Superior TeleCom, Inc.
Filed 4/2/01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-12261
SUPERIOR TELECOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 58-2248978
incorporation or organization) (IRS Employer Identification No.)
1790 BROADWAY NEW YORK, NEW YORK 10019-1412
(Address of principal executive (zip code)
offices)
Registrant's telephone number, including area code 212-757-3333
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
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 requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the 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. / /
At March 23, 2001, the registrant had 20,438,903 shares of common stock, par value $.01 per share, outstanding, and the
aggregate market value of the outstanding shares of voting stock held by non-affiliates of the registrant on such date was
approximately $41.2 million based on the closing price of $4.16 per share of such common stock on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Company's Annual Meeting of Stockholders in
Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Superior TeleCom Inc. (together with its subsidiaries, unless the context otherwise requires, the "Company" or "Superior") is
the largest wire and cable manufacturer in North America and the fourth largest in the world. Superior manufactures wire and
cable products for the communications, original equipment manufacturer, or "OEM", and electrical markets. Superior is a
leading manufacturer and supplier of communications wire and cable products; magnet wire and insulation materials for motors,
transformers and electrical controls; and building and industrial wire for applications in commercial and residential construction
and industrial facilities. Superior operates 31 manufacturing facilities in the United States, Canada, United Kingdom, Israel and
Mexico.
ORGANIZATIONAL HISTORY
Superior was incorporated in July 1996 as a wholly-owned subsidiary of The Alpine Group, Inc. ("Alpine"). On October 2,
1996, Alpine completed a reorganization whereby all of the issued and outstanding common stock of two of Alpine's
wholly-owned subsidiaries, Superior Telecommunications Inc. and DNE Systems, Inc., were contributed to Superior. On
October 17, 1996, Superior completed an initial public offering of its common stock, generating net proceeds of approximately
$100 million which were used to reduce outstanding bank debt and pay Alpine certain previously declared dividends. As a
result of the initial public offering, Alpine's common stock ownership position in Superior was reduced to approximately 50.1%.
As a result of treasury stock repurchases and other transactions, Alpine's current common stock interest in Superior is 51.5%.
Superior effected a five-for-four stock split on February 2, 1998 and on February 3, 1999, and issued a 3% stock dividend on
February 11, 2000. All references herein to shares of common stock (except shares authorized and issued) and to per share
information have been adjusted to reflect the stock splits and stock dividend on a retroactive basis.
RECENT SIGNIFICANT GROWTH
Over the past six years, Superior, including its predecessors, has led a consolidation of the North American wire and cable
industry. In May 1995, Superior Telecommunications Inc. acquired the North American copper telecommunications wire and
cable operations of Alcatel N.A. Cable Systems, Inc. and Alcatel Canada Wire, Inc. With this acquisition, Superior became
the largest North American manufacturer of copper telephone wire and cable.
On November 27, 1998, Superior, through a newly formed, wholly-owned subsidiary, acquired approximately 81% of the
outstanding shares of common stock of Essex International Inc. ("Essex") through a cash tender offer for an aggregate price of
approximately $770 million. Then, on March 31, 1999, Essex merged with that wholly-owned subsidiary of Superior. In the
merger, holders of the remaining 19% of the outstanding shares of common stock of Essex each received 0.64 (in the aggregate
$167 million liquidation value) of an 8 1/2% trust convertible preferred security of Superior Trust I, a Delaware trust in which
Superior owns all the common equity interests, for each share of Essex common stock owned. Upon completion of the merger,
Essex became a wholly-owned subsidiary of Superior. Essex, through its subsidiaries, manufactures and distributes wire and
cable products, including magnet wire for electromechanical devices, building wire for commercial and residential construction
applications, copper communications wire and cable and industrial wire. As a result of the acquisition of Essex, Superior has
diversified its wire and cable product offering and has become the largest wire and cable manufacturer in North America and
the fourth largest wire and cable manufacturer in the world.
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During 1998, Superior also expanded its international operations. On May 5, 1998, Superior acquired 51% of the issued and
outstanding shares of common stock of Cables of Zion United Works, Ltd. ("Cables of Zion") for approximately $25.0 million
in cash. Cables of Zion is an Israel-based cable and wire manufacturer whose primary products include fiber and copper
communications wire and cable and power cable. Cables of Zion products are sold primarily into the Israeli and European
markets.
On December 31, 1998, Superior, through Cables of Zion, acquired the business and certain operating assets of Cvalim-The
Electric Wire & Cable Company of Israel Ltd. and its wholly-owned subsidiary, Dash Cable Industries (Israel) Ltd., for
approximately $41.2 million in cash. Cvalim was the leading Israeli manufacturer of electrical, communications and industrial
wire and cable products. Furthermore, in October 1999 Cables of Zion acquired the business and certain operating assets of
Pica Plast Limited, the remaining major wire and cable company in Israel, for a purchase price of approximately $10.8 million.
As a result of these acquisitions, Cables of Zion, which has changed its name to Superior Cables Limited, is the dominant wire
and cable manufacturer in Israel with an approximate 80% market share. Superior believes that expanding its operational
presence in Israel will enable it to participate further in the growing communications wire and cable markets in Europe and the
Middle East. The operations of Superior Cables Limited, including the acquired operations of Cvalim and Pica Plast, are
hereinafter referred to as "Superior Israel".
RECENT CORPORATE REORGANIZATION AND OPERATIONAL RESTRUCTURINGS
During 1999 and continuing into 2000, the Company initiated and completed significant corporate reorganization at Essex and a
major restructuring of certain operations of Essex, including the sale of non-strategic business lines and the rationalization of
certain manufacturing assets.
In April 1999, the Company completed a corporate reorganization which included the elimination of more than 130 corporate
and divisional general and administrative positions at Essex. Annual savings in corporate expenses from these personnel
reductions, along with other corporate general and administrative cost reductions and synergies, approximate $25 million.
The Company has also divested non-core product lines, including the sale of the business and operating assets of Essex's
insulation products business in October 1999 and its Interstate operations (wiring assemblies for trucks and buses) in
December 1999. Total cash proceeds from these sales amounted to $11 million.
Additionally, the Company has substantially completed a restructuring and rationalization of the operating assets comprising
Essex's Electrical Group. During the past two years, the Company shut down or sold six electrical wire manufacturing plants.
This has resulted in the Electrical Group's manufacturing being consolidated into six remaining manufacturing facilities. This
restructuring resulted in the elimination of 600 positions and a reduction of 22% in the Electrical Group's manufacturing
capacity, all of which was considered excess capacity.
As a result of the above mentioned activities, the Company has eliminated approximately 1,100 positions in the aggregate, a
25% reduction in Essex's total workforce since the beginning of 1999.
COMMUNICATIONS GROUP
Superior's Communications Group includes its North American communications wire and cable operations as well as the
operations of Superior Israel.
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The Communications Group's North American operations manufacture and sell the following communications wire and cable
products:
(1) Copper outside plant ("OSP") wire and cable for voice and data transmission, used in the distribution or local loop portion
of the telecommunications infrastructure, principally by the local exchange carriers ("LECs");
(2) Fiber optic OSP cable products used principally for trunking and feeder applications in local exchange, CATV, and long
distance networks; and OSP composite (or hybrid) cables (including fiber optic/twisted pair and coaxial/twisted pair cables) for
local exchange feeder, distribution and service wire applications; and
(3) Copper and fiber optic premise wire and cable used within homes, offices and switching structures for local area networks
("LANs"), Internet connectivity and other applications.
Superior is the largest manufacturer of copper communications cable in North America, and the largest worldwide
manufacturer of copper OSP wire and cable products.
The Communications Group North American operations also include the operations of DNE Systems, Inc. ("DNE"). DNE
designs and manufactures data communications equipment, integrated access devices and other electronic equipment for
defense, government and commercial applications. DNE's net sales are not material in relation to the total net sales of the
Communications Group.
COPPER OSP PRODUCTS
Copper wire and cable are the most widely-used media for voice and data transmission in the local loop portion of the
traditional telecommunications infrastructure operated by the LECs, which include the regional Bell operating companies
("RBOCs") and the independent telephone operating companies. The local loop is the segment of the telecommunications
network that connects the customer's premises to the nearest telephone company switching center or central office. Superior
believes that copper will continue to be a leading transmission medium in the local loop due to factors such as:
- the installed base of copper cable and associated switches, connectors and other accessory components represents an
investment of over $150 billion that must be maintained by the LECs;
- the lower installation costs of copper compared to optical fiber and other media;
- technological advances, such as digital subscriber line ("xDSL") technologies and integrated services digital networks
("ISDN"), that increase the bandwidth of the installed local loop copper network;
- the increasing demand by consumers for affordable enhanced services, which, because of technological advances, can be
supported by the copper-based local loop; and
- the increasing demand for affordable multiple residential access lines to support fax machines, Internet access and multiple
voice lines.
Demand for copper OSP wire and cable is dependent on several factors, including the rate at which new access lines are
installed in homes and businesses, the level of infrastructure spending for items such as road-widenings and bridges, which
generally necessitates replacement of existing utilities, including telephone cable, and the level of general maintenance spending
by the LECs. The installation of new access lines is, in turn, partially dependent on the level of new home construction and
expansion of business and, increasingly in recent years, on demand for additional telephone and data lines dedicated to facsimile
machines and computer modems, which are used for, among other purposes, business communications and access to the
Internet.
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The local loop comprises approximately 185 million residential and business access lines in the United States. The installed base
of copper wire and cable and associated switches and other components utilized in the local loop represents an investment of
over $150 billion that must be maintained by the LECs. Although other media, such as fiber optic cable, are used for trunk lines
between central offices and for feeder lines connecting central offices to the local loop, a substantial portion of all local loop
lines and systems continue to be copper-based. Superior believes that in the local loop, copper-based networks require
significantly lower installation costs than other alternative networks such as fiber optics.
Copper usage in the local loop continues to be supported by technological advances that expand the use and bandwidth of the
installed local loop copper network. These advances include xDSL and ISDN technologies. These technologies, together with
regulatory developments and increased competition among service providers, have accelerated the demand for and the
introduction of new high-speed and bandwidth-intensive telecommunications services, such as integrated voice and data,
broadcast and conference quality video, Internet, high-speed LAN-to-LAN connectivity, and other specialized
bandwidth-intensive applications, all of which can now be provided over the copper based local loop network.
Superior's copper OSP products include distribution cable and service wire products, ranging in size from a single twisted pair
wire to a 4,200-pair cable. The basic unit of virtually all copper OSP wire and cable is the "twisted pair," a pair of insulated
conductors twisted around each other. Twisted pairs are bundled together to form communications wire and cable. Superior's
copper OSP wire and cable products are differentiated by a multitude of design variations, depending on where the cable is to
be installed. Copper OSP products normally have metallic shields for mechanical protection and electromagnetic shielding, as
well as an outer polyethylene jacket.
For the year ended December 31, 2000, net sales of copper OSP products accounted for 63% of the Communications
Group's net sales.
Superior has historically been a key supplier of copper OSP wire and cable to the RBOCs and the two major independent
telephone companies, GTE Corporation and Sprint Corporation. It is estimated that the RBOCs, GTE and Sprint comprise
approximately 80% of the approximately $1.3 billion North American copper OSP market. The remaining 20% of the North
American market is comprised of more than 1,200 smaller independent telephone companies. Prior to the Essex acquisition,
Superior was not a major supplier to the smaller independent telephone companies due to capacity constraints and lack of
established distributor relationships. However, the Essex acquisition provided Superior both the capacity and the established
distributor network to address this market. For the year ended December 31, 2000, 63% of Superior's OSP net sales were to
the RBOCs and the two major independent telephone companies. Superior sells to the RBOCs and major independent
telephone companies through a direct sales force. With the acquisition of Essex, Superior's OSP wire and cable products are
increasingly being sold through domestic and international distributors and sales representatives.
Superior's sales to the RBOCs and the major independent telephone operating companies are generally pursuant to multi-year
supply arrangements in which the customer agrees to have Superior supply a certain percentage of the customer's OSP wire or
cable needs during the term of the arrangement. Typically, customers are not required to purchase any minimum quantities of
product under these arrangements. At December 31, 2000, Superior had multi-year arrangements with two of the four RBOCs
and with the two major independent telephone companies.
BROADBAND PRODUCTS
The Company's broadband products include: (i) OSP fiber and composite cables and (ii) copper and fiber optic premise wire
and cable products. These products are designed to meet the highest
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bandwidth requirements necessary in trunking and feeder applications to service the growing demand for increasing
transmission rates within the copper based local loop distribution network, and to service the high transmission rate
requirements of local area and wide area networks. Sales of broadband products in 2000 were $141 million, representing a
growth rate of 69% over 1999.
FIBER OPTIC OSP PRODUCTS
For many years the use of fiber optic OSP cable was principally limited to trunking applications and, to a lesser degree, high
density feeder applications within the local exchange network. During this period the fiber optic OSP cable market was
dominated by major vertically integrated optical fiber producers, including Corning, Inc. and Lucent Technologies Inc., who
held significant technological and cost advantages. In recent years, the demand for fiber optic cable has increased dramatically
in the feeder network as a funnel to support the emerging high bandwidth digital copper loops, and as both a backbone and
distribution medium for CATV applications. Further, technological advances now have allowed other manufacturers to cost
efficiently produce fiber optic OSP cable products and effectively compete with the major vertically integrated fiber optic cable
producers.
Superior began manufacturing fiber optic OSP cable products in 1999. In 2000 Superior completed a major expansion of its
fiber optic cabling capabilities and successfully produced and sold $47 million of fiber optic OSP cable products, a growth rate
of 273% over 1999. The Company expects to continue to invest in expanding its fiber optic cabling capabilities and anticipates
continued revenue growth in this product segment.
The fiber optic OSP cables Superior manufacturers can be used in a variety of installations such as aerial, buried and
underground conduit and can be configured with two to over 280 fibers, which are typically single-mode fibers. These cables
are sold to traditional customers, such as distributors and LECs (including the RBOCs), as well as new customers, such as
CATV companies, inter-exchange carriers and competitive access providers.
PREMISE PRODUCTS
Premise wire and cable is used within buildings to provide connectivity for telecommunications networks and LANs and within
switching structures to connect various electronic switching and testing components. Rapid technological advances in
communication and computer system capabilities have created increasing demand for greater bandwidth capabilities in wire and
cable products. Superior expects demand for premise wire and cable products to continue to increase, particularly as new
office buildings are constructed, existing office buildings are upgraded to accommodate advanced network requirements and
multiple residential access lines for facsimile machines, home offices, home networks and access to the Internet are installed.
There are two primary applications for communications wiring systems within buildings: voice applications, estimated at 15% of
new wiring system investment, and data applications, estimated at 85% of new wiring system investment. The primary voice
application consists of networking telephone stations. The primary data application is LANs, which require the wired
interconnection of workstations and peripherals, such as printers and file servers, to form a network.
Four major types of cables are currently deployed in premise applications:
(1) LAN copper twisted pair (unshielded twisted pair or "UTP" and shielded twisted pair or "STP"), (2) LAN fiber optic cable,
(3) LAN coaxial cable and
(4) voice grade twisted copper pair. Superior anticipates that UTP and fiber optic cable will provide the most significant growth
opportunities due to increasing demands in the premise market for cost-effective, high bandwidth solutions.
Continued high growth for new LAN installations, as well as voice system upgrades, have resulted in increased demand for
LAN UTP cables, particularly Category 5, Category 5e and Category 6 cables.
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These high bandwidth cables have made it possible for UTP to compete with fiber and LAN STP for high-speed LAN
applications. The other large component of the premise segment is fiber optic cable, which meets the needs of communications
services requiring bandwidth capabilities greater than can be provided by copper based technologies.
Superior's current premise wire and cable product offerings include voice grade twisted pair, LAN UTP and LAN fiber optic
cable. Superior's LAN UTP product offerings include Category 6 cables, Category 5e and Category 5 cables ranging in size
from 4-pair to 25-pair. These cables are designed and manufactured for use in both plenum (horizontal) and riser (vertical)
applications. Superior has recently developed and has begun manufacturing, marketing and selling LAN fiber optic cables.
These cables, which may be used for LAN trunking or distribution applications, contain from one to 144 fibers, and are used in
plenum and riser applications within buildings. Superior is continuing to expand its manufacturing capabilities for both copper
UTP and fiber optic cable products with an anticipated increase in sales and market share in 2001.
Superior's premise wire and cable products are sold primarily through major national and international distributors, smaller
regional distributors who in turn resell to contractors, international and domestic telephone companies and private overseas
contractors for installation in the industrial, commercial and residential markets.
The premise wire and cable market is fragmented, with nearly 25 premise wire and cable manufacturers in North America and
more than 75 worldwide. Major suppliers in North America include Lucent Technologies Inc., Cable Design Technologies
Corporation, Berk-Tek (an Alcatel company), Belden Inc., CommScope Inc., General Cable Corporation, Corning, Inc. and
Avaya Inc. Superior estimates the North American market for premise wire and cable products similar to those manufactured
by Superior to be approximately $2.0 billion.
SUPERIOR ISRAEL
As previously discussed, during 1998 Superior acquired 51% of the outstanding common stock of Cables of Zion, an Israeli
wire and cable company. Cables of Zion, in subsequent transactions, acquired the business and certain operating assets of
Cvalim and Pica Plast. With the consolidation of these three businesses, Superior Israel is the largest Israeli wire and cable
manufacturer with an approximate 80% share of the Israeli wire and cable market.
Superior Israel's major product offerings include: (1) communications cable including copper and optical fiber OSP and
premise products; (2) high and medium voltage power cable utilized by power utilities; and (3) industrial and automotive wire
and cable.
Superior Israel's major customers include the two largest public utilities in Israel: Bezeq, the largest Israeli telephone company;
and IEC, the largest Israeli power utility. Product export sales outside of Israel amounted to 27% of total sales for the year
ended December 31, 2000. The major export markets include Europe, Latin America and Southeast Asia.
As a result of the combination of the operations of Cables of Zion, Cvalim and Pica Plast, Superior has consolidated certain
manufacturing facilities and administrative functions. This restructuring resulted in closure of five manufacturing facilities, closure
of administrative offices in Rishon LeZion and elimination of 299 personnel to date. Superior Israel currently operates three
manufacturing plants.
OEM GROUP
Superior's OEM Group develops, manufactures and markets magnet wire and other related products to major OEMs for use
in motors, transformers and electrical controls. Through its Essex
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Brownell distribution business, Superior also distributes its magnet wire and certain related accessory products to smaller
OEMs as well as to motor repair facilities.
In 1998, Essex, prior to its acquisition by Superior, acquired BICC's UK-based magnet wire operations. Superior has
completed a manufacturing restructuring project to improve and expand this operation. This enhanced production capability
provides Superior an opportunity to participate in growth arising from the consolidation of the Western European magnet wire
market and from economic growth and development in Eastern Europe. During 2000, Superior substantially completed
construction of a new 280,000 square foot magnet wire manufacturing facility located in Torreon, Mexico. This new facility is
strategically located to service, on a cost effective basis, Mexican based manufacturing locations of current major OEM
customers as well as to take advantage of one of the world's largest and fastest growing markets for magnet wire. With the
addition of the Torreon facility, the OEM Group operates 12 manufacturing plants and 21 warehousing and distribution
locations in North America and the U.K.
For the year ended December 31, 2000, sales of magnet wire accounted for 74% of the OEM Group's net sales.
MAGNET WIRE
Superior is the leading manufacturer and supplier of magnet wire in the North American market. Magnet wire is used in
electrical motors, with the principal end market applications including electrical motors used in automotive and industrial
applications, and for appliances. Magnet wire is also used in transformers for power generation by power utilities and for
power conversion and electrical controls in industrial applications.
The North American market demand for magnet wire has experienced continued growth since 1991. Sales growth in the
magnet wire industry is driven by increasing demand for electrical devices containing motors for, among other things, home
appliances and automobiles. Additionally, federal government mandates are requiring higher energy efficiency from electric
devices, which is achieved by using, on average, 25% more magnet wire in motors and transformers. Strong consumer demand
for greater numbers of electrical convenience items in homes, offices and vehicles has resulted in increased sales of household
appliances and increased demand for magnet wire for use in electric motors and coils.
Due to the substantial initial capital costs associated with magnet wire production, the importance of consistent quality, stringent
technological requirements and the cost efficiencies achieved by larger magnet wire producers, significant industry consolidation
has occurred during the past ten years in the North American magnet wire industry. In addition, the percentage of domestic
magnet wire produced by independent magnet wire manufacturers, such as Superior, has grown over the last several years as
the manufacturing capacity of captive magnet wire producers (electrical equipment manufacturers who internally produce their
own magnet wire) has declined as a result of outsourcing. It is estimated that captive magnet wire manufacturers now represent
only 7% of total magnet wire production in North America.
Superior offers a comprehensive line of magnet wire products, including over 500 types of magnet wire used in a wide variety
of applications. Magnet wire is insulated copper or aluminum wire that is wound into coils for use in electromagnetic devices
including motors, alternators, transformers, control devices and power generators. Electromagnetic devices have numerous
applications in industrial and household settings.
Superior works closely with global OEMs to develop new magnet wire for applications in energy efficient motors, generators
and transformers. In recent years, Superior has introduced the Ultra Shield-TM- Plus wire, for use by global OEM motor
manufacturers in inverter drive motors where high
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voltage spikes are encountered. Other new products include Soderon-Registered Trademark-/180 and Soderex-Registered
Trademark-/180, two new magnet wires that are used in appliance controls in higher temperature applications. These products
allow for increased throughput with faster soldering times than conventional high temperature type products. Superior is also a
leader in product palletizing and packaging with a focus on ease of handling, reduced freight damage, environmental disposal
issues and cost reduction.
Superior's magnet wire products are sold directly to major OEMs and, through its Essex Brownell distribution business, to
secondary OEMs, aftermarket repair facilities, coil manufacturers and distributors. Products are also marketed internationally
through authorized distributors.
Sales to major OEMs, including, among others, Emerson, Delphi Automotive Systems, A.O. Smith, Howard Industries,
Cooper Power and Tecumseh, are typically pursuant to annual or multi-year supply agreements based on a percentage of the
customers' total requirements and on a negotiated fixed price, subject to adjustment for the cost of copper. For the year ended
December 31, 2000, approximately 84% of magnet wire sales were pursuant to such supply arrangements.
ESSEX BROWNELL DISTRIBUTION AND ACCESSORY PRODUCTS
Through its Essex Brownell distribution operations, Superior sells magnet wire, insulation and other related accessory products
to the motor repair and secondary OEM markets. The Essex Brownell distribution operations include a nationwide sales force,
supported by over 20 strategically located distribution and warehouse locations. In addition to magnet wire, the Essex Brownell
line includes products from manufacturers such as 3M, Permacel, Dow Corning and P.D. George. Superior believes that it has
a distinct competitive advantage in that it is the only major North American magnet wire producer that also distributes a full line
of complementary electrical accessory products used by the motor repair and secondary OEM markets.
ELECTRICAL GROUP
Superior's Electrical Group manufactures and distributes a complete line of building wire products as well as a limited line of
industrial wire products. As discussed above in "Recent Corporate Reorganization and Operational Restructurings", the
Electrical Group has consolidated its manufacturing operations, reducing its manufacturing facilities from twelve to six remaining
manufacturing facilities in the United States. This manufacturing consolidation eliminated excess capacity and is expected to
result in lowered manufacturing cost and an overall improved cost structure.
Building wire products include a wide variety of thermoplastic and thermoset insulated wires for the commercial and industrial
construction markets and service entrance cable, underground feeder wire and nonmetallic jacketed wire and cable for the
residential construction market. These products are generally installed behind walls, in ceilings and underground. The industrial
wire product segment (which forms a much smaller component of sales than building wire) includes appliance wire, motor lead
wire, submersible pump cable, power cable, bulk flexible cord, power supply cord sets, welding cable and recreational vehicle
wire.
Superior is one of the leading manufacturers in North America of copper building wire products used in commercial and
residential applications. Superior estimates that the building wire market has grown, on average, approximately 2%-4% per
annum over the past five years. Sales growth in the building wire industry has resulted primarily from renovation activity, as well
as new nonresidential and residential construction. Both new construction and renovation growth are being affected by the
increased number of circuits and amperage handling capacity needed to support the increasing demand for electrical services.
In addition, there has been a greater wiring density required in new construction and renovation projects to provide for the
electrical needs of appliances such as trash compactors, microwave ovens, air conditioners, entertainment centers, lighting and
climate controls, specialty and task lighting, electric garages and outdoor lighting systems. New home automation and computer
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systems contribute to the increased cable and wire density requirements in new and renovation construction as well. The
average new home is also increasing in size and thus influencing demand in this industry.
The building wire industry has experienced significant consolidation in recent years, declining from approximately 28
manufacturers in 1980 to nine primary manufacturers in 1999. Superior believes this consolidation is due primarily to cost
efficiencies achieved by the larger building wire producers as they capitalize on the benefits of vertical integration and
manufacturing, purchasing and distribution economies of scale.
In the industrial wire market, Superior has a significantly smaller market position than in the building wire industry. Factors
impacting sales growth in this market include the construction and expansion of manufacturing plants, mine expansion and
consumer spending for hard goods. Due to the diversity of product offerings within this industry, Superior's competition is
fragmented across product lines and markets served.
Superior sells its electrical wire and cable products nationally through an internal sales force and through manufacturers'
representatives. Its customer base is large and diverse, consisting primarily of wholesale electrical and specialty distributors,
consumer product retailers and hardware wholesalers. No single customer accounts for more than 10% of the Electrical
Group's net sales.
Notwithstanding this consolidation of suppliers, there still exists manufacturing overcapacity for building wire, which is generally
viewed as a commodity product. As a result, the market is extremely competitive, with price and availability being the most
important factors. During 1999 and 2000, market pricing for building wire products declined substantially, with copper
adjusted pricing reaching five year lows through much of this period. As previously discussed, the Company has responded to
these conditions by eliminating excess capacity and consolidating remaining production capacity to achieve cost reductions
necessary to offset, in part, the impact of the recent period price declines.
Prior to 1998, Superior served the wholesale electrical and specialty distributors through a network of over 30 service centers
and stocking locations in the United States. In 1998, Essex, prior to its acquisition by Superior, began an initiative to
consolidate the service centers and stocking locations into a smaller number of strategically located regional distribution centers
("RDCs"). These RDCs provide for centralized stocking of "off-the-shelf" products, including substantially all of Superior's
building and industrial wire products. To a lesser degree, these RDCs provide regionally centralized distribution for
communication wire and cable, magnet wire and related insulation products. The Company currently operates four RDCs
located in Georgia, Missouri, California and Indiana.
RAW MATERIALS AND MANUFACTURING
The principal raw materials used by Superior in the manufacture of its wire and cable products are copper, aluminum, bronze,
steel, optical fibers and plastics, such as polyethylene and polyvinyl chloride. Copper rod is the most significant raw material
used in Superior's manufacturing process. Superior estimates it is the largest North American consumer of copper rod with
over 900 million pounds used annually in its production process. Due to the importance of copper to its business, Superior
maintains a centralized metals operation that manages copper procurement and provides vertical integration in the production of
copper rod and in scrap recycling.
Superior maintains four copper rod continuous casting units, strategically located in proximity to many of its major wire
producing plants to minimize freight costs. These facilities convert copper cathode into copper rod which is then shipped and
utilized directly in Superior's manufacturing operations. Through these continuous casting units, Superior is able to produce
approximately 70% of its North American copper rod requirements.
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In addition to converting copper cathode into copper rod, Superior's metal processing center also processes copper scrap,
both internally generated scrap as well as scrap purchased from other copper wire producers. Copper scrap is processed in
rotary furnaces, which also have refining capability to remove impurities. Superior uses a continuous casting process to convert
scrap material directly into copper rod. Management believes that internal reclamation of scrap copper provides greater control
over the cost to recover Superior's principal manufacturing by-product.
Superior purchases copper cathode and, to the extent not provided internally, copper rod from a number of copper producers
and metals merchants. Generally, copper cathode and rod purchases are pursuant to contracts which extend for a one-year
period and are normally based on the COMEX price, plus a premium to cover transportation and payment terms.
Historically, Superior has had adequate supplies of copper and other raw materials available to it from producers and
merchants, both foreign and domestic. In addition, competition from other users of copper has not affected Superior's ability to
meet its copper procurement requirements. Although Superior has not experienced any shortages in the recent past, no
assurance can be given that Superior will be able to procure adequate supplies of its essential raw materials to meet its future
needs.
The cost of copper has been subject to considerable volatility over the past several years. Fluctuations in the cost of copper
have not had a material impact on profitability due to the ability of Superior in most cases to adjust product pricing in order to
properly match the price of copper billed with the copper cost component of its inventory shipped. Additionally, Superior, to a
limited extent, utilizes COMEX fixed price futures contracts to manage its commodity price risk. Superior does not hold or
issue such contracts for trading purposes.
During 2000 the Company substantially increased its production capability for fiber optic cable, requiring a significant increase
in procurement of optical fiber. The Company was able to satisfy its requirement for fiber in 2000 and believes it has secured
an available supply of optical fiber from multiple suppliers sufficient to meet its 2001 production plan. However, demand for
optical fiber has increased dramatically in recent years and there is no assurance that existing optical fiber producers can
continue to meet the growing demand of manufacturers of fiber optic cable such as Superior.
Superior's manufacturing strategy is primarily focused on maximizing product quality and production efficiencies while
maintaining a high level of vertical integration through internal production of its principal raw materials. In addition to copper
rod, Superior is also vertically integrated in the production of magnet wire enamels and extrudable polymeric compounds.
Superior believes one of its primary cost and quality advantages in the magnet wire business is the ability to produce most of its
enamel and copper rod requirements internally. Similarly, Superior believes its ability to develop and produce PVC and rubber
compounds, which are used as insulation and jacketing materials for many of its building wire, communication wire and
industrial wire products, provides competitive advantages because greater control over the cost and quality of essential
compounds used in production can be achieved.
EXPORT SALES
Superior's export sales during the year ended December 31, 2000 were $98.7 million. Superior's primary markets for export
sales are Latin America and Europe.
BACKLOG; RETURNS
Backlog in the communications wire and cable segment typically consists of 3-5 weeks of sales depending on seasonal issues.
Superior's other product lines have no significant order backlog because Superior follows the industry practice of manufacturing
products on an ongoing basis to meet customer demand on a just-in-time basis. Superior believes that the ability to supply
orders in a timely fashion is
10
a competitive factor in the markets in which it operates. Historically, sales returns have not had a material adverse effect on
Superior's results of operations.
COMPETITION
The market for wire and cable products is highly competitive. Each of Superior's businesses competes with at least one major
competitor. However, due to the diversity of Superior's product lines as a whole, no single competitor competes with Superior
across the entire spectrum of Superior's product lines.
Many of Superior's products are made to industry specifications and, therefore, may be interchangeable with competitors'
products. Superior is subject to competition in many markets on the basis of price, delivery time, customer service and its
ability to meet specialty needs. Superior believes it enjoys strong customer relations resulting from its long participation in the
industry, emphasis on customer service, commitment to quality control, reliability and substantial production resources.
Furthermore, Superior believes that its distribution networks enable it to compete effectively with respect to delivery time.
RESEARCH AND DEVELOPMENT
In response to the changing requirements of the communications industry, Superior established a product development center
during the fourth quarter of fiscal 1997. This 58,000 square foot facility is located in Kennesaw, Georgia and is dedicated to
defining and creating new wire and cable systems that meet the needs of the evolving communications networks. Recent
projects include the development of single mode and multimode fiber optic cable products for use in LANs as well as telephone
networks. Initial sales and shipments of these products began in 1998.
Superior also has development projects underway for performance enhanced copper-based communications wire products
that are designed to meet the existing and future needs of telephone and datacom customers. Several of these projects have
been undertaken in conjunction with Superior's telephone company customers and include the development of composite
cables that incorporate copper twisted pair wire and coaxial cable or optical fibers in a single cable construction.
Superior also operates research and development facilities in Lafayette and Fort Wayne, Indiana. Research activities at the
Lafayette facility are focused on development of improved PVC and rubber compounds, which are used as insulation and
jacketing materials for many communication, automotive, building and industrial wire products. At the Fort Wayne facility,
Superior's metallurgical and chemical labs are focused on the development of magnet wire metal properties and processing
qualities, as well as enhancement of enamels and their application in the magnet wire manufacturing process.
Aggregate research and development expenses of Superior during the fiscal year ended April 30, 1998, the eight months ended
December 31, 1998 and the years ended December 31, 1999 and 2000, amounted to $3.0 million, $2.7 million, $6.6 million
and $7.2 million, respectively.
Although Superior holds certain trademarks, licenses and patents, none is considered to be material to its business.
EMPLOYEES
As of December 31, 2000, Superior employed approximately 5,900 employees. Approximately 2,350 persons employed by
Superior are represented by unions. Collective bargaining agreements expire at various times between 2001 and 2004, with
contracts covering approximately 41% of Superior's unionized work force due to expire at various times in 2001. Superior
considers relations with its employees to be satisfactory.
11
ENVIRONMENTAL MATTERS
The manufacturing operations of Superior's subsidiaries are subject to extensive and evolving federal, foreign, state and local
environmental laws and regulations relating to, among other things, the storage, handling, disposal, emission, transportation and
discharge of hazardous substances, materials and waste products, as well as the imposition of stringent permitting requirements.
Superior does not believe that compliance with environmental laws and regulations will have a material effect on the level of
capital expenditures of Superior or its business, financial condition, liquidity or results of operations. No material expenditures
relating to these matters were made in 1998, 1999 or 2000. However, violation of, or non-compliance with, such laws,
regulations or permit requirements, even if inadvertent, could result in an adverse impact on the operations, business, financial
condition, liquidity or results of operations of Superior.
