UNITED STATES
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
[NO FEE REQUIRED]
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from _______ to _______
Commission file number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1686453
-------- ----------
(State or other jurisdiction (IRS employer
incorporation or organization) of identification no.)
63 Lincoln Highway
Malvern, Pennsylvania 19355-2143
(Address of principal executive offices)
(610) 644-1300
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value
(Title of Class)
New York Stock Exchange
(Exchange on which registered)
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 registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined Exchange Act Rule 12b-2).
Yes X No
----- ----
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the common equity was last sold as
of the last business day of the registrant's most recently completed second
fiscal quarter, assuming conversion of all of its Class B common stock held by
non-affiliates into common stock of the registrant, was $1,909,596,000. There is
no non-voting stock outstanding.
As of March 9, 2004, registrant had 145,539,733 shares of its common stock
and 14,979,440 shares of its Class B common stock outstanding.
Portions of the registrant's definitive proxy statement, which will be
filed within 120 days of December 31, 2003, are incorporated by reference into
Part III.
1
This page intentionally left blank.
-----------------------------------
2
PART I
------
Item 1. DESCRIPTION OF BUSINESS
- ------ -----------------------
General
Vishay Intertechnology, Inc. is a leading international manufacturer and
supplier of passive and discrete active electronic components. Passive
components include resistors, capacitors, transducers and inductors. Active
components include diodes, transistors, rectifiers, power integrated circuits
(ICs), infrared transceivers, infrared (IR) sensors and optocouplers. Passive
electronic components and discrete active electronic components are the primary
elements of almost every electronic circuit. We offer our customers "one-stop"
access to one of the most comprehensive electronic component lines of any
manufacturer in the United States, Europe and Asia in both the newer surface
mount configuration and the traditional leaded form.
Our components are used in virtually every type of product that contains
electronic circuitry, including:
o computer-related products, o automotive applications,
o power management products, o process control systems,
o telecommunications o military and aerospace
equipment, applications,
o measuring instruments, o consumer electronics and
appliances,
o industrial equipment,
o medical instruments, and
o electronic scales.
Since 1985, we have pursued a business strategy that principally consists
of the following elements:
1. expanding within the electronic components industry, primarily through
the acquisition of other manufacturers of electronic components that have
established positions in major markets, reputations for product quality and
reliability, and product lines with which we have substantial marketing and
technical expertise;
2. reducing selling, general and administrative expenses through the
integration or elimination of redundant sales offices and administrative
functions at acquired companies;
3. achieving significant production cost savings through the transfer and
expansion of manufacturing operations to regions such as the Czech Republic,
Hungary, India, Israel, Malaysia, Mexico, the People's Republic of China, the
Philippines, Portugal and the Republic of China (Taiwan), where we can take
advantage of lower labor costs and available tax and other government-sponsored
incentives;
4. maintaining significant production facilities in those regions where we
market the bulk of our products in order to enhance the service and
responsiveness that we provide to our customers;
5. consistently rolling out new and innovative products; and
6. strengthening our relationships with customers and strategic partners.
As a result of this strategy, we have grown from a small manufacturer of
precision resistors and resistance strain gages to one of the world's largest
manufacturers and suppliers of a broad line of electronic components.
3
Our significant acquisitions in the last several years include:
Siliconix and Telefunken. We acquired an 80.4% interest in Siliconix
incorporated (NASDAQ: SILI) in March 1998 from Daimler-Benz A.G. Siliconix is a
publicly traded chip maker, based in Santa Clara, California, which designs,
markets and manufactures power and analog semiconductor products, such as
metal-oxide-semiconductor field-effect transistors (MOSFETs), junction
field-effect transistors (JFETs), bipolar switches, signal processing ICs and
power ICs for computers, cell phones, fixed communications networks, automobiles
and other electronic systems. Siliconix has manufacturing facilities in Santa
Clara, California, maintains assembly and testing facilities in the Republic of
China (Taiwan), is party to a joint venture in Shanghai, the People's Republic
of China and has subcontractors in the Philippines, the People's Republic of
China, Israel, and the United States. Siliconix reported worldwide sales of
$392.1 million in 2003, $372.9 million in 2002, and $305.6 million in 2001.
In the same transaction, we acquired from Daimler-Benz the semiconductor
business unit of TEMIC Telefunken Microelectronic GmbH headquartered in
Heilbronn, Germany, but promptly disposed of its integrated circuits division.
Telefunken launched our expansion into discrete active components with a product
line of diodes, RF transistors, optoelectronic semiconductors, infrared data
transceivers (IRDCs) and light-emitting diodes (LEDs). Our net cost of these two
acquisitions was approximately $444 million.
Electro-Films, Cera-Mite and Spectrol. In May 2000, we acquired
Electro-Films, Inc., a manufacturer of thin film components and networks on
ceramic and silicon. In August 2000, we acquired Cera-Mite Corporation, a
worldwide supplier of ceramic capacitors, used in power supplies, electronic
lighting and other applications, and thermistors (temperature-sensitive
resistors) used in refrigeration, HVAC, telecommunications and other electronic
applications. Separately, in August 2000, we acquired Spectrol, a manufacturer
of sensing potentiometers used primarily in the automotive industry and trimmer
potentiometers used in various kinds of electronic circuitry.
Tansitor and Mallory. In January 2001, we acquired Tansitor, a leading
manufacturer of wet tantalum electrolytic capacitors and miniature conformal
coated solid tantalum capacitors. These components have power management
applications in the military, aerospace and medical industries. Later, in
November 2001, we acquired Yosemite Investment, Inc. d/b/a the North American
Capacitor Company, known as Mallory, a manufacturer and distributor of wet
tantalum capacitors and other products. As a result of these two acquisitions,
we have become the number one manufacturer of wet tantalum capacitors worldwide.
Infineon. In July 2001, we acquired the infrared components business of
Infineon A.G. for approximately $116 million. As a result, we added several new
device types to our optoelectronics portfolio. We also became the largest
supplier outside Japan of optocouplers and the largest supplier worldwide of
IRDCs.
General Semiconductor. On November 2, 2001, we completed the acquisition
of General Semiconductor, Inc., a leader in the design, manufacture and
distribution of semiconductors for the power management market. In the
transaction, we exchanged 0.563 of a share of Vishay common stock for each share
of General Semiconductor stock. Based on the closing price of our common stock
on November 2, 2001, the transaction was valued at approximately $555 million.
General Semiconductor manufactures and distributes a broad range of power
management products, including rectifiers, transient voltage suppressors,
small-signal transistors, diodes, MOSFETs and analog ICs. As a result of this
acquisition, we became the number one manufacturer of diodes and rectifiers
worldwide.
Sensortronics, Tedea-Huntleigh, BLH and Nobel, and Celtron. In January
2002, we acquired the transducer and strain gage business of Sensortronics, Inc.
In June 2002, we acquired Tedea-Huntleigh BV, a leading manufacturer of load
cells used in digital scales by the weighing industry. In July 2002, we
purchased the BLH and Nobel businesses from Thermo Electron Corporation. BLH and
Nobel are engaged in the production and sale of load cell based process weighing
systems, weighing and batching instruments, web tension instruments, weighing
scales, servo control systems, and components relating to load cells, including
strain gages, foil gages and transducers. In October 2002, we acquired Celtron
Technologies, another company engaged in the production and sale of load cells
used in digital scales for the weighing industry. As a result of these
acquisitions, the product portfolio of our Measurements Group has been expanded
and we are now a world leader in stress analysis products and transducers used
in the weighing industry (load cells).
4
BCcomponents. In December 2002, we completed the acquisition of
BCcomponents Holdings B.V., a leading manufacturer of passive components with
operations in Europe, India and the People's Republic of China. The product
lines of BCcomponents include linear and non-linear resistors; ceramic, film and
aluminum electrolytic capacitors; switches; and trimming potentiometers. We
acquired the outstanding shares of BCcomponents in exchange for ten-year
warrants to acquire 7,000,000 shares of Vishay common stock at an exercise price
of $20.00 per share and ten-year warrants to acquire 1,823,529 shares of Vishay
common stock at an exercise price of $30.30 per share. In the transaction, we
paid or assumed outstanding obligations of BCcomponents, including indebtedness,
transaction fees and expenses in the amount of approximately $224 million. Also,
we exchanged $105 million in principal amount of BCcomponents' mezzanine
indebtedness and certain other securities of BCcomponents for $105 million
principal amount of floating rate unsecured loan notes of Vishay due 2102. This
major acquisition has significantly enhanced our global market position in
passive components.
In addition to our acquisition activity in recent years, we have taken
steps to assure our competitiveness, enhance our operating efficiency and
strengthen our liquidity in the face of the economic downturn, which broadly
impacted the electronics industry in recent years. In this regard, we:
(i) closed or consolidated several manufacturing facilities and
administrative offices;
(ii) reduced our headcount, particularly in high labor cost countries;
(iii) integrated our acquisitions within our existing management and
operational infrastructure; and
(iv) relying on the strength of our balance sheet, continued our search
for suitable acquisition candidates.
Vishay also intends to explore opportunities for investments of
non-controlling interests in privately held developers or manufacturers of
electronic components, where Vishay believes that it can forge strategic
alliances with such companies.
Vishay was incorporated in Delaware in 1962 and maintains its principal
executive offices at 63 Lincoln Highway, Malvern, Pennsylvania 19355-2143. Our
telephone number is (610) 644-1300.
Products
We design, manufacture and market electronic components that cover a wide
range of products and technologies. Our products primarily consist of:
o resistors, o signal processing ICs,
o tantalum capacitors, o transistors,
o multi-layer and disc ceramic o voltage suppressors,
capacitors (MLCCs),
o aluminum and specialty ceramic o infrared data transceivers
capacitors, (IRDCs),
o film capacitors, o optocouplers,
o power MOSFETs, o IR sensors,
o power ICs, o strain gages and load cells, and
o diodes and rectifiers
5
and, to a lesser extent:
o inductors, o plasma displays,
o connectors, o thermistors, and
o transformers, o potentiometers.
We manufacture one of the broadest lines of surface mount devices, a
format for electronic components that has evolved into the standard required by
most customers. In addition, we continue to produce components in the
traditional leaded form. We believe that we produce one of the broadest lines of
discrete electronic components available from any single manufacturer.
Passive Components
Passive components include resistors, capacitors and inductors. They are
referred to as "passive" because they do not require power to operate. These
components adjust and regulate voltage and current, store energy and filter
frequencies. We also include in this category the products and services of our
Measurements Group that employ passive components in electro-mechanical
measurements.
Resistors are basic components used in all forms of electronic circuitry
to adjust and regulate levels of voltage and current. They vary widely in
precision and cost, and are manufactured from numerous materials and in many
forms. Linear resistive components are classified as variable or fixed,
depending on whether or not their resistance is adjustable. Non-linear resistors
can also be used as measuring devices. We manufacture a line of thermistors,
which are heat sensitive resistors. Other types of resistive sensors are strain
gages for measurement of mechanical stress. See "Measurements Group" below.
