<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange -
- -
Act of 1934
For the quarterly period ended June 25, 1999
Commission file Number 0-6508
IEC ELECTRONICS CORP.
-----------------------------------------------------
(Exact name of registrant as specified in its charter.)
Delaware 13-3458955
----------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
105 Norton Street, Newark, New York 14513
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices (Zip Code)
(315) 331-7742
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code:
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $0.01 Par Value - 7,583,965 shares as of August 11, 1999.
Page 1 of 15
<PAGE>
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
June 25, 1999 (Unaudited) and September 30, 1998............. 4
Consolidated Statements of Income
for the three months ended:
June 25, 1999 (Unaudited) and
June 26, 1998 (Unaudited).................................... 5
Consolidated Statements of Income
for the nine months ended:
June 25, 1999 (Unaudited) and
June 26, 1998 (Unaudited).................................... 6
Consolidated Statement of Cash Flows
for the nine months ended:
June 25, 1999 (Unaudited) and
June 26, 1998 (Unaudited).................................... 7
Notes to Consolidated Financial
Statements (Unaudited)....................................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 11
PART II
Item 1. Legal Proceedings.............................................. 14
Item 2. Changes in Securities.......................................... 14
Page 2 of 15
<PAGE>
Item 3. Defaults Upon Senior Securities................................ 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
Item 5. Other Information.............................................. 14
Item 6. Exhibits and Reports on Form 8-K............................... 14
Signature ............................................................. 15
Page 3 of 15
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 25, 1999 AND SEPTEMBER 30, 1998
(in thousands, except for per share data)
<CAPTION>
June 25,1999 SEPTEMBER 30,1998
---------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 264 $2,278
Accounts receivable 17,933 22,842
Inventories 31,689 20,072
Income taxes receivable 2,640 1,960
Deferred income taxes 3,226 3,226
Other current assets 988 441
--------- ----------
Total current assets 56,740 50,819
--------- ----------
Property, Plant and Equipment, net 29,743 36,321
--------- ----------
Other Assets:
Cost in excess of net assets acquired, net 10,923 11,310
Other assets 163 215
---------- ----------
Total other assets 11,086 11,525
---------- ----------
$ 97,569 $98,665
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ - $ 20
Accounts payable 22,752 13,424
Accrued payroll and related expenses 2,457 3,878
Accrued insurance 756 1,353
Other accrued expenses 398 380
-------- --------
Total current liabilities 26,363 19,055
-------- --------
Deferred Income Taxes 2,904 2,904
-------- --------
Long-Term Debt 4,700 7,138
-------- --------
Shareholders' Equity:
Preferred stock, par value $.01 per share
Authorized - 500,000 shares
Outstanding - 0 shares - -
Common stock, par value $.01 per share
Authorized - 50,000,000 shares
Outstanding - 7,583,076 shares 76 76
Additional paid-in capital 38,563 38,563
Retained earnings 25,435 31,207
Cumulative translation adjustment (61) 133
Treasury Stock, at cost - 20,573 shares (411) (411)
-------- --------
Total shareholders' equity 63,602 69,568
------- -------
$97,569 $98,665
======== ========
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these balance sheets
</FN>
</TABLE>
Page 4 of 15
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED June 25, 1999 AND June 26, 1998
(in thousands, except per share data)
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
June 25, 1999 June 26, 1998
-------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $37,522 $43,125
Cost of sales 36,964 41,867
------- -------
Gross profit 558 1,258
Selling and administrative expenses 2,632 3,195
Customer bankruptcy (recovery)write-off (102) -
------- -------
Operating loss (1,972) (1,937)
Interest expense (284) (348)
Other income, net 9 109
------- -------
(Loss) before income taxes (2,247) (2,176)
Provision for(Benefit from)Income taxes (541) (839)
------- -------
Net (Loss) ($1,706) $(1,337)
======== =======
Net (loss) per share:
Basic ($0.23) ($0.18)
======== =======
Diluted ($0.23) ($0.18)
======== =======
Weighted average number of shares:
Basic 7,563 7,539
Diluted 7,563 7,539
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
</TABLE>
Page 5 of 15
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED June 25, 1999 AND June 26, 1998
(in thousands, except per share data)
<CAPTION>
9 MONTHS ENDED 9 MONTHS ENDED
June 25, 1999 June 26, 1998
-------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $108,657 $208,286
Cost of sales 108,227 194,033
------- -------
Gross profit 430 14,253
Selling and administrative expenses 8,004 11,537
Customer bankruptcy (recovery)write-off (102) 1,130
------- -------
Operating (loss)income (7,472) 1,586
Interest expense (560) (1,538)
Other income, net - 113
------- -------
(Loss)income before income taxes (8,032) 161
(Benefit from)provision for Income taxes (2,261) 62
------- -------
Net (Loss)income $ (5,771) $99
======= =======
Net (loss)income per share:
Basic ($0.76) $0.01
======== =======
Diluted ($0.76) $0.01
======== =======
Weighted average number of shares:
Basic 7,563 7,537
Diluted 7,563 7,665
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
</TABLE>
Page 6 of 15
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MOTHS ENDED JUNE 25, 1999 AND JUNE 26, 1998
(in thousands)
<CAPTION>
9 MONTHS 9 MONTHS
ENDED ENDED
JUNE 25, JUNE 26,
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss)income ($5,771) $99
Adjustments to reconcile net (loss)income to net
cash provided by operating activities:
Depreciation and amortization 7,616 7,350
Gain on sale of fixed assets (12) (80)
Amortization of cost in excess of net assets
acquired 361 355
Changes in operating assets and liabilities:
(Increase) decrease
Accounts receivable 4,861 27,390
Inventories (11,641) 20,999
Income taxes receivable (683) (1,185)
Other current assets (556) (427)
Other Assets 24 (3)
Increase (decrease)
Accounts payable 9,359 (32,919)
Accrued payroll and related expenses (1,408) (2,484)
Accrued income taxes - (1,887)
Accrued insurance (597) 1,463
Other accrued expenses 18 (148)
------- -------
Net cash provided by operating activities 1,571 18,523
------- -------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (1,348) (6,256)
Proceeds from sale of property 232 73
------- --------
Net cash used in investing activities (1,116) (6,183)
------- --------
Cash Flows from Financing Activities:
Exercise of stock options - 48
Net borrowings (repayments)under
line of credit agreements (2,300 2,970
Principal payments on long-term debt (158) (11,546)
-------- ---------
Net cash provided by(used in)financing activities (2,458) (8,528)
-------- ---------
Net (decrease)increase in cash and cash equivalents (2,003) 3,812
Effect of exchange rates changes (11) 0
Cash and cash equivalents at beginning of period 2,278 3,921
-------- ---------
Cash and cash equivalents at end of period $264 $7,733
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $485 $1,512
Income taxes $363 $3,134
========== ==========
Cash received during the period for:
Income taxes $1,945 $ - -
========== ==========
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
</TABLE>
Page 7 of 15
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 25, 1999
In thousands, except per share data
(1) Business and Summary of Significant Accounting Policies
Business
- --------
IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. IEC offers
its customers a wide range of manufacturing services, on either a turnkey or
consignment basis, including material procurement and control, manufacturing and
test engineering support, statistical quality assurance and complete resource
management.
Consolidation
- -------------
The consolidated financial statements include the accounts of IEC and its
wholly-owned subsidiaries, IEC Edinburg-Texas Inc.(Edinburg), IEC-Arab,
Alabama Inc.(Arab)and IEC Electronics-Ireland Limitd.(Longford)as of
August 31, 1998 (collectively, the Company). All significant intercompany
transactions and accounts have been eliminated.
Revenue Recognition
- -------------------
The Company recognizes revenues upon shipment of product for both turnkey and
consignment contracts.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include money market and bank account balances. The
Company's cash and cash equivlents are held and managed by institutions which
follow the Company's investment policy. The fair value of the Company's
finanical instruments approximates carrying amounts due to the relatively short
maturies and variable interest rates of the instruments, which approximate
current market interest rates.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market. The
major classifications of inventories are as follows at period end:
June 25, 1999 September 30, 1998
---------------- ----------------
(Unaudited)
Raw materials $22,277 $14,170
Work-in-process 9,412 5,902
---------------- ----------------
$31,689 $20,072
================ ================
Foreign Currency Translation
- ----------------------------
The assets and liabilities of the Company's foreign subsidiary are translated
based on the current exchange rate at the end of the period for the balance
sheet and a weighted-average rate for the period of the consolidated statement
of operations. Translation adjustments are recorded as a separate component of
equity. Transaction gains or losses are included in operations.
Page 8 of 15
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 25, 1999
In thousands, except per share data
Unaudited Finanical Statements
- ------------------------------
The accompaning unaudited financial statements as of June 25, 1999, and for the
three and nine months ended June 25, 1999 have been prepared in accordance with
generally accepted accounting princples for the interm financia1 information. In
the opinion of management, all adjustments considered necessary for a fair
presentation, which consist solely of normal recurring adjustments have been
included. The accompaning financial statements should be read in conjuction with
the financial statements and notes thereto included in the Company's September
30, 1998 Annual Report on Form 10-K.