12
ITEM 2. PROPERTIES
The Company conducts its principal operations at the facilities set forth below:
SQUARE
OPERATION LOCATION FOOTAGE LEASED/OWNED
--------- ------------------------- -------- ---------------------
COMMUNICATIONS
OSP/Datacom....................... Brownwood, Texas 415,000 Leased (expires 2013)
Chester, South Carolina 210,000 Owned
Elizabethtown, Kentucky 165,000 Owned
Hoisington, Kansas 275,000 Owned
Kennesaw, Georgia 58,000 Leased (expires 2002)
Tarboro, North Carolina 295,000 Owned
Winnipeg, Manitoba 184,000 Owned
DNE............................... Wallingford, Connecticut 65,000 Leased (expires 2007)
Superior Israel Shaar Hanegav, Israel 351,000 Owned
Bet-Shean, Israel 181,000 Leased (expires 2002)
Maalot, Israel 46,000 Leased (expires 2003)
OEM
Magnet Wire....................... Charlotte, North Carolina 26,000 Leased (expires 2006)
Fort Wayne, Indiana 181,000 Owned
Franklin, Indiana 35,000 (a)
Franklin, Tennessee 289,000 Leased (expires 2008)
Huyton Quarry, U.K. 146,000 Owned
Kendallville, Indiana 88,000 Owned
Rockford, Illinois 319,000 Owned
Torreon, Mexico 317,000 Owned
Vincennes, Indiana 267,000 Owned
Accessory Products................ Athens, Georgia 30,000 Leased (expires 2016)
Clifton Park, New York 22,000 Leased (expires 2016)
Willowbrook, Illinois 60,000 Leased (expires 2016)
ELECTRICAL
Building Wire..................... Anaheim, California 174,000 Owned
Columbia City, Indiana 400,000 Owned
Florence, Alabama 129,000 Owned
Orleans, Indiana 425,000 Owned
Sikeston, Missouri 189,000 Owned
Industrial Wire................... Lafayette, Indiana 350,000 Owned
METALS PROCESSING................... Columbia City, Indiana 75,000 Owned
Jonesboro, Indiana 56,000 Owned
ADMINISTRATIVE OFFICES.............. Atlanta, Georgia 39,000 Leased (expires 2008)
Fort Wayne, Indiana 295,000 Owned
New York, New York 5,400 Leased (expires 2002)
(a) The Franklin, Indiana facility is approximately 70,000 square feet, of which 35,000 square feet is leased to Femco Magnet
Wire Corporation as a joint venture between Superior and the Furukawa Electric Co., Ltd., Tokyo, Japan. Femco
manufactures and markets magnet wire with special emphasis on products required by Japanese manufacturers with production
facilities in the United States.
13
In addition to the facilities described in the table above, Superior owns or leases 29 warehousing and distribution facilities
throughout the United States, Canada and United Kingdom to facilitate the sale and distribution of its products.
Superior believes that its plants are generally suitable and adequate for the business being conducted and to service the
requirements of its customers. Capital spending plans are primarily designed to keep up with current and best available
technology, to increase capacity in existing product lines and for cost reduction initiatives. The extent of current utilization is
generally consistent with historical patterns and, in the view of management, is satisfactory. Superior does not view any of its
plants as being underutilized. A majority of Superior's plants operate on 24 hour-a-day schedules, on either a five day or seven
day per week basis. During the year ended December 31, 2000, Superior's facilities have operated at approximately 90%
capacity.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in certain routine litigation arising in the ordinary course of business. While the outcome of litigation
can never be predicted with certainty, the Company does not believe that any of its existing litigation, either individually or in the
aggregate, will have a material adverse effect upon its business, financial condition, liquidity or results of operations.
Superior's operations are subject to environmental laws and regulations in each of the jurisdictions in which it operates
governing, among other things, emissions into the air, discharges to water, the use, handling and disposal of hazardous
substances and the investigation and remediation of soil and groundwater contamination both on-site at Superior's facilities and
at off-site disposal locations. On-site contamination at certain of Superior's facilities is the result of historic disposal activities,
including activities attributable to Superior's operations and those occurring prior to the use of a facility by Superior. Off-site
liability includes clean-up responsibilities at various sites, to be remedied under federal or state statutes, for which Superior has
been identified by the United States Environmental Protection Agency, or the equivalent state agency, as a Potentially
Responsible Party ("PRP").
Essex (including subsidiaries thereof) has been named as a PRP at a number of sites. Most of the sites for which Essex is
currently named as a PRP are covered by an indemnity from United Technologies Corporation provided in connection with the
February 1988 sale of Essex by United Technologies to Essex. Pursuant to the indemnity, United Technologies agreed to
indemnify Essex against losses incurred under any environmental protection and pollution control laws or resulting from, or in
connection with, damage or pollution to the environment arising from events, operations or activities of Essex prior to February
29, 1988, or from conditions or circumstances existing at or prior to February 29, 1988. In order to be covered by the
indemnity, the condition, event or circumstance must have been known to United Technologies prior to February 29, 1988.
The sites covered by the indemnity are handled directly by United Technologies and all payments required to be made are paid
directly by United Technologies. These sites are all mature sites where allocations have been settled and remediation is well
underway or has been completed. Superior is not aware of any inability or refusal on the part of United Technologies to pay
amounts that are owing under the indemnity or any disputes with United Technologies concerning matters covered by the
indemnity.
United Technologies also provided an additional environmental indemnity, referred to as the "basket indemnity." This indemnity
relates to liabilities arising from environmental events, conditions or circumstances existing at or prior to February 29, 1988 that
only became known to United Technologies in the five-year period commencing February 29, 1988. As to such liabilities,
Essex is responsible for the first $4.0 million incurred. Thereafter, United Technologies has agreed to indemnify Essex fully for
any liabilities in excess of $4.0 million. To date, Essex has incurred less than $0.2 million in the basket.
14
Apart from the indemnified sites and those subject to the basket indemnity, Essex has been named as a PRP or a defendant in a
civil lawsuit at eleven sites. Operations of Superior Telecommunications Inc. and DNE have resulted in releases of hazardous
substances or wastes at sites currently or formerly owned or operated by such companies. Superior Telecommunications Inc. is
involved in investigatory and remedial activities at one site subject to the oversight of a state governmental authority. Essex is
cooperating with a state environmental agency to resolve a notice of violation issued against one Essex facility alleging that
certain of such facility's operations are in violation of that state's air quality rules (the "Air Quality Matter"). Essex anticipates
resolving the matter through agreed administrative order providing for the installation of certain air emission control equipment
and possibly a monetary penalty in an amount not yet specified by the state regulatory agency. Superior has provided an
accrual in the amount of $2.5 million to cover its environmental contingencies as of December 31, 2000. This accrual is based
on management's best estimate of Superior's exposure in light of relevant available information. Superior currently does not
believe that any of the environmental proceedings in which it is involved, and for which it may be liable, will individually, or in
the aggregate, have a material adverse effect upon its business, financial condition, liquidity or results of operations. There can
be no assurance that future developments will not alter this conclusion. Except for the Air Quality Matter, none of the sites or
matters mentioned above involves sanctions, fines or administrative penalties against Superior.
Since approximately 1990, Essex has been named as a defendant in a number of product liability lawsuits brought by
electricians and other skilled tradesmen claiming injury from exposure to asbestos found in electrical wire products produced
many years ago. Litigation against various past insurers of Essex who had previously refused to defend and indemnify Essex
against these lawsuits was settled during 1999. Pursuant to the settlement, Essex was reimbursed for substantially all of its costs
and expenses incurred in the defense of these lawsuits, and the insurers have undertaken to defend, are currently directly
defending and, if it should become necessary, will indemnify Essex against such asbestos lawsuits, subject to the express terms
and limits of the respective policies. Superior believes that Essex's liability, if any, in these matters will not have a material
adverse effect either individually, or in the aggregate, upon its business, financial condition, liquidity or results of operations.
There can be no assurance, however, that future developments will not alter this conclusion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders during the fourth quarter of the year ended December 31,
2000.
15
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
(a) Market Information
The Company's common stock, $.01 par value, is listed on the New York Stock Exchange (the "NYSE") under the symbol
SUT. The following table sets forth the high and low daily closing sales prices for the Superior common stock as reported on
the NYSE (adjusted for the impact of stock splits and a stock dividend) for the years ended December 31, 1999 and 2000.
HIGH LOW
-------- --------
Year Ended December 31, 1999
First Quarter ended March 31, 1999........................ $38.06 $16.99
Second Quarter ended June 30, 1999........................ 30.89 18.75
Third Quarter ended September 30, 1999.................... 28.70 13.47
Fourth Quarter ended December 31, 1999.................... 16.08 11.59
Year Ended December 31, 2000
First Quarter ended March 31, 2000........................ $17.48 $11.06
Second Quarter ended June 30, 2000........................ 13.69 9.94
Third Quarter ended September 30, 2000.................... 10.63 6.00
Fourth Quarter ended December 31, 2000.................... 6.19 1.81
(b) Holders
The Company's transfer agent is American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
At March 23, 2001, 20,438,903 shares of Superior common stock were issued and outstanding, and there were
approximately 55 record holders (exclusive of beneficial owners of shares held in street name or other nominee form) thereof.
(c) Dividends
The Company paid regular quarterly cash dividends on the Superior common stock at a rate of $0.25 per share, beginning in
January 1998 and continuing through October 1999. In January 2000, the Company suspended the payment of quarterly cash
dividends on the Superior common stock. The Company does not currently anticipate reinstating any regular common stock
cash dividend payments. The Company's principal credit agreements contain certain limitations and restrictions on the payment
of cash dividends on the Superior common stock.
On December 28, 2000, the Board of Directors of the Company declared a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of Superior common stock, payable to the stockholders of record on
January 10, 2001. The Board of Directors also authorized and directed the issuance of one Right with respect to each share of
Superior common stock issued thereafter until the date of distribution of separate certificates evidencing the Rights (or the
earlier redemption or expiration of the Rights).
Subject to certain exceptions, each Right, when it becomes exercisable, entitles the registered holder to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock, $.01 par value, at a price of $10.88, subject to
adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of December 28, 2000,
between the Company and American Stock Transfer & Trust Company, as Rights Agent.
16
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL FINANCIAL DATA
Set forth below are certain selected historical consolidated financial data of the Company. This information should be read in
conjunction with the consolidated financial statements of the Company and related notes thereto appearing elsewhere herein
and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected historical
consolidated financial data for, and as of the end of, the years ended December 31, 2000 and 1999, for, and as of the end of,
the eight months ended December 31, 1998, and for, and as of the end of, each of the fiscal years in the three-year period
ended April 30, 1998, are derived from the audited consolidated financial statements of Superior.
YEAR ENDED YEAR ENDED EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,
DECEMBER 31, DECEMBER 31, ENDED DECEMBER 31, ------------------------------
2000 1999 1998(A) 1998 1997 1996
------------ ------------ ------------------- -------- -------- --------
STATEMENT OF OPERATIONS DATA(B)(C)(D):
Net sales.............................. $2,049,048 $2,036,732 $ 488,279 $518,459 $463,840 $410,413
Cost of goods sold..................... 1,708,920 1,652,839 385,284 419,218 384,271 362,854
---------- ---------- --------- -------- -------- --------
Gross profit......................... 340,128 383,893 102,995 99,241 79,569 47,559
Selling, general and administrative
expenses............................. 156,437 150,833 32,333 22,181 17,166 14,223
Infrequent and unusual charges......... 14,961 8,431 13,511 -- -- --
Amortization of goodwill............... 20,959 19,629 2,447 1,715 1,726 1,556
---------- ---------- --------- -------- -------- --------
Operating income..................... 147,771 205,000 54,704 75,345 60,677 31,780
Interest expense....................... (129,905) (120,100) (16,651) (8,090) (12,907) (17,355)
Other income (expense), net............ 976 2,503 (346) 206 (305) 404
---------- ---------- --------- -------- -------- --------
Income before income taxes,
distributions on preferred securities
of Superior Trust I, minority
interest and extraordinary (loss).... 18,842 87,403 37,707 67,461 47,465 14,829
Provision for income taxes............. (10,925) (36,733) (15,544) (26,786) (18,989) (6,722)
---------- ---------- --------- -------- -------- --------
Income before distributions on
preferred securities of Superior
Trust I, minority interest and
extraordinary (loss)................. 7,917 50,670 22,163 40,675 28,476 8,107
Distributions on preferred securities
of Superior Trust I.................. (15,145) (11,289) -- -- -- --
---------- ---------- --------- -------- -------- --------
Income (loss) before minority interest
and extraordinary (loss)............. (7,228) 39,381 22,163 40,675 28,476 8,107
Minority interest in (earnings) losses
of subsidiaries...................... 5,088 (596) 93 -- -- --
---------- ---------- --------- -------- -------- --------
Income (loss) before extraordinary
(loss)............................... (2,140) 38,785 22,256 40,675 28,476 8,107
Extraordinary (loss) on early
extinguishmentof debt................ -- (1,617) (1,243) -- -- (2,645)
---------- ---------- --------- -------- -------- --------
Net income (loss).................... $ (2,140) $ 37,168 $ 21,013 $ 40,675 $ 28,476 $ 5,462
========== ========== ========= ======== ======== ========
Net income per share of common stock:
Basic:
Income (loss) before extraordinary
(loss)............................. $ (0.11) $ 1.91 $ 1.07 $ 1.95
Extraordinary (loss) on early
extinguishment of debt............. -- (0.08) (0.06) --
---------- ---------- --------- --------
Net income (loss) per basic share
of common stock.................. $ (0.11) $ 1.83 $ 1.01 $ 1.95
========== ========== ========= ========
Diluted:
Income (loss) before extraordinary
(loss)............................. $ (0.11) $ 1.86 $ 1.04 $ 1.91
Extraordinary (loss) on early
extinguishment of debt............. -- (0.08) (0.06) --
---------- ---------- --------- --------
Net income (loss) per diluted share
of common stock.................. $ (0.11) $ 1.78 $ 0.98 $ 1.91
========== ========== ========= ========
17
YEAR ENDED YEAR ENDED EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,
DECEMBER 31, DECEMBER 31, ENDED DECEMBER 31, ------------------------------
2000 1999 1998(A) 1998 1997 1996
------------ ------------ ------------------- -------- -------- --------
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets......................... $ 596,657 $ 627,464 $ 629,953 $100,847 $109,967 $117,908
Current liabilities.................... 532,061 465,915 397,556 62,315 62,350 59,182
Total assets........................... 1,991,669 2,000,354 1,886,556 232,243 238,108 244,065
Total long-term debt(e)................ 1,224,364 1,255,974 1,278,197 75,380 122,089 125,760
Mandatorily redeemable preferred
stock................................ 134,941 133,959 -- -- -- --
---------- ---------- --------- -------- -------- --------
Total debt, including mandatorily
redeemable preferred stock........... 1,359,305 1,389,933 1,278,197 75,380 122,089 125,760
Total stockholders' equity............. 110,003 113,008 91,380 82,206 44,028 51,656
(a) On December 15, 1998, the Company elected to change its fiscal year end to December 31 from April 30. This change
was made effective on December 31, 1998.
(b) The results of operations set forth above for the period May 1, 1995 through October 1, 1996 include the combined
operations of Superior Telecommunications Inc. and DNE Systems, Inc. From October 2, 1996 through December 31, 1998,
the results of operations represent the consolidated results of the Company subsequent to its reorganization and initial public
offering as described in Note 1 to the accompanying consolidated financial statements.
(c) The results of operations include, on a prospective basis, the acquisition of Alcatel N.A., which was acquired by Superior
Telecommunications Inc. on May 11, 1995; the acquisition of 51% of Cables of Zion on May 5, 1998; the acquisition of 81%
of Essex on November 27, 1998; and the acquisition of the remaining 19% of Essex on March 31, 1999.
(d) Certain reclassifications have been made to net sales and cost of goods sold for the fiscal year ended April 30, 1998, the
eight months ended December 31, 1998 and the year ended December 31, 1999 to conform with the December 31, 2000
presentation as discussed in Note 2 to the accompanying consolidated financial statements. The fiscal years ended April 30,
1997 and 1996 have not been restated.
(e) Total debt includes debt of the Company's 50.2% owned Israeli subsidiary, Superior Israel, of $153.9 million, $120.7
million and $53.2 million at December 31, 2000, 1999 and 1998, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Superior TeleCom Inc. ("Superior" or the "Company") manufactures a portfolio of wire and cable products grouped into the
following primary industry segments:
(i) communications, (ii) original equipment manufacturer ("OEM") and
(iii) electrical. The Communications Group includes communications wire and cable products sold to telephone companies,
distributors and systems integrators, principally in North America. In addition, included within the Communications Group is the
Company's 50.2% owned Israeli subsidiary, Superior Cables Limited ("Superior Israel"), which manufactures a range of wire
and cable products in Israel, including communications cable, power cable and other industrial and electronic wire and cable
products. The OEM Group includes magnet wire and accessory products for motors, transformers and electrical controls sold
primarily to OEMs. The Electrical Group includes building and industrial wire for applications in commercial and residential
construction and industrial facilities.
Prior to the acquisitions of Essex and Superior Israel (see Note 5 to the consolidated financial statements), the Company's
operations consisted principally of its North American communications wire and cable business. The Essex acquisition, which
occurred on November 27, 1998, resulted in the addition of the OEM and Electrical Group product lines as well as
incremental sales of communications wire and cable. The May 1998 acquisition of 51% of Superior Israel and Superior Israel's
subsequent acquisition of two major Israeli competitors resulted in the addition to the Company's operating results of its Israeli
operations. These acquisitions were accounted for under the purchase method of accounting with the operating results from
these acquired businesses being included in the Company's consolidated statements of operations prospectively, from the date
of acquisition.
18
Industry segment financial data (including sales and operating income by industry segment) for the twelve month periods ended
December 31, 2000 and 1999, the eight-month transition period ended December 31, 1998, and the twelve month period
ended April 30, 1998 is included in Note 20 to the accompanying consolidated financial statements.
IMPACT OF COPPER PRICE FLUCTUATIONS ON OPERATING RESULTS
Copper is one of the principal raw materials used in the Company's wire and cable product manufacturing. Fluctuations in the
price of copper do affect per unit product pricing and related revenues. However, the cost of copper has not had a material
impact on profitability as the Company, in most cases, has the ability to adjust prices billed for its products to properly match
the copper cost component of its inventory shipped.
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED DECEMBER 31, 2000 (2000)
COMPARED TO THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (1999)
Net sales for 2000 were $2.05 billion as compared to sales of $2.04 billion for 1999. Adjusted to a constant cost of copper,
net sales in 2000 declined 4% as compared to 1999. The reduction in copper-adjusted sales for 2000 was due to lower sales
in the Company's Electrical and OEM Groups partially offset by comparative sales growth in the Company's Communications
Group.
Communications Group sales for 2000 were $848.1 million, an increase of 8% on a copper-adjusted basis over 1999. Sales
growth in 2000 as compared to 1999 was due to a 69% increase in sales of broadband products (which include fiber optic,
copper premise and composite cables). Total broadband sales were $141.0 million in 2000 and reached an annualized run rate
of $163.0 million in the fourth quarter of 2000. Sales growth in this product line was the result of strong industry demand trends
as well as market share gains attributable to recent capacity additions, new product introductions and broadened marketing and
sales activities. 2000 sales of copper outside plant (OSP) products, which are used principally by telephone companies in the
local loop segment of the telephony network, decreased 1% as compared to copper-adjusted sales for the prior year primarily
due to the loss of business under a major customer contract impacting the second half of 2000. This volume decline was offset
partially by overall industry demand growth and increased sales in the distributor and international market.
OEM Group sales were $613.4 million for 2000, reflecting a copper-adjusted decline of 1% as compared to 1999. The
comparative sales decline reflected softening demand for magnet wire from the Company's major OEM customers due
principally to an industry-wide economic slowdown in the second half of 2000, particularly impacting the construction,
refrigeration, consumer durables and automotive sectors. The Company believes that the impact of end market demand
slowdown was exacerbated by inventory reductions at several major customers.
Electrical Group sales were $587.6 million for 2000, representing a decline of 21% on a copper-adjusted basis as compared
to 1999. Sales volume in the Electrical Group was impacted by lower available productive capacity during 2000 as the
Company was in the process of relocating and consolidating manufacturing equipment and balancing capacity in its building wire
operations. Additionally, softening industry demand also impacted sales volume in the fourth quarter of 2000. The Company,
having substantially completed its equipment relocation and capacity consolidation program, achieved a modest increase in
production capacity and, subject to strengthening end market demand, has the capability for improving sales volume levels.
Gross profit in 2000 was $340.1 million, a decline of $43.8 million as compared to gross profit of $383.9 million in 1999. The
gross profit percentage in 2000 was 16.6%, a decline on a copper-adjusted basis of 130 basis points as compared to the prior
year. The decline in gross profit and gross profit percentage was principally attributable to the Electrical Group, where
comparative pricing pressures,
19
lower sales and higher per unit production costs negatively impacted the gross profit and margin. Also impacting gross profit in
all business segments during 2000 were increased raw material, freight and fuel costs, most of which were not recoverable
through price adjustments due to competitive market factors.
Selling, general and administrative expenses ("SG&A expenses") in 2000 were $156.4 million, an increase of 4% as compared
to SG&A expenses of $150.8 million in 1999. The 2000 increase in SG&A expenses included higher Communications Group
selling and marketing expenses to support broadband sales growth and incremental Superior Israel SG&A expenses related to
entities acquired in late 1999, partially offset by the benefit of corporate restructuring actions initiated in the second quarter of
1999.
Goodwill amortization increased from $19.6 million in 1999 to $21.0 million in 2000 principally as a result of incremental
goodwill charges incurred after the acquisition of the minority interest component (19%) of Essex in March 1999.
The Company incurred infrequent and unusual charges of $15.0 million during 2000 and $8.4 million during 1999. The
infrequent and unusual charges in 2000 include $12.4 million related to the restructuring and consolidation program in the
building wire (Electrical Group) operations and in the Company's Superior Israel operations and $2.6 million of start-up costs
for the Company's Mexican magnet wire facility. The charges incurred during 1999 included $4.4 million associated with the
evaluation and termination of a management information system project at Essex, $2.2 million related to manufacturing
rationalization activities at Essex, $1.3 million related to manufacturing and corporate restructuring activities of Superior Israel
and $0.5 million of start-up costs for the Company's Mexican magnet wire facility.
Operating income before infrequent and unusual charges was $162.7 million, a decline of $50.7 million as compared to 1999.
The comparative decline in operating income for the current year was principally attributable to lower sales and margins in the
Electrical Group and the impact of increased raw material and other costs impacting all of the Company's business segments.
Interest expense for 2000 was $129.9 million representing an increase of $9.8 million over the prior year. The increase in
interest expense was the result of higher short-term (LIBOR) interest rates in 2000 and, to a lesser degree, higher interest costs
at Superior Israel associated with acquisition related debt.
Other income, net amounted to $1.0 million for 2000 and $2.5 million for 1999, with such income due primarily to currency
translation gains at Superior Israel on certain debt linked to non-functional currencies (principally Euro-linked), as well as gains
on the sale of certain fixed assets and investments.
For 2000, the Company recorded income of $5.1 million related to the common equity minority interest component (49.8%) of
losses incurred by Superior Israel. For 1999, the Company recorded a minority interest charge of $0.6 million reflecting the
common equity minority interest component (19%) of Essex net income for the March 31, 1999 quarter, reduced by the
minority interest component of Superior Israel's net loss for 1999.
The Company recorded an after tax extraordinary charge of $1.6 million, or $0.08 per diluted share, in 1999. This charge
represented previously capitalized deferred financing fees written off in connection with the refinancing of the Company's
$200.0 million senior subordinated notes.
Income before infrequent and unusual charges and goodwill amortization for 2000 was $27.5 million, or $1.37 per diluted
share, as compared to income before infrequent, unusual and extraordinary charges and goodwill amortization of $62.9 million,
or $3.01 per diluted share, for 1999, with the reduction in income in the current year being due to lower operating income
combined with the impact of rising interest rates and higher interest expense. After infrequent, unusual and goodwill
20
amortization charges, the Company incurred a net loss of $2.1 million, or $0.11 per diluted share, for 2000 as compared to net
income of $37.2 million, or $1.78 per diluted share, for 1999.
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED DECEMBER 31, 1999
COMPARED TO THE EIGHT MONTHS ENDED DECEMBER 31, 1998
Net sales were $2.037 billion for the twelve months ended December 31, 1999 as compared to net sales of $488.3 million
during the eight months ended December 31, 1998. The comparative increase in net sales was due to the longer 1999 period
used for comparison (twelve months versus eight months) and the inclusion of net sales from the acquired operations of Essex
for twelve months versus only one month during the eight months ended December 31, 1998.
The Communications Group net sales were $755.2 million for the twelve months ended December 31, 1999 compared to
$386.2 million for the eight months ended December 31, 1998. The comparison is impacted by the longer 1999 period, the
inclusion of net sales from the acquired operations of Essex for a full year in 1999, and growth in net sales of broadband
products in 1999, partially offset by a reduction in sales of OSP cable products to major telephone exchange carriers during the
second half of 1999.
The OEM Group net sales were $594.7 million for the twelve months ended December 31, 1999 as compared to $43.9
million for the 1998 eight month period, with the 1998 period reflecting only one month's activity following the Essex
acquisition.
Net sales for the Electrical Group were $686.8 million for the twelve months ended December 31, 1999 as compared to $58.2
million for the 1998 eight month period, which 1998 period also reflects only one month's activity following the Essex
acquisition.
Gross profit for the twelve months ended December 31, 1999 was $383.9 million as compared to $103.0 million for the eight
months ended December 31, 1998. The increase in gross profit resulted from the longer 1999 period (twelve months versus
eight months) and the inclusion of gross profit contributed by the acquired operations of Essex for a full twelve month period.
The gross margin percentage was 18.9% for the twelve months ended December 31, 1999 and 21.1% for the eight months
ended December 31, 1998. The reduction in gross margin percentage was primarily attributable to the significant change in
product mix resulting from the product lines acquired in the acquisition of Essex.
SG&A expenses increased from $32.3 million for the eight months ended December 31, 1998 to $150.8 million for the twelve
months ended December 31, 1999. The increase resulted from the longer comparison period (twelve month versus eight
months) and the incremental expenses associated with the acquired operations of Essex, offset to some degree by corporate
cost reductions instituted during 1999.
Goodwill amortization increased from $2.4 million for the eight months ended December 31, 1998 to $19.6 million for the
twelve months ended December 31, 1999 with such increase due to incremental goodwill associated with the acquisition of
Essex.
Operating income (excluding infrequent and unusual charges) was $213.4 million for the twelve months ended December 31,
1999 as compared to $68.2 for the eight months ended December 31, 1998. The increase reflects the longer comparison
period and the operating income contribution from the acquired operations of Essex.
The Company incurred infrequent and unusual charges of $8.4 million during the twelve months ended December 31, 1999 as
previously discussed and $13.5 million during the eight months ended December 31, 1998. The infrequent and unusual charges
in 1998 consisted of a $10.0 million investment advisory fee for services provided by Alpine related to the acquisition of Essex,
a $2.9 million restructuring charge at Superior Israel related to plant consolidations and corporate
21
rationalization activities and $0.6 million associated with the evaluation of management information systems at Essex.
Interest expense was $120.1 million for the twelve months ended December 31, 1998, as compared to $16.7 million for the
eight months ended December 31, 1998. The increase in interest expense in 1999 was attributable to the longer comparison
period and to the debt incurred in connection with the Essex acquisition.
Other income of $2.5 million for the twelve months ended December 31, 1999 related principally to foreign currency
conversion associated with certain debt of Superior Israel which is linked to nonfunctional (principally euro-based) currency.
The Company recorded after tax extraordinary charges of $1.6 million, or $0.08 per diluted share, and $1.2 million, or $0.06
per diluted share, during the twelve months ended December 31, 1999 and eight months ended December 31, 1998,
respectively. These charges represented the write-off of capitalized deferred financing fees associated with debt that was
refinanced during these periods.
Income before infrequent, unusual and extraordinary charges and goodwill amortization for the twelve month period ended
December 31, 1999 was $62.9 million, or $3.01 per diluted share, as compared to income before infrequent, unusual and
extraordinary charges and goodwill amortization of $31.9 million, or $1.49 per diluted share, for the eight months ended
December 31, 1998. After infrequent, unusual and extraordinary charges and goodwill amortization, net income for the twelve
months ended December 1999 was $37.2 million, or $1.78 per diluted share, as compared to $21.0 million, or $0.98 per
diluted share, for the eight months ended December 31, 1998.
RESULTS OF OPERATIONS--EIGHT MONTHS ENDED DECEMBER 31, 1998
COMPARED TO THE YEAR ENDED APRIL 30, 1998
Net sales were $488.3 million for the eight months ended December 31, 1998, representing a decrease of $30.2 million, as
compared to net sales of $518.5 million for the fiscal year ended April 30, 1998. The comparative decrease in net sales for the
eight month period ended December 31, 1998 was due to the shorter period comparison (eight months versus twelve months)
and the impact of lower copper prices in the December 31, 1998 eight month period, partially offset by the inclusion in the
1998 eight month period of $114.2 million and $43.5 million in net sales contributed by the acquired operations of Essex and
Superior Israel, respectively.
Gross profit increased to $103.0 million during the eight month period ended December 31, 1998, as compared to gross profit
of $99.2 million for the fiscal year ended April 30, 1998. The comparative increase in gross profit for the eight month period
ended December 31, 1998 included the gross profit contribution from the Essex and Superior Israel acquisitions of $20.1
million and $7.1 million, respectively, and a comparative increase in gross margin percentage in the operations of the
Communications Group, offset by the impact of the shorter period comparison.
SG&A expenses increased to $32.3 million during the eight month period ended December 31, 1998, as compared to $22.2
million for the fiscal year ended April 30, 1998. The increase in SG&A expenses of $10.1 million during the eight month period
ended December 31, 1998 was due to $11.7 million and $4.1 million in incremental SG&A expenses associated with the
acquired operations of Essex and Superior Israel, respectively, partially offset by the shorter period comparisons.
As previously discussed, during the eight month period ended December 31, 1998, the Company incurred infrequent and
unusual charges of $13.5 million.
Operating income was $54.7 million for the eight month period ended December 31, 1998, representing a decrease of $20.6
million, as compared to operating income of $75.3 million for the fiscal year ended April 30, 1998. The comparative decrease
in operating income for the eight months ended December 31, 1998 reflects the shorter period comparison and the impact of
the aforementioned
22
infrequent charges, offset by the operating income contribution of the acquired operations of Essex and Superior Israel.
Interest expense was $16.7 million for the eight month period ended December 31, 1998, representing an increase of $8.6
million, as compared to interest expense of $8.1 million during the fiscal year ended April 30, 1998. The increase in interest
expense reflects the increase in debt associated with the Essex and Superior Israel acquisitions offset by the shorter period
comparison.
Income before infrequent, unusual and extraordinary charges and goodwill amortization during the eight month period ended
December 31, 1998 was $31.9 million, or $1.49 per diluted share, as compared to $42.4 million, or $1.99 per diluted share,
for the fiscal year ended April 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 2000, the Company generated $105.9 million in cash flows from operating activities
consisting of $68.3 million in cash flows generated from operations (net income plus non-cash charges) plus $37.6 million in
cash flows provided from reductions in net working capital. Included in cash flows generated from operating activities was a
use of cash flow from operating activities of $5.1 million in the Company's 50.2% owned, separately financed Israeli subsidiary,
Superior Israel. The remainder of the Company's wholly-owned operations generated $111.0 million in cash flow from
operating activities, including $32.6 million in cash flow generated primarily from net working capital reductions, principally from
inventory reduction. Cash used for investing activities amounted to $90.7 million and consisted principally of capital
expenditures and pre-arranged long-term loans ("Israel Customer Loans") made to one of Superior Israel's principal customers.
Cash used for financing activities amounted to $16.5 million. The major components were a net increase in borrowings of
Superior Israel of $32.9 million (including $24.0 million related to Superior Israel Customer Loans) and other debt reductions
(net) of $45.2 million.
The Company finances its operating activities (exclusive of operating activities of Superior Israel which are financed under
separate, non recourse, financing arrangements) and other capital requirements from operating cash flow and funding availability
under its $1.15 billion amended and restated credit agreement (the "Credit Agreement") and a $200 million senior subordinated
credit agreement (the "Sub Notes"). Obligations under the Credit Agreement are secured by substantially all of the assets of the
Company and its domestic subsidiaries, and by the common stock of the Company's domestic subsidiaries and 65% of the
common stock of its principal foreign subsidiaries. At December 31, 2000, the Company had $149.7 million in unused and
excess borrowing availability under the Credit Agreement. The Credit Agreement contains certain performance and financial
covenants that are measured on a quarterly basis. As of December 31, 2000, the Company was in compliance with all
performance and financial covenants. The Company believes it can maintain compliance with such financial covenants through
2001 or obtain waivers from, or modifications to such covenants. In 2002, these financial covenants do require a significant
improvement in financial performance from current operating levels to maintain compliance with such covenants.
In addition to financing provided by the Credit Agreement and Sub Notes, the Company has financing availability under a
receivable securitization program providing for up to $160.0 million in short term financing through the issuance of secured
commercial paper. The receivable securitization program expires on November 30, 2001, although it may be extended for
successive one-year periods, subject to agreement. The Company intends to seek an extension of this agreement prior to its
expiration. At December 31, 2000, $160.0 million was outstanding under this program bearing an interest rate of 7.23%.
The Company's principal debt service commitments for the next 12 months (excluding Superior Israel) amount to $80.4 million.
