicable law.
SECTION V.4 CONSENTS AND APPROVALS.
Cookson shall cause use commercially reasonable efforts to obtain the
consents and approvals required for the consummation of the transactions
contemplated by this Agreement.
SECTION V.5 CONSUMMATION OF AGREEMENT.
Cookson shall use its best efforts and due diligence to satisfy all
conditions to the Closing that are within its reasonable control to the end that
the transactions contemplated by this Agreement shall be fully carried out.
SECTION V.6 LISTING OF SECURITIES.
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Cookson shall use all commercially reasonable efforts to cause the
Securities to be issued in the Merger, prior to or upon issuance thereof, to be
approved for listing on The London Stock Exchange Limited.
SECTION V.7 RIGHTS UNDER EXCHANGE AGREEMENT.
Cookson agrees that it shall instruct MTI to pay any Adjustment under
the Exchange Agreement directly to Alpine and hereby authorizes Alpine, at
Alpine's expense, to assert any rights under the Exchange Agreement that may be
asserted by Premier.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES
SECTION VI.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
Subject to restrictions contained in confidentiality agreements to
which such party is subject and upon reasonable notice to an executive officer
of the other party, Alpine shall (and it shall cause Premier and each of
Premier's Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of Cookson reasonable access, during the
period prior to the Closing Date, to all its properties, books, contracts,
commitments and records relating to Premier and Premier's Subsidiaries;
PROVIDED, HOWEVER, that, with respect to any environmental matters, access shall
be limited to the appropriate personnel of Premier and its Subsidiaries,
relevant environmental documents and, as requested by Cookson, additional site
visits to specified properties on terms and conditions approved in advance by
Alpine. In addition, during such period, Alpine shall cause Premier and each of
Premier's Subsidiaries to furnish promptly to Cookson all information concerning
their business, properties and personnel as Cookson may reasonably request, and
shall make available to Cookson the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of their
business, properties and personnel as Cookson may reasonably request. Cookson
shall keep such information confidential in accordance with the terms of the
confidentiality agreement dated February 18, 1999 between Alpine and Cookson.
Notwithstanding the foregoing, no such review, inquiry or investigation shall
affect any representations or warranties of any parties herein or the conditions
to the obligations of any parties.
SECTION VI.2 NOTIFICATION OF CERTAIN MATTERS.
(a Alpine shall give prompt notice to Cookson of (i) the occurrence,
or non-occurrence, of any event of which it has knowledge, the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of Alpine and Premier contained in this Agreement to be untrue or inaccurate at
or prior to the Closing Date, (ii) any failure of Alpine to comply with or
satisfy any covenant, condition or agreement to be complied with or
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satisfied by it hereunder and (iii) any change since the close of business on
May 27, 1999 with respect to the Premier Indebtedness or the holders thereof.
(b Cookson shall give prompt notice to Alpine of (i) the occurrence,
or non-occurrence, of any event of which it has knowledge, the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of Cookson contained in this Agreement to be untrue or inaccurate at or prior to
the Closing Date and (ii) any failure of Cookson to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
SECTION VI.3 FURTHER ACTION.
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all other things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, including, but not limited to: (i) reasonable efforts
to lift or rescind any injunction or restraining order or other order which may
be entered; (ii) reasonable cooperation in respect of any filings to be made in
connection with the transactions contemplated hereby; and (iii) full compliance
with any obligations to consult with workers' councils, where required.
SECTION VI.4 PUBLIC ANNOUNCEMENTS.
Alpine and Cookson shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement and the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law or by the New York Stock Exchange or
by the London Stock Exchange.
SECTION VI.5 GOVERNMENT COMPLIANCE.
Alpine and Cookson agree promptly to effect all necessary
registrations, filings, applications and submissions of information required or
requested by any governmental or regulatory authorities.
SECTION VI.6 RELEASES OF SECURITY INTERESTS.
In connection with the payment by Cookson of the Debt Repayment Amount,
Alpine shall use commercially reasonable efforts, and Cookson shall cooperate
with Alpine, to obtain any and all releases and discharges regarding any
security interests, mortgages, pledges or other liens and encumbrances on any of
the assets of Premier or any of its Subsidiaries securing the Premier
Indebtedness which is a part of the Debt Repayment Amount.
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SECTION VI.7 EMPLOYEE BENEFITS.
(a) For a period of at least one year following the Effective Time,
Cookson shall provide or cause the Surviving Corporation to provide compensation
and benefits to employees and officers of Premier immediately before the
Effective Time ("Employees") who continue to be employed by Cookson or the
Surviving Corporation following the Effective Time ("Transferred Employees")
that are substantially comparable in the aggregate to the compensation and
benefits provided to such Transferred Employees immediately prior to the
Effective Time. Cookson shall ensure that any employee benefit plan or
arrangement established, maintained or contributed to by Cookson or the
Surviving Corporation or any of their Affiliates shall grant full credit for all
service or employment with, or recognized by, Alpine, Premier and any of their
Affiliates for purposes of eligibility and vesting with respect to any employee
pension benefit plan, as defined in Section 3(2) of ERISA, and for purposes of
eligibility and determining the amount of any benefit with respect to any
vacation program and any employee welfare benefit plan, as defined in Section
3(1) of ERISA ("Cookson Welfare Plan"), including, without limitation, any
severance plan or sick plan.
(b) As of the Effective Time, Cookson or the Surviving Corporation
shall cause any Cookson Welfare Plan to waive any pre-existing condition
exclusions and waiting periods (except to the extent that such exclusions would
have then applied or such waiting periods were not satisfied under Premier's
medical plans) with respect to Transferred Employees (and their dependents or
other beneficiaries). For purposes of computing deductible amounts, co-pays or
other maximums under any Cookson Welfare Plan, expenses and claims recognized
prior to the Effective Time for similar purposes under the applicable welfare
plan of Premier or any of its Affiliates shall be credited or recognized under
such Cookson Welfare Plan. Cookson shall be responsible for all obligations and
liabilities relating to or arising under the group health plan continuation
coverage requirements of Section 4980B of the Code and Title I, Subtitle B of
ERISA for the Employees and their eligible dependents.
(c) Cookson acknowledges that the Adience, Inc. 401(k) Plan (to be
renamed, effective June 1, 1999, the Premier Refractories Inc. 401(k) Plan (the
"401(k) PLAN")) covers employees of Alpine (the "ALPINE EMPLOYEES"). Prior to
the Effective Time, Alpine shall use its best efforts to establish a defined
contribution plan (the "ALPINE DEFINED CONTRIBUTION PLAN") intended to be
tax-qualified under Section 401(a) of the Code, in which the Alpine Employees
who participate in the 401(k) Plan shall participate following the Effective
Time. In the event that Alpine is unable to establish the Alpine Defined
Contribution Plan prior to the Effective Time for a period of 90 days following
the Effective Time (or such other period as may be mutually agreed to by Alpine
and either Cookson or the Surviving Corporation), Cookson or the Surviving
Corporation shall convert the 401(k) Plan into a "multiple employer" plan in
which Alpine will be an unrelated participating employer. During such period,
Alpine (as an unrelated participating employer), Cookson and the Surviving
Corporation shall maintain and operate the 401(k) Plan in all material respects
in accordance with its terms and applicable law, including, without limitation,
ERISA and the Code. Alpine shall provide such assurances as shall be reasonably
satisfactory to Cookson as to the qualified status of the Alpine Defined
Contribution
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Plan. Within 90 days following the Effective Time (or, if later, the end of the
"black-out" period affecting the 401(k) Plan or the date the trustee of the
Alpine Defined Contribution Plan is able to accept a transfer of assets from the
401(k) Plan), Cookson or the Surviving Corporation shall cause the trustee under
the 401(k) Plan to transfer to the Alpine Defined Contribution Plan an amount
equal to the total account balances of the Alpine Employees determined as of the
date immediately preceding the actual date of transfer, including the promissory
notes (if any) evidencing any outstanding loans to the Alpine Employees, less
any amounts as to which withdrawal requests have been duly submitted prior to
the transfer to the Alpine Defined Contribution Plan and paid by the 401(k) Plan
(the "TRANSFERRED ASSETS"). To the extent that the investment vehicles available
under the Alpine Defined Contribution Plan and the 401(k) Plan on the date of
transfer are identical, such transfer shall be in-kind, without liquidation
provided such transfer is permitted by the trustees of the 401(k) Plan and the
Alpine Defined Contribution Plan; otherwise, to the extent that the investment
vehicles available under the Alpine Defined Contribution Plan and the 401(k)
Plan on the date of transfer are not identical, such transfer shall be in cash.
The parties hereto agree that in no event shall the Transferred Assets be less
than the amount required under Section 414(l) of the Code and the regulations
thereunder. The Alpine Defined Contribution Plan shall provide as of the date of
transfer benefits for each Alpine Employee which are not less than the Alpine
Employees' respective account balances (including any net earnings or losses
accrued thereon from the Effective Time until the date of actual transfer) under
the 401(k) Plan as of the date of such transfer. Alpine shall ensure that the
Alpine Defined Contribution Plan preserves benefits protected under Section
411(d)(6) of the Code with respect to benefits accrued as of the date of
transfer and shall contain all the optional forms of benefit which the 401(k)
Plan contains, with respect to the account balances of the Alpine Employees.
With respect to the transfer of the Transferred Assets to the Alpine Defined
Contribution Plan, as contemplated herein, the parties hereto agree, if required
by law, and in accordance with any time periods required by law, to notify the
IRS of the contemplated transfer.
SECTION VI.8 NOTIFICATION OF DISPOSITIONS; PROVISION OF INFORMATION.
If, on or before December 31, 2005, there is to be a disposition of
equity interests in, or assets of, Premier or any of its Subsidiaries that would
cause any recognition of gain under any gain recognition agreement ("GRA")
entered into by Alpine with the IRS under Section 367(a) of the Code and
Sections 1.367(a)-3 and 1.367(a)-8 of the Treas. Regs. with respect to the
Merger, at least 90 days (or such shorter period in order to comply with law or
legal requirement) prior to such disposition Cookson shall provide Alpine with
notice of such disposition and a description of the transaction pursuant to
which such disposition is to be accomplished. Cookson also shall (i) provide
Alpine with all information it requires in order to comply with the reporting
requirements of Treas. Regs. Section 1.367(a)-8(b)(5) pursuant to the GRA and
(ii) if there has been a disposition of equity interests in, or assets of,
Premier or any of its Subsidiaries in a nonrecognition transaction, as described
in Treas. Regs. Sections 1.367(a)-8(g)(2) and (3), provide Alpine with all
information it requires to comply with the reporting requirements of Treas.
Regs. Sections 1.367(a)-8(g)(2)(ii) and (iii) with respect to that disposition.
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SECTION VI.9 POST-CLOSING INCOME TAX MATTERS.
(a Alpine shall prepare and timely file, or cause to be prepared and
timely filed, with the appropriate taxing authorities all Income Tax Returns
required to be filed on behalf of Premier and Premier's Subsidiaries with
respect to Income Tax liabilities for all taxable years, or short periods
containing less than 12 months, ending on or prior to the Closing Date. Such
Income Tax Returns shall be prepared in accordance with the relevant books of
account and, in all material respects, will correctly reflect the amount of the
Income Tax liability as well as the facts regarding the income, business,
operations, assets, activities and status of the taxpayer and all other
information required to be shown thereon. Alpine is obligated to pay and will be
liable for all Income Tax liabilities of Premier and its Subsidiaries
attributable to all taxable years or short periods ending on or prior to the
Closing Date and is obligated to pay and will be liable for all foreign Income
Taxes for periods beginning prior to the Closing Date and ending after the
Closing Date to the extent attributable to the Pre-Closing Date Period (as
hereinafter defined). For this purpose the portion of any foreign Income Tax
liability attributable to the Pre-Closing Date Period shall be determined by
assuming that the Pre-Closing Date Period constitutes a separate taxable period
of Premier and its Subsidiaries and by taking into account the actual activities
and income or loss of Premier and its Subsidiaries during such period, except
that exemptions, allowances and/or deductions for a taxable period beginning
prior to and ending after the Closing Date that are calculated on an annual or
periodic basis shall be apportioned to the Pre-Closing Date period on a per diem
basis. "Pre-Closing Date Period" shall mean, with respect to any taxable period
beginning prior to and ending after the Closing Date, the portion of such
taxable period beginning on the date such taxable period commences and ending on
the Closing Date.
(b Alpine shall be entitled to any Income Tax refunds plus interest
received thereon resulting from or applicable to the operations of Premier and
its Subsidiaries with respect to taxable years and short periods ending on or
before the Closing Date and the portion of any foreign Income Tax refund
properly attributable to the Pre-Closing Date Period; PROVIDED, HOWEVER, that
Alpine shall not be entitled to any Income Tax refunds arising from an audit
adjustment to the extent that Premier and its Subsidiaries are caused to suffer
a corresponding increase in Income Tax as a result of such adjustment. Effective
as of the Closing Date, all liabilities and obligations between Premier and its
Subsidiaries, on the one hand, and Alpine and any of its Affiliates, on the
other hand, under any Tax Sharing Arrangement in effect prior to the Closing
Date shall be deemed to have been extinguished in full (without the necessity of
any payment with respect thereto) and any liabilities or rights existing under
any such agreement or arrangement shall terminate and shall no longer be
enforceable.
(c The parties shall cooperate in connection with the filing of all
Income Tax Returns covering any period ending on or prior to the Closing Date
and for any period that includes a Pre-Closing Date Period. The parties shall
not destroy or permit the destruction of any books, records or files pertaining
to or used in preparing any such Income Tax Return as long as the statute of
limitations and any extensions thereof, as extended by the parties, has not
expired, shall comply with all reasonable requests regarding production of or
access to
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documents or files, and shall make personnel available for depositions,
interviews or testimony.
(d Alpine agrees that, with respect to short periods or taxable years
ending on or before the Closing Date with respect to Premier and Premier's
Subsidiaries, it shall not, without the prior written consent of Cookson:
(i0 make an election with respect to any Income Tax that
would materially adversely affect Premier or any of Premier's Subsidiaries;
(ii0 change its annual accounting period within the meaning of
Section 442 of the Code or, in the case of a company resident in the United
Kingdom Section 12 of the Income and Corporation Taxes Act of 1988 or in the
case of a company resident elsewhere, any equivalent local statute;
(iii0 change its method of accounting within the meaning of
Section 446 of the Code in a manner that would materially adversely affect
Premier or any of Premier's Subsidiaries;
(iv0 take any action or omit to take any required action,
including, but not limited to, those in connection with the determination of
inventory costs, that would materially adversely affect the Income Tax liability
of Premier or any of Premier's Subsidiaries; or
(v0 file any amended Income Tax Return that would materially
adversely affect Premier or any of Premier's Subsidiaries.
(e In connection with its obligations set forth herein, Alpine, at its
sole expense, shall have the right to pursue, contest, appeal and settle any
claims or assessments made against Premier and Premier's Subsidiaries by any
taxing authority for taxable years or short periods ending on or prior to the
Closing Date and the Pre-Closing Date Period, and Cookson shall cause Premier
and Premier's Subsidiaries to cooperate with Alpine (at Alpine's expense), shall
comply with all reasonable requests regarding production of or access to
documents or files and shall make personnel available for depositions,
interviews or testimony. Alpine shall keep Cookson fully informed as to any
claims or assessments and the management thereof, and shall not settle the same
without Cookson's approval if such settlement would materially and adversely
affect Premier and Premier's Subsidiaries.
(f Any payments with respect to Income Taxes made by Alpine pursuant
to this Agreement shall be treated as an adjustment to the consideration
received by Alpine pursuant to the Merger.
(g In the case of any Income Tax Return required to be filed by
Premier or any Premier Subsidiary with respect to which Alpine is obligated to
pay Income Taxes with respect to any Pre-Closing Date Period, Cookson shall
cause such Return to be prepared consistent
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with past practice and in accordance with the relevant books of account and to
correctly reflect, in all material respects, the amount of the Income Tax
liability as well as the facts regarding the income, business, operations,
assets, activities and status of the taxpayer and all other information required
to be shown thereon.
(h Neither Cookson nor Premier or any of Premier's Subsidiaries, with
respect to any tax period ending on or before the Closing Date, shall, without
the written approval of Alpine, (i) file any amended Tax Returns or claims or
suits for refunds or (ii) maintain any tax positions inconsistent with the tax
positions with respect to any periods to the Closing Date taken on the Returns
filed or with respect to the Taxes paid with respect to such prior periods.
SECTION VI.10 ACCESS TO INSURANCE POLICIES.
As used in this Section 6.10 hereof and elsewhere herein, the term
"SUBJECT INSURANCE POLICIES" shall mean all insurance policies of any kind
whatsoever, whenever in effect, by whomsoever owned, which name as an insured or
additional insured, or which provide coverage for, any of Premier or any of its
present or former Subsidiaries (or any of their respective predecessors in
interest). For clarification and the avoidance of doubt, predecessors in
interest of Premier and its Subsidiaries shall include, without limitation: (i)
Adience, Inc. and its Subsidiaries and predecessors, (ii) Hepworth (as defined
in Section 9.2(b)) and its Subsidiaries and predecessors, (iii) BMI, Inc., a
Pennsylvania corporation, and its Subsidiaries, (iv) J. H. France Refractories
Company, a Pennsylvania corporation and (v) the CE Refractories Division of
Combustion Engineering Inc.
Following the Closing, Alpine will, whenever and from time to time as
reasonably requested by any of Cookson, Premier or any of Premier's
Subsidiaries: (a) exercise commercially reasonable efforts, without expense to
Alpine, to obtain the consent of any carrier of the Subject Insurance Policies
to the Merger if such consent is required for the continuation of coverage
thereunder following the Closing; and (b) in the case of any of the Subject
Insurance Policies owned by Alpine, and in any event without any cost to Alpine,
file notices of claim thereunder in respect of any losses heretofore or
hereafter incurred by any of Premier and its Subsidiaries (and their respective
predecessors in interest) arising out of any accident, occurrence, event or
exposure taking place wholly or partly before the Closing, or beginning before
the Closing and continuing thereafter; prosecute, compromise and settle such
claims as reasonably requested by any of Cookson, Premier or any of Premier's
Subsidiaries; and remit the proceeds thereof to Cookson, Premier and/or any of
Premier's Subsidiaries, as their interests may appear, subject, however, to the
payment by Cookson, Premier or any of Premier's Subsidiaries of an equitable
portion of any applicable "deductible" or "retention."
SECTION VI.11 AVAILABILITY OF KEY EMPLOYEES.
For a period of up to 30 days following the Closing, upon Cookson's
reasonable request, Alpine shall make available to Cookson the services of
Stephen M. Johnson and Stephen Knup, at a rate of compensation to be mutually
agreed upon, provided that the
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provision of such services shall not unreasonably interfere with the performance
of their duties to Alpine.
SECTION VI.12 STAY-PUT AGREEMENTS.
Cookson shall, or shall cause Premier or any of Premier's Subsidiaries
to, fully pay and discharge any and all obligations of Premier under the
stay-put agreements listed on Section 2.10 of the Premier Disclosure Schedule,
and Alpine shall reimburse Cookson, Premier or any such Subsidiary for any
payments made thereunder promptly upon the presentation of invoices showing such
payments in reasonable detail.
ARTICLE VII
CONDITIONS TO THE CLOSING
SECTION VII.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by all of the parties hereto in writing, and each party shall use its
commercially reasonable efforts to cause such conditions to be fulfilled:
(a) At the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the Merger not be consummated as herein provided, and there shall not have
been any action taken, or any statute, rule, regulation or order enacted,
promulgated, issued or deemed applicable to the Merger, by any foreign, federal,
state, local or other government or governmental authority or court which would
make the consummation of the Merger illegal, and no such action shall have been
taken or any such statute, rule, regulation or order enacted, promulgated,
issued or deemed applicable to the Merger which would be reasonably likely to
produce such result.
(b) The passing at a general meeting of Cookson of a
resolution to approve the Merger and a resolution to authorize the allotment and
issue of the Securities, if such approval is required.
(c) All applicable waiting periods under the HSR Act and the
Exon-Florio Amendment to the Defense Production Act of 1950 shall have expired
or been terminated.
(d) Premier shall, or shall have caused its Subsidiaries to,
inform and/or consult with any workers' councils or committees regarding the
transactions contemplated by
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this Agreement, as required by applicable law and the provisions of any
collective bargaining agreements.
SECTION VII.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COOKSON.
The obligations of Cookson and Merger Sub to consummate the
transactions contemplated by this Agreement shall also be subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Cookson in writing, and Alpine and
Premier shall use their commercially reasonable efforts to cause such conditions
to be fulfilled:
(a) The representations and warranties of Alpine and Premier
set forth in Article II of this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of such
time, except for changes contemplated by this Agreement and by the Premier
Disclosure Schedule, and except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct in all material respects as of such
date.
(b) Each of Alpine and Premier shall in all material respects
have performed each obligation to be performed by it hereunder at or prior to
the Closing Date.
(c) Cookson shall have received a certificate of Alpine and
Premier, dated the Closing Date, signed by the Chief Executive Officer of
Alpine, to the effect that the conditions specified in Sections 7.2(a) and (b)
have been fulfilled.
(d) Since the date of this Agreement, there shall not have
been any change, effect, event, situation or condition, together with all other
changes, effects, events, situations or conditions, that is materially adverse
to the business, results of operations, properties or financial condition of
Premier and its Subsidiaries taken as a whole, except for changes, effects,
events, situations or conditions relating to or arising out of (i) general
economic, business or financial market conditions; (ii) general industry
conditions, including, without limitation, conditions affecting the steel
industry; (iii) the announcement of this Agreement; (iv) the breach by Cookson
of this Agreement; or (v) any change in any law, rule or regulation or U.S.
generally accepted accounting principles or interpretations thereof that applies
to Alpine or Premier (a "PREMIER MATERIAL ADVERSE CHANGE").
(e) Each of the documents and certificates shall have been
executed and/or delivered to Cookson by the parties thereto, and all of the
actions shall have been taken, as contemplated by Section 1.7(b) and Section
1.7(c) hereof.
(f) Cookson shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and third parties as are required in connection with the consummation of the
transactions contemplated hereby or necessary to conduct the business of
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Premier and its Subsidiaries as presently conducted have been obtained and are
in full force and effect other than those which, if not obtained, would not,
either individually or in the aggregate, result in a Premier Material Adverse
Change.
(g) Cookson shall have received the consent of HM Treasury
pursuant to Section 765 of the Taxes Act of 1988 (or confirmation from HM
Treasury, or an opinion of counsel or other assurance reasonably satisfactory to
Cookson, that no such consent is required) to the transactions contemplated by
this Agreement.
(h) All required clearances in respect of the transactions
contemplated by this Agreement shall have been received from the appropriate
national competition authorities. The phrase "all required clearances" includes,
in respect of the United Kingdom, to the extent applicable:
(i) the Office of Fair Trading indicating in terms
reasonably satisfactory to Cookson and Premier that it is not the intention of
the Secretary of State to refer the Merger to the UK Competition Commission (the
"CC") pursuant to the Fair Trading Act of 1973, as amended; or
(ii) the Secretary of State accepting undertakings from
Cookson in lieu of a reference of the Merger to the CC as aforesaid.
(i) None of the holders of Shares shall have delivered a
written demand for appraisal under Section 262 of Delaware Law.
(j) Cookson shall have received an opinion of counsel to
Alpine and Premier substantially in the form of EXHIBIT 7.2(j) hereto.
(k) At the Closing Date, there shall not have been any action
taken, or any statute, rule, regulation or order enacted, promulgated, issued or
deemed applicable to the Merger, by any foreign, federal, state, local or other
government or governmental authority or court which would prohibit the Surviving
Corporation's ownership or operation of any of Premier's or any of its
Subsidiaries' business or assets, or compel the Surviving Corporation to dispose
of or hold separate any of Premier's or any of its Subsidiaries' business or
assets, as a result of the Merger, and no such action shall have been taken or
any such statute, rule, regulation or order enacted, promulgated, issued or
deemed applicable to the Merger which would be reasonably likely to produce such
result.
(l) All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement and all
other related legal matters shall have been reasonably satisfactory to and
approved by counsel for Cookson and such counsel shall have been furnished with
such certified copies of such corporate actions and proceedings and such other
instruments and documents as it shall have reasonably requested.
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(m) Premier and its Subsidiaries shall have been released from
the guarantee, indemnification or similar obligations set forth on EXHIBIT
7.2(m).
(n) The pre-closing steps described in Section 1.10 shall have
been completed to the reasonable satisfaction of Cookson, if so requested by
Cookson.
SECTION VII.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ALPINE AND PREMIER.
The obligations of Alpine and Premier to consummate the transactions
contemplated by this Agreement are also subject to the fulfillment, at or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by such parties in writing, and Cookson shall use its commercially
reasonable efforts to cause such conditions to be fulfilled:
(a) The representations and warranties of Cookson set forth in
Article III of this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if made at and as of such time, except for
changes contemplated by this Agreement and by the Cookson Disclosure Schedule,
and except to the extent that any such representation or warranty is made as of
a specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such date.
(b) Cookson shall in all material respects have performed each
obligation to be performed by it hereunder at or prior to the Closing Date.
(c) Alpine shall have received a certificate of Cookson, dated
the Closing Date, signed by an executive officer of Cookson, to the effect that,
to the best of the knowledge, information and belief of such officer, the
conditions specified in Sections 7.3(a) and (b) have been fulfilled.
(d) Since the date of this Agreement, there shall not have
been any change, effect, event, situation or condition, together with all other
changes, effects, events, situations or conditions, that is materially adverse
to the business, results of operations, properties or financial condition of
Cookson and its Subsidiaries taken as a whole, except for changes, effects,
events, situations or conditions relating to or arising out of (i) general
economic, business or financial market conditions; (ii) general stock market and
stock market sector conditions; (iii) general industry conditions, including,
without limitation, conditions affecting the steel industry; (iv) the
announcement of this Agreement; (v) the breach by Alpine or Premier of this
Agreement; or (vi) any change in any law, rule or regulation or generally
accepted accounting principles or interpretations thereof that applies to
Cookson (a "COOKSON MATERIAL ADVERSE CHANGE").
(e) Each of the documents shall have been executed and
delivered to Alpine by the parties thereto, and all of the actions shall have
been taken, as contemplated by Section 1.7(a) and Section 1.7(c) hereof.
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(f) Alpine shall have received evidence, in form and substance
reasonably satisfactory to it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and third
parties as are required in connection with the consummation of the transactions
contemplated hereby have been obtained and are in full force and effect other
than those which, if not obtained, would not, either individually or in the
aggregate, result in a Cookson Material Adverse Change.
(g) Premier shall have received an opinion of counsel to
Cookson substantially in the form of EXHIBIT 7.3(g) hereto.
(h) All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement and all
other related legal matters shall have been reasonably satisfactory to and
approved by counsel for Alpine and Premier and such counsel shall have been
furnished with such certified copies of such corporate actions and proceedings
and such other instruments and documents as it shall have reasonably requested.
(i) The Securities shall have been admitted to the official
list of the LSE and such listing shall have become fully effective in accordance
with the rules and regulations of the LSE.
ARTICLE VIII
TERMINATION
SECTION VIII.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date,
notwithstanding the approval thereof by the stockholders of Cookson and Premier:
(a) By mutual consent of Cookson and Premier;
(b) By either Cookson or Premier, if the Merger shall not have
been consummated by October 31, 1999, unless the absence of such consummation
shall be due to the failure of the party seeking to terminate this Agreement (or
its Subsidiaries or Affiliates) to perform its obligations under this Agreement
required to be performed by it at or prior to the Closing Date;
(c) By either Cookson or Premier, if any governmental
authority, agency or commission or court of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or action the parties hereto shall use their commercially
reasonable efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the Merger, and such order, decree, ruling or action shall
have become final and non-appealable; or
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(d) (i) by Cookson, if Alpine or Premier shall breach or fail
to perform in any material respect any of their respective covenants or
agreements contained herein or (ii) by Premier, if Cookson shall breach or fail
to perform in any material respect any of its covenants or agreements contained
herein; provided that if any such breach is curable prior to the expiration of
30 days from its occurrence (but in no event later than October 31, 1999) by the
breaching party through the exercise of commercially reasonable efforts and for
so long as the breaching party continues to exercise such commercially
reasonable efforts, the non-breaching party may not terminate this Agreement
under this Section 8.1(d) until the expiration of such period without such
breach having been cured.
SECTION VIII.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement as provided in Section
8.1, there shall be no liability or further obligation on the part of any party
hereto except (i) as set forth in Section 12.11 hereof and (ii) nothing herein
shall relieve any party from liability for any willful or intentional breach of
this Agreement.
ARTICLE IX
INDEMNIFICATION PROVISIONS
SECTION IX.1 ALPINE'S INDEMNIFICATION OBLIGATION.
Alpine agrees that, from and after the Closing, it shall indemnify,
defend and hold harmless Cookson, its officers, directors, Affiliates
(including, but not limited to, Premier and each of its Subsidiaries subsequent
to the Closing), employees and agents from and against any damages, claims,
losses, liabilities, actions, suits, proceedings, reasonable costs and expenses
(including, without limitation, reasonable attorneys' and expert witnesses and
consultant fees incurred in seeking indemnification hereunder or defending any
claim by a third person, amounts paid in settlement of any claim or suit and
costs of clean-up, restoration, remediation and removal), taxes (other than
Income Taxes, which are covered by Section 6.9), fines, penalties and interest
of any kind or nature (each, a "LIABILITY," and collectively, "LIABILITIES") in
connection with, relating to or arising out of (a) any breach of any
representation or warranty of Alpine and/or Premier contained in Article II of
this Agreement or any covenant or other agreement of Alpine and Premier
contained in this Agreement, (b) any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by such breached
representation, warranty, agreement or covenant, (c) any claims of any broker or
finder engaged by Alpine or Premier in connection with the transactions
contemplated hereby or (d) any Taxes arising out of the payment of the Premier
Indebtedness to the extent not included in the Debt Repayment Amount or arising
out of the assignment of the Adjustment; PROVIDED, HOWEVER, that the foregoing
obligation of Alpine is subject to the applicable provisions set forth in
Section 9.5; PROVIDED, FURTHER, that Alpine shall have no right to receive
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any indemnification or contribution from Premier or any Premier Subsidiary with
respect to Liabilities under this Section 9.1 or otherwise.
SECTION IX.2 CERTAIN ENVIRONMENTAL MATTERS.
(a Alpine agrees that, from and after the Closing, it shall indemnify,
defend and hold harmless Cookson, its officers, directors, Affiliates
(including, but not limited to, Premier subsequent to the Closing), employees
and agents from and against any claims(s) made under any Environmental Laws by
any third party not related to Cookson or its officers, directors, Affiliates,
employees or agents, which claim was not in any way precipitated, caused or
initiated by or on behalf of Cookson or any of its officers, directors,
Affiliates, employees or agents, and which relates directly to (i) any real
property formerly owned, leased or operated by Premier or any of its
Subsidiaries or predecessors of either or (ii) the off-site transportation,
treatment, storage or disposal prior to the Closing Date of Hazardous Substances
generated by Premier or any of its Subsidiaries or predecessors of either;
PROVIDED, HOWEVER, that the foregoing obligation of Alpine is subject to the
applicable provisions set forth in Section 9.5.
(b Cookson shall have the full benefit of the Environmental Deed,
dated April 15, 1997, between Hepworth R. and M. Holdings Limited ("Hepworth")
and Refraco Holdings Limited, which provides for the grant by Hepworth of a
Subsequent Purchaser Deed in the event of a Subsequent Purchase of a
Subsequently Purchased Property (as such terms are defined in the Environmental
Deed), and Alpine shall use all commercially reasonable efforts to take all
actions and to do all other things necessary, proper and advisable to ensure
that Cookson receives the full benefit of the indemnification provisions
thereunder, and Cookson is granted a Subsequent Purchaser Deed as contemplated
by the Environmental Deed.
SECTION IX.3 COOKSON INDEMNIFICATION OBLIGATION.
Cookson agrees that, from and after the Closing, it shall
indemnify, defend and hold harmless Alpine, its officers, directors, Affiliates,
employees and agents from and against any Liabilities in connection with,
relating to or arising out of (a) any breach of any representation or warranty
of Cookson contained in this Agreement or any covenant or other agreement of
Cookson contained in this Agreement, (b) any, claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by such
breached representation, warranty, agreement or covenant or (c) any claims of
any broker or finder engaged by Cookson in connection with the transactions
contemplated hereby; PROVIDED, HOWEVER, that the foregoing obligation of Cookson
is subject to the applicable provisions set forth in Section 9.5.
SECTION IX.4 PROCEDURES FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS.
For purposes of Sections 9.4 and 9.5, any party entitled to be
indemnified under Article IX is referred to herein as an "INDEMNIFIED PARTY,"
and any party obligated to provide indemnification under Article IX is referred
to herein as an "INDEMNIFYING PARTY." The
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obligations and liabilities of the parties under this Agreement with respect to,
relating to or arising out of claims of third parties (individually, a "THIRD
PARTY CLAIM," and collectively, the "THIRD PARTY CLAIMS") shall be subject to
the following terms and conditions:
(a) The Indemnified Party shall give the Indemnifying Party
prompt notice of any Third Party Claim, and, provided that the Indemnifying
Party acknowledges in writing its obligation to indemnify in accordance with the
terms of this Agreement, the Indemnifying Party may undertake the defense of
that claim by representatives chosen by it, provided the Indemnified Party will
have the right to participate in such defense and settlement discussions,
through counsel of its own choice and at its own expense and provided, further,
that the Indemnifying Party shall keep the Indemnified Party informed as to the
status of the defense. Any such notice of a Third Party Claim shall identify
with reasonable specificity the basis for the Third Party Claim, the facts
giving rise to the Third Party Claim and the amount of the Third Party Claim
(or, if such amount is not yet known, a reasonable estimate of the amount of the
Third Party Claim). The Indemnified Party shall make available to the
Indemnifying Party copies of all relevant documents and records in its
possession. Failure of an Indemnified Party to give prompt notice shall not
relieve the Indemnifying Party of its obligation to indemnify, except to the
extent that the failure to so notify materially adversely affects the
Indemnifying Party's ability to defend such claim against a third party.
