<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22336
ANTEC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 36-3892082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11450 TECHNOLOGY CIRCLE
DULUTH, GA 30097
(678) 473-2000
(Address, including zip code and telephone number,
including area code, of registrant's principal
executive offices)
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
---- -------
At April 30, 1999, there were 36,244,203 shares of Common Stock, $0.01
par value, of the registrant outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 4,436
Accounts receivable (net of allowance for doubtful accounts
of $5,037 in 1999 and $4,609 in 1998) 135,763 123,959
Inventories 168,998 150,988
Other current assets 6,817 6,089
-------- --------
Total current assets 311,578 285,472
Property, plant and equipment, net 43,955 41,612
Goodwill (net of accumulated amortization of $42,931 in 1999 and $41,695 in
1998) 153,546 154,782
Deferred income taxes, net -- 22,591
Investments 74,243 11,743
Other assets 16,131 16,445
-------- --------
$599,453 532,645
======== ========
LIABILITIES AND STOCK HOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 5,077 $ --
Accounts payable 59,022 57,383
Accrued compensation, benefits and related taxes 15,647 19,804
Other current liabilities 28,695 24,680
-------- --------
Total current liabilities 108,441 101,867
Long-term debt 192,000 181,000
Deferred income taxes, net 3,209 --
-------- --------
Total Liabilities 303,650 282,867
Stockholders' equity:
Preferred stock, par value $1.00 per share, 5 million shares authorized, none
issued and outstanding -- --
Common stock, par value $0.01 per share, 50 million shares authorized; 36.4
million and 35.8 million shares issued and outstanding in 1999 and
1998, respectively 364 358
Capital in excess of par value 216,634 209,193
Retained earnings 78,805 40,190
Cumulative translation adjustments -- 37
-------- --------
Total stockholders' equity 295,803 249,778
-------- --------
$599,453 $532,645
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements
2
<PAGE> 3
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales $145,256 $123,441
Cost of sales 111,045 90,614
-------- --------
Gross profit 34,211 32,827
Operating expenses:
Selling, general and administrative 24,895 26,769
Amortization of goodwill 1,236 1,226
Restructuring charge -- 10,000
Gain on LANcity transaction (60,000) --
-------- --------
(33,869) 37,995
-------- --------
Operating income (loss) 68,080 (5,168)
Interest expense 2,858 1,330
Other (income) expense, net (2,303) 25
-------- --------
Income (loss) before income taxes 67,525 (6,523)
Income tax expense (benefit) 28,910 (1,905)
-------- --------
Net income (loss) $ 38,615 $ (4,618)
======== ========
Net income (loss) per
Weighted average common
and common equivalent shares:
Basic $ 1.07 $ (0.12)
======== ========
Diluted $ 0.92 $ (0.12)
======== ========
Weighted average common and Common equivalent shares:
Basic 36,085 39,348
======== =========
Diluted 43,140 39,348
======== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
-------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) $ 38,615 $ (4,618)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Depreciation and amortization 3,986 3,427
Deferred income taxes 25,800 (4,740)
LANcity transaction (60,000) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable (9,554) (10,631)
(Increase) in inventories (18,010) (9,536)
Increase in cash overdraft 5,077 --
Increase (decrease) in accounts payable and
accrued liabilities (5,018) 19,793
(Increase) decrease in other, net 1,327 (987)
-------- --------
Net cash (used in) operating activities (17,777) (7,292)
Investing activities:
Purchases of property, plant and equipment (5,093) (4,121)
Investments in / advances to joint ventures -- (3,300)
Other -- 211
-------- --------
Net cash (used in) investing activities (5,093) (7,210)
Financing activities:
Borrowings under credit facilities 52,000 32,500
Reductions in borrowings under credit facilities (41,000) (24,504)
Issuance of 4.5% convertible subordinated notes -- --
Purchase and retirement of common stock -- --
Deferred financing costs paid (13) --
Proceeds from issuance of common stock 7,447 662
-------- --------
Net cash provided by financing activities 18,434 8,658
-------- --------
Net decrease in cash and cash equivalents (4,436) (5,844)
Cash and cash equivalents at beginning of period 4,436 7,244
-------- --------
Cash and cash equivalents at end of period $ -- $ 1,400
======== ========
Supplemental cash flow information:
Interest paid during the period $ 1,274 $ 1,322
======== ========
Income taxes paid during the period $ 573 $ 19
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
ANTEC Corporation ("ANTEC" or herein together with its consolidated
subsidiaries called the "Company") is an international communications technology
company, headquartered in Duluth, Georgia, with major offices in Englewood,
Colorado and Tinton Falls, New Jersey. The consolidated financial statements
include the accounts of the Company after elimination of intercompany
transactions. The consolidated financial statements furnished herein reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of the consolidated financial
statements for the periods shown. Additionally, certain prior year amounts have
been reclassified to conform to the 1999 financial statement presentation.
Interim results of operations are not necessarily indicative of results to be
expected from a twelve-month period. These interim financial statements should
be read in conjunction with the Company's audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the Company's year ended December 31, 1998.
The Company operates in one business segment, communications, providing
a range of customers with hybrid fiber / coax ("HFC") networks and integrative
systems, coupled with a full range of products and services to support those
networks and systems. This segment accounts for 100% of the consolidated sales,
operating profit and identifiable assets of the Company. ANTEC is a leading
developer, manufacturer and supplier of optical transmission, construction,
rebuild and maintenance equipment for the broadband communications industry.
ANTEC provides a broad range of products and services to cable system operators
and telecommunication providers. ANTEC supplies almost all of the products
required in a broadband communication system, including headend, distribution,
drop and in-home subscriber products.
NOTE 2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
FASB Statement No. 133 is effective for fiscal years beginning June 15, 1999.
The Statement will require the Company to disclose certain information regarding
derivative financial instruments. The Company does not anticipate that the
adoption of FASB Statement No. 133 will have a significant effect on the results
of operations or financial position.
NOTE 3. RESTRUCTURING AND OTHER CHARGES
In January 1998, ANTEC announced a consolidation plan to be implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Atlanta. The Company is in the final stages of consolidating all
of its Rolling Meadows, Illinois corporate and administrative functions to
either the Atlanta, Georgia or the Englewood, Colorado locations. As part of
this consolidation, the two principal facilities located in Atlanta are being
consolidated and certain international operating and administrative functions
located in Miami and Chicago have also been consolidated in Atlanta. In
connection with these consolidations, ANTEC recorded a charge of approximately
$10.0 million in the first quarter of 1998. The components of the restructuring
charge included approximately $7.6 million related to personnel costs and
approximately $2.4 million related to lease termination and other costs.
Subsequently, during the fourth quarter of 1998, this charge was reduced by $0.9
million as a result of the ongoing evaluation of the estimated costs associated
with these actions. The personnel-related costs included termination costs
related to the involuntary termination of approximately 177 employees, primarily
related to finance, management information systems, and international operations
functions located in Chicago and Miami. Terminated employees were offered
separation amounts in accordance with the Company's severance policy and were
provided specific separation dates. As of March 31, 1999, 126 of the estimated
177 employees have been terminated. As of March 31, 1999, approximately $2.3
million of the cash costs related to personnel costs and approximately $1.1
million of cash costs related to lease termination
5
<PAGE> 6
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
payments and other costs had yet to be expended. The Company anticipates these
costs will be incurred during the current year.
NOTE 4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ----------
(Unaudited)
<S> <C> <C>
Raw material $ 42,478 $ 37,437
Work in process 7,022 10,496
Finished goods 119,498 103,055
---------- ----------
Total inventories $ 168,998 $ 150,988
========== ==========
</TABLE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, at cost, consists of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Land $ 2,549 $ 2,549
Building 14,552 14,548
Machinery and equipment 65,012 60,448
---------- -----------
82,113 77,545
Less: Accumulated depreciation (38,158) (35,933)
---------- -----------
Total property, plant and equipment, net $ 43,955 $ 41,612
========== ===========
</TABLE>
NOTE 6. LONG TERM DEBT
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
Revolving Credit Facility $ 77,000 $ 66,000
4.5% Convertible Subordinated Notes 115,000 115,000
----------- ----------
Total long term debt $ 192,000 $ 181,000
=========== ==========
</TABLE>
On May 8, 1998, the Company issued $115.0 million of 4.5% Convertible
Subordinated Notes ("Notes") due May 15, 2003 (the "Offering"). The Notes are
convertible, at the option of the holder, at any time prior to the close of
business on the stated maturity date, into the Company's common stock ("Common
Stock") at a conversion price of $24.00 per share. The Notes are redeemable, in
whole or in part, at the Company's option, at any time on or after May 15, 2001.
On May 21, 1998, the Company entered into a new secured four-year
credit facility ("New Credit Facility") with a group of banks aggregating $85.0
million. The New Credit Facility permits the Company to borrow, on a revolving
basis, an amount contingent upon the level of certain eligible assets. The New
Credit Facility provides for various interest rate alternatives. The average
annual interest rate on borrowings was approximately 6.85% at March 31, 1999.
The commitment fee on unused borrowings is approximately 0.5%. The New Credit
Facility contains various restrictions and covenants, including limits
6
<PAGE> 7
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
on payments to stockholders, interest coverage, and net worth tests. All
borrowings under the New Credit Facility are secured by substantially all of the
Company's assets. As of March 31, 1999, the Company had approximately $8.0
million of available borrowings under the New Credit Facility.
In April 1999, the Company amended the New Credit Facility. This
amendment increased the existing line from $85.0 million to $120.0 million;
$110.0 million of which is currently committed. The New Credit Facility has
also been amended to increase the assets eligible for borrowings to be
advanced against. None of the other significant terms, including pricing, were
changed with the amendment.
NOTE 7. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) for the three-month periods ended
March 31, 1999 and 1998 was $38.6 million and $(4.6) million, respectively.
Comprehensive income decreased approximately $37 thousand during the first
quarter of 1999 and increased approximately $31 thousand during the first
quarter of 1998.
NOTE 8. SALES INFORMATION
As of March 31, 1999, Liberty Media Corporation, which is part of the
Liberty Media Group of AT&T whose financial performance is "tracked" by a
separate class of AT&T stock, was the beneficial owner of approximately 21.1% of
the outstanding ANTEC common stock. This beneficial ownership includes options
to acquire an additional 854,341 shares. A significant portion of the Company's
revenue was derived from sales to AT&T aggregating approximately $37.9 million
and $26.3 million for the quarters ended March 31, 1999 and 1998, respectively.
The Company sells its products primarily in the United States with its
international revenue being generated from Asia Pacific, Europe, Latin America
and Canada. The Asia Pacific market includes Australia, New Zealand, China, Hong
Kong, Taiwan, India, Indonesia, Japan, Korea, Malaysia, Philippines, Sampan,
Singapore and Thailand. The European market includes the United Kingdom,
Ireland, France, Italy, Portugal and Spain. International sales for the three
months ended March 31, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
INTERNATIONAL REGION (Unaudited) (Unaudited)
Asia Pacific...................... $ 3,994 $ 6,084
Europe............................ 3,124 2,412
Latin America..................... 7,139 6,807
Canada............................ 696 523
------------- ------------
Total international sales $ 14,953 $ 15,826
============= ============
</TABLE>
Total identifiable international assets were immaterial.
NOTE 9. LANcity TRANSACTION
During the first quarter of 1999, the Company completed the
combination of the Broadband Technology Division of Nortel Networks (LANcity)
with Arris Interactive, LLC, a joint venture between ANTEC and Nortel
Networks. This combination was effected by the contribution of the LANcity
assets and business into Arris Interactive. ANTEC's interest in the joint
venture was reduced by 6.25% from 25% to 18.75%, while Nortel's interest was
increased from 75.0% to 81.25%. In addition, based on the
7
<PAGE> 8
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
achievement of certain revenue goals for LANcity products, up to an additional
6.25% of dilution in ANTEC's interest (to 12.5%) may occur. Nortel, however, has
the option to take, in lieu of the additional interest in Arris, up to 2,747,252
shares of ANTEC stock. In order to achieve the full amount of ANTEC shares or
the full additional 6.25% ownership interest in Arris Interactive, sales of
LANcity products from January 1, 1999 to June 30, 2000 must reach or exceed
$300.0 million during such period. The amount of additional Arris interest or
ANTEC stock will be prorated on a straight-line basis for sales between $180.0
million and $300.0 million. No additional interest or stock ownership will occur
if sales of LANcity products during the eighteen-month period are less than
$180.0 million.
The Company recorded a gain of $60.0 million, net of related expenses,
based on an independent valuation of LANcity. The Company has elected to
recognize gains or losses on the sale of previously unissued stock of a
subsidiary or investee, based on the difference between the carrying amount of
the equity interest in the investee immediately before and after the
transaction.
NOTE 10. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share ("EPS") computations for the periods
indicated (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Basic:
Net income (loss) $ 38,615 $ (4,618)
============= =============
Weighted average shares outstanding 36,085 39,348
============= =============
Basic earnings per share $ 1.07 $ (0.12)
============= =============
Diluted:
Net income (loss) $ 38,615 $ (4,618)
Add:
4.5% convertible subordinated notes interest-
and fees, net of federal income tax effect 887 --
------------- -------------
Total 39,502 $ (4,618)
============= =============
Weighted average shares outstanding 36,085 39,348
Net effect of dilutive
securities:
Add options / warrants 2,263 --
Add assumed conversion of
4.5% convertible subordinated notes 4,792 --
------------- -------------
Total 43,140 39,348
============= =============
Diluted earnings per share $ 0.92 $ (0.12)
============= =============
</TABLE>
The effects of the options and warrants were not presented for the three-month
period ended March 31, 1998 as the Company incurred a net loss and inclusion of
these securities would be antidilutive.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Net Sales. Net sales for the first three months of 1999 were $145.3
million as compared to $123.4 million for the first three months of 1998, an
increase of 17.7%. This revenue growth reflects increased capital spending by
ANTEC's largest customer, AT&T, during the first quarter of 1999 as compared to
the same period last year. Sales to AT&T grew from approximately $26.3 million
in the quarter ended March 31, 1998 to approximately $37.9 million in the
quarter ended March 31, 1999. Additionally, the Company's Cornerstone product
sales have grown from $0.9 million in the first quarter of 1998 to $11.0 million
during the first quarter of 1999 pushed by the strength of Host Digital Terminal
("HDT") sales. The HDT product provides an interface between the hybrid fiber /
coax ("HFC") system and digital telephone switches.
Gross Profit. Gross profit for the first three months of 1999 was $34.2
million as compared to $32.8 million for the first three months of 1998. Gross
profit as a percentage of sales for the first three months of 1999 was 23.6% as
compared to 26.6% for the first three months of 1998. The decreased gross profit
percentage for the three-month period is a result of product mix; most notable
is the increased Cornerstone sales, as previously mentioned, which carried a
lower than average gross margin.
Additionally, the quarter ended March 31, 1999, included $1.2 million
in additional gross margin related to intercompany profit in inventory
pertaining to transactions with the Tanco joint venture, which provides turnkey
construction or upgrading of broadband distribution services. Related to its
ownership interest in Tanco, ANTEC defers its portion of this profit, on sales
to Tanco, based on its ownership percentage, until the inventory is effectively
transferred, by Tanco, to the ultimate customer.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses
for the first three months of 1999 were $24.9 million compared to $26.8 million
for the first three months of 1998. This variance includes the reversal of
approximately $1.8 million in over-accrued expenses made during the quarter due
to a change in estimated bonuses and a reduction in self-insurance reserves from
year end.
Restructuring. In the first quarter of 1998, ANTEC recorded a
restructuring charge of approximately $10.0 million, which was subsequently
reduced to $9.1 million in the fourth quarter of 1998 based on the continuing
evaluation of these expenses. This charge included the severance, relocation and
real estate costs associated with: the consolidation of the Company's Rolling
Meadows, Illinois corporate and administrative functions into either the
Atlanta, Georgia or the Englewood, Colorado locations; the consolidation of the
Company's two principal facilities in Atlanta into one; and the consolidation of
certain international operating and administrative functions located in Miami
and Chicago into Atlanta. (See Note 3 of the Notes to the Consolidated Financial
Statements.)
Other Charges. The costs incurred to make modifications to previously
sold TSX products have been charged against a reserve created in December 1996
when TSX agreed to make these modifications. As of March 31, 1999 this reserve
stood at $0.2 million, which is the current estimated cost for the completion of
the modifications. Final modifications should be complete during the second
quarter of 1999. This reserve was initially established because TSX had agreed
to make modifications to a variety of products purchased from TSX over the
period from 1993 to 1994. Late in 1996, the customer voiced concerns that these
products might prematurely fail. TSX believed the customer's concern was not
justified and that it was not obligated to make these modifications under its
warranties covering these products. Nevertheless, in order to maintain good
relations with a major customer, TSX agreed, in December 1996, at the insistence
of the customer, to make these modifications. Having agreed to make these
modifications, TSX believed it was legally obligated to make the modifications
without further consideration from the customer other than its forbearance.
Although the agreement is not in writing, TSX's understanding was that it was
obligated to make the requested modifications to the customer's reasonable
satisfaction as soon as practicable at no significant cost or inconvenience to
the customer. It was contemplated that these modifications would begin promptly
and be completed within a few months. However, a general hold on construction
imposed by the customer, allowed almost no progress on these modifications
during 1997. The
9
<PAGE> 10
Company has been working with the customer to complete these modifications and,
as previously stated it is contemplated that the remaining modifications will be
completed during the second quarter of 1999.
Gain on LANcity Transaction. The transaction was accounted for, in
effect, as if it were a gain on the sale of ANTEC's 6.25% interest in Arris
Interactive to Nortel. As a result, a pre-tax gain of approximately $60.0
million was recognized during the quarter ended March 31, 1999. Additionally,
ANTEC will be the exclusive distributor of LANcity products to domestic cable
operators. (See Note 9 of the Notes to the Consolidated Financial Statements)
Interest Expense. Interest expense for the first three months of 1999
was recorded at $2.9 million as compared to $1.3 million in the first three
months of 1998. Interest expense for the quarter ended March 31, 1999 reflects
the cost of the increased short-term borrowings coupled with the impact of the
issuance of $115.0 million of 4.5% Convertible Subordinated Notes not completed
until the second quarter of 1998.
Other Income and Expense. The results for the quarter ended March 31,
1999 include the impact of approximately $2.2 million of channel fees related to
LANcity's first quarter sales. LANcity sales at quarter end were approximately
$15.0 million. Beginning in April, all LANcity revenue, pertaining to cable
modem and headend products sold into our market, will be recorded by ANTEC. Due
to the timing of the completion of this transaction, a channel fee of 15% was
earned by ANTEC for sales of LANcity products sold in the first quarter.
Net Income (Loss). Net income of $38.6 million was recorded for the
first three months of 1999 as compared to a net loss of $4.6 million for the
first three months of 1998. First quarter results for 1999 include a gain on the
LANcity transaction of approximately $60.0 million, whereas, included in the net
loss for 1998, was a restructuring charge of approximately $10.0 million.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
REORGANIZATION
In January 1998, ANTEC announced a consolidation plan to be implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Atlanta. The Company is in the final stages of consolidating all
of its Rolling Meadows, Illinois corporate and administrative functions into
either the Atlanta, Georgia or the Englewood, Colorado locations. As part of
this consolidation, the two principal facilities located in Atlanta are being
consolidated and certain international operating and administrative functions
located in Miami and Chicago have been consolidated into Atlanta. In connection
with these consolidations, ANTEC recorded a charge of approximately $10.0
million in the first quarter of 1998. The components of the non-recurring charge
included approximately $7.6 million related to personnel costs; and
approximately $2.4 million related to facilities and other costs. Subsequently,
during the fourth quarter of 1998 this charge was reduced by $0.9 million as a
result of the ongoing evaluation of the estimated costs associated with these
actions. The personnel-related costs included termination costs related to the
involuntary termination of approximately 177 employees, primarily related to
finance, management information systems, and international operations functions
located in Chicago and Miami. Terminated employees were offered separation
amounts in accordance with the Company's severance policy and were provided
specific separation dates. As of March 31, 1999, 126 of the estimated 177
employees have been terminated. As of March 31, 1999, approximately $2.3 million
of the cash costs related to personnel costs and approximately $1.1 million of
cash costs related to lease termination payments and other costs had yet to be
expended. The Company anticipates these costs will be charged during the current
year.
FINANCING
As of March 31, 1999, the Company had a balance of $77.0 million
outstanding under its New Credit Facility and $8.0 million of available
borrowings. The average interest rate on its outstanding borrowings was 6.85% at
March 31, 1999. The commitment fee on unused borrowings is approximately 0.5%.
In April 1999, the Company, with its banks, amended its line of
10
<PAGE> 11
credit. This amendment serves to increase the existing line
from $85.0 million to $120.0 million; $110.0 million of which is currently
committed. The line has also been amended to increase the assets eligible for
borrowings to be advanced against. None of the other significant terms,
including pricing, were changed with the amendment.
CAPITAL EXPENDITURES
The Company's capital expenditures were $5.1 million and $4.1 million
in the three months ended March 31, 1999 and 1998, respectively. Except for the
Year 2000 project discussed in a separate section of this document, the Company
had no significant commitments for capital expenditures at March 31, 1999.
CASH FLOW
Cash levels have decreased by approximately $4.4 million in the first
quarter of 1999 and decreased by $5.8 million during the same period of the
prior year. During the quarter ended March 31, 1999 cash used in operating
activities was $17.8 million while the Company spent $5.1 million in capital
expenditures. Positive cash flows of $18.4 million were provided through
financing activities during the first three months of 1999. Cash used in
operating activities was $7.3 million during the quarter ended March 31, 1998.
During the first quarter of 1998 the Company recorded capital expenditures of
$4.1 million while $3.3 million was invested in / advanced to joint ventures.
These cash outlays during the first quarter of 1998 were partially offset by the
positive cash flows of $8.7 million generated through financing activities at
that time.
Operating activities utilized cash of $17.8 million during the first
quarter of 1999. In the first quarter of 1999, the Company recorded an
investment of $62.5 million in their Arris joint venture as outlined in the
LANcity transaction and based off the joint venture's estimated value at the
time of the transaction (See Note 9 of the Notes to the Consolidated Financial
Statements). Additionally, increases in accounts receivable and inventories
during the quarter ended March 31, 1999 utilized cash of approximately $9.6
million and $18.0 million, respectively. Cash flows used by operating activities
were $7.3 million for the three months ended March 31, 1998 with a net loss of
$4.6 million being recorded for that period.