Capital expenditures (excluding Superior Israel) for the next twelve months which are substantially discretionary are expected
to approximate $30-$35 million. Management
23
anticipates that the Company will continue to generate positive cash flows from its operating activities over the next twelve
months subject to fluctuations resulting from operating performance and working capital changes. The Company believes that
operating cash flows plus excess funds available under the Company's Credit Agreement will be sufficient to fund the
aforementioned debt service obligations and estimated capital expenditure levels over the next twelve month period.
Superior Israel's operations are funded and financed separately, on a non recourse basis to the Company, and include a $93.0
million credit facility consisting of a $63.0 million term loan and a $30.0 million revolving credit facility. Obligations under this
credit facility are secured by all of the assets of Superior Israel. The credit facility contains customary performance and financial
covenants. At December 31, 2000 Superior Israel had $7.7 million in excess availability under its revolving credit facility.
DERIVATIVE FINANCIAL INSTRUMENTS
To a limited extent, the Company uses forward fixed price contracts and derivative financial instruments to manage foreign
currency exchange and commodity price risks. To protect the Company's anticipated cash flows from the risk of adverse
foreign currency exchange fluctuations for firm sales and purchase commitments, the Company enters into foreign currency
forward exchange contracts. Superior TeleCom's principal raw material, copper, experiences marked fluctuations in market
prices, thereby subjecting the Company to copper price risk with respect to copper repurchases on fixed customer sales
contracts. Forward fixed price contracts and derivative financial instruments in the form of copper futures contracts are utilized
by the Company to reduce those risks. The Company does not hold or issue financial instruments for financial or trading
purposes. The Company is exposed to credit risk in the event of nonperformance by counterparties for foreign exchange
forward contracts, metal forward price contracts and metals futures contracts; however, the Company does not anticipate
nonperformance by any of these counterparties. The amount of such exposure is generally the unrealized gains with respect to
the underlying contracts.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of Effective Date of FASB Statement No. 133--an amendment of FASB Statement No. 133"
which delayed SFAS No. 133's effective date for one year. In June 2000, the FASB issued SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an amendment of FASB Statement No. 133" which amends
certain paragraphs of SFAS No. 133. SFAS No. 133 as amended, which is effective for the Company beginning January 1,
2001, establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as
either assets or liabilities in the statements of financial position and measurement of those instruments at fair value. The
cumulative effect of the change in accounting for derivative instruments recorded on January 1, 2001 was not material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk primarily relates to interest rates on long-term debt. The Company enters into interest
rate swap and cap agreements to manage its exposure to interest rates changes. At December 31, 2000, the Company has an
interest rate cap on $400 million principal amount with a 90-day LIBOR rate cap at 7.0% expiring December 20, 2001. A one
percent increase in interest rates affecting the Company's $1.15 billion credit agreement and its $200 million senior
subordinated notes would increase annual interest expense by approximately 8% or $10.5 million.
24
EXCEPT FOR THE HISTORICAL INFORMATION HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL
REPORT ON FORM 10-K INCLUDE FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE A NUMBER
OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY SIGNIFICANTLY BASED ON A NUMBER
OF FACTORS, INCLUDING, BUT NOT LIMITED TO, RISKS IN PRODUCT AND TECHNOLOGY
DEVELOPMENT, MARKET ACCEPTANCE OF NEW PRODUCTS AND CONTINUING PRODUCT DEMAND,
PREDICTION AND TIMING OF CUSTOMER ORDERS, THE IMPACT OF COMPETITIVE PRODUCTS AND
PRICING, CHANGING ECONOMIC CONDITIONS, INCLUDING CHANGES IN SHORT TERM INTEREST
RATES AND FOREIGN EXCHANGE RATES, AND OTHER RISK FACTORS DETAILED IN THE COMPANY'S
MOST RECENT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of December 31, 2000 and 1999 and for the years ended December 31,
2000 and 1999, the eight months ended December 31, 1998 and the year ended April 30, 1998 and the report of the
independent public accountants thereon and financial statement schedules required under Regulation S-X are submitted herein
as a separate section following Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year
covered by this report (the "Company's Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1), (a)(2) See the separate section of this report following Item 14 for a list of financial statements and schedules filed
herewith.
(a)(3) Exhibits as required by Item 601 of Regulation S-K are listed in Item
14(c) below.
(b) None.
ITEM 14(C) EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
2(a) Stock Purchase Agreement, dated February 14, 1992, by and
between Alpine and Dataproducts Corporation, relating to the
purchase of shares of capital stock of DNE Systems, Inc.
(incorporated herein by reference to Exhibit 1 to the
Current Report on Form 8-K of Alpine dated March 2, 1992).
2(b) Agreement and Plan of Merger, dated as of June 17, 1993 and
amended on September 24, 1993, by and between Alpine and
Superior TeleTec Inc. (incorporated herein by reference to
Exhibit 2 to the Registration Statement on Form S-4
(Registration No. 33-9978) of Alpine, as filed with the
Securities and Exchange Commission (the "Commission") on
October 5, 1993).
2(c) Asset Purchase Agreement, dated as of March 17, 1995, by and
among Alcatel NA Cable Systems, Inc., Alcatel Canada
Wire, Inc., Superior Cable Corporation and Superior
TeleTec Inc. (the "Alcatel Acquisition Agreement")
(incorporated herein by reference to Exhibit 1 to the
Current Report on Form 8-K of Alpine dated May 24, 1995).
2(d) Amendment dated May 11, 1995 to Asset Purchase Agreement by
and among Alcatel NA Cable Systems, Inc., Alcatel Canada
Wire, Inc., Superior Cable Corporation and Superior
TeleTec Inc. (incorporated herein by reference to Exhibit 2
to the Current Report on Form 8-K of Alpine dated May 24,
1995).
2(e) Agreement Regarding Certain Employee Benefit Plans, amending
the Alcatel Acquisition Agreement, dated June 10, 1996
(incorporated herein by reference to Exhibit 2(b) to the
Annual Report on Form 10-K of Alpine for the year ended
April 30, 1996).
2(f) Share Purchase Agreement, dated as of May 5, 1998, among
CLAL Industries and Investments Ltd., ISAL Holland B.V. and
Halachoh Hane'eman Hashivim Veshmona Ltd. (incorporated
herein by reference to Exhibit 1 to the Current Report on
Form 8-K of the Company dated May 5, 1998).
2(g) Agreement and Plan of Merger, dated as of October 21, 1998,
by and among the Company, SUT Acquisition Corp. and Essex
International Inc. (incorporated herein by reference to
Appendix A-1 to the Joint Proxy Statement/Prospectus filed
as part of the Registration Statement on Form S-4
(Registration No. 333-68889) of the Company and Superior
Trust I, as filed with the Commission on December 14, 1998,
as amended (the "S-4"))
2(h) Amendment No. 1 to Agreement and Plan of Merger, dated as of
February 24, 1999, by and among the Company, SUT Acquisition
Corp. and Essex International Inc. (incorporated herein by
reference to Appendix A-2 to the Joint Proxy Statement/
Prospectus filed as part of the S-4).
2(i) Asset Purchase Agreement, dated October 2, 1998, among
Cables of Zion United Works Ltd., Cvalim--The Electric Wire
and Cable Company of Israel Ltd. and Dash Cable Industries
(Israel) Ltd. (incorporated herein by reference to
Exhibit 1 to the Current Report on Form 8-K of the Company
dated December 31, 1998 (the "Cvalim 8-K")).
26
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
2(j) Amendment No. 1 to Asset Purchase Agreement, dated
December 31, 1998, among Cables of Zion United Works Ltd.,
Cvalim--The Electric Wire and Cable Company of Israel Ltd.
and Dash Cable Industries (Israel) Ltd. (incorporated herein
by reference to Exhibit 2 to the Cvalim 8-K).
3(a) Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.2 to the Registration
Statement on Form S-1 (Registration No. 333-09933) of the
Company, as filed with the Commission on August 9, 1996, as
amended (the "S-1")).
3(b) Certificate of Amendment, dated July 12, 1996, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.2 to the S-1).
3(c) Certificate of Amendment, dated August 6, 1996, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.3 to S-1).
3(d) Certificate of Amendment, dated March 31, 1999, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 4.4 to the Registration
Statement on Form S-3 (Registration No. 333-68889) of the
Company, as filed with the Commission on August 17, 1999
(the "S-3")).
3(e) By-laws of the Company (incorporated herein by reference to
Exhibit 3.4 to the S-1).
3(f)* Amendment to the By-Laws of the Company.
4(a) Amended and Restated Declaration of Trust of Superior Trust
I, dated as of March 31, 1999, among the Company, American
Stock Transfer & Trust Company, as Property Trustee,
Wilmington Trust Company, as Delaware Trustee, and the
Administrative Trustees named therein (incorporated herein
by reference to Exhibit 4.6 to the S-3).
4(b) Indenture for the 8 1/2% Convertible Subordinated Debentures
of the Company Due 2014, dated as of March 31, 1999, between
the Company and American Stock Transfer & Trust Company, as
Indenture Trustee (incorporated herein by reference to
Exhibit 4.7 to the S-3).
4(c) Guarantee Agreement for the 8 1/2% Trust Convertible
Preferred Securities of Superior Trust I, dated as of
March 31, 1999, between the Company and American Stock
Transfer & Trust Company, as Guarantee Trustee (incorporated
herein by reference to Exhibit 4.8 to the S-e).
4(d) Rights Agreement, dated as of December 28, 2000, between the
Company and American Stock Transfer & Trust Company, as
Rights Agent (incorporated herein by reference to
Exhibit 4.1 to the Form 8-A of the Company, as filed with
the Commission on January 9, 2001).
10(a) Amended and Restated Superior TeleCom Inc. 1996 Stock Option
Plan (incorporated herein by reference to Appendix D to the
Joint Proxy Statement/Prospectus filed as part of the S-4).
10(b) Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.1 to the S-1).
10(c) Lease Agreement, dated as of December 16, 1993, by and
between ALP(TX) QRS 11-28, Inc. and Superior TeleTec
Transmission Products, Inc. (incorporated herein by
reference to Exhibit (i) to the Quarterly Report on
Form 10-Q of Alpine for the quarter ended January 31, 1994).
10(d) First Amendment to Lease Agreement, dated as of May 10,
1995, by and between ALP (TX) QRS 11-28, Inc. and Superior
TeleTec Inc. (incorporated herein by reference to
Exhibit 10(o) to the Annual Report on Form 10-K of the
Alpine for the year ended April 30, 1995 (the "1995 Alpine
10-K")).
10(e) Second Amendment to Lease Agreement, dated as of July 21,
1995, by and between ALP (TX) QRS 11-28, Inc. and Superior
Telecommunications Inc. (incorporated herein by reference to
Exhibit 10(x) to the 1995 Alpine 10-K).
10(f) Third Amendment to Lease Agreement, dated as of October 2,
1996, by and between ALP (TX) QRS 11-28, Inc. and Superior
Telecommunications Inc. (incorporated herein by reference to
Exhibit 10.8 to the S-1).
27
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10(g) First Amendment to Guaranty and Surety Agreement, dated as
of October 2, 1996, among the Company, Alpine and ALP (TX)
QRS 11-28, Inc. (incorporated herein by reference to
Exhibit 10.12 to the S-1).
10(h) Employment Agreement, dated April 26, 1996, between Superior
Telecommunications Inc. and Justin F. Deedy, Jr.
(incorporated herein by reference to Exhibit 10.3 to the
S-1).
10(i) Employment Agreement, dated as of October 17, 1996, between
the Company and Steven S. Elbaum (incorporated herein by
reference to Exhibit 10(14) to the Quarterly Report on
Form 10-Q of the Company for the quarter ended January 31,
1997).
10(j) Letter Agreement, dated October 8, 1996, between the Company
and Alpine relating to a capital contribution by Alpine to
the Company (incorporated herein by reference to
Exhibit 10.2 to the S-1).
10(k) Letter Agreement, dated October 2, 1996, between the Company
and Alpine relating to tax indemnification (incorporated
herein by reference to Exhibit 10.5 to the S-1).
10(l) Tax Allocation Agreement, dated as of October 2, 1996, among
Alpine, the Company and its subsidiaries (incorporated
herein by reference to Exhibit 10.9 to the S-1).
10(m) Exchange Agreement, dated October 2, 1996, between the
Company and Alpine (incorporated herein by reference to
Exhibit 10.10 to the S-1).
10(n) Registration Rights Agreement, dated October 2, 1996,
between the Company and Alpine (incorporated herein by
reference to Exhibit 10.11 to the S-1).
10(o) Services Agreement, dated October 2, 1996, between the
Company and Alpine (incorporated herein by reference to
Exhibit 10.4 to the S-1).
10(p) Amendment No. 1, dated as of May 1, 1997, to the Services
Agreement (incorporated herein by reference to
Exhibit 10(t) to the Annual Report on Form 10-K of the
Company for the year ended April 30, 1997).
10(q) Amendment No. 2, dated as of May 1, 1998, to the Services
Agreement (incorporated herein by reference to
Exhibit 10(w) to the Annual Report on Form 10-K of the
Company for the year ended April 30, 1998).
10(r) Amended and Restated Credit Agreement, dated as of
November 27, 1998 (the "Credit Agreement"), among
Superior/Essex Corp., Essex Group, Inc., the guarantors
named therein, various lenders, Merrill Lynch & Co., as
documentation agent, Fleet National Bank, as syndication
agent, and Bankers Trust Company, as administrative agent
(incorporated herein by reference to Exhibit 99.7 to the
Schedule 13D/A of Alpine, the Company, Superior/Essex Corp.
and SUT Acquisition Corp., as filed with the Commission on
December 7, 1998).
10(s) Senior Subordinated Credit Agreement, dated as of May 26,
1999 (the "Senior Subordinated Credit Agreement"), among
Superior/Essex Corp., as borrower, the Company, as parent,
the subsidiary guarantors named therein, various lenders,
Fleet Corporate Finance, Inc., as syndication agent, and
Bankers Trust Company, as administrative agent (incorporated
herein by reference to Exhibit 10(s) to the Annual Report on
Form 10-K of the Company for the year ended December 31,
1999 (the "1999 10-K").
10(t) Addendum No. 1 to the Application to Open an Account, dated
December 29, 1998, between Cables of Zion United Works Ltd.
and Bank Hapoalim B.M. (incorporated herein by reference to
Exhibit 3 to the Cvalim 8-K).
10(u) Superior TeleCom Inc. Stock Compensation Plan for
Non-Employee Directors (Amended and Restated effective as of
May 1, 2000) (incorporated herein by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of the
Company for the quarter ended June 30, 2000).
10(v) Amendment No. 1, dated as of December 10, 1999, to the
Senior Subordinated Credit Agreement (incorporated herein by
reference to Exhibit 10(v) to the 1999 10-K).
10(w) Amendment No. 2, dated as of February 18, 2000, to the
Senior Subordinated Credit Agreement (incorporated herein by
reference to Exhibit 10(w) to the 1999 10-K).
28
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10(x) Fourth Amendment to Lease Agreement, dated as of
November 27, 1998, between ALP (TX) QRS 11-28, Inc. and
Superior Telecommunications Inc. (incorporated herein by
reference to Exhibit 10(x) to the 1999 10-K).
10(y) Second Amendment to Guaranty and Suretyship Agreement, dated
as of November 27, 1998, among ALP (TX) QRS 11-28, Inc.,
the Company and Alpine (incorporated herein by reference to
Exhibit 10(y) to the 1999 10-K).
10(z) Amendment No. 3, dated as of May 1, 1999, to the Services
Agreement (incorporated herein by reference to Exhibit 10.3
to the Quarterly Report on Form 10-Q of the Company for the
quarter ended September 30, 2000 (the "September 2000
10-Q").
10(aa)* Amendment No. 1, dated as of December 31, 1998, to the
Credit Agreement.
10(bb)* Amendment No. 2 and Waiver, dated as of December 10, 1999,
to the Credit Agreement.
10(cc) Amendment No. 3 and Waiver, dated as of March 13, 2000, to
the Credit Agreement (incorporated herein by reference to
Exhibit 10.1 to the September 2000 10-Q).
10(dd) Amendment No. 4 and Waiver, dated as of September 30, 2000,
to the Credit Agreement (incorporated herein by reference to
Exhibit 10.2 to the September 2000 10-Q).
10(ee)* Amendment No. 3, dated as of March 30, 2000, to the Senior
Subordinated Credit Agreement.
10(ff)* Amendment No. 4, dated as of April 20, 2000, to the Senior
Subordinated Credit Agreement.
10(gg)* Amendment No. 5, dated as of June 5, 2000, to the Senior
Subordinated Credit Agreement.
10(hh)* Superior TeleCom Inc. Deferred Stock Account Plan.
10(ii)* Superior TeleCom Inc. Deferred Cash Account Plan.
10(jj)* Amendment No. 1 to the Superior TeleCom Inc. Stock
Compensation Plan for Non-Employee Directors.
18* Letter regarding change in accounting principles.
21 * List of Subsidiaries
23(a)* Consent of Arthur Andersen LLP
* Filed herewith.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 2, 2001
SUPERIOR TELECOM INC.
By: /s/ STEVEN S. ELBAUM
-----------------------------------------
Steven S. Elbaum
CHAIRMAN OF THE BOARD 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.
NAME TITLE DATE
---- ----- ----
/s/ STEVEN S. ELBAUM Chairman of the Board and Chief
------------------------------------------- Executive Officer (principal April 2, 2001
Steven S. Elbaum executive officer)
/s/ DAVID S. ALDRIDGE Chief Financial Officer and
------------------------------------------- Treasurer (principal financial April 2, 2001
David S. Aldridge and accounting officer)
/s/ EUGENE P. CONNELL
------------------------------------------- Director April 2, 2001
Eugene P. Connell
/s/ ROBERT J. LEVENSON
------------------------------------------- Director April 2, 2001
Robert J. Levenson
/s/ CHARLES Y.C. TSE
------------------------------------------- Director April 2, 2001
Charles Y.C. Tse
/s/ BRAGI F. SCHUT
------------------------------------------- Director April 2, 2001
Bragi F. Schut
30
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of independent public accountants.................... F-2
Consolidated balance sheets as of December 31, 2000 and
1999...................................................... F-3
Consolidated statements of operations for the years ended
December 31, 2000 and 1999, the eight months ended
December 31, 1998, and the year ended April 30, 1998...... F-4
Consolidated statements of stockholders' equity for the
years ended December 31, 2000 and 1999, the eight months
ended December 31, 1998, and the year ended April 30,
1998...................................................... F-5
Consolidated statements of cash flows for the years ended
December 31, 2000 and 1999, the eight months ended
December 31, 1998, and the year ended April 30, 1998...... F-6
Notes to consolidated financial statements.................. F-8
SCHEDULE:
Report of independent public accountants.................... F-35
Schedule II-Valuation and qualifying accounts............... F-36
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Superior TeleCom Inc.:
We have audited the accompanying consolidated balance sheets of Superior TeleCom Inc. (a Delaware corporation) and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended December 31, 2000 and 1999, the eight months ended December 31, 1998, and the year
ended April 30, 1998. 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 auditing standards generally accepted in the United States. 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 Superior
TeleCom Inc. and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for
the years ended December 31, 2000 and 1999, the eight months ended December 31, 1998, and the year ended April 30,
1998, in conformity with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Atlanta, Georgia
February 13, 2001
F-2
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 13,002 $ 14,305
Accounts receivable, net.................................. 280,411 261,263
Inventories............................................... 261,859 313,571
Other current assets...................................... 41,385 38,325
---------- ----------
Total current assets.................................... 596,657 627,464
Property, plant and equipment, net.......................... 539,065 513,914
Other assets................................................ 83,873 65,586
Goodwill, net............................................... 772,074 793,390
---------- ----------
Total assets............................................ $1,991,669 $2,000,354
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $ 160,000 $ 140,369
Superior Israel revolving credit facility................. 25,406 --
Current portion of long-term debt......................... 91,401 85,831
Accounts payable.......................................... 143,927 147,290
Accrued expenses.......................................... 99,760 92,425
---------- ----------
Total current liabilities............................... 520,494 465,915
Long-term debt, less current portion........................ 1,107,557 1,170,143
Minority interest in subsidiaries........................... 8,429 13,205
Other long-term liabilities................................. 110,245 104,124
---------- ----------
Total liabilities....................................... 1,746,725 1,753,387
---------- ----------
Company-obligated Mandatorily Redeemable Trust Convertible
Preferred Securities of Superior Trust I holding solely
convertible debentures of the Company, net of discount.... 134,941 133,959
Commitments and contingencies
Stockholders' equity:
Common stock (21,133,361 and 20,980,101, shares issued at
December 31, 2000 and 1999, respectively)............... 211 210
Capital in excess of par value............................ 40,937 38,765
Accumulated other comprehensive deficit................... (8,485) (5,447)
Retained earnings......................................... 96,483 98,623
---------- ----------
129,146 132,151
Treasury stock, at cost (828,300 shares at December 31,
2000 and 1999).......................................... (19,143) (19,143)
---------- ----------
Total stockholders' equity.............................. 110,003 113,008
---------- ----------
Total liabilities and stockholders' equity............ $1,991,669 $2,000,354
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(NOTE 1)
Net sales.................................... $2,049,048 $2,036,732 $488,279 $518,459
Cost of goods sold........................... 1,708,920 1,652,839 385,284 419,218
---------- ---------- -------- --------
Gross profit............................... 340,128 383,893 102,995 99,241
Selling, general and administrative
expenses................................... 156,437 150,833 32,333 22,181
Infrequent and unusual charges............... 14,961 8,431 13,511 --
Amortization of goodwill..................... 20,959 19,629 2,447 1,715
---------- ---------- -------- --------
Operating income........................... 147,771 205,000 54,704 75,345
Interest expense............................. (129,905) (120,100) (16,651) (8,090)
Other income (expense), net.................. 976 2,503 (346) 206
---------- ---------- -------- --------
Income before income taxes, distributions
on preferred securities of Superior Trust
I, minority interest and extraordinary
(loss)................................... 18,842 87,403 37,707 67,461
Provision for income taxes................... (10,925) (36,733) (15,544) (26,786)
---------- ---------- -------- --------
Income before distributions on preferred
securities of Superior Trust I, minority
interest and extraordinary (loss)........ 7,917 50,670 22,163 40,675
Distributions on preferred securities of
Superior Trust I........................... (15,145) (11,289) -- --
---------- ---------- -------- --------
Income (loss) before minority interest and
extraordinary (loss)..................... (7,228) 39,381 22,163 40,675
Minority interest in (earnings) losses of
subsidiaries............................... 5,088 (596) 93 --
---------- ---------- -------- --------
Income (loss) before extraordinary
(loss)................................... (2,140) 38,785 22,256 40,675
Extraordinary (loss) on early extinguishment
of debt, net............................... -- (1,617) (1,243) --
---------- ---------- -------- --------
Net income (loss).......................... $ (2,140) $ 37,168 $ 21,013 $ 40,675
========== ========== ======== ========
Net income per share of common stock:
Basic:
Income (loss) before extraordinary
(loss)................................. $ (0.11) $ 1.91 $ 1.07 $ 1.95
Extraordinary (loss) on early
extinguishment of debt................. -- (0.08) (0.06) --
---------- ---------- -------- --------
Net income (loss) per basic share of
common stock........................... $ (0.11) $ 1.83 $ 1.01 $ 1.95
========== ========== ======== ========
Diluted:
Income (loss) before extraordinary
(loss)................................. $ (0.11) $ 1.86 $ 1.04 $ 1.91
Extraordinary (loss) on early
extinguishment of debt................. -- (0.08) (0.06) --
---------- ---------- -------- --------
Net income (loss) per diluted share of
common stock........................... $ (0.11) $ 1.78 $ 0.98 $ 1.91
========== ========== ======== ========
Weighted average shares outstanding:
Basic.................................... 20,238 20,351 20,735 20,811
========== ========== ======== ========
Diluted.................................. 20,238 20,908 21,348 21,303
========== ========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
YEARS ENDED
--------------------------------------------- EIGHT MONTHS
DECEMBER 31, DECEMBER 31, ENDED YEAR ENDED
2000 1999 DECEMBER 31, 1998 APRIL 30, 1998
--------------------- --------------------- --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- -------- ---------- -------- ---------- -------- ---------- --------
Common stock:
Balance at beginning of
period........................ 20,980,101 $ 210 20,287,274 $ 203 16,170,666 $ 162 12,926,536 $ 129
Exercise of stock options....... -- -- 18,101 -- 52,163 -- 3,162 --
Employee stock purchase plan.... 153,260 1 63,655 1 4,745 -- 7,333 1
Partial stock split............. -- -- -- -- 4,059,700 41 3,233,635 32
Stock dividend.................. -- -- 611,071 6 -- -- -- --
---------- -------- ---------- -------- ---------- ------- ---------- -------
Balance at end of period...... 21,133,361 211 20,980,101 210 20,287,274 203 16,170,666 162
Capital in excess of par value:
Balance at beginning of
period........................ 38,765 28,332 27,528 27,340
Exercise of stock options....... 270 905 680 46
Employee stock purchase plan.... 1,304 889 165 174
Compensation expense related to
stock grants.................. 598 -- -- --
Partial stock split............. -- -- (41) (32)
Stock dividend.................. -- 8,639 -- --
-------- -------- ------- -------
Balance at end of period...... 40,937 38,765 28,332 27,528
Accumulated other comprehensive
deficit:
Balance at beginning of
period........................ (5,447) (6,081) (1,528) (831)
Foreign currency translation
adjustment.................... (3,093) 1,500 (4,553) (697)
Additional minimum pension
liability..................... 55 (866) -- --
-------- -------- ------- -------
Balance at end of period...... (8,485) (5,447) (6,081) (1,528)
Retained earnings:
Balance at beginning of
period........................ 98,623 75,043 56,044 17,390
Net income (loss)............... (2,140) 37,168 21,013 40,675
Cash dividends declared......... -- (4,943) (2,014) (2,021)
Stock dividend.................. -- (8,645) -- --
-------- -------- ------- -------
Balance at end of period...... 96,483 98,623 75,043 56,044
Treasury stock:
Balance at beginning of
period........................ (828,300) (19,143) (210,875) (6,117) -- -- -- --
Purchase of treasury stock...... -- -- (593,300) (13,026) (168,700) (6,117) -- --
Partial stock split............. -- -- -- -- (42,175) -- -- --
Stock dividend.................. -- -- (24,125) -- -- -- -- --
---------- -------- ---------- -------- ---------- ------- ---------- -------
Balance at end of period...... (828,300) (19,143) (828,300) (19,143) (210,875) (6,117) -- --
Total stockholders' equity........ 20,305,061 $110,003 20,151,801 $113,008 20,076,399 $91,380 16,170,666 $82,206
========== ======== ========== ======== ========== ======= ========== =======
Comprehensive income (loss)....... $ (5,178) $ 37,802 $16,460 $39,978
======== ======== ======= =======
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(NOTE 1)
Cash flows from operating activities:
Income (loss) before extraordinary
(loss)................................... $ (2,140) $ 38,785 $ 22,256 $40,675
Adjustments to reconcile income (loss)
before extraordinary (loss) to cash
provided by operating activities:
Depreciation and amortization.............. 62,931 58,813 11,926 10,045
Amortization of deferred financing costs... 5,621 4,805 1,046 1,059
Provision (benefit) for deferred taxes..... 7,022 12,536 174 (545)
Minority interest in earnings (losses) of
subsidiary............................... (5,088) 596 (93) --
Change in assets and liabilities, net of
effects from companies acquired:
Accounts receivable...................... (18,575) (37,505) 18,655 1,971
Inventories.............................. 52,097 26,751 (19,615) 12,998
Other current and noncurrent assets...... 1,544 14,834 638 (213)
Accounts payable and accrued expenses.... 6,400 (3,153) (20,538) 4,756
Other, net............................... (3,938) (178) 698 (1,158)
-------- -------- ---------- -------
Cash flows provided by operating
activities................................... 105,874 116,284 15,147 69,588
-------- -------- ---------- -------
Cash flows from investing activities:
Acquisitions, net of cash acquired......... -- (10,842) (1,104,679) --
Capital expenditures....................... (78,339) (72,237) (28,014) (18,488)
Net proceeds from sale of assets........... 10,195 14,197 1,751 5,113
Superior Israel customer loans............. (23,989) (28,708) (4,953) --
Other...................................... 1,450 (53) -- --
-------- -------- ---------- -------
Cash flows used for investing activities..... (90,683) (97,643) (1,135,895) (13,375)
-------- -------- ---------- -------
Cash flows from financing activities:
Short-term borrowings (repayments), net.... 19,631 20,260 (12,895) --
Borrowings (repayments) under revolving
credit facilities, net................... 13,912 12,596 8,899 (42,307)
Debt issuance costs........................ (4,597) (6,294) (31,026) --
Long-term borrowings....................... 61,232 279,348 1,171,153 --
Repayments of long-term borrowings......... (107,059) (310,342) (1,044) (3,963)
Dividends paid on common stock............. -- (4,943) (2,014) (1,011)
Purchase of treasury stock................. -- (13,026) (6,117) --
Other...................................... 387 1,955 36 (118)
-------- -------- ---------- -------
Cash flows provided by (used for) financing
activities................................... (16,494) (20,446) 1,126,992 (47,399)
-------- -------- ---------- -------
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
YEARS ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(NOTE 1)
Net increase (decrease) in cash and cash
equivalents................................ $ (1,303) $ (1,805) $ 6,244 $ 8,814
Cash and cash equivalents at beginning of
period..................................... 14,305 16,110 9,866 1,052
-------- -------- ---------- -------
Cash and cash equivalents at end of period... $ 13,002 $ 14,305 $ 16,110 $ 9,866
======== ======== ========== =======
Supplemental disclosures:
Cash paid for interest, net of amount
capitalized.............................. $117,141 $109,963 $ 11,702 $ 7,402
======== ======== ========== =======
Cash paid for income taxes, net of
refunds.................................. $ 7,371 $ 3,818 $ 27,396 $29,440
======== ======== ========== =======
Acquisition of businesses:
Assets, net of cash acquired............. $1,599,305
Liabilities assumed...................... (428,097)
Minority interest in subsidiaries........ (66,529)
----------
Net cash paid............................ $1,104,679
==========
Acquisition of Essex minority interest:
Net assets acquired including goodwill... $ 83,044
Minority interest in subsidiary.......... 50,246
--------
Issuance of Company-obligated Mandatorily
Redeemable Trust Convertible Preferred
Securities of Superior Trust I holding
solely convertible debentures (net of
discount of $33.3 million)............. $133,290
========
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
DESCRIPTION OF BUSINESS
Superior TeleCom Inc. (together with its subsidiaries, unless the context otherwise requires, the "Company" or "Superior")
manufactures wire and cable products for the communications, original equipment manufacturer ("OEM"), and electrical
markets. The Company is a manufacturer and supplier of communications wire and cable products; magnet wire and insulation
materials for motors, transformers and electrical controls, and building and industrial wire for applications in commercial and
residential construction and industrial facilities. The Company operates manufacturing and distribution facilities in the United
States, Canada, the United Kingdom, Israel and Mexico.
ORGANIZATIONAL HISTORY
Superior was incorporated in July 1996 as a wholly owned subsidiary of The Alpine Group, Inc. ("Alpine"). On October 2,
1996, Alpine completed a reorganization (the "Reorganization") whereby 100% of the common stock of two of Alpine's
subsidiaries, Superior Telecommunications Inc. ("STI") and DNE Systems, Inc., were contributed to the Company in exchange
for 100% of the shares of the Company's then outstanding common stock. In October 1996, the Company sold 9.4 million
shares of its common stock through an initial public offering (the "Offering"). As a result of the Offering, Alpine's ownership
interest was reduced to 50.1%. As a result of treasury stock purchases and other transactions following the Offering, Alpine's
ownership interest was approximately 51.5% at December 31, 2000.
On November 27, 1998, the Company completed a cash tender offer for 81% of the outstanding common shares of Essex
International Inc. ("Essex"). On March 31, 1999, the Company acquired the remaining 19% of the Essex common stock
through the issuance of 8 1/2% trust convertible preferred securities of Superior Trust I, a Delaware trust in which Superior
owns all the common equity interests (see Note 5).
CHANGE IN YEAR END
On December 15, 1998, the Company elected to change its year end to December 31 from April 30. This change was made
effective December 31, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements present the consolidated balance sheets of the Company at December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2000
and 1999, for the eight months ended December 31, 1998, and for the year ended April 30, 1998 ("fiscal 1998"). All
significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity at acquisition of 90 days or less are considered to be cash equivalents.
F-8
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES
Inventories of communications products are stated at the lower of cost or market, using the first-in, first-out ("FIFO") cost
method. Inventories of OEM and electrical products are primarily stated at the lower of cost or market, using the last-in,
first-out ("LIFO") cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Leasehold improvements are
amortized over the lesser of the estimated useful lives of the assets or the lease term. Depreciation and amortization are
provided over the estimated useful lives of the assets using the straight-line method. The estimated lives are as follows:
Building and improvements................................... 10 to 40 years
Machinery and equipment..................................... 3 to 15 years
Maintenance and repairs are charged to expense as incurred. Long-term improvements are capitalized as additions to property,
plant and equipment. Upon retirement or other disposal, the asset cost and related accumulated depreciation are removed from
the accounts and the net amount, less any proceeds, is charged or credited to income. Interest is capitalized during the active
construction period of major capital projects. During 2000 and 1999, $5.0 million and $2.0 million, respectively, was
capitalized in connection with various capital projects.
GOODWILL
The excess of the purchase price over the net identifiable assets of businesses acquired is amortized ratably over periods not
exceeding 40 years. Accumulated amortization of goodwill at December 31, 2000 and 1999, was $49.6 million, and $28.6
million, respectively. The Company periodically reviews goodwill to assess recoverability from future operations using
undiscounted cash flows. If the carrying amount exceeds undiscounted cash flows, an impairment loss would be recognized for
the difference between the carrying amount and its estimated fair value.
