<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended July 31, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _________
Commission File No. 0-22724
CABLE DESIGN TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3601505
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Foster Plaza 7
661 Andersen Drive
Pittsburgh, PA 15220
(Address of Principal Executive Offices and Zip Code)
(412) 937-2300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights, with respect to Common
Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes[x] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and need not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
================================================================================
Exhibit Index on Page 14 Page 1 of 22
------
<PAGE>
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant at October 1, 1999, is $555,815,153.
The number of shares outstanding of the registrant's Common Stock at October 1,
1999, is 28,197,340.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Cable Design Technologies Corporation Proxy Statement for the
Annual Meeting of Stockholders to be held on December 7, 1999, (the "Proxy
Statement") are incorporated by reference into Part III.
Portions of the 1999 Cable Design Technologies Corporation Annual Report to
Stockholders (the "1999 Annual Report") are incorporated by reference into Parts
I, II and IV.
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
Table of Contents
PART I Page
<TABLE>
<CAPTION>
<S> <C>
Item 1. Business......................................... 2
Item 2. Properties....................................... 9
Item 3. Legal Proceedings................................ 9
Item 4. Submission of Matters to a Vote of Security
Holders.......................................... 10
Item 4.1. Executive Officers of the Registrant............. 10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters...................... 12
Item 6. Selected Financial Data.......................... 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk...................................... 12
Item 8. Financial Statements and Supplementary Data...... 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 12
PART III
Item 10. Directors and Executive Officers of the
Registrant....................................... 13
Item 11. Executive Compensation........................... 13
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................ 13
Item 13. Certain Relationships and Related Transactions... 13
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K........................... 14
Signatures........................................ 19
</TABLE>
<PAGE>
PART I.
ITEM 1. BUSINESS
General Description of Business
Cable Design Technologies Corporation (the "Company", the "Registrant" or
"CDT") was incorporated on May 18, 1988 under the laws of the State of Delaware
with its principal office located at 661 Andersen Drive, Pittsburgh,
Pennsylvania 15220 (Telephone: 412-937-2300).
CDT is a designer and manufacturer of specialty electronic data
transmission cables and network structured wiring systems. CDT products include
high performance copper, fiber optic, and composite cable constructions,
connectors and component assemblies that are used in network, communication,
computer interconnect, wireless, commercial aviation, automotive, automation &
process control, and other applications.
The Company, as it exists today, was incorporated on May 18, 1988, but was
conceived in 1985 by its current President and Chief Executive Officer, Paul
Olson, together with other members of current management, shortly after its
predecessor company, Intercole, Inc., acquired the West Penn Wire Corporation
("West Penn/CDT"). In 1985 Intercole Inc., a Company traded on the American
Stock Exchange, was acquired by the Northern Group which subsequently took it
private. In 1988, the Company underwent a recapitalization pursuant to which
Golder, Thoma, Cressey Fund II purchased a controlling interest in the Company,
with the Northern Group retaining a smaller interest in the Company.
Acquisitions have been an important part of CDT's growth strategy. In March
1986, the Company acquired Mohawk Wire & Cable Corporation ("Mohawk/CDT") , a
cable manufacturer which had established relationships with companies involved
in the early stages of computer network development. In December 1988, the
Company purchased Montrose Products Company ("Montrose/CDT"), a specialty
electronics cable company with established relationships with IBM and other
major purchasers of computer interconnect products. In August 1990, the Company
established CDT International to respond to increasing demand for data
transmission cable products in international markets. In May 1991, the Company
expanded its international presence by purchasing Anglo-American Cables Ltd.
("Anglo/CDT"), a European cable distributor. In March 1993, the Company
established Phalo/CDT to further increase its production capabilities and
broaden its product line. In May 1994, the Company acquired all the outstanding
stock of Nya NEK Kabel AB ("NEK/CDT"), located near Gothenburg, Sweden, to enter
the sophisticated broadcast, CATV and antenna cable markets and to expand
network systems cable manufacturing capacity into Europe. In June 1995, the
Company purchased all of the operating assets of Manhattan Electric Cable
Corporation ("Manhattan/CDT") based in Rye, New York to enhance sales of
specialty electronic cable for industrial automation and robotic applications.
In August 1995, the Company purchased Cole-Flex Corporation of West Babylon, New
York to combine its sleeving and tubing capabilities with Manhattan/CDT. In
September 1995, the Company purchased the operating assets of the Raydex
Division of Volex Group, p.l.c. ("Raydex/CDT") (United Kingdom) to provide
additional international manufacturing capabilities of specialty and high
performance electronic cable for computer network systems, telecommunication,
aerospace, CATV, and industrial applications. On February 2, 1996, the Company
acquired the assets of Northern Telecom Limited's ("Nortel") communication cable
and IBDN network structured wiring products businesses ("NORDX/CDT")
2
<PAGE>
(Canada). On June 4, 1996, the Company acquired the stock of Cekan A/S
("Cekan/CDT") (Denmark), a manufacturer of high performance, telecommunication
connectors. On July 25, 1996, the Company acquired, in exchange for shares of
its common stock, X-Mark Industries ("X-Mark/CDT") (Washington, PA), a
manufacturer of specialized metal enclosures for network systems. On March 14,
1997 the Company acquired 51% of the outstanding stock of Stronglink, Pty. Ltd.
("Stronglink/CDT") (Australia), to enhance international distribution of network
and specialty cable in the Australian marketplace. The Company subsequently
increased its ownership of Stronglink/CDT to 75%. On April 7, 1997, the Company
acquired the assets of Dearborn Wire & Cable, L.P. and its affiliates, Dearborn
West, L.P. and Thermax Wire, L.P. (collectively, "Dearborn/CDT"), a manufacturer
of specialty electronic cable for instrumentation and control, commercial
aviation, automotive and marine applications, and component assemblies for
wireless applications. In September 1997, the Company acquired all the
outstanding stock of Barcel Acquisition Corporation ("Barcel/CDT") of Irvine,
California, a manufacturer of high performance specialty cable for commercial
and military aviation applications. In March 1998, the Company acquired all the
outstanding stock of (Orebro/CDT) of Orebro, Sweden, a manufacturer of custom
designed wire and cable for wireless communication, robotics and other
industries. On August 3, 1998, the Company acquired 80% of HEW-Kabel Heinz
Eilentropp GmbH & Co. KG and related entities ("HEW-Kabel/CDT") located in
Wipperfurth, Germany, a manufacturer of specialty cable for process control,
robotics, transportation, medical and other specialty applications. On September
25, 1998, the Company purchased the assets of Network Essentials, Inc. ("Red
Hawk/CDT") of Milpitas, California. Red Hawk/CDT is a provider of fiber optic
products for voice, video and data networks. In March 1999, the company acquired
the Tennecast Company ("Tennecast/CDT") of Barberton, Ohio, a manufacturer of
precision aluminum tire castings and computer designed and machined mold models
utilized for tire castings.
Products
The Company's products are generally comprised of electronic copper and
fiber optic cable and network structured wiring components which are categorized
into two reportable segments, Network Communication and Specialty Electronic.
The markets served by the Company's products include computer local area
networks ("LANS") and wide area networks ("WANS"), communication, computer
interconnect, wireless, commercial aviation, automotive, automation & process
control, and other applications.
Network Communication Segment:
- ------------------------------
The Company's Network Communication business segment encompasses
connectivity products for the electronic transmission of data, voice, and
multimedia over local and wide area networks and local loop communication
infrastructures. The products included in this segment are high performance
cable and passive components, including connectors, wiring racks and panels,
outlets and interconnecting hardware, for end-to-end network structured wiring
systems and communication cable products for outside communication and central
office switchboard and equipment applications. The Company entered the market
for communication cable products in fiscal 1996 with the acquisition of
NORDX/CDT. The Company's NORCOM/CDT facility in Kingston, Ontario, is the
largest communication cable operation in Canada. Additional capital expenditures
over the last three years have significantly increased the Company's production
capacity for network communication connectivity products.
3
<PAGE>
Network Communication segment sales were $373.0 million, $393.3 million and
$347.5 million for fiscal 1999, 1998 and 1997, respectively, and represented
approximately 55%, 60% and 67% of the Company's total sales for fiscal 1999,
1998 and 1997, respectively.
Specialty Electronic Segment:
- -----------------------------
The Specialty Electronic business segment encompasses primarily electronic
data and signal transmission cables for automation and process control
applications and specialized wire and cable products for niche markets,
including computer interconnect, commercial aviation, automotive electronics,
broadcast and wireless communication.
Automation & process control products encompass four distinct applications
for data and signal transmission cables. Automation applications include climate
control, premise video distribution and sophisticated security and signal
systems involving motion detection, electronic card and video surveillance
technologies. Process control applications include remote signaling and
electronic monitoring systems. Sound applications include voice activation,
evacuation and other similar systems. Safety applications refer to data
transmission cable for advanced fire alarm and safety systems, including cable
having improved safety and performance attributes under hazardous conditions.
Specialty products refers to a variety of highly engineered wire and cable
products covering a broad range of specialized applications and niche markets,
including commercial aviation and marine, automotive electronics, broadcast,
wireless component assemblies, communication switching equipment, CATV,
microwave antenna, medical electronics, electronic testing equipment, robotics
and electronically controlled factory equipment. Included in the Specialty
Electronic segment are non-cable manufacturing activities encompassing precision
tire casting and sheet metal fabrication which are not material to the Company's
business.
Specialty Electronic segment sales were $311.0 million, $258.4 million and
$169.5 million for fiscal 1999, 1998 and 1997, respectively, and represented
approximately 45%, 40% and 33% of the Company's total sales for fiscal 1999,
1998 and 1997, respectively.
Raw Materials
The principal raw materials used by CDT are copper and insulating
compounds. Raw materials are purchased on a consolidated basis whenever possible
to reduce costs and improve supplier service levels. Copper is purchased from
several suppliers. Price terms are generally producers' prices at time of
shipment. The Company does not generally engage in hedging transactions for the
purchase of copper. Currently, world stocks of and capacity for copper are
adequate to meet the Company's requirements. CDT purchases insulating compounds,
including Teflon(R), from various suppliers. Other raw materials used by CDT
include LEXAN(R), optical fiber, reels, tapes, textiles, chemicals and other
materials. Currently, supplies of these other raw materials are adequate to meet
the Company's needs and are expected to remain so for the foreseeable future.
Customers
The Company sells its products directly to original equipment manufacturers
(OEMs), regional Bell operating companies, certified system vendors, and
established distributors. The Company supports over
4
<PAGE>
10,000 customers. No single customer accounted for more than 10% of sales in
fiscal 1999, 1998 or 1997, except that sales to business units of Bell Canada
Enterprises represented approximately 11% of fiscal 1997 sales.
Competition
The markets served by the Company's products are highly competitive. Although
some of the Company's competitors are substantially larger and have greater
resources than the Company, management believes that it competes successfully in
its markets due to its experienced management team, manufacturing expertise,
breadth of product offerings and leading edge technology, large number of
customer approved specifications, emphasis on quality and established
reputation.
The principal competitive factors in all the markets for Network
Communication and Specialty Electronic products are availability, customer
support, price and product features. The relative importance of each of these
factors varies depending on the specific product category.
In the market for network structured wiring system products, the Company
competes with a large number of competitors, a few of which are significantly
larger than the Company. The Company competes in the network structured wiring
systems market by adapting to shifting customer demand for new products, and in
the case of NORDX/CDT, by offering complete, end-to-end certified network
structured wiring systems. In the markets for communication, switchboard and
equipment cable, price, reputation, production quality and availability are
principal competitive factors. In the automation & process control market, the
Company competes against a relatively large number of companies, most of which
are smaller in size than the Company. Product prices, company reputation and
product integrity are principal factors which affect competition in the
automation & process control market. In the specialty products market,
production quality, engineering capabilities and price are principal competitive
factors.
Backlog
Backlog orders believed to be firm were $90.4 million at July 31, 1999,
compared to $75.3 million at July 31, 1998. The Company believes that
substantially all of the backlog is shippable within the next twelve months.
Generally, customers may cancel orders for standard products without penalty
upon thirty days notice.
Environmental Matters
The Company is subject to numerous federal, state, provincial, local and
foreign laws and regulations relating to the storage, handling, emission and
discharge of materials into the environment, including the United States
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Clean Water Act, the Clean Air Act, the Emergency Planning and Community
Right-To-Know Act and the Resource Conservation and Recovery Act. Regulations of
particular significance to the Company include those pertaining to handling and
disposal of solid and hazardous waste, discharge of process wastewater and storm
water and release of hazardous chemicals. Although the Company believes it is in
substantial compliance with such laws and regulations, the Company may from time
to time not be in full compliance and may be subject to fines or other penalties
for noncompliance.
5
<PAGE>
The Company does not currently anticipate any material adverse effect on
its business as a result of compliance with federal, state, provincial, local or
foreign environmental laws or regulations. However, some risk of environmental
liability and other costs is inherent in the nature of the Company's business,
and there can be no assurance that material environmental costs will not arise
in the future.
Employees
As of July 31, 1999, the Company had approximately 3,700 full-time
employees and 617 workers under contract manufacturing arrangements in Mexico.
Approximately 1,400 of the full-time employees are represented by labor unions.
The Company has not experienced any material work stoppages at its plants and
believes its current relations with its employees are good, however, there can
be no assurance that conflicts will not arise with unions or other employee
groups or that such conflicts would not have a material adverse effect on the
Company's business.
Foreign Operations
For information regarding the Company's foreign and domestic operations,
see Note 14, "Industry and Geographic Segment Information" as presented in the
Company's Notes to Consolidated Financial Statements.
Research and Development
The Company engages in research and development activities including new and
existing product development. Research and development costs were $5.5 million,
$7.9 million and $7.2 million in fiscal 1999, 1998 and 1997, respectively. The
lower research and development expenses in fiscal 1999 were primarily the result
of the discontinuance in July 1998 of the DynaTraX (TM) product line and related
product development activities.
Risk Factors
Ability to Successfully Integrate Acquisitions. Growth through acquisitions
is an important part of the Company's strategy. Although the Company has been
successful in integrating previous acquisitions, no assurance can be given that
it will continue to be successful in integrating future acquisitions. The
integration and consolidation of acquired businesses will require substantial
management, financial and other resources and may pose risks with respect to
production, customer service and market share. While the Company believes that
it has sufficient financial and management resources to accomplish such
integration, there can be no assurance in this regard or that the Company will
not experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisitions will enhance the competitive
position and business prospects of the Company, there can be no assurance that
such benefits will be realized or that any combination will be successful.
Technological Obsolescence. Many of the markets that the Company serves are
characterized by rapid technological change. The Company believes that its
future success will depend in part upon its ability to enhance existing products
and to develop and manufacture new products that meet or anticipate such
changes. The failure to successfully introduce new or enhanced products on a
timely and cost-
6
<PAGE>
competitive basis could have a material adverse effect on the Company's
business.
Fiber optic technology represents a potential substitute for copper-based
cable products. A significant decrease in the cost of fiber optic systems or
increase in the cost of copper-based systems could make fiber optic systems
superior on a price performance basis to copper systems and may have a material
adverse effect on the Company's business. To date, fiber optic cables have not
significantly penetrated the markets served by the Company due to the high
relative cost required to interface electronic and light signals and the high
cost of fiber termination and connection. Although the Company currently
supplies fiber optic cable in niche specialty markets and has excess capacity as
well as the technological expertise to expand capacity, there can be no
assurance that the Company will have sufficient production capacity for fiber
optic cable products in order to adapt to a potential significant increase in
demand for fiber optic cable products.
Wireless technology, as it relates to premise network and communication
systems, may represent a threat to both copper and fiber optic cable based
systems by reducing the need for premise wiring. The Company believes that the
limited signal security and the relatively slow transmission speeds of current
premise wireless systems restrict the use of such systems in many data
communication markets. However, there can be no assurance that future advances
in wireless technology will not have a material adverse effect on the Company's
business.
Products have recently been introduced by other companies that
electronically expand cable bandwidth. By enhancing cable performance, these
products allow expanded data services without upgrading existing cable. These
devices are being sold primarily to telephone companies to enhance local loop
and central office cable performance, eliminating costly replacement of aerial
and/or direct burial telephone cable. The Company believes that the complexity
these systems add to the maintenance and repair of a communication network
limits their attractiveness to users and consequently limits their effect on the
Company's business. There can be no assurance, however, that potential advances
in electronic cable enhancement will not have a material adverse effect on the
Company's business.
Price Fluctuations and Availability of Raw Materials. Copper is the
principal raw material purchased by the Company, and the Company's sales may be
affected by the market price of copper. The Company does not generally engage in
hedging transactions for copper.
The Company also purchases compounds, such as Teflon (R), from various
suppliers. From time to time, the supply of such materials has been limited. The
inability of suppliers to supply such raw materials could have a material
adverse effect on the Company's business until a replacement supplier is found
or substitute materials are approved for use. Although the Company has generally
been able to pass on increases in the price of copper and other raw materials to
its customers, there can be no assurance that the company will be able to do so
in the future. Additionally, significant increases in the price of copper or
other raw materials could have a negative effect on demand for the Company's
products. Similarly, significant decreases in the price of copper, or excess
supplies of such other raw materials, over time could have a material adverse
effect on the Company's business.
Foreign Currency Fluctuations. The Company's operations may be adversely
affected by significant fluctuations in the value of the U.S. dollar against
certain foreign currencies or by the enactment of exchange controls or foreign
governmental or regulatory restrictions on the transfer of funds. The most
significant foreign currencies for the Company, in order of dollar equivalent
net sales, during fiscal 1999 were the Canadian Dollar, German Deutschmark and
the British Pound.
7
<PAGE>
Competition. The Company is subject to competition from a substantial
number of international and regional competitors, some of which have greater
financial, engineering, manufacturing and other resources than the Company. The
Company's competitors can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive
price and performance characteristics. Although the Company believes that it has
certain technological and other advantages over its competitors, realizing and
maintaining such advantages will require continued investment by the Company in
engineering, research and development, marketing and customer service and
support. There can be no assurance that the Company will have sufficient
resources to continue to make such investments or that the Company will be
successful in maintaining such advantages. See "Business -- Competition."
Environmental Matters. The Company does not currently anticipate any
material adverse effect on its business as a result of compliance with federal,
state, provincial, local or foreign environmental laws or regulations or cleanup
costs. However, some risk of environmental liability and other costs is inherent
in the nature of the Company's business, and there can be no assurance that
material environmental costs will not arise in the future. Moreover, it is
possible that future developments, such as increasingly strict requirements of
air emission control and other environmental laws and enforcement policies
thereunder, could lead to material costs for environmental compliance and
cleanup by the Company.
Year 2000 Compliance. The Company has a program in place to address the
Year 2000 date processing issue and its effect on the Company's information
technology ("IT") systems, non-IT systems, such as equipment and machinery
controlled by microcontrollers with embedded technology, and key suppliers and
customers. As of October 20, 1999 operating units representing approximately 99%
of the Company's consolidated revenues have completed any Year 2000 remediation
believed necessary with respect to their IT and non-IT systems. The remaining
units are expected to complete their remediation activities by November 30,
1999. The Company is assessing third party Year 2000 compliance, however as many
of the Company's suppliers and customers are still engaged in executing their
Year 2000 programs, the Company cannot fully evaluate such compliance. If,
however, the Company, its key suppliers and customers or other entities upon
which the Company relies (such as utility providers) fail to make necessary
modifications, conversions and contingency plans on a timely basis, the year
2000 issue could have a material adverse effect on the Company's business,
operations, cash flow and financial condition.
Disclosure Regarding Forward-Looking Statements
This report includes and incorporates by reference "Forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements other than statements of historical fact included
or incorporated in this report may constitute forward-looking statements.
Although the company believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the company's expectations ("cautionary
statements") are disclosed in this report and the documents incorporated by
reference herein, including without limitation in conjunction with the forward-
looking statements included in this report and under "risk factors." All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements.
8
<PAGE>
ITEM 2. PROPERTIES
The Company uses various owned or leased properties as manufacturing
facilities, warehouses, and sales and administration offices. The Company
believes that current facilities, together with planned expenditures for normal
maintenance, capacity and technological improvements, will provide adequate
production capacity to meet expected demand for its products.
Listed below are the principal manufacturing, warehouse and sales
facilities operated by the Company. Additionally, the Company also owns or
leases approximately 275,000 square feet of other warehouse and sales facilities
and facilities of approximately 96,000 and 40,000 square feet are operated on
behalf of the Company in Nogales, Mexico and Tijuana, Mexico, respectively, by
third parties pursuant to contract manufacturing arrangements.
<TABLE>
<CAPTION>
OWNED OR APPROX.
LOCATION USE LEASED SQ. FEET
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Auburn, MA Manufacturing, Sales and Administration Owned 146,000
Barberton, OH Manufacturing, Sales and Administration Owned 52,000
Chicago, IL Manufacturing Owned 18,000
Gjern, Denmark Manufacturing, Sales and Administration Owned 22,000
Gothenburg, Sweden Manufacturing, Sales and Administration Owned 108,000
Irvine, CA Manufacturing, Sales and Administration Leased 77,000
Kingston, Ontario Manufacturing Owned 500,000
Las Vegas, NV Warehouse Leased 44,000
Leominster, MA Manufacturing, Sales and Administration Leased 202,000
Littleborough, United Kingdom Manufacturing Owned 42,000
Manchester, CT Manufacturing Leased 55,000
Manchester, CT Manufacturing, Sales and Administration Leased 150,000
Memphis, TN Warehousing Owned 147,000
Montreal, Quebec Manufacturing, Sales and Administration Owned 300,000
Orebro, Sweden Manufacturing, Sales and Administration Leased 42,000
Skelmersdale, United Kingdom Manufacturing, Sales and Administration Owned 121,000
Wadsworth, OH Manufacturing, Sales and Administration Owned 45,000
Waynesburg, PA Manufacturing Owned 42,000
Washington, PA Manufacturing Leased 82,000
Washington, PA Manufacturing Owned 123,000
Washington, PA Manufacturing, Sales and Administration Owned 85,000
Washington, PA Warehousing Owned 79,000
Wheeling, IL Manufacturing, Sales and Administration Owned 110,000
Wheeling, IL Manufacturing, Sales and Administration Owned 80,000
Wipperfurth, Germany Manufacturing, Sales and Administration Owned 349,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. In the opinion of the
9
<PAGE>
Company's management, such proceedings and actions should not, individually or
in the aggregate, have a material adverse effect on the Company's results of
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report no
matter was submitted to a vote of security holders.
ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT
Age Present Office and Experience
- --- -----------------------------
65 Paul M. Olson has been President and a director of the Company since 1985,
and Chief Executive Officer of the Company since 1993. From 1972 to 1984
Mr. Olson was the President of Phalo Corporation, a wire and cable
manufacturer, and directed sales and marketing at Phalo Corporation from
1967 to 1972. From 1963 to 1967, Mr. Olson was employed at General Electric
and from 1960 to 1963, at General Cable, in wire and cable related sales
and marketing positions. Mr. Olson has a Bachelor's Degree in Economics
from Hobart College.
57 George C. Graeber has been Chief Operating Officer and a director of the
Company since 1998. Mr. Graeber served as President of Montrose/CDT from
1994 to 1998. From 1992 to 1994, Mr. Graeber was Executive Vice President
of the Company and President of Phalo/CDT. From 1990 to 1992 Mr. Graeber
was a Vice President and General Manager of the Energy division of Anixter
International, Inc., a distributor of cable and communication equipment.
From 1989 to 1990 Mr. Graeber was a consultant for Manhattan Electric
Cable, a wire and cable company. From 1983 to 1989 he was the President of
the Industrial Electronic division of Brintec Corp. and from 1979 to 1983
he was a Vice President of Brand Rex Cable, a wire and cable company. Mr.
Graeber has a Master's Degree in Electrical Engineering from the University
of Connecticut.
57 Michael A. Dudley has been an Executive Vice President of the Company and
President of CDT International since 1991. From 1988 to 1991 he was the
President of Superior Optics, a division of Superior Teletec, Inc., a
manufacturer of communication cable. Mr. Dudley has a Doctorate Degree in
Material Science from The National College of Rubber Technology in London,
England.
49 Normand R. Bourque has been an Executive Vice President of the Company
since 1996 and President and Chief Executive Officer of NORDX/CDT since its
acquisition. Prior to the acquisition, Mr. Bourque was Vice President-Cable
Group at Nortel from 1991 to 1995 and Vice President, Operations-Cable
Group from 1989 to 1991. From 1985 to 1988, Mr. Bourque was Vice President
and General Manager-Transmission Networks at Nortel, and prior to that,
held a number of positions in general management and finance at Nortel. Mr.
Bourque has a Bachelor's Degree in Business Administration from the Ecole
des Hautes Etudes Commerciales in Montreal, Canada.
10
<PAGE>
60 David R. Harden has been a Senior Vice President of CDT and President of
West Penn/CDT since 1988. He founded West Penn Wire in 1971, and operated
that company until 1984 when it was acquired by the Company. From 1984
until 1988 Mr. Harden was an Executive Vice President of West Penn/CDT.
38 Peter Sheehan has been an Executive Vice President of the Company since
1998. Mr. Sheehan joined the Company in 1995 in the area of international
sales and marketing. Prior to joining the company Mr. Sheehan was Senior
Vice President of Sales and Marketing of Berk-tek, a wire and cable
company. Mr. Sheehan has a Bachelor's Degree from Boston College.
49 Kenneth O. Hale has been Vice President and Chief Financial Officer of the
Company since 1987. Mr. Hale holds a Certified Public Accountant's
certificate and an MBA in finance from the University of Missouri.
38 Charles B. Fromm was appointed Vice President and General Counsel of the
Company in October 1997, and Secretary of the Company in 1999. Prior
thereto, Mr. Fromm was a Partner at Kirkland & Ellis, New York. Mr. Fromm
has a Bachelor's Degree in Business Administration and a Juris Doctor
Degree from the University of Michigan.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
As of September 30, 1999, there were 167 holders of record of the Company's
Common Stock.
Additional information required by this item is set forth under the heading
"Directors, Officers, and Corporate Information" on page 45 of the 1999 Annual
Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is set forth under the heading "Selected
Historical Consolidated Financial Data" on page 44 of the 1999 Annual Report and
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 14 through 22 of the 1999 Annual Report and is
incorporated herein by reference .
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item appears under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 20 of the 1999 Annual Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on pages 23 through 43 of the
1999 Annual Report and is incorporated herein by reference and filed
electronically herewith as Exhibit 13.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
12
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Information concerning the Registrant's directors is set forth in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission on or before November 17, 1999. Such information is
incorporated herein by reference.
b. Information concerning executive officers of the Registrant is set forth in
Item 4.1 of Part I at page 10 of this Report under the heading "Executive
Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive officers of the Registrant is set forth in
the Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission on or before November 17, 1999. Such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is set forth in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission on or before November 17,
1999. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is set
forth in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission on or before November 17, 1999. Such
information is incorporated herein by reference.
13
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. The following documents are included in the 1999 Annual Report, pages 23
through 43, and are incorporated herein by reference:
a. Report of Independent Public Accountants.
b. Consolidated Statements of Income for the years ended July 31, 1999,
1998 and 1997.
c Consolidated Balance Sheets as of July 31, 1999 and 1998.
d. Consolidated Statements of Cash Flow for the years ended July 31, 1999,
1998 and 1997.
e. Consolidated Statements of Stockholders' Equity for the years ended
July 31, 1999, 1998 and 1997.
f. Notes to Consolidated Financial Statements.
2. The following documents are filed as part of this report:
a. Report of Independent Public Accountants on Supplemental Schedules.
b. Schedule II Valuation and Qualifying Accounts for the three years ended
July 31, 1999.
c. List of Exhibits
3. List of Exhibits
2.2 - Asset Purchase Agreement by and among Cable Design Technologies
(CDT) Canada Inc., Cable Design Technologies Corporation and
Northern Telecom Limited, dated as of December 19, 1995.
Incorporated by reference to Exhibit 10.16 to CDT's Registration
Statement on Form S-3 (File No. 333-00554).
2.3 - Asset Purchase Agreement, dated March 31, 1997, between Cable Design
Technologies Inc., Dearborn/CDT, Inc., Dearborn West/CDT, Inc., and
Thermax/CDT, Inc. and Dearborn Wire and Cable L.P., Dearborn West
L.P. and Thermax Wire L.P. Incorporated by reference to Exhibit 10.1
to CDT's Report on Form 8-K, as filed on April 22, 1997.
3.1 - Amended and Restated Certificate of Incorporation of CDT as filed
with the Secretary of State of Delaware on November 10, 1993,
incorporated by reference to Exhibit 3.1 to CDT's Registration
Statement on Form S-1 (File No. 33-69992), Certificate of Amendment
of the Restated Certificate of Incorporation of CDT and Certificate
of Designation, Preferences and Rights of Junior Participating
14
<PAGE>
Preferred Stock, Series A of CDT, as filed with the Secretary of
State of Delaware on December 11, 1996 and incorporated by reference
to CDT's Registration Statement on Form 8-A/A, as filed on December
23, 1996.