Day's sales outstanding have increased to approximately 84 days at the
close of the first quarter of 1999 as compared to approximately 72 days at the
end of the first quarter of 1998. This increase was driven by three specific
factors. The first is the increased sales volume experienced during the first
quarter of 1999 and in particular the large percentage of the quarter's total
revenue recorded during the month of March. The second factor is the economic
volatility in the international market and the subsequent tightening of bank
credit that has resulted in ANTEC offering extended payment terms to
credit-worthy international customers. The third factor is the extended terms to
Tanco, the Company's 50% joint venture, as a result of the terms of Tanco's
turnkey contracts with TCI.
The increase in current inventory levels during the first three months
of 1999 is reflective of the increased revenue and product demands during the
quarter. Additionally, part of this increase is being driven by contractual
obligations with certain suppliers combined with temporary softness in sales of
those same supplied products. It is expected that this trend will reverse and
inventory levels will be reduced over the coming months.
Cash flows used in investing activities were $5.1 million and $7.2
million for the three months ended March 31, 1999 and 1998, respectively. These
investment amounts included $5.1 million and $4.1 million spent on capital
assets for the first quarter of 1999 and 1998, respectively. Included in the
first quarter of 1998 were advances to joint ventures of approximately $3.3
million.
Cash flows provided by financing activities were $18.4 million and $8.7
million for the three months ended March 31, 1999 and 1998, respectively. Both
periods reflect their respective trends in operating and investing activities,
as well as significant reductions in cash balances. The first quarter of 1999
was also affected by the exercise of stock options that provided positive cash
flows
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<PAGE> 12
of approximately $7.4 million. Net borrowings under the respective credit
facilities were $11.0 million and $8.0 million for the quarters ended March 31,
1999 and 1998, respectively.
Based upon current levels of operations and anticipated growth, the
Company expects that sufficient cash flow will be generated from operations, so
that, combined with other financing alternatives available, including bank
credit facilities, the Company will be able to meet all of its debt service,
capital expenditures and working capital requirements for the immediately
foreseeable future.
YEAR 2000 DISCLOSURE
IMPACT OF YEAR 2000:
As the millenium approaches, the Company, like most other companies, is
preparing for the impact of its arrival on the Company's business, as well as on
the businesses of its customers, suppliers, and business partners. The Year 2000
Issue is the result of computer programs being written using two digits rather
than four to define the applicable year. With regard to dates after December 31,
1999, computer programs that have time-sensitive software may interpret a date
using "00" as the year 1900 rather than the year 2000. The Year 2000 Issue
creates potential risks for the Company. The Company has numerous operating
components consisting of hardware, software, operating systems,
telecommunications applications and database software that, if failure were to
occur, would jeopardize the operations of the Company and its ability to conduct
normal business activities. The Company may also be exposed to risks from third
parties with whom the Company conducts business who fail to adequately address
their own Year 2000 Issues.
STATE OF READINESS:
The Company has been addressing the Year 2000 Issue since the beginning
of 1997 starting with the review of its internal Information Technology ("IT")
and non-IT systems and assessing potential exposures. In 1998, the Company began
concentrating on a more centralized approach to the Year 2000 Issue and
subsequently created a Year 2000 Committee. This Committee is comprised of a
cross-functional team from various disciplines throughout the Company. The
Committee meets regularly to set milestones, review the process to date,
formulate contingency plans and evaluate cost summaries as they relate to the
Year 2000 Issue. These periodic reviews are summarized and the results are
communicated to the Company' management and to the Board of Directors as
requested.
The Year 2000 Committee outlined and defined the Company's strategy for
identifying and managing exposure to mission critical applications due to the
change in the millenium. This strategy delineates scope and responsibility,
defines a methodology and approach for identifying and assessing risk, develops
contingency plans where required, and provides a structure for maintaining the
oversight and accountability of the Year 2000 project.
Based on its assessments, the Company determined that it would be
required to modify or replace significant portions of its software and certain
hardware to enable those systems to properly utilize and recognize dates beyond
December 31, 1999. The Company presently believes that with modifications or
replacements of existing software and certain hardware, and conversions to new
software, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications, replacements and
conversions are not made, or are not completed timely, the Year 2000 Issue could
have a material impact on the operations of the Company.
The Company's plan regarding the Year 2000 Issue evolves through four
phases: assessment, remediation, testing and implementation. As of March 31,
1999, the Company has completed its assessment of all mission critical systems
that could be significantly affected by the Year 2000 Issue. As previously
mentioned, based on the review conducted during 1997, it was concluded that a
significant portion of the Company's information technology software and certain
hardware as they pertain to the Company's distribution efforts, were to be
replaced. The Company's assessment further indicated that the software and
hardware used in its production and manufacturing systems had limited risk and
would
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<PAGE> 13
require module upgrades to attain compliance. In addition, the Company has
reviewed its product lines and has determined that it has no exposure to
contingencies related to the Year 2000 Issue for the products it has sold. Also,
the Company has gathered information about Year 2000 compliance status of its
significant suppliers, subcontractors, and customers and continues to monitor
their compliance.
For its information technology exposures, as of March 31, 1999 the
Company is 100% complete on the remediation phase as it pertains to the
replacement, reprogramming and modifications to its software and certain
hardware. The testing and implementation phases run concurrently for different
systems. Testing is currently underway on the information technology software
related to the Company's distribution efforts. Implementation of this software
is scheduled for June 1999. Implementation and testing of software and hardware
modifications used in the Company's production and manufacturing systems has
been completed. The Company has scheduled a final intensive review of its
production and manufacturing system during the third quarter of 1999.
Additionally, the Company's final implementation of system upgrades as they
pertain to the Company's telecommunications application will be completed during
the second quarter of 1999.
The Company's primary information technology systems used for
manufacturing, production and distribution do not interface directly with any
suppliers, customers, subcontractors or business partners. The Company has
queried its significant suppliers, subcontractors, customers and business
partners as to their state of readiness and compliance to the Year 2000 Issue.
To date, the Company is not aware of any external agent with a Year 2000 Issue
that could materially impact the Company's results of operations, liquidity, or
capital resources. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted and would
not have an adverse effect on the Company's operations. The Company, based on
its normal interaction with its customers and suppliers and the wide attention
the Year 2000 Issue has received, believes that its suppliers and customers will
be prepared for the Year 2000 Issue. There can, however, be no assurance that
this will be so. The Company continues to solicit written assurances from its
major suppliers, customers, and service providers, however, these assurances, if
given, may not be enforceable.
COSTS:
The Company's total Year 2000 project cost and estimates to complete
include the estimated costs and time associated with the impact of third party
Year 2000 Issues based on presently available information. The Company utilizes
both internal and external resources to reprogram, replace, implement and test
the software for the system improvements and Year 2000 modifications. The
Company anticipates the final system improvements and testing related to its
distribution efforts will be completed during the second quarter of 1999 and
that the implementation will commence in June 1999. The total cost of the system
improvement and the Year 2000 project is estimated at approximately $6.0 million
and is being funded through operating cash flows.
Of the total $6.0 million project cost, approximately $3.8 million is
attributable to the purchase of new software and hardware that is being
capitalized. The remaining $2.2 million, which will be expensed as incurred, is
not expected to have a material effect on the results of operations. To date,
the Company has incurred approximately $4.9 million ($3.5 million capitalized
for new systems and $1.4 million expensed as incurred) related to its system
improvement and the Year 2000 project related to the Company's distribution
efforts.
Approximately $0.2 million has been expended on modifying all other
mission critical information applications. Another $0.2 million is expected to
be incurred by the close of the third quarter of 1999 related to the compliance
efforts regarding the telecommunications applications and the final code review
within the production and manufacturing system environment.
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<PAGE> 14
RISKS:
The Management of the Company believes it has an effective program in
place to resolve the Year 2000 Issue in a timely manner. As previously noted,
the Company is in the final stages of compliance on all its mission critical
information technology systems. If any of the Company's suppliers or customers
do not, or if the Company itself does not, successfully deal with the Year 2000
Issue, the Company could experience delays in receiving or sending goods that
would increase its costs and that could cause the Company to lose business and
even customers and could subject the Company to claims for damages. Problems
with the Year 2000 Issue could also result in delays in the Company invoicing
its customers or in the Company receiving payments from them that would affect
the Company's liquidity. Problems with the Year 2000 Issue could affect the
activities of the Company's customers to the point that their demand for the
Company's products is reduced. The severity of these possible problems would
depend on the nature of the problem and how quickly it could be corrected or an
alternative implemented, which is unknown at this time. In the extreme, such
problems could have a significant adverse effect on the Company's operations to
the point of ceasing all normal business activities.
Some risks of the Year 2000 Issue are beyond the control of the Company
and its suppliers and customers. For example no preparations or contingency plan
will protect the Company from a down turn in economic activity caused by the
possible ripple effect throughout the entire economy that could be caused by the
problems of others with the Year 2000 Issue.
CONTINGENCY PLANS:
The Company is constantly evaluating the need for contingency plans for
the Year 2000 Issue. This need is being continuously monitored as the Company
acquires more information about the preparations of its suppliers and customers
as well as its continued assessment of internal risk factors.
YEAR 2000 FORWARD LOOKING STATEMENTS:
The foregoing Year 2000 discussion contains "forward-looking
statements" within the meaning defined by the Private Securities Litigation
Reform Act of 1995. Such statements, including without limitation, anticipated
costs and the dates by which the Company expects to complete certain actions,
are based on management's best current estimates, which were derived utilizing
numerous assumptions about future events, including the continued availability
of certain resources, representations received from third parties and other
factors. However, there can be no guarantee that these estimates will be
achieved and that actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to,
- the ability to identify and remediate all relevant IT and
non-IT systems,
- results of Year 2000 testing,
- adequate resolution of Year 2000 Issues by businesses and
other third parties who are service providers, suppliers or
customers of the Company,
- unanticipated system costs,
- the adequacy of and ability to develop and implement
contingency plans and similar uncertainties.
The "forward-looking statements" made in the foregoing Year 2000 discussion
speak only as of the date on which such statements are made, and the Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.
FORWARD LOOKING STATEMENTS
Any of the above statements that are not statements about historical
facts are forward looking statements. The forward looking statements, as
outlined in the Private Securities Litigation Reform Act of 1995 ("the Act"),
can be identified by the use of terms such as "may," "expect," "anticipate,"
"intend," "estimate," "believe," "continue," "could be," or similar variations
or the negative thereof. Such forward
14
<PAGE> 15
looking statements are based on current expectations but involve risks and
uncertainties. The Company's business is dependent upon general economic
conditions as well as competitive, technological, and regulatory developments
and trends specific to the Company's industry and customers. These conditions
and events could be substantially different than believed or expected and these
differences may cause actual results to vary materially from the forward looking
statements made or the results which could be expected to accompany such
statements. Specific factors, which could cause such material differences,
include the following:
- design or manufacturing defects in the Company's products
which could curtail sales and subject the Company to
substantial costs for removal, replacement and reinstallation
of such products;
- manufacturing or product development problems that the Company
does not anticipate because of the Company's relative
experience with these activities;
- an inability to absorb or adjust costs in response to lower
than anticipated sales volumes;
- unanticipated costs or inefficiencies from the ongoing
consolidation of certain activities; o loss of key management,
sales or technical employees;
- decisions, by the Company's larger customers, to cancel
contracts or orders as they are entitled to do or not enter
into new contracts or orders with the Company because of
dissatisfaction, technological or competitive changes, changes
in control or other reasons;
- and the Company's inability, as a result of the Company's
relative experience, to deliver construction services within
anticipated costs and time frames that could cause loss of
business, operating losses and damage claims.
The above list is representative of the factors which could affect the Company's
forward looking statements and is not intended as an all encompassing list of
such factors. In providing forward looking statements, the Company is not
undertaking any obligation to update publicly or otherwise these statements,
whether as a result of new information, future events or otherwise.
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<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
The following discussion of the Company's risk-management activities
includes "forward looking statements" that involve risks and uncertainties.
Actual results could differ materially from those projected in the forward
looking statements.
ANTEC is exposed to various market risks, including interest rates and
foreign currency rates. Changes in these rates may adversely affect its results
of operations and financial condition. To manage the volatility relating to
these typical business exposures, ANTEC may enter into various derivative
transactions, when appropriate. ANTEC does not hold or issue derivative
instruments for trading or other speculative purposes.
ANTEC uses an interest rate swap agreement, with large creditworthy
financial institutions, to manage its exposure to interest rate changes. The
swap involves the exchange of fixed and variable interest rate payments without
exchanging the notional principal amount. Payments or receipts on the agreement
are recorded as adjustments to interest expense. At March 31, 1999 the Company
had an outstanding interest rate swap agreement denominated in dollars, maturing
in 2001, with an aggregate notional principal amount of $50.0 million. Under
this agreement, the Company receives a floating rate marked to LIBOR and pays a
fixed interest rate. The swap effectively changes the Company's payment of
interest on $50.0 million of variable rate debt to fixed rate debt.
The fair value of the interest rate swap agreement represents the
estimated receipts or payments that would be made to terminate the agreement. At
March 31, 1999, the Company would have paid $1.2 million to terminate the
agreement. A 1% decrease in short-term borrowing rates would increase the amount
paid to terminate the agreement by approximately $1.1 million.
The Company is exposed to foreign currency exchange rate risk as a
result of sales of its products in various foreign countries and manufacturing
operations conducted in Juarez, Mexico. In order to minimize the risks
associated with foreign currency fluctuations most sales contracts are issued in
U.S. dollars. The Company has previously used foreign currency contracts to
hedge the risks associated from foreign currency fluctuations for significant
sales contracts. The Company constantly monitors the exchange rate between the
U.S. dollar and Mexican peso to determine if any adverse exposure exists
relative to its costs of manufacturing. As a result of current market conditions
there are currently no material contracts denominated in foreign currencies.
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<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
10.1 Amended and Restated Limited Liability Company Agreement of Arris Interactive L.L.C., dated
March 31, 1999
10.2 Earnout Share Agreement between Nortel Networks L.L.C. and ANTEC Corporation, dated March
31, 1999
10.3 Amendment to Products Distributor Agreement between Arris Interactive L.L.C. and ANTEC
Corporation, dated March 31, 1999
10.4 Amendment to Credit and Guarantee Agreement, dated April 28, 1999
27.1 Financieal Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
</TABLE>
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<PAGE> 18
SIGNATURES
Pursuant to the requirements 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.
ANTEC CORPORATION
/s/ LAWRENCE A. MARGOLIS
------------------------------------
Lawrence A. Margolis
Executive Vice President
(Principal Financial Officer, duly
authorized to sign on behalf of
the registrant)
Dated: May 12, 1999
18
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF ARRIS INTERACTIVE L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
dated as of March 31, 1999
<PAGE> 2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF ARRIS INTERACTIVE L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I -INTRODUCTORY PROVISIONS................................................................................2
Section 1.01. Certain Definitions.......................................................................2
Section 1.02. Name......................................................................................9
Section 1.03. Principal Place of Business...............................................................9
Section 1.04. Purposes..................................................................................9
Section 1.05. Duration.................................................................................10
Section 1.06. Limitation of Liability..................................................................10
ARTICLE II - CAPITAL CONTRIBUTIONS; WITHDRAWAL OF CAPITAL; LIMITATIONS ON DISTRIBUTIONS; CAPITAL ACCOUNTS;
ALLOCATIONS; RESTRICTIONS ON TRANSFER; ADDITIONAL FUNDING...............................................10
Section 2.01. Capital Contributions....................................................................10
Section 2.02. Withdrawal of Capital; Limitation on Distributions.......................................10
Section 2.03. Capital Accounts.........................................................................11
Section 2.04. Allocation of Net Profits and Net Losses.................................................12
Section 2.05. Restrictions on Transfers; Changes in Interest...........................................14
ARTICLE III - MANAGEMENT.........................................................................................16
Section 3.01. Members Committee........................................................................16
Section 3.02 Officers.................................................................................19
Section 3.03. Matters Requiring the Approval of a Majority of the Members Committee....................20
Section 3.04. Matters Requiring the Approval of a Supermajority of the Members Committee...............23
Section 3.05. Transactions with Members................................................................25
Section 3.06. Conciliation Procedure...................................................................25
Section 3.07. Company's and Members' Indemnification of Members, Representatives and Officers..........25
Section 3.08. Remedies.................................................................................27
Section 3.09. Waiver...................................................................................27
Section 3.10. Ratification and Authorization...........................................................27
ARTICLE IV - BOOKS; ELECTIONS; BUDGETS; FISCAL YEAR..............................................................28
Section 4.01. Administrative Services, Books, Records and Reports......................................28
Section 4.02. Federal Income Tax Elections; Method of Depreciation; Classification for Tax Purposes....28
Section 4.03. Fiscal Year; Fiscal Quarters.............................................................28
Section 4.04. Reports..................................................................................28
Section 4.05. Annual Audit.............................................................................29
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V - DISTRIBUTIONS........................................................................................29
Section 5.01. Distributions............................................................................29
Section 5.02. Restoration of Funds.....................................................................29
ARTICLE VI -TERM; DISSOLUTION; WINDING UP........................................................................29
Section 6.01. Term.....................................................................................29
Section 6.02. Dissolution..............................................................................29
Section 6.03. Procedure in Case of Certain Events of Dissolution.......................................30
Section 6.04. Procedure in Case of Certain Other Events................................................31
Section 6.05. Winding up Affairs and Distribution of Assets............................................33
ARTICLE VII - TERMS AND CONDITIONS OF EMPLOYMENT.................................................................34
Section 7.01. Legacy Employees.........................................................................34
Section 7.02. Employment Prior to Commencement Date....................................................34
Section 7.03. Identification of Employees..............................................................35
Section 7.04. Offers of Employment to Prospective Employees............................................35
Section 7.05. Loaned Employees.........................................................................37
Section 7.06. Credited Service.........................................................................37
Section 7.07. Plan Asset Transfer......................................................................37
Section 7.08. Post-Closing Employment Matters..........................................................37
ARTICLE VIII - MISCELLANEOUS.....................................................................................39
Section 8.01. Notices..................................................................................39
Section 8.02. Certificate Requirements.................................................................39
Section 8.03. Entire Agreement.........................................................................39
Section 8.04. Modification.............................................................................39
Section 8.05. Waivers..................................................................................39
Section 8.06. Severability.............................................................................39
Section 8.07. Further Assurances.......................................................................40
Section 8.08. Governing Law............................................................................40
Section 8.09. Counterparts.............................................................................40
Section 8.10. Limitation on Rights of Others...........................................................40
Section 8.11. Brokers and Finders......................................................................40
Section 8.12. Number and Gender........................................................................40
Section 8.13. Successors and Assigns...................................................................40
Section 8.14. Securities Laws..........................................................................40
Section 8.15. Waiver of Partition......................................................................40
Exhibit A Members Committee
Exhibit B-1 BTD Products Budget
Exhibit B-2 Cornerstone Products Budget
Attachment B-3 Funding Requirements
Schedule 7.04(b) Terms and Conditions of Employment
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF ARRIS INTERACTIVE L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
Arris Interactive L.L.C., a Delaware limited liability company (the "Company"),
dated as of March 31, 1999, by and between Nortel Networks LLC ("Nortel") and
Antec Corporation ("Antec"; Nortel and Antec, collectively, the "Members").
W I T N E S S E T H:
WHEREAS, in November 1995 Northern Telecom Inc. ("NTI") and
Antec formed the Company pursuant to the provisions of the Delaware Limited
Liability Company Act, Del. Code title 6, Section 18-101, et seq., as amended
from time to time (the "Act"), and entered into the Limited Liability Company
Agreement of the Company, dated as of November 1, 1995 (the "Original LLC
Agreement");
WHEREAS, the Original LLC Agreement was amended by that
certain Agreement, dated as of February 27, 1998, by and among the Members and
the Company;
WHEREAS, NTI has assigned all of its membership interest in
the Company to Nortel and has withdrawn from the Company as a member immediately
prior to the effectiveness of this Agreement, and Antec has consented to the
admission of Nortel as a member pursuant to, and as further set forth in, the
Second Framework Agreement among NTI, Nortel, Antec and the Company dated of
even date herewith (the "Second Framework Agreement");
WHEREAS, in connection with the above admission of Nortel and
withdrawal of NTI, and the making by Nortel of certain additional Capital
Contributions to the Company pursuant to the Asset Sale and Contribution
Agreement, of even date herewith, by and between Nortel and the Company (the
"BTD Asset Contribution Agreement"), the parties desire to amend and restate the
Original LLC Agreement in its entirety; and
WHEREAS, it is intended that, subject to the provisions of
this Agreement and related agreements between the parties, the Company shall
design and manufacture and have manufactured, and sell and distribute, the
Company Products and provide services relating thereto (the "Business Scope");
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, and of good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is mutually agreed by and
between the parties hereto as follows:
1
<PAGE> 5
ARTICLE I
INTRODUCTORY PROVISIONS
Section 1.01. Certain Definitions. As used herein:
"Act" means the Limited Liability Company Act of the State of
Delaware, as the same may be amended from time to time.
"Additional Loans" means the additional loans made to the
Company under Section 11 of the Arris Loan Agreement.
"Affiliate" of any Person means, in the case of any Affiliate
of Nortel or NTI, Northern Telecom Limited and any Person who is controlled by
Northern Telecom Limited and, in the case of any Affiliate of Antec, any Person
who is controlled by Antec; provided, however, that for the purposes of the
definition of the term "End User Revenue" herein, any Person which has 30% or
more of its equity securities, membership or partnership interests or other
ownership interests owned or held, directly or indirectly, by Northern Telecom
Limited or any of its Affiliates (as defined above without regard to this
proviso) shall also be deemed to be an Affiliate of Nortel and NTI; provided
further that, for the purposes of Article VII, the Company shall not be deemed
an Affiliate or a subsidiary of Nortel or NTI.
"Arris Loan Agreement" means the loan agreement dated November
17, 1995, as amended prior to and including the date hereof, among Nortel, Antec
and the Company for the purpose of providing additional funding to the Company
in excess of the Members' Capital Contributions.
"Arris Security Agreement" means the security agreement dated
November 17, 1995, as amended of even date hereof, between Nortel and the
Company pursuant to which the Company has granted Nortel a security interest in
certain of its assets.
"Benefit Plan" means (a) any employee benefit plan within the
meaning of Section 3(3) of ERISA including without limitation all welfare,
pension, profit sharing, retirement, stock purchase, stock option, stock bonus,
severance or deferred compensation plans and (b) any other plans, funds,
programs, policies, arrangements, practices, customs and understandings which
provide benefits of economic value to employees or former employees (and/or
their beneficiaries or dependents) other than Compensation.
"BTD Asset Contribution Agreement" has the meaning specified
in the recitals hereto.
"BTD List of Products" has the meaning specified in the Second
Framework Agreement.
2
<PAGE> 6
"BTD Plan of Record" has the meaning specified in the Second
Framework Agreement.