(b) If the Indemnifying Party, within 30 days after notice
from the Indemnified Party of any such Third Party Claim (or ten (10) days in
the case of a Third Party Claim with respect to which a complaint has been
filed), fails to assume the defense in accordance with Section 9.4(a) of this
Agreement, the Indemnified Party shall (upon further notice to the Indemnifying
Party) have the right (but not the obligation) to undertake the defense,
compromise or settlement of the Third Party Claim. Any failure on the part of
the Indemnifying Party to notify the Indemnified Party within the time period
provided above regarding the election shall be deemed an election by the
Indemnifying Party not to assume and control the defense and settlement of the
Third Party Claim.
(c) Anything in this Section 9.4 to the contrary
notwithstanding, the Indemnifying Party shall not, without the written consent
of the Indemnified Party, settle or compromise any Third Party Claim or consent
to the entry of judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of an
unconditional release from all liability in respect of the Third Party Claim. In
the event the Indemnifying Party assumes the defense of a Third Party Claim as
provided above or otherwise acknowledges in writing its indemnification
obligation, the Indemnified Party shall not, without consultation and
coordination with, and the prior written consent (which shall not be
unreasonably withheld or delayed) of, the Indemnifying Party, settle, compromise
or pay any Third Party Claim or consent to the entry of judgment with respect
thereto.
(d) If more than one party hereto comprise the Indemnifying
Party, they shall use their best efforts to cooperate in the defense of the
Third Party Claim with a view to avoiding duplication of expenses.
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SECTION IX.5 INDEMNIFICATION DEDUCTIBLES AND CAPS.
(a) DEDUCTIBLES. Subject to Section 9.5(c), no indemnification under
Section 9.1, Section 9.2(a) or Section 9.3 shall be required, unless:
(i) the amount of the Liability with respect to any single
Liability or series of related Liabilities for a breach of a representation or
warranty exceeds $50,000 U.S. Dollars (the "INDIVIDUAL THRESHOLD AMOUNT");
PROVIDED, HOWEVER, that the Individual Threshold Amount shall not apply to
Liabilities relating to or arising out of any breach of any representation or
warranty of Alpine that is qualified as to a Premier Material Adverse Effect.
(ii) the aggregate amount of Liabilities for breaches of
representations or warranties exceeds $1.0 million U.S. Dollars (the "AGGREGATE
THRESHOLD AMOUNT"), in which case the applicable Indemnifying Party's
indemnification obligation shall extend to the amount of such Liabilities in
excess of the Aggregate Threshold Amount; provided that for purposes of
calculating whether the aggregate Liabilities reach the Aggregate Threshold
Amount, Liabilities which are subject to the Individual Threshold Amount that do
not meet the Individual Threshold Amount will be excluded; PROVIDED, FURTHER,
that Liabilities for a breach of a representation or warranty in Section 2.14
may be asserted without regard to, and shall not be applied toward, the
Aggregate Threshold Amount.
(b) OVERALL LIMITATION. Subject to Section 9.5(c), in no event
whatsoever shall Alpine's maximum liability with respect to Liabilities under
Section 9.1 exceed in the aggregate $50.0 million U.S. Dollars (the "INDEMNITY
CAP AMOUNT"); provided that in no event shall Alpine's maximum liability with
respect to liabilities under Section 9.2(a) exceed $10.0 million U.S. Dollars.
(c) NO LIMITATION ON CERTAIN INDEMNITIES. Notwithstanding anything
herein to the contrary, any indemnification payable hereunder by Alpine with
respect to Section 1.6(b)(iii) (Adjustment), Section 1.7(a)(iv) and Section
2.7(e) (Premier Indebtedness), Section 2.17 (Tax Returns, Audits and
Liabilities) (to the extent it relates solely to Income Taxes), Section
6.2(a)(iii) (Notification of Certain Matters), Section 6.9 (Post-Closing Income
Tax Matters) and Section 6.12 (Stay-Put Agreements) shall be recoverable in
full, shall not be subject to the Individual Threshold Amount or the Aggregate
Threshold Amount and shall not be subject to or apply toward the Indemnity Cap
Amount.
(d) TIME LIMITS ON INDEMNIFICATION. No claim on account of a breach of
a representation or warranty shall be made after the survival periods referred
to in Section 12.1 of this Agreement, no claim for a breach of a covenant in
Section 6.9 shall be made after the expiration of the statute of limitations on
assessment of the applicable Income Tax Return (including extensions) and no
claim under Section 9.2(a) shall be made after May 31, 2000; provided that once
notice of any claim has been timely given, additional related claims arising out
of the same operative facts or events may be made at any time prior to the final
resolution
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of such claim (by means of a final, non-appealable judgment of a court of
competent jurisdiction, a binding arbitration decision or a settlement approved
by the parties involved) even if such resolution occurs after the applicable
expiration or termination date referred to above.
(e) NET RECOVERY. The amount which an Indemnified Party shall be
entitled to receive from an unaffiliated Indemnifying Party under this Article
IX with respect to any indemnifiable liability shall be net of any recovery
actually received by such Indemnified Party from unaffiliated third parties
(including insurance proceeds (except from self-insurance programs),
counterclaims, subrogation actions and the like).
(f) NO TAX BENEFITS. Indemnification payable under this Agreement shall
be determined without regard to tax benefits to the Indemnified Party or any
other Person resulting therefrom.
SECTION IX.6 EXCLUSIVE REMEDY.
The remedies provided in this Article IX shall be the exclusive
remedies of the parties with respect to the matters covered by Sections 9.1, 9.2
and 9.3, except that nothing herein shall prevent a party from seeking specific
performance pursuant to Section 12.10, subject to the provisions thereof.
ARTICLE X
SELLER'S NON-COMPETITION COVENANT
SECTION X.1 NON-COMPETITION.
Alpine covenants and agrees with Cookson that Alpine and its Affiliates
will not, without the prior written consent of Cookson, directly or indirectly,
anywhere within the world (the "TERRITORY"), during the period commencing on the
Closing Date and expiring on the fifth (5th) anniversary of the Closing Date
(the "RESTRICTIVE PERIOD"): (a) engage or have any interest, directly or
indirectly, in an enterprise which is competitive with the business and
operations of Premier and its Subsidiaries as conducted as of the Closing Date
(a "COMPETING BUSINESS"); PROVIDED, HOWEVER, that Alpine and its Affiliates may,
without violating this covenant, own as a passive investment not in excess of 5%
of the outstanding capital stock of a corporation that engages in a Competing
Business if such capital stock is a security that is actively traded on an
established national or foreign securities exchange or is listed on the Nasdaq
National Market System or another established "over-the-counter" market; (b)
interfere with or attempt to interfere with any officers or senior executives of
Premier and its Subsidiaries, or induce or attempt to induce any of them to
leave the employ of Premier and its Subsidiaries, or violate the terms of their
contract with any of them; or (c) for the purpose of conducting or engaging in a
Competing Business, call upon, solicit, advise or otherwise do, or
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attempt to do, business with any clients, suppliers, consultants, customers or
accounts of the business and operations of Cookson or any of its Affiliates
(including Premier and its Subsidiaries) or take away or interfere or attempt to
interfere with any custom, trade, business or patronage of the business and
operations of Cookson or any of its Affiliates (including Premier and its
Subsidiaries).
SECTION X.2 INJUNCTIVE RELIEF.
The parties hereto acknowledge and agree that any breach by Alpine or
its Affiliates of the restrictive covenant contained in this Article X would
cause irreparable injury to Cookson and that the remedy at law for any such
breach would be inadequate, and Alpine agrees and consents that, in addition to
any other available remedy, temporary and permanent injunctive relief may be
granted in any proceeding which may be brought by Cookson to enforce such
restrictive covenant without necessity of proof that any other remedy at law is
inadequate.
SECTION X.3 ENFORCEMENT.
Cookson and Alpine intend that the covenants of Section 10.1 shall be
deemed to be a series of separate covenants, one for each county or province of
each and every state, territory or jurisdiction of each country included within
the Territory and one for each month of the Restrictive Period. If, in any
judicial proceeding, a court shall refuse to enforce any of such covenants, then
such unenforceable covenants shall be deemed eliminated from the provisions
hereof for the purpose of such proceeding to the extent necessary to permit the
remaining separate covenants to be enforced in such proceeding. If, in any
judicial proceeding, a court shall refuse to enforce any one or more of such
separate covenants because the total time thereof is deemed to be excessive or
unreasonable, then it is the intent of the parties hereto that such covenants,
which would otherwise be unenforceable due to such excessive or unreasonable
period of time, be in force for such lesser period of time as shall be deemed
reasonable and not excessive by such court.
ARTICLE XI
SELLER'S NON-DISCLOSURE COVENANT
SECTION XI.1 NON-DISCLOSURE OF INFORMATION BY ALPINE.
It is understood that the business and operations of Premier and its
Subsidiaries to be acquired by Cookson hereunder are of a confidential nature.
Prior to the date hereof there may have been revealed and on or after the date
hereof there may be revealed to Alpine and its Affiliates Confidential
Information (as hereinafter defined) concerning the business and operations of
Premier and its Subsidiaries. Alpine for itself and its Affiliates and employees
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agrees that, following the Closing, they will, for a period of five (5) years
after the Closing Date, not (and, with respect to trade secrets of Cookson,
Premier or Premier's Subsidiaries will never) divulge or appropriate to their
own use, or to the use of any third party, any Confidential Information, except
as may be required (i) in response to any summons or subpoena after reasonable
prior notice to Cookson or (ii) to comply with any applicable law, order,
regulation or ruling after reasonable prior notice to Cookson.
SECTION XI.2 DEFINITION OF CONFIDENTIAL INFORMATION.
As used herein, the term "CONFIDENTIAL INFORMATION" means the following
oral or written information relating to the business and operations of Premier
and its Subsidiaries: know-how, technology, inventions, designs, methodologies,
trade secrets, patents, secret processes and formulae, information and data
relating to the development, research, testing, manufacturing, marketing, sale,
distribution and uses of products, sources of supplies, budgets and strategic
plans, the identity and special needs of customers, plants and other properties,
and any other information which may give Premier and its Subsidiaries an
opportunity to obtain an advantage over its competitors who do not know or use
such information, provided that the term "Confidential Information" shall not
include (i) any such information that, prior to its use or disclosure by Alpine
or its Affiliates or employees, can be shown to have been in the public domain
or generally known or available to customers, suppliers or competitors of the
business through no breach of the provisions of this Article XI or other
non-disclosure covenants; (ii) any such information that, prior to its use or
disclosure by Alpine or its Affiliates or employees, was rightfully in the
receiving party's possession, without violation of the provisions of this
Article XI or other non-disclosure covenants; and (iii) any such information
that, prior to its use or disclosure by Alpine or its Affiliates or employees,
was independently developed by the receiving party without violation of the
provisions of this Article XI or other non-disclosure covenants.
SECTION XI.3 INJUNCTIVE RELIEF.
The parties hereto acknowledge and agree that the breach by Alpine and
its Affiliates and employees of the restrictive covenant contained in this
Article XI would cause irreparable injury to Cookson and that the remedy at law
for any such breach would be inadequate, and Alpine agrees and consents that, in
addition to any other available remedy, temporary and permanent injunctive
relief may be granted in any proceeding which may be brought by Cookson to
enforce such restrictive covenant without necessity of proof that any other
remedy at law is inadequate.
ARTICLE XII
GENERAL PROVISIONS
SECTION XII.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
52
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The representations and warranties made by Alpine and Premier in
Article II shall survive the Closing Date until May 31, 2000, except that those
made in Section 2.10 (Employee Benefit Plans) (to the extent it relates solely
to ERISA and/or the Code) and Section 2.17 (Tax Returns, Audits and Liabilities)
shall survive until the expiration of the statute of limitations on assessment
with respect to the applicable Return (or if no Return is required, the statute
of limitations on assessment with respect to the applicable Tax), as extended
(if applicable), and those made in Sections 2.1(Title to Shares) and 2.3
(Authority Relative to this Agreement and Related Matters) shall survive without
contractual limitation hereunder. The representations and warranties made by
Cookson in Article III of this Agreement shall survive the Closing Date, until
May 31, 2000, except that those made in Section 3.2 (Authority Relative to this
Agreement and Related Matters) shall survive without contractual limitation
hereunder; PROVIDED, HOWEVER, that, with respect to Premier, the representations
and warranties made by Cookson shall survive only through the Closing Date.
SECTION XII.2 NOTICES.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, if delivered personally or mailed by registered or certified
mail (postage prepaid, return receipt requested) or sent by overnight delivery
or courier service or by telecopy to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Alpine or Premier: The Alpine Group, Inc.
1790 Broadway
New York, New York 10019-1412
Telecopier No.: (212) 757-3423
Attention: General Counsel
with a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Telecopier No.: (212) 969-2900
Attention: Ronald R. Papa, Esq.
(b) If to Cookson or Merger Sub: Cookson Group plc
The Adelphi
1-11 John Adam Street
London, WC2N 6HJ, England
Telecopier No.: 44 (171) 747-6600
Attention: Group Secretary
with a copy to: Adler Pollock & Sheehan P.C.
2300 BankBoston Plaza
53
<PAGE>
Providence, Rhode Island 02903
Telecopier No.: (401) 751-0604
Attention: John F. Corrigan, Esq.
Any notice or other communication that has been given or made as of a
date that is not a Business Day shall be deemed to have been given or made on
the next succeeding day that is a Business Day.
SECTION XII.3 CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
"AFFILIATE" of a Person means a Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, the first mentioned Person.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
"PERSON" means an individual, corporation, partnership,
association, trust or any unincorporated organization.
"SUBSIDIARY" of a Person shall mean any corporation or other
legal entity of which that Person (either alone or together with other
Subsidiaries of that Person) owns, directly or indirectly, more than 50% of the
stock or other equity interests that are ordinarily and generally, in the
absence of contingencies or understandings, entitled to vote for the election of
a majority of the members of the board of directors or governing body of such
entity.
SECTION XII.4 HEADINGS.
The headings contained in this Agreement and the disclosure schedules
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or the disclosure schedules. Unless the context
of this Agreement otherwise requires, words of any gender are deemed to include
each other gender and words using the singular or plural number also include the
plural or singular number, respectively.
SECTION XII.5 ENTIRE AGREEMENT.
This Agreement, together with the Exhibits and Schedules attached
hereto, constitutes the entire agreement and supersedes all prior agreements and
undertakings, including, without limitation, the Agreement in Principle, both
written and oral, among the parties, or any of
54
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them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, is not intended to confer upon any other Person any
rights or remedies hereunder.
SECTION XII.6 ASSIGNMENT: PARTIES IN INTEREST.
Neither this Agreement nor any benefits or obligations hereunder shall
be assigned by any party without the consent of the other parties, except that
Cookson may assign this Agreement to any of its Affiliates after the Closing
Date that succeed to the business of Premier. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors,
heirs, personal representatives and permitted assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under this Agreement, except that
any of the indemnified parties shall be entitled after the Closing Date to
enforce the provisions of Article IX.
SECTION XII.7 GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York applicable to contracts executed in and to be
performed entirely in that State, without regard to conflicts of laws, except to
the extent that the Delaware General Corporation Law is applicable and, in the
case of Cookson, the UK Companies Act of 1985 and English Law are applicable.
The parties hereto hereby irrevocably submit to the jurisdiction of any New York
state or federal court sitting in the County of New York, State of New York, in
any action or proceeding arising out of or relating to this Agreement, and the
parties hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined exclusively in such New York state or
federal court. The parties hereto hereby irrevocably waive, to the fullest
extent permitted by law, any objection which they or any of them may now or
hereafter have to the laying of the venue of any such action or proceeding
brought in any such court, and any claim that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION XII.8 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION XII.9 SEVERABILITY.
If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances.
SECTION XII.10 SPECIFIC PERFORMANCE.
55
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Since a breach of the provisions of this Agreement could not adequately
be compensated by money damages, any party shall be entitled, in addition to any
other right or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such
injunction and to the ordering of specific performance.
SECTION XII.11 FEES AND EXPENSES.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, regardless of the termination, if any, of this Agreement pursuant to
Section 8.1; PROVIDED, HOWEVER, that any expenses of Rothschild Inc. and any
fees and expenses of McKinsey & Company, Inc. through February 12, 1999 shall be
shared equally between Alpine and Cookson. Notwithstanding anything herein to
the contrary, Alpine shall be responsible for, and reimburse Premier for, any
and all out-of-pocket expenses Premier may incur or has incurred as a result of
the transactions contemplated hereby, other than incidental expenses incurred by
employees of Premier in the performance of their duties, to the extent such
expenses have not been paid as of the Closing Date.
SECTION XII.12 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto; provided that after the adoption of this Agreement
by stockholders of either Premier or Merger Sub, no amendment shall be made
which under Delaware Law would require the approval (or further approval) of
stockholders without obtaining such approval or further approval.
SECTION XII.13 WAIVER.
At any time prior to the Closing Date, any party hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the parties hereto. The failure of any party hereto to assert any of
its rights hereunder shall not constitute a waiver of such rights.
56
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IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
COOKSON GROUP PLC
By: /s/ Dennis H. Millard
--------------------------------------
Name: Dennis H. Millard
--------------------------------
Title: Group Finance Director
--------------------------------
PRI ACQUISITION, INC.
By: /s/ Dennis H. Millard
--------------------------------------
Name: Dennis H. Millard
--------------------------------
Title: Group Finance Director
--------------------------------
THE ALPINE GROUP, INC.
By: /s/ Bragi F. Schut
--------------------------------------
Name: Bragi F. Schut
--------------------------------
Title: Executive Vice President
--------------------------------
PREMIER REFRACTORIES
INTERNATIONAL INC.
By: /s/ Bragi F. Schut
--------------------------------------
Name: Bragi F. Schut
--------------------------------
Title: Executive Vice President
--------------------------------
<PAGE>
Exhibit 10(bb)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SENIOR SUBORDINATED CREDIT AGREEMENT
among
SUPERIOR/ESSEX CORP.,
as Borrower,
SUPERIOR TELECOM INC.,
as Parent,
THE SUBSIDIARY GUARANTORS NAMED HEREIN,
THE LENDING INSTITUTIONS LISTED HEREIN,
FLEET CORPORATE FINANCE, INC.,
as SYNDICATION AGENT,
and
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT
----------------------------------
Dated as of November 27, 1998
----------------------------------
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- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. AMOUNT AND TERMS OF CREDIT...........................................................................1
1.01. The Commitments............................................................................1
1.02. Amount of Borrowing........................................................................1
1.03. Disbursement of Funds......................................................................1
1.04. Notes......................................................................................2
1.05. Pro Rata Borrowings........................................................................2
1.06. Interest...................................................................................3
1.07. Increased Costs, Illegality, etc...........................................................3
1.08. Compensation...............................................................................5
1.09. Change of Lending Office...................................................................6
1.10. Replacement Lenders........................................................................6
1.11. Fees.......................................................................................7
2. PREPAYMENTS; PAYMENTS; TAXES.........................................................................7
2.01. Voluntary Prepayments......................................................................7
2.02. Mandatory Offers to Prepay and Mandatory Prepayments.......................................8
2.03. Notice and Procedures.....................................................................10
2.04. Method and Place of Payment...............................................................12
2.05. Notation of Payment.......................................................................12
2.06. Net Payments..............................................................................13
3. CONDITIONS PRECEDENT TO THE BORROWING DATE..........................................................15
3.01. Execution of Agreement; Notes.............................................................15
3.02. No Default; Representations and Warranties................................................15
3.03. Officers' Certificate.....................................................................16
3.04. Opinions of Counsel.......................................................................16
3.05. Corporate Proceedings.....................................................................16
3.06. Adverse Change, etc.......................................................................16
3.07. Litigation................................................................................17
3.08. Approvals.................................................................................17
3.09. Consummation of the Transaction...........................................................17
3.10. Essex Credit Agreement....................................................................18
3.11. Payment of Fees...........................................................................18
3.12. Solvency Certificate; Evidence of Insurance...............................................18
3.13. Margin Regulations........................................................................19
3.14. Senior Secured Credit Agreement...........................................................19
</TABLE>
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<TABLE>
<S> <C> <C>
3.15. Representations and Warranties in Senior Secured Credit Agreement.........................20
3.16. Creation of the Borrower..................................................................20
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........................................................20
4.01. Corporate Status..........................................................................20
4.02. Corporate Power and Authority.............................................................21
4.03. No Violation..............................................................................21
4.04. Use of Proceeds...........................................................................21
4.05. Governmental Approvals....................................................................22
4.06. Investment Company Act; Public Utility Holding Company Act................................22
4.07. True and Complete Disclosure..............................................................22
4.08. Financial Condition; Financial Statements.................................................22
4.09. Transaction...............................................................................24
4.10. Compliance with ERISA.....................................................................24
4.11. Subsidiaries..............................................................................26
4.12. Intellectual Property.....................................................................26
4.13. Compliance with Statutes, etc.............................................................26
4.14. Environmental Matters.....................................................................27
4.15. Properties................................................................................28
4.16. Labor Relations...........................................................................28
4.17. Tax Returns and Payments..................................................................28
4.18. Year 2000.....................................................................................29
5. AFFIRMATIVE COVENANTS...............................................................................29
5.01. Information Covenants.....................................................................29
5.02. Books, Records and Inspections............................................................32
5.03. Insurance.................................................................................32
5.04. Payment of Taxes..........................................................................32
5.05. Compliance with Statutes, etc.............................................................32
5.06. Corporate Franchises......................................................................33
5.07. Good Repair...............................................................................33
5.08. Year 2000.................................................................................33
6. NEGATIVE COVENANTS..................................................................................34
6.01. Indebtedness..............................................................................34
6.02. Restricted Payments.......................................................................37
6.03. Asset Sales...............................................................................40
6.04. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries..............41
6.05. Liens.....................................................................................42
</TABLE>
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<TABLE>
<S> <C> <C>
6.06. Senior Subordinated Debt..................................................................42
6.07. Merger, Consolidation and Sale of Assets..................................................42
6.08. Transactions with Affiliates..............................................................44
6.09. Additional Guarantees.....................................................................45
6.10. Designation of Unrestricted Subsidiaries..................................................46
6.11. Conduct of Business.......................................................................47
6.12. Limitation of Activities of Parent........................................................47
7. EVENTS OF DEFAULT...................................................................................47
7.01. Failure to Make Payments When Due.........................................................47
7.02. Representations, etc......................................................................47
7.03. Breach of Covenants.......................................................................47
7.04. Default Under Other Agreements............................................................48
7.05. Judgments.................................................................................48
7.06. Bankruptcy................................................................................48
7.07. Merger....................................................................................49
7.08. Guarantees................................................................................49
7.09. Remedies..................................................................................49
8. SUBORDINATION.......................................................................................51
8.01. Obligations Subordinated to Senior Indebtedness...........................................51
8.02. Suspension of Payment When Senior Indebtedness Is in Default..............................51
8.03. Loans Subordinated to Prior Payment of All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Borrower..............................................52
8.04. Lenders to Be Subrogated to Rights of Holders of Senior Indebtedness......................54
8.05. Obligations of the Borrower Unconditional.................................................55
8.06. Administrative Agent Entitled to Assume Payments Not Prohibited in Absence of
Notice.................................................................................55
8.07. Application by Administrative Agent of Assets Deposited with It...........................56
8.08. No Waiver of Subordination Provisions.....................................................56
8.09. Lenders Authorize Administrative Agent to Effectuate Subordination of Loans...............57
8.10. Right of Administrative Agent and Lenders to Hold Senior Indebtedness.....................57
8.11. This Section 8 Not to Prevent Events of Default...........................................57
8.12. No Fiduciary Duty of Administrative Agent to Holders of Senior Indebtedness...............58
8.13. Effect on Senior Indebtedness.............................................................58
</TABLE>
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<TABLE>
<S> <C> <C>
9. DEFINITIONS AND ACCOUNTING TERMS....................................................................58
9.01. Defined Terms.............................................................................58
10. THE AGENTS..........................................................................................90
10.01. Appointment...............................................................................90
10.02. Delegation of Duties......................................................................90
10.03. Exculpatory Provisions....................................................................91
10.04. Reliance by Agent.........................................................................91
10.05. Notice of Default.........................................................................92
10.06. Nonreliance on Agent and Other Lenders....................................................92
10.07. Indemnification...........................................................................93
10.08. Agent in Its Individual Capacity..........................................................93
10.09. Holders...................................................................................93
10.10. Resignation of the Administrative Agent; Successor Administrative Agent...................93
11. MISCELLANEOUS.......................................................................................94
11.01. Payment of Expenses, etc..................................................................94
11.02. Right of Setoff...........................................................................95
11.03. Notices...................................................................................95
11.04. Benefit of Agreement......................................................................95
11.05. No Waiver; Remedies Cumulative............................................................97
11.06. Payments Pro Rata.........................................................................97
11.07. Calculations; Computations................................................................98
11.08. Governing Law; Submission to Jurisdiction; Venue..........................................98
11.09. Counterparts..............................................................................99
11.10. Effectiveness.............................................................................99
11.11. Headings Descriptive.....................................................................100
11.12. Amendment or Waiver; etc.................................................................100
11.13. Survival.................................................................................101
11.14. Domicile of Loans........................................................................101
11.15. Register.................................................................................101
11.16. Confidentiality..........................................................................102
11.17. Waiver of Jury Trial.....................................................................102
11.18. Margin Stock.............................................................................102
11.19. DNE Systems..............................................................................103
12. GUARANTEE..........................................................................................103
12.01. The Guarantee............................................................................103
12.02. Nature of Liability......................................................................105
12.03. Independent Obligation...................................................................105
</TABLE>
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<TABLE>
<S> <C> <C>
12.04. Authorization............................................................................106
12.05. Reliance.................................................................................107
12.06. Subordination............................................................................107
12.07. Waiver...................................................................................107
12.08. Release of Guarantee.....................................................................108
</TABLE>
<TABLE>
<S> <C>
SCHEDULE I Commitments
SCHEDULE II Lender Addresses
SCHEDULE III Real Property
SCHEDULE IV Subsidiaries
SCHEDULE V Existing Indebtedness
SCHEDULE VI Financial Condition
SCHEDULE VII Environmental Matters
SCHEDULE VIII Existing Investments
SCHEDULE IX Tax Returns and Payments
SCHEDULE X Essex Capital Lease Facility Liens
SCHEDULE XI Credit Party Addresses
EXHIBIT A Form of Senior Subordinated Term Note
EXHIBIT B Form of Section 2.06(b)(ii) Certificate
EXHIBIT C Form of Opinion of Proskauer Rose LLP, Special Counsel to the
Credit Parties
EXHIBIT D Form of Officers' Certificate
EXHIBIT E Form of Solvency Certificate
EXHIBIT F Form of Assignment and Assumption Agreement
EXHIBIT G Form of Trust Preferred Securities Documents
</TABLE>
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<PAGE>
SENIOR SUBORDINATED CREDIT AGREEMENT, dated as of November 27,
1998, among SUPERIOR/ESSEX CORP., a Delaware corporation (the "Borrower"),
SUPERIOR TELECOM INC., a Delaware corporation (the "Parent"), the Subsidiary
Guarantors named herein (the "Guarantors"), the Lenders party hereto from time
to time, FLEET CORPORATE FINANCE, INC., as Syndication Agent, and BANKERS TRUST
COMPANY, as Administrative Agent (all capitalized terms used herein and defined
in Section 9 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Lenders are willing to make available to the Borrower the
Loans provided for herein;
NOW, THEREFORE, IT IS AGREED:
1. AMOUNT AND TERMS OF CREDIT.
1.01. THE COMMITMENTS. Subject to and upon the terms and
conditions set forth herein, each Lender with a Commitment severally agrees to
make a senior subordinated term loan (each a "Loan" and, collectively, the
"Loans") to the Borrower, which Loans (i) only may be incurred by the Borrower
on the Borrowing Date and (ii) shall be made by each such Lender in that
aggregate principal amount which does not exceed the Commitment of such Lender
on the Borrowing Date. Once repaid, Loans incurred hereunder may not be
reborrowed.
1.02. AMOUNT OF BORROWING. The Borrowing of the Loans will
be in a maximum aggregate amount of $200,000,000 made available in a single
Borrowing on the Borrowing Date.
1.03. DISBURSEMENT OF FUNDS. No later than 12:00 Noon (New
York time) on the Borrowing Date, each Lender with a Commitment will make
available its PRO RATA portion (determined in accordance with Section 1.05) of
the Loans. All such amounts will be made available in Dollars and in immediately
available funds at the Payment Office, and the Administrative Agent will
promptly make available to the Borrower at the Payment Office the aggregate of
the amounts so made available by the Lenders. Unless the Administrative Agent
shall have been notified by any Lender prior to the Borrowing Date that such
Lender does not intend to make available to the Administrative Agent such
Lender's portion of the Borrowing to be made on such date, the Administrative
Agent may assume that such Lender has made such amount available to the
Administrative Agent on the Borrowing Date and the Administrative Agent may (but
shall not be obligated to), in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender, the Administrative
Agent shall be entitled to recover such corresponding amount on demand from
<PAGE>
such Lender. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify the Borrower and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent. The Administrative Agent also
shall be entitled to recover on demand from such Lender or the Borrower, as the
case may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Administrative
Agent to the Borrower until the date such corresponding amount is recovered by
the Administrative Agent, at a rate per annum equal to (i) if recovered from
such Lender, at the overnight Federal Funds Rate and (ii) if recovered from the
Borrower, the rate of interest applicable to the respective Borrowing, as
determined pursuant to Section 1.06. Nothing in this Section 1.03 shall be
deemed to relieve any Lender from its obligation to make Loans hereunder or to
prejudice any rights which the Borrower may have against any Lender as a result
of any failure by such Lender to make Loans hereunder.
1.04. NOTES. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans made by each Lender shall be set forth
in the Register maintained by the Administrative Agent pursuant to Section 11.15
and shall, if requested by any Lender, also be evidenced by a promissory note
duly executed and delivered by the Borrower and the Guarantors substantially in
the form of Exhibit A, with blanks appropriately completed in conformity
herewith (each a "Note" and, collectively, the "Notes").
(b) The Note issued to each Lender shall (i) be executed by
the Borrower and the Guarantors, (ii) be payable to such Lender or its
registered assigns and be dated the Borrowing Date, (iii) be in a stated
principal amount equal to the Loans made by such Lender on the Borrowing Date
and be payable in the outstanding principal amount of Loans evidenced thereby,
(iv) mature on the Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.06, (vi) be subject to voluntary prepayment as
provided in Section 2.01, mandatory repayments as provided in Sections 2.02(c)
and (d) and mandatory offers to prepay as provided in Section 2.02(a) and (b),
and (vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(c) Each Lender will note on its internal records the amount
of the Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in such notation shall not affect the Borrower's obligations in
respect of such Loans.
1.05. PRO RATA BORROWINGS. All Borrowings of Loans under
this Agreement shall be incurred from the Lenders PRO RATA on the basis of their
Commitments. It is understood that no Lender shall be responsible for any
default by any other Lender of its obligation to make Loans hereunder and that
each Lender shall be obligated to make the Loans
-2-
<PAGE>
provided to be made by it hereunder, regardless of the failure of any other
Lender to make its Loans hereunder.
1.06. INTEREST. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Loan from the date of Borrowing
thereof until the maturity thereof (whether by acceleration or otherwise) at a
rate per annum equal to the then applicable Interest Rate.
(b) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
rate which is 2% in excess of the rate then borne by such Loans. Interest which
accrues under this Section 1.06(b) shall be payable on demand.
(c) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Loan, quarterly in arrears on each Interest Payment Date
and (ii) in respect of each Loan, on any repayment or prepayment (on the amount
repaid or prepaid), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.
(d) Upon each Interest Determination Date, the Administrative
Agent shall determine the Interest Rate applicable to the Loans and shall
promptly notify the Borrower and the Lenders thereof. Each such determination
shall, absent manifest error, be final and conclusive and binding on all parties
hereto.
1.07. INCREASED COSTS, ILLEGALITY, ETC. (a) In the event
that (x) in the case of clause (i) below, the Administrative Agent or (y) in the
case of clauses (ii) and (iii) below, any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining LIBOR for any Interest Period,
that, by reason of any changes arising after the date of this Agreement
affecting LIBOR, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the
definition of LIBOR; or
(ii) at any time, that such Lender shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any LIBOR Loans (other than any increased cost or reduction
in the amount received or receivable resulting from the imposition of
or a change in the rate of net income taxes or similar charges) because
of (x) any change since the date of this Agreement in any applicable
law, governmental rule, regulation, guideline, order or request
(whether or not having the force of law), or in the interpretation or
administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline, order or request (such as,
for example, but not limited to, a change in official re-
-3-
<PAGE>
serve requirements) and/or (y) other circumstances affecting such
Lender or the position of such Lender in such market; or
(iii) at any time since the date of this Agreement, that the
making or continuance of any LIBOR Loan has become unlawful by
compliance by such Lender in good faith with any law, governmental
rule, regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force
of law but with which such Lender customarily complies even though the
failure to comply therewith would not be unlawful), or has become
impracticable as a result of a contingency occurring after the date of
this Agreement which materially and adversely affects LIBOR;
then, and in any such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (x) within five Business Days after any such
event and (y) within five Business Days of the date on which such event no
longer exists give notice (by telephone confirmed in writing) to the Borrower
and (except in the case of clause (i)) to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders). Thereafter, (x) in the case of clause (i) above,
LIBOR Loans shall no longer be available until such time as the Administrative
Agent notifies the Borrower and the Lenders that the circumstances giving rise
to such notice by the Administrative Agent no longer exist (which notice the
Administrative Agent shall endeavor to give promptly after any express
determination thereof by the Administrative Agent), and the Loans will be
converted from LIBOR Loans to Alternate Base Rate Loans, (y) in the case of
clause (ii) above, the Borrower shall pay to such Lender, upon written demand
therefor (accompanied by the written notice referred to below), such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its sole discretion shall
determine) as shall be required to compensate such Lender for such increased
costs or reductions in amounts received or receivable hereunder (a written
notice as to the additional amounts owed to such Lender, showing the basis for
the calculation thereof, submitted to the Borrower by such Lender shall, absent
manifest error, be final and conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.07(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any LIBOR Loan is affected by the
circumstances described in Section 1.07(a)(ii) or (iii), the Borrower may (and
in the case of a LIBOR Loan affected pursuant to Section 1.07(a)(iii) the
Borrower shall) either (i) if the affected LIBOR Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Administrative
Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Borrower was notified by a Lender pursuant to Section 1.07(a)(ii) or
(iii)), or (ii) if the affected LIBOR Loan is then outstanding, upon at least
two Business Days' notice
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to the Administrative Agent, require the affected Lender to convert each such
LIBOR Loan into an Alternate Base Rate Loan (which conversion, in the case of
the circumstances described in Section 1.07(a)(iii), shall occur no later than
the last day of the Interest Period then applicable to such LIBOR Loan (or such
earlier date as shall be required by applicable law)); PROVIDED that if more
than one Lender is affected at any time, then all affected Lenders must be
treated the same pursuant to this Section 1.07(b).