We manufacture virtually all types of fixed resistors, both in discrete
and network forms, as well as many variable types. These resistors are produced
for virtually every segment of the resistive product market, from resistors used
in the highest quality precision instruments for which the performance of the
resistor is the most important requirement, to low-cost resistors for which
price is the most important factor.
Capacitors perform energy storage, frequency control, discharge, coupling,
timing and filtering functions. The more important applications for capacitors
are:
o electronic filtering for linear and switching power supplies;
o decoupling and bypass of electronic signals for integrated circuits and
circuit boards; and
o frequency control, timing and conditioning of electronic signals for a
broad range of applications.
Our capacitor products include solid tantalum surface mount chip
capacitors, solid tantalum leaded capacitors, wet/foil tantalum capacitors, MLCC
capacitors, disc ceramic capacitors, aluminum and specialty ceramic capacitors,
and film capacitors. Each capacitor product has unique physical and electrical
performance characteristics that make that type of capacitor useful for specific
applications. Tantalum and MLCC capacitors are generally used in conjunction
with integrated circuits in applications requiring low to medium capacitance
values, "capacitance" being the measure of the capacitor's ability to store
energy. The tantalum capacitor is the smallest type of capacitor for its range
of capacitance. MLCC capacitors, on the other hand, are more cost-effective for
applications requiring lower capacitance. Disc ceramic capacitors are used for
high voltage applications. Aluminum capacitors are used for high capacitance
applications. Film capacitors are for general use in telecommunications,
automotive, consumer and industrial products. They are the most stable
capacitors.
Inductors use an internal magnetic field to change the phase of electric
current. They are utilized in electronic circuitry to control alternating
current and voltage, and to filter out unwanted electronic signals. They are
also used in transformers to change voltage levels.
6
Measurements Group
Vishay Measurements Group is a leading manufacturer of products for
precision measurement of mechanical strains. Our products include strain gages,
load cells, force measurement sensors, displacement sensors, and photoelastic
sensors. These products are used in experimental stress analysis systems, as
well as in the electronic measurement of loads (electronic scales), acceleration
and fluid pressure. The Measurements Group also provides installation
accessories for its products, instrumentation to sample and record measurement
output, and training seminars in stress analysis testing and transducer
development and manufacture.
As a result of Vishay's acquisitions in 2002, the Measurements Group has
implemented a strategy of vertical market integration, with a product range from
resistance strain gages, to transducers (the metallic structures to which strain
gages are cemented), to the electronic instruments and systems that measure and
control output of the transducers. Vishay Measurements Group now has two
operating divisions: Vishay Micro-Measurements (for strain gages, instruments
and PhotoStress products) and Vishay Transducers (for load cells, weigh modules,
instruments and weighing systems).
Active Components
Our active electronic components include both discrete devices and
integrated circuits (ICs). They are referred to as "active" because they require
power to function. Discrete devices are single components or an arrangement of
components that generate, control, regulate and amplify or switch electronic
signals or energy. Examples of our discrete active components include diodes,
rectifiers, transient voltage suppressors, transistors and power MOSFETs. These
devices are interconnected with passive components or other active components to
create an electronic circuit. Our IC devices consist of a number of active and
passive components interconnected on a single chip to perform a specific
function. Examples of our integrated circuits include power ICs, motor control
ICs and signal processing ICs. Our discrete active components and ICs are
manufactured and marketed primarily through our majority owned Siliconix
subsidiary, our Telefunken unit and the General Semiconductor business.
We also include in the category of active components our line of
optoelectronic components, manufactured and marketed by our Telefunken unit, and
the infrared components business acquired from Infineon A.G.
Discrete Devices
Diodes and rectifiers are used to convert electrical currents from
alternating current (AC) into direct current (DC) by conducting electricity in
one direction and blocking it in the reverse direction. Because electrical
outlets carry AC while the vast majority of electronic devices use DC,
rectifiers are used in a wide variety of applications. We offer a broad line of
diodes and rectifiers with differing power, speed, cost, packaging and
conversion (half wave or full wave) characteristics. Our rectifiers include a
series of high voltage devices that have been optimized for power correction
circuits.
Transient voltage suppressors protect electronic circuits by limiting
voltage to a safe level. Examples of transient events that could damage
unprotected circuits include static electricity charges and natural or induced
lightning. Voltage suppressors protect circuits by absorbing large amounts of
energy for short periods of time. We offer a broad range of state-of-the-art
transient voltage suppressors for use in most modern electronic equipment.
Small signal diodes and transistors perform amplification, signal
blocking, routing and switching functions at lower current levels. Our
small-signal transistors range from the older junction field-effect transistors
(JFETs), to newer products such as those based upon double-diffused metal oxide
semiconductor (DMOS) technology.
Discrete power MOSFETs are specialized field-effect transistors used to
switch and manage power in a broad range of electronic devices. These include
particularly low-voltage applications such as cell phones, portable and desktop
computers, automobiles, instrumentation and industrial applications. Our
innovative "trench" power MOSFET technology offers very high cell density, very
low on-resistance and optimized switching parameters for high frequency DC-DC
power conversion. Power MOSFETs conserve power and help prevent components from
over-heating.
7
Integrated Circuits
Power ICs are used in applications such as cell phones, where an input
voltage from a battery or other supply source must be switched, interfaced or
converted to a level that is compatible with logic signals used by
microprocessors and other digital components. Our ICs are designed to operate at
higher frequencies without compromising efficiencies. Often our power MOSFETs
and power ICs can be used together as chip sets with complementary performance
characteristics optimized for a specific application.
Motor control ICs control the starting, speed or position of electric
motors, such as the head positioning and spindle motors in hard disk drives.
Signal processing ICs are used for analog switching and multiplexing in
devices that either receive or output analog (non-digital) signals. A recent
application of this technology is in broadband communications devices such as
DSL modems.
Optoelectronics
Our line of optoelectronic components includes light emitting diodes
(LEDs), infrared emitters (IREDs) and photo detectors, infrared receiver
modules, optocouplers, solid-state relays (SSRs), optical sensors, and infrared
transceivers (IRDCs).
Our photo detectors are light-sensitive semiconductor devices, and include
linear photo diodes for light measurement, photo-transistors for light switching
applications in printers, copiers, facsimile machines, vending machines and
automobiles, and high speed photo PIN diodes specially designed for infrared
data transfer. Our photo detector products are available in a wide variety of
sensitivity angles, light sensitivities, daylight filters and packaging shapes.
Our infrared emitters are used for optical switching and data transfer
applications, often in conjunction with our photo detectors, and in devices like
infrared remote controls for televisions.
An optocoupler consists of an infrared emitting diode and a receiver
facing each other through an insulation medium inside a light-isolated housing.
The receiver may either be a photodetector or a pair of MOSFETs, and in the
latter case the device is referred to as a solid-state relay (SSR). The function
of an optocoupler is to electrically isolate input and output signals. Our
optocouplers are used in switch mode power supplies, safety circuitry and
programmable controllers for computer monitors, consumer electronics,
telecommunications equipment and industrial systems.
IRDCs consist of a detector photo diode, an infrared light emitting diode
and a control IC. IRDCs are used for short range, two-way wireless, infrared
data transfer between electronic devices such as mobile phones and other
telecommunications equipment, computers and personal digital assistants (PDAs).
LEDs are light emitting diodes used as light indicators in a variety of
industries.
Packaging
We have taken advantage of the growth of the surface mount component
market, and we are an industry leader in designing and marketing surface mount
devices. Surface mount devices adhere to the surface of a circuit board rather
than being secured by leads that pass through holes to the back side of the
board. Surface mounting provides distinct advantages over through-hole mounting.
For example, surface mounting allows the placement of more components on the
surface of a circuit board, and also allows placement on both sides of the
board. This is particularly desirable in applications such as hand held
computers and cell phones where there is a continuing design trend towards
product miniaturization. Surface mounting also facilitates automated product
assembly, resulting in lower production costs for equipment manufacturers than
those associated with leaded or through-hole mounted devices.
8
We believe that we are a market leader in the development and production
of a wide range of surface mount devices, including:
o thick film chip resistors, o wirewound chip resistors,
o thick film resistor networks o power strip resistors,
and arrays,
o metal film leadless o bulk metal foil chip
resistors (MELFs), resistors,
o molded tantalum chip o current sensing chips,
capacitors,
o coated tantalum chip o chip inductors,
capacitors,
o multi-layer ceramic chip o chip transformers,
capacitors,
o thin film chip resistors, o chip trimmers,
o thin film networks, o NTC chip thermistors,
o certain diodes and o PTC chip thermistors, and
transistor products,
o power MOSFETs, o strain gages.
We also provide a number of component packaging styles to facilitate
automated product assembly by our customers.
Military Qualifications
We have qualified certain products under various military specifications,
approved and monitored by the United States Defense Electronic Supply Center
(DESC), and under certain European military specifications. DESC qualification
levels are based in part upon the rate of failure of products. In order to
maintain the classification level of a product, we must continuously perform
tests on the product and the results of these tests must be reported to DESC. If
the product fails to meet the requirements for the applicable classification
level, the product's classification may be reduced to a lower level. Products
from some of our United States manufacturing facilities experience a reduction
in product classification levels from time to time. During the time that the
DESC classification level is reduced for a product with military application,
net sales and earnings attributable to that product may be adversely affected.
Customers
We sell our products primarily to original equipment manufacturers (OEMs),
electronic manufacturing services (EMS) companies, which manufacture for OEMs on
an outsourcing basis, and independent distributors that maintain large
inventories of electronic components for resale to OEMs.
To better serve our customers, we maintain production facilities in
regions where we market the bulk of our products, principally in the United
States, Israel, Mexico, Germany, France, the United Kingdom, Austria, Hungary,
and the Czech Republic. In Asia, we have facilities in the People's Republic of
China, Taiwan, Malaysia, and the Philippines. We work with our customers so that
our products are incorporated into the design of electronic equipment at the
research and prototype stages. We also employ a staff of application and field
engineers to assist our customers, independent manufacturers' representatives
and distributors in solving technical problems and developing products to meet
specific needs.
Our top 30 customers are quite stable despite not having long-term
commitments to purchase our products. With selected customers, we have signed
two to three year contracts for specific products.
During 2003, approximately 26% of our net sales were attributable to
customers in the Americas, approximately 38% were attributable to customers in
Europe, and approximately 36% were attributable to customers in Asia.
9
Marketing
Our products are marketed through independent manufacturers'
representatives compensated solely on a commission basis, by our own sales
personnel and by independent distributors. We have regional sales personnel in
several North American locations that make sales directly to OEMs and provide
technical and sales support for independent manufacturers' representatives
throughout the United States, Mexico and Canada. As noted, we also use
independent distributors to resell our products. Outside North America, we use
similar channels to sell our products worldwide.
Research and Development
Many of our products and manufacturing techniques, technologies and
packaging methods have been invented, designed and developed by our engineers
and scientists. We maintain strategically placed design centers where proximity
to customers enables us to more easily gauge and satisfy the needs of local
markets. These design centers are located predominantly in the United States,
France, Germany, Israel, the People's Republic of China, the Republic of China
(Taiwan) and South Korea.