"BTD Products" means those products identified in the BTD List
of Products and the BTD Plan of Record, as well as improvements and enhancements
of such products as well as new and substitute products which perform
substantially the same functions as such products, that are developed by the
Company to provide narrowband and broadband services over a Hybrid Fiber Coaxial
Cable Network.
"Budget" means the annual operating budget of the Company as
approved by the Members Committee from time to time; provided that the Budget in
effect as of the date hereof shall mean, in the aggregate, the separate 1999
budgets relating to the BTD Products and the Cornerstone Products, which are
attached hereto as Exhibits B-1 and B-2, respectively, and the funding
requirements for the Company, which is attached hereto as Attachment B-3.
"Business Scope" has the meaning specified in the recitals
hereto.
"Capital Account" has the meaning specified in Section 2.03.
"Capital Contribution" means a contribution of Property by a
Member to the capital of the Company pursuant to this Agreement.
"Carrying Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Carrying Value of any asset
contributed to the Company shall be such asset's gross fair market value at the
time of such contribution;
(ii) The Carrying Values of all Company assets
shall be adjusted to equal their respective gross fair market values upon an
election by the Company described in Section 2.04(h);
(iii) If the adjusted basis of any asset acquired by
the Company is determined by reference to the adjusted basis of any other asset
of the Company, the Carrying Value of the acquired asset shall be determined by
reference to the Carrying Value of the other asset rather than its adjusted
basis; and
(iv) If the Carrying Value of an asset has been
determined pursuant to clause (i), (ii) or (iii) above, such Carrying Value
shall thereafter be adjusted in the same manner as would the asset's adjusted
basis for federal income tax purposes except that depreciation and amortization
deductions shall be computed in accordance with subsection (i) of the definition
of "Net Profits and Net Losses".
3
<PAGE> 7
"Certificate" means the Certificate of Formation of the
Company as filed with the Secretary of State of Delaware, as it shall be amended
from time to time.
"Change of Control" has the meaning specified in Section
6.04(c).
"Charges" shall mean all costs to be reimbursed to Nortel by
the Company pursuant to the Loaned Employee Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
Any reference to a section of the Code shall include a reference to any
amendatory or successor provision thereto.
"Commencement Date" has the meaning specified in Section
7.04(a).
"Company Benefit Plans" means those Benefit Plans in effect as
of the date hereof and those Benefit Plans as established, terminated or
modified pursuant to Section 3.03(s).
"Company Products" means, collectively, the BTD Products and
the Cornerstone Products.
"Company Revenue" means the gross amount invoiced by the
Company to customers (including, without limitation, Nortel, Antec and their
respective Affiliates) for (i) shipments of BTD Products and (ii) services
relating to the BTD line of business.
"Compensation" means remuneration, whether in cash or in kind,
including but not limited to, base salary, hourly wage, bonus, commission,
profit sharing or other incentive payment or allowance, which is paid
substantially concurrently with an employee's performance of services.
"Competitor" means a significant competitor of a Member or any
of its Affiliates in one or more of its principal lines of business, which for
these purposes means a line of business accounting for more than 10% of such
Member's gross revenues.
"Cornerstone List of Products" has the meaning specified in
the Second Framework Agreement.
"Cornerstone Plan of Record" has the meaning specified in the
Second Framework Agreement.
"Cornerstone Products" means those products identified in the
Cornerstone List of Products and the Cornerstone Plan of Record, as well as
improvements and enhancements of such products as well as new and substitute
products which perform substantially the same functions as such products, that
are developed by the Company to provide narrowband and broadband services over a
Hybrid Fiber Coaxial Cable Network.
4
<PAGE> 8
"Distribution Agreements" means (i) the distribution agreement
dated November 17, 1995 between Antec and the Company, as amended, (ii) the
distribution agreement dated March 31, 1999, between NTI and the Company, and
(iii) the international distribution agreement executed March 6, 1998, as
amended of even date herewith, between NTI and the Company.
"Earnout Auditor" has the meaning set forth in Section
2.05(g).
"Earnout Calculation Date" means the date on which the Earnout
Report is first delivered by the Earnout Auditor to the Company and to each of
the Members.
"Earnout Date" means June 30, 2000.
"Earnout Share Agreement" means the Earnout Share Agreement
between the Members dated of even date herewith.
"Earnout Event" means that Earnout Revenue exceeds $180
million.
"Earnout Report" has the meaning set forth in Section 2.05(g).
"Earnout Revenue" means the amount equal to the greater of (a)
the aggregate End User Revenue booked, during the period from January 1, 1999 to
and including the Earnout Date, by any Person making sales to which End User
Revenue is attributable, and (b) Company Revenue booked, during the same period,
by the Company; provided, however, that the Earnout Revenue for the period from
April 1, 2000 to and including the Earnout Date shall be adjusted for the effect
of any abnormal activities by the Company, the Members or their respective
Affiliates that reasonably appear to be intended to manipulate the timing of
revenue.
"End User Revenue" means the gross revenue attributable to
sales of BTD Products and services relating thereto, in each case made by any of
the Company, the Members and their respective Affiliates, during the period from
January 1, 1999 to and including the Earnout Date, to any customer that is not
an Affiliate of the Company or any Member.
"Employee" means any Legacy Employee, Hired Employee or other
employee of the Company or any of its subsidiaries.
"End of Committed Funding" means the time as of which the
aggregate principal amount of the Additional Loans made to the Company after the
date hereof (other than any such Additional Loans deemed made by reason of
accrual of unpaid interest and/or royalties) first reaches $40 million.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"Event of Dissolution" has the meaning specified in Section
6.02.
"Fair Market Price" has the meaning set forth in Section
6.04(c).
"Fair Market Value" means (i) for all times from and after the
date hereof and until the End of Committed Funding, the Implied Company Value,
or (ii) for all times after the End of Committed Funding, the fair market value
of the Company and its subsidiaries (as agreed by the Members within 30 days of
the giving of the Notice referred to in Section 6.04(b)(ii) or, failing such
agreement, as determined by a nationally recognized investment banking firm
selected by the Non-Affected Member or by mutual agreement of the Members in
accordance with the provisions of this Agreement).
"Fiscal Quarters" has the meaning specified in Section 4.03.
"Fiscal Year" has the meaning specified in Section 4.03.
"Formation Date" means the date that the Company is formed, as
specified in Section 1.05.
"GAAP" has the meaning specified in Section 4.01.
"Hire Date" means the date on which a Hired Employee commences
employment with the Company. In no event shall a Hired Employee's Hire Date
precede the Commencement Date.
"Hired Employee" means a Prospective Employee who accepts an
offer of employment made by or on behalf of the Company in accordance with
Section 7.04 and commences employment with the Company pursuant to this
Agreement.
"Implied Company Value" means the value of equity of the
Company as determined by an investment banking firm in accordance with Section
6.04(c), provided that such determination shall be made in accordance with the
requirements of Sections 6.04(c)(I) and (II), and not in accordance with the
requirements of Sections 6.04(c)(III) or (IV), provided further that in no case
shall the determined value of the equity of the Company be less than $533
million or greater than $800 million.
"Indemnitee" has the meaning specified in Section 3.07(a).
"Intellectual Property Rights" means trademarks, service
marks, brand names, certification marks, trade dress, assumed names, trade names
and other indications of origin, the
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goodwill associated with the foregoing and registrations of, and applications to
register, the foregoing; inventions, discoveries and ideas, whether patentable
or not; patents and applications for patents; non-public information, trade
secrets and confidential information and rights to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not;
copyrights; mask works; registrations or applications for registration of
copyrights or mask work rights, and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any claims or causes of
action arising out of or related to any infringement or misappropriation of any
of the foregoing; in each case in any jurisdiction.
"Interest" means, in the case of Nortel, Nortel's 81.25%
interest in the Company or any other percentage interest in the Company held by
Nortel as a result of either a Transfer of a portion of its percentage interest
pursuant to Section 2.05(c) or an adjustment of its percentage interest made
pursuant to Section 2.05(d), (e) or (g) and, in the case of Antec, Antec's
18.75% interest in the Company or any other percentage interest in the Company
held by Antec as a result of an adjustment of its percentage interest made
pursuant to Section 2.05(d), (e) or (g) .
"Legacy Employee" means any employee of the Company as of the
date hereof.
"Liquidating Member" has the meaning specified in Section
6.05(a).
"Loaned Employee Agreement" has the meaning specified in
Section 7.02.
"Loaned Employees" has the meaning specified in Section 7.02.
"Members Committee" has the meaning specified in Section
3.01(a).
"Net Profits" and "Net Losses" mean the taxable income or
loss, as the case may be, for a period (or from a transaction) as determined in
accordance with Code Section 703(a) computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be
computed based upon the Carrying Values of the Company's assets rather than upon
the assets' adjusted bases for federal income tax purposes, and, in particular,
the amount of any deductions for depreciation or amortization with respect to an
asset for a period shall equal such asset's Carrying Value multiplied by a
fraction the numerator of which shall be the amount of depreciation or
amortization with respect to such asset allowable for federal income tax
purposes for such period and the denominator of which shall be such asset's
adjusted basis;
(ii) Any tax-exempt income received by the Company
shall be included as an item of gross income;
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(iii) The amount of any adjustments to the Carrying
Values of any assets of the Company pursuant to Code Section 743 shall not be
taken into account;
(iv) Any expenditure of the Company described in
Code Section 705(a)(2)(B) (including any expenditures treated as being described
in Section 705(a)(2)(B) pursuant to Treasury Regulations under Code Section
704(b) shall be treated as a deductible expense; and
(v) The amount of gross income specially allocated
to any Members pursuant to Section 2.04(d), (e), (f) or (g) shall not be
included in the computation.
"Non-Affected Member" has the meaning specified in Section
6.04(a).
"Nortel Indemnitees" shall, solely for the purposes of Article
VII hereof, mean NTI and any of its Affiliates and their respective officers,
directors, agents and employees.
"Notices" has the meaning specified in Section 8.01.
"Officers" has the meaning specified in Section 3.02(c).
"NTI" means Northern Telecom Inc.
"Optional Indemnitee" has the meaning specified in Section
3.07(b).
"Original Asset Contribution Agreement" means the Asset Sale
and Contribution Agreement between NTI, Antec and the Company, dated as of
November 1, 1995, relating to the initial contributions to the Company.
"Other Officers" has the meaning specified in Section 3.02(c).
"Person" means an individual, corporation, association,
limited liability company, limited liability partnership, partnership, estate,
trust, unincorporated organization or a government or any agency or political
subdivision thereof.
"President" has the meaning specified in Section 3.02(a).
"Property" means any property, real or personal, tangible or
intangible, including Intellectual Property Rights, money and any legal or
equitable interest in such property, but excluding services and promises to
perform services in the future.
"Prospective Employees" has the meaning specified in Section
7.03.
"Representatives" has the meaning specified in Section
3.01(a).
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"Second Framework Agreement" has the meaning specified in the
recitals hereto.
"Securities" has the meaning specified in Section 3.04(c).
"Senior Employee" means the president of a subsidiary of the
Company, any Employee who reports directly to the President of the Company or to
the president of any subsidiary, or any Employee whose annual total targeted
Compensation is greater than $200,000.
"Termination Date" has the meaning specified in Section 7.03.
"Transfer", with respect to any asset, means any direct or
indirect sale, assignment, gift or other disposition or the creation of any
lien, pledge, mortgage, security interest or other encumbrance, whether
voluntary or by operation of law, by sale of stock or partnership interests or
otherwise, or of any entity which directly or indirectly through one or more
intermediaries holds such asset.
"Transferring Member" has the meaning specified in Section
2.05(b).
"Treasury Regulations" means the regulations promulgated by
the U.S. Department of the Treasury under the Code.
"Triggering Events" has the meaning specified in Section
6.04(a).
"United States" means the United States of America, its
commonwealth and territories, excluding Puerto Rico and the U.S. Virgin Islands.
"Vice President-Finance" has the meaning specified in Section
3.02(b).
Section 1.02. Name. The name of the Company shall be "Arris
Interactive L.L.C."
Section 1.03. Principal Place of Business. The Company's
principal place of business shall be Atlanta, Georgia, or such other place as
the Members Committee shall determine from time to time.
Section 1.04. Purposes. The purposes of the Company shall be
to conduct any lawful business, purpose or activity within the Business Scope.
The activities of the Company in regard to Company Products shall be limited to
the development, manufacture, and distribution and sale thereof through the
Members (and, subject to certain distribution agreements to which the Company is
a party, distribution and sale directly or through other parties) directly or
through other parties. All risks and rewards relating to the Company's business,
purpose and activity within the Business Scope shall be for the account of the
Company only. The Company shall
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have the power to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of
such purpose, and for the protection and benefit of its business.
Section 1.05. Duration. The Company was formed on November 9,
1995, upon the filing of a Certificate with the Office of the Secretary of State
of Delaware pursuant to the Act (the "Formation Date") and shall continue until
dissolved pursuant to Article VI.
Section 1.06. Limitation of Liability. The liability of each
Member and each Employee of the Company to third parties for obligations of the
Company shall be limited to the fullest extent provided in the Act and other
applicable law.
ARTICLE II
CAPITAL CONTRIBUTIONS; WITHDRAWAL OF CAPITAL;
LIMITATIONS ON DISTRIBUTIONS; CAPITAL ACCOUNTS;
ALLOCATIONS; RESTRICTIONS ON TRANSFER; ADDITIONAL FUNDING
Section 2.01. Capital Contributions. (a) Prior to the date
hereof, each Member has made the initial Capital Contributions required to be
made by it on the Formation Date under the Original LLC Agreement.
(b) Contemporaneously herewith, Nortel has made a Capital
Contribution of certain assets to the Company pursuant to the BTD Asset
Contribution Agreement. The Carrying Values of the assets contributed to the
Company pursuant to the BTD Asset Contribution Agreement is $133,333,333.
(c) The Company shall not, except as specified in the BTD
Asset Contribution Agreement and the Original Asset Contribution Agreement,
assume any liabilities, obligations or promises relating to any Property
contributed by a Member as part of such Member's Capital Contribution made prior
to or as of the date hereof. Each Member shall hold the Company harmless from
any cost, loss, liability or expense paid or incurred by the Company as a result
of any liability, obligation or promise for which the Company becomes liable as
a result of its ownership of the Property contributed by such Member, except for
any such costs, losses, liabilities or expenses that arise as a result of the
use of such Property by the Company subsequent to its receipt thereof.
(d) In addition to the initial Capital Contributions made by
each Member on the Formation Date and the Capital Contributions described in
Section 2.01(b), the Members shall make additional Capital Contributions at such
times and in such amounts as may be determined by mutual agreement of the
Members, unless (and to the extent) permitted by the provisions of Sections
2.05(d) or 2.05(e) or otherwise expressly provided elsewhere herein.
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Section 2.02. Withdrawal of Capital; Limitation on
Distributions. No Member shall be entitled to withdraw any part of its Capital
Contributions to, or to receive any distributions from, the Company except as
provided in Section 5.01 and Section 6.05. No Member shall be entitled to demand
or receive (a) interest on its Capital Contributions or (b) any Property from
the Company other than cash except as provided in Section 6.05(a). Without
limiting the foregoing, and except as may be otherwise expressly provided in
this Agreement, no Member shall be entitled to receive, pursuant to Section
18-604 of the Act or otherwise, any payment or other distribution in connection
with such Member's resignation or other withdrawal from the Company; provided,
however, that the provisions of this sentence shall not be construed to grant
any Member any right to resign or otherwise withdraw from the Company except as
may be expressly provided otherwise elsewhere in this Agreement.
Section 2.03. Capital Accounts. (a) The Company shall
maintain a capital account for each Member (a "Capital Account"). Each Member's
Capital Account shall be increased by:
(i) the amount of any money contributed by the
Member to the Company;
(ii) the fair market value of any Property (other
than money) contributed by the Member to the Company;
(iii) the amount of Net Profits allocated to the
Member; and
(iv) the amount of any Company liabilities assumed
or paid by the Member (or, the amount of any Company liabilities the distributed
Property is subject to if Property is distributed to the Member by the Company);
and shall be decreased by:
(v) the amount of any money distributed to the
Member by the Company;
(vi) the fair market value of any Property (other
than money) distributed to the Member by the Company;
(vii) the amount of Net Losses allocated to the
Member; and
(viii) the amount of any Member liabilities assumed
or paid by the Company (or, the amount of any Member liabilities contributed
Property is subject to if Property is contributed to the Company by the Member).
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The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treasury
Regulations under section 704(b) of the Code and, to the extent not inconsistent
with the provisions of this Agreement, shall be interpreted and applied in a
manner consistent with such Regulations.
(b) The Capital Accounts of the Members as of March 31, 1999,
after such Capital Accounts have been adjusted in accordance with Section
2.04(h) of this Agreement and Treasury Regulations Section 1.704-1(b)(2)(iv)(f)
and the BTD Asset Contribution Agreement are as follows:
Nortel $433,333,333
Antec $100,000,000
Section 2.04. Allocation of Net Profits and Net Losses.
(a) Subject to Sections 2.04(d), (e), (f) and (g), which shall be applied first,
Net Profits shall be allocated:
(i) first, to any Members with negative Capital
Account balances, in proportion to such negative balances until such Capital
Accounts equal zero;
(ii) second, to Nortel or Antec, as the case may
be, until the Members' Capital Accounts are in the ratio of the Members'
Interests in the Company; and
(iii) the balance, if any, between the Members in
proportion to their Interests in the Company.
(b) Subject to Sections 2.04(d), (e), (f) and (g), which shall
be applied first, Net Losses shall be allocated:
(i) first, to any Members with positive Capital
Account balances, in proportion to such positive balances until such Capital
Accounts equal zero;
(ii) the balance, if any, between the Members in
proportion to their Interests in the Company.
(c) For purposes of making the allocations in Sections 2.04(a)
and (b) above, each Member's Capital Account shall be increased by their share
of minimum gain and partner nonrecourse debt minimum gain (determined pursuant
to Treasury Regulations sections 1.704-2(g) and 1.704-2(i)(5)).
(d) In order to comply with the "alternate test for economic
effect" set out in the Treasury Regulations and to ensure that the allocations
set forth in Sections 2.04(a) and (b) are respected for federal income tax
purposes, notwithstanding Sections 2.04(a) and (b) if any Member unexpectedly
receives any adjustments, allocations, or distributions described in
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Treasury Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be specially allocated to such Member in an amount
and manner sufficient to eliminate as quickly as possible any deficit balance in
its Capital Account (as computed in accordance with the rules of Treasury
Regulation 1.704-1(b)(2)(ii)(c) and (d)(3)) created by such adjustments,
allocations or distributions. Any special allocations of items of income or gain
pursuant to this Section 2.04(d) shall be taken into account in computing
subsequent allocations pursuant to this Section 2.04 so that the net amount of
any item so allocated and all other items allocated to each Member pursuant to
this Section 2.04 shall, to the extent possible, equal the net amount that would
have been allocated to each such Member pursuant to the provisions of this
Section 2.04 if such unexpected adjustments, allocations or distributions had
not occurred.
(e) In order to comply with certain Treasury Regulations and
permit the Members to be allocated losses, deductions and expenditures
attributable to a loan by the Company from a party that is not a Member (under
circumstances in which no Member bears economic risk of loss for such loan),
notwithstanding Sections 2.04(a) and (b), any income or gain in an amount equal
to a decrease in "partnership minimum gain" of the Company shall be allocated to
the Members that were allocated nonrecourse deductions or received distributions
of proceeds attributable to "nonrecourse liabilities" of the Company in
accordance with the "minimum gain chargeback" provisions of section 1.704-2 of
the Treasury Regulations. The terms used in the preceding sentence shall have
the meanings set forth in section 1.704-2 of the Treasury Regulations. Any
special allocations of items of income or gain pursuant to this Section 2.04(e)
shall be taken into account in computing subsequent allocations pursuant to this
Section 2.04 so that the net amount of any item so allocated and all other items
allocated to each Member pursuant to this Section 2.04 shall, to the extent
possible, be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this Section 2.04 if the allocations under
this Section 2.04(e) had not been made.
(f) In order to comply with certain Treasury Regulations,
notwithstanding Sections 2.04(a) and (b), any "partner nonrecourse deductions"
for any Fiscal Year or other period shall be specially allocated to the Member
who bears the economic risk of loss with respect to the "partner nonrecourse
debt" to which such partner nonrecourse deductions are attributable in
accordance with Treasury Regulations section 1.704-2(i). In addition, in order
to comply with certain Treasury Regulations, notwithstanding Sections 2.04(a)
and (b), any income or gain in an amount equal to a decrease in "partner
nonrecourse debt minimum gain" of the Company shall be allocated to the Members
that were allocated partner nonrecourse deductions or received distributions of
proceeds attributable to "partner nonrecourse debt" of the Company in accordance
with the "minimum gain chargeback" provisions of section 1.704-2 of the Treasury
Regulations. The terms in quotation marks in this Section 2.04(f) shall have the
meanings set forth in section 1.704-2 of the Treasury Regulations. Any special
allocations of items of income or gain pursuant to this Section 2.04(f) shall be
taken into account in computing subsequent allocations pursuant to this Section
2.04 so that the net amount of any items allocated and all other items allocated
to each Member pursuant to this Section 2.04 shall, to the extent possible,
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be equal to the net amount that would have been allocated to each such Member
pursuant to the provisions of this Section 2.04 if the allocations under this
Section 2.04(f) had not been made.
(g) If after allocating any (realized or unrealized) Net
Profits or Net Losses of the Company in the year of liquidation, the Member's
Capital Accounts are not in the ratio of their Interests in the Company, to the
extent available, gross income or deductions shall be allocated to and among the
Members such that their Capital Accounts are in the ratio of their Interests in
the Company.
(h) The Capital Accounts of the Members may be adjusted in
accordance with Treasury Regulations section 1.704-1(b)(2)(iv)(f) to reflect the
gross fair market value of the Company's property as determined by the Members,
as of the following times: (i) the admission of a new Member to the Company or
acquisition of an additional interest in the Company by an existing Member from
the Company; (ii) the distribution by the Company of Property to a retiring or
continuing Member in consideration for the retirement of all or a portion of
such Member's Interest; (iii) the termination of the Company for federal income
tax purposes pursuant to section 708(b)(1)(B) of the Code; and (iv) such other
times as determined by the Members.
(i) For federal, state and local income tax purposes, items of
income, gain, loss and deduction shall be allocated to the Members in accordance
with the allocations of the corresponding items for Capital Account purposes
under this Section 2.04, except that items with respect to which there is a
difference between tax and book basis (including, for example, contributed
Property that had appreciated prior to its contribution to the Company) will be
allocated in accordance with section 704(c) of the Code, the Treasury
Regulations thereunder and Treasury Regulations sections 1.704-1(b)(4)(i) and
1.704-3.
Section 2.05. Restrictions on Transfers; Changes in Interest.