(c) If any Lender shall have determined that the adoption
or effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, in each case, after the
date of this Agreement, has or would have the effect of reducing the rate of
return on such Lender's or such other corporation's capital or assets as a
consequence of such Lender's Commitments or obligations hereunder to a level
below that which such Lender or such other corporation could have achieved but
for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's or such other corporation's policies with respect to
capital adequacy), then from time to time, upon written demand by such Lender
(with a copy to the Administrative Agent), accompanied by the notice referred to
in the last sentence of this clause (c), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such other
corporation for such reduction. Each Lender, upon determining in good faith that
any additional amounts will be payable pursuant to this Section 1.07(c), will
give prompt written notice thereof to the Borrower, which notice shall set forth
the basis of the calculation of such additional amounts, although the failure to
give any such notice shall not release or diminish the Borrower's obligations to
pay additional amounts pursuant to this Section 1.07(c) upon the subsequent
receipt of such notice.
1.08. COMPENSATION. The Borrower shall compensate each
Lender, promptly upon its written request (which request shall set forth the
basis for requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its LIBOR Loans but excluding loss of
anticipated profit with respect to any LIBOR Loans) which such Lender may
sustain: (i) if any repayment (including any repayment made pursuant to Section
2.01 or 2.02 or as a result of an acceleration of the Loans pursuant to Section
7) or conversion of any LIBOR Loans occurs on a date which is not the last day
of an Interest Period applicable thereto; (ii) if any prepayment of any LIBOR
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iii) as a consequence of (x) any other default by the Borrower to
repay its LIBOR Loans when required by the terms of this Agreement or (y) an
election made pursuant to Section 1.07(b). It is further understood and agreed
that if any
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repayment of LIBOR Loans pursuant to Section 2.01 or any conversion
of LIBOR Loans in either case occurs on a date which is not the last day of an
Interest Period applicable thereto, such repayment or conversion shall be
accompanied by any amounts owing to any Lender pursuant to this Section 1.08.
1.09. CHANGE OF LENDING OFFICE. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section
1.07(a)(ii) or (iii), 1.07(c) or 2.06 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event; PROVIDED that such designation is made on such terms
that, in the sole judgment of such Lender, such Lender and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.09 shall affect or postpone any of the
obligations of the Borrower or the right of any Lender provided in Section 1.07
or 2.06.
1.10. REPLACEMENT LENDERS. (x) Upon the occurrence of any
event giving rise to the operation of Section 1.07(a)(ii) or (iii), Section
1.07(c) or Section 2.06 with respect to any Lender which results in such Lender
charging to the Borrower increased costs in excess of those being generally
charged by the other Lenders or (y) in the case of a refusal by a Lender to
consent to a proposed change, waiver, discharge or termination with respect to
this Agreement which has been approved by the Required Lenders as provided in
Section 11.12, the Borrower shall have the right, if no Default or Event of
Default then exists or, in the case of clause (y) above, would exist after
giving effect to such replacement, to replace such Lender (the "Replaced
Lender") with one or more other Eligible Transferees (collectively, the
"Replacement Lender"), each of whom shall be acceptable to the Administrative
Agent; PROVIDED that (i) at the time of any replacement pursuant to this Section
1.10, the Replacement Lender shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 11.04(b) (and with all fees payable
pursuant to said Section 11.04(b) to be paid by the Replacement Lender) pursuant
to which the Replacement Lender shall acquire the outstanding Loans of the
Replaced Lender and, in connection therewith, shall pay to the Replaced Lender
in respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender and (B) an amount equal to all accrued, but theretofore unpaid, fees
owing to the Replaced Lender, and (ii) all obligations of the Borrower then
owing to the Replaced Lender (other than those specifically described in clause
(i) above in respect of which the assignment purchase price has been, or is
concurrently being, paid, but including all amounts, if any, owing under Section
1.08) shall be paid in full to such Replaced Lender, concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) above,
recordation of the assignment on the Register by the Administrative Agent
pursuant to Section 11.15 and, if so requested by the Replacement Lender, of the
appropriate Note or
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Notes executed by the Borrower, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to constitute a Lender hereunder,
except with respect to indemnification provisions under this Agreement
(including, without limitation, Sections 1.07, 1.08, 2.06, 11.01 and 11.06),
which shall survive as to such Replaced Lender.
1.11. FEES. (a) On the Borrowing Date, the Borrower shall
pay to the Administrative Agent for the account of the Lenders PRO RATA on the
basis of their Percentages, a fee computed at a rate equal to 1.25% of the
Borrowing Amount.
(b) On each of the sixth (6) and the twelfth (12) month
anniversaries of the Borrowing Date, the Borrower shall pay to the
Administrative Agent for the account of the Lenders PRO RATA on the basis of the
principal amount of their Loans then outstanding, a fee computed at a rate equal
to .50% of the aggregate principal amount of the Loans then outstanding on such
anniversary date.
2. PREPAYMENTS; PAYMENTS; TAXES.
2.01. VOLUNTARY PREPAYMENTS. The Borrower shall have the
right to prepay the Loans, without premium or penalty, in whole or in part at
any time and from time to time on the following terms and conditions:
(i) the Borrower shall prepay Loans at 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
prepayment;
(ii) the Borrower shall give the Administrative Agent prior to
2:00 p.m. (New York time) at the Notice Office at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay Loans ("Notice of Voluntary
Prepayment") and the amount of such prepayment, which notice the
Administrative Agent shall promptly transmit to each of the Lenders;
(iii) without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice of any prepayment of Loans,
the Administrative Agent may act without liability upon the basis of
telephonic notice of such prepayment believed by the Administrative
Agent in good faith to be from the chairman of the board, the chief
executive officer, the president, the chief financial officer, the
treasurer or any assistant treasurer of the Borrower, or from any other
authorized officer of the Borrower designated in writing by any of the
foregoing officers of the Borrower to the Administrative Agent as being
authorized to give such notices, prior to receipt of written
confirmation. The Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of such telephonic notice of
such prepayment of Loans absent manifest error;
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(iv) each partial prepayment of Loans pursuant to this Section
2.01 shall be in an aggregate principal amount of at least $1,000,000
and in integral multiples of $100,000 in excess thereof; and
(v) each prepayment pursuant to this Section 2.01 in respect
of any Loans shall be applied PRO RATA among such Loans.
2.02. MANDATORY OFFERS TO PREPAY AND MANDATORY PREPAYMENTS.
(a) PREPAYMENTS FROM ASSET SALE. Upon the consummation of an
Asset Sale, the Borrower shall apply, or cause a Restricted Subsidiary to apply,
the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt
thereof, or such later date if prior to such 365th day the Borrower or a
Restricted Subsidiary shall have entered into a binding agreement to so use such
Net Cash Proceeds within 180 days after the date of such agreement, either (A)
to repay any Senior Indebtedness of the Borrower, (B) to reinvest in assets
(including Capital Stock of a Person that directly or indirectly owns assets) of
a kind used or usable in the business of the Company and its Restricted
Subsidiaries as, or related or incidental to such business, conducted on the
Borrowing Date (hereinafter referred to as "Replacement Assets") or (C) a
combination of repayment and investment permitted by the foregoing clauses (A)
and (B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Borrower or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (A), (B) and (C) of the next preceding sentence, or such later
date (which date shall not be later than the 180th day after the date of the
binding agreement referred to in the immediately preceding sentence) (each, a
"Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds
which have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (A), (B) and (C) of the next preceding sentence (each a
"Net Proceeds Offer Amount") shall be applied by the Borrower or such Restricted
Subsidiary to make an offer to prepay the Loans (the "Net Proceeds Offer") at a
price equal to 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, to the date of prepayment, on a date (the "Net Proceeds
Offer Payment Date") in accordance with the procedures set forth in Sections
2.03 through 2.06. The Borrower may defer the Net Proceeds Offer until there is
an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $7.5
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $7.5
million, shall be applied as required pursuant to this paragraph).
(b) PREPAYMENTS FROM CHANGE OF CONTROL. (i) Within 30 days
following any Change of Control (each a "Change of Control Offer Trigger Date";
together with the Net Proceeds Offer Trigger Date, the "Trigger Date"), the
Borrower will be obligated to offer to each Lender to prepay the Loans (the
"Change of Control Offer Amount"; together with the Net Proceeds Offer Amount,
the "Prepayment Amount") at a price equal to 101% of the
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aggregate principal amount thereof, plus accrued and unpaid interest, if any, to
the date of prepayment (the "Change of Control Offer"; together with the Net
Proceeds Offer, the "Mandatory Prepayment Offer") on a date (the "Change of
Control Offer Payment Date"; together with the Net Proceeds Offer Payment Date,
the "Payment Date") in accordance with the procedures set forth in Sections 2.03
through 2.06.
(ii) Prior to the mailing of the notice to the Administrative
Agent provided for in Section 2.03 below but in any event within 30 days
following any Change of Control, the Borrower hereby covenants to (i) repay in
full all Indebtedness under the Senior Secured Credit Agreement and all other
Senior Indebtedness the terms of which require a repayment upon a Change of
Control and to terminate all commitments under the Senior Secured Credit
Agreement and all such other Senior Indebtedness or to offer to repay in full
all such Indebtedness and to terminate all such commitments and to repay the
Indebtedness (and terminate the commitments) of each lender under the Senior
Secured Credit Agreement and all such other Senior Indebtedness who has accepted
such offer or (ii) obtain the requisite consents under the Senior Secured Credit
Agreement and all such other Senior Indebtedness to permit the payment of the
Loans. The Borrower shall first comply with the covenant in the preceding
sentence before it shall be required to prepay the Loans pursuant to this
Section 2.02(b). The Borrower's failure to comply with the covenant described in
this clause (ii) shall constitute an Event of Default under Section 7.03 and not
Section 7.01.
(c) PREPAYMENTS FROM ISSUANCES OF DEBT. In addition to any
other mandatory repayments pursuant to this Section 2.02, on each date on or
after the Borrowing Date on which the Borrower or any of its Restricted
Subsidiaries or the Parent receives any cash proceeds from either (I) any
incurrence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 6.01 or Section 6.12) by the Borrower or any of its
Restricted Subsidiaries or the Parent or (II) any Receivables Financing
Agreement (to the extent that the amount made available thereunder exceeds
$150.0 million), an amount equal to 100% of the cash proceeds (net of all
underwriting discounts, fees and commissions and other costs and expenses
associated therewith) of the respective incurrence of Indebtedness shall be
applied as a mandatory repayment of principal of outstanding Loans in accordance
with Sections 2.03 through 2.06, except to the extent required to repay
Indebtedness under the Senior Secured Credit Agreement.
(d) PREPAYMENTS FROM ISSUANCES OF EQUITY. In addition to any
other mandatory repayments or commitment reductions pursuant to this Section
2.02, on each date on or after the Borrowing Date on which the Borrower or any
of its Restricted Subsidiaries or the Parent receives any cash proceeds from any
sale or issuance of preferred or common equity of (or cash capital contributions
to) the Borrower or any of its Restricted Subsidiaries or the Parent (other than
proceeds received from (u) sale of Margin Stock prior to consummation of the
Merger, (v) the Transaction, (w) issuances of options to purchase the Parent
Common Stock to management, directors, non-employee consultants and employees of
the Parent and
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its Subsidiaries, (x) issuances of the Parent Common Stock (including as a
result of the exercise of any options with regard thereto) to management,
directors, non-employee consultants, and employees of the Parent and its
Subsidiaries, (y) issuance of Parent Common Stock as consideration for an
acquisition and (z) equity contributions to any Subsidiary of the Borrower made
by the Borrower or any other Subsidiary of the Borrower), an amount equal to 75%
of such cash proceeds (net of all underwriting discounts, fees and commissions
and other costs and expenses associated therewith) of the respective equity
issuance or capital contribution shall be applied as a mandatory repayment of
principal of outstanding Loans in accordance with Sections 2.03 through 2.06;
PROVIDED, HOWEVER, that if, on the date of receipt of such cash proceeds, the
ratio of (x) total Indebtedness of the Borrower and its Restricted Subsidiaries
on a consolidated basis as of the end of the most recently completed fiscal
quarter (without treating the Trust Preferred Securities as Indebtedness) to (y)
Consolidated EBITDA for the four consecutive fiscal quarters of the Borrower
ended on or immediately prior to such date, in each case on a PRO FORMA basis,
is less than 4.00 to 1.00, then only 50% of such cash proceeds of the respective
equity issuance or capital contribution shall be required to be applied as a
mandatory repayment of principal of outstanding Loans.
2.03. NOTICE AND PROCEDURES. (a) With respect to each
Mandatory Prepayment Offer, the Borrower shall mail to the Administrative Agent
at the Notice Office, a notice of prepayment (the "Mandatory Prepayment Offer
Notice"), within 25 days following the Trigger Date, with a copy to each of the
Lenders. Upon receiving a Mandatory Prepayment Offer Notice, Lenders may elect
to have their Loans prepaid in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Lenders properly accept the offer to prepay
the Loans in an amount exceeding the Net Proceeds Offer Amount pursuant to an
Asset Sale, Loans of tendering Lenders will be prepaid on a PRO RATA basis
(based on amounts tendered).
A Mandatory Prepayment Offer shall remain open for a period of
20 Business Days or such longer period as may be required by law.
The notice to the Administrative Agent described in the first
paragraph of this Section 2.03(a) shall contain all instructions and materials
necessary to enable the Borrower to prepay the Loans:
(i) that a Net Proceeds Offer or a Change of Control Offer, as
the case may be, is being made pursuant to Section 2.02 and that all
Loans validly tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be
no earlier than 30 days nor later than 40 days from the date such
notice is mailed (the "Payment Date");
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(iii) that any Loan not tendered will continue to accrue
interest;
(iv) that any Loan accepted for payment pursuant to the
Mandatory Prepayment Offer shall cease to accrue interest after the
Payment Date unless the Borrower shall default in the payment of the
repurchase price of the Loans;
(v) that if a Lender elects to have its Loan prepaid pursuant
to the Mandatory Prepayment Offer, it will be required to surrender
any Note held by it to the Borrower prior to 5:00 p.m. New York time
on the Payment Date;
(vi) that a Lender will be entitled to withdraw its election if
the Borrower receives, not later than 5:00 p.m. New York time on the
Business Day preceding the Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the principal amount of Loans such
Lender delivered for prepayment, and a statement that such Lender is
withdrawing its election to have such Loan prepaid; and
(vii) that if Loans are prepaid only in part, a new Note of the
same type will be issued in principal amount equal to the non-prepaid
portion of the Loans surrendered.
On or before the Payment Date, the Borrower shall (i) accept
for prepayment Loans or portions thereof which are to be prepaid in accordance
with the above, and (ii) deposit at the Payment Office Dollars sufficient to pay
the purchase price of all Loans to be prepaid. The Administrative Agent shall
promptly mail to the Lenders whose Loans are so accepted payment in an amount
equal to the purchase price therefor. Any Net Cash Proceeds remaining after the
Borrower has complied with its obligations under Section 2.02(a) shall be
available to the Borrower for general corporate purposes and the aggregate
unutilized Net Proceeds Offer Amount shall be reset to zero.
(b) With respect to each prepayment of Loans pursuant to
Section 2.02, each prepayment of any Loans made pursuant to a Borrowing shall be
applied PRO RATA among such Loans. In the absence of a designation by the
Borrower as described in the previous sentence, the Administrative Agent shall
make such designation in its sole discretion.
(c) Notwithstanding anything to the contrary contained in this
Agreement or in any other Credit Document, all then outstanding Loans shall be
repaid in full on the Maturity Date.
(d) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if on the date any required prepayment or repayment
hereunder (other than on the Maturity Date) is to be made and as a result
thereof breakage costs would become due and owing under Section 1.08, so long as
no Default or Event of Default shall have occurred and be continuing, the
Borrower, at its option, may, in lieu of making any such pre-
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payment or repayment, place any amounts which would otherwise be required to be
so prepaid or repaid in an interest-bearing cash collateral account established
with the Administrative Agent (on terms and conditions satisfactory to the
Administrative Agent) for the benefit of the Lenders until the expiration of the
Interest Periods applicable to the subject LIBOR Loans, at which time such
amounts shall be applied to such required prepayments or repayments, as the case
may be.
2.04. METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement or under any
Note shall be made to the Administrative Agent for the account of the Lender or
Lenders entitled thereto not later than 2:00 P.M. (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office; funds received by the Administrative Agent after that time shall
be deemed to have been paid by the Borrower on the next succeeding Business Day.
Whenever any payment to be made hereunder or under any Note shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest shall be payable at the applicable rate during such
extension. The Borrower hereby authorizes the Administrative Agent to charge its
account with the Administrative Agent in order to cause timely payment to be
made of all principal, interest and fees due hereunder (subject to sufficient
funds being available in its account for that purpose).
2.05. NOTATION OF PAYMENT. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by granting
participations therein), such Lender will make a notation thereon of all
principal payments previously made thereon and of the date to which interest
thereon has been paid and will notify the Borrower of the name and address of
the transferee of that Note; PROVIDED, HOWEVER, that the failure to make (or any
error in the making of) such a notation or to notify the Borrower of the name
and address of such transferee shall not limit or otherwise affect the
obligation of the Borrower hereunder or under such Notes with respect to the
Loans and payments of principal or interest on any such Note.
2.06. NET PAYMENTS. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense (which payment shall not be deemed a waiver of any claims under this
Agreement). Except as provided in Section 2.06, all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payment
(but excluding, except as provided in the second succeeding sentence, any tax
(including any franchise tax) imposed on or measured by the net income or net
profits of a Lender pursuant to the laws of the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Lender is located or any subdivision thereof
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or therein) and all interest, penalties or similar liabilities with respect
thereto (all such nonexcluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement or under any Note, after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for herein
or in such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Lender, upon the
written request of such Lender, for taxes imposed on or measured by the net
income or net profits of such Lender pursuant to the laws of the jurisdiction in
which the principal office or applicable lending office of such Lender is
located or under the laws of any political subdivision or taxing authority of
any such jurisdiction in which the principal office or applicable lending office
of such Lender is located and for any withholding of taxes as such Lender shall
determine are payable by, or withheld from, such Lender in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence; PROVIDED, HOWEVER, that no such reimbursement shall
be required unless such Lender determines that the amount of such Taxes exceeds
the amount of any credit, allowance or deduction allowable to such Lender as an
offset against any taxes payable on behalf of such Lender and in such event
reimbursement shall not be required in any amount greater than such excess. The
Borrower will furnish to the Administrative Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by the Borrower. The Borrower agrees to
indemnify and hold harmless each Lender and the Administrative Agent, and
reimburse such Lender and the Administrative Agent upon its written request, for
the amount of any Taxes so levied or imposed and paid by such Lender or the
Administrative Agent. A certificate as to the amount of any such required
indemnification payment prepared by such Lender or the Administrative Agent
shall be final, conclusive and binding for all purposes absent manifest error.
(b) Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Administrative Agent on or prior to the Closing Date, or in the
case of a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 1.10 or Section 11.04 (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Lender is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i)
above, (x) a certificate substantially in the form of Exhibit B (any such
certificate, a "Section 2.06(b)(ii) Certificate") and (y) two accurate and
complete
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original signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Lender agrees that from
time to time after the Closing Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver promptly to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
2.06(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Administrative Agent of its inability to deliver any
such Form or Certificate, in which case such Lender shall not be required to
deliver any such Form or Certificate pursuant to this Section 2.06(b).
Notwithstanding anything to the contrary contained in Section 2.06(a), but
subject to Section 11.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Lender which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such Lender
has not provided to the Borrower U.S. Internal Revenue Service Forms that
establish a complete exemption from such deduction or withholding and (y) the
Borrower shall not be obligated pursuant to Section 2.06(a) hereof to gross up
payments to be made to a Lender in respect of income withholding or similar
taxes imposed by the United States if (I) such Lender has not provided to the
Borrower the Internal Revenue Service Forms required to be provided to the
Borrower pursuant to this Section 2.06(b) or (II) in the case of a payment,
other than interest, to a Lender described in clause (ii) above, to the extent
that such Forms do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 2.06 and except as set forth in Section
11.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Lender and the Administrative Agent in the manner set forth in Section 2.06(a)
(without regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the immediately preceding sentence as a result of any changes after the
Closing Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
3. CONDITIONS PRECEDENT TO THE BORROWING DATE.
The obligation of each Lender to make Loans on the Borrowing
Date is subject at the time of the making of such Loans to the satisfaction of
the following conditions:
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3.01. EXECUTION OF AGREEMENT; NOTES. (i) On or prior to the
Borrowing Date, the Borrower shall have delivered to the Administrative Agent
executed copies of this Agreement and (ii) on or prior to the Borrowing Date,
there shall have been delivered to the Administrative Agent for the account of
each of the Lenders that have requested a Note or Notes the appropriate Note
executed by the Borrower and the Guarantors in the amount, maturity and as
otherwise provided herein.
3.02. NO DEFAULT; REPRESENTATIONS AND WARRANTIES. On the
Borrowing Date and also after giving effect to the Loans made on the Borrowing
Date, (i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein and in the other Documents in
effect at such time shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the Borrowing Date, unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date.
3.03. OFFICERS' CERTIFICATE. On the Borrowing Date, the
Administrative Agent shall have received a certificate dated such date signed by
an appropriate officer of each of the Parent, the Borrower and Essex, stating
that all of the applicable conditions set forth in Sections 3.02, 3.06 (deleting
the reference to the Administrative Agent and the Lenders therein), 3.07
(deleting the reference to the Lenders therein), 3.08, 3.09 (deleting the
reference to the Administrative Agent therein), 3.10(a) and (b) (deleting the
reference to the Administrative Agent therein) and 3.13, as such provisions
relate to such Credit Party, exist as of such date.
3.04. OPINIONS OF COUNSEL. On the Borrowing Date, the
Administrative Agent shall have received an opinion, addressed to the
Administrative Agent and each of the Lenders and dated the Borrowing Date, from
Proskauer Rose LLP, counsel to the Borrower, in the form of Exhibit C.
3.05. CORPORATE PROCEEDINGS. (a) On the Borrowing Date, the
Administrative Agent shall have received from each Credit Party a certificate,
dated the Borrowing Date, signed by the chairman, a vice chairman, the president
or any vice-president of such Credit Party, and attested to by the secretary or
any assistant secretary of such Credit Party, in the form of Exhibit D with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws of such Credit Party and the resolutions of such Credit Party
referred to in such certificate and all of the foregoing (including each such
Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to
the Administrative Agent.
(b) On the Borrowing Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by the Credit Documents shall be reasonably satisfactory in form
and substance to the Administrative
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Agent, and the Administrative Agent shall have received all information and
copies of all certificates, documents and papers, including good standing
certificates, bring-down certificates and any other records of corporate
proceedings and governmental approvals, if any, which the Administrative Agent
reasonably may have requested in connection therewith, such documents and
papers, where appropriate, to be certified by proper corporate or governmental
authorities.
3.06. ADVERSE CHANGE, ETC. On the Borrowing Date and after
giving effect to the Loans made on the Borrowing Date and any loans made under
the Senior Secured Credit Agreement on the Borrowing Date, nothing shall have
occurred since June 30, 1998, in the case of Essex, or July 31, 1998, in the
case of the Parent or the Borrower (and neither the Lenders nor the
Administrative Agent shall have become aware of any facts or conditions not
previously known), which has, or could reasonably be expected to have, a
Material Adverse Effect.
3.07. LITIGATION. On the Borrowing Date and after giving
effect to the Loans made on the Borrowing Date and any loans made under the
Senior Secured Credit Agreement on the Borrowing Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Document or the Transaction or (b) which the Lenders
shall have determined could reasonably be expected to have a Material Adverse
Effect.
3.08. APPROVALS. (a) On or prior to the Borrowing Date, all
necessary governmental (domestic and non-U.S.) and third party approvals in
connection with the Transaction, the transactions contemplated by the Credit
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains,
prevents or imposes materially adverse conditions upon the consummation of the
Transaction, the transactions contemplated by the Documents and otherwise
referred to herein or therein. Additionally, there shall not exist any judgment,
order, injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or imposing
materially adverse conditions upon the consummation of the Transaction or the
making of the Loans.
(b) On or prior to the Borrowing Date, all necessary
approvals in connection with the continuation of the Essex Funding Agreement,
the Essex Capital Lease Facility and the Essex Canadian Facility beyond the
Borrowing Date as they are in effect as of the date hereof shall have been
obtained and remain in place and evidence thereof (in form and substance
reasonably satisfactory to the Administrative Agent) shall have been delivered
to the Administrative Agent.
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3.09. CONSUMMATION OF THE TRANSACTION. On the Borrowing
Date, the following shall be true: (i) the Merger Agreement shall be in full
force and effect, without any waiver or amendment of any term or other condition
thereof; (ii) the Tender Offer shall have been consummated in accordance with
applicable law and in accordance with the Acquisition Documents, without any
waiver or amendment of any term or other condition thereof; (iii) the
recommendation of the Board of Directors of the Parent with respect to the
Transaction shall not have been modified in any material respect or withdrawn;
(iv) the Minimum Condition shall have been satisfied and Acquisition Co shall
have accepted for payment up to the Maximum Number of shares under the Tender
Offer and, as a result thereof, the Parent shall be able to effect the Merger
without the affirmative vote of any other Person; (v) no Change of Control shall
have occurred; (vi) all necessary material governmental and third party
approvals in connection with the Transaction shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired (including,
without limitation, those prescribed by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976), in each case, without any action being taken by any
authority which restrains, prevents or imposes materially adverse conditions
upon the consummation of the transactions contemplated by the Loans (or which
may have any such effect); (vii) the Parent, the Borrower, Essex and their
respective Subsidiaries shall have no Indebtedness outstanding except as
permitted by Section 6.01(i)-(xvii), inclusive; (viii) there shall not have
occurred after October 21, 1998 any material adverse change to the syndication
market for credit facilities similar in nature to the Loans and there shall not
have occurred after October 21, 1998 and be continuing a material disruption of
or material adverse change in financial, banking or capital markets that would
have a material adverse effect on the syndication of the Loans, in each case as
determined by the Administrative Agent in its reasonable discretion; and (ix)
not less than a majority of the board of directors of Essex International shall
be comprised of the Parent's designees and all actions (including any amendment
of the bylaws of Essex International) necessary to cause the foregoing shall
have been taken.
3.10. ESSEX CREDIT AGREEMENT. (a) On the Borrowing Date, the
commitments under the Essex Credit Agreement shall have been terminated, all
loans thereunder shall have been repaid in full, together with all accrued and
unpaid interest thereon, all accrued and unpaid fees thereon shall have been
repaid in full and all other amounts then owing pursuant to the Essex Credit
Agreement shall have been repaid in full.
(b) On the Borrowing Date, all security interests and
Liens created under the Essex Credit Agreement and the related security
documents on the capital stock of, and assets (including intercompany notes)
owned by, Essex and its Subsidiaries shall have been terminated and released,
and the Administrative Agent shall have received all such releases as may have
been requested by the Administrative Agent, which releases shall be in the form
and substance reasonably satisfactory to the Administrative Agent.
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(c) The Administrative Agent shall have received evidence
from the lenders under the Essex Credit Agreement in form, scope and substance
reasonably satisfactory to it that the matters set forth in Section 3.10(a) and
(b) have been satisfied at such time.
3.11. PAYMENT OF FEES. On or before the Borrowing Date, all
costs, fees and expenses, and all other compensation contemplated by this
Agreement or any other agreement with the Administrative Agent or any Lender due
to the Administrative Agent or the Lenders (including, without limitation,
reasonable legal fees and expenses), shall have been paid to the extent then
due.
3.12. SOLVENCY CERTIFICATE; EVIDENCE OF INSURANCE. On the
Borrowing Date, the Agent shall have received:
(a) one or more solvency certificates in the form of Exhibit E
from the chief financial officer of the Borrower and of each Guarantor
and dated the Borrowing Date, in each case, addressed to the
Administrative Agent and each Lender, and reciting that, both prior to
and after giving effect to the Transaction and the incurrence of all
financings contemplated herein and in the Senior Secured Credit
Agreement, the Parent, the Borrower, Essex and each of their respective
Subsidiaries (on a stand-alone basis) are not and will not be rendered
insolvent or inadequately capitalized for the respective businesses
they intend to conduct and have not and will not have incurred debts
beyond their ability to pay as they mature and that, upon consummation
of the Transaction, the total assets of the Borrower exceed the amount
necessary to pay all of its liabilities and that neither the Parent,
the Borrower, Essex nor any of their respective Subsidiaries is
entering into the Transaction with the intent to hinder, delay or
defraud any creditor of the Parent, the Borrower, Essex or any of their
respective Subsidiaries; and
(b) evidence of insurance complying with the requirements of
Section 5.03 for the business and properties of the Parent, the
Borrower, Essex and their respective Subsidiaries, in scope, form and
substance reasonably satisfactory to the Administrative Agent.
3.13. MARGIN REGULATIONS. On the Borrowing Date and after
giving effect to the making of the Loans hereunder and Section 11.18, neither
the making of any Loan, nor the use of the proceeds thereof, shall have violated
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
3.14. SENIOR SECURED CREDIT AGREEMENT. (a) On or prior to
the Borrowing Date, the Borrower shall have entered into definitive
documentation with respect to the Senior Secured Credit Agreement with a
syndicate of lenders in an amount that is, together with the proceeds of the
incurrence of Loans, sufficient to consummate the Transaction and
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to pay all related fees and expenses, as contemplated herein. No default or
event of default shall have occurred under the Senior Secured Credit Agreement
and all material conditions to borrowings thereunder shall have been satisfied
without waiver. The loans to be made under the Senior Secured Credit Agreement
on the Borrowing Date shall be made no later than simultaneously with the making
of the Loans hereunder.
(b) On or prior to the Borrowing Date, there shall have been
delivered to the Agent true and correct copies of the Senior Secured Credit
Documents and all of the terms and conditions of the Senior Secured Credit
Documents shall be reasonably satisfactory in form and substance to the Agent
and the Required Lenders.
3.15. REPRESENTATIONS AND WARRANTIES IN SENIOR SECURED
CREDIT AGREEMENT. On the Borrowing Date, all representations and warranties in
the Senior Secured Credit Agreement shall be true and correct in all material
respects.
The acceptance of the benefits of the Loans shall constitute a
representation and warranty by each Credit Party to the Agent and each of the
Lenders that all of the applicable conditions specified above exist as of the
date of such Loans. All of the certificates, legal opinions and other documents
and papers referred to in this Section 3, unless otherwise specified, shall be
delivered to the Agent at its Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders and shall be reasonably satisfactory in form and substance to the Agent
and the Required Lenders.
3.16. CREATION OF THE BORROWER. The Borrower shall have
been duly organized under the laws of the State of Delaware and the Parent shall
have transferred all of its assets to the Borrower (other than the Capital Stock
of DNE Systems and insignificant assets).
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
In order to induce the Lenders to enter into this Agreement
and to make the Loans provided for herein, the Parent and the Borrower makes the
following representations, warranties and agreements with the Lenders (in each
case both before and after giving PRO FORMA effect to the Transaction and (other
than with respect to scheduling consents required or necessary) the receipt of
all required or necessary consents to the extent that they have been received
and are effective on and after the Borrowing Date), all of which shall survive
the execution and delivery of this Agreement and the making of the Loans (with
the occurrence of the Borrowing Date being deemed to constitute a representation
and warranty that the matters specified in this Section 4 are true and correct
in all material respects on and as of the Borrowing Date, unless stated to
relate to a specific earlier date, in which case such
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representations and warranties shall be true and correct in all material
respects as of such earlier date):
4.01. CORPORATE STATUS. The Parent, the Borrower, Essex and
each of their respective Subsidiaries (i) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of its
organization, (ii) has the requisite corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (iii) is duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to be
so qualified and where the failure to be so qualified would have a Material
Adverse Effect.
4.02. CORPORATE POWER AND AUTHORITY. Each Credit Party has
the requisite corporate power and authority to execute, deliver and carry out
the terms and provisions of the Documents to which it is a party and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Documents to which it is a party. Each Credit Party has duly
executed and delivered each Document to which it is a party and each such
Document constitutes the legal, valid and binding obligation of such Credit
Party enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
4.03. NO VIOLATION. Neither the execution, delivery or
performance by any Credit Party of the Documents to which it is a party nor
compliance by any Credit Party with the terms and provisions thereof, nor the
consummation of the transactions contemplated herein or therein, including,
without limitation, the making of any Loan or the use of the proceeds thereof,
(i) after giving effect to Section 11.18, will contravene any applicable
provision of any law, statute, rule or regulation, or any order, writ,
injunction or decree of any court or governmental instrumentality, including,
without limitation, the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System, (ii) will conflict or be inconsistent
with, or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of the Parent, the Borrower, Essex or any of their respective
Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust,
loan agreement, credit agreement or any other material agreement or instrument
to which the Parent, the Borrower, Essex or any of their respective Subsidiaries
is a party or by which it or any of its property or assets are bound or to which
it may be subject or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of the Parent, the Borrower, Essex or any of their
respective Subsidiaries.
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4.04. USE OF PROCEEDS. The proceeds of the Loans (together
with the proceeds of the loans under the Senior Secured Credit Agreement to be
made on the Borrowing Date) shall be utilized as follows: on the Borrowing Date,
all proceeds of the Loans shall be used to (i) consummate the Tender Offer
(including payments in respect of stock options and settlement of certain
employee rights with respect to a change of control of Essex International) and
pay fees and expenses in connection therewith, (ii) refinance the Existing
Superior Credit Agreement and (iii) refinance up to $280.0 million of
Indebtedness of Essex incurred under the Essex Credit Agreement.