DEFERRED FINANCING COSTS
Origination costs incurred in connection with outstanding debt financings are included in the balance sheet in other assets. These
deferred financing costs are being amortized over the lives of the applicable debt instruments on a straight-line basis and are
charged to operations as additional interest expense.
AMOUNTS DUE CUSTOMERS
Included in accrued expenses at December 31, 2000 and 1999, are certain amounts due customers totaling $14.6 million and
$12.8 million, respectively, representing cash discount liabilities to customers who meet certain contractual sales volume criteria.
Such discounts are paid periodically to those qualifying customers.
F-9
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION
Revenue is recognized when the following criteria are met: pervasive evidence of an agreement exists, delivery has occurred,
the Company's price to the buyer is fixed and determinable, and collectability is reasonably assured.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of foreign subsidiaries are measured using local currency as the functional
currency. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at
fiscal year-end. The resulting translation gains and losses are charged directly to accumulated other comprehensive income, a
component of stockholders' equity, and are not included in net income until realized through sale or liquidation of the
investment. Revenues and expenses are translated at average exchange rates prevailing during the fiscal year. Foreign currency
exchange gains and losses incurred on foreign currency transactions are included in income as they occur.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Research and development costs during the years ended
December 31, 2000 and 1999, the eight months ended December 31, 1998 and fiscal 1998 amounted to $7.2 million, $6.6
million, $2.7 million and $3.0 million, respectively.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common
stock outstanding for the period. Diluted earnings per common share is determined assuming the conversion of outstanding
stock options and grants under the treasury stock method.
COMPREHENSIVE INCOME
Comprehensive income includes all changes in equity from non-owner sources such as net income, foreign currency translation
adjustments and minimum pension liability adjustments.
CONCENTRATION OF CREDIT RISK AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
During both the eight months ended December 31, 1998 and fiscal 1998, sales to the regional Bell operating companies and
major independent telephone companies represented 88% of STI's North American net sales. At December 31, 2000 and
1999, accounts receivable from these customers amounted to $27.2 million and $25.6 million, respectively.
Accounts receivable includes allowances for doubtful accounts of $5.0 million and $3.2 million at December 31, 2000 and
1999, respectively.
F-10
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES
The Company's consolidated financial statements are prepared in accordance with generally accepted accounting principles,
which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 1999 and 1998 and fiscal 1998, consolidated financial
statements to conform with the December 31, 2000 presentation.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133-an amendment of FASB Statement No. 133"
which delayed SFAS No. 133's effective date for one year. In June 2000, the FASB issued SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities-an amendment of FASB Statement No. 133" which amends
certain paragraphs of SFAS No. 133. SFAS No. 133 as amended, which is effective for the Company beginning January 1,
2001, establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as
either assets or liabilities in the statements of financial position and measurement of those instruments at fair value. The
Company has evaluated the effect of these statements on its derivative instruments, which are primarily commodity futures,
foreign currency forward contracts and interest rate swaps. The cumulative effect of the change in accounting for derivative
instruments recorded on January 1, 2001 was not material.
In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-10--ACCOUNTING
FOR SHIPPING AND HANDLING FEES AND COSTS. The EITF consensus establishes guidance on the income
statement classification of amounts charged to customers for shipping and handling, as well as for costs incurred related to
shipping and handling. The EITF concluded that amounts billed to a customer in a sale transaction related to shipping and
handling should be classified as revenue. The EITF consensus also requires an entity to disclose the amount of shipping and
handling costs and the line item on the income statement which includes such costs if the costs are not included in cost of sales
and are significant. The Company implemented EITF 00-10 in the fourth quarter of 2000. Prior to implementing EITF 00-10,
shipping and handling costs billed to a customer were netted against shipping and handling costs recorded in cost of goods sold.
Shipping and handling revenues that were reclassified from cost of sales to net sales were $10.8 million, $9.2 million, $2.2
million and $1.9 million for the years ended December 31, 2000 and 1999, the eight months ended December 31, 1998 and
fiscal 1998.
In December 1999, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin No. 101 REVENUE
RECOGNITION IN FINANCIAL STATEMENTS ("SAB 101") which provides the SEC's views regarding revenue
recognition in financial statements, including income statement presentation and disclosure. SAB 101 clarifies that revenue
generally is realized or realizable when pervasive evidence of an arrangement exists, delivery has occurred or services have
been rendered, the seller's
F-11
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) price to the buyer is fixed or
determinable and collectibility is reasonably assured. The SEC subsequently released SAB 101B deferring implementation of
SAB 101 to the fourth quarter of 2000. The Company is in compliance with the provisions of SAB 101 and this bulletin had no
effect on the results of operations or financial position of the Company.
3. INVENTORIES
At December 31, 2000 and 1999, the components of inventories are as follows:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS)
Raw materials....................................... $ 45,793 $ 50,618
Work in process..................................... 42,006 42,150
Finished goods...................................... 190,782 233,142
-------- --------
278,581 325,910
LIFO reserve........................................ (16,722) (12,339)
-------- --------
$261,859 $313,571
======== ========
During the year ended December 31, 1999, the Company changed its method of determining the cost of inventories for the
acquired communications segment of Essex from the LIFO method to the FIFO method. This change was made to conform to
consistent operational and accounting policies for the Company's communications segment. Utilization of the FIFO method of
accounting for the year ended December 31, 1999 resulted in net income being $0.6 million or $0.03 per diluted share greater
than net income under the LIFO method.
Inventories valued using the LIFO method amounted to $133.6 million and $167.3 million at December 31, 2000 and 1999,
respectively. During the year ended December 31, 2000, inventory quantities were reduced which resulted in a LIFO layer
liquidation. The impact of the liquidation reduced net loss by $1.6 million.
4. PROPERTY, PLANT AND EQUIPMENT
At December 31, 2000 and 1999, property, plant and equipment consists of the following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS)
Land................................................ $ 23,652 $ 25,230
Buildings and improvements.......................... 148,540 122,810
Machinery and equipment............................. 483,459 443,062
-------- --------
655,651 591,102
Less accumulated depreciation....................... 116,586 77,188
-------- --------
$539,065 $513,914
======== ========
F-12
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Depreciation expense for the years ended December 31,
2000 and 1999, the eight months ended December 31, 1998 and fiscal 1998, was $41.0 million, $38.5 million, $9.5 million
and $8.3 million, respectively.
5. ACQUISITIONS
ESSEX ACQUISITION
On November 27, 1998, the Company completed a cash tender offer for 81% of the outstanding common shares of Essex, at
an aggregate cash tender value of $770 million (the "Essex Acquisition"). On March 31, 1999, the Company acquired the
remaining outstanding common stock of Essex through the issuance of approximately $167 million (face amount) of 8 1/2%
Company-obligated Manditorily Redeemable Trust Convertible Preferred Securities of Superior Trust I holding solely
convertible debentures (see Note 9).
The acquisition of Essex was accounted for using the purchase method and, accordingly, the results of operations of Essex have
been included in the consolidated financial statements on a prospective basis from the dates of acquisition. The purchase price
was allocated based upon assessments of the fair values of assets and liabilities at the dates of acquisition which included
accruals for planned consolidations, overhead rationalization and loss contingencies. The excess of the purchase price over the
net assets acquired is being amortized on a straight-line basis over 40 years.
CABLES OF ZION AND CVALIM ACQUISITIONS
On May 5, 1998, the Company acquired 51% of the common stock of Cables of Zion United Works Ltd. ("Cables of Zion"),
an Israel-based cable and wire manufacturer whose common stock is traded on the Tel Aviv Stock Exchange, for
approximately $25 million in cash.
On December 31, 1998, Cables of Zion acquired the business and certain operating assets of Cvalim-The Electric Wire and
Cable Company of Israel Ltd. ("Cvalim") for an adjusted purchase price of $41.2 million in cash. Following the Cvalim
acquisition, Cables of Zion changed its name to Superior Cables Limited ("Superior Israel").
On October 20, 1999, Superior Israel acquired the business and certain operating assets of Pica Plast Limited for $10.8 million
in cash.
The acquisitions of Cables of Zion, Cvalim and Pica Plast were accounted for using the purchase method and, accordingly, the
results of operations of Cables of Zion, Cvalim and Pica Plast are included in the Company's consolidated financial statements
on a prospective basis from the date of their respective acquisition. The purchase price was allocated based upon the estimated
fair values of assets and liabilities at the date of acquisition. The excess of the purchase price over the net assets acquired is
being amortized on a straight-line basis over 30 years.
PRO FORMA FINANCIAL DATA (UNAUDITED)
Unaudited condensed pro forma results of operations for the year ended December 31, 1999, the eight months ended
December 31, 1998 and the year ended April 30, 1998, which give effect to the acquisition of Essex and the acquisition of
Cables of Zion as if the transactions had occurred on May 1, 1997, are presented below. The pro forma results of operations
do not include the results of operations
F-13
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS (CONTINUED) of Cvalim or Pica Plast prior to their dates of acquisition as they are not material to the
Company's consolidated results of operations. The pro forma amounts reflect acquisition-related purchase accounting
adjustments, including adjustments to depreciation and amortization expense and interest expense on acquisition debt and
certain other adjustments, together with related income tax effects. The pro forma financial information does not purport to be
indicative of either the results of operations that would have occurred if the transactions had taken place at the beginning of the
period presented or of the future results of operations.
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, APRIL 30,
1999 1998 1998
------------ ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales............................... $2,036,732 $1,351,089 $2,277,246
Income before income taxes,
distributions on preferred securities
of subsidiary trust, minority interest
and extraordinary (loss).............. 86,613 30,204 $ 119,521
Income before extraordinary (loss)...... 37,429 6,617 55,129
Extraordinary (loss) on early
extinguishment of debt................ (1,617) (1,243) --
---------- ---------- ----------
Net income applicable to common stock... $ 35,812 $ 5,374 $ 55,129
========== ========== ==========
Net income per diluted share of common
stock:
Income before extraordinary (loss).... $ 1.79 $ 0.31 $ 2.59
Extraordinary (loss) on early
extinguishment of debt.............. (0.08) (0.06) --
---------- ---------- ----------
Net income per diluted share of common
stock............................... $ 1.71 $ 0.25 $ 2.59
========== ========== ==========
6. ACCRUED EXPENSES
At December 31, 2000 and 1999, accrued expenses consist of the following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS)
Accrued wages, salaries and employee benefits....... $23,085 $26,657
Other accrued expenses.............................. 76,675 65,768
------- -------
$99,760 $92,425
======= =======
7. SHORT-TERM BORROWINGS
At December 31, 2000 and 1999, short-term borrowings consist principally of $160.0 million and $140.4 million, respectively,
in borrowings under an accounts receivable securitization program which provides for up to $160.0 million in short-term
financing through the issuance of secured commercial
F-14
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SHORT-TERM BORROWINGS (CONTINUED) paper through a limited purpose subsidiary. Under the receivable
securitization program, the Company has granted a security interest in all its trade accounts receivable of domestic subsidiaries
to secure borrowings under the facility. The receivable securitization program expires on November 30, 2001, although it may
be extended for successive one-year periods subject to agreement. Borrowings under this agreement bear interest at the
lender's commercial paper rate (which approximated 6.88% and 6.37% at December 31, 2000 and 1999) plus 0.35%.
8. DEBT
At December 31, 2000 and 1999, long-term debt consists of the following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS)
Senior revolving credit facility (a)................ $ 71,001 $ 53,735
Term loan A (a)..................................... 374,420 446,433
Term loan B (a)..................................... 408,346 415,542
Senior subordinated notes (a)....................... 200,000 200,000
Cables of Zion credit facility (b).................. 88,522 82,507
Other............................................... 82,075 57,757
---------- ----------
Total debt.......................................... 1,224,364 1,255,974
Less current portion of long-term debt.............. 91,401 85,831
Less Superior Israel revolving credit facility...... 25,406 --
---------- ----------
$1,107,557 $1,170,143
========== ==========
At December 31, 2000, the fair value of the Company's debt, based on the quoted market prices for the same or similar issues
or on the current rates offered to the Company for debt of the same remaining maturities, was approximately $1,124.6 million.
The Company has entered into several interest rate swap and interest rate cap agreements in order to limit the effect of changes
in interest rates on certain of the Company's floating rate long-term obligations. Amounts currently due to or from interest rate
swap counterparties are recorded in interest expense in the period in which they accrue. The Company does not enter into
financial instruments for trading or speculative purposes. The fair market value of the interest rate caps and swaps was $6.4
million at December 31, 1999. At December 31, 2000, the Company had an interest rate cap outstanding with a notional
amount of $400 million with a 90-day LIBOR rate cap at 7.0% and a fair value of zero.
F-15
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. DEBT (CONTINUED) The aggregate principal maturities of long-term debt for the five years subsequent to December 31,
2000 are as follows:
YEAR AMOUNT
---- --------------
(IN THOUSANDS)
2001........................................................ $ 116,807
2002........................................................ 106,777
2003........................................................ 200,917
2004........................................................ 330,840
2005........................................................ 201,835
Thereafter.................................................. 267,188
----------
$1,224,364
==========
(a) In connection with the Essex Acquisition (see Note 5), the Company amended and restated its existing credit facilities. The
amended and restated credit facilities provide for total borrowing availability of up to $1.35 billion, consisting of a $225.0
million revolving credit facility, a $500.0 million term loan A facility, a $425.0 million term loan B facility and $200.0 million in
senior subordinated notes.
The revolving credit facility is available to the Company's principal subsidiaries. Borrowings under the facility are allowable up
to $225 million in the aggregate and mature on May 27, 2004. Interest on the outstanding balance is based upon LIBOR plus
3.25% or the base rate
(prime) plus 2.25%, (10.03% and 9.97% at December 31, 2000 and 1999, respectively), and is payable quarterly.
The term loan A is repayable in varying installments over five and one-half years, with interest payable quarterly based upon
LIBOR plus
3.25% or the base rate (prime) plus 2.25%, (10.06% and 10.5% and at December 31, 2000 and 1999, respectively), and
matures on May 27, 2004.
The term loan B is repayable in varying installments over seven years, with interest payable quarterly based upon LIBOR plus
4.0% or the base rate (prime) plus 3.0% (10.88% and 9.94% at December 31, 2000 and 1999, respectively), and matures on
November 27, 2005.
The senior subordinated notes were due in November 2006. Interest for the initial six months was LIBOR plus 4.25% or base
rate (prime) plus 3.25%. On May 26, 1999, the Company refinanced its $200 million senior subordinated notes. The new
senior subordinated notes include a $120 million term note A and an $80 million term note B, which are due May 26, 2007.
Interest for the term note A for the first 270 days ranges from LIBOR plus 2.5% to LIBOR plus 4.0% and after the nine month
anniversary of the borrowing date through maturity is LIBOR plus 5% (11.81% and 10.19% at December 31, 2000 and
1999). Interest on the term note B for the first 270 days ranges from LIBOR plus 3.625% to LIBOR plus
4.0% and after the nine month anniversary of the borrowing date through maturity is LIBOR plus 5% (11.13% and 10.19% at
December 31, 2000 and 1999).
All the borrowings under the above described credit arrangements are guaranteed by each of the Company's principal domestic
subsidiaries. The common stock of all such domestic subsidiaries of the Company and 65% of the common stock of its foreign
subsidiaries have been pledged to secure the guarantees (other than those guarantees given with respect to the
F-16
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. DEBT (CONTINUED) senior subordinated notes). The obligations under these credit arrangements (other than the senior
subordinated notes) are secured by substantially all of the assets of the Company and its domestic subsidiaries.
(b) In connection with the December 31, 1998 acquisition of the Cvalim assets, Superior Israel entered into an $83.0 million
credit facility consisting of a $53.0 million term loan ("Superior Israel term loan") and a $30.0 million revolving credit facility
("Superior Israel revolving credit facility"). Proceeds from these facilities were used to finance the acquisition of the Cvalim
assets, pay related transaction expenses and provide for ongoing working capital requirements. In October 1999, Superior
Israel increased the amount available under the credit facility by $10.0 million, which increased the term loan availability to
$63.0 million.
The Superior Israel term loan is repayable on December 31, 2008. Interest on the Superior Israel term loan is based upon
LIBOR plus 1.0% or the average of the gross yield to maturity of all the series of fixed rate bonds issued by the State of Israel,
listed on the Tel-Aviv stock exchange and having a remaining maturity of 18-30 months, plus 1.3% or the lending bank's
wholesale rate of interest for credits linked to the Israeli consumer price index plus 0.7%. Interest on the Superior Israel
revolving credit facility outstanding balance is based upon either LIBOR plus 0.4%, the lending bank's prime rate minus 1.1%,
or a rate to be agreed upon by the parties. The Superior Israel credit facility terminates on December 31, 2003. Obligations
under the Superior Israel credit facility are secured by all of the assets of Superior Israel. At December 31, 2000, Superior
Israel was not in compliance with certain financial covenants under the Superior Israel credit facility and has classified the $25.4
million outstanding under this facility as current in the December 31, 2000 balance sheet.
The above credit agreements contain certain restrictive covenants, including, among other things, requirements to maintain
certain financial ratios, limitations on the amount of dividends the Company is allowed to pay on its common stock and
restrictions on additional indebtedness. During 2000, the credit facilities described in (a) above were amended with respect to
certain restrictive covenants relating to maintenance of certain financial ratios.
In connection with the refinancing of the senior subordinated notes, the Company recognized an extraordinary charge on the
early extinguishment of debt of $1.6 million (net of income taxes of $1.0 million), or $0.08 per diluted share, for the year ended
December 31, 1999. In connection with the amendment and restatement of the Company's credit facility, the Company
recognized an extraordinary charge on the early extinguishment of debt of $1.2 million (net of income taxes of $0.8 million), or
$0.06 per diluted share, during the eight months ended December 31, 1998.
9. TRUST CONVERTIBLE PREFERRED SECURITIES
On March 31, 1999, Superior Trust I (the "Trust"), a trust in which the Company owns all the common equity interests, issued
3,332,254 8 1/2% Trust Convertible Preferred Securities ("Trust Convertible Preferred Securities") with a liquidation value of
$50 per share. The sole assets of the Trust are the Company's 8 1/2% Convertible Subordinated Debentures ("Convertible
Debentures") with an aggregate principal amount of $171,765,650, at an interest rate of 8 1/2% per annum and a maturity date
of March 30, 2014. The Company has fully and unconditionally guaranteed the Trust's obligations under the Trust Convertible
Preferred Securities. The Trust Convertible Preferred Securities are currently convertible into common stock of the Company
at the rate of 1.1496 shares of the Company's common
F-17
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. TRUST CONVERTIBLE PREFERRED SECURITIES (CONTINUED) stock for each Trust Convertible Preferred
Security (equivalent to a conversion price of $43.49 per share of common stock). This conversion rate is subject to customary
anti-dilution adjustments. Dividends on the Trust Convertible Preferred Securities are payable quarterly by the Trust. The Trust
Convertible Preferred Securities are subject to mandatory redemption on March 30, 2014, at a redemption price of $50 per
Trust Convertible Security, plus accrued and unpaid dividends.
The Trust Convertible Preferred Securities are not redeemable before April 1, 2003. At any time on and after that date, the
Trust Convertible Preferred Securities may be redeemed by the Company at a per share redemption price of $52.55,
periodically declining to $50.00 in April 2008 and thereafter. In addition, the Company has the option to call the Trust
Convertible Preferred Securities during the one-year period commencing on March 31, 2002, at a per share cash redemption
price of $52.975, plus accrued and unpaid dividends, if any, provided the average closing price of the Company's common
stock, for any 10 consecutive trading days preceding the date of the call, multiplied by the then effective conversion rate, equals
or exceeds $65.00 per share. The Company has reserved 3,830,759 shares of its common stock for possible conversion of
the Trust Convertible Preferred Securities.
The Company may cause the Trust to defer the payment of dividends for successive periods of up to 20 consecutive quarters.
During such periods, accrued dividends on the Trust Convertible Preferred Securities will accrue interest at the rate of 8 1/2%
per annum and the Company may not declare or pay dividends on its common stock. Also during such period, if holders of
Trust Convertible Preferred Securities convert such securities into Company common stock, the holder will not receive any
cash related to the deferred dividends.
The estimated aggregate fair value of the Trust Convertible Preferred Securities, when issued, was approximately $133.3
million based on average per share trading values on the New York Stock Exchange. The resulting discount of $33.3 million is
being amortized using the effective interest method over the term of the Trust Convertible Preferred Securities. At December
31, 2000, the fair value of the Trust Convertible Preferred Securities, based on quoted market price, was approximately $23.3
million.
10. EARNINGS PER SHARE
The computation of basic and diluted earnings per share for the years ended December 31, 2000 and 1999, the eight months
ended December 31, 1998, and the year ended April 30, 1998, is as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------------------- -------------------------------
NET PER SHARE NET PER SHARE
LOSS SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Basic earnings (loss) per common share before
extraordinary (loss)......................... $(2,140) 20,238 $(0.11) $38,785 20,351 $1.91
======= ====== ======= =====
Dilutive impact of stock options and grants.... -- 557
------ ------
Diluted earnings (loss) per common share before
extraordinary (loss)......................... $(2,140) 20,238 $(0.11) $38,785 20,908 $1.86
======= ====== ====== ======= ====== =====
F-18
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EARNINGS PER SHARE (CONTINUED)
EIGHT MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 APRIL 30, 1998
------------------------------- -------------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Basic earnings per common share before
extraordinary (loss)......................... $22,256 20,735 $1.07 $40,675 20,811 $1.95
======= ===== ======= =====
Dilutive impact of stock options and grants.... 613 492
------ ------
Diluted earnings per common share before
extraordinary (loss)......................... $22,256 21,348 $1.04 $40,675 21,303 $1.91
======= ====== ===== ======= ====== =====
As a publicly traded company, Superior Israel has certain stock options outstanding pursuant to stock option plans in existence
prior to the acquisition. At December 31, 2000, the impact of stock options to the Company's earnings per share calculation
was anti-dilutive. The Company has excluded the assumed conversion of the Trust Convertible Preferred Securities from the
earnings per share calculation as the impact would be anti-dilutive.
11. STOCKHOLDERS' EQUITY
The Company has 35,000,000 shares of common stock authorized for issuance, with a $0.01 par value. At December 31,
2000 and 1999, the Company had 21,133,361 and 20,980,101 common shares, respectively, issued and 20,305,061 and
20,151,801 common shares, respectively, outstanding.
On January 25, 2000, the Company declared a 3% stock dividend to stockholders of record on February 3, 2000. As a
result, 612,069 shares were issued on February 11, 2000. On both January 11, 1999 and January 15, 1998, the Company
declared five-for-four common stock splits, which were effected in the form of a 25% stock dividend paid on February 3,
1999 and February 2, 1998, respectively. As a result, 4,059,700 and 3,233,635 shares, respectively, were issued to
stockholders of record on January 20, 1999 and January 23, 1998, respectively. All references to common shares (except
shares authorized and issued) and to per share information in the consolidated financial statements have been adjusted to reflect
the stock splits and stock dividend on a retroactive basis.
The Company declared a $0.25 per common share cash dividend payable quarterly at a rate of $0.0625 per share beginning in
January 1998 and continuing through October 1999. Cash dividends, totaling $4.9 million, $2.0 million and $2.0 million, were
declared during the year ended December 31, 1999, the eight months ended December 31, 1998 and fiscal 1998,
respectively.
In December 2000, the Company adopted a Stockholder Rights Plan (the "Rights Plan"). Under the Rights Plan, a Preferred
Share Purchase Right ("Right") is attached to each share of common stock pursuant to which the holder will, in certain
takeover-related circumstances, become entitled to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a price of $10.88, subject to adjustment, with each share having substantially the rights
and preferences of 100 shares of common stock. The Rights will separate from the common shares after a person or entity or
group of affiliated or associated persons acquire, or commence a tender offer that would result in a person or group acquiring
beneficial ownership of 15% or more of the outstanding common shares. Also, in certain takeover-related circumstances, each
Right (other than those held by an acquiring person) will be exercisable for shares of common stock of the Company and stock
of the
F-19
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED) acquiring person having a market value of twice the exercise price. Once
certain triggering events have occurred to cause the Rights to become exercisable, each Right may be exchanged by the
Company for one share of common stock. The Rights are redeemable at any time, prior to the time that a person becomes an
acquiring person, by the Company before their expiration on December 28, 2010 at a redemption price of $0.01 per Right. At
December 31, 2000, 500,000 shares of Series A Junior Participating Preferred Stock were reserved for issuance under this
Plan.
12. STOCK BASED COMPENSATION PLANS
The Company sponsors the Superior TeleCom Inc. 1996 Stock Option Plan (the "Option Plan") which has 3,170,469 shares
of common stock reserved for issuance. At December 31, 2000, there were 174,597 shares of common stock available for
issuance under the Option Plan. Participation in the Option Plan is limited to employees, directors, and consultants of the
Company, its parent and affiliates thereof. The Option Plan provides for grants of incentive and non-incentive stock options,
which cannot be exercised in the first year or after ten years from the date of grant. In January 2001, subject in certain
circumstances to stockholder approval of amendments to the Option Plan, the Company adopted a stock option restructuring
program under the Option Plan pursuant to which designated employees may elect to cancel certain of their outstanding stock
options in exchange for the grant of replacement stock options or shares of restricted stock, depending upon the number of
stock options held by the employee and non-employee directors of the Company may elect to cancel certain of their
outstanding stock options in exchange for the grant of a replacement stock option. Approximately 2.9 million options are
subject to cancellation and the new options granted will be accounted for on a variable basis.
The Company also sponsors the Superior TeleCom Employee Stock Purchase Plan (the "ESPP") which allows 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 last day of the preceding calendar quarter or on the last day of the current calendar quarter.
There are 402,344 shares of the Company's common stock reserved under the ESPP, of which 153,260 shares, 63,655
shares, 4,745 shares and 7,333 shares were issued to employees during the years ended December 31, 2000 and 1999, the
eight months ended December 31, 1998, and fiscal 1998, respectively.
The Company also adopted the Stock Compensation Plan for Non-Employee Directors (the "Stock Plan") in January, 1999.
Under the Stock Plan, each non-employee director of the Company automatically receives 50% of the annual retainer in either
restricted common stock or non-qualified stock options, as elected by the director. In addition, each non-employee director
may also elect to receive all or a portion of the remaining amount of the annual retainer and any meeting fees in the form of
restricted stock or stock options in lieu of cash payment. Any shares issued pursuant to the Stock Plan will be issued from the
Company's treasury stock.
The Company sponsors unfunded deferred compensation plans whereby certain key management employees are permitted to
defer the receipt of all, or a portion of, their salary or bonus and shares issued upon stock option exercises, as defined by the
plans. The plans also provide for matching contributions of Company common stock on shares deferred upon exercise of stock
options. Shares issued pursuant to the deferred stock component of these plans are held in an irrevocable grantor trust.
Compensation expense related to these plans for the year ended December 31, 2000 was $0.5 million.
F-20
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BASED COMPENSATION PLANS (CONTINUED) The Company continues to account for stock-based
compensation (including options issued under the Option Plan and the ESPP) using the intrinsic value method prescribed by
APB Opinion No. 25, under which no compensation cost for stock options is recognized for stock option awards granted to
employees or directors at an exercise price at or above the common stock's fair market value. Had compensation expense
been determined based on the fair value of the stock option award at the grant date as prescribed by SFAS No. 123, the
Company's net income and basic and diluted net income per share of common stock for the years ended December 31, 2000
and 1999, the eight months ended December 31, 1998, and the year ended April 30, 1998, would approximate the following
pro forma amounts:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------- -------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income (loss)........................................ $(2,140) $(5,513) $37,168 $32,407
Net income (loss) per basic share of common stock........ $ (0.11) $ (0.27) $ 1.83 $ 1.59
Net income (loss) per diluted share of common stock...... $ (0.11) $ (0.27) $ 1.78 $ 1.57
EIGHT MONTHS ENDED YEAR ENDED
DECEMBER 31,1998 APRIL 30, 1998
------------------- -------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income.............................................. $21,013 $18,882 $40,675 $39,030
Net income per basic share of common stock.............. $ 1.01 $ 0.91 $ 1.95 $ 1.88
Net income per diluted share of common stock............ $ 0.98 $ 0.88 $ 1.91 $ 1.83
The effects of applying SFAS No. 123 in the pro forma disclosure are not necessarily indicative of future amounts, since the
estimated fair value of common stock options is amortized to expense over the vesting period and additional options may be
granted in future years. The fair value for these options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions for December 31, 2000, 1999 and 1998 and April 30,
1998, respectively: dividend yield of 2%, 2%, 1% and 1%; expected volatility of 64%, 53%, 43% and 39%; risk-free interest
rate of 5.11%, 6.30%, 4.57%, and 5.53%; and expected life of four years for all periods. The weighted average per share fair
value of options granted at an exercise price equal to the fair market value (using the Black-Scholes option-pricing model)
during December 31, 2000 and 1999, the eight months ended December 31, 1998 and fiscal 1998, was $5.33, $7.99, $11.05
and $7.39, respectively. The weighted average per share fair value of options granted at an exercise price above the fair market
value during the year ended December 31, 1999 was $19.47.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no
vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Since the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
F-21
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BASED COMPENSATION PLANS (CONTINUED)
The following table summarizes stock option activity for the year ended April 30, 1998, the eight months ended December 31,
1998, and the years ended December 31, 1999 and 2000:
SHARES WEIGHTED-AVERAGE
OUTSTANDING EXERCISE PRICE
----------- ----------------
Outstanding at April 30, 1997............................... 1,203,415 $9.98
Exercised................................................. (4,989) 10.00
Canceled.................................................. (42,635) 9.99
Granted................................................... 77,250 20.47
---------
Outstanding at April 30, 1998............................... 1,233,041 10.64
Exercised................................................. (66,462) 10.08
Canceled.................................................. (8,692) 29.51
Granted................................................... 641,339 29.61
---------
Outstanding at December 31, 1998............................ 1,799,226 17.33
Exercised................................................. (18,644) 10.94
Canceled.................................................. (35,295) 30.19
Granted................................................... 1,197,567 17.78
---------
Outstanding at December 31, 1999............................ 2,942,854 17.54
Canceled.................................................. (282,019) 18.91
Granted................................................... 646,692 11.52
---------
Outstanding at December 31, 2000............................ 3,307,527 16.29
=========
Information with respect to stock-based compensation plan stock options outstanding at December 31, 2000, is as follows:
OPTIONS OUTSTANDING
-----------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED- OPTIONS EXERCISABLE
NUMBER REMAINING AVERAGE ----------------------------------------
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE NUMBER EXERCISABLE AT WEIGHTED AVERAGE
PRICES DECEMBER 31, 2000 LIFE (IN YEARS) PRICE DECEMBER 31, 2000 EXERCISE PRICE
-------- ----------------- --------------- --------- --------------------- ----------------
$5.31................. 48,280 9.78 $ 5.31 0 $ --
$9.94-$11.13.......... 1,249,274 6.30 10.01 1,072,723 9.97
$12.25-$17.23......... 1,291,226 8.53 15.78 325,631 16.76
$22.82-$30.78......... 718,747 7.54 28.85 464,472 28.86
--------- ---------
3,307,527 7.49 16.29 1,862,826 15.87
========= =========
13. EMPLOYEE BENEFITS
Superior provides for postretirement employee health care and life insurance benefits for a limited number of its employees.
Superior established a maximum amount it will pay per employee for such benefits; therefore, health care cost trends do not
affect the calculation of the postretirement benefit obligation or its net periodic benefit cost.
F-22
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFITS (CONTINUED) Superior sponsors several defined benefit pension plans and an unfunded
supplemental executive retirement plan (the "SERP"). The SERP provides retirement benefits based on the same formula as in
effect under a certain salaried employees' plan, but only takes into account compensation in excess of amounts that can be
recognized under the salaried employees' plan. The defined benefit pension plans and the SERP generally provide for payment
of benefits, commencing at retirement (between the ages of 55 and 65), based on the employee's length of service and earnings.
Assets of the plans consist principally of cash and cash equivalents, short-term investments, equities and fixed income
instruments.
During the fourth quarter ended December 31, 2000 and effective as of January 1, 2000, the Company changed its method of
amortizing unrecognized actuarial gains and losses in computing annual pension cost for certain plans. Unrecognized actuarial
gains and losses exceeding ten percent of the greater of the projected benefit obligation or the market value of plan assets are
amortized over five years. Under the previous method, all unrecognized gains and losses exceeding the ten percent corridor
were amortized over the average remaining service life of active employees. Amortizing these amounts over five years results in
more timely recognition of significant actuarial gains and losses in annual pension cost. This change resulted in net income for the
year ended December 31, 2000 being $1.0 million or $0.05 per diluted share greater than net income under the previous
method. The impact related to prior quarters of the year was not material.