3.2 - By-Laws of CDT, as amended to date, incorporated by reference to
Exhibit 3.2 to the Post-Effective Amendment No. 1 to CDT's
Registration Statement on Form S-3 (File No. 333-00554), as filed on
February 28, 1996.
4.1 - Form of certificate representing shares of the Common Stock of CDT.
Incorporated by reference to Exhibit 4.1 to CDT's Registration
Statement on Form S-1 (File No. 33-69992).
4.2 - Rights Agreement dated as of December 11, 1996, between Cable Design
Technologies Corporation and The First National Bank of Boston, as
Rights Agent, including the form of Certificate of Designation,
Preferences and Rights of Junior Participating Preferred Stock,
Series A attached thereto as Exhibit A, the form of Rights
Certificate attached thereto as Exhibit B and the Summary of Rights
attached thereto as Exhibit C. Incorporated herein by reference to
CDT's Registration Statement on Form 8-A, as filed on December 11,
1996.
10.1 - CDT Long-Term Performance Incentive Plan (adopted on September 23,
1993). Incorporated by reference to Exhibit 10.18 to CDT's
Registration Statement on Form S-1 (File No. 33-69992).
10.2 - CDT Stock Option Plan. Incorporated by reference to Exhibit 4.3 to
CDT's Registration Statement on Form S-8 as filed on December 22,
1993.
10.3 - Cable Design Technologies Corporation Management Stock Award Plan
(adopted on September 23, 1993). Incorporated by reference to
Exhibit 4.3 to CDT's Registration Statement on Form S-8, as filed on
May 2, 1994.
10.4 - Description of CDT Bonus Plan. Incorporated by reference to Exhibit
10.20 to CDT's Registration Statement on Form S-1 (File No.
33-69992).
10.5 - Lease Agreement between Phalo and First Hartford Realty Corp., dated
as of November 9, 1992. Incorporated by reference to Exhibit 10.23
to CDT's Registration Statement on Form S-1 (File No. 33-69992).
10.6 - Lease Agreement between Mohawk and 9 Mohawk Drive Realty Trust,
dated as of March 24, 1986. Incorporated by reference to Exhibit
10.24 to CDT's Registration Statement on Form S-1 (File No.
33-69992).
10.7 - Consulting Agreement, dated as of July 14, 1988, and amendment
thereto, dated as of July 14, 1994, between Golder, Thoma, Cressey &
Rauner and CDT. Incorporated by reference to Exhibit 10.13 to CDT's
Annual Report on Form 10-K, as filed on October 31, 1994.
15
<PAGE>
10.8 - Consulting Agreement, dated as of July 14, 1988, and amendment
thereto, dated as of July 14, 1994, between Northern Investment
Ltd. Partnership II and CDT. Incorporated by reference to Exhibit
10.14 to CDT's Annual Report on Form 10-K, as filed on October 31,
1994.
10.9 - Employment Agreement dated February 2, 1996, among CDT, NORDX/CDT
and Normand Bourque. Incorporated by reference to Exhibit 10.17 to
CDT's Report on Form 8-K as filed on February 20, 1996.
10.10 - Collective Labour Agreement dated June 10, 1996, between NORDX/CDT
and Canadian Union of Communications Workers Unit 4. Incorporated
by reference to Exhibit 10.19 to CDT's Annual Report on Form 10-K,
as filed on October 29, 1996.
10.12 - 1996 Amendment of Lease between Mohawk and 9 Mohawk Drive Realty,
dated as of September 3, 1996. Incorporated by reference to Exhibit
10.23 to CDT's Annual Report on Form 10-K, as filed on October 29,
1996.
10.13 - Registration Agreement among CDT, GTC Fund II, The Prudential
Insurance Company of America and Pruco Life Insurance Company,
dated as of July 14, 1988, as amended. Incorporated by reference to
Exhibit 10.21 to CDT's Registration Statement on Form S-1 (File No.
33-69992).
10.14 - Form of Change in Control Agreement dated June 11, 1999, between
CDT and each of George C. Graeber, Kenneth O. Hale, Charles B.
Fromm, Peter Sheehan, and Michael A. Dudley.**
10.15 - Change in Control Agreement dated June 11, 1999, between CDT and
Paul M. Olson.**
10.16 - Cable Design Technologies Corporation 1999 Long-Term Performance
Incentive Plan adopted April 19, 1999 and amended June 11, 1999.**
10.17 - Cable Design Technologies Corporation Employee Stock Purchase Plan.
Incorporated by reference to Exhibit 4.3 to CDT's Registration
Statement on Form S-8 (File No. 333-76351).
10.18 - Form of June 11, 1999 Stock Option Grant under the 1999 Long-Term
Performance Incentive Plan.**
10.19 - Form of April 23, 1999 Stock Option Grant.**
13.1 - CDT 1999 Annual Report to Stockholders (to the extent incorporated
herein by
16
<PAGE>
reference).**
21.1 - List of Subsidiaries of CDT.**
23.1 - Consent of Arthur Andersen LLP.**
27.1 - Financial Data Schedule.**
99.4 - Credit Agreement dated April 10, 1997, among the Company, The First
National Bank of Boston, Banque Paribas, Chicago Branch, Paribas
Bank of Canada, Bank of America Illinois, Bank of America Canada
and other lenders party thereto. Incorporated by reference to CDT's
Report on Form 10-Q, as filed on June 16, 1997.
99.5 - First Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank
of Canada, Bank of America NT & SA, Bank of America Canada and
other Lenders party thereto. Incorporated by reference to CDT's
Report on Form 10-K as filed on October 29, 1998.
99.6 - Second Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank
of Canada, Bank of America NT & SA, Bank of America Canada and
other Lenders party thereto. Incorporated by reference to CDT's
Report on Form 10-K as filed on October 29, 1998.
99.7 - Revolving Line of Credit Letter Agreement dated December 14, 1998,
between CDT and ABN AMRO Bank N.V.. Incorporated by reference to
CDT's Report on Form 10-Q as filed on March 16, 1999.
99.8 - Master Revolving Line of Credit Promissory Note issued by CDT in
favor of ABN AMRO Bank N.V.. Incorporated by reference to CDT's
Report on Form 10-Q as filed on March 16, 1999.
17
<PAGE>
** Filed Herein
(b) Reports on Form 8-k
None
18
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
Cable Design Technologies Corporation
By: /s/ Paul M. Olson October 27, 1999
--------------------------------
Paul M. Olson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Bryan C. Cressey Chairman of the Board October 27, 1999
- -----------------------------------
Bryan C. Cressey Director
/s/ Paul M. Olson Director, President, Chief October 27, 1999
- -----------------------------------
Paul M. Olson Executive Officer (Principal
Executive Officer)
/s/ George C. Graeber Director, Chief Operating October 27, 1999
- -----------------------------------
George C. Graeber Officer
/s/ Kenneth O. Hale Vice President, Chief Financial October 27, 1999
- -----------------------------------
Kenneth O. Hale Officer (Principal Financial
and Accounting Officer)
/s/ Myron S. Gelbach, Jr. Director October 27, 1999
- -----------------------------------
Myron S. Gelbach, Jr.
/s/ Michael F. O. Harris Director October 27, 1999
- -----------------------------------
Michael F. O. Harris
Director October 27, 1999
- -----------------------------------
Glenn Kalnasy
/s/ Richard C. Tuttle Director October 27, 1999
- -----------------------------------
Richard C. Tuttle
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Cable Design Technologies
Corporation and Subsidiaries' annual report to stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated September
20, 1999. Our audits were made for the purpose of forming an opinion on those
financial statements taken as a whole. The schedule listed in the accompanying
index is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Pittsburgh, Pennsylvania
September 20, 1999
20
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1999, 1998, 1997
<TABLE>
<CAPTION>
Additions To
Balance Reserve from Additions Balance
at Acquisitions Charged to at
Beginning & Other Costs and Reduction End of
of Period Adjustments Expenses from Reserve Period
---------- ------------ ---------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for uncollectible
accounts/sales returns:
Year Ended July 31, 1997 $2,660 $891 $1,644 $( 837) $4,358
Year Ended July 31, 1998 $4,358 $(93) $1,367 $(1,637) $3,995
Year Ended July 31, 1999 $3,995 $172 $1,479 $ (720) $4,926
Reserve for discontinuance of
DynaTraX(TM) product line and
other restructuring activities:
Year Ended July 31, 1999 $1,759 $--- $ (264) $(1,247) $ 248
</TABLE>
21
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
INDEX TO EXHIBITS FILED HEREIN
JULY 31, 1999
EXHIBIT
NUMBER EXHIBIT
10.14 - Form of Change in Control Agreement dated June 11, 1999, between
CDT and each of George C. Graeber, Kenneth O. Hale, Charles B.
Fromm, Peter Sheehan, and Michael A. Dudley.
10.15 - Change in Control Agreement dated June 11, 1999, between CDT and
Paul M. Olson.
10.16 - Cable Design Technologies Corporation 1999 Long-Term Performance
Incentive Plan adopted April 19, 1999 and amended June 11, 1999.
10.18 - Form of June 11, 1999 Stock Option Grant under 1999 Long-Term
Performance Incentive Plan.
10.19 - Form of April 23, 1999 Stock Option Grant.
13.1 - CDT 1999 Annual Report to Stockholders (to the extent
incorporated herein by reference).
21.1 - List of Subsidiaries of CDT.
23.1 - Consent of Arthur Andersen LLP.
27.1 - Financial Data Schedule.
22
<PAGE>
EXHIBIT 10.14
June 11, 1999
Dear :
Cable Design Technologies Corporation (the "Company") considers the
-------
maintenance of a sound management to be essential to protecting and enhancing
the best interests of the Company and its stockholders. In this connection, the
Company recognizes that the possibility of a change in control may exist from
time to time, and that this possibility, and the uncertainty and questions it
may raise among management and employees, may result in the departure or
distraction of management and other personnel to the detriment of the Company
and its stockholders. Accordingly, the Company has determined that appropriate
steps should be taken to encourage the continued attention and dedication of
members of the Company's management and other key employees, including yourself,
to their assigned duties without the distraction which may arise from the
possibility of a change in control of the Company.
This is not an employment contract nor does it alter your status as an at-
will employee of the Company. Just as you remain free to leave the employ of
the Company at any time, so too does the Company retain its right to terminate
your employment without notice, at any time, for any reason. However, the
Company believes that, both prior to and at the time a change in control is
anticipated or occurring, it is necessary to have your continued attention and
dedication to your assigned duties without distraction. Therefore, should you
still be an employee of the Company at such time, the Company agrees that you
shall receive the severance benefits hereinafter set forth in the event your
employment with the Company terminates in contemplation of or subsequent to a
"change in control" (as defined in Section 2 hereof) under the circumstances
described below.
For good and valuable consideration, the sufficiency and receipt of which
is acknowledged, the Company and you agree as follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall continue in effect through June 11, 2004; provided, however, that, if
a change in control of the Company, as defined in Section 2 hereof, shall have
occurred during the term of this Agreement, then this Agreement shall continue
in effect until the date twenty-four months after the occurrence of change in
control.
2. Change in Control. No benefits shall be payable hereunder unless
-----------------
there shall have been a change in control of the Company, as set forth below,
and your employment by the Company or any of its subsidiaries shall have been
terminated in accordance with Section 3 below. For purposes of this Agreement,
a "change in control" shall be deemed to have occurred if:
-----------------
(a) any "person" or "group" (as such terms are used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or
<PAGE>
June 11, 1999
page 2
(b) there shall be consummated any consolidation, merger,
reorganization or acquisition involving the Company unless following such
event (i) all or substantially all of the individuals and entities who were
the beneficial owners of the outstanding voting securities of the Company
immediately prior to such event beneficially own, directly or indirectly,
more than 55% of the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors of the
corporation resulting from such event in substantially the same proportions
as their ownership immediately prior to such event and (ii) the provisions
of clause (a) above are not met and (iii) at least 55% of the members of
the board of directors of the corporation resulting from such event were
members of the board of directors at the time of the initial consideration
of, or any action of the board relating to, such event; or
(c) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
assets of the Company (on a consolidated basis); or
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
(e) as the result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, proxy
or consent solicitation, contested election or substantial stock
accumulation (a "Control Transaction"), the members of the Board
-------------------
immediately prior to the date the Company initiates, or is notified of,
such Control Transaction (the "Incumbent Board") shall thereafter cease to
---------------
constitute at least a majority of the Board; provided, however, that for
purposes of this clause (e) any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board.
3. Termination of Employment Following Change in Control.
-----------------------------------------------------
(a) If at any time after the date hereof any of the events described in
Section 2 hereof constituting a change in control of the Company occurs and in
contemplation thereof, in connection therewith or within two years thereafter
(i) you involuntarily cease to be an employee of the Company or any of its
subsidiaries for any reason other than termination for good cause (as
hereinafter defined), disability (as hereinafter defined) or death or (ii) you
terminate your employment with the Company and its subsidiaries for good reason
(as hereinafter defined) then
(A) you shall be entitled to the benefits provided in Section 4(a)
hereof;
(B) any options, profit sharing, matching contributions or other
similar items that are unvested shall vest, and, in the case of options or
other items that have an expiration date, you shall be entitled to exercise
such options or other items for a period of 90 days following such
termination;
(C) contributions on your behalf to any pension, profit sharing,
401(k) matching or similar plan shall be made, to the extent not previously
made, for the period(s) (including any partial periods) up to the Date of
Termination (defined below) or, if such plan does not permit such
contributions, compensation in such amount shall be paid to you (it being
understood that to the extent such contributions are not mandatory,
<PAGE>
June 11, 1999
page 3
contributions in the amount consistent with prior contributions shall be
made), and all amount under such plans shall vest; and
(D) the Company shall provide you with health benefits, at a level no
less than those in effect prior to the change in control, for 24 months
after such termination or, the extent that you are able to purchase health
benefits at a level no less than those in effect prior to the change in
control, reimburse you for COBRA payments for such period (in each case,
together with a tax "gross-up" to offset the tax impact of such benefits or
payment and gross-up); provided that the benefits under this clause (D)
shall cease to the extent that such benefits, at a level no less than those
in effect prior to the change of control, are otherwise available to you
(at a cost no more than that paid by you prior to the change of control)
during such period.
In the event of multiple changes of control during the term of this Agreement,
the foregoing two year period shall re-start in the event of such subsequent
change of control(s).
(b) For purposes of this Agreement: (i) "good cause" means (A) your
----------
conviction of any felony involving dishonesty, fraud or breach of trust with
respect to the Company or its subsidiaries, or (B) your willful engagement in
gross misconduct in the performance of your duties that is materially and
demonstrably injurious to the Company and its subsidiaries, which conduct is not
cured after notice (any action or failure to act shall not be "willful" unless
it is done, or omitted to be done, by you in bad faith or without reasonable
belief that the act, or failure to act was in the best interests of the Company
and its subsidiaries); (ii) you shall be "disabled" if your inability to perform
--------
your normal duties on a full-time basis for 180 consecutive business days (or
such shorter period as will suffice for you to qualify for full disability
benefits under the applicable disability insurance policy or policies of the
Company or its applicable subsidiaries) as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a qualified
physician selected by the Company or its insurers and reasonably acceptable to
you; and (iii) "good reason" shall exist if, without your express written
-----------
consent:
(A) you are assigned duties materially inconsistent with your
position, duties, responsibilities and status with the Company and/or its
subsidiaries as of the time of the change in control (excluding for
purposes of establishing such "base" any adverse change made in
contemplation of such change of control), excluding for this purpose
isolated, insubstantial and inadvertent action(s) not taken in bad faith
and remedied by the Company or applicable subsidiary promptly after receipt
of notice from you; or
(B) the Company or any of its subsidiaries reduces your annual base
salary as in effect on the date hereof or as the same may be increased from
time to time; or
(C) the Company or any of its subsidiaries reduces your aggregate
compensation and incentive and benefit package as in effect at the time of
the change in control (excluding for purposes of establishing such "base"
any adverse change made in contemplation of such change of control); or
(D) the Company or any of its subsidiaries requires you regularly to
perform your duties of employment beyond a fifty-mile radius from the
location of your employment as of the time of the change in control
(excluding for purposes of establishing such "base" any adverse change made
in contemplation of such change of control); or
(E) the Company or any of its subsidiaries takes any other action
which materially and adversely changes the conditions or perquisites of
your employment as in effect at the time of the change in control
<PAGE>
June 11, 1999
page 4
(excluding for purposes of establishing such "base" any adverse change made
in contemplation of such change of control); or
(F) the Company or any of its subsidiaries fails to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Agreement, as contemplated by Section 10(a) hereof.
(c) For purposes of this Agreement, any purported termination by the
Company or any of its subsidiaries or by you shall be communicated by written
"Notice of Termination" to the other party hereto in accordance with Section 11
- ----------------------
hereof. "Date of Termination" shall mean the effective date specified in the
-------------------
Notice of Termination as of which your employment terminates (which shall be not
more than sixty (60) days after the date such Notice of Termination is given).
(d) The above provisions of this Section 3, and the provisions of Section
4, shall be applicable after a change in control has occurred, but not prior
thereto (unless termination is in contemplation of or in connection with such
change of control, in which case they shall apply).
4. Benefits Upon Termination.
-------------------------
(a) If your employment with the Company or any of its subsidiaries is
terminated under circumstances which entitle you to benefits under this Section
4(a), then the amount of such benefits (which benefits shall be in addition to
any other benefits to which you are entitled other than by reason of this
Agreement, except as specifically set forth in Section 9) shall be equal to the
sum of:
(i) unpaid salary with respect to any vacation days accrued but not
taken as of the Date of Termination;
(ii) accrued but unpaid salary and bonus through the Date of
Termination; and
(iii) an amount equal to the product of (A) two (2) times (B) the
sum of (x) the highest Annual Compensation in effect at any time during the
three calendar years preceding the date the change in control occurs and
(y) your average annual bonus during the three calendar years (or, if you
have not been employed for three calendar years, such shorter number of
calendar years during which you've been employed) preceding the date the
change in control occurs.
"Annual Compensation" means your total compensation (including salary but
-------------------
excluding bonus) as reported on your W-2(s), or other applicable tax form, plus
any deductions or other deferrals of compensation not reported thereon
(including 401(k) contributions) and excluding any income resulting from
bonuses, the exercise of stock options, stock appreciation rights or other
similar long-term incentive plans.
(b) Notwithstanding paragraph (a) of this Section 4, if all or any portion
of the payments or benefits provided under this Section 4 either alone or
together with other payments or benefits which you receive or are then entitled
to receive from the Company and any of its subsidiaries, would constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), such payments or benefits provided to you
----
under this Section 4 shall be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the Code;
but only if, by reason of such reduction, your net after tax benefit shall
exceed the net after tax benefit if such reduction were not made. "Net after
---------
tax benefit" for purposes of this Section
- -----------
<PAGE>
June 11, 1999
page 5
4 shall mean the sum of (i) the total amount payable to you under this Section
4, plus (ii) all other payments and benefits which you receive or are then
entitled to receive from the Company and any of its subsidiaries that would
constitute a "parachute payment" within the meaning of Section 280G of the Code,
less (iii) the amount of federal income taxes payable with respect to the
payment and benefits described in (i) and (ii) above calculated at the maximum
marginal income tax rate for each year in which such payments and benefits shall
be paid to you (based upon the rate in effect for such year as set forth in the
Code at the time of the first payment of the foregoing), less (iv) the amount of
excise taxes imposed with respect to the payments and benefits described in (i)
and (ii) above by Section 4999 of the Code.
(c) The cash payment obligation of the Company under Sections 4(a)(i), (ii)
and (iii) above shall be paid to you in a lump sum within ten days of the Date
of Termination.
(d) Following any change of control, the Company will indemnify you to the
fullest extent permitted under applicable laws against any claim, proceeding,
lawsuit, investigation or other action (collectively, an "Action") involving you
------
in connection with, or relating to, your employment with the Company or its
subsidiaries, and the Company will, to the fullest extent permitted under
applicable laws, advance to you such expenses incurred by you in connection with
your investigation and defense of any such Action.
5. Default in Payment. Any payment not made within ten days after it is
------------------
due in accordance with this Agreement shall thereafter bear interest, compounded
annually, at the prime rate from time to time in effect at Citibank, N.A. (or
any successor thereto).
6. No Assignment. No interest of you or your spouse or any other
-------------
beneficiary under this Agreement, or any right to receive payment hereunder,
shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind (except
a transfer upon death of rights that have accrued prior to such death), nor may
such interest or right to receive a payment or distribution be taken,
voluntarily or involuntarily, for the satisfaction of the obligations or debts
of, or other claims against, you or your spouse or other beneficiary, including
for alimony.
7. Unsecured Obligation. All rights of you and your spouse or their
--------------------
beneficiary under this Agreement shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company or payment of any amounts due hereunder. Neither you nor your
spouse or other beneficiary shall have any interest in or rights against any
specific assets of the Company, and you and your spouse or other beneficiary
shall have only the rights of a general unsecured creditor of the Company.
8. Confidential Information. You hereby acknowledge that, in the course
------------------------
of your employment, you will necessarily have access to become familiar with
and, as an indispensable part of your employment, use trade secrets, customer
lists and detailed customer-related information (some or all of which may
constitute trade secrets), business plans, financial and other proprietary and
confidential information (collectively "Confidential Information") concerning
------------------------
the Company and its subsidiaries and that such knowledge and familiarity was and
will continue to be of special, unique, and extraordinary value to the Company
and its subsidiaries. You agree that you will not reveal or disclose to any
unauthorized person, or take and use for your own account any Confidential
Information concerning the Company or any of its subsidiaries unless and to the
extent that (a) the information was or becomes available to you on a
nonconfidential basis from a source which is not, to your knowledge, bound by a
confidentiality obligation to the Company or any of its subsidiaries, (b) you
are required by a court of competent jurisdiction or otherwise compelled by law
to disclose such Confidential Information or (c) such disclosure is made by you
in good faith in connection with your responsibilities and duties to the Company
or any of its subsidiaries. Upon termination of employment, you agree
<PAGE>
June 11, 1999
page 6
to promptly return to the Company and its subsidiaries or destroy all materials
and all copies of materials involving any Confidential Information in your
possession or control. You also agree to represent to the Company in writing
that you have complied with the provisions of the preceding sentence upon
termination of employment. In no event shall a breach or alleged breach of this
Section 8 be grounds for withholding or reclaiming payments under this
Agreement.
9. Effect on Other Plans, Agreements and Benefits. Except to the extent
----------------------------------------------
expressly set forth herein, any benefit or compensation to which you are
entitled under any agreement between you and the Company or any of its
subsidiaries or under any plan maintained by the Company or any of its
subsidiaries in which you participate or participated shall not be modified or
lessened in any way, but shall be payable according to the terms of the
applicable plan or agreement. The terms of this Agreement shall supersede any
existing agreement between you and the Company or any of its subsidiaries
executed prior to the date hereof to the extent any such agreement is
inconsistent with the terms hereof. Notwithstanding the above, any benefits
received by you pursuant to this Agreement shall be in lieu of any severance
benefits to which you would otherwise be entitled under any general severance
policy maintained by the Company or any of its subsidiaries for its management
or other personnel.
10. Successors; Binding Agreement.
-----------------------------
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean Cable Design Technologies Corporation and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or if there
is no such designee, to your estate.
11. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when actually delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
President of the Company with a copy to the Secretary of the Company, or to such
other address for either party as it may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
12. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such modification, waiver or discharge is agreed to in
writing and signed by you and a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach of or failure to comply
with any condition or provision of this Agreement by the other party hereto
shall be deemed to be a waiver of any similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
<PAGE>
June 11, 1999
page 7
13. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of this Agreement and any exhibits and schedules hereto will
be governed by the internal law, and not the law of conflicts of, the State of
Delaware.
14. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
15. Counterpart. This Agreement may be executed in several counterparts,
-----------
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16. Survival. The obligations of the parties under this Agreement all
--------
survive the term of this Agreement.
17. Enforcement. The Company agrees to reimburse you for all expenses
-----------
(including reasonable legal fees and expenses) incurred by you to enforce the
terms of this Agreement.
* * * * *
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company this letter and the enclosed copy
of this letter which will then constitute our agreement on this subject. We
will return the copy of this letter to you.
Sincerely,
CABLE DESIGN TECHNOLOGIES CORPORATION
By: /s/ Paul M. Olson
----------------------------------
at the direction of the Board of
Directors
Name: Paul M. Olson
Title: CEO & President
Agreed to as of: ______________, 1999
_______________________________________
<PAGE>
EXHIBIT 10.15
June 11, 1999
Paul M. Olson
c/o Cable Design Technologies
661 Andersen Drive
Pittsburgh, PA 15108
Dear Paul:
Cable Design Technologies Corporation (the "Company") considers the
-------
maintenance of a sound management to be essential to protecting and enhancing
the best interests of the Company and its stockholders. In this connection, the
Company recognizes that the possibility of a change in control may exist from
time to time, and that this possibility, and the uncertainty and questions it
may raise among management and employees, may result in the departure or
distraction of management and other personnel to the detriment of the Company
and its stockholders. Accordingly, the Company has determined that appropriate
steps should be taken to encourage the continued attention and dedication of
members of the Company's management and other key employees, including yourself,
to their assigned duties without the distraction which may arise from the
possibility of a change in control of the Company.
This is not an employment contract nor does it alter your status as an at-
will employee of the Company. Just as you remain free to leave the employ of
the Company at any time, so too does the Company retain its right to terminate
your employment without notice, at any time, for any reason. However, the
Company believes that, both prior to and at the time a change in control is
anticipated or occurring, it is necessary to have your continued attention and
dedication to your assigned duties without distraction. Therefore, should you
still be an employee of the Company at such time, the Company agrees that you
shall receive the severance benefits hereinafter set forth in the event your
employment with the Company terminates in contemplation of or subsequent to a
"change in control" (as defined in Section 2 hereof) under the circumstances
described below.
For good and valuable consideration, the sufficiency and receipt of which
is acknowledged, the Company and you agree as follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall continue in effect through June 11, 2004; provided, however, that, if
a change in control of the Company, as defined in Section 2 hereof, shall have
occurred during the term of this Agreement, then this Agreement shall continue
in effect until the date twenty-four months after the occurrence of change in
control.
2. Change in Control. No benefits shall be payable hereunder unless
-----------------
there shall have been a change in control of the Company, as set forth below,
and your employment by the Company or any of its subsidiaries shall have been
terminated in accordance with Section 3 below. For purposes of this Agreement,
a "change in control" shall be deemed to have occurred if:
-----------------
(a) any "person" or "group" (as such terms are used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or
<PAGE>
Paul M. Olson
June 11, 1999
page 2
(b) there shall be consummated any consolidation, merger,
reorganization or acquisition involving the Company unless following such
event (i) all or substantially all of the individuals and entities who were
the beneficial owners of the outstanding voting securities of the Company
immediately prior to such event beneficially own, directly or indirectly,
more than 55% of the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors of the
corporation resulting from such event in substantially the same proportions
as their ownership immediately prior to such event and (ii) the provisions
of clause (a) above are not met and (iii) at least 55% of the members of
the board of directors of the corporation resulting from such event were
members of the board of directors at the time of the initial consideration
of, or any action of the board relating to, such event; or
(c) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
assets of the Company (on a consolidated basis); or
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
(e) as the result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, proxy
or consent solicitation, contested election or substantial stock
accumulation (a "Control Transaction"), the members of the Board
-------------------
immediately prior to the date the Company initiates, or is notified of,
such Control Transaction (the "Incumbent Board") shall thereafter cease to
---------------
constitute at least a majority of the Board; provided, however, that for
purposes of this clause (e) any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board.
3. Termination of Employment Following Change in Control.
-----------------------------------------------------
(a) If at any time after the date hereof any of the events described in
Section 2 hereof constituting a change in control of the Company occurs and in
contemplation thereof, in connection therewith or within two years thereafter
(i) you involuntarily cease to be an employee of the Company or any of its
subsidiaries for any reason other than termination for good cause (as
hereinafter defined), disability (as hereinafter defined) or death or (ii) you
terminate your employment with the Company and its subsidiaries for good reason
(as hereinafter defined) then
(A) you shall be entitled to the benefits provided in Section 4(a)
hereof;
(B) any options, profit sharing, matching contributions or other
similar items that are unvested shall vest, and, in the case of options or
other items that have an expiration date, you shall be entitled to exercise
such options or other items for a period of 90 days following such
termination;
(C) contributions on your behalf to any pension, profit sharing,
401(k) matching or similar plan shall be made, to the extent not previously
made, for the period(s) (including any partial periods) up to the Date of
Termination (defined below) or, if such plan does not permit such
contributions, compensation in such amount shall be paid to you (it being
understood that to the extent such contributions are not mandatory,
<PAGE>
Paul M. Olson
June 11, 1999
page 3
contributions in the amount consistent with prior contributions shall be
made), and all amount under such plans shall vest; and
(D) the Company shall provide you with health benefits, at a level no
less than those in effect prior to the change in control, for 24 months
after such termination or, the the extent that you are able to purchase
health benefits at a level no less than those in effect prior to the change
in control, reimburse you for COBRA payments for such period (in each case,
together with a tax "gross-up" to offset the tax impact of such benefits or
payment and gross-up); provided that the benefits under this clause (D)
shall cease to the extent that such benefits, at a level no less than those
in effect prior to the change of control, are otherwise available to you
(at a cost no more than that paid by you prior to the change of control)
during such period.