Earnings per Share
- ------------------
Net (Loss) income per Common and Common Equivalent Share
- --------------------------------------------------------
(Loss)Income Shares Per Share
Three Months Ended (Numerator) (Denominator) Amount
- -------------------------------------------------------------------------------
June 25, 1999
Basic EPS
Loss available to common shareholders ($1,706) 7,563 ($0.23)
====================================
June 26, 1998
Basic EPS
Loss available to common shareholders ($1,337) 7,539 ($0.18)
====================================
(Loss)Income Shares Per Share
Nine Months Ended (Numerator) (Denominator) Amount
- -------------------------------------------------------------------------------
June 25, 1999
Basic EPS
Loss available to common shareholders ($5,771) 7,563 ($0.76)
====================================
June 26, 1998
Basic EPS
Income available to common shareholders
and assumed conversions $ 99 7,537 $0.01
=============
Effect of dilutive options - 128
-----------------------
Diluted EPS
Income available to common shareholders
and assumed conversions $ 99 7,665 $0.01
====================================
Basic EPS was computed by dividing reported earnings available to common
shareholders by weighted-average common shares outstanding during the three and
nine month period. No reconciliation is provided for the three and nine month
periods ending June 25, 1999 and for the three month period ending June 25, 1998
as the effect would be antidilutive.
Page 9 of 15
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 25, 1999
In thousands, except per share data
(2) Comprehensive Income
--------------------
The Company adopted Statement of Finacial Accounting Standards No. 130,
"Reporting Comprehensive Income"(SFAS No. 130)on October 1, 1998. SFAS No. 130
requires comprehensive (loss)income and its components to be presented in the
financial Statements. Comprehensive (loss)income, which includes net (loss)
income and foreign currency translation adjustments, was as follows for the
three and nine months ended June 25, 1999 and June 26, 1998.
3 MONTHS 3 MONTHS
ENDED ENDED
June 25, June 26,
1999 1998
---------- -----------
(Unaudited) (Unaudited)
Net (loss) $ (1,706) $ (1,337)
Other comprehensive income:
Foreign currency translation adjustments (8) -
---------- -----------
Comprehensive loss $ (1,714) $ (1,337)
---------- ----------
9 MONTHS 9 MONTHS
ENDED ENDED
June 25, June 26,
1999 1998
---------- -----------
(Unaudited) (Unaudited)
Net (loss)income $ (5,771) $ 99
Other comprehensive income:
Foreign currency translation adjustments (194) -
---------- -----------
Comprehensive (loss) income $ (5,965) $ 99
---------- -----------
Financing Arrangements
- ----------------------
In May 1998, the Company closed on a $65 million senior credit facility, which
replaced the previous $33 million credit facility. On June 11, 1999, the
Company reduced the credit facility by $15 million to a $50 million senior
credit facility. At June 25, 1999, $4.7 million was outstanding under the
three year credit facility.
Legal Matters
- -------------
There are no material legal proceedings pending to which the Company or any of
its subsidiaries is a party or to which any of the Company's or subsidiaries'
property is subject. To the Company's knowledge, there are no material legal
proceedings to which any director, officer or affiliate of the Company, or any
beneficial owner of more than 5 percent (5%) of Common Stock, or any associate
of any of the foregoing, is a party adverse to the Company or any of its
subsidiaries.
Recently Issued Accounting Standards
- ------------------------------------
In late 1997, Statement of Financial Accounting Standards No.131 (SFAS No.131)
"Disclosure about Segments of Enterprise and Related Information" was issued.
This statement was to be effective for the Company in fiscal 1999. The Company
believes that the effect of adoption of SFAS No.131 will not be material.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.137 (SFAS No.137), "Accounting for Derivative
Instruments and Hedging Activities"--Deferral of Effective Date of FASB
Statement No. 133 for one year. With issuance of SFAS No.137, the Company is
required to adopt SFAS No.133 on a prospective basis for interm periods and
fiscal years beginning March 1, 2001. The Company believes that the effect of
adoption of SFAS No.133 will not be material based on the Company's current
risk management strategies.
Page 10 of 15
<PAGE>
Management's Discussion and Analysis
------------------------------------
Results of Operations - Three Months Ended June 25, 1999, Compared to the
- --------------------------------------------------------------------------
Three Months Ended June 26, 1998.
- ----------------------------------
Net sales for the three months ended June 25, 1999, were $37.5 million,
compared to $43.1 million for the same quarter of the prior fiscal year, a
decrease of 13%. The decrease in sales is primarily due to two major customers
who moved their related production offshore. Turnkey sales for the quarter
represented 97% and 94% of net sales for the same quarter of the prior fiscal
year.
Gross profit was $0.6 million or 1.49% of sales in 1999 versus $1.3 million or
2.92% of sales in the comparable period of 1998. The decrease was due to higher
labor and overhead costs as a percent of sales and lower efficiency leading to
an under absorption of fixed overhead costs.
Selling and administrative expenses decreased to $2.6 million for the three
months ended June 25, 1999, from $3.2 million in the comparable quarter of the
prior fiscal year. This decrease is primarily due to decreases in sales
commissions, salary and other expenses. As a percentage of net sales, selling
and administrative expenses decreased to 7.0% from 7.4% in the same
quarter of the prior fiscal year.
Net loss for the quarter was ($1.7)million versus ($1.3)million in the same
quarter of the prior fiscal year. Diluted loss per share was ($0.23) as compared
to diluted loss per share of ($0.18) per share in the same quarter of prior
fiscal year.
Results of Operations - Nine months Ended June 25, 1999, compared to nine
- ------------------------------------------------------------------------
months ended June 26, 1998.
- ----------------------------
Net sales for the nine months ended June 25, 1999, were $109 million, as
compared to $208 million for the comparable period of the prior fiscal year, a
decrease of 48%. The decrease in sales is primarily due to two major customers
who moved their related production offshore. Turnkey sales represented 96% and
98% of net sales for the comparable period of the prior fiscal year.
Gross profit was $0.4 million or 0.4% of sales in 1999 verus $14.3 million or
6.8% of sales in the comparable period of the prior fiscal year. The decrease
was due to higher labor and overhead costs as a percent of sales and lower
efficiency leading to an absorption of fixed overhead costs.
Selling and administrative expenses decreased to $8.0 million for the nine
months ended June 25, 1999, from $11.5 million in the comparable period of the
prior fiscal year. This decrease is primarily due to decreases in sales
commissions, salary and other expenses. As a percentage of net sales, selling
and administrative expenses increased to 7.4% from 5.5% in the same
period of the prior fiscal year.
Net (loss)income for the nine months were ($5.8)million versus $0.1 million
in the comparable period of the prior fiscal year. Diluted (loss)income per
share was ($0.76) as compared to income per share of $0.01 per share in the
comparable period of prior fiscal year.
Liquidity and Capital Resources
- -------------------------------
Net sales for the month of June 1999 were $17 million, representing 45% of
the total net sales for the three month period ending June 25, 1999. The
Company operates on a fiscal quarter consisting of four weeks in the first and
second months and five weeks in the third month.
In May 1998, the Company closed on a $65 million senior credit facility. In
June 1999, the Company reduced the credit facility by $15 million to a
$50 million senior credit facility. At June 25, 1999, $4.7 million was
outstanding under the three year credit facility.
The Company believes that its cash balances, funds generated from
operations and its existing credit facilities will be sufficient for the Company
to meet its capital expenditures and working capital needs for its operations as
presently conducted. As part of its overall business strategy, the Company may
from time to time evaluate acquisition opportunities. The funding for these
future transactions, if any, may require the Company to obtain additional
sources of financing.
The impact of inflation on the Company's operations has been minimal due to the
fact that it is able to adjust its bids to reflect any inflationary increases in
cost.
Page 11 of 15
<PAGE>
Year 2000 Conversion
- --------------------
The Year 2000 issue is the result of many existing computer programs written to
handle two digits, rather than four, to define the applicable year. Accordingly,
date-sensitive software or hardware may not be able to distinguish between the
year 1900 and year 2000, and programs that perform arithmetic operations,
comparisons or sorting of date fields may begin yielding incorrect results. This
could potentially cause a system failure or miscalculations that could disrupt
operations, including, among other things, an inability to process transactions,
send invoices, or engage in normal business activities. These Year 2000 issues
affect virtually all companies and organizations.
The Company has developed plans to address the potential risks it faces as a
result of Year 2000 issues. These risks include, among other things, the
possible failure or malfunction of the Company's internal information systems,
possible problems with the products and services the Company has provided its
customers, and possible problems arising from the failure of the Company's
supplier's systems.
The Company has addressed its Year 2000 issues by initially
identifying and assessing Year 2000 compliance for all of its applications and
information technology(IT)equipment(including all mainframe, network and
desktop software and hardware, custom and packaged applications, and IT embedded
systems), as well as its non-information technology embedded systems, (including
non-IT equipment and machinery such as security, fire prevention and climate
control systems) into the categories of business "critical", "important", and
"non-important".
Business "critical" are those systems whose Year 2000 compliance is necessary to
ensure the proper functioning of the business. These systems had the highest
priority in being tested and where appropriate upgraded. All business critical
systems have been tested and upgraded where necessary. Verification testing
of upgrades was completed Ausgust 1, 1999.
Business "important" systems are those systems, that while not critical to the
operation of the business would pose a significant inconvenience if they did not
function properly. All business important systems have been tested and upgraded
as appropriate. Final verification testing will be completed no later than
September 30, 1999.
Certain other systems have been classified as business "not important", since
alternative programs or methods are readily available, or they do not use
the date function. These systems are the lowest priority of the Company's three
system classifications. These systems have been evaluated and tested, and will
be upgraded where it is of benefit to the Company. Any upgrades will be
completed by December 31, 1999.
The Company's remediation plan for its Year 2000 issue is an ongoing process,
and the estimated completion dates above are subject to change. While we believe
that our testing and evaluation have been entirely comprehensive, there can be
no complete assurance that all critical and important systems have been
identified, or that the corrective actions taken will be completely sucessful.