The change in the projected benefit obligation, the change in plan assets and the funded status of the defined benefit pension
plans and the post-retirement health care benefits plans during the years ended December 31, 2000 and 1999 and the eight
months ended December 31, 1998, are presented below, along with amounts recognized in the respective consolidated
balance sheets and consolidated statements of operations:
POST-RETIREMENT
DEFINED BENEFIT PENSION PLANS HEALTH CARE BENEFITS
------------------------------------------ ------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
CHANGE IN BENEFIT
OBLIGATION:
Benefit obligation at
beginning of year..... $ 93,387 $105,005 $ 4,927 $ 2,085 $ 2,174 $ 1,994
Impact of
acquisitions.......... -- -- 99,364 -- -- --
Service cost............ 3,525 5,423 550 60 72 44
Interest cost........... 7,256 7,164 792 166 152 91
Actuarial (gain) loss... 4,302 (20,223) 41 168 (228) 87
Impact of foreign
currency exchange..... (205) 300 (339) -- -- --
Benefits paid........... (2,978) (4,282) (330) (85) (85) (42)
-------- -------- -------- ------- ------- -------
Benefit obligation at
end of year........... $105,287 $ 93,387 $105,005 $ 2,394 $ 2,085 $ 2,174
======== ======== ======== ======= ======= =======
F-23
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFITS (CONTINUED)
POST-RETIREMENT
DEFINED BENEFIT PENSION PLANS HEALTH CARE BENEFITS
------------------------------------------ ------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
CHANGE IN PLAN ASSETS:
Fair value of plan
assets at beginning of
year.................. $ 88,148 $ 82,965 $ 4,360 $ -- $ -- $ --
Impact of
acquisitions.......... -- -- 77,060 -- -- --
Actual return on plan
assets................ 5,014 6,900 1,802 -- -- --
Employer
contributions......... 3,914 2,353 357 85 85 42
Impact of foreign
currency exchange..... (137) 212 (284) -- -- --
Benefits paid........... (2,978) (4,282) (330) (85) (85) (42)
-------- -------- -------- ------- ------- -------
Fair value of plan
assets at end of
year.................. $ 93,961 $ 88,148 $ 82,965 $ -- $ -- $ --
======== ======== ======== ======= ======= =======
Funded status........... $(11,326) $ (5,239) $(22,040) $(2,394) $(2,085) $(2,174)
Unrecognized actuarial
(gain) loss........... (10,922) (20,569) (711) 413 250 502
Unrecognized prior
service cost.......... 276 299 322 -- -- --
-------- -------- -------- ------- ------- -------
Accrued benefit cost.... $(21,972) $(25,509) $(22,429) $(1,981) $(1,835) $(1,672)
======== ======== ======== ======= ======= =======
AMOUNTS RECOGNIZED IN THE
CONSOLIDATED BALANCE
SHEETS:
Prepaid benefit cost.... $ 420 $ -- $ 299 $ -- $ -- $ --
Accrued benefit
liability............. (22,392) (25,509) (22,728) (1,981) (1,835) (1,672)
Additional minimum
liability............. (1,085) (1,165) (322) -- -- --
Intangible asset........ 274 299 322 -- -- --
Accumulated other
comprehensive income.. 811 866 -- -- -- --
-------- -------- -------- ------- ------- -------
Accrued benefit cost.... $(21,972) $(25,509) $(22,429) $(1,981) $(1,835) $(1,672)
======== ======== ======== ======= ======= =======
COMPONENTS OF NET PERIODIC
BENEFIT COST:
Service cost............ $ 3,525 $ 5,423 $ 550 $ 60 $ 72 $ 44
Interest cost........... 7,256 7,164 792 166 152 91
Expected return on plan
assets................ (7,869) (7,354) (819) -- -- --
Amortization of prior
service cost.......... 22 22 17 -- -- --
Actuarial (gain) loss... (2,493) 84 10 5 24 9
-------- -------- -------- ------- ------- -------
Net periodic benefit
cost.................. $ 441 $ 5,339 $ 550 $ 231 $ 248 $ 144
======== ======== ======== ======= ======= =======
F-24
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFITS (CONTINUED) The actuarial present value of the projected pension benefit obligation and the
postretirement health care benefits obligation at December 31, 2000, 1999 and 1998 were determined based upon the
following assumptions:
POST-RETIREMENT
DEFINED BENEFIT PENSION PLANS HEALTH CARE BENEFITS
------------------------------------------ ------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
Discount rate........ 7.5% 8.0% 6.5% 7.5% 8.00% 6.75%
Expected return on
plan assets........ 9.0% 9.0% 8.0% N/A N/A N/A
Increase in future
compensation....... 4.5% 5.0% 5.0% N/A N/A N/A
The Company and its subsidiaries sponsor several defined contribution plans covering substantially all U.S. and Israeli
employees. The plans provide for limited company matching of participants' contributions. The Company's contributions during
the years ended December 31, 2000 and 1999, the eight months ended December 31, 1998, and fiscal 1998, were $5.3
million, $4.7 million, $1.5 million, $0.8 million, respectively.
14. INCOME TAXES
The Company's provision for income tax expense (benefit) for the years ended December 31, 2000 and 1999, the eight
months ended December 31, 1998 and fiscal 1998, is comprised of the following:
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
Current:
Federal.................................... $ 5,046 $16,400 $11,713 $21,586
State...................................... (1,683) 6,040 1,193 3,261
Foreign.................................... 540 1,757 2,464 2,484
------- ------- ------- -------
Total current............................ 3,903 24,197 15,370 27,331
------- ------- ------- -------
Deferred:
Federal.................................... 8,504 16,952 624 (900)
State...................................... 1,280 (3,915) 50 (100)
Foreign.................................... (2,762) (501) (500) 455
------- ------- ------- -------
Total deferred........................... 7,022 12,536 174 (545)
------- ------- ------- -------
Total income tax expense............... $10,925 $36,733 $15,544 $26,786
======= ======= ======= =======
F-25
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED) Income before income taxes, distributions on preferred securities of Superior Trust I,
minority interest and extraordinary loss attributable to domestic and foreign operations for the years ended December 31, 2000
and 1999, the eight months ended December 31, 1998 and fiscal 1998 was as follows:
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
United States................................ $28,181 $84,032 $32,777 $60,270
Foreign...................................... (9,339) 3,371 4,930 7,191
------- ------- ------- -------
Income before income taxes, distributions
on preferred securities of Superior
Trust I, minority interest and
extraordinary loss....................... $18,842 $87,403 $37,707 $67,461
======= ======= ======= =======
The provision for income taxes differs from the amount computed by applying the U.S. federal income tax rate of 35% for
December 31, 2000 and 1999, the eight months ended December 31, 1998, and fiscal 1998, because of the effect of the
following items:
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
Expected income tax expense at U.S. federal
statutory tax rate......................... $ 6,595 $30,591 $13,197 $23,611
State income tax expense, net of U.S. federal
income tax benefit......................... 679 2,340 930 2,195
Taxes on foreign income at rates which differ
from the U.S. federal statutory rate....... 668 725 36 288
Distributions on preferred securities of
Superior Trust I........................... (5,300) (3,760) -- --
Nondeductible goodwill amortization.......... 7,099 6,649 856 435
Change in valuation allowance................ 647 -- -- (1,100)
Other, net................................... 537 188 525 1,357
------- ------- ------- -------
Provision for income taxes................... $10,925 $36,733 $15,544 $26,786
======= ======= ======= =======
At December 31, 2000, the Company's foreign subsidiaries had $10 million in distributable earnings, exclusive of amounts that
if remitted in the future, would result in little or no tax under current laws. The Company's earnings from foreign subsidiaries are
considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made
for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, the Company would
be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries.
F-26
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED) The Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected future tax impact of temporary differences arising
from assets and liabilities whose tax bases are different from financial statement amounts. A valuation allowance is established if
it is more likely than not that all or a portion of deferred tax assets will not be realized. Realization of the future tax benefits of
deferred tax assets is dependent on the Company's ability to generate taxable income within the carryforward period and the
periods in which net temporary differences reverse.
Items that result in deferred tax assets and liabilities at December 31, 2000 and 1999 are as follows:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Deferred tax assets:
Sale leaseback.................................... $ 1,875 $ 1,875
Accruals not currently deductible for tax......... 11,114 17,801
Pension and post retirement benefits.............. 10,034 12,630
Net operating losses.............................. 13,143 5,164
Other............................................. 3,549 5,810
-------- --------
Total deferred tax assets....................... 39,715 43,280
-------- --------
Deferred tax liabilities:
Inventory reserves................................ 11,536 10,830
Depreciation and amortization..................... 95,207 88,227
Other............................................. 6,661 6,920
-------- --------
Total deferred tax liabilities.................. 113,404 105,977
-------- --------
Net deferred income tax liability............... $ 73,689 $ 62,697
======== ========
The Company established a valuation allowance of $0.6 million associated with net operating losses of Superior Israel. The
valuation allowance was established as it was more likely than not that a portion of the deferred tax assets would not be
realized. The net operating loss carryforwards expire beginning in 2018.
15. RESTRUCTURING AND INFREQUENT AND UNUSUAL CHARGES
During the year ended December 31, 2000, the Company recorded infrequent and unusual charges of $15.0 million, which
included (i) a $3.8 million charge related to restructuring activities at Superior Israel; (ii) $8.6 million in charges primarily
associated with the rationalization of certain Essex manufacturing facilities, and (iii) $2.6 million of start-up costs for the
Company's Torreon, Mexico magnet wire facility. During the year ended December 31, 1999, the Company recorded unusual
charges of $8.4 million, which included (i) $4.4 million in charges associated with the evaluation and termination of a
management information system project at Essex, (ii) a $1.3 million charge related to restructuring activities at Superior Israel,
(iii) $2.2 million in charges primarily associated with the rationalization of certain Essex manufacturing facilities and (iv) $0.5
million of start-up costs for the Company's Torreon, Mexico magnet wire facility. During the eight months ended December 31,
1998 the Company recorded infrequent and unusual charges of $13.5 million, consisting of (i) a $10.0 million
F-27
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. RESTRUCTURING AND INFREQUENT AND UNUSUAL CHARGES (CONTINUED) investment advisory fee paid
to Alpine in connection with the acquisition of Essex, (ii) a $2.9 million restructuring charge recorded by Superior Israel relating
to planned manufacturing plant consolidations and overhead rationalization associated with the acquisition of Cvalim and
(iii) $0.6 million in charges associated with the evaluation of management information systems at Essex.
ESSEX
Since the completion of the acquisition of Essex, the Company has been involved in the consolidation and integration of
manufacturing, corporate and distribution functions of Essex into Superior. As a result, the Company initially accrued as part of
the Essex Acquisition purchase price a $29.7 million provision, which included $11.8 million of employee termination and
relocation cost, $11.9 million of facility consolidation cost, $4.4 million of management information system project termination
costs, and $1.6 million of other exit costs. During 1999, the Company revised its estimate and, as a result, increased the
provision for employee termination and relocation costs, facility consolidation costs, and other exit costs by $6.1 million, $0.2
million and $1.3 million, respectively, and decreased the provision for management information system project termination by
$1.4 million. The net increase to the accrual of $6.2 million has been reflected as an increase in goodwill. As of December 31,
2000, $17.2 million, $11.1 million, $3.0 million and $2.6 million have been incurred and paid related to employee termination
and relocation costs, facility consolidation costs, management information system project costs and other exit costs,
respectively. The provision for employee termination and relocation costs was primarily associated with selling, general and
administrative functions within Essex. The provisions for facility consolidation costs included both manufacturing and distribution
facility rationalization and the related costs associated with employee severance. The restructuring resulted in the severance of
approximately 1,100 employees. All significant aspects of the plan are complete.
During 1999, the Company also wrote off $10.4 million of previously capitalized costs related to a discontinued management
information system project at Essex. In addition, under purchase accounting, the Company adjusted the carrying value of
certain fixed assets by $17.3 million to reflect their net realizable value. These adjustments have been reflected as increases to
goodwill.
SUPERIOR ISRAEL
On December 31, 1998, Superior Israel purchased Cvalim. Included in the allocated purchase price was a $3.5 million
provision for the restructuring of Cvalim's manufacturing and corporate functions. The provisions included $2.6 million of
employee termination and severance costs and $0.9 million of other miscellaneous costs. Additionally during the eight months
ended December 31, 1998, Superior Israel recorded a $2.9 million restructuring charge, which included a provision for the
consolidation of seven manufacturing facilities into five and two headquarters facilities into one. All aspects of the restructuring
plan have been completed. As of December 31, 2000, approximately $5.5 million has been incurred and paid related to
employee termination and severance costs and $0.9 million has been incurred and paid related to other miscellaneous costs.
The provision for employee termination and severance costs was primarily associated with manufacturing, selling, general and
administrative functions, and approximately 146 positions have been eliminated.
During 1999, Superior Israel recorded a $1.3 million restructuring charge, which included a provision for the consolidation of
manufacturing facilities. The restructuring actions resulted in the
F-28
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. RESTRUCTURING AND INFREQUENT AND UNUSUAL CHARGES (CONTINUED) elimination of approximately
30 positions, most of which were manufacturing related employees. All aspects of the restructuring plan are complete.
During 2000, Superior Israel recorded a $3.8 million restructuring charge, which included a provision for further consolidation
of manufacturing facilities. The restructuring actions resulted in the elimination of approximately 123 positions, most of which
were manufacturing related employees. All significant aspects of the restructuring plan are complete.
16. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION
The Company, to a limited extent, uses forward fixed price contracts and derivative financial instruments to manage foreign
currency exchange and commodity price risks. The Company does not hold or issue financial instruments for investment or
trading purposes. The Company is exposed to credit risk in the event of nonperformance by counterparties for foreign
exchange forward contracts, metal forward price contracts and metals futures contracts but the Company does not anticipate
nonperformance by any of these counterparties. The amount of such exposure is generally any unrealized gains within the
underlying contracts.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company engages in the sale and purchase of goods and services which periodically require payment or receipt of
amounts denominated in foreign currencies. To protect the Company's related anticipated cash flows from the risk of adverse
foreign currency exchange fluctuations for firm sales and purchase commitments, the Company enters into foreign currency
forward exchange contracts. At December 31, 2000, the Company had no forward exchange sales contracts, but did have
$6.7 million of purchase contracts whose fair value approximated the contract amount. Foreign currency gains or losses
resulting from the Company's operating and hedging activities are recognized in earnings in the period in which the hedged
currency is collected or paid.
COMMODITY PRICE RISK MANAGEMENT
The cost of copper, the Company's most significant raw material, is subject to volatility. So that the Company may manage the
matching of the copper component of customer product pricing with the copper cost component of the inventory shipped, the
Company enters into futures contracts as qualifying hedges. At December 31, 2000, the Company had sales contracts for 3.2
million copper pounds, or $2.7 million, with an estimated fair value of $2.7 million. Unrealized gains and losses on the qualified
hedges, as appropriate, are included in other assets and are recognized when the related underlying copper is purchased or
sold or when a sale is no longer expected to occur.
17. COMMITMENTS AND CONTINGENCIES
Total rent expense under cancelable and noncancelable operating leases was $13.9 million, $13.7 million, $2.6 million and $1.4
million for the years ended December 31, 2000 and 1999, the eight months ended December 31, 1998 and fiscal 1998,
respectively.
F-29
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED) At December 31, 2000, future minimum lease payments
under noncancelable operating leases are as follows:
YEAR AMOUNT
---- --------------
(IN THOUSANDS)
2001........................................................ $ 9,263
2002........................................................ 8,179
2003........................................................ 7,501
2004........................................................ 6,694
2005........................................................ 6,265
Thereafter.................................................. 13,653
-------
$51,555
=======
Approximately 40% of the Company's total labor force is covered by collective bargaining agreements.
The Company is subject to routine lawsuits incidental to its business. In the opinion of management, based on its examination of
such matters and discussions with counsel, the ultimate resolution of all pending or threatened litigation, claims and assessments
will have no material adverse effect upon the Company's financial position, liquidity or results of operations.
In connection with Essex's 1988 acquisition of Essex Group, Inc., United Technologies Corporation ("UTC"), Essex's former
parent, has indemnified Essex against all losses resulting from or in connection with damage or pollution to the environment and
arising from events, operations, or activities of Essex prior to February 29, 1988, or from conditions or circumstances existing
at February 29, 1988, known to UTC prior to February 29, 1988. The sites covered by the indemnity are handled directly by
UTC and all payments required to be made are paid directly by UTC. UTC also provided an additional environmental
indemnity which deals with liabilities related to environmental events, conditions or circumstances existing at or prior to
February 29, 1988, which became known prior to February 28, 1993. As to such liabilities, the Company is responsible for
the first $4 million incurred. The Company accrues for these costs when it is probable that a liability has been incurred and the
amount of the loss can be reasonably estimated.
Essex has been named as a defendant in a limited number of product liability lawsuits brought by electricians and other skilled
tradesmen claiming injury from exposure to asbestos found in electrical wire products produced many years ago. Litigation
against various past insurers of Essex who had previously refused to defend and indemnify Essex against these lawsuits was
settled during 1999. Pursuant to the settlement, Essex was reimbursed for substantially all of its costs and expenses incurred in
defense of these lawsuits, and the insurers have undertaken and are currently defending and, if it should become necessary,
indemnifying Essex against such asbestos lawsuits, subject to the express terms and limits of their respective policies.
The Company accepts certain customer orders for future delivery at fixed prices. As copper is the most significant raw material
used in the manufacturing process, the Company enters into forward purchase fixed price commitments for copper to properly
match its cost to the value of the copper to be billed to the customers. At December 31, 2000, the Company had forward fixed
price purchase commitments for 67.0 million copper pounds.
F-30
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED) At December 31, 2000, the Company had committed
$6.3 million to outside vendors for certain capital projects.
Certain executives of the Company have employment contracts which generally provide minimum base salaries, cash bonuses
based on the Company's achievement of certain performance objectives, stock options and restricted stock grants, and certain
retirement and other employee benefits. Further, in the event of termination or voluntary resignation for "good reason"
accompanied by a change in control, as defined, such employment agreements provide for severance payments not in excess of
three times annual cash compensation and bonus and the continuation for stipulated periods of other benefits, as defined.
18. RELATED PARTY TRANSACTIONS
The Company and Alpine are parties to a services agreement (the "Services Agreement") whereby Alpine agrees to provide
certain financial, audit and accounting, corporate finance and strategic planning, legal, treasury, insurance and administrative
services in return for an annual fee in addition to reimbursement of incidental costs and expenses incurred in connection with
Alpine's provision of such services. Under the Services Agreement as amended to date, Superior TeleCom paid Alpine $3.5
million, $2.7 million, $1.8 million and $2.7 million during the years ended December 31, 2000 and 1999, the eight months
ended December 31, 1998 and fiscal year 1998, respectively.
In addition to amounts paid pursuant to the aforementioned Service Agreement, during the eight months ended December 31,
1998, the Company paid Alpine a $10.0 million investment advisory fee in connection with the Essex Acquisition, which fee
was included in infrequent and unusual charges (see Note 15).
The Company had amounts due to Alpine of $0.5 million, $0.6 million and $1.1 million, respectively, at December 31, 2000,
1999 and 1998, which are included in accrued expenses in the consolidated balance sheets.
19. CHANGE IN YEAR END (UNAUDITED)
The Company's unaudited results of operations for the eight months ended December 31, 1997, are summarized as follows:
EIGHT MONTHS ENDED
DECEMBER 31, 1997
----------------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net sales................................................. $347,447
Gross profit.............................................. 64,202
Operating income.......................................... 48,554
Provision for income taxes................................ 16,878
Net income................................................ 25,959
Net income per basic share of common stock................ $ 1.25
========
Net income per diluted share of common stock.............. $ 1.22
========
F-31
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company's reportable segments are strategic businesses that offer different products and services to different customers.
These segments are communications, OEM and electrical. The communications segment includes
(i) copper and fiber optic outside plant wire and cable for voice and data transmission in telecommunications networks and (ii)
copper and fiber optic datacom or premise wire and cable for use within homes and offices for local area networks, Internet
connectivity and other applications. The OEM segment includes magnet wire and related products. The electrical segment
includes building and industrial wire and cable.
The Company evaluates segment performance based on a number of factors with operating income being the most critical.
Intersegment sales are generally recorded at cost, are not significant and, therefore, have been eliminated below.
Operating results for each of the Company's three reportable segments are presented below. Corporate and other items shown
below are provided to reconcile to the Company's consolidated statements of operations, cash flows and balance sheets.
YEAR ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
Net sales (a):
Communications............................. $ 848,099 $ 755,225 $ 386,196 $518,459
OEM........................................ 613,382 594,716 43,860 --
Electrical................................. 587,567 686,791 58,223 --
---------- ---------- ---------- --------
$2,049,048 $2,036,732 $ 488,279 $518,459
========== ========== ========== ========
Depreciation and amortization expense:
Communications............................. $ 20,240 $ 18,036 $ 7,776 $ 8,330
OEM........................................ 9,287 10,333 987 --
Electrical................................. 7,560 6,534 716 --
Corporate and other........................ 4,885 4,281 -- --
Amortization of goodwill................... 20,959 19,629 2,447 1,715
---------- ---------- ---------- --------
$ 62,931 $ 58,813 $ 11,926 $ 10,045
========== ========== ========== ========
Operating income (loss):
Communications............................. $ 120,071 $ 131,675 $ 68,222 $ 80,975
OEM........................................ 75,839 82,633 3,601 --
Electrical................................. 6,797 36,962 4,855 --
Corporate and other........................ (19,016) (18,210) (6,016) (3,915)
Infrequent and unusual charges............. (14,961) (8,431) (13,511) --
Amortization of goodwill................... (20,959) (19,629) (2,447) (1,715)
---------- ---------- ---------- --------
$ 147,771 $ 205,000 $ 54,704 $ 75,345
========== ========== ========== ========
F-32
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)
YEAR ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
Total assets:
Communications............................. $ 539,987 $ 510,537 $ 407,754 $186,217
OEM........................................ 295,930 274,103 280,743 --
Electrical................................. 265,336 323,154 358,555 --
Corporate and other........................ 890,416 892,560 839,504 46,026
---------- ---------- ---------- --------
$1,991,669 $2,000,354 $1,886,556 $232,243
========== ========== ========== ========
Capital expenditures:
Communications............................. $ 33,552 $ 26,306 $ 19,029 $ 18,488
OEM........................................ 35,363 24,972 3,085 --
Electrical................................. 6,564 10,562 3,853 --
Corporate and other........................ 2,860 10,397 2,047 --
---------- ---------- ---------- --------
$ 78,339 $ 72,237 $ 28,014 $ 18,488
========== ========== ========== ========
(a) No customer accounted for more than 10% of net sales for the years ended December 31, 2000 and 1999. Three
customers accounted for 14%, 13%, and 11% of net sales during the eight months ended December 31, 1998 and five
customers accounted for 19%, 19%, 17%, 16% and 13% of net sales in fiscal 1998.
The following provides information about domestic and foreign operations for the years ended December 31, 2000 and 1999,
the eight months ended December 31, 1998, and fiscal 1998:
YEAR ENDED EIGHT MONTHS
--------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
2000 1999 1998 1998
------------ ------------ ------------ ----------
(IN THOUSANDS)
Net sales:
United States.............................. $1,818,510 $1,825,709 $410,198 $473,879
Canada..................................... 48,664 36,990 30,749 44,580
Israel..................................... 139,363 128,380 43,482 --
United Kingdom............................. 42,511 45,653 3,850 --
---------- ---------- -------- --------
$2,049,048 $2,036,732 $488,279 $518,459
========== ========== ======== ========
Long-lived assets:
United States.............................. $ 392,598 $ 397,595 $428,245 $ 72,348
Canada..................................... 11,944 13,431 11,894 10,773
Israel..................................... 75,453 74,093 64,184 --
United Kingdom............................. 12,189 14,093 9,110 --
Mexico..................................... 46,881 14,702 -- --
---------- ---------- -------- --------
$ 539,065 $ 513,914 $513,433 $ 83,121
========== ========== ======== ========
F-33
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected unaudited quarterly data is presented below:
2000
--------------------------------------------------------------
QUARTER ENDED
------------------------------------------------ YEAR ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 DECEMBER 31
-------- -------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales............................ $497,896 $550,086 $507,223 $493,843 $2,049,048
Gross profit......................... 85,622 98,695 80,325 75,486 340,128
Infrequent and unusual charges....... 5,856 2,956 3,915 2,234 14,961
Operating income..................... 36,537 51,515 32,694 27,025 147,771
Net income (loss).................... $ 381 $ 8,456 $ (1,585) $ (9,392) $ (2,140)
======== ======== ======== ======== ==========
Net income (loss) per basic share of
common stock(a).................... $ 0.02 $ 0.42 $ (0.08) $ (0.46) $ (0.11)
======== ======== ======== ======== ==========
Net income (loss) per diluted share
of common stock(a)................. $ 0.02 $ 0.42 $ (0.08) $ (0.46) $ (0.11)
======== ======== ======== ======== ==========
1999
--------------------------------------------------------------
QUARTER ENDED
------------------------------------------------ YEAR ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 DECEMBER 31
-------- -------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales............................ $508,657 $517,094 $525,082 $485,899 $2,036,732
Gross profit......................... 100,190 101,280 96,418 86,005 383,893
Infrequent and unusual charges....... 2,522 2,030 -- 3,879 8,431
Operating income..................... 51,719 57,596 55,184 40,501 205,000
Income before extraordinary loss..... 10,459 14,537 10,957 2,832 38,785
Net income........................... $ 10,459 $ 12,920 $ 10,957 $ 2,832 $ 37,168
======== ======== ======== ======== ==========
Income before extraordinary loss per
basic share of common stock(a)..... $ 0.51 $ 0.72 $ 0.54 $ 0.14 $ 1.91
======== ======== ======== ======== ==========
Income before extraordinary loss per
diluted share of common stock(a)... $ 0.49 $ 0.68 $ 0.52 $ 0.14 $ 1.86
======== ======== ======== ======== ==========
Net income per basic share of common
stock(a)........................... $ 0.51 $ 0.64 $ 0.54 $ 0.14 $ 1.83
======== ======== ======== ======== ==========
Net income per diluted share of
common stock(a).................... $ 0.49 $ 0.61 $ 0.52 $ 0.14 $ 1.78
======== ======== ======== ======== ==========
(a) Net income per share of common stock is determined by computing a year-to-date weighted average of the incremental
shares included in each quarterly net income per share calculation. As a result, the sum of the net income for the four quarters
may not equal the net income per share for the twelve-month period.
F-34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Superior TeleCom Inc.:
We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of
Superior TeleCom Inc. and subsidiaries included in this annual report on Form 10-K and have issued our report thereon dated
February 13, 2001. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The Schedule II listed in the index to financial statements 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
Atlanta, Georgia
February 13, 2001
F-35
SUPERIOR TELECOM INC. AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ---------- ---------- -------- ---------- -------------
2000:
Allowance for restructuring
activities......................... 14,326 2,085 -- (14,085)(a) 2,326
Allowance for doubtful accounts...... 3,193 2,490 -- (685)(b) 4,998
1999:
Allowance for restructuring
activities......................... 35,969 1,321 6,231(c) (29,195)(a) 14,326
(a) Payments for restructuring liabilities
(b) Write-offs net of recoveries
(c) Accrued as a component of acquisition purchase price
F-36
Exhibit 3(f)
Section 1.10 NOTICE OF STOCKHOLDER NOMINATIONS AT SPECIAL MEETINGS.
(A) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at
a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or
at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided
for in this Section 1.10(A) is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such
election and who complies with the notice procedures set forth in this Section 1.10(A). In the event the Corporation calls a
special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such
stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to
such position(s) as specified in the Corporation's notice of meeting, if the stockholder's notice, which shall set forth the
information required by Article Fifth, Section 3 of the Corporation's Certificate of Incorporation, shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier than the close of business on the ninetieth day prior to
such special meeting and not later than the close of business on the later of the sixtieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an
adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a
stockholder's notice as described above.
(B) GENERAL. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.10
shall be eligible to be elected at a special meeting of stockholders of the Corporation to serve as directors. Except as otherwise
provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination was made in
accordance with the procedures set forth in this Section 1.10 and (b) if any proposed nomination was not made in compliance
with this Section 1.10, to declare that such nomination shall be disregarded. Notwithstanding the foregoing provisions of
Section 1.9 and this Section 1.10, if the stockholder (or a qualified representative of the stockholder) does not appear at the
annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be
disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have
been received by the Corporation.
(2) For purposes of this Section 1.10, "public announcement" shall include disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(3) Notwithstanding the foregoing provisions of this Section
1.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 1.10.
(4) Nothing in Section 1.9 or this Section 1.10 shall be deemed to affect any rights (a) of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any
series of preferred stock of the Corporation to elect directors pursuant to any applicable provisions of the Company's
Certificate of Incorporation.
Exhibit 10(aa)
AMENDMENT NUMBER ONE, dated as of December 31, 1998 ("Amendment"), to the Amended and Restated Credit
Agreement dated as of November 27, 1998 (the "Credit Agreement"), among SUPERIOR/ESSEX CORP., a Delaware
corporation (the "Company"), ESSEX GROUP INC., a Michigan corporation ("Essex" and, together with the Company, the
"Borrowers"), each of the Guarantors party thereto (the "Guarantors") (which Guarantors shall include Superior TeleCom Inc.,
a Delaware corporation (the "Parent")), the lending institutions from time to time party thereto (each a "Lender" and collectively,
the "Lenders"), BANKERS TRUST COMPANY, as Administrative Agent, MERRILL LYNCH & CO., as Documentation
Agent and FLEET NATIONAL BANK, as Syndication Agent (the "Agents"). Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.
WHEREAS, the Parent intends to change its fiscal year end to December 31; and
WHEREAS, in connection with the foregoing the Borrowers have requested that the Agents and the Lenders amend and waive
certain provisions of the Credit Agreement; and
WHEREAS, the Agents and the Lenders have considered and agreed to the Borrowers' requests, upon the terms and
conditions set forth in this Amendment; and
WHEREAS, the consent of the Required Lenders is necessary to effect this Amendment;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENT
The Credit Agreement is amended as hereinafter provided in this
Section One, effective as of December 31, 1998 (the "Amendment Effective Date").
1.1. AMENDMENTS TO SECTION 4 (PAYMENTS)_OF THE CREDIT AGREEMENT.
(a) Section 4.02(b) shall be amended by deleting the text thereof in its entirety and replacing it with the following:
-2-
"(b) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set
forth below, the Borrowers shall be required to repay that principal amount of Tranche A Term Loans, to the extent then
outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01
and
4.02(i), a "Tranche A Term Loan Scheduled Repayment," and each such date, a "Tranche A Term Loan Scheduled
Repayment Date"):
Tranche A Term Loan Scheduled Repayment Date Amount
-------------------------------------------- ------
Quarterly Payment Date in March 1999 $10,500,000
Quarterly Payment Date in June 1999 10,500,000
Quarterly Payment Date in September 1999 10,500,000
Quarterly Payment Date in December 1999 17,125,000
Quarterly Payment Date in March 2000 17,125,000
Quarterly Payment Date in June 2000 17,125,000
Quarterly Payment Date in September 2000 17,125,000
Quarterly Payment Date in December 2000 18,750,000
Quarterly Payment Date in March 2001 18,750,000
Quarterly Payment Date in June 2001 18,750,000
Quarterly Payment Date in September 2001 18,750,000
Quarterly Payment Date in December 2001 18,750,000
Quarterly Payment Date in March 2002 18,750,000
Quarterly Payment Date in June 2002 18,750,000
Quarterly Payment Date in September 2002 18,750,000
Quarterly Payment Date in December 2002 25,000,000
Quarterly Payment Date in March 2003 25,000,000
Quarterly Payment Date in June 2003 25,000,000
Quarterly Payment Date in September 2003 25,000,000
Quarterly Payment Date in December 2003 75,000,000
May 27, 2004 75,000,000"
(b) Section 4.02(c) shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"(c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set
forth below, the Borrowers shall be required to repay that principal amount of Tranche B Term Loans, to the extent then
outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01
and
4.02(i), a "Tranche B Term Loan Scheduled Repay
-3-
ment," and each such date, a "Tranche B Term Loan Scheduled Repayment Date"):
Tranche B Term Loan Scheduled Repayment Date Amount
-------------------------------------------- ------
Quarterly Payment Date in March 1999 $1,214,286
Quarterly Payment Date in June 1999 1,214,286
Quarterly Payment Date in September 1999 1,214,286
Quarterly Payment Date in December 1999 1,214,286
Quarterly Payment Date in March 2000 1,214,286
Quarterly Payment Date in June 2000 1,214,286
Quarterly Payment Date in September 2000 1,214,286
Quarterly Payment Date in December 2000 1,062,500
Quarterly Payment Date in March 2001 1,062,500
Quarterly Payment Date in June 2001 1,062,500
Quarterly Payment Date in September 2001 1,062,500
Quarterly Payment Date in December 2001 1,062,500
Quarterly Payment Date in March 2002 1,062,500
Quarterly Payment Date in June 2002 1,062,500
Quarterly Payment Date in September 2002 1,062,500
Quarterly Payment Date in December 2002 1,062,500
Quarterly Payment Date in March 2003 1,062,500
Quarterly Payment Date in June 2003 1,062,500
Quarterly Payment Date in September 2003 1,062,500
Quarterly Payment Date in December 2003 37,187,500
Quarterly Payment Date in March 2004 37,187,500
Quarterly Payment Date in June 2004 37,187,500
Quarterly Payment Date in September 2004 37,187,500
Quarterly Payment Date in December 2004 63,750,000
Quarterly Payment Date in March 2005 63,750,000
Quarterly Payment Date in June 2005 63,750,000
November 27, 2005 63,750,000"
1.2. AMENDMENT TO SECTION 7 (AFFIRMATIVE COVENANTS) OF THE CREDIT AGREEMENT.
(a) Section 7.10 shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"7.10. END OF FISCAL YEARS; FISCAL QUARTERS. The Parent will, for financial reporting purposes, cause (i) each of
its, and each of its Subsidiaries', fiscal years to end on or about
-4-
December 31st of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on or about March 31st,
June 30th and September 30th of each year; PROVIDED that the Parent may change such fiscal year to any other fiscal year
period of twelve consecutive months with the consent of the Administrative Agent (which consent shall not unreasonably be
withheld)."