We also maintain research and development staffs and promote programs at a
number of our production facilities to develop new products and new applications
of existing products, and to improve manufacturing techniques. This
decentralized system encourages individual product development at individual
manufacturing facilities that occasionally have applications at other
facilities. Our research and development costs (exclusive of purchased
in-process research and development) were approximately $45.4 million for 2003,
$37.1 million for 2002, and $30.2 million for 2001. These amounts include
expenditures of our Siliconix subsidiary of $19.5 million, $19.3 million, and
$17.2 million in 2003, 2002, and 2001, respectively, principally for the
development of new power products and power ICs. These amounts do not include
substantial expenditures for the development and manufacturing of machinery and
equipment for new processes and for cost reduction measures.
Although we have numerous United States and foreign patents covering
certain of our products and manufacturing processes, no particular patent is
considered material to our business.
Sources of Supplies
Although most materials incorporated in our products are available from a
number of sources, certain materials, particularly tantalum and palladium, are
available only from a relatively limited number of suppliers.
Tantalum
We are a major consumer of the world's annual production of tantalum.
Tantalum, a metal purchased in powder or wire form, is the principal material
used in the manufacture of tantalum capacitors. There are currently three major
suppliers that process tantalum ore into capacitor grade tantalum powder. Due to
the strong demand for our tantalum capacitors and difficulty in obtaining
sufficient quantities of tantalum powder from our suppliers, we stockpiled
tantalum ore in 2000 and early 2001. From 2001 to 2003, we and our competitors
experienced a significant decline in the tantalum capacitor business as well as
significant decreases in the market prices for tantalum. As a result, we
recorded in costs of products sold write-downs of $25.7 million and $52.0
million, respectively, on tantalum inventories during the years ended December
31, 2002 and 2001. We also recorded a loss on future purchase commitments of
$106.0 million for the year ended December 31, 2002. In 2003, prices of tantalum
continued to decline. As a result, we recorded write-downs of $5.4 million to
reduce our tantalum inventories to current market value in 2003. We also
recorded a loss on future purchase commitments of $11.4 million in 2003. Our
purchase commitments were entered into at a time when market demand for tantalum
capacitors was high and tantalum powder was in short supply. If the downward
pricing trend were to continue, we could again be required to write down the
carrying value of its tantalum inventory and record additional losses on its
long-term purchase commitments.
10
We have two agreements with Cabot Corporation for the supply of tantalum
powder, a July 2000 agreement and a November 2000 agreement. Our purchase
commitments with Cabot were entered into at a time when market demand for
tantalum capacitors was high and tantalum powder was in short supply. With the
decline in market demand and prices for tantalum, we began the process of
negotiating modifications to the agreements with Cabot during 2001. Our major
competitors in the tantalum capacitor business were also seeking modifications
to their contracts with Cabot. In June 2002, following the prior initiation of
legal proceedings by Cabot, we and Cabot agreed to make certain modifications to
the supply agreements. These included price reductions, the extension of the
term of one of the contracts, and the regular scheduling of our purchase
commitments.
Palladium
Palladium, a metal used to produce multi-layer ceramic capacitors, is
currently found primarily in South Africa and Russia. Palladium is a commodity
product that is subject to price volatility. The price of palladium fluctuated
in the range of approximately $148 to $1,090 per troy ounce during the three
years ended December 31, 2003, and as of December 31, 2003, the price of
palladium was approximately $195 per troy ounce. During the years ended December
31, 2003, 2002 and 2001, we recorded in costs of products sold write-downs on
palladium inventories of $1.6 million, $1.7 million and $18.0 million,
respectively.
Inventory and Backlog
We manufacture both standardized products and those designed and produced
to meet customer specifications. We maintain an inventory of resistors and other
standardized components. Backlogs of outstanding orders for our products were
$532.0 million, $407.6 million, and $337.9 million, respectively, at December
31, 2003, 2002, and 2001. The backlog at December 31, 2003 and 2002 includes
$58.9 million and $49.8 million, respectively, of backlog attributable to the
business of BCcomponents, which was acquired in December 2002. The increase in
our backlog at December 31, 2003 compared to December 31, 2002 is indicative of
improving market conditions.
Many of the orders that comprise our backlog may be canceled by customers
without penalty. Customers may on occasion double and triple order components
from multiple sources to ensure timely delivery when backlog is particularly
long. Customers often cancel orders when business is weak and inventories are
excessive, a situation that we experienced in the recent economic slowdown.
Therefore, the amount of our backlog may exceed the level of orders that will
ultimately be delivered. Our results of operations could be adversely impacted
if customers cancel a material portion of orders in our backlog.
Competition
We face strong competition in various product lines from both domestic
and foreign manufacturers that produce products using technologies similar to
ours. Our main competitors for tantalum capacitors are KEMET Corporation, AVX
Corporation and NEC Electronics, Inc. For MLCC capacitors, our principal
competitors are KEMET, AVX, Murata and TDK Corp. For thick film chip
resistors, our major competitors include Rohm Corp., Koa Speer Electronics
Inc. and Yageo Corporation. For wirewound and metal film resistors, the
principal competitors are I.R.C. Inc., Rohm Corp. and Ohmite Manufacturing
Company. For active components, our main competitors include International
Rectifier, Philips, N.V., ON Semiconductor, Rohm Corp., Motorola, Inc.,
Fairchild Semiconductor Corp., Maxim, Shindengen Electric Manufacturing Co.
Ltd., Sanken Electric Co. Ltd., STMicroelectronics N.V. and Samsung Co., Ltd.
There are many other companies that produce products in the markets in which
we compete.
11
Our competitive position depends on our product quality, know-how,
proprietary data, marketing and service capabilities and business reputation, as
well as on price. We compete for sales of certain products on the basis of our
marketing and distribution network, which provides a high level of customer
service. For example, we work closely with our customers to have our components
incorporated into their electronic equipment at the early stages of design and
production and maintain redundant production sites for some of our products to
ensure an uninterrupted supply of products. We have also established a National
Accounts Management Program, which provides our largest customers with one
national account executive who can cut across business unit lines for sales,
marketing and contract coordination. In addition, the breadth of our product
offerings enables us to strengthen our market position by providing customers
with "one-stop" access to one of the broadest selections of passive electronic
components available directly from a manufacturing source.
Manufacturing Operations
We strive to balance the location of our manufacturing facilities. In
order to better serve our customers, we maintain some of our production
facilities in regions where we market the bulk of our products, such as the
United States, Germany, France, the United Kingdom, and more recently, Asia. To
maximize production efficiencies, we seek whenever practicable to establish
manufacturing facilities in countries, such as the Czech Republic, Hungary,
India, Israel, Malaysia, Mexico, the People's Republic of China, the
Philippines, Portugal, and the Republic of China (Taiwan), where we can take
advantage of lower labor and tax costs and, in the case of Israel, to take
advantage of various government incentives, including grants and tax relief.
Some of our most sophisticated manufacturing operations are the production
of power semiconductor components. This manufacturing process involves two
phases of production: wafer fabrication and assembly (or packaging). Wafer
fabrication subjects silicon wafers to various thermal, metallurgical and
chemical process steps that change their electrical and physical properties.
These process steps define cells or circuits within numerous individual devices
(termed "dies" or "chips") on each wafer. Assembly is the sequence of production
steps that divides the wafer into individual chips and encloses the chips in
structures (termed "packages") that make them usable in a circuit. Both wafer
fabrication and assembly phases incorporate wafer level and device level
electrical testing to ensure that device design integrity has been achieved.
At December 31, 2003, approximately 21% of our fixed assets were located
in the United States, approximately 30% were located in Europe, approximately
26% were located in Israel, and approximately 30% were located in Asia. In the
United States, our manufacturing facilities are located in California,
Connecticut, Indiana, Maine, Maryland, New York, Nebraska, North Carolina,
Pennsylvania, Rhode Island, South Dakota, Vermont, and Wisconsin. In Europe, our
main manufacturing facilities are located in Germany, France, Hungary, and the
Czech Republic, with other facilities in Austria, Belgium, Portugal and the
Netherlands. We also have manufacturing facilities in India, Israel, Malaysia,
Mexico, the People's Republic of China, the Philippines and the Republic of
China (Taiwan). Over the past several years, we have invested substantial
resources to increase capacity and to maximize automation in our plants, which
we believe will further reduce production costs.
We are aggressively undertaking to have the quality systems at most of our
major manufacturing facilities approved under the ISO 9001 international quality
control standard. ISO 9001 is a comprehensive set of quality program standards
developed by the International Standards Organization. A majority of our
manufacturing operations have already received ISO 9001 approval and others are
actively pursuing such approval.
In 2003, we continued the implementation of our strategy to shift
manufacturing emphasis to higher automation in higher labor cost regions and to
relocate a fair amount of production to regions with skilled workforces and
relatively lower labor costs. As a result, we incurred restructuring costs in
the year ended December 31, 2003 associated with the downsizing of manufacturing
facilities in Europe and the United States. We may continue to incur such
expenses in 2004.
See Note 16 to our consolidated financial statements, "Business Segment
and Geographic Area Data," for financial information by geographic area.
12
Israeli Government Incentives
We have substantial manufacturing operations in Israel, where we benefit
from the government's employment and tax incentive programs designed to increase
employment, lower wage rates and increase our ability to attract a
highly-skilled labor force, all of which have contributed substantially to our
growth and profitability. For the year ended December 31, 2003, sales of
products manufactured in Israel accounted for approximately 17% of our net
sales.
Under the terms of the Israeli government's incentive programs, once a
project is approved, the recipient is eligible to receive the benefits of the
related grants for the life of the project, so long as the recipient continues
to meet preset eligibility standards. None of our approved projects has ever
been cancelled or modified, and we have already received approval for a majority
of the projects contemplated by our capital expenditure program. However, as a
result of the recent economic downturn, we were forced to lay off a significant
number of employees in Israel in 2001. In 2002, the Israeli government initially
withheld certain grant monies claiming that we had not maintained employment at
the required minimum levels; however, we were able to settle our dispute in the
fourth quarter and the government agreed to continue making grant payments to
us. While the number of employees continues to satisfy the eligibility
requirements for our Israeli government grants, economic circumstances could
compel future additional layoffs. Also, over the past few years, the Israeli
government has scaled back or discontinued some of its incentive programs. There
can be no assurance that we will maintain our eligibility for existing projects
or that in the future the Israeli government will continue to offer new
incentive programs applicable to us or that, if it does, such programs will
provide the same level of benefits we have historically received or that we will
continue to be eligible to take advantage of them. Because we have received
approvals for most projects currently contemplated, we do not anticipate that
cutbacks in the incentive programs for new projects would have an adverse impact
on our earnings and operations for at least several years.
We might be materially adversely affected if events were to occur in the
Middle East that interfered with our operations in Israel. However, we have
never experienced any material interruption in our Israeli operations in our 33
years of operations there, in spite of several Middle East crises, including
wars.