4.05. GOVERNMENTAL APPROVALS. All applicable waiting periods
(including, without limitation, those prescribed by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976) shall have expired and except for filings
with applicable governmental authorities contemplated by the Senior Secured
Credit Documents, all of which shall be made in accordance with such Senior
Secured Credit Documents, no order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
non-U.S. or domestic governmental or public body or authority, or any
subdivision thereof, is required to authorize or is required in connection with
(i) the execution, delivery and performance of any Document or (ii) the
legality, validity, binding effect or enforceability of any Document.
4.06. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Parent, the Borrower, Essex nor any of their respective
Subsidiaries is (a) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, or (b) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.07. TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) (which term shall not include, for purposes of this Section
4.07, the Projections or PRO FORMA information delivered in connection herewith)
heretofore or contemporaneously furnished by or on behalf of the Parent, the
Borrower or Essex or any of their respective Subsidiaries in writing to the
Administrative Agent or any Lender (including, without limitation, all
information contained in the Documents) for purposes of or in connection with
the Documents or any transaction contemplated therein is, and all other such
factual information (taken as a whole) hereafter furnished by or on behalf of
any such Person in writing to the Administrative Agent or any Lender will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time.
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4.08. FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and
as of the Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and to all Indebtedness incurred, and to be incurred, and Liens
created, and to be created, by each Credit Party in connection therewith, (x)
the sum of the assets, at a fair valuation (I.E., the amount that may be
realized within a reasonable time, considered to be six months to one year,
either through collection or sale at the regular market value, conceiving the
latter as the amount that would be obtained for such assets within such period
by a capable and diligent businessperson from an interested buyer who is willing
to purchase under ordinary selling conditions), of the Parent, the Borrower,
Essex and their respective Subsidiaries (on a consolidated basis) will exceed
their debts, (y) each Credit Party has not incurred or intended to, nor believes
that it will, incur debts beyond its ability to pay such debts as such debts
mature and (z) each Credit Party will have sufficient capital with which to
conduct its business. For purposes of this Section 4.08, "debt" means any
liability on a claim, and "claim" means (i) right to payment whether or not such
a right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (ii) right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured; PROVIDED that to the extent any such "claim"
is not fixed, the amount thereof shall equal the Parent's, the Borrower's or
Essex's good faith estimate of the maximum amount thereof.
(b) The annual and interim financial statements previously
provided to the Administrative Agent (as to the Parent and Essex International
and as to their Subsidiaries on a combined basis) (including statements of
income and cash flows and changes in shareholders' equity) present fairly in all
material respects the financial condition of the relevant Persons at the dates
of said statements and the results for the periods covered thereby. All such
financial statements have been prepared in accordance with GAAP consistently
applied (other than, in the case of such interim financial statements, the
absence of footnotes and normal year-end adjustments) and the financial
statements as of and for the fiscal years have been audited by and accompanied
by the opinion of Arthur Andersen LLP, independent public accountants of the
Parent, and Ernst & Young, LLP, independent public accountants of Essex
International.
(c) Since June 30, 1998, in the case of Essex, and since
July 31, 1998, in the case of the Parent or the Borrower, nothing has occurred
that has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements
described in Section 4.08(b), the Indebtedness incurred under this Agreement and
the Senior Secured Credit Agreement and liabilities and obligations arising
under the Merger Agreement and except as set forth in Schedule VI hereto, (i)
there were as of the Borrowing Date (and after giving
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effect to any Loans made on such date and any loans made under the Senior
Secured Credit Agreement on such date), no liabilities or obligations (excluding
obligations or liabilities incurred in the ordinary course of business which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect) with respect to the Parent, the Borrower, Essex or any
of their respective Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due), and (ii) neither the
Parent, the Borrower, Essex nor any of their respective Subsidiaries knows of
any basis for the assertion against the Parent, the Borrower, Essex or any of
their respective Subsidiaries of any such liability or obligation which, either
individually or in the aggregate, has, or could be reasonably likely to have, a
Material Adverse Effect.
(e) The PRO FORMA information contained in the Projections is
based on good faith estimates and assumptions made by the management of the
Parent, the Borrower and Essex, and on the Borrowing Date the management
believes that the Projections and such PRO FORMA information were reasonable
and, in the case of the Projections, attainable under the facts and
circumstances known to such management, it being recognized by the Lenders,
however, that projections as to future events are not to be viewed as facts and
that the actual results during the period or periods covered by the Projections
may differ from the projected results and that the differences could be
material. There is no fact known to the Parent, the Borrower, Essex or any of
their respective Subsidiaries which would have a Material Adverse Effect which
has not been disclosed herein or in such other documents, certificates and
statements furnished to the Lenders for use in connection with the transactions
contemplated hereby.
4.09. TRANSACTION. At the time of consummation of the
appropriate portion of the Transaction, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required to make or
consummate such portion of the Transaction shall have been obtained, given,
filed or taken or waived and are or will be in full force and effect (or
effective judicial relief with respect thereto has been obtained) except where
the failure to obtain, give, file or take would not reasonably be expected to
have a Material Adverse Affect. All applicable waiting periods with respect
thereto have or, prior to the time when required, will have expired without, in
all such cases, any action being taken by any competent authority which
restrains, prevents or imposes material adverse conditions upon the Transaction.
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the Transaction or the occurrence
of the making of the Loans or the performance by the Borrower and its
Subsidiaries and the Parent of their obligations under the Documents and all
applicable laws. The Transaction has been consummated in accordance with the
respective Documents and all applicable laws.
4.10. COMPLIANCE WITH ERISA. (a) The Parent, the Borrower,
Essex, their respective Subsidiaries and their respective ERISA Affiliates are
in compliance with all ap-
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plicable provisions of ERISA and the Code and the published regulations and
interpretations thereunder with respect to all employee benefit plans (as
defined in Section 3(3) of ERISA); no Reportable Event has occurred with respect
to a Plan; no Plan is insolvent or in reorganization in excess of $3.0 million;
the aggregate Unfunded Current Liability of all Plans (excluding Plans without
Unfunded Current Liabilities) does not exceed $3,000,000; no Plan has an
accumulated or waived funding deficiency, has permitted decreases in its funding
standard account or has applied for a waiver of the minimum funding standard or
an extension of any amortization period within the meaning of Section 412 of the
Code; all contributions required to be made with respect to a Plan and a
Non-U.S. Pension Plan have been timely made; neither the Parent, the Borrower,
Essex, any Subsidiary of the Parent, the Borrower or Essex nor any ERISA
Affiliate has incurred any liability to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or reasonably
expects to incur any liability (including any indirect, contingent or secondary
liability) under any of the foregoing Sections with respect to any Plan (other
than liabilities of any ERISA Affiliate which could not, by operation of law or
otherwise, become a liability of the Borrower or any of its Subsidiaries); no
proceedings have been instituted to terminate, or to appoint a trustee to
administer, any Plan; no condition exists which presents a material risk to the
Parent, the Borrower, Essex or any Subsidiary of the Parent, the Borrower or
Essex or any ERISA Affiliate of incurring a liability to or on account of a Plan
pursuant to the foregoing provisions of ERISA and the Code; using actuarial
assumptions and computation methods consistent with subpart 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of the Parent, the Borrower, Essex
and their respective Subsidiaries and their respective ERISA Affiliates to all
Multiemployer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the
Borrowing Date, would not, singly or in the aggregate, result in a Material
Adverse Effect; no lien imposed under the Code or ERISA on the assets of the
Parent, the Borrower, Essex or any Subsidiary of the Parent, the Borrower or
Essex or any ERISA Affiliate exists or is reasonably likely to arise on account
of any Plan; and the Parent, the Borrower, Essex and their respective
Subsidiaries do not maintain or contribute to any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) which provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which could reasonably be expected,
singly or in the aggregate, to have a Material Adverse Effect.
(b) Each Non-U.S. Pension Plan has been maintained in
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither the
Parent, the Borrower, Essex nor any of their respective Subsidiaries has
incurred any obligation in connection with the termination of or withdrawal from
any Non-U.S. Pension Plan. The present value of the accrued benefit liabilities
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(whether or not vested) under each Non-U.S. Pension Plan which is funded,
determined as of the end of the most recently ended fiscal year of the Parent,
the Borrower or Essex on the basis of actuarial assumptions, each of which is
reasonable, did not exceed the current value of the assets of such Non-U.S.
Pension Plan, and for each Non-U.S. Pension Plan which is not funded, the
obligations of such Non-U.S. Pension Plan are properly accrued.
(c) Notwithstanding the foregoing, the representations,
warranties and agreements contained in this Section 4.10 are qualified such that
a breach or failure thereof shall not be treated as such unless the
circumstances of such breach or failure have resulted in or are reasonably
expected to result in either (i) a Material Adverse Effect or (ii) the
imposition of a lien on the assets of the Parent, the Borrower, Essex or any of
their respective Subsidiaries.
4.11. SUBSIDIARIES. On and as of the Borrowing Date and
after giving effect to the consummation of the Transaction, (i) the Borrower has
no Subsidiaries other than those Subsidiaries listed on Schedule IV, and (ii)
the Parent does not have any direct equity interest in any Person other than the
Borrower, DNE Systems and Superior Trust I. Schedule IV correctly sets forth, as
of the Borrowing Date and after giving effect to the Transaction, the percentage
ownership (direct and indirect) of the Borrower in each class of capital stock
of each of its Subsidiaries (including Essex and its Subsidiaries) and also
identifies the direct owner thereof. Prior to the Borrowing Date, the Parent
owned no significant assets other than the Capital Stock of Acquisition Co.,
Superior Telecommunications and DNE Systems, and as of the Borrowing Date, the
Parent owns no significant assets other than all of the outstanding Capital
Stock of the Borrower, DNE Systems and Superior Trust I (other than, in the case
of Superior Trust I, the Trust Preferred Securities).
4.12. INTELLECTUAL PROPERTY. The Parent, the Borrower, Essex
and each of their respective Subsidiaries owns or holds a valid license to use
all the material patents, trademarks, permits, service marks, trade names,
technology, know-how and formulas or other rights with respect to the foregoing,
free from restrictions that are materially adverse to the use thereof, that are
used in the operation of the business of the Parent, the Borrower, Essex and
each of their respective Subsidiaries as presently conducted.
4.13. COMPLIANCE WITH STATUTES, ETC. Each of the Parent,
the Borrower, Essex and their respective Subsidiaries is in compliance with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or non-U.S., in respect of the
conduct of its business and the ownership of its property (PROVIDED, HOWEVER,
that this Section 4.13 does not apply to (i) compliance with respect to
Environmental Laws, as to which no representation is made in this Section 4.13,
but which is covered by Section 4.14 hereof, (ii) compliance with respect to
Taxes, as to which no representation is made in this Section 4.13, but which is
covered by Section 4.17 hereof, (iii) compliance with respect to ERISA, as to
which no representation is made in this
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Section 4.13, but which is covered by Section 4.10 hereof, and (iv) compliance
with respect to labor relations matters, as to which no representation is made
in this Section 4.13, but which is covered by Section 4.16), except such
noncompliance as is not likely to, individually or in the aggregate, have a
Material Adverse Effect.
4.14. ENVIRONMENTAL MATTERS. Except as set forth in
Schedule VII or as could not reasonably be expected to have a Material Adverse
Effect: (a) Each of the Parent, the Borrower, Essex and their respective
Subsidiaries, and their respective businesses and Real Property, has complied
with, and on the Borrowing Date is in compliance with, all applicable
Environmental Laws and the requirements of any permits, licenses or other
authorizations issued under such Environmental Laws. There are no pending or
past or, to the best knowledge of the Parent, the Borrower, Essex and their
respective Subsidiaries, threatened Environmental Claims against the Parent, the
Borrower, Essex or any of their respective Subsidiaries or any Real Property
currently or formerly owned or operated by the Parent, the Borrower, Essex or
any of their respective Subsidiaries. There are no facts, circumstances,
conditions or occurrences on any Real Property currently or formerly owned or
operated by the Parent, the Borrower, Essex or any of their respective
Subsidiaries or, to the best knowledge of the Parent, the Borrower, Essex and
their respective Subsidiaries, on any property adjoining or in the vicinity of
any such Real Property that would reasonably be expected (i) to form the basis
of an Environmental Claim against the Parent, the Borrower, Essex or any of
their respective Subsidiaries or any such Real Property or (ii) to cause any
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by the Parent, the
Borrower, Essex or any of their respective Subsidiaries under any applicable
Environmental Law.
(b) Except as set forth in Schedule VII, Hazardous Materials
have not at any time been generated, used, treated or stored on, or transported
to or from, any Real Property currently or formerly owned or operated by the
Parent, the Borrower, Essex or any of their respective Subsidiaries where such
generation, use, treatment or storage has violated or could reasonably be
expected to violate any Environmental Law. Hazardous Materials have not at any
time been Released on or from any Real Property currently or formerly owned or
operated by the Parent, the Borrower, Essex or any of their respective
Subsidiaries. There are not now any underground storage tanks or related piping
located on any Real Property currently owned or operated by the Parent, the
Borrower, Essex or any of their respective Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section
4.14, the representations and warranties made in this Section 4.14 shall only be
untrue if either the individual or aggregate effect of all conditions, failures,
noncompliances, Environmental Claims, Releases and presence of underground
storage tanks or related piping, in each case of the types described above,
could reasonably be expected to have a Material Adverse Effect.
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4.15. PROPERTIES. All Real Property owned by the Parent,
the Borrower, Essex or any of their respective Subsidiaries and all material
Leaseholds of the Parent, the Borrower, Essex or any of their respective
Subsidiaries, in each case as of the Borrowing Date and after giving effect to
the Transaction, and the nature of the interest therein, is correctly set forth
in Schedule III. Each of the Parent, the Borrower, Essex and their respective
Subsidiaries has good and marketable title to, or a validly subsisting leasehold
interest in, all material properties owned or leased by it, including all Real
Property reflected in Schedule III or in the financial statements referred to in
Section 4.08(b), free and clear of all Liens, other than Liens which are
permitted by Section 6.05.
4.16. LABOR RELATIONS. Neither the Parent, the Borrower,
Essex nor any of their respective Subsidiaries is engaged in any unfair labor
practice that could reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against the Parent, the
Borrower, Essex or any of their respective Subsidiaries or threatened against
any of them before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Parent, the Borrower, Essex or any of their
respective Subsidiaries or, to the best knowledge of the Parent, the Borrower,
Essex or any of their respective Subsidiaries, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against the Parent,
the Borrower, Essex or any of their respective Subsidiaries or threatened
against the Parent, the Borrower, Essex or any of their respective Subsidiaries
and (iii) no union representation question existing with respect to the
employees of the Parent, the Borrower, Essex or any of their respective
Subsidiaries and no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
4.17. TAX RETURNS AND PAYMENTS. All Federal, material state
and other material returns, statements, forms and reports for taxes (the
"Returns") required to be filed by or with respect to the income, properties or
operations of the Parent, the Borrower, Essex and/or any of their respective
Subsidiaries have been timely filed with the appropriate taxing authority. The
Returns accurately reflect all liability for taxes of the Parent, the Borrower,
Essex and their respective Subsidiaries for the periods covered thereby. The
Parent, the Borrower, Essex and each of their respective Subsidiaries have paid
all taxes payable by them other than immaterial taxes and other taxes which are
not yet due and payable, and other than taxes contested in good faith and for
which adequate reserves have been established in accordance with GAAP. Except as
disclosed in the financial statements referred to in Section 4.08(b) or Schedule
IX, (a) there is no material action, suit, proceeding, investigation, audit or
claim now pending or threatened by any authority regarding any taxes relating to
the Parent, the Borrower, Essex or any of their respective Subsidiaries and (b)
neither the Parent, the Borrower, Essex nor any of their respective Subsidiaries
(nor any other person on their behalf or as part of a consolidated group) has
entered into an agree-
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ment or waiver or been requested to enter into an agreement or waiver extending
any statute of limitations relating to the payment or collection of taxes of the
Parent, the Borrower, Essex or any of their respective Subsidiaries, or is aware
of any circumstances that would cause the taxable years or other taxable periods
of the Parent, the Borrower, Essex or any of their respective Subsidiaries not
to be subject to the normally applicable statute of limitations. Neither the
Parent, the Borrower, Essex nor any of their respective Subsidiaries (nor any
other person on their behalf or as part of a consolidated group) has provided,
with respect to themselves or property held by them, any consent under Section
341 of the Code. Neither the Parent, the Borrower, Essex nor any of their
respective Subsidiaries has incurred, or will incur, any material tax liability
in connection with the Transaction and the other transactions contemplated
hereby.
4.18. YEAR 2000. All Information Systems and Equipment are
either Year 2000 Compliant, or any reprogramming, remediation or any other
corrective action, including the internal testing of all such Information
Systems and Equipment, will be completed by September 30, 1999. Further, to the
extent that such reprogramming/remediation and testing action is required, the
cost thereof, as well as the cost of the reasonably foreseeable consequences of
failure to become Year 2000 Compliant, to the Parent, the Borrower, Essex and
their respective Subsidiaries (including, without limitation, reprogramming
errors and the failure of other systems or equipment) will not result in a
Default or a Material Adverse Effect.
5. AFFIRMATIVE COVENANTS.
The Borrower and the Parent hereby covenant and agree that on
and after the Closing Date and until the Loans, Notes, together with interest,
fees and all other Obligations incurred hereunder and thereunder are paid in
full (other than indemnity and similar obligations that are not then due and
payable):
5.01. INFORMATION COVENANTS. The Borrower and the Parent
will furnish to each Lender:
(a) MONTHLY REPORTS. Within 30 days after the end of each
fiscal month of the Parent commencing with the fiscal month in which the
Borrowing Date occurs (other than the end of a fiscal quarter or fiscal year),
the consolidated and consolidating balance sheet of the Parent and its
Subsidiaries as at the end of such fiscal month and the related consolidated and
consolidating statements of income and statements of cash flows for such fiscal
month and for the elapsed portion of the fiscal year ended with the last day of
such fiscal month, in each case setting forth comparative figures for the
corresponding periods in the prior fiscal year (sales to be broken down by the
sales of the original equipment manufacturer, communications and electrical
business segments) and comparable budgeted figures for the current fiscal month
and year-to-date results, all of which shall be certified by
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the chief financial officer or other Authorized Officer of the Parent, subject
to normal year-end audit adjustments and the absence of footnotes.
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after
the close of each of the first three quarterly accounting periods in each fiscal
year of the Parent commencing with the fiscal quarter in which the Borrowing
Date occurs, the consolidated and consolidating balance sheet of the Parent and
its Subsidiaries as at the end of such quarterly accounting period and the
related consolidated and consolidating statements of income, statements of
changes in stockholders equity and statements of cash flows for such quarterly
accounting period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly accounting period, in each case setting forth
comparative figures for the corresponding period in the prior fiscal year (sales
to be broken down by the sales of the original equipment manufacturer,
communications and electrical business segments), and comparative budgeted
figures for the current fiscal quarter and year-to-date results, all of which
shall be in reasonable detail and certified by the chief financial officer or
other Authorized Officer of the Parent that they fairly present in all material
respects the financial condition of the Parent and its Subsidiaries as of the
dates indicated and the results of their operations and changes in their cash
flows for the periods indicated, subject to normal year-end audit adjustments
and the absence of footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the
close of each fiscal year (or if the Parent changes its fiscal year end, the
"stub" period resulting therefrom) of the Parent commencing with the fiscal year
in which the Borrowing Date occurs, the consolidated and consolidating balance
sheet of the Parent and its Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating statements of income, statements of
changes in stockholders equity and statements of cash flows (sales to be broken
down by the sales of the original equipment manufacturer, communications and
electrical business segments) for such fiscal year and setting forth comparative
consolidated figures for the preceding fiscal year and comparable budgeted
figures for the current fiscal year and (except for such comparable budgeted
figures and the sales breakdown referred to above) certified (in the case of
consolidated information) by Arthur Andersen LLP or such other independent
certified public accountants of recognized national standing as shall be
reasonably acceptable to the Administrative Agent, in each case to the effect
that such statements fairly present in all material respects the financial
condition of the Parent and its Subsidiaries as of the dates indicated and the
results of their operations and cash flows, together with a certificate of such
accounting firm stating that in the course of its regular audit of the business
of the Parent and its Subsidiaries, which audit was conducted in accordance with
generally accepted auditing standards, no Default or Event of Default which has
occurred and is continuing has come to their attention insofar as such Default
or Event of Default relates to financial and accounting matters or, if such a
Default or an Event of Default has come to their attention a statement as to the
nature thereof.
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(d) BUDGETS, ETC. No more than 60 days after the commencement
of each fiscal year of the Parent, budgets of and for the Parent and its
Subsidiaries in reasonable detail for each of the four fiscal quarters of such
fiscal year and an annual budget for the immediately succeeding fiscal year, in
each case as customarily prepared by management for its internal use setting
forth, with appropriate discussion, the principal assumptions upon which such
budgets are based. Together with each delivery of financial statements pursuant
to Section 5.01(b) and (c), a comparison of the current year to date financial
results (other than in respect of the balance sheets included therein) against
the budgets required to be submitted pursuant to this clause (d) shall be
presented.
(e) OFFICERS' CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 5.01(b) and (c), a certificate of
the chief financial officer or other Authorized Officer of the Parent and the
Borrower to the effect that no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate shall (x) set forth the calculations required to
establish whether the Parent and the Borrower and its Subsidiaries were in
compliance with the provisions of Sections 2.02, 6.01, 6.02 and 6.03, as at the
end of such fiscal quarter or fiscal year, as the case may be.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any
event within five Business Days (or 10 Business Days in the case of clause (y)
below) after any executive or senior officer of the Parent or the Borrower
obtains actual knowledge thereof, notice of (x) the occurrence of any event
which constitutes a Default or an Event of Default, which notice shall specify
the nature thereof, the period of existence thereof and what action the Parent
or the Borrower proposes to take with respect thereto and (y) the commencement
of, or threat of, any litigation or governmental proceeding pending against the
Parent or the Borrower or any of their respective Subsidiaries which is
reasonably likely to have a Material Adverse Effect, or a material adverse
effect on the ability of any Credit Party to perform its respective obligations
hereunder or under any other Credit Document.
(g) AUDITORS' REPORTS. Promptly upon receipt thereof, a
copy of each report or "management letter" submitted to the Parent or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Parent or any of its
Subsidiaries.
(h) OTHER INFORMATION. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC by the
Parent or any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as the Parent or any of its Subsidiaries shall
send generally to analysts or the holders of their capital stock in their
capacity as such holders (to the extent not theretofore delivered to the Lenders
pursuant to this Agreement) and, with reasonable promptness, such other
informa-
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tion or documents (financial or otherwise) as the Administrative Agent on its
own behalf or on behalf of the Required Lenders may reasonably request from time
to time.
5.02. BOOKS, RECORDS AND INSPECTIONS. The Parent will, and
will cause each of its Subsidiaries to, permit, upon notice to the chief
financial officer or other Authorized Officer of the Parent, officers and
designated representatives of the Administrative Agent or the Required Lenders
to visit and inspect any of the properties or assets of the Parent and any of
its Subsidiaries in whosesoever possession, and to examine the books of account
of the Parent and of any of its Subsidiaries and discuss the affairs, finances
and accounts of the Parent and of any of its Subsidiaries with, and be advised
as to the same by, their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the
Administrative Agent or the Required Lenders may desire.
5.03. INSURANCE. The Parent will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance with
reputable and solvent insurance carriers in such amount, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice.
5.04. PAYMENT OF TAXES. The Parent will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted under Section 6.05 or charge upon any properties of the Parent or any
of its Subsidiaries; PROVIDED that neither the Parent nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
5.05. COMPLIANCE WITH STATUTES, ETC. The Parent will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or non-U.S., in respect of the conduct of its
business and the ownership of its property except for such noncompliance as
would not, singly or in the aggregate, have a Material Adverse Effect or a
material adverse effect on the ability of any Credit Party to perform its
obligations under any Credit Document to which it is a party.
5.06. CORPORATE FRANCHISES. The Parent will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and its rights,
franchises, licenses and patents, except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; PROVIDED,
HOWEVER, that the Parent and the Borrower shall not be required to pre-
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serve, with respect to themselves, any right or franchise, and with respect to
any of their respective Subsidiaries, any such existence, right or franchise, if
the Board of Directors of the Parent, the Borrower or such Subsidiary, as the
case may be, shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Parent and its Subsidiaries
taken as a whole or the Borrower and its Subsidiaries taken as a whole, as
applicable. Nothing in this Section 5.06 shall prevent (a) sales of assets and
other transactions by the Borrower or any of its Subsidiaries in accordance with
Section 6.03 or (b) the withdrawal by the Parent, the Borrower or any of their
respective Subsidiaries of its qualification as a foreign corporation in any
jurisdiction where such withdrawal could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.07. GOOD REPAIR. The Parent will, and will cause each of
its Subsidiaries to, ensure that its material properties and equipment used in
its business are kept in good repair, working order and condition, normal wear
and tear and damage by casualty excepted, and that from time to time there are
made to such properties and equipment all needful and proper repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto, to
the extent and in the manner useful or customary for companies in similar
businesses.
5.08. YEAR 2000. The Parent and the Borrower will ensure
that each of their Information Systems and Equipment are at all times after
September 30, 1999 Year 2000 Compliant, except insofar as the failure to do so
will not result in a Material Adverse Effect, and shall notify the
Administrative Agent and any Lender promptly upon detecting any material failure
of the Information Systems and Equipment to be Year 2000 Compliant. In addition,
the Parent and the Borrower shall provide the Administrative Agent and any
Lender with such information about its year 2000 computer readiness (including,
without limitation, information as to contingency plans, budgets and testing
results) as the Administrative Agent or such Lender shall reasonably request.
6. NEGATIVE COVENANTS.
The Borrower hereby covenants and agrees that until the
satisfaction in full of the Loans and the Notes and all other Obligations (other
than indemnity and similar obligations that are not then due and payable) due
under this Agreement it will fully and timely perform all covenants in this
Section 6:
6.01 INDEBTEDNESS. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, incur any
Indebtedness, except for the following ("Permitted Indebtedness"):
(i) Indebtedness under the Loans and the Guarantees
pursuant to this Agreement, and Permitted Refinancings thereof;
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(ii) Indebtedness incurred pursuant to the Senior Secured
Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed $1,150 million, (A) less the amount of all
mandatory principal payments actually made in respect of the term loan
facilities under the Senior Secured Credit Agreement (excluding any
such repayment to the extent refinanced and replaced at the time of
payment) and (B) reduced by any required permanent repayments actually
made (which are accompanied by a corresponding permanent commitment
reduction in the case of the revolving credit facility under the Senior
Secured Credit Agreement) in respect of the Senior Secured Credit
Agreement (excluding any such repayments and commitment reductions to
the extent refinanced and replaced at the time of payment) in each case
pursuant to this clause (B) actually effected in satisfaction of the
requirement to make a Net Proceeds Offer pursuant to Section 2.02(a);
(iii) Indebtedness (together with other obligations) of Essex
Funding or any other Receivables Subsidiary incurred pursuant to the
Receivables Financing Agreement; PROVIDED that the funded amount,
together with any other Indebtedness thereunder, does not at any time
exceed $225.0 million;
(iv) Indebtedness of Essex Canada under the Essex Canadian
Facility, and any refinancings thereof; PROVIDED that the then
outstanding principal amount thereof is not increased and the terms and
conditions of such refinancings thereof are no more adverse in any
material respect to the Borrower or the Lenders than with respect to
the Indebtedness being so refinanced;
(v) Indebtedness incurred pursuant to the Essex Capital Lease
Facility, PROVIDED that the principal amount thereof at any time does
not exceed $18.0 million, and any refinancings thereof; PROVIDED that
the then outstanding principal amount thereof is not increased and the
terms and conditions of such refinancings thereof are no more adverse
in any material respect to the Borrower or the Lenders than with
respect to the Indebtedness being so refinanced;
(vi) letters of credit existing as of the date hereof as set
forth on Schedule V, and any extensions or refinancings thereof;
PROVIDED that the then outstanding face amounts thereof are not
increased and the terms and conditions of such refinancings thereof are
no more adverse in any material respect to the Borrower or the Lenders
than with respect to the Indebtedness being so refinanced;
(vii) (x) Existing Indebtedness outstanding on the Borrowing
Date and listed on Schedule V, and any Permitted Refinancings thereof,
and (y) Permitted Refinancings of Indebtedness permitted to be incurred
pursuant to clause (xvii) of this Section 6.01;
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(viii) Indebtedness incurred pursuant to (x) Interest Rate
Protection Agreements entered into to protect the Borrower against
fluctuations in interest rates in respect of any Indebtedness permitted
to be incurred under this Agreement and not for speculative purposes,
(y) Other Hedging Agreements with respect to copper and other raw
materials to be used in the business of the Borrower and its Restricted
Subsidiaries; PROVIDED that such purchases are entered into in the
ordinary course of business and for bona fide business (and not
speculative) purposes, and (z) Other Hedging Agreements with respect to
currencies in which the Borrower and its Restricted Subsidiaries
transact business; PROVIDED that such agreements are designed to
protect against fluctuations in currency values and are entered into
the ordinary course of business and for bona fide business (and not
speculative) purposes;
(ix) Indebtedness represented by (a) Capitalized Lease
Obligations and Purchase Money Indebtedness; PROVIDED that the sum of
(x) the aggregate Capitalized Lease Obligations outstanding at any time
plus (y) the aggregate principal amount of such Purchase Money
Indebtedness outstanding at such time shall not exceed $20.0 million,
and (b) Capitalized Lease Obligations referred to on Schedule V;
(x) Indebtedness of a Restricted Subsidiary that is a
Guarantor to the Borrower or to a Restricted Subsidiary that is a
Guarantor for so long as such Indebtedness is held by the Borrower, a
Restricted Subsidiary that is a Guarantor or the lenders or collateral
agent under the Senior Secured Credit Agreement, in each case subject
to no Lien held by a Person other than the Borrower, a Restricted
Subsidiary that is a Guarantor or the lenders or collateral agent under
the Senior Secured Credit Agreement; PROVIDED that if as of any date
any Person other than the Borrower, a Restricted Subsidiary that is a
Guarantor or the lenders or collateral agent under the Senior Secured
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer
of such Indebtedness pursuant to this clause (x);
(xi) Indebtedness of the Borrower to a Restricted Subsidiary
that is a Guarantor for so long as such Indebtedness is held by a
Restricted Subsidiary that is a Guarantor or the lenders or collateral
agent under the Senior Secured Credit Agreement, in each case subject
to no Lien other than in favor of the lenders or collateral agent under
the Senior Secured Credit Agreement; PROVIDED that if as of any date
any Person other than a Restricted Subsidiary that is a Guarantor or
the lenders or collateral agent under the Senior Secured Credit
Agreement owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Indebtedness permitted by
this clause (xi);
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(xii) Indebtedness of Foreign Subsidiaries to the Borrower or
any of its Domestic Subsidiaries as a result of any Investment
permitted to be made pursuant to Section 6.02(b);
(xiii) Indebtedness consisting of guarantees (x) by the Borrower
of Indebtedness, leases and other contractual obligations permitted to
be incurred by Restricted Subsidiaries of the Borrower that are
Guarantors and (y) by Foreign Subsidiaries of Indebtedness, leases and
other contractual obligations permitted to be incurred by the Borrower
and its Restricted Subsidiaries;
(xiv) Indebtedness of the Mexican Subsidiaries as contemplated
by and in accordance with the terms of Section 6.02(b)(8) to fund the
development of certain manufacturing facilities in Mexico;
(xv) Indebtedness consisting of a guarantee by the Borrower or
any Guarantor of Indebtedness of the Israeli Subsidiaries to purchase
the Cvalim Assets; PROVIDED that (x) the portion of the Indebtedness
guaranteed by the Borrower or any Guarantor shall not exceed $15.0
million and (y) such guarantee is otherwise permitted to be made
pursuant to Section 6.02(b)(14);
(xvi) additional Indebtedness of the Borrower and its Restricted
Subsidiaries not otherwise permitted hereunder not exceeding $30.0
million in aggregate principal amount at any time outstanding;
PROVIDED, HOWEVER, that no more than $10.0 million of such amount may
be secured Indebtedness unless it is incurred under the Senior Secured
Credit Agreement; and
(xvii) so long as no Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any
such Indebtedness, the Borrower and any Restricted Subsidiary that is a
Guarantor may incur Indebtedness (including, without limitation,
Acquired Indebtedness) after the end of the first full fiscal quarter
ending after the Borrowing Date if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Borrower is greater
than 2.0 to 1.0.
6.02. RESTRICTED PAYMENTS. (a) The Borrower will not, and
will not cause or permit any Restricted Subsidiary to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock of the Borrower) on or in
respect of shares of the Borrower's Qualified Capital Stock to holders of such
Capital Stock, (b) redeem any Capital Stock of the Borrower or any warrants,
rights or options to purchase or acquire shares of any class of such Capital
Stock or (c) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (a), (b) and (c) being referred to as a
"Restricted Payment"), if at
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the time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default shall have occurred and be continuing or (ii) the Borrower is not
able to incur at least $1.00 of additional Indebtedness pursuant to paragraph
(xvii) of Section 6.01 or (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment but excluding Restricted Payments
pursuant to clause (2), (5), (6), (7), (8), (9), (10), (11), (12) or (13) of the
next paragraph) made subsequent to the Borrowing Date shall exceed the sum (the
"Basket") of (without duplication): (w) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Borrower earned subsequent to the end of the first fiscal
quarter ended after the Borrowing Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date") (treating such period as a
single accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Borrower from any Person (other than a Subsidiary of the
Borrower) from the issuance and sale subsequent to the Borrowing Date and on or
prior to the Reference Date of Qualified Capital Stock of the Borrower; plus (y)
without duplication of any amounts included in clause (iii)(x) above, 100% of
the aggregate net cash proceeds of any equity contribution (other than from a
Subsidiary of the Borrower) received by the Borrower from a holder of the
Borrower's Capital Stock; plus (z) without duplication of any amounts included
in the calculation of Consolidated Net Income, the sum of (1) to the extent any
Investment (other than a Permitted Investment) that was made after the Borrowing
Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of
(A) the cash received with respect to such sale, liquidation or repayment of
such Investment (less the cost of any such sale, liquidation or repayment, if
any) and (B) the initial amount of such Investment included as a Restricted
Payment and (2) upon redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (other than a Subsidiary that is an Unrestricted Subsidiary on the
Borrowing Date), the lesser of (A) the fair market value of the net assets of
such Subsidiary upon its redesignation as a Restricted Subsidiary and (B) the
Investment made in such Subsidiary that is treated as a Restricted Payment.