The Company believes that the area of the greatest potential risk is that of
significant suppliers' failing to remediate their Year 2000 issues. The Company
has communicated with its suppliers to determine their plans to remediate their
own Year 2000 issues in a timely manner. There can be no guarantee that
companies upon which the Company relies will be able to address in a timely
manner their Year 2000 compliance issues. If a number of significant suppliers
fail to become Year 2000 compliant, this could have a material adverse effect
on the Company's results of operations, financial position or cash flow. At this
point, the Company has not been advised by any significant supplier that it will
not be Year 2000 compliant.
To mitigate the effects of significant suppliers' potential failure to
remediate Year 2000 issue in a timely manner, the Company may arrange for
alternate suppliers and scheduling. If this becomes necessary, it is uncertain,
until the contingency plans are finalized, whether this would result in
significant delays in business operations or have a material adverse effect on
the Company's results of operations, financial position or cash flow.
Page 12 of 15
<PAGE>
Based upon the Company's current estimates, incremental out-of-pocket costs of
its Year 2000 program are not expected to be material and have already been
largely absorbed. Such costs do not include internal management time, which the
Company does not separately track, the effects of which are likewise not
expected to be material.
Euro Conversion Issues
- ----------------------
Effective January 1, 1999, 11 of the 15 member countries of the European Union
(the participating countries) established fixed conversion rates between their
existing sovereign currencies and the euro. For three years after the
introduction of the euro, the participating countries can perform financial
transactions in either the euro or their original local currencies. This will
result in a fixed exchange rate among the participating countries, whereas the
euro (and the participating countries' currency in tandem) will continue to
float freely against the U.S. dollar and other currencies of the
non-participanting countries. The Company does not believe that the effects
of the conversion will have a material adverse on the Company's business and
operations.
Interest rate sensitivity
- -------------------------
The Company has entered into a three year interest rate swap transaction with
one of the credit facility partners under which IEC pays a fixed rate of
interest hedging against the varible rates incurred under the credit facility.
The interest rate swap expires in the year 2001 which coincides with the
maturity date of the senior debt facility. As the Company intends to hold the
interest rate swap until maturity date, the Company is not subject to market
risk. In fact, such interest rate swap has fixed a portion of the interest
expense for the debt facility reducing the impact of interest rate risk.
Forward-looking Statements
- --------------------------
Except for historical information, statements in this quarterly report are
forward-looking made pursuant to the safe harbor created by the Private
Securities Litigation Reform Act of 1995 and are therefore subject to certain
risks and uncertainties including timing of orders and shipments, availability
of material, product mix and general market conditions that could cause actual
results to differ materially from those projected in the forward looking
statements. Investors should consider the risks and uncertainties discussed in
the September 30, 1998, Form 10K and its other filings with the Securities and
Exchange Commission.
Page 13 of 15
<PAGE>
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
None.
Item 2 -- Changes in Securities
None.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
None.
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits
EXHIBIT 3.4 AMENDMENT No.3 (IRELAND)and WAIVER dated as of June 11, 1999
TO CREDIT AGREEMENT DATED AS OF MAY 15, 1998 AMONG IEC
ELECTRONICS CORP ANY DESIGNATED AFFLIATE BOROWER(S) THE
LENDERS SIGNATORY THERETO AND THE CHASE MANHATTAN BANK AS
ADMINISTRATIVE AGENT AND AMENDMENT TO SECURITY AGREEMENT OF
PRIMARY BORROWER DATED AS OF MAY 15, 1998
b. Reports on Form 8-K
On July 27, 1999, the Company filed a Current Report on Form 8-K regarding
the Company's existing transition plan, the retirement of Russell E.
Stingel, and the naming of David W. Fradin as Chief Executive Officer as of
October 1, 1999.
Page 14 of 15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
IEC ELECTRONICS CORP.
REGISTRANT
Dated: August 11, 1999 /s/Russell E. Stingel
-----------------------------
Russell E. Stingel
Chairman of The Board and
Chief Executive Officer
Dated: August 11, 1999 /s/Patricia A. Bird
------------------------------
Patricia A. Bird
Corporate Controller
Page 15 of 15
<PAGE>
EXHIBIT 3.4 AMENDMENT No.3 (IRELAND)and WAIVER dated as of June 11, 1999 TO
CREDIT AGREEMENT DATED AS OF MAY 15, 1998 AMONG IEC ELECTRONICS CORP
ANY DESIGNATED AFFLIATE BOROWER(S) THE LENDERS SIGNATORY THERETO
and THE CHASE MANHATTAN BANK AS ADMINISTRATIVE AGENT AND AMENDMENT
TO SECURITY AGREEMENT OF PRIMARY BORROWER DATED AS OF MAY 15, 1998
AMENDMENT No. 3
(IRELAND) and WAIVER
DATED AS OF June 11, 1999
TO
CREDIT AGREEMENT DATED AS OF MAY 15, 1998
AMONG
IEC ELECTRONICS CORP.
ANY DESIGNATED AFFILIATE BORROWER(S)
THE LENDERS SIGNATORY THERETO
AND
THE CHASE MANHATTAN BANK
AS ADMINISTRATIVE AGENT
AND
AMENDMENT TO SECURITY AGREEMENT OF
PRIMARY BORROWER
DATED AS OF MAY 15, 1998
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TABLE OF CONTENTS
RECITALS...............................................................4
1. Definitions......................................................5
2. Amendments.......................................................6
3. Additional Agreements of the Parties............................13
4. Representations, Warranties and Covenants Related to Irish Sub..13
5. Representations and Warranties Related to Primary Borrower......21
6. Irish Sub as Affiliate Borrower.................................22
7. Effectiveness...................................................22
8. Administrative Agent............................................25
9. Administrative Agent's Expenses.................................25
10. Waiver of Covenant Violation.....................................26
11. Initial Borrowing................................................26
12. Primary Borrower Security Agreement-Hedging Agreements...........26
13. Miscellaneous....................................................28
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EXHIBITS
EXHIBIT R4 INVESTMENTS IN IRISH SUB...................................36
EXHIBIT 2.5 SCHEDULE 2.01-Commitments.................................37
EXHIBIT 4.1 QUALIFICATION OF IRISH SUB................................38
EXHIBIT 4.2 REQUIRED CONSENTS.........................................39
EXHIBIT 4.4 MATERIAL ADVERSE EFFECT SINCE March 31, 1999..............40
EXHIBIT 4.7 EXISTING LIENS............................................41
EXHIBIT 4.8 IRISH SUB INDEBTEDNESS....................................42
EXHIBIT 4.15 LABOR MATTERS............................................43
EXHIBIT 4.16 LOCATION OF ASSETS.......................................44
EXHIBIT 4.17 INSURANCE................................................45
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AMENDMENT No. 3
Waiver and Amendment to
Security Agreement of Primary Borrower
Agreement dated as of June 11, 1999 ("Amendment No. 3") among IEC
ELECTRONICS CORP. (the "Primary Borrower"), IEC ELECTRONICS IRELAND LIMITED, a
company incorporated under the laws of Ireland ("Irish Sub"), each of the
Lenders which is a party to the Credit Agreement as defined below (individually
a "Lender" and collectively the "Lenders") and THE CHASE MANHATTAN BANK, as
Administrative Agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
R E C I T A L S
R.1 The Primary Borrower, the Lenders and the Administrative Agent have
entered into a Credit Agreement dated as of May 15, 1998, Amendment No. 1
thereto dated as of November 6, 1998 and Amendment No. 2 thereto dated as of
November 19, 1998 (as so amended, the "Credit Agreement"). Except as otherwise
specified herein, the terms defined in the Credit Agreement are used herein as
so defined.
R.2 As of October 23, 1998, Alabama Sub discontinued its business and the
Primary Borrower is in the process of liquidating the Alabama Sub.
R.3 As contemplated in a Consent and Waiver dated as of August 10, 1998
among the Primary Borrower, each Lender and the Administrative Agent, (the
"Irish Sub Consent") the Primary Borrower formed the Irish Sub as a wholly owned
Subsidiary, and on August 28, 1998, the Irish Sub acquired certain assets
located in Longford, Ireland.
R.4 Pursuant to the Irish Sub Consent, the Lenders consented to the
formation of the Irish Sub for the purpose of completing the acquisition as
described in the Irish Sub Consent, and the Lenders waived the provisions of
Section 5.12(a) of the Credit Agreement in connection with the creation of the
Irish Sub as a Subsidiary. In addition, in the Irish Sub Consent, the Lenders
waived the provisions of Section 5.22 of the Credit Agreement to the extent
necessary to permit the Primary Borrower to make certain "Investments" in the
Irish Sub. The consents and waivers set forth in Section 2 of the Irish Sub
Consent were subject to the condition subsequent set forth in Section 6 of the
Irish
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Sub Consent, which condition has not been met because the aggregate amount of
the "Investments" by the Primary Borrower in the Irish Sub exceeds the U.S.
Dollar Equivalent of $3,000,000, as described in Exhibit R4 hereof.
R.5 Section 9.15 of the Credit Agreement contemplates that the parties to
the Credit Agreement may designate Subsidiaries of the Primary Borrower as
Affiliate Borrowers and/or designate additional Foreign Currencies, by executing
amendments to the Credit Agreement which provide for amending Schedule 2.01 of
the Credit Agreement and for such other provisions, and for such additional Loan
Documents and other documents, as the parties may agree.
R.6 The Primary Borrower has requested that the Irish Sub be designated as
an Affiliate Borrower as contemplated in Section 9.15 of the Credit Agreement.