1.3. AMENDMENTS TO SECTION 8 (NEGATIVE COVENANTS) OF THE CREDIT AGREEMENT
(a) Section 8.02(s) shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"(s) Investments in the Mexican Subsidiaries to fund their development of certain manufacturing facilities in Mexico in an
aggregate amount not to exceed $80,000,000; PROVIDED that until December 31, 2000, the amount of such Investments
shall not exceed $40,000,000 in the aggregate; and PROVIDED, FURTHER, that such amount may either be funded (A)
through Indebtedness incurred by the Mexican Subsidiaries or (B) through intercompany loans, on terms reasonably acceptable
to the Administrative Agent, PROVIDED that (i) such intercompany loans shall be secured, on terms reasonably acceptable to
the Administrative Agent, with all of the assets of the Mexican Subsidiaries, including those contemplated to be built or
constructed; (ii) the Mexican Subsidiaries shall become Guarantors (it being understood that such Guaranty is subject to the last
sentence of Section 8.14) and (iii) such secured intercompany loans are pledged to the Administrative Agent, on behalf of the
Lenders, on terms acceptable to the Administrative Agent or (C) through the investment of up to $16,000,000 of equity or
other similar contributions, or (D) through a combination of (A), (B) and (C); and"
(b) Section 8.08(a) shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"8.08. CAPITAL EXPENDITURES. (a) The Company will not, and will not permit any of its Subsidiaries to, make any
Capital Expenditures during the period set forth below in excess of the amount set forth below with respect to such period:
-5-
($ in millions)
Period Ending Amount:
------------- --------------
12/31/1999 $68.0
12/31/2000 50.1
12/31/2001 47.5
12/31/2002 50.0
12/31/2003 50.0
12/31/2004 50.0
12/31/2005 50.0"
(c) Section 8.09 shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"8.09. MINIMUM CONSOLIDATED EBITDA. The Company will not permit Consolidated EBITDA during any Test
Period set forth below to be less than the amount set forth below with respect to such Test Period:
($ in millions)
Test Period Ending: Amount:
------------------- ---------------
01/31/1999 $ 36.0
03/31/1999 60.0
06/30/1999 130.0
09/30/1999 180.0
12/31/1999 260.0
03/31/2000 270.0
06/30/2000 280.0
09/30/2000 290.0
12/31/2000 300.0
03/31/2001 300.0
06/30/2001 310.0
09/30/2001 320.0
12/31/2001 330.0
03/31/2002 340.0
06/30/2002 350.0
09/30/2002 355.0
12/31/2002 360.0
03/31/2003 365.0
06/30/2003 370.0
09/30/2003 375.0
12/31/2003 and the 380.0
last day of each
Fiscal Quarter there-
after
"
(d) Section 8.10 shall be amended to read as follows:
-6-
"8.10. INTEREST COVERAGE RATIO. The Company will not permit the Interest Coverage Ratio for any Test Period set
forth below to be equal to or less than the ratio set forth below with respect to such Test Period:
Test Period Ending: Ratio:
------------------- ------
03/31/1999 1.75x
06/30/1999 1.75x
09/30/1999 1.80x
12/31/1999 1.85x
03/31/2000 1.90x
06/30/2000 1.95x
09/30/2000 2.00x
12/31/2000 2.05x
03/31/2001 2.10x
06/30/2001 2.15x
09/30/2001 2.25x
12/31/2001 2.35x
03/31/2002 2.50x
06/30/2002 2.75x
09/30/2002 3.00x
12/31/2002 3.00x
03/31/2003 3.25x
06/30/2003 3.25x
09/30/2003 3.50x
12/31/2003 and the 3.50x
last day of each
Fiscal Quarter there-
after "
(e) Section 8.11 shall be amended by deleting the text thereof in its entirety and replacing it with the following:
"8.11. LEVERAGE RATIO. The Company will not permit the Pro Forma Leverage Ratio at any time during the Test Period
set forth below to be equal to or more than the ratio set forth below with respect to such Test Period:
-7-
Test Period Ending: Ratio:
------------------- ------
03/31/1999 5.50x
06/30/1999 5.50x
09/30/1999 5.25x
12/31/1999 5.25x
03/31/2000 5.10x
06/30/2000 5.00x
09/30/2000 4.75x
12/31/2000 4.50x
03/31/2001 4.50x
06/30/2001 4.25x
09/30/2001 4.00x
12/31/2001 4.00x
03/31/2002 3.75x
06/30/2002 3.50x
09/30/2002 3.25x
12/31/2002 3.25x
03/31/2003 3.00x
06/30/2003 3.00x
09/30/2003 2.75x
12/31/2003 and the 2.75x
last day of each
Fiscal Quarter there-
after "
1.4. AMENDMENTS TO SECTION 10 (DEFINITIONS) OF THE CREDIT AGREEMENT.
(a) Section 10 shall be amended by adding the following new definition in appropriate alphabetical order:
"'Amendment No. 1' shall mean Amendment Number One dated as of December 31, 1998 to this Agreement."
(b) Section 10 shall be further amended as follows:
"Excess Cash Payment Date" shall be amended by deleting the definition thereof and replacing it with the following:
"'Excess Cash Payment Date' shall mean the date occurring 90 days after the last day of each fiscal year of the Company
(beginning with its fiscal year ended December 31, 1999)."
"Margin Reduction Period" shall be amended by deleting the definition thereof and replacing it with the following:
-8-
"'Margin Reduction Period' shall mean each period which shall commence on a date on which the financial statements are
delivered pursuant to Section
7.01(b) or (c), as the case may be, and which shall end on the earlier of (i) the date of actual delivery of the next financial
statements pursuant to Section
7.01(b) or (c), as the case may be, and (ii) the latest date on which the next financial statements are required to be delivered
pursuant to Section 7.01(b) or
(c), as the case may be; PROVIDED that the first Margin Reduction Period shall commence on the date that the financial
statements are delivered for the Company's first fiscal quarter ending March 31, 1999."
(a) "Pro Forma Leverage Ratio" shall be amended by deleting the definition thereof and replacing it with the following:
"'Pro Forma Leverage Ratio' shall mean, at any time for the determination thereof, the ratio of (x) Consolidated Debt at such
time to (y) Consolidated EBITDA for the Test Period then last ended, with such Pro Forma Leverage Ratio to be determined
on a PRO FORMA basis (i) in the case of a Permitted Acquisition, as if such Permitted Acquisition (and any other Permitted
Acquisition) that occurred during such Test Period (and the incurrence, assumption and/or repayment of any Indebtedness in
connection with any such Permitted Acquisition), as the case may be, had occurred on the first day of such Test Period (and
such Indebtedness, if any, had remained outstanding (or had not been outstanding, as the case may be) throughout such Test
Period) it being understood that in calculating the Pro Forma Leverage Ratio in connection with each and every Permitted
Acquisition, Consolidated EBITDA shall include the results of operations of the Person or assets acquired pursuant to each
such Permitted Acquisition on a PRO FORMA basis as if such acquisition had occurred on the first day of the respective Test
Period and (ii) in the case of the Transaction, for the first three quarterly Test Periods for which the Pro Forma Leverage Ratio
is being tested, Consolidated EBITDA for the purpose of determining the Pro Forma Leverage Ratio shall be calculated (x) for
the first such Test Period as the product of Consolidated EBITDA for the fiscal quarter ending March 31, 1999 ("First Quarter
EBITDA") times 4, (y) for the second such Test Period as the sum of (1) the product of First Quarter EBITDA times 2 PLUS
(2) the product of the Consolidated EBITDA for the fiscal quarter ending June 30, 1999 ("Second Quarter EBITDA") times 2,
and (z) for the third such Test Period as the product of (1) the sum of First Quarter EBIDTA PLUS Second Quarter EBITDA
PLUS Consolidated EBITDA for the fiscal quarter ending September 30, 1999 times (2) 1 1/3. On any date pursuant to which
the Pro Forma Leverage Ratio is to be calculated
-9-
and on each date of calculation of Pro Forma Leverage Ratio, the Company shall deliver to the Administrative Agent a
certificate of the Company's chief financial officer setting forth in reasonable detail the PRO FORMA calculations required to
establish the Pro Forma Leverage Ratio (with such PRO FORMA calculations to be made on a basis reasonably satisfactory
to the Administrative Agent and to assume that the interest expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in effect on the date of such Permitted Acquisition
(taking into account any Interest Rate Protection Agreement applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months) had been the applicable rate for the entire period). For purposes of
the Pro Forma Leverage Ratio, Consolidated Debt shall not include the Trust Preferred Securities."
(b) "Test Period" shall be amended by deleting the definition thereof and replacing it with the following:
"'Test Period' shall mean four consecutive fiscal quarters of the Company (taken as one accounting period) ended, in the case
of any determination of Interest Reduction Discount, on the last day of each fiscal quarter or fiscal year of the Company and, in
all other cases, ended on the date indicated in the applicable Section hereof; PROVIDED, with respect to the Test Periods
ending prior to March 31, 2000, Consolidated EBITDA and the Interest Coverage Ratio shall be measured in accordance with
the actual results for the period from November 1, 1998 through such last day of such Test Period."
SECTION TWO - REPRESENTATIONS AND WARRANTIES
The Company and Essex each hereby confirms, reaffirms and restates the representations and warranties made by it in Section
6 of the Credit Agreement and all such representations and warranties are true and correct in all material respects as of the date
hereof (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct only as of such specified date), except such representations and warranties need not be
true and correct to the extent that changes in the facts and conditions on which such representations and warranties are based
are required or permitted under the Credit Agreement or such changes arise out of events not prohibited by the covenants set
forth in Sections 7 and 8 of the Credit Agreement or otherwise permitted by consents or waivers. The Company and Essex
each hereby further represents and warrants
-10-
(which representations and warranties shall survive the execution and delivery hereof) to the Agents and each Lender that:
(a) The Company and Essex each has the corporate power and authority to execute, deliver and perform this Amendment and
has taken all corporate actions necessary to authorize the execution, delivery and performance of this Amendment;
(b) No consent of any person other than all of the Lenders and the Agents parties hereto, and no consent, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance, validity or enforceability against the Company or Essex of this
Amendment;
(c) This Amendment has been duly executed and delivered on behalf of each of the Company and Essex by a duly authorized
officer or attorney-in-fact of the Company and Essex, as the case may be, and constitutes a legal, valid and binding obligation
of each of the Company and Essex, as the case may be, enforceable against each of the Company and Essex in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, preferential
transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights and
remedies generally, (b) general principles of equity (whether such enforceability is considered in a proceeding in equity or at
law), and by the discretion of the court before which any proceeding therefor may be brought, or (c) public policy
considerations or court administrative, regulatory or other governmental decisions that may limit rights to indemnification or
contribution or limit or affect any covenants or agreements relating to competition or future employment; and
(d) The execution, delivery and performance of this Amendment will not violate (i) any provision of law applicable to the
Company or Essex or (ii) any contractual obligation of either the Company or Essex, other than such violations that would not
reasonably be expected to result in, singly or in the aggregate, a Material Adverse Effect.
-11-
SECTION THREE - MISCELLANEOUS
(a) Except as herein expressly amended, the Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith, except as otherwise provided herein, are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
(b) This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be an original and
all of which shall constitute one and the same agreement.
(c) THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS.
(d) This Amendment shall not constitute a consent or waiver to or modification of any provision, term or condition of the Credit
Agreement, other than such terms, provisions, or conditions that are required to consummate the transactions contemplated by
this Amendment. All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the
Credit Agreement, as amended hereby, shall remain in full force and effect.
S-1
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this
Amendment as of the date first above written.
SUPERIOR/ESSEX CORP.,
as Borrower and Guarantor
By: ____________________________
Name:
Title:
SUPERIOR TELECOM INC.,
as Guarantor
By: ____________________________
Name:
Title:
SUPERIOR TELECOMMUNICATIONS,
INC., as Guarantor
By: ____________________________
Name:
Title:
DNE SYSTEMS, INC.
as Guarantor
By: ____________________________
Name:
Title:
DNE MANUFACTURING & SERVICE
COMPANY, as Guarantor
By: ____________________________
Name:
Title:
S-2
DNE TECHNOLOGIES, INC.,
as Guarantor
By: ____________________________
Name:
Title:
TEXAS SUT INC.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX GROUP, INC.,
as Borrower and Guarantor
By: ____________________________
Name:
Title:
ESSEX INTERNATIONAL INC.,
as Guarantor
By: ____________________________
Name:
Title:
ACTIVE INDUSTRIES, INC.,
as Guarantor
By: ____________________________
Name:
Title:
DIAMOND WIRE & CABLE CO.,
as Guarantor
By: ____________________________
Name:
Title:
S-3
ESSEX GROUP, INC.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX GROUP MEXICO INC.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX MEXICO HOLDINGS, L.L.C.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX SERVICES, INC.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX TECHNOLOGY, INC.,
as Guarantor
By: ____________________________
Name:
Title:
ESSEX WIRE CORPORATION,
as Guarantor
By: ____________________________
Name:
Title:
S-4
BANKERS TRUST COMPANY,
as Administrative Agent
By: ____________________________
Name:
Title:
S-5
FLEET NATIONAL BANK,
as Syndication Agent
By: ____________________________
Name:
Title:
S-6
MERRILL LYNCH & CO.,
as Documentation Agent
By: ____________________________
Name:
Title:
S-7
BANKERS TRUST COMPANY,
as Lender
By: ____________________________
Name:
Title:
S-8
FLEET NATIONAL BANK,
as Lender
By: ____________________________
Name:
Title:
S-9
MERRILL LYNCH CAPITAL
CORPORATION, as Lender
By: ____________________________
Name:
Title:
S-10
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
its Investment Manager,
as Lender
By: ____________________________
Name:
Title:
Exhibit 10(bb)
AMENDMENT NUMBER TWO and Waiver dated as of December 10, 1999 ("Amendment and Waiver"), to the Amended
and Restated Credit Agreement dated as of November 27, 1998 as amended by Amendment Number One, dated December
31, 1998 (the "Credit Agreement"), among SUPERIOR/ESSEX CORP., a Delaware corporation (the "Company"), ESSEX
GROUP INC., a Michigan corporation ("Essex" and, together with the Company, the "Borrowers"), each of the Guarantors
party thereto (the "Guarantors") (which Guarantors shall include Superior TeleCom Inc., a Delaware corporation (the
"Parent")), the lending institutions from time to time party thereto (each a "Lender" and collectively, the "Lenders"), BANKERS
TRUST COMPANY, as Administrative Agent, MERRILL LYNCH & CO., as Documentation Agent and FLEET
NATIONAL BANK, as Syndication Agent (the "Agents"). Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
WHEREAS, the Company intends to merge with Superior Telecommunications Inc., a Subsidiary Guarantor, with the
Company as survivor; and
WHEREAS, after the Company Merger, the Company intends to change its name to Superior Telecommunications Inc.; and
WHEREAS, the Company intends to issue a subordinated promissory note to the Parent; and
WHEREAS, the Company intends to pay the Parent a one time fee for guaranteeing the Company's Obligations under the
Credit Agreement; and
WHEREAS, in connection with the foregoing the Borrowers have requested that the Agents and the Lenders amend and waive
certain provisions of the Credit Agreement; and
WHEREAS, the Agents and the Lenders have considered and agreed to the Borrowers' requests, upon the terms and
conditions set forth in this Amendment and Waiver; and
WHEREAS, the consent of the Required Lenders is necessary to effect this Amendment and Waiver;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
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SECTION ONE - AMENDMENT
The Credit Agreement is amended as hereinafter provided in this
Section One, effective as of December 10, 1999 (the "Amendment Effective Date").
1.1. AMENDMENTS TO SECTION 8 (NEGATIVE COVENANTS) OF THE CREDIT AGREEMENT.
(a) Section 8.04 shall be amended by inserting the following at the end of such Section:
"(q) the Intercompany Subordinated Loan; PROVIDED, that such Intercompany Subordinated Loan shall be evidenced by a
Subordinated Promissory Note and such Subordinated Promissory Note shall be pledged to the Collateral Agent pursuant to
the Pledge Agreement."
(b) Section 8.06 shall be amended by deleting the text of the first paragraph in its entirety and replacing it with the following:
"The Company will not, and will not permit any of its Subsidiaries (other than the Israeli Subsidiaries) to, declare or pay any
dividends (other than dividends payable solely in common stock of the Company or any such Subsidiary, as the case may be)
or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to
its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for any consideration, any
shares of any class of its capital stock, now or hereafter outstanding (or any warrants for or options or stock appreciation rights
(other than such options or rights as are granted only to employees as compensation for their employment) in respect of any of
such shares), or set aside any funds for any of the foregoing purposes, and the Company will not permit any of its Subsidiaries
(other than the Israeli Subsidiaries) to purchase or otherwise acquire for consideration any shares of any class of the capital
stock of the Company or any Subsidiary of the Company now or hereafter outstanding (or any options or warrants or such
stock appreciation rights issued by such Person with respect to its capital stock) or make any payments with respect to the
Intercompany Subordinated Loan (all of the foregoing "Dividends"
- 3-
or "Restricted Payments", it being understood that the payments made in accordance with the clauses contained in the proviso
of Section 8.07 shall not be deemed to be Dividends), except that:"
Section 8.06 shall be further amended by: (x) by deleting the words "Dividends" and "dividend payment" in clause (v) and
replacing such deleted words with "Restricted Payments" and "Restricted Payment," respectively,
(y) deleting clause (vi) in its entirety and (z) deleting the reference to "8.07(ii)" in clause (vii).
(c) Section 8.07 shall be amended by inserting the following at the end of such Section:
"(vii) amounts paid by the Company to the Parent as a supplemental management fee so long as the proceeds thereof are used
at the time of such fee payment by the Parent (I) to make the payment permitted to be made by the Parent pursuant to clause
(ii) of this Section 8.07 and (II)
(x) to pay expenses for administrative, legal and accounting services provided by third parties that are reasonable and
customary and incurred in the ordinary course of business and other costs and expenses in connection with the Parent being a
publicly traded company for such professional services or to pay franchise and similar costs and (y) in an amount not to exceed
the "additional amount" for any four consecutive fiscal quarters provided that such amount is used at the time of such fee
payment to pay actual expenses of the Parent (including employment expenses) and the "additional amount" is otherwise treated
as an operating expense of the Company for purposes of determining compliance with the financial covenants contained herein;
"additional amount" for any such period shall mean an amount not to exceed the sum of (1) $2,500,000 and (2) that portion of
the fee permitted to be paid by clause (ii) of this Section in such period that is not actually paid; and
(viii) the payment of a one time guaranty fee to the Parent in an amount not to exceed $10,000,000 for the Parent's Guaranty;
PROVIDED, such payment shall be reduced by the amount of cash dividends paid to the Parent with respect to the Trust
Preferred Securities since the Effective Date."
- 4-
(d) Section 8.17 shall be amended by deleting clause (i) its entirety and replacing it with the following:
"(i) hold or acquire any assets (other than the capital stock of the Borrower, Superior Trust I and DNE Systems and its
Subsidiaries, the note evidencing the Intercompany Subordinated Loan and insignificant assets)."
1.2. AMENDMENTS TO SECTION 10 (DEFINITIONS) OF THE CREDIT AGREEMENT.
(a) Section 10 shall be amended by adding the following new definition in appropriate alphabetical order:
"'Amendment No. 2' shall mean Amendment Number Two and Waiver dated as of December 10, 1999 to this Agreement."
"'Company Merger' shall mean the merger of Superior Telecommunications Inc. with and into Superior/Essex Corp. in which
Superior/Essex Corp.
shall be the surviving corporation."
"'Intercompany Subordinated Loan' shall mean the long-term subordinated indebtedness (on terms satisfactory to the
Administrative Agent) of the Company to the Parent in an aggregate principal amount not to exceed $167,000,000."
"'Subordinated Promissory Note' shall mean the note evidencing the Intercompany Subordinated Loan."
(b) Section 10 shall be further amended as follows:
"Superior Preferred Stock" shall be amended by deleting the definition thereof and replacing it with the following:
"'Superior Preferred Stock' shall mean the 6% Cumulative Preferred Stock, par value $1.00 per share, of the Company having
an aggregate liquidation preference of $20,000,000 (but shall include any Parent preferred stock issued in exchange therefor
pursuant to clause (ii)(y) of Section 8.06)."
- 5-
"Superior Telecommunications" shall be amended by deleting the definition thereof and replacing it with the following:
"'Superior Telecommunications' shall mean Superior Telecommunications Inc., a Georgia corporation and Wholly-Owned
Subsidiary of the Company, and after the Company Merger shall mean Superior Telecommunications Inc., a Delaware
corporation."
SECTION TWO - WAIVER
The Banks hereby waive compliance by the Company with Section
8.12 with respect to amending the certificate of incorporation of the Superior/Essex Corp. after the merger with Superior
Telecommunications, Inc., to authorize shares of preferred stock and thereafter issue such shares to the holders of pre-merger
Superior Telecommunications stock.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
The Parent and the Company hereby confirms, reaffirms and restates the representations and warranties made by it in Section 6
of the Credit Agreement and all such representations and warranties are true and correct in all material respects as of the date
hereof (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct only as of such specified date), except such representations and warranties need not be
true and correct to the extent that changes in the facts and conditions on which such representations and warranties are based
are required or permitted under the Credit Agreement or such changes arise out of events not prohibited by the covenants set
forth in Sections 7 and 8 of the Credit Agreement or otherwise permitted by consents or waivers. The Company hereby further
represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agents
and each Lender that:
(a) Each Credit Party has the corporate power and authority to execute, deliver and perform this Amendment and Waiver and
has taken all corporate actions necessary to authorize the execution, delivery and performance of this Amendment and Waiver;
(b) No consent of any person other than all of the Lenders and the Agents parties hereto, and no consent,
- 6-
permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any
governmental authority is required in connection with the execution, delivery, performance, validity or enforceability against any
Credit Party of this Amendment and Waiver;
(c) This Amendment and Waiver has been duly executed and delivered on behalf of each Credit Party by a duly authorized
officer or attorney-in-fact of such Credit Party, and constitutes a legal, valid and binding obligation of each Credit Party
enforceable against such Credit Party in accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights and remedies generally, (b) general principles of equity (whether such
enforceability is considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding
therefor may be brought, or (c) public policy considerations or court administrative, regulatory or other governmental decisions
that may limit rights to indemnification or contribution or limit or affect any covenants or agreements relating to competition or
future employment; and
(d) The execution, delivery and performance of this Amendment and Waiver will not violate (i) any provision of law applicable
to any Credit Party or (ii) any contractual obligation of any Credit Party, other than such violations that would not reasonably
be expected to result in, singly or in the aggregate, a Material Adverse Effect.
(e) The transactions specifically permitted under this Amendment and Waiver are for a proper corporate purpose.
SECTION FOUR - MISCELLANEOUS
(a) Except as herein expressly amended, the Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith, except as otherwise provided herein, are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
- 7-
(b) This Amendment and Waiver may be executed by the parties hereto in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement.
(c) THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS.
(d) This Amendment and Waiver shall not constitute a consent or waiver to or modification of any provision, term or condition
of the Credit Agreement, other than such terms, provisions, or conditions that are required to consummate the transactions
contemplated by this Amendment. All terms, provisions, covenants, representations, warranties, agreements and conditions
contained in the Credit Agreement, as amended hereby, shall remain in full force and effect.
(e) The Company will take, or will cause the Guarantors to take, all necessary actions relating to the Collateral as a result of the
Company Merger.
Exhibit 10(ee)
AMENDMENT NUMBER THREE, dated as of March 30, 2000 ("AMENDMENT NO. 3"), to the Senior Subordinated
Credit Agreement dated as of May 26, 1999 (the "CREDIT AGREEMENT"), among SUPERIOR
TELECOMMUNICATIONS INC. (formerly known as Superior/Essex Corp.), a Delaware corporation (the
"BORROWER"), SUPERIOR TELECOM INC., a Delaware corporation (the "PARENT"), each of the Subsidiary
Guarantors party thereto (the "GUARANTORS," and together with the Borrower and the Parent, the "CREDIT PARTIES"),
the lending institutions from time to time party thereto (each a "LENDER" and collectively, the "Lenders"), FLEET
CORPORATE FINANCE, INC., as Syndication Agent, and BANKERS TRUST COMPANY, as Administrative Agent (the
"AGENTS"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement.
WHEREAS, the Borrowers wish to amend a definition in Section 9; and
WHEREAS, in connection with the foregoing the Borrowers have requested that the Agents and the Lenders amend certain
provisions of the Credit Agreement; and
WHEREAS, the Agents and the Lenders have considered and agreed to the Borrowers' requests, upon the terms and
conditions set forth in this Amendment No. 3; and
WHEREAS, the consent of the Required Lenders is necessary to effect this Amendment No. 3;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENT
The Credit Agreement is amended as hereinafter provided in this
Section One, effective as of March 30, 2000 (the "AMENDMENT EFFECTIVE DATE").
1.1. AMENDMENTS TO SECTION 9 (DEFINITIONS) OF THE CREDIT AGREEMENT.
Section 9 shall be amended by deleting the definition of "Mexican Subsidiaries" and replace it with the following:
- 2-
"'Mexican Subsidiaries' shall mean any Wholly-Owned Subsidiary of the Borrower, Essex or any of their respective
Subsidiaries organized to make the acquisitions and Investments contemplated by Section
6.02(b)(8)."
SECTION TWO - CONDITIONS TO EFFECTIVENESS
This Amendment No. 3 shall become effective as of the Amendment Effective Date when, and only when, the Administrative
Agent shall have received counterparts of this Amendment No. 3 executed by each Borrower and the Required Lenders or, as
to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment No. 3.
Further, the effectiveness of this Amendment No. 3 (other than Section Four hereof) is conditioned upon the accuracy of the
representations and warranties set forth in
Section Four hereof.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
The Parent and the Company hereby confirms, reaffirms and restates the representations and warranties made by it in Section 4
of the Credit Agreement and all such representations and warranties are true and correct in all material respects as of the date
hereof (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct only as of such specified date), except such representations and warranties need not be
true and correct to the extent that changes in the facts and conditions on which such representations and warranties are based
are required or permitted under the Credit Agreement or such changes arise out of events not prohibited by the covenants set
forth in Sections 5 and 6 of the Credit Agreement or otherwise permitted by consents or waivers. The Company hereby further
represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agents
and each Lender that:
(a) Each Credit Party has the corporate power and authority to execute, deliver and perform this Amendment No. 3 and has
taken all corporate actions necessary to authorize the execution, delivery and performance of this Amendment No. 3;
(b) No Default or Event of Default has occurred which is continuing;
- 3-
(c) No consent of any person other than all of the Lenders and the Agents parties hereto, and no consent, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance, validity or enforceability against any Credit Party of this
Amendment No. 3;
(d) This Amendment No. 3 has been duly executed and delivered on behalf of each Credit Party by a duly authorized officer or
attorney-in-fact of such Credit Party, and constitutes a legal, valid and binding obligation of each Credit Party enforceable
against such Credit Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights and remedies generally, (b) general principles of equity (whether such
enforceability is considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding
therefor may be brought, or (c) public policy considerations or court administrative, regulatory or other governmental decisions
that may limit rights to indemnification or contribution or limit or affect any covenants or agreements relating to competition or
future employment; and
(e) The execution, delivery and performance of this Amendment No. 3 will not violate (i) any provision of law applicable to any
Credit Party or (ii) any contractual obligation of any Credit Party, other than such violations that would not reasonably be
expected to result in, singly or in the aggregate, a Material Adverse Effect.
SECTION FOUR - MISCELLANEOUS
(a) Except as herein expressly amended, the Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith, except as otherwise provided herein, are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
(b) This Amendment No. 3 may be executed by the parties hereto in one or more counterparts, each of which shall be
- 4-
an original and all of which shall constitute one and the same agreement.
(c) THIS AMENDMENT NO. 3 SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS.
(d) This Amendment No. 3 shall not constitute a consent or waiver to or modification of any provision, term or condition of the
Credit Agreement, other than such terms, provisions, or conditions that are required to consummate the transactions
contemplated by this Amendment No. 3. All terms, provisions, covenants, representations, warranties, agreements and
conditions contained in the Credit Agreement, as amended hereby, shall remain in full force and effect.
Exhibit 10(ff)
AMENDMENT NUMBER FOUR dated as of April 20, 2000 ("Amendment No. 4"), to the Senior Subordinated Credit
Agreement dated as of May 26, 1999 (the "Credit Agreement"), among SUPERIOR TELECOMMUNICATIONS INC.
(formerly known as Superior/Essex Corp.), a Delaware corporation (the "Borrower"), SUPERIOR TELECOM INC., a
Delaware corporation (the "Parent"), each of the Subsidiary Guarantors party thereto (the "Guarantors," and together with the
Borrower and the Parent, the "Credit Parties"), the lending institutions from time to time party thereto (each a "Lender" and
collectively, the "Lenders"), FLEET CORPORATE FINANCE, INC., as Syndication Agent, and BANKERS TRUST
COMPANY, as Administrative Agent (the "Agents"). Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Credit Agreement.
WHEREAS, the Agents and the Lenders desire to amend a definition in Section 9 of the Credit Agreement;
WHEREAS, in connection with the foregoing, the Agents and the Lenders have requested that certain provisions of the Credit
Agreement be amended; and
WHEREAS, the Credit Parties have considered and agreed to the Agents' and the Lenders' requests, upon the terms and
conditions set forth in this Amendment No. 4; and
WHEREAS, the consent of the Credit Parties and the Required Lenders is necessary to effect this Amendment No. 4;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENT
The Credit Agreement is amended as hereinafter provided in this
Section One, effective as of April 20, 2000 (the "Amendment Effective Date").
1.1. AMENDMENT TO SECTION 9 (DEFINITIONS AND ACCOUNTING TERMS) OF THE CREDIT
AGREEMENT.
(a) Section 9 shall be amended as follows:
"Nine-Month Trigger Date" shall be amended by deleting the definition thereof and replacing it with the following:
- 2-
"'Nine-Month Trigger Date' shall mean June 5, 2000."
SECTION TWO - REPRESENTATIONS AND WARRANTIES
Each of the Parent, Borrower and each Guarantor hereby confirms, reaffirms and restates the representations and warranties
made by it in Section 4 of the Credit Agreement and all such representations and warranties are true and correct in all material
respects as of the date hereof (it being understood and agreed that any representation or warranty which by its terms is made
as of a specified date shall be required to be true and correct only as of such specified date), except such representations and
warranties need not be true and correct to the extent that changes in the facts and conditions on which such representations and
warranties are based are required or permitted under the Credit Agreement or such changes arise out of events not prohibited
by the covenants set forth in Sections 5 and 6 of the Credit Agreement or otherwise permitted by consents or waivers. Each
Credit Party, as applicable, hereby further represents and warrants (which representations and warranties shall survive the
execution and delivery hereof) to the Agents and each Lender that:
(a) Each Credit Party has the corporate power and authority to execute, deliver and perform this Amendment No. 4 and has
taken all corporate actions necessary to authorize the execution, delivery and performance of this Amendment No. 4;
(b) No consent of any person other than all of the Lenders and the Agents parties hereto, and no consent, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance, validity or enforceability against any Credit Party of this
Amendment No. 4;
(c) This Amendment No. 4 has been duly executed and delivered on behalf of each Credit Party by a duly authorized officer or
attorney-in-fact of such Credit Party, and constitutes a legal, valid and binding obligation of each Credit Party enforceable
against such Credit Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating
- 3-
to or affecting creditors' rights and remedies generally, (b) general principles of equity (whether such enforceability is
considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding therefor may be
brought, or (c) public policy considerations or court administrative, regulatory or other governmental decisions that may limit
rights to indemnification or contribution or limit or affect any covenants or agreements relating to competition or future
employment; and
(d) The execution, delivery and performance of this Amendment No. 4 will not violate (i) any provision of law applicable to any
Credit Party or (ii) any contractual obligation of any Credit Party, other than such violations that would not reasonably be
expected to result in, singly or in the aggregate, a Material Adverse Effect.
SECTION THREE - MISCELLANEOUS
(a) Except as herein expressly amended, the Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith, except as otherwise provided herein, are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
(b) This Amendment No. 4 may be executed by the parties hereto in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement.
(c) THIS AMENDMENT NO. 4 SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS.
(d) This Amendment No. 4 shall not constitute a consent or waiver to or modification of any provision, term or condition of the
Credit Agreement, other than such terms, provisions, or conditions that are required to consummate the transactions
contemplated by this Amendment. All terms, provisions, covenants, representations, warranties, agreements and conditions
contained in the Credit Agreement, as amended hereby, shall remain in full force and effect.
[SIGNATURE PAGES FOLLOW]
Exhibit 10(gg)
AMENDMENT NUMBER FIVE dated as of June 5, 2000 ("Amendment No. 5"), to the Senior Subordinated Credit
Agreement dated as of May 26, 1999 (the "Credit Agreement"), among SUPERIOR TELECOMMUNICATIONS INC.
(formerly known as Superior/Essex Corp.), a Delaware corporation (the "Borrower"), SUPERIOR TELECOM INC., a
Delaware corporation (the "Parent"), each of the Subsidiary Guarantors party thereto (the "Guarantors," and together with the
Borrower and the Parent, the "Credit Parties"), the lending institutions from time to time party thereto (each a "Lender" and
collectively, the "Lenders"), FLEET CORPORATE FINANCE, INC., as Syndication Agent, and BANKERS TRUST
COMPANY, as Administrative Agent (the "Agents"). Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Credit Agreement.
WHEREAS, the Agents and the Lenders desire to amend a definition in Section 9 of the Credit Agreement;
WHEREAS, in connection with the foregoing, the Agents and the Lenders have requested that certain provisions of the Credit
Agreement be amended; and
WHEREAS, the Credit Parties have considered and agreed to the Agents' and the Lenders' requests, upon the terms and
conditions set forth in this Amendment No. 5; and
WHEREAS, the consent of the Credit Parties and the Required Lenders is necessary to effect this Amendment No. 5;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENT
The Credit Agreement is amended as hereinafter provided in this
Section One, effective as of June 5, 2000 (the "Amendment Effective Date").
