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
(Mark One) for the fiscal year ended January 2, 1999 or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 0-20388
Littelfuse, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3795742
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
800 East Northwest Highway,
Des Plaines, Illinois 60016
(Address of principal executive offices) (Zip Code)
847/824-1188
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value, and Warrants to purchase shares of Common Stock, $.01 par value
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 18,452,016 shares of voting stock held by
non-affiliates of the registrant was approximately $321,766,255 based on the
last reported sale price of the registrant's Common Stock, $.01 par value, as
reported on The Nasdaq Stock Market on March 12, 1999.
As of March 12, 1999, the registrant had outstanding 19,660,879 shares of
Common Stock, $.01 par value, and Warrants to purchase 2,474,615 shares of
Common Stock, $.01 par value.
Portions of the following documents have been incorporated herein by reference
to the extent indicated herein: Littelfuse, Inc. Proxy Statement dated March 18,
1999 (the "Proxy Statement") --Part III. Littelfuse, Inc. Annual Report to
Stockholders for the year ended January 3, 1998 (the "Annual Report") -- Parts
II and III.
<PAGE>
Part I
ITEM 1. BUSINESS
General
Littelfuse, Inc. (the "Company" or "Littelfuse") is a leading
manufacturer and seller of fuses and other circuit protection devices for use in
the electronic, automotive and general industrial markets. Management believes
the Company is ranked first in market share in the electronic market, first in
the automotive market and third in the power fuse market in North America.
Management believes that the Company, together with its licensees, is also first
in market share in the electronic market and first in the automotive market
worldwide.
In the electronic market, leading manufacturers such as 3Com, Canon,
Compaq, Hewlett Packard, IBM, LG Electronics, Lucent Technologies, Motorola,
Nortel, Panasonic, Samsung, Sharp, Sony and Toshiba obtain a substantial portion
of their electronic circuit protection requirements from the Company. In the
automotive market, the Company or its licensees have customer relationships with
all leading automobile manufacturers throughout the world. Littelfuse provides
substantially all of the automotive fuse requirements for vehicles manufactured
domestically by General Motors and is the primary supplier for Ford, Chrysler
and all Japanese and most European auto manufacturer transplants. The Company
also competes in the power fuse market selling to companies such as the Allen
Bradley division of Rockwell International and Reliance Electric. In addition to
fuses, the Company manufactures and supplies switches, circuit breakers and
indicator lights to the automotive industry and to appliance and general
electronics manufacturers.
See "Business Environment: Circuit Protection Market."
The Company manufactures its products on fully integrated manufacturing
and assembly equipment, much of which is designed and built by its own
engineers. The Company fabricates and assembles a majority of its products and
maintains product quality through a rigorous quality assurance program with all
sites (except the Philippines) certified under ISO 9000 standards and its world
headquarters now certified under the QS9000 standards.
The Company's products are sold worldwide through a direct sales force
and manufacturers' representatives. In Asia Pacific, the Company has licensed
its automotive fuse technology to a Japanese firm that supplies automotive fuses
to Pacific Rim customers. For the year ended January 2, 1999, approximately 43%
of the Company's net sales were to customers outside the United States (exports
and foreign operations).
References herein to "1996" or "fiscal 1996" refer to the calendar year
ended December 28, 1996. References herein to "1997" or "fiscal 1997" refer to
the fiscal year ended January 3, 1998. References herein to "1998" or "fiscal
1998" refer to the fiscal year ended January 2, 1999.
Business Environment: Circuit Protection Market
The circuit protection market can be broadly categorized into five
major product areas: electronic, automotive, industrial (power), high voltage
and residential. The Company sells products designed for the electronic,
automotive and industrial areas. The Company entered the circuit protection
market in 1927 with the development and introduction of the first small,
fast-acting fuse capable of protecting sensitive test meters. Since that time,
the Company has diversified its involvement in the circuit protection market to
become a leader in the production of electronic and automotive fuses. The
Company also entered the power fuse market in 1983 with a broad line of fuses,
including several proprietary products. The Company believes it is the circuit
protection leader because it designs and produces almost all the products it
sells in all three markets including the two markets where it holds the number
one market share position. See "Littelfuse Products."
Electronic Products. Electronic circuit protection products are used to
protect power circuits in a multitude of electronic systems. Electronics
products fall into four major categories: (1) fuses, (2) protectors, (3)
resettables and (4) electrostatic discharge suppressors. Electronics fuses
generally are of two types - miniature and subminiature. Miniature fuses are
generally tubular in shape with glass, ceramic and composition bodies.
Subminiature devices are used where space is at a premium. Protectors are fuses
produced to a less rigorous specification. Resettables are polymer positive
temperature coefficient (PTC) devices that limit the current when an overcurrent
condition exists and let current pass again after the cause of the overcurrent
is removed. Electrostatic discharge (ESD) suppressors are polymer based devices
that shunt transient high voltage energy away from circuitry. Applications for
electronic products include telecommunications equipment, computers and computer
peripherals, power supplies, test and medical instrumentation, and consumer
electronic products. There is also a special segment of the electronic circuit
protection market directed toward the aerospace industry. These special
high-reliability fuses are manufactured in small quantities under extremely high
quality control standards.
Automotive Products. Fuses are extensively used in automobiles, trucks,
buses and off-road equipment to protect electrical circuits and wiring harnesses
supplying electrical power to operate lights, heating, air conditioning,
windshield wipers, radios, windows and controls. Currently, a typical automobile
contains 30 to 70 fuses, depending upon the options installed. The market for
automotive fuses is expected to grow in the coming years as more electronic
features are included in automobiles. Certain new vehicles, such as the Cadillac
Seville, Ford 150 series truck, Jeep Grand Cherokee and the Jaguar, contain as
many as 50 to 90 fuses and this higher fuse count is expected to spread to other
vehicles.
Power Products. Power fuses include both current limiting and
non-current limiting devices used to protect electrical systems against
overcurrents. Power fuses are rated and listed under one of many Underwriters'
Laboratories fuse classifications. The three main end user market segments for
power fuses include original equipment manufacturers ("OEMs"), industrial
maintenance and repair operations ("MROs") and new commercial and industrial
construction. Major applications for power fuses include protection from
over-load and short-circuit currents in motor branch circuits, heating and
cooling systems, control systems, lighting circuits and electrical distribution
networks.
Littelfuse Products
General. The Company is a leading manufacturer and seller of fuses and
other circuit protection devices for use in the electronic, automotive and
general industrial markets. The Company's products are marketed under the
general trademarked names of Littelfuse(R) and, where appropriate, Slo-Blo(R)
Fuse as well as the trademarked names of certain of its products listed below in
the description of the Company's electronic, automotive and power fuse products.
Product Sales. Net sales of the Company's products by industry category for the
periods indicated are as follows:
<TABLE>
Fiscal Year
(in thousands)
-----------------------------------------------------------------
-------------------- --------------------- ----------------------
1998 1997 1996
-------------------- --------------------- ----------------------
-------------------- --------------------- ----------------------
<S> <C> <C> <C>
Electronic $133,085 $135,032 $112,358
Automotive 96,686 102,139 93,690
Industrial (Power) 39,769 37,994 35,398
-------------------- --------------------- ----------------------
==================== ===================== ======================
Total $269,540 $275,165 $241,446
==================== ===================== ======================
</TABLE>
Electronic Products. The Company manufactures and sells a wide range of
electronic circuit protection products, including miniature and subminiature
fuses, protectors and resettables. Electronic miniature and subminiature fuses
are designed to provide circuit protection in the limited space requirements of
electronic equipment. The Company entered the protector market in late 1994 and
the resettable polymer PTC device market in late 1996. While the Company
continues to develop its own resettable fuse products, the Company also entered
into agreements with Raychem Corp. in 1996 which allow the Company to sell
resettable fuses using certain of Raychem's technology. The Company entered the
ESD suppressor market in late 1998. The Company is in the process of developing
ESD suppressor products and also purchased the Pulse-Guard(R) product line and
technology in 1998.
The Company's electronic circuit protection products are marketed under the
following trademarked and brand names:
PICO(R) II Fuse is a very fast-acting subminiature fuse with axial
leads which can be automatically inserted into a circuit board. It
is used in consumer electronics, computers, medical instruments,
power supplies and telecommunication line cards. It was originally
developed for the aerospace industry where extremely small size
and high reliability were prime requisites. This fuse is
encapsulated with an epoxy coating which protects the fuse from
adverse environmental conditions. It can stand up under the rough
treatment found in high speed automated circuit board assembly
processes used by many different manufacturers.
2AG fuses are a miniature version of the standard 1/4" diameter by
1-1/4" long glass bodied fuses manufactured for more than 40
years. The fuse occupies about 1/3 of the space but still provides
the performance of the larger sized product. The Company has
developed a strong market in the telecommunications industry for a
leaded version of the 2AG fuse. These fuses are used in business
and personal telephone systems, answering machines and other
equipment connected to phone lines. They are used to protect the
system from lightning surges and accidental contact with power
lines. These fuses also are used extensively in electronic
ballasts for lighting.
NANO2 (R) SMF Fuse is a fourth generation surface mount fuse
product line. The compact size (.240" x .100" x .100") of this
rectangular shaped fuse is very attractive to design engineers. In
addition, the flat side design permits efficient pick and
placement by automated assembly equipment. The NANO2 (R) SMF Fuse
is used where space considerations are critical, including laptop
computers, camcorders and battery chargers.
ALF(TM) II or "1206" SMF is a very fast acting thin film surface
mount fuse measuring only .12 inch x .06 inch. The subminiature
size assures additional space savings in surface mount
applications. It is completely compatible with common soldering
systems used in surface mount assembly applications and it is
available on 8mm reels for use with automatic placement equipment.
Applications include hard disk drives, PC main boards, digital
cameras and CD-ROMs.
"0603" SMF is a very fast acting thin film surface mount fuse
measuring only .06 inch x .03 inch. The 0603 is the smallest fuse
available and has a very low profile .018 inches. The small
physical size along with low values for resistance and voltage
drop are significant features of this new fuse for battery and
other low voltage applications, such as hard disk drives and PC
main boards. The 0603 has also gained acceptance for use in the
protection of cellular telephones.
SMTelecom(TM) is the first surface mount fuse to comply with UL
1459 and UL 1950 third edition power cross requirements for
telecommunications. The new SMTelecom(TM) Fuse protects all phone
line connected equipment against current surges resulting from
power cross, power induction and lightning strikes. It is rated
for 250 volts with a 600 volt short circuit rating. Four current
ratings are offered, from 0.75 to 1.5 amperes. Applications
include modems, fax machines, desktop telephones, answering
machines and line cards.
Surface Mount PTC is the first in Littelfuse's line of PTC
devices. Its dimensions of 0.200" x 0.290" x 0.120" are ideal for
circuit board applications where space is at a premium. It also is
available in 0.340" x 0.250" x 0.10" and 0.179" x 0.127" x 0.02"
configurations. This polymer surface mount PTC has the ability to
reset itself once the fault or overcurrent condition has cleared.
This new product is used primarily for computer and peripheral
applications such as motherboards, disk drives, PC cards, modems,
printers, etc.
PulseGuard(R), an ESD suppressor, is a polymer based surface mount
or connector style device that utilizes a variable voltage
material to shunt high voltage ESD energy away from circuitry
without affecting data signals. The PulseGuard(R) characteristics
and available packages provide for protection of integrated
circuitry in applications such as PCs and PC peripherals.
Automotive Products. The Company is a primary supplier of automotive
fuses to United States, Japanese and European automotive OEMs, automotive
component parts manufacturers and automotive parts distributors. The Company
also sells its fuses in the replacement parts market, with its products being
sold through mass merchandisers, discount stores and service stations, as well
as under private label by national firms. Management believes that it currently
is the leading worldwide supplier of automotive fuses for new vehicle production
and a leader for the aftermarket/replacement market.
The Company invented and owns all of the U.S. patents related to the
blade type fuse which is the standard and most commonly used fuse in the
automotive industry. The Company believes that, together with its licensees, it
supplies substantially all of the blade type fuses used in the North American
and Japanese markets and a majority in the European market. The Company's
automotive fuse products are marketed under the following trademarked and brand
names:
AUTOFUSE(R) or ATO(R), a standard blade type fuse, is used in
automobiles produced worldwide and designed to provide superior
circuit protection in a small, heat resistant package for low
ampere applications.
MINI(R) Fuse, smaller than its predecessor AUTOFUSE(R), is offered
in a range from two amps to 30 amps and is designed to permit more
fuses in the same amount of space than prior products.
MAXI(TM) Fuse, a larger version of the AUTOFUSE(R), replaces the
commonly used low technology fusible wire or fusible links in
automobile electrical harnesses and is offered in a range from 20
amps to 80 amps.
MIDI(R) Fuse is a bolt down version of the MAXI(TM) fuse. This
style is preferred by some European customers in the 50 to 100 amp
range. Its primary use is for heating, air conditioning and motor
control circuits.
J-CASE(R) Fuse, is a cartridge version of the Maxi(TM) fuse. Its
primary use is for branch circuit protection and protection of
circuits with inductive loads.
MEGA(R)Fuse, a higher current fuse with ratings of 100 to 200
amps, is used for protection of battery cables.
Over half of the Company's North American automotive (blade type) fuse
sales are made to wire harness manufacturers that incorporate the fuses into
their products. The remaining automotive fuse sales are made directly to
automotive manufacturers and through distributors who in turn sell most of their
products to automotive product wholesalers, such as warehouse distributors,
discount stores and service stations.
The Company believes it currently has adequate production capacity to
meet the anticipated increased demand for automotive fuses referred to in
"Business Environment: Circuit Protection Market -- Automotive Fuses." Any
required expenditures for additional machinery and equipment are expected to be
funded by cash flow from operations.
The Company has licensed its patented ATO(R), Mini(R) and Maxi(TM)
automotive fuse designs to Bussmann, a division of Cooper Industries. Bussmann
is the Company's largest domestic competitor. Additionally, the Company has
entered into a licensing agreement with Pacific Engineering Company, Ltd., a
Japanese fuse manufacturer, which produces and distributes the Company's
patented ATO(R) and Mini(R) automotive fuses to the Pacific Rim manufacturing
operations of Japanese based automobile manufacturers. See "Competition" and
"Business -- Patents, Trademarks and Other Intellectual Property."
Power Products. The Company entered the power fuse market in 1983 and
manufactures and sells a broad range of low-voltage circuit protection products
to electrical distributors and their customers in the construction, OEM and MRO
markets. Power fuses are used to protect circuits in various types of industrial
equipment and circuits in industrial plants, office buildings and residential
units. The Company's power fuse products are marketed under the following
classifications:
Class L fuses are commonly used as the first line of electrical
protection in building service entrance equipment of high capacity
electrical systems. Other applications include switchboard mains
and feeders, distribution equipment and branch circuit protection
for large motors.
Class R fuses are commonly used downstream from Class L fuses in a
variety of branch circuit applications. Both time delay and fast
acting versions cover a range of applications including main
feeder, motor, transformer and solenoids. The Company's RK5
INDICATOR fuse series has won numerous product awards and wide
recognition by industrial plant personnel. These fuses have an
integrated blown fuse indicator that turns from clear to dark once
a fuse has blown. This reduces troubleshooting time significantly
and helps improve safety.
Class J fuses are less than half the size of Class R to provide
substantial space savings. Applications for Class J are similar to
Class R. Additional applications include back up protection for
circuit breakers and protection for both IEC and NEMA rated
devices. The Company has also introduced an indicating J line of
fuses with indication functionality like the RK5 INDICATOR fuse.
Class CC fuses, Littelfuse's KLDR (for transformer protection) and
CCMR (for motor branch circuit protection) provide protection
formerly supplied by fuses 10 times larger. Littelfuse was the
first to the market with these products and is the only company
with a CCMR rated up to 60 amps.
Semiconductor fuses, designed for supplementary protection of
semiconducting devices, are used in electronic equipment and power
equipment, such as variable speed drives, power rectifiers, UPS
systems and DC power suppliers.
Midget fuses, in seven different series, provide supplementary
overcurrent protection in such diverse applications as control
circuits, control power transformers, solenoids, street lighting
and computers.
Medium voltage fuses, designed for general and back-up protection,
protect motors, transformers and motor controllers. The medium
voltage fuse line was expanded in 1998 with the purchase of the
product line and assets of a medium voltage fuse manufacturer
allowing for very short delivery times of these products.
Other Products. In addition to the above products, the Company supplies
switches, circuit breakers and indicator lights to the automotive industry and
to appliance and general electronics manufacturers. The Company is also a
supplier of fuse holders (including OMNI-BLOK(R)), fuse blocks (including
Powr-Blok(R) power distribution systems) and fuse clips primarily to customers
that purchase circuit protection devices from the Company.
Product Design and Development
The Company employs scientific, engineering and other personnel to
improve its existing product lines and to develop new products at its research
and engineering facility in Des Plaines, Illinois. The Engineering Department
consists of approximately 60 engineers, chemists, metallurgists, fusologists and
technicians. This department is primarily responsible for the design and
development of new products and consists of eight major groups: two product
design, two materials engineering, one advanced technology development, one
manufacturing engineering automation and two engineering support groups.
Proposals for the development of new products are initiated primarily
by sales and marketing personnel with input from customers. The entire product
development process typically ranges from 6 to 18 months with continuous efforts
to reduce the development cycle. During the fiscal years ended January 2, 1999,
January 3, 1998, and December 28, 1996, the Company expended approximately $8.4
million, $7.9 million and $7.3 million, respectively, on product design and
development.
Patents, Trademarks and Other Intellectual Property
The Company generally relies on patent and trademark laws and license
and nondisclosure agreements to protect its rights in its trade secrets and its
proprietary products. In cases where it is deemed necessary by management, key
employees are required to sign an agreement that they will maintain the
confidentiality of the Company's proprietary information and trade secrets. This
information, which for business reasons, is not disclosed to the public.
As of January 2, 1999, the Company owned 111 patents in North America,
23 patents in the European Economic Community and 29 patents in other foreign
countries. The Company has also registered trademark protection for certain of
its brand names and logos. The 111 North American patents are in the following
categories: 50 Electronic, 7 Resettable, 26 Automotive, 19 Power Fuse and 9
miscellaneous.
The first patent covering the AUTOFUSE(R) or ATO(R) fuse expired on
September 30, 1992. However, the last improvement patent covering the ATO(R)
fuse expires on September 19, 2000. The ATO(R) fuse product is further protected
by trademark and trade dress protection which has a remaining indefinite life so
long as it continues to be correctly used by the Company and its licensees.
New products are continually being developed to replace older products.
The Company regularly applies for patent protection on such new products.
Although in the aggregate the Company's patents are important in the operation
of its businesses, the Company believes that the loss by expiration or otherwise
of any one patent or group of patents would not materially affect its business.
The Company currently licenses its MINI(R) and MAXI(TM) automotive fuse
technology to Bussmann, a division of Cooper Industries and the Company's
largest domestic competitor. The license granted in 1987 is nonexclusive and
grants the Company the right to receive royalties of 4% of the licensee's
revenues from the sale of the licensed products with an annual minimum of
$25,000. Each license expires upon the expiration of the licensed product
patents.
The Company currently licenses its ATO(R) automotive fuse technology to
Pacific Engineering Company, Ltd., a Japanese manufacturer that produces and
distributes the Company's patented automotive fuses to Pacific Rim operations of
Pacific Rim-based automotive manufacturers. The license is exclusive as to Japan
and non-exclusive as to other specified Pacific Rim territories and provides
that the Company will receive royalties of 1.5% of the licensee's revenues from
the sales of the licensed products with a $25,000 annual minimum. This license
expires on August 10, 1999. In addition, a second license covering the MINI(R)
Fuse technology was granted with similar territory arrangements to Pacific
Engineering which provides the Company with royalties of 2.5% of the licensee's
revenues from the sale of the licensed products, with an annual minimum of
$100,000. This second license expires on April 6, 2006.
License royalties amounted to $286,000, $332,000 and $266,000 for 1998,
1997 and 1996, respectively.
<PAGE>
Manufacturing
Much of the Company's manufacturing equipment is custom designed by its
engineers, and the Company conducts the majority of its own fabrication. The
Company stamps most of the metal components used in its fuses, holders and
switches from raw metal stock and makes its own contacts and springs. However,
the Company does depend upon a single source for a substantial portion of its
stamped metal end caps for one family of electronic fuses. The Company believes
that alternative stamping sources are available at prices which would not have a
material adverse effect on the Company. The Company also performs its own
plating (silver, nickel, zinc, tin and oxides). In addition, all thermoplastic
molded component requirements used for such products as the AUTOFUSE(R), MINI(R)
and MAXI(TM) product lines are met through the Company's in-house molding
capabilities.
After components are stamped, molded, plated and readied for assembly,
final assembly is accomplished on fully automatic and semi-automatic assembly
machines. Quality assurance and operations personnel, using techniques such as
Statistical Process Control, perform tests, checks and measurements during the
production process to maintain the highest levels of product quality and
customer satisfaction.
The principal raw materials for the Company's products include copper
and copper alloys, heat resistant plastics, zinc, melamine, glass, silver,
solder, sulphate chipboard and linerboard. The Company depends upon a sole
source for several heat resistant plastics. The Company believes that suitable
alternative heat resistant plastics are available from other sources at prices
which would not have a material adverse effect on the Company. All of the other
raw materials are purchased from a number of readily available outside sources.
A computer-aided design and manufacturing system (CAD/CAM) expedites
product development and machine design, while reliability and high power
laboratories test new products, prototype concepts and production run samples.
The Company participates in "Just-in-Time" delivery programs with many of its
major suppliers and actively promotes the building of strong cooperative
relationships with its suppliers by involving them in pre-engineering product
and process development. The Company also sponsors an annual major supplier
conference and conducts a vendor certification program.
Marketing
The Company's domestic sales staff of approximately 66 people maintains
relations with major OEMs and distributors. The Company's sales and engineering
personnel interact directly with the OEM engineers to ensure maximum circuit
protection and reliability within the parameters of the OEM design.
Internationally, the Company maintains a sales staff of approximately 30 people
and sales offices in The Netherlands, England, Singapore, Korea and China. The
Company also markets its products indirectly through a worldwide organization of
approximately 125 manufacturers' representatives and distributes through an
extensive network of electronic, automotive and electrical distributors.
Electronic. The Company has retained 23 manufacturers' representatives
to sell its electronic products domestically and additional representatives to
sell its electronic products internationally. These representatives call on
major OEMs and distributors. The Company distributes approximately 41% of its
domestic products directly to OEMs, with the remainder distributed by more than
800 distributors nationwide.
In the Asia-Pacific region, the Company maintains a direct sales staff
of five people in Singapore, one in Hong Kong, seven in Korea, and one or more
manufacturers' representatives in Japan, Singapore, Korea, Hong Kong, Taiwan,
China, Malaysia, Thailand, Philippines and Australia. The Company also maintains
an engineering facility in Japan. In Europe, the Company's distribution methods
differ from its domestic methods in that it maintains a direct sales force of 17
people to call on OEMs exclusively and utilizes approximately 15 manufacturers'
representatives to approach distributors and smaller OEMs. Unlike its domestic
representatives, these manufacturers' representatives purchase inventory from
the Company to facilitate delivery and reduce financial risks associated with
currency exchange rate fluctuations.
Automotive. The Company sells automotive fuses through a direct sales
force in Detroit consisting of four employees. Salespersons service all the
major automotive OEMs (including the United States manufacturing operations of
foreign-based OEMs) through both the engineering and purchasing departments of
these companies. Twenty-two manufacturers' representatives distribute the
Company's products to aftermarket fuse retailers such as Autozone, Pep Boys,
K-Mart and NAPA. In Europe, the Company uses both a direct sales force and
manufacturers' representatives to distribute its products to Mercedes Benz, BMW,
Volvo, Saab, Jaguar and other OEMs, as well as aftermarket distributors. In the
Asia-Pacific region, the Company has licensed its automotive fuse technology to
a Japanese firm which supplies the majority of the automotive fuses to the
Japanese manufacturing operations in the region including Toyota, Honda and
Nissan.
Power. The Company markets and sells its power fuses through 36
manufacturers' representatives across North America. These representatives sell
power fuse products through an electrical distribution network comprised of
approximately 1,200 distributors. These distributors have customers that include
electrical contractors, municipalities, utilities and factories (including both
MRO and OEM). Some of the manufacturers' representatives have consigned
inventory in order to facilitate rapid customer delivery.
The Company's field sales force (including application engineers) and
manufacturers' representatives call on both distributors and end-users
(consulting engineers, municipalities, utilities and OEMs) in an effort to
educate these customers on the capabilities and characteristics of the Company's
products.
Business Segment Information
The Company has three reportable business segments: The Americas, Europe and
Asia-Pacific. For information with respect to the Company's operations in its
three geographic areas for the fiscal year ended January 2, 1999, see "Item 8.
Financial Statements and Supplementary Data - Business Segment Information"
incorporated herein by reference.
<PAGE>
Customers
The Company sells to over 10,000 customers worldwide. No single
customer accounted for more than 10% of net sales during the last three years
except for its Japanese stocking representative which accounted for 10.2% in
1998. The Japanese stocking representative serves over 100 customers in the Asia
Pacific electronic market. During the 1998, 1997 and 1996 fiscal years, net
sales to customers outside the United States (exports and foreign operations)
accounted for approximately 43.0%, 40.6% and 38.5%, respectively, of the
Company's total net sales.
Competition
The Company's products compete with similar products of other
manufacturers, many of which have substantially greater financial resources than
the Company. In the electronic fuse market, the Company's competitors are
Bussmann, a division of Cooper Industries, Bel Fuse, Inc., Raychem Corp., San-O
Industrial Corp. and Wickmann-Werke GmbH. In the fuseholder portion of this
market, the Company's principal competitor is Schurter, Inc. In the automotive
fuse market, the Company's major competitor, both in sales to automobile
manufacturers and in the aftermarket, is Bussmann. The Company licenses several
of its automotive fuse designs to Bussmann. Other auto fuse competitors include
Pudenz and MTA. In the power fuse market, the Company's major competitors
include Bussmann, Gould, Inc and Ferraz. The Company believes that it competes
primarily on the basis of innovative products, the breadth of available product
lines, the quality and design of its products and the responsiveness of its
customer service rather than through price competition.
Backlog
The Company does not consider backlog to be a predictive measure of
results due to the Company's short delivery time. The Company manufactures high
volume products based on its demand forecasts and manufactures low volume
products based on customer orders. The Company attempts to ship such products to
the customer within five business days of the date of the order. Over 90% of all
orders, which request delivery within three weeks of the date of the order, are
filled on time from available stock or current production.
Employees
During 1998, the Company employed approximately 3,085 persons.
Approximately 50 employees in Des Plaines and 450 employees in Mexico are
covered by collective bargaining agreements. The Des Plaines agreement expires
March 31, 1999 and the Mexico agreement expires January 31, 2001. The Company
has not experienced any work stoppage or other form of labor dispute within the
last 20 years. The Company believes that its employee relations are excellent
and that its employees, many of whom have long experience with the Company,
represent a valuable resource. The Company emphasizes employee training and
development and has established Quality Improvement Process (QIP) training for
its employees worldwide so as to promote product quality and customer
satisfaction.
<PAGE>
Year 2000
For information relating to year 2000 see "Item 7. Management's Discussion and
Analysis of Financial Conditions and Results of Operations - Year 2000"
incorporated herein by reference.
Environmental Regulation
The Company is subject to numerous federal, state and local regulations
relating to air and water quality, the disposal of hazardous waste materials,
safety and health. Compliance with applicable environmental regulations has not
significantly changed the Company's competitive position, capital spending or
earnings in the past and the Company does not presently anticipate that
compliance with such regulations will change its competitive position, capital
spending or earnings for the foreseeable future. The Company employs an
environmental engineer to monitor regulatory matters and believes that it is
currently in compliance in all material respects with applicable environmental
laws and regulations.
ITEM 2. PROPERTIES
Littelfuse Facilities
The Company's operations are located in 19 owned or leased facilities
worldwide, containing approximately 708,000 square feet. The U.S. headquarters
and principal fabrication and distribution facility is located in Des Plaines,
Illinois, supported by three additional plants in Illinois and one in Mexico.
European headquarters and the primary European distribution center is in
Utrecht, The Netherlands, with manufacturing plants in the United Kingdom and
Switzerland. Asia Pacific operations include a distribution center located in
Singapore, with manufacturing plants in Korea, China and the Philippines. The
Company does not believe that it will encounter any difficulty in renewing its
existing leases upon the expiration of their current terms. Management believes
that the Company's facilities are adequate to meet its requirements for the
foreseeable future.
The following table provides certain information concerning the
Company's facilities:
<TABLE>
Lease
Expir-
Size Lease/ Ation Industry
<S> <C> <C> <C> <C> <C>
Location Use (sq.ft.) Own Date Focus
Des Plaines, Illinois Administrative, 340,000 Owned -- Auto, Electronic, Power
Engineering,
Manufacturing,
Testing and Research
Centralia, Illinois Manufacturing 45,200 Owned -- Electronic
Arcola, Illinois Manufacturing 36,000 Owned -- Power
Watseka, Illinois Manufacturing 26,000 Leased(1) 1999 Auto, Electronic
Watseka, Illinois Storage 5,000 Owned -- Other
Farmington Hills, Michigan Administrative 1,562 Leased 2001 Auto
Piedras Negras, Mexico Manufacturing 59,838 Leased 2000 Auto, Electronic, Power
Piedras Negras, Mexico Manufacturing 12,590 Leased 2000 Electronic and Power
Washington, Manufacturing, 60,000 Owned -- Electronic, Auto, Other
England Sales and
Distribution
Utrecht, The Netherlands Warehousing 8,680 Leased 1999 Auto, Electronic, Other
Utrecht, The Netherlands Sales, 12,000 Owned -- Auto, Electronic, Other
Administrative and
Engineering
Grenchen, Switzerland Manufacturing 11,000 Owned -- Auto
Singapore Sales and 7,836 Leased 1999 Electronic
Distribution
Seoul, Korea Sales and 29,175 Owned -- Electronic
Manufacturing
Philippines Manufacturing 10,200 Leased 1999 Electronic
Suzhou, China Manufacturing 40,000 Owned -- Electronic
Hong Kong, China Sales 200 Leased 2000 Electronic
Yokohama, Japan Engineering 1,815 Leased 1999 Electronic
Sao Paulo, Brazil Sales and
Distribution 1,200 Leased 1999 Electronic, Auto
<FN>
(1)...........The lease of the manufacturing facility in Watseka, Illinois,
provides that the Company may purchase the leased facility upon certain
terms and conditions.
</FN>
</TABLE>
ITEM 3. Legal Proceedings
The Company is not a party to any legal proceedings which it believes
will have a material adverse effect upon the conduct of its business or its
financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the Company's stockholders during
the fourth quarter of fiscal 1998.
Executive Officers of Registrant
<TABLE>
The executive officers of the Company are as follows:
Name Age Position
<S> <C> <C>
Howard B. Witt 58 Chairman of the Board, President
and Chief Executive Officer
Kenneth R. Audino 55 Vice President, Organizational Development
and Total Quality Management
William S. Barron 56 Vice President, Marketing and
Sales
Philip G. Franklin 47 Vice President, Treasurer
and Chief Financial Officer
David J. Krueger 61 Vice President, Engineering
Lloyd J. Turner 55 Vice President, Operations
Hans Ouwehand 52 Vice President, European
Operations
Mary S. Muchoney 53 Secretary
</TABLE>
Officers of Littelfuse are elected by the Board of Directors and serve at the
discretion of the Board.
Howard B. Witt was elected as the Chairman of the Board of the Company
in May, 1993. He was promoted to President and Chief Executive Officer of the
predecessor company of the Company ("Old Littelfuse") in February, 1990. Prior
to his appointment as President and Chief Executive Officer, Mr. Witt served in
several other key management positions with Old Littelfuse, including Operations
Manager from March 1979 to January 1986, Vice President-Manufacturing Operations
from January 1986 to January 1988, and Executive Vice President with full
operating responsibilities for all U.S. activities from January 1988 to February
1990. Prior to joining Old Littelfuse, Mr. Witt was a division president of
Keene Corporation from 1974 to 1979. Mr. Witt currently serves as a member of
the Board of Directors of Franklin Electric Co., Inc. and Material Sciences
Corporation and is a member of the Electronic Industries Association Board of
Governors. He is also a director of the Artisan Mutual Fund.
Kenneth R. Audino, Vice President, Organizational Development and Total
Quality management, He is responsible for the Company's overall quality,
reliability and environmental compliance, quality systems, human resources and
training efforts. Mr. Audino joined Old Littelfuse as a Control Technician in
1964. From 1964 to 1977, he progressed through several quality and reliability
positions to Manager of Reliability and Standards. In 1983, he became Managing
Director of the European Headquarters of Old Littelfuse and later was named
Corporate Director of Quality Assurance and Reliability. He was promoted to his
current position in 1998.
William S. Barron, Vice President, Sales and Marketing, has responsibility
for the general direction of all sales, marketing and related support functions.
He also is responsible for the Information Services Department. Mr. Barron
joined Old Littelfuse in March 1991. From August 1981 to March 1991, Mr. Barron
served as Director of Sales and Marketing of Cinch Manufacturing and the General
Manager of one of its domestic divisions. Cinch Manufacturing is a subsidiary of
Labinal Corporation.
Philip G. Franklin, Vice President, Treasurer and Chief Financial
Officer, has responsibility for the treasury, financial control, financial
reporting and information systems functions of the Company. Mr. Franklin joined
the Company in January 1999 from OmniQuip International, a $450 million
construction equipment manufacturer which he helped take public. .
David J. Krueger, Vice President, Engineering, directs all product
feasibility, design, development and testing activities. Joining Old Littelfuse
as an Industrial Fuse Engineering Manager in 1982, he was named Manager of
Circuit Protection Devices in 1984, promoted to Director of Engineering in
January 1986 and promoted to his current position one year later. Prior to
joining Old Littelfuse, Mr. Krueger worked for 15 years as an Engineering
Manager for the Economy Fuse Division of Federal Electric, and for six years as
a Plant Manager for Federal Pacific Reliance Electric.
Lloyd J. Turner, Vice President, Operations, has responsibility for
manufacturing operations and related support functions. Mr. Turner joined Old
Littelfuse in October 1988, as Director of Manufacturing Operations after having
served as an Operations Manager with Texas Instruments from November 1984 to
September 1988. He was promoted to his current position in 1991.
Hans Ouwehand, Vice President, European Operations, has complete
responsibility for all sales, marketing, research and development, and
manufacturing activities covering the entire range of electronic, automotive and
aftermarket products sold by the Company in Europe. Mr. Ouwehand joined Old
Littelfuse in 1984 as Sales Manager, Europe, Electronics Division. He was later
promoted to the position of European Sales and Marketing Manager for all
Littelfuse products and in 1986 to the position of General Manager-European
Operations. Prior to joining Old Littelfuse, his industrial background included
research and development work with Sperry Rand and sales and product management
with Lameris Medical Instruments.
Mary S. Muchoney has served as Corporate Secretary since 1991, after
joining Old Littelfuse in 1977. She is responsible for providing all secretarial
and administrative functions for the President and Littelfuse Board of
Directors. Ms. Muchoney is a member of the American Society of Corporate
Secretaries.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters The information set forth under "Quarterly Stock Price" on page 38 of
the Annual Report to Stockholders is incorporated herein by reference. It is
also included in Exhibit 13.1 as filed with the SEC. As of March 12, 1999, there
were 295 holders of record of the Company's Common Stock and in excess of 2,700
beneficial holders of its Common Stock.
Since September 22, 1992, shares of the Common Stock have been traded
in the over-the-counter market and quotations are reported using the symbol
"LFUS" on The Nasdaq Stock Market.
The Company has not paid any cash dividends in its history. Future
dividend policy will be determined by the Board of Directors based upon their
evaluation of earnings, cash availability and general business prospects.
Currently, there are restrictions on the payment of dividends contained in the
Company's bank credit agreement which relate to the maintenance of certain
restricted payment ratios.
ITEM 6. Selected Financial Data
The information set forth under "Selected Financial Data - Five Year
Summary" on page 38 of the Annual Report to Stockholders is incorporated herein
by reference. It is also included in Exhibit 13.1 as filed with the SEC.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information set forth under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 16 through 20 of the
Annual Report to Stockholders is incorporated herein by reference. It is also
included in Exhibit 13.1 as filed with the SEC.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risks
The Company is exposed to market risk from changes in interest rates, foreign
exchange rates and commodities.
The Company had long-term debt outstanding at January 2, 1999 in the form of
Senior Notes and lines of credit at both variable and fixed interest rates.
Since substantially all of the debt has fixed interest rates, the Company's
interest expense is not sensitive to changes in interest rate levels.
A portion of the Company's operations consists of manufacturing and sales
activities in foreign countries. The Company has manufacturing facilities in
Mexico, England, Switzerland, South Korea, China and the Philippines. During
1998, sales exported from the United States or manufactured abroad accounted for
43.0% percent of total sales. Substantially all sales in Europe are denominated
in Dutch Guilders, British Pound Sterling and Euros and substantially all sales
in the Asia-Pacific region are denominated in United States Dollars and South
Korean Won.
The Company's identifiable foreign exchange exposures result from the purchase
and sale of products from affiliates, repayment of intercompany trade and loan
amounts and translation of local currency amounts in consolidation of financial
results. Changes in foreign currency exchange rates or weak economic conditions
in the foreign countries in which it manufactures and distributes products could
affect the Company's sales and financial results. Other than utilizing netting
and offsetting intercompany account management techniques to reduce known
exposures, the Company does not use derivative financial instruments to mitigate
its foreign currency risk at the present time.
The Company uses various metals in the production of its products, including
zinc, copper and silver. The Company's earnings are exposed to fluctuations in
the prices of these commodities. The Company does not currently use derivative
financial instruments to mitigate this commodity price risk.
ITEM 8. Financial Statements and Supplementary Data
The Report of Independent Auditors and the Consolidated Financial
Statements and notes thereto of the Company set forth on pages 27 through 34 of
the Annual Report to Stockholders are incorporated herein by reference. They are
also included in Exhibit 13.1 as filed with the SEC.
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
The information set forth under "Election of Directors" in the Proxy
Statement is incorporated herein by reference. The information set forth under
"Executive Officers of the Registrant" in Part I of this Report is incorporated
herein by reference.
ITEM 11. Executive Compensation
The information set forth under "Compensation of Executive Officers" in
the Proxy Statement is incorporated herein by reference, except for the sections
captioned "Reports of the Compensation Committee on Executive Compensation" and
"Company Performance."
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under "Ownership of Littelfuse, Inc. Common
Stock" in the Proxy Statement is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
The information set forth under "Certain Relationships and Related
Transactions" in the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
(1) Financial Statements. The following financial
statements included in the Annual Report to
Stockholders are incorporated herein by reference.
(i) Report of Independent Auditors (page 34)
(ii) Consolidated Statements of Financial Condition
as of January 2, 1999 and January 3, 1998
(pages 22 and 23).
(iii) Consolidated Statements of Income for the years
ended January 2, 1999, January 3, 1998 and
December 28, 1996 (page 24).
(iv) Consolidated Statements of Cash Flows for the
years ended January 2, 1999, January 3, 1998
and December 28, 1996 (page 25).
(v) Consolidated Statements of Shareholders' Equity
for the years ended January 2, 1999, January 3,
1998 and December 28, 1996.
(page 26).
(vi) Notes to Consolidated Financial Statements
(pages 27-33).
(2) Financial Statement Schedules. The following financial
statement schedules are submitted herewith for the periods
indicated therein.
(I) Schedule II-Valuation and Qualifying Accounts and
Reserves
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been
omitted.
(3) Exhibits
See Exhibit Index on pages 22-24, incorporated herein by
reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the fourth
quarter of 1998.
<PAGE>
<TABLE>
LITTELFUSE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In Thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Description Of Year Expenses (A) Year
---------- ---------- ---------- -------
Year ended January 2, 1999
Allowance for losses on
<S> <C> <C> <C> <C>
accounts receivable . . . . . . $ 1,118 $ 626 $ 641 $ 1,103
======= ======= ======= =======
Reserves for sales discounts
and allowances . . . . . . . . $ 4,781 $ 1 $ -- $ 4,782
======= ======== ========= =======
Year ended January 3, 1998
Allowance for losses on
accounts receivable . . . . . . $ 896 $ 410 $ 188 $ 1,118
======== ======= ======= =======
Reserves for sales discounts
and allowances . . . . . . . . $ 4,161 $ 620 $ -- $ 4,781
======= ====== ========= =======
Year ended December 28, 1996
Allowance for losses on
accounts receivable . . . . . $ 863 $ 236 $ 203 $ 896
========= ======= ======= ========
Reserves for sales discounts
and allowances . . . . . . . $ 3,038 $ 1,123 $ -- $ 4,161
======== ======= ========= ========
(A) Write-off of uncollectible accounts, net of recoveries and foreign currency
translation.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Littelfuse, Inc.
By /s/ Howard B. Witt
Howard B. Witt, Chairman, President
and Chief Executive Officer
Date: March 18, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
/s/ Howard B. Witt Chairman of the Board, President
Howard B. Witt and Chief Executive Officer
/s/ John P. Driscoll Director
John P. Driscoll
/s/ Anthony Grillo Director
Anthony Grillo
/s/ Bruce A. Karsh Director
Bruce A. Karsh
/s/ John E. Major Director
John E. Major
/s/ John J. Nevin Director
John J. Nevin
/s/ Philip G. Franklin Vice President, Treasurer
Philip G. Franklin and Chief Financial Officer
(Principal Financial Officer)
</TABLE>
<PAGE>
<TABLE>
LITTELFUSE INC.
INDEX TO EXHIBITS
Sequentialc)
Page Number
<S> <C> <C>
Number Description of Exhibit a)
2.1 Plan of Reorganization under Chapter 11 of the Bankruptcy Code of
Old Littelfuse.
3.1 Certificate of Incorporation (as amended to date).
3.1A Certificate of Designations of Series A Preferred Stock (filed as
Exhibit 4.2 to the Company's Current Report on Form 8-K dated
December 1, 1995 (1934 Act File No. 0-20388) and incorporated herein
by reference.)
3.2 Bylaws
b)4.1 Second amended restated bank credit agreement among Littelfuse, Inc.,
as borrower, the lenders named therein and the First National Bank of
Chicago, as agent, dated as of September 1, 1998.
4.2 Registration Rights Agreement, dated as of December 27, 1991, between
Littelfuse, Inc. and The Toronto-Dominion Bank Trust Company, as
agent.
4.3 Warrant Agreement, dated as of December 27, 1991, between Littelfuse,
Inc., and LaSalle National Trust, N.A., as warrant agent, together
with form of Warrant. (filed as exhibit 4.3A to the Company's Form
10-Q for the quarterly period ended June 28, 1997 (1934 Act File No.
-20388) and incorporated herein by reference), as amended.
4.4 Stock Plan for Employees and Directors of Littelfuse, Inc. d)
4.5 Form of Stock Option Agreement
4.6 Specimen Common Stock certificate.
4.7 Littelfuse, Inc. Retirement Plan dated January 1, 1992, as amended and restated.d)
<FN>
____________
a) All of the exhibits, (except those filed herewith or specifically noted as
being incorporated by reference from a different filing under the
Securities as of 1933 or Securities act of 1934) were filed as exhibits to
the Company's Form 10 as filed with the Securities and Exchange Commission
which became effective on September 16, 1992 (1934 Act File No. 0-20388)
and are incorporated herein by reference.
b) Filed herewith.
c) This information appears only in the manually signed copy of the report.
d) Indicates an employee benefit plan, management contract or compensatory
plan or arrangement in which a named executive officer participates.
</FN>
</TABLE>
<PAGE>
<TABLE>
Sequentialc)
Page Number
Description of Exhibit a)
<S> <C> <C>
Number
4.8 Littelfuse, Inc. 401(k) Savings Plan.d)
4.9 Note Purchase Agreement, dated as of August 31, 1993, relating to
$45,000,000 principal amount of Littelfuse, Inc. 6.31% Senior Notes due
August 31, 2000.
4.10 Littelfuse Rights Plan Agreement, dated as of December 15, 1995, between
Littelfuse, Inc. and LaSalle National Bank, as Rights Agent, together with
Exhibits thereto, as amended.
b)4.11 Note Purchase Agreement dated as of September 1, 1998, relating to
$60,000,000 principal amount of Littelfuse, Inc. 6.16% Senior Notes due
September 1, 2005.