Environment, Health and Safety
We have adopted an Environmental Health and Safety Corporate Policy that
commits us to achieve and maintain compliance with applicable environmental
laws, to promote proper management of hazardous materials for the safety of our
employees and the protection of the environment, and to minimize the hazardous
materials generated in the course of our operations. This policy is implemented
with accountability directly to the Chairman of the Board of Directors. In
addition, our manufacturing operations are subject to various federal, state and
local laws restricting discharge of materials into the environment.
We are not involved in any pending or threatened proceedings that would
require curtailment of our operations. We continually expend funds to ensure
that our facilities comply with applicable environmental regulations. In regard
to all of our facilities, we have completed our undertaking to comply with
environmental regulations relating to the elimination of chlorofluorocarbons
(CFCs) and ozone depleting substances (ODS) pursuant to the Clean Air Act
amendments of 1990. We have completely eliminated the use of CFCs and ODS in our
manufacturing processes, and all facilities are currently in compliance with the
Clean Air Act.
While we believe that we are in material compliance with applicable
environmental laws, we cannot accurately predict future developments and do not
necessarily have knowledge of past occurrences on sites that we currently
occupy. More stringent environmental regulations may be enacted in the future,
and we cannot determine the modifications, if any, in our operations that any
such future regulations might require, or the cost of compliance with such
regulations. Moreover, the risk of environmental liability and remediation costs
is inherent in the nature of our business and, therefore, there can be no
assurance that material environmental costs, including remediation costs, will
not arise in the future.
13
We have been named a Potentially Responsible Party (PRP) at nine Superfund
sites, including two Siliconix facilities, and have become responsible for
certain obligations as a PRP in connection with our acquisition of General
Semiconductor. We expend minimal amounts in connection with several of these
sites and do not expect costs associated with the others to be material.
General Semiconductor has also been named as a defendant in three actions
in the United States District Court for the Eastern District of New York in
connection with its former operations at a facility in Hicksville, New York. The
plaintiffs in these actions allege that they have suffered personal injury and
property damage as a result of the facility's operations. Although we will
vigorously defend these actions, we do not currently possess sufficient
information to estimate reasonably the amount of or timing of liabilities that
may be associated with these litigations. It is our policy to record appropriate
liabilities for environmental matters when damage claim payments are probable
and the costs can be reasonably estimated.
The ultimate cost of site cleanup is difficult to predict given the
uncertainties regarding the extent of the required cleanup, the interpretation
of applicable laws and regulations and alternative cleanup methods. Based upon
our experience with the foregoing environmental matters, we have concluded that
there is at least a reasonable possibility that we will incur remedial costs in
the range of $30 million to $35 million. As of December 31, 2003, we concluded
that the best estimate within this range is $32.7 million, of which $23.5
million is included in other non-current liabilities on the consolidated balance
sheet, and $9.2 million is included in accrued expenses on the consolidated
balance sheet. Of this reserve, approximately $18.7 million is due to the
acquisition of General Semiconductor, but not including any liability that we
may incur in connection with the litigation relating to the Hicksville, New York
facility described above; approximately $8.4 million is due to the acquisition
of BCcomponents; and approximately $5.6 million is reserved for other
miscellaneous environmental liabilities, primarily at our Vitramon subsidiary in
the United States. In view of our financial position and provisions for
environmental matters of $32.7 million, we have concluded that any potential
payment of such estimated amounts will not have a material adverse effect on our
consolidated financial position, results of operations or liquidity.
With each acquisition, we attempt to identify potential environmental
concerns and to minimize, or obtain indemnification for, the environmental
matters we may be required to address. In addition, we establish reserves for
specifically identified potential environmental liabilities. We believe that the
reserves we have established are adequate. Nevertheless, we often unavoidably
inherit certain pre-existing environmental liabilities, generally based on
successor liability doctrines. Although we have never been involved in any
environmental matter that has had a material adverse impact on our overall
operations, there can be no assurance that in connection with any past or future
acquisition we will not be obligated to address environmental matters that could
have a material adverse impact on our operations.
Employees
As of December 31, 2003, we employed approximately 25,200 full time
employees, of whom approximately 21,850 were located outside the United States.
Some of our employees outside the United States are members of trade unions and
employees at one small U.S. facility are represented by a union. Our
relationship with our employees is good. However, no assurance can be given
that, if we continue to restructure our operations in response to changing
economic conditions, labor unrest or strikes, especially at European facilities,
will not occur.
14
Company Information and Website
We file annual, quarterly, and current reports, proxy statements, and
other documents with the Securities and Exchange Commission (SEC) under the
Securities Exchange Act of 1934 (the Exchange Act). The public may read and copy
any materials that we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Also, the SEC maintains an Internet website that contains reports, proxy and
information statements, and other information regarding issuers, including us,
that file electronically with the SEC. The public can obtain any documents that
we file with the SEC at http://www.sec.gov.
In addition, our company website can be found on the Internet at
www.vishay.com. The website contains information about us and our operations.
Copies of each of our filings with the SEC on Form 10-K, Form 10-Q and Form 8-K,
and all amendments to those reports, can be viewed and downloaded free of charge
as soon as reasonably practicable after the reports and amendments are
electronically filed with or furnished to the SEC. To view the reports, access
www.vishay.com, click on Company Info, then Investor Relations and then SEC
Filings.
The following corporate governance related documents are also available on
our website:
o Corporate Governance Principles
o Code of Business Conduct and Ethics
o Code of Ethics Applicable to the Company's Chief Executive Officer,
Chief Financial Officer, Principal Accounting Officer or Controller
and Financial Managers
o Audit Committee Charter
o Nominating and Corporate Governance Committee Charter
o Compensation Committee Charter.
To review these documents, go to our website, click on Company Info, then
Investor Relations and then Corporate Governance.
Any of the above documents can also be obtained in print by any
shareholder who requests them from our Investor Relations Department at the
following address:
Corporate Investor Relations
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, PA 19355-2143
15
Item 2. PROPERTIES
- ------ ----------
As of December 31, 2003, we maintained approximately 77 manufacturing
facilities. The principal locations of such facilities, along with available
space including administrative offices, are:
Approx. Available
Owned Locations Space (Square Feet)
--------------- -------------------
United States
-------------
Columbus and Norfolk, NE* 298,000
Sanford, ME 225,000
Santa Clara, CA 220,000
Grafton and Oconto, WI* 165,000
Wendell and Statesville, NC* 159,000
Monroe, CT 91,000
Greencastle, IN 90,000
Malvern, PA 79,000
- --------------------
* 2 locations
Non-U.S.
--------
Israel (5 locations) 1,058,000
Hungary (2 locations) 961,000
Germany (8 locations) 561,000
People's Republic of China (4 locations) 514,000
Czech Republic (5 locations) 446,000
Republic of China (Taiwan) (3 locations) 397,000
France (3 locations) 332,000
Portugal 301,000
Netherlands 286,000
Belgium (2 locations) 180,000
Austria 153,000
Philippines 149,000
India 140,000
Malaysia 115,000
We own an additional 288,000 square feet of manufacturing facilities
located in Maryland, New York, Rhode Island, South Dakota, Vermont and Mexico.
Leased facilities in the United States include 190,000 square feet of
space located in California, Massachusetts, New York, Connecticut and South
Dakota. Foreign leased facilities consist of 817,000 square feet in China,
204,000 square feet in Germany, 127,000 square feet in Mexico, 120,000 square
feet in Austria, 75,000 square feet in the Czech Republic, 43,000 square feet in
Sweden, 24,000 square feet in Israel, and 13,000 square feet in the United
Kingdom, and 3,000 square feet in Taiwan.
In the opinion of management, our properties and equipment generally are
in good operating condition and are adequate for our present needs. We do not
anticipate difficulty in renewing existing leases as they expire or in finding
alternative facilities.
16
Item 3. LEGAL PROCEEDINGS
- ------ -----------------
From time to time we are involved in routine litigation incidental to our
business. Management believes that such matters, either individually or in the
aggregate, should not have a material adverse effect on our business or
financial condition.
Our 80.4% owned subsidiary, Siliconix, is a party to two environmental
proceedings. The first involves property that Siliconix vacated in 1972. In July
1989, the California Regional Water Quality Control Board (RWQCB) issued Cleanup
and Abatement Order No. 89-115 both to Siliconix and the current owner of the
property. The Order alleged that Siliconix contaminated both the soil and the
groundwater on the property by the improper disposal of certain chemical
solvents. The RWQCB considered both parties to be liable for the contamination
and sought to have them decontaminate the site to acceptable levels. Siliconix
subsequently reached a settlement of this matter with the current owner of the
property. The settlement provided that the current owner will indemnify
Siliconix and its employees, officers, and directors against any liability that
may arise out of any governmental agency actions brought for environmental
cleanup of the subject site, including liability arising out of RWQCB Order No.
89-115, to which Siliconix remains nominally subject.
The second proceeding involves Siliconix's Santa Clara, California
facility, which Siliconix has owned and occupied since 1969. In February 1989,
the RWQCB issued Cleanup and Abatement Order No. 89-27 to Siliconix. The Order
is based on the discovery of contamination of both the soil and the groundwater
on the property by certain chemical solvents. The Order calls for Siliconix to
specify and implement interim remedial actions and to evaluate final remedial
alternatives. The RWQCB issued a subsequent order requiring Siliconix to
complete the decontamination. Siliconix has substantially completed its
compliance with the RWQCB's orders.
Our subsidiary General Semiconductor has been named a PRP at several
Superfund sites and as a defendant in two lawsuits in the United States
District Court for the Eastern District of New York. See "Environment, Health
and Safety."
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
17
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- ------------------------------------
The following table sets forth certain information regarding our executive
officers as of March 15, 2004.
Name Age Positions Held
- ---- --- --------------
Dr. Felix Zandman* 75 Chairman of the Board and
Chief Executive Officer
Dr. Gerald Paul* 55 Chief Operating Officer, President
and Director
Marc Zandman* 42 Vice-Chairman of the Board,
President-Vishay Israel Ltd.
Richard N. Grubb 57 Executive Vice President,
Treasurer, and Chief Financial
Officer
Ziv Shoshani* 38 Executive Vice President,
Resistor and Inductor Group and
Director
* Member of the Executive Committee of the Board of Directors.
Dr. Felix Zandman, a founder of the Company, has been the Chief
Executive Officer and a Director of the Company since its inception. Dr.
Zandman had been President of the Company from its inception until March 16,
1998, when Dr. Gerald Paul was appointed President of the Company. Dr.
Zandman has been Chairman of the Board since March 1989.
Dr. Gerald Paul has served as a Director of the Company since May 1993 and
has been Chief Operating Officer and an Executive Vice President of the Company
since August 1996. On March 16, 1998, Dr. Paul was appointed President of the
Company. He was President of Vishay Electronic Components, Europe from January
1994 to August 1996. Dr. Paul has been Managing Director of Draloric Electronic
GmbH, an affiliate of the Company, since January 1991. Dr. Paul has been
employed by Draloric since February 1978.