(a) Neither Member may Transfer any Interest except in
accordance with this Section 2.05, and any Transfer or attempted Transfer of a
Member's Interest in contravention of the provisions of this Section 2.05 shall
be null and void ab initio.
(b) A Member (the "Transferring Member") may Transfer all but
not less than all of its Interest to (i) the other Member for a price and on
terms and other conditions mutually agreeable to the Members or (ii) upon 30
days Notice to the other Member, to a wholly owned Affiliate of such
Transferring Member, provided that, (A) prior to such Transfer, such Affiliate
enters into a counterpart of this Agreement, (B) such Affiliate is sufficiently
solvent to fulfill its commitments under this Agreement, (C) such Affiliate is
not a Competitor of the other Member or any of its Affiliates or, in the case of
Antec, Keptel, Inc., and (D) the Transferring Member guarantees the obligations
of such Affiliate under this Agreement. Each Transferring Member shall ensure
that before any wholly owned Affiliate to which it has Transferred its Interest
under this Section 2.05(b) shall cease to be a wholly owned Affiliate, it shall
cause such Affiliate to
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Transfer such Interest back to the original Member or to another wholly owned
Affiliate, subject to the conditions in this Section 2.05(b).
(c) In addition, Nortel may Transfer a portion of its Interest
to any Person for a price and on terms and other conditions mutually agreeable
to Nortel and such Person, provided that, (i) Nortel and its Affiliates shall
collectively retain at least a majority interest in the Company, (ii) prior to
such Transfer, such Person enters into a counterpart of this Agreement, and
(iii) such Person is not a Competitor of Antec.
(d) If, with respect to any Additional Loan, Antec has elected
not to purchase a Mandatory Participating Interest (as defined in the Arris Loan
Agreement) therein, Nortel shall, subject to Section 2.05(f), have the option,
in its sole discretion, to (A) increase its Capital Contribution by contributing
to the Company the amount of the Mandatory Participating Interest in connection
with such Additional Loan, and after such contribution has been made, Nortel's
and Antec's Interest shall be adjusted based upon the then current Fair Market
Price determined in accordance with Section 6.04, and/or (B) exercise its rights
under Section 6.04(a)(y).
(e) If, with respect to any Additional Loan, Nortel has
elected not to make the Additional Loan then requested, Antec shall, subject to
Section 2.05(f), have the option, in its sole discretion, to (A) increase its
Capital Contribution by contributing to the Company 100% the principal amount of
such Additional Loan, and after such contribution has been made, Nortel's and
Antec's Interest shall be adjusted based upon the then current Fair Market Price
determined in accordance with Section 6.04, and/or (B) exercise its rights under
Section 6.04(a)(y).
(f) If the Fair Market Price is a negative amount, then the
Member which has elected not to make an Additional Loan or to purchase a
Mandatory Participating Interest, as the case may be, shall have the right to
reverse its election within 10 days of the date of the determination of such
Fair Market Price.
(g) As promptly as reasonably practicable after the Earnout
Date (but in any event not later than 30 days thereafter), the Company and the
Members shall cause the firm of independent certified public accountants then
serving as the Company's auditors (the "Earnout Auditor") to commence an audit
of the Earnout Revenue. Not later than 30 days after the commencement of such
audit of the Earnout Revenue, the Earnout Auditor shall be required to deliver
to the Company and the Members a report of such audit (the "Earnout Report"),
setting forth (1) the Earnout Auditor's determination of the Earnout Revenue
(which determination shall, subject to Section 2.05(h) below, be final and
binding on the Company and the Members) and (2) such explanatory and supporting
materials and documentation as may be reasonably necessary to substantiate such
determination of the Earnout Revenue and explain calculation thereof in
reasonable detail. If the Earnout Report indicates that an Earnout Event has
occurred then, effective as of the Earnout Date, Nortel's Interest shall be
recalculated so as to equal the sum of (A) Nortel's Interest in effect as of the
Earnout Date without giving effect to the provisions of this Section 2.05(g),
and (B) the lesser of (I) 6.25% or (II) the product of (x) 6.25% and (y) a
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fraction, the numerator of which is equal to the excess of Earnout Revenue over
$180 million, and the denominator of which is equal to $120 million; and Antec's
Interest shall equal 100% minus Nortel's Interest as so recalculated. Further,
if the Earnout Report indicates that an Earnout Event has occurred, then Nortel
shall have the right, exercisable by notice given to Antec and to the Company
not later than 30 days after the Earnout Calculation Date, to elect, in Nortel's
sole discretion, to require Antec to purchase the incremental increase in its
Interest in the Company in exchange for Antec Common Stock, as further set forth
in the Earnout Share Agreement. In the event Nortel exercises its rights to
require Antec to purchase the incremental increase in Nortel's Interest as set
forth in the preceding sentence, then, effective as of the Earnout Date, the
Interests of the Members shall, by virtue of such purchase, be in the same
percentages as if the adjustment pursuant to the formula in this Section 2.05(g)
had not occurred.
(h) Within 10 days of delivery of the Earnout Report, either
Member (a "Contesting Member") may request in writing that the other Member (the
"Responding Member") provide a written explanation of any abnormal activities on
the part of the Responding Member intended, in the reasonable opinion of the
Contesting Member, to manipulate the timing of End User Revenue for the period
from April 1, 2000 to and including the Earnout Date, describing in reasonable
detail any such alleged abnormal activities explanation of which is being
requested thereby. Within 15 days of receipt of such request, the Responding
Member shall deliver to the Contesting Member an explanation of such alleged
abnormal activities. If the Contesting Member is not reasonably satisfied with
the explanation, then the President of NTI's Carrier Packet Solutions line of
business and the Chief Executive Officer of Antec shall attempt to resolve such
matter by mutual consent during the following 60-day period. Notwithstanding the
foregoing, nothing in this Section 2.05(h) shall affect the right of Nortel to
exercise its rights pursuant to Section 2.05(g) within 30 days after receipt of
the Earnout Report, and nothing in this Section 2.05(h) shall modify the
obligations of Antec under the Earnout Agreement. If the resolution of the
allegation under this Section 2.05(h) results in a variance from the Earnout
Report, the parties shall on a good faith basis adjust either Nortel's Interest
or the earnout paid under the Earnout Agreement, as appropriate, accordingly.
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ARTICLE III
MANAGEMENT
Section 3.01. Members Committee. (a) Number; Qualification for Office.
The Company shall be member-managed and shall not have "managers" within the
meaning of the Act. The management of the Company's business shall be vested in
the Members, who shall exercise such management authority through a committee
(the "Members Committee"), which shall consist, as of the date hereof, of the
individuals named on Exhibit A hereto (the "Representatives"), who shall act as
representatives of their appointing Members. Nortel shall have the right to
appoint five Representatives, Antec shall have the right to appoint two
Representatives, and each Representative shall serve as such until such
Representative's death, incapacity or resignation or until removed or replaced
by such Representative's appointing Member. Each Member shall retain the right
to replace its appointed Representatives at any time and in its sole discretion.
Each Representative shall be a natural person. Exhibit A hereto shall be amended
upon any change in the composition of the Members Committee.
(b) Representatives as Agents for Members. The Members hereby
expressly acknowledge and agree that (i) each Representative is serving
hereunder solely as, and shall act in all respects hereunder solely in the
capacity of, an agent of the Member appointing such Representative, and (ii) no
Representative in his capacity as such shall have any fiduciary or other similar
duties or obligations to any other person or entity (other than the Member
appointing such Representative) by virtue of the Members' execution or
performance of the terms of this Agreement or such Representative's actions in
his capacity as such (or, if complete elimination of such duties and obligations
is deemed to be not permissible under the Act, then such duties and obligations
shall be reduced to the maximum extent permissible); provided, however, that the
provisions of this sentence shall have no effect on the terms of any
relationship, agreement or arrangement between any Representative and the Member
appointing such Representative. Without limiting the foregoing, no
Representative shall have any liability to the Company or to any Member (other
than the Member appointing such Representative) for any loss suffered by the
Company or any such Member which arises out of any action or inaction of such
Representative if (i) such Representative determined in good faith that such
action or inaction was in, or was not opposed to, the best interests of the
Company, or (ii) such Representative undertook such action or inaction pursuant
to instructions of the Member appointing such Representative.
(c) Quorum; Powers. At least four Representatives, at least
three of whom must be appointed by Nortel, at any time shall constitute a quorum
of the Members Committee. Any Representative may give a power-of-attorney to any
natural person to represent him at any regular or special meeting. Except as
specified in Section 3.04, the Representatives shall act by the affirmative vote
of at least four Representatives, at least three of whom must be appointed by
Nortel, at any regular or special meeting of the Members Committee at which a
quorum is present. The Representatives shall have the right and authority to
take all actions which the Representatives deem necessary, useful or appropriate
for the day-to-day management and
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conduct of the Company's business. All instruments, contracts, agreements and
documents of whatsoever type executed on behalf of the Company shall be executed
in the name of the Company by one or more Representatives on behalf of the
Members Committee or officers of the Company; provided, that each of the Members
agrees that it shall not, and shall not permit any of its Representatives to,
take any action in the name or on behalf of the Company except in accordance
with a validly adopted resolution of the Members Committee. Without limiting the
generality of the foregoing, except as otherwise provided herein, the
Representatives shall have full power and authority:
(i) to engage independent agents, attorneys,
accountants and custodians as the Representatives deem necessary or advisable
for the affairs of the Company;
(ii) to open, maintain and close accounts,
including margin accounts, with brokers and banks, to pay the customary fees and
charges applicable to transactions in those accounts, and to draw checks and
other orders for the payment of money by the Company;
(iii) to file, on behalf of the Company, all
required local, state and federal tax and other returns relating to the Company;
(iv) to cause the Company to purchase or bear the
cost of any insurance covering the potential liabilities of the Representatives
and any officer, associate, Employee or agent of the Company arising out of
their actions on behalf of the Company or of an entity in which the Company has
an investment or of which the Company is a creditor;
(v) to commence or defend litigation or submit to
arbitration any claim or cause of action that pertains to the Company or any
Company assets;
(vi) to enter into, make and perform contracts,
agreements and other undertakings, and to do that which is advisable for, or as
may be incidental to, the conduct of the business of the Company, including,
without limiting the generality of the foregoing, contracts, agreements,
undertakings and transactions with any Member or with any other person, firm or
corporation having any business, financial or other relationship with any Member
or Members;
(vii) to execute on behalf of the Company all
instruments and documents, including, without limitation, checks, drafts, notes
and other negotiable instruments, mortgages or deeds of trust, security
agreements, financing statements, documents providing for the acquisition,
mortgage or disposition of the Company's property, assignments, bills of sale,
leases, partnership agreements, and any other instruments or documents necessary
or appropriate, in the opinion of the Representatives, to the business of the
Company;
(viii) to borrow money on behalf of the Company;
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(ix) to formulate and implement the Company's
client and engagement acceptance procedures;
(x) to do and perform all other acts as may be
necessary or appropriate to the conduct of the Company's business; and
(xi) to delegate the power and authority to take
any of the foregoing actions to any of the Representatives or Officers of the
Company, subject to Sections 3.03 and 3.04.
(d) Meetings. The Members Committee shall hold regular
meetings not less than four times per year at times to be determined by the
Members Committee for the purpose of transacting any business, provided a quorum
is present. Special meetings of the Members Committee may be called by any
Representative, the President or the Vice President-Finance. Meetings of the
Members Committee may be held at the principal office of the Company, or at such
reasonable time and place as shall be designated in the notice of such meeting.
Notice of any special meeting, and, except as the Representatives may otherwise
determine by resolution, notice of any regular meeting, shall be mailed to each
Representative at least five days before the day on which the meeting is to be
held, or if sent by telecopy, or delivered personally or by telephone, not later
than two days before the day on which the meeting is to be held. Any business
may be transacted and any Company action may be taken at any regular or special
meeting of the Members Committee at which a quorum shall be present, whether
such business or proposed action is stated in the notice of such meeting or not.
(e) Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Members Committee may be taken by
written consent of such number of Representatives as would be necessary to
authorize or take such action at a duly convened meeting of the Members
Committee, with the written consent filed with the minutes of the proceedings of
the Members Committee.
(f) Meetings Through Use of Communications Equipment.
Any meeting of the Members Committee, or any subcommittee of the Members
Committee, may, except as otherwise provided by law, the Certificate or this
Agreement, be conducted by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and the participation by any person in any such
meeting by such means shall constitute presence in person at the meeting.
(g) Subcommittees. The Members Committee acting in
accordance with the provisions of this Section 3.01 may establish one or more
subcommittees of the Members Committee composed of one or more Representatives,
and may delegate such power and authority of the Members Committee to such
subcommittees as may be authorized by the resolution of the Members Committee,
provided that no matter listing in Section 3.04 may be acted upon by any such
subcommittee unless the resolution of the Members Committee
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establishing such subcommittee (i) grants such subcommittee the power and
authority to do so, and (ii) is adopted by at least such number of
Representatives as would be necessary to take action with respect to such matter
at a duly convened meeting of the Members Committee.
(h) Observers. Each Member shall have the right to
appoint one observer, and each observer shall serve until his death, incapacity
or resignation or until he is removed or replaced by the Member which appointed
him. Observers shall have the right to attend all meetings of the Members
Committee and of any subcommittee thereof, shall be provided with timely notice
of meetings pursuant to Section 3.01(d) and shall be provided with copies of
materials provided to the Representatives in connection with such meetings.
Section 3.02 Officers.
(a) President. The president of the Company (the
"President") shall initially be appointed by Nortel. Each President shall be
appointed for an initial term of two years and may be reappointed. Nortel shall
have the right, after consultation with Antec (provided that such consultation
shall not be required if Antec's Interest is reduced below the lower of (i) 20%
and (ii) Antec's Interest as of immediately after the effectiveness of this
Agreement as it may be adjusted by operation of Section 2.05(g) (such lower
percentage, the "Officer Threshold")), to dismiss any incumbent President and
appoint any successor or replacement President.
(b) Vice President-Finance. The Vice President-Finance
of the Company (the "Vice President-Finance") shall initially be appointed by
Nortel. Each Vice President-Finance shall be appointed for an initial term of
two years and may be reappointed. So long as any amount is outstanding under the
Arris Loan Agreement, Nortel shall have the right, after consultation with Antec
(provided that such consultation shall not be required if Antec's Interest is
reduced below the Officer Threshold), to dismiss any incumbent Vice
President-Finance and appoint any successor or replacement Vice
President-Finance and, thereafter, provided (1) Antec's Interest has not been
reduced below the Officer Threshold and (2) no amount is outstanding under the
Arris Loan Agreement, Antec shall have the right, after consultation with
Nortel, to dismiss any incumbent Vice President-Finance and appoint any
successor or replacement Vice President-Finance.
(c) Other Officers. The Representatives may, from time
to time, designate one or more persons to be officers of the Company other than
the President or the Vice President-Finance ("Other Officers"; the President,
the Vice President-Finance and the Other Officers, collectively, the
"Officers"). Any Other Officer so designated shall have such authority and
perform such duties as the Representatives may, from time to time, delegate to
them.
(d) Duties. The Members Committee may assign titles to
particular officers. Unless the Representatives decide otherwise, if the title
is one commonly used for officers of a business corporation formed under the
General Corporation Law of the State of Delaware, the assignment of such title
shall constitute the delegation to such Officer of the authority and duties
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that are normally associated with that office, subject to any restrictions on
such authority imposed by the Representatives, the Act, the Certificate or this
Agreement. Any number of offices may be held by the same person. No Officer need
be a resident of the State of Delaware, a Member or a Representative. Any
Officer may (but need not) be an employee of the Company, but no Officer other
than the President and Vice President-Finance shall, unless the Members
Committee determines otherwise, be required to devote substantially all of his
professional time and attention to the business and affairs of the Company.
(e) Resignation and Removal. Each Officer shall hold
office until his successor shall be duly designated and qualified or until his
death or until he shall resign or shall have been removed in the manner herein
provided. Any Officer may resign as such at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Members Committee. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation. Subject to Sections 3.02(a) and (b),
any Officer may be removed as such, either with or without cause, by the Members
Committee whenever in their judgment the best interests of the Company will be
served thereby. Any vacancy occurring in the office of any Other Officer may be
filled by the Members Committee.
Section 3.03. Matters Requiring the Approval of a Majority of
the Members Committee. Notwithstanding anything to the contrary contained in the
Act or this Agreement (except as specifically provided in Section 3.04), the
approval of the Members Committee given in accordance with Section 3.01 shall be
required to approve or disapprove any of the following, in each case unless any
such matter is specifically provided for in an approved Budget:
(a) the declaration of any annual or interim
distribution of the Company;
(b) the appointment, suspension or removal of any Senior
Employee (other than the President and the Vice President-Finance);
(c) the establishment of, or any material variation to,
the terms of employment (including severance and other Compensation) of any
Senior Employee;
(d) the adoption or alteration of the Budget and any
other operating budget or capital expenditure plan of the Company or any
subsidiary (provided, however, that the Budget for the period from the date
hereof to and including the Earnout Date, attached hereto as Exhibits B-1 and
B-2 and Attachment B-3, shall constitute the approved Budget for such period,
and shall require no further approval or other action of the Members Committee
except as the Members shall otherwise agree);
(e) any borrowing of the Company or any subsidiary (i)
under the Arris Loan Agreement in an amount in excess of the amount provided for
in an approved Budget (ii) during the term of the Arris Loan Agreement, any
borrowing of any amount from any third party and
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(iii) thereafter, any borrowing from any lender of an amount in excess of that
provided for in an approved Budget
(f) the extension of credit by the Company or any subsidiary
to any Person, other than extensions of credit to purchasers of goods or
services from the Company or any subsidiary pursuant to agreements providing for
payment by the purchaser on standard and usual terms and conditions, as the
Members Committee may determine from time to time;
(g) the acquisition or Transfer by the Company or any
subsidiary of the Securities of any other Person, including any subsidiary of
the Company, but excluding the acquisition or Transfer of Securities in the
ordinary course of treasury management;
(h) the acquisition or Transfer by the Company or any
subsidiary of any (i) capital assets exceeding the estimated aggregate purchase
price or aggregate realizable value, if any, set forth in an approved Budget for
such real property or capital asset by 10% or more or exceeding a purchase price
or realizable value of $250,000 for any individual item or (ii) real property
(of whatever purchase price or realizable value and whether or not provided for
in an approved Budget);
(i) the entry into or termination, amendment or modification
of any agreement for the purchase of goods or services by the Company or any
subsidiary which (i) involves payments of more than $500,000 in any Fiscal Year,
(ii) involves a commitment exceeding one calendar year or (iii) is on any
non-standard or unusual terms and conditions, as the Members Committee may
determine from time to time;
(j) the entry into or termination, amendment or modification
of any agreement for the sale of goods or services by the Company or any
subsidiary which (i) involves payments of more than $2.5 million in any Fiscal
Year, (ii) involves a commitment of the Company exceeding three calendar years
or (iii) is on any non-standard or unusual terms and conditions, as the Members
Committee may determine from time to time;
(k) the entry into or termination, amendment or modification
of any agreement to license, sublicense or otherwise Transfer any Intellectual
Property Rights;
(l) the entry into or termination, amendment or modification
of any commitment or contract that: (i) is other than in the ordinary course of
business, (ii) is of a speculative nature or (iii) materially affects the
financial position of the Company;
(m) the adoption of and any modification to the Company's
accounting policies;
(n) the approval of the Company's annual financial statements;
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(o) the entry into or termination, amendment or modification
of any agreements or other arrangements with a Member of an Affiliate of a
Member involving consideration in excess of $50,000;
(p) the appointment or removal of any outside legal counsel or
investment banker that has provided substantial services to a Member or an
Affiliate of a Member within the last 12 months;
(q) the giving of any guarantees, other than endorsements of
checks or other negotiable instruments in the ordinary course of business, of
the debts or obligations of any other person or entity;
(r) the making of any gifts, donations or charitable
contributions in excess of $5,000 per annum;
(s) with respect to Employees, the (i) establishment of, or
any non-technical amendment to, or termination of, any employee benefit plan as
defined in Section 3(3) of ERISA, (ii) the establishment or termination of, or
any material variation to, any Compensation plan or program, perquisite, Benefit
Plan (other than an employee benefit plan as defined in Section 3(3) of ERISA),
policy or procedure, except as required by law, or (iii) the adoption,
modification or elimination of policies and procedures as may be appropriate for
the operation of the Company;
(t) the establishment of incentive compensation or bonus plans
for management-level Employees;
(u) the commencement of legal action against Members except to
the extent that the basis of such legal actions is the alleged breach of a
written agreement, warranty, guarantee or indemnification provision;
(v) the entry into any distribution or similar arrangement
other than the Distribution Agreements;
(w) any decision regarding the commencement, extension or
cessation of the manufacture or development of any products of the Company or
any subsidiary;
(x) the commencement or settlement of any litigation or
arbitration proceedings by the Company for an amount exceeding $100,000,
excluding any benefit provided under the terms of Company Benefit Plans and
claims involving receivables of the Company; or
(y) the entry into or termination, amendment or modification
of any lease of real property by the Company or any subsidiary providing for
annual rental payments in an amount greater than $50,000 or having a term
greater than one year.
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Section 3.04. Matters Requiring the Approval of a
Supermajority of the Members Committee. Notwithstanding anything to the contrary
contained in the Act or this Agreement (other than as set forth in Section
3.04(c) below), the affirmative vote of six of the Representatives of the
Members Committee shall be required to approve or disapprove any of the
following:
(a) any modification to the Certificate;
(b) the appointment or removal of the Company's auditors;
(c) the issue of, or grant of any option over, any membership
or partnership interest, shares, stock, debentures or other securities
("Securities") in the Company or any subsidiary or the repurchase, voluntary
redemption or pre-payment of any such Securities (except as otherwise provided
in Article II and any other provision hereof requiring or permitting the making
of Capital Contributions by any Member, subject to the different approval
requirements therefor (if any) set forth in such Article or other provision);
(d) the Transfer of the whole or any substantial part of the
business or assets of the Company or any subsidiary;
(e) any merger, split-up or reorganization of the Company or
any subsidiary;
(f) the taking or refraining from taking of any action by or
on behalf of the Company that would:
(A) enlarge the obligations of any Member, including
requiring any additional contribution, assessment or
payment by a Member, without the consent of such
Member;
(B) adversely affect the federal or state income
tax treatment to be afforded Members or adversely
affect the liabilities of the Members;
(C) adversely affect the rights afforded Members
pursuant to this Agreement; or
(D) cause the Company to become an entity other
than a Delaware limited liability company;
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(g) the conduct of any business other than as specified in the
Business Scope; or
(h) the acquisition of any business or assets of another
entity or person as a going concern;
and, in the case of any agreement to do any of the foregoing, any offer or bid
with respect thereto, provided, however, if pursuant to Section 2.05(d) and/or
2.05(g) of this Agreement, Antec's Interest is reduced below the lower of (i)
15% and (ii) Antec's Interest as of immediately after the effectiveness of this
Agreement as it may be adjusted by operation of Section 2.05(g), then
subparagraphs (c), (d), (e), (g) and (h) of this Section 3.04 shall be deleted
and such subparagraphs shall be added to Section 3.03 of this Agreement, and any
matter set forth in any such subparagraph shall be approved or disapproved in
accordance with the provisions of Section 3.03.