In the event of multiple changes of control during the term of this Agreement,
the foregoing two year period shall re-start in the event of such subsequent
change of control(s).
(b) For purposes of this Agreement: (i) "good cause" means (A) your
----------
conviction of any felony involving dishonesty, fraud or breach of trust with
respect to the Company or its subsidiaries, or (B) your willful engagement in
gross misconduct in the performance of your duties that is materially and
demonstrably injurious to the Company and its subsidiaries, which conduct is not
cured after notice (any action or failure to act shall not be "willful" unless
it is done, or omitted to be done, by you in bad faith or without reasonable
belief that the act, or failure to act was in the best interests of the Company
and its subsidiaries); (ii) you shall be "disabled" if your inability to perform
--------
your normal duties on a full-time basis for 180 consecutive business days (or
such shorter period as will suffice for you to qualify for full disability
benefits under the applicable disability insurance policy or policies of the
Company or its applicable subsidiaries) as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a qualified
physician selected by the Company or its insurers and reasonably acceptable to
you; and (iii) "good reason" shall exist if, without your express written
-----------
consent:
(A) you are assigned duties materially inconsistent with your
position, duties, responsibilities and status with the Company and/or its
subsidiaries as of the time of the change in control (excluding for
purposes of establishing such "base" any adverse change made in
contemplation of such change of control), excluding for this purpose
isolated, insubstantial and inadvertent action(s) not taken in bad faith
and remedied by the Company or applicable subsidiary promptly after receipt
of notice from you; or
(B) the Company or any of its subsidiaries reduces your annual base
salary as in effect on the date hereof or as the same may be increased from
time to time; or
(C) the Company or any of its subsidiaries reduces your aggregate
compensation and incentive and benefit package as in effect at the time of
the change in control (excluding for purposes of establishing such "base"
any adverse change made in contemplation of such change of control); or
(D) the Company or any of its subsidiaries requires you regularly to
perform your duties of employment beyond a fifty-mile radius from the
location of your employment as of the time of the change in control
(excluding for purposes of establishing such "base" any adverse change made
in contemplation of such change of control); or
(E) the Company or any of its subsidiaries takes any other action
which materially and adversely changes the conditions or perquisites of
your employment as in effect at the time of the change in control
<PAGE>
Paul M. Olson
June 11, 1999
page 4
(excluding for purposes of establishing such "base" any adverse change made
in contemplation of such change of control); or
(F) the Company or any of its subsidiaries fails to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Agreement, as contemplated by Section 10(a) hereof.
(c) For purposes of this Agreement, any purported termination by the
Company or any of its subsidiaries or by you shall be communicated by written
"Notice of Termination" to the other party hereto in accordance with Section 11
- ----------------------
hereof. "Date of Termination" shall mean the effective date specified in the
-------------------
Notice of Termination as of which your employment terminates (which shall be not
more than sixty (60) days after the date such Notice of Termination is given).
(d) The above provisions of this Section 3, and the provisions of Section
4, shall be applicable after a change in control has occurred, but not prior
thereto (unless termination is in contemplation of or in connection with such
change of control, in which case they shall apply).
4. Benefits Upon Termination.
-------------------------
(a) If your employment with the Company or any of its subsidiaries is
terminated under circumstances which entitle you to benefits under this Section
4(a), then the amount of such benefits (which benefits shall be in addition to
any other benefits to which you are entitled other than by reason of this
Agreement, except as specifically set forth in Section 9) shall be equal to the
sum of:
(i) unpaid salary with respect to any vacation days accrued but not
taken as of the Date of Termination;
(ii) accrued but unpaid salary and bonus through the Date of
Termination; and
(iii) an amount equal to the product of (A) three (3) times (B) the
sum of (x) the highest Annual Compensation in effect at any time during the
three calendar years preceding the date the change in control occurs and
(y) your average annual bonus during the three calendar years (or, if you
have not been employed for three calendar years, such shorter number of
calendar years during which you've been employed) preceding the date the
change in control occurs.
"Annual Compensation" means your total compensation (including salary but
-------------------
excluding bonus) as reported on your W-2(s), or other applicable tax form, plus
any deductions or other deferrals of compensation not reported thereon
(including 401(k) contributions) and excluding any income resulting from
bonuses, the exercise of stock options, stock appreciation rights or other
similar long-term incentive plans.
(b) Notwithstanding paragraph (a) of this Section 4, if all or any portion
of the payments or benefits provided under this Section 4 either alone or
together with other payments or benefits which you receive or are then entitled
to receive from the Company and any of its subsidiaries, would constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), such payments or benefits provided to you
----
under this Section 4 shall be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the Code;
but only if, by reason of such reduction, your net after tax benefit shall
exceed the net after tax benefit if such reduction were not made. "Net after
---------
tax benefit" for purposes of this Section
- -----------
<PAGE>
Paul M. Olson
June 11, 1999
page 5
4 shall mean the sum of (i) the total amount payable to you under this Section
4, plus (ii) all other payments and benefits which you receive or are then
entitled to receive from the Company and any of its subsidiaries that would
constitute a "parachute payment" within the meaning of Section 280G of the Code,
less (iii) the amount of federal income taxes payable with respect to the
payment and benefits described in (i) and (ii) above calculated at the maximum
marginal income tax rate for each year in which such payments and benefits shall
be paid to you (based upon the rate in effect for such year as set forth in the
Code at the time of the first payment of the foregoing), less (iv) the amount of
excise taxes imposed with respect to the payments and benefits described in (i)
and (ii) above by Section 4999 of the Code.
(c) The cash payment obligation of the Company under Sections 4(a)(i), (ii)
and (iii) above shall be paid to you in a lump sum within ten days of the Date
of Termination.
(d) Following any change of control, the Company will indemnify you to the
fullest extent permitted under applicable laws against any claim, proceeding,
lawsuit, investigation or other action (collectively, an "Action") involving you
------
in connection with, or relating to, your employment with the Company or its
subsidiaries, and the Company will, to the fullest extent permitted under
applicable laws, advance to you such expenses incurred by you in connection with
your investigation and defense of any such Action.
5. Default in Payment. Any payment not made within ten days after it is
------------------
due in accordance with this Agreement shall thereafter bear interest, compounded
annually, at the prime rate from time to time in effect at Citibank, N.A. (or
any successor thereto).
6. No Assignment. No interest of you or your spouse or any other
-------------
beneficiary under this Agreement, or any right to receive payment hereunder,
shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind (except
a transfer upon death of rights that have accrued prior to such death), nor may
such interest or right to receive a payment or distribution be taken,
voluntarily or involuntarily, for the satisfaction of the obligations or debts
of, or other claims against, you or your spouse or other beneficiary, including
for alimony.
7. Unsecured Obligation. All rights of you and your spouse or their
--------------------
beneficiary under this Agreement shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company or payment of any amounts due hereunder. Neither you nor your
spouse or other beneficiary shall have any interest in or rights against any
specific assets of the Company, and you and your spouse or other beneficiary
shall have only the rights of a general unsecured creditor of the Company.
8. Confidential Information. You hereby acknowledge that, in the course
------------------------
of your employment, you will necessarily have access to become familiar with
and, as an indispensable part of your employment, use trade secrets, customer
lists and detailed customer-related information (some or all of which may
constitute trade secrets), business plans, financial and other proprietary and
confidential information (collectively "Confidential Information") concerning
------------------------
the Company and its subsidiaries and that such knowledge and familiarity was and
will continue to be of special, unique, and extraordinary value to the Company
and its subsidiaries. You agree that you will not reveal or disclose to any
unauthorized person, or take and use for your own account any Confidential
Information concerning the Company or any of its subsidiaries unless and to the
extent that (a) the information was or becomes available to you on a
nonconfidential basis from a source which is not, to your knowledge, bound by a
confidentiality obligation to the Company or any of its subsidiaries, (b) you
are required by a court of competent jurisdiction or otherwise compelled by law
to disclose such Confidential Information or (c) such disclosure is made by you
in good faith in connection with your responsibilities and duties to the Company
or any of its subsidiaries. Upon termination of employment, you agree
<PAGE>
Paul M. Olson
June 11, 1999
page 6
to promptly return to the Company and its subsidiaries or destroy all materials
and all copies of materials involving any Confidential Information in your
possession or control. You also agree to represent to the Company in writing
that you have complied with the provisions of the preceding sentence upon
termination of employment. In no event shall a breach or alleged breach of this
Section 8 be grounds for withholding or reclaiming payments under this
Agreement.
9. Effect on Other Plans, Agreements and Benefits. Except to the extent
----------------------------------------------
expressly set forth herein, any benefit or compensation to which you are
entitled under any agreement between you and the Company or any of its
subsidiaries or under any plan maintained by the Company or any of its
subsidiaries in which you participate or participated shall not be modified or
lessened in any way, but shall be payable according to the terms of the
applicable plan or agreement. The terms of this Agreement shall supersede any
existing agreement between you and the Company or any of its subsidiaries
executed prior to the date hereof to the extent any such agreement is
inconsistent with the terms hereof. Notwithstanding the above, any benefits
received by you pursuant to this Agreement shall be in lieu of any severance
benefits to which you would otherwise be entitled under any general severance
policy maintained by the Company or any of its subsidiaries for its management
or other personnel.
10. Successors; Binding Agreement.
-----------------------------
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean Cable Design Technologies Corporation and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or if there
is no such designee, to your estate.
11. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when actually delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
President of the Company with a copy to the Secretary of the Company, or to such
other address for either party as it may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
12. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such modification, waiver or discharge is agreed to in
writing and signed by you and a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach of or failure to comply
with any condition or provision of this Agreement by the other party hereto
shall be deemed to be a waiver of any similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
<PAGE>
Paul M. Olson
June 11, 1999
page 7
13. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of this Agreement and any exhibits and schedules hereto will
be governed by the internal law, and not the law of conflicts of, the State of
Delaware.
14. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
15. Counterpart. This Agreement may be executed in several counterparts,
-----------
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16. Survival. The obligations of the parties under this Agreement all
--------
survive the term of this Agreement.
17. Enforcement. The Company agrees to reimburse you for all expenses
-----------
(including reasonable legal fees and expenses) incurred by you to enforce the
terms of this Agreement.
* * * * *
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company this letter and the enclosed copy
of this letter which will then constitute our agreement on this subject. We
will return the copy of this letter to you.
Sincerely,
CABLE DESIGN TECHNOLOGIES CORPORATION
By: /s/ Charles B. Fromm
-------------------------------,
at the direction of the Board of
Directors
Name: Charles B. Fromm
Title: Vice President & Secretary
Agreed to as of: June 11, 1999
/s/ Paul M. Olson
- -------------------------------
Paul M. Olson
<PAGE>
EXHIBIT 10.16
CABLE DESIGN TECHNOLOGIES CORPORATION
1999 Long-Term Performance Incentive Plan
adopted April 19, 1999 and amended June 11, 1999
1. Purpose. The purpose of the 1999 Long-Term Performance Incentive Plan (the
"Plan") is to advance the interests of Cable Design Technologies Corporation, a
Delaware corporation (the "Company") and its stockholders by providing
incentives to certain key employees of the Company and to certain other key
individuals who perform services for the Company, including those who contribute
significantly to the strategic and long-term performance objectives and growth
of the Company.
2. Administration. The Plan shall be administered solely by the Board of
Directors (the "Board") of the Company or, if the Board shall so designate, by a
committee of the Board that shall be comprised of not fewer than two directors
(the "Committee"); provided that if at any time Rule 16b-3 or any successor rule
("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), so permits without adversely affecting the ability of the Plan
to comply with the conditions for exemption from Section 16 of the Exchange Act
(or any successor provision) provided by Rule 16b-3, the Committee may delegate
the administration of the Plan in whole or in part, on such terms and
conditions, and to such person or persons as it may determine in its discretion,
as it relates to persons not subject to Section 16 of the Exchange Act (or any
successor provision). References to the Committee hereunder shall include the
Board where appropriate. The membership of the Committee or such successor
committee shall be constituted so as to comply at all times with the applicable
requirements of Rule 16b-3.
The Committee has all the powers vested in it by the terms of the Plan set
forth herein, such powers to include exclusive authority (except as may be
delegated as permitted herein) to select the key employees and other key
individuals to be granted Awards under the Plan, to determine the type, size and
terms of the Award to be made to each individual selected, to modify the terms
of any Award that has been granted, to determine the time when Awards will be
granted, to establish performance objectives, to make any adjustments necessary
or desirable as a result of the granting of Awards to eligible individuals
located outside the United States and to prescribe the form of the instruments
embodying Awards made under the Plan. The Committee is authorized to interpret
the Plan and the Awards granted under the Plan, to establish, amend and rescind
any rules and regulations relating to the Plan, and to make any other
determinations which it deems necessary or desirable for the administration of
the Plan. The Committee (or its delegate as permitted herein) may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Award in the manner and to the extent the Committee deems necessary or
desirable to carry it into effect. Any decision of the Committee (or its
delegate as permitted herein) in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned. The Committee
may act only by a majority of its members in office, except that the members
thereof may authorize any one or more of their members or any officer of the
Company to execute and deliver documents or to take any other ministerial action
on behalf of the Committee with respect to Awards made or to be made to Plan
participants. No member of the Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him, by any other member of
the Committee or by any officer of the Company in connection with the
performance of duties under the Plan, except for his own willful misconduct or
as expressly provided by statute. Determinations to be made by the Committee
under the Plan may be made by its delegates.
3. Participation. Consistent with the purposes of the Plan, the Committee
shall have exclusive power (except as may be delegated as permitted herein) to
select the key employees and other key individuals performing services for the
Company who may participate in the Plan and be granted Awards under the Plan.
Eligible individuals may be selected individually or by groups or categories, as
determined by the Committee in its discretion. No non-employee director of the
Company shall be eligible to receive an Award under the Plan.
<PAGE>
4. Awards under the Plan.
(a) Types of Awards. Awards under the Plan may include, but need not be
limited to, one or more of the following types, either alone or in any
combination thereof: (i) "Stock Options," (ii) "Stock Appreciation Rights,"
(iii) "Restricted Stock," (iv) "Performance Grants" and (v) any other type of
Award deemed by the Committee in its discretion to be consistent with the
purposes of the Plan (including, but not limited to, Awards of or options or
similar rights granted with respect to unbundled stock units or components
thereof, and Awards to be made to participants who are foreign nationals or are
employed or performing services outside the United States). Stock Options, which
include "Nonqualified Stock Options" (which may be awarded to participants or
sold at a price determined by the Committee ("Purchased Options")) and
"Incentive Stock Options" or combinations thereof, are rights to purchase common
shares of the Company having a par value of $.01 per share and stock of any
other class into which such shares may thereafter be changed (the "Common
Shares"). Nonqualified Stock Options and Incentive Stock Options are subject to
the terms, conditions and restrictions specified in Paragraph 5. Stock
Appreciation Rights are rights to receive (without payment to the Company) cash,
Common Shares, other Company securities (which may include, but need not be
limited to, unbundled stock units or components thereof, debentures, preferred
stock, warrants, securities convertible into Common Shares or other property
("Other Company Securities")) or property, or other forms of payment, or any
combination thereof, as determined by the Committee, based on the increase in
the value of the number of Common Shares specified in the Stock Appreciation
Right. Stock Appreciation Rights are subject to the terms, conditions and
restrictions specified in Paragraph 6. Shares of Restricted Stock are Common
Shares which are issued subject to certain restrictions pursuant to Paragraph 7.
Performance Grants are contingent awards subject to the terms, conditions and
restrictions described in Paragraph 8, pursuant to which the participant may
become entitled to receive cash, Common Shares, Other Company Securities or
property, or other forms of payment, or any combination thereof, as determined
by the Committee.
(b) Maximum Number of Shares that May be Issued. There may be issued under
the Plan (as Restricted Stock, in payment of Performance Grants, pursuant to the
exercise of Stock Options or Stock Appreciation Rights, or in payment of or
pursuant to the exercise of such other Awards as the Committee, in its
discretion, may determine) an aggregate of not more than 1,507,000 Common
Shares, subject to adjustment as provided in Paragraph 14. Common Shares issued
pursuant to the Plan may be either authorized but unissued shares, treasury
shares, reacquired shares, or any combination thereof; provided, however, that,
unless and until this plan is approved by the Company's shareholders, only
treasury shares shall be issued hereunder. If any Common Shares issued as
Restricted Stock or otherwise subject to repurchase or forfeiture rights are
reacquired by the Company pursuant to such rights, or if any Award is canceled,
terminates or expires unexercised, any Common Shares that would otherwise have
been issuable pursuant thereto will be available for issuance under new Awards.
(c) Rights with respect to Common Shares and Other Securities.
(i) Unless otherwise determined by the Committee in its discretion, a
participant to whom an Award of Restricted Stock has been made (and any person
succeeding to such a participant's rights pursuant to the Plan) shall have,
after issuance of a certificate for the number of Common Shares awarded and
prior to the expiration of the Restricted Period (as hereinafter defined) or the
earlier repurchase of such Common Shares as herein provided, ownership of such
Common Shares, including the right to vote the same and to receive dividends or
other distributions made or paid with respect to such Common Shares (provided
that such Common Shares, and any new, additional or different shares, or Other
Company Securities or property, or other forms of consideration which the
participant may be entitled to receive with respect to such Common Shares as a
result of a stock split, stock dividend or any other change in the corporation
or capital structure of the Company, shall be subject to the restrictions
hereinafter described as determined by the Committee in its discretion),
subject, however, to the options, restrictions and limitations imposed thereon
pursuant to the Plan. Notwithstanding the foregoing, a participant with whom an
Award agreement is made to issue Common Shares in the future, shall have no
rights as a stockholder with respect to Common Shares related to such agreement
until issuance of a certificate to him.
2
<PAGE>
(ii) Unless otherwise determined by the Committee in its discretion,
a participant to whom a grant of Stock Options, Stock Appreciation Rights,
Performance Grants or any other Award is made (and any person succeeding to such
a participant's rights pursuant to the Plan) shall have no rights as a
stockholder with respect to any Common Shares or as a holder with respect to
other securities, if any, issuable pursuant to any such Award until the date of
the issuance of a stock certificate to him for such Common Shares or other
instrument of ownership, if any. Except as provided in Paragraph 14, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities, other property or
other forms of consideration, or any combination thereof) for which the record
date is prior to the date such stock certificate or other instrument of
ownership, if any, is issued.
5. Stock Options. The Committee may grant or sell Stock Options either alone,
or in conjunction with Stock Appreciation Rights, Performance Grants or other
Awards, either at the time of grant or by amendment thereafter; provided that an
Incentive Stock Option may be granted only to an eligible employee of the
Company or any parent or subsidiary corporation. Each Stock Option (referred to
herein as an "Option") granted or sold under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not limited
to, restrictions upon the Option or the Common Shares issuable upon exercise
thereof, as the Committee, in its discretion, shall establish:
(a) The option price may be less than, equal to, or greater than, the fair
market value of the Common Shares subject to such Option at the time the Option
is granted, as determined by the Committee, but in no event will such option
price be less than 50% of the fair market value of the underlying Common Shares
at the time the Option is granted; provided, however, that in the case of an
Incentive Stock Option granted to such an employee, the option price shall not
be less than the fair market value of the Common Shares subject to such Option
at the time the Option is granted, or if granted to such an employee who owns
stock representing more than ten percent of the voting power of all classes of
stock of the Company or any parent or subsidiary (a "Ten Percent Employee"),
such option price shall not be less than 110% of such fair market value at the
time the Option is granted; but in no event will such option price be less than
the par value of such Common Shares.
(b) The Committee shall determine the number of Common Shares to be
subject to each Option. The number of Common Shares subject to an outstanding
Option may be reduced on a share-for-share or other appropriate basis, as
determined by the Committee, to the extent that Common Shares under such Option
are used to calculate the cash, Common Shares, Other Company Securities or
property, or other forms of payment, or any combination thereof, received
pursuant to exercise of a Stock Appreciation Right attached to such Option, or
to the extent that any other Award granted in conjunction with such Option is
paid.
(c) The Option may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of descent and
distribution, and shall be exercisable during the grantee's lifetime only by
him. Unless the Committee determines otherwise, the Option shall not be
exercisable for at least six months after the date of grant, unless the grantee
ceases employment or performance of services before the expiration of such six-
month period by reason of his disability as defined in Paragraph 12 or his
death.
(d) The Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date it is
granted, and, in the case of any other Option, after the expiration of ten
years from the date it is granted. Any Option may be exercised during such
period only at such time or times and in such installments as the Committee
may establish;
(ii) unless payment in full is made for the shares being acquired
thereunder at the time of exercise; such payment shall be made in such form
(including, but not limited to, cash, Common Shares, or
3
<PAGE>
the surrender of another outstanding Award under the Plan, or any
combination thereof) as the Committee may determine in its discretion; and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of the grant of the Option and
ending on the date of such exercise, employed by or otherwise performing
services for the Company, or a corporation, or a parent or subsidiary of a
corporation, substituting or assuming the Option in a transaction to which
Section 424(a) of the Internal Revenue Code of 1986, as amended, or any
successor statutory provision thereto (the "Code"), is applicable, except
that
(A) if such person shall cease such employment or performance
of services by reason of his disability as defined in Paragraph 12 or
early, normal or deferred retirement under an approved retirement program
of the Company (or such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose) while holding an Option
which has not expired and has not been fully exercised, such person, at any
time within three years (or such period determined by the Committee) after
the date he ceased such employment or performance of services (but in no
event after the Option has expired), may exercise the Option with respect
to any shares as to which he could have exercised the Option on the date he
ceased such employment or performance of services, or with respect to such
greater number of shares as determined by the Committee;
(B) if any person to whom an Option has been granted shall die
holding an Option which has not expired and has not been fully exercised,
his executors, administrators, heirs or distributees, as the case may be,
may, at any time within one year (or such other period determined by the
Committee) after the date of death (but in no event after the Option has
expired), exercise the Option with respect to any shares as to which the
decedent could have exercised the Option at the time of his death, or with
respect to such greater number of shares as determined by the Committee; or
(C) if such person shall cease employment or performance of
services while holding an Option which has not expired and has not been
fully exercised, the Committee may determine to allow such person at any
time within the one year (or three months in the case of an Incentive Stock
Option) or such other period determined by the Committee after the date he
ceased such employment or performance of services (but in no event after
the Option has expired), to exercise the Option with respect to any shares
as to which he could have exercised the Option on the date he ceased such
employment or performance of services, or with respect to such greater
number of shares as determined by the Committee.
(e) In the case of an Incentive Stock Option, the amount of the aggregate fair
market value of Common Shares (determined at the time of grant of the Option
pursuant to subparagraph 5(a) of the Plan) with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year (under all such plans of his employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
(f) It is the intent of the Company that Nonqualified Stock Options granted
under the Plan not be classified as Incentive Stock Options, that the Incentive
Stock Options granted under the Plan be consistent with and contain or be deemed
to contain all provisions required under Section 422 and the other appropriate
provisions of the Code and any implementing regulations (and any successor
provisions thereof), and that any ambiguities in construction shall be
interpreted in order to effectuate such intent.
6. Stock Appreciation Rights. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter. Each Award
of Stock Appreciation Rights granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
4
<PAGE>
conditions, and with such other terms and conditions, including, but not limited
to, restrictions upon the Award of Stock Appreciation Rights or the Common
Shares issuable upon exercise thereof, as the Committee, in its discretion,
shall establish:
(a) The Committee shall determine the number of Common Shares to be
subject to each Award of Stock Appreciation Rights. The number of Common
Shares subject to an outstanding Award of Stock Appreciation Rights may be
reduced on a share-for-share or other appropriate basis, as determined by
the Committee, to the extent that Common Shares under such Award of Stock
Appreciation Rights are used to calculate the cash, Common Shares, Other
Company Securities or property, or other forms of payment, or any
combination thereof, received pursuant to exercise of an Option attached to
such Award of Stock Appreciation Rights, or to the extent that any other
Award granted in conjunction with such Award of Stock Appreciation Rights
is paid.
(b) The Award of Stock Appreciation Rights may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will
or the laws of descent and distribution, and shall be exercisable during
the grantee's lifetime only by him. Unless the Committee determines
otherwise, the Award of Stock Appreciation Rights shall not be exercisable
for at least six months after the date of grant, unless the grantee ceases
employment or performance of services before the expiration of such six-
month period by reason of his disability as defined in Paragraph 12 or his
death.
(c) The Award of Stock Appreciation Rights shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights which is
attached to an Incentive Stock Option granted to a Ten Percent Employee,
after the expiration of five years from the date it is granted, and, in
the case of any other Award of Stock Appreciation Rights, after the
expiration of ten years from the date it is granted. Any Award of Stock
Appreciation Rights may be exercised during such period only at such
time or times and in such installments as the Committee may establish;
(ii) unless the Option or other Award to which the Award of Stock
Appreciation Rights is attached is at the time exercisable; and
(iii) unless the person exercising the Award of Stock Appreciation
Rights has been, at all times during the period beginning with the date
of the grant thereof and ending on the date of such exercise, employed
by or otherwise performing services for the Company, except that
(A) if such person shall cease such employment or
performance of services by reason of his disability as defined in
Paragraph 12 or early, normal or deferred retirement under an approved
retirement program of the Company (or such other plan or arrangement as
may be approved by the Committee, in its discretion, for this purpose)
while holding an Award of Stock Appreciation Rights which has not
expired and has not been fully exercised, such person may, at any time
within three years (or such other period determined by the Committee)
after the date he ceased such employment or performance of services
(but in no event after the Award of Stock Appreciation Rights has
expired), exercise the Award of Stock Appreciation Rights with respect
to any shares as to which he could have exercised the Award of Stock
Appreciation Rights on the date he ceased such employment or
performance of services, or with respect to such greater number of
shares as determined by the Committee; or
(B) if any person to whom an Award of Stock Appreciation
Rights has been granted shall die holding an Award of Stock
Appreciation Rights which has not expired and has not been fully
exercised, his executors, administrators, heirs or distributees, as the
case may be, may at any time within one year (or such other period
determined by the Committee) after the date of death (but in no event
after the Award of Stock Appreciation Rights has expired), exercise the
Award of Stock Appreciation Rights with respect to any shares as to
which the decedent could have exercised the Award of Stock Appreciation
Rights at the time of his death,
5
<PAGE>
or with respect to such greater number of shares as determined by the
Committee.
(d) An Award of Stock Appreciation Rights shall entitle the holder (or any
person entitled to act under the provisions of subparagraph 6(c)(iii)(B) hereof)
to exercise such Award and surrender unexercised the Option (or other Award), if
any, to which the Stock Appreciation Right is attached (or any portion of such
Option or other Award) to the Company and to receive from the Company in
exchange thereof, without payment to the Company, that number of Common Shares
having an aggregate value equal to (or, in the discretion of the Committee, less
than) the excess of the fair market value of one share, at the time of such
exercise, over the exercise price (or Option Price, as the case may be), times
the number of shares subject to the Award or the Option (or other Award), or
portion thereof, which is so exercised or surrendered, as the case may be. The
Committee shall be entitled in its discretion to elect to settle the obligation
arising out of the exercise of a Stock Appreciation Right by the payment of cash
or Other Company Securities or property, or other forms of payment, or any
combination thereof, as determined by the Committee, equal to the aggregate
value of the Common Shares it would otherwise be obligated to deliver. Any such
election by the Committee shall be made as soon as practicable after the receipt
by the Committee of written notice of the exercise of the Stock Appreciation
Right. The value of a Common Share, Other Company Securities or property, or
other forms of payment determined by the Committee for this purpose shall be the
fair market value thereof on the last business day next preceding the date of
the election to exercise the Stock Appreciation Right, unless the Committee, in
its discretion, determines otherwise.
(e) A Stock Appreciation Right may provide that it shall be deemed to have
been exercised at the close of business on the business day preceding the
expiration date of the Stock Appreciation Right or of the related Option (or
other Award), or such other date as specified by the Committee, if at such time
such Stock Appreciation Right has a positive value. Such deemed exercise shall
be settled or paid in the same manner as a regular exercise thereof as provided
in subparagraph 6(d) hereof.
(f) No fractional shares may be delivered under this Paragraph 6, but in lieu
thereof a cash or other adjustment shall be made as determined by the Committee
in its discretion.