10.1 Lease Agreement (with option to purchase), dated December 27, 1991, between
Littelfuse, Inc. and Westmark Systems, Inc.
10.3 Patent License Agreement, dated as of July 28, 1995, between Littelfuse,
Inc. and Pacific Engineering Company, Ltd.(filed as exhibit 10.3 to the
Company's Form 10K for the year ended December 28, 1996)
10.4 MINI(R) and MAXITM License Agreement, dated as of June 21, 1989, between
Littelfuse, Inc. and Cooper Industries, Inc.
10.5 Patent License Agreement, dated as of January 1, 1987, between Littelfuse,
Inc. and Cooper Industries, Inc.
10.6 1993 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended
d)
10.7 Littelfuse, Inc. Supplemental Executive Retirement Plan.d)
b)10.8 Littelfuse Deferred Compensation Plan for Non-employee Directors, as
amended.d)
</TABLE>
<PAGE>
<TABLE>
Sequentialc)
Page Number
<S> <C> <C>
Number Description of Exhibit a)
10.9 Littelfuse Executive Loan Program (filed as Exhibit 10.2 to the Company's
Form 10Q for the quarterly period ended June 30, 1995 (1934 Act File No.
0-20388) and incorporated herein by reference.)d)
10.10 Employment Agreement dated as of September 1, 1996 between Littelfuse,
Inc. and Howard B. Witt. d)
10.11 Change of Control Employment Agreement dated as of September 1, 1996
between Littelfuse, Inc. and Howard B. Witt. d)
10.12 Form of change of Control Employment Agreement dated as of September 1,
1996 between Littelfuse, Inc. and Messrs. Anderson, Audino, Barron, Krueger
and Turner. d)
b)10.13 Form of change of Control Employment Agreement dated as of January 4,
1999 between Littelfuse, Inc. and Mr. Franklin. d)
b)13.1 Portions of Littelfuse Annual Report to Stockholders for the fiscal
year ended January 2, 1999.
b)22.1 Subsidiaries.
b)23.1 Consent of Independent Auditors.
</TABLE>
<PAGE>
Exhibit 22.1
SUBSIDIARIES
Littelfuse, S.A. de C.V.
Littelfuse FSC
Littelfuse Do Brazil
Littelfuse, B.V.
Littelfuse, A.G.
Littelfuse Limited
Littelfuse Far East Pte Ltd.
Littelfuse HK Limited
Littelfuse Holdings Pte Ltd.
Suzhou Littelfuse OVS Ltd.
Littelfuse KK
Littelfuse Triad Inc.
Littelfuse Phils Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889331
<NAME> Littelfuse, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jan-02-1999
<PERIOD-START> Jan-04-1998
<PERIOD-END> Jan-02-1999
<EXCHANGE-RATE> 1
<CASH> 27,961
<SECURITIES> 0
<RECEIVABLES> 41,382
<ALLOWANCES> 5,885
<INVENTORY> 36,209
<CURRENT-ASSETS> 111,098
<PP&E> 163,571
<DEPRECIATION> 85,783
<TOTAL-ASSETS> 250,544
<CURRENT-LIABILITIES> 51,967
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 250,544
<SALES> 269,540
<TOTAL-REVENUES> 269,540
<CGS> 169,341
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,989
<INCOME-PRETAX> 30,009
<INCOME-TAX> 10,124
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,885
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.86
</TABLE>
Exhibit 4.1
EXECUTION COPY
$55,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
LITTELFUSE, INC.,
as Borrower,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
September 1, 1998
ARRANGED BY
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
iii
-1-
TABLE OF CONTENTS
<TABLE>
ARTICLE I
DEFINITIONS 1
ARTICLE II
<S> <C>
THE CREDITS 15
2.1 Commitment 15
2.2 Determination of Dollar Amounts; Required Payments; Termination 15
---------------------------------------------------------------
2.3 Ratable Loans 16
-------------
2.4 Types of Advances 16
2.5 Commitment and Utilization Fees; Reductions in Aggregate Commitment 16
2.6 Minimum Amount of Each Advance 17
2.7 Optional Principal Payments 17
2.8 Method of Selecting Types and Interest Periods for New Advances 17
2.9 Conversion and Continuation of Outstanding Advances 18
2.10 Swing Line Advances 19
-------------------
2.11 Method of Borrowing 21
-------------------
2.12 Changes in Interest Rate 21
------------------------
2.13 Rates Applicable After Default 22
------------------------------
2.14 Method of Payment 22
-----------------
2.15 European Economic and Monetary Union 23
------------------------------------
2.15.1. Advances After the Euro Implementation Date 23
-------------------------------------------
2.15.2 Rounding and Other Consequential Changes 23
----------------------------------------
2.16 Noteless Agreement; Evidence of Indebtedness 23
--------------------------------------------
2.17 Telephonic Notices 24
------------------
2.18 Interest Payment Dates; Interest and Fee Basis 24
----------------------------------------------
2.19 Notification of Advances, Interest Rates, Prepayments and
Revolving Credit Commitment Reductions 25
2.20 Lending Installations 25
2.21 Non-Receipt of Funds by the Agent 25
2.22 Market Disruption 25
2.23 Judgment Currency 26
2.24 Taxes 26
2.25 Agent's Fees 28
ARTICLE III
CHANGE IN CIRCUMSTANCES 28
3.1 Yield Protection 28
3.2 Changes in Capital Adequacy Regulations 30
---------------------------------------
3.3 Availability of Types of Advances 30
---------------------------------
3.4 Funding Indemnification 30
-----------------------
<PAGE>
-1-
3.5 Lender Statements; Survival of Indemnity 31
ARTICLE IV
CONDITIONS PRECEDENT 31
4.1 Amendment and Restatement 31
4.2 Each Future Advance 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES 33
------------------------------
5.1 Corporate Existence and Standing 33
--------------------------------
5.2 Authorization and Validity 33
--------------------------
5.3 Compliance with Laws and Contracts 34
----------------------------------
5.4 Governmental Consents 34
---------------------
5.5 Financial Statements 34
--------------------
5.6 Material Adverse Change 35
-----------------------
5.7 Taxes 35
5.8 Litigation and Contingent Obligations 35
5.9 Capitalization 35
5.10 ERISA 36
5.11 Defaults 36
5.12 Federal Reserve Regulations 36
5.13 Investment Company 36
5.14 Certain Fees 36
------------
5.15 Solvency 36
--------
5.16 Ownership of Properties 37
-----------------------
5.17 Indebtedness 37
------------
5.18 Employee Controversies 37
----------------------
5.19 Material Agreements 37
-------------------
5.20 Hazardous Materials 37
-------------------
5.21 Year 2000 38
---------
5.22 Insurance 38
---------
5.23 Disclosure 38
----------
5.24 Contracts 39
---------
ARTICLE VI
COVENANTS 39
6.1 Financial Reporting 39
-------------------
6.2 Use of Proceeds 41
---------------
6.3 Notice of Default 41
-----------------
6.4 Conduct of Business 41
-------------------
6.5 Taxes 41
-----
6.6 Insurance 41
---------
6.7 Compliance with Laws 42
--------------------
6.8 Maintenance of Properties 42
<PAGE>
-1-
6.9 Inspection 42
6.10 Capital Stock and Dividends 42
6.11 Indebtedness 42
------------
6.12 Merger 43
------
6.13 Sale of Assets 43
--------------
6.14 Sale and Leaseback 43
------------------
6.15 Investments and Purchases 44
6.16 Contingent Obligations 44
6.17 Liens 45
-----
6.18 Capital Expenditures 45
--------------------
6.19 Lease Rentals 46
-------------
6.20 Year 2000 46
---------
6.21 Letters of Credit 46
-----------------
6.22 Affiliates 46
----------
6.23 Amendments to Agreements 46
------------------------
6.24 Environmental Matters 46
---------------------
6.25 Agreements as to Prohibited Acts 47
--------------------------------
6.26 Change in Corporate Structure; Fiscal Year 47
6.27 Inconsistent Agreements 47
6.28 Financial Covenants. 47
6.28.1 Interest Expense Coverage Ratio 47
6.28.2. Debt Ratio 47
6.28.3. Minimum Net Worth. 47
ARTICLE VII
DEFAULTS 48
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 50
8.1 Acceleration 50
8.2 Amendments 50
8.3 Preservation of Rights 51
ARTICLE IX
GENERAL PROVISIONS 51
9.1 Survival of Representations 51
9.2 Governmental Regulation 51
9.3 Taxes 51
-----
9.4 Headings 51
--------
9.5 Entire Agreement 51
----------------
9.6 Several Obligations; Benefits of this Agreement 51
9.7 Expenses; Indemnification 52
9.8 Numbers of Documents 53
9.9 Accounting 53
<PAGE>
-1-
9.10 Severability of Provisions 53
9.11 Nonliability of Lenders 53
9.12 CHOICE OF LAW 54
-------------
9.13 CONSENT TO JURISDICTION 54
-----------------------
9.14 WAIVER OF JURY TRIAL 54
--------------------
9.15 Disclosure 54
----------
9.16 Counterparts 55
------------
9.17 Departing Lenders 55
ARTICLE X
THE AGENT 55
10.1 Appointment 55
10.2 Powers 55
10.3 General Immunity 55
10.4 No Responsibility for Loans, Recitals, etc. 56
-------------------------------------------
10.5 Action on Instructions of Lenders 56
---------------------------------
10.6 Employment of Agents and Counsel 56
--------------------------------
10.7 Reliance on Documents; Counsel 56
------------------------------
10.8 Agent's Reimbursement and Indemnification 56
-----------------------------------------
10.9 Rights as a Lender 57
10.10 Lender Credit Decision 57
10.11 Successor Agent 57
10.12 Notice of Default 57
10.13 Delegation to Affiliates 58
ARTICLE XI
SETOFF; RATABLE PAYMENTS 58
11.1 Setoff 58
11.2 Ratable Payments 58
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 59
12.1 Successors and Assigns 59
12.2 Participations 59
12.2.1. Permitted Participants; Effect 59
12.2.2. Voting Rights 59
12.2.3. Benefit of Setoff 60
12.3 Assignments 60
12.3.1. Permitted Assignments 60
12.3.2. Effect; Effective Date 60
12.4 Dissemination of Information 60
12.5 Tax Treatment 61
<PAGE>
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ARTICLE XIII
NOTICES 61
13.1 Giving Notice 61
13.2 Change of Address 61
</TABLE>
<PAGE>
EXHIBITS
Exhibit A - Revolving Credit Note
Exhibit B - Swing Line Note
Exhibit C - Compliance Certificate
Exhibit D - Assignment Agreement
SCHEDULES
Schedule 1.1 - Eurocurrency Payment Offices of the Agent
Schedule 1.2 - Lending Installations
Schedule 5.3 - Approvals and Consents
Schedule 5.8 - Litigation and Material Contingent Obligations
Schedule 5.9 - Capitalization
Schedule 5.10 - ERISA
Schedule 5.14 - Brokers' Fees
Schedule 5.16 - Properties
Schedule 5.17 - Indebtedness
Schedule 5.20 - Environmental
Schedule 5.22 - Insurance
Schedule 6.11 - 1998 Senior Note Terms
Schedule 6.15 - Investments
Schedule 6.17 - Liens
<PAGE>
68
-1-
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of September 1,
1998, is among LITTELFUSE, INC., a Delaware corporation, as Borrower, the
Lenders and THE FIRST NATIONAL BANK OF CHICAGO, individually and as Agent.
W I T N E S S E T H:
WHEREAS, the Borrower has previously entered into that certain Credit
Agreement dated as of August 31, 1993 among the Borrower, the lenders named
therein and The First National Bank of Chicago, as Agent (as amended through but
not including April 26, 1996, the "Original Credit Agreement"), pursuant to
which the lenders thereunder made a term loan and extended a revolving credit
facility to the Borrower;
WHEREAS, the Borrower has previously repaid the term loan to the Lenders;
WHEREAS, the Borrower has previously entered into that certain Amended
and Restated Credit Agreement dated as of April 26, 1996 among the Borrower, the
lenders named therein and The First National Bank of Chicago as Agent (as
amended through but not including the date hereof, the "Existing Credit
Agreement"), pursuant to which the lenders thereunder increased the revolving
credit facility to $65,000,000 and made certain other amendments to the Original
Credit Agreement; and
WHEREAS, the Borrower, the Lenders and the Agent wish to
decrease the revolving credit facility to $55,000,000 and make certain other
amendments to the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements made herein, the Borrower, the Agent and the Lenders hereby agree,
subject to the fulfilment of the conditions precedent set forth in Section 4.1,
that the Existing Credit Agreement is hereby amended and restated in its
entirety as follows:
<PAGE>
-1-
1 ARTICLE DEFINITIONS
As used in this Agreement:
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made on the same Borrowing Date by the Lenders (or,
in the case of a Swing Line Advance, by the Swing Line Bank) to the Borrower (a)
of the same Type and (b) in the case of Eurocurrency Advances, denominated in
the same Agreed Currency and for the same Interest Period, made by the Lenders
on the same Borrowing Date.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise, other than solely
through such Person's duties as an officer of the controlled Person.
"Agent" means First Chicago in its capacity as contractual
representative of the Lenders pursuant to Article X, and not in its individual
capacity as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders hereunder.
"Agreed Currencies" means (a) Dollars, (b) so long as such currencies
remain Eligible Currencies, British Pounds Sterling, German Deutsche Marks,
Dutch Guilders, French Francs, Swiss Francs, Japanese Yen, and, from and after
becoming generally available in the international currency and exchange markets,
the Euro and (c) any other Eligible Currency which the Borrower requests the
Agent to include as an Agreed Currency hereunder and which is acceptable to all
of the Lenders. For the purposes of this definition, each of the specific
currencies referred to in clause (b), above, shall mean and be deemed to refer
to the lawful currency of the jurisdiction referred to in connection with such
currency, e.g., "Swiss Francs" means the lawful currency of Switzerland. The
Agent shall promptly notify each Lender of each such request for inclusion of
any currency described in the immediately preceding clause (c) as an Agreed
Currency and each Lender shall be deemed to have agreed to each such request if
its objection thereto has not been received by the Agent within five (5)
Business Days from the date of such notification by the Agent to such Lender.
"Agreement" means this Credit Agreement, as it may be amended, modified
or restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5.
"Air Regulations" is defined in Section 5.20.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day and (b) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Commitment Fee Rate" means, at any time, the percentage
rate per annum at which commitment fees are accruing on the unused portion of
the Aggregate Commitment at such time as set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"Approximate Equivalent Amount" of any currency with respect to any
amount of Dollars shall mean the Equivalent Amount of such currency with respect
to such amount of Dollars on or as of such date, rounded up to the nearest
smallest denomination of such currency as determined by the Agent from time to
time.
"Arranger" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the Chief Executive Officer, Chief
Financial Officer or Controller of the Borrower, acting singly.
"Bankruptcy Code" means Title 11, United States Code, sections 1 et
seq., as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means Littelfuse, Inc., a Delaware corporation, and its
successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurocurrency Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York, for the conduct of
substantially all of their commercial lending activities and on which dealings
in Dollars and the other Agreed Currencies are carried on in the London
interbank market (and, if the Advances which are the subject of such borrowing,
payment or rate selection are denominated in Euro, a day upon which such
clearing system as is determined by the Agent to be suitable for clearing or
settlement of the Euro is open for business), and (b) for all other purposes, a
day (other than a Saturday or Sunday) on which banks generally are open in
Chicago for the conduct of substantially all of their commercial lending
activities.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition for value of any asset which would be
classified as a fixed or capital asset on a consolidated balance sheet of the
Borrower and its Subsidiaries prepared in accordance with Agreement Accounting
Principles excluding (a) the cost of assets acquired under Capitalized Lease
Obligations, (b) expenditures of insurance proceeds to rebuild or replace any
asset after a casualty loss, and (c) leasehold improvement expenditures for
which the Borrower or a Subsidiary is reimbursed promptly by the lessor.
"Capitalization" means at any date the sum of (a) the Obligations as of
such date, plus (b) all unpaid principal of the 1993 Senior Notes and the 1998
Senior Notes as of such date, plus (c) all unpaid principal of other long-term
Indebtedness of the Borrower and its Subsidiaries as of such date, plus (d) the
shareholders' equity of the Borrower as of such date, as determined in
accordance with Agreement Accounting Principles.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"CERCLA" is defined in Section 6.24.
"Change" is defined in Section 3.2.
"Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, in each case other than Trust Company of the West or
any Affiliate thereof, including without limitation an acquisition effected by
means of any transaction contemplated by Section 6.12 hereof, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of the Borrower.
"Closing Date" means August 31, 1993.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Computation Date" is defined in Section 2.2.
"Condemnation" is defined in Section 7.8.
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with Agreement Accounting
Principles.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract or application for a Letter of Credit.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes. The Corporate Base Rate is a
reference rate and does not necessarily represent the lowest or best rate of
interest actually charged to any customer. First Chicago may make commercial
loans or other loans at rates of interest at, above or below the Corporate Base
Rate.
"Debt Ratio" means, for any date, the ratio of Indebtedness of the
Borrower and its Subsidiaries on a consolidated basis on such date to EBITDA of
the Borrower and its Subsidiaries on a consolidated basis for the four fiscal
quarters ending on such date.
"Default" means an event described in Article VII.
"Departing Lenders" means the Long-Term Credit Bank of Japan, Limited
and NationsBank, N.A.
"Dollar Amount" of any currency at any date shall mean (a) the amount
of such currency if such currency is Dollars or (b) the Equivalent Amount of
Dollars if such currency is any currency other than Dollars, calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange of the
Agent for such currency on the London market at 11:00 a.m., London time, on or
as of the most recent Computation Date provided for in Section 2.2.
"Dollars" and "$" shall mean the lawful currency of the United
States of America.
"EBITDA" means Net Income plus, to the extent deducted from revenues in
determining Net Income, (a) interest expense, (b) expense for taxes paid or
accrued, (c) depreciation, (d) amortization and (e) extraordinary losses
incurred other than in the ordinary course of business, minus, to the extent
included in Net Income, extraordinary gains realized other than in the ordinary
course of business, all calculated for the Borrower and its Subsidiaries on a
consolidated basis in accordance with Agreement Accounting Principles.
"Eligible Currency" means any currency other than Dollars (a) that is
readily available, (b) that is freely traded, (c) in which deposits are
customarily offered to banks in the London interbank market, (d) which is
convertible into Dollars in the international interbank market and (e) as to
which an Equivalent Amount may be readily calculated. If, after the designation
by the Lenders of any currency as an Agreed Currency, (i) currency control or
other exchange regulations are imposed in the country in which such currency is
issued with the result that different types of such currency are introduced,
(ii) such currency is, in the determination of the Agent, no longer readily
available or freely traded or (iii) in the determination of the Agent, an
Equivalent Amount of such currency is not readily calculable, the Agent shall
promptly notify the Lenders and the Borrower, and such currency shall no longer
be an Agreed Currency until such time as all of the Lenders agree to reinstate
such currency as an Agreed Currency and promptly, but in any event within five
Business Days of receipt of such notice from the Administrative Agent, the
Borrower shall repay all Loans in such affected currency or convert such Loans
into Loans in Dollars or another Agreed Currency, subject to the other terms set
forth in Article II.
"Environmental Laws" shall have the meaning set forth in Section 5.20.
"Equivalent Amount" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount of
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Agent for such other currency at 11:00 a.m.,
London time, on the date on or as of which such amount is to be determined.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Euro" and/or "EUR" means the euro referred to in Council Regulation
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful currency of the member states of the
European Union that participate in the third stage of Economic and Monetary
Union.
"Euro Implementation Date" means the first date (currently expected to
be January 1, 1999) on which the Euro becomes the currency of some or all of the
member states of the European Union.
"Eurocurrency" means any Agreed Currency.
"Eurocurrency Advance" means an Advance which bears interest at the
applicable Eurocurrency Rate.
"Eurocurrency Loan" means a Loan which bears interest at the applicable
Eurocurrency Rate.
"Eurocurrency Payment Office" of the Agent shall mean, for each of the
Agreed Currencies, the office, branch, affiliate or correspondent bank of the
Agent specified as the "Eurocurrency Payment Office" for such currency in
Schedule 1.1 hereto or such other office, branch, affiliate or correspondent
bank of the Agent as it may from time to time specify to the Borrower and each
Lender as its Eurocurrency Payment Office.
"Eurocurrency Rate" means, with respect to a Eurocurrency Advance for
the relevant Interest Period, the sum of (a) the quotient of (i) the
Eurocurrency Reference Rate applicable to such Interest Period, divided by (ii)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (b) the Applicable Margin. The Eurocurrency Rate shall be
rounded to the next higher multiple of 1/16 of 1% if the rate is not such a
multiple.
"Eurocurrency Reference Rate" means, with respect to a Eurocurrency
Advance for the relevant Interest Period, the rate determined by the Agent to be
the rate at which First Chicago offers to place deposits in the applicable
Agreed Currency with first-class banks in the London interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of the First Chicago's
relevant Eurocurrency Loan and having a maturity equal to such Interest Period.
"Excluded Taxes" is defined in Section 2.24(a).
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Existing Credit Agreement" is defined in the recitals to this
Agreement.
"Existing Lenders" means those lenders party to the Existing Credit
Agreement.
"Facility Termination Date" means August 31, 2003.
"Federal Funds Effective Rate" means, for any day, an 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 on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Floating Rate" means, for any day, a rate of interest per annum equal
to the Alternate Base Rate for such day, in each case changing when and as the
Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Governmental Authority" is defined in Section 2.24(a).
"Indebtedness" of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which are evidenced by notes, acceptances, or other
instruments, (e) obligations of such Person to purchase securities or other
property arising out of or in connection with the sale of the same or
substantially similar securities or property, (f) Capitalized Lease Obligations,
(g) Rate Hedging Obligations, (h) Contingent Obligations, (i) obligations for
which such Person is obligated pursuant to or in respect of a Letter of Credit,
and (j) Off-Balance Sheet Liabilities.
"Interest Expense Coverage Ratio" means for any applicable computation
period, the ratio of EBITDA for such period to the Borrower's and its
Subsidiaries' interest expenses on a consolidated basis for such period. For
purposes of this definition only "interest expenses" shall mean the aggregate of
all interest paid or accrued by the Borrower and its Subsidiaries, including,
without limitation, all interest, fees and costs payable with respect to the
Obligations, the 1993 Senior Notes and the 1998 Senior Notes (other than fees
and costs which may be capitalized as transaction costs in accordance with
Agreement Accounting Principles), the interest portion of any Capitalized Lease
payments, and any dividends paid or accrued on the Borrower's preferred stock,
all as determined in accordance with Agreement Accounting Principles.
"Interest Period" means, with respect to a Eurocurrency Advance, a
period of one, two, three or six months commencing on a Business Day selected by
the Borrower pursuant to this Agreement. Such Interest Period shall end on (but
exclude) the day which corresponds numerically to such date one, two, three or
six months thereafter; provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any other
Person or any investment in, or purchase or other acquisition of, the stock,
partnership interests, notes, debentures, bonds, interests in mutual funds or
other securities owned by such Person; any deposit accounts and certificate of
deposit owned by such Person; and structured notes, derivative financial
instruments and other similar instruments or contracts owned by such Person.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent with
respect to each Agreed Currency listed on Schedule 1.2 or, with respect to any
Lender, on the administrative information sheets provided to the Agent by such
Lender in connection herewith or otherwise selected by such Lender or the Agent
pursuant to Section 2.20.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender or the Swing Line Bank, any loan
made by such Lender or the Swing Line Bank pursuant hereto, and "Loans" means
with respect to the Lenders and the Swing Line Bank, the aggregate of all
Advances.
"Loan Documents" means this Agreement, the Notes and the other
documents and agreements contemplated hereby and executed by the Borrower in
favor of the Agent or any Lender.
"Margin Stock" has the meaning assigned to such term under Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or otherwise), performance, results of
operations or prospects of the Borrower and its Subsidiaries taken as a whole,
(b) the ability of the Borrower or any Subsidiary to perform its obligations
under the Loan Documents, or (c) the validity or enforceability of any of the
Loan Documents or the rights or remedies of the Agent or the Lenders thereunder.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"National Currency Unit" means the unit of currency (other than a Euro
unit) of each member state of the European Union that participates in the third
stage of Economic and Monetary Union.
"Net Income" means, for any computation period, with respect to the
Borrower on a consolidated basis with its Subsidiaries (other than any
Subsidiary which is restricted from declaring or paying dividends or otherwise
advancing funds to its parent whether by contract or otherwise), cumulative net
income earned during such period in accordance with Agreement Accounting
Principles.
"Net Worth" means at any date the consolidated common stockholders'
equity of the Borrower and its consolidated Subsidiaries determined in
accordance with Agreement Accounting Principles.
"1993 Senior Note Agreement" means, collectively, those certain Note
Purchase Agreements entered into between the Borrower and each purchaser named
therein, dated as of August 31, 1993, as the same has been or may be amended,
supplemented or modified.
"1993 Senior Note Documents" means the 1993 Senior Notes, the 1993
Senior Note Agreement and the other documents executed and delivered in
connection therewith.
"1993 Senior Notes" means those certain 6.31% Senior Notes due August
31, 2000, issued by the Borrower pursuant to the 1993 Senior Note Agreement in
the aggregate principal amount of $45,000,000.
"1998 Senior Note Agreement" means, that certain Note Purchase
Agreement which may be entered into between the Borrower and each purchaser
named therein, as the same may be amended, supplemented or modified after the
Restatement Date.
"1998 Senior Note Documents" means the 1998 Senior Notes, the 1998
Senior Note Agreement and the other documents executed and delivered in
connection therewith.
"1998 Senior Notes" means those certain 6.16% Senior Notes due
September 1, 2005 which may be issued by the Borrower pursuant to the 1998
Senior Note Agreement in the aggregate principal amount of $60,000,000.
"Note" is defined in Section 2.16.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party hereunder arising under any
of the Loan Documents.
"Off Balance Sheet Liability" of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (b) any liability under any Sale and Leaseback
Transaction which does not create a liability on the balance sheet of such
Person, (c) any liability under any financing lease or so-called "synthetic
lease" transaction entered into by such Person or (d) any obligation arising
with respect to any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the
balance sheets of such Person, but excluding Operating Leases.
"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Original Credit Agreement" is defined in the recitals to this
Agreement.
"Original Currency" is defined in Section 2.14(b).
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage of the Aggregate Commitment or if the Aggregate
Commitment has been terminated, its percentage of the aggregate principal amount
of outstanding Advances.
"Purchase" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, division thereof, whether through purchase of assets, merger or
otherwise, or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of such Board of
Governors relating to the extension of credit by securities brokers and dealers
for the purpose of purchasing or carrying margin stocks applicable to such
Persons.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to such Persons.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property, including without limitation Capitalized
Leases having an original term (including any required renewals or any renewals
at the option of the lessor or lessee) of one year or more.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the Equivalent
Amount of the aggregate unpaid principal amount of the outstanding Loans.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) of general application which is imposed under
Regulation D on Eurocurrency liabilities.
"Restatement Date" means September 1, 1998.
"Revolving Credit Advance" means an Advance made by the Lenders to the
Borrower pursuant to Section 2.1.
"Revolving Credit Loan" means, with respect to a Lender, such Lender's
pro-rata portion of all Revolving Credit Advances.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount of
the present value of its liabilities (including for purposes of this definition
all liabilities (including loss reserves as determined by the Borrower), whether
or not reflected on a balance sheet prepared in accordance with Agreement
Accounting Principles and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) such Person is able to pay
its debts or obligations in the ordinary course as they mature and (c) such
Person does not have unreasonably small capital to carry out its business as
conducted and as proposed to be conducted. "Solvency" shall have a correlative
meaning.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (a) represents more than 10% of
the consolidated assets of the Borrower and its Subsidiaries, as would be shown
in the consolidated financial statements of the Borrower and its Subsidiaries as
at the end of the quarter next preceding the date on which such determination is
made, or (b) is responsible for more than 10% of the consolidated net sales or
of the consolidated net income of the Borrower and its Subsidiaries for the 12
month period ending as of the end of the quarter next preceding the date of
determination.
"Swing Line Advance" means a borrowing hereunder consisting of the
aggregate amount of the Swing Line Loan(s) made by the Swing Line Bank to the
Borrower on the same Borrowing Date pursuant to Section 2.10.
"Swing Line Bank" means First Chicago and its respective successors
and assigns.
"Swing Line Commitment Amount" means the maximum principal amount of
Swing Line Loans which the Swing Line Bank may, in its sole discretion, make
pursuant to Section 2.10, as the same may be terminated or permanently reduced
from time to time hereunder. The initial Swing Line Commitment Amount shall be
$5,000,000. The Swing Line Commitment Amount will automatically and permanently
reduce to $0 on the Facility Termination Date.
"Swing Line Loan" means a Loan made in Dollars by the Swing Line Bank
pursuant to Section 2.10.
"Tax Sharing Agreement" means that certain Tax Indebtedness Sharing
Agreement dated as of December 27, 1991 between Littelfuse, Inc. and the
other parties listed therein.
"Taxes" is defined in Section 2.24(a).
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or Eurocurrency Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all accrued (vested and unvested) benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans and valued on a basis consistent with that used to prepare the Borrower's
annual audited financial statements.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Unrefunded Swing Line Loans" is defined in Section 2.10(d).
"U.S. Lender" means a Lender incorporated under the laws of the United
States of America or a state thereof.
"Utilization" means, for any calendar quarter, a percentage equal to
the average aggregate principal amount of Loans outstanding during such calendar
quarter divided by the Aggregate Commitment as of the end of such calendar
quarter.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and its
Subsidiaries and of the Borrower's and its Subsidiaries' material customers,
suppliers and vendors.
"Year 2000 Program" is defined in Section 5.21.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
1 ARTICLE THE CREDITS
1.1 Commitment . From and including the date hereof to but not including the
Facility Termination Date, each Lender severally (and not jointly) agrees, on
the terms and conditions set forth in this Agreement, to make pro-rata Revolving
Credit Advances to the Borrower in Agreed Currencies from time to time in
amounts not to exceed in the aggregate at any one time outstanding the Dollar
Amount of its Commitment, less the amount of such Lender's pro-rata share of the
outstanding principal amount of all Swing Line Advances (regardless of which
Lender made such Swing Line Advances) exclusive of Swing Line Advances being
repaid substantially contemporaneously with the making of any such Revolving
Credit Advances; provided that all Floating Rate Loans shall be made in Dollars.
Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow Revolving Credit Advances at any time prior to the Facility Termination
Date. The Commitments to lend hereunder shall expire on the Facility Termination
Date. 1.2 1.3 Determination of Dollar Amounts; Required Payments; Termination .
1.4 1.5 (a) The Agent will determine the Dollar Amount of: 1.6 1.7 (i) each
Advance as of the date two Business Days prior to the Borrowing Date or, if
applicable, date of conversion/continuation of such Advance; and 1.8 (ii) all
outstanding Revolving Credit Advances on and as of the last Business Day of each
quarter and on any other Business Day elected by the Agent in its discretion or
upon instruction by the Required Lenders. 1.9 1.10 Each day upon or as of which
the Agent determines Dollar Amounts as described in the preceding clauses (i)
and (ii) is herein described as a "Computation Date" with respect to each
Revolving Credit Advance for which a Dollar Amount is determined on or as of
such day. If at any time the Dollar Amount of the sum of the aggregate principal
amount of all outstanding Revolving Credit Advances and Swing Line Advances
(calculated, with respect to those Advances denominated in Agreed Currencies
other than Dollars, as of the most recent Computation Date with respect to each
such Advance) exceeds the Aggregate Commitment, the Borrower shall immediately
repay Revolving Credit Advances and Swing Line Advances in an aggregate
principal amount sufficient to eliminate any such excess. If at any time the
Dollar Amount of the aggregate principal amount of all Revolving Credit Advances
denominated in Agreed Currencies other than Dollars (calculated as of the most
recent Computation Date) exceeds $10,000,000, the Borrower will immediately
repay Revolving Credit Advances so denominated in an aggregate principal amount
sufficient to eliminate any such excess. 1.11 1.12 (b) Each Revolving Credit
Advance shall mature, and the principal amount thereof and the unpaid accrued
interest thereon shall be due and payable along with all other unpaid
Obligations, on the Facility Termination Date. 1.13 1.14 Ratable Loans . Each
Advance hereunder shall consist of Loans made from the several Lenders ratably
in proportion to the ratio that their respective Commitments bear to the
Aggregate Commitment. 1.15 1.16 Types of Advances . The Advances may be Floating
Rate Advances, Eurocurrency Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.8 and 2.9; provided that the Dollar
Amount of Revolving Credit Advances denominated in Agreed Currencies other than
Dollars may not at any time exceed $10,000,000. 1.17 (a) Commitment and
Utilization Fees; Reductions in Aggregate Commitment . The Borrower agrees to
pay to the Agent for the account of each Lender a commitment fee at a per annum
rate equal to the Applicable Commitment Fee Rate on the daily unused portion of
such Lender's Commitment (based on the Equivalent Amount of the principal amount
of the aggregate Loans (determined, with respect to each Loan, as of the date
such Loan was made or, in the case of a Loan which has been continued, upon the
date of continuation) from the date hereof to and including the Facility
Termination Date, payable in arrears on each Payment Date hereafter and on the
Facility Termination Date. All accrued commitment fees shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Loans hereunder. For purposes of calculating the commitment fee hereunder, (i)
Swing Line Loans shall not constitute usage hereunder and (ii) the principal
amount of each Advance made in an Agreed Currency other than Dollars shall be at
any time the Dollar Amount of such Advance as determined on the most recent
Computation Date with respect to such Advance. (b) (c) The Borrower also agrees
to pay to the Agent for the pro-rata account of the Lenders a utilization fee
for each calendar quarter that Utilization is greater than 50% from the date
hereof to and including the later of the Facility Termination Date and the date
all Advances and other Obligations are paid in full. Such utilization fee shall
be payable on each Payment Date and on the Facility Termination Date and shall
be equal to .05% per annum multiplied by the average aggregate outstanding
principal amount of the Advances during such calendar quarter. (d) (e) The
Borrower may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in a minimum aggregate amount of $1,000,000 or any
integral multiple of $100,000 in excess thereof, upon at least two Business
Days' written notice to the Agent, which notice shall specify the amount of any
such reduction; provided, however, that the amount of the Aggregate Commitment
may not be reduced below the aggregate principal Dollar Amount of the
outstanding Revolving Credit Advances. (f) 1.18 Minimum Amount of Each Advance .
Each Eurocurrency Advance shall be in the minimum amount having a Dollar Amount
of $1,000,000 (and in multiples of $500,000 if in excess thereof), and each
Floating Rate Advance shall be in the minimum amount of $500,000 (and in
multiples of $100,000 if in excess thereof); provided, however, that (a) any
Floating Rate Advance may be in the amount of the unused Aggregate Commitment
and (b) in no event shall more than six (6) Eurocurrency Advances be permitted
to be outstanding at any time. 1.19 1.20 Optional Principal Payments . The
Borrower may from time to time pay, without penalty or premium, all outstanding
Floating Rate Advances, or, in a minimum aggregate amount of $500,000 or any
integral multiple of $100,000 in excess thereof, any portion of the outstanding
Floating Rate Advances upon one (1) Business Day's prior notice to the Agent.
The Borrower may from time to time pay, subject to the payment of any funding
indemnification amounts required by Section 3.4 but without penalty or premium,
all outstanding Eurocurrency Advances, or, in a minimum aggregate amount of
$1,000,000 or any integral multiple of $500,000 in excess thereof (or the
Approximate Equivalent Amount if denominated in an Agreed Currency other than
Dollars), any portion of the outstanding Eurocurrency Advances upon three
Business Days' prior notice to the Agent. 1.21 1.22 Method of Selecting Types
and Interest Periods for New Advances . The Borrower shall select the Type of
Advance and, in the case of each Eurocurrency Advance, the Interest Period and
Agreed Currency applicable to each Advance from time to time. The Borrower shall
give the Agent irrevocable notice (a "Borrowing Notice") not later than 2:00
p.m. (Chicago time) at least one (1) Business Day before the Borrowing Date of
each Floating Rate Advance and not later than 10:00 a.m. (Chicago time) at least
three (3) Business Days before the Borrowing Date for each Eurocurrency Advance,
specifying: 1.23 (a) the Borrowing Date, which shall be a Business Day, of such
Advance;
(a) the aggregate amount of such Advance, which, when added to the Equivalent
Amount of all outstanding Revolving Credit Advances and Swing Line Advances, and
after giving effect to the repayment of any outstanding Advances out of the
proceeds of the requested Advance, shall not exceed the Aggregate Commitment;
(b) (c) the Type of Advance selected; and
(a) in the case of each Eurocurrency Advance, the Interest
Period and Agreed Currency applicable thereto.
(a) Conversion and Continuation of Outstanding Advances . Floating Rate Advances
shall continue as Floating Rate Advances unless and until such Floating Rate
Advances are converted into Eurocurrency Advances pursuant to this Section 2.9
or are repaid in accordance with Section 2.7. Each Eurocurrency Advance shall
continue as a Eurocurrency Advance until repaid or the end of the then
applicable Interest Period therefor, at which time: (b) (i) each such
Eurocurrency Advance denominated in Dollars shall be automatically converted
into a Floating
Rate Advance unless (x) such Eurocurrency Advance is or was
repaid in accordance with Section 2.7 or (y) the Borrower
shall have given the Agent a Conversion/Continuation Notice
(as defined below) requesting that, at the end of such
Interest Period, such Eurocurrency Advance either continue
as a Eurocurrency Advance for the same or another Interest
Period or be converted into a Floating Rate Advance; and
(i) Each such Eurocurrency Advance denominated in an Agreed
Currency other than Dollars shall automatically continue as
a Eurocurrency Advance in the same Agreed Currency with an
Interest Period of one month unless (x) such Eurocurrency
Advance is or was repaid in accordance with Section 2.7 or
(y) the Borrower shall have given the Agent a
Conversion/Continuation Notice (as defined below) requesting
that, at the end of such Interest Period, such Eurocurrency
Advance continue as a Eurocurrency Advance for the same or
another Interest Period.
Subject to the terms of Section 2.6, the Borrower may elect from time to time to
convert all or any part of an Advance of any Type into any other Type or Types
of Advances denominated in the same or any other Agreed Currency; provided, that
any conversion of any Eurocurrency Advance shall be made on, and only on, the
last day of the Interest Period applicable thereto.
(a) The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Eurocurrency Advance not later
than 2:00 p.m. (Chicago time) at least one (1) Business Day,
in the case of a conversion into a Floating Rate Advance, or
not later than 10:00 a.m. (Chicago time) three (3) Business
Days, in the case of a conversion into or continuation of a
Eurocurrency Advance, prior to the date of the requested
conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such conversion
or continuation;
(i) the Agreed Currency; and
(i) the amount and Type(s) of Advance(s) into which such Advance is to be
converted or continued and, in the case of a conversion into or
continuation of a Eurocurrency Advance, the duration of the Interest
Period applicable thereto.
1.1 Swing Line Advances .
1.2
1.3 (a) On the terms and subject to the conditions and relying upon the
representations and warranties herein set forth, the Swing Line Bank may, in its
sole discretion, from time to time from and including the date hereof to but
excluding the earlier of the Facility Termination Date and the termination of
the Commitments, in accordance with the terms hereof, make Swing Line Loans to
the Borrower in an aggregate principal amount at any time outstanding not to
exceed the least of (i) the amount of the Swing Line Commitment at such time,
(ii) the amount which, when added to the aggregate principal amount of
outstanding Swing Line Loans and the Swing Line Bank's pro-rata share of
outstanding Revolving Credit Loans, exceeds the amount of the Swing Line Bank's
Commitment, and (iii) an amount equal to (x) the Aggregate Commitment at such
time minus (y) the sum of the aggregate principal Dollar Amount of all Revolving
Credit Loans and Swing Line Loans outstanding at such time. Each Swing Line Loan
shall be made by the Swing Line Bank at the Alternate Base Rate (or such other
rate as may be agreed to by the Borrower and the Swing Line Bank) and may not be
converted pursuant to Section 2.9 into a Eurocurrency Advance. All Swing Line
Loans shall be in a minimum amount of $1,000,000 and in any integral multiple of
$500,000 if in excess thereof. In no event shall any Swing Line Loan be made
hereunder if the Agent and the Swing Line Bank shall have received written
notice from the Required Lenders prior to any such Swing Line Loan that a
condition specified in Section 4.1 or 4.2 has not been satisfied and such
condition shall not have been subsequently waived in compliance with Section
8.2.
1.4
1.5 (b) The Borrower shall give the Swing Line Bank (with a copy to the Agent)
telephonic, written or telecopy notice (in the case of telephonic notice, such
notice shall be promptly confirmed in writing or by telecopy) not later than
3:00 p.m., Chicago time, on a day of a proposed Swing Line Advance. Such notice
shall be delivered on a Business Day, shall be irrevocable and shall refer to
this Agreement and shall specify the requested Borrowing Date (which shall be a
Business Day) and the amount of such Swing Line Advance. The Swing Line Bank
shall by 4:00 p.m., Chicago time, on the requested Borrowing Date, make the
requested Swing Line Loan by crediting the principal amount thereof, in
immediately available funds, to the account of the Borrower maintained with the
Swing Line Bank unless such Advance shall not occur on such date because any
condition precedent herein specified shall not have been met or the Swing Line
Bank elects not to make the requested Swing Line Loan. Each Swing Line Loan
shall be repaid with accrued interest on the thirteenth Business Day following
the Borrowing Date thereof; provided that each Swing Line Loan may on a single
occasion be extended as described in Section 2.10(c)(i)(y) below. 1.6 1.7 (c)
Notwithstanding the occurrence of any Default or noncompliance with the
conditions precedent set forth in Article IV, if (i) any Swing Line Loan shall
remain outstanding at 10 a.m. (Chicago time) on the twelfth Business Day
following the Borrowing Date thereof and if by such time on such twelfth
Business Day the Agent shall have received neither (x) a Borrowing Notice
delivered by the Borrower pursuant to Section 2.8 requesting that Revolving
Credit Loans be made on the immediately succeeding Business Day in an amount at
least equal to the aggregate principal amount of such Swing Line Loan, (y) a
written request that such Swing Line Loan be extended for an additional period
of thirteen (13) Business Days, which request has been consented to by the Swing
Line Bank, nor (z) any other notice satisfactory to the Agent indicating the
Borrower's intent to repay all such Swing Line Loans on or before such
succeeding Business Day with funds obtained from other sources, or (ii) on any
date the Swing Line Bank in its sole discretion shall so request with respect to
the outstanding Swing Line Loans, the Agent shall be deemed to have received a
Borrowing Notice from the Borrower pursuant to Section 2.8 requesting that an
Advance of Revolving Credit Loans at the Floating Rate be made pursuant to
Section 2.1 on such succeeding Business Day in an amount equal to the aggregate
amount of such Swing Line Loans, and the procedures set forth in Section 2.11
shall be followed in making such Revolving Credit Loans; provided that the
proceeds of such Revolving Credit Loans received by the Agent shall be
immediately delivered to the Swing Line Bank and applied to the direct repayment
of such Swing Line Loans. Effective on the day such Revolving Credit Loans are
made, the portion of the Swing Line Loans so repaid shall no longer be
outstanding as Swing Line Loans and shall be outstanding as Revolving Credit
Loans of the Lenders bearing interest at a rate determined by reference to the
Floating Rate, in accordance with the provisions of this Article II. The
Borrower authorizes the Agent and the Swing Line Bank to charge the Borrower's
account maintained with the Swing Line Bank (up to the amount available in such
account) in order to immediately pay the amount of any Swing Line Loans to the
extent amounts received from the Lenders are not sufficient to repay in full
such Swing Line Loans. If any portion of any such amount paid (or deemed paid)
to the Swing Line Bank should be recovered by or on behalf of the Borrower from
the Swing Line Bank in the event of the bankruptcy or reorganization of the
Borrower or otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by Section 11.2. 1.8 1.9 (d)
If, for any reason (including, without limitation, the occurrence of a Default
described in Section 7.6 or 7.7 of Article VII), Revolving Credit Loans at the
Floating Rate may not be, or are not, made pursuant to paragraph (c) of this
Section 2.10 to repay Swing Line Loans as required by such paragraph and the
applicable Swing Line Loan or Swing Line Loans have not otherwise been repaid,
effective on the date such Revolving Credit Loans would otherwise have been
made, each Lender severally, unconditionally and irrevocably agrees that it
shall, without regard to the occurrence of any Default, purchase a participating
interest in such Swing Line Loans ("Unrefunded Swing Line Loans") in an amount
equal to the amount of Revolving Credit Loans which would otherwise have been
made by such Lender pursuant to paragraph (c) of this Section 2.10. Each Lender
will immediately transfer to the Agent, in immediately available funds, the
amount of its participation, and the proceeds of such participation shall be
distributed by the Agent to the Swing Line Bank in such amount as will reduce
the amount of the participating interest retained by the Swing Line Bank in its
Swing Line Loans to the amount of the Revolving Credit Loans which were to have
been made by the Swing Line Bank pursuant to paragraph (c) of this Section 2.10.