R.7 Section 2.20 of the Credit Agreement makes certain provisions for the
commencement of the third stage of EMU, which in fact took place on January 1,
1999. In connection with and/or subsequent to the commencement of the third
stage of EMU, certain practices and procedures have been adopted in connection
with the implementation of EMU that were not contemplated pursuant to Section
2.20 at the time the Credit Agreement was executed in May, 1998, and the parties
wish to provide for said revised practices and procedures.
R.8 Marine Midland Bank has changed its name to HSBC Bank USA. R.9 As of
December 31, 1998, Borrower was required to maintain a ratio of not
less than 3.50 to 1.0 under Section 5.17 of the Credit Agreement, but Borrower's
actual ratio as of that date was 3.46 to 1.0. Primary Borrower has requested
that the Lenders waive such non-compliance.
R.10 The parties desire to amend the Credit Agreement on the terms
hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Except as otherwise set forth herein, (a) as used in this
Amendment No. 3, the terms defined in the Credit Agreement shall have the
meanings assigned to them in the Credit Agreement and (b) all references in this
Amendment No. 3 to Exhibits shall be construed to refer to exhibits to this
Amendment No. 3.
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2. Amendments. The Credit Agreement is hereby amended as set forth below:
2.1 Definitions. The following definitions are added to Section 1.01:
"Amendment No. 3" shall mean Amendment No. 3 and Waiver to Credit
Agreement dated as of May 15, 1998 and Amendment to Security
Agreement of Primary Borrower dated as of May 15, 1998.
"Irish Sub" shall mean IEC Electronics - Ireland Limited, a company
incorporated under the laws of Ireland with registered number 291027
and having its registered office at Arthur Cox Building, Earlsfort
Terrace, Dublin 2, Ireland
2.2 Applicable Rate. The definition of Applicable Rate in Section
1.01 shall be amended to read in its entirety as follows:
"Applicable Rate" means, for any day, with respect to any
Eurocurrency Revolving Loan, or with respect to the facility and
Letter of Credit fees payable hereunder, as the case may be, the
applicable rate per annum, expressed as basis points, set forth below
after the caption "Eurocurrency Revolving Spread", "Letter of Credit
Fee Rate", or "Facility Fee Rate", as the case may be, based upon the
"usage percentage" on such day, as determined by the Administrative
Agent. On any day, the "usage percentage" shall equal the Revolving
Credit Exposure divided by the total of all Commitments on such day.
Each change in the Applicable Rate shall be applicable to all
existing Loans and Letters of Credit as well as any new Loans made or
Letters of Credit issued.
Tier I II III IV
Usage Percentage <25% >25%<50% >50<75% >75%
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Facility Fee Rate 25 35 50 50
Eurocurrency 100 165 225 275
Revolving Spread
Letter of Credit 100 165 225 275
Fee Rate
< means less than or equal to
-
> means greater than
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2.3 LIBO Rate. The definition of LIBO Rate in Section 1.01 shall be
amended to read in its entirety as follows:
"LIBO Rate" means, with respect to any Eurocurrency Borrowing, for
any Interest Period, the rate appearing on Page 3750 or Page 3740, as
applicable, of the Telerate Service (or on any successor or substitute
pages of such Service, or any successor to or substitute for such Service,
providing rate quotations comparable to those currently provided on such
pages of such Service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable
to deposits of the relevant Currency in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for deposits of the
relevant Currency with a maturity comparable to such Interest Period,
provided, that if such rate is not available at such time for any reason,
then the "LIBO Rate" with respect to such Eurocurrency Borrowing for such
Interest Period shall be the rate at which deposits of the relevant
Currency for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent, in an amount
comparable to the principal amount of the Administrative Agent's share of
the Borrowing to which such Interest Period applies, in immediately
available funds in the London interbank market at approximately 11:00
a.m., London time, two Business Days prior to the commencement of such
Interest Period.
2.4. Warehoused Inventory. The definition of Warehoused Inventory in
Section 1.01 is hereby amended to read in its entirety as follows:
"Warehoused Inventory" means inventory (i) of the Primary Borrower
that is not located at 105 Norton Street, Newark, New York, or of Texas
Sub that is not located at 1920 S.E. Industrial Park Drive, Edinburg,
Texas, (ii) that is located at a warehouse, pursuant to a written
agreement, which warehouse is not owned or leased in its entirety by the
Primary Borrower or Texas Sub, and (iii) that is so located for the
purpose of providing just in time delivery of such inventory to a customer
which is not an Affiliate of the Primary Borrower.
2.5. Schedule 2.01. Schedule 2.01 to the Credit Agreement shall be
amended in its entirety to read as set forth in Exhibit 2.5 to this Amendment
No. 3.
2.6 Sections 2.01(a) and 2.04(a). Sections 2.01(a) and 2.04(a) are
amended to provide (i) that the Irish Sub may borrow only Revolving Loans, which
may be
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borrowed only in Dollars, Irish Pounds and/or euros, and (ii) the Primary
Borrower shall be permitted to borrow Revolving Loans and Competitive Loans only
in Dollars.
2.7 Section 2.01(b)(ii) - Commitments. Section 2.01(b)(ii) is amended
so that the unused Revolving Credit Sublimit of the Irish Sub shall not be
deemed reduced by the amounts of the "Investments" described in Exhibit R4 to
this Amendment No. 3 except that it shall be reduced by the $1,459,765 of such
Investments listed in Section 11 of this Amendment No. 3 until such Investments
are repaid by the Irish Sub to the Primary Borrower pursuant to Section 11.
2.8 Section 2.06(a)-Letters of Credit. Section 2.06(a) is amended to
provide that the Irish Sub may not request the issuance of Letters of Credit for
its account.
2.9 Section 2.13(f) -Interest. Section 2.13(f) shall be amended to
read in its entirety as follows:
(f) All interest hereunder shall be computed on the basis of a year
of three hundred sixty (360) days; and in each case interest shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO
Rate or LIBO Rate shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
2.10 Section 2.20 - European Economic and Monetary Union. Section
2.20 of the Credit Agreement shall be amended to read in its entirety as
follows:
SECTION 2.20. European Economic and Monetary Union. (a) Definitions.
In this Section 2.20 and in each other provision of this Agreement to
which reference is made in this Section expressly or impliedly, the
following terms have the meanings given to them in this Section:
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"commencement of the third stage of EMU" means January 1, 1999,
the date of commencement of the third stage of EMU, as contemplated
by the Treaty on European Union;
"EMU" means economic and monetary union as
contemplated in the Treaty on European Union;
"EMU legislation" means legislative measures of the European
Council, from time to time, for the introduction of, changeover to or
operation of a single or unified European currency (whether known as
the euro or otherwise), being in part the implementation of the third
stage of EMU;
"euro" means the single currency of participating
member states of the European Union;
"euro unit" means the currency unit of the euro;
"national currency unit" means the unit of currency (other than
a euro unit) of a participating member state whose currency has been
designated as a Foreign Currency pursuant to Section 9.15;
"participating member state" means each state so
described in any EMU legislation; and
"Treaty on European Union" means the Treaty of Rome of March 25,
1957, as amended by the Single European Act 1986 and the Maastricht
Treaty (which was signed at Maastricht on February 7, 1992, and came
into force on November 1, 1993), as amended from time to time.
(b) Effectiveness of Provisions. The provision of paragraphs (c) to
(h) below (inclusive) became effective at and from the commencement
of the third stage of EMU, provided, that if and to the extent that
any such provision relates to any state (or the Foreign Currency of
such state) that is not a participating member state on the
commencement of the third stage of EMU, such provision shall become
effective in relation to such state (and the national currency unit
of such state) at and from the date on which such state becomes a
participating member state.
(c) Redenomination and Alternative Currencies. So long as any EMU
legislation provides that an amount denominated either in the euro or
in a Foreign Currency constituting the national currency unit of a
participating member state, and
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payable within that participating member state by crediting an
account of the creditor, can be paid by a debtor either in the euro
unit or in that national currency unit, each Borrower having the
right to borrow any such Foreign Currency shall be entitled to elect
to borrow Loans, and to have Letters of Credit issued, that are
denominated either in the euro unit or in such national currency
unit. Each such Loan shall be advanced and, subject to the provisions
of Section 2.06, each such Letter of Credit shall be issued, in the
Currency so elected by the Borrower. To the extent provided in this
Agreement, all payments and reimbursements with respect to such Loans
and Letters of Credit shall be made in the Currency so elected;
provided, however, that to the extent it may hereafter be so required
by any existing or future EMU legislation, (i) no Borrower shall
thereafter have the right to have Loans advanced or Letters of Credit
issued in any such national currency unit, (ii) all such Loans
thereafter advanced and all such Letters of Credit thereafter issued
shall be denominated in the euro, and (iii) each then outstanding
obligation under this Agreement which was previously denominated in
the national currency unit of a participating member state shall be
redenominated into the euro unit at the official rate published on
December 31, 1998.
(d) Payments by the Administrative Agent to the Lenders. Any amount
of a national currency unit or a euro that is received by the
Administrative Agent and is payable by the Administrative Agent to
the Lenders under this Agreement shall be paid in the Currency in
which it was received by the Administrative Agent.