7. Restricted Stock. Each Award of Restricted Stock under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions as the Committee,
in its discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be
issued to a participant pursuant to the Award, and the extent, if any, to
which they shall be issued in exchange for cash, other consideration, or
both.
(b) Restricted Stock awarded to a participant in accordance with the
Award shall be subject to the following restrictions until the expiration of
such period as the Committee shall determine, from the date on which the
Award is granted (the "Restricted Period"): (i) a participant to whom an
award of Restricted Stock is made shall be issued, but shall not be entitled
to, the delivery of a stock certificate, (ii) the Restricted Stock shall not
be transferable prior to the end of the Restricted Period, (iii) the
Restricted Stock shall be forfeited and the stock certificate shall be
returned to the Company and all rights of the holder of such Restricted Stock
to such shares and as a shareholder shall terminate without further
obligation on the part of the Company if the participant's continuous
employment or performance of services for the Company shall terminate for any
reason prior to the end of the Restricted Period, except as otherwise
provided in subparagraph 7(c), and (iv) such other restrictions as determined
by the Committee in its discretion.
(c) If a participant who has been in continuous employment or
performance of services for the Company since the date on which a Restricted
Stock Award was granted to him shall, while in such employment or performance
of services, die, or terminate such employment or performance of services by
reason of disability as defined in Paragraph 12 or by reason of early, normal
or deferred retirement under an approved retirement program of the
6
<PAGE>
Company (or such other plan or arrangement as may be approved by the
Committee in its discretion, for this purpose) and any of such events shall
occur after the date on which the Award was granted to him and prior to the
end of the Restricted Period of such Award, the Committee may determine to
cancel any and all restrictions on any or all of the Common Shares subject to
such Award.
8. Performance Grant. The Award of the Performance Grant ("Performance
Grant") to a participant will entitle him to receive a specified amount
determined by the Committee (the "Actual Value"), if the terms and conditions
specified herein and in the Award are satisfied. Each Award of a Performance
Grant shall be subject to the following terms and conditions, and to such other
terms and conditions, including but not limited to, restrictions upon any cash,
Common Shares, Other Company Securities or property, or other forms of payment,
or any combination thereof, issued in respect of the Performance Grant, as the
Committee, in its discretion, shall establish, and shall be embodied in an
instrument in such form and substance as is determined by the Committee:
(a) The Committee shall determine the value or range of values of a
Performance Grant to be awarded to each participant selected for an Award
and whether or not such a Performance Grant is granted in conjunction with
an Award of Options, Stock Appreciation Rights, Restricted Stock or other
Award, or any combination thereof, under the Plan (which may include, but
need not be limited to, deferred Awards) concurrently or subsequently
granted to the participant (the "Associated Award"). As determined by the
Committee, the maximum value of each Performance Grant (the "Maximum Value")
shall be: (i) an amount fixed by the Committee at the time the Award is made
or amended thereafter, (ii) an amount which varies from time to time based
in whole or in part on the then current value of the Common Shares, Other
Company Securities or property, or other securities or property, or any
combination thereof or (iii) an amount that is determinable from criteria
specified by the Committee. Performance Grants may be issued in difference
classes or series having different names, terms and conditions. In the case
of a Performance Grant awarded in conjunction with an Associated Award, the
Performance Grant may be reduced on an appropriate basis to the extent that
the Associated Award has been exercised, paid to or otherwise received by
the participant, as determined by the Committee.
(b) The award period ("Award Period") related to any Performance Grant
shall be a period determined by the Committee. At the time each Award is
made, the Committee shall establish performance objectives to be attained
within the Award Period as the means of determining the Actual Value of such
a Performance Grant. The performance objectives shall be based on such
measure or measures of performance, which may include, but need not be
limited to, the performance of the participant, the Company, one or more of
its subsidiaries or one or more of their divisions or units, or any
combination of the foregoing, as the Committee shall determine, and may be
applied on an absolute basis or be relative to industry or other indices, or
any combination thereof. The Actual Value of a Performance Grant shall be
equal to its Maximum Value only if the performance objectives are attained
in full, but the Committee shall specify the manner in which the Actual
Value of Performance Grants shall be determined if the performance
objectives are met in part. Such performance measures, the Actual Value or
the Maximum Value, or any combination thereof, may be adjusted in any manner
by the Committee in its discretion at any time and from time to time during
or as soon as practicable after the Award Period, if it determines that such
performance measures, the Actual Value or the Maximum Value, or any
combination thereof, are not appropriate under the circumstances.
(c) The rights of a participant in Performance Grants awarded to him
shall be provisional and may be canceled or paid in whole or in part, all as
determined by the Committee, if the participant's continuous employment or
performance of services for the Company shall terminate for any reason prior
to the end of the Award Period.
(d) The Committee shall determine whether the conditions of subparagraph
8(b) or 8(c) hereof have been met and, if so, shall ascertain the Actual
Value of the Performance Grants. If the Performance Grants have no Actual
Value, the Award and such Performance Grants shall be deemed to have been
canceled and the Associated Award, if any, may be canceled or permitted to
continue in effect in accordance with its terms. If the Performance Grants
have any Actual Value and:
7
<PAGE>
(i) were not awarded in conjunction with an Associated Award, the
Committee shall cause an amount equal to the Actual Value of the
Performance Grants earned by the participant to be paid to him or his
beneficiary as provided below; or
(ii) were awarded in conjunction with an Associated Award, the
Committee shall determine, in accordance with criteria specified by the
Committee (A) to cancel the Performance Grants, in which event no amount
in respect thereof shall be paid to the participant or his beneficiary,
and the Associated Award may be permitted to continue in effect in
accordance with its terms, (B) to pay the Actual Value of the
Performance Grants to the participant or his beneficiary as provided
below, in which event the Associated Award may be canceled or (C) to pay
to the participant or his beneficiary as provided below, the Actual
Value of only a portion of the Performance Grants, in which event all or
a portion of the Associated Award may be permitted to continue in effect
in accordance with its terms or be canceled, as determined by the
Committee.
Such determination by the Committee shall be made as promptly as practicable
following the end of the Award Period or upon the earlier termination of
employment or performance of services, or at such other time or times as the
Committee shall determine, and shall be made pursuant to criteria specified by
the Committee.
Payment of any amount in respect of the Performance Grants which the Committee
determines to pay as provided above shall be made by the Company as promptly as
practicable after the end of the Award Period or at such other time or times as
the Committee shall determine, and may be made in cash, Common Shares, Other
Company Securities or property, or other forms of payment, or any combination
thereof or in such other manner, as determined by the Committee in its
discretion. Notwithstanding anything in this Paragraph 8 to the contrary, the
Committee may, in its discretion, determine and pay out the Actual Value of the
Performance Grants at any time during the Award Period.
9. Deferral of Compensation. The Committee shall determine whether or not an
Award shall be made in conjunction with deferral of the participant's salary,
bonus or other compensation, or any combination thereof, and whether or not such
deferred amounts may be
(i) forfeited to the Company or to other participants or any
combination thereof, under certain circumstances (which may include, but
need not be limited to, certain types of termination of employment or
performance of services for the Company),
(ii) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures and/or
(iii) credited with income equivalents (which may include, but need
not be limited to, interest, dividends or other rates of return) until the
date or dates of payment of the Award, if any.
10. Deferred Payment of Awards. The Committee may specify that the payment of
all or any portion of cash, Common Shares, Other Company Securities or property,
or any other form of payment, or any combination thereof, under an Award shall
be deferred until a later date. Deferrals shall be for such periods or until the
occurrence of such events, and upon such terms, as the Committee shall determine
in its discretion. Deferred payments of Awards may be made by undertaking to
make payment in the future based upon the performance of certain investment
equivalents (which may include, but need not be limited to, government
securities, Common Shares, other securities, property or consideration, or any
combination thereof), together with such additional amounts of income
equivalents (which may be compounded and may include, but need not be limited
to, interest, dividends or other rates of return or any combination thereof) as
may accrue thereon until the date or dates of payment, such investment
equivalents and such additional amounts of income equivalents to be determined
by the Committee in its discretion.
11. Amendment or Substitution of Awards under the Plan. The terms of any
outstanding Award under the Plan
8
<PAGE>
may be amended from time to time by the Committee in its discretion in any
manner that it deems appropriate (including, but not limited to, acceleration of
the date of exercise of any Award and/or payments thereunder); provided that no
such amendment shall adversely affect in a material manner any right of a
participant under the Award without his written consent, unless the Committee
determines in its discretion that there have occurred or are about to occur
significant changes in the participant's position, duties or responsibilities,
or significant changes in economic, legislative, regulatory, tax, accounting or
cost/benefit conditions which are determined by the Committee in its discretion
to have or to be expected to have a substantial effect on the performance of the
Company, or any subsidiary, affiliate, division or department thereof, on the
Plan or on any Award under the Plan. The Committee may, in its discretion,
permit holders of Awards under the Plan to surrender outstanding Awards in order
to exercise or realize the rights under other Awards, or in exchange for the
grant of new Awards, or require holders of Awards to surrender outstanding
Awards as a condition precedent to the grant of new Awards under the Plan.
12. Disability. For the purposes of this Plan, a participant shall be deemed
to have terminated his employment or performance of services for the Company and
its Affiliates by reason of disability, if the Committee shall determine that
the physical or mental condition of the participant by reason of which such
employment or performance of services terminated was such at that time as would
entitle him to payment of monthly disability benefits under any Company
disability plan. If the participant is not eligible for benefits under any
disability plan of the Company, he shall be deemed to have terminated such
employment or performance of services by reason of disability if the Committee
shall determine that his physical or mental condition would entitle him to
benefits under any Company disability plan if he were eligible therefor.
13. Termination of a Participant. For all purposes under the Plan, the
Committee shall determine whether a participant has terminated employment with,
or the performance of services for, the Company.
14. Dilution and Other Adjustments. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split, dividend,
split-up, split-off, spin-off, recapitalization, merger, consolidation, rights
offering, reorganization, combination or exchange of shares, a sale by the
Company of all of its assets, any distribution to stockholders other than a
normal cash dividend, or other extraordinary or unusual event, if the Committee
shall determine, in its discretion, that such change equitably requires an
adjustment in the terms of any Award (including, without limitation, the number
and type of consideration subject to any Award) or the number of Common Shares
available for Awards, such adjustment may be made by the Committee and shall be
final, conclusive and binding for all purposes of the Plan.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Awards shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, all restrictions on any
outstanding Awards shall lapse and participants shall be entitled to the full
benefit of all such Awards immediately prior to the closing date of such sale or
merger, unless otherwise provided by the Committee.
15. Designation of Beneficiary by Participant. A participant may name a
beneficiary to receive any payment to which he may be entitled in respect of any
Award under the Plan in the event of his death, on a written form to be provided
by and filed with the Committee, and in a manner determined by the Committee in
its discretion. The Committee reserves the right to review and approve
beneficiary designations. A participant may change his beneficiary from time to
time in the same manner, unless such participant has made an irrevocable
designation. Any designation of beneficiary under the Plan (to the extent it is
valid and enforceable under applicable law) shall be controlling over any other
disposition, testamentary or otherwise, as determined by the Committee in its
discretion. If no designated beneficiary survives the participant and is living
on the date on which any amount becomes payable to such a participant's
beneficiary, such payment will be made to the legal representatives of the
participant's estate, and the term "beneficiary" as used in the Plan shall be
deemed to include such person or persons. If there are any questions as to the
legal right of any beneficiary to receive a distribution under the Plan, the
Committee in its discretion may determine that
9
<PAGE>
the amount in question be paid to the legal representatives of the estate of the
participant, in which event the Company, the Board and the Committee and the
members thereof, will have no further liability to anyone with respect to such
amount.
16. Financial Assistance. If the Committee determines that such action is
advisable, the Company may assist any person to whom an Award has been granted
in obtaining financing from the Company (or under any program of the Company
approved pursuant to applicable law), or from a bank or other third party, on
such terms as are determined by the Committee, and in such amount as is required
to accomplish the purposes of the Plan, including, but not limited to, to permit
the exercise of an Award, the participation therein, and/or the payment of any
taxes in respect thereof. Such assistance may take any form that the Committee
deems appropriate, including, but not limited to, a direct loan from the
Company, a guarantee of the obligation by the Company, or the maintenance by the
Company of deposits with such bank or third party.
17. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Determinations made by the Committee under
the Plan need not be uniform and may be made selectively among eligible
individuals under the plan, whether or not such eligible individuals are
similarly situated. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee or other person any right to continue to be
employed by or perform services for the Company, and the right to terminate
the employment of or performance of services by any participants at any time
and for any reason is specifically reserved.
(b) No participant or other person shall have any right with respect to
the Plan, the Common Shares reserved for issuance under the Plan or in any
Award, contingent or otherwise, until written evidence of the Award shall
have been delivered to the recipient and all the terms, conditions and
provisions of the Plan and the Award applicable to such recipient (and each
person claiming under or through him) have been met.
(c) Except as may be approved by the Committee where such approval shall
not adversely affect compliance of the Plan with Rule 16b-3 under the
Exchange Act, a participant's rights and interest under the Plan may not be
assigned or transferred, hypothecated or encumbered in whole or in part
either directly or by operation of law or otherwise (except in the event of a
participant's death) including, but not by way of limitation, execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner;
provided, however, that any Option or similar right (including, but not
limited to, a Stock Appreciation Right) offered pursuant to the Plan shall
not be transferable other than by will or the laws of descent and
distribution and shall be exercisable during the participant's lifetime only
by him.
(d) No Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment shall be issued hereunder
with respect to any Award unless counsel for the Company shall be satisfied
that such issuance will be in compliance with applicable federal, state,
local and foreign legal, securities exchange and other applicable
requirements.
(e) It is the intent of the Company that the Plan comply in all respects
with Rule 16b-3 under the Exchange Act, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3, such provision shall be deemed null and void to
the extent required to permit the Plan to comply with Rule 16b-3.
(f) The Company shall have the right to deduct from any payment made
under the Plan any federal, state, local or foreign income or other taxes
required by law to be withheld with respect to such payment. It shall be a
condition to the obligation of the Company to issue Common Shares, Other
Company Securities or property, other securities or property, or other forms
of payment, or any combination thereof, upon exercise, settlement or payment
of any Award under the Plan, that the participant (or any beneficiary or
person entitled to act) pay to the Company, upon
10
<PAGE>
its demand, such amount as may be required by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign income
or other taxes. If the amount requested is not paid, the Company may refuse
to issue Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof. Notwithstanding anything in the Plan to the contrary, the Committee
may, in its discretion, permit an eligible participant (or any beneficiary or
person entitled to act) to elect to pay a portion or all of the amount
requested by the Company for such taxes with respect to such Award, at such
time and in such manner as the Committee shall deem to be appropriate
(including, but not limited to, by authorizing the Company to withhold, or
agreeing to surrender to the Company on or about the date such tax liability
is determinable, Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof, owned by such person or a portion of such forms of payment that
would otherwise be distributed, or have been distributed, as the case may be,
pursuant to such Award to such person, having a fair market value equal to
the amount of such taxes).
(g) The expenses of the Plan shall be borne by the Company.
(h) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under the Plan, and rights to the
payment of Awards shall be no greater than the rights of the Company's
general creditors.
(i) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or the
Committee or its delegates.
(j) Fair market value in relation to Common Shares, Other Company
Securities or property, other securities or property or other forms of
payment of Awards under the Plan, or any combination thereof, as of any
specific time shall mean such value as determined by the Committee in
accordance with applicable law.
(k) The masculine pronoun includes the feminine and the singular includes
the plural wherever appropriate.
(l) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Awards hereunder of any
Common Shares issued pursuant hereto as may be required by Section 13 or
15(d) of the Exchange Act (or any successor provision) or any other
applicable statute, rule or regulation.
(m) The validity, construction, interpretation, administration and effect
of the Plan, and of its rules and regulations, and rights relating to the
Plan and to Awards granted under the Plan, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware.
18. Plan Amendment or Suspension. The Plan may be amended or suspended in
whole or in part at any time from time to time by the Board, but no amendment
shall be effective unless and until the same is approved by stockholders of the
Company where the failure to obtain such approval would adversely affect the
compliance of the Plan with Rule 16b-3 under the Exchange Act. No amendment of
the Plan shall adversely affect in a material manner any right of any
participant with respect to any Award theretofore granted without such
participant's written consent, except as permitted under Paragraphs 11 and 14.
19. Plan Termination. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan;
or
(b) ten years from the date the Plan is initially approved and adopted
by the board of directors of the Company; provided, however, that the Board may,
prior to the expiration of such ten-year period, extend the term of the Plan for
an additional period of up to five years for the grant of Awards other than
Incentive Stock Options.
11
<PAGE>
No termination of the Plan shall materially alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan, except that subsequent to termination of the Plan, the
Committee may make amendments permitted under Paragraph 11.
12
<PAGE>
EXHIBIT 10.18
[date]
RE: STOCK OPTION GRANT
Dear :
Cable Design Technologies Corporation (the "Company") hereby grants to you
("Grantee"), as of the date set forth above (the "grant date"), a nonqualified
stock option to purchase [ ] shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company at the option price per share of $[ ].
This grant is made pursuant to the1999 Long-Term Performance Incentive Plan (the
"Plan").
This grant is subject to the terms and conditions of the Plan and those set
forth in Schedule I hereto, including vesting described in Schedule I, all of
which terms and conditions are incorporated herein. This grant will be
effective only upon receipt of a copy of Schedule I signed by you.
Very truly yours,
CABLE DESIGN TECHNOLOGIES CORPORATION
at the direction of the Board of Directors
By: /s/ Paul M. Olson
-----------------------------------------
Paul M. Olson
Chief Executive Officer and President
ATTACHMENT
<PAGE>
Grantee:
Date of Grant:
SCHEDULE I
CABLE DESIGN TECHNOLOGIES CORPORATION
TERMS OF
NONQUALIFIED STOCK OPTION AGREEMENT EVIDENCING
A GRANT OF A NONQUALIFIED STOCK OPTION
The grant to which these terms are attached is subject to the
following additional terms and conditions. All terms used but not defined
herein shall have the meanings given to them in the grant to which these terms
are attached, and if not defined therein, in the Plan. The grant to which these
terms are attached and these terms constitute the "Agreement" as used herein.
1. Grantee Bound by Plan. A copy of the Plan has been provided to
---------------------
Grantee, which Plan is incorporated herein by reference and made a part hereof.
Grantee hereby acknowledges receipt of a copy of the Plan and the Plan
prospectus and agrees to be bound by all the terms and provisions thereof. The
Plan and any prospectus then in effect should be carefully examined before any
decision is made to exercise the option.
2. Exercise of Option. Subject to the earlier termination of the
------------------
option as provided herein and in the Plan, the option may be exercised, by
written notice to the Company in the form attached as Exhibit B hereto, at any
---------
time and from time to time after the date of grant, but, except as otherwise
provided below, such option shall not be exercisable for more than a percentage
of the aggregate number of shares offered by such option determined by the
number of full years from the date of grant thereof to the date of such
exercise, in accordance with the following schedule:
<TABLE>
<CAPTION>
Completed Years Cumulative Percentage of Shares That
From Date of Grant May Be Exercisable
---------------------- -------------------------------------
<S> <C>
Less than 1 year 0%
1 but less than 2 years up to 20%
2 but less than 3 years up to 40%
3 but less than 4 years up to 60%
4 but less than 5 years up to 80%
5 or more years up to 100%
</TABLE>
provided that, subject to the other conditions of this Agreement, if prior to
the expiration of this option (a) a Change of Control (defined in Exhibit A)
---------
occurs and (b) in contemplation thereof, in connection therewith or thereafter
the
-2-
<PAGE>
Grantee either (i) involuntarily ceases to be an employee of the Company or any
of its Subsidiaries (defined in Exhibit A) other than for Good Cause (defined in
Exhibit A) , disability (defined in Exhibit A) or death or (ii) the Grantee
- --------- ---------
terminates his or her employment with the Company or its Subsidiaries for Good
Reason (defined in Exhibit A), then:
--------- ----
(x) if such termination occurs prior to the first anniversary of the
Change of Control, one-half (1/2) of the then unvested options shall
vest (i.e., one-half of the shares that are then unexercisable shall
be exercisable for purchase) and the remaining options shall be
canceled; and
(y) if such termination occurs on or after the first anniversary of the
Change of Control, all of the then unvested options shall vest (i.e.,
the option shall be exercisable for all of the shares).
An option shall not be exercisable in any event after the expiration of ten
years from the date of grant. An option may not be exercised for a fraction of
a share of Common Stock.
3. Conditions to Exercise. The option may not be exercised by
----------------------
Grantee unless all of the following conditions are met:
(a) Legal counsel for the Company must be satisfied at the time
of exercise that the issuance of shares of Common Stock upon exercise will be in
compliance with the Securities Act of 1933, as amended (the "Act") and other
---
applicable United States federal, state, local and foreign laws;
(b) Grantee must pay at the time of exercise the full purchase
price for the shares of Common Stock being acquired hereunder, by (i) paying in
United States dollars by cash, (ii) tendering shares of Common Stock owned by
Grantee which have a fair market value equal to the full purchase price for the
shares of Common Stock being acquired, such fair market value to be determined
in such reasonable manner as may be provided from time to time by the Committee
or as may be required in order to comply with or conform to the requirements of
any applicable or relevant laws or regulations, (iii) requesting that the
Company withhold from the shares of Common Stock to be issued to the Grantee the
number of shares necessary to satisfy the full purchase price, based on the fair
market value of the shares of Common Stock determined as set forth in clause
(ii); (iv) paying in such other form as the Committee may determine in its sole
discretion, or (v) tendering a combination of the forms of payment provided for
above in clauses (i) through (iv) of this Subparagraph 3(b); provided, however,
-------- -------
that any payment of the purchase price in the form of shares of Common Stock
owned by the Grantee or to be issued to the Grantee shall be made in accordance
with the Company's policy regarding transactions involving the Company's
securities; and
(c) Grantee must, at all times during the period beginning with
the grant date of the option and ending on the date of such exercise, have been
employed by the Company or one of its Subsidiaries, provided that if:
(i) Grantee ceases to be so employed by reason of Grantee's
disability or retirement (as such terms are defined in the Plan and
interpreted and administered by the Committee) while holding the
option which has not expired and has not been fully exercised Grantee
may, at any time within three years of the date of the onset of such
disability or retirement (but in no event after the expiration of ten
years from the grant date), exercise the option with respect to the
number of shares, determined under Paragraph 2 above, as to which
Grantee could have exercised
-3-
<PAGE>
the option on the date of the onset of such disability or retirement
(or with respect to such greater number of shares as determined by the
Committee in its sole discretion) and any remaining portion of the
option shall be canceled and no longer exercisable;
(ii) Grantee dies while holding the option which has not expired
and has not been fully exercised, his executors, administrators, heirs
or distributees, as the case may be, may, at any time within one year
(or such other period determined by the Committee) after the date of
death (but in no event after the Option has expired), exercise the
option with respect to any shares, determined under Paragraph 2, as to
which the decedent could have exercised the option at the time of his
death (or with respect to such greater number of shares as determined
by the Committee) and any remaining portion of the option shall be
canceled and no longer exercisable; and
(iii) Grantee's employment with the Company or its Subsidiaries
is terminated for any reason other than as provided in clauses (i) and
(ii) above and on the date of such termination Grantee holds the
option which has not expired and has not been fully exercised, Grantee
may, at any time within 30 days after such date of termination (but in
no event after the expiration of ten years from the grant date),
exercise the option with respect to the number of shares, determined
under Paragraph 2 above, as to which Grantee could have exercised the
option on such date of termination (or with respect to such greater
number of shares as determined by the Committee in its sole
discretion), and any remaining portion of the option shall be canceled
and no longer exercisable.
Any option that is not exercised within the periods contemplated in clauses (i),
(ii) and (iii) above shall be canceled and no longer exercisable.
4. Transferability. The option may not be sold, assigned,
---------------
transferred, pledged, hypothecated or otherwise disposed of by Grantee, except
by will or the laws of descent and distribution and is exercisable during
Grantee's lifetime only by Grantee. If Grantee or anyone claiming under or
through Grantee attempts to violate this Paragraph 4, such attempted violation
shall be null and void and without effect, and the Company's obligation to make
any further payments (stock or cash) hereunder shall terminate. If at the time
of Grantee's death the option has not been fully exercised, Grantee's estate or
any person who acquires the right to exercise the option by bequest or
inheritance or by reason of Grantee's death may, at any time within one year
after the date of Grantee's death (but in no event after the expiration of ten
years from the grant date), exercise the option with respect to the number of
shares, determined under Paragraph 2 above, as to which Grantee could have
exercised the option at the time of Grantee's death, or with respect to such
greater number of shares as determined by the Committee in its sole discretion.
The applicable requirements of Paragraph 3 above must be satisfied at the time
of such exercise.
5. Adjustments; Change of Control. In the event of any change in
------------------------------
the number of shares of Common Stock outstanding by reason of any stock split,
stock dividend, split-up, split-off, spin-off, recapitalization, merger or
consolidation in which the Company is the surviving corporation, rights
offering, reorganization, combination or exchange of shares, distribution to
shareholders other than a normal cash dividend, or other extraordinary or
unusual event occurring after the grant date specified above and prior to its
exercise in full, the number of shares of Common Stock for which the option may
then be exercised, the type of consideration for which the option may be
exercised and the option price per share may or may not be adjusted so as to
reflect such change, all as determined by the Committee in its sole discretion.
In the event of a Change of Control, the Committee shall
-4-
<PAGE>
either (i) fully vest the options, or (ii) if the Company is not the surviving
corporation, provide for the conversion of this option into an option to acquire
shares of the acquiror, with such adjustments to price and number of shares as
the Committee deems to be equitable to reflect the conversion, and retaining the
same remaining vesting schedule (except as required by Paragraph 2 above), or
(iii) if the Company is the surviving corporation, make such equitable
adjustments to the price and number of shares to reflect such Change of Control.
Notwithstanding anything in this Agreement to the contrary, the Committee may
take the foregoing actions without the consent of the Grantee, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes. Following any Change of Control in which the Company is not the
surviving corporation, the term "Company" shall refer to the acquiror.
6. Withholding of Tax. It shall be a condition to the obligation of
------------------
the Company to furnish shares of Common Stock upon exercise of an option (i)
that Grantee (or any person acting under Paragraph 4 above) pay to the Company
or its designee, upon its demand, in accordance with the Plan, such amount as
may be demanded for the purpose of satisfying the Company's obligation to
withhold federal, state, local or foreign income, employment or other taxes
incurred by reason of the exercise of the option or the transfer of shares
thereupon (the "Tax Withholding Amount"), and (ii) that Grantee (or any person
acting under Paragraph 4 above) provide the Company with any forms, documents or
other information reasonably required by the Company in connection with the
grant. In order to satisfy the condition of clause (i), upon approval by the
Committee, Grantee may (a) make payment of the Tax Withholding Amount in United
States dollars cash, (b) tender shares of Common Stock owned by Grantee which
have a fair market value equal to the Tax Withholding Amount, such fair market
value to be determined in such reasonable manner as may be provided from time to
time by the Committee or as may be required in order to comply with or conform
to the requirements of any applicable or relevant laws or regulations, or (c)
request that the Company withhold from the shares of Common Stock to be issued
to the Grantee the number of shares which have a fair market value equal to the
Tax Withholding Amount, based on the fair market value of the shares of Common
Stock determined as set forth in clause (b), (d) make payment in such other form
as the Committee may determine in its sole discretion, or (e) tender a
combination of the forms of payment provided for above in clauses (a) through
(d) of this Paragraph 6; provided, however, that any payment in the form of
------------------
shares of Common Stock owned by the Grantee or to be issued to the Grantee shall
be made during the period beginning on the third business day following the date
of release of the Company's quarterly or annual summary statements of sales and
earnings and shall be made in accordance with the Company's policy regarding
transactions involving the Company's securities. If the amount requested for
the purpose of satisfying the withholding obligation is not paid, the Company
may refuse to furnish shares of Common Stock upon exercise of the option.
7. Financial Assistance. In accordance with the provisions of the
--------------------
Plan, if Grantee meets all eligibility requirements on the date of the option
exercise, as defined by the Committee, upon Grantee's request the Company may
assist Grantee in obtaining financing from the Company or from a bank or other
third party, in such amount as may be necessary to permit the exercise of the
option and/or the payment of any taxes required to be withheld by the Company in
respect thereof.
8. Amendment or Substitution of Awards. The terms of this Agreement
-----------------------------------
may be amended from time to time by the Committee in its sole discretion in any
manner that it deems appropriate (including, but not limited to, acceleration of
the vesting provisions of the option in Paragraph 2); provided, however, that no
such amendment shall adversely affect in a material manner any right of Grantee
under this Agreement without Grantee's written consent, unless the Committee
determines in its sole discretion that there have occurred or are about to occur
significant changes in Grantee's position, duties or responsibilities, or
significant changes in economic, legislative, regulatory, tax, accounting or
cost/benefit conditions which are determined by the Committee in its sole
discretion
-5-
<PAGE>
to have or to be expected to have a substantial effect on the performance of the
Company, or any Subsidiary, affiliates, division, or department thereof, on the
Plan or on this grant under the Plan. The Committee may, in its sole discretion,
permit Grantee to surrender this grant in order to exercise or realize the
rights under other awards under the Plan, or in exchange for the grant of new
awards under the Plan, or require Grantee to surrender this grant as a condition
precedent to the grant of new awards under the Plan.