(b) Notwithstanding the foregoing, the provisions set forth in
the immediately preceding paragraph will not prohibit:
(1) the payment of any dividend within 60 days after the
date of declaration of such dividend if the dividend would have been
permitted on the date of declaration;
(2) the acquisition of any shares of Capital Stock of the
Borrower, either (i) solely in exchange for shares of Qualified Capital
Stock of the Borrower or (ii) through the application of net proceeds
of a substantially concurrent sale for cash (other than to a Subsidiary
of the Borrower) of shares of Qualified Capital Stock of the Borrower;
PROVIDED, HOWEVER, that no transaction pursuant to this clause (2)
shall increase the Basket;
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(3) the repurchase of shares of Superior Preferred Stock,
PROVIDED that the only consideration to be paid in connection therewith
shall be shares of (x) Parent Common Stock and/or (y) preferred stock
of the Parent having terms identical, in all material respects, to the
Superior Preferred Stock (including as to dividend rate and liquidation
preferences) except that the issuer thereof shall be the Parent;
(4) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, dividends paid by
the Borrower to the Parent so long as the proceeds thereof are used at
the time of such dividend payment by the Parent to pay a dividend on or
repurchase Parent Common Stock; PROVIDED, HOWEVER, that the Borrower is
permitted to pay such dividend to the Parent under the Senior Secured
Credit Agreement (as in effect on the Borrowing Date);
(5) Investments in Foreign Subsidiaries by other Foreign
Subsidiaries (other than the Israeli Subsidiaries);
(6) Investments by the Borrower or any Restricted Subsidiary
that is a Guarantor constituting an intercompany loan by the Borrower
or such Restricted Subsidiary that is a Guarantor to the Israeli
Subsidiaries to purchase the Cvalim Assets in principal amount
outstanding not to exceed $90.0 million at any time; PROVIDED that (i)
such intercompany loan is secured, on terms acceptable to the
Administrative Agent, with substantially all of the assets of the
Israeli Subsidiaries (subject, in certain cases, to Liens on assets
pledged or otherwise provided as collateral to secure governmental
grants and other local obligations), including the Cvalim Assets and
(ii) such $90.0 million amount shall be reduced to the extent that the
Borrower or any of the Guarantors shall have guaranteed Indebtedness of
the Israeli Subsidiaries as permitted by Section 6.01(xv);
(7) Investments by the Borrower or any Restricted Subsidiary
that is a Guarantor constituting vendor financing provided to support
the local operations of the Israeli Subsidiaries in amount not to
exceed $60.0 million outstanding at any time;
(8) Investments in the Mexican Subsidiaries to fund their
development of certain manufacturing facilities in Mexico in an
aggregate amount not to exceed $80.0 million; PROVIDED that until
January 31, 2001, the amount of such Investments shall not exceed $40.0
million in the aggregate; and PROVIDED, FURTHER, that such amount will
either be funded (A) through Indebtedness incurred by the Mexican
Subsidiaries or (B) through intercompany loans made by the Borrower, on
terms satisfactory to the Administrative Agent, PROVIDED that (i) such
intercompany loans shall be secured, on terms reasonably acceptable to
the Administrative Agent, by all of the assets of the Mexican
Subsidiaries, including those contemplated to be built or
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constructed, and (ii) the Mexican Subsidiaries shall become Guarantors
(it being understood that the Guarantee of the Mexican Subsidiaries
shall be subject to release pursuant to Section 12.08) or (C) through
the investment of up to $16.0 million of equity or other similar
contributions or (D) through a combination of (A), (B) and (C);
(9) Investments in Cables of Zion constituting the
outstanding equity interests of Cables of Zion that are not held by the
Borrower or any Subsidiary on the Borrowing Date; PROVIDED that the
aggregate consideration therefor does not exceed $25.0 million;
(10) so long as no Default or Event of Default shall have
occurred or be continuing or would result therefrom, dividends paid by
the Borrower to the Parent not earlier than the second Business Day
prior to the due date of any scheduled interest payment on the
Debentures so long as the proceeds thereof are actually used at the
time of such dividend payment by the Parent to pay, on the scheduled
quarterly interest payment date, interest accrued on the Debentures;
(11) dividends paid by the Borrower to the Parent (x) so long
as the proceeds thereof are used at the time of such dividend payment
by the Parent to pay expenses for administrative, legal and accounting
services provided by third parties that are reasonable and customary
and incurred in the ordinary course of business by a publicly traded
company for such professional services or to pay franchise and similar
costs and (y) in an amount not to exceed the "additional amount" for
any four consecutive fiscal quarters provided that such amount is used
at the time of such dividend payment to pay actual expenses of the
Parent (including employment expenses) and the "additional amount" is
otherwise treated as an operating expense of the Borrower for purposes
of determining compliance with the financial covenants contained
herein; "additional amount" for any such period shall mean an amount
not to exceed the sum of (i) $2.5 million and (ii) that portion of the
fee permitted to be paid by Section 6.08(b)(vi) in such period that is
not actually paid;
(12) dividends paid by the Borrower to the Parent so long as
the proceeds thereof are used at the time of such dividend payment by
the Parent to make the payments permitted to be made by the Borrower
pursuant to and in accordance with Sections 6.08(b)(vi), (vii) and
(viii);
(13) the performance by the Borrower and the Restricted
Subsidiaries of their obligations under the Essex Funding Agreement or
similar obligations under a Receivables Financing Agreement; and
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(14) so long as no Default shall have occurred or be
continuing or would result therefrom, the Borrower and its Restricted
Subsidiaries that are Guarantors may make new or additional cash
Investments (including, without limitation, the Investments
contemplated by Section 6.01(xv)) in an amount not to exceed $25.0
million outstanding at any one time (giving effect to any repayments in
cash, but without giving effect to any distributions or profits
thereon, write-downs or non-cash payments).
(c) Not later than 50 days after the end of any fiscal quarter
(100 days in the case of the last fiscal quarter of the fiscal year) during
which any Restricted Payment in excess of $10.0 million is made, the Borrower
shall deliver to the Administrative Agent an Officers' Certificate stating that
all Restricted Payments made during such fiscal quarter were permitted and
setting forth the basis upon which the calculations required by this covenant
were computed, together with a copy of any opinion or appraisal required by this
Agreement.
6.03. ASSET SALES. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Borrower or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as determined in good
faith by the Borrower's Board of Directors); (ii) at least 80% of the
consideration received by the Borrower or such Restricted Subsidiary, as the
case may be, from such Asset Sale shall be cash or Cash Equivalents and is
received at the time of such disposition; PROVIDED that the amount of (x) any
liabilities (as shown on the Borrower's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Borrower or such Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Loans) that are assumed by the transferee of any such assets and from which the
Borrower and its Restricted Subsidiaries are unconditionally released and (y)
any notes or other obligations received by the Borrower or such Restricted
Subsidiary from such transferee that are promptly, but in no event more than 30
days after receipt, converted by the Borrower or such Restricted Subsidiary into
cash or Cash Equivalents (to the extent of the cash or Cash Equivalents
received) shall be deemed to be cash for purposes of this provision; and (iii)
the Borrower shall apply, or cause such Restricted Subsidiary to apply, the Net
Cash Proceeds in accordance with Section 2.02(a), PROVIDED, HOWEVER, that if at
any time any non-cash consideration received by the Borrower or any Restricted
Subsidiary of the Borrower, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance with Section
2.02(a).
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Notwithstanding clause (ii) of the immediately preceding
paragraph, the Borrower and its Restricted Subsidiaries will be permitted to
consummate an Asset Sale without complying with clause (ii) of such paragraph to
the extent that at least 80% of the consideration from such Asset Sale
constitutes Replacement Assets and the remainder constitutes cash or Cash
Equivalents; PROVIDED that any consideration not constituting Replacement Assets
received by the Borrower or any of its Restricted Subsidiaries in connection
with any Asset Sale permitted to be consummated under this paragraph shall
constitute Net Cash Proceeds subject to the provisions of the immediately
preceding paragraph.
6.04. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES. The Borrower will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Borrower or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Borrower or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) this
Agreement; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired as such
instrument is in effect on the date of the acquisition; (5) the Senior Secured
Credit Documents; (6) agreements existing on the Borrowing Date to the extent
and in the manner such agreements are in effect on the Borrowing Date; (7)
restrictions on the transfer of assets subject to any Lien permitted under this
Agreement imposed by the holder of such Lien; (8) restrictions imposed by any
agreement to sell assets permitted under this Agreement to any Person pending
the closing of such sale; (9) an agreement or instrument governing Indebtedness
incurred to refinance the Indebtedness incurred pursuant to an agreement
referred to in clause (2), (4), (5) or (6) above; PROVIDED, HOWEVER, that the
provisions relating to such encumbrance or restriction contained in any such
refinancing Indebtedness are not materially more restrictive, taken as a whole,
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4), (5) or (6); (10) customary
provisions restricting assignment of any licensing agreement entered into by the
Borrower or a Restricted Subsidiary of the Borrower in the ordinary course of
business; (11) any agreement or instrument governing Capital Stock of any Person
that is assumed in connection with the acquisition thereof and not entered into
in contemplation of such acquisition; and (12) other Indebtedness permitted to
be incurred subsequent to the Borrowing Date pursuant to the provisions of
Section 6.01; PROVIDED that (x) any such restrictions are ordinary and customary
with respect to the type of Indebtedness being incurred (under the relevant
circumstances) and (y) in no event shall such restrictions be more restrictive
in any
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respect than those contained in the Senior Secured Credit Agreement as in effect
on the Borrowing Date.
6.05. LIENS. The Borrower shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) that secures any (i) trade
payables or (ii) Indebtedness of the Borrower or any Guarantor which is
expressly by its terms subordinated in right of payment to any other
Indebtedness of the Borrower or such Guarantor, unless in the case of clause
(ii) the Loans or the Guarantee of such Guarantor, as the case may be, are
secured by a Lien on such asset or property that is (x) pari passu with such
other Indebtedness if such other Indebtedness is pari passu with the Loans or
the Guarantee of such Guarantor, as the case may be, or (y) if such other
indebtedness is subordinated to the Loans or the Guarantee of such Guarantor, as
the case may be, senior in priority to the Lien securing such other
Indebtedness, in each case, until such time as such obligations are no longer
secured by a Lien.
6.06. SENIOR SUBORDINATED DEBT. Neither the Borrower nor
any Guarantor will incur or suffer to exist Indebtedness that is senior in right
of payment to the Loans or the Guarantee of such Guarantor, as applicable, and
expressly subordinate in right of payment to any other Indebtedness of the
Borrower or such Guarantor, as applicable.
6.07. MERGER, CONSOLIDATION AND SALE OF ASSETS. (a) The
Borrower will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any Restricted Subsidiary to
sell, assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Borrower's assets (determined on a consolidated basis
for the Borrower and the Borrower's Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless: (i) either (1)
the Borrower shall be the surviving or continuing corporation or (2) the Person
(if other than the Borrower) formed by such consolidation or into which the
Borrower is merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of the Borrower
and of the Borrower's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by an amended subordinated credit
agreement (in form and substance reasonably satisfactory to the Administrative
Agent), executed and delivered to the Administrative Agent, the due and punctual
payment of the principal of, and premium, if any, and interest on all of the
Loans and any other Obligations hereunder and the performance of every covenant
in this Agreement on the part of the Borrower to be performed or observed; (ii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness incurred or anticipated to be
incurred and any Lien granted or anticipated to be granted in connection with or
in respect of the transaction), no Default shall
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have occurred and be continuing; (iii) immediately before and immediately after
giving effect to such transaction and the assumption contemplated by clause
(i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness incurred or anticipated to be incurred and any Lien granted or
anticipated to be granted in connection with or in respect of the transaction),
the Borrower would be able to incur $1.00 of additional Indebtedness under
Section 6.01(xvii); and (iv) the Borrower or the Surviving Entity shall have
delivered to the Administrative Agent an Officer's Certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a subordinated amended
credit agreement is required in connection with such transaction, such amended
credit agreement comply with the applicable provisions of this Agreement and
that all conditions precedent in this Agreement relating to such transaction
have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Borrower the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Borrower, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Borrower.
(c) Upon any consolidation, combination or merger or any
transfer of all or substantially all of the assets of the Borrower in accordance
with the foregoing, in which the Borrower is not the continuing corporation, the
successor Person formed by such consolidation or into which the Borrower is
merged or to which such conveyance, lease or transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Borrower
under this Agreement and the Loans with the same effect as if such surviving
entity had been named as such. When a successor assumes all of the obligations
of its predecessor under this Agreement, the predecessor shall be released from
those obligations.
(d) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of this Agreement or in
connection with any transaction complying with the provisions of Section 6.03)
will not, and the Borrower will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Borrower or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by an amended subordinated
credit agreement (in form and substance reasonably satisfactory to the
Administrative Agent) all of the obligations of the Guarantor under its
Guarantee and this Agreement and the performance of every covenant in this
Agreement on the part of the Guarantor to be performed or observed; and (iii)
the conditions in clauses (ii) and (iii) in paragraph (a) (with references
therein to clause (i)(2)(y) being deemed to be ref-
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erences to clause (ii) of this paragraph) shall have been satisfied. Any merger
or consolidation of a Guarantor with and into the Borrower (with the Borrower
being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary and the merger of Acquisition Co with and into Essex
pursuant to the terms of the Merger Agreement and the merger of Essex with and
into Superior Telecommunications need only comply with clause (iv) of the first
paragraph of this covenant.
6.08. TRANSACTIONS WITH AFFILIATES. (a) The Borrower will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Borrower or
such Restricted Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common plan)
involving aggregate consideration in excess of $5.0 million shall be approved by
the Board of Directors of the Borrower or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Borrower or any Restricted Subsidiary enters into
an Affiliate Transaction (or a series of related Affiliate Transactions which
are similar or part of a common plan) that involves an aggregate consideration
of more than $20.0 million, the Borrower or such Restricted Subsidiary, as the
case may be, shall, prior to the consummation thereof, also obtain a written
opinion of an Independent Financial Advisor to the effect that such transaction
is fair to the Borrower or such Restricted Subsidiary, as the case may be, from
a financial point of view.
(b) The restrictions set forth in paragraph (a) above shall
not apply to (i) reasonable fees and compensation paid to and indemnity provided
on behalf of, officers, directors, employees or consultants of the Borrower or
any Restricted Subsidiary as determined in good faith by the Borrower's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Borrower and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by this Agreement and, in the case of transactions with a Restricted
Subsidiary that is not a Guarantor, such transactions comply with clause (y) of
the first sentence of paragraph (a) of this Section 6.08; (iii) any agreement as
in effect as of the Borrowing Date or any amendment thereto or replacement
thereof or any transaction contemplated thereby (including pursuant to any
amendment thereto or replacement thereof) so long as any such amendment or
replacement is not more disadvantageous to the Lenders in any material respect
than the agreement as in effect on the Borrowing Date; (iv) Restricted Payments
and Permitted Investments permitted by this Agreement;
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(v) the Transaction substantially in accordance with the terms of the Documents;
(vi) the performance of the Services Agreement and payments thereunder, PROVIDED
that (x) such payments may not exceed $5.0 million in any four fiscal quarter
period and (y) the portion of such payment for services described in Section
3(b) thereof shall be subject to the "arm's-length" standard described in clause
(y) of paragraph (a) of this Section 6.08; (vii) (x) the Parent Tax Allocation
Agreement and the Borrower and its Domestic Subsidiaries may make payments
thereunder and (y) the Alpine Tax Allocation Agreement and the Borrower and its
Domestic Subsidiaries may make payments thereunder; and (viii) upon consummation
of the Tender Offer, the Borrower may pay to Alpine a transaction fee in the
amount of $10.0 million.
6.09. ADDITIONAL GUARANTEES. If (x) the Borrower acquires
or creates any Restricted Subsidiary (including by merger) or designates any
Unrestricted Subsidiary as a Restricted Subsidiary, and such Restricted
Subsidiary is not a Foreign Subsidiary or a Receivables Subsidiary or (y) any
Restricted Subsidiary guarantees or becomes an obligor under the Senior Secured
Credit Agreement, the Borrower shall cause such Restricted Subsidiary to (i)
execute and deliver to the Administrative Agent an amendment to this Agreement
in form reasonably satisfactory to the Administrative Agent pursuant to which
such Restricted Subsidiary shall unconditionally guarantee all of the Borrower's
obligations under the Loans and this Agreement on the terms set forth in this
Agreement and (ii) deliver to the Administrative Agent an opinion of counsel,
subject to customary exceptions to the effect that such amendment has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary; PROVIDED that no such action will be required by any new Restricted
Subsidiary (that is not a Wholly Owned Restricted Subsidiary) to the extent such
new Restricted Subsidiary is a party to a preexisting agreement which prohibits
such new Restricted Subsidiary from becoming a Subsidiary Guarantor hereunder;
PROVIDED, FURTHER, such preexisting agreement was not entered into for the
purpose of avoiding the requirements of this Section 6.09 and the restrictions
contained therein are no more adverse to the Borrower and its Subsidiaries than
to the other equity owners in such new Restricted Subsidiary. In addition, each
new Restricted Subsidiary that is required to execute any Credit Document shall
execute and deliver, or cause to be executed and delivered, all other relevant
documentation of the type described in Section 3 as such new Restricted
Subsidiary would have had to deliver if such new Restricted Subsidiary were a
Credit Party on the Borrowing Date. Thereafter, such Restricted Subsidiary shall
be a Subsidiary Guarantor for all purposes of this Agreement.
6.10. DESIGNATION OF UNRESTRICTED SUBSIDIARIES. (a) The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Borrower or any other Restricted Subsidiary of the Borrower that is not a
Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
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Borrower certifies to the Administrative Agent that such designation complies
with the provisions of Section 6.02 of this Agreement, (y) each Subsidiary to be
so designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Borrower or any of
its Restricted Subsidiaries and (z) immediately before and after giving effect
to such designation, no Default or Event of Default shall have occurred and be
continuing.
(b) The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Borrower is able to incur at least $1.00 of
additional Indebtedness in compliance with Section 6.01(xvii) and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing.
(c) Any such designation in paragraph (a) or (b) above by the
Board of Directors shall be evidenced to the Administrative Agent by promptly
filing with the Administrative Agent a copy of the Board Resolution giving
effect to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
6.11. CONDUCT OF BUSINESS. The Borrower and its Restricted
Subsidiaries will not engage in any business other than the businesses in which
the Borrower and its Restricted Subsidiaries are engaged in as of the Borrowing
Date and activities incidental thereto, and similar or related businesses.
6.12. LIMITATION OF ACTIVITIES OF PARENT. The Parent shall
not (i) hold or acquire any assets (other than the Capital Stock of the
Borrower, Superior Trust I and DNE Systems and its Subsidiaries and
insignificant assets), (ii) incur any Indebtedness (other than the Trust
Preferred Securities, its Guarantee, its guarantee under the Senior Secured
Credit Agreement and obligations in connection with its day to day activities in
the ordinary course), or (iii) conduct any business or have any operations,
other than holding the Capital Stock and assets permitted by clause (i) above,
activities reasonably related thereto and those consistent with its status as a
publicly traded company.
7. EVENTS OF DEFAULT.
Upon the occurrence of any of the following specified events
(each an "Event of Default"):
7.01. FAILURE TO MAKE PAYMENTS WHEN DUE. Failure to pay
interest on the Loans or fees when the same becomes due and payable and the
default continues for a period of 30 days (whether or not such payment shall be
prohibited by the subordination provisions of this Agreement); and failure to
pay the principal on the Loans, when such principal becomes due and payable, at
maturity, upon mandatory prepayment or otherwise (in-
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cluding the failure to make a payment to purchase Loans tendered pursuant to a
Change of Control Offer or a Net Proceeds Offer) (whether or not such payment
shall be prohibited by the subordination provisions of this Agreement);
7.02. BREACH OF REPRESENTATIONS, ETC. Any representation,
warranty or statement made by any Credit Party in any Credit Document or in any
statement or certificate delivered pursuant thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made;
7.03. BREACH OF COVENANTS. Default in the observance or
performance of any other covenant or agreement contained in this Agreement which
default continues for a period of 45 days after the Borrower receives written
notice specifying the default (and demanding that such default be remedied) from
the Administrative Agent or the Lenders holding at least 25% of the outstanding
principal amount of the Loans (except in the case of a default with respect to
Section 6.07 or Section 6.12, which will constitute an Event of Default with
such notice requirement but without such passage of time requirement);
7.04. DEFAULT UNDER OTHER AGREEMENTS. Default under any
mortgage, indenture or other instrument or agreement under which there may be
issued, or by which there may be secured or evidenced, Indebtedness of the
Parent, the Borrower or any Restricted Subsidiary, whether such Indebtedness now
exists or is incurred after the Closing Date, which default (a) is caused by a
failure to pay such Indebtedness at its express final maturity within the
applicable express grace period (and such failure continues for a period of 30
days or more) or (b) results in the acceleration of such Indebtedness prior to
its express final maturity (which acceleration is not rescinded, annulled or
otherwise cured within 30 days of receipt by the Parent, the Borrower or such
Restricted Subsidiary of such notice of acceleration) and, in each case, the
principal amount of such Indebtedness, together with any other Indebtedness with
respect to which an event described in clause (a) or (b) has occurred and is
continuing, aggregates $25.0 million or more;
7.05. JUDGMENTS. One or more judgments in an aggregate
amount in excess of $15.0 million shall have been rendered against the Parent,
the Borrower or any Restricted Subsidiary and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
7.06. BANKRUPTCY. The Parent, the Borrower or any
Significant Subsidiary shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Parent, the Borrower or any Significant Subsidiary and
the petition is not controverted within 30 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the prop-
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erty of the Parent, the Borrower or any Significant Subsidiary; or the Parent,
the Borrower or any Significant Subsidiary commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Parent, the Borrower or any
Significant Subsidiary; or there is commenced against the Parent, the Borrower
or any Significant Subsidiary any such proceeding which remains undismissed for
a period of 60 days; or the Parent, the Borrower or any Significant Subsidiary
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Parent, the Borrower or
any Significant Subsidiary suffers any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for a period of 60 days; or the Parent, the Borrower or any Significant
Subsidiary makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Parent, the Borrower or any Significant
Subsidiary for the purpose of effecting any of the foregoing;
7.07. MERGER. The Merger Agreement shall terminate pursuant
to its terms or the Merger shall not be consummated by October 31, 1999; and
7.08. GUARANTEES. Any of the Guarantees ceases to be in
full force and effect or any of the Guarantees is declared to be null and void
and unenforceable or any of the Guarantees is found to be invalid or any of the
Guarantors denies its liability under its Guarantee (other than in each case by
reason of release of a Subsidiary Guarantor in accordance with the terms of this
Agreement and the Guarantees); PROVIDED, HOWEVER, that if any such Guarantee is
the Guarantee of a Subsidiary Guarantor that is not a Significant Subsidiary,
then such event shall only result in an Event of Default under this Section 7.08
if such event , together with similar events involving Subsidiary Guarantors
that are not Significant Subsidiaries, would have a Material Adverse Effect.
7.09. REMEDIES. If an Event of Default (other than an Event
of Default specified in Section 7.06 above with respect to the Borrower) shall
occur and be continuing, the Administrative Agent or the Lenders holding at
least 25% in principal amount of outstanding Loans may declare the principal of
and accrued interest on all the Loans to be due and payable by notice in writing
to the Borrower and the Administrative Agent specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Senior Secured Credit Agreement, shall become
immediately due and payable upon the first to occur of an acceleration under the
Senior Secured Credit Agreement or 5 Business Days after receipt by the Borrower
and the Representative under the Senior Secured Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If an
Event of Default specified in Section 7.06 above with respect to the Borrower
occurs and is continuing, then all unpaid principal of, and premium, if any, and
accrued and unpaid interest on all of the outstanding Loans shall ipso facto
be-
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come and be immediately due and payable without any declaration or other act on
the part of the Administrative Agent or any Lender.
In the event of a declaration of acceleration because an Event
of Default set forth in Section 7.04 above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if
either (x) the holders of the Indebtedness which is the subject of such Event of
Default have waived such failure to pay at maturity or have rescinded the
acceleration in respect of such Indebtedness within 60 days of such maturity or
declaration of acceleration, as the case may be, and no other Event of Default
has occurred during such 60-day period which has not been cured or waived or (y)
such Indebtedness shall have been discharged or the maturity thereof shall have
been extended such that it is not then due and payable, or the underlying
default has been cured (and any acceleration based thereon of such other
Indebtedness has been rescinded), within 60 days of such maturity or declaration
of acceleration, as the case by be.
At any time after a declaration of acceleration with respect
to the Loans as described in the preceding paragraph, the Required Lenders may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Borrower has paid the Administrative
Agent its reasonable compensation and reimbursed the Administrative Agent for
its expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in Section 7.06, the
Administrative Agent shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
The Required Lenders may waive any existing Default or Event
of Default under this Agreement, and its consequences, except a default in the
payment of the principal of or interest on any Loans or Notes.
The Lenders may not enforce this Agreement or the Loans except
as provided in this Agreement. Subject to the provisions of this Agreement
relating to the duties of the Administrative Agent, the Administrative Agent is
under no obligation to exercise any of its rights or powers under this Agreement
at the request, order or direction of any of the Lenders, unless such Lenders
have offered to the Administrative Agent reasonable indemnity. Subject to all
provisions of this Agreement and applicable law, the Required Lenders have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Administrative Agent or exercising any trust or power
conferred on the Administrative Agent.
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The Borrower shall provide an Officers' Certificate to the
Administrative Agent promptly upon any such officer obtaining knowledge of any
Default or Event of Default (PROVIDED that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
8. SUBORDINATION.
8.01. OBLIGATIONS SUBORDINATED TO SENIOR INDEBTEDNESS. Each
of the Borrower and each Guarantor covenants and agrees, and each Lender, by its
acceptance thereof, likewise covenants and agrees, that payment of all
Obligations in respect of the Loans, Notes and Guarantees shall be subject to
the provisions of this Section 8, and each Lender (including any assignee or
participant thereof) accepts and agrees that the payment of all Obligations on
the Loans, the Notes and Guarantees by the Borrower and the Guarantors shall, to
the extent and in the manner herein set forth, be subordinated and junior in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations in respect of Senior Indebtedness, including, without limitation,
the Borrower's and the Guarantors' obligations under the Senior Secured Credit
Agreement, that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Indebtedness, and that each
holder of Senior Indebtedness whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Agreement and the Notes.
8.02. SUSPENSION OF PAYMENT WHEN SENIOR INDEBTEDNESS IS IN
DEFAULT. (a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Indebtedness,
no payment of any kind or character shall be made by or on behalf of the
Borrower, any Guarantor or any other Person on their behalf with respect to any
Obligations on the Loans, the Guarantees or the Notes or to acquire any of the
Loans, the Guarantees or the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Senior Indebtedness, as such event of default is defined in the instrument
creating or evidencing such Senior Indebtedness, permitting the holders of such
Senior Indebtedness then outstanding to accelerate the maturity thereof and if
the Representative for the respective issue of Senior Indebtedness gives notice
of the event of default to the Administrative Agent (a "Default Notice"), then,
unless and until such event of default have been cured or waived or have ceased
to exist or the Administrative Agent receives notice thereof from the
Representative for the respective issue of Senior Indebtedness terminating the
Blockage Period (as defined below) or all Obligations on Senior Indebtedness
have been repaid in full in cash or Cash Equivalents, during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the
Borrower, nor any Guarantor nor any other Person on their behalf shall (x) make
any payment
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of any kind or character with respect to any Obligations on the Loans, the
Guarantees or the Notes or (y) acquire any of the Loans, the Guarantees or the
Notes for cash or property or otherwise.
(b) Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date any payment on
the Loans was due and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Senior Indebtedness whether or not
within a period of 360 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Administrative Agent or any Lender when such
payment is prohibited by Section 8.02(a) or (b), such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (PRO RATA to such holders on the basis of the respective
amount of Senior Indebtedness held by such holders) or their respective
Representatives, as their respective interests may appear. The Administrative
Agent shall be entitled to rely on information regarding amounts then due and
owing on the Senior Indebtedness, if any, received from the holders of Senior
Indebtedness (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Borrower or the Guarantors
and only amounts included in the information provided to the Administrative
Agent shall be paid to the holders of Senior Indebtedness.
(d) Nothing contained in this Section 8 shall limit the right
of the Administrative Agent or the Lenders to take any action to accelerate the
maturity of the Loans and the Notes or to pursue any rights or remedies
hereunder; PROVIDED that all Senior Indebtedness thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Lenders are entitled to receive any payment of any kind or character with
respect to Obligations on the Loans, the Guarantees or the Notes.
8.03. LOANS SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF BORROWER. (a) Upon
any payment or distribution of assets of the Borrower or any Guarantor of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets
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of the Borrower or such Guarantor, as the case may be, or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Borrower or such Guarantor, as the case may be, or its or their property,
whether voluntary or involuntary, all Obligations due or to become due upon all
Senior Indebtedness of the Borrower or such Guarantor, as the case may be, shall
first be paid in full in cash or Cash Equivalents, or such payment shall be duly
provided for to the satisfaction of the holders of such Senior Indebtedness,
before any payment or distribution of any kind or character is made on account
of any Obligations in respect of the Loans or the Notes, or the Guarantees of
such Guarantor, as the case may be, or for the acquisition of any of the Loans
or the Notes for cash or property or otherwise. Upon any such dissolution,
winding-up, liquidation, reorganization, receivership or similar proceeding, any
payment or distribution of assets of the Borrower or any Guarantor of any kind
or character, whether in cash, property or securities, to which the Lenders or
the Administrative Agent under this Agreement would be entitled, except for the
provisions hereof, shall be paid by the Borrower or such Guarantor, as the case
may be, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution, or by the Lenders or by the
Administrative Agent under this Agreement if received by them, directly to the
holders of Senior Indebtedness (PRO RATA to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full in cash or Cash Equivalents after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Senior
Indebtedness.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Borrower or any Guarantor, as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid to any
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person under any bankruptcy, insolvency, receivership, fraudulent conveyance
or similar law, then, if such payment is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Borrower or any Guarantor of any kind
or character, whether in cash, property or securities, shall be received by the
Administrative Agent or any Lender when such payment or distribution is
prohibited by Section 8.03(a), such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness of Borrower or such Guarantor, as the case may be (PRO RATA
to such holders on the basis of the respective amount of Senior Indebtedness
held by such
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holders), or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of such Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
(d) The consolidation of the Borrower or any Guarantor with,
or the merger of the Borrower or any Guarantor with or into, another corporation
or the liquidation or dissolution of the Borrower following the conveyance or
transfer of all or substantially all of its assets to another corporation upon
the terms and conditions provided in Section 6.07 hereof and as long as
permitted under the terms of the Senior Indebtedness shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 8.03 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, assume the Borrower's or such Guarantor's
obligations, as the case may be, hereunder in accordance with Section 6.07
hereof.
8.04. LENDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF
SENIOR INDEBTEDNESS. Subject to the payment in full in cash or Cash Equivalents
of all Senior Indebtedness, the Lenders shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Borrower or the applicable Guarantor, as the case
may be, applicable to the Senior Indebtedness until the Loans shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Indebtedness by or on behalf of the
Borrower or any Guarantor or by or on behalf of the Lenders by virtue of this
Section 8 which otherwise would have been made to the Lenders shall, as between
the Borrower or the applicable Guarantor, as the case may be, and the Lenders,
be deemed to be a payment by the Borrower or the applicable Guarantor, as the
case may be, to or on account of the Senior Indebtedness, it being understood
that the provisions of this Section 8 are and are intended solely for the
purpose of defining the relative rights of the Lenders, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
8.05. OBLIGATIONS OF THE BORROWER UNCONDITIONAL. Nothing
contained in this Section 8 or elsewhere in this Agreement or in the Notes is
intended to or shall impair, as between the Borrower and the Lenders, the
obligation of the Borrower, which is absolute and unconditional, to pay to the
Lenders the principal of and interest on the Loans as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Lenders and creditors of the Borrower
other than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Administrative Agent or any Lender from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 8 of the holders of
Senior Indebtedness in respect of cash, property or securities of
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the Borrower received upon the exercise of any such remedy. Upon any payment or
distribution of assets or securities of the Borrower referred to in this Section
8, the Administrative Agent and the Lenders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
liquidation, dissolution, winding-up or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or
agent or other Person making any payment or distribution to the Administrative
Agent or to the Lenders for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other Indebtedness of the Borrower, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 8. Nothing in this Section 8 shall apply to the
claims of, or payments to, the Administrative Agent, in its capacity as such.
The Administrative Agent shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Administrative Agent determines in good
faith that any evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Section 8, the Administrative Agent may request such Person to
furnish evidence to the reasonable satisfaction of the Administrative Agent as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Section 8, and if
such evidence is not furnished, the Administrative Agent may defer any payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
8.06. ADMINISTRATIVE AGENT ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE. The Borrower shall give prompt written notice
to the Administrative Agent of any fact known to the Borrower which would
prohibit the making of any payment to or by the Administrative Agent in respect
of the Loans, the Guarantees or the Notes pursuant to the provisions of this
Section 8. Regardless of anything to the contrary contained in this Section 8 or
elsewhere in this Agreement, the Administrative Agent shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment to or by the Administrative Agent unless and until the
Administrative Agent shall have received notice in writing from the Borrower or
any Guarantor, or from a holder of Senior Indebtedness or a Representative
therefor, together with proof satisfactory to the Administrative Agent of such
holding of Senior Indebtedness or of the authority of such Representative, and,
prior to the receipt of any such written notice, the Administrative Agent shall
be entitled to assume that no such facts exist.