(e) Payments by the Administrative Agent Generally. With respect to
the payment of any amount denominated in the euro or in a national
currency unit, the Administrative Agent shall not be liable to the
Borrower or any of the Lenders in any way whatsoever for any delay,
or the consequences of any delay, in the crediting to any account of
any amount required by this Agreement to be paid by the
Administrative Agent if the Administrative Agent shall have taken all
relevant steps to achieve, on the date required by this Agreement,
the payment of such amount in immediately available, freely
transferable, cleared funds (in the euro unit or, as the case may be,
in a national currency unit) to the account which a Borrower or, as
the case may be, any Lender shall have specified for such purpose. In
this paragraph (e), "all relevant steps" means all such steps as may
be prescribed from time to time by the regulations or operating
procedures of such clearing or
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settlement system as the Administrative Agent may from time to time
determine for the purpose of clearing or settling payments of the
euro or such national currency unit.
(f) Basis of Accrual. If the basis of accrual of interest or fees
expressed in this Agreement with respect to a Foreign Currency that
is the national currency unit of any state that becomes a
participating member state shall be inconsistent with any convention
or practice in the London interbank market, such convention or
practice shall replace such expressed basis effective as of and from
the date on which such state becomes a participating member state;
provided, that if any Loan in the national currency unit of such
state is outstanding immediately prior to such date, such replacement
shall take effect, with respect to such Loan, at the end of the then
current Interest Period.
(g) Rounding and Other Consequential Changes. Without prejudice and
in addition to any method of conversion or rounding prescribed by any
EMU legislation and without prejudice to the respective liabilities
for indebtedness of a Borrower to the Lenders and the Lenders to the
Borrowers under or pursuant to this Agreement, except as expressly
provided in this Section, each provision of this Agreement shall be
subject to such reasonable changes of construction as the
Administrative Agent may from time to time specify to be necessary or
appropriate to reflect the introduction of or changeover to the euro
in participating member states.
(h) Increased Costs. The Primary Borrower shall from time to time, at
the request of the Administrative Agent, pay to the Administrative
Agent for the account of each Lender or the Issuing Bank the amount
of any cost or increased cost incurred by, or of any reduction in any
amount payable to or in the effective return on its capital to, or of
interest or other return foregone by, such Lender or the Issuing Bank
or any holding company of such Lender or the Issuing Bank as a
consequence of this Agreement or the Loans and as a result of the
introduction of, changeover to or operation of the euro in any
participating member state. A certificate of a Lender or the Issuing
Bank setting forth the amount or amounts reasonably deemed necessary
to compensate such Lender or the Issuing Bank or its holding company,
as the case may be, as specified in this paragraph shall be delivered
to the Primary Borrower. The Primary Borrower shall pay such Lender
or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within ten (10) days after receipt
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thereof. Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this paragraph shall not
constitute a waiver of such Lender's or the Issuing Bank's right to
demand such compensation; provided that the Primary Borrower shall
not be required to compensate a Lender or the Issuing Bank pursuant
to this paragraph for any cost, increased costs or reductions
incurred more than sixty (60) days prior to the date that such Lender
or the Issuing Bank, as the case may be, notifies the Primary
Borrower of the circumstances giving rise to such cost, increased
costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if
the circumstances giving rise to such costs, increased costs or
reductions are retroactive, then the sixty (60) day period referred
to above shall be extended to include the period of retroactive
effect thereof. Notwithstanding the foregoing provisions of this
paragraph, a Lender shall not be entitled to compensation pursuant to
this paragraph in respect of any Competitive Loan if the
circumstances that would otherwise entitle it to such compensation
shall have been publicly announced prior to submission of the
Competitive Bid pursuant to which such Loan was made.
2.11 Section 5.02(h)-Financial Officer's Certificate. Clause (ii) of
Section 5.02(h) is amended to eliminate the requirement for setting forth a
computation of the Applicable Rate in the Financial Officer's certificate
required pursuant to Section 5.02(h).
2.12 Section 5.29 - Location of Assets. Section 5.29 shall be amended
to provide that the assets of the Irish Sub shall be kept at the address
described in Exhibit 4.16 to Amendment No. 3 and the Irish Sub shall not change
the location of any such assets except in compliance with each Security
Agreement executed by it.
2.13 Section 9.01 - Notices. The first paragraph of Section 9.01
shall be amended to provide that the address of the Irish Sub for notices shall
be that set forth on its signature page to this Amendment No. 3.
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3. Additional Agreements of the Parties.
3.1 Definition of Security Agreements. All parties agree that the
Debenture to be executed by the Irish Sub pursuant to Section 7.5 of this
Amendment No. 3 and the Charge of Shares to be executed by the Primary Borrower
pursuant to Section 7.5 of this Amendment No. 3 shall each be deemed a Security
Agreement, as such term is defined in the Credit Agreement.
3.2 Irish Sub Consent. Upon this Amendment No. 3 becoming
effective, the Irish Sub Consent shall be terminated and of no further force or
effect, and each Lender hereby waives the provisions of:
(a) Section 5.12(a) of the Credit Agreement as it relates to
the creation of the Irish Sub as a Subsidiary; and
(b) Section 5.22 of the Credit Agreement, to the extent
necessary to permit those loans, advances and investments by the
Primary Borrower in the Irish Sub that are described in Exhibit
R4 to this Amendment No. 3, other than those listed in Section
11 of this Amendment No. 3; provided that this waiver shall not
extend to any additional loans, advances or investments, or to
any refinancing or renewals with respect to any such permitted
Investments.
4. Representations, Warranties and Covenants Related to Irish Sub. Primary
Borrower and Irish Sub jointly and severally represent, warrant and covenant to
the Lenders that:
4.1 Existence, Ownership and Legal Power.
(a) Irish Sub is a company duly incorporated and validly existing
under the laws of Ireland. Irish Sub is duly qualified to do business and, where
relevant, is in good standing, in all jurisdictions in which it owns substantial
properties or in which it conducts
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substantial business or in which any of its activities make such qualification
necessary, each of which jurisdictions is indicated on Exhibit 4.1, except in
those jurisdictions in which failure to so qualify would not result in a
material adverse impact on such Borrower's ability to conduct business or own
properties. If, subsequent to the date of this Amendment No. 3, such Borrower
does not qualify in any such jurisdictions to do business or to own properties,
such Borrower shall give the Administrative Agent prompt written notice of such
change in circumstances.
(b) At the date of this Amendment No. 3, Irish Sub owns no interest
in any Subsidiary.
(c) Irish Sub has all requisite power and authority under the laws of
Ireland to carry on its business and to enter into and carry out the terms of
this Amendment No. 3, the Credit Agreement and the other Loan Documents to which
it is a party.
4.2 Right to Act. None of the execution and delivery by the Irish Sub
of this Amendment No. 3 or any other Loan Documents, the consummation of
transactions contemplated by the Credit Agreement and those documents, nor
compliance with their terms and provisions will:
(a) conflict with or result in a breach of any of the terms,
conditions or provisions of the Memorandum and Articles of Association of the
Irish Sub or any law or any regulation, order, writ, injunction or decree of any
court or Governmental Authority, or any agreement or instrument to which the
Irish Sub is a party or is subject or by which the properties of such Borrower
may be bound;
(b) result in the creation or imposition of any Lien upon the
property or assets of the Irish Sub, except for the Liens granted to the Lenders
pursuant to this Amendment No. 3 and the other Loan Documents;
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(c) require the consent of any Person other than as indicated in
Exhibit 4.2; or
(d) other than the Form 47 and Notification to the Revenue
Commissioners, require any consent or approval of, registration or filing with,
or any other action by any Governmental Authority, except such as have been
obtained or made and are in full force and effect.
4.3 Approval by Necessary Organizational Action. The Irish Sub's
execution and delivery of this Amendment No. 3 and the other Loan Documents
executed by it, the Irish Sub's making of the Borrowings contemplated or
permitted by this Amendment No. 3 and the Credit Agreement, and the other
transactions contemplated hereby and thereby have each been duly authorized by
all necessary shareholder, board and other corporate action on the part of such
Borrower. Amendment No. 3 and the other Loan Documents executed by Irish Sub
have been duly and validly executed and delivered by such Borrower, and such
documents and the Credit Agreement as amended by this Amendment No. 3,
constitute the valid and legally binding agreements of such Borrower enforceable
in accordance with their terms, except as may be limited by (a) bankruptcy,
insolvency, or other laws of general application relating to or affecting the
enforcement of creditors' rights and remedies generally and (b) where
applicable, the exercise of judicial discretion in accordance with general
principles of equity.
4.4 Financial Statements.
(a) At the date of this Amendment No. 3, each consolidated and
consolidating financial statement and all other related information theretofore
furnished to the Administrative Agent and the Lenders by the Primary Borrower
and its Subsidiaries, including the Irish Sub, have been prepared in accordance
with GAAP consistently applied in the preparation of the Primary Borrower's and
its Subsidiaries' previous financial statements, are true and complete, and
fairly present the Primary Borrower's and its Subsidiaries', including the Irish
Sub, financial condition and results of operations as of the
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date of each statement or other information and for the respective period(s)
stated; provided that, with respect to projected financial information, the
Primary Borrower and its Subsidiaries, including the Irish Sub represent only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
(b) Except as set forth in Exhibit 4.4, there has been no change that
constitutes a Material Adverse Effect in the Irish Sub's financial condition,
properties, business or operations, since March 31,1999, the date of the Irish
Sub's most recent financial statements delivered to the Administrative Agent and
the Lenders prior to the date of this Amendment No. 3.
(c) The Primary Borrower has delivered to the Administrative Agent
and the Lenders copies of the most recent consolidated and consolidating annual
and quarterly financial statements of the Primary Borrower and its Subsidiaries,
including the Irish Sub.
4.5 Litigation; Regulatory Compliance. Except as may be described
in the opinion of counsel delivered pursuant to Section 7.6 of this
Amendment No. 3.