Section 3.05. Transactions with Members. The Company may
engage in business with, or enter into one or more contracts for the furnishing
to or by the Company of goods, services or space with, any Member (or their
respective Affiliates, subsidiaries, directors, officers or employees), and may
pay compensation in connection with such business, goods, services or space, if
(i) the relevant contract or transaction is made on terms consistent with the
requirements of Treasury Regulations section 1.482-1(b) for arm's length
transactions, or (ii) such contract or transaction has received the affirmative
vote of six of the Representatives of the Members Committee.
Section 3.06. Conciliation Procedure. If the Members Committee
is unable to approve a matter set out in Section 3.03 or 3.04 by the required
number of votes of the Representatives, then any Representative may request each
of the President of NTI's Carrier Packet Solutions line of business and the
Chief Executive Officer of Antec to appoint a single delegate with full power
and authority to resolve such disagreement. Such delegates shall then meet as
necessary in order to discuss the matter and attempt to resolve such matter by
mutual agreement. If such delegates fail to resolve the matter within 60 days of
their appointment, then the President of NTI's Carrier Packet Solutions line of
business and the Chief Executive Officer of Antec shall themselves attempt to
resolve such matter by mutual consent during the following 60-day period.
Section 3.07. Company's and Members' Indemnification of
Members, Representatives and Officers. (a) The Company shall indemnify any
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
Person is a Representative or an Officer of the Company, or is or was serving at
the request of the Company as a director or officer of any other Person (each,
an "Indemnitee"), against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding (i) with respect to any
Indemnitee who is (or, at the time of such Indemnitee's action or omission
giving
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rise to any such action, suit or proceeding, was) a Representative, he
complied with the standards of conduct specified in the last sentence of Section
3.01(b), or (ii) with respect to any other Indemnitee, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the interests
of the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful.
(b) In addition, the Company may indemnify any Person who is
not an Indemnitee who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
Person is an Employee or agent of the Company, or was serving at the request of
the Company as an employee or agent of any other Person (each, an "Optional
Indemnitee"), against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the interests of the Company,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe was unlawful.
(c) To the extent that an Indemnitee has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 3.07(a), or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) To the extent that an Optional Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 3.07(b), or in defense of any claim, issue or
matter therein, he may be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(e) The Company may pay the expenses (including attorneys'
fees) incurred by an Indemnitee or Optional Indemnitee in defending a civil,
criminal, administrative or investigative action, suit or proceeding brought by
a party against the Indemnitee or Optional Indemnitee in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Indemnitee or Optional Indemnitee to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company as authorized in this Section 3.07.
(f) Any indemnification under this Section 3.07 (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee or
Optional Indemnitee is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 3.07(a) and Section 3.07(b).
Such determination shall be made (i) by a majority vote of the Representatives
who are not parties to such action, suit or proceeding, even though less than a
quorum, (ii) if there are no such Representatives, or if such Representatives so
direct, by independent legal counsel in a written opinion, or (iii) by the
Members.
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(g) The right of indemnification and reimbursement provided in
this Section 3.07 shall be in addition to any rights to which an Indemnitee or
Optional Indemnitee may otherwise be entitled and shall inure to the benefit of
the executors, administrators, personal representatives, successors or assigns
of each Indemnitee and Optional Indemnitee.
(h) The rights to indemnification and reimbursement provided
for in this Section 3.07 may be satisfied only out of the assets of the Company
and to the extent of the Capital Contributions of the Members and none of the
Members shall be personally liable for any claim for indemnification or
reimbursement under this Section 3.07.
Section 3.08. Remedies. The remedies of the Members hereunder
are cumulative and shall not exclude any other remedies to which a Member may be
lawfully entitled. The Members acknowledge that all legal remedies for any
breach of this Agreement may be inadequate, and therefore they consent to any
appropriate equitable remedy.
Section 3.09. Waiver. The failure of any Member to insist upon
strict performance of a covenant or condition hereunder shall not be a waiver of
its right to demand strict compliance therewith in the future.
Section 3.10. Ratification and Authorization. Notwithstanding
anything in this Agreement to the contrary, the execution and delivery by the
Company of, and the exercise by the Company of its rights and powers and the
performance by the Company of its obligations under the Distribution Agreements,
the Original Asset Contribution Agreement, the BTD Asset Contribution Agreement,
the Arris Loan Agreement, and the Arris Security Agreement, in each case as
amended and/or restated to date, and any other agreements, instruments and
documents contemplated by any of the foregoing agreements or necessary or
incidental to the consummation of any transactions thereunder, and all actions
taken by or on behalf of the Company prior to the date hereof, are hereby
expressly authorized, approved, ratified and confirmed in all respects.
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ARTICLE IV
BOOKS; ELECTIONS; BUDGETS; FISCAL YEAR
Section 4.01. Administrative Services, Books, Records and
Reports. The Members Committee shall cause to be performed all general and
administrative services on behalf of the Company in order to assure that
complete and accurate books and records of the Company are maintained at the
Company's principal place of business showing the names, addresses and Interests
of each of the Members, all receipts and expenditures, assets and liabilities,
profits and losses, and all other records necessary for recording the Company's
business and affairs. Such books and records shall be maintained in accordance
with generally accepted accounting principles in the United States of America
consistently applied ("GAAP"). To the extent practicable, the Company will
follow the accounting and reporting practices of Nortel.
Section 4.02. Federal Income Tax Elections; Method of
Depreciation; Classification for Tax Purposes. The Members Committee shall
determine the method of depreciation to be utilized by the Company for tax
purposes and all elections to be made by the Company for tax purposes; provided,
however, in the event Nortel exercises its right under Section 2.05(g) to
require Antec to purchase the incremental increase in Nortel's Interest in
exchange for Antec Common Stock (as further set forth in the Earnout Share
Agreement), then, unless otherwise directed in writing by Antec, the Members
Committee shall cause the Company to file an election under Section 754 of the
Code to provide for an adjustment to the basis of Company property. Nortel is
hereby designated as the "tax matters partner" for all purposes of the Code.
Each Member recognizes and intends that for federal income tax purposes, the
Company will be classified as a partnership and that the Members Committee shall
make any election by the Company necessary for such treatment.
Section 4.03. Fiscal Year; Fiscal Quarters. The fiscal year of
the Company (the "Fiscal Year") shall end on December 31. Fiscal quarters will
be calendar quarters ending March 31, June 30, September 30 and December 31
("Fiscal Quarters").
Section 4.04. Reports. The Company shall furnish to each
Member:
(a) annual accounts not more than six business days after the
end of each Fiscal Year;
(b) annual financial statements including a balance sheet,
statement of operations, statement of retained earnings and cash flow statement
together with notes to such financial statements prepared in accordance with
GAAP and certified by the Company's accountants not more than 60 days after the
end of each Fiscal Year;
(c) quarterly accounts not more than five business days after
the end of each Fiscal Quarter; and
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(d) monthly accounts not more than five business days after
the end of each month.
Section 4.05. Annual Audit. The books of account, financial
records and annual financial statements of the Company shall be audited annually
at the Company's expense by a nationally recognized independent public
accounting firm selected by the Members Committee.
ARTICLE V
DISTRIBUTIONS
Section 5.01. Distributions. Distributions shall be made at
such time and in such amounts as determined by the Members Committee and shall,
except as otherwise provided in Section 6.05, be made among the Members in cash
or other property in proportion to their Interests; provided, that it is
understood and agreed that no distributions shall be made at any time when any
amount is outstanding under the Arris Loan Agreement.
Section 5.02. Restoration of Funds. Except as otherwise
provided by law, no Member shall be required to restore to the Company any funds
properly distributed to it pursuant to Section 5.01.
ARTICLE VI
TERM; DISSOLUTION; WINDING UP
Section 6.01. Term. The initial term of the Company shall
begin on the Formation Date and expire on December 31, 2005; provided, that such
term shall be automatically extended for additional periods of five years each
unless either Member notifies the other Member of its desire to terminate the
Company as of the then current expiration date not later than December 31 of the
previous year. Except by operation of the provisions of this Article VI or in
connection with a Transfer by a Member of all of such Member's Interest in
compliance with the provisions of Section 2.05, no Member shall have any right
or power to retire, resign or withdraw from the Company without the prior
written consent of the other Member, and any attempt by a Member to do so shall
be null and void ab initio.
Section 6.02. Dissolution. The Company shall be dissolved upon
the occurrence of any of the following (each, an "Event of Dissolution"):
(a) (i) The expiration of the term of the Company under
Section 6.01 and (ii) the failure of the Members to exercise their rights under
Section 6.03(a);
(b) The Transfer of all or substantially all the assets of the
Company;
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(c) In the event of bankruptcy of a Member, the failure by the
other Member to exercise its rights under Section 6.04(a) within the time period
specified in Section 6.04(b), unless not later than 90 days after the expiration
of such time period such other Member elects to continue the business of the
Company;
(d) The unanimous decision of the Members to dissolve the
Company;
(e) (i) The failure of the Company, which for these purposes
means the occurrence of an Event of Default under the Arris Loan Agreement, and
(ii) the failure of the Members to exercise their rights under Section 6.03(a);
or
(f) The election by both Nortel (as Lender) not to make
Additional Loans and Antec not to purchase a Mandatory Participating Interest
(as such terms are defined in and pursuant to Article XI of the Arris Loan
Agreement) after the aggregate principal amount of the Additional Loans made
subsequent to the date hereof is $52 million or more and the Fair Market Price
in connection with such elections has been determined.
Section 6.03. Procedure in Case of Certain Events of
Dissolution. (a) Upon the occurrence and continuance of either of the events
referred to in Section 6.02(a)(i) or 6.02(e)(i), first Nortel, and then Antec
shall have the right, subject to the conditions specified in Sections
6.03(b)-(d), to purchase the other Member's Interest.
(b) Upon the occurrence of an event referred to in Section
6.02(a)(i) or 6.02(e)(i), Nortel may, for a period of 60 days after the first
occurrence (and during the continuance) of such event, exercise its right under
Section 6.03(a) by Notice to Antec, indicating its interest in purchasing
Antec's Interest. If the Members are unable, prior to the expiration of 30 days
after such Notice, to agree on an amount for which Nortel is willing to buy from
Antec, and Antec is willing to sell to Nortel, Antec's Interest, free and clear
of all pledges, liens, security interests or other encumbrances, the purchase
price payable by Nortel for Antec's Interest shall be determined pursuant to the
second sentence of Section 6.04(c).
(c) Upon the occurrence of an event referred to in Section
6.02(a)(i) or 6.02(e)(i), provided, Nortel has not timely given Notice to Antec
that it will exercise its right under Section 6.03(a), Antec may, for a period
of 60 days after the first occurrence (and during the continuance) of such
event, exercise its right under Section 6.03(a) by Notice to Nortel, indicating
its interest in purchasing Nortel's Interest. If the Members are unable, prior
to the expiration of 30 days after such Notice, to agree on an amount for which
Antec is willing to buy from Nortel, and Nortel is willing to sell to Antec,
Nortel's Interest, free and clear of all pledges, liens, security interests or
other encumbrances, the purchase price payable by Antec for Nortel's Interest
shall be determined pursuant to the second sentence of Section 6.04(c).
(d) The closing of the purchase and sale of a Member's
Interest (which Interest shall be Transferred in connection with such purchase
and sale free and clear of all pledges,
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Liens, security interests or other encumbrances) under this Section 6.03 shall
be held on a business day designated by the purchasing Member upon not less than
10 business days' prior written Notice given on or after the date on which there
is a determination of the purchase price pursuant to Section 6.03(b) or 6.03(c),
as the case may be, but not later than 60 days after such date.
Section 6.04. Procedure in Case of Certain Other Events.
(a) Upon the occurrence of the following events or conditions (the
"Triggering Events"):
(i) Any of the following material breaches:
(A) at any time prior to the End of
Committed Funding, the failure of Antec
under the Arris Loan Agreement to satisfy
the conditions set forth in either Section
11.02(b)(2)(X) or Section 11.02(b)(2)(Y) of
the Arris Loan Agreement with respect to any
Additional Loan;
(B) at any time after the End of Committed
Funding, the failure of Antec under the
Arris Loan Agreement to satisfy the
conditions set forth in either Section
11.02(b)(2)(X) or Section 11.02(b)(2)(Y) of
the Arris Loan Agreement if (1) Antec has
elected not to purchase a Mandatory
Participating Interest with respect to any
Additional Loan and (2) a determination of
the Fair Market Price in connection with
such election has not then been completed;
(C) the failure of Antec to pay the Company
$1,000,000 or more for 180 days or more for
amounts due the Company pursuant to any
distribution agreements between Antec and
the Company or any other contractual
relationship between Antec and the Company,
including any accrued interest for past due
amounts arising therefrom which amounts are
not being reasonably disputed by Antec; or
(D) the occurrence of any other material
breach of this Agreement by a Member that
(1) is not capable of being cured, or (2) is
capable of being cured and is not cured
within 30 days after Notice thereof.
(ii) a change of control of a Member;
(iii) the bankruptcy of a Member; or
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(iv) at any time after the End of Committed Funding,
the election by either Nortel not to make an Additional Loan or Antec not to
purchase its Mandatory Participating Interest in any Additional Loan (except to
the extent that the provisions of Section 6.04(a)(i)(B) apply to such election,
in which case solely the provisions of such Section 6.04(a)(i)(B) shall govern);
provided that with respect to a Triggering Event which occurs after the Earnout
Date, such election is not withdrawn within 15 days from the date the Fair
Market Price has been agreed upon or Notice has been given to the Members of the
determination thereof, in each case as set forth in Section 6.04(c);
the other Member (the "Non-Affected Member") shall have the right (x) to request
a determination of the Fair Market Price of its Interest and the other Member's
Interest and (y) to purchase, at the Fair Market Price (or in the event of such
purchase occurring by reason of a Triggering Event described in Section
6.04(a)(i), at an amount equal to 70% of the Fair Market Price), all of the
other Member's Interest in the Company.
(b) (i) For Triggering Events occurring on or prior to
the End of Committed Funding, a Member may exercise its rights under Section
6.04(a)(y) by Notice to the other Member given not later than 30 days after the
occurrence of such Triggering Event (or, with respect to Triggering Events set
forth in Section 6.04(a)(ii) or Section 6.04(a)(iii) not later than 30 days
after the Non-Affected Member first receives actual notice of such Triggering
Event), and (ii) for Triggering Events occurring after the End of Committed
Funding, a Member may exercise its rights under Section 6.04(a)(y) by Notice to
the other Member between the 16th and the 30th day from the date on which the
Fair Market Price has been agreed upon or Notice has been given to the Members
of the determination thereof, in each case as set forth in Section 6.04(c).
(c) If the relevant Triggering Event is set forth in
Sections 6.04(a)(i), (ii) or (iii), the fair market price of any Member's
Interest (the "Fair Market Price") shall be equal to the amount obtained by
multiplying the Fair Market Value by such Member's Interest. If the Triggering
Event is described in Section 6.04(a)(iv) above, or if Nortel or Antec has
availed itself of the right provided to it under Section 6.03(b) or Section
6.03(c), as the case may be, the Fair Market Price shall be (X) if such
Triggering Event occurs on or before the End of Committed Funding, deemed equal
to the amount obtained by multiplying the Implied Company Value by the relevant
Member's Interest, or (Y) if such Triggering Event occurs after the End of
Committed Funding, determined by the investment banking firm of Donaldson,
Lufkin and Jenrette, or other such firm mutually agreed to by the Members, in
accordance with the following requirements: (I) in making the determination such
firm shall assume that the Company and this Agreement have an indefinite term
rather than a finite term as specified in this Article VI; (II) the
determination of the Fair Market Value of the Company and its subsidiaries shall
be made on an "equity" rather than an "enterprise" valuation basis; (III) the
Fair Market Value of a Member's Interest shall be, if the difference between the
enterprise value and the amount outstanding under the Arris Loan Agreement
("Balance") is a negative number, the product of (1) the Balance and (2) a
fraction, the numerator of which, in the case of Antec, shall be the aggregate
amount of
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participating interests purchased by Antec from the Lender under the Arris Loan
Agreement and the aggregate accrued and unpaid interest on such amount ("Antec
Amount"), and, in the case of Nortel, shall be the difference between the
Balance and the Antec Amount ("Member Repayment Amount") and the denominator of
which shall be the Balance, and, if the difference between the enterprise value
and the Balance is a positive number, the sum of the (A) Member Repayment Amount
and (B) the product of (i) such difference and (ii) the amount of the Member's
Interest (expressed as a percentage); and (IV) the Fair Market Price so
determined shall be valid for one year from the date of its completion unless a
Fair Market Price is required in connection with Section 6.04(a)(y), in which
event a new Fair Market Price shall be determined unless the prior one was
completed within the immediately preceding 90 days. The fees and expenses of the
investment banking firm making the determination of Fair Market Value or Fair
Market Price hereunder will be paid by the breaching Member, in the case of a
determination resulting from an event described in Section 6.04(a)(i), and
otherwise such fees and expenses shall be borne by the Company. For purposes of
this Section 6.04, a change of control shall be deemed to occur upon the direct
or indirect acquisition by any Person (other than an Affiliate of Nortel, NTI or
BCE Inc., in the case of Nortel, and other than an Affiliate of Anixter
International Inc. or Tele-Communication, Inc., in the case of Antec) who is a
Competitor of the other Member of Securities representing 20% or more of the
voting rights attached to voting securities of such other Member and of the
power to direct the management of a Member, whether by ownership of voting
securities, by contract or otherwise (a "Change of Control").
Section 6.05. Winding up Affairs and Distribution of Assets.
(a) Upon dissolution of the Company, and in the absence of an election to
continue the business of the Company pursuant to Section 6.02(c), one Member
(the "Liquidating Member") shall proceed to wind up the affairs of the Company,
liquidate the remaining Property and assets of the Company and wind up and
terminate the business of the Company. In the event of the dissolution of the
Company pursuant to Section 6.02(c), the Liquidating Member shall be the
Non-Affected Member, and in all other cases, the Liquidating Member shall be
Nortel. The Liquidating Member shall cause a full accounting of the assets and
liabilities of the Company to be taken and shall cause the assets to be
liquidated and the business to be wound up as promptly as possible by either or
both of the following methods: (1) selling the Company assets and using the net
proceeds therefrom to repay any Company liabilities (including, without
limitation, all amounts outstanding pursuant to the Arris Loan Agreement) and,
to the extent of any remainder, distributing the net proceeds to each Member in
satisfaction of its Capital Account, as provided in Section 6.05(b); or (2) if
both Members shall agree, after (but only after) repaying any Company
liabilities (including, without limitation, all amounts outstanding pursuant to
the Arris Loan Agreement), distributing the Company assets to the Members in
kind and debiting the Capital Account of each Member with the fair market value
of such assets, each Member accepting an undivided interest in the assets of the
Company (subject to their liabilities) in proportion to and to the extent of
each Member's positive Capital Account balance after allocating and crediting to
the Capital Accounts the unrealized gain or loss to the Members as if such gain
or loss had been recognized and allocated pursuant to Section 2.04.
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(b) If the Company shall employ method (1) as set forth in
Section 6.05(a) in whole or part as a means of liquidation, then the proceeds of
such liquidation shall be applied in the following order of priority: (i) first,
to the expenses of such liquidation; (ii) second, to the debts and liabilities
of the Company to third parties, if any, in the order of priority provided by
law or agreement; (iii) third, a reasonable reserve shall be set up to provide
for any contingent or unforeseen liabilities or obligations of the Company to
third parties (to be held and disbursed, at the discretion of the Liquidating
Member, by an escrow agent selected by the Liquidating Member) and at the
expiration of such period as the Liquidating Member may deem advisable, the
balance remaining in such reserve shall be distributed as provided herein; (iv)
fourth, to debts of the Company to the Members (including, without limitation,
any amount outstanding under the Arris Loan Agreement) or Representatives, their
Affiliates and any fees and reimbursements payable under this Agreement; (v)
fifth, only to the extent that the proceeds of liquidation have fully satisfied
all amounts described in clauses (i) - (iv) of this Section 6.05(b), to the
Members to the extent of their respective positive Capital Account balances
(after such Capital Accounts have been adjusted pursuant to Section 2.04 for all
Net Profits and Net Losses through the date of distribution and for unrealized
Net Profits and Net Losses with respect to any assets distributed in kind) and
(vi) sixth, between the Members in proportion to their Interests in the Company.
(c) In connection with the liquidation of the Company, the
Members severally, jointly, or in any combination upon which they may agree,
shall have the first opportunity to make bids or tenders for all or any portion
of the assets of the Company, and such assets shall not be sold to a third party
except only for a price higher than the highest and best bid of a single Member,
the Members jointly, or a combination of Members.
ARTICLE VII
TERMS AND CONDITIONS OF EMPLOYMENT
Section 7.01. Legacy Employees. The terms and conditions of
employment of Legacy Employees shall be governed by those Company Compensation
plans, programs, policies or arrangements, Company Benefit Plans, and Company
policies and procedures relating to Employees in effect as of the date of this
Agreement, or as modified thereafter. No provision of this Section 7.01 or this
Agreement shall confer upon any Employee, including, without limitation, Legacy
Employees, his representatives, beneficiaries, successors, or assigns, nor upon
any collective bargaining agent, any rights or remedies of any nature,
including, but not limited to, any rights to employment or continued employment
with the Company or any Company subsidiary. Nothing in Article VII or this
Agreement shall preclude the Company or any Company subsidiary employing Legacy
Employees from modifying any terms and conditions of employment of Employees,
including, without limitation, Legacy Employees, after the date hereof except as
expressly set forth in Sections 3.03(b), (c), (s) and (t).
Section 7.02. Employment Prior to Commencement Date. It is
understood by the parties hereto that Nortel shall cause its relevant Affiliates
and subsidiaries to supply the services
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of certain of their employees listed on Schedule 7.02 ("Loaned Employees") to
the Company commencing on the effective date of this Agreement pursuant to the
Loaned Employee Agreement dated as of March 31, 1999, by and between NTI and the
Company ("Loaned Employee Agreement"). Nortel, its Affiliates or its
subsidiaries, as applicable, shall be the sole employer of the Loaned Employees
while such employees supply services to the Company and, as such, shall
compensate, provide benefits to and otherwise determine the terms and conditions
of employment of such Loaned Employees during that period in accordance with
such employer's Compensation plans, programs, policies or arrangements, Benefit
plans, and other policies and procedures then in effect.