9. Confidential Information. Grantee acknowledges that in the
------------------------
course of his employment, he will necessarily have access to become familiar
with and, as an indispensable part of his employment, use trade secrets,
customer lists and detailed customer-related information (some or all of which
may constitute trade secrets), business plans, financial and other proprietary
and confidential information (collectively "Confidential Information")
concerning the Company and its Subsidiaries and that such knowledge and
familiarity was and will continue to be of special, unique, and extraordinary
value to the Company and its Subsidiaries. Grantee agrees that he will not
reveal or disclose to any unauthorized person, or take and use for his own
account any Confidential Information concerning the Company and its Subsidiaries
unless and to the extent that (i) the information was or becomes available to
Grantee on a nonconfidential basis from a source which is not bound by a
confidentiality obligation to the Company or a Subsidiary or (ii) Grantee is
required by a court of competent jurisdiction or otherwise compelled by law to
disclose such Confidential Information. In the event that Grantee is so
required or compelled to make such disclosure, such party shall cooperate with
the Company to preserve in full the confidentiality of all Confidential
Information whose disclosure is not required or compelled. Upon termination of
employment, Grantee shall promptly return to the Company all materials and all
copies of materials involving any Confidential Information in Grantee's
possession or control. Grantee agrees to represent to the Company in writing
that he has complied with the provisions of this paragraph 9(b) upon termination
of employment.
10. Administration. Any action taken or decision made by the
--------------
Company, the Board, or the Committee or its delegates arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan or this Agreement shall lie within its sole and absolute discretion, as
the case may be, and shall be final, conclusive and binding on Grantee and all
persons claiming under or through Grantee. By accepting this grant or other
benefit under the Plan, Grantee and each person claiming under or through
Grantee shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken under the Plan by the Company,
the Board or the Committee or its delegates.
11. No Rights as Stockholder. Unless and until a certificate or
------------------------
certificates representing such shares of Common Stock shall have been issued to
Grantee (or any person acting under Paragraph 4 above), Grantee shall not be or
have any of the rights or privileges of a stockholder of the Company with
respect to shares of Common Stock acquirable upon exercise of the option. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued to
Grantee.
12. Investment Representation. Grantee hereby acknowledges that the
-------------------------
shares of Common Stock which Grantee may acquire by exercising the option shall
be acquired for investment without a view to distribution, within the meaning of
the Act, and shall not be sold, transferred, assigned, pledged or hypothecated
in the absence of an effective registration statement for the shares under the
Act and applicable state securities laws or an applicable exemption from the
registration requirements of the Act and any applicable state securities laws.
Grantee also agrees that the shares of Common Stock which Grantee may acquire by
exercising the option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state.
-6-
<PAGE>
13. Listing and Registration of Common Stock. The Company, in its
----------------------------------------
discretion, may postpone the issuance and/or delivery of shares of Common Stock
upon any exercise of the option until completion of such stock exchange listing,
or registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may consider appropriate.
14. Rights of Participants. Neither this Agreement nor the Plan
----------------------
creates any employment rights in Grantee and the Company shall have no liability
for terminating Grantee's employment. Grantee shall have no rights under the
Plan other than as an unsecured general creditor of the Company except that
insofar as Grantee may have become entitled to payment of additional
compensation by performance of services, Grantee shall have the same rights as
other employees under general law.
15. Notices. Any notice hereunder to the Company shall be addressed
-------
to: Cable Design Technologies Corporation, Foster Plaza 7, 661 Andersen Drive,
Pittsburgh, Pennsylvania 15220, Attention: President, and any notice hereunder
to Grantee shall be addressed to Grantee at Grantee's last address on the
records of the Company, subject to the right of either party to designate at any
time hereafter in writing some other address. Any notice shall be deemed to have
been duly given when delivered personally or enclosed in a properly sealed
envelope, addressed as set forth above, and deposited (with first class postage
prepaid) in the United States mail.
16. Counterparts. This Agreement may be executed in one or several
------------
counterparts, each of which shall constitute one and the same instrument.
17. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of any successors to the Company and all persons lawfully
claiming under Grantee.
18. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. The parties
agree that a court of competent jurisdiction making a determination of the
invalidity or unenforceability of any term or provision of Paragraph 9 of this
Agreement shall have the power to reduce the scope, duration or area of any such
term or provision, to delete specific words or phrases or to replace any invalid
or unenforceable term or provision of Paragraph 9 with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
19. Remedies. The parties hereto agree and acknowledge that
--------
Grantee's breach of Paragraph 9 of this Agreement shall materially and
irreparably harm the Company and its Subsidiaries, that money damages shall
accordingly not be an adequate remedy for any breach of the provisions of
Paragraph 9 of this Agreement by Grantee and that the Company in its sole
discretion and in addition to any other remedies it may have at law or in equity
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
20. Delivery by Facsimile. This Agreement, and any amendments hereto
---------------------
or thereto, to the extent signed and delivered by means of a facsimile machine,
shall be treated in all manner and respects as an
-7-
<PAGE>
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto or to any such agreement, each
other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such agreement
shall raise the use of a facsimile machine to deliver a signature or the fact
that any signature or agreement was transmitted or communicated through the use
of a facsimile machine as a defense to the formation of a contract and each such
party forever waives any such defense.
21. Governing Law. The validity, construction, interpretation,
-------------
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware.
* * * * * *
The Grantee has reviewed the foregoing and acknowledges that the
option grant to which this Schedule I is attached is subject hereto. The
Grantee agrees to be bound by the terms of this Schedule I.
Dated: __________________
__________________________________
Employee's Signature
__________________________________
Name of Employee (Print)
__________________________________
Social Security Number
-8-
<PAGE>
EXHIBIT A
Definitions
-----------
"Change in Control" shall be deemed to have occurred if:
-----------------
(a) any "person" or "group" (as such terms are used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or
(b) there shall be consummated any consolidation, merger,
reorganization or acquisition involving the Company unless following such
event (i) all or substantially all of the individuals and entities who were
the beneficial owners of the outstanding voting securities of the Company
immediately prior to such event beneficially own, directly or indirectly,
more than 55% of the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors of the
corporation resulting from such event in substantially the same proportions
as their ownership immediately prior to such event and (ii) the provisions
of clause (a) above are not met and (iii) at least 55% of the members of
the board of directors of the corporation resulting from such event were
members of the board of directors at the time of the initial consideration
of, or any action of the board relating to, such event; or
(c) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
assets of the Company (on a consolidated basis); or
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
(e) as the result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, proxy
or consent solicitation, contested election or substantial stock
accumulation (a "Control Transaction"), the members of the Board
-------------------
immediately prior to the date the Company initiates, or is notified of,
such Control Transaction (the "Incumbent Board") shall thereafter cease to
---------------
constitute at least a majority of the Board; provided, however, that for
purposes of this clause (e) any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board.
"Disabled" shall mean the Grantee's inability to perform his or her normal
--------
duties on a full-time basis for 180 consecutive business days (or such shorter
period as will suffice for the Grantee to qualify for full disability benefits
under the applicable disability insurance policy or policies of the Company or
its applicable Subsidiaries) as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a qualified physician
selected by the Company or its insurers and reasonably acceptable to the
Grantee.
-9-
<PAGE>
"Good Cause" means (a) the Grantee's conviction of any felony involving
----------
dishonesty, fraud or breach of trust with respect to the Company or its
Subsidiaries, or (b) the Grantee willful engagement in gross misconduct in the
performance of his or her duties that is materially and demonstrably injurious
to the Company and its Subsidiaries, which conduct is not cured after notice
(any action or failure to act shall not be "willful" unless it is done, or
omitted to be done, by the Grantee in bad faith or without reasonable belief
that the act, or failure to act was in the best interests of the Company and its
Subsidiaries);
"Good Reason" shall exist if, without the Grantee's express written consent:
-----------
(a) the Grantee is assigned duties materially inconsistent with his
or her position, duties, responsibilities and status with the Company
and/or its Subsidiaries as of the time of the Change in Control (excluding
for purposes of establishing such "base" any adverse change made in
contemplation of such Change of Control), excluding for this purpose
isolated, insubstantial and inadvertent action(s) not taken in bad faith
and remedied by the Company or applicable Subsidiary promptly after receipt
of notice from the Grantee; or
(b) the Company or any of its Subsidiaries reduces the Grantee's
annual base salary as in effect on the date hereof or as the same may be
increased from time to time; or
(c) the Company or any of its Subsidiaries reduces the Grantee's
aggregate compensation and incentive and benefit package as in effect at
the time of the Change in Control (excluding for purposes of establishing
such "base" any adverse change made in contemplation of such Change of
Control); or
(d) the Company or any of its Subsidiaries requires the Grantee
regularly to perform his or her duties of employment beyond a fifty-mile
radius from the location of his or her employment as of the time of the
Change in Control (excluding for purposes of establishing such "base" any
adverse change made in contemplation of such Change of Control); or
(e) the Company or any of its Subsidiaries takes any other action
which materially and adversely changes the conditions or perquisites of the
Grantee's employment as in effect at the time of the Change in Control
(excluding for purposes of establishing such "base" any adverse change made
in contemplation of such Change of Control).
"Subsidiary" shall mean any corporation of which the securities having a
----------
majority of the voting power in electing directors are, at the time of
determination, owned by the Company, directly or through one or more
Subsidiaries.
-10-
<PAGE>
EXHIBIT B
---------
Form of Letter to be Used on
Exercise of Stock Options
_______________
Date
Cable Design Technologies Corporation
Foster Plaza 7
661 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: President
Dear Sir:
I wish to exercise the stock option granted on ___________, ____ and
evidenced by my 1999 Long-Term Performance Incentive Plan Stock Option Agreement
dated ___________, ____ to the extent of ________ shares of the Common Stock of
Cable Design Technologies Corporation, at the option price of $ ___________ per
share. My check in the amount of $ __________ in payment of the entire purchase
price for these shares accompanies this letter.
Please issue a certificate for these shares in the following name:
__________________________________
Name
__________________________________
Street Address
__________________________________
City/State/Zip
Very truly yours,
__________________________________
Signature
__________________________________
Typed or Printed Name
__________________________________
Social Security Number
<PAGE>
EXHIBIT 10.19
[date]
RE: STOCK OPTION GRANT
Dear :
Cable Design Technologies Corporation (the "Company") hereby grants to you
("Grantee"), as of the date set forth above (the "grant date"), a nonqualified
stock option to purchase [ ] shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company at the option price per share of $[ ].
This grant is made pursuant to the [ ] (the "Plan").
This grant is subject to the terms and conditions of the Plan and those set
forth in Schedule I hereto, including vesting described in Schedule I, all of
which terms and conditions are incorporated herein. This grant will be
effective only upon receipt of a copy of Schedule I signed by you.
Very truly yours,
CABLE DESIGN TECHNOLOGIES CORPORATION
at the direction of the Board of Directors
By: /s/ Paul M. Olson
----------------------------------------
Paul M. Olson
Chief Executive Officer and President
ATTACHMENT
<PAGE>
Employee:
Date of Grant:
SCHEDULE I
CABLE DESIGN TECHNOLOGIES CORPORATION
TERMS OF
NONQUALIFIED STOCK OPTION AGREEMENT EVIDENCING
A GRANT OF A NONQUALIFIED STOCK OPTION
The grant to which these terms are attached is subject to the
following additional terms and conditions. All terms used but not defined
herein shall have the meanings given to them in the grant to which these terms
are attached, and if not defined therein, in the Plan. The grant to which these
terms are attached and these terms constitute the "Agreement" as used herein.
1. Grantee Bound by Plan. A copy of the Plan has been provided to
---------------------
Grantee, which Plan is incorporated herein by reference and made a part hereof.
Grantee hereby acknowledges receipt of a copy of the Plan and the Plan
prospectus and agrees to be bound by all the terms and provisions thereof. The
Plan and any prospectus then in effect should be carefully examined before any
decision is made to exercise the option.
2. Exercise of Option. Subject to the earlier termination of the
------------------
option as provided herein and in the Plan, the option may be exercised, by
written notice to the Company in the form attached as Exhibit A hereto, at any
---------
time and from time to time after the date of grant, but, except as otherwise
provided below, such option shall not be exercisable for more than a percentage
of the aggregate number of shares offered by such option determined by the
number of full years from the date of grant thereof to the date of such
exercise, in accordance with the following schedule:
Cumulative Percentage of
Completed Years Shares That
From Date of Grant May Be Exercisable
------------------------- -------------------------
Less than 1 year 0%
-2-
<PAGE>
1 but less than 2 years up to 33-1/3%
2 but less than 3 years up to 66-2/3%
3 or more years up to 100%
provided that, subject to the other conditions of this Agreement, 100% of the
options shall vest, and 100% of the shares may be exercised, upon (x) your
retirement from the Company or one of its Subsidiaries after reaching age 65 or
(y) a Change in Control. For purposes of this Agreement, "Subsidiary" shall
----------
mean any corporation of which the securities having a majority of the voting
power in electing directors are, at the time of determination, owned by the
Company, directly or through one or more Subsidiaries and a "Change in Control"
-----------------
shall be deemed to have occurred if:
(a) any "person" or "group" (as such terms are used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or
(b) there shall be consummated any consolidation, merger,
reorganization or acquisition involving the Company unless following such
event (i) all or substantially all of the individuals and entities who were
the beneficial owners of the outstanding voting securities of the Company
immediately prior to such event beneficially own, directly or indirectly,
more than 55% of the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors of the
corporation resulting from such event in substantially the same proportions
as their ownership immediately prior to such event and (ii) the provisions
of clause (a) above are not met and (iii) at least 55% of the members of
the board of directors of the corporation resulting from such event were
members of the board of directors at the time of the initial consideration
of, or any action of the board relating to, such event; or
(c) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
assets of the Company (on a consolidated basis); or
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
-3-
<PAGE>
(e) as the result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, proxy
or consent solicitation, contested election or substantial stock
accumulation (a "Control Transaction"), the members of the Board
-------------------
immediately prior to the date the Company initiates, or is notified of,
such Control Transaction (the "Incumbent Board") shall thereafter cease to
---------------
constitute at least a majority of the Board; provided, however, that for
purposes of this clause (e) any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board.
An option shall not be exercisable in any event after the expiration of ten
years from the date of grant. An option may not be exercised for a fraction of
a share of Common Stock.
3. Conditions to Exercise. The option may not be exercised by
----------------------
Grantee unless all of the following conditions are met:
(a) Legal counsel for the Company must be satisfied at the time of
exercise that the issuance of shares of Common Stock upon exercise will be in
compliance with the Securities Act of 1933, as amended (the "Act") and other
---
applicable United States federal, state, local and foreign laws;
(b) Grantee must pay at the time of exercise the full purchase price
for the shares of Common Stock being acquired hereunder, by (i) paying in United
States dollars by cash, (ii) tendering shares of Common Stock owned by Grantee
which have a fair market value equal to the full purchase price for the shares
of Common Stock being acquired, such fair market value to be determined in such
reasonable manner as may be provided from time to time by the Committee or as
may be required in order to comply with or conform to the requirements of any
applicable or relevant laws or regulations, (iii) requesting that the Company
withhold from the shares of Common Stock to be issued to the Grantee the number
of shares necessary to satisfy the full purchase price, based on the fair market
value of the shares of Common Stock determined as set forth in clause (ii); (iv)
paying in such other form as the Committee may determine in its sole discretion,
or (v) tendering a combination of the forms of payment provided for above in
clauses (i) through (iv) of this Subparagraph 3(b); provided, however, that any
-------- -------
-4-
<PAGE>
payment of the purchase price in the form of shares of Common Stock owned by the
Grantee or to be issued to the Grantee shall be made in accordance with the
Company's policy regarding transactions involving the Company's securities; and
(c) Grantee must, at all times during the period beginning with the
grant date of the option and ending on the date of such exercise, have been
employed by the Company or one of its Subsidiaries, provided that if:
(i) Grantee ceases to be so employed by reason of Grantee's
disability or retirement (as such terms are defined in the Plan and
interpreted and administered by the Committee) while holding the
option which has not expired and has not been fully exercised Grantee
may, at any time within three years of the date of the onset of such
disability or retirement (but in no event after the expiration of ten
years from the grant date), exercise the option with respect to the
number of shares, determined under Paragraph 2 above, as to which
Grantee could have exercised the option on the date of the onset of
such disability or retirement (or with respect to such greater number
of shares as determined by the Committee in its sole discretion) and
any remaining portion of the option shall be canceled and no longer
exercisable;
(ii) Grantee dies while holding the option which has not expired
and has not been fully exercised, his executors, administrators, heirs
or distributees, as the case may be, may, at any time within one year
(or such other period determined by the Committee) after the date of
death (but in no event after the Option has expired), exercise the
option with respect to any shares, determined under Paragraph 2, as to
which the decedent could have exercised the option at the time of his
death (or with respect to such greater number of shares as determined
by the Committee) and any remaining portion of the option shall be
canceled and no longer exercisable; and
(iii) Grantee's employment with the Company or its Subsidiaries
is terminated for any reason other than as provided in clauses (i) and
(ii) above and on the date of such termination Grantee holds the
option which has not expired and has not been fully exercised, Grantee
may, at any time within 30 days after such date of termination (but in
no event after the expiration of ten years from the grant date),
exercise the option with respect to the number of shares, determined
under Paragraph 2 above, as to which Grantee could have exercised the
option on such date of termination (or with respect to such greater
number of shares as
-5-
<PAGE>
determined by the Committee in its sole discretion), and any remaining
portion of the option shall be canceled and no longer exercisable.
Any option that is not exercised within the periods contemplated in clauses (i),
(ii) and (iii) above shall be canceled and no longer exercisable.
4. Transferability. The option may not be sold, assigned,
---------------
transferred, pledged, hypothecated or otherwise disposed of by Grantee, except
by will or the laws of descent and distribution and is exercisable during
Grantee's lifetime only by Grantee. If Grantee or anyone claiming under or
through Grantee attempts to violate this Paragraph 4, such attempted violation
shall be null and void and without effect, and the Company's obligation to make
any further payments (stock or cash) hereunder shall terminate. If at the time
of Grantee's death the option has not been fully exercised, Grantee's estate or
any person who acquires the right to exercise the option by bequest or
inheritance or by reason of Grantee's death may, at any time within one year
after the date of Grantee's death (but in no event after the expiration of ten
years from the grant date), exercise the option with respect to the number of
shares, determined under Paragraph 2 above, as to which Grantee could have
exercised the option at the time of Grantee's death, or with respect to such
greater number of shares as determined by the Committee in its sole discretion.
The applicable requirements of Paragraph 3 above must be satisfied at the time
of such exercise.
5. Adjustments. In the event of any change in the number of shares
-----------
of Common Stock outstanding by reason of any stock split, stock dividend, split-
up, split-off, spin-off, recapitalization, merger or consolidation in which the
Company is the surviving corporation, rights offering, reorganization,
combination or exchange of shares, distribution to shareholders other than a
normal cash dividend, or other extraordinary or unusual event occurring after
the grant date specified above and prior to its exercise in full, the number of
shares of Common Stock for which the option may then be exercised, the type of
consideration for which the option may be exercised and the option price per
share may or may not be adjusted so as to reflect such change, all as determined
by the Committee in its sole discretion. In the event of the proposed
dissolution or liquidation of the Company, the option shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Committee. In the event the Company is a party to a merger or
consolidation in which the Company is not the surviving corporation, a
transaction that results in the acquisition of substantially all of the
Company's outstanding stock by a single person or entity, or a sale or transfer
of substantially all of the Company's assets, the Committee may take such
actions with respect to the option as the Committee in its sole discretion deems
appropriate. Notwithstanding anything in this Agreement to the contrary, the
Committee may take the foregoing actions without the consent of the
-6-
<PAGE>
Grantee, and the Committee's determination shall be conclusive and binding on
all persons for all purposes.
6. Withholding of Tax. It shall be a condition to the obligation of
------------------
the Company to furnish shares of Common Stock upon exercise of an option (i)
that Grantee (or any person acting under Paragraph 4 above) pay to the Company
or its designee, upon its demand, in accordance with the Plan, such amount as
may be demanded for the purpose of satisfying the Company's obligation to
withhold federal, state, local or foreign income, employment or other taxes
incurred by reason of the exercise of the option or the transfer of shares
thereupon (the "Tax Withholding Amount"), and (ii) that Grantee (or any person
acting under Paragraph 4 above) provide the Company with any forms, documents or
other information reasonably required by the Company in connection with the
grant. In order to satisfy the condition of clause (i), upon approval by the
Committee, Grantee may (a) make payment of the Tax Withholding Amount in United
States dollars cash, (b) tender shares of Common Stock owned by Grantee which
have a fair market value equal to the Tax Withholding Amount, such fair market
value to be determined in such reasonable manner as may be provided from time to
time by the Committee or as may be required in order to comply with or conform
to the requirements of any applicable or relevant laws or regulations, or (c)
request that the Company withhold from the shares of Common Stock to be issued
to the Grantee the number of shares which have a fair market value equal to the
Tax Withholding Amount, based on the fair market value of the shares of Common
Stock determined as set forth in clause (b), (d) make payment in such other form
as the Committee may determine in its sole discretion, or (e) tender a
combination of the forms of payment provided for above in clauses (a) through
(d) of this Paragraph 6; provided, however, that any payment in the form of
------------------
shares of Common Stock owned by the Grantee or to be issued to the Grantee shall
be made during the period beginning on the third business day following the date
of release of the Company's quarterly or annual summary statements of sales and
earnings and shall be made in accordance with the Company's policy regarding
transactions involving the Company's securities. If the amount requested for
the purpose of satisfying the withholding obligation is not paid, the Company
may refuse to furnish shares of Common Stock upon exercise of the option.
7. Financial Assistance. In accordance with the provisions of the
--------------------
Plan, if Grantee meets all eligibility requirements on the date of the option
exercise, as defined by the Committee, upon Grantee's request the Company may
assist Grantee in obtaining financing from the Company or from a bank or other
third party, in such amount as may be necessary to permit the exercise of the
option and/or the payment of any taxes required to be withheld by the Company in
respect thereof.
-7-
<PAGE>
8. Amendment or Substitution of Awards. The terms of this Agreement
-----------------------------------
may be amended from time to time by the Committee in its sole discretion in any
manner that it deems appropriate (including, but not limited to, acceleration of
the vesting provisions of the option in Paragraph 2); provided, however, that no
such amendment shall adversely affect in a material manner any right of Grantee
under this Agreement without Grantee's written consent, unless the Committee
determines in its sole discretion that there have occurred or are about to occur
significant changes in Grantee's position, duties or responsibilities, or
significant changes in economic, legislative, regulatory, tax, accounting or
cost/benefit conditions which are determined by the Committee in its sole
discretion to have or to be expected to have a substantial effect on the
performance of the Company, or any subsidiary, affiliates, division, or
department thereof, on the Plan or on this grant under the Plan. The Committee
may, in its sole discretion, permit Grantee to surrender this grant in order to
exercise or realize the rights under other awards under the Plan, or in exchange
for the grant of new awards under the Plan, or require Grantee to surrender this
grant as a condition precedent to the grant of new awards under the Plan.
9. Confidential Information. Grantee acknowledges that in the
------------------------
course of his employment, he will necessarily have access to become familiar
with and, as an indispensable part of his employment, use trade secrets,
customer lists and detailed customer-related information (some or all of which
may constitute trade secrets), business plans, financial and other proprietary
and confidential information (collectively "Confidential Information")
concerning the Company and its Subsidiaries and that such knowledge and
familiarity was and will continue to be of special, unique, and extraordinary
value to the Company and its Subsidiaries. Grantee agrees that he will not
reveal or disclose to any unauthorized person, or take and use for his own
account any Confidential Information concerning the Company and its Subsidiaries
unless and to the extent that (i) the information was or becomes available to
Grantee on a nonconfidential basis from a source which is not bound by a
confidentiality obligation to the Company or a Subsidiary or (ii) Grantee is
required by a court of competent jurisdiction or otherwise compelled by law to
disclose such Confidential Information. In the event that Grantee is so
required or compelled to make such disclosure, such party shall cooperate with
the Company to preserve in full the confidentiality of all Confidential
Information whose disclosure is not required or compelled. Upon termination of
employment, Grantee shall promptly return to the Company all materials and all
copies of materials involving any Confidential Information in Grantee's
possession or control. Grantee agrees to represent to the Company in writing
that he has complied with the provisions of this paragraph 9(b) upon termination
of employment.
10. Administration. Any action taken or decision made by the
--------------
Company, the Board, or the Committee or its delegates arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan or this Agreement shall lie within its sole and
-8-
<PAGE>
absolute discretion, as the case may be, and shall be final, conclusive and
binding on Grantee and all persons claiming under or through Grantee. By
accepting this grant or other benefit under the Plan, Grantee and each person
claiming under or through Grantee shall be conclusively deemed to have indicated
acceptance and ratification of, and consent to, any action taken under the Plan
by the Company, the Board or the Committee or its delegates.
11. No Rights as Stockholder. Unless and until a certificate or
------------------------
certificates representing such shares of Common Stock shall have been issued to
Grantee (or any person acting under Paragraph 4 above), Grantee shall not be or
have any of the rights or privileges of a stockholder of the Company with
respect to shares of Common Stock acquirable upon exercise of the option. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued to
Grantee.
12. Investment Representation. Grantee hereby acknowledges that the
-------------------------
shares of Common Stock which Grantee may acquire by exercising the option shall
be acquired for investment without a view to distribution, within the meaning of
the Act, and shall not be sold, transferred, assigned, pledged or hypothecated
in the absence of an effective registration statement for the shares under the
Act and applicable state securities laws or an applicable exemption from the
registration requirements of the Act and any applicable state securities laws.
Grantee also agrees that the shares of Common Stock which Grantee may acquire by
exercising the option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state.
13. Listing and Registration of Common Stock. The Company, in its
----------------------------------------
discretion, may postpone the issuance and/or delivery of shares of Common Stock
upon any exercise of the option until completion of such stock exchange listing,
or registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may consider appropriate.
14. Rights of Participants. Neither this Agreement nor the Plan
----------------------
creates any employment rights in Grantee and the Company shall have no liability
for terminating Grantee's employment. Grantee shall have no rights under the
Plan other than as an unsecured general creditor of the Company except that
insofar as Grantee may have become entitled to payment of additional
compensation by performance of services, Grantee shall have the same rights as
other employees under general law.
-9-
<PAGE>
15. Notices. Any notice hereunder to the Company shall be addressed
-------
to: Cable Design Technologies Corporation, Foster Plaza 7, 661 Andersen Drive,
Pittsburgh, Pennsylvania 15220, Attention: President, and any notice hereunder
to Grantee shall be addressed to Grantee at Grantee's last address on the
records of the Company, subject to the right of either party to designate at any
time hereafter in writing some other address. Any notice shall be deemed to
have been duly given when delivered personally or enclosed in a properly sealed
envelope, addressed as set forth above, and deposited (with first class postage
prepaid) in the United States mail.
16. Counterparts. This Agreement may be executed in one or several
------------
counterparts, each of which shall constitute one and the same instrument.
17. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of any successors to the Company and all persons lawfully
claiming under Grantee.
18. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. The parties
agree that a court of competent jurisdiction making a determination of the
invalidity or unenforceability of any term or provision of Paragraph 9 of this
Agreement shall have the power to reduce the scope, duration or area of any such
term or provision, to delete specific words or phrases or to replace any invalid
or unenforceable term or provision of Paragraph 9 with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
19. Remedies. The parties hereto agree and acknowledge that
--------
Grantee's breach of Paragraph 9 of this Agreement shall materially and
irreparably harm the Company and its Subsidiaries, that money damages shall
accordingly not be an adequate remedy for any breach of the provisions of
Paragraph 9 of this Agreement by Grantee and that the Company in its sole
discretion and in addition to any other remedies it may have at law or in equity
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
-10-
<PAGE>
20. Delivery by Facsimile. This Agreement, and any amendments hereto
---------------------
or thereto, to the extent signed and delivered by means of a facsimile machine,
shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement, each other party hereto or thereto
shall re-execute original forms thereof and deliver them to all other parties.
No party hereto or to any such agreement shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or agreement was
transmitted or communicated through the use of a facsimile machine as a defense
to the formation of a contract and each such party forever waives any such
defense.
21. Governing Law. The validity, construction, interpretation,
-------------
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware.
* * * * * *
The Grantee has reviewed the foregoing and acknowledges that the
option grant to which this Schedule I is attached is subject hereto. The
Grantee agrees to be bound by the terms of this Schedule I.