(a) At the date of this Amendment No. 3, there are no actions, suits
or proceedings pending or threatened against or affecting Irish Sub before any
court or before any Governmental Authority which involve the possibility of any
judgment or liability not covered in full by insurance or which could in one
case or in the aggregate result in any Material Adverse Effect on the business,
operations, property, assets or financial condition of the Irish Sub. If,
subsequent to the date of this Amendment No. 3, there are any such actions,
suits or proceedings pending or threatened against or affecting Irish Sub, the
Primary Borrower shall give the Administrative Agent and the Lenders prompt
written notice of such actions, suits or proceedings.
(b) Irish Sub is not in default with respect to any order, writ,
injunction or decree of any court, arbitrator or Governmental Authority with
which such Borrower is obligated to comply.
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4.6 Plan Compliance. At the date of this Agreement:
(a) No Governmental Authority has asserted that Irish Sub has
incurred any material liability in connection with any Plan nor has Irish Sub
incurred any such material liability.
(b) No Lien has been attached and no Person has threatened to attach
a Lien on any property of Irish Sub as a result of such Borrower's failure to
comply with any act or regulations related to any Plan.
4.7 Title and Freedom from Liens. At the date of this Amendment No.
3, Irish Sub has good, marketable and indefeasible title to all of its
properties and assets, real and personal, free and clear of all Liens and
encumbrances, except for the following:
(a) in the case of real properties, easements, restrictions,
exceptions, reservations or defects which, in the aggregate, do not interfere
materially with the continued use of such properties for the purposes for which
they are used and do not affect materially the value thereof;
(b) pledges, deposits or stay or appeal bonds to secure obligations
under workers' compensation laws or similar legislation or to secure performance
in connection with bids, tenders and contracts (other than contracts for the
payment of borrowed money) to which Irish Sub is a party;
(c) deposits to secure public or statutory obligations of Irish Sub
or otherwise required by law or government regulations as a condition of
transacting business or executing any right, privilege or license;
(d) materialmen's, mechanics', carriers', workers' or other like
Liens arising in the ordinary course of business, or deposits of cash to obtain
the release of such Liens;
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(e) Liens for taxes, assessments or governmental charges which are
not delinquent or are being contested in good faith and against which adequate
reserves have been provided. If any such amount is in excess of the U.S. Dollar
Equivalent of $100,000, Primary Borrower will notify the Administrative Agent
and the Lenders as soon as reasonably practicable; and
(f) mortgages, liens, security interests or encumbrances granted to
the Lenders or in existence as of the date of this Amendment No. 3, as described
in Exhibit 4.7 to this Amendment No. 3.
4.8 Existing Debts. On the date of this Amendment No. 3, the Irish
Sub has no Indebtedness except for (a) trade credit incurred in the ordinary
course of business and (b) the Indebtedness described in Exhibit R4 to this
Amendment No. 3 and any other Indebtedness set forth in Exhibit 4.8 to this
Amendment No. 3.
4.9 Margin Stock. The Irish Sub is not engaged principally, or as one
of its important activities, in the business of extending or arranging for the
extension of credit for the purpose of purchasing or carrying "margin security"
or "margin Stock" (as defined in Regulations G and U issued by the Board). The
Irish Sub does not own or intend to carry or purchase any "margin security" or
"margin Stock". The Irish Sub will not use the proceeds of any Loan to purchase
or carry (or refinance any borrowings the proceeds of which were used to
purchase or carry) any "margin security" or "margin Stock."
4.10 Compliance with Conditions Precedent. The Irish Sub has taken
all actions required of it in order to comply with all the conditions set forth
in Section 7 of this Amendment No. 3.
4.11 Environmental Matters. Except with respect to any other matters
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, the Irish Sub (i) has not failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any
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Environmental Law, (ii) has not become subject to any Environmental Liability,
(iii) has not received notice of any claim with respect to any Environmental
Liability and (iv) knows of no basis for any Environmental Liability.
4.12 Taxes. The Irish Sub has timely filed or caused to be filed all
Tax returns and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Irish Sub
has set aside on its books adequate reserves or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.
4.13 Disclosure. The Primary Borrower has disclosed to the Lenders
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Subject to the proviso contained in Section 4.4(a) of
this Amendment No. 3, with respect to projected financial information, none of
the reports, financial statements, certificates or other information furnished
by or on behalf of the Irish Sub to the Administrative Agent or any Lender in
connection with the negotiation of this Amendment No. 3 or delivered hereunder
(as modified or supplemented by other information so furnished) contains, as of
the date such material is furnished, any material misstatement of fact or omits
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
4.14 Loan Documents. All of the representations and warranties
contained in Security Agreements to be executed and delivered by the Irish Sub
pursuant to Section 7.5 below are complete and accurate.
4.15 Labor Matters. Except as described in Exhibit 4.15, as of the
date of this Amendment No. 3, there are no strikes, lockouts, slowdowns or other
industrial disputes against the Irish Sub pending or, to the knowledge of the
Primary Borrower or the
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<PAGE>
Irish Sub, threatened; and the Irish Sub has complied in all material respects
with all applicable local or, to the knowledge of the Primary Borrower and the
Irish Sub, foreign laws, regulations, orders and awards relating to the
employment of labor including, without limitation, provisions thereof relating
to the notice of termination, wages, hours of work, holidays, equal opportunity,
anti-discrimination, health and safety, collective bargaining and the payment of
social security, levies and other taxes. All payments due from the Irish Sub, or
for which any claim may be made against the Irish Sub, on account of wages,
social security, levies and other taxes, have been paid or accrued as a
liability on the books of the Irish Sub. The consummation of the transactions
contemplated in this Amendment No. 3 will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Irish Sub is bound.
4.16 Locations of Assets. The Irish Sub is, as of the date of this
Amendment No. 3, engaged in business at the addresses listed on Exhibit 4.16;
and as of the date of this Amendment No. 3, the assets of the Irish Sub and all
of its records relating to such assets, are kept at the addresses indicated on
such Exhibit.
4.17 Insurance Program. As of the date of this Amendment No. 3, the
Irish Sub maintains the insurance, with the insurance companies, described in
Exhibit 4.17.
4.18 Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Irish Sub's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Irish Sub's systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed without resulting in any Default or any Material Adverse Effect. The
cost to the Irish Sub of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Irish Sub (including, without
limitation, reprogramming errors and the failure of others who provide to the
Irish Sub computer services, systems or equipment) will not result in a Default
or a Material Adverse Effect. In the opinion of the management of the Primary
Borrower, except for
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such of the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the Irish Sub are
and, with ordinary course replacement, upgrading and maintenance, will continue
for the term of the Credit Agreement to be, sufficient to permit the Irish Sub
to conduct its business without Material Adverse Effect.
5. Representations and Warranties Related to Primary Borrower. The Primary
Borrower hereby represents and warrants to the Lenders that:
5.1 Corporate Power and Authority: No Conflicts. The execution,
delivery and performance by the Primary Borrower and Irish Sub of this Amendment
No. 3, and by Texas Sub of the Guarantor Consent attached hereto, have been duly
authorized by all necessary corporate action and do not and will not: (a)
require any consent or approval of the Primary Borrower's stockholders; (b)
contravene the charter or by-laws of Primary Borrower or any of its
Subsidiaries; (c) violate any provision of, or require any filing, registration,
consent or approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Primary Borrower or any of its Subsidiaries or Affiliates
(other than any appropriate disclosure required to be contained in periodic
reports to be filed by the Primary Borrower pursuant to the Securities Exchange
Act of 1934 and applicable regulations thereunder); (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Primary Borrower or any of its Subsidiaries is a party or by which any of them
or their properties may be bound or affected; or (e) cause the Primary Borrower
or any Subsidiary to be in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
5.2 Legally Enforceable Agreement. Each of this Amendment No. 3,
the Credit Agreement, and the Primary Borrower's Security Agreement, each as
amended by this Amendment No. 3, and the Guarantor Consent attached to this
Amendment No. 3, is a legal, valid and binding obligation of the Primary
Borrower and Texas Sub, as the case
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may be, enforceable against the Primary Borrower and Texas Sub in accordance
with its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
5.3 Recitals. The statements set forth in Recitals R.2, R.3, R.4 and
R.9 are true and correct.
5.4 No Default. On and as of the date of this Amendment No. 3 and
after giving effect to this Amendment No. 3 and to the other Loan Documents
required to be executed by the Irish Sub pursuant to this Amendment No. 3, no
event has occurred and is continuing which constitutes a Default or Event of
Default.
6. Irish Sub as Affiliate Borrower. By its signature on this Amendment No.
3,
(a) the Administrative Agent, the Primary Borrower and the Lenders
hereby designate the Irish Sub as an Affiliate Borrower and a party
to the Credit Agreement, effective as of the date on which this
Amendment No. 3 becomes effective pursuant to Section 7 hereof, with
all of the rights, duties and obligations provided with respect to
such Affiliate Borrower under the Credit Agreement, as amended by
this Amendment No. 3; and
(b) the Irish Sub hereby agrees that it shall become an Affiliate
Borrower and shall thereby be entitled to all of the rights, and
shall be subject to all of the duties and obligations, of an
Affiliate Borrower pursuant to the terms of the Credit Agreement, as
amended by this Amendment No. 3.
7. Effectiveness. This Amendment No. 3 shall be of no force or effect
unless and until the date on which each of the following conditions is
satisfied:
7.1 Executed Amendment. The Primary Borrower and the Administrative
Agent shall have each received counterparts of this Amendment No. 3 duly
executed by
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(a) the Primary Borrower, Texas Sub, the Administrative Agent and all of the
Lenders, and (b) the Irish Sub.
