<PAGE>
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
------------------
/x/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _________ to _________
COMMISSION FILE NO. 1-4474
------------------
OAK INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-1569000
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
BAY COLONY CORPORATE CENTER
1000 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(Address of principal executive offices) (Zip Code)
</TABLE>
(617) 890-0400
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
<S> <C>
Common Stock New York Stock Exchange
Par Value $.01 Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(Title of class)
<PAGE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
The aggregate market value of Registrant's Common Stock held by persons
who are not affiliates of Registrant was $326,852,288 on January 31, 1994.
The Registrant had 17,202,752 shares of Common Stock, $0.01 par value,
issued and outstanding on January 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the documents of the Registrant listed below have
been incorporated by reference into the indicated parts of the Annual Report
on Form 10-K:
<TABLE>
<C> <S>
Proxy Statement to be filed no later
than April 3, 1994........................Part III, Items 10-13
</TABLE>
=============================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Oak Industries Inc. (the "Company") was incorporated under the laws of
the State of Delaware in 1960. The predecessor of the Company was
incorporated in 1932 under the laws of the State of Illinois. The present
corporate name was adopted in 1972. The Company's executive offices are
located at Bay Colony Corporate Center, 1000 Winter Street, Waltham,
Massachusetts 02154, and its telephone number is (617) 890-0400.
The Company manufactures and sells communications components, including
cable television ("CATV") specialty connectors and frequency control devices,
and control components, including electronic and mechanical controls and
switches for consumer appliances and testing and industrial equipment. In
addition, Oak manufactures and sells railway maintenance-of-way equipment and
emergency lighting systems.
Oak Industries Inc. grew rapidly in the early 1980's due primarily to its
cable television equipment, subscription television and other media related
businesses. From 1982 to 1985, the Company sustained severe losses in this
segment as a result of failed product introductions and the collapse of the
subscription television industry. Seeking to arrest this decline, the Company
initiated a series of actions, including the sale of unprofitable or
underutilized assets, cost cutting programs designed to reduce corporate and
divisional overhead costs and the substantial reduction of public debt from
$230 million in 1986 to zero as of December 31, 1992. A significant amount of
this public debt was reduced through a series of debt exchanges, the largest
of which involved the 1986 sale of the Company's materials segment to Allied-
Signal Inc. for approximately $152 million in cash. These proceeds, combined
with the issuance of common stock, were used to retire approximately $197
million of such debt. As a result of these actions, stockholders' equity rose
from negative $64.2 million at December 31, 1985 to positive $89.0 million at
December 31, 1988.
Despite these efforts, the Company continued to incur losses from
continuing operations exclusive of non-recurring items and, in June 1989, a
proxy contest resulted in the election of a new slate of directors. In late
1989 and early 1990, a new management team with extensive experience in
industrial operations and acquisitions was installed. The charter of this new
management team was and is to: 1) dispose of unprofitable businesses with low
potential; 2) improve the profitability of the remaining operations; and 3)
pursue a well planned, focused and consistent acquisition strategy. It is the
intention of the Board of Directors that the Company will serve as a holding
company managing a portfolio of companies which will include both existing
operations and other businesses serving markets with good growth and income
potential.
During 1990 the Company completed the sales of two of its operating
businesses: Oak Communications Inc. and Diamond H Controls Ltd. Oak
Communications Inc. designed and manufactured equipment for the cable
television market. Diamond H Controls is a Norwich, England based
manufacturer of electric range components for the British and European
<PAGE>
appliance markets. This subsidiary was sold due to the lack of strategic fit
with other Oak subsidiaries and to redeploy the cash proceeds generated by the
transaction into domestic operations with greater growth and earnings
potential. Shortly following the disposition of the assets of Oak
Communications Inc. based in Rancho Bernardo, California, the Company
relocated its corporate headquarters from Rancho Bernardo to Waltham,
Massachusetts to be closer to its operating units and to reduce travel costs.
On January 4, 1991, the Company acquired the assets of Standard Grigsby,
Inc. ("SGI"), a subsidiary of Flint Industries, Inc., including the stock of
SGI de Mexico, S.A. de C.V., for approximately $7.5 million in cash and the
assumption of certain liabilities. SGI manufactured switch products
complementary to those of Oak Switch Systems Inc. During 1991, Company
management combined the businesses of SGI and Oak Switch Systems, forming
OakGrigsby Inc., in order to improve the profitability of each entity.
On September 10, 1992, the Company acquired the common stock of H.E.S.
International, Inc. ("H.E.S.") , a manufacturer of hermetically-sealed
packages used by manufacturers of quartz crystals, for approximately $2.8
million in net cash and a $0.3 million note payable through September 1995.
H.E.S. manufactured products complementary to those of the Houston Electronics
division ("Houston") of Oak Crystal Inc. During 1992, Company management
combined the operations of Houston into those of H.E.S. in order to improve
the profitability of the combined entity.
On December 23, 1992, the Company, along with Bain Capital, through an
acquisition company, Connector Holding Company ("Connector"), acquired 85
percent of the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"),
a Glendale, Arizona manufacturer and supplier of specialty connectors to the
cable television and high-end microwave markets. Management of Gilbert
retained ownership of the remaining 15 percent of Gilbert. The Company has
the right of first refusal should Gilbert management wish to sell their shares
in Gilbert. If the Company refuses the offer, Gilbert management may, after a
specified period of time and at its option, exchange its shares of Gilbert for
the Company's common stock. The Company owns 80 percent of Connector, with
Bain Capital owning the other 20 percent. Bain may at any time after December
22, 1995 require Oak to buy and Oak may at any time after December 22, 1996
require Bain to sell its outstanding shares in Connector at a price determined
according to the terms of the stockholders agreement entered into by Oak and
Bain at the time of the acquisition. The aggregate purchase price was
approximately $106.9 million, including refinancing of existing debt of
Gilbert and transaction expenses. Gilbert is required to make mandatory debt
payments equal to 90% of annual cash flows from operations less capital
expenditures and other expenditures as specified in the credit agreement
relating to the financing of the acquisition.
On January 12, 1993, the Company acquired the assets of the hybrid
oscillator business of Spectrum Technology Inc. ("Spectrum"), a subsidiary of
Datum Inc., for approximately $1.6 million in cash including consolidation
costs. Spectrum manufactured products complementary to those of
McCoy/Ovenaire. This acquired business was consolidated into the
McCoy/Ovenaire operations during the first quarter of 1993.
<PAGE>
Effective May 13, 1993, the Company's shareholders approved a one-for-
five reverse stock split of the Company's common stock (the "Reverse Split").
All share and earnings per share amounts used herein have been restated to
reflect the Reverse Split.
The Company is party to a 1989 agreement with Invesco MIM Management
Limited, formerly MIM Ltd. ("MIM"), an international fund management company
based in the United Kingdom, pursuant to which MIM and its clients (the "MIM
Group") purchased 1.4 million shares of the Company's newly issued common
stock at $3.75 per share and a warrant to acquire an additional 0.6 million
shares at $6.00 per share until January 25, 1996. The agreement with MIM
contains certain restrictions on the MIM Group's right to sell, transfer and
purchase additional Oak common stock. It also grants the MIM Group certain
rights with respect to the registration of the Oak securities acquired under
the terms of the agreement. In a separate transaction in 1989, the MIM Group
acquired 2 million shares of the Company's common stock previously held by
Itel Corporation. In December 1993, the MIM Group sold approximately 1.8
million shares, including 0.5 million shares obtained from the exercise of
warrants, pursuant to registration rights under the 1989 agreement with MIM.
As of December 31, 1993, the MIM Group held approximately 1.1 million shares,
or 6% of the Company's outstanding common stock.
As of December 31, 1993, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $164.0 million, primarily
expiring from 1999 through 2006. Under federal tax law, certain changes in
ownership of the Company, which may not be within the Company's control, may
operate to restrict future utilization of these carryforwards.
(B) FINANCIAL INFORMATION ABOUT THE INDUSTRY SEGMENTS
The Company's businesses are currently classified into the Components
Segment and the Other Segment. For information regarding sales, operating
income and identifiable assets attributable to each industry segment, see Note
9 of the Notes to Consolidated Financial Statements which is incorporated
herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS
The Company's operations are conducted in two industry segments, the
Components Segment and the Other Segment. The Company's Components Segment
manufactures connectors for CATV systems and other precision applications,
frequency control devices, controls for gas and electric appliances, switches
and other products which generally have the common function of controlling or
regulating the flow of energy. The Other Segment is composed of the Company's
railway maintenance equipment and emergency lighting divisions.
<PAGE>
COMPONENTS SEGMENT
The Company operates principally through its Components Segment, which
manufactures and sells communications components and control components.
Communications Components
The Company's communications components include specialty connectors for
use in CATV and other precision applications and devices which control radio
frequencies such as quartz crystals, filters and oscillators and their related
bases and enclosures. The Company has completed several acquisitions of
businesses offering communications components and believes that, over time,
the Company will expand its product offerings to the communications markets
through new product development and the acquisition of businesses which
compete in growing markets and offer strong margin potential. Collectively,
communications components accounted for approximately 51% of the Company's net
sales for 1993.
CATV and Specialty Connectors. On December 23, 1992, the Company, along
with Bain Capital, through an acquisition company, Connector Holding Company
("Connector"), acquired 85 percent of the outstanding stock of Gilbert
Engineering Co., Inc. ("Gilbert"). Management of Gilbert retained ownership
of the remaining 15 percent of Gilbert. The Company owns 80 percent of
Connector, with Bain Capital owning the other 20 percent.
Gilbert manufactures and supplies specialty connectors to the cable
television and high-end microwave markets. Its operations are based in
Glendale, Arizona and Amboise, France.
Domestic and export sales are made directly to cable television system
operators as well as through distributors and manufacturers' representatives.
Gilbert's wholly-owned French subsidiary, Societe d'Appareillages
Electroniques, S.A. ("S.A.E."), sells primarily to cable operators in France.
Gilbert's major customers include cable operators such as Tele-Communications,
Inc. (TCI), Sammons Communications, Scripps Howard and Time Warner Cable, and
distributors such as Antec Corporation. The top ten customers are responsible
for approximately 55 percent of total sales.
The cable industry is experiencing a continuing expansion of channel
capacity in response to the desire of cable operators to provide subscribers
with more programming selections, including pay-per-view and additional
programming services. In addition, rapid developments in fiber optic
technology, digital compression (which allows several channels to be
transmitted within the same bandwidth that a single analog channel currently
requires), computer electronics and mass storage technology have placed the
U.S. cable industry in a position to market and supply a wide array of
communication services. The Company believes that cable operators will
continue to invest capital, including investment in fiber optic trunk lines,
to upgrade the technological capabilities of their systems, provide higher
quality and more reliable signal transmission and increase channel capacity in
order to meet subscriber demand for better picture quality and more
programming services, such as expanded pay-per-view, premium services and
telephony. Once a fiber optic "trunk" has replaced or supplemented the
existing coaxial trunk in a cable system, or once digital compression is
<PAGE>
utilized in a system, the active electronic components in the shorter "feeder"
lines (which run from the trunk to the home) are generally upgraded to
accommodate the increased information flow. As a general rule, when cable
operators replace the active electronic components in a system, the connectors
must also be replaced. Although connectors of the type manufactured by
Gilbert are not used in fiber optic lines, the Company believes that most
feeder lines will remain coaxial due to the lower cost and comparable quality
of coaxial cable relative to fiber optic cable over short distances.
Gilbert is the leading U.S. manufacturer of aluminum connectors and a
major U.S. manufacturer of brass connectors for the cable television industry.
Although the market for these products is highly competitive with respect to
quality and delivery, the Company believes it competes favorably with respect
to each of these factors. In particular, the Company's aluminum connector
products are engineered to meet stringent reliability requirements. Certain
parties are also attempting to develop technologies which could compete with
those currently employed by Gilbert's customers. If successful, these
developments could have a negative impact on Gilbert's business.
The primary raw materials used in the manufacture of specialty connectors
are aluminum and brass. Gilbert currently purchases all of its aluminum
requirements from a single supplier. Although the Company believes several
alternative sources of supply of aluminum are available, a sudden disruption
of its supply from this supplier could have a temporary adverse effect on the
manufacture and sale of Gilbert's connector products. Gilbert is not
dependent on any single supplier for its other raw materials. Management does
not foresee any problems obtaining the raw materials necessary for the
manufacture of specialty connectors.
Gilbert owns a number of patents but does not consider any one patent or
group of patents material to the conduct of the business.
Shipments of Gilbert's products are typically made shortly after the
receipt of the order. Accordingly, the Company does not consider Gilbert's
order backlog at any date to be a significant predictor of Gilbert's future
results of operations.
Frequency Control Devices. Through its frequency control devices
business units, McCoy/Ovenaire/Spectrum, Croven Crystals and H.E.S.
International, the Company offers its precision frequency control devices to
original equipment manufacturers for both commercial and military
applications. For these products, the Company provides custom design, joint
development opportunities, value-added assembly and low cost component and
subsystem manufacturing.
The Company's frequency control products include crystals, crystal
oscillators, and crystal filters for a variety of applications, including key
components made for cellular telephone base stations, telecommunications
switching equipment, global positioning systems, satellite programs,
scientific test and/or measurement equipment, avionics, and computer systems.
Major customers of the Company's frequency control products include Rockwell
International, Hewlett-Packard, Hughes Aircraft, AT&T, ITT, Motorola and
Alcatel Network Systems.
<PAGE>
There are many suppliers, both domestic and foreign, of crystal frequency
control devices. In order to compete effectively in this market, the company
places a strong emphasis on high quality and sophisticated design technology.
A large percentage of the Company's frequency control products are
manufactured to exacting customer specifications, and the Company relies to a
large extent on its engineering staff in identifying customer needs and
meeting production and delivery schedules. Sales of the Company's frequency
control products are made through a direct sales force and manufacturers'
representatives.
Manufacturing facilities for the Company's frequency control products are
located in Mt. Holly Springs and Mercersburg, Pennsylvania, and Whitby,
Ontario, Canada. Management believes that recent improvements in each
facility allow the Company to provide superior quality and delivery
performance for such products at competitive prices.
In 1993, sales of frequency control products to military contractors
constituted less than 10% of the Company's total sales. In recent periods,
the Company has reduced the percentage of its sales of frequency control
products attributable to such customers through the introduction of new
products for the commercial telecommunications industry.
The Company believes there is ready availability of the raw materials,
principally natural and synthetic quartz, required for the production of its
frequency control products. There are multiple suppliers of such raw
materials, and the Company utilizes many of these suppliers. Moreover, the
Company has recently entered into a strategic alliance with Alfa Quartz
("Alfa"), a subsidiary of Sural C.A. Alfa has made significant capital
investments in its Venezuelan operation in order to become a major supplier of
synthetic quartz crystals on the world market. The strategic alliance is
intended to develop Alfa's finishing capabilities and thereby allow it to
broaden its product offerings as well as ensure the Company of a ready supply
of high-quality, low-cost crystal blanks.
The Company also manufactures glass-to-metal hermetically sealed packages
used in a variety of products including frequency controls, lithium batteries
and semiconductors. These operations are based in Kansas City, Kansas. The
Company believes it is a leader in four major types of hermetically sealed
packages: cold weld, resistance weld, solder seal and all-glass induction
seal. Approximately 85% of the Company's sales of hermetic packages are to
customers in the United States. These customers are currently serviced on a
factory direct basis. Foreign sales are conducted through direct sales and
distributors. In the sale of hermetic packages, the Company believes it
enjoys competitive advantages including a worldwide reputation for superior
quality and delivery performance, a leadership position in glass-to-metal
sealing technology, low-cost, value-added contract assembly operations in
Acuna, Mexico, and experience in the custom design of unique packages for
customer needs.
<PAGE>
Control Components
The Company's controls products include electronic, electro-mechanical
and mechanical controls, switches and components sold to various consumer and
industrial manufacturers. The Company provides gas range and outdoor grill
controls, components and replacement parts through its Harper-Wyman Company
subsidiary, and optical, rotary and appliance switches and other products
through its OakGrigsby Inc. subsidiary. The Company expects to expand its
product offerings to the market for control devices through new product
development and acquisitions. Collectively, control components accounted for
approximately 41% of the Company's net sales for 1993.
Appliance Components and Controls. The Company, through its Harper-Wyman
Company subsidiary ("Harper-Wyman") manufactures a broad line of controls and
components for gas and electric range appliances for sale to original
equipment manufacturers in the consumer appliance industry. Harper-Wyman has
operations in Aurora and Princeton, Illinois and Ciudad Juarez, Mexico.
Harper-Wyman's major customers include General Electric Corporation,
Raytheon Company (Caloric and Amana), Maytag Corporation (Magic Chef and Jenn-
Air) and Brown Stove Works Inc.
The sale of Harper-Wyman's products is conducted through its direct sales
force with assistance from a small number of manufacturers' representatives.
Harper-Wyman is dependent on a small number of customers, principally the
major original equipment appliance manufacturers. The loss of any one of
these customers could have a material adverse effect on Harper-Wyman's
business.
The market in which Harper-Wyman participates is very competitive in
terms of price, quality and delivery, with three significant competitors.
Harper-Wyman believes it is a leading supplier to the market for its gas range
products.
Harper-Wyman's domestic control products must conform to Underwriters'
Laboratories and American Gas Association specifications. All such approvals
have been obtained and Harper-Wyman's quality assurance team maintains
compliance with these specifications. Harper-Wyman is not dependent upon any
single supplier for raw materials. Harper-Wyman owns a number of patents but
does not consider any one patent or group of patents material to the conduct
of business.
Harper-Wyman, through its Harpco Division, is a manufacturer and supplier
of replacement parts to the consumer appliance and outdoor grill industries.
The market for Harpco Division's products consists of original equipment
manufacturers and distributors. Sales are made primarily through
manufacturers' representatives.
Switch Devices. The Company's OakGrigsby business unit manufactures low-
power open frame, enclosed and encoded rotary switches along with solenoids,
lighted push-button switches and appliance switches. OakGrigsby has also
developed an optical switch which eliminates many of the mechanical aspects of
rotary switches providing for a longer product life and more accurate control
of switching operations. These products are sold primarily to original
equipment manufacturers of industrial, test and medical equipment. The
Company has recently introduced a new device which is used in sorting machines
used by the U.S. Postal Service. The Company's switch manufacturing
operations are located in Sugar Grove, Illinois and Ciudad Juarez, Mexico.
<PAGE>
Some of OakGrigsby's top customers include Rockwell International,
Motorola, the U.S. Government, Pitney Bowes and Tektronix. The top ten
customers are responsible for approximately 36% of total sales. Open frame
rotary switches account for about 36% of total sales revenue. OakGrigsby's
marketplace is principally domestic with some product shipped to Canada and
Europe. Product is sold by manufacturers' representatives directly to
customers across the United States and in Europe, with an increasing amount of
product sold through distributors. OakGrigsby supplies to a highly fragmented
market and competes primarily on the basis of price, technology, innovation
and distribution.
OakGrigsby owns a number of patents but does not consider any one patent
or group of patents material to the conduct of business. Management does not
foresee any problems obtaining raw material for use in the production of
OakGrigsby's products. The company is not dependent on any single supplier
for raw materials.
OTHER SEGMENT
The businesses comprising the Company's Other Segment accounted for
approximately 8% of the Company's net sales for 1993.
Railway Products. Through its Nordco Inc. subsidiary ("Nordco"), the
Company manufactures, sells and leases products used in the construction,
maintenance and repair of railway tracks. Nordco's products fall into three
general categories: tie renewal equipment, rail renewal equipment and track
inspection equipment. A significant portion of Nordco's business results from
sales of replacement parts for these machines.
The sale of Nordco's products is conducted through a sales and
distribution network throughout North America. Although Nordco has several
key competitors, including Fairmont Tamper, the Company believes that no more
than three competitors sell against Nordco in any particular product line.
Management believes it is well-positioned for this competitive environment.
The Company believes Nordco's strong marketing relationships and the resulting
awareness of customer needs, combined with superior engineering capability,
certain patents, which have remaining lives of 2 to 12 years, and a successful
research and development program, have given Nordco a reputation as a
technological and quality leader in this industry.
Nordco's primary market includes railroads in the United States and
Canada designated as Class I (railroads with revenues in excess of $96.1
million). Other markets for Nordco's products include Mexico , the
Scandinavian countries and Australia.
Nordco's new equipment and parts customers have distinct seasonal
demands. New equipment shipments are heaviest during early spring when the
summer track maintenance programs commence and parts shipments are heaviest
during the summer work season.
<PAGE>
Nordco is primarily an assembler of purchased components from a wide
variety of suppliers, and it is not dependent upon any single supplier.
Emergency Lighting. Through its Carpenter Emergency Lighting business
unit ("Carpenter"), the Company manufactures and assembles self-powered
emergency lights, exit signs, and portable lights for use in industrial,
commercial, and office functions. Carpenter's operations are located in
Charlottesville, Virginia.
Carpenter's products are sold to electrical distributors through a
nationwide network of independent manufacturers' representatives. Sales are
driven by new construction, renovation, and local safety code ordinances. The
industry in which Carpenter operates is highly competitive, with approximately
fifteen companies serving the industry. No single competitor has a dominant
market share. The Company believes that the quality of Carpenter's products,
the experience of its sales force, its short lead times, order to delivery,
and competitive product pricing provide Carpenter with competitive advantages.
Raw materials, primarily plastics, metals, batteries, and electronic
components, are purchased from a variety of vendors. Carpenter is not
dependent upon any single supplier.
OTHER INVESTMENTS
Channel 44. The Company owns a 49% interest in TV Station WSNS which, as
a Telemundo affiliate, broadcasts Spanish language programming in the Chicago
metropolitan area.
O/E/N India. The Company owns a 45% interest in O/E/N India Ltd. ("O/E/N
India"), located in Cochin, Kerala, India. O/E/N India assembles and markets
relays, potentiometers, and switches for the Indian market. The principal
markets include communications systems, data processing equipment and
industrial applications. O/E/N India and its subsidiaries' products also
include floppy diskettes, terminals and connectors. The operations of O/E/N
India do not have a material impact on the Company's financial condition or
results of operations.
EMPLOYEES
At December 31, 1993, the company had approximately 2,620 employees,
1,728 of whom were located in the United States and 892 in foreign countries.
Of these employees, 175 are members of unions. The Company believes its
relationship with its employees are good.
<PAGE>
BACKLOG
The Company's backlog of domestic and foreign orders for each industry
segment at the indicated dates was as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
----------------- -----------------
<S> <C> <C>
Components.................... $39,585 $38,343
Other......................... 1,303 218
------- -------
Total $40,888 $38,561
======= =======
</TABLE>
Substantially all orders in each segment's backlog are considered firm
and are expected to be delivered within twelve months of the dates indicated
above. Consistent with practices in the Company's businesses, a portion of
the backlog is unscheduled as to the delivery date. Orders are normally
cancelable subject to payment by the purchaser of charges incurred by the
Company up to the time of cancellation.
<PAGE>
EXECUTIVE OFFICERS
The following table lists the name, age, position and offices of all
executive officers of the Company. The term of office of all executive
officers will expire upon the holding of the first meeting of the Board of
Directors following the 1994 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C>
<S>
William S. Antle III.... 49 President and Chief Executive Officer since
December 1989; President of the Hadleigh
Group, a consulting firm specializing in
improving the profitability of underperforming
companies, June to December 1989; Executive
Vice President of Bain and Company, an
international strategy consulting firm, from
prior to 1989.
Paul J. Halas........... 37 Senior Vice President, General Counsel, and
Secretary since August 1990; Treasurer of Timex
Group, Ltd., an international manufacturer and
distributor of timepieces and other products,
from June 1989 to July 1990, Assistant General
Counsel and Assistant Secretary from prior to
1989 to June 1989.
John D. Richardson...... 48 Senior Vice President, Human Resources since
August 1990; Corporate Vice President of Human
Resources of Fidelity Investments, a privately-
held mutual fund company, from prior to 1989 to
July 1990.
William C. Weaver....... 52 Senior Vice President and Chief Financial
Officer since January 1990; Vice President and
Chief Financial Officer of Kennametal, Inc., a
provider of tools, tooling systems, supplies
and services to the metalworking industry, from
prior to 1989.
<PAGE>
ITEM 2. PROPERTIES
The Company believes that its plants and facilities are suitable and
adequate for its business. They are well maintained, are in sound operating
condition, and are in regular use. The table below sets forth the location
and general character of important properties of the Company as of December
31, 1993. Properties without reference to leases are owned by the Company.
</TABLE>
<TABLE>
<CAPTION>
FLOOR SPACE
(APPROXIMATE
LOCATION / YEAR LEASE EXPIRES SQUARE FEET)
- ----------------------------- ---------------------
<S> <C>
Amboise, France {A,C,D}................................ 34,000 (2 buildings)
Aurora, Illinois (lease expires 11/30/96) {A,C}........ 16,000
Charlottesville, Virginia {C,D, E}..................... 57,000
Glendale, Arizona (leases expire 12/31/97 and
8/31/01) {A,C,D}.................................. 157,000 (3 buildings)
Juarez, Mexico (lease expires 5/16/98) {A,D}........... 51,000
Kansas City, Kansas {A,C,D} (lease expires 9/30/97).... 19,000
Mercersburg, Pennsylvania {A,D}........................ 34,000 (2 buildings)
Milwaukee, Wisconsin (lease expires 12/31/94) {C,D,E}.. 92,000
Mt. Holly Springs, Pennsylvania {A,C,D}................ 79,000 (2 buildings)
Princeton, Illinois {A,D}.............................. 235,000 (2 buildings)
Sugar Grove, Illinois (leases expire 2/28/97 and
12/14/98) {A,C,D}................................. 86,000 (2 buildings)
Waltham, Massachusetts (lease expires 7/15/95) {B,C}... 12,000
Whitby, Ontario, Canada {A,C,D}........................ 25,000
Zaragosa, Mexico (lease expires 6/30/97) {A,D}......... 97,000
- ----------------
<FN>
{A} Used by the Components Segment.
{B} Corporate Headquarters.
{C} Office Space.
{D} Manufacturing Facilities.
{E} Used by the Other Segment
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the ordinary course of
business. Some of these proceedings involve claims for punitive damages in
addition to other special relief. The Company's management does not consider
any of such proceedings to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1993, no matters were submitted to a vote of
security holders.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The markets on which the common stock of the Company is traded are the
New York Stock Exchange and the Pacific Stock Exchange. As of January 31,
1994, there were approximately 9,666 stockholders of record of common stock of
the Company.
Information regarding the trading price of the Company's common stock for
each quarterly period during the last two fiscal years is set forth below. No
dividends on the Company's common stock were paid during 1993 or 1992. (See
description of dividend restrictions included in the Revolving Credit Facility
Agreement in Note 4 to the Consolidated Financial Statements.)
<TABLE>
<CAPTION>
PRICE OF COMMON STOCK
--------------------------
1993 1992
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter........... $20 $10 5/8 $14 3/8 $4 3/8
Second Quarter.......... 27 1/4 14 3/8 12 1/2 5 5/8
Third Quarter........... 29 17 10 6 7/8
Fourth Quarter.......... 20 5/8 12 1/2 13 1/8 6 7/8
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL RESULTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales:
Components............... $201,593 $123,375 $108,555 $120,635 $121,326
Other.................... 17,969 19,874 15,811 18,690 17,406
Net sales from
continuing operations.. 219,562 143,249 124,366 139,325 138,732
Interest expense........... 7,795 1,405 1,798 2,112 4,564
Income (loss) from
continuing operations.... 26,660 10,388 5,265 1,389 (20,222)
Net income (loss).......... 26,660 14,438 5,570 9,669 (25,481)
Income (loss) per
common share:
Primary:
Continuing operations. 1.47 .60 .32 .09 (1.23)
Net income (loss)..... 1.47 .83 .34 .59 (1.55)
Fully-diluted:
Continuing operations. 1.47 .59 .32 .09 (1.23)
Net income (loss) 1.47 .82 .34 .59 (1.55)
Cash dividends per
common share............. -- -- -- -- --
FINANCIAL POSITION
Working capital............ $ 69,575 $ 54,829 $ 61,805 $ 63,476 $ 43,961
Plant and equipment, net... 33,429 32,668 24,658 24,929 23,947
Total assets............... 237,727 228,948 124,512 130,848 127,753
Long-term debt............. 61,549 76,922 11,225 11,255 17,749
Stockholders' equity....... 126,919 98,074 84,182 78,278 68,613
GENERAL STATISTICS
Capital expenditures....... $ 7,018 $ 4,111 $ 4,667 $ 6,461 $ 4,657
Depreciation............... $ 6,142 $ 4,380 $ 4,322 $ 4,609 $ 4,453
Average common shares
outstanding:
Primary............... 18,100,104 17,309,489 16,505,446 16,504,892 16,407,217
Fully-diluted......... 18,100,104 17,666,745 16,505,446 16,504,892 16,407,217
Number of recordholders
(at year end)........... 9,732 12,146 12,113 12,716 13,199
Number of employees
(at year end)........... 2,620 2,253 1,620 1,708 2,203
Salaries and wages......... $ 53,016 $ 40,435 $ 38,544 $ 44,516 $ 46,289
</TABLE>
- ------------------------
All prior years' data has been restated to reflect only continuing operations
as of December 31, 1993.
<PAGE>
See description of 1992 change in accounting for income taxes in Note 8 to the
Consolidated Financial Statements.