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8.07. APPLICATION BY ADMINISTRATIVE AGENT OF ASSETS
DEPOSITED WITH IT. Any deposit of assets or securities by or on behalf of the
Borrower or any Guarantor with the Administrative Agent (whether or not in
trust) for the payment of principal of or interest on any Loans, the Guarantees
or Notes shall be subject to the provisions of this Section 8; PROVIDED,
HOWEVER, that if prior to the second Business Day preceding the date on which by
the terms of this Agreement any such assets may become distributable for any
purpose (including, without limitation, the payment of either principal of or
interest on any Loan or Note) the Administrative Agent shall not have received
with respect to such assets the notice provided for in Section 8.06, then the
Administrative Agent shall have full power and authority to receive such assets
and to apply the same to the purpose for which they were received, and shall not
be affected by any notice to the contrary received by it on or after such date.
Nothing contained in this Section 8.07 shall limit the right of the holders of
Senior Indebtedness to recover payments as contemplated by this Section 8.
8.08. NO WAIVER OF SUBORDINATION PROVISIONS. (a) No right
of any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Borrower or any
Guarantor or by any act or failure to act by any such holder, or by any
non-compliance by the Borrower or any Guarantor with the terms, provisions and
covenants of this Agreement, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 8.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Administrative Agent or the
Lenders, without incurring responsibility to the Administrative Agent or the
Lenders and without impairing or releasing the subordination provided in this
Section 8 or the obligations hereunder of the Lenders to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place,
terms or time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Borrower and any other Person.
8.09. LENDERS AUTHORIZE ADMINISTRATIVE AGENT TO EFFECTUATE
SUBORDINATION OF LOANS. Each Lender authorizes and expressly directs the
Administrative Agent on such Lender's behalf to take such action as may be
necessary or appropriate to effect the subordination provisions contained in
this Section 8, and appoints the Administrative Agent such Lender's
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Borrower or any Guarantor tending towards
liquidation or reorganization of
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the business and assets of the Borrower or any Guarantor, the immediate filing
of a claim for the unpaid balance of such Lender's Loans in the form required in
said proceedings and cause said claim to be approved. If the Administrative
Agent does not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims, then any of the holders of the Senior Indebtedness or their
Representative is hereby authorized to file an appropriate claim for and on
behalf of the Lenders. Nothing herein contained shall be deemed to authorize the
Administrative Agent or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Loans or the rights of any Lender, or to authorize the
Administrative Agent or the holders of Senior Indebtedness or their
Representative to vote in respect of the claim of any Lender in any such
proceeding.
8.10. RIGHT OF ADMINISTRATIVE AGENT AND LENDERS TO HOLD
SENIOR INDEBTEDNESS. The Administrative Agent and each Lender shall be entitled
to all the rights set forth in this Section 8 with respect to any Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Agreement shall deprive the Administrative Agent or any Lender
or any such agent of any of its rights as such holder.
8.11. THIS SECTION 8 NOT TO PREVENT EVENTS OF DEFAULT. The
failure to make a payment on account of principal of or interest on the Loans by
reason of any provision of this Section 8 will not be construed as preventing
the occurrence of an Event of Default.
Nothing contained in this Section 8 shall limit the right of
the Administrative Agent or the Lenders to take any action to accelerate the
maturity of the Loans pursuant to Section 7 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Section 8 of the holders, from time to time, of Senior Indebtedness.
8.12. NO FIDUCIARY DUTY OF ADMINISTRATIVE AGENT TO HOLDERS
OF SENIOR INDEBTEDNESS. The Administrative Agent shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and it undertakes to
perform or observe such of its covenants and obligations as are specifically set
forth in this Section 8, and no implied covenants or obligations with respect to
the Senior Indebtedness shall be read into this Agreement against the
Administrative Agent. The Administrative Agent shall not be liable to any such
holders if it shall pay over or deliver to the Lenders or the Borrower or any
other Person money or assets in compliance with the terms of this Agreement.
Nothing in this Section 8.12 shall affect the obligation of any Person other
than the Administrative Agent and the Lenders to hold such payment for the
benefit of, and to pay such payment over to, the holders of Senior Indebtedness
or their Representative.
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8.13. EFFECT ON SENIOR INDEBTEDNESS. No amendment of this
Agreement shall adversely affect the rights of any holder of Senior Indebtedness
under this Section 8 of this Agreement, without the consent of such holder.
9. DEFINITIONS AND ACCOUNTING TERMS.
9.01. DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquired Indebtedness" shall mean Indebtedness of a Person or
any of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Borrower or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.
"Acquisition" shall mean the acquisition by the Parent
(through its ownership of the Borrower) of 100% of the outstanding shares of
capital stock of Essex International Inc. pursuant to the Acquisition Documents.
"Acquisition Co" shall mean the single purpose, newly formed
wholly owned subsidiary of the Borrower party to the Merger Agreement.
"Acquisition Documents" shall mean each of the Tender Offer
Documents and the Merger Agreement.
"Adjusted Maximum Amount" shall have the meaning provided in
Section 12.01(c) of this Agreement.
"Administrative Agent" shall mean BTCo, and shall include any
successor appointed pursuant to Section 10.10.
"Affiliate" shall mean, with respect to any specified Person,
any other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing. A Person shall be deemed to control a corporation
if such Person possesses, directly or indirectly, the power (i) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the
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ownership of voting securities, by contract or otherwise. Without limiting
the foregoing, Alpine and its Affiliates shall be deemed to be Affiliates of
the Borrower and its Subsidiaries so long as the Service Agreement is in
place.
"Agent" shall mean the Administrative Agent and the
Syndication Agent, collectively.
"Aggregate Payments" shall have the meaning provided in
Section 12.01(c) of this Agreement.
"Agreement" shall mean this Senior Subordinated Credit
Agreement, as modified, supplemented, amended, restated (including any amendment
and restatement hereof), extended, renewed, refinanced or replaced from time to
time.
"Alpine" shall mean The Alpine Group, Inc., a Delaware
corporation, which currently owns approximately 50.1% of the outstanding stock
of the Parent.
"Alpine Tax Allocation Agreement" shall mean the tax
allocation agreement by and among Alpine, the Parent and their respective
Affiliates dated as of October 2, 1996, effective as of May 1, 1996.
"Alternate Base Rate" shall mean, at any time, the higher of
(i) the Prime Lending Rate and (ii) 1/2 of 1% in excess of the Federal Funds
Rate.
"Alternate Base Rate Loan" shall mean a Loan for which the
Interest Rate on such Loan is the Alternate Base Rate.
"amend" shall mean amend, modify, supplement, restate or amend
and restate, including successively; and "amending" and "amended" have
correlative meanings.
"Approved Lender" shall have the meaning provided in the
definition of "Cash Equivalents."
"Asset Acquisition" shall mean (a) an Investment by the
Borrower or any Restricted Subsidiary in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Borrower or of any Restricted
Subsidiary of the Borrower, or shall be merged with or into the Borrower or any
Restricted Subsidiary, or (b) the acquisition by the Borrower or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
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"Asset Sale" shall mean any direct or indirect sale, issuance,
conveyance, transfer, assignment or other transfer for value by the Borrower or
any of its Restricted Subsidiaries (including any sale and leaseback
transaction) to any Person other than the Borrower or a Wholly Owned Restricted
Subsidiary that is a Guarantor of (a) any Capital Stock of any Subsidiary (other
than an Unrestricted Subsidiary (excluding the Israeli Subsidiaries)); or (b)
any other property or assets of the Borrower or any Restricted Subsidiary other
than in the ordinary course of business; PROVIDED, HOWEVER, that Asset Sales
shall not include (i) a transaction or series of related transactions involving
aggregate consideration of less than $500,000 in any fiscal year of the
Borrower; (ii) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Borrower as permitted by Section 6.07;
(iii) a transaction or series of related transactions pursuant to any
foreclosure of assets or other remedy provided by applicable law to a creditor
of the Borrower or any Subsidiary with a Lien on such assets, which Lien is
permitted under this Agreement; PROVIDED that such foreclosure or other remedy
is conducted in a commercially reasonable manner or in accordance with any
Bankruptcy Law; (iv) a transaction or series of related transactions involving
only Cash Equivalents or inventory in the ordinary course of business or
obsolete, worn-out or outmoded equipment in the ordinary course of business of
the Borrower; (v) a transaction or series of related transactions involving only
the lease or sublease of any real or personal property in the ordinary course of
business or transfers for security purposes only; (vi) a transaction or series
of related transactions resulting from (a) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, or the contribution to the capital of
any Unrestricted Subsidiary, in accordance with and pursuant to the applicable
provisions of this Agreement or (b) the sale of Capital Stock of any
Unrestricted Subsidiary (other than the Israeli Subsidiaries) or the sale of all
or substantially all of the assets of any Unrestricted Subsidiary (other than
the Israeli Subsidiaries); (vii) the sale or discount, in each case without
recourse (other than recourse for a breach of a representation or warranty), of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof in the ordinary course of
business and not as part of a financing transaction; and (viii) the sale or
discount or other financing of accounts receivable pursuant to the Receivables
Financing Agreement.
"Assignment and Assumption Agreement" shall mean an Assignment
and Assumption Agreement substantially in the form of Exhibit F (appropriately
completed).
"Authorized Officer" shall mean any senior officer of the
Borrower, the Parent or Essex, as the case may be, designated as such in writing
to the Administrative Agent by the Borrower, the Parent or Essex to the extent
reasonably acceptable to the Administrative Agent.
"Bankruptcy Code" shall have the meaning provided in
Section 7.06.
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"Bankruptcy Law" shall mean Title 11, U.S. Code or any
similar Federal, state or foreign law for relief of debtors.
"Basket" shall have the meaning provided in Section 6.02(a).
"Board of Directors" shall mean as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" shall mean with respect to any Person, a
copy of a resolution certified by the Secretary or an Assistant Secretary of
such Person to have been duly adopted by the Board of Directors of such Person
and to be in full force and effect on the date of such certification, and
delivered to the Administrative Agent.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement, and shall include any successor as provided in
Section 6.07.
"Borrowing" shall mean the borrowing of the Loans from all the
Lenders having Commitments on the Closing Date.
"Borrowing Amount" shall mean in a maximum aggregate principal
amount of $200,000,000 available in a single borrowing on the Borrowing Date.
"Borrowing Date" shall mean the Closing Date.
"BTCo" shall mean Bankers Trust Company, in its individual
capacity, and any successor corporation thereto by merger, consolidation or
otherwise.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, LIBOR Loans, any day which is a Business
Day described in clause (i) and which is also a day for trading by and between
banks in U.S. dollar deposits in the LIBOR market.
"Cables of Zion" shall mean Cables of Zion United Works Ltd.,
a company organized under the laws of Israel.
"Capital Lease," as applied to any Person, shall mean any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, should be accounted for as a capital lease on
the balance sheet of that Person.
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"Capital Stock" shall mean (i) with respect to any Person that
is a corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person, and in each case any options, warrants or
other rights to purchase or acquire such stocks, shares and interests.
"Capitalized Lease Obligations" shall mean, as to any Person,
the obligations of such Person under a lease that are required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes of
this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof) or the government of
any member of the European Union having maturities of not more than twelve
months from the date of acquisition, (ii) U.S. dollar denominated and
Eurocurrency time deposits, certificates of deposit and banker acceptances of
(x) any Lender or (y) any commercial bank organized under the laws of the United
States, any State thereof, the District of Columbia, or its branches or agencies
or the laws of any member of the European Union and having capital and surplus
in an aggregate amount not less than $500,000,000 (any such bank or Lender, an
"Approved Lender"), in each case with maturities of not more than twelve months
from the date of acquisition, (iii) U.S. Dollar denominated commercial paper
issued by any Approved Lender or by the parent company of any Approved Lender
and commercial paper issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating of at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
as the case may be, and in each case maturing within twelve months after the
date of acquisition, (iv) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within twelve months from the date
of acquisition thereof and, at the time of acquisition having one of the two
highest ratings obtainable from either S&P or Moody's, (v) any repurchase
agreement entered into with any Approved Lender which is secured by any
obligation of the type described in any of clauses (i) through (iii) and (vi)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Change of Control" shall mean (a) the Borrower shall cease to
own directly 100% on a fully diluted basis of the economic and voting interest
in the Capital Stock of Superior Telecommunications (other than the shares of
Superior Preferred Stock) or, after consummation of the Merger, of Essex (other
than as a result of the merger of Essex into
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Superior Telecommunications or another Subsidiary of the Borrower); or (b) any
Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as in effect on the Effective Date), other than
Alpine, shall have (A) acquired beneficial ownership of 20% or more on a fully
diluted basis of the voting and/or economic interest in the Parent's Capital
Stock (PROVIDED, HOWEVER, such referenced percentage in this clause (A) shall be
25% if, and so long as, Alpine directly maintains ownership of more than 30% on
a fully diluted basis of the economic and voting interests in the Parent's
capital stock) or (B) obtained the power (whether or not exercised) to elect a
majority of the Borrower's directors; (c) the Board of Directors of the Parent
shall cease to consist of a majority of Continuing Directors; or (d) the Parent
shall cease to own directly 100% on a fully diluted basis of the economic and
voting interest in the Capital Stock of the Borrower.
"Closing Date" shall have the meaning provided in
Section 11.10.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Commitment" shall mean, for each Lender, the amount set forth
opposite such Lender's name in Schedule I directly below the column entitled
"Senior Subordinated Term Loan Commitment."
"Common Stock" of any Person shall mean any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated EBIT" shall mean, for any period, Consolidated
Net Income, before total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest Rate Protection Agreements and any original
issue discount) of the Borrower and its Restricted Subsidiaries determined on a
consolidated basis and provisions for taxes based on income, whether paid or
deferred.
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT, adjusted by adding thereto the amount of all depreciation expense and
amortization expense plus non-cash compensation expenses relating to restricted
stock and stock-option grants, in each case, that were deducted in determining
Consolidated EBIT for such period.
"Consolidated Fixed Charge Coverage Ratio" shall mean the
ratio of Consolidated EBITDA of such Person during the four full fiscal quarters
(the "Four Quarter Pe-
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riod") ending on or prior to the date of the transaction giving rise to the need
to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction
Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period.
Notwithstanding the foregoing, for any calculation of the Consolidated Fixed
Charge Coverage Ratio occurring on or prior to the first anniversary of the
Borrowing Date, "Consolidated Fixed Charge Coverage Ratio" shall mean the ratio
of Consolidated EBITDA of such Person during the number of full fiscal quarters
ending after the Borrowing Date to Consolidated Fixed Charges of such Person
(calculated after giving effect on a PRO FORMA basis to the issuance of the
Trust Preferred Securities as if such issuance occurred on the Borrowing Date)
for such period (with references in the next succeeding sentence to "Four
Quarter Period" being deemed to be references to the number of full fiscal
quarters ending after the Borrowing Date). In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital or revolving credit
facilities, occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, Acquired Indebtedness and also including any
Consolidated EBITDA attributable to the assets which are the subject of the
Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during
the Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period; PROVIDED, HOWEVER, that PRO FORMA effect shall not be given to the
Transactions in calculating "Consolidated EBITDA" and "Consolidated Interest
Expense." If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees or proposes to guarantee Indebtedness of a third Person
(other than a Restricted Subsidiary), the preceding sentence shall give effect
to the incurrence of such guaranteed Indebtedness as if such Person or any
Restricted Subsidiary of such Person had directly incurred or otherwise assumed
such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per
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annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; (2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four Quarter Period; (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Agreements, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements; and
(4) to the extent PRO FORMA effect is being given to interest expense
attributable to Indebtedness denominated in a currency other than Dollars which
was not outstanding for the entire Four Quarter Period, PRO FORMA effect shall
be given based on the relevant exchange rates applicable on the date of any
determination of the Consolidated Fixed Charge Coverage Ratio is being made.
"Consolidated Fixed Charges" shall mean, with respect to any
Person for any period, the sum, without duplication, of (i) Consolidated
Interest Expense for such period, plus (ii) the product of (x) the amount of all
dividend payments on any series of Disqualified Capital Stock of the Borrower
and all Preferred Stock of the Restricted Subsidiaries (other than dividends
paid in Qualified Capital Stock and dividends to the extent payable to the
Borrower or any Wholly Owned Restricted Subsidiary) paid, accrued or scheduled
to be paid or accrued during such period times (y) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
effective consolidated federal, state and local income tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" shall mean, with respect to
any Person for any period, the sum of, without duplication: (i) the aggregate of
the interest expense of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, including
without limitation, (a) any amortization of debt discount, but excluding any
amortization or write-off of deferred financing costs, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP. Consolidated Interest Expense of the
Borrower and its Restricted Subsidiaries shall include interest accrued by the
Parent on the Debentures.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss), after provisions for income taxes (other than with respect to
net income taxes attributable to items that are excluded from the calculation of
Consolidated Net Income in the period), of the Borrower and its Restricted
Subsidiaries on a consolidated basis for such period taken as a single
accounting period in conformity with GAAP but excluding in any event (a)
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any extraordinary gains (net of extraordinary losses) but with giving effect to
gains or losses from sales of assets sold in the ordinary course of business;
(b) net earnings (or loss for purposes of determining Consolidated EBIT only) of
any other Person (other than a consolidated Restricted Subsidiary) in which the
Borrower or any consolidated Restricted Subsidiary has an ownership interest,
except to the extent such net earnings shall have actually been received by the
Borrower or such consolidated Restricted Subsidiary in the form of cash
distributions; (c) any portion of the net earnings of any consolidated
Restricted Subsidiary which is unavailable for payment of dividends to the
Borrower or any other consolidated Restricted Subsidiary by reason of the
provisions of any agreement or applicable law or regulation (including, without
limitation, those agreements referred to in the exceptions set forth in Section
6.04); (d) earnings resulting from any reappraisal, revaluation or write-up of
assets; (e) the income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary of such Person or is merged into or consolidated
with such Person or any of its Restricted Subsidiaries or that Person's assets
are acquired by such Person or any of its Restricted Subsidiaries; (f) the
aggregate net gain (or loss) during such period arising from the revaluation
(but not sale) of readily marketable securities; (g) the income (or loss) from
discontinued operations; and (h) non-cash charges and cash charges (but only to
the extent such cash charges are reimbursed by a controlling Affiliate in cash
at the time of incurrence thereof), in each case, relating to the Transaction
and repayment of Indebtedness incurred under the Essex Credit Agreement and the
Existing Superior Credit Agreement.
"Continuing Directors" shall mean the directors of the Parent
on the Borrowing Date and each other director if such director's nomination for
the election to the Board of Directors of the Parent is recommended by a
majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note and the Guarantees.
"Credit Party" shall mean the Borrower and each Guarantor.
"Cvalim" shall mean The Israeli Cable and Wire Company
Limited, a company organized under the laws of Israel.
"Cvalim Assets" shall mean all assets used or held for use in
the conduct of the cable business of Cvalim, including: fixed assets (save land
and buildings), inventory, Cvalim's rights under contracts including certain
leases for real property, licenses and purchase orders, records, trademarks and
know-how, Cvalim's prepaid items and expenses, rights deriving from approved
enterprise status (save grants received by Cvalim and recorded in its books or
rights to receive grants to the extent such amounts were due to Cvalim on or
before the closing date of such sale), customer deposits (save deposits for
products shipped by Cvalim prior to the closing date), software and hardware,
goodwill and
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rights to the names "Cvalim", "Cvalim - The Wire and Cable Company
of Israel Ltd.", "D.A.S.H. Cable Industries (Israel) Ltd." and "D.A.S.H." and
any derivatives of such names and casualty insurance proceeds payable as a
result of loss or destruction of equipment; PROVIDED that Cvalim Assets shall
not include cash, short term investments, customers' receivables and debit
balances, deposits and long term receivables, investment and investee companies,
other properties and deferred expenses.
"Debentures" shall have the meaning provided in the
definition of Trust Preferred Securities.
"Default" shall mean an event or condition the occurrence of
which is, or with the lapse of time or the giving of notice or both would be, an
Event of Default.
"Disqualified Capital Stock" shall mean with respect to any
Person, any Capital Stock of such Person or its Subsidiaries that, by its terms,
by the terms of any agreement related thereto or by the terms of any security
into which it is convertible, puttable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be redeemed
or repurchased by such Person or its Subsidiaries, including at the option of
the holder thereof, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due on or
prior to the Maturity Date, or any other Capital Stock of such Person or its
subsidiaries designated as Disqualified Capital Stock by such Person at the time
of issuance; PROVIDED, HOWEVER, that if such Capital Stock is issued to
employees of the Borrower or the Subsidiaries or to any plan for the benefit of
such employees, such Capital Stock shall not constitute Disqualified Capital
Stock unless so designated.
"DNE Systems" shall mean DNE Systems, Inc., a Delaware
corporation.
"Documents" shall mean the Credit Documents, the Senior
Secured Credit Documents and the Acquisition Documents.
"Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States.
"Domestic Subsidiary" shall mean each Restricted Subsidiary of
the Borrower incorporated or organized in the United States or any State or
territory thereof.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or any other "accredited investor" (as defined in
Regulation D of the Securities Act).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance,
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deficiency, liability or violation, investigations or proceedings relating in
any way to any violation or liability (or alleged violation or liability) by the
Parent, the Borrower, Essex or any of their respective Subsidiaries under any
Environmental Law (hereafter "Claims") or any permit, license or other
authorization issued to the Parent, the Borrower, Essex or any of their
respective Subsidiaries under any such law, including, without limitation, (a)
any and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, remedial, corrective, response or other actions or damages
pursuant to any Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any non-U.S., federal, state or
local policy, statute, law, rule, regulation, ordinance, code or rule of common
law now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials, or
health and safety to the extent such health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Parent, the Borrower or any
Subsidiary thereof would be deemed to be a "single employer" within the meaning
of Section 414(b) or (c) of the Code or (to the extent required by operation of
Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA) Section
414(m) or (o) of the Code.
"Essex" shall mean Essex Group Inc., a Michigan corporation.
"Essex Canada" shall mean Essex Canada Inc., a Delaware
corporation.
"Essex Canadian Facility" shall mean the credit facility
provided pursuant to the Credit Agreement dated as of May 30, 1996, as amended
and restated as of March 27, 1998, between Essex Canada and Bank of Montreal.
"Essex Capital Lease Facility" shall mean that facility
available pursuant to the Agreement and Lease dated as of April 12, 1995, as
amended as of June 1, 1997 and September 2, 1997, between Mellon Leasing
Corporation and Essex.
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"Essex Credit Agreement" shall mean the credit facility
provided pursuant to the Credit Agreement dated as of October 31, 1996, as
amended and restated as of March 27, 1998, among Essex International Inc., Essex
Group, Inc., the lenders named therein and The Chase Manhattan Bank, as
Administrative Agent.
"Essex Funding" shall mean Essex Funding Inc., a Delaware
corporation and a wholly owned subsidiary of Essex.
"Essex Funding Agreement" shall mean (i) the Loan and Security
Agreement, dated as of April 29, 1998, between Essex Funding and Three Rivers
Funding Corporation and (ii) the related Sales and Servicing Agreement dated as
of April 29, 1998.
"Essex International" shall mean Essex International Inc., a
Delaware corporation.
"Event of Default" shall have the meaning provided in
Section 7.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor statute or statutes thereto.
"Existing Indebtedness" shall mean Indebtedness of the
Borrower and its Subsidiaries as of the Borrowing Date and which is to remain
outstanding after giving effect to the Transaction and the incurrence of Loans
on such date, but excluding the Loans and the loans being made under the Senior
Secured Credit Agreement on the Borrowing Date, all as set forth on Schedule V,
and other Indebtedness which in the aggregate does not exceed $100,000.
"Existing Superior Credit Agreement" shall mean the Revolving
Credit Agreement dated as of October 2, 1996, as the same may have previously
been amended, modified or supplemented, among the Parent, the Subsidiary
Guarantors named therein, the lending institutions listed therein, Bankers Trust
Company, as Administrative Agent, and Bank of Boston Connecticut, as
Documentation Agent.
"fair market value" shall mean, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Borrower acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Borrower delivered to the
Administrative Agent.
"Fair Share Shortfall" shall have the meaning provided in
Section 12.01(c) of this Agreement.
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"Fair Share" shall have the meaning provided in Section
12.01(c) of this Agreement.
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Foreign Subsidiary" shall mean a Restricted Subsidiary that
is not a Domestic Subsidiary.
"Four Quarter Period" shall have the meaning provided in the
definition of "Consolidated Fixed
Charge Coverage Ratio."
"Funding Guarantor" shall have the meaning provided in Section
12.01(c) of this Agreement.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time; it being understood
and agreed that determinations in accordance with GAAP for purposes of Sections
2.02 and 6, including defined terms as used therein, are subject (to the extent
provided therein) to Section 11.07(a).
"Guaranteed Creditors" shall mean and include each of the
Administrative Agent and the Lenders.
"Guaranteed Obligations" shall mean the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of the principal and interest on each Note issued by the Borrower to each
Lender, and Loans made under this Agreement, together with all the other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Borrower or any Guarantor to such Lender and the Administrative Agent now
existing or hereafter incurred under, arising out of or in connection with any
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in each of the Credit Documents by the
Borrower.
"Guarantee" shall mean the Guarantee provided in Section 12.
"Guarantor" shall mean each of the Parent and the Subsidiary
Guarantors.
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"Hazardous Materials" shall mean (a) any petrochemical or
petroleum products or wastes (including crude oil or any fraction thereof),
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
and (b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous wastes," "restrictive
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar meaning and regulatory effect under any
Environmental Law.
"incur" shall mean, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "incurrence," "incurred" and "incurring" shall
have meanings correlative to the foregoing). Indebtedness of a Person existing
at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Borrower or any Restricted Subsidiary shall be
deemed to be incurred at such time. The accrual of interest or the accretion of
original issue discount shall not be deemed to be an incurrence.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money, (ii) all
indebtedness of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all indebtedness of such Person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable, other
accrued liabilities arising and payable in the ordinary course of business and
deferred rent as determined in accordance with GAAP), (v) all indebtedness for
the reimbursement of any obligor on any banker's acceptance or similar credit
transaction, (vi) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn thereunder,
(vii) guarantees and other contingent obligations in respect of indebtedness
referred to in clauses (i) through (vi) above and clause (ix) below, (viii) all
indebtedness of any other Person of the type referred to in clauses (i) through
(vii) which are secured by any lien on any property or asset of such Person, the
amount of such indebtedness being deemed to be the lesser of the fair market
value of such property or asset or the amount of the indebtedness so secured,
(ix) all indebtedness under Interest Rate Protection Agreements and Other
Hedging Agreements of such Person and (x) all Disqualified Capital Stock issued
by such Person with the amount of indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any, and all Preferred Stock of Restricted Subsidiaries.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed re-
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purchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock. The Trust Preferred Securities shall
constitute Indebtedness of the Parent.
"Independent Financial Advisor" means a firm which, in the
judgment of the Board of Directors of the Borrower, is independent and qualified
to perform the task for which it is to be engaged.
"Information Systems and Equipment" shall mean all computer
hardware, firmware and software, as well as other information processing
systems, or any equipment containing embedded microchips, whether directly
owned, licensed, leased, operated or otherwise controlled by the Parent, the
Borrower, Essex or any of their respective Subsidiaries, including through
third-party service providers, and which, in whole or in part, are used,
operated, relied upon, or integral to, the Parent, the Borrower, Essex or any of
their respective Subsidiaries' conduct of their business.
"Interest Determination Date" shall mean, with respect to an
Interest Period, the second Business Day preceding the first day of such
Interest Period.
"Interest Payment Date" shall mean May 31, August 30, November
30 and February 28 of each year, commencing May 31, 1999.
"Interest Period" shall mean the period commencing on and
including the immediately preceding Interest Payment Date (or in the case of the
first Interest Period, commencing on the Closing Date) and ending on and
including the second succeeding Interest Payment Date; PROVIDED, HOWEVER, that
(i) if any Interest Period relating to a LIBOR Loan begins on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last Business Day of
such calendar month; (ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED that if any Interest Period for a LIBOR Loan
would otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Interest
Period shall expire on the next preceding Business Day; and (iii) no Interest
Period in respect of any LIBOR Loan shall extend beyond the Maturity Date;
PROVIDED, FURTHER that the Interest Period for all Loans from the Borrowing Date
until the earlier of (x) the 60th day after the Borrowing Date or (y) the
determination by the Administrative Agent that the Syndication Date has occurred
shall be seven days.
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"Interest Rate" shall mean, for the first six (6) months after
the Borrowing Date, LIBOR plus 4.25%, and if LIBOR rate loans are not available
(as provided in Section 1.07 hereof), the Alternate Base Rate plus 3.25%. Upon
the six (6) month anniversary of the Borrowing Date, the Interest Rate shall
increase by 0.25% so that the Interest Rate shall be LIBOR plus 4.50% and if
LIBOR rate loans are not available (as provided in Section 1.07 hereof), the
Alternate Base Rate plus 3.50%. Upon the twelve (12) month anniversary of the
Borrowing Date, the Interest Rate shall increase by 0.50% so that the Interest
Rate shall be LIBOR plus 5.00% and if LIBOR rate loans are not available (as
provided in Section 1.07 hereof), the Alternate Base Rate plus 4.00%. After the
Interest Rate increase on the twelve (12) month anniversary of the Borrowing
Date, the Interest Rate will increase at the end of each three-month period
thereafter by 0.25%, but the maximum Interest Rate shall be LIBOR plus 5.50% and
if LIBOR rate loans are not available (as provided in Section 1.07 hereof), the
Alternate Base Rate plus 4.50%.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest cap agreement, interest rate collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Investments" shall mean, with respect to any Person, any
direct or indirect loan or other extension of credit (including, without
limitation, a guarantee) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any Person. "Investment" shall exclude (i) extensions of
trade credit by the Borrower and its Restricted Subsidiaries in the ordinary
course of business and (ii) loans and advances to employees and officers of the
Borrower and its Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes (it being understood that the purchase of Capital
Stock shall not be deemed to occur in the ordinary course of business for
purposes of this clause). For the purposes of Section 6.02, (i) "Investment"
shall include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Borrower or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; PROVIDED that no such payment of dividends or distributions or
receipt of any such other amounts (i) shall reduce the amount of any Investment
to the extent that payment of dividends or distributions or receipt of any such
amounts would be included in the Basket or (ii) shall reduce the amount of any
Investment below the initial amount of such Investment included as a Restricted
Payment. If the Borrower or any Restricted Subsidiary sells or otherwise
disposes of any Common Stock of any direct or indirect Wholly Owned Re-
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stricted Subsidiary that is a Guarantor such that, after giving effect to any
such sale or disposition, such Restricted Subsidiary is no longer a Wholly Owned
Restricted Subsidiary that is a Guarantor, the Borrower shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Israeli Subsidiaries" shall mean Superior Cable Israel Ltd.,
Cables of Zion and their respective Subsidiaries.
"Leaseholds" of any Person shall mean all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Lender" shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a "Lender" hereunder pursuant to
Section 11.04(b).
"LIBOR" shall mean, with respect to an Interest Period, (i)
the rate (expressed as a percentage per annum) for deposits in United States
dollars for a six-month period (if such Interest Period is for six months) or a
seven-day period (if such Interest Period is for seven days), as applicable,
beginning on the second London Banking Day after the Interest Determination Date
that appears on Telerate Page 3750 as of 11:00 a.m., London time, on the
Interest Determination Date; if Telerate Page 3750 does not include such a rate
or is unavailable on an Interest Determination Date, LIBOR for the Interest
Period shall be the arithmetic mean of the rates (expressed as a percentage per
annum) for deposits in a Representative Amount in United States dollars for a
six-month period (if such Interest Period is for six months) or a seven-day
period (if such Interest Period is for seven days), as applicable, beginning on
the second London Banking Day after the Interest Determination Date that appears
on Reuters Screen LIBO Page (as defined) as of 11:00 a.m., London time, on the
Interest Determination Date; if Reuters Screen LIBO Page does not include two or
more rates or is unavailable on an Interest Determination Date, the
Administrative Agent will request the principal London office of each of four
major banks in the London interbank market, as selected by the Administrative
Agent, to provide such bank's offered quotation (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such Interest
Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in United States dollars for a six-month period (if
such Interest Period is for six months) or a seven-day period (if such Interest
Period is for seven days), as applicable, beginning on the second London Banking
Day after the Interest Determination Date; if at least two such offered
quotations are so provided, LIBOR for the Interest Period will be the arithmetic
mean of such quotations; if fewer than two such quotations are so provided, the
Administrative Agent will request each of three major banks in New York City, as
selected by the Administrative Agent, to provide such bank's rate (expressed as
a percentage per annum), as of approximately 11:00 a.m., New York City time,
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on such Interest Determination Date, for loans in a Representative Amount in
United States dollars to leading European banks for a six-month period (if such
Interest Period is for six months) or a seven-day period (if such Interest
Period is for seven days), as applicable, beginning on the second London Banking
Day after the Interest Determination Date; if at least two such rates are so
provided, LIBOR for the Interest Period will be the arithmetic mean of such
rates; if fewer than two such rates are so provided, then LIBOR for the Interest
Period will be LIBOR in effect with respect to the immediately preceding
Interest Period, in each case divided (and rounded upward to the next whole
multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect of Eurocurrency funding or
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"LIBOR Loan" shall mean a Loan for which the Interest Rate on
such Loan is based on LIBOR.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean the senior subordinated term loans made on
the Borrowing Date pursuant to this Agreement. All references to "Loan" or
"Loans" shall mean Loans and both Types of Loans, I.E. the LIBOR Loan and the
Alternate Base Rate Loan.
"London Banking Day" shall mean any day in which dealings in
United States dollars are transacted or, with respect to any future date, are
expected to be transacted in the London interbank market.
"Margin Stock" shall have the meaning provided in
Regulation U.
"Material Adverse Effect" shall mean (x) a material adverse
effect on the Transaction or (y) a material adverse effect on the business,
properties, assets, nature of assets, liabilities, condition (financial or
otherwise) (i) on the Borrowing Date, of the Borrower and its Subsidiaries, the
Parent and its Subsidiaries or Essex and its Subsidiaries, in each case taken as
a whole, and both before and after giving effect to the Transaction and (ii)
thereafter, of the Borrower and its Subsidiaries (including Essex), or the
Parent and its Subsidiaries, in each case taken as a whole or (z) a material
adverse effect on the rights or remedies of the Lenders or the Administrative
Agent, or on the ability of any Credit Party to perform its obligations to them
hereunder or under any other Credit Document.
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"Maturity Date" shall mean November 27, 2006.
"Maximum Number" shall have the meaning provided in the
definition of "Tender Offer."