7.2 Amendment/Waiver Fee. The Administrative Agent shall have
received, for the account of the Lenders, an amendment/waiver fee of $62,500.00,
and the Administrative Agent shall deliver to each Lender its Applicable
Percentage of such fee.
7.3 Corporate Action. The Administrative Agent shall have received
certified copies of (a) resolutions of the Board of Directors of the Primary
Borrower, in form and content reasonably satisfactory to the Administrative
Agent, authorizing the Primary Borrower's execution, delivery and performance of
this Amendment No. 3 and all other documents required pursuant hereto to which
the Primary Borrower is a party, and (b) appropriate resolutions of the Irish
Sub, in form and content reasonably satisfactory to the Administrative Agent,
authorizing the Irish Sub's execution, delivery and performance of this
Amendment No. 3 and of all other Loan Documents required pursuant hereto to
which the Irish Sub is a party.
7.4 Representations and Warranties. On and as of the date on which
all other conditions set forth in this Section 7 are met, all of the
representations and warranties contained in (a) Section 5 and (b) Section 4
above must be true and correct.
7.5 Irish Sub Security Agreements. The Administrative Agent shall
have received:
(a) a Debenture, in a form satisfactory to the Lenders, executed
by the Irish Sub and the Administrative Agent, as Security
Trustee, providing for a Lien in favor of the Lenders against
the assets of the Irish Sub, to secure the Irish Sub's
obligations under the Credit Agreement as an Affiliate Borrower;
(b) a Charge of Shares, duly executed by the Primary Borrower
and the Administrative Agent, as Security Trustee, in a form
satisfactory
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to the Lenders, providing for a pledge by the Primary Borrower
to the Lenders of 65% of the outstanding shares of the Irish
Sub, to secure the obligations of the Primary Borrower under the
Credit Agreement; and
(c) any and all documents, filings, stock certificates and other
instruments provided for in either of said Security Agreements
and/or necessary, in the reasonable opinion of Irish counsel for
the Administrative Agent, for the perfection of the Lien of the
Lenders under and pursuant to such Security Agreements.
7.6 Opinion. An Opinion of Arthur Cox in a form satisfactory to the
Lenders.
7.7 Credit Searches. Appropriate searches in Ireland, evidencing the
due incorporation and continued existence of the Irish Sub and the freedom from
liens of the assets of the Irish Sub, as represented in this Amendment No. 3 and
in the Security Agreements to be executed by the Irish Sub pursuant hereto.
Provided, however, that if all of the conditions described in clause (a) of each
of Sections 7.1, 7.3, and 7.4 and in Section 7.2, are met, this Amendment No. 3
shall become fully effective, except that the "Irish Sub Provisions" shall not
become effective until all of the remaining conditions are met. For purposes of
the preceding sentence, the term "Irish Sub Provisions" shall be deemed to refer
to the following Sections and provisions of this Amendment No. 3:
(a) Section 2.5, to the extent it refers to sections 2 and 3 of
Schedule 2.01.
(b) Sections 2.6, 2.7, 2.8, 2.12, 2.13, 3 and 4.
(c) Section 5.3, to the extent that it refers to the Irish Sub.
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(d) Section 5.4, to the extent it refers to the Default described in
Recital R4 above.
(e) Sections 6, 8 and 11.
(f) Sections 13.5(b) and (c), to the extent that they relate to the
Irish Sub.
The Administrative Agent shall notify the Primary Borrower and the Lenders
of the effective date of this Amendment No. 3, and of the effective date, if
different, of the Irish Sub Provisions, and each such notice shall be conclusive
and binding. Notwithstanding the foregoing, this Amendment No. 3 shall not
become effective at all unless it becomes effective, at least in part, pursuant
to this Section 7, at or prior to 3:00 p.m., New York City time, on July 15,
1999 (and, in the event it does not become effective, at least in part, at or
prior to such time, this Amendment No. 3 shall not have any force or effect).
Further, if the Irish Sub Provisions do not become effective at or prior to such
time, then the Irish Sub Provisions shall not thereafter become effective and
shall not have any force or effect.
8. Administrative Agent. The appointment by each of the Lenders, in
Article VIII of the Credit Agreement, of the Administrative Agent as its agent
under the Loan Documents, shall include appointment of the Administrative Agent
as its agent, acting as Security Trustee for the Lenders, as Secured Parties,
under each of the Security Agreements to be executed by Irish Sub pursuant to
Section 7.5 of this Amendment No. 3. The Administrative Agent's rights, duties
and obligations as such agent are set forth in and controlled by the Credit
Agreement, as amended hereby.
9. Administrative Agent's Expenses. Primary Borrower agrees to pay the
Administrative Agent for all costs, expenses and charges (including, without
limitation, fees and charges of external legal counsel for the Administrative
Agent) incurred by the Administrative Agent in connection with the negotiation,
preparation and execution of this Amendment No. 3 and the documents executed in
connection herewith.
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10. Waiver of Covenant Violation. In reliance on the representation and
warranty, set forth in Section 5.3 above, each of the Lenders waives the
violation, as of December 31, 1998, of Section 5.17 of the Credit Agreement,
described in Recital R.9 of this Amendment No. 3. However, this waiver of the
Primary Borrower's violation as of December 31, 1998 of Section 5.17 shall not
be deemed a waiver with respect to any subsequent violations of such Section
5.17 or any other Section of the Credit Agreement.
11. Initial Borrowing. Immediately upon the Primary Borrower receiving
notice of this Amendment No. 3 becoming effective pursuant to Section 7 above,
the Irish Sub shall request a Revolving Borrowing pursuant to Section 2.03 of
the Credit Agreement in an amount sufficient to make the payments required
pursuant to the next sentence. The proceeds of such Borrowing shall be used to
repay the Primary Borrower for the following intercompany advances described on
Exhibit R4 to this Amendment No. 3:
DESCRIPTION OF ADVANCE AMOUNT
Universal Instruments $ 334,765
Cash-December $ 400,000
Cash-January $ 225,000
Cash February $ 300,000
Cash-May $ 200,000
-----------
TOTAL $1,459,765
If such notice of Borrowing is given as required above, and if Borrowing
proceeds are so applied promptly upon receipt thereof by the Irish Sub, the
amount of the above-described advances from the Primary Borrower to the Irish
Sub shall not be deemed to have been outstanding for purposes of Section 5.22 of
the Credit Agreement.
12. Primary Borrower Security Agreement-Hedging Agreements. The Security
Agreement executed by the Primary Borrower is hereby amended as follows:
12.1 Secured Obligations. The definition of Secured Obligations is
amended to add the following at the end thereof:
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and (c) to any Lender for Debtor's obligations under or pursuant to
any Hedging Agreement(s) between such Lender and the Debtor providing
for interest rate protection and related to Debtor's obligations
under the Credit Agreement, to the extent that such Hedging Agreement
obligations qualify as Secured Obligations pursuant to Section 7
hereof (also "Qualifying Obligations").
12.2 Section 7 - Qualifying Obligations. Section 7 of such Security
Agreement, beginning with the introductory paragraph of Section 7 through
Section 7.4 of such Security Agreement, is hereby amended to read as follows:
7. Qualifying Obligations. All debts, liabilities and
obligations of the Debtor to any Lender (i) for reimbursement
obligations related to one or more letters of credit issued by
such Lender at the request of the Debtor, other than Letters of
Credit issued pursuant to the Credit Agreement, and (ii) under
or pursuant to any Hedging Agreement(s) between such Lender and
the Debtor providing for interest rate protection and related to
Debtor's obligations under the Credit Agreement, in each case
qualify as Secured Obligations, and therefore constitute
Qualifying Obligations, provided that the following conditions
are met in connection with each such letter of credit issued by
any such Lender and/or each such Hedging Agreement between
Debtor and such Lender:
7.1 In the case of a letter of credit, the issuing Lender and
the Debtor shall provide written notice to the Administrative
Agent, not less than ten (10) days prior to the issuance,
extension or modification of any such letter of credit, setting
forth the face amount, the beneficiary and the term of such
letter of credit, the terms of any extension or modification to
any such letter of credit and the approximate date on which the
Lender expects to issue, extend or modify such letter of credit.
In the case of a Hedging Agreement, the Lender and the Debtor
shall provide written notice to the Administrative Agent, as
soon as possible prior to the execution or modification of any
such Hedging Agreement, briefly describing the terms thereof and
the indebtedness under the Credit Agreement to which such
Hedging Agreement relates.
7.1.1This obligation to provide written notice prior to the
execution or modification of any Hedging Agreement shall not
apply to those Hedging Agreements outstanding as of the date of
execution of the Amendment No. 3 ("Prior Agreements").
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7.2 The issuance of such letter of credit or the execution of
such Hedging Agreement shall not cause the Debtor to violate
Section 5.20 (d) of the Credit Agreement and the Lender and the
Debtor shall not have received from the Administrative Agent any
notice that the issuance of such letter of credit or the
execution of such Hedging Agreement will or may cause the Debtor
to be in violation of such Section.
7.3 The Administrative Agent shall have received, under a cover
letter executed by the Lender and the Debtor, a copy of (i) such
letter of credit, of all reimbursement agreements between such
Lender and the Debtor executed in connection therewith, and of
any documents evidencing any extension or modification thereof,
not later than five (5) days after the actual issuance,
extension or modification of such letter of credit or (ii) a
copy of such Hedging Agreement, not later than five (5) days
after the execution of same by the Lender and Debtor.
7.3.1Copies of any and all Prior Agreements shall be
provided by the issuing Lender to the Administrative Agent
within ten (10) days of the execution of Amendment No. 3.