Section 7.03. Identification of Employees. On or before the
fourty-fifth (45) calendar day immediately preceding the termination date of the
Loaned Employee Agreement ("Termination Date"), Nortel shall provide to the
Company a list of those Loaned Employees who, as of that date, are (i) employed
by Nortel, its Affiliates or its subsidiaries and (ii) providing services to the
Company pursuant to the Loaned Employee Agreement or, with respect to such
employees on a leave approved by their employer, were providing such services at
the time such leave commenced ("Prospective Employees"). Such list shall set
forth the following information, to the extent permitted by applicable law, with
respect to such Prospective Employees: full name, job title, job location,
current base salary, outstanding bonus amounts under applicable staying bonus
agreements, bonus eligibility under applicable bonus programs related to the
Company's performance, employment status (active or on leave), home address,
years of service, vacation accrual rate, accrued but unused vacation entitlement
and such other information as mutually agreed by Nortel and the Company. Nortel
warrants and represents that (a) information which it provides about Prospective
Employees shall be true and complete, (b) that with the exception of [sales,
marketing and sales support] personnel, the Prospective Employees constitute the
employees involved in operating the Transferred Business (as defined in the BTD
Asset Contribution Agreement) as of immediately prior to the effectiveness of
this Agreement, and (c) the Prospective Employees are qualified to perform their
individual responsibilities in all material respects.
Section 7.04. Offers of Employment to Prospective Employees.
(a) Conditions of Employment. On or before the tenth calendar day immediately
preceding the Termination Date, the Company shall deliver to each Prospective
Employee, except as otherwise mutually agreed by the Company and Nortel, by
means of a letter, an offer of employment to commence as of 12:00 a.m. on the
day immediately following the Termination Date ("Commencement Date"). Such
letter shall be in a form mutually agreed to by the Company and Nortel and shall
contain, at a minimum, those terms and conditions of employment set forth in
Schedule 7.04(b). On or before the fifth calendar day immediately preceding the
Termination Date, the Company shall inform Nortel in writing of the identity of
those Prospective Employees accepting and not accepting such offer of
employment. Such offers of employment shall be conditioned on such Prospective
Employees providing any legally required evidence of eligibility for employment
and meeting such other requirements mutually agreed to by the Company and
Nortel; provided, however, that the employment of such Prospective Employees
shall not be conditioned upon
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their successful completion of employment, education or criminal history
verification, drug or alcohol testing or similar employment screening processes.
Except as provided in Section 7.04(c) with respect to Prospective employees on
leave, the Company shall employ Prospective Employees accepting its employment
offer and satisfying the conditions of such offer as of 12:00 a.m. on the
Commencement Date and Nortel, its Affiliates or its subsidiaries employing such
employees shall terminate their employment as of 11:59 p.m. on the Termination
Date.
(b) Terms and Conditions of Employment. The Company's
employment of Hired Employees as of the Hire Date shall, at a minimum, be on
those terms and conditions set forth in Schedule 7.04(b). No provision of this
Section 7.04(b) or this Agreement shall confer upon any Employee, including,
without limitation, Hired Employees, his representatives, beneficiaries,
successors, or assigns, nor upon any collective bargaining agent, any rights or
remedies of any nature, including, but not limited to, any rights to employment
or continued employment with the Company or any Company subsidiary. Nothing in
Section 7.04(b) or this Agreement shall preclude the Company or any Company
subsidiary employing Hired Employees from modifying any terms and conditions of
Hired Employees after the Hire Date except as expressly set forth in Sections
3.03(b),(c), (s) and (t).
(c) Prospective Employees on Leave on Commencement Date. If a
Prospective Employee accepting employment with the Company pursuant to Section
7.04(a) is on an approved leave of absence from employment with Nortel, its
Affiliates or subsidiaries as of 11:59 p.m. on the Termination Date, such
Prospective Employee's Hire Date shall be the first business day following the
expiration of such leave if (i) the leave has not exceeded twenty-six (26) weeks
from its commencement or, if longer, such other leave period as required by
applicable law, (ii) such Prospective Employee's employment with Nortel, its
Affiliates or subsidiaries continued through the period of such leave without
termination, whether voluntary or involuntary, and (iii) such Prospective
Employee otherwise satisfies the requirements of the Company's offer of
employment. If any such Prospective Employee becomes a Hired Employee, the other
provisions of this Article VII shall apply to such Hired Employee. The Company
shall not be obligated to employ any Prospective Employee upon the expiration of
an approved leave of absence if such Prospective Employee fails to meet any of
the foregoing requirements. Except as otherwise provided in the Loaned Employee
Agreement, Nortel, its Affiliates or subsidiaries shall be responsible for any
benefits or other incidents of employment owing to such Prospective Employee
during any such leave of absence.
(d) Employment Incentives. Nothing in this Section 7.04 or
elsewhere in this Agreement shall preclude Nortel, its Affiliates or
subsidiaries from providing additional incentives to a Prospective Employee who
is the employee of Nortel, its Affiliates or subsidiaries as an inducement for
such Prospective Employee to accept the Company's offer of employment, provided,
such incentive is disclosed in advance to the Company and the Company has no
objection to such incentive and any and all expense and liability with respect
to such incentive (excluding any payments made pursuant to staying bonus
agreements) shall be the sole responsibility of Nortel.
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(e) Employment after Commencement Date. Except with respect to
Prospective Employees whose employment with the Company commences after the
Commencement Date pursuant to Section 7.04(c), the terms and conditions of
employment set forth in this Section 7.04 shall not be applicable to Prospective
Employees or other employees of Nortel, its Affiliates or subsidiaries who
become Employees of the Company after the Commencement Date.
Section 7.05. Loaned Employees. Upon request by the Company,
each Member, their subsidiaries and Affiliates may from time to time loan
employees to the Company or any subsidiary on terms to be agreed.
Section 7.06. Credited Service. With respect to an Employee
whose employment with the Company commences immediately upon termination of
employment with Nortel, its Affiliates or its subsidiaries, such Employee's
prior service recognized by such employers as of such termination of employment
shall be recognized for purposes of each Company Benefit Plan, other than a
qualified defined contribution or defined benefit plan (as defined in Section
401(a) of the Code and regulations issued thereunder), to the extent service is
generally recognized by such Company Benefit Plan. Except as otherwise provided
with respect to Hired Employees in Section 7.04(b) and as otherwise required by
law, such prior service shall not be recognized for any purpose by the 401(k)
plan adopted by the Company. No credited service shall be required for
participation in the Company Benefit Plans by an Employee whose employment with
the Company commences immediately upon termination of employment with Nortel,
its Affiliates or subsidiaries.
Section 7.07. Plan Asset Transfer. Within twelve (12) months
following the Commencement Date, the Nortel, its Affiliates or its subsidiaries,
as applicable, may transfer, or may cause to be transferred, an amount in cash
equal to the account balances of the Hired Employees then employed in their
qualified defined contribution benefit plans to the Company's qualified defined
contribution benefit plan.
Section 7.08. Post-Closing Employment Matters. (a)
Solicitation of Employees. No Member or Member's Affiliate or subsidiary shall
solicit for employment, offer employment to, or hire any Employee or any former
Employee within one (1) year of such former Employee's termination date from the
Company or any subsidiary unless such termination was involuntary or unless
agreed to by the Company. Neither the Company nor any subsidiary shall solicit
for employment, offer employment to, or hire any employee of a Member or a
Member's Affiliate or subsidiary, other than a Prospective Employee pursuant to
Section 7.04, unless otherwise agreed to by such Member.
(b) Severance Benefits. The termination or other disposition
of any Employee after the date hereof shall be the sole responsibility of the
Company. Notwithstanding the foregoing, any Hired Employee who is terminated
from employment with the Company or any
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subsidiary during the twelve (12) month period immediately following the
Commencement Date, shall, to the extent in excess of any legally required
severance or termination payments, be entitled to severance cash benefits, to be
paid by the Company, at least equal to the severance cash benefits, if any, to
which such Hired Employee would have been entitled under the severance plan or
severance arrangements of Nortel, its Affiliates or its subsidiaries by which
such employee was previously employed.
(c) Responsibility for Prior Compensation, Expenses or
Benefits. Except as otherwise provided in Section 7.04(b) or under the Loaned
Employee Agreement, the Nortel, its Affiliates or its subsidiaries, as
applicable, shall be responsible for the payment of any Compensation, benefits
or expenses owed to a Hired Employee based on such Hired Employee's employment
with Nortel, its Affiliates or its subsidiaries prior to such Hired Employee's
Hire Date. Nortel, its Affiliates or its subsidiaries shall provide payment to
each of their respective former employees who become Hired Employees for any
vacation time which accrued during their employment with such employer that has
not been taken prior to their termination of employment with such employer and
will not be paid by the Company pursuant to Section 7.04(b). Except as otherwise
provided in this Section 7.08(c), obligations with respect to accrued benefits
under any Benefit Plan maintained by Nortel, its Affiliates or its subsidiaries
for any Employee or other employee's service recognized under their respective
Benefit Plans shall remain the obligations of Nortel, its Affiliates or its
subsidiaries.
(d) Employment Representations and Warranties and Indemnity By
Nortel. Nortel, its Affiliates or its subsidiaries have complied with applicable
statutes, laws, common law, codes, ordinances, rules, orders, regulations and
decrees with respect to their employees who are Prospective Employees including,
but not limited to, those governing wages and hours, wage payment, fair
employment, occupational safety and health, workers compensation, labor and
immigration, and there are no pending claims suits or other proceedings by or on
behalf of or with respect to such Prospective Employees. There has not been any
strike slowdown, picketing, work stoppage or other job action by any union or
employees relating to the Prospective Employees and no collective bargaining
agent has, or has sought or is seeking, representation rights with respect to
the Prospective Employees. There is no contract of employment binding on Nortel,
its Affiliates or its subsidiaries, with respect to any Prospective Employee.
Subject to the provisions contained in Section 3.05, and except with respect to
those matters for which the Company shall indemnify Nortel Indemnitees and those
Charges for which the Company shall reimburse Nortel under the Loaned Employee
Agreement, Nortel shall indemnify Antec, the Company and their respective
Affiliates, subsidiaries, Representatives, officers, directors, employees,
agents and representatives against, and shall hold them harmless from, any loss,
liability, claim, damage or expense (including, without limitation, reasonable
legal fees and expenses), as incurred from or in connection with or otherwise
with respect to any matter relating to the employment or termination of
employment by Nortel's Subsidiaries, their Affiliates or their subsidiaries, as
applicable, of any Hired Employee, including without limitation claims related
to salary, wages, benefits or employment discrimination.
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(e) Employment Representations and Warranties and Indemnity By
the Company. Subject to the conditions contained in Section 3.05, the Company
shall indemnify Nortel and Nortel's Affiliates, subsidiaries, and their
officers, directors, employees, agents and representatives against, and shall
hold them harmless from, any loss, liability, claim, damage or expense
(including without limitation reasonable legal fees and expenses), as incurred
from or in connection with or otherwise with respect to any matter relating to
the employment or termination of employment by the Company of any Employee,
including without limitation claims related to salary, wages, benefits or
employment discrimination, but excluding any claims for severance benefits
arising as a result of termination of employment of Hired Employees from Nortel,
its Affiliates or its subsidiaries as a result of their commencement of
employment with the Company.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. All notices, consents, approvals,
reports, designations, requests, waivers, elections and other communications
(collectively, "Notices") authorized or required to be given pursuant to this
Agreement shall be given in writing and either personally delivered to the
Member or Representative to whom it is given or delivered by an established
delivery service by which receipts are given or mailed by registered or
certified mail, postage prepaid, or sent by telex or telegram or electronic
telecopier, addressed to the Member or Representative at his or her address. Any
Member or Representative may change his or her address for the receipt of
Notices at any time by giving Notice thereof to all of the other Members and
Representatives.
Section 8.02. Certificate Requirements. From time to time the
Members shall sign and acknowledge all such writings as are required to amend
the Certificate or for the carrying out of the terms of this Agreement or, upon
dissolution of the Company, to cancel such Certificate.
Section 8.03. Entire Agreement. Effective as of the date
hereof, this Agreement supersedes all prior agreements and understandings among
the Members with respect to the subject matter hereof.
Section 8.04. Modification. No change or modification of this
Agreement shall be of any force unless such change or modification is in writing
and has been signed by the Members.
Section 8.05. Waivers. No waiver of any breach of any of the
terms of this Agreement shall be effective unless such waiver is in writing and
signed by the Member against whom such waiver is claimed. No waiver of any
breach shall be deemed to be a waiver of any other or subsequent breach.
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Section 8.06. Severability. If any provision of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 8.07. Further Assurances. Each Member shall execute
such deeds, assignments, endorsements, evidences of Transfer and other
instruments and documents and shall give such further assurances as shall be
necessary to perform its obligations hereunder.
Section 8.08. Governing Law. This Agreement shall be governed
by and be construed in accordance with the laws of the State of Delaware.
Section 8.09. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
Section 8.10. Limitation on Rights of Others. No Person other
than a Member shall have any legal or equitable right, remedy or claim under or
in respect of this Agreement; provided, however, that, notwithstanding the
foregoing, any Person entitled to indemnification hereunder shall, to the extent
such Person is not a party hereto, be deemed to be a third party beneficiary
hereof with respect to all matters relating to such indemnification, and shall
be entitled to enforce any and all of such Person's rights relating to such
indemnification as if such Person were a party hereto.
Section 8.11. Brokers and Finders. Each Member shall indemnify
and hold all of the other Members and the Company harmless from and against any
commission, fee or other payment due, or claimed to be due, to any broker,
finder or other Person in connection with such Member's decision to invest in
the Company.
Section 8.12. Number and Gender. As used in this Agreement,
all pronouns and any variation thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the Person
or Persons may require.
Section 8.13. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Members and their respective
successors and permitted assigns.
Section 8.14. Securities Laws. All offerings and Transfers of
Interests shall be made in compliance with applicable federal and state
securities laws. Each Member shall indemnify the other Members and the Company
for any loss, cost, liability or damage arising from its breach of the foregoing
sentence.
Section 8.15. Waiver of Partition. Each Member hereby waives
its right to bring an action for partition of any of the Property owned by the
Company or to apply to any court for dissolution of the Company.
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<PAGE> 44
IN WITNESS WHEREOF, the Members have duly executed this Agreement as of
the opening of business on the day and year first above written.
ANTEC CORPORATION NORTEL NETWORKS LLC
By:/s/ Lawrence Margolis By:/s/ F. Plastina
--------------------- ------------------------
Name: Name:
Title: Title:
[Signature Page to Amended and Restated Limited Liability Company Agreement]
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<PAGE> 1
EXHIBIT 10.2
EARNOUT SHARE AGREEMENT
between
NORTEL NETWORKS LLC
and
ANTEC CORPORATION
dated as of March 31, 1999
<PAGE> 2
EARNOUT SHARE AGREEMENT (the "Agreement"), dated as of March 31, 1999,
made by and between Nortel Networks LLC ("Nortel") and Antec Corporation
("Antec").
W I T N E S S E T H:
WHEREAS, this Agreement is being entered into as part of a series of
transactions between Nortel, Antec and Arris Interactive L.L.C. ("Arris") which
include, among other events, the execution of an Asset Sale and Contribution
Agreement between Nortel, on the one hand, and Arris, on the other, pursuant to
which Nortel contributed certain assets obtained by Nortel from Bay Network,
Inc.'s Broadband Technology Division to Arris in return for an increased
membership interest in Arris;
WHEREAS, as part of such transaction, Nortel and Antec have entered
into the Amended and Restated Limited Liability Company Agreement of Arris (the
"LLC Agreement"), pursuant to which Nortel's interest in Arris will be adjusted
upon the achievement by Arris of certain performance goals and Nortel shall
have the right to require Antec to purchase such incremental increase in
exchange for shares of Antec Common Stock as described in this Agreement; and
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and of good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is mutually agreed by and between the parties
hereto as follows:
1. CERTAIN DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Section 1 or elsewhere in this Agreement. Terms not otherwise defined are used
herein as defined in the LLC Agreement. As used herein:
"Agreement" has the meaning specified in the first paragraph hereof.
"Antec" means Antec Corporation, a Delaware corporation.
"Arris" has the meaning specified in the recitals hereto.
"Commission" means the United States Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act.
"Common Stock" means the common stock, $0.01 par value per share, of
Antec.
"Earnout Revenue" is defined in the LLC Agreement.
"Effective Date" shall mean the date of this Agreement.
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<PAGE> 3
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Exercise Notice" has the meaning specified in Section 2.a below.
"LLC Agreement" has the meaning set forth in the recitals hereto.
"Nortel" has the meaning specified in the first paragraph hereof.
"Registration Statement" means a registration statement filed by Antec
with the Commission for a public offering and sale of Common Stock (other than
a registration statement on Form S-8 or Form S-4, or their successors, or any
other form for a similar limited purpose, or any registration statement
covering only securities proposed to be issued in exchange for securities or
assets of another corporation).
"Registration Expenses" means the expenses described in Section 9.E.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Share Amount" means 2,747,252 shares of Common Stock, as adjusted
pursuant to Section 5 below.
"Shares" means the shares of Antec Common Stock purchasable by Nortel
hereunder.
2. SHARE PURCHASE
a. Upon Nortel's written election to receive shares hereunder (the
"Exercise Notice") given in accordance with Section 2.05(g) of the LLC
Agreement, Antec shall issue and sell to Nortel, and Nortel shall purchase from
Antec, the Shares in consideration of the incremental membership interest in
Arris described in Section 2.05(g) of the LLC Agreement (the "Incremental
Interest"). Each party hereto acknowledges and agrees that, at the time of such
purchase, the Incremental Interest shall have a value of not less than the
aggregate par value of the Shares.
b. The number of Shares shall be calculated as follows:
(i) If the Earnout Revenue is equal to or greater than US
$300,000,000, the number of Shares shall be the Share Amount.
(ii) If the Earnout Revenue is equal to or greater than US
$180,000,000 but lower than US $300,000,000, the number of Shares shall equal
Share Amount x (Earnout Revenue - $180,000,000)/$120,000,000
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<PAGE> 4
(iii) If the Earnout Revenue is less than $180,000,000, then the
number of Shares shall be zero.
3. CLOSING.
a. The closing of the issuance of Shares under this Agreement shall
take place on the date specified by Nortel in its exercise notice, which shall
be no later than thirty (30) days following such Exercise Notice (the "Closing
Date"), at the offices of Hale and Dorr LLP, 60 State Street, Boston, MA 02109,
or at such other time and place as the parties may agree. On the Closing Date,
Antec will deliver to Nortel a certificate or certificates in the name of
Nortel (or its designee(s)) representing the Shares in the denominations
designated by Nortel, and Nortel will purchase such Shares from Antec by
delivering to Antec an instrument of assignment for the Incremental Interest in
the form reasonably satisfactory to each of Nortel and Antec.
b. Upon the delivery by Nortel to Antec of the Exercise Notice and
the instrument of assignment for the Incremental Interest as set forth in
Section 3.a above, Nortel shall be deemed to be the holder of record of the
Shares, notwithstanding that the stock transfer books of Antec shall then be
closed or that certificates representing such Shares shall not then be actually
delivered to Nortel. Antec shall pay all expenses that may be payable in
connection with the preparation, issuance and delivery of stock certificates in
the name of Nortel.
4. TERMINATION.
This Agreement, and all rights and obligations of the parties
hereunder, shall immediately terminate and be of no further force or effect on
the earliest to occur of:
a. Nortel's failure to exercise its right under Section 2.05(g) of
the LLC Agreement to require Antec to purchase the Incremental Interest as set
forth herein;
b. A determination (made in accordance with Section 2.05(g) of the
LLC Agreement) that the Earnout Revenue is less than $180,000,000; and
c. The tenth anniversary of the issuance of the Shares.
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<PAGE> 5
5. ADJUSTMENTS.
(a) Adjustment for Stock Splits and Combinations. If Antec shall at
any time or from time to time after the Effective Date effect a subdivision of
the outstanding Common Stock, the Share Amount then in effect immediately
before that subdivision shall be proportionately increased. If Antec shall at
any time or from time to time after the Effective Date combine the outstanding
shares of Common Stock, the Share Amount then in effect immediately before the
combination shall be proportionately decreased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(b) Adjustment for Certain Dividends and Distributions. In the event
Antec at any time, or from time to time after the Effective Date shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock), then and in each such event the Share Amount then in
effect immediately before such event shall be increased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Share Amount then in
effect by the number of shares of Common Stock (or the amount of such other
securities) issuable in payment of such dividend or other distribution per each
share of Common Stock; provided, however, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Share Amount shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Share Amount shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividend or distributions.
(c) Adjustments for Changes and Distributions. The Share Amount shall
be appropriately adjusted to reflect any of the following changes in the Common
Stock for distributions to all holders of the Common Stock on a proportional
basis based on a record date between the Effective Date and the issuance of the
Shares:
(1) To the extent not adjusted therefor by operation of
Sections 5(a) and (b) hereof, any dividend of cash or property (other
than shares of Common Stock of Antec) which is not intended to be
periodically repeated for the indefinite future, or
(2) the right to buy securities or any asset for less than
fair market value.
(d) Adjustment for Merger or Reorganization, etc. If there shall
occur any reorganization, recapitalization, consolidation or merger involving
Antec in which the Common Stock is converted into or exchanged for securities,
cash or other property (other than a transaction covered by paragraphs (a), (b)
or (c) of this Section 5), then, following any such reorganization,
recapitalization, consolidation or merger, Nortel shall be entitled to receive
hereunder the kind and amount of securities, cash or other property which a
holder of the number of shares of Common Stock of Antec that would have been
issuable under this Agreement had
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<PAGE> 6
such issuance occurred immediately prior to such reorganization,
recapitalization, consolidation or merger would have been entitled to receive
pursuant to such transaction; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 5 set forth with respect to the
rights and interest thereafter of Nortel, to the end that the provisions set
forth in this Section 5 shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable hereunder.
(e) No Impairment. Antec will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Antec, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of Nortel hereunder against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Share Amount pursuant to this Section 5,
Antec at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to Nortel a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. Antec shall, upon the written
request at any time of Nortel, furnish or cause to be furnished to Nortel a
certificate setting forth the Share Amount and the amount, if any, of other
securities, cash or property which then would be received hereunder.