In the event a Lender fails to make available to the Swing Line Bank the amount
of such Lender's participation as provided in this paragraph (d), the Swing Line
Bank shall be entitled to recover such amount on demand from such Lender
together with interest at the customary rate set by the Swing Line Bank for
correction of errors among banks for one Business Day and thereafter at the
Alternate Base Rate then in effect. All payments in respect of Unrefunded Swing
Line Loans and participations therein shall be made in accordance with Section
2.14. 1.10 1.11 (e) Each Lender's obligation to make Revolving Credit Loans
pursuant to paragraph (c) of this Section 2.10 and to purchase participating
interests pursuant to paragraph (d) of this Section 2.10 shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which such Lender or the Borrower may have against the Swing Line Bank, the
Borrower or any other Person, as the case may be, for any reason whatsoever;
(ii) the occurrence or continuance of a Default; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower or any of its Subsidiaries;
(iv) any breach of this Agreement by the Borrower, any of its Subsidiaries or
any Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. 1.12 1.13 Method of Borrowing .
On each Borrowing Date, each Lender shall make available its Loan or Loans, if
any, (a) if such Loan is denominated in Dollars, not later than noon, Chicago
time, in Federal or other funds immediately available to the Agent, in Chicago,
Illinois at its address specified in or pursuant to Article XIII and (b) if such
loan is denominated in an Agreed Currency other than Dollars, not later than
noon, local time, in the city of the Agent's Eurocurrency Payment Office for
such currency, in such funds as may then be customary for the settlement of
international transactions in such currency in the city of and at the address of
the Agent's Eurocurrency Payment Office for such currency. Unless the Agent
determines that any applicable condition specified in Article IV has not been
satisfied, the Agent will make the funds so received from the Lenders available
to the Borrower at the Agent's aforesaid address. Notwithstanding the foregoing
provisions of this Section 2.11, to the extent that a Loan made by a Lender
matures on the Borrowing Date of a requested Loan, such Lender shall apply the
proceeds of the Loan it is then making to the repayment of principal of the
maturing Loan. 1.14 1.15 Changes in Interest Rate , etc. Each Floating Rate
Advance shall bear interest on the outstanding principal amount thereof, for
each day from and including the date such Advance is made or is converted from a
Eurocurrency Advance into a Floating Rate Advance pursuant to Section 2.9 to but
excluding the date it becomes due or is converted into a Eurocurrency Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate
for such day. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Advance will take effect simultaneously with each
change in the Alternate Base Rate. Each Eurocurrency Advance shall bear interest
on the outstanding principal amount thereof from and including the first day of
the Interest Period applicable thereto to (but not including), the last day of
such Interest Period at the interest rate determined by the Agent as applicable
to such Eurocurrency Advance based upon the Borrower's selections under Section
2.8 and 2.9 and otherwise in accordance with the terms hereof. No Interest
Period may end after the Facility Termination Date. 1.16 1.17 Rates Applicable
After Default . Notwithstanding anything to the contrary contained in Section
2.8 or 2.9 during the continuance of a Default, the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that no Revolving Credit Advance may be made as, converted into or
continued as a Eurocurrency Advance. During the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that each Eurocurrency Advance, Floating Rate
Advance and Swing Line Advance shall bear interest for the remainder of the
applicable Interest Period in the case of Eurocurrency Advances) at the rate
otherwise applicable plus 3% per annum; provided that, during the continuance of
a Default under Section 7.6 or 7.7, the interest rates set forth above shall be
applicable to all Advances without any election or action on the part of the
Agent or any Lender. 1.18 1.19 Method of Payment . (a) Each Advance shall be
repaid and each payment of interest thereon shall be paid in the currency in
which such Advance was made or, where such currency has converted to the Euro,
in the Euro. All payments of the Obligations hereunder shall be made, without
setoff, deduction or counterclaim, in immediately available funds to the Agent
at (except as set forth in the next sentence) the Agent's address specified
pursuant to, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time) on the date when due
and shall be applied ratably by the Agent among the Lenders. All payments to be
made by the Borrower hereunder in any currency other than Dollars shall be made
in such currency on the date due in such funds as may then be customary for the
settlement of international transactions in such currency for the account of the
Agent, at its Eurocurrency Payment Office for such currency and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent for
the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received, at, (i) with respect
to Floating Rate Loans and Eurocurrency Loans denominated in Dollars, its
address specified pursuant to Article XIII or at any Lending Installation
specified in a notice received by the Agent from such Lender and (ii) with
respect to Eurocurrency Loans denominated in an Agreed Currency other than
Dollars, in the funds received from the Borrower at the address of the Agent's
Eurocurrency Payment Office for such currency. The Agent is hereby authorized to
charge any account of the Borrower maintained with First Chicago or any of its
Affiliates for each payment of principal, interest and fees as it becomes due
hereunder. 1.20 1.21 (b) Notwithstanding the foregoing provisions of this
Section, if, after the making of any Advance in any currency other than Dollars,
currency control or exchange regulations are imposed in the country which issues
such currency with the result that the type of currency in which the Advance was
made (the "Original Currency") no longer exists or the Borrower is not able to
make payment to the Agent for the account of the Lenders in such Original
Currency, then all payments shall be made by the Borrower hereunder in such
currency shall instead be made when due in Dollars in an amount equal to the
Dollar Amount (as of the date of repayment) of such payment due, it being the
intention of the parties hereto that the Borrower take all risks of the
imposition of any such currency control or exchange regulations. For purposes of
this Section 2.14(b), the commencement of the third stage of European Economic
and Monetary Union and the occurrence of the Euro Implementation Date shall not
constitute the imposition of currency control or exchange regulations. 1.22 1.23
European Economic and Monetary Union . 1.24
2.15.1. Advances After the Euro Implementation Date . If any
Advance made (or to be made) on or after the Euro Implementation Date
would, but for the provisions of this Section 2.15.1, be capable of
being made in either the Euro or in a National Currency Unit, such
Advance shall be made in the Euro.
2.15.2 Rounding and Other Consequential Changes . With effect
on and from the Euro Implementation Date:
(a) without prejudice to any method of conversion or rounding prescribed
by any legislative measures of the Council of the European Union, each
reference in this Agreement to a fixed amount or to fixed amounts in a
National Currency Unit to be paid to or by the Agent shall,
notwithstanding any other provision of this Agreement, be replaced by
a reference to such comparable and convenient fixed amount or fixed
amounts in the Euro as the Agent may from time to time specify; and
(b) the Agent may notify the other parties to this Agreement of any
modifications to this Agreement which the Agent (acting reasonably and
after consultation with the other parties to this Agreement)
determines to be necessary as a result of the commencement of the
third stage of European Economic and Monetary Union and the occurrence
of the Euro Implementation Date. Notwithstanding any other provision
of this Agreement, any modifications of which the Agent so notifies
the other parties shall take effect in accordance with the terms of
such notification. So far as possible, such modifications shall be
such as to put the parties in the same position as if the Euro
Implementation Date had not occurred. However, if and to the extent
that the Agent determines that it is not possible to put the parties
in such position, the Agent may give priority to putting the Agent,
the Arranger and the Lenders into such position.
1.1 Noteless Agreement; Evidence of Indebtedness . (a) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. 1.2 1.3 (b) The
Agent shall maintain accounts in which it will record (i) the amount of each
Loan made hereunder, the Agreed Currency and Type thereof and the Interest
Period with respect thereto, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder from
the Borrower and each Lender's share thereof. 1.4 1.5 (c) The entries maintained
in the accounts maintained pursuant to paragraphs (a) and (b) above shall be
prima facie evidence of the existence and amounts of the Obligations therein
recorded; provided, however, that the failure of the Agent or any Lender to
maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Obligations in accordance with their
terms. 1.6 1.7 (d) Any Lender may request that its Loans be evidenced by a
promissory note (a "Note"). In such event, the Borrower shall prepare, execute
and deliver to such Lender a Note payable to the order of such Lender in the
form of Exhibit A or B, as applicable. Thereafter, the Loans evidenced by such
Note and interest thereon shall at all times (including after any assignment
pursuant to Section 12.3) be represented by one or more Notes payable to the
order of the payee named therein or any assignee pursuant to Section 12.3,
except to the extent that any such Lender or assignee subsequently returns any
such Note for cancellation and requests that such Loans once again be evidenced
as described in paragraphs (a) and (b) above. 1.8 1.9 Telephonic Notices . The
Borrower hereby authorizes the Lenders and the Agent to extend, convert or
continue Advances, effect selections of Agreed Currencies and Types of Advances
and to transfer funds based on telephonic notices made by any person or persons
the Agent or any Lender in good faith believes to be acting on behalf of the
Borrower, it being understood that the foregoing authorization is specifically
intended to allow Borrowing Notices and Conversion/Continuation Notices to be
given telephonically. The Borrower agrees to deliver promptly to the Agent a
written confirmation, if such confirmation is requested by the Agent or any
Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error. 1.10 1.11 Interest Payment Dates; Interest and Fee Basis
. Interest accrued on each Floating Rate Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date
hereof, on any date on which the Floating Rate Advance is prepaid, whether due
to acceleration or otherwise, and at maturity. Interest accrued on that portion
of the outstanding principal amount of any Floating Rate Advance converted into
a Eurocurrency Advance on a day other than a Payment Date shall be payable on
the next Payment Date. Interest accrued on each Eurocurrency Advance shall be
payable on the last day of its applicable Interest Period, on any date on which
the Eurocurrency Advance is prepaid, whether by acceleration or otherwise, and
at maturity. Interest accrued on each Eurocurrency Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest and commitment fees
shall be calculated for actual days elapsed on the basis of a 360-day year;
provided, that interest on Eurocurrency Advances denominated in British Pounds
Sterling shall be calculated on the basis of a 365-day or 366-day year, as
appropriate, for the actual number of days elapsed. Interest shall be payable
for the day an Advance is made but not for the day of any payment on the amount
paid if payment is received prior to noon (local time) at the place of payment.
If any payment of principal of or interest on an Advance shall become due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such payment.
1.12 1.13 Notification of Advances, Interest Rates, Prepayments and Revolving
Credit Commitment Reductions . Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurocurrency Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate. 1.14 1.15 Lending Installations . Each Lender may book its
Loans at the appropriate Lending Installation listed on Schedule 1.2 hereto or
such other Lending Installation designated by such Lender in accordance with the
final sentence of this Section 2.20. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed held by each Lender
for the benefit of such Lending Installation. Each Lender may, by written notice
to the Agent and the Borrower, in accordance with Article XIII, designate
replacement or additional Lending Installations, through which Loans will be
made by it and for whose account Loan payments are to be made. 1.16 1.17
Non-Receipt of Funds by the Agent . Unless the Borrower or a Lender, as the case
may be, notifies the Agent prior to the date on which it is scheduled to make
payment to the Agent of (a) in the case of a Lender, the proceeds of a Loan, or
(b) in the case of the Borrower, a payment of principal, interest or fees to the
Agent for the account of the Lenders, that it does not intend to make such
payment, the Agent may assume that such payment has been made. The Agent may,
but shall not be obligated to, make the amount of such payment available to the
intended recipient in reliance upon such assumption. If such Lender or the
Borrower, as the case may be, has not in fact made such payment to the Agent,
the recipient of such payment shall, on demand by the Agent, repay to the Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to (i) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day for the first three days and, thereafter, the interest rate
applicable to the relevant Loan or (ii) in the case of payment by the Borrower,
the interest rate applicable to the relevant Loan. 1.18 1.19 Market Disruption .
Notwithstanding the satisfaction of all conditions referred to in Article II and
Article IV with respect to any Advance in any Agreed Currency other than
Dollars, if there shall occur on or prior to the date of such Advance any change
in national or international financial, political or economic conditions or
currency exchange rates or exchange controls which would in the reasonable
opinion of the Agent or the Required Lenders make it impracticable for the
Eurocurrency Loans comprising such Advance to be denominated in the Agreed
Currency specified by the Borrower, then the Agent shall forthwith give notice
thereof to the Borrower and the Lenders, and such Loans shall not be denominated
in such Agreed Currency but shall, except as otherwise set forth in Section
2.15.1, be made on such Borrowing Date in Dollars, in an aggregate principal
amount equal to the Dollar Amount of the aggregate principal amount specified in
the related Borrowing Notice or Conversion/Continuation Notice, as the case may
be, as Floating Rate Loans, unless the Borrower notifies the Agent at least one
Business Day before such date that (a) it elects not to borrow on such date or
(b) it elects to borrow on such date in a different Agreed Currency, as the case
may be, in which the denomination of such Loans would in the opinion of the
Agent and the Required Lenders be practicable and in an aggregate principal
amount equal to the Dollar Amount of the aggregate principal amount specified in
the related Borrowing Notice or Conversion/Continuation Notice, as the case may
be. 1.20 1.21 Judgment Currency . If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due from the Borrower hereunder in
the currency expressed to be payable herein (the "specified currency") into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the specified
currency with such other currency at the Agent's main Chicago office on the
Business Day preceding that on which final, non-appealable judgment is given.
The obligations of the Borrower in respect of any sum due to any Lender or the
Agent hereunder shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Agent (as the case may be) of any sum
adjudged to be so due in such other currency such Lender or the Agent (as the
case may be) may in accordance with normal, reasonable banking procedures
purchase the specified currency with such other currency. If the amount of the
specified currency so purchased is less than the sum originally due to such
Lender or the Agent, as the case may be, in the specified currency, the Borrower
agrees, to the fullest extent that it may effectively do so, as a separate
obligation and notwithstanding any such judgment, to indemnify such Lender or
the Agent, as the case may be, against such loss, and if the amount of the
specified currency so purchased exceeds (a) the sum originally due to any Lender
or the Agent, as the case may be, in the specified currency and (b) any amounts
shared with other Lenders as a result of allocations of such excess as a
disproportionate payment to such Lender under Section 12.2, such Lender or the
Agent, as the case may be, agrees to remit such excess to the Borrower. 1.22
1.23 Taxes . 1.24 1.25 (a) All sums payable by the Borrower whether in respect
of principal, interest, fees or otherwise shall be paid without deduction for
any present and future taxes, levies, imposts, charges or withholdings imposed
by any country, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (a "Governmental Authority") thereof or
therein, any jurisdiction from which any or all such payments are made and any
political subdivision or taxing authority thereof or therein, excluding income
and franchise taxes (and deductions and withholdings therefor) imposed on the
Agent or any Lender (i) by the jurisdiction under the laws of which the Agent
(in the case of payments to the Agent) or such Lender is organized or any
Governmental Authority or taxing authority thereof or therein, or (ii) by any
jurisdiction in which the Agent's (in the case of payments to the Agent) or such
Lender's applicable Lending Installations are located or any Governmental
Authority or taxing authority thereof or therein (such excluded taxes,
deductions and withholdings, collectively, "Excluded Taxes"; and all such taxes,
levies, imposts, deductions, charges and withholdings (including Excluded
Taxes), collectively, "Taxes"), which amounts shall be paid by the Borrower as
provided in Section 2.24(b), provided, however, that in no event shall the
Borrower have any responsibility for or be required to pay any penalties arising
from the gross negligence or willful misconduct of the Agent or Lender seeking
compensation. As set forth in the preceding sentence, the Borrower will pay each
Lender the amounts necessary such that the net amount of the principal,
interest, fees or other sums received and retained by each Lender is not less
than the amount payable under this Agreement. 1.26 1.27 (b) If (i) the Borrower
or any other Person is required by law to make any deduction or withholding on
account of any Tax (other than Excluded Taxes) or other amount from any sum paid
or expressed to be payable by the Borrower to any Lender under this Agreement
(other than on account of Excluded Taxes); or (ii) any party to this Agreement
(or any Person on its behalf) other than the Borrower is required by law to make
any deduction or withholding from, or (other than on account of any Excluded
Tax) any payment on or calculated by reference to the amount of, any such sum
received or receivable by any Lender under this Agreement: 1.28
(A) the Borrower shall notify the Agent of any such requirement or any
change in any such requirement as soon as the Borrower becomes aware
of it and such Lender shall promptly notify the Borrower of any such
requirement or any change of such requirement as soon as such Lender
becomes aware thereof;
(B) to the extent the Borrower is aware or is so notified by such Lender,
the Borrower shall pay any such Tax or other amount before the date on
which penalties attached thereto become due and payable, such payment
to be made (if the liability to pay is imposed on the Borrower) for
its own account or (if that liability is imposed on any other party to
this Agreement) on behalf of and in the name of that party;
(C) the sum payable by the Borrower in respect of which the relevant
deduction, withholding or payment is required shall (except, in the
case of any such payment, to the extent that the amount thereof is not
ascertainable when that sum is paid, provided no amount is actually
withheld from such payment) be increased to the extent necessary to
ensure that, after the making of that deduction, withholding or
payment, that party receives on the due date and retains (free from
any liability in respect of any such deduction, withholding or
payment) a sum equal to that which it would have received and so
retained had no such deduction, withholding or payment been required
or made; and
(D) within thirty (30) days after payment of any sum from which the
Borrower is required by law to make any deduction or withholding, and
within thirty (30) days after the due date of payment of any Tax or
other amount which it is required by this Section 2.24 ------------ to
pay, it shall deliver to the Agent all such certified documents and
other evidence as to the making of such deduction, withholding or
payment as (1) are reasonably satisfactory to other affected parties
as proof of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority and (2)
are reasonably required by any such party to enable it to claim a tax
credit with respect to such deduction, withholding or payment.
(c) The Borrower shall not be obligated to make any payments
under this Section 2.24 to any Lender which is not a U.S. Lender until such
Lender shall have delivered the tax forms required to be delivered by it
pursuant to Section 2.24(d).
(d) At least five Business Days prior to the first date on
which interest or fees are payable hereunder for the account of any Lender, each
Lender which is not a U.S. Lender agrees that it will deliver to each of the
Borrower and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
1.1 Agent's Fees . The Borrower shall pay to the Agent those fees, in addition
to the commitment fees referenced in Section 2.5(a), in the amounts and at the
times separately agreed to between the Agent and the Borrower. 1.2
1 ARTICLE CHANGE IN CIRCUMSTANCES
1.1 Yield Protection . (a) If, after the Restatement Date, the adoption of or
any change in any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any interpretation thereof, or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation or
Eurocurrency Payment Office to any tax, duty, charge or withholding on
or from payments due from the Borrower (excluding taxation of the
overall net income of any Lender or applicable Lending Installation in
respect of its Eurocurrency Advances, or
(i) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
any Lender or any applicable Lending Installation in respect of its
Eurocurrency Advances (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurocurrency
Advances), or
(i) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining its Eurocurrency Advances Loans including,
without limitation, any conversion of any Loan denominated in an
Agreed Currency other than Euro into a Loan denominated in Euro) or
reduces any amount receivable by any Lender or any applicable Lending
Installation in connection with its Eurocurrency Advances, or requires
any Lender or any applicable Lending Installation or Eurocurrency
Payment Office to make any payment calculated by reference to the
amount of its Eurocurrency Advances held, or interest received by it
in respect thereof, by an amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurocurrency
Advances or Commitment then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender that portion of such increased expense incurred
or resulting in an amount received which such Lender determines is attributable
to making, funding and maintaining its Eurocurrency Advances and its Commitment
in respect thereof.
(b) In addition to any other amounts payable by the Borrower
hereunder, each Lender may require the Borrower to pay, contemporaneously with
each payment of interest on Eurocurrency Advances of the Borrower additional
interest on the related Eurocurrency Loan of such Lender at the percentage
calculated from time to time by such Lender to be the percentage required to
fully compensate such Lender for all reserve costs, liabilities, expenses and
assessments which have been incurred by such Lender (or its applicable Lending
Installation or Eurocurrency Payment Office) pursuant to requirements of
applicable law or any applicable governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding the making, funding or maintaining of such Eurocurrency Loan
(including, without limitation, any and all liquid asset maintenance
requirements of the Bank of England and any reserve requirements of Regulation
D), to the extent that any such amount is not already included in the
determination of the Eurocurrency Rate. Any Lender wishing to require payment of
such additional interest (i) shall so notify the Borrower and the Agent pursuant
to Section 3.5, in which case such additional interest on the Eurocurrency Loans
of such Lender shall be payable in the applicable Agreed Currency to such Lender
at the place indicated in such notice with respect to each Interest Period
commencing at least five (5) Business Days after the giving of such notice and
(ii) shall notify the Borrower at least five (5) Business Days prior to each
date on which interest is payable on such Eurocurrency Loans of the amount then
due it under this Section 3.1(b); provided, however, that if a Lender fails to
give such prior notice, then such additional interest shall be payable five (5)
business Days after such notice if given.
1.1 Changes in Capital Adequacy Regulations . If a Lender determines the amount
of capital required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender is
increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (a) any change after the
Restatement Date in the Risk-Based Capital Guidelines, or (b) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the Restatement Date which affects the amount of capital required
or expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means (a)
the risk-based capital guidelines in effect in the United States on the
Restatement Date, including transition rules, and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the Restatement Date. 1.2 1.3
Availability of Types of Advances . If any Lender determines that maintenance of
its Eurocurrency Advances at a suitable Lending Installation would violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law, or if the Required Lenders determine that (a) deposits of a type,
currency and maturity appropriate to match fund Eurocurrency Advances are not
available to banks in the London interbank market, (b) the interest rate
applicable to a Type of Eurocurrency Advance does not accurately or fairly
reflect the cost of deposits generally available to banks in the London
interbank market, or (c) a fundamental change has occurred in the foreign
exchange or interbank markets with respect to the applicable Agreed Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls), which change has the effect of making deposits in the applicable
Agreed Currency generally not available to banks in the London interbank market,
then the Agent shall suspend the availability of the affected Type of Advance
and require any Eurocurrency Advances of the affected Type to be repaid. 1.4 1.5
Funding Indemnification . If any payment of a Eurocurrency Advance occurs on a
date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a Eurocurrency Advance is
not made on the date specified by the Borrower for any reason other than default
by the Lenders, the Borrower will indemnify the Agent and each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain the Eurocurrency Advance. 1.6 1.7 Lender Statements; Survival of
Indemnity . To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurocurrency Advances to
reduce any liability of the Borrower to such Lender under Sections 2.24(a), 3.1
and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3,
so long as such designation is not disadvantageous to such Lender. Each Lender
shall deliver a written statement of such Lender to the Borrower (with a copy to
the Agent) as to the amount due, if any, under Sections 2.24(a), 3.1, 3.2 or
3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurocurrency Advance shall be calculated as though each Lender funded its
Eurocurrency Advances through the purchase of a deposit of the type, currency
and maturity corresponding to the deposit used as a reference in determining the
Eurocurrency Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by the Borrower
of the written statement. The obligations of the Borrower under Sections
2.24(a), 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement. 1.8
1 ARTICLE CONDITIONS PRECEDENT
1.1 Amendment and Restatement . This Agreement shall not become effective until
the Borrower has furnished to the Agent with sufficient copies for the Lenders:
(a) Charter Documents. Copies of the certificate of incorporation
of the Borrower, together with all amendments, and a
certificate of good standing, both certified by the
appropriate governmental officer in its jurisdiction of
incorporation.
(a) By-Laws and Resolutions. Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed necessary
by counsel for any Lender) authorizing the execution, delivery and
performance of the Loan Documents to which the Borrower is a party.
(a) Secretary's Certificate. An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the Borrower
authorized to sign the Loan Documents and to make borrowings hereunder,
upon which certificate the Agent and the Lenders shall be entitled to rely
until informed of any change in writing by the Borrower.
(a) Officer's Certificate. A certificate, dated the Restatement Date, signed by
an Authorized --------------------- Officer of the Borrower, in form and
substance satisfactory to the Required Lenders, to the effect that: (i) on
the Restatement Date no Default or Unmatured Default has occurred and is
continuing; (ii) no injunction or temporary restraining order which would
prohibit the making of the Loans or the consummation of any of the other
transactions contemplated by any of the Loan Documents (collectively the
"Restatement Transactions"), or other litigation which could
------------------------ reasonably be expected to have a Material Adverse
Effect is pending or, to the best of such Person's knowledge, threatened;
(iii) all orders, consents, approvals, licenses, authorizations, or
validations of, or filings, recordings or registrations with, or exemptions
by, any governmental or public body or authority, or any subdivision
thereof, required to make or consummate the Restatement Transactions have
been or, prior to the time required, will have been, obtained, given, filed
or taken and are or will be in full force and effect (or the Borrower has
obtained effective judicial relief with respect to the application thereof)
and that all applicable waiting periods have expired; (iv) the Loan
Documents are in full force and effect and no term or condition thereof has
been amended, modified or waived after the execution thereof except with
the written consent of the Agent; (v) each of the representations and
warranties set forth in Article V of this Agreement is true and correct on
and as of the --------- date hereof; and (vi) since January 3, 1998, no
event or change has occurred that has caused or evidences a Material
Adverse Effect.
(a) Legal Opinion. A written opinion of the Borrower's counsel, addressed to
the Agent and the Lenders in form and substance acceptable to the Agent and
its counsel.
(a) Notes. To the extent required by any Lender, Notes payable to the order of
each such Lender ----- duly executed by the Borrower.
(a) Transfer Instructions. Written money transfer instructions addressed to the
Agent and signed by an Authorized Officer, together with such other related
money transfer authorizations as the Agent may have reasonably requested.
(a) Year 2000. Information satisfactory to the Agent and the Required Lenders
regarding the Borrower's Year 2000 Program.
(a) Loan Documents. Executed originals of this Agreement and each of the other
Loan Documents to be executed on the Restatement Date, which shall be in
full force and effect, together with all schedules, exhibits, certificates,
instruments, opinions, documents and financial statements required to be
delivered pursuant hereto and thereto.
(a) Certain Payments. The Borrower shall have paid to the Agent for the ratable
account of the Existing Lenders the full amount of all principal, interest
and fees outstanding or accrued and unpaid under the Existing Credit
Agreement.
(a) Departing Lenders. The Departing Lenders shall have consented to this
Agreement and the reduction to $0 of their respective commitments
hereunder, such consent to be in form and substance satisfactory to the
Agent.
(a) Fees. Evidence that the Borrower shall have paid all fees due or owing on
the Restatement Date pursuant to that certain letter agreement with First
Chicago dated as of July 22, 1998.
(a) Other. Such other documents as the Agent or any Lender or its counsel may
have reasonably ----- requested.
1.1 Each Future Advance . The Lenders shall not be required to make any Advance
unless on the applicable Borrowing Date: 1.2 (a) There exists no Default or
Unmatured Default and none would result from such Advance;
(a) The representations and warranties contained in Article V are true and
correct as of such Borrowing Date except as to matters occurring after the
date hereof and affecting solely the accuracy of Schedule 5.9, 5.10, 5.16,
5.20 or 5.22;
(a) A Borrowing Notice shall have been properly submitted; and
(a) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Section 4.2 have been satisfied. Any Lender may require a duly
completed compliance certificate in substantially the form of Exhibit C hereto
as a condition to making an Advance.
1 ARTICLE REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that, both before
and after giving effect to the Restatement Transactions:
1.1 Corporate Existence and Standing . Each of the Borrower and each Subsidiary
is a corporation duly incorporated, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation and is duly qualified
and in good standing as a foreign corporation and is duly authorized to conduct
its business in each jurisdiction in which its business is conducted or proposed
to be conducted.
1.2
1.3 Authorization and Validity . The Borrower has all requisite power and
authority (corporate and otherwise) and legal right to execute and deliver each
of the Loan Documents to which it is a party and to perform its obligations
thereunder. The execution and delivery by the Borrower of the Loan Documents to
which it is a party and the performance of its obligations thereunder have been
duly authorized by proper corporate proceedings, and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
1.4
1.5 Compliance with Laws and Contracts . The Borrower and its Subsidiaries have
complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective properties,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. Neither the execution and delivery by the Borrower of
the Loan Documents, the application of the proceeds of the Loans, the
consummation of any transaction contemplated in the Loan Documents, nor
compliance with the provisions of the Loan Documents will, or at the relevant
time did, (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or any Subsidiary or the
Borrower's or any Subsidiary's articles or certificate of incorporation or
by-laws, (b) violate the provisions of or require the approval or consent of any
party to any indenture, instrument or agreement to which the Borrower or any
Subsidiary is a party or is subject, or by which it, or its property, is bound,
or conflict with or constitute a default thereunder, or result in the creation
or imposition of any Lien (other than Liens permitted by the Loan Documents) in,
of or on the property of the Borrower or any Subsidiary pursuant to the terms of
any such indenture, instrument or agreement, or (c) require any consent of the
stockholders of any Person, except for approvals or consents which will be
obtained on or before the initial Advance and are disclosed on Schedule 5.3,
except for any violation of, or failure to obtain an approval or consent
required under, any such indenture, instrument or agreement that could not
reasonably be expected to have a Material Adverse Effect. 1.6 1.7 Governmental
Consents . No order, consent, approval, qualification, license, authorization,
or validation of, or filing, recording or registration with, or exemption by, or
other action in respect of, any court, governmental or public body or authority,
or any subdivision thereof, any securities exchange or other Person is or at the
relevant time was required to authorize, or is or at the relevant time was
required in connection with the execution, delivery, consummation or performance
of, or the legality, validity, binding effect or enforceability of, any of the
Loan Documents, the application of the proceeds of the Loans or the consummation
of any transaction contemplated in the Loan Documents. Neither the Borrower nor
any Subsidiary is in default under or in violation of any foreign, federal,
state or local law, rule, regulation, order, writ, judgment, injunction, decree
or award binding upon or applicable to the Borrower or such Subsidiary, in each
case the consequences of which default or violation could reasonably be expected
to have a Material Adverse Effect. 1.8 1.9 Financial Statements . The Borrower
has heretofore furnished to each of the Lenders (a) the January 3, 1998 audited
consolidated financial statements of the Borrower and its Subsidiaries, and (b)
the unaudited consolidated financial statements of the Borrower and its
Subsidiaries through April 4, 1998 (collectively, the "Financial Statements").
Each of the Financial Statements was prepared in accordance with Agreement
Accounting Principles and fairly presents the consolidated financial condition
and operations of the Borrower and its Subsidiaries at such dates and the
consolidated results of their operations for the respective periods then ended
(except, in the case of such unaudited statements, for normal year-end audit
adjustments and the absence of footnotes). 1.10 1.11 Material Adverse Change .
No material adverse change in the business, Property, condition (financial or
otherwise), performance, prospects or results of operations of the Borrower and
its Subsidiaries has occurred since January 3, 1998. 1.12 1.13 Taxes . The
Borrower and its Subsidiaries have filed or caused to be filed all United States
federal and applicable state tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any Subsidiary, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and to which no Lien exists. No United States income tax returns of
the Borrower on a consolidated basis have been audited by the Internal Revenue
Service. No tax liens have been filed and no claims are being asserted with
respect to any such taxes which could reasonably be expected to have a Material
Adverse Effect. The charges, accruals and reserves on the books of the Borrower
and its Subsidiaries in respect of any taxes or other governmental charges are
in accordance with Agreement Accounting Principles. 1.14 1.15 Litigation and
Contingent Obligations . There is no litigation, arbitration, proceeding,
inquiry or governmental investigation (including, without limitation, by the
Federal Trade Commission) pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any Subsidiary or any of their
respective properties (a) which could reasonably be expected to have a Material
Adverse Effect or to prevent, enjoin or unduly delay the making of the Loans or
Advances under this Agreement or (b) as of the date of this Agreement, except as
set forth in Schedule 5.8. Neither the Borrower nor any Subsidiary has any
material contingent obligations except as set forth on Schedule 5.8. 1.16 1.17
Capitalization . Schedule 5.9 hereto contains an accurate list of all of the
existing Subsidiaries as of the date of this Agreement, setting forth their
respective jurisdictions of incorporation and the percentage of their capital
stock owned by the Borrower or other Subsidiaries. All of the issued and
outstanding shares of capital stock of the Borrower and of each Subsidiary have
been duly authorized and validly issued and are fully paid and non-assessable,
and all such shares of each Subsidiary are free and clear of all Liens. Except
as set forth on Schedule 5.9, no authorized but unissued or treasury shares of
capital stock of the Borrower or any Subsidiary are subject to any option,
warrant, right to call or commitment of any kind or character. Except as set
forth on Schedule 5.9, neither the Borrower nor any Subsidiary has any
outstanding stock or securities convertible into or exchangeable for any shares
of its capital stock, or any right issued to any Person (either preemptive or
other) to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or other) of, or any
calls, commitments or claims of any character relating to any of its capital
stock or any stock or securities convertible into or exchangeable for any of its
capital stock other than as expressly set forth in the certificate or articles
of incorporation of the Borrower or such Subsidiary. Neither the Borrower nor
any Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
convertible securities, rights or options of the type described in the preceding
sentence except as otherwise set forth on Schedule 5.9. 1.18 1.19 ERISA . Except
as set forth on Schedule 5.10 hereto, the Borrower does not maintain any Single
Employer Plans. The Borrower has no Unfunded Liabilities with respect to any
Single Employer Plans. Neither the Borrower nor any other member of the
Controlled Group is a party to any Multiemployer Plan or has incurred, or is
reasonably expected to incur, any withdrawal liability to any Multiemployer
Plan. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so and no steps have
been taken to reorganize or terminate any Plan. 1.20 1.21 Defaults . No Default
or Unmatured Default has occurred and is continuing. 1.22 1.23 Federal Reserve
Regulations . Neither the Borrower nor any Subsidiary is engaged, directly or
indirectly, principally, or as one of its important activities, in the business
of extending, or arranging for the extension of, credit for the purpose of
purchasing or carrying Margin Stock. No part of the proceeds of any Loan will be
used in a manner which would violate, or result in a violation of, Regulation T,
Regulation U or Regulation X. Neither the making of any Advance hereunder, nor
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation T, Regulation U or Regulation X. Following the
application of the proceeds of any Revolving Loan, less than 25% of the value
(as determined by any reasonable method) of the assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder taken as a whole have been, and will continue to be,
represented by Margin Stock. 1.24 1.25 Investment Company . Neither the Borrower
nor any Subsidiary is, or after giving effect to any Advance will be, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. 1.26 1.27 Certain
Fees . Other than as disclosed on Schedule 5.14, no broker's or finder's fee or
commission was, is or will be payable by the Borrower or any Subsidiary with
respect to any of the transactions contemplated by this Agreement. The Borrower
hereby agrees to indemnify the Agent and the Lenders against and agrees that it
will hold each of them harmless from any claim, demand or liability for broker's
or finder's fees or commissions alleged to have been incurred by the Borrower in
connection with any of the transactions contemplated by this Agreement and any
expenses (including, without limitation, attorneys' fees and time charges of
attorneys for the Agent or any Lender, which attorneys may be employees of the
Agent or any Lender) arising in connection with any such claim, demand or
liability. No other similar fee or commissions will be payable by the Borrower
or any Subsidiary for any other services rendered to the Borrower or any
Subsidiary ancillary to any of the transactions contemplated by this Agreement.
1.28 1.29 Solvency . As of the date hereof, after giving effect to the
consummation of the Restatement Transactions and the payment of all fees, costs
and expenses payable by the Borrower with respect to the Restatement
Transactions, each of the Borrower and each Subsidiary is Solvent. 1.30
Ownership of Properties . Except as set forth on Schedule 5.16 hereto, the
Borrower and its Subsidiaries have a subsisting leasehold interest in, or good
and marketable title, free of all Liens, other than those permitted by Section
6.17, to all of the properties and assets reflected in the Financial Statements
as being owned by it, except for assets sold, transferred or otherwise disposed
of in the ordinary course of business since the date thereof. Schedule 5.16
hereto contains a true, complete and accurate list of all real property owned or
leased by the Borrower and indicates whether such property is owned or leased.
To the knowledge of the Borrower, there are no actual, threatened or alleged
defaults with respect to any leases of real property under which the Borrower or
any Subsidiary is lessee or lessor which could reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries own or possess rights
to use all licenses, patents, patent applications, copyrights, servicemarks,
trademarks and trade names necessary to continue to conduct their business as
heretofore conducted, and no such license, patent or trademark has been declared
invalid, been limited by order of any court or by agreement or is the subject of
any infringement, interference or similar proceeding or challenge, except for
challenges which could not reasonably be expected to have a Material Adverse
Effect. 1.31 1.32 Indebtedness . Attached hereto as Schedule 5.17 is a complete
and correct list of all Indebtedness of the Borrower and its Subsidiaries
outstanding on the date of this Agreement (other than Indebtedness in a
principal amount not exceeding $5,000 for a single item of Indebtedness and
$50,000 in the aggregate for all such Indebtedness), showing the aggregate
principal amount which was outstanding on such date after giving effect to the
making of the Loans and the sale of the 1998 Senior Notes. The Borrower has
delivered or caused to be delivered to the Lenders a true and complete copy of
each instrument evidencing any Indebtedness listed on Schedule 5.17 and of each
document pursuant to which any of such Indebtedness was issued except as set
forth on Schedule 5.17. 1.33 1.34 Employee Controversies . There are no strikes,
work stoppages or controversies pending or threatened between the Borrower or
any Subsidiary and any of its employees, other than employee grievances arising
in the ordinary course of business, which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. 1.35 1.36 Material
Agreements . Neither the Borrower nor any Subsidiary is a party to any agreement
or instrument or subject to any charter or other corporate restriction which
could reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement to which it is a party, which default could reasonably be expected to
have a Material Adverse Effect. 1.37 1.38 Hazardous Materials . Neither the
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in compliance with any of the requirements of applicable
federal, state and local environmental, health and safety statutes and
regulations (hereinafter "Environmental Laws") with respect to, or are the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. Neither the Borrower nor any Subsidiary has
caused or permitted any toxic or hazardous waste or product to be disposed of,
either on or under real property legally or beneficially owned or operated by
the Borrower or any Subsidiary, that could reasonably be expected to have a
Material Adverse Effect. No such real property has ever been used as a dump site
or storage site for any toxic or hazardous waste, substance or product that
could reasonably be expected to have a Material Adverse Effect. The failure, if
any, of the Borrower or any Subsidiary, in connection with the operation of
their business, to obtain or be in compliance with any permit, certificate,
license, approval and other authorization, or to file any notification or report
relating to chemical substances, air emissions, effluent discharges and storage,
treatment, transport and disposal has not had and could not reasonably be
expected to have, a Material Adverse Effect. The Borrower and its Subsidiaries
have no liabilities with respect to toxic or hazardous waste or product, and no
facts or circumstances exist which could give rise to liabilities with respect
to toxic or hazardous waste or product, which, in either case, have or could
reasonably be expected to have a Material Adverse Effect. Except as disclosed on
Schedule 5.20, the Borrower and its Subsidiaries have no liabilities exceeding
$100,000 with respect to toxic or hazardous waste or product and no facts or
circumstances exist which could give rise to such liabilities with respect to
toxic or hazardous waste product. None of the matters disclosed on Schedule
5.20, have or could reasonably be expected to have a Material Adverse Effect. As
of the date hereof, the Borrower and its Subsidiaries have no liabilities
exceeding $100,000 with respect to compliance with applicable federal, state and
local laws, statutes, codes, rules or regulations relating to the protection of
the air and atmosphere, including, without limitation, the Clean Air Act, 42
U.S.C. ss. 7401 et seq., and the Illinois Air Pollution Rules and Regulations,
35 Ill. Admin. Code ss. 201.101 et seq. (collectively, "Air Regulations"), and
no facts or circumstances exist which could give rise to such liabilities with
respect to compliance with applicable Air Regulations, and the operation and
production of the Borrower and its Subsidiaries will not be materially impacted
or affected by Borrower's and its Subsidiaries' compliance with applicable Air
Regulations. 1.39 1.40 Year 2000 . The Borrower has made a full and complete
assessment of the Year 2000 Issues and has a realistic and achievable program
for remediating the Year 2000 Issues on a timely basis (the "Year 2000
Program"). Based on such assessment and on the Year 2000 Program the Borrower
does not reasonably anticipate that Year 2000 Issues will have a Material
Adverse Effect. 1.41 1.42 Insurance . Each of the Borrower and each Subsidiary
carries and has in existence insurance which is adequate to protect it. Schedule
5.22 completely and accurately summarizes the property and casualty insurance in
existence and carried by the Borrower applicable to its domestic operations and
includes the insurer's or insurers' name(s), policy number(s), expiration
date(s), amount(s) of coverage, type(s) of coverage, exclusion(s), and
deductibles. Schedule 5.22 also includes similar information, and describes any
reserves, relating to any self-insurance program covering the domestic
operations of the Borrower or any Subsidiary that is in effect. 1.43 1.44
Disclosure . None of the (a) information, exhibits or reports furnished or to be
furnished by the Borrower or any Subsidiary to the Agent or to any Lender in
connection with the negotiation of the Loan Documents, or (b) representations or
warranties of the Borrower or any Subsidiary contained in this Agreement, the
other Loan Documents or any other document, certificate or written statement
furnished to the Agent or the Lenders by or on behalf of the Borrower or any
Subsidiary for use in connection with the transactions contemplated by this
Agreement, contained, contains or will contain any untrue statement of a
material fact or omitted, omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. The pro forma financial
information contained in such materials is based upon good faith estimates and
assumptions believed by the Borrower to be reasonable at the time made. There is
no fact known to the Borrower (other than matters of a general economic nature)
that has had or could reasonably be expected to have a Material Adverse Effect
and that has not been disclosed herein or in such other documents, certificates
and statements furnished to the Lenders for use in connection with the
transactions contemplated by this Agreement. 1.45 1.46 Contracts . The Borrower
has no actual knowledge that any party is in default under any material
contract, agreement, franchise, lease, permit, consent, license or commitment
applicable thereto. Without limiting the generality of the foregoing, the
Borrower has no actual knowledge that any equipment necessary for the continued
operation of its businesses (and those of its Subsidiaries) as now conducted,
and as proposed to be conducted, is being utilized, operated and maintained
other than in conformity in all material respects with the provisions of such
contracts, agreements, franchises, leases, permits, consents and licenses
applicable thereto.
1 ARTICLE COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
1.1 Financial Reporting . The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, consistently applied, and furnish
to the Lenders:
(a) As soon as practicable and in any event within 90 days after the close of
each of its fiscal years, an unqualified audit report certified by
independent certified public accountants, acceptable to the Lenders,
prepared in accordance with Agreement Accounting Principles on a
consolidated and consolidating basis (consolidating statements need not be
certified by such accountants) for itself and its Subsidiaries, including
balance sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows,
accompanied by (i) any management letter prepared by said accountants, (ii)
a certificate of said accountants that, in the course of the examination
necessary for their certification of the foregoing, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the opinion of
such accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof, (iii) a letter from said accountants addressed
to the Lenders acknowledging that the Lenders are extending credit in
primary reliance on such financial statements and authorizing such
reliance, and (iv) a certificate describing any changes which would be
required to be made to Schedules 5.9, 5.10, 5.16, 5.20 and 5.22 in order
------------- ---- ---- ---- ---- to make such Schedules accurate as of
such date.
(a) As soon as practicable and in any event within 45 days after the close of
the first three quarterly periods of each of its fiscal years, for itself
and its Subsidiaries, consolidated and consolidating unaudited balance
sheets as at the close of each such period and consolidated and
consolidating profit and loss and reconciliation of surplus statements and
a statement of cash flows for the period from the beginning of such fiscal
year to the end of such quarter, all certified by its chief financial
officer.