1.1. AMENDMENT TO SECTION 9 (DEFINITIONS AND ACCOUNTING TERMS) OF THE CREDIT
AGREEMENT.
(a) Section 9 shall be amended as follows:
"Nine-Month Trigger Date" shall be amended by deleting the definition thereof and replacing it with the following:
- 2-
"'Nine-Month Trigger Date' shall mean June 30, 2000."
SECTION TWO - REPRESENTATIONS AND WARRANTIES
Each of the Parent, Borrower and each Guarantor hereby confirms, reaffirms and restates the representations and warranties
made by it in Section 4 of the Credit Agreement and all such representations and warranties are true and correct in all material
respects as of the date hereof (it being understood and agreed that any representation or warranty which by its terms is made
as of a specified date shall be required to be true and correct only as of such specified date), except such representations and
warranties need not be true and correct to the extent that changes in the facts and conditions on which such representations and
warranties are based are required or permitted under the Credit Agreement or such changes arise out of events not prohibited
by the covenants set forth in Sections 5 and 6 of the Credit Agreement or otherwise permitted by consents or waivers. Each
Credit Party, as applicable, hereby further represents and warrants (which representations and warranties shall survive the
execution and delivery hereof) to the Agents and each Lender that:
(a) Each Credit Party has the corporate power and authority to execute, deliver and perform this Amendment No. 5 and has
taken all corporate actions necessary to authorize the execution, delivery and performance of this Amendment No. 5;
(b) No consent of any person other than all of the Lenders and the Agents parties hereto, and no consent, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance, validity or enforceability against any Credit Party of this
Amendment No. 5;
(c) This Amendment No. 5 has been duly executed and delivered on behalf of each Credit Party by a duly authorized officer or
attorney-in-fact of such Credit Party, and constitutes a legal, valid and binding obligation of each Credit Party enforceable
against such Credit Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating
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to or affecting creditors' rights and remedies generally, (b) general principles of equity (whether such enforceability is
considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding therefor may be
brought, or (c) public policy considerations or court administrative, regulatory or other governmental decisions that may limit
rights to indemnification or contribution or limit or affect any covenants or agreements relating to competition or future
employment; and
(d) The execution, delivery and performance of this Amendment No. 5 will not violate (i) any provision of law applicable to any
Credit Party or (ii) any contractual obligation of any Credit Party, other than such violations that would not reasonably be
expected to result in, singly or in the aggregate, a Material Adverse Effect.
SECTION THREE - MISCELLANEOUS
(a) Except as herein expressly amended, the Credit Agreement and all other agreements, documents, instruments and
certificates executed in connection therewith, except as otherwise provided herein, are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
(b) This Amendment No. 5 may be executed by the parties hereto in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement.
(c) THIS AMENDMENT NO. 5 SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS.
(d) This Amendment No. 5 shall not constitute a consent or waiver to or modification of any provision, term or condition of the
Credit Agreement, other than such terms, provisions, or conditions that are required to consummate the transactions
contemplated by this Amendment. All terms, provisions, covenants, representations, warranties, agreements and conditions
contained in the Credit Agreement, as amended hereby, shall remain in full force and effect.
[SIGNATURE PAGES FOLLOW]
Exhibit 10(hh)
AMENDMENT NUMBER ONE
TO
THE SUPERIOR TELECOM INC.
STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
WHEREAS, Superior TeleCom Inc. (the "Company") maintains the Superior TeleCom Inc. Stock Compensation Plan for
Non-Employee Directors (the "Plan");
WHEREAS, pursuant to Article XI of the Plan, the Board may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as of May __, 2000.
NOW, THEREFORE, pursuant to Article XI of the Plan, the Plan is hereby amended, effective as of May __, 2000, as
follows:
1. Section 2.16 is amended in its entirety to read as follows:
"'RETIREMENT' shall mean a Non-Employee Director's attainment of age sixty-five (65)."
2. Section 6.2(c) of the Plan is amended by the addition of the following language at the end thereof:
"Upon a Non-Employee Director's Retirement, all Restricted Stock held by such Non-Employee Director and still subject to
restrictions shall become fully vested and the restrictions thereon shall lapse."
3. Section 7.2(d) of the Plan is amended by the addition of the following language at the end thereof:
"Upon a Non-Employee Director's Retirement, all Stock Options held by such Non-Employee Director and not previously
exercisable shall become fully vested and exercisable."
4. Section 8.3(b) of the Plan is deleted in its entirety.
Exhibit 10(ii)
SUPERIOR TELECOM INC.
DEFERRED CASH ACCOUNT PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I. PURPOSE....................................................................1
ARTICLE II. DEFINITIONS................................................................1
ARTICLE III. ADMINISTRATION.............................................................4
ARTICLE IV. ELECTIONS..................................................................5
ARTICLE V. ESTABLISHMENT OF DEFERRED CASH ACCOUNT.....................................7
ARTICLE VI. ADDITIONS TO DEFERRED CASH ACCOUNT.........................................7
ARTICLE VII. COMMENCEMENT OF BENEFITS...................................................8
ARTICLE VIII. FORFEITURE.................................................................9
ARTICLE IX. CLAIMS PROCEDURE...........................................................9
ARTICLE X. NON-ALIENATION OF BENEFITS................................................10
ARTICLE XI. CHANGE IN CONTROL PROVISIONS..............................................10
ARTICLE XII. TERMINATION OR AMENDMENT OF THE PLAN......................................11
ARTICLE XIII. UNFUNDED PLAN................................................................12
ARTICLE XIV. GENERAL PROVISIONS...........................................................12
SUPERIOR TELECOM INC.
DEFERRED CASH ACCOUNT PLAN
ARTICLE I
PURPOSE
The purpose of the Plan is to provide a select group of management and highly compensated employees of the Employer with
the opportunity to (i) defer the receipt of all or a portion of his or her Salary and (ii) defer the receipt of all or a portion of his or
her Bonus in accordance with the terms and conditions set forth herein.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
II.1 "AFFILIATE" shall mean each of the following: (i) any Subsidiary;
(ii) any Parent; (iii) any corporation, trade or business (including, without limitation, a partnership or limited liability company)
which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) by the Company or one of its Affiliates; and (iv) any other entity in which the Company or any of its
Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee.
II.2 "BENEFICIARY" shall mean the individual designated by the Participant, on a form acceptable by the Committee, to
receive benefits payable under the Plan in the event of the Participant's death. If no Beneficiary is designated, the Participant's
Beneficiary shall be his or her spouse, or if the Participant is not married, the Participant's estate. Upon the acceptance by the
Committee of a new Beneficiary designation, all Beneficiary designations previously filed shall be canceled. The Committee shall
be entitled to rely on the last Beneficiary designation filed by the Participant and accepted by the Committee prior to his or her
death.
II.3 "BOARD" shall mean the Board of Directors of the Company.
II.4 "BONUS" shall mean a Participant's performance bonus or any other bonus (whether or not discretionary) paid by the
Employer to the Participant in cash and that is designated by the Committee as eligible for deferral under the Plan..
II.5 "CAUSE" shall mean with respect to a Participant's Termination of Employment, a Participant's fraud, embezzlement or
commission of a crime with regard to the Employer or its assets or a Participant's breach of any noncompetition or
nonsolicitation provision or breach of confidentiality, to the extent set forth in a written agreement between the Participant and
the Company. The Committee shall have sole discretion in determining whether Cause exists, and its determination shall be
final, binding and conclusive.
II.6 "CHANGE IN CONTROL" shall have the meaning set forth in Section 11.2.
II.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also
be a reference to any successor provision.
II.8 "COMMITTEE" shall mean the Stock Option Committee of the Board or such other committee designated by the Board.
II.9 "COMMON STOCK" shall mean common stock, $.01 par value per share, of the Company.
II.10 "COMPANY" shall mean Superior TeleCom Inc. or any successor corporation by merger, consolidation or transfer of
assets substantially as a whole.
II.11 "DEFERRAL PERIOD" shall mean the earlier of: (i) the period of deferral selected by the Participant for the period
described in Section 4.1(b), as may be extended pursuant to Section 4.1(c) or (ii) the period beginning on the effective date of
a deferral election and ending on a Participant's Termination of Employment.
II.12 "DEFERRED BONUS" shall mean the Bonus deferred by a Participant under Section 4.1(a)(ii) hereof.
II.13 "DEFERRED CASH ACCOUNT" shall mean the account to which a Participant's book entry contributions made
pursuant to Article IV hereof shall be credited.
II.14 "DEFERRED SALARY" shall mean the amount of Salary deferred by a Participant under Section 4.1(a)(i) hereof.
II.15 "DISABILITY" shall mean any disability as determined under the Employer's long term disability policies, provided that
the Participant is entitled to and is receiving long term disability benefits under such policies.
II.16 "EARNINGS" shall mean, for any Plan Year, earnings on amounts in the Deferred Cash Account computed in
accordance with Article VI hereof.
II.17 "EFFECTIVE DATE" shall mean June 1, 1999.
II.18 "ELIGIBLE EMPLOYEE" shall mean an Employee who is a member of a select group of management or highly
compensated employees and who is designated by the Committee, in its sole discretion, as an Eligible Employee. Any Eligible
Employee shall continue to be eligible to participate in the Plan until he or she ceases to be an Eligible Employee, whether by
reason of his or her Termination of Employment or by reason of the Committee's determination in its sole discretion that he or
she should no longer be designated as an Eligible Employee.
II.19 "EMPLOYEE" shall mean any person employed by the Employer excluding any "leased employee," as defined in Section
414(n) of the Code, any independent contractor or agent.
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II.20 "EMPLOYER" shall mean the Company and any Affiliate.
II.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
II.22 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
II.23 "PARENT" shall mean any parent corporation of the Company within the meaning of Section 424(e) of the Code.
II.24 "PARTICIPANT" shall mean any Eligible Employee who: (i) elects to defer his or her Salary or Bonus in accordance with
the terms hereunder; and
(ii) has a balance in his or her Deferred Cash Account under the Plan. A Participant shall cease to be permitted to defer his or
her Salary or Bonus with regard to a Plan Year if he or she is not, or ceases to be, an Eligible Employee with regard to the
Plan.
II.25 "PLAN" shall mean the Superior TeleCom Inc. Deferred Cash Account Plan.
II.26 "PLAN YEAR" shall mean the calendar year, except that the first Plan Year shall be the short Plan Year commencing on
the Effective Date and ending on December 31, 1999.
II.27 "SALARY" shall mean a Participant's base monthly cash compensation rate for services paid by the Employer to the
Participant. Salary shall not include commissions, bonuses, overtime pay, incentive compensation, benefits paid under any
qualified plan, any group medical, dental or other welfare benefit plan, noncash compensation, fringe benefits (cash and
noncash), reimbursements or other expense allowances or any other additional compensation and shall not include amounts
reduced pursuant to a Participant's salary reduction agreement under Section 125 or Section 401(k) of the Code (if any) or a
nonqualified elective deferred compensation arrangement or any other deductions for premium payments or offsets with regard
to any health or welfare plan to the extent that in each such case the reduction is to base cash compensation.
II.28 "SALARY REDUCTION AGREEMENT" shall mean an agreement entered into between a Participant and the
Employer or a form executed by the Participant to authorize the Employer to reduce the Participant's Salary and/or Bonus and
credit the amount of such reduction to the Plan. A Salary Reduction Agreement shall contain such provisions, consistent with
the provisions of the Plan, as may be established from time to time by the Employer or the Committee. A new Salary Reduction
Agreement must be made for each Plan Year.
II.29 "SUBSIDIARY" shall mean any corporation that is defined as a subsidiary corporation in Section 424(f) of the Code.
II.30 "TERMINATION OF EMPLOYMENT" shall mean termination of employment as an Employee of the Employer for any
reason whatsoever, including but not limited to death, retirement, resignation, Disability, dismissal (with or without Cause) or the
cessation of an entity as an Affiliate.
ARTICLE III
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ADMINISTRATION
III.1 THE COMMITTEE. The Plan shall be administered by the Committee.
III.2 DUTIES OF THE COMMITTEE. The Committee (or its delegate) shall have the exclusive right, power and authority to
administer, apply and interpret the Plan and any other Plan documents and to decide any questions and settle all controversies
and disputes that may arise in connection with the operation or administration of the Plan. Without limiting the generality of the
foregoing, the Committee shall have the sole and absolute discretionary authority: (i) to take all actions and make all decisions
with respect to the eligibility for, and the amount of, benefits payable under the Plan; (ii) to formulate, interpret and apply rules,
regulations and policies necessary to administer the Plan in accordance with its terms; (iii) to decide questions, including legal or
factual questions, relating to the calculation and payment of benefits under the Plan;
(iv) to resolve and/or clarify any ambiguities, inconsistencies and omissions arising under the Plan or other Plan documents; and
(v) to process and approve or deny benefit claims and rule on any benefit exclusions. All determinations made by the
Committee (or any delegate) with respect to any matter arising under the Plan and any other Plan documents including, without
limitation, the interpretation and administration of the Plan shall be final, binding and conclusive on all parties.
III.3 ADVISORS. The Company, the Board or the Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan, and the Committee may rely upon any advice or opinion received from
any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred for the
engagement of such counsel, consultant or agent shall be paid by the Company. The Committee may also rely on information,
and consider recommendations, provided by the Board or the executive officers of the Company.
III.4 ACTION BY MAJORITY. Decisions of the Committee shall be made by a majority of its members attending a meeting
at which a quorum is present (which meeting may be held telephonically), or by written action in accordance with applicable
law.
III.5 LIABILITY OF COMMITTEE MEMBERS. No member of the Committee and no officer, director or employee of the
Employer shall be liable for any action or inaction with respect to his or her functions under the Plan unless such action or
inaction is adjudged to be due to fraud. Further, no such person shall be personally liable merely by virtue of any instrument
executed by him or her or on his or her behalf in connection with the Plan.
III.6 INDEMNIFICATION OF COMMITTEE MEMBERS. Each Employer shall indemnify, to the full extent permitted by
law and its Certificate of Incorporation and By-laws (but only to the extent not covered by insurance) its officers and directors
(and any employee involved in carrying out the functions of the Employer under the Plan) and each member of the Committee
against any expenses, including amounts paid in settlement of a liability, which are reasonably incurred in connection with any
legal action to which such person is a party by reason of his or her duties or responsibilities with respect to the Plan (other than
as a Participant).
-4-
III.7 SECURITIES LAW COMPLIANCE. The Committee shall impose such rules designed to facilitate compliance with
Federal and state securities laws, including to the extent applicable, the limitations of Section 4(2) and Rule 701 under the
Securities Act of 1933, as amended, and shall have the authority to suspend the Plan and take any action necessary, including
revoking a Participant's salary deferral elections, prospectively and/or retroactively, to ensure that the Plan complies with
Federal and state securities laws.
ARTICLE IV
ELECTIONS
IV.1 ELECTIONS.
(a) AMOUNT OF DEFERRAL. An Eligible Employee may elect on a Salary Reduction Agreement to defer the receipt of all
or a portion (in whole percentages) of his or her: (i) Salary, subject to a minimum deferral of at least ten percent (10%) of his or
her Salary; and (ii) Bonus, subject to a minimum deferral of at least fifteen percent (15%) of his or her Bonus. With respect to
any discretionary Bonus, the Committee in its sole discretion may automatically defer all or a portion of any discretionary Bonus
of an Eligible Employee without such Eligible Employee electing to defer such Bonus or consenting to such deferral (except that
an Eligible Employee may be required to select the required length of the Deferral Period under Section 4.1(b) hereof).
(b) LENGTH OF DEFERRAL. An Eligible Employee making an election pursuant to Section 4.1(a) hereof or, if so
determined by the Committee, an Eligible Employee receiving an automatic deferred Bonus, shall also elect a Deferral Period of
either two (2), three (3), five (5), ten (10) or fifteen (15) years, which Deferral Period shall begin on the January 1st of the Plan
Year for which an election under Section 4.1(a)(i) applies or on the day on which a Deferred Bonus would otherwise have
been paid. If an Eligible Employee makes an election under Section 4.1(a) but makes no election under Section 4.1(b), then the
Deferral Period shall be two (2) years.
(c) EXTENSION OF DEFERRAL PERIOD. Notwithstanding any election made pursuant to Section 4.1(b) above, a
Participant may elect to extend any Deferral Period on a form prescribed by the Committee for either two (2), three
(3), five (5), ten (10) or fifteen (15) additional years, provided that any such election is made at least one (1) year prior to the
expiration of the applicable Deferral Period. Each election to extend a Deferral Period shall be irrevocable.
IV.2 TIMING AND MANNER OF ELECTION.
(a) METHOD OF ELECTION FOR SALARY. Any election to defer payment of a Participant's Salary shall be made by the
Participant in writing to the Committee on a Salary Reduction Agreement on or before the last day of the Plan Year preceding
the Plan Year in which the Salary is earned. Any such election to defer payment of a Participant's Salary shall apply on a pro
rata basis with respect to the entire amount of Salary earned in or for such Plan Year,
-5-
whenever payable, or on such other basis as may be agreed to by the Committee; provided, however, that with respect to a
Participant's Salary for the 1999 Plan Year, any election under Section 4.1(a) shall be made in writing at the time specified by
the Committee but shall be on a prospective basis only. With respect to a Participant's Salary, any such election made by the
last day of the preceding Plan Year shall become effective on the first day of the following Plan Year. An election with respect
to a Participant's Salary under this Article IV is irrevocable and is valid only for the Plan Year commencing immediately
following the date of the election or, in the case of an Employee who first becomes an Eligible Employee during a Plan Year, for
such Plan Year. If a new election is not made with respect to any subsequent Plan Year under Section
4.1(a), Salary earned in such Plan Year shall not be deferred under the Plan.
(b) METHOD OF ELECTION FOR BONUS. Any election to defer payment of a Participant's Bonus shall be made by the
Participant in writing to the Committee on a form prescribed by the Committee on or before the first day of the second quarter
of the Company's fiscal year to which the Bonus relates; provided, however, that with respect to a Participant's Bonus for the
1999 Plan Year, any election under Section 4.1(b) shall be made in writing at the time specified by the Committee. An election
with respect to a Participant's Bonus under this Article IV is irrevocable and is valid only for the fiscal year of the Company
with respect to which the election is made. If a new election is not made with respect to any subsequent fiscal year of the
Company under Section
4.1(a), a Participant's Bonus earned in such fiscal year shall not be deferred under the Plan.
(c) MID-YEAR PARTICIPATION. An individual who becomes an Eligible Employee after the date by which an election
would otherwise be required to be made hereunder may elect to become a Participant (solely with respect to Salary and Bonus
earned after the Salary Reduction Agreement is executed and delivered to the Employer pursuant to the procedures established
by the Committee) within thirty (30) days after the individual becomes an Eligible Employee, by making an election, in writing,
on a form prescribed by the Committee.
IV.3 CHANGE IN STATUS. An election made pursuant to Section 4.1 by a Participant who ceases to be an Eligible
Employee but who does not incur a Termination of Employment shall remain in effect and such Participant shall not be entitled
to receive a distribution from the Plan solely as a result of such change in status.
ARTICLE V
ESTABLISHMENT OF DEFERRED CASH ACCOUNT
V.1 BOOK ENTRY OF DEFERRALS. Deferred Salary and Deferred Bonus shall be credited as a book entry to a
Participant's Deferred Cash Account in the name of the Participant not later than the date such amount would otherwise be
payable to the Participant.
V.2 BOOK ENTRY EARNINGS. Earnings shall be credited to a Participant's Deferred Cash Account in accordance with the
provisions of Article VI.
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V.3 VESTING. A Participant's Deferred Cash Account shall be fully vested at all times, including Earnings thereon.
ARTICLE VI
ADDITIONS TO DEFERRED CASH ACCOUNT
VI.1 MEASURING ALTERNATIVE. The measuring alternative used for the measurement of Earnings on the amounts in a
Participant's Deferred Cash Account shall be selected by the Committee, unless the Committee decides in its sole discretion to
allow each Participant to select in writing, on a form prescribed by the Committee, from among the various measuring
alternatives offered by the Committee. In the event that various measuring alternatives are made available, each Participant may
change the selection of his or her measuring alternative as of the beginning of any calendar quarter (or at such other times and in
such manner as prescribed by the Committee, in its sole discretion), subject to such notice and other administrative procedures
as may be established by the Committee. Notwithstanding anything herein to the contrary, in no event shall the measuring
alternative be less than the prime rate of interest as reported in the Money Rates section of THE WALL STREET JOURNAL
as of the first business day of each quarter within a Plan Year. Once a Participant defers amounts into such Participant's
Deferred Cash Account, the measuring alternative described in the foregoing sentence may not be decreased with respect to
amounts previously deferred into the Deferred Cash Account.
VI.2 CREDITING OF EARNINGS. The Committee shall credit the Earnings computed under this Article VI to the balance in
each Participant's Deferred Cash Account as of the last business day of each calendar quarter, or such other dates as are
selected by the Committee, in its sole discretion, at a rate equal to the performance of the measuring alternative selected by the
Committee for the calendar quarter (or such other applicable period) or, if the Committee allows each Participant to select from
among various measuring alternatives, at a rate equal to the performance of the measuring alternative selected by the Participant
for the calendar quarter (or such other applicable period) to which such selection relates.
VI.3 RULES AND PROCEDURES. The Committee may, in its sole discretion, establish rules and procedures for the
crediting of Earnings and the election of measuring alternatives pursuant to this Article VI.
ARTICLE VII
COMMENCEMENT OF BENEFITS
VII.1 TIME AND FORM OF PAYMENT. Except as otherwise provided in this Article VII and Article XI, a Participant's
Deferred Cash Account shall be paid to the Participant (or, in the case of the Participant's death, his or her Beneficiary) in a
lump sum cash payment as soon as administratively practicable after the earlier of the following to occur: (i) a Participant's
Termination of Employment; or (ii) the end of the applicable Deferral Period. A Participant shall not be entitled to, and the
Employer shall not be obligated to pay to such Participant, the whole or any part of the amounts deferred under the Plan,
except as provided in the Plan.
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VII.2 HARDSHIP DISTRIBUTIONS.
(a) DISTRIBUTION ON ACCOUNT OF HARDSHIP. Upon the request of a Participant, the Committee, in its sole
discretion, may approve an immediate lump sum cash distribution of the Deferred Cash Account to a Participant due to the
Participant's Hardship.
(b) HARDSHIP. For the purposes of this Section 7.2, a Participant shall experience a "Hardship" if, and only if, such
Participant experiences an immediate and heavy financial need and the withdrawal is necessary to pay for expenses directly
resulting from an "Unforeseeable Emergency." An Unforeseeable Emergency is a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of
the Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Participant. The circumstances constituting an
Unforeseeable Emergency shall depend upon the facts of each case, but, in any event, shall not be made to the extent that such
Hardship is or may be relieved: (i) through liquidation or compensation by insurance or otherwise; (ii) by liquidation of the
Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (iii) by
cessation of deferrals under a cash-or-deferred arrangement maintained by the Participant's current employer.
In addition to the requirements set forth in clauses (i), (ii) and (iii) above, as a precondition to a Hardship, a Participant must
have obtained all distributions, other than hardship distributions of salary reduction contributions under a cash-or-deferred
arrangement maintained by any employer pursuant to plan qualified under Section 401(a) of the Code which contains a
cash-or-deferred arrangement, currently available under all plans maintained by any employer.
(c) SUBSTANTIATION. A Participant must provide documentation to the Committee reasonably substantiating his or her
Hardship.
VII.3 IN-SERVICE WITHDRAWALS. Upon thirty (30) days written notice to the Committee on a form provided by the
Committee for such purpose, a Participant may withdraw all or a portion of his Deferred Cash Account (as decreased for the
ten percent (10%) forfeiture provision) at any time while an Employee of the Employer; provided, however, that an amount
equal to ten percent (10%) of the Participant's withdrawal pursuant to this Section 7.3 shall be forfeited.
VII.4 BOOK ENTRY REDUCTIONS. The Company shall make a book entry to a Participant's Deferred Cash Account to
reduce such Participant's Deferred Cash Account in the amount of any payment from such Participant's Deferred Cash
Account.
ARTICLE VIII
FORFEITURE
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Notwithstanding any provision to the contrary hereunder, in the event that a Participant is terminated by the Employer for
Cause, the Participant's Deferred Cash Account excluding any Earnings contributed thereto during the Deferral Period shall be
paid to the Participant in a lump sum cash payment as soon as administratively practicable after such termination.
ARTICLE IX
CLAIMS PROCEDURE
Any claim by a Participant or Beneficiary ("Claimant") with respect to eligibility, participation, contributions, benefits or other
aspects of the operation of the Plan shall be made in writing to the Committee or such other person designated by the
Committee from time to time for such purpose. If the Committee believes that the claim should be denied, the Committee shall
notify the Claimant in writing of the denial of the claim within ninety (90) days after receipt thereof (this period may be extended
an additional ninety (90) days in special circumstances and, in such event, the Claimant shall be notified in writing of the
extension). Such notice shall (i) set forth the specific reason or reasons for the denial making reference to the pertinent
provisions of the Plan or of Plan documents on which the denial is based; (ii) describe any additional material or information
necessary to perfect the claim, and explain why such material or information, if any, is necessary; and (iii) inform the Claimant of
his or her right pursuant to this section to request review of the decision.
A Claimant may appeal the denial of a claim by submitting a written request for review to the Committee, within sixty (60) days
after the date on which such denial is received. Such period may be extended by the Committee for good cause shown. The
claim will then be reviewed by the Committee. A Claimant or his or her duly authorized representative may discuss any issues
relevant to the claim, may review pertinent documents and may submit issues and comments in writing. If the Committee deems
it appropriate, it may hold a hearing as to a claim. If a hearing is held, the Claimant shall be entitled to be represented by
counsel. The Committee shall decide whether or not to grant the claim within sixty (60) days after receipt of the request for
review, but this period may be extended by the Committee for up to an additional sixty (60) days in special circumstances.
Written notice of any such special circumstances shall be sent to the Claimant. Any claim not decided upon in the required time
period shall be deemed denied. All interpretations, determinations and decisions of the Committee with respect to any claim
shall be made in its sole discretion based on the Plan and other relevant documents and shall be final, conclusive and binding on
all persons.
The Committee may at any time alter the claims procedure set forth above, provided that the revised claims procedure
complies with ERISA and the regulations issued thereunder.
ARTICLE X
NON-ALIENATION OF BENEFITS
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A Participant's Deferred Cash Account shall not be subject to alienation, transfer, assignment, garnishment, execution or levy of
any kind, and any attempt to cause any benefits to be so subjected shall not be recognized.
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
XI.1 BENEFITS. Upon a Change in Control of the Company, each Participant hereunder shall receive his or her entire
Deferred Cash Account, from the Plan in a lump sum cash payment, as soon as administratively practicable following such
Change in Control, but in no event later than five (5) days after the date of such Change in Control.
XI.2 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred:
(a) upon any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee
benefit plan of the Company, any company owned, directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of Common Stock of the Company, as a group or individually by Steven S. Elbaum or
The Alpine Group, Inc.), becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's
then outstanding securities (including, without limitation, securities owned at the time of any increase in ownership);
(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into an agreement with the Company to effect a
transaction described in paragraph (a), (c), or (d) of this section) or a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than
the Board whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the
Board.
(c) upon the merger or consolidation of the Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or consolidation effected to implement a
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recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in (a)
above) acquires more than twenty-five percent (25%) of the combined voting power of the Company's then outstanding
securities shall not constitute a Change in Control of the Company; or
(d) upon the stockholder's of the Company approval of a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's assets other than the sale of all or substantially all
of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or
more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.
ARTICLE XII
TERMINATION OR AMENDMENT OF THE PLAN
Notwithstanding any other provision of the Plan, the Board may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that
no amendment or termination shall reduce or terminate the then benefit of any Participant or Beneficiary. Upon an amendment
or suspension, the Company shall not be required to distribute a Participant's Deferred Cash Account prior to the end of the
Deferral Period, but, in no event shall the measuring alternative be reduced with respect to amounts in a Participant's Deferred
Cash Account. In the event of a suspension of the Plan, the Company may distribute a Participant's Deferred Cash Account
prior to the end of the Deferral Period in a lump sum cash payment at the discretion of the Board or the Committee. In the
event of a termination of the Plan, a Participant's Deferred Cash Account shall be distributed in a lump sum cash payment, as
soon as administratively practicable following such termination.
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ARTICLE XIII
UNFUNDED PLAN
The Plan shall not be construed to require the Employer to fund any of the benefits payable under the Plan or to set aside or
earmark any monies or other assets specifically for payments under the Plan. The Plan is intended to constitute an "unfunded"
plan for incentive compensation and any amounts payable hereunder shall be paid by the Employer out of its general assets.
Participants and their designated Beneficiaries shall not have any interest in any specific asset of the Employer as a result of the
Plan. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to
create a trust of any kind, or a fiduciary relationship amongst any Employer, the Committee, and the Participants, their
designated Beneficiaries or any other person. Any funds which may be invested under the provisions of the Plan shall continue
for all purposes to be part of the general funds of the applicable Employer and no person other than the applicable Employer
shall by virtue of the provisions of the Plan have any interest in such funds. With respect to any payments as to which a
Participant has a fixed and vested interest but which are not yet made to a Participant by the applicable Employer, nothing
contained herein shall give any such Participant any rights that are greater than those of an unsecured general creditor of the
applicable Employer. The Employer may, in its sole discretion, establish a "rabbi trust" to pay amounts payable hereunder. If
the Employer decides to establish any advance accrued reserve on its books against the future expense of benefits payable
hereunder, or if the Employer is required to fund a trust under the Plan, such reserve or trust shall not under any circumstances
be deemed to be an asset of the Plan.
ARTICLE XIV
GENERAL PROVISIONS
XIV.1 WITHHOLDING OF TAXES. The Employer shall have the right to make such provisions as it deems necessary or
appropriate to satisfy any obligations it may have to withhold Federal, state or local income or other taxes incurred by reason of
payments pursuant to the Plan. In lieu thereof, the Employer shall have the right to withhold the amount of such taxes from any
other sums due or to become due from the Employer to the Participant upon such terms and conditions as the Committee may
prescribe.
XIV.2 OTHER PLANS. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
XIV.3 OTHER BENEFITS. No payment under the Plan shall be deemed compensation for purposes of computing benefits
under any retirement plan of the Employer nor affect any benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the level of compensation.
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XIV.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the deferral of any amount hereunder shall impose any
obligations on the Employer to retain any Participant as an Employee nor shall it impose on the part of any Participant any
obligation to remain as an Employee of the Employer.
XIV.5 COSTS. The Company shall bear all expenses included in administering the Plan.
XIV.6 MINORS AND INCOMPETENTS. In the event that the Committee finds that a Participant is unable to care for his or
her affairs because of illness or accident, then benefits payable hereunder, unless claim has been made therefor by a duly
appointed guardian, committee, or other legal representative, may be paid in such manner as the Committee shall determine,
and the application thereof shall be a complete discharge of all liability for any payments or benefits to which such Participant
was or would have been otherwise entitled under the Plan. Any payments to a minor from the Plan may be paid by the
Committee in its sole and absolute discretion (i) directly to such minor; (ii) to the legal or natural guardian of such minor; or (iii)
to any other person, whether or not appointed guardian of the minor, who shall have the care and custody of such minor. The
receipt by such individual shall be a complete discharge of all liability under the Plan therefor.
XIV.7 ASSIGNMENT. The Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns
and the Participants and their heirs, executors, administrators and legal representatives. In the event that the Company sells all
or substantially all of the assets of its business and the acquiror of such assets assumes the obligations hereunder, the Company
shall be released from any liability imposed herein and shall have no obligation to provide any benefits payable hereunder.
XIV.8 TOP-HAT STATUS. The Plan is intended to constitute a "top-hat" pension plan under Sections 201(2) and 301(a)(3)
of ERISA. To the extent necessary to comply with the top-hat requirements, the Committee may terminate an Eligible
Employee as a Participant and may, in its sole discretion, distribute his or her Deferred Cash Account.
XIV.9 GOVERNING LAW. Except to the extent preempted by ERISA or other Federal law, the Plan shall be governed by
and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws).
XIV.10 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.
XIV.11 CONSTRUCTION. Wherever any words are used in the Plan in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would
so apply.
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XIV.12 HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
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Exhibit 10(jj)
SUPERIOR TELECOM INC.
DEFERRED STOCK ACCOUNT PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I. PURPOSE....................................................................1
ARTICLE II. DEFINITIONS................................................................1
ARTICLE III. ADMINISTRATION.............................................................4
ARTICLE IV. SHARES; ADJUSTMENT UPON CERTAIN EVENTS.....................................5
ARTICLE V. ELECTIONS..................................................................6
ARTICLE VI. MATCHING CONTRIBUTIONS.....................................................8
ARTICLE VII. ESTABLISHMENT OF DEFERRED STOCK ACCOUNT....................................8
ARTICLE VIII. ADDITIONS TO DEFERRED STOCK ACCOUNT........................................9
ARTICLE IX. COMMENCEMENT OF BENEFITS...................................................9
ARTICLE X. FORFEITURE................................................................10
ARTICLE XI. CLAIMS PROCEDURE..........................................................10
ARTICLE XII. NON-ALIENATION OF BENEFITS................................................11
ARTICLE XIII. CHANGE IN CONTROL PROVISIONS..............................................11
ARTICLE XIV. TERMINATION OR AMENDMENT OF THE PLAN......................................12
ARTICLE XV. UNFUNDED PLAN................................................................13
ARTICLE XVI. GENERAL PROVISIONS...........................................................13
SUPERIOR TELECOM INC.