Dated: ____________________
______________________________________
Employee's Signature
______________________________________
Name of Employee (Print)
______________________________________
Social Security Number
-11-
<PAGE>
EXHIBIT A
---------
Form of Letter to be Used on
Exercise of Stock Options
_______________ Date
Cable Design Technologies Corporation
Foster Plaza 7
661 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: President
Dear Sir:
I wish to exercise the stock option granted on___________, ____ and
evidenced by my 1999 Long-Term Performance Incentive Plan Stock Option Agreement
dated __________, ____ to the extent of _________ shares of the Common Stock of
Cable Design Technologies Corporation, at the option price of $ __________ per
share. My check in the amount of $ _________ in payment of the entire purchase
price for these shares accompanies this letter.
Please issue a certificate for these shares in the following name:
_______________________________
Name
_______________________________
Street Address
_______________________________
City/State/Zip
Very truly yours,
_________________________________
Signature
_________________________________
Typed or Printed Name
_________________________________
Social Security Number
<PAGE>
Exhibit 13.1
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Overview
The following discussion of Cable Design Technologies Corporation's ("the
Company" or "CDT") consolidated historical results of operations and financial
condition should be read in conjunction with the Consolidated Financial
Statements of the Company and the Notes thereto included elsewhere in this
report.
The fiscal year ended July 31, 1999 ("fiscal 1999") was a transition year for
CDT in which the Company achieved record sales of $684.0 million and record
earnings per diluted share of $1.47, excluding net nonrecurring charges. During
the year the Company focused on integrating its recent acquisitions, initiating
a company wide cost reduction effort, and organizing the considerable capital
expenditures made over the past twenty-four months. Record results in the
Company's fourth fiscal quarter helped to offset the slowness experienced in the
Network Communication segment during the second and third fiscal quarters,
resulting in a 4% increase in earnings per diluted share for fiscal 1999,
excluding net nonrecurring charges.
Acquisition of niche businesses is an important part of CDT's growth strategy
and during fiscal 1999 the Company purchased one foreign and two domestic
businesses. In August 1998, CDT purchased 80% of HEW-Kabel Heinz Eilentropp GmbH
& Co. KG and related entities ("HEW-Kabel/CDT"), a German manufacturer of
specialty electronic cable for extreme and hazardous applications in process
control, robotics, transportation and other industries. The acquisition of HEW-
Kabel/CDT furthers the Company's diversification of specialty interconnectivity
product offerings. In September 1998, the Company purchased the assets of
Network Essentials, Inc., ("Red Hawk/CDT"), based in Milpitas, California. Red
Hawk/CDT is a provider of fiber optic products for voice, video and data
networks. To complement its Admiral/CDT business, in March 1999 the Company
acquired the Tennecast Company ("Tennecast/CDT") of Barberton, Ohio.
Sales for fiscal 1999 increased 5%, including sales attributable to recently
acquired businesses. Excluding these acquisitions, sales decreased 4% due to
lower sales for the Network Communication segment. The small decline in sales
for this segment was split approximately equally between communication cable
products and network products. Although sales of network cable products were
down slightly for the year, an 83% year-over-year increase in sales of the
higher margin advanced network Category 5e and 6 cables partially offset lower
sales of Category 5 network cable and lower pricing for both Category 5 and 5e
cables. The slightly lower sales of communication cable were primarily
attributable to lower selling prices as a result of the decline in the market
price of copper, unfavorable foreign currency translation and lower sales in the
U.S. marketplace.
Excluding net nonrecurring charges in both years, earnings per diluted share for
fiscal 1999 were $1.47 compared to $1.42 per diluted share for the year ended
July 31, 1998 ("fiscal 1998"). Net nonrecurring charges of $4.9 million ($3.3
million net of tax) were recognized in fiscal 1999, including a charge of $6.3
million incurred in connection with the purchase of 1.6 million shares of the
Company's common stock, partially offset by $1.4 million of nonrecurring income
which was primarily due to the sale of assets related to the previously
discontinued DynaTraX(TM) product line.
14
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following table presents, for the periods indicated, summary selected
financial data from the Company's statements of income, and should be read in
conjunction with the following discussion.
<TABLE>
<CAPTION>
for the year ended July 31, 1999 1998 1997
- --------------------------------------------------------------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Sales $683,999 $651,668 $ 516,996
Cost of sales 479,469 457,767 360,365
Gross profit 204,530 193,901 156,631
Selling, general and administrative expenses 113,610 106,491 86,875
Research and development expenses 5,450 7,863 7,154
Income from operations before nonrecurring charges 85,470 79,547 62,602
Nonrecurring charges, net 4,895 6,093 -
Income from operations 80,575 73,454 62,602
Net income excluding nonrecurring charges $ 42,930 $ 44,426 $ 36,035
Net income $ 39,641 $ 40,481 $ 36,035
</TABLE>
Year ended July 31, 1999 compared with year ended July 31, 1998
Sales increased $32.3 million, or 5%, to a record $684.0 million for fiscal 1999
compared to $651.7 million for fiscal 1998. The increase in fiscal 1999 includes
$56.8 million of sales attributable to the recently acquired businesses,
primarily HEW-Kabel/CDT.
Sales for the Network Communication segment were $373.0 million for fiscal 1999
compared to $393.3 million for fiscal 1998. Excluding the unfavorable effects of
foreign currency translation and of the change in the price of copper on sales
of communication cable, the decrease in sales for this segment was 2%.
Communication cable selling prices are generally adjusted for changes in the
market price of copper. Reduced demand in the U.S. marketplace for communication
cable and for plenum Category 5 network cable as well as competitive pricing
pressure on Category 5 and 5e network cables were the primary factors
responsible for the lower sales. The product mix improved as the result of an
83% increase in sales of the higher priced Category 5e and 6 cables which
partially offset the reduction in communication cable and Category 5 network
cable sales.
Fiscal 1999 sales for the Specialty Electronic segment increased $52.6 million,
or 20%, to $311.0 million. Sales attributable to the recently acquired
businesses accounted for $53.2 million of the increase in sales for this
segment. The Company believes that the significant decline in the market price
of copper during fiscal 1999 contributed to lower pricing conditions for this
segment, particularly for automation & process control products. The lower
pricing environment contributed to the lack of sales growth for this segment,
excluding acquisitions.
Sales outside of North America increased $49.1 million, or 46%, to $155.3
million in fiscal 1999 compared to $106.2 million in fiscal 1998. Sales
attributable to the recently acquired businesses accounted for $50.7 million of
the increase in international sales. Excluding acquisitions, international sales
were unfavorably affected by the sluggish economy in the United Kingdom and
economic turmoil in Russia and Latin America.
15
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Gross profit increased $10.6 million, or 5%, to $204.5 million in fiscal 1999
compared to $193.9 million for fiscal 1998. Growth in gross profit for the
Specialty Electronic segment, primarily due to the recently acquired businesses,
offset a modest decline in the gross profit for the Network Communication
segment. For the Network Communication segment, the improved network cable
product sales mix resulting from an 83% increase in sales of higher margin
enhanced network cable products and less product outsourcing partially offset
the unfavorable effects of lower sales of Category 5 network cable and
communication cable as well as lower pricing for Category 5 and 5e network cable
products.
The overall gross margin for fiscal 1999 of 29.9% improved slightly compared to
29.8% for fiscal 1998. An improvement in the gross margin for the Network
Communication segment was partially offset by a modest reduction in the gross
margin for the Specialty Electronic segment. Factors contributing to the
improvement in the gross margin for the Network Communication segment were, for
network cable products, better product mix due to 83% higher sales of enhanced
Category 5e and 6 network cable products and lower sales of Category 5 network
cable, less product outsourcing and lower product costs. The lower Specialty
Electronic segment gross margin was primarily due to the inclusion of the
comparatively lower gross margins of the recently acquired businesses and a
lower gross margin on wireless products due to product mix, which were partially
offset by a higher gross margin for automation and process control cables
primarily due to the relief from inventory of lower copper material costs.
Selling, general and administrative expense ("SG&A") increased $7.1 million, or
7%, to $113.6 million for fiscal 1999 compared to $106.5 million for fiscal
1998. Excluding an additional $9.0 million of SG&A attributable to the recently
acquired businesses, SG&A decreased $1.9 million. The lower SG&A was primarily
the result of significantly lower expenses due to the discontinuance of the
DynaTraX(TM) product line and other restructuring activities implemented in July
1998 and the favorable effect of foreign currency translation, which more than
offset increases in certain other SG&A expenses. SG&A as a percentage of sales
was 16.6% for fiscal 1999 compared to 16.3% for fiscal 1998. Research and
development expense decreased $2.4 million to $5.5 million compared to $7.9
million in fiscal 1998, primarily as a result of the discontinuance of the
DynaTraX(TM) product line.
Net nonrecurring charges of $4.9 million ($3.3 million net of tax) were
recognized in fiscal 1999. A charge of $6.3 million was incurred in the second
fiscal quarter in connection with the purchase of 1.6 million shares of the
Company's common stock acquired by key employees through the exercise of
incentive stock options pursuant to a share purchase plan previously adopted by
the Board of Directors (the "Share Purchase Plan"). As a result of the purchase
of such shares, the Company obtained a cash benefit of approximately $12.8
million realized through the reduction of income taxes payable. Also, in fiscal
1999, nonrecurring income of $1.4 million was recognized which was primarily due
to the sale of assets related to the previously discontinued DynaTraX(TM)
product line. Fiscal 1998 nonrecurring charges of $6.1 million ($3.9 million net
of tax) represented a provision for costs associated with the discontinuance of
the DynaTraX(TM) product line and other restructuring activities.
Income from operations, excluding net nonrecurring charges in both years,
increased $5.9 million, or 7%, to $85.5 million in fiscal 1999 compared to $79.5
million for fiscal 1998, and the operating margin was 12.5% for fiscal 1999
compared to 12.2% for fiscal 1998. Including net nonrecurring charges, income
from operations was $80.6 million for fiscal 1999 compared to $73.5 million for
fiscal 1998.
16
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Interest expense for fiscal 1999 increased $4.8 million to $13.3 million
compared to $8.6 million for fiscal 1998. The increase was primarily the result
of the higher average balance of debt outstanding due to the acquisition of HEW-
Kabel/CDT in August 1998 and the purchase of 2.4 million shares of the Company's
common stock during the first six months of fiscal 1999. The effective tax rate
for fiscal 1999 increased to 40.3% compared to 38.5% for fiscal 1998, partially
due to the fact that approximately $0.9 million of the second quarter
nonrecurring charge is non-deductible for income tax purposes. Excluding net
nonrecurring expense in fiscal 1999, the increase in the effective tax rate to
39.6% compared to 38.5% for fiscal 1998 was primarily the result of lower
Canadian tax credits for research and development and a change in the tax rate
mix among domestic and foreign statutory entities primarily due to the inclusion
of the recently acquired German subsidiary, HEW-Kabel/CDT.
Excluding net nonrecurring charges in both years, fiscal 1999 earnings per share
increased 4% to $1.47 per diluted share on net income of $42.9 million, compared
to $1.42 per diluted share for fiscal 1998 on net income of $44.4 million.
Including net nonrecurring charges, earnings per share increased to $1.36 per
diluted share on net income of $39.6 million compared to $1.29 per diluted share
on net income of $40.5 million for fiscal 1998.
Year ended July 31, 1998 compared with year ended July 31, 1997
Sales increased by $134.7 million, or 26%, to $651.7 million for fiscal 1998
compared to $517.0 million for the fiscal year ended July 31, 1997 ("fiscal
1997"). The increase in fiscal 1998 includes the addition of $87.9 million of
sales attributable to the recently acquired businesses: Barcel/CDT, Orebro/CDT,
and the incremental sales of Dearborn/CDT and Stronglink/CDT for fiscal 1998.
The sales for the Network Communication segment increased $45.8 million, or 13%,
to $393.3 million. Sales of network products increased primarily due to higher
sales of network cable, partially offset by reduced sales of network structured
wiring components. The increase in sales of network cable was due to higher
sales in the North American marketplace which were partially offset by lower
international sales resulting from reduced sales in Western Europe due to a very
competitive environment, particularly in the United Kingdom. The lower sales of
network structured wiring components were primarily a result of lower sales in
Western Europe. A strong U.S. dollar and British pound contributed to the lower
sales in Western Europe. Sales of communication cable increased primarily as a
result of continued demand from telephone companies as they upgrade and expand
their local distribution network infrastructure.
Sales for the Specialty Electronic segment increased $88.9 million, or 52%, to
$258.4 million, including $85.5 million of additional sales attributable to the
recently acquired businesses. Although selling prices are generally not
contractually adjusted for changes in the market price of copper for the
Specialty Electronic segment, the Company believes that the significant decline
in the market price of copper during the year contributed to competitive pricing
conditions during fiscal 1998, particularly for automation & process control
products.
International sales increased $1.5 million, or 1%, to $106.2 million in fiscal
1998 compared to $104.7 million in fiscal 1997. The additional sales
attributable to the recently acquired businesses contributed $8.9 million to the
increase in international sales. Excluding acquisitions, reduced sales in the
United Kingdom and Western Europe, primarily due to competitive market
conditions, were partially offset by increased sales in other geographic areas,
including Latin America, Australia and the Middle East.
17
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Gross profit increased $37.3 million, or 24%, to $193.9 million in fiscal 1998
compared to $156.6 million for fiscal 1997. The gross profit contributed by the
recently acquired businesses accounted for $24.8 million of the increase in
total gross profit. The Network Communication segment accounted for
approximately 36% of the increase in total gross profit. The increase for this
segment was primarily attributable to the higher sales of network cable,
including a shift to the higher priced enhanced network cable products, an
increase in the gross profit for network structured wiring components due to an
improved product mix, and higher sales of communication cable. These increases
were partially offset by the unfavorable impact of the decline in the market
price of copper during the year on communication cable which is estimated to
have reduced the gross profit by approximately $2.5 million. The increase in
gross profit for the Specialty Electronic segment accounted for approximately
64% of the increase in total gross profit, primarily due to the additional gross
profit attributable to the recently acquired businesses.
The overall gross margin for fiscal 1998 was 29.8% compared to 30.3% for fiscal
1997, primarily due to a lower margin for the Specialty Electronic segment. The
lower gross margin for the Specialty Electronic segment was primarily due to the
inclusion of the recently acquired businesses which collectively have a
relatively lower gross margin. Additionally, the gross margin for the Network
Communication segment was negatively impacted as a result of the effect on
communication cable gross margin of the decline in the market price of copper
during the year and the mix effect of higher sales of the relatively lower gross
margin communication cable.
SG&A increased $19.6 million, or 23%, to $106.5 million for fiscal 1998 compared
to $86.9 million for fiscal 1997. The increase in SG&A was primarily the result
of an additional $11.6 million of SG&A attributable to the recently acquired
businesses, as well as increased commission and other direct sales expenses
related to the increase in sales, and increases in other SG&A to support the
growth in sales. As a percentage of sales, SG&A declined to 16.3% for fiscal
1998 from 16.8% for fiscal 1997 primarily as a result of the lower average SG&A
percentage of the recently acquired businesses. Excluding the effect of
acquisitions, SG&A as a percentage of sales for fiscal 1998 was relatively
unchanged from fiscal 1997. Research and development expense increased $0.7
million to $7.9 million compared to $7.2 million in fiscal 1997.
A nonrecurring charge of $6.1 million ($3.9 million net of tax) was recognized
in fiscal 1998 to provide for costs associated with NORDX/CDT's discontinuance
of its DynaTraX(TM) product line and other restructuring activities.
Income from operations increased $16.9 million, or 27%, to $79.5 million in
fiscal 1998, excluding nonrecurring charges, compared to $62.6 million for
fiscal 1997. Including nonrecurring charges, income from operations was $73.5
million for fiscal 1998. The operating margin was 12.2%, excluding nonrecurring
charges, for fiscal 1998 compared to 12.1% for fiscal 1997.
Fiscal 1998 net income, excluding nonrecurring charges, increased $8.4 million
to $44.4 million, or $1.42 per diluted share, compared to fiscal 1997 net income
of $36.0 million, or $1.17 per diluted share. Including nonrecurring charges,
net income for fiscal 1998 increased $4.5 million to $40.5 million, or $1.29 per
diluted share.
Liquidity and Capital Resources
During fiscal 1999, operating working capital increased $4.5 million, excluding
increases resulting from the initial recording of the working capital of
acquired businesses. The change in operating working capital was primarily the
result of a decrease in accounts payable of $9.9 million and an increase in
accounts receivable of $7.6 million, which were partially offset by an increase
in various accrued liabilities of $10.0 million. The change in operating working
capital excludes changes in cash and current maturities of long-term debt.
18
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
During fiscal 1999, the Company generated $54.8 million of net cash from
operating activities after providing for the increase in working capital. Net
cash used by investing activities during fiscal 1999 of $74.4 million included
$49.1 million for the acquisition of businesses and $25.3 million for capital
projects. Net cash provided by financing activities during fiscal 1999 of $19.9
million included $51.7 million from debt sources and $13.0 million from the tax
benefit obtained as a result of the repurchase of shares under the Share
Purchase Plan and the exercise of stock options, which were partially offset by
$45.0 million used for the purchase of 2.4 million shares of the Company's
common stock. The net increase in cash for fiscal 1999 was $0.3 million.
During fiscal 1999 and fiscal 1998, the Company expended $25.3 million and $49.2
million, respectively, for capital projects. Expenditures for fiscal 1999
included the purchase of additional equipment to further expand manufacturing
capacity for enhanced bandwidth networking products in North America and Europe
and the expansion of CDT's telecommunication cabling production. The
expenditures for fiscal 1998 included the enlargement of certain facilities,
including the construction of NORDX/CDT's 300,000 square foot manufacturing,
administration and R & D facility, improvements in manufacturing efficiencies
and expansion of the Company's production capacity for new and existing product
lines, including capacity expansion for enhanced network, communication,
aerospace, and high end coaxial cable products.
On August 3, 1998 the Company amended its credit agreement dated April 10, 1997
(the "Credit Agreement") to, among other things, increase the borrowing limit
under its U.S. revolving credit facility, and to include a German loan sub-
facility. The Credit Agreement as amended is comprised of a $121.3 million U.S.
revolving facility, including a $50.0 million Deutschmark sub-facility, and a
CDN $115.0 million Canadian revolving facility. The Credit Agreement includes a
provision whereby the applicable margins over the prime rate or the
London Inter-Bank Offered Rate ("LIBOR") are based on the attainment of certain
performance factors. A fee of .15% to .375% is applied to the unused portion of
each revolver. In addition to the Credit Agreement, the Company maintains a
foreign credit facility in the United Kingdom (the "Foreign Credit Facility")
which provides for up to approximately $12 million of borrowings. Effective
December 14, 1998, the Company entered into a 364-day, unsecured bank revolving
credit agreement (the "Revolving Facility") which provides for maximum
borrowings of $35.0 million. Outstanding borrowings bear floating interest rates
of either LIBOR plus the applicable margin or the base rate, as defined, at the
Company's election. The applicable margin over LIBOR ranges from .525% to 1.05%
and is determined based on the attainment of specified leverage ratios. A
facility fee of between .10% and .20%, based on the attainment of specified
leverage ratios, is payable quarterly on the maximum facility amount. The Credit
Agreement and Revolving Facility contain customary financial and non-financial
covenants, except the Revolving Facility is limited by the terms of the existing
Credit Agreement. On July 31, 1999, the Company had approximately $33.4 million
of availability under the Credit Agreement, $12.0 million of availability under
the Revolving Facility and $2.0 million of availability under the Foreign Credit
Facility. Based on the Company's current expectations for its business,
management believes that its cash flow from operations and the available portion
of its credit facilities will provide it with sufficient liquidity to meet the
current liquidity needs of the Company.
Effects of Inflation
The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling costs of operations and, whenever possible, seeking to
ensure that selling prices reflect increases in costs due to inflation.
19
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Fluctuation in Copper Price
The cost of copper in inventories (including finished goods) reflects purchases
over various periods of time ranging from one to several months for each of the
Company's operations. For communication cable products, profitability is
generally not significantly affected by volatility of copper prices as changes
in copper prices are generally passed along to customers, however, differences
in the timing of selling price adjustments do occur and may impact near term
results. For other products, although selling prices are generally not
contractually adjusted to directly reflect changes in copper prices, the relief
of copper costs from inventory for those operations having longer inventory
cycles may affect profitability from one period to the next following periods of
significant movement in the cost of copper. The Company does not engage in
activities to hedge the underlying value of its copper inventory.
Interest Rate Sensitivity
The table below provides information about the Company's financial instruments,
primarily debt obligations, that are sensitive to changes in interest rates. The
table presents principal cash flows and related weighted average interest rates
for debt obligations by expected maturity date and the currency in which the
instrument's cash flows are denominated. Weighted average variable interest
rates are based on the rates in effect at the reporting date for the respective
debt obligations. No assumptions have been made for future changes in such
variable rates. The fair value of fixed rate debt obligations as determined
under current market interest rate assumptions does not differ materially from
the carrying value as presented below. The information is provided in U.S.
dollar equivalents, which is the Company's reporting currency.
<TABLE>
<CAPTION>
Expected Maturity Date For Periods Ending July 31,
------------------------------------------------------------
Demand There-
Type* notes 2000 2001 2002 2003 2004 after Total
- ---------------------------------------------------------------------------------------------------------------------------------
(U.S. dollar equivalents in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
Average interest rate
Demand notes payable
U. S. dollar VR $ 23.0 $23.0
6.0% 6.0%
British pound VR $ 7.9 $ 7.9
6.0% 6.0%
Swedish krona VR $ 1.6 $ 1.6
4.2% 4.2%
Australian dollar VR $ 0.6 $ 0.6
5.8% 5.8%
Long-term debt
U.S. dollar FR $ 1.3 $ 1.5 $ 0.1 $ 0.1 $ 0.1 $ 1.0 $ 4.1
7.8% 9.7% 9.6% 9.1% 8.5% 8.5% 8.7%
Deutschmark FR $12.5 $ 1.7 $ 1.1 $ 0.7 $ 0.4 $ 1.6 $18.0
5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%
U.S. dollar VR $66.5 $66.5
5.7% 5.7%
Canadian dollar VR $73.6 $73.6
5.3% 5.3%
Deutschmark VR $23.3 $23.3
3.1% 3.1%
* VR-Variable interest rate; FR-Fixed interest rate
</TABLE>
20
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments and requires recognition in the
balance sheet of all derivative instruments as either assets or liabilities,
measured at fair value. This statement has been amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
effective date of SFAS No. 133". SFAS No. 137 is effective for the Company's
fiscal year ending July 31, 2001. The Company does not believe the effect of
adoption will be material.
Year 2000
Readers are cautioned that forward-looking statements contained in the Year 2000
discussion below should be read in conjunction with the Company's disclosures
under the heading "Forward-Looking Statements".
Each of the Company's operating units has established a Year 2000 project leader
and, in the case of the larger units, a project team. In addition, CDT's
corporate headquarters has established a Year 2000 project team. The function of
each unit's project team is to identify and remediate Year 2000 issues at their
respective facilities. The function of the corporate team is to review and
remediate any corporate-wide Year 2000 issues and monitor the status of the
remediation activities of the operating units.
Each operating unit has assessed their internal information systems ("IT
systems") and non-information systems ("non-IT systems"), such as manufacturing
equipment and control devices. As of October 20, 1999, operating units
representing approximately 99% of the Company's consolidated revenues have
completed the Year 2000 remediation believed necessary with respect to their IT
systems. The remaining operating units are in the process of implementing
compliant hardware and/or software, and all units are expected to complete their
remediation activities by November 30, 1999.
The remediation of such IT systems has included the purchase of new hardware and
software or the modification of existing software. In certain cases, new IT
systems were acquired to improve functionality and provide additional system
capabilities, as well as address Year 2000 issues. The cost to maintain or
modify existing IT systems is expensed as incurred, while the cost of new and
functionally improved IT systems are capitalized and amortized over their
estimated useful lives. As of July 31, 1999, the Company had expended $3.4
million with respect to IT systems, which represented approximately 89% of the
total costs expected to be incurred. Based on management's estimates, it is not
expected that expenditures associated with modifying or replacing existing IT
systems to resolve the Year 2000 issue will have a material adverse effect on
the Company's results of operations, liquidity or capital resources. The Company
does not anticipate any material issues or delays regarding implementation
schedules for IT system remediations.
Each of the operating units has undertaken an assessment of non-IT systems. Such
reviews are substantially completed. While certain items of equipment have been
found to contain potentially non-compliant components, neither the number or
function of such items are material. Such equipment is either being modified or
replaced. The Company does not anticipate material Year 2000 compliance issues
with respect to non-IT systems, and does not expect expenditures to remediate
non-compliant non-IT systems to have a material adverse effect on the Company's
results of operations, liquidity or capital resources.
The Company and its operating units are in the process of assessing third party
Year 2000 compliance. As many of the Company's suppliers and customers are still
engaged in executing their Year 2000 programs, the Company cannot fully evaluate
such compliance. Neither the Company nor its operating units intend to adopt
contingency plans regarding third party Year 2000 compliance issues.
21
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. However, since it is not
possible to anticipate all possible future outcomes, especially in the case of
third parties, there could be "worst-case scenarios" in which one or more
operating units of the Company would be unable to conduct normal operations due
to Year 2000 related matters, such as the inability to take customer orders,
manufacture and ship products, invoice customers or collect payments. In
addition, there is still uncertainty about the broader scope of the Year 2000
issue as it may affect the Company and third parties who are critical to the
Company's operations. For example, lack of readiness by electrical and water
utilities, suppliers, financial institutions, government agencies or other
providers of general infrastructure could, in some geographic areas, pose
significant impediments to one or more of the Company's operating units to carry
on their normal operations in the area or areas so affected. In the event that
the Company or third parties (including those described above) do not properly
complete their Year 2000 remedial actions or unanticipated Year 2000 events
occur there could be a material adverse effect on the Company's business,
results of operations or financial condition.
Introduction of the Euro Currency
The European Economic Monetary Union's ("EEMU") common currency, the Euro, was
implemented effective January 1, 1999, at which time fixed exchange rates were
established between the legacy currencies of the participating countries and the
Euro. During the transition period, which extends through June 30, 2002,
transactions may be conducted in either the Euro or the legacy currencies. The
Company has subsidiaries in the United Kingdom, Sweden, Denmark and Germany
which have customers and suppliers in participating EEMU countries. The
Company's German subsidiary is the only subsidiary domiciled in a participating
country. These subsidiaries currently have the ability to support transactions
in both the Euro and their respective legacy currencies. Conversion to the Euro
as the functional currency for the Company's German subsidiary will be phased in
prior to January 1, 2002, and conversion costs are not expected to be
significant. The EEMU's introduction of the Euro may potentially have economic
and business implications, such as changes in product pricing and currency
exchange risks, for businesses within the EEMU as well as for businesses outside
the EEMU that do business with companies within the EEMU. The nature and extent
of such effects, whether beneficial or adverse, are unknown at this time.
However, the Company does not believe that such effects will have a material
impact on its consolidated results of operations or financial condition,
although there can be no assurance that unanticipated effects will not have an
adverse impact on the Company's future results of operations.
Forward Looking statements - Under the Private Securities
Litigation Act of 1995
Certain of the statements in this annual report are forward-looking statements,
including, without limitation, statements regarding future financial results and
performance, Year 2000 compliance, accretiveness of acquisitions, growth
factors, cost savings and other beliefs, expectations or opinions of the Company
and its management. These statements are subject to various risks and
uncertainties, many of which are outside the control of the Company, including
the level of market demand for the Company's products, competitive pressures,
the ability to achieve reductions in operating costs and to continue to
integrate acquisitions, price fluctuations of raw materials and the potential
unavailability thereof, foreign currency fluctuations, technological
obsolescence, environmental matters and other specific factors discussed in the
Company's Annual Report on Form 10-K for the year ended July 31, 1999 and other
Securities and Exchange Commission filings. The information contained herein
represents management's best judgement as of the date hereof based on
information currently available; however, the Company does not intend to update
this information to reflect developments or information obtained after the date
hereof and disclaims any legal obligation to the contrary.