Marc Zandman was appointed Vice-Chairman of the Board as of March 1, 2003.
He has been a Director of the Company since May 2001, President of Vishay Israel
Ltd. since April 1998, and Group Vice President of Measurements Group since
August 2002. Mr. Zandman has served in various other capacities with the Company
since August 1984. He is the son of Dr. Felix Zandman, the Company's Chief
Executive Officer.
Richard N. Grubb has been Vice President, Treasurer and Chief Financial
Officer of the Company since May 1994, and has been an Executive Vice President
of the Company since August 1996. Mr. Grubb has been associated with the Company
in various capacities since 1972, and was a Director from 1994 through 2003.
Ziv Shoshani has been Executive Vice President of the Resistor and
Inductor Group since 2002. He was Executive Vice President of the Capacitors
Group in 2001 and 2002 and was Executive Vice President, Specialty Products
Division in 2000 and 2001, including responsibility for oversight of Vishay's
Measurements Group Division. Prior to that, Mr. Shoshani served in various
capacities including Senior Vice President Precision Resistors, Worldwide Foil
Resistors Manager, Plant Manager, Holon, Israel, and Quality Control Manager,
Holon. Mr. Shoshani has been employed by the Company since 1995. He is the
nephew of Dr. Felix Zandman, the Company's Chief Executive Officer.
18
PART II
-------
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
- ------ ----------------------------------------------------------------
MATTERS
-------
Our common stock is listed on the New York Stock Exchange under the symbol
VSH. The following table sets forth the high and low sales prices for our common
stock as reported on the New York Stock Exchange Composite Tape for the
quarterly periods within the 2002 and 2003 calendar years indicated. We do not
currently pay cash dividends on our capital stock. Our policy is to retain
earnings to support the growth of our business and we do not intend to change
this policy at the present time. In addition, we are restricted from paying cash
dividends under the terms of our revolving credit agreement. See Note 6 to our
consolidated financial statements. Holders of record of our common stock totaled
approximately 2,007 at March 9, 2004.
COMMON STOCK MARKET PRICES
Calendar 2002 Calendar 2003
------------- -------------
High Low High Low
---- --- ---- ---
First Quarter $22.50 $17.05 $13.24 $ 8.77
Second Quarter $26.15 $19.31 $15.15 $ 9.93
Third Quarter $22.00 $ 8.51 $19.00 $12.47
Fourth Quarter $15.10 $ 6.70 $23.15 $17.45
At March 9, 2004, we had outstanding 14,979,440 shares of Class B common
stock, par value $.10 per share, each of which entitles the holder to ten votes.
The Class B common stock generally is not transferable except in certain very
limited instances, and there is no market for those shares. The Class B common
stock is convertible, at the option of the holder, into common stock on a share
for share basis. Substantially all of the Class B common stock is owned by Dr.
Felix Zandman, our Chairman and Chief Executive Officer, the estate of Mrs.
Luella B. Slaner, a former director, the children of Mrs. Slaner, and trusts for
the benefit of the grandchildren of Mrs. Slaner, either directly or
beneficially. Directly, and as voting trustee under a voting trust agreement,
Dr. Zandman has voting power over substantially all of the outstanding Class B
common stock.
See Item 12 for certain equity compensation information with respect to
equity compensation plans approved by security holders and equity compensation
plans not approved by security holders.
19
Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------
The following table sets forth selected consolidated financial information
of the Company as of and for the fiscal years ended December 31, 2003, 2002,
2001, 2000, and 1999. This table should be read in conjunction with our
consolidated financial statements and the related notes thereto included
elsewhere in this Form 10-K.
As of and for the Year Ended December 31,
-----------------------------------------------------------
2003 (1) 2002 (2) 2001 (3) 2000 1999 (4)
---- ---- ---- ---- ----
Income Statement Data (in thousands,
except per share amounts):
Net sales $2,170,597 $1,822,813 $1,655,346 $2,465,066 $1,760,091
Interest expense 37,831 28,761 16,848 25,177 53,296
Earnings (loss) before income
tax provision (benefit) and
minority interest 46,426 (100,045) 10,103 690,225 134,711
Income tax provision (benefit) 11,528 (16,900) 5,695 148,186 36,940
Minority interest 8,056 9,469 3,895 24,175 14,534
Net earnings (loss) 26,842 (92,614) 513 517,864 83,237
Basic earnings (loss) per
share(5) $0.17 $(0.58) $0.00 $3.83 $ 0.66
Diluted earnings (loss) per
share(5) $0.17 $(0.58) $0.00 $3.77 $ 0.65
Weighted average shares
outstanding - basic (5) 159,631 159,413 141,171 135,295 126,678
Weighted average shares
outstanding - diluted (5) 160,443 159,413 142,514 137,463 128,233
Balance Sheet Data (in thousands):
Total assets $4,572,513 $4,315,159 $3,951,523 $2,783,658 $2,323,781
Long-term debt 836,606 706,316 605,031 140,467 656,943
Working capital 1,049,892 897,456 1,096,034 1,057,200 604,150
Stockholders' equity 2,514,034 2,358,787 2,366,545 1,833,855 1,013,592
- -----------------------------------------------------------------------
(1) Includes the results of BCcomponents, acquired in December 2002. Also
includes net charge of $22,362,000 for restructuring and severance costs,
inventory write-downs, a loss on purchase commitments, and a loss on
extinguishment of debt, partially offset by a gain on insurance proceeds.
These items and their tax related consequences had a negative $0.11 effect
on earnings per share. These items are more fully described in the notes to
the consolidated financial statements.
(2) Includes the results from January 1, 2002 of Infineon Malaysia
optoelectronic infrared components business, January 31, 2002 of
Sensortronics, July 1, 2002 of Tedea-Huntleigh, August 1, 2002 of BLH/Nobel,
and October 1, 2002 of Celtron. Also includes charges for restructuring and
severance costs, inventory write-downs, a loss on purchase commitments and
other charges of $169,900,000. These items and their tax related
consequences had a negative $0.85 effect on earnings per share. These items
are more fully described in the notes to the consolidated financial
statements.
(3) Includes the results from January 1, 2001 of Tansitor, July 27, 2001 of
Infineon U.S. optoelectronic infrared components business, November 2, 2001
of General Semiconductor, and November 7, 2001 of Mallory. Also includes
charges for restructuring and severance costs, inventory write-downs, a
write-off of purchased in-process research and development, and other
charges of $156,590,000. These items and their tax related consequences had
a negative $0.84 effect on earnings per share. These items are more fully
described in the notes to the consolidated financial statements.
(4) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14,562,000 ($0.11 per share).
(5) Adjusted to reflect a three-for-two stock split distributed June 9, 2000,
and a five-for-four stock split distributed June 22, 1999.
Management believes that stating the impact on net earnings of items such as
restructuring, inventory write-downs, losses on purchase commitments, losses on
early extinguishment of debt, gains on insurance proceeds, write-offs of
in-process research and development, and other charges is meaningful to
investors because its provides insight with respect to ongoing operating results
of the Company.
20
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Sales for the year ended December 31, 2003 were $2.171 billion compared to
sales of $1.823 billion for the year ended December 31, 2002. Net earnings for
the year ended December 31, 2003 were $26.8 million or $0.17 per share, compared
with a net loss for the year ended December 31, 2002 of $92.6 million or $0.58
per share. Earnings for the year ended December 31, 2003 were impacted by
restructuring and severance costs of $29.6 million, a loss on extinguishment of
debt of $9.9 million, a loss on long-term purchase commitments of $11.4 million,
and a write-down of tantalum inventories on hand to market value of $5.4
million, offset by a gain on an insurance claim of $33.9 million. These items
and their tax related consequences had a negative $0.11 effect on earnings per
share. The year ended December 31, 2002 included charges for restructuring,
inventory write-downs, a loss on purchase commitments and other charges of
$169.9 million resulting in a reduction of $0.85 in net earnings per share.
Following a difficult 2002 and 2001, in which the electronic components
business generally was depressed both in the United States and much of the
world, market conditions remained difficult in first half of 2003. In the latter
half of the year, we noted substantial improvement of the general economic
outlook worldwide. We have seen a rapid acceleration of demand in electronics in
all regions, in almost all market segments, beyond pure seasonality and stock
replenishment. We noted, in particular, strength in automotive products,
computers and mobile phones. The economic recovery began in the actives
business, consistent with historical trends and as seen in the third quarter of
2003. The passives business is also showing indications of recovery. Pricing
pressure has started to abate in the active products markets, but its presence
continues to be felt in the passive segment, particularly for commodity
products.
Capacity utilization is a reflection, in part, of product demand trends.
We were approaching full capacity in most of our active facilities during the
latter half of the year. We are working to alleviate capacity constraints in the
active segment by addressing production bottlenecks in our fabrication
facilities, expanding our backend operations and expanding and broadening our
foundry activities. Capacity utilization showed some improvement in the passive
segment during 2003, where capacity for resistors and inductors ranged from 60%
to 75%, while in the capacitor lines it averaged around 50%.
Despite these positive trends, operating results for 2003 remained
depressed because of pricing pressures. Average selling prices continued to
decline during 2003 in both the passive and active segments, though considerably
less rapidly in the second half of the year. Operating results for the first
half of 2003 also suffered from the severe acute respiratory syndrome, or SARS,
outbreak, particularly in the active segment which does a substantial portion of
its business in Asia.
Financial Metrics
We utilize several financial measures and metrics to evaluate the
performance and assess the future direction of our business. These key financial
measures and metrics include sales, end-of-period backlog, the book-to-bill
ratio, and inventory turnover. We also monitor changes in average selling
prices.
End-of-period backlog is one indicator of future sales. However, if demand
falls below customers' forecasts, or if customers do not control their inventory
effectively, they may cancel or reschedule the shipments that are included in
our backlog, in many instances without the payment of any penalty. Therefore,
the backlog is not necessarily indicative of the results of future periods.
Another important indicator of demand in our industry is the book-to-bill
ratio, which is the ratio of the amount of product ordered during a period as
compared with the product that we ship during that period. A book-to-bill ratio
that is greater than one indicates that our orders are building and that we are
likely to see increasing revenues in future periods. Conversely, a book-to-bill
ratio that is less than one is an indicator of declining demand and may foretell
declining sales.
21
We also focus on our inventory turnover as a measure of how well we are
managing our inventory. We define inventory turnover for a financial reporting
period as our cost of products sold for that period divided by our average
inventory for the period. A higher level of inventory turnover reflects more
efficient use of our capital. In 2003, inventory turnover improved to 3.16 from
2.52 in 2002, which we attribute to somewhat improved selling conditions and
enhanced selling efficiencies implemented during the year. Exclusive of tantalum
and palladium write-downs, inventory turnover would have been approximately 3.15
in 2003 as compared to 2.47 in 2002.
The quarter-to-quarter trends in these financial metrics can also be an
important indicator of the likely direction of our business. The following table
shows sales, the end-of-period backlog and the book-to-bill ratio for our
business as a whole during the five quarters beginning with the fourth quarter
of 2002 and through the fourth quarter of 2003.