"Merger" shall mean the merger of Acquisition Co with and into
Essex International in which Essex International will be the surviving
corporation and remaining common stockholders of Essex International (other than
Acquisition Co) will receive Trust Preferred Securities and, to the extent less
than the Maximum Number of shares of common stock of Essex International are
accepted in the Tender Offer, any of the Tender Offer Cash Consideration not
paid.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of October 21, 1998 among the Parent, Acquisition Co and Essex
International pursuant to which the Parent will acquire 100% of the equity
securities of Essex International.
"Mexican Subsidiaries" shall mean any Wholly Owned Restricted
Subsidiary of the Borrower, Essex or any of their respective Subsidiaries
organized under the laws of Mexico in order to make the investments contemplated
by Section 6.02(b)(7).
"Minimum Condition" shall have the meaning provided in the
definition of "Tender Offer."
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean, with respect to any Asset
Sale, the proceeds in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when actually received in the form of
cash or Cash Equivalents (other than the portion of any such deferred payment
constituting interest) received by the Borrower or any of its Restricted
Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses
and fees relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions), (b) taxes paid or
payable after taking into account any reduction in consolidated tax liability
due to available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be provided by the Borrower or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Borrower or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale; PROVIDED,
HOWEVER, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Cash Proceeds.
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"Non-U.S. Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the Parent,
the Borrower, Essex or any one or more of their respective Subsidiaries
primarily for the benefit of employees of the Parent, the Borrower, Essex or
such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment or any such plan as to which the Parent, the Borrower,
Essex or any of their respective Subsidiaries may have any liability.
"Note" shall have the meaning provided in Section 1.04.
"Notice of Voluntary Prepayment" shall have the meaning
provided in Section 2.01(a).
"Notice Office" shall mean the office of the Administrative
Agent located at One Bankers Trust Plaza, New York, New York 10006, or such
other office as the Administrative Agent may hereafter designate in writing as
such to the other parties hereto.
"Obligations" shall mean all obligations for principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other liabilities payable under the documentation governing any
Indebtedness.
"Offer to Purchase" shall mean the offer to purchase for cash
up to 22,562,135 shares of common stock of Essex International at $32.00 net per
share by Acquisition Co dated as of October 28, 1998.
"Officers' Certificate" shall mean a certificate, signed by
the chairman, a vice chairman, the president, or any vice president of a Credit
Party, and attested to by the secretary or any assistant secretary of such
Credit Party.
"Other Hedging Agreements" shall mean (x) any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values and (y) agreements
relating to the future purchase of commodities or designed to protect against
fluctuations in the prices of specific commodities.
"Parent" shall have the meaning provided in the first
paragraph to this Agreement.
"Parent Common Stock" shall mean shares of common stock, $.01
par value per share, of the Parent.
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"Parent Tax Allocation Agreement" shall mean the tax
allocation agreement by and among the Borrower and its Subsidiaries dated as of
October 2, 1996, effective as of May 1, 1996.
"Payment Office" shall mean the office of the Administrative
Agent located at One Bankers Trust Plaza, New York, New York 10006, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guarantee Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean a fraction (expressed as a
percentage), the numerator of which is the Commitment of such Lender and the
denominator of which is the Borrowing Amount.
"Permitted Investments" shall mean (i) Investments by the
Borrower or any Restricted Subsidiary in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary that is a
Guarantor or that will merge or consolidate into the Borrower or a Wholly Owned
Restricted Subsidiary that is a Guarantor; (ii) Investments in the Borrower or
any Guarantor by any Restricted Subsidiary; (iii) Investments by the Borrower or
any Restricted Subsidiary in any Guarantor; (iv) Investments in cash and Cash
Equivalents; provided that any such Investments (including in cash) (other than
Investments denominated in Dollars) shall only be made to the extent necessary
to fund the local operations of the Foreign Subsidiaries; (v) Interest Rate
Protection Agreements and Other Hedging Agreements entered into in the ordinary
course of the Borrower's or its Restricted Subsidiaries' businesses and
otherwise in compliance with this Agreement; (vi) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers or in good faith settlement or delinquent obligations and disputes
with trade creditors or customers; (vii) Investments made by the Borrower or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with Section 6.03; (viii) guarantees of
Indebtedness and other obligations otherwise permitted under this Agreement; and
(ix) Investments identified in Schedule VIII existing on the Closing Date.
"Permitted Liens" shall mean (i) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other like Liens arising in the ordinary course of business, deposits made to
obtain the release of such Liens, and with respect to amounts not yet delinquent
for a period of more than 60 days or being contested in good faith by an
appropriate process of law, and for which a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made; (ii) Liens
incurred or pledges or deposits made in the ordinary course of business to
secure obligations under
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workers' compensation, unemployment insurance and other types of social security
or similar legislation; (iii) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and appeal
bonds, governmental contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (iv) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods in the ordinary course of business; (v) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof; (vi) Liens encumbering customary initial deposits
and margin deposits, and other Liens incurred in the ordinary course of business
that are within the general parameters customary in the industry, in each case
securing Indebtedness under Interest Rate Protection Agreements and forward
contracts, option futures contracts, futures options or similar agreements or
arrangements designed to protect the Borrower or any Restricted Subsidiary from
fluctuations in the price of commodities; (vii) Liens encumbering deposits made
in the ordinary course of business to secure nondelinquent obligations arising
from statutory, regulatory, contractual or warranty requirements of the Borrower
or the Restricted Subsidiaries for which a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made; (viii)
Liens arising out of consignment or similar arrangements for the sale of goods
entered into by the Borrower or any Restricted Subsidiary in the ordinary course
of business in accordance with past practices; (ix) any interest or title of a
lessor in the property subject to any lease, whether characterized as
capitalized or operating other than any such interest or title resulting from or
arising out of a default by the Borrower or any Restricted Subsidiary of its
obligations under such lease; (x) Liens arising from filing UCC financing
statements for precautionary purposes in connection with true leases of personal
property that are otherwise permitted under this Agreement and under which the
Borrower or any Restricted Subsidiary is lessee; (xi) Liens securing Purchase
Money Obligations incurred pursuant to Section 6.01(ix) and other purchase money
or similar liens incurred in the ordinary course of business and consistent with
past practice; (xii) Liens in favor of the Administrative Agent; (xiii) Liens on
the receivables subject to the Receivables Financing Agreement and Receivables
Related Assets, in each case securing the Receivables Financing Agreement; (xiv)
Liens set forth on Schedule X securing Indebtedness of Essex or any of its
Subsidiaries pursuant to the Essex Capital Lease Facility; (xv) Liens on assets
of Essex Canada securing the Essex Canadian Facility and any permitted
refinancing thereof; and (xvi) Liens on the assets of the Mexican Subsidiaries
to secure Indebtedness permitted under Section 6.01(xiv).
"Permitted Refinancing" shall mean with respect to any Person,
Indebtedness of such Person issued in exchange for, or the proceeds from the
issuance and sale or disbursement of which are used to substantially
concurrently repay, redeem, refund, refinance, discharge or otherwise retire for
value, in whole or in part (collectively, "repay"), or consti-
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tuting an amendment, modification or supplement to, or a deferral or renewal of
(collectively, an "amendment"), any Indebtedness of such Person incurred in
accordance with this Agreement (a) in a principal amount (or, if such Permitted
Refinancing provides for an amount less than the principal amount thereof to be
due and payable upon the acceleration thereof, with an original issue price) not
in excess of (without duplication) (i) the principal amount or the original
issue price, as the case may be, of the Indebtedness so refinanced (or, if such
Permitted Refinancing refinances Indebtedness under a revolving credit facility
or other agreement providing a commitment for subsequent borrowings, with a
maximum commitment not to exceed the maximum commitment under such revolving
credit facility or other agreement) plus (ii) unpaid accrued interest on such
Indebtedness plus (iii) premiums, penalties, fees and expenses actually incurred
by such Person in connection with the repayment or amendment thereof and (b)
with respect to Permitted Refinancing that repays or constitutes an amendment to
Subordinated Indebtedness, such Refinancing Indebtedness (x) shall not have any
fixed mandatory redemption or sinking fund requirement in an amount greater than
or at a time prior to the amounts and times specified in such repaid or amended
Subordinated Indebtedness, except to the extent that any such requirement
applies on a date after the Maturity Date and (y) shall contain subordination
and default provisions no less favorable in any material respect to the Lenders
than those contained in such repaid or amended Subordinated Indebtedness.
"Person" shall mean an individual, partnership, limited
liability corporation, corporation, unincorporated organization, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Plan" shall mean any multiemployer plan or single-employer
plan as defined in Section 4001 of ERISA, which is maintained or contributed to
by (or to which there is an obligation to contribute of) the Borrower, any of
its Subsidiaries or any ERISA Affiliate and each such plan for the five calendar
year period immediately following the latest date on which the Borrower, any of
its Subsidiaries or any ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan or any such plan as to which the Borrower,
any of its Subsidiaries or any ERISA Affiliate may have any liability; PROVIDED,
HOWEVER, the term "Plan" shall not include any Non-U.S. Pension Plan.
"Preferred Stock" of any Person shall mean any Capital Stock
of such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
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"Projections" shall mean the financial projections dated
November 10, 1998 which include the projected consolidated and consolidating
results of the Parent and its Subsidiaries (including Essex) for at least the
five fiscal years ended after the Borrowing Date.
"Purchase Money Indebtedness" shall mean Indebtedness of the
Borrower and its Restricted Subsidiaries incurred in the normal course of
business for the purpose of financing all or any part of the purchase price, or
the cost of installation, construction or improvement, of property or equipment;
PROVIDED, HOWEVER, (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of the
Borrower or any Restricted Subsidiary other than the property and assets so
acquired or constructed and (B) any Lien securing such Indebtedness shall be
created within 360 days of such acquisition or construction or, in the case of a
refinancing of any Purchase Money Indebtedness, within 360 days of such
refinancing.
"Qualified Capital Stock" shall mean any Capital Stock that
is not Disqualified Capital Stock.
"Real Property" of any Person shall mean all the right, title
and interest of such Person in and to land, buildings, improvements and
fixtures, including Leaseholds.
"Receivables Financing Agreement" shall mean (i) the Essex
Funding Agreement and any amendments or refinancings thereof; and (ii) a
replacement accounts receivable facility (it being understood that such
replacement facility may be in the form of a sale of receivables and Receivables
Related Assets or fractional undivided interests therein); PROVIDED that, in
each case, (x) the advance rates, discounts and other pricing terms shall be no
more adverse to the Borrower and its Subsidiaries than those governing similar
facilities for similar credits, but in no case shall such in the aggregate
result in proceeds therefrom being less than 75% of the book value (or, if
greater, the fair market value) of such receivables and Receivables Related
Assets, (y) neither the Borrower nor any of its Subsidiaries (other than a
Receivables Subsidiary) provides, directly or indirectly, any credit support
with respect to such facility, other than as described in clause (c)(ii) of the
definition of Receivables Subsidiary and (z) in the case of amendments and
refinancings of the Essex Funding Agreement, the terms thereof are no more
adverse to the Borrower and its Subsidiaries than the terms of such Agreement,
as in effect on the Initial Borrowing Date, except as specifically permitted by
clause (x) of this proviso.
"Receivables Related Assets" shall mean accounts receivable
and instruments, chattel papers, obligations, general intangibles and other
similar assets, in each case, relating to receivables subject to a Receivables
Financing Agreement, including interests in merchandise or goods, the sale or
lease of which gave rise to such receivables, related contractual rights,
guarantees, insurance proceeds, collections, other related assets and proceeds
of all of the foregoing.
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"Receivables Subsidiary" shall mean (i) Essex Funding, in the
case of a Receivables Financing Agreement that meets the condition of clause (i)
of the definition thereof, or (ii) a Wholly Owned Restricted Subsidiary of the
Borrower (a) that is designated (as set forth below) as a "Receivables
Subsidiary" by the Board of Directors of the Borrower, (b) that does not engage
in, and whose charter prohibits it from engaging in, any activities other than
in connection with the Receivables Financing Agreement on the terms otherwise
permitted hereby, (c) no portion of the Indebtedness or any other obligation
(contingent or otherwise) of which under such Receivables Financing Agreement
(i) is guaranteed by the Borrower or any other Restricted Subsidiary of the
Borrower, (ii) is recourse to or obligates the Borrower or any other Restricted
Subsidiary of the Borrower in any way other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with such Receivables Financing Agreement or (iii)
subjects any property or asset of the Borrower or any other Restricted
Subsidiary of the Borrower, directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with such a Receivables Financing Agreement, (d) with which neither
the Borrower nor any other Restricted Subsidiary of the Borrower has any
material contract, agreement, arrangement or understanding and (e) with respect
to which neither the Borrower nor any other Restricted Subsidiary of the
Borrower has any obligation to maintain or preserve such Subsidiary's financial
condition or cause such Subsidiary to achieve certain levels of operating
results. Any such designation by the Board of Directors of the Borrower shall be
evidenced by filing with the Administrative Agent a certified copy of the
resolutions of the Board of Directors of the Borrower giving effect to such
designation and a certificate of the chief financial officer of the Borrower or
other Authorized Officer of the Borrower certifying that such designation
complied with the foregoing conditions.
"redeem" means redeem, repurchase, defease or otherwise
acquire or retire for value; and "redemption" and "redeemed" have correlative
meanings.
"refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "refinanced" and "refinancing"
shall have correlative meanings.
"Refinancing" shall mean, at the closing of the Acquisition,
(i) the refinancing of the Existing Superior Credit Agreement by the Parent and
(ii) the refinancing of all obligations (not to exceed $280,000,000) outstanding
under the Essex Credit Agreements by Essex.
"Register" shall have the meaning provided in Section 11.15.
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"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Replaced Lender" shall have the meaning provided in
Section 1.10.
"Replacement Assets" shall have the meaning provided in
Section 2.02(a).
"Replacement Lender" shall have the meaning provided in
Section 1.10.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan as to which the 30-day notice
requirement has not been waived by the PGBC by regulation.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Senior Indebtedness; PROVIDED that if,
and for so long as, any Senior Indebtedness lacks such a representative, then
the Representative for such Senior Indebtedness shall at all times constitute
the holders of a majority in outstanding principal amount of such Senior
Indebtedness in respect of any Senior Indebtedness.
"Representative Amount" shall mean a principal amount of not
less than U.S. $1,000,000 for a single transaction in the relevant market at the
relevant time.
"Required Lenders" shall mean Lenders the sum of whose
outstanding Loans (or, if prior to the Borrowing Date, Commitments) represent an
amount greater than 50% of the sum of all outstanding Loans (or, if prior to the
Borrowing Date, the Total Commitment).
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"Restricted Payment" shall have the meaning provided in
Section 6.02(a).
"Restricted Subsidiary" shall mean any Subsidiary of the
Borrower which at the time of determination is not an Unrestricted Subsidiary.
"Reuters Screen LIBO Page" shall mean the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service).
"S&P" shall mean Standard & Poor's Ratings Services.
"SEC" shall mean the Securities and Exchange Commission and
any successor thereto.
"Section 2.06(b)(ii) Certificate" shall have the meaning
provided in Section 2.06(b)(ii).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Senior Indebtedness" shall mean, with respect to the Borrower
or any Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness
(including guarantees) of the Borrower or such Guarantor, whether outstanding on
the Borrowing Date or thereafter created, incurred or assumed, in each case as
permitted hereunder pursuant to clause (ii) or subclause (x) of clause (viii)
(only to the extent relating to Indebtedness incurred under the Senior Secured
Credit Agreement) or clause (xvi) (so long as such additional Indebtedness is
incurred under the Senior Secured Credit Agreement) of Section 6.01, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Loans or the
Guarantee of such Guarantor. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) any Indebtedness of the Borrower or such
Guarantor to a Restricted Subsidiary of the Borrower, (ii) Indebtedness to, or
guaranteed on behalf of, any employee of the Borrower or such Guarantor or any
Subsidiary of the Borrower or such Guarantor (including, without limitation,
amounts owed for compensation), (iii) obligations for goods, materials or
services purchased in the ordinary course of business or obligations consisting
of trade payables, (iv) Indebtedness represented by Disqualified Capital Stock,
(v) any liability for federal, state, local or other taxes owed or owing by the
Borrower or such Guar-
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antor, (vi) that portion of any Indebtedness to the extent incurred in violation
of the provisions set forth under Section 6.01 (but, as to any such obligation,
no such violation shall be deemed to exist for purposes of this clause (vi) if
the holder(s) of such obligation or their representative and the Administrative
Agent shall have received an Officers' Certificate of the Borrower to the effect
that the incurrence of such Indebtedness does not (or, in the case of revolving
credit Indebtedness, that the incurrence of the entire committed amount thereof
at the date on which the initial borrowing thereunder is made would not) violate
such provisions of this Agreement), (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Borrower, (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness of
the Borrower or such Guarantor and (ix) Indebtedness incurred to repurchase
capital stock of the Borrower from employees or former employees.
"Senior Secured Credit Agreement" means the Amended and
Restated Credit Agreement dated as of November 27, 1998, among the Borrower,
Essex Group, Inc., the guarantors named therein, the lenders party thereto in
their capacities as lenders thereunder, Bankers Trust Company, as administrative
agent, Merrill Lynch & Co., as documentation agent, and Fleet National Bank, as
syndication agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of the Borrower as additional
borrowers or guarantors thereunder to the extent permitted hereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Senior Secured Credit Documents" shall mean and include each
of the documents and other agreements (including, without limitation, the Senior
Secured Credit Agreement) governing or evidencing the Senior Secured Credit
Loans, as in effect on the Borrowing Date and as the same may be amended,
modified or supplemented from time to time pursuant to the terms thereof.
"Services Agreement" shall mean the services agreement between
Alpine and the Parent, dated as of October 2, 1996, as amended May 1, 1997 and
May 1, 1998.
"Significant Subsidiary," with respect to any Person, means
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
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"Subordinated Indebtedness" means Indebtedness of the Borrower
or any Restricted Subsidiary that is expressly subordinated in right of payment
to the Loans or the Guarantee of such Restricted Subsidiary.
"Subsidiary," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person; in the case of the Borrower, a Subsidiary of the Borrower shall
include, at any time after the consummation of the Tender Offer, Essex and its
Subsidiaries. Unless the context otherwise requires, references herein to a
Subsidiary shall refer to a Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean (i) each of the Borrower's
Domestic Subsidiaries existing on the Borrowing Date other than its Unrestricted
Subsidiaries, Essex Funding, any Receivables Subsidiary and Essex Canada, (ii)
DNE Systems and each of its Subsidiaries, (iii) each of the Borrower's Domestic
Subsidiaries that in the future executes an amendment to this Agreement in which
such Domestic Subsidiary agrees to be bound by the terms of this Agreement as a
Subsidiary Guarantor pursuant to Section 6.09 and (iv) any other Subsidiary
which guarantees the Senior Secured Credit Agreement; PROVIDED that any Person
constituting a Subsidiary Guarantor as described above shall cease to constitute
a Subsidiary Guarantor when its respective Subsidiary Guarantee is released in
accordance with the terms of this Agreement.
"Superior Preferred Stock" shall mean the 6% Cumulative
Preferred Stock, par value $1.00 per share, of Superior Telecommunications
having an aggregate liquidation preference of $20,000,000 (but shall include any
Parent preferred stock issued in exchange therefor pursuant to clause (b)(3) of
Section 6.02).
"Superior Telecommunications" shall mean Superior
Telecommunications Inc., a Georgia corporation and a wholly owned Subsidiary of
the Borrower.
"Superior Trust I" shall mean Superior Trust I, a statutory
business trust formed under the laws of the State of Delaware, the common
securities of which shall be directly or indirectly wholly owned by the Parent.
"Syndication Agent" shall mean Fleet Corporate Finance, Inc.,
and any successor corporation thereto by merger or otherwise.
"Syndication Date" shall mean that date upon which the
Administrative Agent determines (and notifies the Borrower and the Lenders) that
the primary syndication (and resultant addition of Persons as Lenders pursuant
to Section 11.04(b)) has been completed.
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"Taxes" shall have the meaning provided in Section 2.06(a).
"Telerate Page 3750" shall mean the display designated as
"Page 3750" on the Dow Jones Telerate Service (or such other page as may replace
Page 3750 on that service).
"Tender Offer" shall mean the tender offer by Acquisition Co
for no less than a majority (the "Minimum Condition"), and no more than
22,562,135 (the "Maximum Number") shares, of Essex International's outstanding
common stock.
"Tender Offer Documents" shall mean the Offer to Purchase, the
Schedule 14D-1 filed by the Parent and Acquisition Co, the Schedule 14D-9 filed
by Essex and all amendments and exhibits thereto and related documents filed
with the SEC or distributed to the stockholders of Essex.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"Transaction" shall mean, collectively, (i) the consummation
of the Acquisition, (ii) the incurrence of the loans under the Senior Secured
Credit Agreement, (iii) the consummation of the Refinancing, (iv) the entering
into of the Credit Documents and the incurrence of all Loans on the Borrowing
Date, (v) the consummation of the Merger and (vi) the payment of fees and
expenses in connection with the foregoing.
"Transaction Date" shall have the meaning provided in the
definition of "Consolidated Fixed Charge Coverage Ratio."
"Trust Preferred Securities" shall mean collectively: (i) the
shares of Series A Cumulative Convertible Exchangeable Trust Preferred
Securities of Superior Trust I having an aggregate liquidation preference of
approximately $167,000,000; (ii) the long-term, subordinated debenture issued by
the Parent and purchased by Superior Trust I which, under certain circumstances,
may be distributed to the holders of the Series A Cumulative Convertible
Exchangeable Trust Preferred Securities (the "Debentures"); and (iii) shall
include the guarantee by the Parent of dividend, redemption and liquidation
payments as in effect on the Borrowing Date, all substantially in the form of
Exhibit G hereto, with such modifications consistent with the substantive
provisions thereof, as to which the Administrative Agent may agree, such
agreement not to be unreasonably withheld or delayed. The Guarantee of the
Parent shall be pari passu with the Debentures and the guarantee referred to in
clause (iii) of the preceding sentence.
"Type" shall mean the type of Loan determined with regard to
the interest option applicable thereto, I.E., whether a Base Rate Loan or a
LIBOR Loan.
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"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"United States" and "U.S." shall each mean the United States
of America.
"Unrestricted Subsidiary" of any Person shall mean (i) any
Subsidiary of such Person that at the time of determination shall be or continue
to be designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided in clause (iii) below; (ii) any Subsidiary of an
Unrestricted Subsidiary; and (iii) any Subsidiary of the Borrower designated as
such pursuant to Section 6.10. On the Borrowing Date, the Borrower shall have no
Unrestricted Subsidiaries other than the Israeli Subsidiaries.
"Weighted Average Life to Maturity" shall mean, when applied
to any Indebtedness at any date, the number of years obtained by dividing (a)
the then outstanding aggregate principal amount of such Indebtedness into (b)
the sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect thereof,
by (ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person shall mean
any Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
"Year 2000 Compliant" shall mean that all Information Systems
and Equipment accurately process date data (including, but not limited to,
calculating, comparing and sequencing), before, during and after the year 2000,
as well as same and multi-century dates, or between the years 1999 and 2000,
taking into account all leap years, including the fact that the year 2000 is a
leap year, and further, that when used in combination with, or interfacing with,
other Information Systems and Equipment, shall accurately accept, release and
exchange date data, and shall in all material respects continue to function in
the same manner as it performs today and shall not otherwise impair the accuracy
or functionality of Information Systems and Equipment.
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10. THE AGENTS.
10.01. APPOINTMENT. Each Lender hereby irrevocably designates
and appoints BTCo as Administrative Agent of such Lender to act as specified
herein and in the other Credit Documents, and each such Lender hereby
irrevocably authorizes BTCo as the Administrative Agent to take such action on
its behalf under the provisions of the Credit Documents and to exercise such
powers and perform such duties as are expressly delegated to the Administrative
Agent by the terms of the Credit Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent agrees to act as
such upon the express conditions contained in this Section 10. Notwithstanding
any provision to the contrary elsewhere in any Credit Document, no Agent shall
have any duties or responsibilities, except those expressly set forth in the
Credit Documents, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise (including by operation of law) to
exist against any Agent. The provisions of this Section 10 are solely for the
benefit of the Agents and the Lenders, and neither the Parent, the Borrower,
Essex nor any of their respective Subsidiaries or Affiliates shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agents shall act
solely as agents of the Lenders and the Agents do not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Parent, the Borrower or any of their respective Subsidiaries (including
Essex) or Affiliates.
10.02. DELEGATION OF DUTIES. The Agents may execute any of
their duties under or any Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agents shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by them
with reasonable care except to the extent otherwise required by Section 10.03.
10.03. EXCULPATORY PROVISIONS. No Agent or any of its
Affiliates or any of their officers, directors, employees, agents or
attorneys-in-fact shall be (i) liable for any action lawfully taken or omitted
to be taken by it or such Person in its capacity as an Agent under or in
connection with any Credit Document (except to the extent found to have resulted
from such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Parent, the Borrower, Essex, any of
their respective Subsidiaries or any of their respective officers contained in
any Credit Document, any other Document or in any certificate, report, statement
or other document referred to or provided for in, or received by any Agent under
or in connection with, any Document or for any failure of the Parent, the
Borrower, Essex or any of their respective Subsidiaries or any of their
respective officers to perform its obligations hereunder or thereunder. No Agent
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or condition
of, any Document, or to inspect the properties,
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books or records of the Parent, the Borrower, Essex or any of their respective
Subsidiaries. No Agent shall be responsible to any Lender for the effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of any
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by any Agent to the
Lenders or by or on behalf of the Parent, the Borrower, Essex or any of their
respective Subsidiaries to any Agent or any Lender or be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
10.04. RELIANCE BY AGENTS. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, telex or teletype message, statement, order or other
document or conversation reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Parent, the Borrower, Essex or any of their respective Subsidiaries),
independent accountants and other experts selected by the Agents. Each Agent
shall be fully justified in failing or refusing to take any action under any
Credit Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under any of the Credit Documents in accordance with a request of
the Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
10.05. NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default unless the Administrative Agent has actually received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders. The Administrative Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders; PROVIDED that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
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10.06. NONRELIANCE ON AGENTS AND OTHER LENDERS. Each Lender
expressly acknowledges that no Agent or any of its Affiliates nor any of their
respective officers, directors, employees, agents or attorneys-in-fact have made
any representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of the Parent, the Borrower, Essex or
any of their respective Subsidiaries, shall be deemed to constitute any
representation or warranty by such Agent or any such other Person to any Lender.
Each Lender represents to the Agents that it has, independently and without
reliance upon any Agent or any such other Person or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Parent, the
Borrower, Essex and their respective Subsidiaries and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon any Agent or
any such other Person or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
condition, prospects and creditworthiness of the Parent, the Borrower, Essex and
their respective Subsidiaries. No Agent shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of the Borrower, Essex or any of their respective Subsidiaries
which may come into the possession of any Agent or any of its Affiliates or any
of their officers, directors, employees, agents or attorneys-in-fact.
10.07. INDEMNIFICATION. The Lenders agree to indemnify each
Agent in its capacity as such ratably according to their respective
"percentages" as used in determining the Required Lenders at such time, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against such Agent in its capacity as such in any way relating to or
arising out of any Credit Document, or any documents contemplated by or referred
to herein or therein, or the transactions contemplated hereby or thereby or any
action taken or omitted to be taken by the Agent under or in connection with any
of the foregoing, but only to the extent that any of the foregoing is not paid
by the Parent, the Borrower, Essex or any of their respective Subsidiaries;
PROVIDED that no Lender shall be liable to any Agent for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent found to have
resulted solely from the gross negligence or willful misconduct of such Agent.
If any indemnity furnished to any Agent for any purpose shall, in the opinion of
such Agent be insufficient or become impaired, such Agent may call for
additional indemnity and cease, or not commence, to do the acts indem-
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nified against until such additional indemnity is furnished. The agreements in
this Section 10.07 shall survive the payment of all Obligations.
10.08. AGENTS IN THEIR INDIVIDUAL CAPACITY. Each Agent and
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Parent, the Borrower, Essex and their respective
Subsidiaries and Affiliates as though such Agent were not an Agent hereunder.
With respect to the Loans made by it and all Obligations owing to it, each Agent
shall have the same rights and powers under this Agreement as any Lender and may
exercise the same as though it were not an Agent and the terms "Lender" and
"Lenders" shall include such Agent in its individual capacity.
10.09. HOLDERS. The Administrative Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Administrative Agent. Any
request, authority or consent of any Person or entity who, at the time of making
such request or giving such authority or consent, is the holder of any Note
shall be conclusive and binding on any subsequent holder, transferee, assignee
or indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
10.10. RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT. The Administrative Agent may resign as the Administrative
Agent upon 60 days' notice to the Lenders and the Borrower. Upon the resignation
of the Administrative Agent, the Required Lenders shall appoint from among the
Lenders a successor Administrative Agent which is a bank or a trust company for
the Lenders subject to prior approval by the Borrower (such approval not to be
unreasonably withheld; PROVIDED that such approval shall not be required if a
Default or an Event of Default then exists), whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term "Administrative Agent" shall include such successor agent effective
upon its appointment, and the resigning Administrative Agent's rights, powers
and duties as the Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement. After the resignation of the Administrative Agent
hereunder, the provisions of this Section 10 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.
11. MISCELLANEOUS.
11.01. PAYMENT OF EXPENSES, ETC. The Parent and the Borrower,
jointly and severally, agree to: (i) whether or not the transactions herein
contemplated are consummated, pay all out-of-pocket costs and expenses of the
Administrative Agent (including, without limitation, the reasonable fees and
disbursements of Cahill Gordon & Reindel) in
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connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto and in connection with the
Administrative Agent's syndication efforts with respect to this Agreement; (ii)
pay all out-of-pocket costs and expenses of the Administrative Agent and each of
the Lenders in connection with the enforcement of the Credit Documents and the
documents and instruments referred to therein and, after a Default or an Event
of Default shall have occurred and be continuing, the protection of the rights
of the Administrative Agent and each of the Lenders thereunder (including,
without limitation, the fees and disbursements of counsel for the Administrative
Agent and for each of the Lenders); (iii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iv) indemnify each Agent and each Lender and
each of their Affiliates, and each of their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred by
any of them as a result of, or arising out of, or in any way related to, or by
reason of, any investigation, litigation or other proceeding (whether or not any
such Person is a party thereto and whether or not any such investigation,
litigation or other proceeding is between or among any such Person, or any third
Person or otherwise) related to the entering into and/or performance of any
Credit Document or the use of the proceeds of any Loans hereunder or the
consummation of any other transactions contemplated in any Credit Document (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent found to have been incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified), in each case, including, without
limitation, the reasonable fees and disbursements of counsel and independent
consultants incurred in connection with any such investigation, litigation or
other proceeding.
11.02. RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, the
Administrative Agent and each Lender are hereby authorized at any time or from
time to time, without presentment, demand, protest or any other notice of any
kind to the Borrower or any of its Subsidiaries or any Guarantor or any other
Person, any such notice, to the full extent permitted by applicable law, being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by the Administrative Agent or such Lender (including, without limitation,
by branches and agencies of the Administrative Agent and such Lender wherever
located) to or for the credit or the account of the Borrower or any Guarantor
against and on account of the Obligations of the Borrower or any Guarantor to
the Administrative Agent or such Lender under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations of the Borrower or any Guarantor purchased by such Lender pursuant
to Section 11.06(b), and
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all other claims of any nature or description arising out of or connected with
any Credit Document, irrespective of whether or not the Administrative Agent or
such Lender shall have made any demand hereunder and although said Obligations
shall be contingent or unmatured.
11.03. NOTICES. Except as otherwise expressly PROVIDED
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered, if to any Credit
Party, at the address specified for such Credit Party on Schedule XI; if to any
Lender, at the address specified for such Lender on Schedule II; or, at such
other address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied or cabled or sent by overnight courier, and
shall be effective when received.
11.04. BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, neither the
Borrower nor any Guarantor may assign or transfer any of its rights, obligations
or interest under any Credit Document without the prior written consent of the
Lenders; and PROVIDED, FURTHER, that, although any Lender may transfer, assign
or grant participations in its rights hereunder, such Lender shall remain a
"Lender" for all purposes hereunder (and may not transfer or assign all or any
portion of its Commitment hereunder except as provided in Section 11.04(b)) and
the transferee, assignee or participant, as the case may be, shall not
constitute a "Lender" hereunder; and PROVIDED, FURTHER, that no Lender shall
transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of any Credit Document except to
the extent such amendment or waiver would (i) extend the Maturity Date, or
reduce the rate or extend the time of payment of interest or fees on Loans in
which such participant is participating (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the
principal amount thereof (it being understood that any amendment or modification
to the financial definitions in this Agreement shall not constitute a reduction
in any rate of interest or fees for purposes of this clause (i), or increase the
amount of the participant's participation over the amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default
shall not constitute a change in the terms of such participation, and that an
increase in any Commitment or Loan shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof) or (ii) consent to the assignment or transfer by the Borrower of its
rights and obligations under this Agreement. In the case of any such
participation, the participant shall not have any rights under any of the Credit
Documents (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation.
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(b) Notwithstanding the foregoing, any Lender (or any Lender
together with one or more other Lenders) may (x) assign all or a portion of its
Commitment (and related outstanding Obligations hereunder) to (i) any Affiliate
of such Lender which is at least 50% owned by such Lender or its parent company
or to one or more Lenders or (ii) in the case of any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is managed
by the same investment advisor of such Lender or by an Affiliate of such
investment advisor or (y) assign all, or if less than all, a portion equal to at
least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders,
of such Commitment (and related outstanding Obligations hereunder) to one or
more Eligible Transferees (treating any fund that invests in bank loans and any
other fund that invests in bank loans and is managed by the same investment
advisor of such fund or by an Affiliate of such fund as a single Eligible
Transferee), each of which assignees shall become a party to this Agreement as a
Lender by execution of an Assignment and Assumption Agreement; PROVIDED that (i)
at such time Schedule I shall be deemed modified to reflect the Commitments of
such new Lender and of the existing Lenders, (ii) upon surrender of the old
Notes, new Notes will be issued, at the Borrower's expense, to such new Lender
and to the assigning Lender, such new Notes to be in conformity with the
requirements of Section 1.04 (with appropriate modifications) to the extent
needed to reflect the revised Commitments, (iii) the consent of the
Administrative Agent shall be required in connection with any such assignment
pursuant to clause (y) of this Section 11.04(b) and (iv) the Administrative
Agent shall receive at the time of each such assignment, from the assigning or
assignee Lender, the payment of a non-refundable assignment fee of $3,500; and
PROVIDED, FURTHER, that such transfer or assignment will not be effective until
recorded by the Administrative Agent on the Register pursuant to Section 11.15.