See description of December 23, 1992 acquisition of Gilbert Engineering Co.,
Inc. in Note 2 to the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow remained strong throughout 1993 with cash and
cash equivalents increasing by $8.4 million to $27.4 million at December 31,
1993. Operations generated $31.3 million of cash during 1993 compared to
$10.6 million during 1992. The Company spent $7.0 million for capital
equipment and $1.6 million to acquire a business. Cash of $22.7 million was
used to repay debt and $6.0 million was freed from restriction due to the
elimination of a requirement for collateral for a letter of credit. The
Company also received $3.2 million as the result of the exercise of warrants
to purchase 540,000 shares of the Company's common stock.
In September 1993, the Company entered into a new revolving credit
facility with a group of banks, increasing available borrowings from $15.0
million to $30.0 million. The new facility, which is available through
December 1995, is at various interest rates at the Company's option based on
the prime rate or LIBOR. Borrowings under the facility are secured by the
Company's pledge of the outstanding capital stock of certain of the Company's
subsidiaries. At December 31, 1993, there were no borrowings outstanding
under this facility.
At December 31, 1993, cash and unused lines of credit totaled $76.4
million of which $21.2 million was available only to Gilbert and $55.2 million
was available for general corporate purposes, including acquisitions. The
maximum amount of borrowing under the line of credit available only to Gilbert
decreases at each quarter end through 1994 and will be $10.0 million at
December 31, 1994. The Company believes its current financial resources are
sufficient to meet its continuing operating requirements, service its long-
term debt, and provide for future growth.
The indebtedness of Gilbert incurred as a result of its acquisition by
the Company and Bain Capital is repayable on various dates through 1999. Such
indebtedness is collateralized by the assets and common stock of Gilbert and
is non-recourse to the Company. At December 31, 1993, the principal amount of
such indebtedness, net of original issue discount, was $57.1 million. Such
indebtedness as of December 31, 1993 bears various interest rates from LIBOR
plus 3.0% to prime plus 3.0% per annum (6.3% to 9.0% at December 31, 1993).
In addition to scheduled repayments, Gilbert is required to make mandatory
prepayments on this indebtedness equal to 90% of annual cash flows from
operations less capital expenditures and certain other expenditures. A
portion of this indebtedness is outstanding under Gilbert's line of credit,
and a portion of the scheduled repayments of this indebtedness account for the
scheduled reductions in the maximum borrowings available under such line of
credit described in the immediately preceding paragraph. In January 1994,
Gilbert borrowed $10.0 million under its line of credit in order to make
certain mandatory prepayments as described above.
<PAGE>
At December 31, 1993, the Company's Nordco Inc. subsidiary had $5.6
million principal amount of indebtedness outstanding under a term loan
agreement. This principal amount bears interest at 12.05% per annum and is
repayable in equal semi-annual installments through 1997. The obligations are
secured by a pledge of the common stock of Nordco Inc. held by the Company.
The Company is involved in certain environmental matters at several of
its operating divisions. Management believes that the ultimate resolution of
these environmental matters will not have a material effect on the Company's
financial position or results of operations. The Company's operations, like
those of similar manufacturing businesses, may involve certain ongoing risks
to the environment.
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the course of business.
Some of these proceedings involve claims for punitive damages in addition to
other special relief. The Company's management, based upon advice of legal
counsel representing the Company with respect to each of these proceedings,
does not believe any of these proceedings will have a material effect on the
Company's consolidated financial position.
On December 23, 1992, the Company, along with certain affiliates of Bain
Capital ("Bain Capital"), through an acquisition company, Connector Holding
Company ("Connector"), acquired 85% of the outstanding stock of Gilbert. The
aggregate purchase price was approximately $106.9 million, including
refinancing of existing debt of Gilbert and transaction expenses. Management
of Gilbert retained ownership of the remaining 15% of Gilbert. The Company
has the right of first refusal should Gilbert management wish to sell their
shares in Gilbert. If the Company refuses the offer, Gilbert management may,
after a specified period of time and at its option, exchange its shares of
Gilbert for shares of the Company's common stock. The Company owns 80% of
Connector, with Bain Capital owning the other 20%.
Bain Capital may at any time after December 22, 1995 require the Company
to buy and Oak may at any time after December 22, 1996 require Bain Capital to
sell its outstanding shares in Connector at a price determined according to
the terms of the stockholders agreement entered into by the Company and Bain
Capital at the time of the acquisition (the "Stockholders Agreement"). The
price is the higher of fair market value as determined by an independent
appraisal and a price based upon certain formulas applied to the earnings of
Gilbert in certain periods. The Stockholders Agreement limits the ability of
Connector or Gilbert to take certain fundamental corporate actions without the
prior consent of the Company and Bain Capital. The agreement prohibits the
sale by either the Company or Bain Capital of its equity interests in
Connector. The Company's shares of Connector have been pledged to Bain
Capital to secure the financial obligations of the Company under the
Stockholders Agreement.
<PAGE>
Although the Company operates internally with several businesses
functioning as profit centers, these businesses are also managed as a group.
That is, if a given business is performing strongly, corporate management may
use this opportunity to invest additional funds in product development and
marketing in another business. Certain agreements applicable to Gilbert limit
Gilbert's ability to make distributions or advances to the Company and
likewise the Company has no obligation to make further advances to, or
investments in, Gilbert.
As of December 31, 1993, the Company had net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $164.0 million,
which will, if unused, expire from 1999 through 2006. Under federal tax law,
certain changes in ownership of the Company, which may not be within the
Company's control, may operate to restrict future utilization of these
carryforwards.
In accordance with FAS 109, the Company has recorded as a deferred tax
asset the expected tax benefit in future periods associated with the
anticipated utilization of these NOLs. At December 31, 1993, this deferred
tax asset was $29.4 million. In order to realize the deferred tax asset, the
Company must generate domestic pretax profit of at least $80 million before
the NOLs expire. Management has determined, based on the Company's history of
prior operating earnings, the history of prior operating earnings of Gilbert
and the Company's expectations for the future, that income of the Company will
more likely than not be sufficient to utilize $29.4 million of benefit from
the utilization of NOLs prior to their expiration.
Consistent with its strategy, the Company will aggressively explore
additional acquisition opportunities in 1994. If consummated, an acquisition
would involve the expenditure of cash and may require borrowing against its
existing revolving credit facility and/or new borrowing arrangements.
Currently, the Company has no commitment, understanding, or arrangement
relating to any material acquisition and there can be no assurance that
additional transactions will be consummated in 1994.
RESULTS OF OPERATIONS
On December 23, 1992, the Company along with Bain Capital, through their
acquisition company, Connector Holding Company ("Connector"), acquired 85% of
the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"), a
Glendale, Arizona manufacturer and supplier of specialty connectors to the
cable television, microwave, and high-end specialty precision markets.
Management of Gilbert retained ownership of the remaining 15% of Gilbert. The
Company owns 80% of Connector, with Bain Capital owning the other 20%. The
acquisition was accounted for as a purchase and, accordingly the operating
results of Gilbert for the nine days from the date of acquisition through
December 31, 1992 were included in the Company's consolidated statement of
operations. The effect of these operating results on the Company's 1992 sales
and net income was insignificant.
<PAGE>
1993 COMPARED TO 1992
Consolidated sales for 1993 were $219.6 million, an increase of $76.4
million, or 53.3%, over 1992. Components Segment sales increased $78.3
million, or 63.4% and Other Segment sales decreased $1.9 million, or 9.6%.
The increase in consolidated sales is attributable primarily to the
acquisition of Gilbert at the end of 1992.
Net income during 1993 was $26.7 million compared to net income of $14.4
million in 1992. Each period, however, includes certain non-recurring items
shown in the table below. Income from continuing operations before non-
recurring items in 1993 increased by $14.6 million, or 217.9% over 1992,
primarily as a result of the inclusion of Gilbert's results of operations in
the 1993 period. Included in income from continuing operations is equity in
net income of affiliated companies of $1.7 million and $2.3 million for 1993
and 1992, respectively.
NET INCOME ($ MILLIONS)
<TABLE>
<CAPTION>
1993 1992
------ ------
<C> <C>
<S>
Income from continuing operations
before non-recurring items..................... $21.3 $ 6.7
Subtract non-recurring items:
Restructuring charge (a)....................... (2.9) (1.5)
Add non-recurring items:
Gain on resolution of income tax issue (b)..... 3.9 --
Sale of minority interest investment (c)....... -- 2.7
Adjustment to deferred income tax
valuation reserve (d)........................ 6.0 2.5
Adjustment to minority interest (d)............ (1.6) --
Effect of change in accounting principle (e)... -- 3.5
Income from discontinued operations............ -- 0.5
----- -----
Net income........................................ $26.7 $14.4
===== =====
<FN>
- ------------------
(a) In the third quarter of 1993, the Company recorded a $2.9 million
restructuring charge to cover the costs associated with reorganizing its
Mexican manufacturing operations, consolidating certain U.S. operations, and
certain other overhead reductions. During the fourth quarter of 1992, the
Company recognized a charge of $1.5 million related to the reorganizations and
facilities consolidations at certain divisions.
(b) In the third quarter of 1993, the Company recorded a gain of $3.9 million
resulting from an Internal Revenue Service refund relating to the settlement
of a tax dispute.
(c) During the fourth quarter of 1992, the Company recognized a gain of $2.7
million related to the sale of its investment in ComStream Corporation, in
which the Company held a minority ownership interest.
<PAGE>
(d) During the fourth quarters of 1993 and 1992, the Company adjusted its
deferred income tax valuation reserve in accordance with FAS 109, resulting in
an income tax benefit of $6.0 million and $2.5 million, respectively. The
1993 income tax benefit caused minority interest in net income of subsidiaries
to increase $1.6 million.
(e) In the first quarter of 1992, the Company adopted FAS 109, which allowed
the Company to recognize a portion of the benefits from its net operating loss
carryforwards. The effect of such adoption was income of $3.5 million in
1992.
</TABLE>
The $14.6 million improvement in income from continuing operations before
non-recurring items for 1993 resulted primarily from a $31.1 million increase
in segment operating profitability (see discussion under "Segment Data")
offset, in part, by several non-operating items. Interest expense increased
$6.4 million due to higher debt levels resulting from the acquisition of
Gilbert. Minority interest in net income of subsidiaries of $5.8 million,
before the non-recurring increase of $1.6 million resulting from the FAS 109
adjustment, represents the minority stockholders' proportionate share of the
income of Connector and Gilbert. Interest income decreased $0.5 million due
to lower invested balances and lower interest rates. Equity in net income of
subsidiaries decreased $0.6 million. Income tax expense, excluding the tax
benefit related to the settlement of the tax dispute and adjustments to the
deferred income tax valuation reserve, increased $1.2 million due to higher
foreign and state taxes, reflecting higher earnings levels.
In the first quarter of 1993, the Company adopted FAS 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions". This statement
changes the past practice of accounting for the cost of postretirement
benefits from a pay-as-you-go (cash) basis to the accrual basis. Under the
new statement, the expected cost of providing those benefits to an employee,
the employee's beneficiaries, and covered dependents will be recognized in the
years that the employee renders the necessary service. The accumulated
postretirement benefit obligation as of January 1, 1993 was $1.1 million. The
Company has elected to amortize this transition obligation over 20 years in
accordance with the provisions of FAS 106. The effect on the financial
statements of the adoption of the provisions of this statement was not
material in 1993 and is not expected to be material in the future. The
Company allows certain employees aged 55 or older and with 10 or more years of
service to retire and continue their medical and/or dental coverage until age
65. In most cases, retirees are responsible for paying premiums to the
Company to continue coverage.
<PAGE>
The Financial Accounting Standards Board has issued FAS 112 "Employers'
Accounting for Postemployment Benefits". This statement changes the past
practice of accounting for the cost of certain postemployment benefits from a
pay-as-you-go (cash) basis to an accrual basis. The statement generally
requires adoption for fiscal years beginning after December 15, 1993.
Management does not expect the effect of the adoption of this statement in
1994 to be material to the Company's financial statements.
SEGMENT DATA ($ MILLIONS)
<TABLE>
<CAPTION>
Sales Operating Income
-------------- ----------------
1993 1992 1993 1992
------ ------ ----- -----
<C> <C> <C> <C>
<S>
Components......................... $201.6 $123.3 $39.0 $8.7
Other.............................. 18.0 19.9 1.9 1.1
------ ------ ----- ----
Subtotal........................ $219.6 $143.2 40.9 9.8
====== ======
Restructuring charges.............. (2.9) (1.5)
----- ----
Total........................... $38.0 $8.3
===== ====
</TABLE>
Sales of the Components Segment increased $78.3 million, or 63.4%, in
1993 compared to 1992. This increase was due primarily to incremental sales
of Gilbert, which was acquired in December 1992, and to a lesser extent, sales
of two smaller businesses, acquired in January 1993 and September 1992, and to
volume increases in the switch controls business, partially offset by volume
declines in the appliance controls business (from historically high levels in
1992). Components Segment order backlog was $39.6 million at December 31,
1993, up $1.2 million, or 3.2% from December 31, 1992.
Excluding the effect of the restructuring charges discussed above,
operating income of the Components Segment increased $30.3 million, or 347.6%,
in 1993 as compared to 1992. This improvement was primarily the result of the
inclusion of Gilbert's results of operations in 1993.
The strength of the operating performance of the Components Segment
during the first half of 1993 was primarily attributable to the high sales
level of CATV connector products in this period. Sales of such products were
slower in the second half of 1993, as cable operators took time to assess the
financial impact of the Cable Act of 1992 on their capital spending plans.
Other Segment sales decreased $1.9 million, or 9.6%, compared to 1992 due
to decreased volume from the Company's railway maintenance equipment division.
Operating income increased by $0.8 million, or 70.2%, compared to 1992,
however, due to higher gross margins resulting from various cost reduction
programs. Order backlog for the segment was $1.3 million at December 31,
1993, up $1.1 million from December 31, 1992.
<PAGE>
Consolidated gross profit increased as a percentage of sales in 1993 to
34.1% from 22.8% in 1992 due to higher sales volumes of higher margin products
and productivity enhancements. Selling, general and administrative expenses
increased $10.3 million primarily as a result of the acquisition of Gilbert.
As a percentage of sales, selling, general and administrative expenses
decreased from 19.5% to 17.4%.
Equity in net income of affiliated companies decreased $0.6 million in
1993, primarily as a result of increased amortization and interest expense of
the Company's 49%-owned Chicago TV station WSNS ("Channel 44") as a result of
costs incurred and payments made in connection with the 1992 reacquisition of
its license to operate.
1992 COMPARED TO 1991
Consolidated sales for 1992 were $143.2 million, an increase of $18.8
million, or 15.2%, from 1991. Components Segment sales increased $14.7
million, or 13.5%, and Other Segment sales increased $4.1 million, or 25.9%.
The Company acquired Gilbert on December 23, 1992, and therefore, the
acquisition had only a minor effect on the Company's results for 1992.
Consolidated net income for 1992 was $14.4 million which included income
from discontinued operations of $0.5 million and income of $3.5 million
resulting from a change in accounting principle for income taxes. Net income
for 1991 was $5.6 million, which included income from discontinued operations
of $0.3 million. Exclusive of the adjustments for non-recurring items shown
in the table below, the current year consolidated income was $2.1 million
greater than 1991. The increased income reflects higher operating profits as
discussed below under "Segment Data".
<PAGE>
NET INCOME ($ MILLIONS)
<TABLE>
<CAPTION>
1992 1991
------ ------
<C> <C>
<S>
Income from continuing operations
before non-recurring items.................... $ 6.7 $4.6
Subtract non-recurring items:
Reorganizations and facility
consolidation charges (a).................... (1.5) (2.2)
McCoy/Ovenaire division environmental reserve.. -- (0.4)
Adec litigation costs.......................... -- (0.2)
Add non-recurring items:
Sale of minority interest investment (b)....... 2.7 --
Adjustment to deferred income tax
valuation reserve (c)........................ 2.5 --
Gain on resolution of income tax issue (d)..... -- 3.5
Income from discontinued operations............ 0.5 0.3
Cumulative effect of change in
accounting principle (e)..................... 3.5 --
----- ----
Net income....................................... $14.4 $5.6
===== ====
<FN>
- --------------------
(a) During the fourth quarter of 1992, the Company recognized a charge of
$1.5 million related to the reorganizations and facilities consolidations at
certain divisions. During the second quarter of 1991, the Company recognized
a charge of $2.2 million related to the reorganizations and facilities
consolidations at certain divisions.
(b) During the fourth quarter of 1992, the Company recognized a gain of $2.7
million related to the sale of its investment in ComStream Corporation, in
which the Company held a minority ownership interest.
(c) During the fourth quarter of 1992, the Company adjusted its deferred
income tax valuation reserve in accordance FAS 109 resulting in an income tax
benefit of $2.5 million.
(d) During the third quarter of 1991, the Company recognized a gain of $3.5
million related to the favorable resolution of an income tax issue for which a
reserve had been previously provided.
(e) Gain resulting from the adoption of FAS 109.
</TABLE>
<PAGE>
SEGMENT DATA ($ MILLIONS)
<TABLE>
<CAPTION>
SALES OPERATING INCOME
--------------- ----------------
1992 1991 1992 1991
------ ------ ------ ------
<C> <C> <C> <C>
<S>
Components....................... $123.3 $108.6 $7.2 $3.4
Other............................ 19.9 15.8 1.1 0.9
</TABLE>
Components Segment sales increased $14.7 million, or 13.5%, from 1991.
Contributing to the higher volume was a more robust market as well as
increased market share in one part of the business. Partially offsetting this
increase were volume declines in other parts of the business resulting from
reductions and delays in military spending and continued softness in the
economy. Components Segment order backlog was $38.3 million at year end, up
$2.2 million from December 31, 1991.
Operating income from the Components Segment increased $3.8 million, or
111.8%, from 1991. Both 1992 and 1991 operating income included non-
recurring charges for reorganizations and facilities consolidations of $1.5
million and $2.6 million, respectively. Exclusive of these non-recurring
items, operating income increased $2.3 million. This increase resulted
primarily from higher gross profits resulting from the sales increase
discussed above.
Other Segment sales increased $4.1 million, or 25.9%, higher than 1991
due to increased volume from the Company's railway maintenance equipment and
emergency lighting divisions reflecting increased purchasing activities by the
railroads and higher sales of emergency lights and exit signs. Operating
income increased only $0.2 million despite higher sales volumes due to an
unfavorable mix of product shipments. Order backlog for the segment was $0.2
million at December 31, 1992, down $1.9 million from the previous year.
Backlog at December 31, 1991 was unusually high as several railroad customers
placed orders earlier than usual.
Consolidated gross margins decreased as a percentage of sales in 1992 to
22.8% from 22.9% in 1991 due to higher sales volumes of lower margin products.
Selling, general and administrative expenses increased 6.7% due to increased
engineering, selling and marketing expenses reflecting the Company's strategy
to grow the base businesses.
Equity in net income of affiliated companies increased $0.5 million in
1992 from $1.8 million in 1991 due to improved operating performance of the
Company's 49% owned TV Station WSNS ("Channel 44").
<PAGE>
The Company adopted FAS 109 effective January 1, 1992 on a prospective
basis. The effect of such adoption was income of $3.5 million in the first
quarter 1992 consolidated statement of operations reported as "Cumulative
effect of change in accounting principle." This income resulted from the
recognition of a deferred tax asset of $80.1 million, net of a valuation
allowance of $76.6 million. At December 31, 1992, the deferred tax asset was
$79.3 million and the valuation allowance was $57.3 million resulting in a net
asset of $22.0 million. Of the increase in the net deferred tax asset, $16.9
million resulted from purchase accounting related to the acquisitions of
Gilbert and H.E.S. during 1992 and $2.5 million resulted from an adjustment to
the valuation allowance in the fourth quarter of 1992 due to management's
improved expectations of future operating income. This $2.5 million was
recognized as an income tax benefit in the fourth quarter 1992 consolidated
statement of operations as "Income taxes".
The tax provision for 1991 includes a benefit of $3.5 million from the
favorable resolution of an income tax issue for which a reserve had been
previously provided.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
OAK INDUSTRIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
FINANCIAL STATEMENTS -
Consolidated Balance Sheet at December 31, 1993 and 1992
Consolidated Statement of Operations for the years
ended December 31, 1993, 1992 and 1991
Consolidated Statement of Stockholders' Equity for
the years ended December 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows for the years
ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
SCHEDULES -
II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employers other than
Related Parties
VIII - Valuation and Qualifying Accounts
X - Supplementary Statement of Operations Information
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Oak Industries Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Oak Industries Inc. and its subsidiaries at December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 8 to the consolidated financial statements,
the Company changed its method of accounting for income taxes in 1992.
PRICE WATERHOUSE
Boston, Massachusetts
January 21, 1994
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1993 1992
-------- --------
<C> <C>
<S>
Current Assets:
Cash and cash equivalents...................... $ 27,367 $ 18,937
Restricted cash................................ -- 6,000
Receivables, less reserves of $901 and $1,030.. 27,753 26,280
Inventories.................................... 31,325 32,461
Deferred income taxes.......................... 6,950 2,485
Other current assets........................... 3,063 3,970
-------- --------
Total current assets....................... 96,458 90,133
-------- --------
Plant and Equipment:
Land........................................... 1,094 1,161
Buildings and leasehold improvements........... 16,934 16,986
Machinery and equipment........................ 68,447 63,035
Furniture and fixtures......................... 4,898 4,626
-------- --------
91,373 85,808
Less - Accumulated depreciation................ (57,944) (53,140)
-------- --------
Total plant and equipment.................. 33,429 32,668
-------- --------
Other Assets:
Deferred income taxes.......................... 22,400 20,400
Goodwill and other intangible assets, less
accumulated amortization of $5,839
and $3,296.................................. 70,999 72,414
Investments in affiliates...................... 8,962 7,606
Other assets................................... 5,479 5,727
-------- --------
Total other assets......................... 107,840 106,147
-------- --------
Total Assets............................... $237,727 $228,948
======== ========
</TABLE>
- --------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
-------- --------
<C> <C>
<S>
Current Liabilities:
Current portion of long-term debt.............. $ 1,546 $ 8,503
Accounts payable............................... 8,567 10,084
Accrued liabilities............................ 16,770 16,717
-------- --------
Total current liabilities................. 26,883 35,304
-------- --------
Other Liabilities:
Deferred compensation and pensions.......... 5,461 7,445
Other....................................... 2,074 3,805
-------- --------
Total other liabilities................... 7,535 11,250
-------- --------
Long-Term Debt, Less Current Maturities....... 61,549 76,922
-------- --------
Minority Interest............................. 14,841 7,398
-------- --------
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, no par value; authorized
4,834,237 shares; none issued............ -- --
Common stock, par value of $0.01;
authorized 50,000,000 shares;
issued 17,202,783 and 16,524,135 shares.. 172 165
Additional paid-in capital.................. 280,467 276,637
Accumulated deficit......................... (151,850) (178,510)
Cumulative translation adjustment........... (530) (23)
Treasury stock, 12,797, and 12,248 shares... (35) (31)
Other....................................... (1,305) (164)
-------- --------
Total stockholders' equity................ 126,919 98,074
-------- --------
Total Liabilities and
Stockholders' Equity.................... $237,727 $228,948
======== ========
</TABLE>
- -----------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net Sales.................................. $219,562 $143,249 $124,366
-------- -------- --------
Costs, Expenses and Other Income (Expense):
Cost of sales............................ (144,706) (110,582) (95,883)
Selling, general and administrative
expenses.............................. (38,207) (27,907) (26,148)
Interest expense......................... (7,795) (1,405) (1,798)
Interest income.......................... 731 1,248 1,976
Equity in net income of affiliated
companies............................. 1,673 2,296 1,783
Other income (expense)................... (4,991) 1,849 (2,579)
-------- -------- --------
Total costs, expenses and other
income (expense).................. (193,295) (134,501) (122,649)
-------- -------- --------
Income from Continuing Operations before
Income Taxes and Minority Interest....... 26,267 8,748 1,717
Income Tax Benefit......................... 7,836 1,640 3,548
Minority Interest in Net Income
of Subsidiaries.......................... (7,443) -- --
-------- -------- --------
Income from Continuing Operations.......... 26,660 10,388 5,265
Income from Discontinued Operations........ -- 550 305
Cumulative Effect of Change in
Accounting Principle..................... -- 3,500 --
-------- -------- --------
Net Income................................. $ 26,660 $ 14,438 $ 5,570
======== ======== ========
Income per Common Share:
Primary:
Continuing operations............... $ 1.47 $ .60 $ .32
Discontinued operations............. -- .03 .02
Cumulative effect of change in
accounting principle.............. -- .20 --
-------- -------- --------
Net Income per Common Share......... $ 1.47 $ .83 $ .34
======== ======== ========
Fully-diluted:
Continuing operations............... $ 1.47 $ .59 $ .32
Discontinued operations............. -- .03 .02
Cumulative effect of change in
accounting principle.............. -- .20 --
-------- -------- --------
Net Income per Common Share......... $ 1.47 $ .82 $ .34
======== ======== ========
</TABLE>
- --------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION TREASURY
STOCK CAPITAL DEFICIT ADJUSTMENT STOCK OTHER TOTAL
------- -------- ----------- ----------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
<S>
Balance, December 31, 1990......... $16,514 $260,245 $(198,518) $ 556 $(31) $ (488) $ 78,278
Net income......................... -- -- 5,570 -- -- -- 5,570
Current year translation adjustment -- -- -- 15 -- -- 15
Other.............................. 4 -- -- -- -- 315 319
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1991......... 16,518 260,245 (192,948) 571 (31) (173) 84,182
Net income......................... -- -- 14,438 -- -- -- 14,438
Current year translation adjustment -- -- -- (594) -- -- (594)
Reduction of par value............. (16,359) 16,359 -- -- -- -- --
Other.............................. 6 33 -- -- -- 9 48
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1992......... 165 276,637 (178,510) (23) (31) (164) 98,074
Net income......................... -- -- 26,660 -- -- -- 26,660
Current year translation adjustment -- -- -- (507) -- -- (507)
Exercise of warrants............... 5 3,235 -- -- -- -- 3,240
Employee notes receivable.......... -- -- -- -- -- (1,305) (1,305)
Other.............................. 2 595 -- -- (4) 164 757
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1993......... $ 172 $280,467 $(151,850) $(530) $(35) $(1,305) $126,919
======= ======== ========== ======= ======== ======== ========
</TABLE>
- ------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
OPERATING ACTIVITIES:
Income from continuing operations........ $ 26,660 $ 10,388 $ 5,265
Adjustments to reconcile income
from continuing operations to net
cash provided by operations:
Depreciation and amortization.......... 10,328 5,322 5,093
Change in minority interest............ 7,443 -- --
Gain on the sale of minority
interest investment................... -- (2,700) --
Undistributed earnings of
affiliated companies.................. (1,356) (1,865) (1,485)
Change in assets and liabilities,
net of effects from acquisition
of businesses:
Receivables.......................... (1,152) 1,239 1,002
Inventories.......................... 1,681 3,391 5,220
Accounts payable and accrued
liabilities......................... (1,464) (1,255) (4,366)
Deferred compensation and pensions... (1,984) (1,088) (3,391)
Deferred income taxes................ (6,734) (2,529) (8)
Other................................ (2,120) (292) 2,803
-------- -------- --------
Net cash provided by
continuing operations.............. 31,302 10,611 10,133
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures..................... (7,018) (4,111) (4,667)
Acquisition of businesses................ (1,594) (16,734) (7,529)
Minority interest investment............. -- (900) --
Proceeds from the sale of minority
interest investment..................... -- 3,717 --
Loans to employees....................... (1,360) -- --
Other.................................... 265 499 562
-------- -------- --------
Net cash used in investing activities (9,707) (17,529) (11,634)
-------- -------- --------
<PAGE>
FINANCING ACTIVITIES:
Principal payments on long-term
borrowings.............................. (22,655) (1,660) (70)
Retirement of long-term debt............. -- (4,071) (5,365)
Cash restricted for letter of credit..... -- (6,000) --
Reduction in cash restricted for
letter of credit........................ 6,000 -- --
Exercise of warrants..................... 3,240 -- --
Other.................................... 757 12 --
-------- -------- --------
Net cash used for financing
activities........................... (12,658) (11,719) (5,435)
-------- -------- --------
Effect of exchange rate changes............ (507) (594) 15
-------- -------- --------
Net cash provided by discontinued
operations................................ -- 550 --
-------- -------- --------
Net change during year..................... 8,430 (18,681) (6,921)
Balance, beginning of year................. 18,937 37,618 44,539
-------- -------- --------
Balance, end of year....................... $ 27,367 $ 18,937 $ 37,618
======== ======== ========
</TABLE>
- -----------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
(1) STATEMENT OF ACCOUNTING POLICIES:
Following are the significant financial and accounting policies of the
Company:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its majority-owned subsidiaries. All significant transactions
between the Company and its subsidiaries are eliminated.
MINORITY INTEREST
Minority interest represents the minority stockholders' proportionate
share of the equity and the income or loss of Connector and Gilbert (See Note
2). The minority interest in the income of these operations was insignificant
in 1992.