(a) As soon as practicable and in any event within 30 days after the end of
each month, for itself and its Subsidiaries, consolidated and consolidating
unaudited profit and loss and reconciliation of surplus statements and a
statement of cash flows and an unaudited balance sheet of the Borrower and
its Subsidiaries as at the end of such monthly period and for the period
from the beginning of such fiscal year to the end of such monthly period,
setting forth in each case in comparative form consolidated figures for the
corresponding period in the preceding fiscal year and to the projections
delivered for such fiscal year, all prepared in accordance with Agreement
Accounting Principles and in reasonable detail and all certified by the
chief financial officer of the Borrower.
(a) As soon as available, but in any event not later than the last Business Day
in February of each year, a copy of the plan and forecast (including a
projected consolidated and consolidating balance sheet, income statement
and funds flow statement) of the Borrower and its Subsidiaries for such
year.
(a) Together with the financial statements required by clauses (a) and (b)
above, a compliance certificate in substantially the form of Exhibit C
hereto signed by its chief financial officer showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(a) Within 270 days after the close of each fiscal year, a statement of the
Unfunded Liabilities of each Single Employer Plan, certified as correct by
an actuary enrolled under ERISA.
(a) As soon as possible and in any event within 10 days after the Borrower
knows that any Reportable Event has occurred with respect to any Plan, a
statement, signed by the chief financial officer of the Borrower,
describing said Reportable Event and the action which the Borrower proposes
to take with respect thereto.
(a) As soon as possible and in any event within 10 days after receipt by the
Borrower, a copy of (i) any notice or claim to the effect that the Borrower
or any of its Subsidiaries is or may be liable to any Person as a result of
the release by the Borrower, any of its Subsidiaries, or any other Person
of any toxic or hazardous waste or substance into the environment, and (ii)
any notice alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the Borrower or any of
its Subsidiaries, which, in either case, could reasonably be expected to
have a Material Adverse Effect.
(a) Promptly upon the furnishing thereof to the shareholders of the Borrower,
copies of all financial statements, reports and proxy statements so
furnished.
(a) Promptly upon the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which the Borrower or
any of its Subsidiaries files with the Securities and Exchange Commission.
(a) Promptly upon the execution thereof, copies of the 1998 Senior Notes and
1998 Senior Note Agreement.
(a) Such other information (including non-financial information) as the Agent
or any Lender may from time to time reasonably request.
1.1 Use of Proceeds . The Borrower will, and will cause each Subsidiary to, use
the proceeds of the Loans to provide funds for repurchases of the Borrower's
common stock and common stock warrants, Purchases and Investments in joint
ventures and to meet the working capital needs of the Borrower and its
Subsidiaries. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances (a) to purchase or carry any Margin Stock or
(b) in connection with any hostile takeover.
1.2
1.3 Notice of Default . The Borrower will, and will cause each Subsidiary to,
give prompt notice in writing to the Lenders of the occurrence of any Default or
Unmatured Default and of any other development, financial or other, which could
reasonably be expected to have a Material Adverse Effect.
1.4
1.5 Conduct of Business . The Borrower will, and will cause each Subsidiary to,
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted and to
do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted. 1.6 1.7 Taxes . The Borrower will, and will
cause each Subsidiary to, pay when due all taxes, assessments and governmental
charges and levies upon it or its income, profits or Property, except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside. 1.8 1.9 Insurance . The
Borrower will, and will cause each Subsidiary to, maintain with financially
sound and reputable insurance companies insurance on all their Property in such
amounts and covering such risks as is consistent with sound business practice,
and the Borrower will furnish to the Agent or any Lender upon request full
information as to the insurance carried. 1.10 1.11 Compliance with Laws . The
Borrower will, and will cause each Subsidiary to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, the failure to comply with which could reasonably be expected
to have a Material Adverse Effect. 1.12 1.13 Maintenance of Properties . The
Borrower will, and will cause each Subsidiary to, do all things necessary to
maintain, preserve, protect and keep its Property in good repair, working order
and condition, and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times. 1.14 1.15 Inspection . The Borrower will, and
will cause each Subsidiary to, permit the Agent and the Lenders, by their
respective representatives and agents, to inspect any of the Property, corporate
books and financial records of the Borrower and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of the Borrower
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and each Subsidiary with, and to be advised as to the same by, their
respective officers at such reasonable times and intervals as the Lenders may
designate. The Borrower will keep or cause to be kept, and cause each Subsidiary
to keep or cause to be kept, appropriate records and books of account in which
complete entries are to be made reflecting its and their business and financial
transactions, such entries to be made in accordance with Agreement Accounting
Principles consistently applied. 1.16 1.17 Capital Stock and Dividends . If a
Default or an Unmatured Default has occurred and is continuing or would occur
after giving effect thereto, the Borrower will not, nor will it permit any
Subsidiary to, (a) issue any preferred stock, other capital stock or any debt or
equity securities of any kind, or (b) declare or pay any dividends on its
capital stock (other than dividends payable in its own capital stock) or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any time
outstanding, except that any Subsidiary may declare and pay dividends to the
Borrower. 1.18 1.19 Indebtedness . The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except: 1.20
(a) the Loans;
(a) Indebtedness existing on the date hereof and described in Schedule 5.17
hereto; -------------
(a) the 1993 Senior Notes and the 1998 Senior Notes, provided that the 1998
Senior Notes shall be issued substantially on the terms set forth on
Schedule 6.11 hereto and otherwise on terms and pursuant to documentation
satisfactory to the Agent;
(a) Rate Hedging Obligations related to the Loans;
(a) Letters of Credit with an aggregate face amount not to exceed $8,000,000 at
any one time outstanding or a credit facility providing for the issuance
thereof;
(a) Rate Hedging Obligations related to foreign currency exchange transactions
entered into in the ordinary course of business; and
(a) such additional Indebtedness incurred by the Borrower or any Subsidiary
which is either unsecured or secured by liens permitted under Section
6.17(f) as would not cause the Debt Ratio (determined, as to the EBITDA
component thereof, as of the end of the previous quarter, but after giving
effect to the incurrence of such Indebtedness), to exceed 2.5 to 1.0 as of
the date of such incurrence.
1.1 Merger . The Borrower will not, nor will it permit any Subsidiary to, merge
or consolidate with or into or sell all or substantially all of its assets to
any other Person; provided, that the Borrower or any Subsidiary may enter into
any merger or consolidation with or sell all or substantially all of its assets
to, a corporation organized under the laws of any state of the United States
(the "surviving corporation"), so long as (a) any entity with or into which the
Borrower is being merged or consolidated or to which all or substantially all of
the Borrower's assets are being sold assumes the obligations of the Borrower
under the Loan Documents by written instrument reasonably acceptable in form and
substance to the Required Lenders, (b) no Default or Unmatured Default has
occurred and is continuing or would occur after giving effect thereto, including
without limitation any Default or Unmatured Default under Section 7.14, (c)
after giving effect thereto, the Borrower could incur an additional $1 of
Indebtedness pursuant to Section 6.11(g), (d) the Borrower has provided the
Lenders with pro forma financial statements giving effect thereto which evidence
compliance with Section 6.28 hereof, (e) the entity with or into which the
Borrower or such Subsidiary is being merged or consolidated or to which all or
substantially all of the Borrower's or such Subsidiary's assets are being sold
is in substantially the same or a similar type of business as the Borrower or
such Subsidiary and (f) such transaction is not a hostile takeover. 1.2 1.3 Sale
of Assets . The Borrower will not, nor will it permit any Subsidiary to, lease,
sell, transfer or otherwise dispose of its Property, to any other Person except
for (a) sales of inventory in the ordinary course of business, and (b) so long
as no Default or Event of Default has occurred and is continuing, leases, sales,
transfers or other dispositions that, together with all other Property of the
Borrower and its Subsidiaries previously leased, sold or disposed of (other than
inventory sold in the ordinary course of business) as permitted by this Section
6.13, (i) in any fiscal year do not constitute more than 5% of the consolidated
assets of the Borrower and its Subsidiaries, as would be shown in the
consolidated financial statements of the Borrower and its Subsidiaries as at the
end of the quarter next preceding the date of determination, or (ii) for the
period from the Closing Date through the date of determination do not constitute
more than 25% of such assets. 1.4 1.5 Sale and Leaseback . The Borrower will
not, nor will it permit any Subsidiary to, sell or transfer any of its Property
in order to concurrently or subsequently lease as lessee such or similar
Property. 1.6 1.7 Investments and Purchases . The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including,
without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or create any Subsidiary or become or
remain a partner in any partnership or joint venture, or make any Purchases of
any Person, except: 1.8 (a) Short-term obligations of, or fully guaranteed by,
the United States of America;
(a) Commercial paper rated A-l or better by Standard and Poor's Rating
Services, a division of the McGraw Hill Companies, or P-l or better by
Moody's Investors Service, Inc.;
(a) Demand deposit accounts maintained in the ordinary course of business;
(a) Negotiable certificates of deposit issued by and time deposits with
domestic commercial banks having capital and surplus in excess of
$250,000,000;
(a) Municipal bonds rated BBB or better by Standard and Poor's Rating Services,
a division of the McGraw Hill Companies;
(a) Existing Investments in Subsidiaries and other Investments in existence on
the date hereof and described in Schedule 6.15 hereto;
(a) Purchases by the Borrower or any Subsidiary, so long as (i) no Default or
Unmatured Default has occurred and is continuing or would occur after
giving effect thereto, (ii) after giving effect thereto, the Borrower could
incur an additional $1 of Indebtedness pursuant to Section 6.11(g),
--------------- (iii) the Borrower has provided the Lenders with pro forma
financial statements giving effect thereto which evidence compliance with
Section 6.28 hereof, (iv) the entity being acquired is ------------ in
substantially the same or a similar type of business as the Borrower and
(v) such transaction is not a hostile takeover; and
(a) So long as no Default or Unmatured Default has occurred and is continuing,
other Investments (including without limitation the creation of and the
making of Investments in newly-formed Subsidiaries) which do not exceed, in
the aggregate at one time outstanding, fifteen percent (15%) of the
aggregate Capitalization of the Borrower and its Subsidiaries; provided,
that the -------- Borrower shall not be required to dispose of any
Investment due to (i) a decrease in Capitalization following the date on
which such Investment was made or (ii) the occurrence of a Default or an
Unmatured Default.
1.1 Contingent Obligations . The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except by endorsement of instruments for deposit or collection in
the ordinary course of business. 1.2 1.3 Liens . The Borrower will not, nor will
it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of
or on the Property of the Borrower or any of its Subsidiaries, except: 1.4 (a)
Liens for taxes, assessments or governmental charges or levies on its Property
if the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books;
(a) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens and other similar liens arising in the ordinary course of business
which secure payment of obligations not more than 60 days past due or which
are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books;
(a) Liens arising out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;
(a) Utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with
respect to properties of a similar character and which do not in any
material way affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries;
(a) Liens existing on the date hereof and described in Schedule 6.17 hereto;
and -------------
(a) Purchase money Liens in connection with the acquisition of assets intended
to be used in the ordinary course of business; provided, that (i) such
Liens attached only to the tangible -------- Property (including
improvements to previously owned Property) so purchased or leased, (ii) the
Indebtedness secured by any such Lien does not exceed eighty percent (80%)
of the purchase price of the Property or improvements, as applicable, and
(iii) the aggregate Indebtedness securing all such Liens at any one time
outstanding does not exceed five percent (5%) of the aggregate
Capitalization of the Borrower and its Subsidiaries.
1.1 Capital Expenditures . If a Default or an Unmatured Default has occurred and
is continuing, the Borrower will not, nor will it permit any Subsidiary to,
expend, or be committed to expend for Capital Expenditures (including, without
limitation, for the acquisition of fixed assets) during any fiscal year in
excess of the amount of Capital Expenditures estimated to be expended in such
fiscal year by the Borrower in the projections delivered to the Lenders pursuant
to Section 6.1(d).
1.1 Lease Rentals . The Borrower will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist obligations for Rentals in excess of $5,000,000
during any one fiscal year on a non-cumulative basis in the aggregate for the
Borrower and its Subsidiaries.
1.1 Year 2000 . The Borrower will take and will cause each of its Subsidiaries
to take all such actions as are reasonably necessary to successfully implement
the Year 2000 Program and to assure that Year 2000 Issues will not have a
Material Adverse Effect. At the request of the Agent or any Lender, the Borrower
will provide a description of the Year 2000 Program, together with any updates
or progress reports with respect thereto. 1.2 1.3 Letters of Credit . The
Borrower will not, nor will it permit any Subsidiary to, apply for or become
liable upon any Letter of Credit except as permitted under Section 6.11(e).
1.1 Affiliates . The Borrower will not, and will not permit any Subsidiary to,
enter into any transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer to, any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than the Borrower or such Subsidiary would obtain in a comparable arms-length
transaction. 1.2 1.3 Amendments to Agreements . The Borrower will not, and will
not permit any Subsidiary to, (a) amend, waive, modify or terminate the terms
and conditions governing any preferred stock, (b) permit any amendment, waiver
or modification of the Tax Sharing Agreement which is materially adverse to the
interests of the Lenders or terminate the Tax Sharing Agreement or (c) if a
Default or an Unmatured Default has occurred and is continuing, directly or
indirectly voluntarily prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire any Senior Note or redeem or retire any
preferred stock. 1.4 (a) Environmental Matters . If the Borrower or any
Subsidiary receives notice of any of the following: (i) the issuance of a
complaint, notice or citation alleging a violation of any Environmental Law or
regulation by the Borrower or any Subsidiary; (ii) the issuance of an
administrative or judicial complaint or order against the Borrower or any
Subsidiary seeking or requiring that action be taken to respond to or clean up a
"release" of "hazardous substances" (as those terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. ss.9601 et seq. ("CERCLA")) into the environment; or (iii) a
notice alleging that the Borrower or any Subsidiary may be liable or responsible
for costs associated with a response to or cleanup of a "release" of "hazardous
substances" (as those terms are defined in CERCLA), and if, based upon
information reasonably available at the time of receipt, the Borrower or any
Subsidiary expects that any such complaint, notice, citation or order is
reasonably likely to result in the payment of fines, penalties, compliance
costs, clean-up costs or other associated costs by the Borrower or any
Subsidiary in excess of an aggregate of $100,000, then the Borrower shall
provide the Agent with a copy of such notice within thirty days of receipt
thereof by the Borrower or such Subsidiary. In addition, if at any time
subsequent to any such notice, any information subsequently becomes available to
the Borrower or any Subsidiary which leads the Borrower to expect that any such
complaint, notice, or citation is reasonably likely to result in the payment of
fines, penalties, compliance costs, clean-up costs or other associated costs by
the Borrower or any Subsidiary in excess of an aggregate of $100,000, then the
Borrower shall provide the Agent with a copy of such notice and a summary of
such information within ten days after receipt of such information by the
Borrower or any Subsidiary. (b) (c) Within ten days of the Borrower or any
Subsidiary having learned of the proposal, enactment or
promulgation of any federal, state or local environmental law
or regulation which could reasonably be expected to have a
Material Adverse Effect, the Borrower shall provide the Agent
with written notice thereof.
1.1 Agreements as to Prohibited Acts . Neither the Borrower nor any subsidiary
shall agree or in any manner commit itself to take or fail to take any action
which, if taken or not taken, as applicable, would constitute a breach of this
Agreement. 1.2 1.3 Change in Corporate Structure; Fiscal Year . The Borrower
shall not, nor shall it permit any Subsidiary to, (a) permit any amendment or
modification to be made to its certificate or articles of incorporation or
by-laws which is materially adverse to the interests of the Lenders (provided
that the Borrower shall notify the Agent of any other amendment or modification
thereto as soon as practicable thereafter) or (b) change its fiscal year to end
on any date other than December 31 of each year. 1.4 1.5 Inconsistent Agreements
. The Borrower shall not, nor shall it permit any Subsidiary to, enter into any
indenture, agreement, instrument or other arrangement which (a) directly or
indirectly prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the incurrence of
the Obligations, the granting of Liens pursuant to the Loan Documents, the
amending of the Loan Documents or the ability of any Subsidiary to declare or
pay dividends or otherwise advance funds to its parent or (b) contains any
provision which would be violated or breached by the making of Advances or by
the performance by the Borrower of any of its obligations under any Loan
Document. 1.6 1.7 Financial Covenants. 1.8
6.28.1 Interest Expense Coverage Ratio . As of the end of each
of its fiscal quarters, the Borrower will cause the Interest Expense
Coverage Ratio for the then most-recently ended four fiscal quarters to
be not less than 4.0 to 1.0.
6.28.2. Debt Ratio . As of the end of each of its fiscal
quarters, the Borrower will cause the Debt Ratio to be not more than
2.5 to 1.0.
6.28.3. Minimum Net Worth. The Borrower will at all times
maintain Net Worth of not less than (a) $70,000,000 through January 1,
2000, (b) $75,000,000 through December 30, 2000, (c) $80,000,000
through December 29, 2001, (d) $85,000,000 through December 28, 2002
and (e) $90,000,000 through January 3, 2004.
1 ARTICLE DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
1.1 Any representation or warranty made or deemed made by or on behalf of the
Borrower or any of its Subsidiaries to the Lenders or the Agent under or in
connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
false in any material respect on the date as of which made.
1.1 Nonpayment of (a) principal of any Note when due, or (b) interest upon any
Note or any commitment fee or other fee or obligations under any of the Loan
Documents within five (5) days after the same becomes due. 1.2 1.3 The breach by
the Borrower of any of the terms or provisions of Sections 6.2 or 6.10 through
6.28. 1.4 1.5 The breach by the Borrower (other than a breach which constitutes
a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within five (5) days after written notice
from the Agent or any Lender. 1.6 1.7 The default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or condition contained in
any agreement or agreements under which any Indebtedness aggregating in excess
of $2,000,000 was created or is governed, or the occurrence of any other event
or the existence of any other condition, the effect of any of which is to cause,
or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof; or the Borrower or any of its
Subsidiaries shall become unable, not pay, or admit in writing its inability to
pay, its debts generally as they become due. 1.8 1.9 The Borrower or any of its
Subsidiaries shall (a) have an order for relief entered with respect to it under
the Federal bankruptcy laws as now or hereafter in effect, (b) make an
assignment for the benefit of creditors, (c) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (d) institute any proceeding seeking an order for relief under the
Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate
it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (e) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section 7.6, or (f) fail to contest in good faith any appointment or proceeding
described in Section 7.7. 1.10 1.11 Without the application, approval or consent
of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower or any of its
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 7.6(d) shall be instituted against the Borrower or any of
its Subsidiaries and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of thirty (30) consecutive days.
1.12 1.13 Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its Subsidiaries
so condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
constitutes a Substantial Portion. 1.14 1.15 The Borrower or any of its
Subsidiaries shall fail within thirty days to pay, bond or otherwise discharge
any judgment or order for the payment of money in excess of $500,000 (or
multiple judgments or orders for the payment of an aggregate amount in excess of
$2,000,000), which is not stayed on appeal or otherwise being appropriately
contested in good faith. 1.16 1.17 Any Unfunded Liabilities in excess of
$3,000,000 under any Single Employer Plan shall exist or any Reportable Event
shall occur in connection with any Plan. 1.18 1.19 The Borrower or any other
member of the Controlled Group shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan. 1.20 1.21 The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, and as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated has been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by any amount. 1.22
1.23 The Borrower or any of its Subsidiaries shall be the subject of any
proceeding or investigation pertaining to the discovery of any toxic or
hazardous waste or substance on the leased or owned property of the Borrower or
any of its Subsidiaries, the release by the Borrower or any of its Subsidiaries,
or any other Person of any toxic or hazardous waste or substance into the
environment, or any violation of any federal, state or local environmental,
health or safety law or regulation, which, in either case, could reasonably be
expected to have a Material Adverse Effect. 1.24 1.25 Any Change in Control
shall occur. 1.26
1 ARTICLE ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
- ----------------------------------------------
1.1 Acceleration . If any Default described in Section 7.6 or 7.7 occurs with
respect to the Borrower, the obligations of the Lenders to make Loans hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Agent or any
Lender. If any other Default occurs, the Required Lenders (or the Agent with the
consent of the Required Lenders) may terminate or suspend the obligations of the
Lenders to make Loans hereunder, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives.
Within ten (10) Business Days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, if the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
1.1 Amendments . Subject to the provisions of this Article VIII, the Required
Lenders (or the Agent with the consent in writing of the Required Lenders)
and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder
or waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of each Lender affected
thereby:
1.2 (a) Extend the final maturity of any Loan or Note or reduce
the principal amount thereof, or reduce the rate or extend the time of
payment of interest or fees thereon;
(a) Reduce the percentage specified in the definition of Required Lenders;
(a) Reduce the amount or extend the payment date for the mandatory payments
required under Section 2.2, or increase the amount of the Revolving Credit
Commitment of any Lender hereunder, or permit the Borrower to assign its
rights under this Agreement;
(a) Extend the Facility Termination Date;
(a) Amend this Section 8.2 or any of Sections 3.1, 3.2 and 3.4; or -----------
------------ --- ---
(a) Consent to any assignment by the Borrower of the Obligations except to the
extent expressly permitted by Section 6.12.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
1.1 Preservation of Rights . No delay or omission of the Lenders or the Agent to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
1 ARTICLE GENERAL PROVISIONS
1.1 Survival of Representations . All representations and warranties of the
Borrower contained in this Agreement or of the Borrower or any Subsidiary
contained in any Loan Document shall survive delivery of the Notes and the
making of the Loans herein contemplated.
1.1 Governmental Regulation . Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation. 1.2 1.3 Taxes . Any taxes (excluding taxes on
the overall net income of any Lender) or other similar assessments or charges
payable or ruled payable by any governmental authority in respect of the Loan
Documents shall be paid by the Borrower, together with interest and penalties,
if any. 1.4 1.5 Headings . Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents. 1.6 1.7 Entire Agreement . The Loan
Documents embody the entire agreement and understanding among the Borrower, the
Agent and the Lenders and supersede all prior agreements and understandings
among the Borrower, the Agent and the Lenders relating to the subject matter
thereof other than the fee letter dated July 15, 1993 in favor of First Chicago,
the letter dated February 27, 1996 between the Borrower and First Chicago and
the letter dated July 22, 1998 between the Borrower and First Chicago. 1.8 1.9
Several Obligations; Benefits of this Agreement . The respective obligations of
the Lenders hereunder are several and not joint and no Lender shall be the
partner or agent of any other (except to the extent to which the Agent is
authorized to act as such). The failure of any Lender to perform any of its
obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.7, 9.11 and 10.10 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
1.10 (a) Expenses; Indemnification . The Borrower shall reimburse the Agent and
the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent or the
Arranger in connection with the preparation, negotiation, execution, delivery,
syndication, review, amendment, modification, and administration of the Loan
Documents. The Borrower also agrees to reimburse the Agent, the Arranger and the
Lenders for any costs, internal charges and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Agent, the Arranger and
the Lenders, which attorneys may be employees of the Agent, the Arranger or the
Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection
with the collection and enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent, the Arranger and each Lender, its directors,
officers and employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all expenses
of litigation or preparation therefor whether or not the Agent or any Lender is
a party thereto) which any of them may pay or incur arising out of or relating
to this Agreement, the other Loan Documents, the transactions contemplated
hereby or thereby or the direct or indirect application or proposed application
of the proceeds of any Loan hereunder. The obligations of the Borrower under
this Section shall survive the termination of this Agreement. (b) (c) (b) The
Borrower shall indemnify, pay and hold the Agent, the Arranger and each Lender
harmless from and against any and all losses, costs (including, without
limitation, court costs and attorneys' fees), liabilities, injuries, expenses,
claims and damages whatsoever incurred or suffered by or asserted against the
Agent, the Arranger or such Lender by reason of any violation of any applicable
Environmental Law for which the Borrower or any of its Subsidiaries is liable or
which is related to any real estate owned, leased or operated by the Borrower or
any of its Subsidiaries, or by reason of the imposition of any governmental lien
for the recovery of environmental cleanup or response costs expended by reason
of any such violation, or by reason of any breach of any representation,
warranty or affirmative or negative covenant of this Agreement, including,
without limitation, by reason of any matter disclosed in Schedule 5.20 hereto;
provided, that to the extent that the Borrower or any of its Subsidiaries is
strictly liable under any such statute, order or regulation, the Borrower's
obligation to the Agent, the Arranger and each Lender under this indemnity shall
likewise be without regard to fault on the part of the Borrower or any of its
Subsidiaries with respect to the violation of law which results in liability to
the Agent, the Arranger or any Lender. The provisions of and undertakings and
indemnification set out in this Section 9.7 shall survive the termination of
this Agreement and the payment and satisfaction of the Obligations, and shall
continue to be the liability, obligation and indemnification of the Borrower,
binding upon the Borrower. 1.11 Numbers of Documents . All statements, notices,
closing documents and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders. 1.12 1.13 Accounting . Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles. 1.14 1.15 Severability of Provisions . Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable. 1.16 1.17 Nonliability of Lenders . The relationship between
the Borrower and the Lenders and the Agent shall be solely that of borrower and
lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent, the Arranger nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower's business or
operations. The Borrower shall rely entirely upon its own judgment with respect
to its business, and any review, inspection or supervision of, or information
supplied to the Borrower by the Agent, the Arranger or the Lenders is for the
protection of the Agent, the Arranger and the Lenders and neither the Borrower
nor any other Person is entitled to rely thereon. The Borrower (a) agrees that
neither the Agent, the Arranger nor any Lender shall have liability to the
Borrower (whether sounding in tort, contract or otherwise) for losses suffered
by the Borrower in connection with, arising out of, or in any way related to,
the transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined by a judgment of a court that is binding on the Agent,
the Arranger or such Lender, final and not subject to review on appeal, that
such losses were the result of acts or omissions on the part of the Agent, the
Arranger or such Lender, as the case may be, constituting gross negligence,
willful misconduct or knowing violations of law, and (b) waives, releases and
agrees not to sue upon any claim against the Agent, the Arranger or any Lender
(whether sounding in tort, contract or otherwise) except a claim based upon
gross negligence, willful misconduct or knowing violations of law. Whether or
not such damages are related to a claim that is subject to the waiver effected
above and whether or not such waiver is effective, none of the Agent, the
Arranger nor any Lender shall have any liability with respect to, and the
Borrower hereby waives, releases and agrees not to sue for, any special,
indirect or consequential damages suffered by the Borrower in connection with,
arising out of, or in any way related to the transactions contemplated or the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined by a judgment of a
court that is binding on the Agent, the Arranger or such Lender, as the case may
be, final and not subject to review on appeal, that such damages were the result
of acts or omissions on the part of the Agent, the Arranger or such Lender, as
the case may be, constituting gross negligence, willful misconduct or knowing
violations of law. 1.18 1.19 CHOICE OF LAW . THE LOAN DOCUMENTS (OTHER THAN
THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS. 1.20 1.21 CONSENT TO JURISDICTION . THE BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS;
PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION
MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS. 1.22 1.23 WAIVER OF JURY
TRIAL . THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
1.24 1.25 Disclosure . The Borrower and each Lender hereby (a) acknowledge and
agree that First Chicago and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the
Borrower, including, without limitation, in connection with (i) the placement of
the 1993 Senior Notes and (ii) any interest rate hedging instruments or
agreements or swap transactions, and (b) waive any liability of First Chicago or
such Affiliate to the Borrower or any Lender, respectively, arising out of or
resulting from such investments, loans or relationships other than liabilities
arising out of the gross negligence or willful misconduct of First Chicago or
its Affiliates. The Borrower hereby acknowledges and agrees that each Lender
and/or its Affiliates from time to time may hold other investments in, make
other loans to or have other relationships with the Borrower and waives any
liability of such Lender or Affiliate to the Borrower in connection with the
transactions contemplated by this Agreement and to the extent arising out of or
resulting from such investments, loans, or relationships, other than liabilities
arising out of the gross negligence or willful misconduct of such Lender or
Affiliate. 1.26 Counterparts . This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent by
telex or telephone, that it has taken such action. 1.27 1.28 9.17 Departing
Lenders. Upon the effectiveness of this Agreement and the payment to the
Departing Lenders of the Obligations due them, (a) the Departing Lenders shall
have no further Commitments hereunder and (b) the Departing Lenders shall cease
to have any rights or duties as Lenders hereunder; provided however, that the
Departing Lenders shall remain entitled to indemnities hereunder which by their
terms survive termination of this Agreement. 1.29 1.30
1 ARTICLE THE AGENT
1.1 Appointment . The First National Bank of Chicago is hereby appointed by each
of the Lenders as its contractual representative hereunder and under each other
Loan Document, and each of the Lenders, subject to the provisions of Section
10.11, irrevocably authorizes the Agent to act as the contractual representative
of such Lender with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such contractual representative
upon the express conditions contained in this Article X. Notwithstanding the use
of the defined term "Agent," it is expressly understood and agreed that the
Agent shall not have any fiduciary responsibilities to any Lender by reason of
this Agreement or any other Loan Document and that the Agent is merely acting as
the contractual representative of the Lenders with only those duties as are
expressly set forth in this Agreement and the other Loan Documents. In its
capacity as the Lenders' contractual representative, the Agent (i) does not
hereby assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105 of the
Uniform Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents.
1.1 Powers . The Agent shall have and may exercise such powers under the Loan
Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder, except any action specifically provided
by the Loan Documents to be taken by the Agent. 1.2 1.3 General Immunity .
Neither the Agent nor any of its directors, officers, agents or employees shall
be liable to the Borrower or any Lender for any action taken or omitted to be
taken by it or them hereunder or under any other Loan Document or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. 1.4 1.5 No Responsibility for Loans, Recitals, etc. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (a) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder, (b) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, (c) the
satisfaction of any condition specified in Article IV, except receipt of items
required to be delivered to the Agent and not waived at closing, or (d) the
validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith. 1.6 1.7 Action on
Instructions of Lenders . The Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and under any other Loan
Document in accordance with written instructions signed by the Required Lenders,
and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders and on all holders of Notes. The Agent
shall be fully justified in failing or refusing to take any action hereunder and
under any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action. 1.8 1.9 Employment of Agents and Counsel . The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document. 1.10 1.11 Reliance on
Documents; Counsel . The Agent shall be entitled to rely upon any Note, notice,
consent, certificate, affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and, in respect to legal matters, upon the opinion of
counsel selected by the Agent, which counsel may be employees of the Agent. 1.12
1.13 Agent's Reimbursement and Indemnification . The Lenders agree to reimburse
and indemnify the Agent ratably in proportion to their respective Commitments
(a) for any amounts not reimbursed by the Borrower for which the Agent is
entitled to reimbursement by the Borrower under the Loan Documents (but not
including any agent's fees), (b) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents, and (c) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents; provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement. 1.14 1.15 Rights as a Lender . In the event the Agent is a
Lender, the Agent shall have the same rights and powers hereunder and under any
other Loan Document as any Lender and may exercise the same as though it were
not the Agent, the Agent shall have the same obligations and responsibilities as
any Lender and the term "Lender" or "Lenders" shall, at any time when the Agent
is a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender. 1.16
1.17 Lender Credit Decision . Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents. 1.18 1.19 Successor Agent . The Agent
may resign at any time by giving written notice thereof to the Lenders and the
Borrower, and the Agent may be removed at any time with or without cause by
written notice received by the Agent from the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within thirty days after the retiring Agent's giving notice of
resignation, then the retiring Agent may appoint, on behalf of the Borrower and
the Lenders, a successor Agent. Such successor Agent shall be a commercial bank
having capital and retained earnings of at least $150,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent, and the
retiring or removed Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. After any retiring or removed
Agent's resignation or removal hereunder as Agent, the provisions of this
Article X shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents. 1.20 1.21 Notice of Default . The Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Unmatured Default hereunder unless the Agent has received notice from a
Lender or the Borrower referring to this Agreement describing such Default or
Unmatured Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders. Subject to the provisions of Section 10.5, the Agent
shall take any action of the type specified in this Agreement with respect to
such Default or Unmatured Default as shall be reasonably directed by the
Required Lenders (or, if so required by Section 8.2, by all Lenders); provided,
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Unmatured Default as the Agent
shall determine is in the best interests of the Lenders. 1.22 1.23 Delegation to
Affiliates . The Borrower and the Lenders agree that the Agent may delegate any
of its duties under this Agreement to any of its Affiliates. Any such Affiliate
(and such Affiliate's directors, officers, agents and employees) which performs
duties in connection with this Agreement shall be subject to the obligations
relating to such duties and shall be entitled to the same benefits of the
indemnification, waiver and other protective provisions to which the Agent is
entitled under Articles IX and X. 1.24
1 ARTICLE SETOFF; RATABLE PAYMENTS
1.1 Setoff . In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by
any Lender to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Obligations owing to such Lender, whether or
not the Obligations, or any part hereof, shall then be due.
1.1 Ratable Payments . If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Section 2.24(a), 3.1, 3.2 or 3.4) in a greater proportion than its pro-rata
share of such Loans, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made. If an amount to be setoff is to be applied to Indebtedness of the
Borrower to a Lender, other than Indebtedness evidenced by any of the Notes held
by such Lender, such amount shall be applied ratably to such other Indebtedness
and to the Indebtedness evidenced by such Notes. 1.2
1 ARTICLE BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
1.1 Successors and Assigns . The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that (a) the Borrower shall
not have the right to assign its rights or obligations under the Loan Documents,
and (b) any assignment by any Lender must be made in compliance with Section
12.3. Notwithstanding clause (b) of this Section, any Lender may at any time,
without the consent of the Borrower or the Agent, assign all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve Bank;
provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until such payee complies with Section 12.3 in the case of an assignment
thereof or, in the case of any other transfer, a written notice of the transfer
is filed with the Agent. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
1.1 Participations .
1.2
12.2.1. Permitted Participants; Effect . Any Lender may, in
the ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest of such Lender under
the Loan Documents; provided, that, other than in the case of a sale of a
participation by a Lender to an Affiliate thereof, such Lender has first offered
to sell such participating interests to the other Lenders for a period of ten
(10) days for an amount equal to the face value thereof plus all amounts owing
in connection therewith. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such Note for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement shall
be determined as if such Lender had not sold such participating interests, and
the Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the Loan
Documents.
12.2.2. Voting Rights . Each Lender shall retain the sole
right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than any
amendment, modification or waiver which effects any of the modifications
referenced in clauses (a) through (e) of Section 8.2.
12.2.3. Benefit of Setoff . The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section 11.1
in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under the Loan Documents; provided, that each
Lender shall retain the right of setoff provided in Section 11.1 with respect to
the amount of participating interests sold to each Participant. The Lenders
agree to share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each Lender, any
amount received pursuant to the exercise of its right of setoff, such amounts to
be shared in accordance with Section 11.2 as if each Participant were a Lender.
1.1 Assignments .
1.2
12.3.1. Permitted Assignments . Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all or any
part of its rights and obligations under the Loan Documents; provided, that,
other than in the case of an assignment by a Lender to an Affiliate thereof,
such Lender has first offered to sell such assignment to the other Lenders for a
period of ten (10) days for an amount equal to the face value thereof plus all
amounts owing in connection therewith. Such assignment shall be substantially in
the form of Exhibit D hereto or in such other form as may be agreed to by the
parties thereto. The consent of the Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a Lender
or an Affiliate thereof. Such consent shall not be unreasonably withheld or
delayed.
12.3.2. Effect; Effective Date . Upon (a) delivery to the
Agent of a notice of assignment, substantially in the form attached as Exhibit I
to Exhibit D hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (b) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and (b)
the transferor Lender shall be released with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser without any further
consent or action by the Borrower, the Lenders or the Agent. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting their Commitment, as adjusted
pursuant to such assignment.
1.1 Dissemination of Information . The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries. 1.2 1.3
Tax Treatment . If any interest in any Loan Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.24. 1.4
1 ARTICLE NOTICES
1.1 Giving Notice . Except as otherwise permitted by Section 2.8 with respect to
borrowing notices, all notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing, by
facsimile, first class U.S. mail or overnight courier and addressed or delivered
to such party at its address set forth below its signature hereto or at such
other address as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with first class postage
prepaid, return receipt requested, shall be deemed given three (3) Business Days
after deposit in the U.S. mail; any notice, if transmitted by facsimile, shall
be deemed given when transmitted; and any notice given by overnight courier
shall be deemed given when received by the addressee. Wherever under this
Agreement or under any other Loan Document any certificate or other writing is
given by any director, officer or employee of the Borrower or any Subsidiary,
such certificate or other writing shall be delivered by such director, officer
or employee on behalf of the Borrower or such Subsidiary in his or her capacity
as a director, officer or employee and not in his or her individual capacity.
1.1 Change of Address . The Borrower, the Agent and any Lender may each change
the address for service of notice upon it by a notice in writing to the other
parties hereto.
1.2
1.3
[signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
<PAGE>
-1-
LITTELFUSE, INC.
By:
Print Name:
Title:
Address: 800 Northwest Highway
Des Plaines, Illinois 60016
Attn: Chief Financial Officer
Telecopy: (847) 824-3024
Telephone: (847) 824-1188
<PAGE>
-1-
Commitments
$17,500,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
Print Name:
Title:
Address: One First National Plaza
Chicago, Illinois 60670
Attn: Karen F. Kizer
Telecopy: (312) 732-5161
Telephone: (312) 732-2330
<PAGE>
$12,500,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Print Name:
Title:
Address: 231 South LaSalle Street
6th Floor
Chicago, Illinois 60697
Attn: Jim Duff
Telecopy: (312) 974-2108
Telephone: (312) 828-5964
$12,500,000 CREDIT AGRICOLE INDOSUEZ
By:
Print Name:
Title:
By:
Print Name:
Title:
Address: 55 East Monroe
Suite 4700
Chicago, Illinois 60603
Attn: Susan Knight
Telecopy: (312) 372-2830
Telephone: (312) 917-7446
<PAGE>
$12,500,000 THE NORTHERN TRUST COMPANY
By:
Print Name:
Title:
Address: 50 South LaSalle
Floor B-2
Chicago, Illinois 60675
Attn: Robin Brody
Telecopy: (312) 444-7028
Telephone: (312) 444-3438
$55,000,000 Aggregate Commitment
<PAGE>
<TABLE>
PRICING SCHEDULE
============================== --------------------- -------------------- =====================
APPLICABLE MARGIN LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS
============================== --------------------- -------------------- =====================
<S> <C> <C> <C>
Eurocurrency Rate .375% .50% .625%
============================== ===================== ==================== =====================
Floating Rate 0% 0% 0%
============================== ===================== ==================== =====================
============================== ===================== ==================== =====================
LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS
============================== ===================== ==================== =====================
============================== ===================== ==================== =====================
Applicable Commitment Fee .125% .150% .20%
Rate
============================== ===================== ==================== =====================
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Financials" means the annual or quarterly financial statements of the
Borrower delivered pursuant to Section 6.1(a) or (b).
"Level I Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Debt Ratio is less than 1.50 to 1.00.
"Level II Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Debt Ratio is greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00.
"Level III Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Debt Ratio is greater than or equal to 2.00 to 1.00.
"Status" means either Level I Status, Level II Status or Level III
Status.
The Applicable Margin and Applicable Commitment Fee Rate shall be
determined in accordance with the foregoing table based on the Borrower's Status
as reflected in the then most recent Financials. Adjustments, if any, to the
Applicable Margin or Applicable Fee Rate shall be effective five (5) Business
Days after the Agent has received the applicable Financials. If the Borrower
fails to deliver the Financials to the Agent at the time required pursuant to
Section 6.1, then the Applicable Margin and Applicable Commitment Fee Rate shall
be the highest Applicable Margin and Applicable Commitment Fee Rate set forth in
the foregoing table until five (5) days after such Financials are so delivered.
Until adjusted as provided above after the date hereof, Level I Status shall be
deemed to exist.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Exhibit 4.11
- -----------------------------------------------------------------------------
LITTELFUSE, INC.
- ----------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
- ----------------------------------------------------------------------------
DATED AS OF SEPTEMBER 1, 1998
$60,000,000
6.16% SENIOR NOTES DUE SEPTEMBER 1, 2005
- -----------------------------------------------------------------------------
<PAGE>
ii
<TABLE>
TABLE OF CONTENTS
(Not a Part of the Agreement)
1. PURCHASE AND SALE OF NOTES...............................................................................1
<S> <C> <C>
1.1. Authorization of Notes..............................................................................1
1.2. The Closing.........................................................................................1
1.3. Purchase for Investment; ERISA......................................................................2
1.4. Source of Funds.....................................................................................2
1.5. Failure to Tender, Failure of Conditions............................................................4
1.6. Expenses............................................................................................4
2. WARRANTIES AND REPRESENTATIONS...........................................................................5
2.1. Nature of Business..................................................................................5
2.2. Financial Statements; Debt; Material Adverse Change.................................................5
2.3. Subsidiaries and Affiliates.........................................................................6
2.4. Title to Properties; Patents, Trademarks, etc.......................................................6
2.5. Taxes...............................................................................................7
2.6. Pending Litigation..................................................................................7
2.7. Full Disclosure.....................................................................................8
2.8. Corporate Organization and Authority................................................................8
2.9. Charter Instruments, Other Agreements...............................................................8
2.10. Restrictions on Company and Subsidiaries............................................................9
2.11. Compliance with Law.................................................................................9
2.12. ERISA, etc..........................................................................................9
2.13. Environmental Compliance...........................................................................10
2.14. Sale of Notes is Legal and Authorized; Obligations are Enforceable.................................11
2.15. Governmental Consent to Sale of Notes..............................................................12
2.16. Private Offering of Notes..........................................................................12
2.17. No Defaults; Transactions Prior to Closing Date....................................................12
2.18. Use of Proceeds of Notes...........................................................................13
3. CLOSING CONDITIONS......................................................................................13
3.1. Opinions of Counsel................................................................................14
3.2. Warranties and Representations True................................................................14
3.3. Officers'Certificates..............................................................................14
3.4. Legality...........................................................................................14
3.5. Private Placement Number...........................................................................14
3.6. Expenses...........................................................................................14
3.7. Other Purchasers...................................................................................15
3.8. Compliance with this Agreement.....................................................................15
3.9. Proceedings Satisfactory...........................................................................15
4. PAYMENTS................................................................................................15
4.1. Mandatory Principal Amortization Payments..........................................................15
4.2. Optional Prepayments...............................................................................15
4.3. Partial Prepayment Pro Rata........................................................................17
4.4. Notation of Notes on Prepayment....................................................................17
4.5. No Other Optional Prepayments......................................................................17
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...........................................................17
5.1. Registration of Notes..............................................................................17
5.2. Exchange of Notes..................................................................................18
5.3. Replacement of Notes...............................................................................19
5.4. Issuance Taxes.....................................................................................19
6. COVENANTS...............................................................................................19
6.1. Net Worth..........................................................................................19
6.2. Fixed Charges Coverage.............................................................................20
6.3. Restricted Payments................................................................................20
6.4. Funded Debt; Subsidiary Debt.......................................................................21
6.5. Transfers of Property; Subsidiary Stock............................................................22
6.6. Merger, Consolidation, etc.........................................................................24
6.7. Liens..............................................................................................25
6.8. Restricted Investments.............................................................................27
6.9. Transactions with Affiliates.......................................................................27
6.10. Nature of Business.................................................................................28
6.11. Payment of Taxes and Claims........................................................................28
6.12. Maintenance of Properties; Corporate Existence; etc................................................28
6.13. Payment of Notes and Maintenance of Office.........................................................29
6.14. ERISA, etc.........................................................................................30
6.15. Pro-Rata Offers....................................................................................31
6.16. Private Offering...................................................................................31
7. INFORMATION AS TO COMPANY...............................................................................31
7.1. Financial and Business Information.................................................................31
7.2. Officers'Certificates..............................................................................35
7.3. Accountants'Certificates...........................................................................36
7.4. Inspection.........................................................................................36
8. EVENTS OF DEFAULT.......................................................................................36
8.1. Nature of Events...................................................................................36
8.2. Default Remedies...................................................................................38
8.3. Annulment of Acceleration of Notes.................................................................40
9. INTERPRETATION OF THIS AGREEMENT........................................................................41
9.1. Terms Defined......................................................................................41
9.2. GAAP...............................................................................................55
9.3. Directly or Indirectly.............................................................................55
9.4. Section Headings and Table of Contents and Construction............................................56
9.5. Governing Law......................................................................................56
10. MISCELLANEOUS...........................................................................................56
10.1. Communications.....................................................................................56
10.2. Reproduction of Documents..........................................................................57
10.3. Survival...........................................................................................58
10.4. Successors and Assigns.............................................................................58
10.5. Amendment and Waiver...............................................................................58
10.6. Payments on Notes..................................................................................60
10.7. Entire Agreement; Severability.....................................................................60
10.8. Duplicate Originals, Execution in Counterpart......................................................61
Annex 1 -........Information as to Purchasers
Annex 2 -........Payment Instructions at Closing
Annex 3 -........Information as to Company
Exhibit A.........- Form of 6.16% Senior Note due September 1, 2005
Exhibit B1........- Form of Company's Counsel Closing Opinion
Exhibit B2........- Form of Purchaser's Special Counsel Closing Opinion
Exhibit C.........- Form of Officers' Certificate
Exhibit D.........- Form of Secretary's Certificate
</TABLE>
<PAGE>
-61-
Littelfuse, Inc.