(g) Notice of Record Date. In the event:
(i) Antec shall take a record of the holders of its
Common Stock (or other stock or securities at the
time issuable hereunder) for the purpose of
entitling or enabling them to receive any dividend
or other distribution, or to receive any right to
subscribe for a purchase any shares of stock of any
class or any other securities, or to receive any
other right; or
(ii) of any capital reorganization of Antec, any
reclassification of the Common Stock of Antec, any
consolidation or merger of Antec with or into
another corporation (other than a consolidation or
merger in which Antec is the surviving entity and
its Common Stock is not converted into or exchanged
for any other securities or property), or any
transfer of all or substantially all of the assets
of Antec; or
(iii) of the voluntary or involuntary dissolution, liquidation
or winding-up of Antec,
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<PAGE> 7
then, and in each such case, Antec will mail or cause to be mailed to Nortel a
notice specifying, as the case may be, (i) the record date for such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time issuable hereunder) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed
at least 20 days prior to the record date or effective date for the event
specified in such notice.
6. REPRESENTATIONS AND WARRANTIES OF ANTEC.
Antec represents and warrants to Nortel that
a. Antec is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to enter into and perform this Agreement;
b. the execution and delivery of this Agreement by Antec and the
consummation by it of the transactions contemplated by this Agreement have been
duly authorized by the Board of Directors of Antec and this Agreement has been
duly executed and delivered by a duly authorized officer of Antec and
constitutes a valid and binding obligation of Antec, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
c. the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by it will not, conflict with, or
result in any violation pursuant to any provisions of the certificate of
incorporation or bylaws of Antec or of any loan or credit agreement, note,
mortgage, indenture, lease, plan or other agreement, contractual obligation,
instrument, permit, concession, franchise or license applicable to Antec or its
properties or assets;
d. Antec has taken all necessary corporate action to authorize and
reserve the Shares for issuance, and the Shares, when issued and delivered by
Antec, will be duly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights;
e. The execution and delivery of this Agreement by Antec and the
issuance of Shares upon exercise of this Agreement do not require the consent,
waiver, approval or authorization of or any filing with any person or public
authority and will not violate, result in a breach of or the acceleration of
any obligation under, or constitute a default under, any provision of any
charter or bylaw or any indenture, mortgage, lien, lease, agreement, contract,
instrument, order, law, rule, regulation, judgment, ordinance, or decree, or
restriction by which Antec or any of its subsidiaries or any of their
respective properties or assets is bound; and
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<PAGE> 8
f. none of the restrictions of any "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or regulation
(including, without limitation, the restrictions on "business combinations" set
forth in Section 203 of the Delaware General Corporation Law) is or shall be
applicable to the acquisition of Shares that may be issued pursuant to this
Agreement (and the Board of Directors of Antec has taken all action to approve
the acquisition of the Shares to the extent necessary to avoid such
application). Additionally, Antec will not avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed under this Agreement by Antec and Antec will not take
any action which would cause any of its representations or warranties not to be
true in any material respect.
7. REPRESENTATIONS AND WARRANTIES OF NORTEL.
Nortel represents and warrants to Antec that:
a. The execution of this Agreement by Nortel and the consummation by
it of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Nortel and this Agreement has
been duly executed and delivered by a duly authorized officer of Nortel and
will constitute a valid and binding obligation of Nortel; and
b. If and when Nortel purchases the Shares, it will be acquiring the
Shares for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Securities Act.
8. RESERVATION OF SHARES.
Antec agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued shares of Antec Common
Stock so that the Shares may be issued without additional authorization by
Antec; and (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of
any of the covenants to be observed or performed under this Agreement.
9. REGISTRATION RIGHTS.
A. Required Registrations.
a. At any time on or after the six month anniversary of the issuance
of the Shares, Nortel may request in writing that Antec file a Registration
Statement on the form required by the applicable rules, provided that no more
than two such requests may be made. Upon any such
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<PAGE> 9
request, Antec shall, as expeditiously as possible, use its best efforts to
effect the registration of all Shares which Antec has been requested to so
register.
b. Antec shall be entitled to delay the filing or effectiveness of
any Registration Statement for up to 90 days in any 12 month period if the
offering would, in the judgment of the Board of Directors of Antec, require
premature disclosure of any material corporate development or otherwise
materially interfere with or adversely affect any pending or proposed offering
of securities of Antec or any other material transaction involving Antec.
B. Incidental Registration.
a. Subject to such limitations as may be imposed by the specific
terms of any legally binding written commitment undertaken by Antec prior to
March 31, 1999 and remaining in force and effect at the time of the exercise by
Nortel of its rights under this Section 9.B, whenever Antec proposes to file a
Registration Statement (other than pursuant to Section 9.A) at any time and
from time to time, it will, prior to such filing, give written notice to Nortel
of its intention to do so and, upon the written request of Nortel given within
20 days after Antec provides such notice (which request shall state the
intended method of disposition of such Shares), Antec shall use its best
efforts to cause all Shares which Antec has been requested by Nortel to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of Nortel; provided that Antec shall
have the right to postpone or withdraw any registration effected pursuant to
this Section 9.B without obligation to Nortel. Notwithstanding the foregoing,
Antec is not required to give notice to Nortel or register the Shares if the
Registration Statement is to be filed pursuant to a legally binding written
commitment with a third party which provides demand registration rights and
prohibits incidental registration of securities or other holders in connection
therewith.
b. In connection with any registration under this Section 9.B
involving an underwriting, Antec shall not be required to include any Shares in
such registration unless the holders thereof accept the terms of the
underwriting as agreed upon between Antec and the underwriters selected by it
(provided that such terms must be consistent with this Agreement). If in the
opinion of the managing underwriter it is appropriate because of marketing
factors to limit the number of Shares to be included in the offering, then
Antec shall be required to include in the registration only that number of
Shares, if any, which the managing underwriter believes should be included
therein, provided that no persons or entities other than Antec shall be
permitted to include securities in the offering, subject to such requirements
as may be imposed on Antec by the specific terms of any legally binding written
commitment undertaken by Antec prior to March 31, 1999 for so long as such
requirements remain in force and effect.
C. Registration Procedures. If and whenever Antec is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Shares under the Securities Act, Antec shall:
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<PAGE> 10
a. file with the Commission a Registration Statement with respect to
such Shares and use its best efforts to cause that Registration Statement to
become and remain effective;
b. as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Shares covered thereby or 90 days after the
effective date thereof;
c. as expeditiously as possible furnish to Nortel such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as Nortel may reasonably request in order to facilitate the public
sale or other disposition of the Shares; and
d. as expeditiously as possible use its best efforts to register or
qualify the Shares covered by the Registration Statement under the securities
or Blue Sky laws of such states as Nortel shall reasonably request, and do any
and all other acts and things that may be necessary or desirable to enable
Nortel to consummate the public sale or other disposition in such states of the
Shares; provided, however, that Antec shall not be required in connection with
this paragraph (d) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
If Antec has delivered preliminary or final prospectuses to Nortel and
after having done so the prospectus is amended to comply with the requirements
of the Securities Act, Antec shall promptly notify Nortel and, if requested,
Nortel shall immediately cease making offers of Shares and return all
prospectuses to Antec. Antec shall promptly provide Nortel with revised
prospectuses and, following receipt of the revised prospectuses, Nortel shall
be free to resume making offers of the Shares.
D. Standstill. If at any time Nortel holds 5% or more of the Common Stock,
it will agree, upon the reasonable recommendation of any underwriter involved
in the sale on behalf of Antec of Common Stock or securities which can be
converted into Common Stock, to refrain from selling any shares of Common Stock
for such period, not to exceed 90 days, which the underwriter may reasonably
recommend.
E. Allocation of Expenses. Antec will pay all Registration Expenses of all
registrations under this Agreement; provided, however, that if a registration
under Section 9.A is withdrawn at the request of Nortel (other than as a result
of information concerning the business or financial condition of Antec which is
made known to Nortel after the date on which such registration was requested)
and if Nortel elects not to have such registration counted as a registration
requested under Section 9.A, Nortel shall pay the Registration Expenses of such
registration. For purposes of this Section 9, the term "Registration Expenses"
shall mean all expenses incurred by Antec in complying with this Agreement,
including, without limitation, all registration and filing fees,
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<PAGE> 11
exchange listing fees, printing expenses, fees and expenses of counsel for
Antec, state Blue Sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding underwriting
discounts, selling commissions and the fees and expenses of counsel selected by
Nortel or any underwriter.
F. Indemnification and Contribution.
a. In the event of any registration of any of the Shares under the
Securities Act pursuant to this Agreement, Antec will indemnify and hold
harmless the seller of such Shares, each underwriter of such Shares, and each
other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act or the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and Antec
will reimburse such seller, underwriter and each such controlling person for
any legal or any other expenses reasonably incurred by such seller, underwriter
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that Antec will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or omission
made in such Registration Statement, preliminary prospectus or final
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to Antec, in writing, by or on behalf of
such seller, underwriter or controlling person specifically for use in the
preparation thereof.
b. In the event of any registration of any of the Shares under the
Securities Act pursuant to this Agreement, each seller of Shares, severally and
not jointly, will indemnify and hold harmless Antec, each of its directors and
officers and each underwriter (if any) and each person, if any, who controls
Antec or any such underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which Antec, such directors and officers, underwriter or
controlling person may become subject under the Securities Act, Exchange Act,
state securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the statement or
omission was made in reliance
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upon and in conformity with information relating to such seller furnished in
writing to Antec by or on behalf of such seller specifically for use in
connection with the preparation of such Registration Statement, prospectus,
amendment or supplement; provided, however, that the obligations of such
Stockholders hereunder shall be limited to an amount equal to the proceeds to
each Stockholder of Shares sold in connection with such registration.
c. Each party entitled to indemnification under this Section 9.F
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 9.F, except to the
extent the Indemnifying Party may have been prejudiced by such failure. The
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party.
d. In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder
of Shares exercising rights under this Agreement, or any controlling person of
any such holder, makes a claim for indemnification pursuant to this Section 9.F
but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9.F provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Stockholder or any such
controlling person in circumstances for which indemnification is provided under
this Section 9.F; then, in each such case, Antec and such Stockholder will
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportions so
that such holder is responsible for the portion represented by the percentage
that the public offering price of its Shares offered by the Registration
Statement bears to the public offering price of all securities offered by such
Registration Statement, and Antec is responsible for the remaining portion;
provided, however, that, in any such case, (A) no such holder will be required
to contribute any amount in excess of the proceeds to it of all Shares sold by
it pursuant to such Registration Statement, and (B) no person or entity guilty
of fraudulent
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misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty
of such fraudulent misrepresentation.
G. Indemnification with Respect to Underwritten Offering. In the event
that Shares are sold pursuant to a Registration Statement in an underwritten
offering pursuant to Section 9.A, Antec agrees to enter into an underwriting
agreement containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being registered and
customary provisions with respect to indemnification by Antec of the
underwriters of such offering.
H. Limitations on Subsequent Registration Rights. Antec shall not, without
the prior written consent of Nortel, enter into any agreement (other than this
Agreement) with any holder or prospective holder of any securities of Antec
which would allow such holder or prospective holder to include securities of
Antec in any Registration Statement filed at the request of Nortel under this
Agreement, subject to such requirements as may be imposed by the specific terms
of any legally binding written commitment undertaken by Antec prior to March
31, 1999 for so long as such requirements remain in force and effect.
I. Rule 144 Requirements. Antec agrees to:
a. comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about Antec;
b. use its best efforts to file with the Commission in a timely
manner all reports and other documents required of Antec under the Securities
Act and the Exchange Act (at any time after it has become subject to such
reporting requirements); and
c. furnish to any holder of Shares upon request (i) a written
statement by Antec as to its compliance with the requirements of said Rule
144(c), and the reporting requirements of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of Antec, and (iii)
such other reports and documents of Antec as such holder may reasonably request
to avail itself of any similar rule or regulation of the Commission allowing it
to sell any such securities without registration.
10. MERGERS, ETC.
Antec shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which Antec shall not be the surviving
corporation unless the proposed surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of Antec under this Agreement, and for that purpose references
hereunder to "Shares" shall be deemed to be references to the securities which
Nortel would be entitled to receive in exchange for Shares under any such
merger, consolidation or reorganization; provided, however, that the provisions
of this Section 10 shall not apply in the
12
<PAGE> 14
event of any merger, consolidation or reorganization in which Antec is not the
surviving corporation if Nortel is entitled to receive in exchange for its
Shares consideration consisting solely of (i) cash, (ii) securities of the
acquiring corporation which may be immediately sold to the public without
registration under the Securities Act, or (iii) securities of the acquiring
corporation which the acquiring corporation has agreed to register within 90
days of completion of the transaction for resale to the public pursuant to the
Securities Act.
11. RESTRICTIONS ON TRANSFER
Nortel agrees not to assign, sell, pledge, transfer or otherwise dispose of or
transfer any Shares unless registered under the Securities Act and applicable
state securities laws, or an opinion is given by counsel satisfactory to Antec
that such registration is not required. Each certificate representing the
Shares will contain a legend substantially as follows:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933. They may not be
offered or transferred by sale, assignment, pledge or
otherwise unless (i) a registration statement for the shares
under the Securities Act of 1933 is in effect or (ii) the
corporation has received an opinion of counsel, which opinion
is satisfactory to the corporation, to the effect that such
registration is not required under the Securities Act of
1933."
The foregoing legend shall be removed from the certificates representing the
Shares, at the request of the holder thereof, at such time as they become
eligible for resale pursuant to Rule 144(k) under the Securities Act.
12. MISCELLANEOUS
a. Notices.01. Notices. All notices, consents, approvals, reports,
designations, requests, waivers, elections and other communications
(collectively, "Notices") authorized or required to be given pursuant to this
Agreement shall be given in writing and either personally delivered to the
party to whom it is given or delivered by an established delivery service by
which receipts are given or mailed by registered or certified mail, postage
prepaid, or sent by telex or telegram or electronic telecopier, addressed to
the party at its address listed below. Any party may change its address for the
receipt of Notices at any time by giving Notice thereof to the other party.
If to Nortel:
Nortel Networks
c/o Northern Telecom Inc.
Northern Telecom Plaza
200 Athens Way
Nashville, TN 37228
Attn: President
13
<PAGE> 15
With a copy to:
Northern Telecom, Inc.
Office of the General Counsel
Northern Telecom Plaza
200 Athens Way
Nashville, TN 37228
Attn: President
If to Antec:
Antec Corporation
5720 Peachtree Parkway NW
Norcross, GA 30092
Attn: President
b. Entire Agreement.02. Entire Agreement. This Agreement, together
with the other agreements referenced herein, supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
c. Modification.03. Modification. No change or modification of this
Agreement shall be of any force unless such change or modification is in
writing and has been signed by the parties hereto.
d. Waivers.04. Waivers. No waiver of any breach of any of the terms
of this Agreement shall be effective unless such waiver is in writing and
signed by the party against which such waiver is claimed. No waiver of any
breach shall be deemed to be a waiver of any other or subsequent breach.
e. Severability.05. Severability. If any provision of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
f. Further Assistance.06. Further Assistance. Antec shall execute
such additional deeds, assignments, endorsements and other instruments and
documents and shall give such further assurances as shall be necessary to
perform its obligations hereunder.
g. Governing Law.07. Governing Law. This Agreement shall be
governed by and be construed in accordance with the laws of the State of New
York without regard to its choice of law rules.
14
<PAGE> 16
h. Jurisdiction.08. Jurisdiction. The parties hereto irrevocably
submit to the jurisdiction of the courts of the State of New York and of the
United States sitting in New York in respect of any action or proceeding
against them relating in any way to this Agreement (a "Proceeding"). Any
process or summons for purposes of any Proceeding may be served on it by
mailing a copy thereof by registered mail, or a form of mail substantially
equivalent thereto, addressed to the party at its address as provided for
Notices hereunder.
i. Waiver of Jury Trial.09. Waiver of Jury Trial. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
j. Counterparts.10. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
k. Limitation on Rights of Others.11. Limitation on Rights of
Others. No Person other than a party hereto shall have any legal or equitable
right, remedy or claim under or in respect of this Agreement.
l. Successors and Assigns.14. Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Nortel shall be
permitted to assign its rights hereunder to any transferee of all or part of
the Shares, provided that such transferee agrees to be bound by the provisions
hereof.
m. Expenses.15. Expenses. Each party hereto shall bear its own
expenses in connection with the drafting, negotiation and implementation of
this Agreement.
15
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the opening of business on the day and year first above
written.
ANTEC CORPORATION NORTEL NETWORKS LLC
By: /s/ Lawrence Margolis By: /s/ F. Plastina
Name: Name:
Title: Title:
[Signature Page to Earnout Share Agreement]
16
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO
PRODUCTS DISTRIBUTOR AGREEMENT
BETWEEN
PRODUCTS VENTURE L.L.C.
AND
ANTEC CORPORATION
THIS AMENDMENT ("Amendment") made as of the 31st day of March 1999, by and
between Arris Interactive L.L.C. (f/k/a Products Venture L.L.C.), a Delaware
limited liability company (the "Joint Venture") and Antec Corporation, a
Delaware corporation, for itself and on behalf of its Affiliates ("Antec").
WHEREAS, the Joint Venture and Antec entered into a Products Distributor
Agreement dated November 17, 1995 ("Agreement"; capitalized terms not otherwise
defined herein shall have their respective meanings set forth in the
Agreement); and
WHEREAS, contemporaneously the Joint Venture, Nortel and Antec are executing
various agreements pursuant to which Nortel is conveying certain assets to the
Joint Venture and as a result the Parties desire to amend the Agreement to
reflect the new terms of the distribution relationship;
NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
A. Section 1 of the Agreement shall be amended by deleting in their
entirety the definition for "Products", and "Products Limited Liability Company
Agreement" and inserting the following definitions in their applicable
alphabetized order:
"CABLE MODEM PRODUCTS": shall mean Hardware and/or Software and any
enhancements thereto described on Annex A and which Antec is
authorized to distribute pursuant to the terms of this Agreement.
"CORNERSTONE PRODUCTS": shall mean Hardware and/or Software and any
enhancements thereto described on Annex B and which Antec is
authorized to distribute pursuant to the terms of this Agreement.
"PRODUCTS": shall mean the Cable Modem Products and the Cornerstone
Products, collectively.
<PAGE> 2
"PRODUCTS LIMITED LIABILITY COMPANY AGREEMENT": shall mean Limited
Liability Company Agreement for the Joint Venture dated as of the date
hereof between Nortel and Antec, as amended from time to time.
B. The second sentence of Section 3 of the Agreement shall be deleted in
its entirety and the following shall be inserted in lieu of this
sentence:
"The Parties agree to execute amendments to exiting Product Annex(es)
or to execute new Annex(es) for the Hardware and Software comprising
the Products distributed hereunder, for replacements and enhancements
thereto, and for new hardware and software that the Joint Venture
manufactures or distributes.
C. A new Section 5.7 of the Agreement shall be inserted:
"5.7 Any revisions to Exhibit G in accordance with Sections 5.1(ii),
5.1(iii), or 5.6(iii) shall be mutually agreed to in writing."
D. A new Section 5.8 of the Agreement shall be inserted:
"5.8 Notwithstanding anything to the contrary contained in this
Section 5, those End Users listed in Exhibit G which are Nortel's
pre-existing customers for the Cable Modem Products shall be
transferred to Antec with notice by Nortel substantially in the form
attached hereto as Exhibit ___that such End User's account is being
transferred to Antec
E. The first and fifth sentences of Section 9.2 of the Agreement shall be
deleted in their entirety and the following shall be inserted in lieu of the
first sentence:
"Except as otherwise provided in a Product Annex, periodically at the
request of either Party, no more often than quarterly, Nortel, Antec
and the Joint Venture shall agree on a revision to the Distributor
Discount so that the Joint Venture's price of the Products to Antec
shall be equal to eighty-five percent (85%) of their best estimate of
the market price for resale of the Products to the End Users to which
Antec is permitted to sell Products hereunder.
F. Except for the amendments expressly set forth above, the Agreement
shall remain unchanged and in full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the
date first written above.
ARRIS INTERACTIVE L.L.C. ANTEC CORPORATION
(F/K/A PRODUCTS VENTURE L.L.C.]
/s/ F. Plastina /s/ Lawrence Margolis
- ----------------------------- ---------------------------
Signature Signature
- ----------------------------- ---------------------------
Name (Please Print or Type) Name (Please Print or Type)
- ----------------------------- ---------------------------
Title Title
<PAGE> 1
EXHIBIT 10.4
AMENDMENT AND RESTATEMENT,
DATED AS OF APRIL 28, 1999
CREDIT AND GUARANTEE AGREEMENT,
DATED AS OF MAY 21, 1998, AS AMENDED
BY AND AMONG
ANTEC CORPORATION
THE SUBSIDIARY GUARANTORS PARTY THERETO
THE LENDERS PARTY THEREOF
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS COLLATERAL AGENT
AND
THE BANK OF NEW YORK,
AS ADMINISTRATIVE AGENT
BNY CAPITAL MARKETS, INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS CO-LEAD ARRANGERS
BNY CAPITAL MARKETS, INC.
SOLE BOOK MANAGER
<PAGE> 2
AMENDMENT AND RESTATEMENT (this "AMENDMENT"), dated as of April 28,
1999, of the Credit and Guarantee Agreement, dated as of May 21, 1998, by and
among ANTEC Corporation, a Delaware corporation (the "BORROWER"), the
Subsidiary Guarantors party thereto, the several banks and other parties from
time to time parties thereto (the "LENDERS"), Bank of America National Trust
and Savings Association, as Collateral Agent, and The Bank of New York, as the
administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), as amended
by Amendment No. 1, dated as of October 7, 1998 (the "CREDIT AGREEMENT").
I. Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
II. The parties desire to amend and restate the Credit Agreement
to the extent set forth herein subject to the terms and conditions hereof.
Accordingly, in consideration of the terms and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. The Credit Agreement be and the same is hereby amended and
restated in its entirety so as to read as presently set forth therein with the
following exceptions:
(a) The definitions of "Borrowing Base Amount" and "Special
Counsel" shall read as follows:
"BORROWING BASE AMOUNT" means, on any date of
determination, an amount equal to the sum of (i) 85% of
Eligible Receivables and (ii) the lesser of (x) 60% of
Eligible Inventory or (y) an amount equal to 60% of the
Aggregate Credit Exposure (after giving effect to any
Extensions of Credit and prepayments made on such date).
"SPECIAL COUNSEL" means Bryan Cave LLP, as, or such
other counsel selected by the Administrative Agent as,
special counsel to the Administrative Agent hereunder.
(b) The following definition is added to Section 1.1 of the
Credit Agreement in its appropriate alphabetical order:
"INCREASE REQUEST" means a request by the Borrower
for an increase of the Aggregate Revolving Commitment in
accordance with Section 2.3(e).