INVESTMENTS IN AFFILIATES
The Company owns a 49% interest in TV Station WSNS, which broadcasts
Spanish language programming in the Chicago metropolitan area, and a 45%
interest in O/E/N India Ltd., located in Cochin, Kerala, India, which
assembles and markets relays and switches for the Indian market. Investments
in these affiliated companies are recorded at cost plus equity in
undistributed earnings. The cumulative amount of these undistributed earnings
included in consolidated accumulated deficit at December 31, 1993 and 1992 was
approximately $8,292,000 and $6,937,000, respectively. Dividends received
from these affiliated companies were $317,000, $431,000 and $298,000 for 1993,
1992, and 1991, respectively. Summarized financial information of TV Station
WSNS as of and for the year ended December 31 is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Current assets............................. $ 5,155 $10,298 $ 7,134
Non-current assets......................... 21,443 4,247 3,135
Current liabilities........................ 2,166 2,627 1,515
Net revenues............................... 13,496 12,827 11,237
Gross profit............................... 4,822 4,463 3,808
Net income................................. 4,413 4,589 3,965
</TABLE>
<PAGE>
TRANSLATION OF FOREIGN CURRENCIES
The financial statements of foreign subsidiaries are translated into U.S.
dollars in accordance with FAS 52. Under this statement, balance sheet
accounts are translated at the current exchange rate and income statement
items are translated at the average exchange rate for the year. Resulting
translation adjustments, if any, are made directly to a separate component of
stockholders' equity. Foreign currency transaction gains and losses are
included in net income when realized.
REVENUE RECOGNITION
Revenues from product sales are recognized at the time products are
shipped.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out basis)
or market. Inventory costs, which include material, labor and factory
manufacturing expenses, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1992
------- -------
<C> <C>
<S>
Raw materials.................... $ 8,736 $ 7,756
Work in process.................. 15,419 16,572
Finished goods................... 7,170 8,133
------- -------
$31,325 $32,461
======= =======
</TABLE>
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Replacements and improvements
are capitalized, while repairs and maintenance costs are charged to expense as
incurred. Depreciation is provided under the straight-line method over the
following useful lives:
Buildings.................. 10 to 40 years
Machinery and equipment.... 3 to 15 years
Furniture and fixtures..... 5 to 15 years
The cost and accumulated depreciation of items sold or retired are
removed from the plant and equipment accounts and any resulting profit or loss
is recognized currently.
<PAGE>
INTANGIBLE ASSETS
Goodwill and other intangibles, and the related amortization are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
OTHER
GOODWILL INTANGIBLES TOTAL
-------- ----------- -------
<C> <C> <C>
<S>
Balance, December 31, 1991....... $ 6,594 $2,683 $ 9,277
Additions........................ 63,954 32 63,986
Amortization..................... (306) (543) (849)
------- ------ -------
Balance, December 31, 1992....... 70,242 2,172 72,414
Additions........................ 1,112 16 1,128
Amortization..................... (2,057) (486) (2,543)
------- ------ -------
Balance, December 31, 1993..... $69,297 $1,702 $70,999
======= ====== =======
</TABLE>
Goodwill represents the excess of the cost of acquired businesses over
the fair market value of their net assets. Goodwill is being amortized on the
straight-line method over periods of 15 to 40 years. Other intangibles,
including patents and engineering drawings are stated at cost and amortized on
the straight-line method over periods of 7 to 17 years.
CAPITALIZED DEBT COSTS
The Company capitalizes all costs related to the issuance of debt. The
resulting capitalized debt costs ($2,232,000 and $3,261,000 at December 31,
1993 and 1992, respectively) are classified as "Other assets" on the
consolidated balance sheet. The capitalized debt costs related to each debt
issue are amortized to expense under the interest method over the life of the
respective debt issue. During the years 1993, 1992 and 1991 the Company
amortized $1,318,000, $93,000 and $38,000, respectively, of capitalized debt
costs.
INCOME TAXES
Effective January 1, 1992, the Company adopted FAS 109, "Accounting for
Income Taxes". FAS 109 requires the recognition of deferred tax assets and
liabilities for the difference between the financial statement and tax bases
of assets and liabilities utilizing current tax rates. Deferred tax assets
are recognized, net of any valuation allowance, for deductible temporary
differences and operating loss and credit carryforwards. Deferred tax benefit
or expense represents the change in the deferred tax asset or liability
balances. Previously, the Company used the FAS 96 asset and liability
approach which gave no recognition to future events other than the recovery of
assets and settlement of liabilities at their carrying amounts.
<PAGE>
RESEARCH AND DEVELOPMENT
Research and development costs, expensed as incurred, were $3,345,000,
$1,361,000 and $821,000 in 1993, 1992 and 1991, respectively.
EARNINGS PER COMMON SHARE
Earnings per share are based on the weighted average number of shares of
common stock and common stock equivalents outstanding as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<C> <C> <C>
<S>
Primary................................ 18,100,104 17,309,489 16,505,446
Fully-diluted.......................... 18,100,104 17,666,745 16,505,446
</TABLE>
Effective May 13, 1993, the Company's stockholders approved a one-for-
five reverse stock split of the Company's common stock (the "Reverse Split").
All share amounts and earnings per share amounts have been restated to reflect
the Reverse Split.
CASH EQUIVALENTS
The Company's cash equivalents represent funds invested in a variety of
liquid short-term instruments with maturities of less than three months. The
carrying amount of these instruments approximates fair value.
CONSOLIDATED STATEMENT OF CASH FLOWS
Supplementary information for the consolidated statement of cash flows is
as follows (dollars in thousands):
Cash paid during the year for:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Interest................................... $ 6,280 $ 1,260 $ 1,770
Income taxes............................... $ 4,890 $ 568 $ 817
</TABLE>
<PAGE>
Details of businesses acquired were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Assets acquired............................ $ 1,594 $118,470 $ 8,489
Liabilities assumed........................ -- (12,364) (960)
Debt assumed............................... -- (82,888) --
Minority interest cash investment.......... -- (3,400) --
-------- -------- --------
Cash paid.................................. 1,594 19,818 7,529
Cash acquired.............................. -- (3,084) --
-------- -------- --------
Net cash paid.............................. $ 1,594 $ 16,734 $ 7,529
======== ======== ========
</TABLE>
RECLASSIFICATIONS
Certain items in the 1992 and 1991 financial statements have been reclassified
to conform with the 1993 presentation.
(2) ACQUISITIONS:
On December 23, 1992, the Company, along with Bain Capital, through their
acquisition company, Connector Holding Company ("Connector"), acquired 85% of
the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"), a
Glendale, Arizona and Amboise, France manufacturer and supplier of specialty
connectors to the cable television, local area network, microwave and high-end
specialty precision markets. Management of Gilbert retained ownership of the
remaining 15% of Gilbert. The Company has the right of first refusal should
Gilbert management wish to sell their shares in Gilbert. If the Company
refuses the offer, Gilbert management may, after a specified period of time
and at its option, exchange its shares of Gilbert for 282,353 shares of the
Company's common stock (see Note 5 - Exchangeable Shares). The Company owns
80% of Connector, with Bain Capital owning the other 20%. Bain may at any
time after December 22, 1995 require Oak to buy and Oak may at any time after
December 22, 1996 require Bain to sell its outstanding shares in Connector at
a price determined according to the terms of the stockholders agreement
entered into by Oak and Bain at the time of the acquisition. The Company's
shares of Connector have been pledged to Bain Capital to secure the financial
obligations of the Company under the stockholders agreement.
The aggregate purchase price was approximately $106,900,000, including
refinancing of existing debt of Gilbert and transaction expenses. The
purchase price was financed with (i) a $13,600,000 cash equity investment by
the Company, (ii) a $3,400,000 cash investment by Bain Capital, (iii) a
$3,000,000 junior subordinated note issued by Connector to the Company, (iv)
an aggregate of $10,000,000 of 8% senior subordinated promissory notes issued
by Connector to the selling stockholders of Gilbert, and (v) $76,900,000 of
senior indebtedness of Gilbert provided by General Electric Capital
Corporation. The acquisition was accounted for as a purchase and,
accordingly, operating results of this business subsequent to the date of
<PAGE>
acquisition were included in the Company's consolidated statement of
operations. Goodwill resulting from this acquisition of approximately
$59,737,000 in the United States and $2,773,000 in France is being amortized
over 40 and 15 years, respectively. The transaction also resulted in the
recording of a deferred tax asset of approximately $16,200,000 which reflects
the expected future benefit from the utilization of the Company's net
operating loss carryforwards to offset Gilbert's taxable income (see Note 8).
The following unaudited pro forma summary combines the consolidated
results of operations of the Company and Gilbert as if the acquisition had
occurred at the beginning of 1992, after giving effect to certain adjustments,
including amortization of goodwill, increased interest expense on the
acquisition debt, related income tax effects, and minority interest. The pro
forma summary does not necessarily reflect the results of operations as they
would have been if the Company and Gilbert had constituted a single entity
during such period.
(Dollars in thousands, except per share amounts.)
<TABLE>
<CAPTION>
December 31, 1992
(Unaudited)
-----------------
<C>
<S>
Net sales.............................. $211,618
Income from continuing operations...... 19,111
Income from continuing operations
per common share:
Primary........................... 1.10
Fully-diluted..................... 1.08
</TABLE>
On September 10, 1992, the Company acquired all of the outstanding common
stock of H.E.S. International, Inc. ("H.E.S."), a manufacturer of hermetically
sealed packages used by manufacturers of quartz crystals, for approximately
$2,800,000 in net cash and a $257,000 note. The acquisition was accounted for
as a purchase and, accordingly, operating results of this business subsequent
to the date of acquisition were included in the Company's consolidated
statement of operations. Goodwill resulting from this acquisition is being
amortized over 25 years.
On January 12, 1993, the Company acquired the assets of the hybrid
oscillator business of Spectrum Technology Inc., a subsidiary of Datum Inc.,
for approximately $1,594,000 in cash, including consolidation costs. The
acquisition was accounted for as a purchase and, accordingly, operating
results of the business subsequent to the date of acquisition were included in
the Company's consolidated statement of operations. Goodwill resulting from
this acquisition is being amortized over 15 years.
<PAGE>
On January 4, 1991, the Company acquired the assets of Standard Grigsby,
Inc. ("SGI"), a manufacturer of switches for industrial and commercial
applications, including the stock of SGI de Mexico, S.A. de C.V. for
approximately $7,529,000 in cash and the assumption of certain liabilities.
The acquisition was accounted for as a purchase and, accordingly, operating
results of this business subsequent to the date of acquisition were included
in the Company's consolidated statement of operations. Goodwill resulting
from this acquisition is being amortized over 25 years.
(3) DISCONTINUED OPERATIONS:
On August 3, 1990, the Company sold the assets of its wholly-owned Oak
Communications Inc. subsidiary, including the stock of the Taiwan
manufacturing subsidiary, Oak Industries Taiwan Ltd., for $7,065,000 (subject
to post-closing adjustment) including a note for $2,000,000 and the assumption
of certain liabilities. During 1992, the Company and the buyer reached an
agreement on the post-closing adjustment and determined the final sale price
to be $6,565,000 with the buyer paying the Company an additional $1,500,000
through March 30, 1994. The agreement was renegotiated in December 1992 to
settle certain outstanding litigation. This agreement required the buyer to
pay a total of $1,385,000 to the Company as settlement of the purchase price
dispute, for use of the Company's trademark and to reimburse certain expenses.
During 1992, $1,200,000 was received related to these matters. Income from
discontinued operations in 1992 includes $800,000 net of related expenses and
$400,000 is included in other income. During 1993, the final $185,000 was
received related to these matters and is included in other income.
During 1991, a gain on sale of discontinued operations of $305,000 was
recorded as a result of the resolution of various commitments and other
matters related to the Company's 1984 disposal of STV and related operations.
<PAGE>
(4) INDEBTEDNESS:
Long-term debt at December 31 is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1992
------- -------
<C> <C>
<S>
Gilbert Engineering borrowings:
Term Loan A............................. $43,334 $62,000
Term Loan B............................. 7,123 8,957
Revolving Credit Facility............... 237 785
Connector Holding Company Senior
Subordinated Notes...................... 6,250 5,925
Nordco borrowings......................... 5,600 7,000
Other..................................... 551 758
------- -------
63,095 85,425
Less -
Current maturities...................... (1,546) (8,503)
------- -------
$61,549 $76,922
======= =======
</TABLE>
In connection with its acquisition by the Company, Gilbert entered into a
credit agreement with General Electric Capital Corporation dated as of
December 23, 1992 and amended on April 1, 1993. The Gilbert borrowings under
this agreement are collateralized by the assets, excluding the common stock of
its foreign subsidiary, and the common stock of Gilbert and are non-recourse
to the Company. Gilbert must meet certain financial covenants related to
fixed charge coverage, interest coverage and earnings targets. The credit
agreement will not allow Gilbert to pay cash dividends to the Company.
Gilbert is required to make mandatory debt payments equal to 90% of its annual
cash flow from operations less capital expenditures and other expenditures as
defined in the credit agreement. As a result of the agreement to make these
mandatory debt payments, in January 1994, Gilbert will borrow $10,005,000 on
the revolving credit facility and use $7,123,000 to pay off Term Loan B in its
entirety and $2,882,000 to pay down Term Loan A. Term Loan A bears interest
at LIBOR plus 3.0% or prime plus 1.5% and is repayable from 1995 through 1997.
The revolving credit facility, which expires and is repayable on December 23,
1997 and bears interest at LIBOR plus 3.0% or prime plus 1.5%, provides for
borrowings up to $21,000,000 at December 31, 1993 decreasing at each quarter
end through 1994 to $10,000,000 at December 31, 1994. The book value of these
borrowings approximates fair value.
<PAGE>
In connection with the acquisition of Gilbert, Connector issued
$10,000,000 of 8.0% senior subordinated notes to the sellers of Gilbert.
These notes are recorded net of original issue discount ($3,750,000 at
December 31, 1993) based on an interest rate of 18.5%. These notes are
subordinated to the Gilbert borrowings described above and mature on December
23, 1999. The net book value of these borrowings approximates fair value.
In December 1987, the Nordco Inc. ("Nordco") subsidiary entered into a
$13,000,000 financing agreement. Borrowings under this agreement are secured
by Nordco common stock pledged by the Company. Warrants to purchase 150,000
shares of the Company's common stock were issued in consideration for
execution of the financing agreement (see Note 5). Under the term loan
portion of the agreement, Nordco borrowed $7,000,000 at an interest rate of
12.05%. The principal amount of the debt of $5,600,000 at December 31, 1993
is repayable in equal semi-annual installments from 1994 through 1997. Based
on the borrowing rates currently available, the fair value of this debt is
approximately $6,200,000 at December 31, 1993.
In September 1993, the Company entered into a new revolving credit
facility with a group of banks, increasing available borrowings from
$15,000,000 to $30,000,000. The new facility, which is available through
December 1995, is at various interest rates at the Company's option based on the
prime rate or LIBOR. Borrowings under the facility are secured by the Company's
pledge of the outstanding capital stock of certain of the Company's
subsidiaries. At December 31, 1993, there were no borrowings outstanding under
this facility.
Scheduled maturities of long-term debt at December 31, 1993 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31
--------------
<S> <C>
1994................................... $ 1,546
1995................................... 16,158
1996................................... 17,903
1997................................... 21,094
1998................................... 0
Thereafter............................. 10,144
</TABLE>
(5) CAPITAL STOCK:
COMMON STOCK
At December 31, 1990, Invesco MIM Management Limited ("MIM"), an
international fund management company based in the United Kingdom, and various
funds that MIM advises held approximately 3,660,000 shares of the Company's
common stock and warrants for the purchase of 600,000 common shares. In 1992,
MIM and its clients sold approximately 520,000 shares of the Company's common
stock. In November 1992, a MIM client was liquidated and an aggregate of
2,275,540 shares and warrants for the purchase of 420,000 shares were
transferred to MIM and a successor fund, Second Consolidated Trust plc
("Second Consolidated"). At December 31, 1992, MIM and its clients held
<PAGE>
approximately 1,696,000 shares and warrants for the purchase of 333,000 shares
while Second Consolidated held approximately 1,445,000 shares and warrants for
the purchase of 267,000 shares. In January 1993, a client of MIM for which
one of the Company's directors is the managing director transferred its
management contract from MIM to another fund management company. As a result,
the holdings managed by MIM decreased by 430,000 common shares and warrants
for the purchase of 60,000 shares. In December 1993, MIM and its clients and
Second Consolidated sold approximately 1,103,000 shares and 693,000 shares,
respectively, including those obtained from the exercise of warrants, in a
secondary offering pursuant to registration rights under a 1989 agreement
between the Company and MIM. In addition, MIM and its clients sold
approximately 345,000 shares during 1993. At December 31, 1993, MIM and its
clients held approximately 91,000 shares and Second Consolidated held
approximately 1,019,000 shares.
In connection with the secondary offering in December 1993, the Company
lent $1,305,000 to its corporate officers and certain key divisional managers
for the purchase of 90,000 shares of the Company's stock from the selling
shareholders. The principal amount of such loans is repayable in full in
February 1997, with interest on such loans accruing at prime plus 0.5% per
annum, payable annually in February of each year beginning in 1995 until
maturity. These loans, which are included in stockholders' equity on the
balance sheet, are secured by the common stock purchased and certain other
amounts owed to such individuals by the Company.
Effective May 13, 1993, the Company's stockholders approved a one-for-
five reverse stock split of the Company's common stock (the "Reverse Split").
All share amounts and earnings per share amounts have been restated to reflect
the Reverse Split.
On June 3, 1992, the Company's shareholders approved an amendment to the
Restated Certificate of Incorporation, as amended, to change the par value of
the Company's common stock from $1.00 per share to $.01 per share resulting in
a reduction of "Common stock" and an increase of "Additional paid-in capital"
of $16,359,000 on the consolidated balance sheet.
PREFERRED STOCK
At December 31, 1993 and 1992, there were 4,834,237 shares of authorized
preferred stock without par value available for issuance. The Company has no
issues of preferred stock outstanding.
WARRANTS
The Company, in conjunction with the 1987 Nordco financing (see Note 4),
issued Series E warrants to purchase 150,000 shares of common stock to the
lender in consideration for execution of the financing agreement.
The Company issued Series F warrants in conjunction with the sale of
common stock to MIM (see Common Stock). In December 1993, warrants for the
purchase of 540,000 shares of common stock were exercised.
<PAGE>
Under the terms of the warrant agreements, the exercise price of the
warrants and the number of shares purchasable with each warrant are adjusted
whenever common stock is issued at a share price below the current market
value. At December 31, 1993, the following warrants were outstanding:
<TABLE>
<CAPTION>
Number Exercise Expiration
of Shares Price Date
--------- -------- ----------------
<C> <C> <C>
<S>
Warrant Series E....... 150,000 $6.00 December 1, 1997
Warrant Series F....... 60,000 $6.00 January 25, 1996
</TABLE>
EXCHANGEABLE SHARES
In connection with the Company's 1992 acquisition of Gilbert, the Company
issued options under the 1992 Non-qualified Stock Option Plan (see Note 6)
pursuant to which Gilbert management may, beginning in 1995, exchange their
shares in Gilbert for 282,353 shares of the Company's common stock.
(6) STOCK OPTIONS AND AWARDS:
1982 INCENTIVE STOCK OPTION PLAN
The 1982 Incentive Stock Option Plan provides for the issuance of up to
435,400 shares of common stock to key full-time salaried employees at the
market value of the stock on the date of the grant. The options vest over
periods of three to five years from the date the options are granted. This
plan expired on May 16, 1992 and no new options may be granted under this
plan.
1986 STOCK OPTION AND RESTRICTED STOCK PLAN
The 1986 Stock Option and Restricted Stock Plan provides for the issuance
of up to 600,000 shares of common stock to executives and key employees of the
Company at not less than 100% of the market value of such shares on the date
of the grant. The options vest over periods of three to four years from the
date the options are granted.
1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The 1988 Stock Option Plan for Non-Employee Directors of Oak Industries
Inc. provides for the issuance of up to 100,000 shares of common stock to non-
employee directors at the market value of the stock on the date of the grant.
The options vest over a four-year period from the date the options are
granted.
<PAGE>
1992 STOCK OPTION AND RESTRICTED STOCK PLAN
The 1992 Stock Option and Restricted Stock Plan provides for the issuance
of up to 1,000,000 shares of common stock to non-employee directors,
executives, and key employees of the Company at the market value of such
shares on the date of the grant. The options granted under this plan to date
vest over a three year period from the date the options are granted.
1992 NON-QUALIFIED STOCK OPTION PLAN
The 1992 Non-Qualified Stock Option Plan provides for the issuance of up
to 500,000 shares of common stock to employees, consultants and advisors of
the Company but not to officers and directors. Options become exercisable and
terminate as determined by the Compensation Committee and as detailed in the
Stock Option Agreements for each grant. The options granted under this plan
to date have been granted at the market value of the common stock on the date
of grant. In addition to the shares described under "Exchangeable Shares" in
Note 5 above, 120,000 of such options have been granted and vest over a three
year period.
STOCK OPTION SUMMARY
<TABLE>
<CAPTION>
Shares Option Price
--------- ------------------
<C> <C>
<S>
Outstanding at December 31, 1990.... 620,550 $3.15 to $59.40
Granted........................... 343,400 $4.05 to $5.00
Expired or cancelled.............. (112,200) $4.05 to $5.65
---------
Outstanding at December 31, 1991.... 851,750 $3.15 to $59.40
Granted........................... 755,400 $4.05 to $11.25
Expired or cancelled.............. (56,300) $4.05 to $59.40
Exercised......................... (10,750) $4.15 to $5.65
---------
Outstanding at December 31, 1992.... 1,540,100 $3.15 to $11.25
Granted........................... 200,665 $16.50 to $17.50
Expired or cancelled.............. (88,835) $4.06 to $11.25
Exercised......................... (137,751) $3.15 to $11.25
---------
Outstanding at December 31, 1993.... 1,514,179 $4.06 to $17.50
=========
Exercisable at December 31, 1993.... 828,986
=========
Available for grant at
December 31, 1993................. 483,985
=========
Available for grant at
December 31, 1992................. 636,183
=========
</TABLE>
<PAGE>
There were 2,280,517 shares of common stock reserved for issuance in
connection with the Company's stock option and award plans at December 31,
1993. Options issued under all option plans, if not exercised, expire ten
years from the date of grant.
(7) POSTRETIREMENT BENEFITS:
The Company has a number of noncontributory pension plans covering
substantially all of its employees. Benefits under the plans are generally
based on years of service and employees' compensation during the last years of
employment or a specified dollar benefit. It is the Company's policy to fund
at least the minimum amount required by ERISA for each plan.
Net periodic pension cost for all defined benefit plans was comprised of
the following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Service costs - benefits earned during the period..... $ 666 $ 686 $ 569
Interest cost on projected benefit obligation......... 2,376 2,328 2,113
Actual return on assets............................... (2,700) (1,382) (3,624)
Net amortization and deferral......................... 506 (235) 2,121
------ ------ ------
Net periodic pension cost............................. $ 848 $1,397 $1,179
====== ====== ======
</TABLE>
<PAGE>
The following table sets forth the funded status of all defined benefit
plans at December 31, 1993 and 1992 (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
------------------------------- -------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Exceed Accumulated Benefits Exceed
Benefits Assets Benefits Assets
------------- --------------- ------------- ---------------
<C> <C> <C> <C>
<S>
Actuarial present value of benefit obligations:
Vested.......................................... $690 $27,961 $521 $24,268
Nonvested....................................... 7 580 7 553
---- ------- ---- -------
Accumulated benefit obligation.................. $697 $28,541 $528 $24,821
==== ======= ==== =======
Fair value of assets.............................. $838 $22,558 $676 $20,272
Less: Projected benefit obligation................ 930 31,470 760 28,741
---- ------- ---- -------
Underfunded plans................................. (92) (8,912) (84) (8,469)
Unrecognized transition liability................. 11 176 13 205
Unrecognized prior service costs.................. 1 539 1 831
Unrecognized net loss............................. 182 2,717 153 1,036
Additional liability.............................. -- (283) -- (170)
---- ------- ---- -------
Accrued pension cost.............................. $102 $(5,763) $ 83 $(6,567)
==== ======= ==== =======
</TABLE>
In 1993 and 1991, the Company incurred curtailments in several plans as a
result of reduced employment levels and plan design changes. The impact of
these curtailments were gains of $359,000 in 1993 and $678,000 in 1991. The
1991 curtailment gain was included in the reorganizations and facility
consolidation charges recorded during 1991.
The projected benefit obligation was determined using an assumed discount
rate of 7.5% for 1993 and 8.5% for 1992 and 1991 and an assumed rate of
compensation increase of 5.0% for 1993 and 6.0% for 1992 and 1991. The
expected long-term rate of return on plan assets was 9.0% for all three years.
The assets of the plans at December 31, 1993 and 1992 consist principally
of common stocks, bonds, cash equivalents and real estate.
The Company has defined contribution plans covering substantially all
full-time employees who meet certain eligibility requirements. Contributions
by the Company and the employees are determined according to salary-based
formulas. Pension expense recognized by the Company related to these plans
was $1,014,000, $382,000 and $280,000 in 1993, 1992 and 1991, respectively.
The Company allows certain employees aged 55 or older and with 10 or more
years of service to retire and continue their medical and/or dental coverage
until age 65. In most cases, retirees are responsible for paying premiums to
the Company to continue coverage.
<PAGE>
In the first quarter of 1993, the Company adopted FAS 106 "Employers'
Accounting for Postretirement Benefits Other than Pensions." This statement
changes the past practice of accounting for the cost of postretirement
benefits from a pay-as-you-go (cash) basis to an accrual basis. Under the new
statement, the expected cost of providing those benefits to an employee, the
employee's beneficiaries, and covered dependents will be recognized in the
years that the employee renders the necessary service. The accumulated
postretirement benefit obligation as of January 1, 1993 was $1,096,000. In
determining the present value of the accumulated postretirement benefit
obligation, none of which has been funded, the Company used a 15 percent
health care cost trend rate for 1993, decreasing 1 percent per year until
1998, then decreasing 1/2 percent per year until leveling off at 5 percent. A
1 percent increase in the trend rate would increase the accumulated
postretirement obligation by approximately 12 percent. The weighted average
discount rate used was 7.5 percent. The Company has elected to amortize this
transition obligation over 20 years in accordance with the provisions of FAS
106. The effect on the financial statements of the adoption of this statement
is not material in 1993 and is not expected to be material in the future.
The Financial Accounting Standards Board has issued FAS 112 "Employers'
Accounting for Postemployment Benefits". This statement changes the past
practice of accounting for the cost of certain postemployment benefits from a
pay-as-you-go (cash) basis to an accrual basis. Management does not expect
the effect of the adoption of this statement in 1994 to be material to the
Company's financial statements.
(8) INCOME TAXES
Pretax income from continuing operations for the years ended December 31
consists of the following sources (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Domestic.................................. $25,284 $7,476 $ 984
Foreign................................... 983 1,272 733
------- ------ ------
$26,267 $8,748 $1,717
======= ====== ======
</TABLE>
<PAGE>
The income tax benefit for the years ended December 31 consists of the
following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Current -
Federal (a)............................. $3,782 $ (203) $3,900
Foreign................................. (255) (528) (278)
State and local......................... (2,156) (129) (74)
------ ------ ------
1,371 (860) 3,548
Deferred -
Benefit from federal rate increase...... 465 -- --
Benefit from change in deferred
tax asset valuation allowance......... 6,000 2,500 --
------ ------ ------
Total Benefit........................... $7,836 $1,640 $3,548
====== ====== ======
<FN>
- ------------------
(a) The income tax benefit in 1993 includes the receipt of $3,878,000
resulting from the settlement of an Internal Revenue Service tax dispute. The
income tax benefit in 1991 includes a benefit of $3,900,000 from the favorable
resolution of income tax issues for which reserves had been previously
provided. These issues related to periods prior to the generation of the
existing net operating loss carryforwards.
</TABLE>
The Company adopted FAS 109 on a prospective basis. The adjustment to
the January 1, 1992 balance sheet to adopt FAS 109 amounted to $3,500,000.
This amount is reflected in 1992 net income as the cumulative effect of a
change in accounting principle. It primarily represents the tax benefits of
net operating loss carryforwards that could not be recorded under FAS 96.
<PAGE>
Deferred income tax assets (liabilities) at December 31 are comprised of
the following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<C> <C>
<S>
Net operating loss carryforwards.......... $67,500 $71,000
Other..................................... 11,800 15,100
------- -------
Gross deferred tax assets................. 79,300 86,100
Gross deferred tax liabilities............ (9,300) (6,900)
Deferred tax asset valuation allowance.... (41,300) (57,250)
------- -------
Net deferred tax asset.................... $28,700 $21,950
======= =======
</TABLE>
During 1993 and 1992, the net deferred income tax asset increased by
$6,465,000 and $2,500,000, respectively, reflecting the increase in the
expected future benefit from the utilization of the Company's net operating
loss carryforwards due to management's improved expectations of future income
and an increase in the federal income tax rate. In addition, during 1992, the
net deferred income tax asset increased by $16,885,000 which reflected the
expected future tax benefits from the utilization of the Company's net
operating loss carryforwards to offset taxable income from the Gilbert and
H.E.S. acquisitions. At December 31, 1993 and 1992, deferred income tax
liabilities of $650,000 and $935,000, respectively, are classified as "Other
liabilities".