4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ------------ ------------ ------------ -----------
2002 2003 2003 2003 2003
---- ---- ---- ---- ----
Sales $459,377,000 $532,127,000(1) $538,103,000(1) $533,168,000(1) $567,199,000(1)
End-of-Period
Backlog $407,600,000 $438,200,000 $419,800,000 $434,000,000 $532,000,000
Book-to-Bill
Ratio 0.93 1.05 0.96 1.03 1.14
(1) Includes $69,300,000, $63,600,000, $60,800,000, and $63,900,000
attributable to BCcomponents for the first, second, third and fourth
quarters of 2003, respectively.
Management believes that these trends are an encouraging indication of
broad-based demand into 2004, in all of our major markets and all geographic
areas.
Pricing in our industry is volatile. During 2003, we experienced
significant declines in average selling prices, particularly in the first half
of the year in our actives business. Prices stabilized in the second half of the
year, and we expect relatively stable pricing to continue into 2004.
Segments
Vishay operates in two segments, passive components and active components.
We are the leading manufacturer of passive components in the United States and
Europe. These components include resistors, capacitors, inductors, strain gages
and load cells. We include in this segment our Measurements Group, which
manufactures and markets strain gages, load cells, transducers, instruments and
weighing systems. The core components of these devices are resistors that are
sensitive to various types of mechanical stress. We are also one of the world's
leading manufacturers of active electronic components, also referred to as
discrete semiconductors. These include transistors, diodes, rectifiers, certain
types of integrated circuits and optoelectronic products. Our active segment
includes our 80.4% owned subsidiary, Siliconix. The passive components business
had historically predominated at Vishay until the purchase of General
Semiconductor in November 2001, after which the lead position shifted to the
active business. With the acquisition of BCcomponents in December 2002, revenues
from our active and passive businesses are essentially split evenly between the
segments. For 2003, approximately 51% of our revenues were attributable to our
passive business and 49% to our active business.
The passive and active segments of our business have historically
responded differently to phases of the business cycle. Having strong
capabilities in both areas not only gives us a broad line of products to offer
our customers, it also smoothes, to some extent, the business swings that we
experience. When business slows down, active components are usually first to
feel the effects of the downturn that are later experienced by passive
components. Similarly, when business begins to increase, our semiconductor
products usually lead the recovery, followed some time later by resistors,
inductors and capacitors. Results for the second half of 2003 are indicative of
these past trends, where we saw improvements in active products beginning in the
third quarter, which was followed by improvements in our passive products in the
fourth quarter. We expect these trends to continue into 2004.
22
The following table shows sales and book-to-bill ratios broken out by
segment for the five quarters beginning with the fourth quarter of 2002 through
the fourth quarter of 2003:
4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- ----------- -----------
2002 2003 2003 2003 2003
---- ---- ---- ---- ----
Passive
Components
Sales $198,542,000 $274,874,000(1) $280,056,000(1) $268,368,000(1) $281,558,000(1)
Book-to-Bill
Ratio 1.00 1.07 0.96 0.97 1.06
Active
Components
Sales $260,835,000 $257,253,000 $258,047,000 $264,800,000 $285,641,000
Book-to-Bill
Ratio 0.88 1.03 0.96 1.09 1.23
(1) Includes $69,300,000, $63,600,000, $60,800,000, and $63,900,000
attributable to BCcomponents for the first, second, third and fourth
quarters of 2003, respectively.
Cost Management
We place a strong emphasis on reducing our costs. One way we do this is by
moving production to the extent possible from high-labor-cost markets, such as
the United States and Western Europe, to lower-labor-cost markets, such as
Israel, Mexico, the Republic of China (Taiwan), the People's Republic of China
and Eastern Europe. The percentage of our total headcount in lower-labor-cost
countries is a measure of the extent to which we are successful in implementing
this program. This percentage was 69% at the end of 2003, as compared to 65% at
the end of 2002, 61% at the end of 2001, and 57% at the end of 2000. We continue
to target improvement in this area as we proceed with the integration of the
business of BCcomponents, acquired in December 2002. The long-term target
remains between 75% and 80% of our headcount in lower-labor-cost countries.
We are placing particular emphasis on cost reduction in our capacitor
lines, which have been hardest hit by the recent market downturn and where the
business continues to suffer from worldwide overcapacity. In 2003, we completed
the transfer of our power capacitor production from Western Europe to the Czech
Republic and began moving our molded tantalum capacitor business to the People's
Republic of China. We also began to consolidate our existing film capacitor line
within the business of BCcomponents.
Israeli Government Incentives
Our production facilities in Israel benefit from incentives offered by the
Israeli government for creation of jobs and capital investment in that country.
These benefits take the form of government grants and reduced tax rates that are
lower than those in the United States. These reduced tax rates apply to projects
specifically approved by the Israeli government and, depending on project size,
are available for periods of ten or fifteen years. Due to the write-downs of
inventories and the losses on long-term purchase commitments in 2002 and 2003,
the application of the Israeli tax rates rather than United States tax rates
resulted in an increase in net loss of $24.8 million in 2002 and a decrease in
net earnings of $3.1 million in 2003. In 2001, lower tax rates in Israel, as
compared to the statutory rate in the United States, resulted in an increase in
net earnings of $3.0 million.
23
Israeli government grants are awarded to specific projects. These grants
are intended to promote employment in Israel's industrial sector and are
conditioned on the recipient maintaining certain prescribed employment levels.
Grants are paid when the related projects become operational, and the Israeli
government approves the project. Israeli government grants, recorded as a
reduction in the costs of products sold, were $12.4 million, $17.3 million and
$19.1 million in the years 2003, 2002 and 2001, respectively. At December 31,
2003, our balance sheet reflected $27.7 million in deferred grant income.
During the second quarter of 2002, the government of Israel informed us
that since the headcount in our Israeli subsidiaries decreased significantly
over the previous 18 months, the government intended to withhold up to $15
million grant otherwise due to us. The grant, which was made by the Israeli
government under an economic stimulus program, was conditioned in part on the
employment levels at certain of our Israeli facilities. The Israeli government
argued that we had not maintained employment at the required minimum levels.
During the fourth quarter of 2002, we settled our dispute with the government of
Israel, and the government agreed to continue making grant payments to us. Under
the terms of the settlement with the Israeli government, Vishay is required to
employ at least an additional 1,500 employees in Israel over the next three
years in order to preserve its eligibility for the government grant. We have
hired an additional 1,319 employees to date and expect to comply with these
requirements. We therefore recorded a catch up adjustment of approximately $1.0
million of grant income for the fourth quarter of 2002 and reversed the
allowances against the grant and deferred income reflected on the September 30,
2002 balance sheet.
If we were no longer able to maintain the required level of employment in
the future, we could be required to return some grant funds that were previously
awarded to us. The effect of the return of these funds would be to reduce our
income in future years. Also, if the current business climate continues, we
might not initiate new projects that qualify for grants or reduced tax rates or
the Israeli government could curtail or eliminate the programs from which we
have benefited in the past.
Write-Downs of Inventory and Purchase Commitments
Tantalum is the principal material used in the manufacture of tantalum
capacitors. We generally purchase this metal in powder or wire form, although in
2000 and early 2001, when we perceived possible supply shortages, we also
stockpiled quantities of tantalum ore. In July and November of 2000, we entered
into purchase contracts with Cabot Corporation for tantalum powder and wire that
committed us to minimum purchases of these materials at fixed prices through
2005. We regularly utilize tantalum powder and wire in the production of
tantalum capacitors but have not used our stockpile of tantalum ore since 2000.
Palladium is a precious metal used in the production of multi-layer ceramic
capacitors that we purchase under short-term contracts.
In 2001, as a result of the general downturn in the electronics business,
we experienced a significant decrease in capacitor sales. Prices of tantalum
ore, powder and wire and of palladium also experienced significant declines.
Accordingly, we recorded write-downs of our raw material inventories of these
metals including $38.0 million for tantalum ore, $14.0 million for tantalum wire
and powder and $18.0 million for palladium.
In June 2002, following initiation of a lawsuit by Cabot regarding its
tantalum supply contracts with Vishay, we agreed with Cabot to modify the
contracts, including reducing prices, providing for purchases at regular
intervals and extending one of the contracts through 2006. In the fourth quarter
of 2002, our management concluded that the depressed prices for tantalum were
not attributable to temporary imbalances in distributor inventories for tantalum
capacitors and that the prices for tantalum were likely to remain at their
currently depressed levels for the foreseeable future. Also during the fourth
quarter, one of our competitors settled its dispute with Cabot regarding
long-term tantalum purchase commitments at prices that we understand are in the
same range as the prices under our June 2002 settlement with Cabot. Our
management therefore concluded that it was unlikely to obtain further price
concessions from Cabot. Accordingly, we determined that it was appropriate to
accrue a loss on our purchase commitments under our supply contracts with Cabot
to reflect the difference between the prices that we are required to pay under
the contracts and current market prices for tantalum. For the same reasons, we
also determined to further write down our raw material inventories of tantalum
ore, powder and wire. These charges amounted to approximately $106.0 million for
the purchase commitments and $25.7 million for inventory. In 2002, we also
recorded a write-down of $1.7 million on palladium inventories.
24
Prices for tantalum continued to decline in 2003. We recorded write-downs
of $5.4 million to reduce tantalum inventories to current market value, and a
loss on purchase commitments for future delivery of tantalum of $11.4 million.
In addition, we recorded a write-down of $1.6 million of palladium inventory in
the first quarter of 2003.
The raw materials write-downs have the effect of improving gross margins
in subsequent periods by reducing cost of goods sold as inventory is utilized.
This effect cannot be quantified in any specific reporting period, however,
because of the large number of affected products and the impracticality of
tracking raw material inventory usage on a product-by-product basis.
We anticipate, based on current and foreseeable demand for tantalum
capacitors, that our minimum purchase commitments under the contracts with Cabot
will substantially exceed our requirements over the terms of the contracts. See
"Contractual Commitments" below. Also, we do not anticipate utilizing our
stockpile of tantalum ore at any time in the foreseeable future. Tantalum ore,
powder and wire have an indefinite shelf life; therefore, we believe that we
will eventually utilize all of the material in our inventory or purchased under
the contracts. Based on usage currently expected in 2004, our purchase
commitments represent approximately 7.5 years of usage. We have little
visibility of the demand for our tantalum capacitor products beyond twelve
months. It is almost certain that our actual requirements of tantalum will
differ from those projected, and likely that the difference will be material.
Foreign Currency
In 2003, we realized approximately 74% of our revenues from customers
outside the United States. Any third party sales not using the U.S. dollar as
the functional currency must be reported in the local currency and be translated
at the weighted average exchange rate. This translation has an impact on the net
sales line of the consolidated statements of operations and also on the expense
lines of the consolidated statements of operations. We generally do not purchase
foreign currency exchange contracts or other derivative instruments to hedge our
exposure to foreign currency fluctuations.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to our
consolidated financial statements. We identify here a number of policies that
entail significant judgments or estimates.