DEFERRED STOCK ACCOUNT PLAN
ARTICLE I
PURPOSE
The purpose of the Plan, which is established along with a "rabbi trust," is to provide a select group of management and highly
compensated employees of the Employer with the opportunity to: (i) defer the receipt of all or a portion of his or her Bonus; (ii)
defer delivery of Stock Option Gains; and
(iii) receive an employer Matching Contribution in shares of Common Stock in accordance with the terms and conditions set
forth herein.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
II.1 "AFFILIATE" shall mean each of the following: (i) any Subsidiary;
(ii) any Parent; (iii) any corporation, trade or business (including, without limitation, a partnership or limited liability company)
which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) by the Company or one of its Affiliates; and (iv) any other entity in which the Company or any of its
Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee.
II.2 "BENEFICIARY" shall mean the individual designated by the Participant, on a form acceptable by the Committee, to
receive benefits payable under the Plan in the event of the Participant's death. If no Beneficiary is designated, the Participant's
Beneficiary shall be his or her spouse, or if the Participant is not married, the Participant's estate. Upon the acceptance by the
Committee of a new Beneficiary designation, all Beneficiary designations previously filed shall be canceled. The Committee shall
be entitled to rely on the last Beneficiary designation filed by the Participant and accepted by the Committee prior to his or her
death.
II.3 "BOARD" shall mean the Board of Directors of the Company.
II.4 "BONUS" shall mean a Participant's performance bonus or any other bonus (whether or not discretionary) paid by the
Employer to the Participant in shares of Common Stock, including shares of restricted Common Stock, that is designated by
the Committee as eligible for deferral under the Plan.
II.5 "CAUSE" shall mean with respect to a Participant's Termination of Employment, a Participant's fraud, embezzlement or
commission of a crime with regard to the Employer or its assets or a Participant's breach of any noncompetition or
nonsolicitation provision or breach of confidentiality, to the extent set forth in a written agreement between the Participant and
the Company. The Committee shall have sole discretion in determining whether Cause exists, and its determination shall be
final, binding and conclusive.
Company. The Committee shall have sole discretion in determining whether Cause exists, and its determination shall be final,
binding and conclusive.
II.6 "CHANGE IN CONTROL" shall have the meaning set forth in Section 13.2.
II.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also
be a reference to any successor provision.
II.8 "COMMITTEE" shall mean the Stock Option Committee of the Board or such other committee of the Board which
consists solely of at least two non-employee directors, each of whom is intended to be an "outside director," as defined under
Section 162(m) of the Code and a "non-employee director," as defined under Section 16(b) of the Exchange Act. In the event
that the Committee does not satisfy such requirements, it shall not affect the validity of any contributions or deferral elections
hereunder.
II.9 "COMMON STOCK" shall mean common stock, $.01 par value per share, of the Company.
II.10 "COMPANY" shall mean Superior TeleCom Inc. or any successor corporation by merger, consolidation or transfer of
assets substantially as a whole.
II.11 "DEEMED DIVIDENDS" shall mean the amount of dividends (whether stock or cash), if any, which are declared on a
share of Common Stock multiplied by the number of shares of Common Stock credited to the Deferred Stock Account.
II.12 "DEFERRAL PERIOD" shall mean the earlier of: (i) the period of deferral selected by the Participant for the period
described in Section 5.1(b), as may be extended pursuant to Section 5.1(c) or (ii) the period beginning on the effective date of
a deferral election and ending on a Participant's Termination of Employment.
II.13 "DEFERRED BONUS" shall mean the Bonus deferred by a Participant under Section 5.1(a)(i) hereof.
II.14 "DEFERRED STOCK OPTION GAINS" shall mean the Stock Option Gains deferred under Section 5.1(a)(ii) hereof.
II.15 "DEFERRED STOCK ACCOUNT" shall mean the individual account established pursuant to Article VII to which a
Participant's Deferred Bonus and Deferred Stock Option Gains are credited.
II.16 "DISABILITY" shall mean any disability as determined under the Employer's long term disability policies, provided that
the Participant is entitled to and is receiving long term disability benefits under such policies.
II.17 "EFFECTIVE DATE" shall mean June 1, 1999.
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II.18 "ELIGIBLE EMPLOYEE" shall mean an Employee who is a member of a select group of management or highly
compensated employees and who is designated by the Committee, in its sole discretion, as an Eligible Employee. Any Eligible
Employee shall continue to be eligible to participate in the Plan until he or she ceases to be an Eligible Employee, whether by
reason of his or her Termination of Employment or by reason of the Committee's determination in its sole discretion that he or
she should no longer be designated as an Eligible Employee.
II.19 "ELIGIBLE STOCK OPTION" shall mean one or more nonqualified stock options (including incentive stock options
disqualified as such and treated as nonqualified stock options) selected by the Committee in its sole discretion as eligible for
deferral of Stock Option Gains hereunder.
II.20 "EMPLOYEE" shall mean any person employed by the Employer excluding any "leased employee," as defined in Section
414(n) of the Code, any independent contractor or agent.
II.21 "EMPLOYER" shall mean the Company and any Affiliate.
II.22 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
II.23 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
II.24 "MATCHING CONTRIBUTION" shall mean the contribution made pursuant to Article VI hereof.
II.25 "PARENT" shall mean any parent corporation of the Company within the meaning of Section 424(e) of the Code.
II.26 "PARTICIPANT" shall mean any Eligible Employee who: (i) elects to defer his or her Bonus or Stock Option Gains in
accordance with the terms hereunder; and (ii) has a balance in his or her Deferred Stock Account under the Plan. A Participant
shall cease to be permitted to defer his or her Bonus or Stock Option Gains with regard to a Plan Year if he or she is not, or
ceases to be, an Eligible Employee with regard to the Plan.
II.27 "PLAN" shall mean the Superior TeleCom Inc. Deferred Stock Account Plan.
II.28 "PLAN YEAR" shall mean the calendar year, except that the first Plan Year shall be the short Plan Year commencing on
the Effective Date and ending on December 31, 1999.
II.29 "STOCK-FOR-STOCK EXERCISE" shall mean the payment of the exercise price of the Eligible Stock Option with
Common Stock owned by the Participant for at least six (6) months (and for which the Participant has good title free and clear
of any liens and encumbrances and has represented that he has owned the shares of Common Stock for at least six (6) months)
based on the fair market value of the Common Stock on the exercise date. The Committee (or its delegate), in its sole
discretion, shall determine whether payment of the exercise price of the
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Eligible Stock Option with Common Stock may be accomplished through attestation or by physical tender of the shares.
II.30 "STOCK OPTION GAINS" shall mean the number of shares of Common Stock equal in number to (i) the shares of
Common Stock subject to an Eligible Stock Option less (ii) the number of shares of Common Stock delivered to satisfy the
exercise price for the Eligible Stock Option pursuant to a Stock-for-Stock Exercise.
II.31 "SUBSIDIARY" shall mean any corporation that is defined as a subsidiary corporation in Section 424(f) of the Code.
II.32 "TERMINATION OF EMPLOYMENT" shall mean termination of employment as an Employee of the Employer for any
reason whatsoever, including but not limited to death, retirement, resignation, Disability, dismissal (with or without Cause) or the
cessation of an entity as an Affiliate.
ARTICLE III
ADMINISTRATION
III.1 THE COMMITTEE. The Plan shall be administered by the Committee.
III.2 DUTIES OF THE COMMITTEE. The Committee (or its delegate) shall have the exclusive right, power and authority to
administer, apply and interpret the Plan and any other Plan documents and to decide any questions and settle all controversies
and disputes that may arise in connection with the operation or administration of the Plan. Without limiting the generality of the
foregoing, the Committee shall have the sole and absolute discretionary authority: (i) to take all actions and make all decisions
with respect to the eligibility for, and the amount of, benefits payable under the Plan; (ii) to formulate, interpret and apply rules,
regulations and policies necessary to administer the Plan in accordance with its terms; (iii) to decide questions, including legal or
factual questions, relating to the calculation and payment of benefits under the Plan;
(iv) to resolve and/or clarify any ambiguities, inconsistencies and omissions arising under the Plan or other Plan documents; and
(v) to process and approve or deny benefit claims and rule on any benefit exclusions. All determinations made by the
Committee (or any delegate) with respect to any matter arising under the Plan and any other Plan documents including, without
limitation, the interpretation and administration of the Plan shall be final, binding and conclusive on all parties.
III.3 ADVISORS. The Company, the Board or the Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan, and the Committee may rely upon any advice or opinion received from
any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred for the
engagement of such counsel, consultant or agent shall be paid by the Company. The Committee may also rely on information,
and consider recommendations, provided by the Board or the executive officers of the Company.
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III.4 ACTION BY MAJORITY. Decisions of the Committee shall be made by a majority of its members attending a meeting
at which a quorum is present (which meeting may be held telephonically), or by written action in accordance with applicable
law.
III.5 LIABILITY OF COMMITTEE MEMBERS. No member of the Committee and no officer, director or employee of the
Employer shall be liable for any action or inaction with respect to his or her functions under the Plan unless such action or
inaction is adjudged to be due to fraud. Further, no such person shall be personally liable merely by virtue of any instrument
executed by him or her or on his or her behalf in connection with the Plan.
III.6 INDEMNIFICATION OF COMMITTEE MEMBERS. Each Employer shall indemnify, to the full extent permitted by
law and its Certificate of Incorporation and By-laws (but only to the extent not covered by insurance) its officers and directors
(and any employee involved in carrying out the functions of the Employer under the Plan) and each member of the Committee
against any expenses, including amounts paid in settlement of a liability, which are reasonably incurred in connection with any
legal action to which such person is a party by reason of his or her duties or responsibilities with respect to the Plan (other than
as a Participant).
III.7 SECURITIES LAW COMPLIANCE. The Committee shall impose such rules designed to facilitate compliance with
Federal and state securities laws, including to the extent applicable, the limitations of Section 4(2) and Rule 701 under the
Securities Act of 1933, as amended, and shall have the authority to suspend the Plan and take any action necessary, including
revoking a Participant's deferral elections, prospectively and/or retroactively, to ensure that the Plan complies with Federal and
state securities laws.
ARTICLE IV
SHARES; ADJUSTMENT UPON CERTAIN EVENTS
IV.1 SHARES TO BE DELIVERED. Shares to be delivered under the Plan shall be: (i) with respect to shares of Common
Stock contributed as a Matching Contribution, shares of Common Stock reacquired by the Company and held in treasury; (ii)
with respect to shares of Common Stock deferred as Deferred Stock Option Gains upon the exercise of an Eligible Stock
Option, shares of Common Stock held under the applicable stock option plan of the Company, including, without limitation, the
Company's 1996 Stock Option Plan; or (iii) with respect to shares of Common Stock deferred as Deferred Bonus, either (x)
shares of Common Stock held under the applicable restricted stock plan of the Company, if any, or (y) shares of Common
Stock reacquired by the Company and held in treasury.
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IV.2 ADJUSTMENTS UPON CERTAIN EVENTS.
(a) ADJUSTMENTS. The existence of the Plan and any Deferred Stock Account shall not affect in any way the right or power
of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting Common Stock, the dissolution or liquidation of the
Company or any sale or transfer of all or part of the assets or business of the Company, or any other corporate act or
proceeding.
(b) CAPITAL STRUCTURE. In the event of (i) any such change in the capital structure or business of the Company by reason
of any stock dividend or distribution, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other
than Common Stock, sale or transfer of all or part of its assets or business, reclassification of its capital stock, or any similar
change affecting the Company's capital structure or business and (ii) the Committee determines an adjustment is appropriate
under the Plan, then the aggregate number and kind of shares of Common Stock held in the Deferred Stock Account shall be
appropriately adjusted consistent with such change in such manner as the Committee may deem necessary to reflect the change,
and any such adjustment determined by the Committee shall be binding and conclusive on the Company and all Participants and
their respective heirs, executors, administrators, successors and assigns.
(c) FRACTIONAL SHARES. Fractional shares of Common Stock resulting from any adjustment in shares of Common Stock
pursuant to
Section 4.2(a) or (b) or any other provision hereunder shall be aggregated until, and eliminated at, the time of exercise by
rounding-down for fractions less than one-half (1/2) and rounding-up for fractions equal to or greater than one-half (1/2). No
cash settlements shall be made with respect to fractional shares eliminated by rounding. Notice of any adjustment shall be given
by the Committee to each Participant whose Deferred Stock Account has been adjusted and such adjustment (whether or not
such notice is given) shall be effective and binding for all purposes of the Plan.
ARTICLE V
ELECTIONS
V.1 ELECTIONS.
(a) AMOUNT OF DEFERRAL. An Eligible Employee may elect in writing on a form prescribed by the Employer to defer the
receipt of all or a portion (in whole percentages) of his or her: (i) Bonus, subject to a minimum deferral of at least fifteen percent
(15%) of his or her Bonus; and (ii) Stock Option Gains. With respect to any discretionary Bonus, the Committee in its sole
discretion may automatically defer all or a portion of any discretionary Bonus of an
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Eligible Employee without such Eligible Employee electing to defer such Bonus or consenting to such deferral (except that an
Eligible Employee may be required to select the required length of the Deferral Period under Section 5.1(b) hereof).
(b) LENGTH OF DEFERRAL. An Eligible Employee making an election pursuant to Section 5.1(a) hereof or, if so
determined by the Committee, an Eligible Employee receiving an automatic deferred Bonus, shall also elect a Deferral Period of
either two (2), three (3), five (5), ten (10) or fifteen (15) years, which Deferral Period shall begin on the day on which a
Deferred Bonus and/or Deferred Stock Option Gains would otherwise have been paid. If an Eligible Employee makes an
election under Section 5.1(a) but makes no election under Section 5.1(b), then the Deferral Period shall be two (2) years.
(c) EXTENSION OF DEFERRAL PERIOD. Notwithstanding any election made pursuant to Section 5.1(b) above, a
Participant may elect to extend any Deferral Period on a form prescribed by the Committee for either two (2), three
(3), five (5), ten (10) or fifteen (15) additional years, provided that any such election is made at least one (1) year prior to the
expiration of the applicable Deferral Period. Each election to extend a Deferral Period shall be irrevocable.
V.2 TIMING AND MANNER OF BONUS DEFERRAL ELECTION.
(a) METHOD OF ELECTION. Any election to defer payment of a Participant's Bonus shall be made by the Participant in
writing to the Committee on a form prescribed by the Employer on or before the first day of the second quarter of the
Company's fiscal year to which the Bonus relates; provided, however, that with respect to Participant's Bonus for the 1999
Plan Year, any election under this Section 5.2(a) shall be made in writing at the time specified by the Committee.
Notwithstanding the foregoing, an election to defer payment of a Bonus which is in the form of shares of restricted Common
Stock shall be made by the Participant in writing to the Committee on a form prescribed by the Employer at least six (6)
months prior to the date on which the restrictions on such shares of restricted Common Stock lapse.
(b) IRREVOCABLE ELECTION. An election with respect to a Participant's Bonus under this Article V is irrevocable. An
election with respect to a Participant's Bonus (other than a Bonus which is in the form of shares of restricted Common Stock) is
valid only for the fiscal year of the Company with respect to which the election is made. If a new election is not made with
respect to any subsequent fiscal year of the Company under Section
5.1(a), a Participant's Bonus (other than a Bonus which is in the form of shares of restricted Common Stock) earned in such
fiscal year shall not be deferred under the Plan. An election with respect to a Bonus which is in the form of shares of restricted
Common Stock is valid only for shares of restricted Common Stock for which the restrictions lapse at any time after six (6)
months following the election.
(c) MID-YEAR PARTICIPATION. An individual who becomes an Eligible Employee after the date by which an election
would otherwise be required to be made hereunder may elect to become a Participant (solely with respect to Bonus earned
after an election pursuant to Section 5.1(a) is executed and delivered to the Employer pursuant to the procedures
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established by the Committee) within thirty (30) days after the individual becomes an Eligible Employee, by making an election,
in writing, on a form prescribed by the Committee.
V.3 TIMING AND MANNER OF STOCK OPTION GAINS DEFERRAL ELECTION. Any election to defer payment of
a Participant's Stock Option Gains shall be made by the Participant in writing to the Committee on a form prescribed by the
Employer at least six (6) months prior to the date the Participant exercises the Eligible Stock Option. The deferral election for
such Eligible Stock Option shall be irrevocable and shall apply to the Participant's exercise of the Eligible Stock Option at any
time after six (6) months following the election until the expiration date of the Eligible Stock Option.
V.4 CHANGE IN STATUS. An election made pursuant to Section 5.1 by a Participant who ceases to be an Eligible
Employee but who does not incur a Termination of Employment shall remain in effect and such Participant shall not be entitled
to receive a distribution from the Plan solely as a result of such change in status.
ARTICLE VI
MATCHING CONTRIBUTIONS
The Employer shall contribute a Matching Contribution in shares of Common Stock to a Participant's Deferred Stock Account
equal to: (i) 25% of the Deferred Stock Account deferred for at least three (3) years and (ii) 25% of the Deferred Stock
Account deferred for at least five (5) years. Any Matching Contribution shall be credited to the Participant's Deferred Stock
Account as soon as practicable following satisfaction of the three (3) year period (with respect to Deferral Periods of at least
three (3) years or at least three (3) years but less than five (5) years) or the three (3) year and the five (5) year periods, as
applicable (with respect to Deferral Periods of at least five (5) years). For purposes of this Article VI, with respect to Deferred
Bonus which is in the form of shares of restricted Common Stock, such shares shall be treated as if the Deferral Period
commenced on the date such shares of restricted Common Stock were awarded to the Participant notwithstanding that such
shares are held in the custody of the Company.
ARTICLE VII
ESTABLISHMENT OF DEFERRED STOCK ACCOUNT
VII.1 CREDITING OF DEFERRALS. Deferred Bonus and Deferred Stock Option Gains shall be credited to the
Participant's Deferred Stock Account not later than the date such amount would otherwise be payable to the Participant.
Notwithstanding the foregoing, with respect to Deferred Bonus which is in the form of shares of restricted Common Stock, the
Company shall retain custody of the shares of restricted Common Stock during the applicable restriction period and shall credit
such shares to the Participant's Deferred Stock Account not later than the date immediately prior to the date the applicable
restriction period expires.
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VII.2 VESTING. A Participant's Deferred Stock Account shall be fully vested at all times, except that with regard to shares of
restricted Common Stock, such shares and any Matching Contributions with regard thereto, shall not be vested until the date
the applicable restriction period expires.
VII.3 OWNERSHIP. Prior to the end of the Deferral Period, the Participant shall not have any rights as a stockholder of the
Company with respect to shares of Common Stock held in a Participant's Deferred Stock Account, except the right to have
Deemed Dividends, if any, credited to his or her Deferred Stock Account and adjustment made to the shares of Common
Stock under the Deferred Stock Account under Article IV.
ARTICLE VIII
ADDITIONS TO DEFERRED STOCK ACCOUNT
VIII.1 PLAN INVESTMENTS. Amounts deferred under the Plan shall be held solely in the form of Common Stock.
VIII.2 DIVIDENDS. At such time or times as any dividends on Common Stock shall be distributed to the Company's
stockholders, the Company shall credit to the Deferred Stock Account the Deemed Dividends. Deemed Dividends so credited
to the Deferred Stock Account which are cash dividends shall be reinvested in shares of Common Stock (based on the fair
market value of such shares on the date the dividend is paid).
ARTICLE IX
COMMENCEMENT OF BENEFITS
Except as otherwise provided in this Article IX and Article XIII, a Participant's Deferred Stock Account shall be paid to the
Participant (or, in the case of the Participant's death, his or her Beneficiary) in a lump sum payment payable solely in shares of
Common Stock as soon as administratively practicable after the earlier of the following to occur: (i) a Participant's Termination
of Employment; or (ii) the end of the applicable Deferral Period. A Participant shall not be entitled to, and the Employer shall
not be obligated to pay to such Participant, the whole or any part of the amounts deferred under the Plan, except as provided in
the Plan.
Any remaining fractional shares of Common Stock shall be treated in the manner described in Section 4.2(c) hereof.
ARTICLE X
FORFEITURE
Notwithstanding any provision to the contrary hereunder, in the event that a Participant is terminated by the Employer for
Cause, the Participant's Deferred Stock Account excluding any Matching Contributions shall be paid to the Participant in a
lump sum payment consisting solely of shares of Common Stock as soon as administratively practicable after such termination.
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ARTICLE XI
CLAIMS PROCEDURE
Any claim by a Participant or Beneficiary ("Claimant") with respect to eligibility, participation, contributions, benefits or other
aspects of the operation of the Plan shall be made in writing to the Committee or such other person designated by the
Committee from time to time for such purpose. If the Committee believes that the claim should be denied, the Committee shall
notify the Claimant in writing of the denial of the claim within ninety (90) days after receipt thereof (this period may be extended
an additional ninety (90) days in special circumstances and, in such event, the Claimant shall be notified in writing of the
extension). Such notice shall (i) set forth the specific reason or reasons for the denial making reference to the pertinent
provisions of the Plan or of Plan documents on which the denial is based; (ii) describe any additional material or information
necessary to perfect the claim, and explain why such material or information, if any, is necessary; and (iii) inform the Claimant of
his or her right pursuant to this section to request review of the decision.
A Claimant may appeal the denial of a claim by submitting a written request for review to the Committee, within sixty (60) days
after the date on which such denial is received. Such period may be extended by the Committee for good cause shown. The
claim will then be reviewed by the Committee. A Claimant or his or her duly authorized representative may discuss any issues
relevant to the claim, may review pertinent documents and may submit issues and comments in writing. If the Committee deems
it appropriate, it may hold a hearing as to a claim. If a hearing is held, the Claimant shall be entitled to be represented by
counsel. The Committee shall decide whether or not to grant the claim within sixty (60) days after receipt of the request for
review, but this period may be extended by the Committee for up to an additional sixty (60) days in special circumstances.
Written notice of any such special circumstances shall be sent to the Claimant. Any claim not decided upon in the required time
period shall be deemed denied. All interpretations, determinations and decisions of the Committee with respect to any claim
shall be made in its sole discretion based on the Plan and other relevant documents and shall be final, conclusive and binding on
all persons.
The Committee may at any time alter the claims procedure set forth above, provided that the revised claims procedure
complies with ERISA and the regulations issued thereunder.
ARTICLE XII
NON-ALIENATION OF BENEFITS
A Participant's Deferred Stock Account shall not be subject to alienation, transfer, assignment, garnishment, execution or levy
of any kind, and any attempt to cause any benefits to be so subjected shall not be recognized.
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ARTICLE XIII
CHANGE IN CONTROL PROVISIONS
XIII.1 BENEFITS.
(a) LUMP SUM DISTRIBUTION. Upon a Change in Control of the Company, each Participant hereunder shall receive his or
her entire Deferred Stock Account, from the Plan in a lump sum payment payable solely in shares of Common Stock, as soon
as administratively practicable following such Change in Control, but in no event later than five (5) days after the date of such
Change in Control. Any remaining fractional shares of Common Stock shall be treated in the manner described in Section
4.2(c) hereof.
(b) MATCHING CONTRIBUTION ACCELERATION. Upon a Change in Control of the Company, the Employer shall
contribute on such date the Matching Contribution that otherwise would be contributed to a Participant's Deferred Stock
Account pursuant to Article VI hereof if the Participant's outstanding election pursuant to Section 5.3 in effect at the time of the
Change in Control would have resulted in a Matching Contribution being made pursuant to Article VI at any time before the
end of the Deferral Period (assuming that the Participant would have remained continuously employed through the Deferral
Period).
(c) ELECTION REVOCABLE. Upon a Change in Control of the Company, a Participant's election to defer Stock Option
Gains pursuant to Section 5.2(a) hereof may be revoked by the Participant upon written notice to the Company of a
Participant's intent to exercise the Eligible Stock Option without any deferral of Stock Option Gains or may be revoked by the
Company contingent upon the occurrence of a Change in Control.
XIII.2 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred:
(a) upon any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee
benefit plan of the Company, any company owned, directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of Common Stock of the Company, as a group or individually by Steven S. Elbaum or
The Alpine Group, Inc.), becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's
then outstanding securities (including, without limitation, securities owned at the time of any increase in ownership);
(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into an agreement with the Company to effect a
transaction described in paragraph (a), (c), or (d) of this section) or a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the
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Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board
whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the
Board.
(c) upon the merger or consolidation of the Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person (other than those covered by the exceptions in (a) above) acquires more
than twenty-five percent (25%) of the combined voting power of the Company's then outstanding securities shall not constitute
a Change in Control of the Company; or
(d) upon the stockholder's of the Company approval of a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's assets other than the sale of all or substantially all
of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or
more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.
ARTICLE XIV
TERMINATION OR AMENDMENT OF THE PLAN
Notwithstanding any other provision of the Plan, the Board may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that
no amendment or termination shall reduce or terminate the then benefit of any Participant or Beneficiary or the right to receive
an accelerated Matching Contribution under Section 13.1(b) hereof. Upon an amendment or suspension, the Company shall
not be required to distribute a Participant's Deferred Stock Account prior to the end of the Deferral Period, but, in the event of
a suspension of the Plan, may do so in a lump sum payment, at the discretion of the Board or the Committee, payable solely in
shares of Common Stock. In the event of a termination of the Plan, a Participant's Deferred Stock Account shall be distributed
in a lump sum payment payable solely in shares of Common Stock as soon as administratively practicable following such
termination.
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ARTICLE XV
UNFUNDED PLAN
The Plan shall not be construed to require the Employer to fund any of the benefits payable under the Plan or to set aside or
earmark any monies or other assets specifically for payments under the Plan. The Plan is intended to constitute an "unfunded"
plan for incentive compensation and any amounts payable hereunder shall be paid by the Employer out of its general assets.
Participants and their designated Beneficiaries shall not have any interest in any specific asset of the Employer as a result of the
Plan. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to
create a trust of any kind, or a fiduciary relationship amongst any Employer, the Committee, and the Participants, their
designated Beneficiaries or any other person. Any funds which may be invested under the provisions of the Plan shall continue
for all purposes to be part of the general funds of the applicable Employer and no person other than the applicable Employer
shall by virtue of the provisions of the Plan have any interest in such funds. With respect to any payments as to which a
Participant has a fixed and vested interest but which are not yet made to a Participant by the applicable Employer, nothing
contained herein shall give any such Participant any rights that are greater than those of an unsecured general creditor of the
applicable Employer. The Employer shall establish a "rabbi trust" to hold the shares of Common Stock hereunder and to pay
the shares of Common Stock payable hereunder. If the Employer decides to establish any advance accrued reserve on its
books against the future expense of benefits payable hereunder, or if the Employer is required to fund a trust under the Plan,
such reserve or trust shall not under any circumstances be deemed to be an asset of the Plan.
ARTICLE XVI
GENERAL PROVISIONS
XVI.1 WITHHOLDING OF TAXES. The Employer shall have the right to make such provisions as it deems necessary or
appropriate to satisfy any obligations it may have to withhold Federal, state or local income or other taxes incurred by reason of
payments pursuant to the Plan. In lieu thereof, the Employer shall have the right to withhold the amount of such taxes from any
other sums due or to become due from the Employer to the Participant upon such terms and conditions as the Committee may
prescribe.
XVI.2 OTHER PLANS. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
XVI.3 OTHER BENEFITS. No payment under the Plan shall be deemed compensation for purposes of computing benefits
under any retirement plan of the Employer nor affect any benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the level of compensation.
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XVI.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the deferral of any amount hereunder shall impose any
obligations on the Employer to retain any Participant as an Employee nor shall it impose on the part of any Participant any
obligation to remain as an Employee of the Employer.
XVI.5 COSTS. The Company shall bear all expenses included in administering the Plan.
XVI.6 MINORS AND INCOMPETENTS. In the event that the Committee finds that a Participant is unable to care for his or
her affairs because of illness or accident, then benefits payable hereunder, unless claim has been made therefor by a duly
appointed guardian, committee, or other legal representative, may be paid in such manner as the Committee shall determine,
and the application thereof shall be a complete discharge of all liability for any payments or benefits to which such Participant
was or would have been otherwise entitled under the Plan. Any payments to a minor from the Plan may be paid by the
Committee in its sole and absolute discretion (i) directly to such minor; (ii) to the legal or natural guardian of such minor; or (iii)
to any other person, whether or not appointed guardian of the minor, who shall have the care and custody of such minor. The
receipt by such individual shall be a complete discharge of all liability under the Plan therefor.
XVI.7 SECTION 16(B) OF THE EXCHANGE ACT. To the extent applicable, all elections and transactions under the Plan
by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any
applicable condition under Rule 16b-3. The Committee may establish and adopt written administrative guidelines, designed to
facilitate compliance with
Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and
the transaction of business thereunder.
XVI.8 TOP-HAT STATUS. The Plan is intended to constitute a "top-hat" pension plan under Sections 201(2) and 301(a)(3)
of ERISA. To the extent necessary to comply with the top-hat requirements, the Committee may terminate an Eligible
Employee as a Participant and may, in its sole discretion, distribute his or her Deferred Stock Account.
XVI.9 SECTION 162(M) OF THE CODE. The portion of the Plan attributable to the Stock Option Gains and Deferred
Stock Option Gains is intended to comply with Section 162(m) of the Code and shall be interpreted as part of the applicable
stock option plan of the Company.
XVI.10 REPRESENTATION AND LEGEND. The Committee may require each person receiving shares of Common Stock
hereunder to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by the Plan, the certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association
system upon whose system the Common Stock is then quoted, any applicable Federal or state
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securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
XVI.11 LISTING AND OTHER CONDITIONS.
(a) As long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock hereunder shall be conditioned upon such shares being listed on such
exchange or system. The Company shall have no obligation to issue such shares unless and until such shares are so listed, and
the right to receive any shares of Common Stock shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock
hereunder is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the
statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery,
or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Common Stock issued hereunder and the right to receive any shares of
Common Stock shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in
the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this
Section 14.10, any shares of Common Stock affected by such suspension which remain payable shall be payable as to all
shares payable before such suspension and as to shares which would otherwise have become payable during the period of such
suspension.
XVI.12 ASSIGNMENT. The Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns
and the Participants and their heirs, executors, administrators and legal representatives. In the event that the Company sells all
or substantially all of the assets of its business and the acquiror of such assets assumes the obligations hereunder, the Company
shall be released from any liability imposed herein and shall have no obligation to provide any benefits payable hereunder.
XVI.13 GOVERNING LAW. Except to the extent preempted by ERISA or other Federal law, the Plan shall be governed by
and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws).
XVI.14 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.
XVI.15 CONSTRUCTION. Wherever any words are used in the Plan in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would
so apply.
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XVI.16 HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
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EXHIBIT 18
[Arthur Andersen Letterhead]
Superior Telecom, Inc.
150 Interstate North Parkway
Suite 110
Atlanta, Georgia 30339
February 13, 2001
Gentlemen:
This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountant
whenever there has been a change in an accounting principle or practice.
In the fourth quarter of 2000, the Company changed its method of amortizing unrecognized actuarial gains and losses in
computing its annual pension cost for its defined benefit pension plans. Under the new method, any unrecognized actuarial gains
and losses that exceed 10% of the greater of a) the projected benefit obligation or b) the market value of plan assets are
amortized over five years using a straight-line basis. Under the previous method, all unrecognized actuarial gains and losses that
exceeded the 10% corridor were amortized over the average remaining service life of active employees. Company management
believes that this accelerated amortization method is preferable as it will result in more timely recognition of significant actuarial
gains and losses in computing the Company's annual pension cost.
A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among
acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective
determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However,
we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis,
and our opinion stated below is based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting
which, based upon three reasons stated for the change and our discussions with you, is also preferable under the circumstances
in this particular case. In arriving at this opinion, we have relied on the business judgement and business planning of your
management.
Very truly yours,
/s/ Arthur Andersen
EXHIBIT 21
SUBSIDIARY JURISDICTION
---------- OF ORGANIZATION
---------------
Superior TeleCom Inc.......................................... Delaware
Superior Trust I.............................................. Delaware
DNE Systems, Inc.............................................. Delaware
DNE Manufacturing & Service Company........................... Delaware
DNE Technologies, Inc......................................... Delaware
Superior Telecommunications Inc............................... Delaware
Superior Cable Corporation.................................... Ontario
Texas SUT Inc................................................. Texas
Superior Cable Ltd............................................ Israel
Superior Cable Holdings (1997) Ltd. (50%)..................... Israel
The United Marketing Company Cables of Zion Israel Ltd. ...... Israel
Premier Cables Ltd. (80%)..................................... U.K.
Eliat Optical Cables Ltd. .................................... Israel
H.T. Cable Ltd. .............................................. Israel
Rishon Business Center (37.5%)................................ Israel
Essex International Inc....................................... Delaware
Essex Group Inc............................................... Delaware
Essex Group Inc............................................... Michigan
Essex Services Inc............................................ Delaware
FEMCO Magnet Wire Corporation (50%)........................... Indiana
Diamond Wire and Cable Company................................ Illinois
Essex Technology Inc.......................................... Delaware
Essex International Limited................................... U.K.
Temple Electrical Company Limited............................. U.K.
Essex Pension Trustees Limited................................ U.K.
Interstate Industries Holdings, Inc........................... Delaware
Interstate Industries, Inc.................................... Mississippi
Essex Group Export, Inc....................................... Barbados
Essex Canada Inc.............................................. Delaware
SX Mauritius Holding, Inc. ................................... Mauritius
Active Industries Inc......................................... Delaware
Essex Funding Inc............................................. Delaware
Raychem-Essex Ltd. (50%)...................................... Delaware
Essex Group Mexico Inc........................................ Delaware
Essex Mexico Holdings, LLC.................................... Delaware
Essex Group Mexico, S.A. de C.V............................... Mexico
Grupo Essex de Mexico, S. de R.L. de C.V...................... Mexico
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports dated February 13, 2001 included in
this Form 10-K, into Superior TeleCom Inc.'s previously filed Registration Statement File Nos. 333-16705 and 333-85409.
Arthur Andersen LLP
Atlanta, Georgia
March 28, 2001