<PAGE>
The income tax benefit differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to income
from continuing operations before income taxes and minority interest as a
result of the following differences (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---------------- ---------------- ----------------
Amount Percent Amount Percent Amount Percent
------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C>
<S>
Computed statutory tax................................ $(9,194) (35.0) $(2,974) (34.0) $ (584) (34.0)
Increase (decrease) in tax benefit resulting from -
Operating loss carryforward which resulted in
current tax benefit.............................. 8,849 33.7 2,541 29.0 335 19.5
Change in deferred tax asset valuation allowance.... 6,000 22.8 2,500 28.6 -- --
Resolution of tax issues............................ 3,878 14.8 -- -- 3,900 227.1
State income taxes.................................. (2,156) (8.2) (129) (1.5) (74) (4.3)
Enacted federal rate change benefit................. 465 1.7 -- -- -- --
Other............................................... (6) -- (298) (3.4) (29) (1.7)
------- ------- ------- ------- ------- -------
Income tax benefit.................................... $ 7,836 29.8 $ 1,640 18.7 $3,548 206.6
======= ======= ======= ======= ======= =======
</TABLE>
At December 31, 1993, the Company has net operating loss carryforwards of
approximately $164,000,000 for tax reporting purposes, which will, if unused,
expire from 1999 to 2006. The Company has an alternative minimum tax credit
carryforward of approximately $513,000 as of December 31, 1993, which may be
carried forward indefinitely. The Company has investment tax credit
carryforwards of approximately $3,298,000 at December 31, 1993 which, if
unused, will expire from 1996 to 2001. The Company also has a research and
development tax credit carryforward of approximately $809,000 at December 31,
1993 which will, if unused, expire from 1998 to 2000. The use of the
carryforwards is limited to future taxable earnings of the Company. Under
Federal tax law, certain potential changes in ownership of the Company, which
may not be within the Company's control, may operate to restrict future
utilization of these carryforwards.
(9) SEGMENT INFORMATION:
The Company's industry and geographic data for continuing operations for
the years ended December 31 are as follows (dollars in thousands):
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
INDUSTRY SEGMENTS (a)
SALES
Components (b)................................. $201,593 $123,375 $108,555
Other.......................................... 17,969 19,874 15,811
-------- -------- --------
Consolidated sales........................... $219,562 $143,249 $124,366
======== ======== ========
OPERATING INCOME
Components (c)................................. $ 36,151 $ 7,225 $ 3,378
Other.......................................... 1,888 1,109 929
-------- -------- --------
Operating income............................. 38,039 8,334 4,307
Corporate expense (d).......................... (6,381) (1,725) (4,551)
Interest income (expense), net................. (7,064) (157) 178
Equity income.................................. 1,673 2,296 1,783
-------- -------- --------
Income before taxes and minority interest.... $ 26,267 $ 8,748 $ 1,717
======== ======== ========
IDENTIFIABLE ASSETS
Components..................................... $192,019 $180,690 $ 81,975
Other.......................................... 13,104 12,024 11,260
-------- -------- --------
205,123 192,714 93,235
Corporate assets............................... 32,604 36,234 31,277
-------- -------- --------
Consolidated assets.......................... $237,727 $228,948 $124,512
======== ======== ========
DEPRECIATION AND AMORTIZATION
Components..................................... $ 9,770 $ 4,840 $ 4,576
Other.......................................... 309 281 358
-------- -------- --------
10,079 5,121 4,934
Corporate...................................... 249 201 159
-------- -------- --------
Consolidated depreciation and amortization... $ 10,328 $ 5,322 $ 5,093
======== ======== ========
CAPITAL EXPENDITURES
Components..................................... $ 6,905 $ 3,904 $ 4,433
Other.......................................... 83 166 187
-------- -------- --------
6,988 4,070 4,620
Corporate...................................... 30 41 47
-------- -------- --------
Consolidated capital expenditures............ $ 7,018 $ 4,111 $ 4,667
======== ======== ========
<PAGE>
GEOGRAPHIC AREAS
SALES(e)
United States:
Unaffiliated................................. $207,410 $136,188 $117,185
To foreign affiliates........................ 274 220 326
Foreign:
Unaffiliated................................. 12,152 7,061 7,181
To United States affiliates.................. 426 147 324
Total sales between geographic areas........... (700) (367) (650)
-------- -------- --------
Consolidated sales........................... $219,562 $143,249 $124,366
======== ======== ========
OPERATING INCOME
United States.................................. $ 36,822 $ 7,070 $ 3,649
Foreign........................................ 1,217 1,264 658
-------- -------- --------
Operating income............................. $ 38,039 $ 8,334 $ 4,307
======== ======== ========
IDENTIFIABLE ASSETS
United States.................................. $192,153 $175,171 $ 84,215
Foreign........................................ 12,970 17,543 9,020
-------- -------- --------
Identifiable assets.......................... $205,123 $192,714 $ 93,235
======== ======== ========
<FN>
- -------------------
(a) The Company's operations serving the Components Segment manufacture
connectors for CATV systems and other precision applications, frequency
control devices, controls for gas and electric appliances, switches and other
products which generally have the common function of controlling or regulating
the flow of energy. The Other Segment represents the railway maintenance
equipment and emergency lighting divisions.
(b) Sales to one customer in the Components Segment amounted to $23,241,000,
$28,199,000 and $18,105,000, in 1993, 1992 and 1991, respectively. Sales to
another customer in the Components Segment amounted to $18,695,000 and
$18,267,000 in 1992 and 1991, respectively.
(c) The Components Segment's 1993 operating income includes a $2,900,000
charge to cover the costs associated with reorganizing its Mexican
manufacturing operations, consolidating certain U.S. operations, and certain
other overhead reductions.
The Components Segment's 1992 operating income includes a $1,500,000
charge for costs related to reorganizations and facilities consolidations at
certain divisions.
The Components Segment's 1991 operating income includes a $2,590,000
charge for costs related to reorganizations and facility consolidations and a
$400,000 charge related to an environmental matter at the McCoy division.
<PAGE>
(d) Corporate expense for 1992 includes a gain of $2,700,000 related to the
sale of the Company's investment in ComStream Corporation, in which the
Company held a minority ownership interest.
Corporate expense for 1991 includes $350,000 of income from the release
of an excess reorganization reserve established in a prior year.
(e) Export sales were $36,440,000, $29,282,000 and $17,271,000 for 1993,
1992, and 1991, respectively. These sales were principally to customers in
North America and Europe.
</TABLE>
(10) ACCRUED LIABILITIES:
Accrued liabilities at December 31 are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<C> <C>
<S>
Wages, bonuses, commissions, vacation, and severance.... $ 5,260 $ 4,506
Insurance............................................... 3,574 3,466
Contribution to employees' retirement income plans...... 1,957 1,269
Income taxes............................................ 1,529 2,975
Other................................................... 4,450 4,501
------- -------
$16,770 $16,717
======= =======
</TABLE>
(11) COMMITMENTS AND CONTINGENCIES:
Rent expense for facilities and office equipment was $3,249,000,
$1,721,000 and $1,482,000 in 1993, 1992, and 1991, respectively. At December
31, 1993, the Company was committed under non-cancelable operating leases for
minimum annual rentals for the next five years as follows: 1994 - $3,396,000;
1995 - $3,164,000; 1996 - $2,870,000; 1997 - $2,017,000; 1998 - $1,327,000;
thereafter - $2,272,000.
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the course of business.
Some of these proceedings involve claims for punitive damages in addition to
other special relief. The Company's management, based upon advice of legal
counsel representing the Company with respect to each of these proceedings,
does not believe any of these proceedings will have a significant impact on
the Company's consolidated financial position.
<PAGE>
(12) OTHER INCOME (EXPENSE):
Other income (expense) for the years ended December 31 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<C> <C> <C>
<S>
Reorganizations and facility consolidation charges.... $(2,900) $(1,500) $(2,240)
Amortization of intangibles........................... (2,543) (849) (733)
Royalty income........................................ 686 1,026 1,179
Environmental clean-up reserves....................... -- -- (400)
Sale of minority interest investment.................. -- 2,700 --
Other................................................. (234) 472 (385)
-------- -------- --------
$(4,991) $ 1,849 $(2,579)
======== ======== ========
</TABLE>
(13) Quarterly Results of Operations (Unaudited):
The following is a summary of the unaudited quarterly results of
operations for 1993 and 1992 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
---------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
1993
Net sales.............................. $59,223 $58,223 $51,578 $50,538 $219,562
======= ======= ======= ======= ========
Gross margin........................... $19,131 $19,792 $18,395 $17,538 $ 74,856
======= ======= ======= ======= ========
Income from continuing operations...... $ 5,015 $ 5,565 $ 6,450 $ 9,630 $ 26,660
======= ======= ======= ======= ========
Net income............................. $ 5,015 $ 5,565 $ 6,450 $ 9,630 $ 26,660
======= ======= ======= ======= ========
Income per common share:
Primary:
Continuing operations.............. $ .28 $ .31 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Net income......................... $ .28 $ .31 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Fully-diluted:
Continuing operations.............. $ .28 $ .30 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Net income......................... $ .28 $ .30 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
<PAGE>
1992
Net sales.............................. $35,983 $38,204 $33,242 $35,820 $143,249
======= ======= ======= ======= ========
Gross margin........................... $ 9,023 $ 8,952 $ 7,253 $ 7,439 $ 32,667
======= ======= ======= ======= ========
Income from continuing operations...... $ 2,485 $ 2,425 $ 1,186 $ 4,292 $ 10,388
======= ======= ======= ======= ========
Net income............................. $ 5,985 $ 2,425 $ 1,736 $ 4,292 $ 14,438
======= ======= ======= ======= ========
Income per common share:
Primary:
Continuing operations.............. $ .15 $ .14 $ .07 $ .25 $ .60
======= ======= ======= ======= ========
Net income......................... $ .35 $ .14 $ .10 $ .25 $ .83
======= ======= ======= ======= ========
Fully-diluted:
Continuing operations.............. $ .15 $ .14 $ .07 $ .24 $ .59
======= ======= ======= ======= ========
Net income......................... $ .35 $ .14 $ .10 $ .24 $ .82
======= ======= ======= ======= ========
</TABLE>
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED):
CONTINUING OPERATIONS
FOURTH QUARTER - 1993
The Company recognized an income tax benefit of $6,000,000 resulting from
an adjustment to its deferred income tax valuation reserve in accordance with
FAS 109. This benefit caused minority interest in net income of subsidiaries
to increase $1,600,000.
THIRD QUARTER - 1993
The Company recognized a gain of $3,878,000 resulting from an Internal
Revenue Service refund relating to the settlement of a tax dispute.
The Company recognized a restructuring charge of $2,900,000 to cover the
costs associated with reorganizing its Mexican manufacturing operations,
consolidating certain U.S. operations, and certain other overhead reductions.
FOURTH QUARTER - 1992
The Company recognized a gain of $2,700,000 related to the sale of its
investment in ComStream Corporation, in which the Company held a minority
interest.
The Company recognized an income tax benefit of $2,500,000 resulting from
an adjustment to its deferred income tax valuation reserve in accordance with
FAS 109.
The Company recognized a charge of $1,500,000 related to certain
reorganizations and facilities consolidations at certain divisions.
<PAGE>
DISCONTINUED OPERATIONS
THIRD QUARTER - 1992
The Company recognized income of $550,000 related to an additional
payment received, net of expenses, resulting from the post-closing adjustment
to the sales price of its discontinued Oak Communications business.
CHANGE IN ACCOUNTING PRINCIPLE
FIRST QUARTER - 1992
The Company recognized income of $3,500,000 related to the cumulative
effect of adopting FAS 109.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executive officers of the registrant,
see "Executive Officers" at the end of Part I of this report. For information
with respect to the Directors of the registrant, see "Elections of Directors"
in the Proxy Statement to be filed no later than April 3, 1994 for the Annual
Meeting of Stockholders to be held on May 3, 1994 which is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Officers,
Compensation and Other Information" in the Proxy Statement to be filed no
later than April 3, 1994 for the Annual Meeting of Stockholders to be held on
May 3, 1994 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and Stock
Ownership" in the Proxy Statement to be filed no later than April 3, 1994 for
the Annual Meeting of Stockholders to be held on May 3, 1994 is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and
Transactions" in the Proxy Statement to be filed no later than April 3, 1994
for the Annual Meeting of Stockholders to be held on May 3, 1994 is
incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THE REPORT:
1. Financial Statements
Consolidated balance sheet at December 31, 1993 and 1992
Consolidated statement of operations for the years ended
December 31, 1993, 1992 and 1991
Consolidated statement of stockholders' equity for the years
ended December 31, 1993, 1992 and 1991
Consolidated statement of cash flows for the years ended
December 31, 1993, 1992 and 1991
Notes to consolidated financial statements
2. Schedules
II - Amounts receivable from related parties and underwriters,
promoters and employees other than related parties
VIII - Valuation and qualifying accounts
X - Supplementary statement of operations information
All other schedules have been omitted since the information is either not
applicable, not required or is included in the financial statements or notes
thereto.
3. Exhibit Index
2(a) Stockholders Agreement dated as of December 22, 1992 by and among
Connector Holding Company, Oak Industries Inc., Tyler Capital Fund, L.P.,
Tyler Massachusetts, L.P., Tyler International, L.P.-II, BCIP Associates, BCIP
Trust Associates, and, solely as to Sections 1.5 and 11 thereof, Bain Venture
Capital, a California limited partnership filed as Exhibit 2.1 to the
Company's Amendment No. 2 to Form S-3 dated December 16, 1993 is incorporated
herein by this reference.
<PAGE>
(3)(a) Restated Certificate of Incorporation of Oak Industries Inc.
dated October 28, 1980; Certificate of Amendment of Restated Certificate of
Incorporation dated May 1, 1981; Certificate of Amendment of Restated
Certificate of Incorporation as Amended dated August 14, 1985; Certificate of
Amendment of Restated Certificate of Incorporation as Amended dated September
30, 1986; Certificate of Amendment of Certificate of Incorporation as Amended
dated July 15, 1987; Certificate of Amendment of Certificate of Incorporation
as Amended dated June 3, 1992; and Certificate of Amendment of Restated
Certificate of Incorporation, as Amended dated May 7, 1993 all filed as
Exhibit 3.1 to the Company's Amendment No. 1 to Form S-3 dated November 24,
1993 are incorporated herein by this reference.
(3)(b) Bylaws of Oak Industries Inc. as amended through February 3,
1993, filed herewith.
(4)(a) $3,000,000 Junior Subordinated Note due 2000 issued by Connector
Holding Company to the Company, filed as Exhibit (4)-2 to the Company's Form
8-K dated January 6, 1993 is incorporated herein by this reference.
(4)(b) Form of Senior Subordinated Note issued by Connector Holding
Company, filed as Exhibit (4)-3 to the Company's Form 8-K dated January 6,
1993 is incorporated herein by this reference.
(4)(c) Series E Warrant Agreement dated December 1, 1987, filed as
Exhibit 4(k) to the Company's 1988 Annual Report on Form 10-K dated March 31,
1989, is incorporated herein by this reference.
(10)(a) 1982 Incentive Stock Option Plan filed as Exhibit (A) to the
Company's 1982 Proxy Statement is incorporated herein by this reference.
(10)(b) 1986 Stock Option and Restricted Stock Plan for Executive and
Key Employees of Oak Industries Inc. filed as Annex III to the Proxy Statement
dated February 14, 1986 for a Special Meeting of Stockholders is incorporated
herein by this reference.
(10)(c) 1988 Stock Option Plan for Non-Employee Directors of Oak
Industries Inc. filed as Exhibit A to the Company's Proxy Statement in
connection with 1988 Annual Meeting of Stockholders filed with the Commission
on April 6, 1988 is incorporated herein by this reference.
(10)(d) 1992 Stock Option and Restricted Stock Plan filed as Exhibit A
to the Company's Proxy Statement in connection with the 1992 Annual Meeting of
Stockholders is incorporated herein by this reference.
(10)(e) Oak Industries Inc. Non-Qualified Stock Option Plan, filed as
Exhibit 10(e) to the Company's 1992 Annual Report on Form 10-K dated March 15,
1993 is incorporated herein by this reference.
(10)(f) Agreement between the Company and MIM Ltd. dated January 25,
1989, filed as Exhibit 10(g) to the Company's 1989 Annual Report on Form 10-K
dated March 28, 1990, Commission File Number 1-4474 is incorporated herein by
this reference.
(10)(g) Amended and Restated Revolving Credit Agreement between the
Company and The First National Bank of Boston dated as of September 1, 1993,
filed herewith.
<PAGE>
(10)(h) First Amendment to the Amended and Restated Revolving Credit
Agreement dated as of November 1, 1993 between the Company and The First
National Bank of Boston, filed herewith.
(10)(i) Credit Agreement dated as of December 23, 1992 among General
Electric Capital Corporation, Heller Financial, Inc., Gilbert Engineering Co.,
Inc. and Connector Holding Company, filed as Exhibit (4)-1 to the Company's
Form 8-K dated January 6, 1993 is incorporated herein by this reference.
(10)(j) Amendment No. 1 dated as of December 23, 1992 to Credit
Agreement dated as of December 23, 1992 among General Electric Capital
Corporation, Heller Financial, Inc., Gilbert Engineering Co., Inc. and
Connector Holding Company, filed as Exhibit 10(j) to the Company's 1992 Annual
Report on Form 10-K dated March 15, 1993 is incorporated herein by this
reference.
(10)(k) Amendment No. 2 dated as of February 24, 1993 to Credit
Agreement dated as of December 23, 1992 among General Electric Capital
Corporation, Heller Financial, Inc., Gilbert Engineering Co., Inc. and
Connector Holding Company, filed as Exhibit 10(k) to the Company's 1992 Annual
Report on Form 10-K dated March 15, 1993 is incorporated herein by this
reference.
(10)(l) Amendment No. 3 dated as of April 1, 1993 to Credit Agreement
dated as of December 23, 1993 among General Electric Capital Corporation,
Heller Financial, Inc., Gilbert Engineering Co., Inc. and Connector Holding
Company filed as Exhibit 10.1 to the Company's Amendment No. 2 to Form S-3
dated December 16, 1993 is incorporated herein by this reference.
(11) Statement regarding computation of per share earnings, filed
herewith.
(13) 1993 Annual Report to be provided no later than March 31, 1994 for
the information of the Commission and not deemed "filed" as a part of the
filing.
(21) Subsidiaries of the Company, filed herewith.
(99)(a) Financial Statements and Financial Statement Schedules of Video
44 for the years ended December 31, 1992, 1991 and 1990, filed as Exhibit
(28)(a) to the Company's 1992 Annual Report on Form 10-K dated March 15, 1993,
is incorporated herein by this reference.
(B) REPORTS ON FORM 8-K:
The Company filed a report on Form 8-K dated November 5, 1993 relating to
(i) its filing of a Registration Statement on Form S-3 with the Securities and
Exchange Commission and (ii) certain other financial information.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS TO INCORPORATION
BY REFERENCE INTO FORM S-8 FILING
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (File Nos.
33-14708, 2-71969, 33-32104, 2-83639, 33-53012, and 33-58878) of Oak
Industries Inc. of our report dated January 21, 1994 appearing previously
in this Form 10-K.
PRICE WATERHOUSE
Boston, Massachusetts
February 28, 1994
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
OAK INDUSTRIES INC.
Dated: February 28, 1994 By WILLIAM S. ANTLE III
WILLIAM S. ANTLE III
President and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C>
<S>
WILLIAM S. ANTLE III President and February 28,1994
(WILLIAM S. ANTLE III) Chief Executive Officer
WILLIAM C. WEAVER Senior Vice President and February 28, 1994
(WILLIAM C. WEAVER) Chief Financial Officer
THE RT. HON. LORD STEVENS OF LUDGATE Chairman of the Board February 28, 1994
(THE RT. HON. LORD STEVENS OF LUDGATE)
RODERICK M. HILLS Vice Chairman of the Board February 28, 1994
(RODERICK M. HILLS)
DANIEL W. DERBES Director February 28, 1994
(DANIEL W. DERBES)
GEORGE W. LEISZ Director February 28, 1994
(GEORGE W. LEISZ)
GILBERT E. MATTHEWS Director February 28, 1994
(GILBERT E. MATTHEWS)
CHRISTOPHER H.B. MILLS Director February 28, 1994
(CHRISTOPHER H.B. MILLS)
ELLIOT L. RICHARDSON Director February 28, 1994
(ELLIOT L. RICHARDSON)
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
For the Years Ended December 31, 1993, 1992, and 1991
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Increase Balance at Increase Balance at Increase Balance at
Name Note 12/31/90 (Decrease) 12/31/91 (Decrease) 12/31/92 (Decrease) 12/31/93
- --------------- ----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. S. Antle (1) $ -- $ -- $ -- $ -- $ -- $ 362 $ 362
E. A. Carter (3)(4) 578 -- 578 -- 578 (578) --
M. F. Goss (1) -- -- -- -- -- 116 116
J. P. Gwin (3) 126 -- 126 -- 126 -- 126
P. J. Halas (1) -- -- -- -- -- 145 145
D. A. Himes (1) -- -- -- -- -- 116 116
J. C. Horne (1) -- -- -- -- -- 116 116
R. Mehra (1) -- -- -- -- -- 44 44
J. D. Richardson (1) -- -- -- -- -- 145 145
J. D. Richardson (2) -- -- -- -- -- 55 55
T. F. Sheehan (1) -- -- -- -- -- 116 116
B. J. Smith (3)(4) 163 (163) -- -- -- -- --
W. C. Weaver (1) -- -- -- -- -- 145 145
<FN>
- ----------------
(1) Represents promissory notes receivables with the Company's corporate
officers and certain key divisional managers for the purpose of permitting
such individuals to purchase stock in the secondary offering dated December
16, 1993 from the selling shareholders. The promissory notes, which are
secured by the common stock purchased and certain other amounts owed to such
individuals by the Company, are repayable in full on February 21, 1997, with
interest on such loans accruing at a market rate and payable annually in
February of each year beginning in 1995 until maturity.
(2) Represents unsecured demand promissory note for the purpose of
reimbursing the individual for certain relocation costs. Interest accrues at
a market rate and is payable upon demand. The principal and interest on this
note will be forgiven over a three-year period provided the individual remains
employed by the Company.
(3) Represents unsecured notes receivable which were due on December 15, 1990
or earlier if the related shares were sold or under certain other conditions.
Interest is payable quarterly and is equal to the dividends received on the
common stock of the registrant purchased and held pursuant to stock options
exercised on December 15, 1980. The loans were made to enable the above
former employees to exercise these options and pay income taxes generated by
such exercises. The original loans made totaled $2,948,000. Loans totaling
$2,822,000 have subsequently been settled. The remaining book balance of
these loans at December 31, 1993 is zero, which reflects a realizability
reserve.
(4) The decreases in 1993 and 1991 are primarily the result of offsetting a
supplemental pension liability against the notes receivable.
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
ALLOWANCE FOR LOSSES IN COLLECTION
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<C> <C> <C>
<S>
Balance, beginning of year............. $1,030 $ 674 $ 763
Provision charged to selling, general,
and administrative expenses.......... 312 219 195
Recoveries of accounts previously
written off.......................... 7 35 54
Less write-off of uncollectible
accounts............................. (448) (291) (338)
Acquisition of businesses.............. -- 393 --
------ ------ ------
Balance, end of year................... $ 901 $1,030 $ 674
====== ====== ======
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
SCHEDULE X
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<C> <C> <C>
<S>
Charged to costs and expenses -
Depreciation.......................... $6,142 $4,380 $4,322
Amortization of intangibles........... 2,543 849 733
Amortization of other deferred
expenses............................ 1,643 93 38
Maintenance and repairs............... 3,406 2,417 2,260
</TABLE>
- -------------------
Note 1: Amounts for other taxes, royalties and advertising have been omitted
since each is less than 1% of net sales.
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 3(b) - BY-LAWS OF OAK INDUSTRIES INC.
BY-LAWS
OF
OAK INDUSTRIES INC.
(A Delaware Corporation)
(as amended through February 3, 1993)
ARTICLE I
Offices
Section 1. Registered Office. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders for the
election of directors shall be held at such place as may be fixed from time to
time by the board of directors. Meetings of stockholders for any other purpose
may be held at such time and place, within and without the State of Delaware,
as shall be stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
Section 2. Annual Meetings. Annual meetings of the stockholders shall be
held on the date and at the time fixed from time to time by the directors,
provided each annual meeting shall be held on a date within six months after
the end of each fiscal year or within thirteen months after the date of the
preceding annual meeting, whichever shall be the earlier date.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting
shall be given to each stockholder entitled to vote thereat at least ten days
before the date of the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every election of directors, a complete list of the stockholders entitled to
vote at said election, arranged in alphabetical order, showing the address of
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, during ordinary business
hours, for a period of at least ten days prior to the election, either at a
place within the city, town or village where the election is to be held and
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the list shall
be produced and kept at the time and place of election during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
Section 5. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board or
the president and shall be called by the chairman of the board, the president
or secretary at the request in writing of the stockholders owning not less
than 75% of all the shares of capital stock of the corporation which are
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meetings. Written or printed notice of a
special meeting of stockholders, stating the time, place and object thereof,
shall be given to each stockholder entitled to vote thereat, at least ten days
before the date fixed for the meeting.
Section 7. Business at Special Meetings. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum. The holders of stock having a majority of the voting
power of the issued and outstanding stock entitled to vote thereat, when
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the certificate of incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 9. Necessary Vote. When a quorum is present at any meeting, a
majority of the votes by the stockholders, present in person or represented by
proxy and entitled to vote thereon, shall decide any question brought before
such meeting, unless the question is one upon which by express provision of
the statutes or of the certificate of incorporation or of these by-laws, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 10. Vote, Proxies. Each stockholder shall at every meeting of the
stockholders be entitled to such vote (in person or by proxy) for each share
of the capital stock having voting power held by such stockholder and entitled
to vote at such meeting as shall be fixed by the certificate of incorporation.
No proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period. Except where the transfer books of the
corporation have been closed or a date has been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall be
voted on at any election for directors which has been transferred on the books
of the corporation within twenty days next preceding such election of
directors.
ARTICLE III
Directors
Section 1. Number. The number of directors which constitutes the whole board
of directors shall be fixed from time to time by resolution of the board of
directors provided, however, that such number of directors shall be not less
than six nor more than nine as required by ARTICLE TWELFTH of the Restated
Certificate of Incorporation, as amended. The term of office of directors is
to expire at the first annual meeting of stockholders after their election or
until their respective successors are elected and qualified. Directors need
not be stockholders.
Section 2. Nominations. A nomination with respect to the corporation's board
of directors (other than by a nominating committee of the board of directors)
shall be proposed at least 60 days before the date of the corporation's annual
meeting of stockholders in order for the nominee to be eligible for election
to the corporation's board of directors. Director nominations other than by a
nominating committee of the board of directors must be made over the signature
of at least five stockholders holding an aggregate of at least 5% of the total
number of outstanding stock of the corporation.
Section 3. Retirement. Board members who attain the age of 71 during their
term as a member of the board must retire at the Annual Meeting following that
director's 71st birthday, and no person over the age of 71 may be elected to
the board of directors.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, and the
directors so chosen shall hold office until the next annual election of the
class for which each such director has been chosen and until his successor is
elected and qualified.
Section 5. Powers. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the certificate
of incorporation or by these by-laws directed or required to be exercised or
done by the stockholders.
Section 6. Meetings. The board of directors of the corporation, and any
committee thereof, may hold meetings, both regular and special, either within
or without the State of Delaware. Members of the board of directors or of any
committee of the board of directors may participate in a meeting of such board
or committee by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and such participation in such a meeting shall constitute presence in person
at the meeting.
Section 7. Organization Meeting. An organization meeting of the board of
directors shall be held following, and at the same place as, the annual
meeting of stockholders and no notice of such meeting shall be necessary to
the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting of the board of
directors is not held at such time and place, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the board of directors
shall be held without notice at such time and place as shall from time to time
be determined by the board of directors.
Section 9. Special Meetings. Special meetings of the board of directors may
be called by the chairman of the board or the president on two days notice to
each director, either personally or by mail or by telegram, and special
meetings shall be called by the chairman of the board, the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 10. Quorum. At all meetings of the board of directors not less than
one-third of the total number of directors, but in any event not less than two
directors, shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
Section 11. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the board of directors or
of such committee as the case may be, and such written consent is filed with
the minutes of proceedings of the board of directors or committee.
Section 12. Committees of directors. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it; but no such committee shall have the power or authority
in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the by-laws of the
corporation; and unless the resolution expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 13. Reports of Committees. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors when required.
Section 14. Compensation. The board of directors, by the affirmative vote of
a majority of the directors then in office and irrespective of any personal
interests of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise, and shall have authority to reimburse directors for
their expenses, if any, of attendance at each meeting of the board of
directors. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Directors serving on committees, designated by the board of directors, may be
paid additional compensation for serving on such committees.
ARTICLE IV
Notices
Section 1. Notices. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice
to directors may also be given by telegram and in such case shall be deemed to
be given at the time when the same shall be delivered to the telegraph
company.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation or
of these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
ARTICLE V
Officers
Section 1. Designation; Number; Election. The board of directors, at its
first regular meeting after each annual meeting of stockholders, shall elect
the officers of the corporation. Such officers shall be a chairman of the
board, a president, one or more vice presidents (the number thereof to be
determined by the board of directors), a secretary, and a treasurer and such
assistant secretaries and assistant treasurers as the board of directors may
choose. The board of directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the board.