- -------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
- -------------------------------------------------------------------------------
$60,000,000
6.16% SENIOR NOTES DUE SEPTEMBER 1, 2005
Dated as of September 1, 1998
TO EACH OF THE PURCHASERS
LISTED IN THE ATTACHED ANNEX 1
Ladies and Gentlemen:
LITTELFUSE, INC., a Delaware corporation (together with its successors
and assigns, the "Company"), hereby agrees with you as follows:
1. PURCHASE AND SALE OF NOTES
1.1......Authorization of Notes.
The Company will authorize the issuance and sale of Sixty Million
Dollars ($60,000,000) in the aggregate principal amount of its six and sixteen
one-hundredths percent (6.16%) Senior Notes due September 1, 2005 (the "Notes,"
such term to include each Note delivered from time to time in accordance with
the Note Purchase Agreement). The Notes shall be substantially in the form of
Exhibit A and shall have the terms as herein and therein provided.
1.2......The Closing.
(a) Purchase and Sale of Notes. The Company hereby agrees to
sell to you and you hereby agree to purchase from the Company, in
accordance with the provisions hereof, the aggregate principal amount
of Notes set forth next to your name on Annex 1 at one hundred percent
(100%) of the principal amount thereof. Your obligation hereunder and
the obligations of the other Purchasers are several and not joint
obligations and you shall have no obligation hereunder and no liability
to any person for the performance or non-performance by any other
Purchaser hereunder.
(b) The Closing. The closing (the "Closing") of the Company's
sale of Notes will be held on September 1, 1998 (the "Closing Date") at
10:00 a.m., local time, at the office of Gardner, Carton & Douglas,
3400 Quaker Tower, 321 North Clark Street, Chicago, Illinois 60610. At
the Closing, the Company will deliver to you one or more Notes (as
indicated next to your name on Annex 1), in the denominations indicated
on Annex 1, in the aggregate principal amount of your purchase, dated
the Closing Date and payable to you or payable as indicated on Annex 1,
against payment by federal funds wire transfer in immediately available
funds of the purchase price thereof, as directed by the Company on
Annex 2.
1.3......Purchase for Investment; ERISA.
(a) Purchase for Investment. You represent to the Company that
you are purchasing the Notes listed on Annex 1 next to your name for
your own account for investment and with no present intention of
distributing the Notes or any part thereof, but without prejudice to
your right at all times to:
(i) sell or otherwise dispose of all or any part of
the Notes under a registration statement filed under the
Securities Act, or in a transaction exempt from the
registration requirements of the Securities Act; and
(ii) have control over the disposition of all of your
assets to the fullest extent required by any applicable
insurance law.
It is understood that, in making the representations set out in Section
2.14(a) and Section 2.15, the Company is relying, to the extent
applicable, upon your representation in the immediately preceding
sentence.
1.4......Source of Funds.
.........You represent that at least one of the following statements
is an accurate representation as to each source of funds (a "Source") to be
used by you to pay the purchase price of the Notes to be purchased by you
hereunder:
(a) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in
which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely in
connection with your fixed contractual obligations under which the
amounts payable, or credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not affected in
any manner by the investment performance of the separate account; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction
Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA; or
(g) if you are an insurance company and the Source includes
assets of your general account, the acquisition of the Notes by the
Purchasers is exempt under PTE 95-60 (issued July 12, 1995); or
(h) if you are an insurance company, the source of funds from
which your investment is to be made is a general account of an
insurance company, and the amount of the reserves and liabilities for
the general account contract(s) held by or on behalf of any Benefit
Plan (as defined by the annual statement for life insurance companies
approved by the National Association of Insurance approved by the
National Association of Insurance Commissioners (the "NAIC Annual
Statement")) together with the amount of the reserves and liabilities
for the general account contract(s) held by or on behalf of any other
Benefit Plans maintained by the same employer (or affiliate thereof as
defined in Department of Labor Prohibited Transaction Exemption ("PTE")
95-60) or by the same employee organization (as defined by the NAIC
Annual Statement) in he general account do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual
Statement filed with the state of domicile of the insurance company
(for purposes of the percentage limitation in this clause (h), the
amount of reserves and liabilities for the general account contract(s)
held by or on behalf of a plan shall be determined before reduction for
credits on account of any reinsurance ceded on a coinsurance basis).
As used in this Section 1.4, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
1.5. Failure to Tender, Failure of Conditions.
If at the Closing the Company fails to tender to you the Notes to be
purchased by you thereat, or if the conditions specified in Section 3 to be
fulfilled at the Closing have not been fulfilled, you may thereupon elect to be
relieved of all further obligations hereunder. Nothing in this Section 1.4 shall
operate to relieve the Company from any of its obligations hereunder or to waive
any of your rights against the Company.
1.6. Expenses.
(a) Generally. Whether or not the Notes are sold, the Company
will promptly (and in any event within thirty (30) days of receiving
any statement or invoice therefor) pay all fees, expenses and costs
relating hereto, including, but not limited to:
(i) the cost of reproducing this Agreement, the Notes and the
other documents delivered in connection with the Closing;
(ii) the fees and disbursements of your special counsel incurred
in connection herewith;
(iii)the cost of delivering to your home office or custodian
bank, insured to your satisfaction, the Notes purchased by
you at the Closing; and
(iv) the fees, expenses and costs incurred in complying with each
of the conditions to closing set forth in Section 3.
(b) Counsel. Without limiting the generality of the foregoing,
it is agreed and understood that the Company will pay, at the Closing,
the statement for fees and disbursements of your special counsel
presented at the Closing and the Company will also pay upon receipt of
any statement therefor each additional statement for fees and
disbursements of your special counsel rendered after the Closing in
connection with the issuance of the Notes or the matters referred to in
Section 1.5(a).
(c) Survival. The obligations of the Company under this
Section 1.5, Section 5.4, Section 8.2(e) and Section 10.5(d) shall
survive the payment of the Notes and the termination hereof.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the Notes
listed on Annex 1 next to your name, the Company warrants and represents, as of
the Closing Date, as follows:
2.1. Nature of Business.
The Confidential Offering Memorandum, prepared by the Placement Agent
(together with all exhibits and annexes thereto, the "Offering Memorandum") (a
copy of which previously has been delivered to you), correctly describes the
general nature of the business and principal Properties of the Company and the
Subsidiaries as of the Closing Date.
2.2. Financial Statements; Debt; Material Adverse Change.
(a) Financial Statements. The Company has provided you with
its financial statements described in Part 2.2(a) of Annex 3. Such
financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied, and present
fairly, in all material respects, the consolidated financial position
of the Company and its consolidated subsidiaries as of such dates
(reflecting "fresh-start reporting" at December 27, 1991) and the
results of their operations and cash flows for such periods.
(b) Debt. Part 2.2(b) of Annex 3 lists all Debt of the Company
and the Subsidiaries as of the Closing Date, and provides the following
information with respect to each item of such Debt:
(i) the type thereof,
(ii) the holder thereof,
(iii) the outstanding amount,
(iv) the current portion, if any, and (v) the
collateral securing such Debt, if any.
(c) Material Adverse Change. Since December 31, 1997, there
has been no change in the business, prospects, profits, Properties or
condition (financial or otherwise) of the Company or any of the
Subsidiaries except changes in the ordinary course of business that, in
the aggregate for all such changes, could not reasonably be expected to
have a Material Adverse Effect.
2.3. Subsidiaries and Affiliates.
Part 2.3 of Annex 3 sets forth:
(a) the name of each of the Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the
Company and each other Subsidiary, and
(b) to the extent that such information is not disclosed in
the Offering Memorandum, a description of the Affiliates (other than
individuals) and the nature of their affiliation.
Each of the Company and the Subsidiaries has good and marketable title to all of
the shares it purports to own of the stock of each Subsidiary, free and clear in
each case of any Lien. All such shares have been duly issued and are fully paid
and nonassessable.
2.4. Title to Properties; Patents, Trademarks, etc.
(a) Each of the Company and the Subsidiaries has good and
marketable title to all of the real Property, and good title to all of
the other Property, reflected in the most recent statement of financial
condition referred to in Part 2.2(a) of Annex 3 (except as sold or
otherwise disposed of in the ordinary course of business), except for
such failures to have such good and marketable title as are immaterial
to such financial statements and that, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect. All such Property is free from Liens not permitted by Section
6.7.
(b) Each of the Company and the Subsidiaries owns, possesses
or has the right to use all of the patents, trademarks, service marks,
trade names, copyrights and licenses, and rights with respect thereto,
necessary for the present and currently planned future conduct of its
business, without any known conflict with the rights of others, except
for such failures to own, possess, or have the right to use, that, in
the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect.
2.5. Taxes.
(a) Returns Filed; Taxes Paid.
(i) All tax returns required to be filed by each of
the Company and each Subsidiary and any other Person with
which the Company or any Subsidiary files or has filed a
consolidated return in any jurisdiction have been filed on a
timely basis, and all taxes, assessments, fees and other
governmental charges upon each of the Company, such Subsidiary
and any such Person, and upon any of their respective
Properties, income or franchises, that are due and payable
have been paid, except for such tax returns and such tax
payments that could not, in the aggregate for all such tax
returns and payments, reasonably be expected to have a
Material Adverse Effect.
(ii) All liabilities of each of the Company, the
Subsidiaries and the other Persons referred to in the
preceding clause (i) with respect to federal income taxes have
been finally determined except for the fiscal years 1994
through 1997, the only years not closed by the completion of
an audit or the expiration of the statute of limitations.
(b) Book Provisions Adequate.
(i) The amount of the liability for taxes reflected
in each of the statements of financial condition referred to
in Part 2.2(a) of Annex 3 is in each case an adequate
provision for taxes as of the dates of such statements of
financial condition (including, without limitation, any
payment due pursuant to any tax sharing agreement) as are or
may become payable by any one or more of the Company and the
other Persons consolidated with the Company in such financial
statements in respect of all tax periods ending on or prior to
such dates.
(ii) The Company does not know of any proposed
additional tax assessment against it or any such Person that
is not reflected in full in the most recent statement of
financial condition referred to in Part 2.2(a) of Annex 3.
2.6. Pending Litigation.
(a) There are no proceedings, actions or investigations
pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary in any court or before any
Governmental Authority or arbitration board or tribunal that, in the
aggregate for all such proceedings, actions and investigations, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default with
respect to any judgment, order, writ, injunction or decree of any
court, Governmental Authority, arbitration board or tribunal that, in
the aggregate for all such defaults, could reasonably be expected to
have a Material Adverse Effect.
2.7. Full Disclosure.
The financial statements referred to in Part 2.2(a) of Annex 3 do not,
nor does this Agreement, the Offering Memorandum or any written statement
furnished by or on behalf of the Company to you in connection with the
negotiation or the closing of the sale of the Notes, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein and herein not misleading. There is no fact that
the Company has not disclosed to you in writing that has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have a
Material Adverse Effect.
2.8. Corporate Organization and Authority.
Each of the Company and the Subsidiaries:
(a) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of
incorporation;
(b) has all legal and corporate power and authority to own and
operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and
operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted, except
where the failure to have such licenses, certificates,
permits, franchises and other governmental authorizations,
in the aggregate for all such failures, could not reasonably
be expected to have a Material Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a
foreign corporation, in each state (each of which states is
listed in Part 2.8(d) of Annex 3) where the failure to be so
qualified or licensed and authorized and in good standing,
in the aggregate for all such failures, could reasonably be
expected to have a Material Adverse Effect.
2.9. Charter Instruments, Other Agreements.
Neither the Company nor any Subsidiary is in violation in any respect
of any term of any charter instrument or bylaw. Neither the Company nor any
Subsidiary is in violation in any respect of any term in any agreement or other
instrument to which it is a party or by which it or any of its Properties may be
bound except for such failures that, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect.
2.10. Restrictions on Company and Subsidiaries.
Neither the Company nor any Subsidiary:
(a) is a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all
such contracts, agreements, charters and corporate restrictions, could
reasonably be expected to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the
right or ability of such corporation to incur Debt, other than this
Agreement and the agreements listed in Part 2.10(b) of Annex 3, none of
which restricts the issuance and sale of the Notes or the performance
of the Company hereunder or under the Notes, and true, correct and
complete copies of each of which have been provided to you; or
(c) has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its Property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 6.7.
2.11. Compliance with Law.
Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, which
violations, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
2.12. ERISA, etc.
(a) Prohibited Transactions. Neither the execution of this
Agreement nor the purchase of the Notes by you will constitute a
"prohibited transaction" (as defined in section 406 of ERISA or section
4975 of the IRC). The representation by the Company in the preceding
sentence is made in reliance upon and subject to the accuracy of the
representations in Section 1.4 hereof as to the source of funds used by
you.
(b) Pension Plans.
(i) Compliance with ERISA. The Company and the ERISA
Affiliates are in compliance with ERISA, except for such
failures to comply that, in the aggregate for all such
failures, could not reasonably be expected to have a Material
Adverse Effect.
(ii) Funding Status. No "accumulated funding
deficiency" (as defined in section 302 of ERISA and section
412 of the IRC), whether or not waived, exists with respect to
any Pension Plan.
(iii) PBGC. No liability to the PBGC has been or is
expected to be incurred by the Company or any ERISA Affiliate
with respect to any Pension Plan that, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect. No circumstance exists that constitutes
grounds under section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to
administer, any Pension Plan or trust created thereunder, nor
has the PBGC instituted any such proceeding.
(iv) Multiemployer Plans. Neither the Company nor any
ERISA Affiliate has incurred or presently expects to incur any
withdrawal liability under Title IV of ERISA with respect to
any Multiemployer Plan. There have been no "reportable events"
(as defined in section 4043 of ERISA) with respect to any
Multiemployer Plan that could result in the termination of
such Multiemployer Plan and give rise to a liability of the
Company or any ERISA Affiliate in respect thereof.
(c) Foreign Pension Plans. All Foreign Pension Plans have been
established, operated, administered and maintained in compliance in all
material respects with all laws, regulations and orders applicable
thereto. Except where it would not have, either individually or in the
aggregate, a Material Adverse Effect, all premiums, contributions and
any other amounts required by applicable Foreign Pension Plan documents
or applicable laws, regulations and orders have been paid or accrued as
required.
(d) Information in Annex. Part 2.12(d) of Annex 3
identifies each:
(i) ERISA Affiliate;
(ii) Pension Plan;
(iii) Multiemployer Plan; and
(iv) Foreign Pension Plan.
2.13. Environmental Compliance.
(a) Compliance. Each of the Company and the Subsidiaries is in
compliance with all Environmental Protection Laws in effect in each
jurisdiction where it is presently doing business and in which the
failure so to comply, in the aggregate for all such failures, could
reasonably be expected to have a Material Adverse Effect.
(b) Liability. Neither the Company nor any Subsidiary is
subject to any liability under any Environmental Protection Laws that,
in the aggregate for all such liabilities, could reasonably be expected
to have a Material Adverse Effect.
(c) Notices. Neither the Company nor any Subsidiary has
received any:
(i) notice from any Governmental Authority by which
any of its present or previously-owned or leased Properties
has been identified in any manner by any Governmental
Authority as a hazardous substance disposal or removal site,
"Super Fund" clean-up site or candidate for removal or closure
pursuant to any Environmental Protection Law;
(ii) notice of any Lien arising under or in
connection with any Environmental Protection Law that has
attached to any revenues of, or to, any of its owned or leased
Properties; or
(iii) any communication, written or oral, from any
Governmental Authority concerning action or omission by the
Company or such Subsidiary in connection with its ownership or
leasing of any Property resulting in the release of any
hazardous substance resulting in any violation of any
Environmental Protection Law;
where the effect of which, in the aggregate for all such notices and
communications, could reasonably be expected to have a Material Adverse
Effect.
2.14. Sale of Notes is Legal and Authorized; Obligations are
Enforceable.
(a) Sale of Notes is Legal and Authorized. Each of the
issuance, sale and delivery of the Notes by the Company, the execution
and delivery hereof by the Company and compliance by the Company with
all of the provisions hereof and of the Notes;
(i) is within the corporate powers of the Company; and
(ii) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default
under, or result in the creation of any Lien upon any Property
of the Company or any Subsidiary under the provisions of, any
agreement, charter instrument, bylaw or other instrument to
which it is a party or by which it or any of its Properties
may be bound.
(b) Obligations are Enforceable. Each of this Agreement and
the Notes has been duly authorized by all necessary action on the part
of the Company, has been executed and delivered by duly authorized
officers of the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except that the enforceability hereof and of the Notes may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or other similar laws
affecting the enforceability of creditors' rights generally;
and
(ii) subject to the availability of equitable
remedies.
2.15. Governmental Consent to Sale of Notes.
Neither the nature of the Company or any Subsidiary, or of any of their
respective businesses or Properties, nor any relationship between the Company or
any Subsidiary and any other Person, nor any circumstance in connection with the
offer, issuance, sale or delivery of the Notes and the execution and delivery of
this Agreement, is such as to require a consent, approval or authorization of,
or filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition to the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the Notes. Neither the
Company nor any Subsidiary is subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as
amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as
amended.
2.16. Private Offering of Notes.
Neither the Company nor the Placement Agent (the only Person authorized
or employed by the Company as agent, broker, dealer or otherwise in connection
with the offering or sale of the Notes or any similar Security of the Company,
other than employees of the Company) has offered any of the Notes or any similar
Security of the Company for sale to, or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
prospective purchaser, other than the Purchasers and not more than thirty nine
(39) other institutional investors, each of whom was offered all or a portion of
the Notes at private sale for investment.
2.17. No Defaults; Transactions Prior to Closing Date.
(a) No event has occurred and no condition exists that, upon
the execution and delivery of this Agreement and the issuance of the
Notes, would constitute a Default or an Event of Default. Neither the
Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary and no event or
condition exists with respect to any Indebtedness of the Company or any
Subsidiary that would permit (or that with notice or the lapse of time,
or both, would permit) one or more Persons to cause such to become due
and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) The Company has not entered into any transaction since the
date of the most recent statement of financial condition referred to in
Part 2.2(a) of Annex 3 that would have been prohibited by Section 6.1
through Section 6.9, inclusive, had such Sections applied since such
date.
2.18. Use of Proceeds of Notes.
(a) Use of Proceeds. The Company will apply the proceeds from
the sale of the Notes in the manner specified in Part 2.18(a) of Annex
3.
(b) Margin Securities. None of the transactions contemplated
herein and in the Notes (including, without limitation, the use of the
proceeds from the sale of the Notes) violates, will violate or will
result in a violation of section 7 of the Exchange Act or any
regulations issued pursuant thereto, including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. The obligations of the Company under
this Agreement and the Notes are not and will not be directly or
indirectly secured by any Margin Security, and no Notes are being sold
on the basis of any such collateral.
(c) Absence of Foreign or Enemy Status. Neither the Company
nor any Subsidiary is an "enemy" or an "ally of the enemy" within the
meaning of section 2 of the Trading with the Enemy Act (50 U.S.C. App.
ss.ss. 1 et seq.), as amended. Neither the Company nor any Subsidiary
is in violation of, and neither the issuance and sale of the Notes by
the Company nor its use of the proceeds thereof as contemplated by this
Agreement will violate, the Trading with the Enemy Act, as amended, or
any executive orders, proclamations or regulations issued pursuant
thereto, including, without limitation, regulations administered by the
Office of Foreign Asset Control of the Department of the Treasury (31
C.F.R., Subtitle B, Chapter V).
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes to be delivered to
you at the Closing is subject to the following conditions precedent:
3.1. Opinions of Counsel.
You shall have received from
(a) Chapman and Cutler, counsel for the Company, and
(b) Gardner, Carton & Douglas, your special counsel,
closing opinions, each dated as of the Closing Date, substantially in the
respective forms set forth in Exhibit B1 and Exhibit B2 and as to such other
matters as you may reasonably request. This Section 3.1 shall constitute
direction by the Company to such counsel named in the foregoing clause (a) to
deliver such closing opinion to you.
3.2. Warranties and Representations True.
The warranties and representations contained in Section 2 shall be true
on the Closing Date with the same effect as though made on and as of that date.
3.3. Officers' Certificates.
You shall have received:
(a) a certificate dated the Closing Date and signed by two
Senior Officers, substantially in the form of Exhibit
C; and
(b) a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Company,
substantially in the form of Exhibit D.
3.4. Legality.
The Notes shall on the Closing Date qualify as a legal investment for
you under applicable insurance law (without regard to any "basket" or "leeway"
provisions), and such acquisition shall not subject you to any penalty or other
onerous condition in or pursuant to any such law or regulation, and you shall
have received such evidence as you may reasonably request to establish
compliance with this condition.
3.5. Private Placement Number.
The Company shall have obtained or caused to be obtained a private
placement number for the Notes from the CUSIP Service Bureau of Standard &
Poor's Corporation and you shall have been informed of such private placement
number.
3.6. Expenses.
All fees and disbursements required to be paid pursuant to Section
1.6(b) shall have been paid in full.
3.7. Other Purchasers.
None of the other Purchasers shall have failed to execute and deliver
this Agreement or to accept delivery of or make payment for the Notes to be
purchased by it on the Closing Date.
3.8. Compliance with this Agreement.
Each of the Company and the Subsidiaries shall have performed and
complied with all agreements and conditions contained herein that are required
to be performed or complied with by the Company and the Subsidiaries on or prior
to the Closing Date, and such performance and compliance shall remain in effect
on the Closing Date.
3.9. Proceedings Satisfactory.
All proceedings taken in connection with the issuance and sale of the
Notes and all documents and papers relating thereto shall be satisfactory to you
and your special counsel. You and your special counsel shall have received
copies of such documents and papers as you or they may reasonably request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance satisfactory to you and your special counsel.
4. PAYMENTS
4.1. Mandatory Principal Amortization Payments.
The Company shall pay, and there shall become due and payable, the
following principal amounts of the Notes on September 1 in each year beginning
on September 1, 1999 and ending on September 1, 2005, inclusive (each, a
"Mandatory Principal Amortization Payment"):
September 1, 1999 $5,000,000
September 1, 2000 $5,000,000
September 1, 2001 $10,000,000
September 1, 2002 $10,000,000
September 1, 2003 $10,000,000
September 1, 2004 $10,000,000
September 1, 2005 $10,000,000 (final maturity)
Each Mandatory Principal Amortization Payment shall be at one hundred
percent (100%) of the principal amount payable, together with interest accrued
thereon to the date of payment. Without limitation of the foregoing, all of the
principal of the Notes remaining outstanding on September 1, 2005 (if any),
together with interest accrued thereon, shall become due and payable on
September 1, 2005.
4.2. Optional Prepayments.
(a) Optional Prepayments. The Company may at any time after
the Closing Date prepay the principal amount of the
Notes in part, in integral multiples of One Million
Dollars ($1,000,000), or in whole, in each case
together with: (i) an amount equal to the Make-Whole
Amount at such time in respect of the principal amount
of the Notes being so prepaid; and
(ii) interest on such principal amount then being
prepaid accrued to the prepayment date.
(b) Notice of Optional Prepayment. The Company will give
notice of any optional prepayment of the Notes to each holder of Notes
not less than thirty (30) days or more than sixty (60) days before the
date fixed for prepayment, specifying:
(i) such date;
(ii) the Section hereof under which the prepayment is to be
made;
(iii)the principal amount of each Note to be prepaid on
such date;
(iv) the interest to be paid on each such Note, accrued to
the date fixed for prepayment; and
(v) a reasonably detailed calculation of an estimated
Make-Whole Amount, if any (calculated as if the date of
such notice was the date of prepayment), due in
connection with such prepayment.
Notice of prepayment having been so given, the aggregate principal
amount of the Notes to be prepaid specified in such notice, together
with the Make-Whole Amount as of the specified prepayment date with
respect thereto, if any, and accrued interest thereon shall become due
and payable on the specified prepayment date. Two (2) Business Days
prior to the making of such prepayment, the Company shall deliver to
each holder of Notes by facsimile transmission a certificate of a
Senior Financial Officer specifying the details of the calculation of
such Make-Whole Amount as of the specified prepayment date, together
with a copy of the Applicable H.15 used in determining the Make-Whole
Discount Rate (as both such terms are defined in the definition of
Make-Whole Amount) in respect of such prepayment.
(c) Effect of Prepayment. Each prepayment of Notes pursuant to
this Section 4.2 shall be applied to the Mandatory Principal
Amortization Payments in inverse order of maturity.
4.3. Partial Prepayment Pro Rata. If at the time any required
prepayment or optional prepayment under Section 4.1 or Section 4.2 is due there
is more than one Note outstanding, the aggregate principal amount of each
required or optional partial prepayment of the Notes shall be allocated among
the holders of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts of the Notes then
outstanding, with adjustments, to the extent practicable, to equalize for any
prior prepayments not in such proportion.
4.4. Notation of Notes on Prepayment.
Upon any partial prepayment of a Note, such Note may, at the option of
the holder thereof be:
(a) surrendered to the Company pursuant to Section 5.2 in
exchange for a new Note in principal amount equal to
the principal amount remaining unpaid on the
surrendered Note;
(b) made available to the Company for notation thereon of
the portion of the principal so prepaid; or
(c) marked by such holder with a notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
4.5. No Other Optional Prepayments.
Except as provided in Section 4.2 or in accordance with an offer made
in compliance with Section 6.15, the Company may not make any optional
prepayment (whether directly or indirectly by purchase or other acquisition) in
respect of the Notes.
5. registration; exchange; substitution of notes
5.1. Registration of Notes.
The Company will cause to be kept at its office maintained pursuant to
Section 6.13 a register for the registration and transfer of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof.
5.2. Exchange of Notes.
(a) Upon surrender of any Note at the office of the Company
maintained pursuant to Section 6.13 duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder
of such Note or such holder's attorney duly authorized in writing, the
Company will execute and, within five (5) Business Days after such
surrender, deliver, at the Company's expense (except as provided
below), new Notes in exchange therefor, in denominations of at least
the Applicable Minimum Denomination, in an aggregate principal amount
equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall, subject to Section 5.2(d), be payable to such Person as
such holder may request and shall be substantially in the form of
Exhibit A. Each such new Note shall be dated and bear interest from the
date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any
such transfer of Notes.
(b) The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company,
insured to the reasonable satisfaction of such holder, the surrendered
Note and any Note issued in substitution or replacement for the
surrendered Note.
(c) Each holder of Notes agrees that, in the event it shall
sell or transfer any Note without surrendering such Note to the Company
as set forth in Section 5.2(a), it shall:
(i) prior to the delivery of such Note, make a
notation thereon of all principal, if any, paid on such Note
and shall also indicate thereon the date to which interest
shall have been paid on such Note; and
(ii) promptly notify (or cause the transferee of any
such Note to notify) the Company of the name and address of
the transferee of any such Note so transferred and the
effective date of such transfer.
(d) Notwithstanding anything else in this Section 5.2 or
elsewhere in this Agreement to the contrary, each holder of Notes
agrees that such holder will not at any time (except with the written
consent of the Company) sell or transfer any Note to any other Person
(other than to a Investor Affiliate of such holder) unless the
outstanding principal amount of such Note at such time, aggregated with
the outstanding principal amount of each other Note sold or transferred
at such time to such other Person (or group of other Persons that are
Investor Affiliates of one another) and the aggregate principal amount
of Notes (if any) already held by such other Person (or group of other
Persons that are Investor Affiliates of one another), equals or exceeds
the Applicable Minimum Denomination at such time.
5.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership (or of ownership by such
Institutional Investor's nominee) and such loss, theft, destruction or
mutilation), and
(a) In the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company (provided that if the holder of such Note is an
Institutional Investor or a nominee of such Institutional Investor, such
Institutional Investor's own unsecured agreement of indemnity shall be
deemed to be satisfactory for such purpose), or
(b) In the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense will execute and, within five (5) Business Days
after such receipt, deliver, in lieu thereof, a new Note, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.
5.4. Issuance Taxes.
The Company will pay all taxes (if any) due in connection with and as
the result of the initial issuance and sales of the Notes and in connection with
any modification of this Agreement or the Notes and shall save each holder of
Notes harmless without limitation as to time against any and all liabilities
with respect to all such taxes, provided that this Section 5.4 shall not be
construed to require the Company to pay, or to save any holder of Notes harmless
against any liabilities with respect to, any income tax imposed on any holder of
Notes. The obligations of the Company under this Section 5.4 shall survive the
payment or prepayment of the Notes and the termination hereof.
6. COVENANTS
The Company covenants that on and after the Closing Date and so long as
any of the Notes shall be outstanding:
6.1. Net Worth.
The Company will not at any time permit Consolidated Net Worth to be
less than Fifty-Five Million Dollars ($55,000,000).
6.2. Fixed Charges Coverage.
The Company will not at any time permit the ratio of:
(a) the result of
(i) Consolidated Operating Cash Flow for the period
of four (4) consecutive fiscal quarters of the Company then
most recently ended, minus
(ii) the aggregate amount of Capital Expenditures
incurred by the Company and the Subsidiaries during such
period;
to
(b) Consolidated Fixed Charges for such period;
to be less than 1.5 to 1.0
6.3. Restricted Payments.
The Company will not, and will not permit any Subsidiary to, declare or
make, or become obligated to declare or make, any Restricted Payment unless:
(a) Immediately after, and after giving effect to, such
Restricted Payment, Consolidated Net Worth would be equal to at least
the following amounts during the following periods:
<TABLE>
Period Consolidated Net Worth
<S> <C> <C>
Closing Date through January 1, 2000 $70,000,000
January 2, 2000 through December 30, 2000 75,000,000
December 31, 2000 through December 29, 2001 80,000,000
December 30, 2001 through December 28, 2002 85,000,000
December 29, 2002 through January 3, 2004 90,000,000
January 4, 2004 through January 1, 2005 95,000,000
January 2, 2005 through Maturity 100,000,000
</TABLE>
For purposes of determining whether a particular Restricted
Payment will cause the Consolidated Net Worth to fall below the
above-described applicable Consolidated Net Worth threshold amount, it
shall be assumed that the Consolidated Net Worth immediately prior to
such Restricted Payment shall be equal to the Consolidated Net Worth
reflected in the most recent Form 10-Q filed by the Company with the
Securities and Exchange Commission or, if the Company has filed a Form
10-K with the Securities and Exchange Commission since the filing of
its most recent Form 10-Q, the Consolidated Net Worth reflected in such
Form 10-K.
(b) at the time of such declaration, making or becoming
obligated and immediately before, and after giving effect to, such
Restricted Payment and any concurrent transactions;
(i) no Default or Event or Default exists or would exist,
and
(ii) the Company would be permitted by the provisions of
Section 6.4(a) to incur at least One Dollar ($1.00) of
additional Funded Debt.
6.4. Funded Debt; Subsidiary Debt.
(a) Funded Debt. The Company will not, and will not permit any
Subsidiary to, at any time after the Initial issuance and sale of the
Notes, incur or in any other manner become liable in respect of any
Funded Debt (other than Funded Debt of a Subsidiary owed to the Company
or a Wholly-Owned Subsidiary) unless, after giving effect thereto and
to any concurrent application of the proceeds of such Funded Debt, the
ratio of:
(i) Consolidated Funded Debt;
to
(ii) Consolidated Operating Cash Flow for the period
of four (4) consecutive fiscal quarters of the Company then
most recently ended;
would not exceed 3.25 to 1.0.
(b) Subsidiary Debt. The Company will not permit any
Subsidiary to, at any time after the initial issuance and sale of the
Notes, incur or in any other manner become liable in respect of any
Debt (other than Debt of a Subsidiary owed to the Company or a
Wholly-Owned Subsidiary) unless, after giving effect thereto and to any
concurrent application of the proceeds of such Debt, (i) Total
Subsidiary Debt, plus (ii) Debt secured by Liens incurred pursuant to
Section 6.7(a)(viii), would not exceed five percent (5%) of
Consolidated Capitalization and provided further that such Debt could
be incurred pursuant to paragraph (a) of this Section 6.4.
(c) Deemed Incurrences. For purposes hereof:
(i) each Person any of whose outstanding Debt is at
any time sold, transferred or otherwise disposed of by the
Company or a Subsidiary shall be deemed to have incurred all
such Debt at the time of such sale, transfer or other
disposition;
(ii) each Person that becomes a Subsidiary after the
Closing Date will be deemed to have incurred all Debt of such
Person at the time such Person becomes a Subsidiary; and
(iii) each Person that at any time extends, renews,
refunds or refinances any Debt will be deemed to have incurred
such Debt at such time.
6.5. Transfers of Property; Subsidiary Stock.
(a) Transfers of Property. The Company will not, and will not
permit any Subsidiary to, sell, lease as lessor, transfer or otherwise
dispose of any Property (collectively, "Transfers"), except:
(i) Transfers of inventory and of unuseful, obsolete or worn
out Property, in each case in the ordinary course of business of
the Company or such Subsidiary;
(ii) Transfers from a Subsidiary to the Company or to a
Wholly-Owned Subsidiary; and
(iii) any other Transfer of Property at any time to any
Person, other than to an Affiliate, for an Acceptable
Consideration if:
(A) the sum of
(1) the current book value of such Property, plus
(2) the aggregate book value of all other Property of the
Company and the Subsidiaries Transferred (other than in
Transfers referred to in the foregoing clause (i) and
clause (ii) (collectively, "Excluded Transfers"))
during the period of three hundred sixty-five (365)
days ended at the time of such Transfer,
would not exceed five percent (5%) of Consolidated
Assets determined immediately prior to giving effect
to such Transfer;
(B) the sum of
(1) the current book value of such Property, plus
(2) the aggregate book value of all other Property of the
Company and the Subsidiaries Transferred (other than in
Excluded Transfers) during the period commencing on the
Closing Date and ended at the time of such Transfer,
would not exceed twenty-five percent (25%) of
Consolidated Assets determined immediately prior to
giving effect to such Transfer; and
(C) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default would
exist.
(b) Transfers of Subsidiary Stock. The Company will not, and
will not permit any Subsidiary to, Transfer any shares of the stock (or
any warrants, rights or options to purchase stock or other Securities
exchangeable for or convertible into stock) of a Subsidiary (such
stock, warrants, rights, options and other Securities herein called
"Subsidiary Stock"), nor will any Subsidiary issue, sell or otherwise
dispose of any shares of its own Subsidiary Stock, provided that the
foregoing restrictions do not apply to:
(i) the issuance by a Subsidiary of shares of its own
Subsidiary Stock to the Company or a Wholly-Owned Subsidiary;
(ii) Transfers (other than leases) by the Company or a
Subsidiary of shares of Subsidiary Stock to the Company or a
Wholly-Owned Subsidiary;
(iii) the issuance by a Subsidiary of directors' qualifying
shares; and
(iv) the Transfer of all of the Subsidiary Stock of a
Subsidiary owned by the Company and the other Subsidiaries if:
(A) such Transfer satisfies the requirements of Section
6.5(a)(iii);
(B) in connection with such Transfer the entire investment
(whether represented by stock, Debt, claims or
otherwise) of the Company and the other Subsidiaries in
such Subsidiary is Transferred to a Person other than
(1) the Company or (2) a Subsidiary not simultaneously
being disposed of;
(C) the Subsidiary being disposed of has no continuing
investment in any other Subsidiary not simultaneously
being disposed of or in the Company; and
(D) immediately before and after the consummation of such
Transfer, and after giving effect thereto, no Default
or Event of Default would exist.
For purposes of determining the book value of Property constituting Subsidiary
Stock being Transferred as provided in clause (iv) above, such book value shall
be deemed to be the aggregate book value of all assets of the Subsidiary that
shall have issued such Subsidiary Stock.
6.6. Merger, Consolidation, etc.
(a) Merger and Consolidation. The Company will not, and will
not permit any Subsidiary to, merge with or into or consolidate with or
into any other Person or permit any other Person to merge or
consolidate with or into it (except that a Subsidiary may merge into or
consolidate with the Company or a Wholly-Owned Subsidiary if the
Company or such Wholly-Owned Subsidiary is the surviving corporation),
provided that the foregoing restriction does not apply to the merger or
consolidation of the Company with another corporation if:
(i) the corporation that results from such merger or
consolidation (the "Surviving Corporation") is organized under
the laws of the United States of America or any state thereof;
(ii) the due and punctual payment of the principal of
and Make-Whole Amount, if any, and interest on all of the
Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants in the Notes
and this Agreement to be performed or observed by the Company,
are expressly assumed or acknowledged by the Surviving
Corporation pursuant to such agreements and instruments as
shall be approved by the Required Holders, and the Company
causes to be delivered to each holder of Notes an opinion of
independent counsel, in form, scope and substance satisfactory
to the Required Holders, to the effect that such agreements
and instruments are enforceable in accordance with their
terms; and
(iii) immediately prior to, and immediately after the
consummation of the transaction, and after giving effect
thereto,
(A) no Default or Event of Default exists or would exist,
and
(B) the Surviving Corporation would be permitted by the
provisions of Section 6.4(a) to incur at least One
Dollar ($1.00) of additional Funded Debt.
(b) Acquisition of Stock, etc. The Company will not, and will
not permit any Subsidiary to, acquire any stock of any corporation if
upon completion of such acquisition such corporation would be a
Subsidiary, or acquire all of the Property of, or such of the Property
as would permit the transferee to continue any one or more integral
business operations of, any Person unless, immediately after the
consummation of such acquisition, and after giving effect thereto,
(i) no Default or Event of Default exists or would exist,
and
(ii) the Company would be permitted by the provisions of
Section 6.4(a) to incur at least One Dollar ($1.00) of
additional Funded Debt.
6.7. Liens.
(a) Negative Pledge. The Company will not, and will not permit
any Subsidiary to, cause or permit to exist, or agree or consent to
cause or permit to exist in the future (upon the happening of a
contingency or otherwise), any of their Property, whether now owned or
hereafter acquired, to be subject to any Lien except:
(i) Liens securing Property taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, vendors,
landlords and other like Persons, provided that the payment
thereof is not at the time required by Section 6.11;
(ii) Liens
(A) arising from judicial attachments and judgments,
(B) securing appeal bonds or supersedeas bonds, and
(C) arising in connection with court proceedings
(including, without limitation, surety bonds and letters of
credit or any other instrument serving a similar purpose),
provided that (1) the execution or other enforcement of such
Liens is effectively stayed, (2) the claims secured thereby
are being actively contested in good faith and by appropriate
proceedings, (3) adequate book reserves shall have been
established and maintained and shall exist with respect
thereto and (4) the aggregate amount so secured shall not at
any time exceed Three Million Dollars ($3,000,000);
(iii) Liens incurred or deposits made in the ordinary
course of business
(A) in connection with workers'
compensation, unemployment insurance, social security
and other like laws, and
(B) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance bonds
(of a type other than set forth in Section 6.7(a)(ii)
and other similar obligations not incurred in
connection with the borrowing of money, the obtaining
of advances or the payment of the deferred purchase
price of Property;
(iv) Liens in the nature of reservations, exceptions,
encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other similar title
exceptions or encumbrances affecting real Property, provided
that such exceptions and encumbrances do not in the aggregate
detract from the value of such Properties or interfere with
the use of such Property in the ordinary conduct of the
business of the Company and the Subsidiaries in a manner that
has or could reasonably be expected to have a Material Adverse
Effect;
(v) Liens on Property of a Subsidiary, provided that
such Liens secure only obligations owing to the Company;
(vi) Liens in existence on the Closing Date securing
Debt, provided that such Liens are described in Part
6.7(a)(vi) of Annex 3;
(vii) Purchase Money Liens, if, after giving effect
thereto and to any concurrent transactions:
(A) each such Purchase Money Lien secures Debt in an amount
not exceeding eighty percent (80%) of the cost of
acquisition or construction of the particular Property
to which such Debt relates;
(B) such Property is useful, and intended to be used, in
the ordinary course of business of the Company or a
Subsidiary;
(C) the aggregate principal amount of all Debt secured by
all such Purchase Money Liens does not at any time
exceed five percent (5%) of Consolidated
Capitalization; and
(D) no Default or Event of Default would exist; and
(viii) In addition to Liens permitted by the preceding
subparagraphs (i) through (vii), additional Liens securing
Debt; provided that (i) such Debt shall be permitted to be
incurred pursuant to Section 6.4(a) and (ii) the aggregate
amount of Debt secured by Liens permitted by this
subparagraph (viii) plus Debt incurred pursuant to Section
6.4(b), shall not at any time exceed five percent (5%) of
Consolidated Capitalization.
(b) Equal and Ratable Lien; Equitable Lien. In case any
Property shall be subjected to a Lien in violation of this Section 6.7,
the Company will immediately make or cause to be made, to the fullest
extent permitted by applicable law, provision whereby the Notes will be
secured equally and ratably with all other obligations secured thereby
pursuant to such agreements and instruments as shall be approved by the
Required Holders, and the Company will cause to be delivered to each
holder of a Note an opinion, satisfactory in form and substance to the
Required Holders, of independent counsel to the effect that such
agreements and instruments are enforceable in accordance with their
terms, and in any such case the Notes shall have the benefit, to the
fullest extent that, and with such priority as, the holders of Notes
may be entitled thereto under applicable law, of an equitable Lien on
such Property securing the Notes (provided that, notwithstanding the
foregoing, each holder of Notes shall have the right to elect at any
time, by delivery of written notice of such election to the Company, to
cause the Notes held by such holder not to be secured by such Lien or
such equitable Lien). A violation of this Section 6.7 will constitute
an Event of Default, whether or not any such provision is made pursuant
to this Section 6.7(b).
(c) Financing Statements. The Company will not, and will not
permit any Subsidiary to, sign or file a financing statement under the
Uniform Commercial Code of any jurisdiction that names the Company or
such Subsidiary as debtor, or sign any security agreement authorizing
any secured party thereunder to file any such financing statement,
except, in any such case, a financing statement filed or to be filed to
perfect or protect a security interest that the Company or such
Subsidiary is not prohibited to create, assume or incur, or permit to
exist, under the foregoing provisions of this Section 6.7 or to
evidence for informational purposes a lessor's interest in Property
leased to the Company or any such Subsidiary.
6.8. Restricted Investments.
The Company will not, and will not permit any Subsidiary to make or
permit to exist any Restricted Investment unless immediately after, and after
giving effect to such Restricted Investment:
(a) the aggregate amount of all Restricted Investments held by
the Company and the Subsidiaries at such time would not exceed ten
percent (10%) of Consolidated Capitalization; and
(b) no Default or Event of Default exists or would exist.
6.9. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, enter into
any transaction, including, without limitation, the purchase, sale or exchange
of Property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company of such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate (provided that, with
respect to salaries, bonuses and other compensation paid to officers and
directors of the Company and of the Subsidiaries, such terms shall be fair and
reasonable but need not be comparable to terms that would obtain in an
arm's-length transaction).
6.10. Nature of Business.
The Company will not, and will not permit any Subsidiary to, engage in
any business if, as a result thereof, the general nature of the businesses of
the Company and the Subsidiaries, taken as a whole, would be substantially
changed from the businesses thereof described in the Offering Memorandum.
6.11. Payment of Taxes and Claims.
The Company will, and will cause each Subsidiary to, pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or
levies imposed upon it or its Property; and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, vendors, landlords and other
like Persons that, if unpaid, might result in the
creation of a Lien upon its Property;
provided, that items of the foregoing description need not be paid
(i) while being actively contested in good faith and
by appropriate proceedings as long as adequate book reserves
have been established and maintained and exist with respect
thereto, and
(ii) so long as the title of the Company or the
Subsidiary, as the case may be, to, and its right to use, such
Property, is not materially adversely affected thereby.