22
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Cable Design Technologies Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Cable Design
Technologies Corporation (a Delaware corporation) and Subsidiaries as of July
31, 1999 and 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the three years in the period ended July
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cable Design Technologies
Corporation and Subsidiaries as of July 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Pittsburgh, Pennsylvania
September 20, 1999
23
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
-------------------------------------------------------------------------- --------- ---------
(Dollars in thousands, except per share information)
<S> <C> <C> <C>
Sales $ 683,999 $ 651,668 $ 516,996
Cost of sales 479,469 457,767 360,365
--------- --------- ---------
Gross profit 204,530 193,901 156,631
Selling, general and administrative expenses 113,610 106,491 86,875
Research and development expenses 5,450 7,863 7,154
Nonrecurring charges, net 4,895 6,093 -
--------- --------- ---------
Income from operations 80,575 73,454 62,602
Interest expense, net 13,346 8,560 5,338
Minority interest in earnings (losses) of subsidiaries, net 883 25 (35)
Other (income) expense, net (18) (947) (23)
--------- --------- ---------
Income before income taxes 66,364 65,816 57,322
Income tax provision 26,723 25,335 21,287
--------- --------- ---------
Net income $ 39,641 $ 40,481 $ 36,035
========= ========= =========
Basic earnings per common share $ 1.38 $ 1.40 $ 1.31
Diluted earnings per common share $ 1.36 $ 1.29 $ 1.17
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
24
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, 1999 1998
------------------------------------------------------------------------------------------- -----------
(Dollars in thousands, except per share information)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,424 $ 11,143
Trade accounts receivable, net of allowance for uncollectible accounts of
$4,926 and $3,995, respectively 130,936 117,265
Inventories 141,762 130,307
Prepaid expenses and other 10,937 11,983
Deferred income taxes 10,926 7,714
----------- -----------
Total current assets 305,985 278,412
Property, plant and equipment, net 201,586 160,891
Intangible assets, net 8,409 6,735
Goodwill, net 76,584 57,656
Other assets 2,536 1,733
----------- -----------
Total assets $ 595,100 $ 505,427
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 33,109 $ 10,150
Current maturities of long-term debt 13,831 9,593
Accounts payable 38,452 45,737
Accrued payroll and related benefits 21,127 15,596
Accrued taxes 10,474 2,953
Other accrued liabilities 25,228 19,707
----------- -----------
Total current liabilities 142,221 103,736
Long-term debt 171,727 136,052
Minority interest in subsidiaries 2,451 120
Other non-current liabilities 7,990 6,239
Deferred income taxes 18,609 14,382
----------- -----------
Total liabilities 342,998 260,529
----------- -----------
Contingencies (Note 16)
Stockholders' equity:
Preferred stock, par value $.01 per share - 1,000,000 shares authorized,
no shares issued - -
Common stock, par value $.01 per share - 100,000,000 shares authorized,
30,778,928 and 30,660,472 shares issued, respectively 308 307
Paid-in capital 178,979 165,681
Common stock issuable, 22,679 shares at July 31, 1999 253 -
Retained earnings 128,246 88,605
Treasury stock, at cost, 2,623,452 and 200,000 shares, respectively (49,262) (4,291)
Accumulated other comprehensive income (deficit) (6,422) (5,404)
----------- -----------
Total stockholders' equity 252,102 244,898
----------- -----------
Total liabilities and stockholders' equity $ 595,100 $ 505,427
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
25
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
--------------------------------------------------------------------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net income $ 39,641 $ 40,481 $ 36,035
Adjustments for Non-Cash Items to Reconcile Net Income
to Cash Provided by Operating Activities:
Depreciation 14,823 11,079 8,034
Amortization 4,007 2,966 2,041
Costs to discontinue DynaTraX(TM) and other restructuring - 6,093 -
Deferred income taxes 827 1,830 3,107
Changes in Assets and Liabilities Net of Effects of Businesses Acquired:
Accounts receivable (7,644) (12,627) (3,972)
Inventories (1,511) (12,262) (12,679)
Prepaid expenses and other 2,131 (2,141) (996)
Accounts payable (9,914) 5,181 316
Accrued payroll and related benefits 1,547 (486) (674)
Accrued taxes 6,148 983 (1,918)
Other accrued liabilities 2,277 1,406 1,348
Other non-current assets and liabilities 2,452 1,117 263
-------- -------- --------
Net cash provided by operating activities 54,784 43,620 30,905
-------- -------- --------
Cash Flow from Investing Activities:
Purchases of property, plant and equipment (25,262) (49,248) (26,704)
Acquisition of businesses, including transaction costs,
net of cash acquired (49,091) (19,092) (72,445)
-------- -------- --------
Net cash used in investing activities (74,353) (68,340) (99,149)
-------- -------- --------
Cash Flow from Financing Activities:
Net change in demand and revolving note borrowings 54,323 27,314 87,490
Funds provided by term debt 12,506 1,316 7,242
Funds used to reduce term debt (15,152) (4,519) (39,166)
Common shares issued or issuable 283 24 1,006
Net proceeds from exercise of stock options and related tax benefits 12,954 6,966 4,762
Repurchase of common stock (44,971) (4,291) -
-------- -------- --------
Net cash provided by financing activities 19,943 26,810 61,334
-------- -------- --------
Effect of currency translation on cash (93) 36 (170)
-------- -------- --------
Net increase (decrease) in cash 281 2,126 (7,080)
Cash, beginning of year 11,143 9,017 16,097
-------- -------- --------
Cash, end of year $ 11,424 $ 11,143 $ 9,017
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
26
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
For the Years ended July 31, 1999, 1998 and 1997
-------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Common Stock
------------------------ Common
Par Paid-in Stock Retained Treasury
Shares Value Capital Issuable Earnings Stock
-------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1996 18,054,498 $ 181 $152,864 $ - $ 12,184 $ -
Net income - - - - 36,035 -
Currency translation
adjustments - - - - - -
Comprehensive income
Exercise of options
and related tax benefits 649,637 6 4,762 - - -
Stock grants 1,512 - 45 - - -
Deferred compensation - - - - - -
Stock issuance 50,218 1 999 - - -
-------------------------------------------------------------------------------------
Balance, July 31, 1997 18,755,865 188 158,670 - 48,219 -
Net income - - - - 40,481 -
Currency translation
adjustments - - - - - -
Minimum pension liability - - - - - -
Comprehensive income
Exercise of options
and related tax benefits 2,525,296 24 6,966 - - -
Stock grants 1,980 - 45 - - -
Deferred compensation - - - - - -
Stock split 9,377,331 95 - - (95) -
Purchase of 200,000
shares treasury stock - - - - - (4,291)
-------------------------------------------------------------------------------------
Balance, July 31, 1998 30,660,472 307 165,681 - 88,605 (4,291)
Net income - - - - 39,641 -
Currency translation
adjustments - - - - - -
Minimum pension liability - - - - - -
Comprehensive income
Exercise of options
and related tax benefits 91,550 1 12,953 - - -
Stock grants 1,428 - 30 - - -
Stock issuance 25,478 - 315 - - -
Purchase of 2,423,452
shares treasury stock - - - - - (44,971)
Employee stock purchase
plan, 22,679 shares
issuable - - - 253 - -
-------------------------------------------------------------------------------------
Balance, July 31, 1999 30,778,928 $ 308 $178,979 $ 253 $ 128,246 $(49,262)
=====================================================================================
<CAPTION>
For the Years ended July 31, 1999, 1998 and 1997
----------------------------------------------------------------------------------------
(Dollars in thousands)
Accumulated
Other Total
Deferred Comprehensive Stockholders'
Compensation Income/(Deficit) Equity
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, July 31, 1996 $ (208) $ 436 $ 165,457
Net income - - 36,035
Currency translation
adjustments - (2,301) (2,301)
------------
Comprehensive income 33,734
Exercise of options
and related tax benefits - - 4,768
Stock grants - - 45
Deferred compensation 121 - 121
Stock issuance - - 1,000
----------------------------------------------------
Balance, July 31, 1997 (87) (1,865) 205,125
Net income - - 40,481
Currency translation
adjustments - (3,529) (3,529)
Minimum pension liability - (10) (10)
------------
Comprehensive income 36,942
Exercise of options
and related tax benefits - - 6,990
Stock grants - - 45
Deferred compensation 87 - 87
Stock split - - -
Purchase of 200,000
shares treasury stock - - (4,291)
----------------------------------------------------
Balance, July 31, 1998 - (5,404) 244,898
Net income - - 39,641
Currency translation
adjustments - (1,028) (1,028)
Minimum pension liability - 10 10
------------
Comprehensive income 38,623
Exercise of options
and related tax benefits - - 12,954
Stock grants - - 30
Stock issuance - - 315
Purchase of 2,423,452
shares treasury stock - - (44,971)
Employee stock purchase
plan, 22,679 shares
issuable - - 253
----------------------------------------------------
Balance, July 31, 1999 $ - $ (6,422) $ 252,102
====================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
27
<PAGE>
Notes to Consolidated Financial Statements
Note 1. Operations
Cable Design Technologies Corporation is a leading designer and
manufacturer of technologically advanced electronic data transmission
cable for network, communication, specialty electronic, and automation
and process control applications, including gigabit end-to-end network
structured wiring solutions, fiber optic connective solutions and
other components required to build high performance data and
telecommunication infrastructures.
Note 2. Significant Accounting Policies
The consolidated financial statements reflect the application of the
following significant accounting policies:
Principles of Consolidation
The consolidated financial statements include the accounts of Cable
Design Technologies Corporation and its majority owned subsidiaries
("the Company"). All material intercompany transactions and balances
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market. Inventory costs include material, labor and manufacturing
overhead. The Company's products contain significant amounts of
certain raw materials, such as copper and Teflon(R). The Company
believes that adequate sources are available for these commodities;
however, any disruption of the supplies or significant deviations in
market prices could impact the Company's operations.
Property, Plant and Equipment
Property, plant and equipment are carried on the cost basis.
Provisions for depreciation and amortization are computed using the
straight-line method based upon the estimated useful lives of the
assets. Maintenance and repair costs are charged to operations as
incurred. Major replacements or betterments are capitalized. Cost and
accumulated depreciation of property sold or retired are removed from
the accounts and any resulting gain or loss is recognized in the
current period statement of income.
Goodwill
Goodwill represents the excess of the purchase price over the fair
market value of identifiable net assets acquired in connection with
various business acquisitions and combinations. Goodwill is being
amortized using the straight-line method over periods of between 20 to
40 years. Accumulated amortization of goodwill was $8.2 million and
$5.9 million at July 31, 1999 and 1998, respectively.
The Company continually evaluates the carrying value of goodwill on
the basis of whether goodwill is fully recoverable from estimated
undiscounted net income, before the effects of goodwill amortization,
over the remaining amortization period.
Loan Origination Fees
In connection with the issuance of the Company's debt instruments, the
Company defers related credit acquisition costs. These costs are
amortized using the straight-line method over the life of the debt
instruments.
28
<PAGE>
Notes to Consolidated Financial Statements
Translation of Foreign Currency Financial Statements/Comprehensive
Income
The financial statements of foreign subsidiaries are translated using
the exchange rate in effect at year end for balance sheet accounts and
the average exchange rate in effect during the year for income and
expense accounts. Unrealized gains or losses arising from the
translation are charged or credited directly to accumulated other
comprehensive income/(deficit), a component of stockholders' equity.
Gains and losses on foreign currency transactions are included in
income as they occur.
Income Taxes
Income taxes are accounted for in accordance with the liability
method, under which deferred tax assets or liabilities are computed
based on the temporary differences between the financial statement and
income tax bases of assets and liabilities using the enacted marginal
tax rate. These differences are classified as current or non-current
based upon the classification of the related asset or liability. For
temporary differences that are not related to an asset or liability,
classification is based upon the expected reversal date of the
temporary difference.
Reclassifications
Certain reclassifications have been made to the prior year statements
to conform with the current year presentation.
Statements of Cash Flows
Supplemental disclosure of cash flow information:
<TABLE>
Year ended July 31, 1999 1998 1997
------------------------------------------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net $12,014 $ 8,165 $ 5,308
Income taxes $10,055 $19,707 $16,649
</TABLE>
Impact of Newly Issued Accounting Standards
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 130 established standards for reporting and displaying
comprehensive income and its components in financial statements.
Comprehensive income is defined as all changes in stockholders' equity
except those resulting from investments by or distributions to
stockholders. Comprehensive income is displayed in the accompanying
consolidated statements of stockholders' equity. SFAS No. 131
established standards for reporting information about operating
segments. This standard expanded and modified disclosure requirements
and had no impact on the reported results of operations or financial
position of the Company (see Note 14).
The Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in
June 1998. SFAS No. 133 establishes accounting and reporting standards
for derivative instruments and requires recognition of all derivatives
as either assets or liabilities, measured at fair value, in the
balance sheet. This statement has been amended by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities -
Deferral of the effective date of SFAS No. 133". SFAS No. 137 is
effective for the Company's fiscal year beginning August 1, 2000, and
the Company does not believe that adoption will have a material effect
on its financial position or results of operations.
29
<PAGE>
Notes to Consolidated Financial Statements
Note 3. Stockholders' Equity
The Company effected a 3-for-2 stock split in the form of a common
stock dividend on January 8, 1998. Prior period common share
information other than amounts displayed on the consolidated
statements of stockholders' equity have been adjusted to reflect the
effect of the split.
On May 7, 1997, the Board of Directors approved a program under which
up to $30 million of the Company's common stock may be repurchased on
the open market or in privately negotiated transactions. The Company
repurchased 827,400 and 200,000 common shares during fiscal 1999 and
1998, respectively, under this program. Additionally, on December 1,
1998, the Board of Directors approved the purchase of up to 1.9
million shares of the Company's common stock held by certain key
employees. The stock was acquired by the employees more than six
months previously upon the exercise of certain incentive stock options
granted primarily in 1988 and 1989 and expiring in 1998 and 1999.
During fiscal 1999 the Company repurchased 1,596,052 common shares
from such employees (see Note 19).
On December 10, 1996, the Board of Directors adopted a Rights
Agreement ("Rights Agreement"). Under the Rights Agreement, one
Preferred Share Purchase Right ("Right") for each outstanding share of
the Company's common stock was distributed to stockholders of record
on December 26, 1996. Each Right entitles the holder to buy one-
fifteen hundredth of a share of a new series of junior participating
preferred stock for an exercise price of $100.00. The Company has
designated 100,000 shares of the previously authorized $0.01 par value
preferred stock as junior participating preferred stock in connection
with the Rights Agreement. The Rights are exercisable only if a person
or group (with certain exceptions) acquires, or announces a tender
offer to acquire, 20% or more of the Company's common stock (the
"Acquirer"). If the Acquirer purchases 20% or more of the total
outstanding shares of the Company's common stock, or if the Acquirer
acquires the Company in a reverse merger, each Right (except those
held by the Acquirer) becomes a right to buy shares of the Company's
common stock having a market value equal to two times the exercise
price of the Right. If the Company is acquired in a merger or other
business combination, or 50% or more of the Company's assets or
earning power is sold or transferred, each Right (except those held by
the Acquirer) becomes a right to buy shares of the common stock of the
Acquirer having a market value of two times the exercise price. The
Company may exchange the Rights for shares of the Company's common
stock on a one-to-one basis at any time after a person or group has
acquired 20% or more of the outstanding stock. The Company is entitled
to redeem the Rights at $0.01 per Right (payable in cash or common
stock of the Company, at the Company's option) at any time before
public disclosure that a 20% position has been acquired. The Rights
expire on December 11, 2006, unless previously redeemed or exercised.
Note 4. Inventories
Inventories of the Company consist of the following:
<TABLE>
<CAPTION>
July 31, 1999 1998
------------------------------------------ --------- -------
(Dollars in thousands)
<S> <C> <C>
Raw materials $ 36,851 $ 40,089
Work-in-process 32,297 27,485
Finished goods 72,614 62,733
--------- ---------
$ 141,762 $ 130,307
========= =========
</TABLE>
30
<PAGE>
Notes to Consolidated Financial Statements
Note 5. Property, Plant and Equipment
Property, plant and equipment of the Company consist of the following:
<TABLE>
<CAPTION>
July 31, 1999 1998
----------------------------------------- --------- ---------
(Dollars in thousands)
<S> <C> <C>
Asset (asset lives):
Land $ 10,812 $ 8,945
Buildings and improvements (10 - 40 years) 64,412 49,567
Machinery and equipment (3 - 15 years) 168,563 134,404
Furniture and fixtures (5 - 10 years) 11,866 8,481
--------- ---------
Total 255,653 201,397
Less: accumulated depreciation (54,067) (40,506)
--------- ---------
$201,586 $160,891
========= =========
</TABLE>
Note 6. Intangible Assets
Intangible assets consist of patents, trademarks, loan origination
fees and non-compete agreements. Patents, trademarks and non-compete
agreements are being amortized over periods ranging from five to ten
years. Loan origination fees are amortized over the term of the
related loan. Accumulated amortization for intangible assets was $4.2
million and $2.6 million at July 31, 1999 and 1998, respectively.
Note 7. Financing Arrangements
Notes payable to banks consist of an unsecured, 364 day revolving
credit agreement (the "Revolving Facility"), and borrowings by certain
of the Company's foreign subsidiaries under credit agreements entered
into on September 18, 1995 (the "European Credit Agreement") and on
March 14, 1997 (the "Australian Facility") (collectively, "the Foreign
Facilities") to support the financing needs of its subsidiaries
located in the United Kingdom, Sweden and Australia.
The Revolving Facility provides for maximum borrowings of $35 million.
Outstanding borrowings bear floating interest rates of either the
London Inter-Bank Offered Rate ("LIBOR") plus the applicable margin or
the base rate, as defined, at the Company's election. The applicable
margin over LIBOR ranges from .525% to 1.05% and is determined based
on the attainment of specified leverage ratios. A facility fee of
between .10% and .20%, based on the attainment of specified leverage
ratios, is payable quarterly on the maximum facility amount. The
Revolving Facility contains customary financial and non-financial
covenants, except as limited by the terms of the Company's primary
credit agreement. Outstanding and maximum borrowings under the
Revolving Facility were $23.0 million and $28.5 million as of and for
the year ended July 31, 1999, respectively. Weighted average
outstanding borrowings were $24.6 million and the effective interest
rate was 5.9% for the year ended July 31, 1999.
The European Credit Agreement is comprised of a sterling overdraft and
multi-currency demand facility in an aggregate amount of approximately
$12.2 million. Terms of the facility permit borrowings based on a
percentage of certain accounts receivable and inventory at applicable
margins over LIBOR. The Australian Facility is a revolving demand
facility with maximum availability of approximately $0.7 million. The
Foreign Facilities are guaranteed by the Company. The Company had
outstanding borrowings of $10.1 million and $10.2 million and maximum
borrowings of $11.3 and $10.2 million under the Foreign Facilities as
of and for the years ended July 31, 1999 and 1998, respectively.
Weighted average outstanding borrowings were $10.5 million and $9.2
million and the effective interest rates were 7.07% and 7.70% for the
years ended July 31, 1999 and 1998, respectively.
31
<PAGE>
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Long-term debt consists of the following:
July 31, 1999 1998
------------------------------------------------------------------------------------------ -----------
(Dollars in thousands)
<S> <C> <C>
U.S. revolver, due April 10, 2002, bears interest at LIBOR plus 0.625%,
or approximately 5.8% at July 31, 1999 $ 66,500 $ 66,000
Deutschmark sub-facility, due April 10, 2002, bears interest at LIBOR
plus 0.625%, or approximately 3.2% at July 31, 1999 23,306 -
Canadian revolver, due April 10, 2002, bears interest at LIBOR
plus 0.625%, or approximately 5.3% at July 31, 1999 73,628 66,330
Other indebtedness
22,124 13,315
---------- ---------
Total 185,558 145,645
Less: current portion 13,831 9,593
---------- ---------
$ 171,727 $ 136,052
========== =========
</TABLE>
The Company's primary credit agreement (the "Credit Agreement")
was amended on August 3, 1998. The Credit Agreement, as amended,
is comprised of a $121.3 million U.S. revolving facility,
including a $50.0 million Deutschmark sub-facility (the "U.S.
Revolver"), and a CDN $115.0 million revolver (the "Canadian
Revolver"). The Credit Agreement includes a provision whereby the
applicable margins over the prime rate or LIBOR are based on the
attainment of certain performance factors. A commitment fee of
0.15% to 0.375% is applied to the unused portion of each revolver.
The terms of the Credit Agreement contain various customary
financial and non-financial covenants including the maintenance of
minimum consolidated net worth and restrictions on payment of
dividends. The Company is in compliance with all applicable
covenants.
On July 31, 1999 the Company had approximately $33.4 million of
availability under the Credit Agreement, $12.0 million of
availability under the Revolving Facility, and $2.1 million of
availability under its Foreign Facilities.
The scheduled aggregate annual principal payments of long-term
debt as of July 31, 1999, are as follows:
Year ended: Long-term Debt
-------------------------------------------------------------
(Dollars in thousands)
2000 $ 13,831
2001 3,180
2002 164,656
2003 729
2004 510
Thereafter 2,652
----------
$ 185,558
==========
32
<PAGE>
Notes to Consolidated Financial Statements
Note 8. Retirement and Other Employee Benefits
The Company and its subsidiaries have various defined contribution
and defined benefit plans covering substantially all of its
employees. Benefits provided under the Company's defined benefit
pension plans are primarily based on years of service and the
employee's compensation. The defined contribution plans provide
benefits primarily based on compensation levels.
Defined Benefit Plans
The Company maintains defined benefit plans for one of its U.S.
locations (the "U.S. Plan") and for certain employees in Canada
(the "Canadian Plans").
The following sets forth the changes in benefit obligations and
plan assets, and reconciles amounts recognized in the Company's
consolidated balance sheets:
<TABLE>
U.S. Plan Canadian Plans
---------------------------------------------------------------------------- ----------------------
Year ended July 31, 1999 1998 1999 1998
-------------------------------------------------------------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 1,984 $ 1,913 $ 5,954 $ 3,647
Service cost 47 28 2,131 1,817
Interest cost 130 133 507 421
Loss (gain) - - - (182)
Change in actuarial assumptions (60) 29 (845) 882
Benefits paid (122) (119) (94) (150)
Effect of currency translation - - 26 (481)
--------- --------- --------- ---------
Benefit obligation at end of year $ 1,979 $ 1,984 $ 7,679 $ 5,954
========= ========= ========= =========
Fair value of plan assets at beginning of year $ 2,496 $ 2,395 $ 3,186 $ 1,944
Company contributions - - 1,342 1,335
Actual return on plan assets 215 220 196 314
Benefits paid (122) (119) (61) (150)
Effect of currency translation - - 15 (257)
--------- --------- --------- ---------
Fair value of plan assets at end of year $ 2,589 $ 2,496 $ 4,678 $ 3,186
========= ========= ========= =========
Funded status $ 610 $ 512 $ (3,001) $ (2,768)
Unrecognized net actuarial gain (loss) (56) (31) (37) 792
Unrecognized prior service cost 50 60 - -
--------- --------- --------- ---------
Net prepaid benefit (accrued liability) $ 604 $ 541 $ (3,038) $ (1,976)
========= ========= ========= =========
<CAPTION>
Amounts recognized in the consolidated balance sheets consist of:
Prepaid benefit cost $ 604 $ 541 $ - $ -
Accrued benefit liability - - (3,038) (1,976)
Additional minimum liability - - - (10)
Adjustment to retained earnings - - - 10
--------- --------- --------- ---------
Net prepaid benefit (accrued liability) $ 604 $ 541 $ (3,038) $ (1,976)
========= ========= ========= =========
</TABLE>
33
<PAGE>
Notes to Consolidated Financial Statements
Assets of the U.S. and Canadian plans are invested primarily in equity
and fixed income securities.
The weighted-average assumptions as of the end of the periods were as
follows:
<TABLE>
<CAPTION>
U.S. plan Canadian Plans
-----------------------------------------------------------------------------------------------
Year ended July 31, 1999 1998 1997 1999 1998 1997
--------------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Weighted average discount rate 7.00% 7.00% 7.50% 6.75% 6.30% 8.00%
Weighted average expected
long term rate of return 8.50% 9.50% 9.50% 8.00% 8.00% 8.00%
</TABLE>
The components of pension expense for fiscal 1999, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
U.S. plan Canadian Plans
-----------------------------------------------------------------------------------------------
Year ended July 31, 1999 1998 1997 1999 1998 1997
--------------------------------------------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 47 $ 28 $ 26 $ 2,131 $ 1,817 $ 1,690
Interest cost 130 133 135 507 421 265
Expected return on plan assets (231) (220) (460) (307) (198) (97)
One time adjustment - - - - (174) -
Net amortization (9) (12) 268 97 9 -
------- ------- ------- ------- ------- -------
Net periodic benefit expense (credit) $ (63) $ (71) $ (31) $ 2,428 $ 1,875 $ 1,858
======= ======= ======= ======= ======= =======
</TABLE>
The Company also maintains defined contribution profit-sharing plans
for eligible employees. Certain contributions are made under the
matching provision of 401(k) plans, while the remainder are made at
the discretion of the Company's Board of Directors. Expenses incurred
by the Company in connection with these profit-sharing plans were $3.8
million, $4.3 million and $3.2 million for the years ended July 31,
1999, 1998, and 1997 respectively.
Note 9. Postretirement Benefits Other than Pensions
Certain of the Company's operations are covered by postretirement
health and life insurance benefits under unfunded plans.
The components that comprise the changes in the benefit obligation
were as follows:
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998
------------------------------------------------------------------------------------- -------
(Dollars in thousands)
<S> <C> <C>
Benefit obligation at beginning of year $ 4,291 $ 4,110
Service cost 270 218
Interest cost 362 335
Actuarial loss 1,125 23
Benefits paid (16) -
Effect of currency translation 21 (395)
------- -------
Benefit obligation at end of year $ 6,053 $ 4,291
======= =======
</TABLE>
Amounts recognized in the consolidated balance sheets consist of:
<TABLE>
<CAPTION>
July 31, 1999 1998
------------------------------------------------------------------------------------- -------
(Dollars in thousands)
<S> <C> <C>
Funded status $(6,053) $(4,291)
Unrecognized net loss 1,320 234
------- -------
Accrued postretirement benefit liability $(4,733) $(4,057)
======= =======
</TABLE>
34
<PAGE>
Notes to Consolidated Financial Statements
The components of postretirement expense for fiscal 1999, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
July 31, 1999 1998 1997
-------------------------------------------------------------------------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 270 $ 218 $ 202
Interest cost 362 335 293
Net amortization 43 22 -
-------- -------- -------
Net postretirement benefit expense $ 675 $ 575 $ 495
======== ======== =======
</TABLE>
Future benefits were estimated assuming medical costs would increase
at approximately a 6.50% annual rate for 1998 and 10.00% for 1999,
decreasing gradually to 4.00% in year 2005 and thereafter, and dental
costs would increase at approximately a 4.25% annual rate for 1998 and
4.00% for 1999 and thereafter.
Assuming a 1% increase in this annual trend, the accumulated
postretirement benefit obligation would have increased by $732,000 and
$369,000 at July 31, 1999 and 1998, respectively and the
postretirement benefit expense would have increased by approximately
$96,000, $51,000 and $58,000 for fiscal 1999, 1998, and 1997
respectively. The weighted average discount rate used to estimate the
accumulated postretirement benefit obligation was 6.75% and 6.30% for
the years ended July 31, 1999 and 1998, respectively.
Note 10. Stock Benefit Plans
During fiscal 1999 the Company established the CDT Employee Stock
Purchase Plan (the "ESPP") which provides eligible employees the right
to purchase common stock of the Company on a quarterly basis at the
lower of 85% of the common stock's fair market value on the first
business day of a fiscal quarter or on the last business day of a
fiscal quarter. There are 500,000 shares of common stock reserved for
issuance under the ESPP, and 22,679 shares of common stock were
issuable to employees under the ESPP at July 31, 1999.
In December 1995, the Company adopted the Non-Employee Director Stock
Plan (the "Non-Employee Plan"). The Non-Employee Plan provides that
shares of common stock having a fair market value of $15,000 be
granted annually to each non-employee director each August 1. Shares
granted under the Non-Employee Plan were 1,428 in fiscal 1999, 1,980
in fiscal 1998 and 2,268 in fiscal 1997.
The Company maintains a Stock Purchase and Option Plan (the "Former
Plan") which was terminated as to future grants effective upon
completion of the Company's initial public offering on November 24,
1993 (the "Initial Public Offering"). As of the grant termination
date, 4,166,544 options had been granted under the Former Plan to
directors, executives and other key employees of the Company. Options
issued under the Former Plan expire on the earlier of ten years after
the date of grant (July 1988 through September 1992) or ten days after
termination of employment. Substantially all of the outstanding
options became fully vested as of the date of the Initial Public
Offering. Substantially all of the options granted under the Former
Plan were exercised prior to July 31, 1998.
A Long Term Performance Incentive Plan (the "Stock Option Plan") was
adopted in September 1993 and provides for the granting to employees
and other key individuals stock options, stock appreciation rights,
restricted stock, performance units and other types of incentive
awards. The Stock Option Plan is scheduled to terminate in ten years
from the date of adoption but may be extended another five years by
the Company's Board of Directors for the grant of awards other than
incentive stock options. Employee rights to grants pursuant to the
Stock Option Plan are forfeited if a recipient's employment terminates
within a specified period following the grant. An aggregate of 655,083
shares of common stock were reserved for issuance pursuant to the
Stock Option Plan, and 36,958 remained available for issuance as of
July 31, 1999.