Section 2. Compensation. The salaries of all principal officers of the
corporation shall be fixed by the board of directors. The salaries of all
other officers of the corporation shall be fixed by the chairman of the board
or by any other principal officer designated by the chairman of the board.
Section 3. Term, Removal, Vacancy. The officers of the corporation shall
hold office until their successors are chosen and qualified, except as
hereinafter provided. Any officer may be removed at any time by the
affirmative vote of a majority of the board of directors.
Section 4. Chairman of the board. The chairman of the board, if such an
officer be elected, shall be the chief executive officer of the corporation.
He shall have the general direction of the affairs of the corporation, and may
sign all deeds, mortgages, notes, contracts, proxies or other instruments on
behalf of the corporation, except where the signing thereof shall have been
expressly delegated by the board of directors or these by-laws, or shall be
required by law, to be signed by some other officer. He shall preside at all
meetings of the stockholders and of the board of directors of the corporation.
Subject to the board of directors, the chairman of the board shall be the
chief policy making officer of the corporation. He shall be responsible for
presentation of any proposed changes in the major policies of the corporation
to the board of directors for action; shall report to the board of directors
with respect to matters of policy affecting the corporation; and in general
shall discharge all other responsibilities and perform all other duties
usually incident to the office of chairman of the board and chief executive
officer and such as are assigned to him from time to time by the board. (The
office of chairman of the board shall also be known as chairman and chairman
of the board of directors.)
Section 5. Vice-Chairman of the board. In the event of the absence,
disability or inability to act of the chairman of the board, the vice-chairman
of the board shall perform the duties of the chairman of the board and when so
acting shall also have all the powers of and be subject to all restrictions
upon the chairman of the board. The vice-chairman shall perform such other
duties as from time to time may be prescribed by the board of directors or
delegated by the chairman of the board.
Section 6. President. The president shall be the chief operating officer of
the corporation and shall in general supervise and manage the day to day
business and affairs of the corporation. He shall implement and carry into
effect all orders and resolutions of the board of directors or of the
executive committee and shall submit to the board of directors and the
executive committee, at the regular meetings thereof or, upon their request,
at special meetings thereof, detailed reports of the operations of the
corporation and shall also submit to the board of directors a complete and
detailed report of the operations of the corporation for each fiscal year.
The president shall from time to time report to the board of directors all
matters within his knowledge which the interests of the corporation may
require to be brought to its notice. In the absence of the chairman and vice-
chairman of the board, or in the event of their disability or inability to
act, the president shall assume the responsibilities and perform the duties of
the chairman of the board, and when so acting shall have all the powers of and
be subject to all the restrictions upon the chairman of the board.
Section 7. Vice-Presidents.
(a) In the event of the absence, disability or inability to act of the
president, the vice-presidents in the order determined by the board of
directors, or in the absence of such determination, in the order each shall
have respectively held the office of vice-president for the longest time,
shall perform the duties of the president and when so acting shall also have
all the powers of and be subject to all the restrictions upon the president.
(b) In the event of the absence, disability or inability to act of the
president and chairman of the board, the vice-president who shall have assumed
the performance of the duties of the president shall also perform the duties
of the chairman of the board, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the chairman of the board.
(c) The vice-presidents shall have such titles as may be designated by the
board of directors. The vice-presidents shall perform such other duties as
from time to time may be prescribed by the board of directors or delegated by
the president or the chairman of the board.
Section 8. Secretary. The secretary shall attend all meetings of the board
of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors
in books to be kept for that purpose and shall perform like duties for the
committees of directors when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board
of directors. He shall have custody of the corporate seal of the corporation
and he, and any assistant secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. He shall perform
all duties incident to the office of secretary and such other duties as from
time to time may be prescribed by the board of directors or delegated by the
chairman of the board or the president. The board of directors may give
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 9. Assistant Secretaries. In the absence of the secretary, or in the
event of his disability, or inability to act or to continue to act, the
assistant secretaries, in the order determined by the board of directors,
shall perform the duties of the secretary and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the secretary. The
assistant secretaries shall perform such other duties as from time to time may
be prescribed by the board of directors or delegated by the secretary.
Section 10. Treasurer. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors. He shall disburse or cause to be disbursed the funds of the
corporation as may be ordered by the board of directors, taking proper
vouchers for such disbursements, and shall render to the president and the
board of directors, at its regular meetings, or when the board of directors so
requires, an account of his transactions as treasurer and of the financial
condition of the corporation. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation. He shall perform all duties incident to the
office of treasurer and such other duties as from time to time may be
prescribed by the board of directors or delegated by the chairman of the board
or the president.
Section 11. Assistant Treasurers. In the absence of the treasurer, or in the
event of his disability, or inability to act or continue to act, the assistant
treasurers, in the order determined by the board of directors, shall perform
the duties of the treasurer and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the treasurer. If required by the
board of directors, the assistant treasurers shall give the corporation bonds
(as the treasurer may be required to do) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors. The assistant
treasurers shall perform such other duties as from time to time may be
prescribed by the board of directors or delegated by the treasurer.
Section 12. Controller. The controller shall have supervision over all
accounts and account books of the corporation, and establish and maintain all
controls and accounting procedures. He shall direct the keeping of accounts
and records, analyze the accounts and records of the company and prepare and
furnish statements and reports to the board of directors, the president, and
the vice president, finance, concerning the financial condition of the company
and establish and maintain accounting policies. He shall direct and supervise
the internal auditing procedures of the company. He shall cause the books and
accounts of all officers and agents charged with the receipt and disbursement
of money to be examined as often as practicable, or when requested by the
president or vice president, finance, and shall ascertain whether or not the
cash and vouchers covering the balances are actually on hand. He shall
perform all other duties incident to the office of controller and such other
duties as from time to time may be prescribed by the board of directors or
designated by the president or delegated by the vice president, finance.
ARTICLE VI
Certificates of Stock
Section 1. Form and Execution of Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of the corporation by, the chairman of the board, the president or any vice
president and the treasurer or an assistant treasurer or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation. Such certificates shall be in such form as may be
determined by the board of directors. During the period while more than one
class of stock of the corporation is authorized there will be set forth on the
face or back of the certificate which the corporation shall issue to represent
each class or series of stock, a statement that the corporation will furnish
without charge to each stockholder who so requests, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Where a certificate is signed
by a transfer agent acting on behalf of the corporation and a registrar, the
signature of any such chairman of the board, president, vice president,
treasurer, assistant treasurer, secretary or assistant secretary may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing
such issue of a new certificate or certificates, the board of directors may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or certificates, or
his legal representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 3. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Closing of Transfer Books. The board of directors may close the
stock transfer books of the corporation for a period not exceeding sixty days
preceding the date of any meeting of stockholders or the date for payment of
any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect or for
a period not exceeding sixty days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the board of directors may fix in advance a date, not exceeding
sixty days preceding the date of any meeting of stockholders, or the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent, as a record date
for the determination of the stockholders entitled to notice of, and to vote
at, any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent, and in such case such stockholders and
only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, or to give such consent,
as the case may be notwithstanding any transfer of any stock on the books of
the corporation after such record date fixed as aforesaid.
ARTICLE VII
Miscellaneous Provisions
Section 1. Contracts. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the board of directors. Such authority may be general or
confined to specific instances.
Section 3. Bank Accounts. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such general or special
bank account or accounts in such banks, trust companies or other depositaries
as the board of directors may from time to time designate, and the board of
directors may make such special rules and regulations with respect thereto as
it may deem expedient.
Section 4. Checks, Drafts, Notes. All checks, drafts or other orders for the
payment of money, notes or other evidence of indebtedness issued in the name
of the corporation shall be signed by such officer or officers or such agent
or agents of the corporation as the board of directors may from time to time
designate.
Section 5. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the certificate of incorporation.
Section 6. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums
as the directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 7. Proxies. The board of directors may appoint and direct any
officer or officers of any other agent or agents of the corporation to cast
the votes which the corporation may be entitled to cast as a stockholder or
otherwise in any other corporation any of whose stock or other securities may
be held by the corporation at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing to any action
by such other corporation. Unless otherwise ordered by the board of
directors, the president shall have full power and authority to cast such
votes and to consent to such action as he may deem in the best interests of
the corporation.
Section 8. Fiscal Year. The fiscal year of the corporation shall begin on
the first day of January of each year.
Section 9. Seal. The corporate seal shall have inscribed thereon the name of
the corporation and the words "Corporate Seal, Delaware." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 10. Amendments. These by-laws may be altered or repealed at any
regular or special meeting of the board of directors, if notice of such
alteration or repeal be contained in the notice of such special meeting.
Section 11. Indemnification and Insurance. The corporation shall, to the
fullest extent to which it is empowered to do so by the General Corporation
Law of Delaware, or any other applicable laws, as from time to time in effect,
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
he is or was a director or officer of the corporation or a division thereof,
or is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding. This section shall not be
construed as requiring the corporation to indemnify any person by reason of
the fact that he is or was a director or officer of a constituent corporation
absorbed in a consolidation or merger in which the corporation was the
resulting or surviving corporation.
The provisions of this section shall be deemed to be a contract between the
corporation and each director or officer who serves in any such capacity at
any time while this section and the relevant provisions of the General
Corporation Law of Delaware or other applicable law, if any, are in effect,
and any repeal or modification of any such law shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
Persons who are not covered by the foregoing provisions of this section and
(a) who are or were employees or agents of the corporation or a division
thereof, or are or were serving at the request of the corporation as employees
or agents of another corporation, partnership, joint venture, trust or other
enterprise, or (b) are or were directors, officers, employees or agents of a
constituent corporation absorbed in a consolidation or merger in which the
corporation was the resulting or surviving corporation, or who are or were
serving at the request of such constituent corporation as directors, officers,
employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time
or from time to time by the board of directors of the corporation.
The indemnification provided or permitted by this section shall not be deemed
exclusive of any other rights to which those indemnified may be entitled by
law or otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
The corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or of a constituent corporation absorbed in a consolidation or
merger in which the corporation was the resulting or surviving corporation, or
is or was serving at the request of the corporation or of such a constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 10 (g)
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of September 1, 1993
OAK INDUSTRIES INC.
THE BANKS LISTED ON THE SIGNATURE PAGES HERETO
and
THE FIRST NATIONAL BANK OF BOSTON, AS AGENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C>
<S>SECTION I - DEFINITIONS
1.1 Definitions.................................................. 1
1.2 Accounting Terms............................................. 10
SECTION II - DESCRIPTION OF CREDIT
2.1 The Revolving Loans.......................................... 10
2.2 Notice and Manner of Borrowing or Conversion of Loans........ 11
2.3 Fees......................................................... 12
2.4 Reduction of Commitment Amount and Maximum Letter
of Credit Amount........................................... 13
2.5 The Notes.................................................... 13
2.6 Duration of Interest Periods................................. 14
2.7 Interest Rates and Payments of Interest...................... 14
2.8 Changed Circumstances........................................ 15
2.9 Capital Requirements......................................... 16
2.10 Payments and Prepayments of the Revolving Loans............. 16
2.11 Method of Payment........................................... 17
2.12 Overdue Payments............................................ 17
2.13 Payments not at End of Interest Period...................... 17
2.14 Computation of Interest and Fees............................ 18
2.15 Letter of Credit Facility................................... 18
SECTION III - CONDITIONS OF REVOLVING LOANS
3.1 Conditions Precedent to Initial Revolving Loan............... 21
3.2 Conditions Precedent to all Revolving Loans and
Letters of Credit.......................................... 22
SECTION IV - REPRESENTATIONS AND WARRANTIES
4.1 Organization and Qualification............................... 24
4.2 Corporate Authority.......................................... 24
4.3 Valid Obligations............................................ 24
4.4 Consents or Approvals........................................ 24
4.5 Title to Properties; Absence of Encumbrances................. 24
4.6 Financial Statements......................................... 25
4.7 Changes...................................................... 25
4.8 Defaults..................................................... 25
4.9 Taxes........................................................ 25
4.10 Litigation.................................................. 25
4.11 Limitation on Use of Proceeds............................... 26
4.12 Subsidiaries................................................ 26
4.13 Investment Company Act...................................... 26
4.14 Compliance with ERISA....................................... 26
4.15 Environmental Matters....................................... 26
SECTION V - AFFIRMATIVE COVENANTS
5.1 Financial Statements and other Reporting Requirements........ 28
5.2 Conduct of Business.......................................... 30
5.3 Maintenance of Properties and Insurance...................... 30
5.4 Taxes........................................................ 30
5.5 Inspection by the Banks; Confidentiality..................... 30
5.6 Maintenance of Books and Records............................. 31
5.7 The Nordco Note.............................................. 31
SECTION VI - FINANCIAL COVENANTS
6.1 Combined Tangible Net Worth.................................. 31
6.2 Ratio of Consolidated Total Liabilities to Net Worth......... 32
6.3 Ratio of Combined Total Liabilities to Tangible Net Worth.... 32
6.4 Cash Flow Coverage Ratios.................................... 32
SECTION VII - NEGATIVE COVENANTS
7.1 Indebtedness................................................. 32
7.2 Contingent Liabilities....................................... 33
7.3 Sale and Leaseback........................................... 34
7.4 Encumbrances................................................. 34
7.5 Merger; Consolidation; Sale or Lease of Assets............... 35
7.6 Additional Stock Issuance.................................... 35
7.7 Equity Distributions......................................... 35
7.8 Investments and Transactions with Affiliates................. 36
7.9 ERISA........................................................ 36
7.10 Acquisitions................................................ 36
7.11 Payment Restrictions........................................ 37
SECTION VIII - DEFAULTS
8.1 Events of Default............................................ 37
8.2 Remedies..................................................... 39
8.3 Distribution of Proceeds..................................... 39
SECTION IX - CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
9.1 Consents; Amendments; Waivers; Remedies...................... 40
9.2 Additional Guarantors........................................ 41
SECTION X - THE AGENT
10.1 Appointment of Agent........................................ 42
10.2 Exercise of Powers.......................................... 42
10.3 No Liability................................................ 42
10.4 Responsibilities............................................ 42
10.5 Direction by Court.......................................... 43
10.6 Treatment of Payees......................................... 43
10.7 Agent as Bank............................................... 43
10.8 Sharing of Costs and Expenses............................... 43
SECTION XI - MISCELLANEOUS
11.1 Notices..................................................... 43
11.2 Expenses.................................................... 44
11.3 Set-Off..................................................... 44
11.4 Term of Agreement........................................... 44
11.5 Governing Law............................................... 44
11.6 Binding Effect of Agreement................................. 45
11.7 Sales of Interests.......................................... 45
11.8 Indemnification............................................. 46
11.9 Counterparts................................................ 46
11.10 Partial Invalidity......................................... 46
11.11 Captions................................................... 46
11.12 Waiver of Jury Trial....................................... 46
11.13 Entire Agreement........................................... 47
</TABLE>
EXHIBITS
EXHIBIT A - Form of Promissory Note
EXHIBIT B-1 - Form of Notice of Borrowing or Conversion
EXHIBIT B-2 - Form of L/C Notice
EXHIBIT C - Form of Amended and Restated Guaranty
EXHIBIT C-2 - Form of Guaranty for Additional Guarantors
EXHIBIT D - Form of Pledge Agreement
EXHIBIT E - Form of Opinion of Counsel to the Company
EXHIBIT F - Form of Compliance Certificate
SCHEDULES
Schedule 4.5 - Encumbrances
Schedule 4.7 - Changes
Schedule 4.9 - Tax Matters
Schedule 4.10 - Litigation
Schedule 4.12 - Subsidiaries of the Company
Schedules 4.15 - Environmental Matters (a), (b), (c), (d) and (e)
Schedule 7.1 - Indebtedness
Schedule 7.2 - Contingent Liabilities
Schedule 7.8 - Investments
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is made as of September 1, 1993, by and
between OAK INDUSTRIES INC., a Delaware corporation having its chief executive
office at Bay Colony Corporate Center, 1000 Winter Street, Waltham,
Massachusetts 02154 (the "Company"), each of the banks listed on the signature
pages hereto (individually, a "Bank," and collectively, the "Banks") and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association having its head
office at 100 Federal Street, Boston, Massachusetts 02110 ("FNBB"), as agent
for the Banks (FNBB in such capacity, the "Agent").
WHEREAS, the Company and FNBB entered into that certain Revolving Credit
Agreement dated as of December 4, 1992, as amended from time to time (the "Old
Credit Agreement"); and
WHEREAS, the parties hereto desire to amend and restate the Old Credit
Agreement in its entirety.
NOW, THEREFORE, the parties agree as follows:
SECTION I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used in this Agreement or
in any other Bank Agreement or in any certificate, report or other document
made or delivered pursuant to this Agreement (unless otherwise defined
therein) shall have the respective meanings assigned to them below:
Acquisition. Any purchase or other acquisition by the Company or any of its
Subsidiaries of all or substantially all of (a) the capital stock of, or other
equity interest in, any Person (other than the Company or any Subsidiary of
the Company existing on the date of this Agreement or hereafter formed by the
Company or a Subsidiary), or (b) any assets of such Person, if such assets
include all or substantially all of the fixed assets and inventory of such
Person or any business division, line of business or business operation
conducted by such Person.
Additional Commitment Fee Period. As of any date, the period consisting of
the shorter of (a) the preceding 180 days, or (b) the period commencing on the
date of this Agreement and ending on the date of determination.
Adjusted Debt Service. For any Person with respect to any period, the sum
of (a) Interest Expense for such period, plus (b) scheduled installments of
principal required to be paid in respect of Indebtedness of such Person for
such period, plus (c) cash dividends paid during such period in respect of
capital stock issued by such Person, plus (d) all principal and interest
required to be paid by such Person pursuant to Guarantees which are permitted
hereunder.
<PAGE>
Adjusted Eurodollar Rate. Applicable to any Interest Period, shall mean a
rate per annum determined pursuant to the following formula:
AER = [ IOR ]*
[1.00 - RP]
AER = Adjusted Eurodollar Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
*The amount in brackets shall be rounded upwards, if necessary,
to the next higher 1/100 of 1%.
WHERE:
"Interbank Offered Rate" applicable to any Eurodollar Loan for any Interest
Period means the rate of interest determined by the Agent to be the prevailing
rate per annum at which deposits in U.S. dollars are offered to the Agent by
first-class banks in the Interbank Eurodollar market in which it regularly
participates on or about 10:00 a.m. (Boston time) two (2) Business Days before
the first day of such Interest Period in an amount approximately equal to the
principal amount of the Eurodollar Loan to which such Interest Period is to
apply for a period of time beginning on the first day of such Interest Period
and of a length approximately equal to such Interest Period.
"Reserve Percentage" applicable to any Interest Period means the rate
(expressed as a decimal) applicable to the class of banks of which the Agent
is a member during such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System for determining
the maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency or marginal reserve requirement) of the class of banks
of which the Agent is a member with respect to "Eurocurrency liabilities" as
that term is defined under such regulations.
The Adjusted Eurodollar Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Percentage.
Affected Loans. See Section 2.8(a).
Agent. See Preamble.
AGREEMENT. This Agreement, as the same may be supplemented or amended from
time to time.
Bank(s). See Preamble.
Bank Agreement. This Agreement, the Note, the Pledge Agreement, the
Guaranty, and any other present or future agreement from time to time entered
into between the Borrower and/or a Subsidiary and the Agent or any Bank
relating to this Agreement, each as from time to time amended or modified.
Base Rate. The greater of (a) the rate of interest announced from time to
time by the Agent at its head office as its Base Rate, and (b) the Federal
Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary,
to the next l/8 of l%).
Base Rate Loan. Any Revolving Loan bearing interest determined with
reference to the Base Rate.
Business Day. (a) For all purposes other than as covered by clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which banks
in Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business, and (b) with respect to
all notices and determinations in connection with, and payments of principal
and interest on, Eurodollar Loans, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in U.S.
Dollar deposits in the Interbank Eurodollar market.
Capital Expenditures. Amounts paid or Indebtedness incurred by any Person
in connection with the purchase or lease by such Person of capital assets that
would be required to be capitalized and shown on the balance sheet of such
Person in accordance with generally accepted accounting principles.
Capitalized Leases. Leases under which the discounted future rental payment
obligations are required to be capitalized on the balance sheet of the lessee
or obligor in accordance with generally accepted accounting principles.
Cash Flow Coverage Ratio. For any Person at any date as of which the amount
thereof shall be determined and for the period specified, the quotient
obtained by dividing (a) the sum of (i) Net Income of such Person for such
period excluding the effect of any non-cash item of income or expense, PLUS
(ii) depreciation and amortization expense of such Person for such period,
MINUS (iii) Capital Expenditures of such Person for such period, by (b)
Adjusted Debt Service for such period.
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Combined or combined. With reference to any term defined herein, shall mean
that term as applied to the accounts of the Company and each of the Combined
Subsidiaries, combined in accordance with generally accepted accounting
principles.
Combined Subsidiaries. Collectively, each of the Guarantors, Croven
Crystals Ltd., Acunatronics S.A., SGI de Mexico, S.A. de C.V., Harper-Mex,
S.A. de C.V., and Nordco.
Commitment Amount. As to any Bank, an amount equal to the product of (a)
the Maximum Revolving Credit, times (b) such Bank's Commitment Percentage.
Commitment Fee. See Section 2.3(a).
Commitment Percentage. As to each Bank the percentage figure set forth
below such Bank's name on the signature pages hereto.
Company. See Preamble.
Compliance Certificate. See Section 5.1(c).
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Company and all of its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
Default. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Encumbrances. See Section 7.4.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or
hereafter enacted or promulgated), of all governmental agencies, bureaus or
departments which may now or hereafter have jurisdiction over the Company or
any of its Subsidiaries and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the environment, including, without limitation,
all requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges, releases or
threatened releases of Hazardous Materials, chemical substances, pollutants or
contaminants whether solid, liquid or gaseous in nature, into the environment
or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of such Hazardous Materials, chemical
substances, pollutants or contaminants.
Eurodollar Loan. Any Revolving Loan bearing interest at a rate determined
with reference to the Adjusted Eurodollar Rate.
Event of Default. Any event described in Section 8.1.
Existing Letters of Credit. Collectively, the following standby letters of
credit issued by FNBB for the account of the Company, together with any
replacements, renewals and extensions thereof issued by FNBB:
DATE OF OPENING FACE AMOUNT BENEFICIARY
--------------- ----------- -----------
November 12, 1991 $ 50,000 Aurora National Bank
February 25, 1992 $ 500,000 Sentry Insurance Company
Federal Funds Effective Rate. For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing selected by
the Agent.
Guarantees. As applied to the Company and its Subsidiaries, all guarantees,
endorsements or other contingent or surety obligations with respect to
obligations of others whether or not reflected on the consolidated balance
sheet of the Company and its Subsidiaries, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements,
by agreement to keep - well or otherwise), through the purchase of goods,
supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other person or entity.
Guarantors. Collectively, each of the Subsidiaries of the Company (i)
listed on SCHEDULE 4.12 attached hereto as a Guarantor, or (ii) which may
hereafter become a Guarantor pursuant to the provisions of Section 9.2.
Hazardous Material. Any substance (a) the presence of which at the time in
question requires notification, investigation or remediation under any
Environmental Law; (b) which at the time in question is defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or
"controlled industrial waste" or "pollutant" or "contaminant" under any
Environmental Law or amendments thereto in effect at the time in question
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any
applicable local statutes and the regulations promulgated thereunder; (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
governmental authority, agency, department, commission, board, agency or
instrumentality of any foreign country, the United States, any state of the
United States, or any political subdivision thereof to the extent any of the
foregoing has or had jurisdiction over the Company; or (d) without limitation,
which contains gasoline, diesel fuel or other petroleum products, asbestos or
polychlorinated biphenyls ("PCB's").
Indebtedness. As applied to the Company and its Subsidiaries, (a) all
obligations for borrowed money or other extensions of credit whether secured
or unsecured, absolute or contingent, including, without limitation, unmatured
reimbursement obligations with respect to letters of credit or guarantees
issued for the account of the Company and its Subsidiaries and all obligations
representing the deferred purchase price of property, other than accounts
payable arising in the ordinary course of business, (b) all indebtedness,
obligations and liabilities which, in accordance with generally accepted
accounting principles, would be reflected on the consolidated balance sheet of
the Company and its Subsidiaries, (c) all obligations evidenced by bonds,
notes, debentures or other similar instruments, (d) all obligations secured by
any mortgage, pledge, security interest or other lien on property owned or
acquired by the Company or any of its Subsidiaries whether or not the
obligations secured thereby shall have been assumed, (e) that portion of all
obligations arising under Capitalized Leases that is required to be
capitalized on the consolidated balance sheet of the Company and its
Subsidiaries, (f) all Guarantees, and (g) all obligations that are immediately
due and payable out of the proceeds of or production from property now or
hereafter owned or acquired by the Company or any of its Subsidiaries.
Interest Expense. For any Person with respect to any period, the aggregate
amount of interest required by generally accepted accounting principles to be
expensed by such Person during such period on all Indebtedness of such Person
outstanding during all or any part of such period (including interest expense
in respect of Guarantees incurred by such Person as if such interest expense
was a direct interest expense of such Person but excluding the effect of any
non-cash expense related to amortization of original issue discount), whether
such interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of
Capitalized Leases.
Interest Period. With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one, two, three or six months thereafter, as the
Company may elect in the applicable Notice of Borrowing or Conversion;
provided that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject
to clause (iii) below, end on the last Business Day of a calendar month;
(iii) any Interest Period during the Revolving Credit Period that
would otherwise end after the Revolving Credit Termination Date shall end on
the Revolving Credit Termination Date;
(iv) notwithstanding clause (iii) above, no Interest Period
applicable to a Eurodollar Loan shall have a duration of less than one month,
and if any Interest Period applicable to a Eurodollar Loan would be for a
shorter period, such Interest Period shall not be available hereunder.
Investment. The purchase or acquisition of any share of capital stock,
partnership interest, evidence of indebtedness or other equity security of any
other person or entity; any loan, advance or extension of credit to, or
contribution to the capital of, any other person or entity; any real estate
acquired for sale or investment; any commodities futures contracts held other
than in connection with bona fide hedging transactions; any other investment
in any other person or entity; and the making of any commitment, or
acquisition of any option, to make an Investment.
L/C Notice. See Section 2.15.2.
Letter of Credit. A Letter of Credit issued by the Agent for the account
of the Company in accordance with the provisions of Section 2.15.
Major Subsidiaries. Collectively, each of the Subsidiaries of the Company
listed on SCHEDULE 4.12 as Major Subsidiaries.
Material Adverse Effect. A material adverse effect on the business, assets,
properties, prospects or condition, financial or otherwise, of (a) the
Company, or (b) the Company and the Combined Subsidiaries taken as a whole.
Maximum Letter of Credit Amount. $10,000,000 or any lesser amount,
including zero, resulting from a termination or reduction of such amount in
accordance with Section 2.4 or 8.2 hereof.
Maximum Revolving Credit. $30,000,000 or any lesser amount, including zero,
resulting from a termination or reduction of such amount in accordance with
Section 2.4 or 8.2 hereof.
Net Income. The net income (or net deficit) of the applicable Person, after
all expenses, taxes and other proper charges, determined in accordance with
generally accepted accounting principles.
Net Worth. For any Person at any date as of which the amount thereof shall
be determined, the total assets of the applicable Person minus the Total
Liabilities of such Person.
Nordco. Nordco Inc., a Delaware corporation.
Nordco Payable. The net of the intercompany account payable by the Company
to Nordco less the intercompany account payable by Nordco to the Company, in
each case as shown on the latest of the financial statements referred to in
Section 4.6.
Nordco Note. The promissory note of the Company dated December 8, 1987
payable to the order of Nordco (as successor to Railway Maintenance Equipment
Company) in the original principal amount of $10,000,000, and any amendments
or modifications thereto or substitutions or replacements therefor.
Note. A promissory note of the Company, substantially in the form of
Exhibit A attached hereto, evidencing the obligation of the Company to each
Bank to repay the Revolving Loans made by such Bank.
Notice of Borrowing or Conversion. See Section 2.2.
Obligations. Any and all obligations of the Company to the Agent or any
Bank arising under this Agreement, the Notes and the other Bank Agreements, of
every kind and description, direct or indirect, absolute or contingent,
primary or secondary, due or to become due, whether now existing or hereafter
arising, including obligations to perform acts and refrain from taking action
as well as obligations to pay money, and further including, without
limitation, all Revolving Loans and all other indebtedness and obligations
arising under any Bank Agreement.
Payment Restriction. With respect to the Company and any of the Guarantors,
any encumbrance, restriction or limitation, whether by operation of the terms
of its charter or by reason of any agreement or instrument to which the
Company or such Guarantor is a party, on the ability of: (a) any such
Guarantor to (i) pay dividends or make other distributions on its capital
stock or make payments on any obligation, liability or Indebtedness owed to
the Company or any other Guarantor, (ii) make loans or advances to the Company
or any other Guarantor, or (iii) transfer any of its properties or assets to
the Company or any other Guarantor; or (b) the Company or any such Guarantor
to receive or retain any such dividends, distributions, payments, loans,
advances, or transfers of properties or assets.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
Permitted Encumbrances. See Section 7.4.
Person. An individual, corporation, partnership, joint venture,
association, estate, joint stock company, trust, organization, business, or a
government agency or political subdivision thereof.
Plan. At any time, an employee pension or other benefit Plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of
the Controlled Group or (b) if such Plan is established, maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which the Company or any member
of the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five Plan years made contributions.