6.12. Maintenance of Properties; Corporate Existence; etc.
The Company will, and will cause each Subsidiary to:
(a) Property - maintain its Property in good condition and
working order, ordinary wear and tear excepted, and make all necessary
renewals, replacements, additions, betterments and improvements
thereto;
(b) Insurance - maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against
such casualties and contingencies, of such types (including, without
limitation, insurance with respect to losses arising out of Property
loss or damage, public liability, business interruption, larceny,
workers' compensation, embezzlement or other criminal misappropriation)
and in such amounts as is customary in the case of corporations of
established reputations engaged in the same or a similar business and
similarly situated;
(c) Financial Records - keep accurate and complete books of
records and accounts in which accurate and complete entries shall be
made of all its business transactions and that will permit the
provision of accurate and complete financial statements in accordance
with GAAP;
(d) Corporate Existence and Rights -
(i) do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises,
except where the failure to do so, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and
(ii) to maintain each Subsidiary as a Subsidiary,
in each case except as permitted by Section 6.5(b) and Section 6.6; and
(e) Compliance with Law - not be in violation of any law,
ordinance or governmental rule or regulation to which it is subject
(including, without limitation, any Environmental Protection Law and
OSHA) and not fall to obtain any license, certificate, permit,
franchise or other governmental authorization necessary to the
ownership of its Properties or to the conduct of its business if such
violations or failures to obtain, in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
6.13. Payment of Notes and Maintenance of Office.
The Company will punctually pay, or cause to be paid, the principal of
and interest (and Make-Whole Amount, if any) on, the Notes, as and when the same
shall become due according to the terms hereof and of the Notes, and will
maintain an office at the address of the Company set forth in Section 10.1 where
notices, presentations and demands in respect hereof or of the Notes may be made
upon it. Such office will be maintained at such address until such time as the
Company shall notify the holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.
6.14. ERISA, etc.
(a) Compliance. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Pension Plan, make
timely payment of contributions required to meet the minimum funding
standard set forth in ERISA or the IRC with respect thereto, and to
comply with all other applicable provisions of ERISA.
(b) Relationship of Vested Benefits to Pension Plan Assets.
The Company will not at any time permit the present value of all
employees benefits vested under each Pension Plan to exceed the assets
of such Pension Plan allocable to such vested benefits at such time, in
each case determined pursuant to Section 6.14(c), if such excess,
together with the excess (if any) of such present value over such
assets for each other Pension Plan at such time, is more than Five
Million Dollars ($5,000,000).
(c) Valuations. All assumptions and methods used to determine
the actuarial valuation of vested employee benefits under Pension Plans
and the present value of assets of Pension Plans will be reasonable in
the good faith judgment of the Company and will comply with all
requirements of law.
(d) Prohibited Actions. The Company will not, and will not
permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as
defined in section 406 of ERISA or section 4975 of the IRC)
that would result in the imposition of a material tax or
penalty;
(ii) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as defined in section 302 of
ERISA), whether or not waived;
(iii) terminate any Pension Plan in a manner that could
result in
(A) the imposition of a Lien on the Property of the Company
or any Subsidiary pursuant to section 4068 of ERISA, or
(B) the creation of any liability under section 4062 of
ERISA;
(iv) fail to make any payment required by section 515
of ERISA; or
(v) at any time be an "employer" (as defined in
section 3(5) of ERISA) required to contribute to any
Multiemployer Plan if, at such time, it could reasonably be
expected that the Company or any Subsidiary will incur
withdrawal liability in respect of such Multiemployer Plan and
such liability, if incurred, together with the aggregate
amount of all other withdrawal liability as to which there is
a reasonable expectation of incurrence by the Company or any
Subsidiary under any one or more Multiemployer Plans, could
reasonably be expected to have a Material Adverse Effect.
(e) Foreign Pension Plans. The Company will, and will cause
each Subsidiary to, make all required payments in respect of funding
any Foreign Pension Plan applicable to such Person and otherwise comply
with all applicable laws, statutes, rules and regulations governing or
affecting such Foreign Pension Plan, except where the failure to make
any such payment or the failure to so otherwise comply, in the
aggregate for all such failures, could not reasonably be expected to
have a Material Adverse Effect.
6.15. Pro-Rata Offers.
The Company will not, and will not permit any Subsidiary or any
Affiliate to, directly or indirectly, acquire or make any offer to acquire any
Notes unless the Company or such Subsidiary or Affiliate shall have offered to
acquire Notes, pro rata, from all holders of the Notes and upon the same terms.
In case the Company acquires any Notes, such Notes will immediately thereafter
be canceled and no Notes will be issued in substitution therefor.
6.16. Private Offering.
The Company will not, and will not permit any Person acting on its
behalf to, offer the Notes or any part thereof or any similar Securities for
issuance or sale to, or solicit any offer to acquire any of the same from, any
Person so as to bring the issuance and sale of the Notes within the provisions
of section 5 of the Securities Act.
7. INFORMATION AS TO COMPANY
7.1. Financial and Business Information.
The Company will deliver to each holder of Notes:
(a) Quarterly Statements - as soon as practicable after the
end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
and in any event within forty-five (45) days thereafter, duplicate
copies of:
(i) a consolidated statement of financial condition of
the Company and the Subsidiaries as at the end of such
quarter, and
(ii) consolidated statements of operations and cash
flows of the Company and the Subsidiaries for such quarter and
(in the case of the second and third quarters) for the portion
of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the immediately preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct, subject to changes resulting
from year-end adjustments, by a Senior Financial Officer, and accompanied by the
certificate required by Section 7.2;
(b) Annual Statements - as soon as practicable after the end
of each fiscal year of the Company, and in any event within ninety (90)
days thereafter, duplicate copies of:
(i) consolidated and consolidating statements of
financial condition of the Company and the Subsidiaries, as
at the end of such year, and
(ii) consolidated and consolidating statements of
operations, shareholders' equity and cash flows of the Company
and the Subsidiaries for such year,
setting forth in each case in comparative form the figures for the immediately
preceding fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied by:
(A) In the case of such consolidated
statements, an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall, without qualification,
state that such financial statements present fairly,
in all material respects, the financial position of
the companies being reported upon and their results
of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of
such accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances,
(B) a statement from such independent certified public
accountants that such consolidating statements were
prepared using the same work papers as were used in the
preparation of such consolidated statements,
(C) a certification by a Senior Financial Officer that such
consolidated and consolidating statements are complete
and correct, and
(D) the certificates required by Section 7.2 and Section
7.3;
(c) Audit Reports - promptly upon receipt thereof, a copy of
each other report submitted to the Company or any Subsidiary by
independent accountants in connection with any management report,
special audit report or comparable analysis prepared by them with
respect to the books of the Company or any Subsidiary;
(d) SEC and Other Reports - promptly upon their becoming
available, a copy of each financial statement, report (including,
without limitation, each Quarterly Report on Form 10-Q, each Annual
Report on Form 10-K and each Current Report on Form 8-K), notice or
proxy statement sent by the Company or any Subsidiary to stockholders
generally and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters), and each amendment thereto, in respect thereof filed by the
Company or any Subsidiary with, or received by, such Person in
connection therewith from, the National Association of Securities
Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency;
(e) ERISA -
(i) Immediately upon becoming aware of the occurrence of
any
(A) "reportable event" (as defined in section 4043 of
ERISA), excluding, however, such events as to which the PBGC by
regulation shall have waived the requirement of section 4043(a)
of ERISA that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to meet the
minimum funding standard of section 412 of the IRC and of section
302 of ERISA shall not be so excluded regardless of the issuance
of any such waiver of the notice requirement in accordance with
either section 4043(a) of ERISA or section 412(d) of the IRC), or
(B) "prohibited transaction" (as defined in section 406 of
ERISA or section 4975 of the IRC),
In connection with any Pension Plan or any trust created
thereunder, a written notice specifying the nature thereof, what
action the Company is taking or proposes to take with respect
thereto and, when known, any action taken by the IRS, the DOL or
the PBGC with respect thereto, and
(ii) prompt written notice of and, where applicable, a
description of
(A) any notice from the PBGC in respect of the commencement
of any proceeding pursuant to section 4042 of ERISA to
terminate any Pension Plan or for the appointment of a
trustee to administer any Pension Plan,
(B) any distress termination notice delivered to the PBGC
under section 4041 of ERISA in respect of any Pension
Plan, and any determination of the PBGC in respect
thereof,
(C) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA,
(D) any Multiemployer Plan becoming "insolvent" (as defined
in section 4245 of ERISA) under Title IV of ERISA, and
(E) the whole or partial withdrawal of the Company or any
ERISA Affiliate from any Multiemployer Plan and the
withdrawal liability incurred in connection therewith;
(f) Actions, Proceedings - promptly after the commencement
thereof, notice of any action or proceeding relating to
the Company or any Subsidiary in any court or before
any Governmental Authority or arbitration board or
tribunal as to which there is a reasonable possibility
of an adverse determination and that, if adversely
determined, would have a Material Adverse Effect;
(g) Certain Environmental Matters - promptly written notice
of and a description of any event or circumstance that,
had such event or circumstance occurred or existed
immediately prior to the Closing Date, would have been
required to be disclosed as an exception to any
statement set forth in Section 2.13;
(h) Notice of Default or Event of Default - immediately
upon becoming aware of the existence of any condition
or event that constitutes a Default or an Event of
Default, a written notice specifying the nature and
period of existence thereof and what action the Company
is taking or proposes to take with respect thereto;
(i) Notice of Claimed Default - immediately upon becoming
aware that the holder of any Note, or of any Debt or
any Security of the Company or any Subsidiary, shall
have given notice or taken any other action with
respect to a claimed Default, Event or Default, default
or event of default, a written notice specifying the
notice given or action taken by such holder and the
nature of the claimed Default, Event of Default,
default or event of default and what action the Company
is taking or proposes to take with respect thereto; and
(j) Requested Information - with reasonable promptness,
such other data and information as from time to time
may be reasonably requested by any holder of Notes,
including, without limitation,
(i) copies of any statement, report or certificate furnished
to any holder of any Debt or any Security of the Company or any
Subsidiary,
(ii) information requested to comply with any request
of the National Association of Insurance Commissioners in
respect of the designation of the Notes, and
(iii) information requested to comply with 17 C.F.R.
ss.230.144A, as amended from time to time,
provided that any such request with respect to any of the data and
information referred to in the foregoing clauses (i), (ii), (iii) shall
be deemed to be reasonable for purposes of this Section 7.1(j).
7.2. Officers' Certificates.
Each set of financial statements delivered to each holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 6.1 through Section 6.9,
inclusive, during the period covered by the statement of operations
then being furnished (including with respect to each such Section,
where applicable, the calculations of the maximum or minimum amount,
ratio or percentage, as the case may be, permissible under the terms of
such Sections, and the calculations of the amounts, ratio or percentage
then in existence); and
(b) Event of Default - a statement that the signers have
reviewed the relevant terms hereof and have made, or caused to be made,
under their supervision, a review of the transactions and conditions of
the Company and the Subsidiaries from the beginning of the accounting
period covered by the income statements being delivered therewith to
the date of the certificate and that such review shall not have
disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3. Accountants' Certificates.
Each set of annual financial statement delivered pursuant to Section
7.1(b) shall be accompanied by a certificate of the accountants who certify such
financial statements, stating that they have reviewed this Agreement and stating
further, whether, in making their audit, such accountants have become aware of
any condition or event that then constitutes a Default or an Event of Default,
and, if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof.
7.4. Inspection.
The Company will permit the representatives of each holder of Notes, at
the expense of the Company at any time when a Default or Event of Default has
occurred and is in existence, and otherwise at the expense of such holder, to
visit and inspect any of the Properties of the Company or any Subsidiary, to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants (and by this provision the Company authorizes
such accountants to discuss the finances and affairs of the Company and the
Subsidiaries), all at such reasonable times and as often as may be reasonably
requested.
8. EVENTS OF DEFAULT
8.1. Nature of Events.
An "Event of Default" shall exist if any of the following occurs and is
continuing at any time:
(a) Principal or Make-Whole Amount Payments - the Company
shall fail to make any payment of principal or Make-Whole Amount on any
Note on or before the date such payment is due;
(b) Interest Payments - the Company shall fail to make any
payment of interest on any Note on or before five (5) Business Days
after the date such payment is due;
(c) Particular Covenant Defaults - the Company or any
Subsidiary shall fail to perform or observe any covenant contained in
Section 6.1 through 6.8, inclusive, or in Section 7.1(h) or Section
7.1(i), and such failure shall continue for more than five (5) days
after such failure shall first become known to any officer of the
Company;
(d) Other Defaults - the Company or any Subsidiary shall fail
to comply with any other provision hereof, and such failure shall
continue for more than thirty (30) days after such failure shall first
become known to any officer of the Company;
(e) Warranties or Representations - any warranty,
representation or other statement by or on behalf of the Company
contained herein or in any certificate or instrument furnished in
compliance with or in reference hereto shall have been false or
misleading in any material respect when made;
(f) Default on Debt or Security -
(i) the Company or any Subsidiary shall fail to make any
payment on any Debt or any Security when due; or
(ii) any event shall occur or any condition shall
exist in respect of any Debt or any Security of the Company or
any Subsidiary, or under any agreement securing or relating to
any such Debt or Security, that immediately or with any one or
more of the passage of time, the giving of notice or the
expiration of waivers or modifications granted in respect of
such event or condition:
(A) causes (or permits any one or more of
the holders thereof or a trustee therefor to cause)
such Debt or Security, or a portion thereof, to
become due prior to its stated maturity or prior to
its regularly scheduled date or dates of payment; or
(B) permits any one or more of the holders
thereof or a trustee therefor to require the Company
or any Subsidiary to repurchase such Debt or Security
from such holder;
provided that the aggregate amount of all obligations in
respect of all such Debt and Securities referred to in this
clause (f) exceeds at such time Three Million Dollars
($3,000,000);
(g) Involuntary Bankruptcy Proceedings -
(i) a receiver, liquidator, custodian or trustee of
the Company or any Subsidiary, or of all or any part of the
Property of either, shall be appointed by court order and such
order shall remain in effect for more than thirty (30) days,
or an order for relief shall be entered with respect to the
Company or any Subsidiary, or the Company or any Subsidiary
shall be adjudicated bankrupt or insolvent;
(ii) any of the Property of the Company or any
Subsidiary shall be sequestered by court order and such order
shall remain in effect for more than thirty (30) days; or
(iii) a petition shall be filed against the Company
or any Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter
in effect, and shall not be dismissed within thirty (30) days
after such filing;
(h) Voluntary Petitions - the Company or any Subsidiary shall
file a petition in voluntary bankruptcy or seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or shall consent to
the filing of any petition against it under any such law;
(i) Assignments for Benefit of Creditors, etc. - the Company
or any Subsidiary shall make an assignment for the benefit of its
creditors, or shall admit in writing its inability, or shall fail, to
pay its debts generally as they become due, or shall consent to the
appointment of a receiver, liquidator or trustee of the Company or any
Subsidiary or of all or any part of the Property of either; or
(j) Undischarged Final Judgments - a final judgment or final
judgments for the payment of money aggregating in excess of Three
Million Dollars ($3,000,000) shall be outstanding against any one or
more of the Company and the Subsidiaries and any one of such judgments
shall have been outstanding for more than thirty (30) days from the
date of its entry and shall not have been discharged in full or stayed.
8.2. Default Remedies.
(a) Acceleration on Event of Default.
(i) If an Event of Default specified in clause (g),
clause (h) or clause (i) of Section 8.1 shall exist, all of
the Notes at the time outstanding shall automatically become
immediately due and payable, together with interest accrued
thereon and the Make-Whole Amount at such time with respect to
such principal amount of such Notes; in each case without
presentment, demand, protest of notice of any kind, all of
which are hereby expressly waived.
(ii) If an Event of Default other than those
specified in clause (g), clause (h) and clause (i) of Section
8.1 shall exist, the holder or holders of at least fifty
percent (50%) in principal amount of the Notes then
outstanding (exclusive of Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate) may exercise
any right, power or remedy permitted to such holder or holders
by law and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire
principal of, and all interest accrued on, all the Notes then
outstanding to be, and such Notes shall thereupon become,
immediately due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall immediately pay to the
holder or holders of all the Notes then outstanding the entire
principal of, and interest accrued on, the Notes and, to the
extent permitted by applicable law, the Make-Whole Amount on
the date of such declaration with respect to such principal
amount of such Notes.
(b) Acceleration on Payment Default. During the existence of
an Event of Default described in Section 8.1(a) or Section 8.1(b), and
irrespective of whether the Notes then outstanding shall have been
declared to be due and payable pursuant to Section 8.2(a)(ii), any
holder of Notes that shall have not consented to any waiver with
respect to such Event of Default may, at such holder's option, by
notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, immediately due
and payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Company shall immediately pay to
such holder the entire principal of interest accrued on such Notes and,
to the extent permitted by applicable law, the Make-Whole Amount at
such time with respect to such principal amount of such Notes.
(c) Valuable Rights. The Company acknowledges, and the parties
hereto agree, that the right of each holder to maintain its investment
in the Notes free from repayment by the Company (except as herein
specifically provided for) is a valuable right and that the provision
for payment of a Make-Whole Amount by the Company in the event that the
Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of
such right under such circumstances.
(d) Other Remedies. During the existence of an Event of
Default and irrespective of whether the Notes then outstanding shall
have been declared to be due and payable pursuant to Section 8.2(a)(ii)
and irrespective of whether any holder of Notes then outstanding shall
otherwise have pursued or be pursuing any other rights or remedies, any
holder of Notes may proceed to protect and enforce its rights hereunder
and under such Notes by exercising such remedies as are available to
such holder in respect thereof under applicable law, either by suit in
equity or by action at law, or both, whether for specific performance
of any agreement contained herein or in aid of the exercise of any
power granted herein, provided that the maturity of such holder's Notes
may be accelerated only in accordance with Section 8.2(a) and Section
8.2(b).
(e) Nonwaiver and Expenses. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any
holder of Notes to exercise any right shall operate as a waiver of such
right or otherwise prejudice such holder's rights, powers and remedies.
If the Company shall fail to pay when due any principal of, or
Make-Whole Amount or interest on, any Note, or shall fail to comply
with any other provision hereof, or if there shall be a controversy or
potential controversy between the Company and one or more holders of
Notes as to any of the provisions of this Agreement or the Notes, the
Company shall pay to each holder of Notes, to the extent permitted by
applicable law, such further amounts as shall be sufficient to cover
the costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by each such holder in collecting any sums
due on such Notes or in otherwise assessing, analyzing or enforcing any
rights or remedies that are or may be available to it.
8.3. Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 8.2(a)(ii), then and in
every such case, the holders of at least fifty-one percent (51%) in aggregate
principal amount of the Notes then outstanding (exclusive of Notes then owned by
any one or more of the Company, any Subsidiaries and any Affiliates) may, by
written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:
(a) no judgment or decree shall have been entered for the
payment of any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all the Notes and all other
sums payable hereunder and under the Notes (except any principal of, or
interest or Make-Whole Amount on, the Notes that shall have become due
and payable by reason of such declaration under Section 8.2(a)(ii))
shall have been duly paid; and
(c) each and every other Default and Event of Default shall
have been waived pursuant to Section 10.5 or otherwise made good or
cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
9. INTERPRETATION OF THIS AGREEMENT
9.1. Terms Defined.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
Acceptable Consideration - means with respect to any Transfer
of any Property of the Company or a Subsidiary, cash consideration,
promissory notes or such other consideration (or any combination of the
foregoing) received by such Person in connection with such Transfer as
is, in each case, determined by the Board of Directors, in its good
faith opinion, to be in the best interests of the Company and to
reflect the Fair Market Value of such Property. It is understood that
the Company's or such Subsidiary's acceptance of any such consideration
in connection with such Transfer will constitute an investment and may,
depending upon the form of such consideration, constitute a Restricted
Investment made by the Company or such Subsidiary.
Affiliate - means, at any time, a Person (other than a
Subsidiary):
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Company;
(b) that beneficially owns or holds five percent (5%) or
more of any class of the Voting Stock of the Company;
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary; or
(d) that is an officer or director (or a member of the
immediate family of an officer or director) of the Company or any
Subsidiary;
at such time.
As used in this definition:
Control - means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Agreement - means this agreement, as it may be amended and restated
from time to time.
Applicable Minimum Denomination - means, at any time, with respect to
any Note, the product of:
(a) Five Million Dollars ($5,000,000), multiplied by
(b) the quotient of
(1) the aggregate principal amount of Notes outstanding at
such time, divided by
(2) Sixty Million Dollars ($60,000,000);
provided that:
(A) If such Note was issued on the Closing Date in an original
principal amount less than Five Million Dollars ($5,000,000) or if such
Note was issued in exchange for a Note that was issued on the Closing
Date in an original principal amount less than Five Million Dollars
($5,000,000) (or was issued as a result of any number of successive
exchanges of Notes referred to in this clause (A)), then in determining
the Applicable Minimum Denomination with respect to such Note there
shall be substituted in clause (a) of this definition, in place of
"Five Million Dollars ($5,000,000)," the original principal amount of
such Note issued on the Closing Date in such original principal amount
less than Five Million Dollars ($5,000,000); and
(B) If two or more Notes are held or are proposed to be held
by a single Person, and/or by two or more Persons that are Investor
Affiliates of one another, then the Applicable Minimum Denomination
with respect to each of such Notes shall be One Million Dollars
($1,000,000) (except as may be necessary to reflect any principal
amount not evenly divisible by One Million Dollars ($1,000,000)).
Board of Directors - means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
Business Day - means, at any time, a day other than a Saturday, a
Sunday or a day on which the bank designated by the holder of a Note to receive
(for such holder's account) payments on such Note is required by law (other than
a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
Capital Expenditures - means the costs of acquisition or construction
of any asset that at the time of acquisition or construction has an expected
economic useful life of more than one (1) year, and would be shown on a balance
sheet (or on a statement of financial condition) of the acquiring or
constructing Person as an asset.
Capital Lease - means, at any time, a lease with respect to which the
lessee is required by GAAP to recognize the acquisition of an asset and the
incurrence of a liability at such time.
Closing - Section 1.2.
Closing Date - Section 1.2.
Company - introductory paragraph hereof.
Consolidated Assets - means, at any time, the amount at which the
assets of the Company and the Subsidiaries would be shown on a consolidated
balance sheet (or on a consolidated statement of financial condition) of such
Persons at such time after deduction of depreciation, amortization and all other
properly deductible valuation reserves.
Consolidated Capitalization - means, at any time, the sum of
(a) Consolidated Net Worth, plus
(b) Consolidated Funded Debt,
in each case determined at such time.
Consolidated Debt - means, at any time, the aggregate amount of Debt of
the Company and the Subsidiaries, determined at such time after eliminating
intercompany transactions among the Company and the Subsidiaries.
Consolidated Fixed Charges - means, for any period, the sum of
(a) Consolidated Interest Expense for such period, plus
(b) the amount payable in respect of such period with respect
to Operating Rentals payable by the Company and the Subsidiaries,
determined after eliminating intercompany transactions among the
Company and the Subsidiaries.
Consolidated Funded Debt - means, at any time, the aggregate amount of
Funded Debt of the Company and the Subsidiaries, determined at such time after
eliminating intercompany transactions among the Company and the Subsidiaries.
Consolidated Interest Expense - means, for any period, the amount of
interest accrued or capitalized on, or with respect to, Consolidated Debt for
such period, including, without limitation, amortization of debt discount,
imputed interest on Capital Leases and interest on the Notes.
Consolidated Net Income - means, for any period, net earnings (or loss)
after income taxes of the Company and the Subsidiaries, determined on a
consolidated basis for such Persons, but excluding:
(a) net earnings (or loss) of any Subsidiary accrued prior
to the date it became a Subsidiary;
(b) any gain or loss (net of tax effects applicable thereto)
resulting from the sale, conversion or other disposition of
capital assets other than in the ordinary course of business;
(c) any extraordinary, unusual or nonrecurring gains or
losses;
(d) any gain arising from any reappraisal or write-up of
assets;
(e) any portion of the net earnings of any Subsidiary that for
any reason is unavailable for payment of dividends to the Company or a
Subsidiary;
(f) any gain or loss (net of tax effects applicable thereto)
during such period resulting from the receipt of any proceeds of any
insurance policy;
(g) any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise, or
earnings of any Person substantially all of whose assets have been
acquired by the Company or any Subsidiary, for any period prior to the
date of acquisition, provided that the earnings referred to in this
clause (g) shall not be excluded in determining Consolidated Net Income
for purposes of clause (a) of the definition of Consolidated Operating
Cash Flow;
(h) net earnings of any Person (other than a Subsidiary) in
which the Company or any Subsidiary shall have an ownership interest
unless such net earnings shall have actually been received by the
Company or such Subsidiary in the form of cash distributions; and
(i) any restoration during such period to income of any
contingency reserve, except to the extent that provision for such
reserve was made during such period out of income accrued during such
period.
Consolidated Net Income Before Amortization - means, for any
period, the sum of
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of amortization of intangibles (to
the extent, and only to the extent, that such aggregate amount was
deducted in the computation of Consolidated Net Income for such
period).
Consolidated Net Worth - means, at any time, total shareholders' equity
as would be shown on a consolidated balance sheet (or on a consolidated
statement of financial condition) of the Company and the Subsidiaries at such
time.
Consolidated Operating Cash Flow - means, for any period, the sum of:
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of:
(i) Consolidated Fixed Charges, and
(ii) income taxes, depreciation and amortization
(to the extent, and only to the extent, that such aggregate amount was
deducted in the computation of Consolidated Net Income for such
period). Consolidated Operating Cash Flow shall be adjusted
retroactively on a pro forma basis to give effect to the net income (as
determined in the same manner as Consolidated Net Income hereunder)
attributable to any Person acquired or disposed of by the Company or
any Subsidiary.
Debt - means, with respect to any Person, without duplication:
(a) its liabilities for borrowed money (whether or not
evidenced by a Security);
(b) any liabilities secured by any Lien existing on Property
owned by such Person (whether or not such liabilities have been
assumed);
(c) its liabilities in respect of Capital Leases;
(d) the present value of all payments due under any
arrangement for retention of title or any conditional sale agreement
(other than a Capital Lease) discounted at the implicit rate, if known,
with respect thereto or, if unknown, at eight percent (8%) per annum;
and
(e) its Guaranties of any liabilities of another Person
constituting liabilities of a type set forth above.
Default - means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
DOL - means the Department of Labor and any successor agency.
Dollars or $ - means United States of America dollars.
Environmental Protection Laws - means any federal, state, county,
regional or local law, statute or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing or transporting of Hazardous
Substances, and any regulations issued or promulgated in connection with such
statutes by any Governmental Authority, and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing.
As used in this definition:
CERCLA - means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith.
RCRA - means the Resource Conservation and Recovery Act of
1976, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
SARA - means the Superfund Amendments and Reauthorization Act
of 1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate - means any corporation or trade or business that:
(a) is a member of the same controlled group of corporations
(within the meaning of section 414(b) of the IRC) as the Company;
or
(b) is under common control (within the meaning of section
414(c) of the IRC) with the Company.
Event of Default - Section 8.1.
Exchange Act - means the Securities Exchange Act of 1934, as amended.
Excluded Transfers - Section 6.5.
Fair Market Value - means, at any time, with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller under no compulsion to buy or sell, respectively.
Foreign Pension Plan - means any plan, fund or other similar program.
(a) established or maintained outside of the United States of
America by any one or more of the Company or the Subsidiaries primarily
for the benefit of the employees (substantially all of whom are aliens
not residing in the United States of America) of the Company or such
Subsidiaries which plan, fund or other similar program provides for
retirement income for such employees or results in a deferral of income
for such employees in contemplation of retirement, and
(b) not otherwise subject to ERISA.
Funded Debt - means, at any time of determination, with respect to any
Person, all Debt of such person that is expressed to mature more than one (1)
year from the date of the creation thereof or that is extendible or renewable at
the option of such Person to a time more than one (1) year after the date of the
creation thereof (whether or not at such time of determination such Debt is
payable within one (1) year).
GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
Governmental Authority - means:
(a) the government of
(i) the United States of America and any state or other
political subdivision thereof, or
(ii) any other jurisdiction (y) in which the Company
or any Subsidiary conducts all or any part of its business of
(z) that asserts jurisdiction over the conduct of the affairs
or Properties of the Company or any Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
Guaranty - means, with respect to any Person (for the purposes of this
definition, the "Guarantor"), any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of the Guarantor guaranteeing or in effect guaranteeing (including, without
limitation, by means of a surety bond, letter of credit or other similar
instrument, whether or not designated as a "guaranty") any indebtedness,
dividend or other obligation of any other Person (the "Primary Obligor") in any
manner, whether directly or indirectly, including, without limitation,
obligations incurred through an agreement, contingent or otherwise, by the
Guarantor:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such indebtedness or
obligation, or
(ii) to maintain working capital or other balance sheet (or
statement of financial condition) condition or any income
statement condition of the Primary Obligor or otherwise to
advance or make available funds for the purchase or payment of
such indebtedness or obligation;
(c) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of the Primary Obligor
to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty. Without limiting the
generality of the foregoing, it is agreed and understood that each general
partner of a partnership shall be deemed to be a Guarantor of all indebtedness
and other obligations of such partnership and such partnership shall be deemed
to be the Primary Obligor in respect of such indebtedness and other obligations.
For purposes of the immediately preceding sentence, a Person shall be deemed to
be a general partner of any so-called "joint venture" or other arrangement
(whether or not constituting a partnership), and such joint venture or other
arrangement shall be deemed to be a partnership, if, pursuant to applicable law,
by contract or otherwise, such Person is liable, directly or indirectly,
contingently or otherwise, either individually or jointly with one or more other
Persons, for the indebtedness or other obligations of such joint venture or
other arrangement.
Hazardous Substances - means any and all pollutants, contaminants,
toxic or hazardous wastes and any other substances that might pose a hazard to
health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage
or filtration of which is or shall be, in each of the foregoing cases,
restricted, prohibited or penalized by any applicable law.
Institutional Investor - means the Purchasers, any affiliate of any of
the Purchasers, any holder or beneficial owner of Notes that is an "accredited
investor" as defined in section 2(15) of the Securities Act and or a "qualified
institutional buyer" as defined in 17 C.F.R. ss.230.144A, as amended from time
to time.
Investment - means any investment, made in cash or by
delivery of Property, by the Company or any Subsidiary:
(a) in any Person, whether by acquisition of stock,
indebtedness or other obligation or Security, or by loan, Guaranty,
advance, capital contribution or otherwise; or
(b) in any Property.
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon.
Investor Affiliate - means, at any time, with respect to any holder or
proposed holder of Notes, any Person that directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such holder or proposed holder.
As used in this definition:
Control - means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person (including, without limitation, the management and policies
of the investment of assets of such Person), whether through the
ownership of voting securities, by contract or otherwise. Without
limitation of the foregoing, any separate account of an insurance
company shall be deemed to be Controlled by such insurance company.
IRC - means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
IRS - means the Internal Revenue Service and any successor agency.
Lien - means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including, but not
limited to, the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale, sale with recourse or a trust receipt, or a lease,
consignment or bailment for security purposes. The term "Lien" includes, without
limitation, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting real Property and includes, without limitation, with
respect to stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements. For the purposes hereof, the Company
and each Subsidiary shall be deemed to be the owner of any Property that it
shall have acquired or holds subject to a conditional sale agreement, Capital
Lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes, and such
retention or vesting is deemed a Lien. The term "Lien" does not include negative
pledge clauses in agreements relating to the borrowing of money.
Make-Whole Amount - means, with respect to any date (a "Prepayment
Date") and any principal amount ("Prepaid Principal") of Notes required for any
reason to be paid prior to the regularly scheduled maturity thereof on such
Prepayment Date, the greater of
(a) Zero Dollars ($0), and
(b) (i) the sum of the present values of the then remaining
scheduled payments of principal and interest that would be payable in
respect of such Prepaid Principal but for such prepayment or
acceleration, minus
(ii) the sum of
(A) the amount of such Prepaid Principal, plus
(B) the amount of interest accrued on such Prepaid
Principal since the scheduled interest payment date
immediately preceding such Prepayment Date.
In determining such present values, a discount rate equal to the Make-Whole
Discount Rate with respect to such Prepayment Date and Prepaid Principal divided
by two (2), and a discount period of six (6) months to thirty (30) days each,
shall be used.
As used in this definition:
Make-Whole Discount Rate - means, with respect to any Prepayment
Date and Prepaid Principal, the sum of
(a) the per annum percentage rate (rounded to the nearest
three (3) decimal places) equal to the (i) yields reported, as of 10:00
A.M. (New York City time) on the second Business Day preceding the
Prepayment Date with respect to such Prepaid Principal on the display
designated as the "USD Screen" on the Bloomberg Financial Market
Service (or such other screen as may replace the USD Screen on
Bloomberg Financial Market Service) for actively traded U.S. Treasury
securities having a maturity equal to the Weighted Average Life to
Maturity of such Prepaid Principal as of such Prepayment Date, or (ii)
if such yields are not reported as of such time or the yields reported
as of such time are not ascertainable, the yield to maturity derived
from the annual yield to maturity of the United States Treasury
obligation listed in the Applicable H.15 as of such Prepayment Date for
the then most recently available day in such Applicable H.15 with a
Treasury Constant Maturity (as defined in such Applicable H.15) equal
to the Weighted Average Life to Maturity of such Prepaid Principal
determined as of such Prepayment Date, plus
(b) forty one-hundredths percent (0.40%) per annum. For
purposes of clause (a) of the preceding sentence, if no United States
Treasury obligation with a Treasury Constant Maturity corresponding
exactly to the Weighted Average Life to Maturity of such Prepaid
Principal is listed, the yields for the two (2) published United States
Treasury obligation with Treasury Constant Maturities most closely
corresponding to such Weighted Average Life to Maturity (one (1) with a
longer maturity and one (1) with a shorter maturity, if available)
shall be calculated pursuant to the immediately preceding sentence and
the Make-Whole Discount Rate shall be interpolated or extrapolated from
such yields on a straight-line basis.
Applicable H.15 - means, at any time, United States Federal
Reserve Statistical Release H.15(519) or its successor publication then
most recently published and available to the public or, if no such
successor publication is available, then any other source of current
information in respect of interest rates on securities of the United
States of America that is generally available and, in the judgment of
the Required Holders, provides information reasonably comparable to the
H.15(519) report.
Weighted Average Life to Maturity - means, with respect to any
Prepayment Date and Prepaid Principal, the number of years obtained by
dividing the Remaining Dollar-Years of such Prepaid Principal
determined on such Prepayment Date by such Prepaid Principal.
Remaining Dollar-Years - means, with respect to any Prepayment
Date and Prepaid Principal, the result obtained by
(a) multiplying, in the case of each required payment of
principal (including payment at maturity) that would be payable in
respect of such Prepaid Principal but for such prepayment,
(i) an amount equal to such required payment of principal,
by
(ii) the number of years (calculated to the nearest
one-twelfth (1/12) that will elapse between such Prepayment
Date and the date such required principal payment would be due
if such Prepaid Principal had not be so prepaid, and
(b) calculating the sum of each of the products obtained in
the preceding subsection (a).
Mandatory Principal Amortization Payments - Section 4.1.
Margin Security - means "margin stock" within the meaning of
Regulations T, U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II, as amended from time to time.
Material Adverse Effect - means a material adverse effect on the
business, profits, Properties or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or on the ability of the Company
to perform its obligations set forth herein and in the Notes.
Multiemployer Plan - means any "multiemployer plan" (as defined in
section 3 of ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as defined in section 3 of ERISA).
Note Purchase Agreements - Section 1.2.
Notes - Section 1.1.
Offering Memorandum - Section 2.1.
Operating Lease - means, with respect to any Person, any lease other
than a Capital Lease.
Operating Rentals - means all fixed payments that the lessee is required to
make by the terms of any Operating Lease.
OSHA - means the Occupational Safety and Health Act of 1970, together
with all rules, regulations and standards promulgated pursuant thereto, all as
amended from time to time.
PBGC - means the Pension Benefit Guaranty Corporation and any successor
corporation or governmental agency.
Pension Plan - means, at any time, any "employee pension benefit plan"
(as defined in section 3 of ERISA) maintained at such time by the Company or any
ERISA Affiliate for employees of the Company of such ERISA Affiliate, excluding
any Multiemployer Plan.
Person - means an individual, sole proprietorship, partnership,
corporation, trust, joint venture, unincorporated organization, or a government
or agency or political subdivision thereof.
Placement Agent - means William Blair & Company, L.L.C.
Preferred Stock - means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
Property - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchase Money Lien - means a Lien held by any Person (whether or not
the seller of such Property) on tangible Property (or a group of related items
of Property the substantial portion of which are tangible) acquired or
constructed by the Company or any Subsidiary, which Lien secures all or a
portion of the related purchase price or construction costs of such Property,
provided that such Lien
(a) is created contemporaneously with, or within thirty (30) days
of, such acquisition or construction,
(b) encumbers only Property purchased or constructed after the
Closing Date and acquired with the proceeds of the Debt secured
thereby, and
(c) is not thereafter extended to any other Property.
Purchasers - means the purchasers of the Notes set forth in Annex 1
hereto.
Required Holders - means, at any time, the holders of at least
fifty-one percent (51%) in principal amount of the Notes at any time outstanding
(exclusive of Notes then owned by any one or more of the Company, any Subsidiary
and any Affiliate).
Restricted Investment - means, at any time, all Investments except the
following:
(a) Investments in Property to be used in the ordinary
course of business of the Company and the Subsidiaries;
(b) Investments in current assets arising from the sale of
goods and services in the ordinary course of business of the Company
and the Subsidiaries;
(c) Investments in one or more Subsidiaries or any corporation
that concurrently with such Investment becomes a Subsidiary;
(d) Investments in direct obligations of, or obligations
guarantied by, the United States of America or any agency of the United
States of America the obligations of which agency carry the full faith
and credit of the United States of America, provided that such
obligations mature within one (1) year from the date of acquisition
thereof;
(e) Investments in negotiable certificates of deposit issued
by commercial banks organized under the laws of the United States of
America or any state thereof, having capital, surplus and undivided
profits aggregating at least Two Hundred Fifty Million Dollars
($250,000,000) and the long-term unsecured debt obligations (or the
long-term unsecured debt obligations of the bank holding company owning
all of the capital stock of such bank) of which are rate "A" or higher
by Standard & Poor's Corporation or "A2" or higher by Moody's Investors
Service, provided that such certificates of deposit mature within one
(1) year from the date of acquisition thereof;
(f) Investments in commercial paper rated "A-1" or higher by
Standard & Poor's Corporation or "P-1" or higher by Moody's Investors
Service, provided that such obligations mature within two hundred
seventy (270) days from the date or creation thereof; and
(f) Investments in any obligation of any state of the United
States of America or any municipality thereof rated "BBB" or higher by
Standard & Poor's Corporation or "Baa" or higher by Moody's Investors
Service, provided that such obligations mature within one (1) year from
the date of acquisition thereof.
Restricted Payment - means:
(a) any dividend or other distribution, direct or indirect, on
account of any shares of capital stock of the Company or any Subsidiary
(other than on account of capital stock of a Subsidiary owned legally
and beneficially by the Company or a Wholly-Owned Subsidiary) now or
hereafter outstanding, whether in cash or other Property, except a
dividend or other distribution payable solely in shares of common stock
of such Person; and
(b) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of capital stock of the Company or
any Subsidiary (other than on account of capital stock of a Subsidiary
owned legally and beneficially by the Company or a Wholly-Owned
Subsidiary) now or hereafter outstanding, or of any warrants, rights or
options to acquire any shares of such stock.
Securities Act - means the Securities Act of 1933, as amended.
Security - means "security" as defined in section 2(1) of the
Securities Act.
Senior Financial Officer - means the chief financial officer, the
principal accounting officer, the controller or the treasurer of the Company.
Senior Officer - means the chief executive officer, the president or the
chief financial officer of the Company.
Subsidiary - means, at any time, a corporation of which the Company
owns, directly or indirectly, more than fifty percent (50%) (by number of votes)
of each class of the Voting Stock at such time.
Subsidiary Stock - Section 6.5.
Surviving Corporation - Section 6.6.
Total Subsidiary Debt - means, at any time, without duplication, the
aggregate amount of Debt and Preferred Stock of the Subsidiaries, determined at
such time after eliminating intercompany transactions among the Company and the
Subsidiaries.
Transfers - Section 6.5.
Voting Stock - means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
Wholly-Owned Subsidiary - means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity Securities (except directors'
qualifying shares) and voting Securities of which are owned by, and all of the
Debt of which is held by, any one or more of the Company and the other
Wholly-Owned Subsidiaries at such time.
9.2. GAAP.
Where the character or amount of any asset or liability or item of
income or expense, or any consolidation or other accounting computation is
required to be made for any purpose hereunder, it shall, unless otherwise
specified, be done in accordance with GAAP, provided, that if any term defined
herein includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term was defined with reference
solely to GAAP, such term will be deemed to include or exclude such amounts,
items or concepts as set forth herein.
9.3. Directly or Indirectly.
Where any provision herein refers to action to be taken by any Person,
or that such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
9.4. Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of
the Sections of this Agreement and Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof
and shall not affect the construction hereof. The words "herein,"
"hereof," "hereunder," and "hereto" refer to this Agreement as a whole
and not to any particular Section or other subdivision. Unless
otherwise specified, references to Sections are to Sections of this
Agreement, references to Annexes are to Annexes to this Agreement and
references to Exhibits are to Exhibit to this Agreement.
(b) Construction. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
9.5. Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL ILLINOIS LAW.
10. MISCELLANEOUS
10.1. Communications.
(a) Method; Address. All communications hereunder or under the
Notes shall be in writing, shall be (y) hand delivered or deposited
into the United States mail (registered or certified mail), postage
prepaid and (z) sent by overnight courier or by facsimile transmission,
and shall be addressed,
(i) if to the Company,
Littelfuse, Inc.
800 East Northwest Highway
Des Plaines, Illinois 60016
Attention: Chief Financial Officer
Facsimile: (847) 824-3864
or at such other address as the Company shall have furnished in writing to
all holders of the Notes at the time outstanding, and
(ii) If to any of the holders of the Notes.
(A) If such holders are the Purchasers, at
their respective addresses set forth on Annex 1, and
further including any parties referred to on Annex 1
that are required to receive notices in addition to
such holders of the Notes, and
(B) If such holders are not the Purchasers,
at their respective addresses set forth in the
register for the registration and transfer of Notes
maintained pursuant to Section 6.13,
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 10.1 to the
Company (which other address shall be entered in such register).
(b) When Given. Any communication so addressed and deposited
in the United States mail, postage prepaid, by registered or certified
mail (in each case, with return receipt requested) shall be deemed to
be received on the third (3rd) succeeding Business Day after the day of
such deposit (not including the date of such deposit). Any
communication so addressed and otherwise delivered shall be deemed to
be received when actually received at the address of the addressee.
(c) Certificates, etc. Whenever under this Agreement any
certificate or other writing is given by any director, officer or
employee of the Company or any Subsidiary, such certificate of other
writing shall be delivered by such director, officer or employee on
behalf of the Company or such Subsidiary in his or her capacity as such
director, officer or employee, and not in his or her individual
capacity.
10.2. Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by you at the closing of your purchase of
the Notes (except the Notes themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to you or any other holder of Notes,
may be reproduced by any holder of Notes by any photographic, photostatic,
microfilm, microcard, miniature photographic, digital or other similar process
and each holder of Notes may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such holder of Notes in the regular course of business)
and that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. Nothing in this Section 10.2 shall
prohibit the Company or any holder of Notes from contesting the validity or the
accuracy of any such reproduction.
10.3. Survival.
All warranties, representations, certifications and covenants made by
the Company herein or in any certificate or other instrument delivered by it or
on its behalf hereunder shall be considered to have been relied upon by you and
shall survive the delivery to you of the Notes regardless of any investigation
made by you or on your behalf. All statements in any such certificate or other
instrument shall constitute warranties and representations by the Company
hereunder.
10.4. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder, whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign.