Revenue Recognition
We recognize revenue on product sales during the period when the sales
process is complete. This generally occurs when products are shipped to the
customer in accordance with terms of an agreement of sale, title and risk of
loss have been transferred, collectibility is reasonably assured and pricing is
fixed or determinable. We have agreements with distributors that historically
provided limited rights of product return. Beginning in 2002, we modified these
arrangements to allow distributors a limited credit for unsaleable products,
which we term a "scrap allowance." Consistent with industry practice, we also
have a "stock, ship and debit" program whereby we consider, and grant in our
discretion, requests by distributors for credits on previously purchased
products that remain in distributors' inventory, to enable the distributors to
offer more competitive pricing. In addition, we have contractual arrangements
whereby we provide distributors with protection against price reductions that we
initiate after sale of product to the distributor and prior to resale by the
distributor.
We record end of period accruals for each of the programs based upon our
estimate of future credits under the programs that will be attributable to sales
recorded through the end of the period. We calculate reductions of revenue
attributable to each of the programs during any period by computing the change
in the accruals from the prior period and adding the credits actually given to
distributors during the period under the programs. These procedures require the
exercise of significant judgments, but we believe they enable us to estimate
reasonably future credits under the programs.
25
Recording and monitoring of these accruals takes place at our subsidiaries
and divisions, with input from sales and marketing personnel and review,
assessment and, if necessary, adjustment by corporate management. While our
subsidiaries and divisions utilize different methodologies based on their
individual experiences, all of the methodologies take into account sales to
distributors during the relevant period, inventory levels at the distributors,
current and projected market trends and conditions, recent and historical
activity under the relevant programs, changes in program policies, and open
requests for credits. These are the elements that management considers relevant,
and, in our judgment, the different methodologies provide us with equally
reliable estimates upon which to base our accruals. We do not track the credits
that we record against specific products sold from distributor inventories, so
as to directly compare revenue reduction for credits recorded during any period
with credits ultimately awarded in respect of products sold during that period.
Nevertheless, we believe that we have an adequate basis to assess the
reasonableness and reliability of our estimates.
Accounts Receivable
Our receivables represent a significant portion of our current assets. We
are required to estimate the collectibility of our receivables and to establish
allowances for the amount of receivables that will prove uncollectible. We base
these allowances on our historical collection experience, the length of time our
receivables are outstanding, the financial circumstances of individual
customers, and general business and economic conditions.
Inventories
We value our inventories at the lower of cost or market, with cost
determined under the first-in first-out method and market based upon net
realizable value. The valuation of our inventories requires our management to
make market estimates. For instance, in the case of tantalum powder, we estimate
market value by obtaining current quotations from available sources of supply.
For work in progress goods, we are required to estimate the cost to completion
of the products and the prices at which we will be able to sell the products.
For finished goods, we must assess the prices at which we believe the inventory
can be sold. As noted, we recorded write-downs of our tantalum and palladium
inventories in 2002 and 2003. Inventories are also adjusted for estimated
obsolescence and written down to net realizable value based upon estimates of
future demand, technology developments and market conditions.
Estimates of Restructuring and Severance Costs and Purchase Related
Restructuring Costs
In 2003, we recorded restructuring costs of approximately $29.6 million
related to our existing businesses. In 2002, we recorded restructuring costs of
approximately $48.0 million related to our acquisitions and $31.0 million
related to our existing businesses. Our acquisition-related restructuring costs
included, among other things, costs related to our acquisition of BCcomponents
in December 2002. Our restructuring activities related to existing business were
designed to reduce both our fixed and variable costs, particularly in response
to the reduced demand for our products occasioned by the electronics industry
downturn. These included the disposition of fixed assets and the termination of
employees. Acquisition-related costs are included in the allocation of the cost
of the acquired business and generally add to goodwill. Other restructuring
costs are expensed during the period in which we determine that we will incur
those costs, and all of the requirements for accrual are met.
Because these costs are recorded based upon estimates, our actual
expenditures for the restructuring activities may differ from the initially
recorded costs. If this happens, we will have to adjust our estimates in future
periods. In the case of acquisition-related restructuring costs, this would
generally require a change in value of the goodwill appearing on our balance
sheet, but would not affect our earnings. In the case of other restructuring
costs, we could be required either to record additional expenses in future
periods, if our initial estimates were too low, or to reverse part of the
charges that we recorded initially, if our initial estimates were too high.
26
Raw Material Write-downs
In 2002 and 2003, we took charges against contractual commitments to
purchase tantalum powder and wire through 2006 and wrote-down our existing
inventory of tantalum ore, powder and wire to present market value. We did this
because the current market prices of tantalum are substantially below the prices
at which we are committed to purchase tantalum in the future under long-term
contracts and the prices at which we were carrying our tantalum raw materials
inventory. These actions involved significant judgments on our part, including
decisions of whether to take these charges and write-downs, their timing and
their amount.
We made the decision to take the charges and write-downs after our
management concluded that the substantial fall-off in the demand for tantalum
capacitors was likely to continue for the foreseeable future. Combining this
assessment with the worldwide over-capacity in tantalum production, we could not
foresee when tantalum prices might recover from their currently depressed
levels. Although we believe that both the charges and write-downs as well as
their timing were appropriate under the circumstances, our visibility for future
demand and pricing is limited and the judgments made by our management
necessarily involved subjective assessments.
The write-down of our current tantalum inventory and the charges with
respect to our future tantalum commitments were calculated based on market
prices for tantalum. There is no established market on which tantalum raw
materials are regularly traded and quoted. We based our determination of current
market price on quotations from two suppliers of these materials. We cannot say
that the prices at which we could currently enter into contracts for the
purchase of tantalum would be the same as these quoted prices. Had we made other
assumptions on current and future prices for tantalum, the amount of the
inventory write-downs and the charges against our purchase commitments would
have been different.
If tantalum prices were to recover in the future, we would not reverse the
write-downs that we have taken on our raw materials inventory, so that our cost
of materials will continue to reflect these write-downs regardless of future
price increases in tantalum. This could have the effect of increasing the
earnings that we realize in future periods from what they would have been had we
not taken these actions until future raw material prices were known with
certainty. We could also be required to take further write-downs and charges if
tantalum prices experience further declines.
Based upon similar considerations, we recorded write-downs of our
palladium inventory to market value in both 2002 and 2003.
Goodwill
Goodwill represents the excess of the cost of businesses acquired over the
fair value of the related net assets at the date of acquisition. Goodwill is
tested for impairment at least annually. These tests will be performed more
frequently if there are triggering events. SFAS No. 142 prescribes a two-step
method for determining goodwill impairment. In the first step, we determine the
fair value of the reporting unit using a comparable companies market multiple
approach. If the net book value of the reporting unit exceeds the fair value, we
would then perform the second step of the impairment test which requires
allocation of the reporting unit's fair value to all of its assets and
liabilities in a manner similar to a purchase price allocation, with any
residual fair value being allocated to goodwill. An impairment charge will be
recognized only when the implied fair value of a reporting unit's goodwill is
less than its carrying amount.
Fair value of reporting units is determined using comparable company
market multiples. The comparable companies utilized in our evaluation are the
members of our peer group utilized in the presentation of our stock performance
in our annual proxy statement.
27
Impairment of Long-Lived Assets
We assess the impairment of our long-lived assets, other than goodwill and
tradenames, including property and equipment, and identifiable intangible assets
subject to amortization, whenever events or changes in circumstances indicate
the carrying value may not be recoverable. Factors we consider important which
could trigger an impairment review include significant changes in the manner of
our use of the acquired asset, changes in historical or projected operating
performance and significant negative economic trends.
Results of Operations
Income statement captions as a percentage of sales and the effective tax
rates were as follows:
Year Ended December 31
----------------------------------------------
2003 2002 2001
---- ---- ----
Costs of products sold 77.9% 79.8% 77.0%
Gross profit* 21.6% 14.4% 23.0%
Selling, general and
administrative expenses 17.6% 17.1% 16.8%
Operating income (loss) 2.7% (4.4%) 0.9%
Earnings (loss) before
income taxes (benefit)
and minority interest 2.1% (5.5%) 0.6%
Net earnings (loss) 1.2% (5.1%) 0.0%
Effective tax rate 24.8% 16.9% 56.4%
* - Reflects losses on purchase commitments of $11.4 million and $106.0
million during the years ended December 31, 2003 and 2002.
Net Sales, Gross Profits and Margins
Net sales for the year ended December 31, 2003 increased by $347.8 million
or 19.1% over the prior year. The increase primarily reflects the acquisitions
of BCcomponents in December 2002, Celtron Technologies in October 2002, BLH and
Nobel in July 2002 and Tedea-Huntleigh BV in September 2002. Excluding these
acquisitions, net sales increased $49.1 million, or 3%. The weakening of the
U.S. dollar against foreign currencies for the year ended December 31, 2003, in
comparison to the prior year, resulted in increases in reported sales of $74
million.
Net sales for the year ended December 31, 2002 increased by $167.5 million
or 10.1% over the prior year. This reflects a substantial increase in sales in
the active segment, attributable in large measure to 2001 acquisitions reflected
only partially in 2001 but fully in 2002, partially offset by a continuing drop
in sales in the passive segment in 2002. The weakening of the U.S. dollar
against foreign currencies for the year ended December 31, 2002, in comparison
to the prior year, resulted in increases in reported sales of $18 million.
28
We deduct, from the sales that we record to distributors, allowances for
future credits that we expect to provide for returns, scrapped product and price
adjustments under various programs made available to the distributors. We make
deductions corresponding to particular sales in the period in which the sales
are made, although the corresponding credits may not be issued until future
periods. We estimate the deductions based on sales levels to distributors,
inventory levels at the distributors, current and projected market trends and
conditions, recent and historical activity under the relevant programs, changes
in program policies and open requests for credits. We recorded deductions from
gross sales under our distributor incentive programs of $67.2 million, $67.4
million, and $56.1 million for the years ended December 31, 2003, 2002, and
2001, respectively, or, as a percentage of gross sales 3.0%, 3.6%, and 3.2%,
respectively. Actual credits issued under the programs for the years ended
December 31, 2003, 2002, and 2001, were approximately $62.4 million, $63.4
million, and $52.7 million, respectively. The increase in the incentives from
2001 is attributable primarily to the adverse business climate that developed
following 2000 and the resulting pricing pressures that affected our
distributors and the electronic component industry generally.
Costs of products sold as a percentage of net sales for the year ended
December 31, 2003 was 77.9% as compared to 79.8% for the prior year. Gross
profit as a percentage of net sales for year ended December 31, 2003 was 21.6%
as compared to 14.4% for the prior year. Price declines were offset in
substantial part by volume increases and cost savings programs. Gross profit for
2003 reflects write-downs of raw material inventory to lower of cost or market
of $7.0 million, which is included in cost of products sold, and an accrual of
loss on long-term purchase commitments of $11.4 million. Gross profit for 2002
reflects a write-down of raw material inventory to market value of $27.4
million, which is included in cost of products sold, and an accrual of loss on
long-term purchase commitments of $106.0 million.