Pledged Subsidiaries. Collectively, the Subsidiaries listed on Exhibit 4.12
as Pledged Subsidiaries, which, as of the date of this Agreement, constitute
all of the direct Subsidiaries of the Company other than Nordco, Connector
Holding Company and Oak Investment Corporation.
Qualified Investments. As applied to the Company and its Subsidiaries,
Investments in (a) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America; (b)
certificates of deposit or other deposit instruments or accounts or bankers
acceptances of any Bank or of other banks or trust companies organized under
the laws of the United States or any state thereof that (i) have capital and
surplus of at least $100,000,000, and (ii) have a short-term deposit rating of
A-2/P-2 or equivalent from Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or their successors; (c) commercial paper
that is rated not less than prime-one or A-1 or their equivalents by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or
their successors; (d) any repurchase agreement secured by any one or more of
the foregoing; and (e) money market mutual funds investing exclusively in one
or more of the foregoing.
Reimbursement Amount. See Section 2.15.3.
Required Banks. The Banks having made at least 75% of the aggregate
principal amount of the Revolving Loans outstanding or, if no Revolving Loans
shall be outstanding, such Banks holding at least 75% of the aggregate
Commitments.
Revolving Credit Period. The period beginning on the date of this Agreement
and extending through and including the Revolving Credit Termination Date or
such earlier date on which the Banks' commitments to make Revolving Loans are
terminated or the Commitment Amount is reduced to zero in accordance with the
terms hereof.
Revolving Credit Termination Date. December 21, 1995.
Revolving Loans. The loans made to the Company pursuant to Section 2.1(a)
of this Agreement.
Subsidiary. Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary
voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by the
Company or a Subsidiary of the Company; or any other such organization the
management of which is directly or indirectly controlled by the Company or a
Subsidiary of the Company through the exercise of voting power or otherwise;
or any joint venture, whether incorporated or not, in which the Company has at
least a 50% ownership interest.
Tangible Net Worth. For any Person at any date as of which the amount
thereof shall be determined, the total assets of the applicable Person minus
(a) the sum of any amounts attributable to (i) goodwill, (ii) intangible items
such as unamortized debt discount and expense, patents, trade and service
marks and names, copyrights and research and development expenses except
prepaid expenses (but in no event including tax loss carry forwards described
in Statement of Financial Accounting Standards No. 109), (iii) all reserves
not already deducted from assets, and (iv) any write-up in the book value of
assets resulting from any revaluation thereof subsequent to the date of the
financial statements referred to in Section 4.6, and (b) Total Liabilities.
Total Liabilities. For any Person at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
generally accepted accounting principles, be classified as liabilities on the
balance sheet of the applicable Person, including, without limitation,
minority interests in subsidiaries.
Unused Amount. See Section 2.3(a).
Section 1.2. Accounting Terms. All terms of an accounting character shall
have the meanings assigned thereto by generally accepted accounting principles
applied on a basis consistent with the financial statements referred to in
Section 4.6 of this Agreement, modified to the extent, but only to the extent,
that such meanings are specifically modified herein.
SECTION II
DESCRIPTION OF CREDIT
Section 2.1. The Revolving Loans.
(a) Subject to the terms and conditions hereof, each Bank severally
agrees to make Revolving Loans to the Company, from time to time until the
close of business on the Revolving Credit Termination Date, in such sums as
the Company may request, provided that the aggregate principal amount of all
Revolving Loans and the aggregate face amount of all Letters of Credit at any
one time outstanding hereunder shall not exceed the Commitment Amount. The
Company may borrow, prepay pursuant to Section 2.10 and reborrow, from the
date of this Agreement until the Revolving Credit Termination Date, the full
amount of the Commitment Amount or any lesser sum that is at least $100,000
and an integral multiple of $100,000. Any Revolving Loan not repaid by the
Revolving Credit Termination Date shall be due and payable on the Revolving
Credit Termination Date.
(b) Provided that no Default shall have occurred and be continuing, the
Company may convert all or any part (in integral multiples of $100,000) of any
outstanding Revolving Loan into a Revolving Loan of any other type provided
for in this Agreement in the same aggregate principal amount. Provided that
no Event of Default shall have occurred and be continuing, the Company may
convert all or any part (in integral multiples of $100,000) of any outstanding
Eurodollar Loan to a Base Rate Loan in the same aggregate principal amount.
Any such conversion shall be on any Business Day (which, in the case of a
conversion of a Eurodollar Loan, shall be the last day of the Interest Period
applicable to such Eurodollar Loan). The Company shall give the Bank prior
notice of each such conversion (which notice shall be effective upon receipt)
in accordance with Section 2.2.
Section 2.2. Notice and Manner of Borrowing or Conversion of Loans.
(a) Whenever the Company desires to obtain or continue a Revolving Loan
hereunder or to convert an outstanding Revolving Loan into a Revolving Loan of
another type provided for in this Agreement, the Company shall notify the
Agent (which notice shall be irrevocable) by telex, telegraph or telephone
received no later than (i) 1:00 p.m. Boston time on the date on which the
requested Revolving Loan is to be made or continued as or converted to a Base
Rate Loan, and (ii) 11:00 a.m. Boston time on the date two (2) Business Days
before the day on which the requested Revolving Loan is to be made or
continued as or converted to a Eurodollar Loan. Such notice shall specify (x)
the effective date and amount of each Revolving Loan or portion thereof to be
continued or converted, subject to the limitations set forth in Section 2.1,
(y) the interest rate option to be applicable thereto, and (z) the duration of
the applicable Interest Period, if any (subject to the provisions of the
definition of Interest Period and Section 2.6). Each such notification (a
"Notice of Borrowing or Conversion") shall be immediately followed by a
written confirmation thereof by the Company in substantially the form of
Exhibit B-1 attached hereto, provided that if such written confirmation
differs in any material respect from the action taken by the Agent, the
records of the Agent shall control absent manifest error.
The Agent shall give the Banks prompt notice of each Notice of Borrowing or
Conversion. The Company agrees to indemnify and hold the Agent and the Banks
harmless for any action, including the making of any Revolving Loan hereunder,
or loss or expense, taken or incurred by the Agent or the Banks in good faith
reliance upon any such request.
(b) Subject to the terms and conditions of this Agreement, each Bank
shall make available no later than 12:00 noon on the date specified in the
Notice of Borrowing or Conversion, at the office of the Agent at 100 Federal
Street, Boston, Massachusetts in immediately available funds, such Bank's
Commitment Percentage of each Revolving Loan. After the Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Article III hereof, the Agent will credit such funds to the Company's demand
deposit account with the Agent on the date specified in the Notice of
Borrowing or Conversion.
(c) Unless the Agent shall have received notice from a Bank prior to the
date of any Revolving Loan that such Bank will not make available to the Agent
such Bank's Commitment Percentage of such Revolving Loan, the Agent may assume
that such Bank has made such funds available to the Agent on the date of such
Revolving Loan in accordance with and as provided in this Section 2.2, and the
Agent may, in reliance upon such assumption (but shall have no obligation to),
make available on such date a corresponding amount to the Company. If and to
the extent any Bank shall not have made its Commitment Percentage of any
Revolving Loan available to the Agent and the Agent shall have made available
a corresponding amount to the Company, such Bank agrees to pay to the Agent
promptly on demand, and the Company agrees to repay to the Agent within one
(1) Business Day after demand (but only after demand for payment has first
been made to such Bank and such Bank has failed to make such payment), an
amount equal to such corresponding amount together with interest thereon for
each day from the date the Agent shall have made such amount available to the
Company until the date such amount is paid or repaid to the Agent, at an
interest rate equal to the interest rate applicable at the time to the
Revolving Loans. If such Bank shall pay to the Agent such corresponding
amount, such amount so paid shall constitute such Bank's Revolving Loan for
purposes of this Agreement. If the Company makes a repayment required by the
foregoing provisions of this Section 2.2(c) and thereafter the applicable Bank
or Banks make the payments to the Agent required by this Section 2.2(c), the
Agent shall promptly refund the amount of the Company's payment.
(d) The failure of any Bank to make any Revolving Loan shall not relieve
any other Bank of its obligation, if any, hereunder to make its Commitment
Percentage of such Revolving Loan on the date of such Revolving Loan, but no
Bank shall be responsible for the failure of any other Bank to make the
Revolving Loan to be made by such other Bank.
Section 2.3. Fees.
(a) The Company shall pay to the Agent, for the ratable account of the
Banks, during the Revolving Credit Period a commitment fee (the "Commitment
Fee") on the average daily amount of the unborrowed portion of the Commitment
Amount during each quarter or portion thereof (the "Unused Amount").
Commitment Fees shall be payable quarterly in arrears, on the last day of
March, June, September and December of each year beginning September 30, 1992,
and on the last day of the Revolving Credit Period, and shall be computed as
follows:
(i) So long as the aggregate outstanding Revolving Loans and Letters
of Credit have never exceeded the sum of $20,000,000, the Commitment Fee
shall be an amount equal to the sum of (A) one-quarter of one percent (1/4%)
per annum of the Unused Amount; and (B) one-eighth of one percent (1/8%) per
annum of the amount by which the Unused Amount exceeds $10,000,000;
(ii) From and after the date that the aggregate outstanding Revolving
Loans and Letters of Credit first exceed the sum of $20,000,000, then at all
times thereafter the Commitment Fee shall be an amount equal to three-eighths
of one percent (3/8%) per annum of the Unused Amount.
(b) In addition to the Commitment Fee, on the first date on which the
aggregate outstanding Revolving Loans and Letters of Credit exceeds the sum of
$20,000,000, the Company shall pay to the Agent, for the ratable account of
the Banks, an additional commitment fee computed at the rate of one-eighth of
one percent (1/8%) per annum on the sum of $10,000,000 for the Additional
Commitment Fee Period.
(c) The Company shall pay to the Agent, for the ratable account of the
Banks a non-refundable closing fee in the amount of $150,000 payable on the
date of this Agreement.
(d) The Company agrees to pay to the Agent, for the ratable account of
the Banks a fee (the "Letter of Credit Facility Fee") with respect to each
Letter of Credit issued hereunder, computed at a rate of one and one-quarter
percent (1.25%) per annum on the aggregate amount available to be drawn on all
outstanding Letters of Credit, from and including the date of issuance of each
Letter of Credit until the expiration date thereof. The Letter of Credit
Facility Fee shall be payable quarterly in advance, on the date of issuance of
the initial Letter(s) of Credit and thereafter on the first day of each March,
June, September and December.
Section 2.4. Reduction of Commitment Amount and Maximum Letter of Credit
Amount. The Company may from time to time by written notice delivered to the
Agent at least five Business Days prior to the date of the requested
reduction, reduce by integral multiples of $1,000,000 any unborrowed portion
of the Commitment Amount and/or the Maximum Letter of Credit Amount. No
reduction of the Commitment Amount shall be subject to reinstatement.
Section 2.5. The Notes.
(a) The Revolving Loans shall be evidenced by the Notes, payable to the
order of each Bank. Each Note shall be in the original principal amount of
the applicable Bank's Commitment Amount; shall be dated on or before the date
of the first Revolving Loan and shall have the blanks therein appropriately
completed; and shall have a final maturity of December 21, 1995.
(b) Each Bank shall, and is hereby irrevocably authorized by the Company
to, enter on the schedule forming a part of its Note or otherwise in its
records appropriate notations evidencing the date and the amount of each
Revolving Loan made by such Bank, the interest rate applicable thereto and the
date and amount of each payment of principal made by the Company with respect
thereto; and in the absence of manifest error, such notations shall constitute
conclusive evidence thereof. Each Bank is hereby irrevocably authorized by
the Company to attach to and make a part of its Note a continuation of any
such schedule as and when required. No failure on the part of any Bank to
make any notation as provided in this subsection (b) shall in any way affect
any Revolving Loan or the rights or obligations of the Bank or the Company
with respect thereto.
Section 2.6. Duration of Interest Periods.
(a) Subject to the provisions of the definition of Interest Period, the
duration of each Interest Period applicable to a Revolving Loan shall be as
specified in the applicable Notice of Borrowing or Conversion. The Company
shall have the option to elect a subsequent Interest Period to be applicable
to such Revolving Loan by delivering to the Agent a Notice of Borrowing or
Conversion evidencing such election received no later than l0:00 a.m. Boston
time on the date one Business Day before the end of the then applicable
Interest Period if such Revolving Loan is to be continued as or converted to a
Base Rate Loan and two (2) Business Days before the end of the then applicable
Interest Period if such Revolving Loan is to be continued as or converted to a
Eurodollar Loan.
(b) If the Agent does not receive a notice of election of duration of an
Interest Period for a Eurodollar Loan pursuant to subsection (a) above within
the applicable time limits specified therein, or if, when such notice must be
given, a Default exists or the representation and warranty contained in
Section 4.7 is untrue as of such date, the Company shall be deemed to have
elected to convert such Revolving Loan in whole into a Base Rate Loan on the
last day of the then current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, the Company may not select an Interest
Period that would end, but for the provisions of the definition of Interest
Period, after the Revolving Credit Termination Date.
Section 2.7. Interest Rates and Payments of Interest.
(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof at a rate per annum equal to the Base Rate plus one-half of one
percent (1/2%), which rate shall change contemporaneously with any change in
the Base Rate. Such interest shall be payable on the last day of March, June,
September and December of each year, commencing September 30, 1992, and when
such Revolving Loan is due (whether at maturity, by reason of acceleration or
otherwise).
(b) Each Eurodollar Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per
annum equal to the Adjusted Eurodollar Rate plus two and one-half of one
percent (2-1/2%). Such interest shall be payable for such Interest Period on
the last day thereof and when such Eurodollar Loan is due (whether at
maturity, by reason of acceleration or otherwise) and, if such Interest Period
is longer than three months, at intervals of three months after the first day
thereof.
Section 2.8. Changed Circumstances.
(a) In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would otherwise
be set the Agent shall have determined in good faith (which determination
shall be final and conclusive) that adequate and fair means do not exist for
ascertaining the Interbank Offered Rate; or
(ii) at any time any Bank shall have determined in good faith (which
determination shall be final and conclusive) that the making or continuation
of or conversion of any Revolving Loan to a Eurodollar Loan has been made
impracticable or unlawful by (A) the occurrence of a contingency that
materially and adversely affects the Interbank Eurodollar market, or (B)
compliance by such Bank in good faith with any applicable law or governmental
regulation, guideline or order or interpretation or change thereof by any
governmental authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental authority
(whether or not having the force of law); then, and in such event, such Bank
shall forthwith so notify the Agent and the Company thereof. Until such Bank
notifies the Agent and the Company that the circumstances giving rise to such
notice no longer apply, the obligation of the Agent to allow selection by the
Company of the type of Revolving Loan affected by the contingencies described
in this Section 2.8(a) (herein called "Affected Loans") shall be suspended.
If at the time a Bank so notifies the Company, the Company has previously
given the Agent a Notice of Borrowing or Conversion with respect to one or
more Affected Loans but such Revolving Loans have not yet gone into effect,
such notification shall automatically be deemed to be a notice of borrowing or
conversion (as the case may be) with respect to a Base Rate Loan, unless the
Agent is instructed otherwise by the Company's giving of a substitute Notice
of Borrowing or Conversion.
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the Company shall, with respect to
the outstanding Affected Loans, prepay the same, together with interest
thereon and, in the event of an occurrence of the type specified in Section
2.8(a)(ii), any amounts required to be paid pursuant to Section 2.13, and may
borrow a Revolving Loan of another type in accordance with Section 2.1 hereof
by giving a Notice of Borrowing or Conversion pursuant to Section 2.2 hereof.
(b) In case any change of general applicability to the class of banks of
which any Bank is a member in law, regulation, treaty or official directive or
the interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects such Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Company or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of such Bank imposed by the United States of
America or any political subdivision thereof); or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, such Bank (other than such
requirements as are already included in the determination of the Adjusted
Eurodollar Rate); or
(iii) imposes upon such Bank any other condition with respect to its
performance under this Agreement;
and the result of any of the foregoing is to increase the cost to such Bank,
reduce the income receivable by such Bank or impose any expense upon such
Bank with respect to any Revolving Loans, the Bank shall notify the Agent and
the Company thereof. The Company agrees to pay to such Bank the amount of
such increase in cost, reduction in income or additional expense as and when
such cost, reduction or expense is incurred or determined, upon presentation
by such Bank of a statement in the amount and setting forth the Bank's
calculation thereof, which statement shall be deemed true and correct absent
manifest error.
Section 2.9. Capital Requirements. If after the date hereof any Bank
determines that (a) the adoption of or change in any law, rule, regulation or
guideline of general applicability regarding capital requirements for banks or
bank holding companies, or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by such Bank or its parent bank holding company with any
generally applicable guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on such Bank's or such holding company's capital
as a consequence of such Bank's commitment to make Revolving Loans hereunder
to a level below that which such Bank or such holding company could have
achieved but for such adoption, change or compliance (taking into
consideration such Bank's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Bank to be material, then such
Bank shall notify the Company thereof. The Company agrees to pay to such
Bank the amount of such reduction of the return on capital as and when such
reduction is determined, upon presentation by such Bank of a statement in the
amount and setting forth such Bank's calculation thereof, which statement
shall be deemed true and correct absent manifest error. In determining such
amount, the Bank may use any reasonable averaging and attribution methods.
Section 2.10. Payments and Prepayments of the Revolving Loans. Revolving
Loans that are Eurodollar Loans may be prepaid at any time, without premium or
penalty, on the last day of any Interest Period applicable thereto, upon three
Business Days' notice to the Agent. Revolving Loans that are Base Rate Loans
may be prepaid at any time, without premium or penalty, upon one Business
Day's notice to the Agent. Any interest accrued on the amounts so prepaid to
the date of such payment must be paid at the time of any such payment. No
prepayment of the Revolving Loans during the Revolving Credit Period shall
affect the Commitment Amount or impair the Company's right to borrow as set
forth in Section 2.1.
Section 2.11. Method of Payment. All payments and prepayments of principal
and all payments of interest shall be made by the Company to the Agent, for
the ratable account of the Banks, at 100 Federal Street, Boston, Massachusetts
in immediately available funds, on or before 11:00 a.m. (Boston time) on the
due date thereof, free and clear of, and without any deduction or withholding
for, any taxes or other payments. The Agent may, and the Company hereby
authorizes the Agent to, debit the amount of any payment not made by such time
to the demand deposit account of the Company with the Agent.
Section 2.12. Overdue Payments.
(a) Overdue principal (whether at maturity, by reason of acceleration or
otherwise) and, to the extent permitted by applicable law, overdue interest
and fees or any other amounts payable hereunder or under the Note shall bear
interest from and including the due date thereof until paid, compounded daily
and payable on demand, at a rate per annum equal to 2% above the rate then
applicable to Base Rate Loans, which interest shall be compounded daily and
payable on demand.
(b) If a payment of principal or interest hereunder is not made within 10
days of its due date, the Company will also pay on demand a late payment
charge equal to 5% of the amount of such payment. Nothing in the preceding
sentence shall affect the Bank's right to exercise any of its rights or
remedies, including those provided in Section 8.2, if an Event of Default has
occurred and is continuing.
Section 2.13. Payments Not at End of Interest Period. If the Company for
any reason makes any payment of principal with respect to any Eurodollar Loan
on any day other than the last day of an Interest Period applicable to such
Eurodollar Loan, or fails to borrow or continue or convert to a Eurodollar
Loan after giving a Notice of Borrowing or Conversion Pursuant to Section 2.2,
or if any Eurodollar Loan is accelerated pursuant to Section 8.2(b), the
Company shall pay to the Bank an amount computed pursuant to the following
formula.
L = (R - T) x P x D
--------------
360
L = amount payable to the Banks
R = interest rate on such Revolving Loan
T = effective interest rate per annum at which any readily marketable bond
or other obligation of the United States, selected at the Agent's sole
discretion, maturing on or near the last day of the then applicable Interest
Period of such Revolving Loan and in approximately the same amount as such
Revolving Loan can be purchased by the Agent on the day of such payment of
principal or failure to borrow or continue or convert
P = the amount of principal prepaid or the amount of the requested Revolving
Loan
D = the number of days remaining in the Interest Period as of the date of
such payment or the number of days of the requested Interest Period
The Company shall pay such amount upon presentation by the Agent of a
statement setting forth the amount and the Agent's calculation thereof
pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
Section 2.14. Computation of Interest and Fees. Interest and all fees
payable hereunder shall be computed daily on the basis of a year of 360 days
and paid for the actual number of days for which due. If the due date for any
payment of principal is extended by operation of law, interest shall be
payable for such extended time. If any payment required by this Agreement
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day (subject to clause (i)
of the definition of Interest Period), and such extension shall be included in
computing interest in connection with such payment.
Section 2.15. Letter of Credit Facility.
Section 2.15.1. Letter of Credit. Subject to the terms and conditions
hereof, including satisfaction of the conditions set forth in Section 3.2
hereof, and provided no Default has occurred, the Agent shall, upon the
request of the Company pursuant to Section 2.15.2 hereof, issue Letters of
Credit, provided that: (a) the aggregate outstanding stated amount of
outstanding Letters of Credit shall not exceed the Maximum Letter of Credit
Amount; (b) the aggregate outstanding stated amount of outstanding Letters of
Credit and the aggregate outstanding amount of Revolving Loans shall not
exceed the Commitment Account; and (c) each Letter of Credit shall expire on
or before the date one year after issuance thereof.
Section 2.15.2. Issuing Letters of Credit. The Company may request that
the Agent issue a Letter of Credit by written notice in the form attached
hereto as Exhibit B-2 (the "L/C Notice") given to the Agent not less than two
(2) Business Days prior to the proposed date of issuance of such Letter of
Credit. The L/C Notice shall specify the proposed date of issuance and the
beneficiary and amount of such Letter of Credit, and shall be accompanied by a
letter of credit application completed to the satisfaction of, and with such
amendments and modifications as may be deemed necessary by, the Agent. The
Agent shall notify each Bank of the L/C Notice prior to the date of issuance
of the applicable Letter of Credit.
Section 2.15.3. Banks' Participation. Upon the issuance by the Agent of
a Letter of Credit, and without further action, each Bank shall be deemed to
have irrevocably purchased, to the extent of its Commitment Percentage, a
participation interest in such Letter of Credit. The Agent shall notify each
Bank of the presentment for payment of any draft under a Letter of Credit,
together with notice of the date (the "Disbursement Date") on which such
payment shall be made. On the Disbursement Date each Bank shall deliver to
the Agent by wire funds transfer such Bank's Commitment Percentage of the
draft paid by the Agent under the applicable Letter of Credit.
Section 2.15.4. Reimbursement and other Payments.
(a) The Company hereby agrees to pay to the Agent on the date on
which the Agent shall be required to pay any draft presented under any Letter
of Credit, a sum (the "Reimbursement Amount") equal to: (i) the amount so paid
under such Letter of Credit, plus (ii) interest on any amount remaining unpaid
by the Company to the Agent under clause (i) from and including the date on
which such amount becomes payable pursuant to clause (i) until payment in
full, payable on demand, at a per annum rate of interest equal to the rate
applicable to Revolving Loans under Section 2.7(a). If the Company shall fail
to pay to the Agent the Reimbursement Amount on the date on which the Agent
shall be required to pay any draft presented under any Letter of Credit, the
Agent shall, to the extent the Company has availability to request a Revolving
Loan, consider such failure to be a request for a Revolving Loan in the amount
of the unpaid Reimbursement Amount, and, to the extent the Agent has received
each Bank's Commitment Percentage of the amount paid by the Agent under such
Letter of Credit the Agent shall apply the proceeds of such Revolving Loan to
reimburse the Banks for such amounts received from the Banks.
(b) The Company hereby agrees to pay to the Agent, for its own
account, sums equal to any and all reasonable charges and expenses which the
Agent may pay or incur relative to the issuance of any Letter of Credit, any
amendment or transfer thereof or any payment by the Agent thereunder, all as
described in the Agent's customary schedule of fees provided to the Company
from time to time.
Section 2.15.5. Obligations Absolute. The obligations of the Company
with respect to the Letters of Credit shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement
under all circumstances, including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of the Letters of Credit
or this Agreement;
(b) any amendment or waiver of or any consent to or actual departure
from this Agreement;
(c) the existence of any claim, set-off, defense or other right which
the Company may have at any time against any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for which any such beneficiary
or any such transferee may be acting), the Agent, any Bank or any other person
or entity, whether in connection with this Agreement, the transactions
contemplated herein or in any other agreements or any unrelated transaction;
(d) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(e) payment by the Agent under a Letter of Credit against
presentation by the beneficiary thereof of a draft or certificate which does
not comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 2.15.6. The Uniform Customs and Practice. The Uniform Customs
and Practice shall be binding on the Company, the Agent and the Banks. The
Company assumes all risks of the acts or omissions of the beneficiary of each
Letter of Credit with respect to such Letter of Credit. In furtherance of,
and not in limitation of the Agent's rights and powers under the Uniform
Customs and Practice, but subject to all other provisions of this Section
2.15.6, it is understood and agreed that the Agent and the Banks shall not
have any liability for, and that the Company assumes all responsibility for:
(a) the genuineness of any signature; (b) the form, correctness, validity,
sufficiency, genuineness, falsification and legal effect of any draft,
certification or other document required by a Letter of Credit or the
authority of the person signing the same; (c) the failure of any instrument to
bear any reference or adequate reference to a Letter of Credit or the failure
of any persons to note the amount of any instrument on the reverse of a Letter
of Credit or to surrender a Letter of Credit (d) the good faith or acts of any
person other than the Bank and its agents and employees; (e) the existence,
form, sufficiency or breach of or default under any agreement or instrument of
any nature whatsoever; (f) any delay in giving or failure to give any notice,
demand or protest; and (g) any error, omission, delay in or nondelivery of any
notice or other communication, however sent. The determination as to whether
the required documents are presented prior to the expiration of a Letter of
Credit and whether such other documents are in proper and sufficient form for
compliance with a Letter of Credit shall be made by the Agent in its sole
discretion, which determination shall be conclusive and binding upon the
Company absent manifest error. Any action, inaction or omission on the part
of the Agent under or in connection with the Letters of Credit or any related
instruments or documents, if in good faith and in conformity with such laws,
regulations or commercial or banking customs as the Agent may reasonably deem
to be applicable, shall be binding upon the Company, shall not place the Agent
under any liability to the Company, and shall not affect, impair or prevent
the vesting of any of the Agent's rights or powers hereunder or the Company's
obligation to make full reimbursement.
Section 2.15.7. Modification, Consent, etc. If the Company, either in
writing or orally, requests or consents to any modification or extension of a
Letter of Credit or waives failure of any draft, certificate or other
documents to comply with the terms of a Letter of Credit, the Agent shall be
entitled to rely and shall be deemed to have relied on such request, consent
or waiver with respect to any action taken or omitted by the Agent pursuant to
any such request, consent or waiver, and such extension, modification or
waiver shall be binding upon the Company.
Section 2.15.8. Liability of the Agent and the Banks. Neither the Banks
nor any of their respective officers or directors shall be liable or
responsible for: (a) the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith;
(b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Agent
against presentation of documents which do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to a Letter of Credit; or (d) any other circumstances
whatsoever in making or failure to make payment under a Letter of Credit,
except that notwithstanding anything in this Section 2.15 to the contrary, the
Company shall have a claim against the Agent, and the Agent shall be liable to
the Company, to the extent, but only to the extent, of any direct, as opposed
to consequential, damages suffered by the Company which were caused by the
Agent's failure to conform to the standards of the Uniform Customs and
Practice. In furtherance and not in limitation of the foregoing, the Agent
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION III
CONDITIONS OF REVOLVING LOANS
Section 3.1. Conditions Precedent to Initial Revolving Loan. The
obligation of the Banks to make the initial Revolving Loan and the issuance of
any Letter of Credit, are subject to the condition precedent that the Banks
shall have received, in form and substance satisfactory to the Agent and its
counsel, the following:
(a) this Agreement and the Notes, duly executed by the Company;
(b) the Amended and Restated Guaranty in the form attached hereto as
Exhibit C-1 executed by each Guarantor that previously executed a guaranty in
respect of the Old Credit Agreement in favor of FNBB, and a Guaranty in the
form attached hereto as Exhibit C-2 executed by each other Guarantor (each
such guaranty, a "Guaranty");
(c) the Amended and Restated Pledge Agreement, executed by the Company in
the form attached hereto as Exhibit D (the "Pledge Agreement"), relating to
all of the issued and outstanding capital stock of each of the Pledged
Subsidiaries, and the original stock certificates relating to such stock
together with related instruments of assignment duly executed in blank shall
have been delivered to the Agent;
(d) a certificate of the Secretary or an Assistant Secretary of the
Company with respect to resolutions of the Company's Board of Directors
authorizing the execution and delivery of this Agreement, the Notes and the
Pledge Agreement and identifying the officer(s) authorized to execute, deliver
and take all other actions required under this Agreement, and providing
specimen signatures of such officers;
(e) a certificate of the Secretary or Clerk or Assistant Secretary or
Assistant Clerk of each of the Guarantors, with respect to resolutions of the
Board of Directors of such Guarantor authorizing the execution and delivery of
the Guaranty and identifying the officer(s) authorized to execute, deliver and
take all other actions required under the Guaranty, and providing specimen
signatures of such officers;
(f) the certificate of incorporation or articles of organization, as the
case may be, of the Company and each of the Guarantors, and all amendments and
supplements thereto, filed in the office of the Secretary of State of the
state of their respective organization, (i) in the case of the Company and its
direct Subsidiaries which are Major Subsidiaries, certified by said Secretary
of State as being a true and correct copy thereof, and (ii) in the case of
each other Guarantor, certified by its Secretary or Clerk or Assistant
Secretary or Assistant Clerk as being a true and accurate copy thereof.