35
<PAGE>
Notes to Consolidated Financial Statements
A Supplemental Long Term Performance Incentive Plan (the "Supplemental
Plan") was adopted in December 1995 and authorizes the grant of awards
with respect to 1,800,000 shares of common stock, of which 1,125,000
shares are to be reserved for grants only to new members of the
Company's management who are employed in connection with acquisitions
by the Company. As of July 31, 1999, 283,375 shares of common stock
remain available for grant under the Supplemental Plan, including
75,875 available for issuance to employees of acquired companies.
A Long Term Performance Incentive Plan (the "1999 Plan") was adopted
in April 1999 and amended on June 11, 1999. The 1999 Plan authorizes
the grant of various types of incentive awards with respect to
1,507,000 shares of the Company's common stock. As of July 31, 1999,
101,900 shares remain available for issuance under the 1999 Plan.
The terms of stock options issued under the Former Plan, Stock Option
Plan, Supplemental Plan and 1999 Plan (collectively "the Option
Plans") include vesting over periods ranging from three to five years
and an exercise price no less than the fair market value of the stock
at the date of grant.
During fiscal 1997, 188,400 and 599,100 of the options previously
issued under the Stock Option Plan and Supplemental Plan,
respectively, were amended. The terms of the amended stock options
include vesting over five years and an exercise price equal to the
fair market value of the stock at the date of the amendment. The
amended options are reflected in the accompanying disclosures as a
cancellation and reissuance.
Certain information regarding stock option transactions is summarized
below:
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
--------------------------------------------------------- --------------------------- -------------------------
Wtd. Wtd. Wtd.
Shares Avg. Ex. Shares Avg. Ex. Shares Avg. Ex.
Price Price Price
--------------------------------------------------------- --------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 1,963,064 $ 13.74 4,393,035 $ 6.03 4,917,491 $ 5.67
Granted/reissued 1,845,600 17.74 99,000 26.17 1,237,500 16.27
Exercised (91,550) 2.31 (2,525,296) 0.81 (974,456) 0.93
Forfeited/canceled (81,069) 12.08 (3,675) 18.42 (787,500) 26.17
-------------------- -------------------- --------------------
Outstanding, end of year 3,636,045 $ 16.09 1,963,064 $ 13.74 4,393,035 $ 6.03
Exercisable at end of year 788,100 $ 11.89 514,002 $ 6.84 2,831,859 $ 0.96
-------------------- -------------------- --------------------
Weighted average fair value of
options granted $ 5.55 $ 13.50 $ 9.27
</TABLE>
Information regarding stock options outstanding as of July 31, 1999 is
summarized below:
<TABLE>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------- ---------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Remaining Exercise Exercise
Range of Exercise Prices Options Contractual Life Price Options Price
--------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.89 - $6.22 319,095 3.2 years $ 3.48 280,846 $ 3.10
$ 12.50 - $26.17 3,316,950 8.8 years $ 17.31 507,254 $ 16.75
</TABLE>
36
<PAGE>
Notes to Consolidated Financial Statements
The Company accounts for the Option Plans and the ESPP in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees"
under which no compensation cost has been recognized. The supplemental
information presented below discloses pro forma net income and net
income per common share as if the Company had determined the cost of
its stock benefit plans in accordance with the fair value method under
SFAS No. 123, "Accounting for Stock-Based Compensation".
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
------------------------------------------------------------- ------------ ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Net income: As reported $39,641 $40,481 $36,035
Pro forma $37,649 $38,550 $34,557
Basic earnings per share: As reported $ 1.38 $ 1.40 $ 1.31
Pro forma $ 1.31 $ 1.33 $ 1.25
Diluted earnings per share: As reported $ 1.36 $ 1.29 $ 1.17
Pro forma $ 1.30 $ 1.23 $ 1.12
</TABLE>
The fair value of each option grant is estimated as of the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions for grants issued in 1999, 1998, and
1997, respectively: risk-free interest rates of 5.87%, 5.93% and
6.53%; expected volatility of 58.5%, 53.0% and 58.5%; expected life of
5 years for all options; and an expected dividend yield of zero for
all options. The Black-Scholes option valuation model requires the use
of highly subjective assumptions, and was developed for use in valuing
stock options with significantly different characteristics from those
issued under the Option Plans. Therefore, management does not believe
that the model necessarily provides a reliable estimate of the fair
value of its employee stock options. Additionally, the SFAS No. 123
method of accounting is effective for options granted after August 1,
1995, and the above pro forma net income does not reflect any
compensation cost that may have resulted if SFAS No. 123 had been
applied to options granted prior to August 1, 1995. Incentive stock
awards are granted at the discretion of the Company's Board of
Directors, therefore, the type and number of awards previously issued
may not be indicative of those to be granted in future periods.
Note 11. Income Taxes
Except for the effects of the reversal of net deductible temporary
differences, the Company is not aware of any factors which would cause
any significant differences between book and taxable income in future
years. Although there can be no assurances that the Company will
generate any earnings or specific level of continuing earnings in
future periods, management believes that it is more likely than not
that the net deductible differences will reverse during periods when
the Company generates sufficient net taxable income.
Income before income taxes, as shown in the accompanying consolidated
statements of income, includes the following components:
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
-------------------------------------------------------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Domestic $35,133 $ 49,084 $ 35,031
Foreign 31,231 16,732 22,291
--------- ------------- -------------
Income before income taxes $66,364 $ 65,816 $ 57,322
========= ============= =============
</TABLE>
37
<PAGE>
Notes to Consolidated Financial Statements
Taxes on income, as shown in the accompanying consolidated statements
of income, include the following components:
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
-------------------------------------------------------------------------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Current provision:
Federal $ 13,893 $ 16,080 $ 11,980
State 2,381 3,533 2,652
Foreign 9,622 3,892 3,548
--------- --------- ---------
Total current provision 25,896 23,505 18,180
Deferred provision (benefit):
Domestic (1,353) 153 (284)
Foreign 2,180 1,677 3,391
--------- --------- ---------
Total deferred provision 827 1,830 3,107
--------- --------- ---------
Income tax provision $ 26,723 $ 25,335 $ 21,287
========= ========= =========
</TABLE>
The effective rate differs from the statutory rate for the following
reasons:
<TABLE>
<CAPTION>
Year ended July 31, 1999 1998 1997
-------------------------------------------------------------------------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Tax provision based on the U.S. federal statutory tax rate $ 23,227 $ 23,035 $ 20,063
State income taxes, net of federal income tax benefit 1,548 2,296 1,724
Research and development tax credit (Canada) (302) (877) (870)
Foreign tax rates different from U.S. federal statutory rate 1,127 586 (67)
Permanent items 985 274 405
All other, net 138 21 32
--------- --------- ---------
Income tax provision $ 26,723 $ 25,335 $ 21,287
========= ========= =========
</TABLE>
The components of the deferred tax assets and liabilities recorded in
the accompanying consolidated balance sheets at July 31, 1999 and
1998, which include net deferred tax liabilities recorded in
connection with acquisitions and reflect reclassifications as a result
of finalization of purchase accounting under APB 16, were as follows:
<TABLE>
<CAPTION>
July 31, 1999 1998
----------------------------------------------------------------------------------------- ---------
(Dollars in thousands)
<S> <C> <C>
Deferred Tax Assets:
Accruals $ 4,193 $ 1,944
Postretirement and pension accruals 2,246 1,751
Asset valuations 4,979 5,204
Uniform cost capitalization 1,167 1,117
Other 2,351 902
--------- ---------
Total deferred tax assets 14,936 10,918
--------- ---------
Deferred Tax Liabilities:
Excess of book basis over tax basis of fixed assets (22,042) (16,648)
Other (360) (775)
--------- ---------
Total deferred tax liabilities (22,402) (17,423)
--------- ---------
Net deferred taxes before valuation allowance (7,466) (6,505)
Valuation allowance (foreign NOL) (217) (163)
--------- ---------
Net deferred tax liability $ (7,683) $ (6,668)
========= =========
Reconciliation to the consolidated balance sheets -
Current deferred tax asset, net $ 10,926 $ 7,714
Non-current deferred tax liability, net (18,609) (14,382)
--------- ---------
Net deferred tax liability $ (7,683) $ (6,668)
========= =========
</TABLE>
38
<PAGE>
Notes to Consolidated Financial Statements
Note 12. Net Income Per Share of Common Stock
Basic net income per share of common stock is computed by dividing net
income by the weighted average number of shares of common stock
outstanding. Diluted net income per share of common stock is computed
based on the weighted average common shares outstanding plus
incremental common stock equivalent shares (shares issuable upon
exercise of options). Incremental common stock equivalent shares are
calculated for each measurement period based on the treasury stock
method. The repurchases are assumed to be made at the average fair
market value price per share of the Company's common stock during the
measurement period.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
July 31, 1999 1998 1997
-------------------------------------------------------------------------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Numerator:
Net income $ 39,641 $ 40,481 $ 36,035
Denominator:
Denominator for basic earnings per share 28,783,869 29,000,494 27,597,653
Shares issuable from assumed conversion
of dilutive stock options 344,675 2,320,982 3,290,130
----------- ----------- -----------
Denominator for diluted earnings per share 29,128,544 31,321,476 30,887,783
Basic earnings per common share $ 1.38 $ 1.40 $ 1.31
Diluted earnings per common share $ 1.36 $ 1.29 $ 1.17
</TABLE>
Options to purchase 1,895,975 and 99,000 shares of common stock were
outstanding during fiscal 1999 and 1998, respectively, but were not
included in the computation of diluted earnings per common share as
the option's exercise price was greater than the average market price
of the common stock for the respective periods.
Note 13. Acquisitions
On August 3, 1998, the Company acquired an 80% interest in HEW-Kabel
Heinz Eilentropp GmbH & Co. KG, and related entities, ("HEW-
Kabel/CDT") located in Wipperfurth, Germany. On April 7, 1997, the
Company purchased the operating assets of Dearborn Wire and Cable L.P.
and Subsidiaries ("Dearborn/CDT"). The acquisitions were accounted for
using the purchase method under APB Opinion No. 16 and the assets and
liabilities assumed were as follows:
<TABLE>
<CAPTION>
HEW-Kabel/CDT Dearborn/CDT
----------------------------------------------------------------------------------------- ------------
(Dollars in thousands)
<S> <C> <C>
Assets acquired, net of cash $ 68,305 $ 87,932
Liabilities assumed (23,986) (13,837)
Notes issued (10,148) (6,595)
------------- ------------
Net cash paid $ 34,171 $ 67,500
============= ============
</TABLE>
On March 12, 1999, the Company acquired the outstanding stock of The
Tennecast Company ("Tennecast/CDT") of Barberton, Ohio, a manufacturer
of precision aluminum tire castings and computer designed and machined
mold models utilized for tire castings.
On September 25, 1998, the Company acquired the assets of Network
Essentials, Inc., ("Red Hawk/CDT") based in Milpitas, California, a
provider of fiber optic products for voice, video and data networks.
On March 17, 1998, the Company acquired the outstanding stock of
Orebro Kabel AB ("Orebro/CDT") of Orebro, Sweden. Orebro/CDT is a
manufacturer of custom designed wire and cable for wireless
communication, robotics and other industries.
On September 10, 1997, the Company acquired the outstanding stock of
Barcel Acquisition Corporation, and its subsidiaries, ("Barcel/CDT")
based in Irvine, California. Barcel/CDT is a manufacturer of high
performance specialty wire and cable for the commercial aerospace,
military and satellite industries.
39
<PAGE>
Notes to Consolidated Financial Statements
The acquisitions of HEW-Kabel/CDT, Tennecast/CDT, Red Hawk/CDT,
Barcel/CDT, and Orebro/CDT were accounted for under the purchase
method of accounting. Under the purchase method, the Company allocates
the purchase price based on the estimated fair market value of the
assets and liabilities acquired.
The pro forma results of operations presented below assumes the
acquisition of Dearborn/CDT had occurred as of the beginning of fiscal
1997. The pro forma results of operations does not give effect to the
acquisitions of HEW-Kabel/CDT, Tennecast/CDT, Red Hawk/CDT,
Barcel/CDT, and Orebro/CDT as their results of operations are not
material to the Company's consolidated results of operations.
<TABLE>
<CAPTION>
(Pro Forma, Unaudited)
Year ended July 31, 1997
----------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C>
Net sales $ 577,531
Income before extraordinary items 38,336
Net income 38,336
Net income per common share (diluted) $ 1.24
</TABLE>
The pro forma financial information presented above does not purport
to present what the Company's results of operations would actually
have been if the acquisition of Dearborn/CDT had occurred as of the
beginning of fiscal 1997 or to project the Company's results of
operations for any future period.
Note 14. Industry and Geographic Segment Information
The Company's operations are organized into two business segments: the
Network Communication segment and the Specialty Electronic segment.
The Network Communication segment encompasses connectivity products
for the electronic transmission of data, voice, and multimedia over
local and wide area networks and local loop communication
infrastructures. Products included in this segment are high
performance cable and passive components, including connectors, wiring
racks and panels, outlets and interconnecting hardware, for end-to-end
network structured wiring systems, and communication cable products
for outside communication and central office switchboard and equipment
applications. The Specialty Electronic segment encompasses electronic
data and signal transmission cables for automation and process control
applications as well as specialized wire and cable products for niche
markets, including computer interconnect, commercial aviation,
automotive electronics, broadcast and wireless communication.
The accounting policies of the reportable segments are the same as
those described in "Significant Accounting Policies" (Note 2). The
Company evaluates segment performance based on operating profit
excluding nonrecurring charges, after allocation of Corporate
expenses. Corporate assets, which primarily consist of cash, deferred
income taxes and other deferred costs, are immaterial and are
allocated to the operating segments.
40
<PAGE>
Notes to Consolidated Financial Statements
The Company has no inter-segment revenues. Summarized financial
information for the Company's operating segments for the years ended
July 31, is as follows:
<TABLE>
<CAPTION>
Network Specialty
Communication Electronic
Segment Segment Total
--------------------------------------------------------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Sales:
1999 $ 373,013 $ 310,986 $ 683,999
1998 393,325 258,343 651,668
1997 347,498 169,498 516,996
Depreciation and Amortization Expense:
1999 10,316 8,514 18,830
1998 8,735 5,310 14,045
1997 6,825 3,250 10,075
Segment Operating Profit:
1999 42,084 43,386 85,470
1998 46,401 33,146 79,547
1997 36,778 25,824 62,602
Total Assets:
1999 310,058 285,042 595,100
1998 290,173 215,254 505,427
1997 251,773 177,726 429,499
Capital Expenditures:
1999 17,988 7,274 25,262
1998 37,766 11,482 49,248
1997 21,603 5,101 26,704
</TABLE>
The following summarizes external sales to customers and long-lived
assets located in the Company's country of domicile and certain
foreign countries:
<TABLE>
<CAPTION>
July 31, 1999 1998 1997
--------------------------------------------------------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Sales:
United States $ 410,744 $ 426,337 $ 295,499
Canada 117,994 119,087 116,700
Other 155,261 106,244 104,797
------------ ------------ ------------
Total $ 683,999 $ 651,668 $ 516,996
Long-lived Assets:
United States $ 75,304 $ 71,519 $ 61,301
Canada 71,815 64,927 49,532
Germany 30,677 - -
Other 26,326 26,178 18,054
------------ ------------ ------------
Total $ 204,122 $ 162,624 $ 128,887
</TABLE>
41
<PAGE>
Notes to Consolidated Financial Statements
Note 15. Lease Commitments
Rental expense under noncancelable leases was approximately $5.0
million, $5.4 million and $6.3 million for the years ended July 31,
1999, 1998 and 1997, respectively. Operating leases relate principally
to manufacturing, warehouse and office space. Minimum annual rents
payable under noncancelable leases in each of the next five years and
thereafter are as follows:
Year ended July 31, total
----------------------------------------------------------------------
(Dollars in thousands)
2000 $ 4,609
2001 3,248
2002 1,973
2003 1,642
2004 966
Thereafter 1,124
--------
$ 13,562
========
Note 16. Commitments and Contingencies
Certain claims have been asserted against the Company in connection
with patent and trademark matters. In management's opinion, any
liability that might be incurred in connection with these claims would
not have a material effect upon the Company's financial position, or
results of operations or cash flows.
As of July 31, 1999, the Company had outstanding letters of credit of
$0.8 million under its workers' compensation policy. The Company also
maintains a $1.2 million bond in connection with workers' compensation
self-insurance in the state of Massachusetts.
Note 17. Related Party Transactions
The Company has an agreement to pay management fees of $12,500 per
quarter to each of Golder Thoma Cressey Rauner, Inc. ("GTCR") and The
Northern Group, Inc. ("Northern"). Principals of each of GTCR and
Northern are directors of the Company. Selling, general and
administrative expenses include $100,000 in 1999, 1998, and 1997 for
fees paid under this agreement.
In the normal course of business the Company enters into transactions
for the purchase of materials, equipment and services with entities
that are affiliated with or owned by an officer/stockholder. Such
transactions totaled $1.2 million, $1.1 million and $1.6 million for
the years ended July 31, 1999, 1998 and 1997, respectively.
Note 18. Nature of Business and Disclosures about Fair Value of
Financial Instruments
Concentrations of credit risk with respect to trade receivables are
limited due to the Company's wide variety of customers and the many
markets into which the Company's products are sold, as well as the
many different geographic areas in which such customers and markets
are located. As a result, at July 31, 1999, the Company does not
believe it has any significant concentrations of credit risk. A group
of customers under common control accounted for 11% of sales for
fiscal 1997.
The fair values and carrying amounts of the Company's financial
instruments, primarily accounts receivable and debt, are approximately
equivalent. The debt instruments bear interest at floating rates which
are based upon market rates or fixed rates which approximate market
rates. All other financial instruments are classified as current and
will be utilized within the next operating cycle.
42
<PAGE>
Notes to Consolidated Financial Statements
Note 19. Nonrecurring Income and Expense
During fiscal 1999, the Company purchased 1,596,052 shares of common
stock held by certain key employees. The stock was acquired by the
employees more than six months previously upon the exercise of
incentive stock options granted primarily in 1988 and 1989 and
expiring in 1998 and 1999. In connection with the purchase of this
stock, the Company incurred a $6.3 million nonrecurring charge in the
second quarter of fiscal 1999 representing incentive payments which
were made to partially compensate the employees for the difference
between the income tax rates for ordinary income and for long term
capital gains. As a result of this transaction, the Company received a
cash benefit of approximately $12.8 million realized through the
reduction of income taxes payable.
In the fourth quarter of fiscal 1998, a nonrecurring charge of $6.1
million was incurred to provide for costs related to the
discontinuance of the DynaTraX(TM) product line and other
restructuring activities at NORDX/CDT. These costs primarily
represented asset valuation provisions and employee separation costs.
As of July 31, 1999, activities related to the discontinuance were
substantially completed and management estimates of the remaining
costs to be incurred were revised resulting in the recognition of $0.3
million of nonrecurring income during the fourth quarter of fiscal
1999. Additionally, during the third quarter of fiscal 1999, the
Company realized a nonrecurring gain of $1.1 million on the sale of
certain assets related to the DynaTraX(TM) product line.
Note 20. Quarterly Financial Information (Unaudited)
Quarterly financial data are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year 1999 First Second Third Fourth
-------------------------------------------------------------- --------------- ------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales $ 173,624 $ 160,896 $ 165,611 $ 183,868
Gross profit 53,741 46,866 46,521 57,402
Income from operations 24,070 12,118/1/ 18,677/1/ 25,710/1/
Net income 12,364 4,806/2/ 8,883/2/ 13,588/2/
Per share information:
Basic earnings per common share $ 0.41 $ 0.17 $ 0.32 $ 0.48
Diluted earnings per common share $ 0.41 $ 0.16/2/ $ 0.31/2/ $ 0.48/2/
</TABLE>
1 Includes $6.3 million of nonrecurring expense, $1.1 million of
nonrecurring income, and $0.3 million of nonrecurring income in the
second, third and fourth quarters, respectively (see Note 19).
2 Excluding nonrecurring items (see Note 19), net income was $9.0
million, or $0.31 per diluted share, $8.1 million, or $0.29 per
diluted share and $13.4 million, or $0.47 per diluted share for the
second, third and fourth quarters, respectively.
<TABLE>
<CAPTION>
Fiscal Year 1998 First Second Third Fourth
------------------------------------------------------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Sales $ 162,144 $ 155,638 $ 167,647 $ 166,239
Gross profit 47,598 45,714 48,515 52,074
Income from operations 19,771 17,411 19,911 16,361/1/
Net income 11,450 9,926 10,658 8,447/2/
Per share information:
Basic earnings per common share $ 0.41 $ 0.35 $ 0.37 $ 0.28
Diluted earnings per common share $ 0.37 $ 0.32 $ 0.34 $ 0.27/2/
</TABLE>
1 Includes $6.1 million of nonrecurring charges (see Note 19).
2 Excluding nonrecurring charges (see Note 19), net income was $12.4
million, or $0.40 per diluted share.
43
<PAGE>
Selected Historical Consolidated Financial Data
<TABLE>
<CAPTION>
For the year ended July 31, 1999 1998 1997 1996 1995
-------------------------------------------------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales $683,999 $651,668 $516,996 $357,352 $188,941
Income from operations 80,575/1/ 73,454/1/ 62,602 31,527/1/ 29,613
Income before extraordinary items 80,575 40,481 36,035 15,881 14,713
Extraordinary loss on early
extinguishment of debt - - - (596) -
Net income 39,641/2/ 40,481/2/ 36,035 15,285/2/ 14,713
Net Income Per Share of Common Stock:
Basic 1.38 1.40 1.31 0.64 0.67
Diluted 1.36/2/ 1.29/2/ 1.17 0.55/2/ 0.57
Weighted Average Shares Outstanding:
Basic 28,784 29,000 27,598 23,966 21,874
Diluted 29,129 31,321 30,888 27,940 25,623
As of July 31, 1999 1998 1997 1996 1995
-------------------------------------------------- -------- -------- -------- --------
Balance Sheet Data:
Total assets $595,100 $505,427 $429,499 $320,105 $118,976
Long-term debt 171,727 136,052 126,661 71,384 52,696
</TABLE>
1 Includes $4.9 million, $6.1 million and $16.7 million of
nonrecurring charges in fiscal 1999, 1998 and 1996,
respectively.
2 Excluding nonrecurring and extraordinary charges, net
income was $42.9 million, $44.4 million and $26.4 million
in fiscal 1999, 1998 and 1996, respectively, and net
income per diluted share was $1.47, $1.42 and $0.95 in
fiscal 1999, 1998 and 1996, respectively.
44
<PAGE>
Directors, Officers and Corporate Information
<TABLE>
<CAPTION>
<S> <C>
Directors David R. Harden
Senior Vice President
Bryan C. Cressey* President, West Penn/CDT
Partner, Thoma Cressey
Equity Partners Kenneth O. Hale
Vice President and
Myron S. Gelbach Jr. Chief Financial Officer
Independent Financial
Consultant Charles B. Fromm
Vice President,
George C. Graeber General Counsel
Chief Operating Officer, and Secretary
Cable Design Technologies Corporation
Annual Meeting
Michael F. O. Harris
Managing Director, Tuesday, December 7, 1999
The Northern Group 10:00 A.M. (Eastern Time)
The Double Tree Hotel
Glenn Kalnasy 1000 Penn Avenue
Managing Director, Pittsburgh, Pennsylvania 15222
The Northern Group
A copy of the Company's annual report to
Paul M. Olson the Securities and Exchange Commission on
President and Form 10-K for fiscal 1999 is available without
Chief Executive Officer, charge to stockholders upon written request
Cable Design Technologies Corporation to Investor Relations at the Company's headquarters.
Richard C. Tuttle
Principal, Prospect Partners Stock Transfer Agent & Registrar
* Chairman of the Board of Directors, Questions regarding
Cable Design Technologies Corporation stock certificates, replacement of lost certificates,
address changes, account consolidation and transfer
procedures should be addressed to:
Executive Officers
Paul M. Olson BankBoston, N.A.
President and Chief c/o Boston EquiServe Limited Partnership
Executive Officer P.O. Box 8040
Boston, Massachusetts 02266
George C. Graeber (781) 575-3120
Chief Operating Officer
Allow three weeks for a reply.
Michael A. Dudley
Executive Vice President
President, CDT International
Normand R. Bourque
Executive Vice President
President, NORDX/CDT
Peter Sheehan
Executive Vice President
</TABLE>
Inquiries
Cable Design Technologies Corporation welcomes questions and comments from its
stockholders, potential investors, financial professionals, institutional
investors and security analysts. Interested parties should contact Investor
Relations at the Company's headquarters by telephone at (412) 937-2300. CDT
maintains a Web site on the Internet at http://www.cdtc.com
Common Stock
The Company's common stock is listed on the New York Stock Exchange under the
ticker symbol "CDT."
The following table sets forth the high and low sales price per share of the
common stock during the fiscal periods indicated. The Company did not pay cash
dividends on the common stock during the periods set forth.
<TABLE>
<CAPTION>
Fiscal 1999
High Low
- ----------------------------- ---
<S> <C> <C>
First 21 1/8 9 5/8
Second 24 7/8 16 1/2
Third 19 10 15/16
Fourth 19 3/8 12 9/16
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998
High Low
- ----------------------------- ---
<S> <C> <C>
First 28 1/2 21 5/16
Second 30 15/16 23 11/16
Third 32 1/4 25 1/4
Fourth 26 5/8 19 13/16
</TABLE>
[LOGO OF CABLE DESIGN TECHNOLOGIES CORPORATION APPEARS HERE]
Cable Design Technologies Corporation And Subsidiaries 45
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF CABLE DESIGN TECHNOLOGIES CORPORATION
Anglo-American Cables Limited (Incorporated - United Kingdom)
Barcel Wire & Cable Corp. (Incorporated - California)
Cable Design Technologies, Inc. (Incorporated - State of Washington)
CDT International Holdings Inc. (Incorporated - Delaware)
Cekan/CDT A/S (Incorporated - Denmark)
Dearborn/CDT, Inc. (Incorporated - Delaware)
Eilentropp GmbH & Co. KG (German Partnership)
HEW-Kabel Heinz Eilentropp GmbH & Co. KG (German Partnership)
HEW Skandinaviska AB (Incorporated - Sweden)
NEK Kabel AB (Incorporated - Sweden)
Network Essentials, Inc. (d/b/a Red Hawk) (Incorporated - Delaware)
NORDX/CDT Australia Pty Limited (Incorporated - Australia)
NORDX/CDT Asia Limited (Incorporated - Hong Kong)
NORDX/CDT, Corp. (Incorporated - Delaware)
NORDX/CDT do Brasil Ltda (Incorporated - Brazil)
NORDX/CDT, Limited (Incorporated - United Kingdom)
NORDX/CDT, Inc. (Incorporated - Canada)
NORDX/CDT - IP Corp. (Incorporated - Delaware)
Noslo Limited (Incorporated - United Kingdom)
Orebro Kabel AB (Incorporated - Sweden)
Raydex/CDT Limited (Incorporated - United Kingdom)
SKL, S.A.S. (Incorporated - France, joint venture)
Stronglink/CDT Pty. Ltd. (Incorporated - Australia)
Tennecast Company (Incorporated - Ohio)
Thermax/CDT, Inc. (Incorporated - Delaware)
Wire Group International, Limited (Incorporated - United Kingdom)
XENO Verwaltungsgesellschaft mbH (Incorporated - Germany)
X-Mark/CDT Inc. (Incorporated - Pennsylvania)
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated September 20, 1999, included in
Cable Design Technologies Corporation and Subsidiaries' annual report for the
year ended July 31, 1999. It should be noted that we have not audited any
financial statements of the Company subsequent to July 31, 1999 or performed any
audit procedures subsequent to the date of our report. We also consent to the
incorporation of our reports, included or incorporated by reference in this Form
10-K, into the Company's previously filed Form S-8 Registration Statements File
No. 333-80229, File No. 333-76351, File No. 33-78418, File No. 33-73272, File
No. 333-02450, File No. 333-06743, and File No. 333-17443 and Form S-3
Registration Statement File No. 333-00554.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 25, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 11,424
<SECURITIES> 0
<RECEIVABLES> 135,862
<ALLOWANCES> 4,926
<INVENTORY> 141,762
<CURRENT-ASSETS> 305,985
<PP&E> 255,653
<DEPRECIATION> 54,067
<TOTAL-ASSETS> 595,100
<CURRENT-LIABILITIES> 142,221
<BONDS> 0
0
0
<COMMON> 308
<OTHER-SE> 251,794
<TOTAL-LIABILITY-AND-EQUITY> 595,100
<SALES> 683,999
<TOTAL-REVENUES> 683,999
<CGS> 479,469
<TOTAL-COSTS> 603,424
<OTHER-EXPENSES> 865
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,346
<INCOME-PRETAX> 66,364
<INCOME-TAX> 26,723
<INCOME-CONTINUING> 39,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,641
<EPS-BASIC> 1.38
<EPS-DILUTED> 1.36
</TABLE>