7.3.2Upon the written request of any Lender, the Administrative
Agent shall provide the following information to such Lender
regarding a Hedging Agreement or any Prior Agreements hereunder:
(a) face amount; (b) issue date; (c) maturity; and (d) any
extension, amendment or modification thereof.
7.4 The Administrative Agent shall have received a notice,
executed by such Lender and the Debtor, notifying the
Administrative Agent of (i) the date and amount of any drawing
under such letter of credit, or of the expiration or termination
of such letter of credit or (ii) any default or acceleration of
Debtor's obligations under such Hedging Agreement.
13. Miscellaneous.
13.1 Use of Terms. Except as expressly provided in this Amendment No.
3, the Credit Agreement and each of the other Loan Documents shall remain
unchanged and in full force and effect, except that each reference in the Credit
Agreement, and in any other Loan Document and in any agreements, certificates
and notices simultaneously herewith or hereafter executed under or pursuant to
the Credit Agreement or the other
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Loan Documents, to the "Credit Agreement", "this Agreement", "hereof", "herein"
and similar terms referring to the Credit Agreement, shall be deemed to refer to
the Credit Agreement as amended by this Amendment No. 3.
13.2 Survival. All covenants, agreements, representations and
warranties made by each Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Amendment No. 3
shall be considered to have been relied upon by the other parties hereto and
shall survive the execution and delivery of this Amendment No. 3 and the making
of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Amendment No. 3 is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated.
13.3 Counterparts; Integration; Effectiveness. This Amendment No. 3
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Amendment No. 3
constitutes the entire contract among the parties relating to the subject matter
hereof and supersedes any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof. Except as provided in Section
7, this Amendment No. 3 shall become effective when it shall have been executed
by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof which, when taken together, bear the signatures of
each of the other parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted successors
and assigns (except as provided in the last paragraph of Article VIII of the
Credit Agreement). Delivery of an executed counterpart of a signature page of
this Amendment No. 3 by telecopy shall be effective as delivery of a manually
executed counterpart of this Amendment No. 3.
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13.4 Severability. Any provision of this Amendment No. 3 held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
13.5 Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Amendment No. 3 and all rights of the parties arising out of
or relating to this Amendment No. 3 and the transactions contemplated herein
shall be construed in accordance with and governed by the law of the State of
New York applicable to contracts and transactions made and to be wholly
performed in such state, without regard to conflict of laws principles.
(b) Each of Primary Borrower and Irish Sub hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in Monroe
County and of the United States District Court for the Western District of New
York sitting in Monroe County, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Amendment No. 3 and the
transactions contemplated herein, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Amendment No. 3 shall affect any right that the Administrative
Agent, the Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Amendment No. 3 and the transactions contemplated
herein against Primary Borrower, Irish Sub or the properties of either in the
courts of any jurisdiction.
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(c) Each of Primary Borrower and Irish Sub hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Amendment No.
3 and the transactions contemplated herein in any court referred to in paragraph
(b) of this Section. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
13.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AMENDMENT NO. 3 OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT NO. 3 BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
13.7 Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Amendment No. 3 and shall
not affect the construction of, or be taken into consideration in interpreting,
this Amendment No. 3.
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
executed as of the date first above written.
IEC ELECTRONICS CORP.
By /s/David W. Fradin
---------------------
Name:David W. Fradin
Title:President
IEC Electronics
ADDRESS FOR NOTICES IEC ELECTRONICS-IRELAND LIMITED
IEC Electronics -- Ireland Limited By/s/David W. Fradin
--------------------
IDA Industrial Estate Name:David W. Fradin
Ballinalee Road Title:President
Longford, Ireland IEC Electronics
GUARANTOR CONSENT
As a Guarantor, the undersigned hereby consents to the provisions of the
foregoing Amendment No. 3 and agrees that its Guarantee remains in full force
and effect in accordance with its terms, after giving effect to this Amendment
No. 3.
IEC ELECTRONICS - EDINBURG, TEXAS, INC.
By:David W. Fradin
------------------
Name:David W. Fradin
Title:President
IEC Electronics
[Signature Page to Amendment No. 3]
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<PAGE>
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By/s/Gail G. Fiorini
--------------------
Name:Gail G. Fiorini
Title:Vice President
LENDER:
THE CHASE MANHATTAN BANK
By:/s/Gail G. Fiorini
---------------------
Name:Gail G. Fiorini
Title:Vice President
[Signature Page to Amendment No. 3]
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<PAGE>
HSBC BANK USA
By:/s/Richard L. Ford
---------------------
Name:Richard L.Ford
Title:Vice President
[Signature Page to Amendment No. 3]
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<PAGE>
KEYBANK NATIONAL ASSOCIATION
By:/s/Lawence A. Mack
---------------------
Name:Lawence A. Mack
Title:Senior Vice President
[Signature Page to Amendment No. 3]
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<PAGE>
EXHIBIT R4
Investments in Irish Sub
Equity Infusion
Purchase of assets $1,119,200
Share Capital 174,875
Working Capital 522,375
-------
Total Equity Infusion $1,816,450
Transfer of Equipment
GenRad Tester $345,655
HSP 415,869
GSM-2 437,580
Barcode Scanner 311
Data General System 25,187
-------
Total Equipment Transferred $1,224,602
Intercompany Loans
Boylan Brown $ 27,045
Arthur Andersen 17,550
Dames & Moore-Envir Testing 8,640
Universal Instruments 334,765
Cash-December 400,000
Cash-January 225,000
Cash-February 300,000
Cash-May 200,000
-------
Total Intercompany Loans $1,513,000
Contingent Liabilities
IDA Liability* $430,140
Lease (Rents) Annual (5 years)* 819,646
--------
Total Contingent Liabilities $1,249,786
----------
TOTAL INVESTMENTS $5,803,838
==========
*Conversion Factor 1.43380
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<PAGE>
EXHIBIT 2.5
SCHEDULE 2.01
Commitments
1. REVOLVING CREDIT COMMITMENTS, EXPRESSED IN DOLLARS
- --------------------------------------------------------------------------------
Lender Revolving
Credit
Commitment
- --------------------------------------------------------------------------------
The Chase Manhattan Bank $ 21,000,000
- --------------------------------------------------------------------------------
HSBC Bank USA $ 19,000,000
- --------------------------------------------------------------------------------
KeyBank National Association $ 10,000,000
- --------------------------------------------------------------------------------
Totals $ 50,000,000
- --------------------------------------------------------------------------------
2. Affiliate Borrowers and Revolving Credit Sublimits - The Irish Sub shall be
an Affiliate Borrower which shall have a Revolving Credit Sublimit of
$8,000,000.
3. Foreign Currencies
Currency Available in London
-------- -------------------
Irish Pounds Yes
euro Yes
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<PAGE>
EXHIBIT 4.1
QUALIFICATION OF IRISH SUB
None.
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<PAGE>
EXHIBIT 4.2
REQUIRED CONSENTS
None.
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<PAGE>
EXHIBIT 4.4
MATERIAL ADVERSE EFFECT SINCE March 31, 1999
None.
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<PAGE>
EXHIBIT 4.7
EXISTING LIENS
None.
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<PAGE>
EXHIBIT 4.8
IRISH SUB INDEBTEDNESS
None.
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<PAGE>
EXHIBIT 4.15
LABOR MATTERS
None.
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<PAGE>
EXHIBIT 4.16
LOCATION OF ASSETS
IDA Industrial Estate
Ballinalee Road
Longford, Ireland
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<PAGE>
EXHIBIT 4.17
INSURANCE
See attached Insurance Summary.
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - July 23, 1999
IEC Electronics Corp.
------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware
---------------------------------------------
(State or other jurisdiction of Incorporation)
0-6508 13-3458955
---------------------- --------------------------------
(Commission File Number) (IRS Employer Identification No.)
105 Norton Street, Newark, New York 14513
-----------------------------------------
(Address of Principal Executive Offices)
(315) 331-7742
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
<PAGE>
Item 5. Other Events
------------
On July 23, 1999, the Registrant announced that, in accordance
with its existing transition plan, Russell E. Stingel, Registrant's Chief
Executive Officer, will retire at the end of Registrant's current fiscal year
(September 30, 1999) after 22 years of service with the Registrant.
David W. Fradin, currently President and Chief Operating Officer
of Registrant, has been named President and Chief Executive Officer effective
October 1, 1999.
In addition, Mr. Fradin will become a member of the Board of
Directors at that time. Mr. Stingel will continue to serve as Chairman of the
Board of Directors.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IEC Electronics Corp.
------------------------------------
(Registrant)
Date: July 27, 1999 By:/s/ Russell E. Stingel
------------------------------------
Russell E. Stingel, Chief Executive Officer
and Chairman of the Board
2
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-25-1999
<CASH> 264
<SECURITIES> 0
<RECEIVABLES> 17,933
<ALLOWANCES> 0
<INVENTORY> 31,689
<CURRENT-ASSETS> 56,736
<PP&E> 29,743
<DEPRECIATION> 0
<TOTAL-ASSETS> 97,569
<CURRENT-LIABILITIES> 26,363
<BONDS> 4,700
0
0
<COMMON> 76
<OTHER-SE> 63,526
<TOTAL-LIABILITY-AND-EQUITY> 97569
<SALES> 108,657
<TOTAL-REVENUES> 108,657
<CGS> 108,227
<TOTAL-COSTS> 7,902
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 560
<INCOME-PRETAX> (8,032)
<INCOME-TAX> (2,261)
<INCOME-CONTINUING> (5,771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,771)
<EPS-BASIC> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