10.5. Amendment and Waiver.
(a) Requirements. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders; provided that
no such amendment or waiver of any of the provisions of Section 1
through Section 4, inclusive, or any defined term used therein, shall
be effective as to any holder of Notes unless consented to by such
holder in writing; and provided further that no such amendment or
waiver shall, without the written consent of the holders of all Notes
(exclusive of Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding,
(i) subject to Section 8, change the amount or time
of any prepayment or payment of principal or Make-Whole Amount
or the rate or time of payment of interest,
(ii) amend Section 8,
(iii) amend the definition of Required Holders, or
(iv) amend this Section 10.5.
(b) Solicitation of Noteholders.
(i) Solicitation. The Company shall not solicit,
request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions hereof or the
Notes unless each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall be provided by the
Company with sufficient information to enable it to make an
informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to
the provisions of this Section 10.5 shall be delivered by the
Company to each holder of outstanding Notes immediately
following the date on which the same shall have been executed
and delivered by all holders of outstanding Notes required to
consent or agree to such waiver or consent.
(ii) Payment. The Company shall not, directly or
indirectly, pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by
any holder of Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the
same terms, ratably to the holders of all Notes then
outstanding.
(iii) Scope of Consent. Any consent made pursuant to
this Section 10.5 by a holder of Notes that has transferred or
has agreed to transfer its Notes to the Company, any
Subsidiary or any Affiliate and has provided or has agreed to
provide such written consent as a condition to such transfer
shall be void and of no force and effect except solely as to
such holder, and any amendments effected or waivers granted or
to be effected or granted that would not have been or would
not be so effected or granted but for such consent (and the
consents of all other holders of Notes that were acquired
under the same or similar conditions) shall be void and of no
force and effect, retroactive to the date such amendment or
waiver initially took or takes effect, except solely as to
such holder.
(c) Binding Effect. Except as provided in Section
10.5(b)(iii), any amendment or waiver consented to as provided in this
Section 10.5 shall apply equally to all holders of Notes and shall be
binding upon them and upon each future holder of any Note and upon the
Company whether or not such Note shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent
thereon.
(d) Expenses. The Company shall pay when billed the reasonable
expenses relating to the consideration, negotiation, preparation or
execution of any amendments, waivers or consents pursuant to the
provisions hereof (except that the Company shall not be required to pay
the allocated cost of your counsel who are your employees or your
affiliates' employees), whether or not any such amendments, waivers or
consents are executed.
10.6. Payments on Notes.
(a) Manner of Payment. The Company shall pay all amounts
payable with respect to each Note (without any presentment of such
Notes and without any notation of such payment being made thereon) by
crediting, by federal funds bank wire transfer, the account of the
holder thereof in any bank in the United States of America as may be
designated in writing by such holder, or in such other manner as may be
reasonably directed or to such other address in the United States of
America as may be reasonably designated in writing by such holder.
Annex 1 shall be deemed to constitute notice, direction or designation
(as appropriate) to the Company with respect to payments as aforesaid.
In the absence of such written direction, all amounts payable with
respect to each Note shall be paid by check mailed and addressed to the
registered holder of such Note at the address shown in the register
maintained by the Company pursuant to Section 5.1.
(b) Payments Due on Holidays. If any payment due on, or with
respect to, any Notes shall fall due on a day other than a Business
Day, then such payment shall be made on the first (1st) Business Day
following the day on which such payment shall have so fallen due,
provided that if all or any portion of such payment shall consist of a
payment of interest, for purposes of calculating such interest, such
payment shall be deemed to have been originally due on such first (1st)
following Business Day, such interest shall accrue and be payable to
(but not including) the actual date of payment and the amount of the
next succeeding interest payment shall be adjusted accordingly.
(c) Payments, When Received. Any payment to be made to the
holders of Notes hereunder or under the Notes shall be deemed to have
been made on the Business Day such payment actually becomes available
to such holder at such holder's bank prior to 11:00 a.m. (local time of
such bank).
10.7. Entire Agreement; Severability.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms. In case
any one or more of the provisions contained in this Agreement or in any Note, or
any application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein, and any other application thereof, shall not in
any way be affected or impaired thereby.
10.8. Duplicate Originals, Execution in Counterpart.
Two (2) or more duplicate originals hereof may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in one or
more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
[Remainder of page intentionally blank; next page is signature page.]
<PAGE>
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.
Very truly yours,
LITTELFUSE, INC.
By: _________________________
Name: _________________________
Title: _________________________
<PAGE>
The foregoing is agreed to as of the date hereof.
PRINCIPAL LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
NATIONWIDE LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
AMERICAN FAMILY LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
TMG LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
BENEFICIAL LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
<PAGE>
ANNEX 1
ANNEX 1
<TABLE>
INFORMATION AS TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
<S> <C>
PRINCIPAL LIFE INSURANCE COMPANY $26,900,000 (general account note)
711 High Street $1,500,000 (general account note)
Des Moines, IA 50392-0800 $4,600,000 (separate account note)
Attention: Investment Department -
Securities Division
Ref: Bond No. 61760
</TABLE>
All notices with respect to the Notes, except with respect to payment, should be
sent to the address above.
All notices with respect to payments on the Notes should be sent to:
Principal Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Securities
[Telefacsimile: (515) 248-2643
Confirmation: (515) 247-0689]
Ref: Bond No. 61760
All payments with respect to the two general account Notes are to be made by a
wire transfer of immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA No.: 073 000 228
For credit to Principal Life Insurance Company,
Account No.014752, Reference:
OBI PFGSE(S)B0061760()
Tax Identification Number: 42-0127290
All payments with respect to the separate account Note are to be made by a wire
transfer of immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA No.: 073 000 228
For credit to Principal Life Insurance Company,
Separate Account No.032395, Reference:
OBI PFGSE(S)B0061760()
Tax Identification Number: 42-0127290
<PAGE>
<TABLE>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
<S> <C>
NATIONWIDE LIFE INSURANCE $13,000,000
COMPANY
One Nationwide Plaza
Columbus, Ohio 43215-2220
Send notices and communications to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
</TABLE>
Wiring Instructions:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attn: P & I Department
PPN# 537008 B * 4
Security Description: Littelfuse, Inc.
6.16% Senior Notes due
September 1, 2005
All notices of payment on or in respect to the security should be sent
to:
Nationwide Life Insurance Company
c/o The Bank of New York
PO Box 19266
Attn: P & I Department
Newark, NJ 07195
With a copy to:
Nationwide Life Insurance Company
Attn: Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
The original note should be registered in the name of Nationwide Life
Insurance Company and delivered to:
The Bank of New York
One Wall Street
3rd Floor - Window A
New York, NY 10286
F/A/O Nationwide Life Insurance Co. Acct. #267829
Tax ID #31-4156830
<PAGE>
<TABLE>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
<S> <C>
AMERICAN FAMILY LIFE INSURANCE $6,000,000
COMPANY
600 American Parkway
Madison, WI 53783-0001
Attn: Investment Division - Private Placements
</TABLE>
Number of Notes/Denominations:
$6,000,000
Payments:
All Payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds. Each such wire transfer shall set
forth the name of the Company, the full title (including the coupon rate and
final maturity date) of the Notes, and the due date and application among
principal and interest of the payment being made. Payment shall be made to:
Firstar Bank Milwaukee, N.A.
Account of Firstar Trust Company
ABA #075000022
For Credit To Account #112-950-027
Trust Account #000018012500 for Life Portfolio
Attn: Accounting Department
Notices:
All notices and communications, including notices with respect to
payments and written confirmation of such payment as well as quarterly
and annual financial statements, be addressed as first provided above.
Nominee Name in which Notes are to be registered:
BAND & Co.
Delivery of Notes:
Send special delivery by overnight carrier to:
Firstar Bank of Madison
1 South Pinckney Street
Madison, WI 53703
Attn: Business Custody
In addition, a specimen copy of each Note should be sent to American Family Life
Insurance Company as
addressed above.
Tax ID #39-6040365
<PAGE>
<TABLE>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
<S> <C>
TMG LIFE INSURANCE COMPANY $5,000,000 c/o The Mutual Group (U.S.), Inc.
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Attention: Connie Keller
Phone: (414) 641-4022
Facsimile: (414) 641-4055
</TABLE>
All payments on account of the Notes shall be made by wire or intrabank transfer
of immediately available funds to:
Norwest Bank Minnesota, N.A.
ABA# 091000019
BNF: A/C: 0840245
BNF: Trust Clearing Account
REF: ATTN: Income Collections
TRUST ACCOUNT: 13075700
Littelfuse, Inc. PPN: 537008 B * 4
All notices in respect of payment shall be delivered to:
TMG Life Insurance Company
c/o The Mutual Group (U.S.), Inc.
Attn: Tamie Greenwood
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Telephone: (414) 641-4027
Facsimile: (414) 641-4055
All other communications shall be delivered to:
TMG Life Insurance Company
c/o The Mutual Group (U.S.), Inc.
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Telephone: (414) 641-4027
Facsimile: (414) 641-4055
Name of Nominee in which Notes are to be issued: TMG Life Insurance Company
Taxpayer I.D. Number: #45-0208990
Please Note:TMG Life Insurance Company requires TWO signatures on all
signature pages.
<PAGE>
<TABLE>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
<S> <C>
BENEFICIAL LIFE INSURANCE $3,000,000
COMPANY
INSTITUTION OR INSTITUTIONAL ADVISOR ACCOUNT SET UP INFORMATION
Address Beneficial Life Insurance Co/BLIC
Attn: Ken Steiner
36 S. State
Salt Lake City, UT 84316
Investment Advisor/Phone Bruce Cundick (801) 933-1279
Sterling Russell (801) 933-1239
Mark Siddoway (801) 933-1238
Investment Advisor Operations Officer/Phone Ken Steiner (801) 933-1291
Susan Denton (801) 933-1279
Investment Advisor Fax Copies Phone Kathy Grange (801) 531-3315
</TABLE>
<TABLE>
SETTLEMENT INSTRUCTIONS
<C>
<S> <C>
1. Delivery instructions for Depository Eligible Settle at Depository Trust Company of New York (DTC-NY)
Securities settling in Next Day Funds (See Security Trade Coding below for details)
2. Delivery Instructions for Depository Eligible Same as #1 above
Securities settling in Same Day Funds
3. Delivery Instructions for Securities settling thru Zions First National Bank - Salt Lake City
Fed Book Entry System. Fed Wire #1240-0005-4
Zions SLC/CUST For the Account of Deseret Trust Co.
(801) 524-4640
4. Delivery Instructions for Securities settling at Deliver to PTC for ZDES
Participants Trust Company (PTC) Confirm with Deseret Trust Co. - Annette/Irene
(801) 363-2992
5. Delivery Instructions for Securities not Eligible for United Missouri Trust
Company of New York Settlement at Depository Trust Company, New York or One
Battery Park Plaza, 8th Floor thru Fed Book Entry System New York, NY 10004
(212) 968-1990
for the account of Zions First National Bank
Account #69-0180-00-5
Contact at Deseret Trust Company for Security Settlements Annette Rohovit, Irene Hester, Vicki Rows
Deseret Trust Company's Fax Copies Phone # (801) 363-2995
INSTITUTION(S) FOR WHICH INVESTMENT ADVISORS ACT(S)
SECURITY TRADE CODING INFORMATION FOR BROKERS
Institution Name Deseret Trust Company
Investment Advisor Institution ID # 25782
Agent Bank Name Deseret Trust Company
Agent Bank ID# 25782
Agent Bank's DTC Participant Clearing # 0958
Agent Bank Internal # for Account 245501028 BLIC -General to be give by Trader to Broker
245500202 BLIC - Gen. EQ
245500210 BLIC - Val EQ
245501010 BLIC - Pledged
245501044 BLIC - Tot Ret Fixed
</TABLE>
<TABLE>
<S> <C> <C>
BROKER ACCOUNT STATEMENTS Deseret Trust Company (copy 1) Beneficial Life Insurance Co.
- -------------------------
(copy 2)
c/o Harvey S. Glade c/o Ken Steiner
P.O. Box 11558 36 S. State St.
SLC, UT 84147 Salt Lake City, UT 84136
TAX ID # FOR INSTITUTIONS FOR WHICH ADVISORS 87-0115120
ACT(S)
</TABLE>
<PAGE>
ANNEX 1
ANNEX 2
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
Wire transfer instructions for purchasers of Littelfuse, Inc. Senior Notes:
Bank: First National Bank of Chicago
One First National Plaza
Chicago, IL 60670-0685
ABA#: 071000013
Account Name: Littelfuse, Inc.
Account #: 52-64626
Littelfuse, Inc. Contact: Linda Bartuch
(847) 391-0362
<PAGE>
ANNEX 3
INFORMATION AS TO COMPANY
<PAGE>
EXHIBIT B-2
EXHIBIT A
[FORM OF NOTE]
LITTELFUSE, INC.
6.16% Senior Note due September 1, 2005
No. R-___
$____________________ [Date]
PPN:
LITTELFUSE, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to ___________ or registered assigns the
principal sum of _____________________ DOLLARS ($__________________) on
September 1, 2005 and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid principal balance thereof from the date
of this Note at the rate of six and sixteen one-hundredths percent (6.16%) per
annum, quarterly on the first day of each March, June, September and December in
each year, commencing on December 1, 1998, until the principal amount hereof
shall become due and payable; and to pay on demand interest on any overdue
principal (including any overdue prepayment of principal) and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the lesser of (a) the highest rate
allowed by applicable law and (b) eight and sixteen one-hundredths percent
(8.16%) per annum.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
(defined below).
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to Sixty Million Dollars ($60,000,000)
pursuant to the Company's Note Purchase Agreement, dated as of September 1,
1998, (the "Note Purchase Agreement"), with the purchasers listed on Annex 1
thereto. This Note is entitled to the benefits of the Note Purchase Agreement
and the terms thereof are incorporated herein by reference. Capitalized terms
used herein and not otherwise defined herein have the meanings specified in the
Note Purchase Agreement. As provided in the Note Purchase Agreement, this Note
is subject to prepayment, in whole or in part, in certain cases without a
Make-Whole Amount and in other cases with a Make-Whole Amount. The Company
agrees to make required prepayments on account of such Notes in accordance with
the provisions of the Note Purchase Agreement.
This Note is a registered Note and is transferable only by surrender
thereof at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or its attorney duly authorized
in writing.
Under certain circumstances, as specified in the Note Purchase
Agreement, the principal of this Note (in certain cases together with any
applicable Make-Whole Amount) may be declared due and payable in the manner and
with the effect provided in the Note Purchase Agreement.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL ILLINOIS LAW.
LITTELFUSE, INC.
By ________________________
Name:
Title:
<PAGE>
September 1, 1998
Page 3
EXHIBIT B-2
FORM OF PURCHASERS' SPECIAL COUNSEL CLOSING OPINION
September 1, 1998
To Each of the Purchasers
Listed on Schedule I hereto
Ladies and Gentlemen:
We have acted as your special counsel in connection with the execution
and delivery of the Agreement (as hereinafter defined) and your purchase on the
date hereof of $60,000,000 aggregate principal amount of 6.16% Senior Notes due
September 1, 2005 (the "Notes") of Littelfuse, Inc., a corporation organized
under the laws of Delaware (the "Company"), pursuant to a Note Purchase
Agreement, dated as of September 1, 1998, entered into by the Company and you
(the "Agreement").
This opinion is being delivered to you pursuant to Section 3.1(b) of
the Agreement. Capitalized terms used but not otherwise defined herein shall
have the same meanings ascribed to them in the Agreement.
We have examined such certificates of public officials and officers of
the Company, documents, corporate records, statutes, rules and regulations, and
we have considered such other questions of law as we have deemed necessary or
appropriate for purposes of this opinion. As to facts material to our opinion,
we have relied, without independent verification, upon the representations of
the Company contained in the Agreement and information contained in the
Company's certificates delivered in connection with the execution and delivery
of the Agreement and the issuance of the Notes. We have assumed the genuineness
and completeness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity to originals of all documents submitted
to us as copies.
Based on the foregoing, and subject to the qualifications set forth
herein and the last paragraphs hereof, we are of the opinion that:
1. The Company is a corporation validly existing in good standing under
the General Corporation Law of the State of Delaware, with the corporate power
to enter into and perform the Agreement and to issue and sell the Notes.
2. The Agreement has been duly authorized by proper corporate action on
the part of the Company, has been duly executed and delivered by an authorized
officer of the Company and constitutes the legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except to the extent that
enforcement of the Agreement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
3. The Notes have been duly authorized by proper corporate action on
the part of the Company, have been duly executed and delivered by an authorized
officer of the Company and constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their terms, except to the extent
that enforcement of the Notes may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
4. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
5. The compliance with the terms and provisions of the Agreement will
not conflict with or result in any breach of any of the provisions of the
Certificate of Incorporation or By-Laws of the Company.
The opinion of Chapman and Cutler, special counsel to the Company,
dated the date hereof and delivered to you pursuant to Section 3.1(a) of the
Agreement, is satisfactory in form and scope to us.
We are admitted to practice in the State of Illinois and express no
opinion with respect to, or as to the effect or applicability of, any laws other
than the laws of the State of Illinois, the General Corporation Law of the State
of Delaware and the federal laws of the United States.
This opinion is rendered as of the date hereof. We assume no
responsibility for updating this opinion to take into account any event, action,
interpretation or change of law occurring subsequent to the date hereof that may
affect the validity of any of the opinions expressed herein.
This opinion is delivered to you solely for your benefit and may not be
furnished to, quoted or relied upon by any other person other than subsequent
purchasers or transferees of the Notes; provided, however that this opinion may
be disclosed (i) to your agents and employees, (ii) in connection with the
enforcement of obligations of the Company under the Notes and the Agreement,
(iii) in response to a subpoena or other legal process, (iv) as otherwise
required by applicable law or regulations; or (v) in connection with the sale or
transfer of the Notes.
Very truly yours,
<PAGE>
SCHEDULE I
Principal Life Insurance Company
Nationwide Life Insurance Company
American Family Life Insurance Company
TMG Life Insurance Company
Beneficial Life Insurance Company
Revised 2/5/99
EXHIBIT 10.8
LITTELFUSE DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the Littelfuse Deferred Compensation Plan for
Non-employee Directors (the "Plan") is to promote the ownership by non-employee
directors of Littelfuse, Inc., a Delaware corporation (the "Company"), of shares
of common stock, $.01 par value, of the Company (the "Company Common Stock"), by
allowing them to elect to receive shares of the Company Common Stock in lieu of
their receiving some or all of the cash compensation which they would otherwise
be entitled to receive as payment for their services as directors of the
Company. The Company believes that ownership of the Company Common Stock by its
non-employee directors aligns the interests of such non-employee directors more
closely with the interests of the stockholders of the Company and that the Plan
will also assist the Company in attracting and retaining highly qualified
persons to serve as non-employee directors of the Company.
ARTICLE II
ELECTIONS BY ELIGIBLE DIRECTORS
ARTICLE II
ELECTIONS BY ELIGIBLE DIRECTORS
Section 2.1. Eligibility. Any person who is serving as a director of
the Company and who is not an employee of the Company or any of its subsidiaries
shall be eligible to participate under the Plan (hereinafter referred to
individually as an "Eligible Director" and collectively as the "Eligible
Directors").
Section 2.2. Compensation. As used herein, the term "Compensation"
shall mean any and all fees and retainers payable in cash to an Eligible
Director by the Company for his or her services as a director, including,
without limitation, his or her annual retainer and meeting fees. A Director
shall be deemed to have earned one-fourth of his or her annual retainer fee on
the date of each of the four regularly scheduled Board of Directors meetings,
whether or not he or she attends such meeting.
Section 2.3. Compensation Deferral for 1995. Not later than June 30,
1995, an Eligible Director may, by filing a written election with the Secretary
of the Company, direct the Company (a) to defer some or all of his or her
Compensation for 1995 which has not theretofore been earned by such Eligible
Director in such amount or percentage as specified by such Eligible Director and
(b) to credit the amount of such deferral to an account maintained on the books
of the Company for such Eligible Director (the "Deferred Compensation Account"),
such credit to be made as of the date that such Compensation is deemed to have
been earned by such Eligible Director.
Section 2.4. Compensation Deferral for 1996. Not later than June 30,
1995, an Eligible Director may, by filing a written election with the Secretary
of the Company, direct the Company (a) to defer some or all of his or her
Compensation for 1996 in such amount or percentage as specified by such Eligible
Director and (b) to credit the amount of such deferral to such Eligible
Director's Deferred Compensation Account, such credit to be made as of the date
that such Compensation is deemed to have been earned by such Eligible Director.
Section 2.5. Compensation Deferral for 1997 and Later Years. An
Eligible Director may, by filing a written election with the Secretary of the
Company from time to time, direct the Company (a) to defer some or all of his or
her Compensation which is payable to him or her on or after January 1, 1997, in
such amount or percentage as specified by such Eligible Director and (b) to
credit the amount of such deferral to such Eligible Director's Deferred
Compensation Account, such credit to be made as of the date that such
Compensation is deemed to have been earned by such Eligible Director.
Section 2.6. Interest. The Company shall credit the Deferred
Compensation Account for each Eligible Director with interest at the rate of
eight percent (8%) per annum on the balance of the Deferred Compensation Account
from time to time, such credit to be made on a monthly basis.
Section 2.7. Elections. Once an election by an Eligible Director to
defer some or all of his or her Compensation becomes effective pursuant to this
Article, such election shall remain in effect until written notice terminating
or amending said election is delivered by said Eligible Director to the
Secretary of the Company.
Section 2.8. Maximum Number of Shares. The maximum number of shares of
Company Common Stock which may be issued pursuant to the Plan shall be 60,000
shares.
ARTICLE III
ESTABLISHMENT OF AND CONTRIBUTIONS TO TRUST
Section 3.1. Establishment of Trust. The Company shall establish a
trust (the "Trust") with an independent third party trustee approved by the
Board of Directors of the Company (the "Trustee") pursuant to a trust agreement
approved by the Board of Directors of the Company (the "Trust Agreement") for
the purpose of holding shares of the Company Common Stock for the benefit of the
Eligible Directors.
Section 3.2. Establishment of Trust Accounts. The Trustee shall
establish a separate account under the Trust (a "Trust Account" and,
collectively with all other Trust Accounts, the "Trust Fund") for any Eligible
Director who elects to defer Compensation pursuant to the Plan.
Section 3.3. Contribution of Shares to Trust Accounts. On the second
business day after the 185th day after an Eligible Director delivers to the
Secretary of the Company his or her election to defer some or all of his or her
Compensation for 1995, and, commencing January 1, 1996, on the second business
day after each date on which the balance of an Eligible Director's Deferred
Compensation Account equals or exceeds Eight Hundred Dollars ($800.00), the
Company shall issue in the name of the Trustee and deliver to the Trustee stock
certificates representing that number of shares of Company Common Stock which is
equal to the balance of the Eligible Director's Deferred Compensation Account on
the Valuation Date divided by the Current Market Price; provided, however, that
no fractional shares shall be issued. The Company shall reduce such Eligible
Director's Deferred Compensation Account by the amount thereof which was used to
purchase said shares of Company Common Stock and the Trustee shall credit the
Trust Account of such Eligible Director with such number of shares of Company
Common Stock. As used herein, the term "Valuation Date" with respect to each
such issuance of shares shall mean the date the Company issues said shares and
the term "Current Market Price" with respect to each such issuance of shares
shall have the same meaning that such term has in that certain Warrant Agreement
dated as of December 20, 1991, by and between the Company and LaSalle National
Trust, N.A. as Warrant Agent (the "Warrant Agreement"). For purposes of
determining the Current Market Price, the five (5) consecutive Trading Days (as
such term is defined in the Warrant Agreement) required to be selected by the
Company shall be the five (5) consecutive Trading Days which end on the day
preceding the day upon which the Company issues said shares.
Section 3.4. Dividends and Distributions. All dividends payable in cash
with respect to any shares of Company Common Stock held in the Trust for the
benefit of an Eligible Director which are received by the Trustee shall be
reinvested by the Trustee in shares of Company Common Stock, either pursuant to
purchases from the Company or from third parties, credited to the Trust Account
of such Eligible Director and held by the Trustee for the benefit of such
Eligible Director and distributed to such Eligible Director pursuant to Article
IV hereof. All non-cash dividends or other distributions with respect to any
shares of Company Common Stock held in the Trust for the benefit of an Eligible
Director which are received by the Trustee, or any shares of stock or other
securities of another entity into which such shares of Company Common Stock
shall be converted or exchanged pursuant to a merger, consolidation, exchange
offer or other transaction which are received by the Trustee, shall be credited
to such Eligible Director's Trust Account and held by the Trustee for the
benefit of such Eligible Director and distributed to such Eligible Director
pursuant to Article IV hereof.
Section 3.5. Voting of Shares. All shares of Company Common Stock or
other voting securities credited to an Eligible Director's Trust Account shall
be voted by and in the discretion of the Trustee.
Section 3.6. Trustee's Fees. All fees and expenses of the Trustee under
the Trust Agreement shall be paid by the Company.
Section 3.7. Vesting. Except as otherwise provided in Article V hereof,
the interests of the Eligible Directors in their respective Deferred
Compensation Accounts and Trust Accounts shall at all times be fully vested and
non-forfeitable.
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
Section 4.1. Time of Distributions. Distributions of any amounts or
assets credited to an Eligible Director's Deferred Compensation Account and
Trust Account shall commence or be made in the manner described in Section 4.2
hereof within ten (10) days after the earlier of: (i) the date of the Eligible
Director' termination of service as a director of the Company on account of
resignation, removal, replacement, retirement, death or otherwise; or (ii) the
date the Board of Directors of the Company determines that it is in the best
interests of the Company or such Eligible Director that such distribution shall
be made; provided, however, that such Eligible Director must abstain from voting
on or with respect to, and may not otherwise participate in, any such
determination.
Section 4.2. Method of Distribution. At the time of an Eligible
Director's initial election described in Article II, the Eligible Director
making such election shall specify in a written notice delivered to the
Secretary of the Company whether the amounts and assets credited to his or her
Deferred Compensation Account and Trust Account shall be distributed to him or
her (or his or her beneficiary) in a single lump sum distribution at the time
described in Section 4.1, or in not more than ten equal annual installments
commencing at such time. If an Eligible Director shall fail to make such an
election, he or she shall be deemed to have elected a lump sum distribution. The
Eligible Director may change such distribution election from time to time by
delivering written notice to the Secretary of the Company. Any amounts or assets
credited to an Eligible Director's Deferred Compensation Account and Trust
Account shall be distributed or commence to be distributed to such Eligible
Director or his or her beneficiary at the time described in Section 4.1 in the
manner so specified. If the Company is not Insolvent (as hereinafter defined) at
the time of any distribution, the distributions shall be made from the Eligible
Director's Deferred Compensation Account and Trust Account (as applicable) and
charged to the Eligible Director's Deferred Compensation Account and Trust
Account (as applicable).
Section 4.3. Designation of Beneficiary. Each Eligible Director
participating in the Plan shall designate a beneficiary or beneficiaries to whom
distributions shall be made pursuant to Section 4.2 in the event of the death of
the Director before his or her entire Deferred Compensation Account and Trust
Account is distributed. If there is no designated beneficiary, or no designated
beneficiary surviving at an Eligible Director's death, the Eligible Director's
beneficiary shall be his or her estate. Beneficiary designations shall be made
in writing. An Eligible Director may designate a new beneficiary or
beneficiaries at any time by filing a new election with the Secretary of the
Company.
Section 4.4. Taxes. In the event any taxes are required by law to be
withheld or paid from any distributions made pursuant to the Plan, the Company
or Trustee (as applicable) shall deduct the amount of such taxes from such
distributions and shall transmit the withheld amounts to the appropriate taxing
authority or obtain payment from the appropriate Eligible Director of the amount
of any such taxes prior to any such distributions.
ARTICLE V
CREDITORS AND INSOLVENCY
Section 5.1. Claims of the Company's Creditors. All balances in the
Deferred Compensation Accounts and assets held in the Trust Accounts pursuant to
the Plan, and any issuances of shares of Company Common Stock to be made by the
Company and any distribution to be made by the Trustee pursuant to the Plan and
Trust Agreement, shall be subject to the claims of the general creditors of the
Company, including judgment creditors and bankruptcy creditors. The rights of an
Eligible Director or his or her beneficiaries to any assets of the Company or
the Trust Fund shall be no greater than the rights of an unsecured creditor of
the Company.
Section 5.2. Notification of Insolvency. In the event the Company
becomes Insolvent, the Board of Directors of the Company or the President of the
Company shall promptly notify the Trustee of that fact. In the event the Company
becomes Insolvent, the Company shall not issue any further shares of Company
Common Stock under the Plan. The Trustee shall not make any further
distributions from the Trust Fund to any Eligible Director or any beneficiary
under the Plan after such notification that the Company is Insolvent is received
or at any time after the Trustee has knowledge that the Company is Insolvent.
Under any such circumstance, the Trustee shall deliver any property held in the
Trust Fund only as a court of competent jurisdiction may direct to satisfy the
claims of the Company's creditors or otherwise. For purposes of this Plan, the
Company shall be deemed to be "Insolvent" if the Company is subject to a pending
voluntary or involuntary proceeding as a debtor under the United States
Bankruptcy Code, as amended, or is unable to pay its debts as they become due.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Funding. Neither any Eligible Director, nor his or her
beneficiaries, nor his or her heirs, successors or assigns, shall have any
secured interest in or claim on any property or assets of the Company or the
Trust under or pursuant to the Plan or otherwise. The Company's obligation under
the Plan shall be merely that of an unfunded and unsecured promise of the
Company to credit certain amounts to the Deferred Compensation Accounts and to
issue and deliver shares of the Company Common Stock to the Trustee for the
benefit of the Eligible Directors. The Company shall fund the Trust in
accordance with the terms of the Plan, but all assets contained therein shall be
and remain subject to the claims of the Company's general creditors as provided
in Article V hereof.
Section 6.2. Term of Plan. The Board of Directors of the Company
reserves the right to amend the Plan or Trust Agreement or terminate the Plan or
Trust at any time; provided, however, that no amendment or termination shall
affect the rights of Eligible Directors to amounts or assets previously credited
to their Deferred Compensation Accounts or Trust Accounts and, provided further,
that the Plan may not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, or the
Employee Retirement Income Security Act, as amended, or the rules thereunder, if
such amendment would cause the Plan not to be in compliance with Rule 16b-3
under the Securities Exchange Act of 1934. Notwithstanding the foregoing, the
Trust shall remain in effect until such time as the entire corpus of the Trust
Fund has been distributed pursuant to the terms of the Trust Agreement, and the
Plan shall remain in effect until such time as all amounts credited to Eligible
Directors' Deferred Compensation Accounts are distributed pursuant to Article IV
hereof.
Section 6.3. Assignment. No right or interest of any Eligible Director
or his or her beneficiary (or any person claiming through or under such Eligible
Director or his or her beneficiary) in any benefit or payment under the Plan or
the Trust shall be assignable or transferable in any manner or be subject to
alienation, anticipation, sale, pledge, encumbrance or other legal process or in
any manner be liable for or subject to the debts or liabilities of such Eligible
Director.
Section 6.4. Tax Effect. This Plan is intended to be treated as an
unfunded deferred compensation plan under the Internal Revenue Code of 1986, as
amended. It is the intention of the Company that the amounts of Compensation
which an Eligible Director elects to have deferred pursuant to the Plan shall
not be included in the gross income of such Eligible Director or his or her
beneficiaries until such time as the amounts or assets credited to such Eligible
Director's Deferred Compensation Account and Trust Account are distributed to
the Eligible Director or his or her beneficiary under the Plan. If at any time
it is determined by the Company that amounts attributable to the Eligible
Directors' Deferred Compensation Accounts or Trust Accounts are includible in
the gross income of the Eligible Directors or their beneficiaries before
distribution pursuant to Article IV hereof, all amounts and assets credited to
the Eligible Directors' Deferred Compensation Accounts and Trust Accounts shall
be immediately distributed to the respective Eligible Directors or, in the case
of deceased Eligible Directors, their beneficiaries. Distributions described in
the preceding sentence shall only be made from the Deferred Compensation
Accounts or from the Trust if the Company is not Insolvent at the time for such
distribution.
Section 6.5. Compliance with Rule 16b-3. It is the intent of the
Company that the Plan comply in all respects with applicable provisions of Rule
16b-3 under the Securities Exchange Act of 1934. Accordingly, if any provision
of the Plan does not comply with the requirements of said Rule 16b-3 as then
applicable to any such Eligible Director, or would cause any Eligible Director
to no longer be deemed a "disinterested person" within the meaning of said Rule
16b-3, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such Eligible
Director. In addition, the Board of Directors of the Company shall have no
authority to make any amendment, alteration, suspension, discontinuation or
termination of the Plan or take other action if and to the extent such authority
would cause an Eligible Director's transactions under the Plan not to be exempt
or any Eligible Director no longer to be deemed a "disinterested person," under
said Rule 16b-3.
Section 6.6. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Illinois.
Section 6.7. Successors. The provisions of this Plan shall bind and inure
to the benefit of the Company and its successors and assigns.
Section 6.8. Effective Date of Plan. The Plan shall be effective as of
March 17, 1995, subject to approval by the stockholders of the Company. Any
Compensation deferral elections, credits to Deferred Compensation Accounts or
contributions to the Trust made prior to such stockholder approval shall be
contingent on such approval, and if such approval is not obtained prior to June
1, 1995, all Compensation deferral elections shall be deemed to be cancelled and
all amounts or assets credited to the Deferred Compensation Accounts and the
Trust Accounts shall be distributed to the Eligible Directors or their
beneficiaries. Distributions described in the preceding sentence shall only be
made if the Company is not Insolvent at the time for such distribution.
Section 6.9. No Right to Continued Service. Nothing contained herein
shall be construed to confer upon any Eligible Director the right to continue to
serve as a Director of the Company or in any other capacity.
Exhibit 10.13
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of January,
1999, by and between LITTELFUSE, INC., a Delaware corporation (hereinafter
referred to as the "Company"), and PHILIP G. FRANKLIN (hereinafter referred to
as the "Executive");
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (hereinafter referred to
as the "Board") has determined that it is in the best interests of the Company
and its stockholders to provide the Executive with certain protections against
the uncertainties usually created by a Change of Control (as such term is
hereinafter defined); and
WHEREAS, the Board believes that the protections provided to the
Executive in connection with a Change of Control will better enable the
Executive to devote his full time, attention and energy to the business of the
Company prior to and after a Change of Control, thereby benefitting the Company
and its stockholders;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the Company and the Executive hereby agree as
follows:
Section 1. Certain Definitions. (a) The "Effective Date" shall mean
the first date during the Change of Control Period (as defined in Section 1(b)
hereof) on which a Change of Control (as defined in Section 2 hereof) occurs.
Notwithstanding anything to the contrary contained in this Agreement, if a
Change of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the direct or indirect request of a third party who theretofore had taken
any steps intended to effect a Change of Control or (ii) otherwise arose in
connection with or in anticipation of a Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on September 1, 2001.
Section 2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition in one or more transactions by any
individual, entity or group (hereinafter referred to collectively as a
"Person") within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (hereinafter referred to as the
"Exchange Act"), of beneficial ownership (within the meaning of, and
calculated in accordance with, Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (hereinafter referred to as the
"Outstanding Company Common Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (hereinafter referred to as
the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2 or
(v) any acquisition by Oaktree Capital Management, LLC, a California
limited liability company, or any of its Affiliates or Associates (as
used herein, the terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act); or
(b) Individuals who, as of the date hereof, constitute the
Board (hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (hereinafter referred to as a "Business Combination")
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination, or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company within one year after a
Business Combination.
Section 3. Employment Period. The Company hereby agrees to continue
to employ the Executive, and the Executive hereby agrees to remain as an
employee of the Company, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
Section 4. Terms of Employment.
(a) Position and Duties. (i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 20 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (hereinafter referred to as the
"Annual Base Salary"), which shall be paid at a monthly rate, equal to at least
twelve times the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the Effective Date
and thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as used in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (hereinafter referred to as the "Annual Bonus") in cash at least
equal to the Executive's highest bonus under the Company's incentive bonus
program or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed by the Company for the whole of such
fiscal year) (hereinafter referred to as the "Recent Annual Bonus"). Each such
Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
Section 5. Termination of Employment.
(a) Disability. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give written notice to
the Executive of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after delivery of such notice to the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such delivery, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company (other
than any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance is
delivered to the Executive by the Board which specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties and such failure is not
cured within sixty (60) calendar days after receipt of such written
demand; or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, any act or failure to act on the part of the
Executive in violation or contravention of any order, resolution or directive of
the Board of Directors of the Company shall be considered "willful" unless such
order, resolution or directive is illegal or in violation of the certificate of
incorporation or by-laws of the Company; provided, however, that no other act or
failure to act on the part of the Executive, shall be considered "willful,"
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the Executive is not elected to, or is removed from, any
elected office of the Company which the Executive held immediately
prior to the Effective Date;
(ii) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position, authority,
duties or responsibilities as contemplated by Section 4(a) hereof, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(iii) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iv) the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date; or
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) hereof. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of delivery of such notice, specifies
the termination date (which date shall be not more than 30 days after the
delivery of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of delivery of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, (iii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall be the date of
death of the Executive or the Disability Effective Date, as the case may be, and
(iv) if the Executive's employment is terminated by the Executive without Good
Reason, the last day of employment of the Executive with the Company.
Section 6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate his
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid, plus (2) the product of (x) the higher of
(I) the Recent Annual Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the
Executive was employed for less than twelve full months), for
the most recently completed fiscal year during the Employment
Period, if any (such higher amount being hereinafter referred
to as the "Highest Annual Bonus") multiplied by (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 plus (3) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1), (2) and (3) are
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two multiplied by
(2) the sum of (x) the Executive's Annual Base Salary plus (y)
the Highest Annual Bonus;
(ii) the Company shall credit as of the Date of Termination
the Account of the Executive under the Littelfuse, Inc. Supplemental
Executive Retirement Plan (hereinafter referred to as the "SERP") with
an amount equal to the sum of the two respective amounts which would be
credited to the Account of the Executive under the SERP on the two
Valuation Dates (as such term is defined in the SERP) next succeeding
the Date of Termination assuming (A) the Executive would continue to be
employed by the Company up to and including said second Valuation Date
(hereinafter said period from the Date of Termination until said second
Valuation Date is referred to as the "Assumed Employment Period"), (B)
the Compensation (as such term is defined in the SERP) of the Executive
during each fiscal year during the Assumed Employment Period would be
equal to the amount of the Compensation of the Executive during the
most recently ended Plan Year (as such term is defined in the SERP)
prior to the Date of Termination, and (C) the Company would continue
the SERP up to and including said second Valuation Date; provided,
however, that if the Executive would reach the age of 62 prior to the
expiration of the Assumed Employment Period, no amounts shall be
credited to the Account of the Executive under the SERP for any
Valuation Date occurring after the date that the Executive reaches age
62;
(iii) during the two years following the Date of Termination,
the Company shall continue to provide medical insurance benefits to the
Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the medical
insurance benefits described in Section 4(b)(iv) hereof if the
Executive's employment had not been terminated; provided, however, that
if the Executive becomes reemployed with another employer and is
eligible to receive medical insurance benefits under another
employer-provided plan, the medical insurance benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall hereinafter be referred to
collectively as the "Other Benefits"); and
(v) notwithstanding anything to the contrary contained in any
employment agreement, benefit plan or other document, in the event the
Executive's employment shall be terminated during the Employment Period
by the Executive for Good Reason or by the Company other than for Cause
or Disability, on and after the Date of Termination the Executive shall
not be bound or prejudiced by any non-competition agreement benefitting
the Company or its subsidiaries, and any provisions contained in the
SERP which would penalize the Executive for being employed by a
competitor, including, without limitation, Section 3.6(c) thereof,
shall not apply in any respect to the Executive and, effective as of
the Date of Termination, the Company waives any right to enforce any
such provisions against the Executive.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations by the Company to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term "Other Benefits" as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations by the Company to the Executive under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term "Other Benefits" as
utilized in this Section 6(c) shall include, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company and
its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer executives
and their families at any time during the 120-day period immediately preceding
the Effective Date.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates his employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations of the Company to the Executive under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination and the Company shall timely pay or provide the Other Benefits to
the Executive. In no event shall the Executive be liable to the Company for any
damages caused by such voluntary termination by the Executive nor shall the
Executive be in any way restricted from being employed by any other party after
such voluntary termination.
Section 7. Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section 12(f)
hereof, shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement, except as explicitly modified by this Agreement.
Section 8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest by the Company, the Executive or others in which the Executive is
the prevailing party and which involves or relates to the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment from the due date thereof until paid
at the prime rate from time to time reported in The Wall Street Journal during
said period.
Section 9. Certain Additional Payments by the Company. (a) Anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 9) (hereinafter referred to collectively as a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 9(c) hereof, all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young LLP or such other independent certified public accounting firm
as may be designated by the Executive (hereinafter referred to as the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (hereinafter referred to as
the "Underpayment") consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) hereof and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or to contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance.
The Company's control of any such contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c) hereof, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 9(c) hereof) promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c) hereof,
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
Section 10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. The
provisions of this Section 10 shall survive any termination of this Agreement or
any termination of the employment of the Executive with the Company.
Section 11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
Section 12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without
reference to principles of conflict of laws. This Agreement may not be amended
or modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(b) Each notice, request, demand, approval or other communication which
may be or is required to be given under this Agreement shall be in writing and
shall be deemed to have been properly given when delivered personally at the
address set forth below for the intended party during normal business hours at
such address, when sent by facsimile or other electronic transmission to the
respective facsimile transmission numbers of the parties set forth below with
telephone confirmation of receipt, or when sent by recognized overnight courier
or by the United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
Littelfuse, Inc.
800 E. Northwest Highway
Des Plaines, Illinois 60016
Attention: President (unless the Executive is
the President, in which case the
communication should be to the
attention of all of the Directors
of the Company other than the
Executive)
Facsimile: (847) 824-3864
Confirm: (847) 391-0304
If to the Executive:
Philip G. Franklin
======================
Facsimile: _____________
Confirm: _____________
Notices shall be given to such other addressee or address, or both, or by way of
such other facsimile transmission number, as a particular party may from time to
time designate by written notice to the other party hereto. Each notice,
request, demand, approval or other communication which is sent in accordance
with this Section shall be deemed given and received for all purposes of this
Agreement as of two business days after the date of deposit thereof for mailing
in a duly constituted United States post office or branch thereof, one business
day after deposit with a recognized overnight courier service or upon
confirmation of receipt of any facsimile transmission. Notice given to a party
hereto by any other method shall only be deemed to be given and received when
actually received in writing by such party.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to promptly
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) hereof, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof and/or any other written agreement between
the Executive and the Company, prior to the Effective Date the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date upon written notice to the
other party, in which case the Executive shall have no further rights under this
Agreement. From and after the Effective Date, this Agreement shall supersede any
other agreement between the parties with respect to the subject matter hereof.
(g) This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Change of
Control Employment Agreement as of the day and year first above written.
--------------------------------------
Philip G. Franklin
LITTELFUSE, INC.
By
Its_____________________________________
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion provides an analysis of the information contained in
the consolidated financial statements and accompanying notes beginning on page
22 for the three fiscal years ended January 2, 1999.
Highlights
Sales decreased 2% in 1998 to $269.5 million. Contributing to the decline in
sales was weakness in the electronic markets domestically and in Asia as well as
lower domestic auto-motive sales. In addition, greater than historical selling
price declines and costs related to new product introductions contributed to
lower gross margins in 1998. The company continued its investment in and
dedication to introducing new products. During the year, the company introduced
a surface mount telecom fuse, J-Case automotive fuse, downsized packaging of
aftermarket products and expanded the line of PTC devices to meet customer
requirements. The company also continued to make investments in its
manufacturing capabilities, successfully integrating plastic molding equipment
into the Switzerland facility and installing new thin film capacity
domestically.