(g) the Bylaws of the Company and each of the Guarantors, and all
amendments and supplements thereto, certified by the Secretary or Clerk or an
Assistant Secretary or Assistant Clerk as being a true and correct copy
thereof;
(h) a certificate of the Secretary of State of the respective state of
organization of each of the Company and the Guarantors as to their respective
legal existence and good standing in such state and listing all documents on
file in the office of said Secretary of State;
(i) an opinion addressed to the Banks from Mr. Paul J. Halas, General
Counsel to the Company and the Guarantors, substantially in the form of
Exhibit E hereto;
(j) payment in full, for FNBB's own account, of all interest and
commitment fees under the Old Credit Agreement and the promissory note issued
thereunder accrued through the date of this Agreement; and
(k) such other documents, and completion of such other matters, as
counsel for the Bank may deem necessary or appropriate.
Section 3.2. Conditions Precedent to All Revolving Loans and Letters of
Credit. The obligation of each Bank to make each Revolving Loan, including the
initial Revolving Loan, or continue or convert Revolving Loans to Revolving
Loans of another type, and the obligation of the Agent to issue or extend any
Letter of Credit, is further subject to the following conditions:
(a) timely receipt by the Agent of the Notice of Borrowing or Conversion
as provided in Section 2.2 or L/C Notice as provided in Section 2.15.2;
(b) (i) the representations and warranties contained in Section IV
(other than Section 4.7) shall be true and accurate in all material respects
on and as of the date of such Notice of Borrowing or Conversion or L/C Notice
and on the effective date of the making, continuation or conversion of each
Revolving Loan or issuance or extension of each Letter of Credit as though
made at and as of each such date (except to the extent that such
representations and warranties expressly relate to an earlier date), and (ii)
the sum of (A) the aggregate principal amount of outstanding Revolving Loans,
and (B) the aggregate stated amount of outstanding Letters of Credit, after
the making, continuation or conversion of such Revolving Loan or issuance or
extension of such Letter of Credit will not exceed the Commitment Amount;
(c) in the case of (i) a request for a new Revolving Loan or for the
conversion of a Revolving Loan to a Revolving Loan of a type other than a Base
Rate Loan, or (ii) a request for the issuance of a Letter of Credit, the
representation and warranty contained in Section 4.7 shall be true and
accurate in all material respects on and as of the date of the applicable
Notice of Borrowing or Conversion or L/C Notice and on the effective date of
the making or conversion of such Revolving Loan or issuance of such Letter of
Credit, as though made at and as of each such date;
(d) in the case of a request for the issuance or extension of a Letter of
Credit (i) the Agent shall at the time of such request be issuing letters of
credit for its customers in the ordinary course of its banking business, and
(ii) the issuance or extension of such Letter of Credit shall not contravene
any provision of any applicable law or regulation;
(e) no Default shall have occurred and be continuing, or would result
from such Revolving Loan or Letter of Credit;
(f) the resolutions referred to in Section 3.1(d) and 3.1(e) shall remain
in full force and effect; and
(g) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Banks, would
make it illegal or against the policy of any governmental agency or authority
for any Bank to make Revolving Loans or issue Letters of Credit hereunder.
The making of each Revolving Loan and issuance or extension of each Letter
of Credit shall be deemed to be a representation and warranty by the Company
on the date of the making, continuation or conversion of such Revolving Loan
or issuance or extension of such Letter of Credit as to the accuracy of the
facts referred to in subsection (b) of this Section 3.2.
SECTION IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and Banks to enter into this Agreement and to
make Revolving Loans and issue Letters of Credit hereunder, the Company
represents and warrants to the Agent and Banks that:
Section 4.1. Organization and Qualification. Each of the Company and its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in
each jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
Section 4.2. Corporate Authority. The execution, delivery and performance
of this Agreement and the other Bank Agreements and the transactions
contemplated hereby and thereby are within the corporate power and authority
of the Company and have been authorized by all necessary corporate
proceedings, and do not and will not (a) require any consent or approval of
the stockholders of the Company or the Guarantors, (b) contravene any
provision of the charter documents or by-laws of the Company or any Guarantor
or any law, rule or regulation applicable to the Company or any Guarantor, (c)
contravene any provision of, or constitute an event of default or event that,
but for the requirement that time elapse or notice be given, or both, would
constitute an event of default under, any other agreement, instrument, order
or undertaking binding on the Company or any Guarantor, or (d) result in or
require the imposition of any Encumbrance on any of the properties, assets or
rights of the Company or any Guarantor other than pursuant to the Pledge
Agreement.
Section 4.3. Valid Obligations. This Agreement and the other Bank
Agreements and all of their respective terms and provisions are the legal,
valid and binding obligations of the Company and the Guarantors, as the case
may be, enforceable in accordance with their respective terms except as
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors rights generally, and except as the
remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Section 4.4. Consents or Approvals. The execution, delivery and
performance of this Agreement and the other Bank Agreements and the
transactions contemplated hereby and thereby do not require any approval or
consent of, or filing or registration with, any governmental or other agency
or authority, or any other party.
Section 4.5. Title to Properties; Absence of Encumbrances. Each of the
Company and the Combined Subsidiaries has good and marketable title to all of
the properties, assets and rights of every name and nature now purported to be
owned by it, including, without limitation, such properties, assets and rights
as are reflected in the financial statements referred to in Section 4.6
(except such properties, assets or rights as have been disposed of in the
ordinary course of business since the date thereof), free from all
Encumbrances except Permitted Encumbrances or those Encumbrances disclosed in
Schedule 4.5 attached hereto, and, except as so disclosed, free from all
defects of title that might materially adversely affect such properties,
assets or rights, taken as a whole.
Section 4.6. Financial Statements. The Company has furnished the Bank its
consolidated balance sheet as of December 31, 1992 and its consolidated
statements of operations, changes in stockholders' equity and cash flow for
the fiscal year then ended, and related footnotes, audited and certified by
Price Waterhouse. The Company has also furnished the Bank its consolidated
balance sheet as of June 30, 1993 and its consolidated statements of
operations, changes in stockholders' equity and cash flow for the fiscal
quarter then ended, certified by the principal financial officer of the
Company but subject, however, to normal, recurring year-end adjustments that
shall not in the aggregate be material in amount. All such financial
statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods specified and
present fairly the financial position of the Company and its Subsidiaries as
of such dates and the results of the operations of the Company and its
Subsidiaries for such periods. There are no liabilities, contingent or
otherwise, not disclosed in such financial statements that involve a material
amount.
Section 4.7. Changes. Except as set forth on Schedule 4.7 attached hereto,
since the date of the most recent financial statements referred to in Section
4.6 there have been no changes in the assets, liabilities, financial
condition, business or prospects of the Company and its Subsidiaries taken as
a whole, other than changes in the ordinary course of business, the effect of
which has not, in the aggregate, been materially adverse.
Section 4.8. Defaults. As of the date of this Agreement, no Default
exists.
Section 4.9. Taxes. Except as set forth on Schedule 4.9 attached hereto
(as supplemented, from time to time, pursuant to Notices of Borrowing or
Conversion, L/C Notices and Compliance Certificates delivered by the Company
to the Agent), the Company and each of its Subsidiaries have filed all
federal, state and other tax returns required to be filed, and all taxes,
assessments and other governmental charges due from the Company and each such
Subsidiary have been fully paid. The Company and each of its Subsidiaries
have established on their books reserves adequate for the payment of all
federal, state and other tax liabilities.
Section 4.10. Litigation. Except as set forth on Schedule 4.10 attached
hereto (as supplemented, from time to time, pursuant to Notices of Borrowing
or Conversion, L/C Notices and Compliance Certificates delivered by the
Company to the Agent), there is no litigation, arbitration, proceeding or
investigation pending, or, to the knowledge of the Company's or any of its
Subsidiaries' officers, threatened, against the Company or any Subsidiary as
to which there is a reasonable likelihood of an adverse determination and
which, if adversely determined, is likely to result in a material judgment not
fully covered by insurance, is likely to result in a forfeiture of all or any
substantial part of the property of the Company, or of the Company and its
Subsidiaries taken as a whole, or is likely to otherwise have a Material
Adverse Effect.
Section 4.11. Limitations on Use of Proceeds. No portion of any Revolving
Loan is to be used for the "purpose of purchasing or carrying" any "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. 221 and 224, as amended; and
following the application of the proceeds of each Revolving Loan, the value of
all "margin stock" of the Company will not exceed 25% of the value of the
total assets of the Company that are subject to the restrictions set forth in
Section 7.6 and 7.7.
Section 4.12. Subsidiaries. All the Subsidiaries of the Company are listed
on Schedule 4.12 attached hereto (as supplemented, from time to time, pursuant
to Notices of Borrowing or Conversion, L/C Notices and Compliance Certificates
delivered by the Company to the Agent). The Company or a Subsidiary of the
Company is the owner, free and clear of all liens and Encumbrances (other than
the lien created by the Pledge Agreement and the pledges of the stock of
Nordco and Connector Holding Company and its Subsidiaries disclosed on
Schedule 4.5), of all of the issued and outstanding stock of each Subsidiary
existing as of the date of this Agreement (except for the minority interests
in Connector Holding Company and its Subsidiaries). All shares of such stock
have been validly issued and are fully paid and nonassessable, and no rights
to subscribe to any additional shares have been granted, and no options,
warrants or similar rights are outstanding.
Section 4.13. Investment Company Act. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of
1940, as amended.
Section 4.14. Compliance with ERISA. The Company and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in
compliance in all material respects with the applicable provisions of ERISA
and the Code, and as of the date of this Agreement have no liability to the
PBGC or a Plan under Title IV of ERISA; and no "prohibited transaction" or
"reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan.
Section 4.15. Environmental Matters.
(a) Except as disclosed on Schedule 4.15(a) attached hereto (as
supplemented, from time to time, pursuant to Notices of Borrowing or
Conversion, L/C Notices and Compliance Certificates delivered by the Company
to the Agent), the Company and each of its Subsidiaries has obtained all
permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a Material Adverse Effect. Except as
disclosed on Schedule 4.15(a) (as supplemented, from time to time, pursuant to
Notices of Borrowing or Conversion, L/C Notices and Compliance Certificates
delivered by the Company to the Agent), the Company and each of its
Subsidiaries is in compliance with the terms and conditions of all such
permits, licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a Material
Adverse Effect.
(b) Except as disclosed on Schedule 4.15(b) (as supplemented, from time
to time, pursuant to Notices of Borrowing or Conversion, L/C Notices and
Compliance Certificates delivered by the Company to the Agent), no notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Company or any of its
Subsidiaries to have any permit, license or authorization required in
connection with the conduct of its business or with respect to any
Environmental Laws, including, without limitation, Environmental Laws relating
to the generation, treatment, storage, recycling, transportation, disposal or
release of any Hazardous Materials, except to the extent that such notice,
complaint, penalty or investigation did not or could not have a Material
Adverse Effect.
(c) Except as disclosed on Schedule 4.15(c) (as supplemented, from time
to time, pursuant to Notices of Borrowing or Conversion, L/C Notices and
Compliance Certificates delivered by the Company to the Agent), to the best of
the Company's knowledge no material oral or written notification of a release
of a Hazardous Material has been filed by or on behalf of the Company or any
of its Subsidiaries since December 31, 1990, and no property now or previously
owned, leased or used by the Company or any of its Subsidiaries is listed or
proposed for listing on The National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites requiring investigation or clean-up.
(d) Except as disclosed on Schedule 4.15(d) (as supplemented, from time
to time, pursuant to Notices of Borrowing or Conversion, L/C Notices and
Compliance Certificates delivered by the Company to the Agent), to the best of
the Company's knowledge, there are no liens or Encumbrances arising under or
pursuant to any Environmental Laws on any of the real property or properties
owned, leased or used by the Company or any of its Subsidiaries, and, to the
best of the Company's knowledge, no governmental actions have been taken or
are in process which could subject any of such properties to such liens or
Encumbrances or, as a result of which the Company or any of its Subsidiaries
would be required to place any notice or restriction relating to the presence
of Hazardous Materials at any property owned by it in any deed to such
property, except to the extent that such liens or encumbrances, singly or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(e) Except as disclosed on Schedule 4.15(e) (as supplemented, from time
to time, pursuant to Notices of Borrowing or Conversion, L/C Notices and
Compliance Certificates delivered by the Company to the Agent), neither the
Company nor any of its Subsidiaries nor, to the best of the Company's
knowledge, any previous owner, tenant, occupant or user of any property owned,
leased or used by the Company or any of its Subsidiaries has (i) engaged in or
permitted any operations or activities upon or any use or occupancy of such
property, or any portion thereof, for the purpose of or in any way involving
the handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal (whether legal or illegal, accidental
or intentional) of any Hazardous Materials on, under, in or about such
property, except to the extent commonly used in day-to-day operations of such
property and in such case only in compliance with all Environmental Laws, or
(ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the best
knowledge of the Company have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
the Company, are any Hazardous Materials presently constructed, deposited,
stored or otherwise located on, under, in or about such property except to the
extent commonly used in day-to-day operations of such property and, in such
case, in compliance with, all Environmental Laws.
SECTION V
AFFIRMATIVE COVENANTS
So long as the Banks have any commitment to lend hereunder or any Revolving
Loan, Letter of Credit or other Obligation remains outstanding, the Company
covenants as follows:
Section 5.1. Financial Statements and other Reporting Requirements. The
Company shall furnish to the Banks:
(a) as soon as available to the Company, but in any event within 90 days
after the end of each of its fiscal years, a consolidated and consolidating
and combined and combining balance sheet as of the end of, and a related
consolidated and consolidating and combined and combining statement of income,
changes in stockholders' equity and cash flow for, such year, audited and
certified by Price Waterhouse (or other independent certified public
accountants acceptable to the Required Banks) in the case of such
consolidated statements, and certified by the chief financial officer in the
case of such consolidating, combined and combining statements; and,
concurrently with such financial statements, a written statement by such
accountants that, in the making of the audit necessary for their report and
opinion upon such financial statements they have obtained no knowledge of any
Default or, if in the opinion of such accountants any such Default exists,
they shall disclose in such written statement the nature and status thereof;
(b) as soon as available to the Company, but in any event within 45 days
after the end of each of its first three fiscal quarters, consolidated and
consolidating and combined and combining balance sheets as of the end of, and
related consolidated and consolidating and combined and combining statements
of income for, the period then ended, certified by the principal financial
officer of the Company but subject, however, to normal, recurring year-end
adjustments that shall not in the aggregate be material in amount;
(c) concurrently with the delivery of each financial statement pursuant
to subsections (a) and (b) of this Section 5.1, a report in substantially the
form of Exhibit F attached hereto (a "Compliance Certificate") signed on
behalf of the Company by its chief financial officer;
(d) concurrently with the delivery of financial statements pursuant to
subsection (a) of this Section 5.1, and for information purposes only, a
consolidated and consolidating and combined and combining budget for the
Company and its Subsidiaries for the then current fiscal year, prepared on a
quarter-by-quarter basis;
(e) promptly after the receipt thereof by the Company, copies of any
reports submitted to the Company by independent public accountants in
connection with any annual or interim review of the accounts of the Company
made by such accountants;
(f) promptly after the same are available, copies of all proxy
statements, financial statements and reports as the Company shall send to its
stockholders or as the Company may file with the Securities and Exchange
Commission or any governmental authority at any time having jurisdiction over
the Company or its Subsidiaries;
(g) if and when the Company gives or is required to give notice to the
PBGC of any "Reportable Event" (as defined in Section 4043 of ERISA) with
respect to any Plan that might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that any member of the Controlled Group
or the Plan administrator of any Plan has given or is required to give notice
of any such Reportable Event, a copy of the notice of such Reportable Event
given or required to be given to the PBGC;
(h) immediately upon becoming aware of the existence of any condition or
event that constitutes a Default, written notice thereof specifying the nature
and duration thereof and the action being or proposed to be taken with respect
thereto;
(i) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Company or any of its Subsidiaries of which it has
notice, the outcome of which has or is reasonably likely to have a Materially
Adverse Effect, written notice thereof and the action being or proposed to be
taken with respect thereto;
(j) promptly upon becoming aware of any investigative proceedings by a
governmental agency or authority commenced or threatened against the Company
or any of its Subsidiaries regarding any potential violation of Environmental
Laws or any spill, release, discharge or disposal of any Hazardous Material
which has or is reasonably likely to have a Material Adverse Effect, written
notice thereof and the action being or proposed to be taken with respect
thereto; and
(k) from time to time, such other financial data and information about
the Company or its Subsidiaries as the Agent or the Banks may reasonably
request.
For purposes of this Agreement, information delivered by the Company
pursuant to this Section 5.1 other than (i) information delivered pursuant to
subsection 5.1(f), (ii) quarterly factsheets and press releases issued by the
Company, and (iii) consolidated financial statements delivered pursuant to
subsections 5.1(a) and (b), shall be deemed to be "non-public information."
Section 5.2. Conduct of Business.
(a) Each of the Company and the Guarantors shall duly observe and comply
in all material respects with all applicable laws and valid requirements of
any governmental authorities relative to its corporate existence, rights and
franchises, to the conduct of its business and to its property and assets
(including without limitation all Environmental Laws and ERISA), and shall
maintain and keep in full force and effect all licenses and permits necessary
in any material respect to the proper conduct of its business.
(b) Each of the Company and the Major Subsidiaries shall maintain its
corporate existence.
Section 5.3. Maintenance of Properties and Insurance. Each of the Company
and the Guarantors shall maintain its properties in good repair, working order
and condition as required for the normal conduct of its business. Each of the
Company and the Guarantors shall at all times maintain liability and casualty
insurance with financially sound and reputable insurers in such amounts as the
officers of the Company in the exercise of their reasonable judgment deem to
be adequate. In the event of failure to provide and maintain insurance as
herein provided, the Agent may, at its option, provide such insurance and
charge the amount thereof to the account of the Company or any of its
Subsidiaries with the Agent. The Company shall furnish to the Agent
certificates or other evidence satisfactory to the Agent of compliance with
the foregoing insurance provisions.
Section 5.4. Taxes. The Company shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any of its
Subsidiaries or its or their properties on or prior to the time when they
become due; provided that this covenant shall not apply to any tax, assessment
or charge that is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established and are being
maintained in accordance with generally accepted accounting principles if no
proceedings to foreclose any lien securing such tax, assessment or charge
shall have been commenced and remained unstayed for more than 90 days.
Section 5.5. Inspection by the Banks; Confidentiality. The Company shall
permit the Banks or their respective designees, at any reasonable time, and
upon reasonable notice (or if a Default shall have occurred and is continuing,
at any time and without prior notice), to (i) visit and inspect the properties
of the Company and the Guarantors, (ii) examine and make copies of and take
abstracts from the books and records of the Company and its Subsidiaries, and
(iii) discuss the affairs, finances and accounts of the Company and the
Guarantors with their appropriate officers, employees and accountants. In
handling such information each Bank shall exercise the same degree of care
that it exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public information thereby
received or received pursuant to subsections 5.l(a), (b), or (c), except that
disclosure of such information may be made (a) to the subsidiaries or
affiliates of a Bank in connection with its present or prospective business
relations with the Company, (b) to prospective transferees or purchasers of an
interest in the Revolving Loans or the Letters of Credit (provided that such
prospective transferees or purchasers shall agree to the same confidentiality
standards imposed by this Section 5.5, and provided further that non-public
information may not be disclosed to any party other than those approved by the
Company pursuant to Section 11.7, (c) as required by law, regulation, rule or
order, subpoena, judicial order or similar order, and (d) as may be required
in connection with the examination, audit or similar investigation of a Bank,
provided that in the event of such required disclosure the Bank shall promptly
notify the Company and, except to the extent disclosure is required by a
judicial, governmental or regulatory entity, the Bank shall, at the sole
expense of the Company, assist the Company in its efforts to obtain protection
to prevent or limit such disclosure.
Section 5.6. Maintenance of Books and Records. Each of the Company and its
Subsidiaries shall keep adequate books and records of account, in which true
and complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with generally
accepted accounting principles consistently applied and applicable law.
Section 5.7. The Nordco Note. Upon release of the Nordco Note by The
Travelers Insurance Company and its affiliates (collectively, "Travelers")
from the restrictions established under the agreements between Nordco and
Travelers, the Company shall provide evidence to the Banks of the cancellation
of the Nordco Note against the intercompany account payable by Nordco to the
Company. The Company shall not permit Nordco to pledge, assign, transfer or
otherwise dispose of the Nordco Note, in whole or in part, to any party other
than Travelers.
SECTION VI
FINANCIAL COVENANTS
So long as the Banks have any commitment to lend hereunder or any Revolving
Loan, Letter of Credit or other Obligation remains outstanding, the Company
covenants as follows:
Section 6.1. Combined Tangible Net Worth. The Company and the Combined
Subsidiaries shall at all times maintain Combined Tangible Net Worth of at
least (i) $85,000,000, plus (ii) 75% of cumulative Combined Net Income of the
Company and the Combined Subsidiaries for each fiscal quarter ending after
December 31, 1992, plus (iii) 100% of the net cash proceeds received by the
Company from the sale of its equity securities after December 31, 1992, minus
(iv) up to $15,000,000 expended by the Company since December 31, 1992 to
repurchase capital stock of the Company. Any combined losses shall not reduce
the amount of Combined Tangible Net Worth required to be maintained pursuant
to this Section 6.2.
Section 6.2. Ratio of Consolidated Total Liabilities to Net Worth. The
Company and its Subsidiaries shall at all times maintain a ratio of
Consolidated Total Liabilities to Consolidated Net Worth of no more than 2.0
to 1.0.
Section 6.3. Ratio of Combined Total Liabilities to Tangible Net Worth.
The Company and the Combined Subsidiaries shall at all times maintain a ratio
of Combined Total Liabilities to Combined Tangible Net Worth of no more than
.75 to 1.0.
Section 6.4. Cash Flow Coverage Ratios.
(a) The Company and its Subsidiaries shall at all times maintain a
Consolidated Cash Flow Coverage Ratio of not less than 1.0 to 1.0 determined
as of the end of each fiscal quarter of the Company on the basis of the
immediately preceding four (4) fiscal quarters;
(b) The Company and the Combined Subsidiaries shall at all times maintain
a Combined Cash Flow Coverage Ratio of not less than 2.0 to 1.0 determined as
of the end of each fiscal quarter of the Company on the basis of the
immediately preceding four (4) fiscal quarters.
SECTION VII
NEGATIVE COVENANTS
So long as the Banks have any commitment to lend hereunder or any Revolving
Loan, Letter of Credit or other Obligation remains outstanding, the Company
covenants as follows:
Section 7.1. Indebtedness. Neither the Company nor any of the Guarantors
shall create, incur, assume, guarantee or be or remain liable with respect to
any Indebtedness other than the following:
(a) Indebtedness of the Company or any of the Guarantors to the Banks
hereunder;
(b) Indebtedness existing as of the date of this Agreement and disclosed
on Schedule 7.1 attached hereto or in the most recent of the financial
statements referred to in Section 4.6;
(c) Indebtedness secured by Permitted Encumbrances;
(d) liabilities incurred in the ordinary course of business, other than
Indebtedness for money borrowed or Guarantees of Indebtedness of others for
money borrowed;
(e) Indebtedness in respect of Capitalized Leases, so long as no Default
is created under any other provision hereof;
(f) Guarantees permitted under Section 7.2;
(g) Indebtedness evidenced by promissory notes issued by the Company to
holders of the Company's stock in connection with the purchase of such stock
by the Company, provided that such Indebtedness is subordinated to the
Obligations pursuant to subordination provisions acceptable to the Required
Banks; and
(h) Indebtedness in respect of the Existing Letters of Credit and
additional letters of credit issued by FNBB for the account of the Company or
a Guarantor.
Section 7.2. Contingent Liabilities. Neither the Company nor any of the
Guarantors shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:
(a) Guarantees in favor of the Banks in respect of Indebtedness arising
under this Agreement and under the Notes;
(b) Guarantees existing on the date of this Agreement and disclosed on
Schedule 7.2 attached hereto or in the most recent of the financial statements
referred to in Section 4.6;
(c) Guarantees resulting from the endorsement of negotiable instruments
for collection in the ordinary course of business;
(d) Guarantees with respect to surety, appeal performance and return-of-
money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) not
exceeding in the aggregate at any time $1,000,000; and
(e) Guarantees of normal trade debt relating to the acquisition of goods
and supplies.
Section 7.3. Sale and Leaseback. Neither the Company nor any of the
Guarantors shall enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that the Company or any such Guarantor
intends to use for substantially the same purpose as the property being sold
or transferred.
Section 7.4. Encumbrances. Neither the Company nor any of the Guarantors
shall create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right
to receive income, including the sale or discount of accounts receivable with
or without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of the Agent for the benefit of the Banks;
(b) Encumbrances existing as of the date of this Agreement and disclosed
in Schedule 4.5 attached hereto;
(c) liens for taxes, fees, assessments and other governmental charges to
the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4;
(d) landlords' and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other
than ERISA) or in connection with appeal and similar bonds incidental to
litigation; mechanics', laborers' and materialmen's and similar liens, if the
obligations secured by such liens are not then delinquent or are being
contested in good faith by appropriate proceedings; liens securing the
performance of bids, tenders, contracts (other than for the payment of money);
and statutory obligations incidental to the conduct of its business and that
do not in the aggregate materially detract from the value of its property or
materially impair the use thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a period
longer than 60 days after the creation thereof or, if a stay of execution
shall have been obtained, for a period longer than 30 days after the
expiration of such stay;
(f) rights of lessors under Capitalized Leases;
(g) Encumbrances in respect of any purchase money obligations for
tangible property used in its business that at any time shall not exceed
$100,000, provided that any such Encumbrances shall not extend to property and
assets of the Company or any such Guarantor not financed by such a purchase
money obligation;
(h) easements, rights of way, restrictions and other similar charges or
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business;
(i) Encumbrances on its property or assets created in connection with the
refinancing of Indebtedness secured by Permitted Encumbrances on such
property, provided that the amount of Indebtedness secured by any such
Encumbrance shall not be increased as a result of such refinancing and no such
Encumbrance shall extend to property and assets of the Company or any such
Subsidiary not encumbered prior to any such refinancing;
(j) Encumbrances on the capital stock of subsidiaries which are not
Guarantors; and
(k) Encumbrances on cash and securities securing Indebtedness incurred
pursuant to Section 7.1(h).
Section 7.5. Merger; Consolidation; Sale or Lease of Assets. Neither the
Company nor any of the Guarantors shall: (a) sell, lease or otherwise dispose
of assets or properties, other than (i) sales of inventory in the ordinary
course of business, (ii) sales of worn out or obsolete equipment, (iii) sales
of all or any part of the stock or assets of Nordco or any other Subsidiary of
the Company which is not a Guarantor, and (iv) additional sales of assets or
properties (valued at net book value as shown on the most recent financial
statements delivered by the Company pursuant to Section 5.1 hereof) in an
amount not to exceed, in the aggregate, $7,500,000; or (b) liquidate, merge or
consolidate into or with any other person or entity, provided that any
Guarantor may merge or consolidate into or with (i) the Company if no Default
has occurred and is continuing or would result from such merger and if the
Company is the surviving Company, or (ii) any other Guarantor, and that any
Subsidiary which is not a Major Subsidiary may be liquidated and dissolved.
Section 7.6. Additional Stock Issuance. The Company shall not permit any
of the Guarantors to issue any additional shares of its capital stock or other
equity securities, any options therefor or any securities convertible thereto
other than to the Company or to a Subsidiary which is its parent company as of
the date of this Agreement; provided, that all such securities issued by a
Pledged Subsidiary shall be subject to the lien of the Agent under the Pledge
Agreement. Neither the Company nor any of the Guarantors shall sell, transfer
or otherwise dispose of any of the capital stock or other equity securities of
a Subsidiary, except (i) to the Company or any of its wholly-owned
Subsidiaries, or (ii) in connection with a transaction permitted by Section
7.5.
Section 7.7. Equity Distributions. The Company shall not pay any dividends
on any class of its capital stock or make any other distribution or payment on
account of or in redemption, retirement or purchase of such capital stock
(collectively, "Distributions"); provided, however, that so long as no Default
has occurred and continues to exist, or would occur after giving effect to any
such proposed Distribution, the Company may make Distributions.
Section 7.8. Investments and Transactions with Affiliates. Neither the
Company nor any of the Guarantors shall make or maintain any Investments other
than:
(a) Investments existing as of the date of this Agreement (including,
without limitation, Investments in Subsidiaries) and described in Schedule 7.8
attached hereto;
(b) Investments in connection with Acquisitions permitted hereunder;
(c) Qualified Investments;
(d) Investments by the Company or a Guarantor in the Company or another
Guarantor;
(e) Investments by Subsidiaries of the Company in the Company and in
their respective corporate parents;
(f) reduction of the Nordco Payable to not less than $5,300,000;
(g) Investments by McCoy International Holdings Company in McCoy
International, a Delaware general partnership, in an aggregate amount not to
exceed $500,000; and
(h) Investments by the Company or a Subsidiary in connection with the
initial capitalization of Subsidiaries formed after the date of this
Agreement, provided, however, that in the case of Subsidiaries which are not
Guarantors, such Investments may not exceed $100,000 in any Subsidiary and
$500,000 in the aggregate.