To the extent of any assignment pursuant to this Section 11.04(b), the assigning
Lender shall be relieved of its obligations hereunder with respect to its
assigned Commitment. At the time of each assignment pursuant to this Section
11.04(b) to a Person which is not already a Lender hereunder and which is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) for Federal income tax purposes, the respective assignee Lender shall
provide to the Borrower and the Administrative Agent the appropriate Internal
Revenue Service Forms (and, if applicable, a Section 2.06(b)(ii) Certificate)
described in Section 2.06(b).
(c) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank.
11.05. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any party in exercising any right, power or privilege under any
Credit Document and no course of dealing between any Credit Party and the
Administrative Agent or any Lender shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege under any Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
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remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which any party would otherwise have. No notice to or demand
on any Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Administrative Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11.06. PAYMENTS PRO RATA. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations of such Credit Party, it shall, except as
otherwise provided in this Agreement, distribute such payment to the Lenders
(other than any Lender that has consented in writing to waive its PRO RATA share
of such payment) PRO RATA based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or fees, of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total of such
Obligation then owed and due to such Lender bears to the total of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, determined in accordance with the terms of this Agreement, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Credit Party to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; PROVIDED that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
11.07. CALCULATIONS; COMPUTATIONS. (a) The financial
statements to be furnished to the Lenders pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in
writing by the Borrower to the Lenders); PROVIDED that except as otherwise
specifically provided herein, all computations determining compliance with
Sections 2.02 and 6, including definitions used therein, shall, in each case,
utilize accounting principles and policies in effect at the time of the
preparation of, and in conformity with those used to prepare, the financial
statements delivered to the Lenders pursuant to Section 4.08(b). For purposes of
calculating Consolidated Net Income and the Consolidated Fixed Charge Coverage
Ratio, as of the Borrowing Date, Essex International shall be treated as a
Wholly Owned Restricted Subsidiary of the Borrower for so long as the Merger
Agreement remains in full force and effect.
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(b) All computations of interest and fees hereunder shall
be based on the actual number of days elapsed over a year of 360 days.
11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a)
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to any Credit Document
brought in any of the aforesaid courts, that any such court lacks jurisdiction
over such Credit Party. Each Credit Party irrevocably consents to the service of
process in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such Credit Party, at its
address for notices pursuant to Section 11.03, such service to become effective
30 days after such mailing. Each Credit Party hereby irrevocably waives any
objection to such service of process and further irrevocably waives and agrees
not to plead or claim in any action or proceeding commenced under any Credit
Document that service of process was in any way invalid or ineffective. Nothing
herein shall affect the right of the Administrative Agent, any Lender or the
holder of any Note to serve process in any other manner permitted by applicable
law or to commence legal proceedings or otherwise proceed against any Credit
Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with any Credit
Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
11.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts executed by all of the parties hereto shall be
lodged with the Borrower and the Administrative Agent.
11.10. EFFECTIVENESS. This Agreement shall become effective
on the date (the "Closing Date") on which the Borrower, each Guarantor, the
Administrative Agent, the
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Syndication Agent and each of the Lenders shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered the same
to the Administrative Agent at the Notice Office or, in the case of the Lenders,
shall have given to the Administrative Agent telephonic (confirmed in writing),
written, telex or facsimile notice (actually received) at such office that the
same has been signed and mailed to it. The Administrative Agent will give the
Borrower and each Lender prompt written notice of the occurrence of the Closing
Date.
11.11. HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
11.12. AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement
nor any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party thereto
and the Required Lenders; PROVIDED that no such change, waiver, discharge or
termination shall, without the consent of each Lender (with Obligations being
directly affected thereby in the case of the following clause (i)), (i) extend
any Maturity Date, or reduce the rate or extend the time of payment of interest
or fees on any Loan, or reduce the principal amount thereof (it being understood
that any amendment or modification to the financial definitions in this
Agreement shall not constitute a reduction in any rate of interest or fees for
purposes of this clause (i)), (ii) amend, modify or waive any provision of this
Section 11.12, (iii) reduce the percentage specified in the definition of
Required Lenders or (iv) consent to the assignment or transfer by the Company of
any of its rights and obligations under this Agreement; PROVIDED, FURTHER, that
no such change, waiver, discharge or termination shall (x) increase the
Commitment of any Lender over the amount thereof then in effect without the
consent of such Lender (it being understood that waivers or modifications of
conditions precedent, covenants, Defaults or Events of Default shall not
constitute an increase of the Commitment of any Lender, and that an increase in
the available portion of any Commitment of any Lender shall not constitute an
increase in the Commitment of such Lender) or (y) without the consent of the
Administrative Agent, amend, modify or waive any provision of Section 10 as the
same applies to the Administrative Agent or any other provision as the same
relates to the rights or obligations of the Administrative Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (iv), inclusive, of the first proviso to
Section 11.12(a), the consent of the Required Lenders is obtained but the
consent of one or more of such other Lenders whose consent is required is not
obtained, then the Borrower shall have the right, so long as all non-consenting
Lenders whose individual consent is required are treated as described in either
clauses (A) or (B) below, to either (A) replace each such non-consenting Lender
or Lenders
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with one or more Replacement Lenders pursuant to Section 1.10 so long as at the
time of such replacement, each such Replacement Lender consents to the proposed
change, waiver, discharge or termination or (B) repay outstanding Loans of such
Lender which gave rise to the need to obtain such Lender's consent, in
accordance with Section 2.01; PROVIDED that, unless the Loans repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through the
addition of new Lenders or the increase of outstanding Loans of existing Lenders
(who in each case must specifically consent thereto), then in the case of any
action pursuant to preceding clause (B) the Required Lenders (determined before
giving effect to the proposed action) shall specifically consent thereto;
PROVIDED, FURTHER, that in any event the Borrower shall not have the right to
replace a Lender or repay its Loans solely as a result of the exercise of such
Lender's rights (and the withholding of any required consent by such Lender)
pursuant to the second proviso to Section 11.12(a).
11.13. SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 1.07, 1.08, 2.06, 10.07 and 11.01 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
11.14. DOMICILE OF LOANS. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Bank; PROVIDED that the Borrower shall not be responsible for
costs arising under Section 1.07, 1.08 or 2.06 resulting from any such transfer
(other than a transfer pursuant to Section 1.09) to the extent such costs would
not otherwise be applicable to such Lender in the absence of such transfer.
11.15. REGISTER. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 11.15, to maintain a register (the "Register") on which it will
record the Loans made by each of the Lenders and each repayment in respect of
the principal amount of the Loans of each Lender. Failure to make any such
recordation, or any error in such recordation, shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Lender, the transfer
of the rights to the principal of, and interest on, any Loan shall not be
effective until such transfer is recorded on the Register maintained by the
Administrative Agent with respect to ownership of such Loans and prior to such
recordation all amounts owing to the transferor with respect to such Loans shall
remain owing to the transferor. The registration of assignment or transfer of
all or part of any Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
11.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Lender shall surrender the Notes (if
any) evidencing such Loans, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Lender
and/or the new Lender upon their request of same. The Parent and the Borrower,
jointly and severally,
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agree to indemnify the Administrative Agent from and against any and all losses,
claims, damages and liabilities of whatsoever nature which may be imposed on,
asserted against or incurred by the Administrative Agent in performing its
duties under this Section 11.15, except to the extent that any such losses,
claims, damages or liabilities are found to have resulted from the gross
negligence or willful misconduct of the Administrative Agent.
11.16. CONFIDENTIALITY. Each of the Lenders agrees that it
will use its reasonable efforts not to disclose without the prior consent of the
Borrower (other than to Affiliates of such Lenders and their respective
directors, employees, auditors, counsel or other professional advisors) any
confidential information with respect to the Borrower or any of its Subsidiaries
which is furnished pursuant to this Agreement; PROVIDED that any Lender may
disclose any such information (a) that is or has become generally available to
the public, (b) as may be required or appropriate (x) in any report, statement
or testimony submitted to any municipal, state or Federal or other governmental
regulatory body having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board or the Federal Deposit Insurance Corporation or
similar organizations (whether in the United States or elsewhere) or their
successors or (y) in connection with any request or requirement of any such
regulatory body, (c) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, (d) to comply with any
law, order, regulation or ruling applicable to such Lender, and (e) to any
prospective transferee in connection with any contemplated transfer of any of
the Notes or any interest therein by such Lender; PROVIDED that such prospective
transferee agrees to be bound by this Section 11.16 to the same extent as such
Lender.
11.17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.18. MARGIN STOCK. Notwithstanding any other provision of
this Agreement or the other Credit Documents to the contrary, prior to the
consummation of the Merger, no provision of this Agreement, including Section
6.05, or any other Credit Document shall be deemed to create a direct or
indirect security interest in the outstanding Common Stock of Essex while it is
Margin Stock and Acquisition Co may hold such Margin Stock and sell the
outstanding Common Stock of Essex for the fair market value thereof in
accordance with Section 6.03.
11.19. DNE SYSTEMS. With respect to all provisions of this
Agreement and other Credit Documents, all of the Capital Stock of DNE Systems
owned by the Parent shall be treated as if it is all owned directly by the
Borrower. As an example of the foregoing, to the extent that provisions of this
Agreement and the other Credit Documents would allow
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DNE Systems, as a Restricted Subsidiary of the Borrower, to pay dividends to its
shareholders or make loans, advances or distributions to its parent company or a
subsidiary of its parent company, such dividends, loans or advances shall only
be permitted hereunder or under the other Credit Documents to the extent that
they are paid to the Borrower or a Restricted Subsidiary of the Borrower that is
a Guarantor (except to the extent this Agreement or the Credit Documents
specifically would otherwise allow a Restricted Subsidiary of the Company to
make such dividends or other payments to the Parent). Without limiting the
foregoing, all financial statements and all financial tests contained herein
shall be determined as if all the Capital Stock of DNE Systems owned by the
Parent is owned by the Borrower. Notwithstanding the other provisions of this
Section 11.19, the Borrower and its Restricted Subsidiaries may make Investments
in DNE Systems or its Subsidiaries only to the extent necessary to fund, in
accordance with existing business practice, DNE Systems' existing operations as
of the Borrowing Date; PROVIDED, HOWEVER, that, notwithstanding the foregoing,
the Borrower and its Restricted Subsidiaries that are Guarantors may make
Investments in DNE Systems and its Subsidiaries to the extent that such
Investments are permitted by and are in accordance with the terms of Section
6.02(b)(14) (such Investments decreasing the basket provided in such Section
6.02(b)(14)).
12. GUARANTEE.
12.01. THE GUARANTEE. (a) In order to induce the Lenders to
enter into this Agreement and to extend credit hereunder and in recognition of
the direct and indirect benefits to be received by each Guarantor from the
proceeds of the Loans, each Guarantor hereby agrees with the Lenders as follows:
Each Guarantor hereby unconditionally and irrevocably, jointly and severally,
guarantees, as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, acceleration or otherwise, of any and
all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors.
If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors becomes due and payable hereunder, each Guarantor, jointly and
severally, and unconditionally promises to pay such indebtedness to the
Guaranteed Creditors, or order, on demand, together with any and all expenses
(including reasonable legal fees and expenses) which may be incurred by the
Guaranteed Creditors in collecting or enforcing any of the Guaranteed
Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation of this
Guarantee or any other instrument evidencing any liability of the Borrower, and
each Guarantor shall be and remain jointly and severally liable to the aforesaid
payees hereunder for the
-99-
<PAGE>
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee. This is a guarantee of payment and
not of collection.
(b) Anything contained in this Guarantee to the contrary
notwithstanding, the obligations of each Subsidiary Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of the Bankruptcy Code or any applicable
provisions of comparable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Subsidiary Guarantor, contingent or otherwise, that are relevant under the
Fraudulent Transfer Laws (specifically excluding, however, any liabilities of
such Subsidiary Guarantor in respect of intercompany Indebtedness to the
Borrower or other Affiliates of the Borrower to the extent that such
Indebtedness would be discharged in an amount equal to the amount paid by such
Subsidiary Guarantor hereunder, and after giving effect (x) to the direct and
indirect benefits received by such Subsidiary Guarantor as a result of the
Credit Documents and the Loans and (y) as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, reimbursement, indemnification or contribution of such
Subsidiary Guarantor pursuant to applicable law or pursuant to the terms of any
agreement (including without limitation any such right of contribution under
Section 12.01(c)).
(c) The Subsidiary Guarantors under this Guarantee together
desire to allocate among themselves in a fair and equitable manner their
obligations arising under this Guarantee. Accordingly, in the event any payment
or distribution is made on any date by any Subsidiary Guarantor under this
Guarantee (a "Funding Guarantor") that exceeds its Fair Share (as defined below)
as of such date, that Funding Guarantor shall be entitled to a contribution from
each of the other Subsidiary Guarantors in the amount of such other Subsidiary
Guarantor's Fair Share Shortfall (as defined below) as of such date, with the
result that all such contributions will cause each Subsidiary Guarantor's
Aggregate Payments (as defined below) to equal its Fair Share as of such date.
"Fair Share" means, with respect to a Subsidiary Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Subsidiary Guarantor to (y) the
aggregate of the Adjusted Maximum Amounts with respect to all Subsidiary
Guarantors, multiplied by (ii) the aggregate amount paid or distributed on or
before such date by all Funding Guarantors under this Guarantee in respect of
the obligations guarantied. "Fair Share Shortfall" means, with respect to a
Subsidiary Guarantor as of any date of determination, the excess, if any, of the
Fair Share of such Subsidiary Guarantor over the Aggregate Payments of such
Subsidiary Guarantor. "Adjusted Maximum Amount" means, with respect to a
Subsidiary Guarantor as of any date of determination, the maximum aggregate
amount of the obligations of such Subsidiary Guarantor under this Guarantee,
determined as of such date in accordance with this Section 12.01; PROVIDED that,
solely for purposes of calculating the "Adjusted Maximum Amount" with respect to
any Subsidiary
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<PAGE>
Guarantor for purposes of this Section 12.01(c), any assets or liabilities of
such Subsidiary Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder shall not be considered as assets or liabilities of such Subsidiary
Guarantor. "Aggregate Payments" means, with respect to a Subsidiary Guarantor as
of any date of determination, an amount equal to (i) the aggregate amount of all
payments and distributions made on or before such date by such Subsidiary
Guarantor in respect of this Guarantee (including, without limitation, in
respect of this Section 12.01(c)) minus (ii) the aggregate amount of all
payments received on or before such date by such Subsidiary Guarantor from the
other Subsidiary Guarantors as contributions under this Section 12.01(c). The
amounts payable as contributions hereunder shall be determined as of the date on
which the related payment or distribution is made by the applicable Funding
Guarantor. The allocation among Subsidiary Guarantors of their obligations as
set forth in this Section 12.01(c) shall not be construed in any way to limit
the liability of any Subsidiary Guarantor hereunder.
12.02. NATURE OF LIABILITY. The liability of each Guarantor
hereunder is joint and several and exclusive and independent of any security for
or other guarantee of the Guaranteed Obligations of the Borrower whether
executed by such Guarantor, any other Guarantor, any other guarantor or by any
other party, and the liability of each Guarantor hereunder is not affected or
impaired by (a) any direction as to application of payment by the Borrower or by
any other party, or (b) any other continuing or other guarantee, undertaking or
maximum liability of a guarantor or of any other party as to the Guaranteed
Obligations of the Borrower, or (c) any payment on or in reduction of any such
other guarantee or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Guaranteed Creditors on the Guaranteed Obligations which any such Guaranteed
Creditor repays to the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor, to the extent permitted by applicable law, waives any right to
the deferral or modification of its obligations hereunder by reason of any such
proceeding.
12.03. INDEPENDENT OBLIGATION. The obligations of each
Guarantor hereunder are independent of the obligations of any other Guarantor,
any other guarantor, any other party or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other Guarantor, any other guarantor, any other
party or the Borrower and whether or not any other guarantor, any other party or
the Borrower is joined in any such action or actions. Each Guarantor waives, to
the full extent permitted by law, the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of limitations
as to the Borrower shall operate to toll the statute of limitations as to any
Guarantor.
-101-
<PAGE>
12.04. AUTHORIZATION. Each Guarantor authorizes the
Guaranteed Creditors without notice or demand (except as shall be required by
applicable statute and cannot be waived), and without affecting or impairing its
liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or
any liability incurred directly or indirectly in respect thereof, and
the Guarantee herein made shall apply to the Guaranteed Obligations as
so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset there against;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers,
guarantors, the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
its creditors other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed
Creditors regardless of what liability or liabilities of the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document
or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of any Guarantor from its liabilities under this Guarantee.
-102-
<PAGE>
12.05. RELIANCE. It is not necessary for the Guaranteed
Creditors to inquire into the capacity or powers of the Borrower or the
officers, directors, partners or agents acting or purporting to act on its
behalf, and any Guaranteed Obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
12.06. SUBORDINATION. Any of the indebtedness of the Borrower
now or hereafter owing to any Guarantor is hereby subordinated to the Guaranteed
Obligations of the Borrower owing to the Guaranteed Creditors; and if the
Administrative Agent so requests at a time when an Event of Default exists, all
such indebtedness of the Borrower to any Guarantor shall be collected, enforced
and received by such Guarantor for the benefit of the Guaranteed Creditors and
be paid over to the Administrative Agent on behalf of the Guaranteed Creditors
on account of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors, but without affecting or impairing in any manner the liability of any
Guarantor under the other provisions of this Guarantee (other than the reduction
of any such liability attributable to such payment). Prior to the transfer by
any Guarantor of any note or negotiable instrument evidencing any of the
indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such
note or negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Guaranteed Creditors that it will not exercise any right
of subrogation which it may at any time otherwise have as a result of this
Guarantee (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
12.07. WAIVER. (a) Each Guarantor waives any right (except as
shall be required by applicable statute and cannot be waived) to require any
Guaranteed Creditor to (i) proceed against the Borrower, any other Guarantor,
any other guarantor or any other party, (ii) proceed against or exhaust any
security held from the Borrower, any other Guarantor, any other guarantor or any
other party or (iii) pursue any other remedy in any Guaranteed Creditor's power
whatsoever. Each Guarantor waives any defense based on or arising out of any
defense of the Borrower, any other Guarantor, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other Guarantor, any other
guarantor or any other party, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the Guaranteed
Obligations. The Guaranteed Creditors may, at their election, foreclose on any
security held by the Administrative Agent or any other Guaranteed Creditor by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Guaranteed Creditors
may have against the Borrower or any other party, or any security, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the Guaranteed Obligations have been paid. Each Guarantor
waives any defense arising out of any such election by the Guaranteed Creditors,
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<PAGE>
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guarantee, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
each Guarantor assumes and incurs hereunder, and agrees that the Guaranteed
Creditors shall have no duty to advise any Guarantor of information known to
them regarding such circumstances or risks.
12.08. RELEASE OF GUARANTEE. Upon the sale or disposition
(whether by merger, stock purchase, asset sale or otherwise) of a Subsidiary
Guarantor (or all or substantially all its assets) to an entity which is not a
Subsidiary of the Borrower and which sale or disposition is otherwise in
compliance with the terms of this Agreement or the designation of a Restricted
Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in
compliance with the terms of this Agreement, such Subsidiary Guarantor shall be
deemed released from all obligations under this Section 12 without any further
action required on the part of the Administrative Agent or any Lender; PROVIDED,
HOWEVER, that (x) no Default or Event of Default shall have occurred and be
continuing and (y) any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor with respect to the Senior Secured
Credit Agreement shall also terminate upon such release, sale or transfer. In
addition, if the Mexican Subsidiaries are required to become Guarantors, the
Borrower may request the Administrative Agent, on behalf of the Lenders, to
consent, effective after the completion of the Borrower's second full fiscal
year after the Initial Borrowing Date, to the release of the Guarantee of the
Mexican Subsidiaries, which consent may not be unreasonably withhold or delayed.
The Administrative Agent shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Borrower accompanied by an Officers'
Certificate certifying as to the compliance with this Section 12.08. Any
Subsidiary Guarantor not so released remains liable for the full amount of
principal of and interest on the Loans as provided in this Section 12.
[Signature Pages Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
SUPERIOR/ESSEX CORP., as Borrower
By:
-------------------------------------------
Name:
Title:
SUPERIOR TELECOM INC., as Guarantor and
as Guarantor
By:
-------------------------------------------
Name:
Title:
SUPERIOR TELECOMMUNICATIONS, INC., as Guarantor
By:
-------------------------------------------
Name:
Title:
DNE SYSTEMS, INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
DNE MANUFACTURING & SERVICE COMPANY,
as Guarantor
By:
-------------------------------------------
Name:
Title:
<PAGE>
DNE TECHNOLOGIES, INC.
as Guarantor
By:
-------------------------------------------
Name:
Title:
TEXAS SUT INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
<PAGE>
ESSEX GROUP, INC., as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX INTERNATIONAL INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ACTIVE INDUSTRIES, INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
DIAMOND WIRE & CABLE CO.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX GROUP, INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX GROUP MEXICO INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
<PAGE>
ESSEX MEXICO HOLDINGS, L.L.C.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX SERVICES, INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX TECHNOLOGY, INC.,
as Guarantor
By:
-------------------------------------------
Name:
Title:
ESSEX WIRE CORPORATION,
as Guarantor
By:
-------------------------------------------
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY,
as Administrative Agent
By:
-------------------------------------------
Name:
Title:
FLEET CORPORATE FINANCE, INC.,
as Syndicate Agent
By:
-------------------------------------------
Name:
Title:
<PAGE>
FLEET CORPORATE FINANCE, INC.,
as Lender
By:
-------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Lender
By:
-------------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
LOAN COMMITMENTS
<TABLE>
<CAPTION>
<S> <C>
Senior Subordinated Term
Lender Loan Commitment
Bankers Trust Company $160,000,000
Fleet Corporate Finance, Inc. 40,000,000
-------------------------
TOTAL: $200,000,000.00
-------------------------
</TABLE>
<PAGE>
SCHEDULE II
LENDER ADDRESSES
<TABLE>
<S> <C>
Lender Address
Bankers Trust Company One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Anthony LoGrippo
Telephone No.: (212) 250-4886
Facsimile No.: (212) 250-7218
Fleet Corporate Finance, Inc. One Federal Street
3rd Floor
Boston, Massachusetts 02110
Attention: Howard Diamond
Telephone No.: (617) 346-0042
Facsimile No.: (617) 346-5093
</TABLE>
<PAGE>
SCHEDULE XI
CREDIT PARTY ADDRESSES
<TABLE>
<CAPTION>
CREDIT PARTY ADDRESS
<S> <C>
Superior/Essex Corp. 150 Interstate North Parkway
Suite 300
Atlanta, Georgia 30334
Telephone No.: (770) 953-8338
Facsimile No.: (770) 984-3218
Superior Telecommunications Inc. 150 Interstate North Parkway
Suite 300
Atlanta, Georgia 30334
Telephone No.: (770) 953-8338
Facsimile No.: (770) 984-3218
Superior Telecom Inc. 150 Interstate North Parkway
Suite 300
Atlanta, Georgia 30334
Telephone No.: (770) 953-8338
Facsimile No.: (770) 984-3218
DNE Systems, Inc. 50 Barnes Park North
Wallingford, Connecticut 06492
Telephone No.: (203)
Facsimile No.: (203) 984-3218
DNE Technologies, Inc. 50 Barnes Park North
Wallingford, Connecticut 06492
Telephone No.: (203)
Facsimile No.: (203) 265-7801
Texas SUT Inc. 150 Interstate North Parkway
Suite 300
Atlanta, Georgia 30334
Telephone No.: (770) 953-8338
Facsimile No.: (770) 984-3218
Essex Group, Inc. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Facsimile No.: (219) 461-4469
Essex International Inc. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Active Industries, Inc. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Diamond Wire & Cable Co. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Essex Mexico Holdings, LLC 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Essex Group Mexico Inc. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Essex Wire Corporation 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
Essex Technology Inc. 1601 Wall Street
Fort Wayne, Indiana 46802
Telephone No.: (219) 461-4000
Facsimile No.: (219) 461-4469
</TABLE>
<PAGE>
Exhibit 10(ll)
AMENDMENT NUMBER ONE
TO
THE ALPINE GROUP, INC. 1997 STOCK OPTION PLAN
WHEREAS, The Alpine Group, Inc. (the "Company") maintains
The Alpine Group, Inc. 1997 Stock Option Plan (the "Plan");
WHEREAS, pursuant to Article IX of the Plan, the Company may
at any time, and from time to time, amend, in whole or in part, any or all of
the provisions of the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as
of March 10, 1999.
NOW, THEREFORE, pursuant to Article IX of the Plan, the Plan
is hereby amended, effective as of March 15, 1999, as follows:
1. Section 4.1(a) of the Plan is amended by the addition of
the following language at the end thereof:
"In determining the number of shares of Common Stock
available for awards other than awards of Incentive
Stock Options, if Common Stock has been delivered or
exchanged by a Participant as full or partial payment to
the Company for the exercise price or for withholding
taxes, in connection with the exercise of a Stock Option
or the number of shares of Common Stock otherwise
deliverable has been reduced for full or partial payment
for the exercise price or for withholding taxes, the
number of shares of Common Stock delivered, exchanged or
reduced shall again be available for purposes of awards
under this Plan."
2. Section 6.3(g) of the Plan is amended in its entirety to
read as follows:
"Options may contain such other provisions, which shall
not be inconsistent with any of the foregoing terms of
the Plan, as the Committee shall deem appropriate
including, without limitation, permitting "reloads" such
that the same number of Options are granted as the
number of Options exercised, shares used to pay for the
exercise price of Options or shares used to pay
withholding taxes or permitting Participants to defer
delivery of Common Stock acquired pursuant to a
Participant's exercise of an Option in accordance with
the terms and conditions established by the Committee."
<PAGE>
Exhibit 10(mm)
AMENDMENT NUMBER TWO
TO
THE ALPINE GROUP, INC. 1997 STOCK OPTION PLAN
WHEREAS, The Alpine Group, Inc. (the "Company") maintains
The Alpine Group, Inc. 1997 Stock Option Plan (the "Plan");
WHEREAS, pursuant to Article IX of the Plan, the Company may
at any time, and from time to time, amend, in whole or in part, any or all of
the provisions of the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as
of April 1, 1999.
NOW, THEREFORE, pursuant to Article IX of the Plan, the Plan
is hereby amended, effective as of April 1, 1999, as follows:
1. Section 3.1 of the Plan is amended by the addition of the
following language at the end thereof:
"The Committee may delegate some or all of its authority
under the Plan as the Committee deems appropriate in its
sole and absolute discretion; provided, however, that no
such delegation shall be made (i) with regard to any
Eligible Employee who is a "covered employee" (as defined
in Section 162(m) of the Code) at the time of grant or (ii)
that would cause Stock Options under the Plan to fail to be
exempt under Section 16(b) of the Exchange Act."
<PAGE>
Exhibit 10(nn)
AMENDMENT NUMBER THREE
TO
THE ALPINE GROUP, INC. 1997 STOCK OPTION PLAN
WHEREAS, The Alpine Group, Inc. (the "Company") maintains
The Alpine Group, Inc. 1997 Stock Option Plan (the "Plan");
WHEREAS, pursuant to Article IX of the Plan, the Company may
at any time, and from time to time, amend, in whole or in part, any or all of
the provisions of the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as
of May 14, 1999.
NOW, THEREFORE, pursuant to Article IX of the Plan, the Plan
is hereby amended, effective as of May 14, 1999, as follows:
1. Article IV of the Plan is amended by adding the following
new Section 4.4 to the end thereof:
"4.4. TRANSFER OF 1987 OPTIONS
(a) Any and all options that (i) were granted under the
Company's 1987 Long-Term Equity Incentive Plan, as
amended and restated (the "1987 Plan"), to
individuals who are active Eligible Employees of
the Company or an Affiliate as of May 14, 1999;
(ii) were outstanding as of May 14, 1999; and (iii)
are vested by June 30, 1999, provided that the
Eligible Employee is continuously employed through
such date (the "1987 Options"), will be transferred
by the Company from the 1987 Plan to the Plan as of
May 14, 1999, provided the individual elects to
participate in the 1999 Stock Option Reload Program
(the "Reload Program") and consents to transfer
such 1987 Options to the Plan. The terms of such
1987 Options shall be governed by the terms of the
Plan as of May 14, 1999. Notwithstanding the
foregoing, such 1987 Options shall continue to be
governed by the terms of the applicable agreement
in effect prior to the date of transfer.
<PAGE>
(b) In determining the number of Common Stock available
for Awards under Section 4.1 of the Plan, the
shares underlying the 1987 Options, to the extent
transferred to the Plan, shall not be included.
(c) In the event an Eligible Employee elects to
transfer his 1987 Options from the 1987 Plan to the
Plan and such 1987 Options expire or terminate for
any reason, such as 1987 Options will not again
become available under the Plan."
<PAGE>
Exhibit 21
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY ORGANIZATION
---------- ------------
<S> <C>
Superior TeleCom Inc................................... Delaware
Superior Trust I....................................... Delaware
DNE Systems, Inc....................................... Delaware
DNE Manufacturing & Service Company.................... Delaware
DNE Technologies Company............................... Delaware
Superior/Essex Corp. .................................. Delaware
Superior Telecommunications Inc. ...................... Georgia
Superior Cable Corporation............................. Ontario
Texas SUT Inc. ........................................ Texas
Superior Cable Ltd. ................................... Israel
Superior Cables Ltd. .................................. Israel
Essex International Inc. .............................. Delaware
Essex Group, Inc. ..................................... Michigan
Essex Services, Inc. .................................. Delaware
Femco Magnet Wire Corporation.......................... Indiana
Diamond Wire & Cable Company........................... Illinois
Essex Technology, Inc. ................................ Delaware
Essex International Ltd. .............................. U.K.
Temple Electrical Company Ltd. ........................ U.K.
Interstate Industries Holdings Inc. ................... Delaware
Interstate Industries, Inc. ........................... Mississippi
Essex Group Export, Inc. .............................. Barbados
Essex Canada Inc. ..................................... Delaware
SX Mauritius Holding Inc. ............................. Mauritius
Finolex Essex Industries Ltd. ......................... India
Active Industries, Inc. ............................... Delaware
Essex Funding Inc. .................................... Delaware
Raychem-Essex LLC...................................... Delaware
Essex Pension Trustees Ltd. ........................... U.K.
Essex Group Mexico, Inc. .............................. Delaware
Essex Mexico Holdings LLC.............................. Delaware
Essex Group Mexico S.A. de C.V. ....................... Mexico
Grupo Essex de Mexico S. de R.L. de C.V. .............. Mexico
Premier Refractories International Inc. ............... Delaware
Premier Refractories Inc. ............................. Delaware
Premier Refractories (Holdings) Ltd. .................. U.K.
Hepworth Refractories (US) Inc. ....................... Ohio
Premier Refractories Canada, Ltd. ..................... Ontario
964738 Ontario Limited................................. Ontario
PSC Technologies, Inc. ................................ Delaware
PSC Investments, Inc. ................................. Delaware
Premier Refractories (Belgium) S.A. ................... Belgium
Intermediare du Refractaire S.A. ...................... Belgium
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY ORGANIZATION
---------- ------------
<S> <C>
Auxilliare du Refractaire S.A. ........................ Belgium
Rotary Nozzle International S.A. ...................... Belgium
Premier Refractories (France) S.A. .................... France
Contructions Thermiques Europeenes S.A. ............... France
Societe Civile Immobiliere 47.......................... France
Premier Refractories (Italiana) SrL.................... Italy
Premier Refractories (Deutschland) GmbH................ Germany
Premier Foreign Sales Corporation...................... Barbados
Globe Refractories, Inc. .............................. Delaware
API Technologies, Inc. ................................ Delaware
BMI Refractory Services, Inc. ......................... Pennsylvania
Adience International Inc. ............................ Virgin Islands
Nutec-Premier, S.A. de C.V. ........................... Mexico
APA Systems............................................ Delaware
Premier Services Corporation........................... Delaware
Premier Refractories Ltd. ............................. U.K.
Dorma Industries Ltd. ................................. U.K.
Premier Refractories (Overseas) Limited................ U.K.
Meltham Silica & Firebrick Co. Limited................. U.K.
Coolee Limited......................................... U.K.
Industry Connect Limited............................... U.K.
Thomas Marshall (Loxley) Limited....................... U.K.
Thomas Marshall (Overseas Investments) Limited......... U.K.
Moler Products Limited................................. U.K.
</TABLE>
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated June 29, 1999, included in this Form 10-K,
into The Alpine Group, Inc.'s previously filed Registration Statements on
Forms S-8 (File Nos. 333-16703, 2-70015, 333-60071, 33-81996 and 33-62544)
and on Forms S-3 (File Nos. 333-60073, 333-00301, 33-63819, 33-81996,
33-30246 and 33-53434).
Arthur Andersen LLP
Atlanta, Georgia
July 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1
<CASH> 33,000
<SECURITIES> 14,957
<RECEIVABLES> 266,347
<ALLOWANCES> 5,029
<INVENTORY> 337,122
<CURRENT-ASSETS> 723,418
<PP&E> 565,305
<DEPRECIATION> 53,728
<TOTAL-ASSETS> 2,109,033
<CURRENT-LIABILITIES> 475,974
<BONDS> 0
0
427
<COMMON> 2,009
<OTHER-SE> 53,947
<TOTAL-LIABILITY-AND-EQUITY> 2,109,033
<SALES> 1,143,245
<TOTAL-REVENUES> 1,143,245
<CGS> 910,651
<TOTAL-COSTS> 910,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 60,119
<INCOME-PRETAX> 64,810
<INCOME-TAX> 27,955
<INCOME-CONTINUING> 16,910
<DISCONTINUED> (2,707)
<EXTRAORDINARY> (634)
<CHANGES> 0
<NET-INCOME> 13,530
<EPS-BASIC> 0.82
<EPS-DILUTED> 0.72
</TABLE>