Results of Operations -- 1998 Compared with 1997
Sales decreased 2% to $269.5 million in 1998 from $275.2 million in 1997. The
gross margin was 37.2% compared to 40.4% the prior year and operating income was
12.7% of net sales compared to 15.9% the prior year. Net income decreased 22% to
$19.9 million in 1998 from $25.3 million in 1997 and diluted earnings per share
decreased 20% to $.86 in 1998 from $1.07 in 1997. Sales decreased $5.6 million
during 1998. Sales declined both in the automotive and electronics markets, with
a modest increase in power fuse sales. Automotive sales decreased $5.5 million
or 5% to $96.7 million in 1998 compared to $102.1 million in 1997. Automotive
sales were down domestically as a result of the continued phase-out of
electromechanical products and the absence of any product fixes by the
automotive OEM's in 1998. Electronic sales decreased $1.9 million or 1% to
$133.1 million in 1998 compared to $135.0 million in 1997. The Company's
electronics business was down due in part to continued inventory reductions at
North American distributors, weakness in Japan and greater than historical
selling price declines. Power fuse sales in-creased $1.8 million or 5% to $39.8
million in 1998 compared to $38.0 million in 1997. On a constant currency basis,
electronic and power fuse sales would have increased 3 and 5% respectively,
automotive sales would have decreased 4% and consolidated sales would have been
flat. Led by European sales increases, international sales increased by 4% in
1998 to 43.0% of net sales in 1998 from 40.6% of net sales in 1997. Gross profit
was $100.2 million or 37.2% of sales for 1998 compared to $111.1 million or
40.4% of sales for 1997. The gross margin decline resulted from greater than
historical selling price reductions, lower volumes than anticipated and costs
associated with the introduction of new products in 1998.Selling, general and
administrative expenses declined $1.3 million to 18.9% of sales in 1998 as
compared to 19.0% of sales in 1997 as a result of the decline in sales and
favorable expense control during 1998. Research and development costs increased
$0.5 million to 3.1% of sales in 1998 as compared to 2.9% of sales in 1997 due
to the continued development of new products. Amortization of reorganization
value and other intangibles was $6.8 million or 2.5% of sales for 1998 compared
to $7.2 million or 2.6% of sales for the prior year. Total operating expenses,
including intangible amortization, were 24.5% of sales for both years.Operating
income for 1998 was $34.1 million or 12.7% of sales compared to $43.8 million or
15.9% of sales the prior year. The decline in operating margin resulted from
decreases in gross margin. Interest expense was $4.0 million for 1998 compared
to $4.1 million for 1997. Other expense, net, consisting of royalties, minority
interest adjustments and foreign currency items was $0.1 million compared to
other income of $1.0 million the prior year. Also included in other expense in
1998 were charges related to the liquidation of SamHwa Littelfuse amounting to
approximately $0.4 million. Income before taxes was $30.0 million in 1998
compared to $40.7 million in 1997. Income tax expense was $10.1 million in 1998
compared to $15.3 million the prior year. The company's effective tax rate was
33.7 % in 1998 compared to 37.7 % in 1997. The decrease in income tax expense
resulted from lower income before taxes as well as a one-time benefit of $1.1
million related to the liquidation of Sam Hwa Littelfuse. Net income for the
year was $19.9 million in 1998 compared to $25.3 million the prior year. Diluted
earnings per share decreased to $0.86 in 1998 compared to $1.07 in 1997.
1997 Compared with 1996
Sales increased 14% to $275.2 million in 1997 from $241.4 million in 1996. The
gross margin was 40.4% compared to 40.7% the prior year and operating income was
15.9% of net sales compared to 15.6% the prior year. Net income increased 17% to
$25.3 million in 1997 from $21.7 million in 1996 and diluted earnings per share
increased 18% to $1.07 in 1997 from $.91 in 1996. Sales increased $33.7 million
during 1997. The sales growth was strongest in the electronics segment, followed
by automotive and power fuses. Electronic sales increased $22.6 million or 20%
to $135.0 million in 1997 compared to $112.4 million in 1996. The electronics
business was very strong in personal computers, tele- and data-communications as
well as consumer electronics throughout the year. Electronics sales enjoyed
significant growth in Asia-Pacific, Europe and North America in 1997. Automotive
sales increased $8.4 million or 9% to $102.1 million in 1997 compared to $93.7
million in 1996. Automotive sales were very strong in the OEM markets, while
they declined slightly in the automotive aftermarkets on a worldwide basis.
Power fuse sales increased $2.6 million or 7% to $38.0 million in 1997 compared
to $35.4 million in 1996. The company believes that its power fuse business grew
twice as fast as the underlying markets for capital equipment and construction
spending during 1997.On a constant currency basis, European sales growth would
have been 16% rather than the 5% reported, Asia-Pacific sales growth would have
been 36% rather than the 32% reported, and consolidated sales growth would have
been 16% rather than the 14% reported. Led by increases in Asia-Pacific and
European sales, international sales increased by 20% in 1997 to 40.6% of net
sales in 1997 from 38.5% of net sales in 1996.Gross profit was $111.1 million or
40.4% of sales for 1997 compared to $98.3 million or 40.7% of sales for 1996.
The gross margin decline of 32 basis points was primarily caused by the lower
margins of our new China and Korean operations having a greater impact than our
margin improvements due to cost reductions and spreading our fixed costs over
higher sales in North America and Europe. Selling, general and administrative
expenses increased $5.9 million to 19.0% of sales in 1997 as compared to 19.2%
of sales in 1996 as a result of the increase in sales during 1997. Research and
development costs increased $0.6 million to 2.9% of sales in 1997 as compared to
3.0% of sales in 1996. Amor-tization of reorganization value and other
intangibles was 2.6% of sales for 1997 compared to 2.9% the prior year. Total
operating expenses, including intangible amortization, were 24.5% of sales for
1997 compared to 25.1% of sales for 1996.Operating income for 1997 was $43.8
million or 15.9% of sales compared to $37.7 million or 15.6% of sales the prior
year.Interest expense was $4.1 million for 1997 compared to $4.2 million for
1996 due to declining debt levels during the year. Other income, net, consisting
of royalties, minority interest adjustments, revaluation of the Korean
non-compete agreement and government grants, was $1.0 million compared to $0.7
million the prior year. Income before taxes was $40.7 million in 1997 compared
to $34.1 million in 1996. Income tax expense was $15.3 million in 1997 compared
to $12.4 million the prior year. The company's effective tax rate was 37.7% in
1997 compared to 36.3% in 1996. Net income for the year was $25.3 million in
1997 compared to $21.7 million the prior year. Diluted earnings per share
increased to $1.07 in 1997 compared to $0.91 in 1996.
Liquidity and Capital Resources
Assuming no material adverse changes in market conditions, management expects
that the company will have sufficient cash from operations to support both its
operations and its debt obligations for the foreseeable future. Littelfuse
started 1998 with $0.8 million of cash. Net cash provided by operations was
$39.3 million for the year. Cash used to invest in property, plant and equipment
was $21.3 million, to invest in product acquisitions for electrostatic discharge
devices and medium voltage power fuses was $2.8 million and to make a
non-compete payment was $0.2 million. Cash provided by financing activities
included net proceeds of long-term debt of $33.9 million due to a $60.0 million
private placement of new senior notes and renegotiation of the existing bank
credit agreement. Terms of the new bank credit agreement provide for a credit
line of $55.0 that was unused as of January 2, 1999. The purchase of the
company's common stock for $26.8 million was partially offset by cash proceeds
from the exercise of stock options and conversion of warrants of $6.3 million.
The effect of exchange rate changes decreased cash by $1.1 million. The net of
cash provided by operations, less investing activities, less financing
activities, plus the effect of exchange rates resulted in a $27.2 million net
increase in cash. This left the company with a cash balance of $28.0 million at
the end of 1998.Net working capital used $2.8 million of cash flow from
operations for 1998. Lower inventory and prepaid and other items were the
primary cash providers, offset by an increase in accounts receivable and a
decrease in accounts payable.Littelfuse started 1997 with $1.4 million of cash.
Net cash provided by operations was $36.8 million for the year. Cash used to
invest in property, plant and equipment was $18.9 million, to invest in a new
Korean acquisition called Samjoo was $5.3 million and to make a non-compete
payment was $0.4 million. Cash used in financing activities included net
payments of long-term debt of $5.2 million. The purchase of the company's
warrants and common stock for $8.6 million was partially offset by cash proceeds
from the exercise of stock options of $1.0 million. The effect of exchange rate
changes decreased cash by $0.1 million. The net of cash provided by operations,
less investing activities, less financing activities, plus the effect of
exchange rates resulted in a $0.7 million net decrease in cash. This left the
company with a cash balance of $0.8 million at the end of 1997. Net working
capital used $9.4 million of cash flow from operations for 1997. All asset
categories used working capital. Accounts receivable increased $3.3 million and
inventory increased $8.3 million. Most accruals provided working capital for the
year. Accounts payable, accrued payroll, and accrued and deferred taxes each
increased by a little less than $1 million and collectively provided funds of
over $2.5 million. Accrued expenses declined $0.6 million using funds of that
amount. The company's capital expenditures were $21.3 million in 1998, $18.9
million in 1997 and $17.1 million in 1996. The company expects that capital
expenditures will be approximately $22 million in 1999. The primary purposes for
capital expenditures in 1999 will be for new product tooling, production
equipment and information systems. As in 1998, capital expenditures in 1999 are
expected to be financed by cash flow from operations. The company increased
total debt by $33.9 million in 1998, after decreasing debt by $5.2 million in
1997 and increasing debt by $4.2 million in 1996. The company is required to
repay $14.0 million of long-term debt in 1999. During 1998, the company's Board
of Directors authorized the company to repurchase up to 2,000,000 shares of its
common stock or 2,000,000 of its warrants, or any combination not to exceed
2,000,000 shares of common stock or warrants, from time to time, depending on
market conditions. The company repurchased 1,345,000 common shares for $26.8
million in 1998, 210,000 warrants and 205,000 common shares for $8.6 million in
1997 and 1,342,000 warrants and 570,000 common shares for $26.8 million in 1996.
As of January 2, 1999, the company had over 700,000 shares remaining under Board
of Directors authorization expiring in May of 1999. Earnings before interest,
taxes, depreciation, amortization and other income and expense (EBITDA)
decreased 12% to $56.3 million in 1998 from $64.1 million in 1997. EBITDA
increased 9% to $64.1 million in 1997 from $58.7 million in 1996. Net working
capital (working capital less cash and the current portion of long-term debt) as
a % of sales was 17.3% at year-end 1998 compared to 15.1% at year-end 1997 and
to 13.0% at year-end 1996. The increase in net working capital was due in part
to the increase in days sales outstanding in accounts receivable to
approximately 61 days at year-end 1998 compared to 55 days at year-end 1997 and
52 days at year-end 1996. The ratio of current assets to current liabilities was
2.1 to 1 at year-end 1998 compared to 1.6 to 1 at year-end 1997 and 1.4 to 1 at
year-end 1996. The ratio of long-term debt to equity was 0.6 to 1 at year end
1998 compared to 0.3 to 1 at year-end 1997 and 0.4 to 1 at year-end 1996.
Year 2000
The company utilizes software, hardware and related computer technologies
essential to its operations that use two digits rather than four to specify the
applicable year, which could result in a date recognition problem with the
transition to the year 2000. The company presently believes that with
modifications or replacements of existing software and certain hardware, date
recognition problems associated with the year 2000 can be mitigated. However, if
such modifications and replacement are not made, or are not completed timely,
the year 2000 transition could have a material adverse effect on the company's
consolidated results of operations. To date, the company has fully completed its
assessment of all mission-critical systems. Assessments of other systems,
including operating equipment systems, which could be significantly affected by
the year 2000 are underway. The completed assessments have indicated that most
of the company's significant information technology systems could be affected,
particularly the order entry, billing and inventory systems. In addition, the
company has gathered information about the year 2000 compliance status of its
significant customers, suppliers and subcontractors and continues to monitor
their compliance.As of January 2, 1999, the company had completed 40% of the
remediation phase for its information technology, operating equipment systems
and external interface exposures. The company expects to complete software
reprogramming and replacement as well as testing of all significant systems no
later than May 1, 1999. All remediated systems are expected to be fully tested
and implemented by June 30, 1999. The company has queried its significant
suppliers and subcontractors, none of which share information systems with the
company ("external agents"). To date, the company is not aware of any external
agent with a year 2000 issue that would materially impact the company's results
of operations, liquidity or capital resources. However, the company has no means
of ensuring that external agents will be year 2000 ready. The inability of
external agents to complete their year 2000 resolution process in a timely
fashion could materially impact the company. The company will utilize both
internal and external resources to reprogram or replace, test, and implement the
software, operating equipment and external interfaces for year 2000
modifications. The total cost of projects that relate to year 2000 compliance is
estimated at $12.0 million and is being funded through operating cash flows.
Through January 2, 1999, the company has incurred costs totaling approximately
$4.9 million, $0.6 of which has been expensed and $4.3 of which has been
capitalized, related to all phases of the year 2000 project. Management of the
company believes it has an effective program in place to become year 2000
compliant in a timely manner. As noted above, the company has not yet completed
all necessary phases of the year 2000 program. In the event that the company
does not complete any additional phases, the company would be unable to use its
electronic systems to take customer orders, manufacture and ship products,
invoice customers or collect payments. In addition, disruptions in the economy
generally resulting from year 2000 issues could also materially adversely affect
the company. The company could be subject to litigation for computer sys- tems
failure, equipment shutdown or failure to properly date business records. The
company currently has no contingency plans in place in the event it does not
complete all phases of the year 2000 pro- gram. The company plans to evaluate
the status of completion in March 1999 and determine whether such a plan is
necessary. The company believes that the foregoing statements are in conformity
with the Year 2000 Information and Readiness Disclosure Act (Public Law 105-271,
112 Stat. 2386), and all of the foregoing statements are designated as year 2000
readiness disclosures thereunder.
The protection of this act does not apply to federal securities fraud.
Outlook
Littelfuse has experienced compounded annual sales growth of 11% for the last
five years. Sales growth is expected in 1999, fueled in part by sales of
products introduced in 1998 and continued increases in the European segment.
Although the company expects that growth will resume in 1999, the rate is
expected to be lower than the last five-year average. In an attempt to offset
continued selling price pressures from its customers, the company has increased
cost reduction efforts worldwide. The company expects that these efforts will
favorably affect the gross margin percentage in 1999. In addition, new product
introduction costs that negatively affected the gross margin in 1998 are not
expected to be as significant in 1999. The development of new products, global
expansion, and reinvestment continue to be Littelfuse's long-term growth
strategy. Accordingly, the company intends to continue its commitment to funding
research and development, international market development, and investments in
capital equipment and operations improvements.
Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995 The statements under "Outlook", "Year 2000" and the other statements which
are not historical facts contained in this report are forward-looking statements
that involve risks and uncertainties, including, but not limited to, product
demand and market acceptance risks, the effect of economic conditions, the
impact of competitive products and pricing, product development,
commercialization and technological difficulties, year 2000 issues discussed
above, capacity and supply constraints or difficulties, the results of financing
efforts, actual purchases under agreements, the effect of the company's
accounting policies, and other risks which may be detailed in the company's
Securities and Exchange Commission filings.
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Littelfuse, Inc.
We have audited the consolidated statements of financial condition of
Littelfuse, Inc. and subsidiaries as of January 2, 1999, and January 3, 1998,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended January 2, 1999.
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 in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Littelfuse, Inc. and subsidiaries as of January 2, 1999 and January 3, 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended January 2, 1999, in conformity with
generally accepted accounting principles.
Chicago, Illinois
January 26, 1999
<PAGE>
<TABLE>
Consolidated Statements of Financial Condition
(thousands of dollars)
Assets January 2, 1999 January 3, 1998
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 27,961 $ 755
Accounts receivable, less allowances
(1998 - $5,885; 1997 - $5,899) 41,382 37,458
Inventories 36,209 39,075
Deferred income taxes 2,456 3,672
Prepaid expenses and other current assets 3,090 2,896
Total current assets 111,098 83,856
Property, plant, and equipment:
Land 6,753 6,355
Buildings 25,682 23,152
Equipment 131,136 111,723
163,571 141,230
Less: Allowances for depreciation and amortization 85,783 70,467
77,788 70,763
Intangible assets, net of amortization:
Reorganization value in excess of amounts
allocable to identifiable assets 37,814 41,202
Patents and licenses 6,522 8,785
Distribution network 6,412 7,126
Trademarks 3,275 3,527
Other 5,940 3,348
59,963 63,988
Other assets 1,695 3,278
$250,544 $221,885
<PAGE>
Consolidated Statements of Financial Condition (continued)
(thousands of dollars)
Liabilities and shareholders' equity January 2, 1999 January 3, 1998
Current liabilities:
Accounts payable $ 9,926 $ 13,858
Accrued payroll 12,555 10,316
Accrued expenses 7,929 7,427
Accrued income taxes 6,042 9,952
Current portion of long-term debt 15,515 10,172
Total current liabilities 51,967 51,725
Long-term debt, less current portion 70,061 40,385
Deferred income taxes 3,951 6,205
Minority interest in subsidiary 41 65
Shareholders' equity:
Preferred stock, par value $.01 per share: 1,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, par value $.01 per share: 38,000,000 shares
authorized; shares issued and outstanding,
1998 - 20,023,520; 1997 - 19,873,140 200 199
Additional paid-in capital 55,537 52,540
Notes receivable - Common stock (2,772) (1,960)
Accumulated other comprehensive loss (3,726) (4,767)
Retained earnings 75,285 77,493
124,524 123,505
$250,544 $221,885
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income
(in thousands of dollars, except per share amounts)
Year ended January 2, 1999 January 3, 1998 December 28, 1996
<S> <C> <C> <C>
Net sales $269,540 $275,165 $241,446
Cost of sales 169,341 164,034 143,158
Gross profit 100,199 111,131 98,288
Selling, general and administrative expenses 50,936 52,226 46,281
Research and development expenses 8,387 7,927 7,330
Amortization of intangibles 6,780 7,210 7,008
Operating income 34,096 43,768 37,669
Interest expense 3,989 4,103 4,235
Other expense/(income), net 98 (987) (660)
Income before income taxes 30,009 40,652 34,094
Income taxes 10,124 15,310 12,359
Net income $ 19,885 $ 25,342 $ 21,735
Net income per share:
Basic $ 0.97 $ 1.28 $ 1.09
Diluted $ 0.86 $ 1.07 $ 0.91
Weighted-average shares and equivalent shares outstanding:
Basic 20,474 19,824 19,888
Diluted 23,154 23,623 23,801
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(thousands of dollars)
Year ended January 2, 1999 January 3, 1998 December 28, 1996
Operating activities
<S> <C> <C> <C>
Net income $ 19,885 $ 25,342 $ 21,735
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,426 13,184 14,057
Amortization of intangibles 6,780 7,210 7,008
Provision for bad debts 626 410 236
Deferred income taxes (896) 215 (962)
Other 326 (159) (411)
Changes in operating assets and liabilities:
Accounts receivable (3,218) (3,331) (5,630)
Inventories 3,610 (8,281) (1,816)
Accounts payable and accrued expenses (4,992) 1,950 6,550
Prepaid expenses and other 1,757 217 (424)
Net cash provided by operating activities 39,304 36,757 40,343
Investing activities
Purchases of property, plant, and equipment, net (21,320) (18,936) (17,094)
Purchase of business, net of cash acquired (2,751) (5,268) --
Other (249) (357) (341)
Net cash used in investing activities (24,320) (24,561) (17,435)
Financing activities
Proceeds (payments) of long-term debt, net 33,851 (5,192) 4,196
Proceeds from exercise of stock options and warrants 6,308 1,055 276
Purchases of common stock and redemption of warrants (26,803) (8,642) (26,845)
Net cash provided by (used in) financing activities 13,356 (12,779) (22,373)
Effect of exchange rate changes on cash (1,134) (89) (416)
Increase (decrease) in cash and cash equivalents 27,206 (672) 119
Cash and cash equivalents at beginning of year 755 1,427 1,308
Cash and cash equivalents at end of year $ 27,961 $ 755 $ 1,427
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
(thousands of dollars)
Notes Accumulated
Additional Receivable- Other
Common Paid-In Common Comprehensive Retained
Period from January 1, 1996 to January 2, 1999 Stock Capital Stock Income/(Loss) Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 202 $ 71,494 $ (571) $ (120) $ 42,377 $113,382
Comprehensive income:
Net income for the year - - - - 21,735 21,735
Foreign currency translation adjustment - - - (750) - (750)
Comprehensive income 20,985
Stock options and warrants exercised 2 1,997 (899) - - 1,100
Purchase of 570,260 shares of common stock (6) (1,986) - - (7,917) (9,909)
Redemption of 1,342,120 warrants - (16,936) - - - (16,936)
Balance at December 28, 1996 198 54,569 (1,470) (870) 56,195 108,622
Comprehensive income:
Net income for the year - - - - 25,342 25,342
Foreign currency translation adjustment - - - (3,897) - (3,897)
Comprehensive income 21,445
Stock options and warrants exercised 3 2,567 (490) - - 2,080
Purchase of 205,000 shares of common stock (2) (720) - - (4,044) (4,766)
Redemption of 210,250 warrants - (3,876) - - - (3,876)
Balance at January 3, 1998 199 52,540 (1,960) (4,767) 77,493 123,505
Comprehensive income:
Net income for the year - - - - 19,885 19,885
Foreign currency translation adjustment - - - 1,041 - 1,041
Comprehensive income 20,926
Stock options and warrants exercised 15 7,693 (812) - - 6,896
Purchase of 1,345,300 shares of common stock (14) (4,696) - - (22,093) (26,803)
Balance at January 2, 1999 200 $ 55,537 $(2,772) $(3,726) $ 75,285 $124,524
See accompanying notes.
</TABLE>
<PAGE>
1. Summary of Significant Accounting Policies
and Other Information
Nature of Operations Littelfuse, Inc. and its subsidiaries (the "Company")
design, manufacture, and sell fuses and other circuit protection devices for use
in the automotive, electronic, and general industrial markets throughout the
world. The Company also manufactures and supplies relays, switches, circuit
breakers, and indicator lights to the automotive industry and to appliance and
general electronics manufacturers.
Fiscal Year Effective January 1, 1996, the Company changed its fiscal year-end
from December 31 to a 52-53-week year ending on the Saturday nearest December
31. The Company's fiscal years ended January 2, 1999, and December 28, 1996,
contained 52 weeks. The Company's fiscal year ended January 3, 1998, contained
53 weeks.
Principles of Consolidation The consolidated financial statements include the
accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Cash Equivalents All highly liquid investments, with a maturity of three months
or less when purchased, are considered to be cash equivalents.
Fair Value of Financial Instruments The Company's financial instruments include
cash and cash equivalents, accounts re-ceivables, and long-term debt. The
carrying values of such financial instruments approximate their estimated fair
values.
Accounts Receivable The Company performs credit eval-uations of customers'
financial condition and generally does not require collateral. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
Inventories Inventories are stated at the lower of cost (first in, first out
method) or market, which approximates current replacement cost.
Property, Plant, and Equipment Land, buildings, and equipment are carried at
cost. Depreciation is provided under accelerated methods using useful lives of
21 years for buildings, 7 to 9 years for equipment, and 7 years for furniture
and fixtures. Tooling and computer software are depreciated using the
straight-line method over 5 years and 3 years, respectively.
Intangible Assets Reorganization value in excess of amounts allocable to
identifiable assets and trademarks are amortized using the straight-line method
over 20 years. Patents are amortized using the straight-line method over their
estimated useful lives, which average approximately 10 years. The distribution
network is amortized using an accelerated method over 20 years. Licenses are
amortized using an accel-erated method over their estimated useful lives, which
average approximately 9 years. Other intangible assets consist principally of an
agreement-not-to-compete that is being amortized over the 3-year term of the
agreement and goodwill that is being amortized over 10 to 20 years. Accumulated
amortization of these intangible assets was $46.1 million at January 2, 1999,
and $39.9 million at January 3, 1998.
Revenue Recognition Sales and associated costs are recognized when products are
shipped to customers.
Advertising Costs The Company expenses advertising costs as incurred which
amounted to $2.6 million in 1998, $2.8 million in 1997, and $2.7 million in
1996.
Foreign Currency Translation The financial statements of foreign entities have
been translated in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, "Foreign Currency Translation," and, accordingly, unrealized
foreign currency translation adjustments are reflected as a component of
shareholders' equity.
Stock-Based Compensation Under the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), the Company accounts for stock option
grants to employees and directors in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company grants
stock options for a fixed number of shares with an exercise price equal to the
market price of the underlying stock at the date of grant and, accordingly, does
not recognize compensation expense.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Comprehensive Income In June 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in the financial statements. The Company adopted SFAS 130 for
fiscal 1998. The Company has chosen to disclose comprehensive income, which
encompasses net income and foreign currency translation adjustments, in the
consolidated statements of shareholders' equity. Prior years have been restated
to conform to SFAS 130 requirements.
Recently Issued Accounting Pronouncements In June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 131 establishes standards for the way in which public business
enterprises report information about operating segments in annual financial
statements and interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company adopted SFAS 131 for fiscal
1998. (See Note 8.)
In March 1998, the Accounting Standards Executive Committee (ACSEC) issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidance
on accounting for costs incurred on software obtained or developed for internal
use. The Company adopted SOP 98-1 in the first quarter of fiscal 1998.
Reclassifications Certain amounts in the 1997 and 1996 financial statements have
been reclassified to conform with the 1998 financial statement presentation.
2. Acquisition of Business and Liquidation
On May 30, 1997, the Company invested $5.3 million in exchange for a 97%
interest in Samjoo Elec. Ind. Co. Ltd., a Korean fuse manufacturer, now doing
business as Littelfuse Triad. This acquisition has been accounted for through
the use of the purchase method of accounting; accordingly, the accompanying
financial statements include the results of its operations since the acquisition
date. Goodwill arising from this acquisition of approximately $2.9 million is
being amortized over 20 years. Pro forma results of operations, assuming this
acquisition had occurred as of January 1, 1996, would not differ materially from
reported results of operations.
During the year ended January 2, 1999, the Company made two acquisitions for
approximately $2.8 million. The acquisitions have been accounted for through the
use of the purchase method of accounting; accordingly, the accompanying
financial statements include the results of operations since the acquisition
dates. Goodwill arising from these acquisitions of approximately $2.6 million is
being amortized over 10 years. Pro forma results of operations, assuming these
acquisitions had occurred as of December 29, 1996, would not differ materially
from reported results of operations.
In March 1998, the Company consolidated its Korean operations into Littelfuse
Triad. Pursuant to the consolidation, the Company incurred costs of
approximately $400,000 to liquidate SamHwa Littelfuse, Inc.
3. Inventories
<TABLE>
The components of inventories are as follows at January 2, 1999, and January 3,
1998 (in thousands):
1998 1997
<S> <C> <C>
Raw materials $ 9,800 $ 8,788
Work in process 5,338 3,556
Finished goods 21,071 26,731
$36,209 $39,075
</TABLE>
4. Long-Term Obligations
The carrying amounts of long-term obligations, which approximate fair value, are
as follows at January 2, 1999, and January 3, 1998 (in thousands):
<TABLE>
1998 1997
<S> <C> <C> <C> <C>
6.16% Senior Notes, maturing 2005 $60,000 $ -
6.31% Senior Notes, maturing 2000 18,000 27,000
Credit line - 20,000
Other obligations 5,539 3,557
Capital lease obligations 2,037 -
85,576 50,557
Less: Current maturities 15,515 10,172
$70,061 $40,385
</TABLE>
During 1998, the Company concluded a $60.0 million private placement of Senior
Notes and renegotiated its existing bank credit agreement to provide for a
credit line of $55.0 million maturing on August 31, 2003. At January 2, 1999,
the Company had available $55.0 million of borrowing capability under the credit
line at an interest rate of LIBOR plus 0.375%. In addition, the Company has
outstanding $18.0 million of Senior Notes issued pursuant to a 1993 Note
Purchase Agreement.
The bank credit agreement provides for letters of credit of up to $8.0 million
as part of the available credit line. At January 2, 1999, the Company had $1.4
million of outstanding letters of credit.
The Senior Notes and bank Credit Agreement contain covenants that, among other
matters, impose limitations on the incurrence of additional indebtedness, future
mergers, sales of assets, payment of dividends, and changes in control, as
defined. In addition, the Company is required to satisfy certain financial
covenants and tests relating to, among other matters, interest coverage, working
capital, leverage and net worth.
Aggregate maturities of long-term obligations at January 2, 1999, are as follows
(in thousands):
<TABLE>
<S> <C> <C>
1999 $15,515
2000 17,916
2001 11,016
2002 10,071
2003 and thereafter 31,058
$85,576
</TABLE>
Interest paid on long-term obligations approximated $3.8 million in 1998 and
$4.0 million in 1997 and 1996, respectively.
5. Benefit Plans
The Company has a defined-benefit pension plan (the "Plan") covering
substantially all of its North American employees. The amount of the retirement
benefit is based on years of service and final average monthly pay. The Plan
also provides post-retirement medical benefits to retirees and their spouses if
the retiree has reached age 62 and has provided at least ten years of service
prior to retirement. Such benefits generally cease once the retiree attains age
65. The Company's contributions are made in amounts sufficient to satisfy ERISA
funding requirements.
In 1998, the Company adopted SFAS No. 132, "Employers' Disclosure about Pensions
and Other Postretirement Benefits." This statement standardizes the disclosure
requirements for pensions and other postretirement benefits. Prior years'
information has been restated to conform with the requirements of this
statement.
<TABLE>
(in thousands) 1998 1997
Change in benefit obligation
<S> <C> <C>
Benefit obligation at beginning of year $41,649 $37,385
Service cost 1,942 1,657
Interest cost 2,822 2,654
Actuarial loss 1,155 1,995
Benefits paid (2,081) (2,042)
Benefit obligation at end of year $45,487 $41,649
Change in plan assets at fair value
Plan assets at beginning of year $39,703 $34,513
Actual return on plan assets 6,041 6,232
Employer contributions 700 1,000
Benefits paid (2,081) (2,042)
Fair value of plan assets at end of year $44,363 $39,703
Funded status $ (1,124) $ (1,946)
Unrecognized prior service cost 245 311
Unrecognized net actuarial loss 2,301 4,094
Prepaid pension obligation $ 1,422 $ 2,459
Weighted-average assumptions
Discount rate 6.75% 7.00%
Expected return on plan assets 9.00% 9.00%
Salary growth rate 4.50% 4.50%
Components of net periodic benefit cost
Service cost $ 1,942 $ 1,657
Interest cost 2,822 2,654
Expected return on plan assets (3,243) (2,822)
Amortization of prior service cost 65 65
Recognized net actuarial loss 151 224
Net periodic benefit cost $ 1,737 $ 1,778
</TABLE>
The Company provides additional retirement benefits for certain key executives
through its unfunded Supplemental Executive Retirement Plan. The charge to
expense for this plan amounted to $852,000, $853,000, and $747,000 in 1998,
1997, and 1996, respectively. The unfunded benefit obligation amounted to $5.5
million and $4.3 million at January 2, 1999, and January 3, 1998, respectively.
The Company also maintains a 401(k) savings plan covering substantially all U.S.
employees. The Company matches 50% of the employee's annual contributions for
the first 4% of the employee's gross wages. Employees vest in the Company
contributions after two years of service. Company matching contributions
amounted to $547,000 in 1998, $523,000 in 1997, and $457,000 in 1996.
6. Shareholders' Equity
Stock Split On April 29, 1997, the Company's Board of Directors approved a
two-for-one stock split to stockholders of record on May 20, 1997, payable June
10, 1997, in the form of a stock dividend. All prior years' number of shares and
per share amounts have been restated to reflect the stock split.
Stock Purchase Warrants Warrants to purchase 2,483,709 shares of common stock at
$4.18 per share were outstanding at January 2, 1999. The warrants are
exercisable at the option of the holder at any time prior to December 27, 2001,
and are not callable by the Company.
Stock Options The Company has stock option plans authorizing the granting of
both incentive and nonqualified options and other stock rights of up to
2,800,000 shares of common stock to employees and directors. The stock options
vest over a five-year period and are exercisable over a ten-year period
commencing from the date of vesting.
A summary of stock option information follows:
<TABLE>
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,361,310 $14.28 1,257,380 $10.95 1,236,800 $ 8.76
Granted 311,500 24.64 274,300 25.29 251,400 18.40
Exercised (153,480) 6.49 (156,170) 6.70(174,900)
5.81
Forfeited (90,420) 15.31 (14,200) 15.69(55,920)
10.43
Outstanding at end of year 1,428,910 $16.91 1,361,310 $14.28 1,257,380 $10.95
Exercisable at end of year 708,818 671,126 461,820
Available for future grant 517,340 138,420 398,520
Weighted-average value of options
granted during the year $11.81 $11.16 $ 9.31
</TABLE>
<TABLE>
As of January 2, 1999, the Company had the following outstanding options:
Weighted- Weighted-
Exercise Options Average Average Options
Price Outstanding Exercise Price Remaining Life Exercisable
<S> <C> <C> <C> <C> <C> <C>
$ 3.688 to $5.00 195,300 $ 3.87 3.23 193,500
$ 7.50 to $11.155 206,900 9.95 4.68 181,620
$ 11.625 to $16.50 287,070 14.69 6.00 202,502
$ 17.813 to $25.50 638,340 22.18 8.53 110,936
$ 28.875 to $34.125 101,300 28.95 8.56 20,260
</TABLE>
<PAGE>
Disclosure of pro forma information regarding net income and net income per
share is required by SFAS 123 and has been determined as if the Company had
accounted for its stock options granted in 1998, 1997, and 1996 under the fair
value method using the Black-Scholes option pricing model. The following
assumptions were utilized in the valuation:
<TABLE>
1998 1997 1996
<S> <C> <C> <C>
Risk-free interest rate 5.59% 6.63% 6.76%
Expected dividend yield 0% 0% 0%
Expected stock price volatility .300% .195% .265%
Expected life of options 8 years 8 years 8 years
</TABLE>
Had compensation cost for the Company's stock options granted in 1998, 1997, and
1996 been determined based on the fair value at the dates of grant, the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated:
<TABLE>
1998 1997 1996
Pro forma net income
<S> <C> <C> <C>
(in thousands of dollars) $18,710 $24,621 $21,340
Pro forma basic net
income per share $ 0.91 $ 1.24 $ 1.08
Pro forma diluted net
income per share $ 0.81 $ 1.04 $ 0.90
</TABLE>
The pro forma effect on net income for 1998, 1997, and 1996 is not
representative of the pro forma effect on net income in future years as the pro
forma disclosures reflect only the fair value of stock options granted in those
years and do not reflect the fair value of outstanding options granted prior to
1996.
Notes Receivable - Common Stock In 1995, the Company established the Executive
Loan Program under which certain management employees may obtain interest-free
loans from the Company to facilitate their exercise of stock options and payment
of the related income tax liabilities. Such loans, limited to 90% of the
exercise price plus related tax liabilities, have a five-year maturity, subject
to acceleration for termination of employment or death of the employee. Such
loans are classified as a reduction of shareholder's equity.
Preferred Stock The Board of Directors may authorize the issuance from time to
time of Preferred Stock in one or more series with such designations,
preferences, qualifications, limitations, restrictions, and optional or other
special rights as the Board may fix by resolution. In connection with the Rights
Plan, the Board of Directors has reserved, but not issued, 200,000 shares of
preferred stock.
Rights Plan In December 1995, the Company adopted a shareholder rights plan
providing for a dividend distribution of one preferred share purchase right for
each share of common stock outstanding on and after December 15, 1995. The
rights can be exercised only if an individual or group acquires or announces a
tender offer for 15% or more of the Company's common stock and warrants. If the
rights first become exercisable as a result of an announced tender offer, each
right would entitle the holder to buy 1/200th of a share of a new series of
preferred stock at an exercise price of $67.50. Once an individual or group
acquires 15% or more of the Company's common stock, each right held by such
individual or group becomes void and the remaining rights will then entitle the
holder to purchase a number of common shares having a market value of twice the
exercise price of the right. If the attempted takeover succeeds, each right will
then entitle the holder to purchase a number of the acquiring Company's common
shares having a market value of twice the exercise price of the right. After an
individual or group acquires 15% of the Company's common stock and before they
acquire 50%, the Company's Board of Directors may exchange the rights in whole
or in part, at an exchange ratio of one share of common stock or 1/100th of a
share of a new series of preferred stock per right. Before an individual or
group acquires 15% of the Company's common stock, or a majority of the Company's
Board of Directors are removed by written consent, which ever occurs first, the
rights are redeemable for $.01 per right at the option of the Company's Board of
Directors. The Company's Board of Directors is authorized to reduce the 15%
threshold to no less than 10%. Each right will expire on December 15, 2005,
unless earlier redeemed by the Company.
7. Income Taxes
Federal, state, and foreign income tax expense (credit) consists of the
following (in thousands):
1998 1997 1996
<TABLE>
Current:
<S> <C> <C> <C>
Federal $ 4,861 $ 7,845 $ 7,091
State 920 1,859 1,440
Foreign 5,239 5,391 4,790
11,020 15,095 13,321
Deferred:
Federal (809) 5 (872)
Foreign (87) 210 (90)
(896) 215 (962)
$10,124 $15,310 $12,359
</TABLE>
Domestic and foreign income before income taxes is as follows (in thousands):
<TABLE>
1998 1997 1996
<S> <C> <C> <C>
Domestic $15,337 $26,494 $21,299
Foreign 14,672 14,158 12,795
$30,009 $40,652 $34,094
</TABLE>
A reconciliation between income taxes computed on income before income taxes at
the federal statutory rate and the provision for income taxes is provided below
(in thousands):
<TABLE>
1998 1997 1996
<S> <C> <C> <C>
Tax expense at statutory
rate of 35% $10,503 $14,228 $11,933
State and local taxes,
net of federal tax benefit 598 1,208 936
Foreign income taxes 68 (705) (181)
SamHwa Littelfuse, Inc.
liquidation (1,055) - -
Foreign losses for which
no tax benefit is available 83 974 703
Other, net (73) (395) (1,032)
$10,124 $15,310 $12,359
</TABLE>
<PAGE>
Deferred income taxes are provided for the tax effects of temporary differences
between the financial reporting bases and the tax bases of the Company's assets
and liabilities. Significant components of the Company's deferred tax assets and
liabilities at January 2, 1999, and January 3, 1998, are as follows (in
thousands):
<TABLE>
1998 1997
Deferred tax liabilities
Tax over book depreciation
<S> <C> <C>
and amortization $4,289 $4,740
Prepaid expenses 1,265 1,346
Other 416 639
Total deferred tax liabilities 5,970 6,725
Deferred tax assets
Accrued expenses 3,899 3,146
Foreign net operating loss carryforwards 174 1,820
Other 578 1,045
Total deferred tax assets 4,651 6,011
Less: Valuation allowance (174) (1,820)
Net deferred tax assets 4,477 4,191
Net deferred tax liabilities $1,493 $2,534
</TABLE>
The deferred tax asset valuation allowance is related to deferred tax assets
from foreign net operating losses. The net operating loss carryforwards have no
expiration date. Certain foreign net operating loss carryforwards and the
related valuation allowance are no longer available due to the liquidation of
SamHwa Littelfuse, Inc. The Company received a one-time tax benefit associated
with the liquidation of approximately $1.1 million for the year ended January 2,
1999. The Company paid income taxes of $11.5 million in 1998, $14.0 million in
1997, and $9.0 million in 1996.
8. Business Segment Information
The Company designs, manufactures, and sells circuit protection devices
throughout the world. The Company has three reportable geographic segments: The
Americas, Europe, and Asia-Pacific. The circuit protection market in these
geographical segments is categorized into three major product areas: electronic,
automotive, and power fuses.
The Company evaluates the performance of each geographic segment based on its
net income or loss. The Company also accounts for intersegment sales as if the
sales were to third parties.
The Company's reportable segments are the business units where the revenue is
earned and expenses are incurred. The Company has subsidiaries in The Americas,
Europe, and Asia-Pacific where each region is measured based on its sales and
operating income or loss.
Information concerning the operations in these geographic segments for the year
ended January 2, 1999, is as follows in Table 1 (in thousands):
<TABLE>
Combined Consolidated
Table 1: Geographic Segments The Americas Europe Asia-Pacific Total CorporateReconciliation Total
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $164,211 $ 44,835 $ 60,494 $269,540 $ -$ - $269,540
Intersegment revenues 30,297 10,024 263 40,584 - (40,584) -
Interest expense 3,724 17 248 3,989 - - 3,989
Depreciation and amortization 8,495 1,459 3,417 13,371 8,835 - 22,206
Other income (loss) 506 68 (672) (98) - - (98)
Income tax expense 4,412 3,896 1,816 10,124 - - 10,124
Net income (loss) 18,970 7,692 2,058 28,720 (8,835) - 19,885
Identifiable assets 130,981 24,282 42,658 197,921 89,619 (36,996) 250,544
Capital expenditures 15,269 2,344 3,707 21,320 - - 21,320
</TABLE>
Intersegment revenues and receivables are eliminated to reconcile to
consolidated totals. Corporate identifiable assets consist primarily of cash and
intangible assets.
The Company's revenues by product areas for the year ended January 2, 1999, are
as follows (in thousands):
Revenues
Electronic $133,086
Automotive 96,685
Power 39,769
Consolidated Total $269,540
Revenues from no single customer of the Company amount to 10% or more of total
revenues, except for its Japanese stocking representative, which accounted for
10.2% for the year ended January 2, 1999.
9. Lease Commitments
The Company leases certain office and warehouse space under noncancelable
operating leases, as well as certain machinery and equipment. Rental expense
under these leases was approximately $900,000 in 1998 and $1.3 million in 1997
and 1996, respectively. Future minimum payments for all noncancelable operating
leases with initial terms of one year or more at January 2, 1999, are as follows
(in thousands):
<TABLE>
<S> <C>
1999 $ 588
2000 200
2001 57
2002 7
2003 and thereafter -
$ 852
</TABLE>
10. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
(in thousands) 1998 1997 1996
Numerator:
<S> <C> <C> <C>
Net income $ 19,885 $ 25,342 $ 21,735
Denominator:
Denominator for basic earnings per share -
Weighted-average shares $ 20,474 $ 19,824 $ 19,888
Effect of dilutive securities:
Warrants 2,311 3,335 3,520
Employee stock options 369 464 393
Denominator for diluted earnings per share -
Adjusted weighted-average shares and
assumed conversions 23,154 23,623 23,801
Basic earnings per share $ 0.97 $ 1.28 $ 1.09
Diluted earnings per share $ 0.86 $ 1.07 $ 0.91
</TABLE>
<PAGE>
<TABLE>
Selected Financial Data
(In thousands, except per share data)
Five Year Summary
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $269,540 $ 275,165 $ 241,446 $ 219,535 $ 194,454
Gross profit 100,199 111,131 98,288 89,872 77,416
Operating income 34,096 43,768 37,669 33,729 27,846
Net income 19,885 25,342 21,735 19,272 15,227
Net income per share - Diluted 0.86 1.07 0.91 0.78 0.63
Net working capital $ 46,685 $ 41,548 $ 31,343 $ 27,963 $ 25,061
Total assets 250,544 221,885 209,951 205,186 199,328
Long-term debt 70,061 40,385 44,556 40,804 60,344
</TABLE>
<TABLE>
Quarterly Results of Operations (Unaudited)
1998 1997
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 62,058 $ 69,035 $ 69,116 $ 69,331 $ 70,761 $ 68,993 $ 69,828 $ 65,583
Gross profit 21,370 25,905 26,331 26,592 27,843 27,860 28,609 26,819
Operating income 5,890 9,226 9,809 9,171 10,196 11,220 11,770 10,582
Net income 3,139 5,366 5,555 5,826 5,767 6,412 6,896 6,267
Net income per share:
Basic 0.16 0.26 0.27 0.29 0.29 0.32 0.35 0.32
Diluted 0.14 0.23 0.24 0.25 0.24 0.27 0.29 0.27
Quarterly Stock Price
1998 1997
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
High 25 1/4 25 5/8 26 5/8 28 1/2 35 1/2 34 1/2 28 1/2 250 /0
Low 16 0/0 16 1/4 20 0/0 25 1/4 21 3/4 27 1/4 22 0/0 22 1/8
Close 19 1/4 19 1/4 25 1/8 25 3/4 25 1/2 33 7/8 270 /0 23 1/8
</TABLE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Littelfuse, Inc. of our report dated January 26, 1999, included in the 1998
Annual Report to Stockholders of Littelfuse, Inc.
Our audit also included the financial statement schedule of Littelfuse, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(No. 33-55942, 33-64442, 33-95020, and 333-03260) on Form S-8 of our report
dated January 26, 1999, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Littelfuse, Inc.
Ernst & Young LLP
Chicago, Illinois
March 17, 1999