Section 7.9. ERISA. Neither the Company nor any member of the Controlled
Group shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether
or not waived, or (iii) terminate any Plan in a manner that could result in
the imposition of a lien or encumbrance on the assets of the Company or any of
its Subsidiaries pursuant to Section 4068 of ERISA.
Section 7.10. Acquisitions. Neither the Company nor any of the Guarantors
shall make any Acquisitions, provided, that, the Company and the Guarantors
may make any Acquisition so long as: (a) no Default has occurred or would,
after giving effect to such Acquisition; and (b) the Company delivers to the
Agent (i) at least five (5) Business Days prior to such proposed Acquisition
(A) a certificate of the president, chief executive officer, chief financial
officer or treasurer of the Company, to the effect of the preceding clause
(a), and (B) the most recent available drafts of all material documents,
instruments and agreements relating to such proposed Acquisition, and (ii)
promptly upon their becoming available, copies of all final material
documents, instruments and agreements relating to such Acquisition. Promptly
upon receipt of any materials pursuant to this Section 7.10, the Agent shall
provide copies of the same to each of the Banks.
Section 7.11. Payment Restrictions. The Company shall not, and shall not
permit any of the Guarantors to, directly or indirectly create or suffer to
exist or allow to become effective any Payment Restriction with respect to any
of its Subsidiaries which are Guarantors.
SECTION VIII
DEFAULTS
Section 8.1. Events of Default. There shall be an Event of Default
hereunder if any of the following events occurs:
(a) the Company shall fail to pay when due or within five (5) days
thereafter any amount of principal of any Revolving Loans or any Reimbursement
Amount, or any amount of interest thereon or any fees or expenses payable
hereunder or under the Note; or
(b) The Company shall fail to perform any term, covenant or agreement
contained in Sections 5.1(h), 5.5, 6.1 through 6.4 or 7.1 through 7.10; or
(c) the Company shall fail to perform any covenant contained in Sections
5.1(a), (b) or (c), 5.1(g), 5.1(i) or 5.2, and such failure shall continue for
15 days; or
(d) the Company shall fail to perform any term, covenant or agreement
(other than of the types specified in 8.1(a) through (c) hereof) contained in
this Agreement and such default shall continue for 30 days after notice
thereof has been sent to the Company by the Agent; or
(e) any representation or warranty of the Company made in this Agreement
or in any other Bank Agreement or any other documents or agreements executed
in connection with the transactions contemplated by this Agreement or in any
certificate delivered hereunder shall prove to have been false in any material
respect upon the date when made or deemed to have been made; or
(f) the Company or any of the Guarantors (or, with respect to
Indebtedness guaranteed by the Company or any Guarantor, Nordco) shall fail to
pay at maturity, or within any applicable period of grace, any obligations in
excess of $500,000 in the aggregate for borrowed monies or advances, or
Capitalized Leases for the use of real or personal property, or fail to
observe or perform any term, covenant or agreement evidencing or securing such
obligations for borrowed monies or advances, or relating to such use of real
or personal property, the result of which failure is to permit the holder or
holders of such Indebtedness to cause such Indebtedness to become due prior to
its stated maturity upon delivery of required notice, if any; or
(g) the Company or any of its Subsidiaries shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar official of itself or of all or a substantial
part of its property, (ii) be generally not paying its debts as such debts
become due, (iii) make a general assignment for the benefit of its creditors,
(iv) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (v) take any action or commence any case or proceeding
under any law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts, or any other law providing for the
relief of debtors, (vi) fail to contest in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or other law, (vii) take any action under
the laws of its jurisdiction of incorporation or organization similar to any
of the foregoing, or (viii) take any corporate action for the purpose of
effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the application or
consent of the Company or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution,
winding up, or composition or readjustment of its debts, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of it or of all or
any substantial part of its assets, or (iii) similar relief in respect of it,
under any law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts or any other law providing for the
relief of debtors, and such proceeding or case shall continue undismissed, or
unstayed and in effect, for a period of 90 days; or an order for relief shall
be entered in an involuntary case under the Federal Bankruptcy Code, against
the Company or such Subsidiary; or action under the laws of the jurisdiction
of incorporation or organization of the Company or any of its Subsidiaries
similar to any of the foregoing shall be taken with respect to the Company or
such Subsidiary and shall continue unstayed and in effect for any period of 90
days; or
(i) a judgment or order for the payment of money shall be entered against
the Company or any of the Guarantors by any court, or a warrant of attachment
or execution or similar process shall be issued or levied against property of
the Company or such Guarantor, that in the aggregate exceeds $500,000 in value
and such judgment, order, warrant or process shall continue undischarged or
unstayed for 60 days; or
(j) the Company or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $100,000 that it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by the Company, any member of the Controlled Group, any Plan
administrator or any combination of the foregoing, or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the Company and
such proceedings shall not have been stayed or dismissed within 90 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(k) the Company shall make any payment on account of the Nordco Note to
Nordco or any other holder thereof; or Nordco or any other holder of the
Nordco Note shall accelerate, demand payment of, or institute any action or
proceeding to enforce payment of, the Nordco Note or any portion thereof; or
any pledgee of the Nordco Note or the proceeds thereof, shall take any action
to foreclose on the pledge of the Nordco Note.
Section 8.2. Remedies. Upon the occurrence of an Event of Default
described in subsections 8.1(g) or (h), immediately and automatically, or upon
the occurrence of any other Event of Default, at any time thereafter while
such Event of Default is continuing, the Agent may, and upon the request of
the Required Banks shall:
(a) declare the Banks' commitment to make any further Revolving Loans or
issue any further Letters of Credit hereunder terminated;
(b) declare the unpaid principal amount of the Revolving Loans together
with accrued interest and all other Obligations immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived;
(c) demand the Company to immediately provide the Agent with cash in an
amount equal to 105% of the stated amount of all outstanding Letters of Credit
to be held by the Agent as collateral for the Obligations; and
(d) exercise any and all rights of the Agent under this Agreement and the
other Bank Agreements, or at law or in equity, and proceed to protect and
enforce the rights of the Agent and the Banks by any action at law, in equity
or other appropriate proceeding.
8.3. Distribution of Proceeds. Notwithstanding anything to the contrary
contained herein, in the event that following the occurrence or during the
continuance of any Event of Default, the Agent or any Bank receives any monies
on account of the Obligations from the Company, any Guarantor or otherwise,
such monies shall be distributed for application as follows:
(a) First, to the payment of or the reimbursement of, the Agent for or in
respect of all costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Agent in connection with the collection of such
monies by the Agent, or in connection with the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent and/or the Banks under this Agreement or any other
Bank Agreements;
(b) Second, to the payment of all interest, including interest on overdue
amounts, and late charges, then due and payable with respect to the Revolving
Loans and Reimbursement Amounts, allocated among the Banks in proportion to
their respective Commitments;
(c) Third, to the payment of the outstanding aggregate principal balance
of the Revolving Loans and Reimbursement Amounts, allocated among the Banks in
proportion to their respective Commitments;
(d) Fourth, to any other outstanding Obligations, allocated among the
Banks in proportion to their respective interests in such Obligations; and
(e) Fifth, the excess, if any, shall be returned to the Company or to
such other Persons as are entitled thereto.
SECTION IX
CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
9.1. Consents; Amendments; Waivers; Remedies. Except as otherwise
expressly set forth in any particular provision of this Agreement, any consent
or approval required or permitted by this Agreement to be given by the Banks
may be given, and any term of this Agreement or of any other instrument
related hereto or mentioned herein may be amended, and the performance or
observance by the Company or any other person of any term of this Agreement or
any other Bank Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of the Company and the Required Banks; provided, however, that
without the written consent of such Banks as hold 100% of the aggregate
principal amount of the Revolving Loans hereunder (or, if no Revolving Loans
have been made, such Banks having 100% of the Commitments hereunder):
(a) no reduction in the principal of, or the interest rates on, or any
fees relating to, the Revolving Loans or the Letters of Credit shall be made;
(b) no extension or postponement of the stated time of payment of the
principal amount of, interest on, or fees relating to the Revolving Loans or
Reimbursement Amounts shall be made;
(c) no increase in the amount of the Maximum Revolving Credit, or
extension of the Maturity Date beyond that provided for hereunder shall be
made;
(d) no change in the definition of the term "Required Banks" shall be
made;
(e) no change in the language of this Section IX shall be made; and
(f) no release of all or substantially all of the collateral for the
Obligations shall be made.
No delay or omission on the Agent's or any Bank's part in exercising its
rights and remedies against the Company or any other interested party shall
constitute a waiver. The waiver of the Company's breach in one or more
instances shall not constitute or otherwise be an implicit waiver of
subsequent breaches. To the extent permitted by applicable law, the Company
hereby agrees to waive, and does hereby absolutely and irrevocably waive (i)
all presentments, demands for performance, notices of nonperformance,
protests, notices of protest and notices of dishonor in connection with any of
the Indebtedness evidenced by the Notes, (ii) any requirement of diligence or
promptness on the Agent's or any Bank's part in the enforcement of its rights
under the provisions of this Agreement or any Bank Agreement, and (iii) except
for such notices as are specifically required under this Agreement, any and
all notices of every kind and description which may be required to be given by
any statute or rule of law with respect to its liability (A) under this
Agreement or in respect of the Indebtedness evidenced by the Notes or any
other Bank Obligation, or (B) under any other Bank Agreement. No course of
dealing between the Company and the Agent or any Bank shall operate as a
waiver of any of the Agent's or any Bank's rights under this Agreement or any
Bank Agreement or with respect to any of the Obligations. The Agent's and the
Banks' rights and remedies under this Agreement and under all subsequent
agreements between the Agent, the Banks, the Company or any other interested
party shall be cumulative and any rights and remedies expressly set forth
herein shall be in addition to, and not in limitation of, any other rights and
remedies which may be available to the Agent and the Banks in law or at
equity.
Section 9.2. Additional Guarantors. The Company may from time to time
cause a Subsidiary which is not a Guarantor under this Agreement to become a
"Guarantor," effective as of the date on which each of the following
conditions shall have been satisfied:
(a) The Agent shall have received a Guaranty substantially in the form of
Exhibit C hereto, duly executed by such Subsidiary;
(b) The Agent shall have received a Certificate of the Secretary or Clerk
of such Subsidiary with respect to (i) resolutions of its Board of Directors
authorizing the execution and delivery of the Guaranty and identifying the
officer(s) authorized to execute, deliver and take all other actions required
under the Guaranty and providing specimen signatures of such officers; (ii)
the Charter of such Subsidiary, certified by the Secretary of State of the
state of its incorporation; and (iii) the By-laws of such Subsidiary; and
(c) The Agent shall have received a certificate from the Company, dated
as of the date of the Guaranty, certifying that prior to and after giving
effect to the addition of such Subsidiary as a Guarantor hereunder, the
representations and warranties set forth in this Agreement are true and
correct as they pertain to such Subsidiary, and that no Default exists
hereunder.
Upon satisfaction of the conditions set forth in this Section 9.2 such
Subsidiary shall become a "Guarantor" under this Agreement, and shall be bound
by all of the terms hereof.
SECTION X
THE AGENT
10.1. Appointment of Agent. Each Bank by becoming a party to this
Agreement does hereby appoint, and consent to the appointment of, the Agent as
agent for the ratable benefit of the Banks hereunder. The Agent is authorized
to take such action on behalf of each of the Banks and to exercise all such
powers as are hereunder and in related documents delegated to the Agent,
together with such powers as are reasonably incidental thereto.
10.2. Exercise of Powers. The Agent may exercise its powers and execute
its duties by or through employees or agents and shall be entitled to take,
and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Agreement. The Agent may utilize the services of
such persons as the Agent in its sole discretion may reasonably determine and,
following the occurrence and during the continuation of an Event of Default,
all reasonable fees and expenses of any such persons shall be paid by the
Company.
10.3. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee of any such person, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder, or in connection herewith or therewith,
or be responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Agent or such other Person, as the case may be,
may be liable for losses due to its willful misconduct or gross negligence.
10.4. Responsibilities. The Agent shall not be responsible for the
execution or validity or enforceability of this Agreement, or any instrument
at any time constituting, or intended to constitute, collateral security for
the Obligations, or for the value of any such collateral security or for the
validity, enforceability or collectibility of any such amounts owing with
respect to the Obligations, or for any recitals or statements, warranties or
representations herein or made in any certificate or instrument hereafter
furnished to it by or on behalf of the Company or any other obligor in respect
of the Obligations, or be bound to ascertain or inquire as to the performance
or observance of any of the terms, conditions, covenants or agreements herein
or in any instrument at any time constituting, or intended to constitute,
collateral security for the Obligations. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to it by
the Company or any holder of any of the Obligations shall have been duly
authorized or is true, accurate and complete. The Agent has not made nor does
it now make any representations or warranties, express or implied, nor does it
assume any liability to the Banks with respect to the creditworthiness or
financial condition of the Company, the Guarantors or any of their
Subsidiaries and each Bank represents and warrants to the Agent that it has
made its own independent evaluation of the creditworthiness of the Company,
the Guarantor and their Subsidiaries and has a not relied upon the Agent or
any material or information furnished by the Agent in making such evaluation.
10.5. Direction by Court. If, in the opinion of the Agent, the
distribution of any amount received by it in such capacity hereunder might
involve it in liability, it may refrain from making distribution until its
right to make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each person to
whom any such distribution shall have been made shall either repay to the
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court. With respect to obligations of the Company hereunder, a payment
to the Agent shall be deemed to be payment to the Banks.
10.6. Treatment of Payees. The Agent may deem and treat the payee of any
Note as the absolute owner thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or by a
subsequent holder.
10.7. Agent as Bank. In its individual capacity, The First National Bank
of Boston shall have the same obligations and the same rights, powers and
privileges in respect to its Commitment and the Revolving Loans made by it
hereunder, as it would have were it not also the Agent.
10.8. Sharing of Costs and Expenses. To the extent not paid by the
Company, each Bank agrees to pay its proportionate share of all costs and
expenses incurred by the Agent in its capacity as Agent hereunder, in
accordance with the respective Commitments of the Banks hereunder. The costs
and expenses to be shared by the Banks pursuant to this Section 10.8 shall not
include any costs or expenses incurred by the Agent as an individual Bank in
connection with the Loans made by it.
SECTION XI
MISCELLANEOUS
Section 11.1. Notices. Unless otherwise specified herein, all notices
hereunder to any party hereto shall be in writing and shall be deemed to have
been given when delivered by hand, when properly deposited in the mails
postage prepaid, when sent by telex, answerback received, or electronic
facsimile transmission, or when delivered to the telegraph company or
overnight courier, addressed to such party at its address indicated below:
If to the Company, at:
Oak Industries Inc.
Bay Colony Corporate Center
1000 Winter Street
Waltham, Massachusetts 02154
Attention: Michael F. Goss, Vice President
Telefax: (617) 890-8585
If to the Agent, at:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Thomas F. Farley, Jr., Vice President
Telefax: (617) 434-0637
or at any other address specified by such party in writing.
Section 11.2. Expenses. The Company will pay on demand all out of pocket
expenses of the Agent in connection with the preparation, waiver or amendment
of this Agreement, the Notes or the other Bank Agreements, or the collection
of the Revolving Loans or other Obligations, or the Agent's and the Banks'
exercise or enforcement of any of their rights, remedies or options
thereunder, including, without limitation, reasonable fees of outside legal
counsel and, following the occurrence and during the continuation of an Event
of Default, accounting, consulting, brokerage or other similar professional
fees or expenses and any fees or expenses associated with any travel or other
costs relating to any appraisals or examinations conducted in connection with
the Obligations or any collateral therefore, and the amount of all such
expenses shall, until paid, bear interest at the rate applicable to principal
hereunder (including any default rate).
Section 11.3. Set-Off. Regardless of the adequacy of any collateral or
other means of obtaining repayment of the Obligations, any deposits, balances
or other sums credited by or due from the head office of any Bank or any of
its branch offices to the Company may, at any time and from time to time after
the occurrence and during the continuation of an Event of Default hereunder,
without notice to the Company or compliance with any other condition precedent
now or hereafter imposed by statute, rule of law, or otherwise (all of which
are hereby expressly waived) be set off, appropriated, and applied by such
Bank against any and all obligations of the Company to such Bank or any of its
affiliates in the manner provided in this Agreement, and the Company hereby
grants to each Bank a continuing security interest in such deposits, balances
or other sums for the payment and performance of all such obligations.
Section 11.4. Term of Agreement. This Agreement shall continue in force
and effect so long as the Banks have any commitment to make Revolving Loans or
issue Letters of Credit hereunder or any Revolving Loan or other Obligation
shall be outstanding.
Section 11.5. Governing Law. This Agreement and the Note shall be deemed
to be contracts made under seal and shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts (without giving
effect to any conflicts of laws provisions contained therein).
Section 11.6. Binding Effect of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Company, the Agent and the Banks and
their respective successors and assigns, provided that the Company may not
assign or transfer its rights or obligations hereunder.
Section 11.7. Sales of Interests.
(a) Subject to the provisions of this Section 11.7, each Bank shall have
the right at any time to sell undivided participating interests in all or any
part of its Commitment or the Obligations owed to it to one or more affiliates
of such Bank or to one or more other Persons; provided, however, that (i) such
sale or transfer shall not relieve such Bank of any obligation or liability
hereunder, (ii) such Bank shall make and receive all payments for account of
its participant(s) and shall retain exclusively, and shall continue to
exercise exclusively, all rights of approval and administration available
hereunder with respect to such Bank's Commitment and the Obligations owed to
it, and such Bank shall make such arrangements with its participant(s) as may
be necessary to accomplish the foregoing, provided that any such participant
may be given the right to vote its interest with respect to the matters
described in clauses (a), (b), (c) and (f) of Section 9.1, and (iii) no such
participant may receive any non-public information without the prior consent
of the Company, which consent will not be unreasonably withheld or delayed.
No such participant shall be a Bank for any purpose under this Agreement, and
all amounts payable hereunder shall be determined as if such Bank had not sold
such participation, except that the participant shall be entitled to the
benefits of Sections 2.8, 2.9, 2.13, 11.2 and 11.8 of this Agreement to the
extent that such Bank would be entitled to such benefits if the participation
had not been entered into or sold. Subject to the foregoing and to the
provisions of Section 5.5, it is expressly agreed that, in connection with the
sale and transfer of any participation or offers therefor pursuant to this
Section 11.7(a), each Bank may provide to any participant or prospective
participant such information pertaining to the Company or any Subsidiary as
such Bank may deem appropriate.
(b) Any Bank may, upon written notice to the Agent and the Company, assign
to any other Bank, commercial bank or other financial institution, with the
consent of the Company (which consent will not be unreasonably withheld or
delayed), all or a portion of its Commitment and its interest in the
Obligations hereunder; provided that any such assignment of less than all of
the assigning Bank's Commitment shall be in a minimum amount of $10,000,000.
If any Bank so sells or assigns all or a part of its rights and obligations
hereunder or under its Notes to another Bank, any reference in this Agreement
or such Note to such assigning Bank and its Commitment Percentage shall
thereafter refer to such assigning Bank and to the respective assignee to the
extent of their respective interests, and such assignee shall have, to the
extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would if it were the assigning Bank. In
the event of any such sale and assignment to a commercial bank or other
financial institution not previously a Bank hereunder, the assignee financial
institution shall become party to this Agreement as a Bank by execution of a
counterpart of this Agreement, and at the time of any assignment pursuant to
this Section 11.7(b) the Company will issue a new Note to the respective
assignee and to the assigning Bank in conformity with the requirements of
Section 2.5. Each Bank and the Company agree to execute new signature pages
to this Agreement reflecting the Commitment Percentage of any Bank after
giving effect to an assignment pursuant to this Section 11.7(b) and such other
documents (including without limitation amendments to this Agreement and the
other Bank Agreements) as shall be necessary to effect the foregoing. In
connection with any assignment pursuant to this Section 11.7(b) the assigning
Bank shall pay to the Agent an administration fee of $2,500.
Section 11.8. Indemnification. The Company hereby indemnifies the Agent
and the Banks and their respective directors, officers, employees, affiliates
and agents (collectively, "Indemnified Persons") against, and agrees to hold
each such Indemnified Person harmless from, any and all losses, claims,
damages and liabilities, and related expenses, including reasonable counsel
fees and expenses, incurred by such Indemnified Person arising out of any
claim, litigation, investigation or proceeding (whether or not such
Indemnified Person is a party thereto) relating to any transactions, services
or matters that are the subject of this Agreement or any other Bank Agreement;
provided, however, that such indemnity shall not apply to any such losses,
claims, damages, or liabilities or related expenses determined by a court of
competent jurisdiction to have arisen from the bad faith, gross negligence or
willful misconduct of such Indemnified Person.
Section 11.9. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
Section 11.10. Partial Invalidity. The invalidity or unenforceability of
any one or more phrases, clauses or sections of this Agreement shall not
affect the validity or enforceability of the remaining portions of it.
Section 11.11. Captions. The captions and headings of the various
sections and subsections of this Agreement are provided for convenience only
and shall not be construed to modify the meaning of such sections or
subsections.
Section 11.12. WAIVER OF JURY TRIAL. THE AGENT, THE BANKS AND THE COMPANY
AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON,
OR ARISING OUT OF, THIS AGREEMENT, ANY BANK AGREEMENT, ANY RELATED
INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR
AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANKS AND THE COMPANY, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANKS NOR THE
COMPANY HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Section 11.13. Entire Agreement. This Agreement, the Notes, the other Bank
Agreements and the documents and agreements executed in connection herewith
constitute the final agreement of the parties hereto and supersede any prior
agreement or understanding, written or oral, with respect to the matters
contained herein and therein.
[END OF TEXT]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
OAK INDUSTRIES INC.
By /S/ MICHAEL F. GOSS
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By:
Title:
[Signatures continued on the following pages]
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
BANK SIGNATURE PAGE
THE FIRST NATIONAL BANK OF
BOSTON, as a Bank
By: /S/ THOMAS F. FARLEY, JR.
Thomas F. Farley, Jr.
Title: Vice President
Address: 100 Federal Street
Boston, Massachusetts 02110
Attn: Thomas F. Farley, Jr.
Vice President
Telefax: (617) 434-0637
Commitment
Percentage: 100%
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 10(h)
FIRST AMENDMENT
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT is entered into as of November 1, 1993, by and among OAK
INDUSTRIES INC., a Delaware corporation (the "Company"), THE FIRST
NATIONAL BANK OF BOSTON, in its capacity as the Bank under the Credit
Agreement referred to below (the "Bank"), and THE FIRST NATIONAL BANK OF
BOSTON, as Agent for the Banks under the Credit Agreement (the "Agent").
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Credit Agreement referred to below.
WHEREAS, the Company, the Bank and the Agent entered into that
certain Amended and Restated Revolving Credit Agreement dated as of
September 1, 1993 (as amended from time to time, the "Credit
Agreement"); and
WHEREAS, the Company, the Bank and the Agent desire to amend certain
provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Section 2.2(b) of the Credit Agreement is hereby amended, as of
the date of this Amendment, by deleting the phrase "12:00 noon"
appearing therein and substituting therefor the phrase "3:00 p.m."
2. Section 2.3(a) of the Credit Agreement is hereby amended, as of
the date of this Amendment, by deleting the date "September 30, 1992"
appearing therein and substituting therefor the date "September 30,
1993."
3. Section 2.15.1 of the Credit Agreement is hereby amended, as of
the date of this Amendment, by deleting clause (c) thereof in its
entirety and substituting therefor the following:
"(c) each Letter of Credit shall expire on or before the earlier of
(i) the date one year after issuance thereof, or (ii) the Revolving
Credit Termination Date."
4. Section 2.15.3 of the Credit Agreement is hereby amended, as of
the date of this Amendment, by adding thereto, following the period at
the end of such Section, the following:
"To the extent that any Bank shall make payment to the Agent pursuant to
the preceding sentence and the Agent shall receive payment by the
Company of the Reimbursement Amount relating to such Letter of Credit
pursuant to Section 2.15.4(a), the Agent shall reimburse such Bank its
Commitment Percentage of such Reimbursement Amount."
5. Section 9.1(c) of the Credit Agreement is hereby amended, as of
the date of this Amendment, by deleting the phrase "Maturity Date"
appearing therein and substituting therefor the phrase "Revolving Credit
Termination Date."
6. Except as expressly amended by this Amendment the Credit
Agreement is in all respects ratified and confirmed and remains in full
force and effect as of the date of this Amendment.
IN WITNESS WHEREOF, parties have caused this Amendment to be executed
by their duly authorized officers as of the date and year first above
written.
OAK INDUSTRIES INC.
By: /S/ MICHAEL F. GOSS
Name: Michael F. Goss
Title: Vice President and Treasuer
THE FIRST NATIONAL BANK
OF BOSTON
By: /S/ ROBERT E. GALLERY
Name: Robert E. Gallery
Title: Division Executive
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By: /S/ ROBERT E. GALLERY
Name: Robert E. Gallery
Title: Division Executive
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
EARNINGS:
Income from continuing operations........................ $ 26,660 $ 10,388 $ 5,265
Income from discontinued operations...................... -- 550 305
Cumulative effect of change in accounting principle...... -- 3,500 --
---------- ---------- ----------
Net income............................................... $ 26,660 $ 14,438 $ 5,570
========== ========== ==========
PRIMARY EARNINGS PER SHARE
SHARES:
Weighted average number of common shares outstanding..... 16,605,160 16,510,159 16,505,446
Additional dilutive effect of outstanding options (as
determined by the application of the treasury stock
method)................................................ 994,516 563,616 --
Additional dilutive effect of outstanding warrants (as
determined by the application of the treasury
stock method).......................................... 500,428 235,714 --
---------- ---------- ----------
Weighted average number of common shares outstanding
as adjusted............................................ 18,100,104 17,309,489 16,505,446
========== ========== ==========
PRIMARY EARNINGS PER COMMON SHARE:
Income from continuing operations........................ $ 1.47 $ .60 $ .32
Income from discontinued operations...................... -- .03 .02
Cumulative effect of change in accounting principle...... -- .20 --
---------- ---------- ----------
Net income............................................... $ 1.47 $ .83 $ .34
========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
SHARES:
Weighted average number of common shares outstanding..... 16,605,160 16,510,159 16,505,446
Additional dilutive effect of outstanding options (as
determined by the application of the treasury stock
method)................................................ 994,516 785,533 --
Additional dilutive effect of outstanding warrants (as
determined by the application of the treasury
stock method).......................................... 500,428 371,053 --
---------- ---------- ----------
Weighted average number of common shares outstanding
as adjusted............................................ 18,100,104 17,666,745 16,505,446
========== ========== ==========
FULLY DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations........................ $ 1.47 $ .59 $ .32
Income from discontinued operations...................... -- .03 .02
Cumulative effect of change in accounting principle...... -- .20 --
---------- ---------- ----------
Net income............................................... $ 1.47 $ .82 $ .34
========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction Percent
in which of Voting
Incorporated Securities Owned
------------ ----------------
<S> <C> <C>
Oak Communications Inc................ Delaware 100
Oak Systems Inc....................... Delaware 100 (1)
National Subscription Television
of Chicago Inc..................... Illinois 100 (2)
Harper-Wyman Company.................. Delaware 100
OakGrigsby Inc........................ Delaware 100
Oak Crystal Inc....................... Delaware 100 (5)
Oak Investment Corporation............ Delaware 100
Oak Overseas Manufacturing Corporation Delaware 100
Electronic Technologies Inc.......... Delaware 100
Croven Crystals Ltd................... Ontario, Canada 100 (3)(6)
Nordco Inc............................ Delaware 100
SGI de Mexico, S.A. de C.V............ Mexico 100 (4)
Connector Holding Company............. Delaware 80
Gilbert Engineering Co., Inc.......... Delaware 85 (7)
H.E.S. International, Inc............. Kansas 100 (10)
Harper-Wyman International Inc....... Delaware 100 (8)
Harper-Mex, S.A. de C.V............... Mexico 100 (9)
Oak Enclosures Inc.................... Delaware 100
Gilbert Engineering Europe, B.V....... Netherlands 100 (11)
Gilbert Engineering (Guam)............ Guam 100 (11)
Gilbert Engineering France, S.A....... France 100 (11)
Societe d'Appareillages
Electroniques, S.A................. France 100 (12)
McCoy International Holding Company... Delaware 100 (13)
<FN>
- ---------------
(1) Owned by Oak Investment Corporation.
(2) Owned by Oak Systems Inc.
(3) Owned by Electronic Technologies Inc.
(4) Owned by OakGrigsby Inc.
(5) Doing business as Oak Frequency Control Group, McCoy/Ovenaire/Spectrum,
and Carpenter Emergency Lighting.
(6) Doing business as Oak Frequency Control Group.
(7) Owned by Connector Holding Company
(8) Owned by Harper-Wyman Company
(9) Owned by Harper-Wyman International Inc.
(10) Owned by Oak Enclosures Inc.
(11) Owned by Gilbert Engineering Co., Inc.
(12) Owned by Gilbert Engineering, France, S.A.
(13) 50% owned by Electronic Technologies Inc. and 50% owned
by Oak Crystal Inc.
</TABLE>