(c) The total of the Revolving Commitments of all Lenders
shall be
<PAGE> 3
increased to $110,000,000 and the Revolving Commitment of each Lender shall be
as set forth on such Lender's signature page to this Amendment adjacent to the
heading "Revolving Commitment".
(d) The heading of Section 2.3 of the Credit Agreement is
amended to read "Termination, Reduction and Increase of Revolving Commitments"
and a new subsection (e) is added to the end thereof to read as follows:
(e) At any time (but not more than once, the
Borrower may, at its sole expense and effort and after
consulting with the Administrative Agent, request one or more
Lenders to increase (in the sole and absolute discretion of
each such Lender) the amount of their respective Revolving
Commitments or may request another Eligible Institution
acceptable to the Administrative Agent and the Issuing Bank
to assume all or a portion of such requested increase. To
request the increase pursuant to this Section, the Borrower
shall submit to the Administrative Agent an Increase Request
signed by the Borrower and in form approved by the
Administrative Agent, which shall be irrevocable. The
Increase Request shall specify each such Lender or proposed
Lender and the amount of the proposed increase in the amount
of its Revolving Commitment or the amount of the Revolving
Credit being assumed by it, as applicable. Promptly following
receipt of an Increase Request, the Administrative Agent
shall advise each Lender of the details thereof. Each Lender
(or proposed Lender) specified in such Increase Request may,
in its sole and absolute discretion, unconditionally agree to
the proposed increase in the amount of (or the assumption of)
its Revolving Commitment specified therein at any time prior
to the 30th day following the date thereof. To so agree, such
Lender or proposed Lender shall deliver to the Administrative
Agent and the Borrower a written agreement in a form approved
by the Administrative Agent and signed by such Lender or
proposed Lender. If one or more of such Lenders or proposed
Lenders shall have so agreed, then, on a day (which shall be
a Business Day) acceptable to such Lender or proposed Lender,
the Borrower and the Administrative Agent, the Revolving
Commitment of each such Lender shall be increased by the
applicable amount specified in such Increase Request or, in
the case of a proposed Lender, such proposed Lender shall
become a Lender under the Agreement with a Revolving
Commitment specified therein, provided that (i) at the time
thereof and immediately after giving effect thereto, no
Default shall have occurred and be continuing, and (ii)
immediately after giving effect thereto, the aggregate amount
of such increase of the
2
<PAGE> 4
Aggregate Revolving Commitment made under this Section shall
not exceed $10,000,000. Simultaneously with such increase (or
assumption) of the Revolving Commitments of one or more
Lenders or a proposed Lender under this Section, the Lenders,
the Administrative Agent and the proposed Lender, if
applicable, shall enter into a master assignment and
assumption agreement in a form mutually acceptable to them
and shall assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in
Section 11.5(b)), such interests, rights and obligations
under this Agreement to the other Lenders to the extent
necessary so that, immediately after giving effect to such
increase, the outstanding Revolving Loans shall be held by
the Lenders ratably in accordance with their Commitments,
provided that each such assignor Lender shall have received
(to the extent of the interests, rights and obligations
assigned) (x) from the applicable assignee Lender or Lenders,
payment of the outstanding principal amount of its Revolving
Loans and (y) from the Borrower, accrued interest on such
Revolving Loans, accrued fees (including breakage fees
calculated as if the Borrower had repaid each existing
Lender's Revolving Loans being assigned as provided herein on
the effective date of such increase), commissions and all
other amounts payable to it under the Loan Documents. Any
proposed Lender which assumes a Revolving Commitment shall
submit to the Administrative Agent such documents as are
required by Section 11.5.
(e) Section 8.3(e) is amended to read as follows:
(c) any Subsidiary Guarantor in existence on
April 29, 1999 which has assets of less than $1,000 and any
Non-Guarantor Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is
not materially disadvantageous to the Lenders, provided that
the Borrower shall notify the Administrative Agent thereof
within 10 Business Days of such dissolution.
(f) Section 11.1(b)(iii) is amended by adding "(except as
provided in Section 2.3(e))" prior to the semi-colon at the end thereof.
(g) Sections 11.2(a) and (b) of the Credit Agreement are
amended to read as follows:
(a) in the case of any Loan Party, to such Loan
Party c/o
3
<PAGE> 5
ANTEC Corporation, 11450 Technology Circle, Duluth, Georgia
30097, Attention: Lawrence A. Margolis, Executive Vice
President, Telephone: (678) 473-2000, Telecopy: (678)
473-8470;
(b) in the case of the Administrative Agent, to
The Bank of New York, Agency Function Administration, One
Wall Street, 18th Floor, New York, NY 10286; Attention: LaRue
Brathwaite, Telephone: (212) 635-6986, Facsimile (212)
635-6365 or 6366 or 6367; with a copy to: The Bank of New
York, One Wall Street, 16th Floor, New York, NY 10286,
Attention: John C. Lambert, Telephone: (212) 635-8694,
Facsimile (212) 635-8595;
2. Exhibit I is amended to change the percentage contained in
clause (ii) of Item 11 thereof from "50%" to "60%".
3. The Administrative Agent with the consent of the Lenders
signing below hereby waives any violations of Section 7.3 and 8.3(e) the Credit
Agreement resulting from the dissolution of Texscan MSI Corporation.
4. Paragraphs 1 - 3 of this Amendment shall not be effective
until such date (the "RESTATEMENT EFFECTIVE DATE") as the Loan Parties and the
Lenders shall have executed and delivered this Amendment to the Administrative
Agent and each of the following conditions have been fulfilled:
(a) The Administrative Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Loan
Party (i) attaching a true and complete copy of the resolutions of its
Managing Person and of all other documents evidencing all necessary
corporate action (in form and substance satisfactory to the
Administrative Agent) taken to authorize this Amendment and certifying
that such resolutions are in full force and effect, (ii) certifying
that there has been no change to its Organizational Documents since
May 21, 1998 or, if so, setting forth the same, and (iii) setting
forth the incumbency of its officer or officers who may sign this
Amendment, including therein a signature specimen of such officer or
officers (or other analogous counterpart).
(b) The Administrative Agent shall have received an
original of this Amendment executed by a duly authorized officer or
officers of the Borrower.
(c) Each Lender shall have executed and delivered to the
Administrative Agent a counterpart copy of a Master Assignment and
Acceptance Agreement substantially in the form attached hereto as
Exhibit A and the conditions precedent to the effectiveness thereof
set forth in Section 4(a) shall have been satisfied.
4
<PAGE> 6
(d) The Administrative Agent shall have received an opinion
of counsel to the Borrower, in form and substance satisfactory to the
Administrative Agent.
(e) On and as of the Restatement Effective Date, no Default
or Event of Default shall have occurred or be continuing.
(f) The Borrower shall pay all of the out-of-pocket costs
and expenses of the Administrative Agent (including the reasonable
fees and disbursements of Special Counsel) incurred in connection with
the preparation, negotiation and closing of this Amendment.
(g) All legal matters incident to the execution and
delivery of this Amendment shall be reasonably satisfactory to Special
Counsel.
5. On and as of the date hereof the Borrower hereby (a) reaffirms
and admits the validity and enforceability of the Loan Documents and all of its
obligations thereunder, (b) agrees and admits that it has no defenses to or
offsets against any such obligation, (c) represents and warrants that no
Default has occurred and is continuing, and that each of the representations
and warranties made by it in the Credit Agreement is true and correct with the
same effect as though such representation and warranty had been made on such
date, and (d) agrees to pay the reasonable fees and disbursements of Special
Counsel in connection with this Amendment.
6. In all other respects, the Loan Documents shall remain in full
force and effect, and no amendment in respect of any term or condition of any
Loan Document contained herein shall be deemed to be an amendment in respect of
any other term or condition contained in any Loan Document.
7. This Amendment may be executed in any number of counterparts
all of which, taken together, shall constitute one amendment. In making proof
of this Amendment, it shall only be necessary to produce the counterpart
executed and delivered by the party to be charged.
8. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS
INTENDED TO BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
5
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Restatement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
ANTEC CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 8
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
ANTEC LATIN AMERICA, INC.
ANTEC DIGITAL VIDEO INC.
ELECTRONIC CONNECTOR
CORPORATION OF ILLINOIS
ELECTRONIC SYSTEM PRODUCTS
INC.
ENGINEERING TECHNOLOGIES
GROUP INC.
ITEL HOLDINGS, INC.
KEPTEL, INC.
REGAL TECHNOLOGIES, LTD.
POWER GUARD, INC.
COMFAB TECHNOLOGIES, INC.
BENEFIT CONNECTIONS, INC.
ANTEC INTERNATIONAL HOLDINGS
INC.
ANTEC PACIFIC INC.
ANTEC SPAIN INC.
SCIENTIFIC-ATLANTA LA VENTURE, INC.
TEXSCAN CORPORATION
AS TO EACH OF THE FOREGOING
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
7
<PAGE> 9
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
ANIXTER CATV INDUSTRIES
MSO SUPPLY COMPANY
TSX CORPORATION
TEXSCAN TRADING COMPANY
AS TO EACH OF THE FOREGOING
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
8
<PAGE> 10
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
THE BANK OF NEW YORK,
as Administrative Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE BANK OF NEW YORK COMPANY, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Revolving Commitment: $30,000,000
9
<PAGE> 11
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Revolving Commitment: $30,000,000
10
<PAGE> 12
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Issuer
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Revolving Commitment: $25,000,000
11
<PAGE> 13
ANTEC AMENDMENT AND RESTATEMENT
OF CREDIT AND GUARANTEE AGREEMENT
WACHOVIA BANK, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Revolving Commitment: $25,000,000
12
<PAGE> 14
EXHIBIT A TO AMENDMENT AND RESTATEMENT
FORM OF MASTER ASSIGNMENT AND ASSUMPTION AGREEMENT
MASTER ASSIGNMENT AND ASSUMPTION AGREEMENT (this "AGREEMENT"), dated
as of April 28, 1999, among THE BANK OF NEW YORK, AS ADMINISTRATIVE AGENT, THE
BANK OF NEW YORK COMPANY, INC. ("BNYCO"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("BOFA"), THE FIRST NATIONAL BANK OF CHICAGO ("FIRST
CHICAGO"), WACHOVIA BANK, N.A. ("WACHOVIA") and CREDIT AGRICOLE INDOSUEZ
("CREDIT AGRICOLE" and together with BNYCO, BofA, First Chicago and Wachovia,
the "PARTIES", each, individually, a "PARTY").
RECITALS
(b) Reference is made to the Credit and Guarantee Agreement, dated as of May
21, 1998, by and among ANTEC Corporation, a Delaware corporation (the
"BORROWER"), the Subsidiary Guarantors party thereto, the several banks and
other parties from time to time parties thereto (the "LENDERS"), Bank of
America National Trust and Savings Association, as Collateral Agent, and The
Bank of New York, as the administrative agent (in such capacity, THE
"ADMINISTRATIVE AGENT"), as amended by Amendment No. 1, dated as of October 7,
1998 (the "CREDIT AGREEMENT").
(c) Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Credit Agreement. For purposes of this
Agreement, BNYCO, BofA, First Chicago and Wachovia are hereinafter referred to
collectively as the "Continuing Lenders") and Credit Agricole is hereinafter
referred to as the "Exiting Lender".
(d) Immediately after the effectiveness of this Agreement, the Parties, the
Borrower and the Subsidiary Guarantors are amending and restating the Credit
Agreement pursuant to an Amendment and Restatement, dated the date hereof (the
"AMENDMENT AND RESTATEMENT"). Pursuant to the Amendment and Restatement, the
Aggregate Revolving Commitment is being increased to $110,000,000 (the
"INCREASE").
(e) Contemporaneously with the effectiveness of the Increase and the Amendment
and Restatement, the Parties desire to make to make assignments and assumptions
under the Loan Documents upon the terms and conditions herein contained.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agrees as
follows:
1. Existing Revolving Commitments and Outstandings.
13
<PAGE> 15
Each Party hereby represents, warrants and
agrees that, on and as of the date hereof
and immediately prior to giving effect to
the assignments and assumptions
contemplated by Section 2(a), its Revolving
Commitment and outstanding Revolving Loans
are as set forth on Schedule A.
2. Assignments and Assumptions; Payments.
Each Party agrees that it hereby assigns to and/or assumes
from each other Party such rights and such obligations as shall cause its
Revolving Commitment and the outstanding principal amount of its Revolving
Loans (i) prior to the effectiveness of the Increase to be as set forth on Part
I of Schedule B and (ii) after the effectiveness of the Increase to be as set
forth on Part II of Schedule B.
In consideration of the assignments and assumptions set forth
in Section 2(a), each Party shall, on and as of the date hereof, pay to the
Administrative Agent in funds immediately available in New York the amount set
forth adjacent to its name on Part III of Schedule C under the heading "Net to
Administrative Agent", and upon receipt thereof, the Administrative Agent shall
pay to each Party in funds immediately available in New York the amount set
forth adjacent to its name on Part III of Schedule C under the heading "Net
from Administrative Agent".
In furtherance of the assignments and
assumptions set forth in paragraph 2(a),
the Borrower shall, on and as of the date
hereof, pay to the Administrative Agent,
for the account of each Party, in funds
immediately available in New York, an
amount representing accrued interest and
fees to the date hereof, breakage costs and
other similar amounts due on the date
hereof to such Party under the Loan
Documents or otherwise in connection
herewith, and upon receipt thereof, the
Administrative Agent shall pay such amount
to such Lender in funds immediately
available in New York. The Parties
acknowledge and agree that in the event
that after the date hereof the outstanding
principal balance of the Revolving Loans
shall have changed by reason of additional
borrowings, prepayments or otherwise,
proper adjustment shall be made to the
payments due from each Lender hereunder.
3. Representation and Warranties.
Each Party represents and warrants that (a)
it has full power and legal right to
execute and deliver this Agreement and to
perform the provisions hereof, (b)
14
<PAGE> 16
the execution, delivery and performance of
this Agreement have been authorized by all
action, corporate or otherwise, and do not
violate any provisions of its
organizational documents or any contractual
obligations or requirement of law binding
on it and (c) this Agreement constitutes
its legal, valid and binding obligation,
enforceable against it in accordance with
its terms. Each Party making an assignment
pursuant to Section 2(a) further represents
and warrants that it is the legal and
beneficial owner of the interest so being
assigned and that such interest is free and
clear of any adverse claim created by such
Party.
4. Conditions Precedent; Assignment Date.
The Parties shall not have any obligation hereunder unless
(i) immediately prior hereto, all Interest Periods with respect to Eurodollar
Loans shall have ended or terminated and all outstanding Revolving Loans shall
be composed of ABR Advances, and (ii) all accrued interest on the Revolving
Loans, all accrued fees payable by the Borrower under the Loan Documents, and
all breakage costs shall have been paid through the Assignment Date.
Subject to the provisions of subsection (a) above, this
Agreement shall become effective on the date on which the Amendment and
Restatement becomes effective (the "ASSIGNMENT DATE") and contemporaneously
with the effectiveness of the Amendment and Restatement. If the Amendment and
Restatement does not become effective, this Agreement shall be of no force and
effect and the Revolving Commitments of the Parties shall be as in effect prior
to the execution and delivery of this Agreement.
5. Binding Effect; Release; Delivery.
From and after the consummation of the transactions
contemplated by Section 2, the Parties acknowledge and agree that (a) each
Party acquiring an assignment pursuant to Section 2(a) shall be a party to and
be bound by the provisions of the Credit Agreement and, to the extent of the
interest so being assigned, have all of the rights and obligations of a Lender
under the Loan Documents and (b) each Party making an assignment pursuant to
Section 2(a) shall, to the extent of the interest so being assigned, relinquish
its rights and be released from its obligations under the Loan Documents.
Notwithstanding the provisions of subsection (a) above, from
and after the consummation of the transactions contemplated by Section 2, the
Parties acknowledge and agree that the Exiting Lender shall no longer have any
rights or obligations under the Loan Documents, it being understood that the
Exiting Lender shall continue to have the benefit of any provision of the Loan
Documents which by its terms survives the termination thereof.
6. Independent Investigation.
15
<PAGE> 17
Each Party acquiring an assignment pursuant to Section 2(a)
agrees that it does so totally without recourse to any other Party and, except
as provided in Section 3, without representation or warranty. Each such Party
further acknowledges that it has made its own independent investigation and
credit evaluation of the Borrower in connection with such assignment. Except
for the representations and warranties set forth in Section 3, each such Party
acknowledges that it is not relying on any representation or warranty of any
Credit Party, expressed or implied, including, without limitation, any
representation or warranty relating to the legality, validity, genuineness,
enforceability, collectibility, interest rate, repayment schedule or accrual
status of the assigned loans or commitments, the legality, validity,
genuineness or enforceability of the Loan Documents or the financial condition
or creditworthiness of the Borrower or any Subsidiary Guarantor or any other
Person. With respect to each such Party, no Credit Party has or will be acting
as either the representative, agent or trustee of such Party with respect to
matters arising out of or relating to the Loan Documents or this Agreement.
7. Miscellaneous.
Section headings used herein are for convenience of reference
only, are not part of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this Agreement.
This Agreement constitutes the entire contract among the
parties relating to the subject matter hereof and supersedes all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one contract.
In the event that any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, legal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each Party and its successors and permitted assigns.
This Agreement may not be amended, changed, waived,
supplemented or otherwise modified except by a writing executed by the Parties.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly
executed and delivered by their proper
and duly authorized officers as of the
day and year first above written.
THE BANK OF NEW YORK,
as Administrative Agent
By:
------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
THE BANK OF NEW YORK
COMPANY, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
<PAGE> 19
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Collateral Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 20
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as Issuer
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 21
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
WACHOVIA BANK, N.A.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 22
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
CREDIT AGRICOLE INDOSUEZ
By:
---------------------------
Name:
-------------------------
Title:
------------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------------
<PAGE> 23
SCHEDULE A TO
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
REVOLVING COMMITMENTS AND OUTSTANDING
REVOLVING LOANS PRIOR TO ASSIGNMENTS
<TABLE>
<CAPTION>
Outstanding
Lender Revolving Commitment Revolving Loans
------ -------------------- ---------------
<S> <C> <C>
The Bank of New York Company, Inc. $22,500,000 $22,500,000
Bank of America NT and SA $22,500,000 $22,500,000
The First National Bank of Chicago $20,000,000 $20,000,000
Wachovia Bank, N.A. $10,000,000 $10,000,000
Credit Agricole Indosuez $10,000,000 $10,000,000
----------- -----------
TOTALS $85,000,000 $85,000,000
=========== ===========
</TABLE>
<PAGE> 24
SCHEDULE B TO
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
PART I
REVOLVING COMMITMENTS AND OUTSTANDING REVOLVING
LOANS AFTER THE ASSIGNMENTS AND PRIOR TO INCREASE
<TABLE>
<CAPTION>
Outstanding
Lender Revolving Commitment Revolving Loans
----- -------------------- ---------------
<S> <C> <C>
The Bank of New York Company, Inc. $25,000,000 $25,000,000
Bank of America NT and SA $25,000,000 $25,000,000
The First National Bank of Chicago $22,500,000 $22,500,000
Wachovia Bank, N.A. $12,500,000 $12,500,000
Credit Agricole Indosuez $ - 0 - $ - 0 -
----------- -----------
Totals $85,000,000 $85,000,000
=========== ===========
</TABLE>
<PAGE> 25
PART II
REVOLVING COMMITMENTS AND OUTSTANDING REVOLVING
LOANS AFTER THE ASSIGNMENTS AND PRIOR TO INCREASE
<TABLE>
<CAPTION>
Outstanding
Lender Revolving Commitment Revolving Loans
----- -------------------- ---------------
<S> <C> <C>
The Bank of New York Company, Inc. $ 30,000,000 $23,181,818.18
Bank of America NT and SA $ 30,000,000 $23,181,818.18
The First National Bank of Chicago $ 25,000,000 $19,318,181.82
Wachovia Bank, N.A. $ 25,000,000 $19,318,181.82
------------ --------------
Totals $110,000,000 $85,000,000.00
============ ==============
</TABLE>
<PAGE> 26
SCHEDULE C TO
ANTEC ASSIGNMENT AND ASSUMPTION AGREEMENT
PART I
NETTING OF PAYMENTS PRIOR TO INCREASE
<TABLE>
<CAPTION>
Net to Net from
Lender Administrative Agent Administrative Agent
------ -------------------- --------------------
<S> <C> <C>
The Bank of New York Company, Inc. $ 2,500,000
Bank of America NT and SA $ 2,500,000
The First National Bank of Chicago $ 2,500,000
Wachovia Bank, N.A. $ 2,500,000
Credit Agricole Indosuez $ -0- $10,000,000
-----------
Totals $10,000,000 $10,000,000
=========== ===========
</TABLE>
<PAGE> 27
PART II
NETTING OF PAYMENTS AFTER GIVING EFFECT TO INCREASE
<TABLE>
<CAPTION>
Net to Net from
Lender Administrative Agent Administrative Agent
------ -------------------- --------------------
<S> <C> <C>
The Bank of New York Company, Inc. $1,818,181.82
Bank of America NT and SA $1,818,181.82
The First National Bank of Chicago $3,181,818.18
-------------
Wachovia Bank, N.A. $6,818,181.82
-------------
Totals $6,818,181.82 $6,818,181.82
============= =============
</TABLE>
<PAGE> 28
PART III
AGGREGATE NETTING OF PAYMENTS
<TABLE>
<CAPTION>
Net to Net from
Lender Administrative Agent Administrative Agent
------ -------------------- --------------------
<S> <C> <C>
The Bank of New York Company, Inc. $ 681,818.18
Bank of America NT and SA $ 681,818.18
The First National Bank of Chicago $ 681,818.18
Wachovia Bank, N.A. $ 9,318,181.82
Credit Agricole Indosuez $ -0- $ 10,000,000
-------------- --------------
Totals $10,681,818.18 $10,681,818.18
============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 135,763
<ALLOWANCES> 5,037
<INVENTORY> 168,998
<CURRENT-ASSETS> 6,817
<PP&E> 43,955
<DEPRECIATION> 0
<TOTAL-ASSETS> 599,453
<CURRENT-LIABILITIES> 108,441
<BONDS> 192,000
0
0
<COMMON> 364
<OTHER-SE> 295,439
<TOTAL-LIABILITY-AND-EQUITY> 599,453
<SALES> 145,256
<TOTAL-REVENUES> 145,256
<CGS> 111,045
<TOTAL-COSTS> 111,045
<OTHER-EXPENSES> 1,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,858
<INCOME-PRETAX> 67,525
<INCOME-TAX> 28,910
<INCOME-CONTINUING> 38,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,615
<EPS-PRIMARY> 1.07
<EPS-DILUTED> .92
</TABLE>