Costs of products sold as a percentage of net sales were 79.8% for the
year ended December 31, 2002 as compared to 77.0% for the prior year. Gross
profit, as a percentage of net sales, for the year ended December 31, 2002 was
14.4% as compared to 23.0% for the prior year. Gross profit for 2002 includes a
write-down of raw material inventory to market value of $27.4 million, which is
included in cost of goods sold, and accruals for losses on purchase commitments
of $106.0 million. The erosion in overall profit margins in 2002 reflected the
continuing weakness in the passive segment, offset in substantial part by
improvements in the active segment. Both volume reduction and further declines
in average selling prices contributed to the declining profit margins in the
passive segment. Profit margins in the active segment benefited from higher
volumes, even as average selling prices continued to decline in various product
lines. For the year ended December 31, 2001, gross profit reflected write-downs
of tantalum and palladium inventories of $70.0 million.
See "Israeli Government Incentives" regarding Israeli government grants,
which are recorded as a reduction in costs of products sold.
The following tables show sales and gross profit margins separately for
our passive and active segments.
Passive Components
Year Ended December 31
----------------------------------------------
2003 2002 2001
---- ---- ----
Net Sales $1,104,856,000 $767,246,000 $1,010,634,000
Gross Profit Margin 17.3% (4.9%) 20.6%
Net sales of passive components for the year ended December 31, 2003
increased $337.6 million or 44% as compared to the prior year. Without the
acquisition of BCcomponents, Celtron Technologies, BLH and Nobel, and
Tedea-Huntleigh, the passive components business sales would have increased by
$38.9 million or 5% as compared to the prior year. The organic increase in net
sales is attributable to the volume increases in the resistor and inductor
product lines, partially offset by price declines, and the positive impact of
foreign currency exchange rates. The average selling price was down versus the
prior year.
29
Our resistor and inductor business stabilized in 2002 and began an
improvement in the latter part of that year which continued into 2003. Our
capacitor business, which was particularly hard hit during the recent global
slowdown in the electronics industry, continues to experience the lingering
effects of worldwide overcapacity in both production and supply. However, with
the slowing of the erosion in average selling prices that began in the fourth
quarter of 2002, the capacitor business appears to have stabilized and is
showing modest signs of improvement.
Gross margins were 17.3% for the year ended December 31, 2003, as compared
to negative 4.9% for the prior year. Results for 2003 reflected average margins
of 29% for our resistor and inductor lines and 5% for our capacitor lines.
Margins were affected negatively by raw material related write-downs in 2003 and
2002, as market prices for these materials continued to decline. During 2003, we
recorded write-downs of $5.4 million to reduce tantalum inventories to current
market value, and a loss on purchase commitments for future delivery of tantalum
of $11.4 million. In addition, we recorded a write-down of $1.6 million of
palladium inventory. In 2002, we recorded a loss on long-term purchase
commitments of tantalum of $106.0 million and write-downs of $27.4 million on
tantalum and palladium inventories. The raw material write-downs have the effect
of improving gross margins in subsequent periods by reducing cost of goods sold
as inventory is utilized. This effect cannot be quantified in any specific
reporting period, however, because of the large number of affected products and
the impracticality of tracking raw material inventory usage on a
product-by-product basis.
We continue to implement cost reduction programs, particularly in our
passives business, in order to reduce costs and thereby stabilize our margins.
We have initiated several significant cost reduction programs in all of our
products lines, including facility combinations and shifts of production to
lower-cost regions, with particular emphasis on reducing headcount in
high-labor-cost countries. Sixty-nine percent of our labor force was in
low-labor-cost countries as of December 31, 2003. The impact of these cost
savings plans has been partially offset by the underutilization of capacity in
the commodity products.
Net sales of passive components for the year ended December 31, 2002
decreased by $243.4 million or 24.1% from comparable sales of the prior year.
The decrease in net sales was attributable to a combination of lower volume and
a continuing slide in prices. Excluding the significant acquisition activity in
our Measurements Group in 2002, sales in the passive segment would have
decreased by $288.9 million or 29% from the prior year. Gross profit margin in
2002 was negatively impacted by a loss on long-term purchase commitments of
tantalum of $106.0 million and write-downs of $27.4 million on tantalum and
palladium inventories. Even excluding the loss on long-term purchase
commitments, our capacitor business had negative average gross margins of 6% in
2002, compared with positive average gross margins of 19% for resistors and
capacitors. The acquisition of BCcomponents, a worldwide manufacturer of
resistors and capacitors, in December 2002 had no material effect on the 2002
results for the passive segment.
30
Active Components
Year Ended December 31
----------------------------------------------
2003 2002 2001
---- ---- ----
Net Sales $1,065,741,000 $1,055,567,000 $644,712,000
Gross Profit Margin 26.1% 28.4% 26.9%
Net sales of the active components business for year ended December 31,
2003 increased by $10.2 million, or 1%, from sales of the comparable prior year
period. The active segment continued to experience pricing pressure in 2003,
especially during the first half of the year. Sales for the first half of 2003
actually decreased from the comparable 2002 period, primarily as a result of the
SARS outbreak in Asia where Siliconix sells approximately 75% of its total
sales. The modest revenue growth for the year was fueled by a significant
rebound in Asian business during the second half, driven by demand for computer
components and by distributors restocking inventories. Gross margins were 26.1%
for the year ended December 31, 2003 as compared to 28.4% for the prior year.
Margins were negatively impacted by product mix changes at Siliconix, where
there was a higher share of commodity products as compared to the comparable
prior year periods. Also, because of capacity constraints that it has begun to
experience, Siliconix made greater use of subcontractors during 2003, which has
the effect of driving down margins. Siliconix's net sales for 2003 were $392.1
million, compared to $372.9 million in 2002, a 5% increase, and its gross profit
margins declined from 31% for 2002 to 29% for 2003.
Net sales of the active components business for the year ended December
31, 2002 increased by $410.9 million or 63.7% from comparable sales of the prior
year. As detailed below, the increase was in substantial measure due to the
acquisitions of General Semiconductor and the Infineon infrared business in
2001, which were included in our results for all of 2002 but for only portions
of 2001. It also reflects sales recovery at our existing semiconductor
operations that began in 2002. The increased volume that we experienced in 2002
was offset to some extent by modest declines in average selling prices in
various product lines. The improvement in gross profit margins to 28.4% from
26.9% is attributable primarily to improvements at Siliconix and to a lesser
extent at our other semiconductor operations. Siliconix's net sales for 2002
were $372.9 million as compared to $305.6 million in 2001, a 22.1% increase, and
its gross profit margins rose from 25% for 2001 to 31% for 2002.
Revenues in the active segment for 2002 included revenues of $350.9
million from the Infineon infrared business and General Semiconductor, compared
to revenues of $82.7 million from these businesses in 2001. Excluding the
contribution of these acquisitions, net sales in 2002 would have increased by
25.4% as compared to 2001 and gross profit margin would have been 29.5%.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the year ended December
31, 2003 were 17.6% of net sales as compared to 17.1% of net sales for the prior
year. This increase was mainly due to the costs associated with the acquisition
and integration of BCcomponents. Our continuing cost reduction initiatives
referred to above also target selling, general, and administrative costs and
offset, in part, the acquisition related increases in SG&A margins.
Selling, general, and administrative expenses for the year ended December
31, 2002 were 17.1% of net sales as compared to 16.8% of net sales for the prior
year. The higher percentage and amount in 2002 was due primarily to acquisition
activity.
31
Restructuring and Severance Costs
Our restructuring activities have been designed to cut both fixed and
variable costs, particularly in response to the reduced demand for products
occasioned by the electronics industry downturn beginning in 2001. These
activities include the closing of facilities and the termination of employees.
Beginning January 1, 2003, restructuring costs have been accounted for under
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
This statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Because costs
are recorded based upon estimates, actual expenditures for the restructuring
activities may differ from the initially recorded costs. If the initial
estimates are too low or too high, we could be required either to record
additional expenses in future periods or to reverse previously recorded
expenses. We anticipate that we will realize the benefits of our restructuring
through lower labor costs and other operating expenses in future periods.
We recorded restructuring and severance costs for the year ended December
31, 2003 of $29.6 million, $28.6 million of which was workforce reduction
expense and $1.0 million of which was fixed asset impairment. The workforce
reduction expense was comprised of termination costs for 708 employees in
Europe, Asia and the United States. Through the end of 2003, we paid $14.2
million of these workforce reduction costs, corresponding to the termination of
653 employees. The balance of workforce reduction expense remaining at December
31, 2003 is expected to be paid by the end of 2004. The fixed asset impairment
related to facility closure. As a result of restructuring activities initiated
in 2003, we expect an annual increase in gross profit of approximately $10.4
million.
We recorded restructuring and severance costs for the year ended December
31, 2002 of $31.0 million, of which $18.6 million was workforce reduction
expense and $12.4 million was fixed asset impairment. The workforce reduction
expense was comprised of termination costs for 1,438 employees in Europe, Israel
and the United States. Through the end of 2003, we paid $16.5 million of these
workforce reduction costs, corresponding to the termination of 1,422 employees.
The balance of workforce reduction expense remaining at December 31, 2003 is
expected to be paid in 2004. The fixed asset impairment related to facility
closure. We continue to realize annual cost savings associated with
restructuring activities initiated in 2002.
We recorded $61.9 million in restructuring and severance costs for the
year ended December 31, 2001, of which $40.9 million was workforce reduction
expense and $21.0 million was fixed asset impairment. The workforce reduction
expense was comprised of termination costs for 5,663 employees in Europe, Israel
and Asia. A balance of $1.6 million of workforce reduction costs remaining at
December 31, 2002 was paid in 2003. The fixed asset impairment related to
facility closure. We continue to realize annual cost savings associated with
restructuring activities initiated in 2001.
For additional detail on restructuring and severance costs, see Note 4 to
our consolidated financial statements.
Restructuring and severance costs are separate from plant closure,
employee termination and similar integration costs we incur in connection with
our acquisition activities. These amounts are included in the costs of our
acquisitions and do not affect earnings or losses on our statement of
operations. For a discussion of these costs, see Note 2 to our consolidated
financial statements.
Interest Expense
Interest expense for the year ended December 31, 2003 increased by $9.1
million, as compared to the prior year. This increase was primarily a result of
debt issued or assumed in the various acquisitions made in 2002 and the issuance
in August 2003 of our $500 million principal amount 3-5/8% convertible
subordinated notes due 2023, net of debt repaid with the proceeds of these notes
of $398 million. Acquisition related debt included, in particular borrowings of
$116 million under our revolving credit facility and the issuance of $105
million principal amount of unsecured loan notes, currently bearing interest at
LIBOR plus 1.5%, in connection with the BCcomponents acquisition in December
2002. The debt we repaid with the proceeds of our 3-5/8% notes included
approximately $171 million principal amount of General Semiconductor's 5.75%
convertible notes, approximately $97 million accreted principal amount of Liquid
Yield Option(TM) Notes (LYONs) and $130 million in borrowings under our
revolving credit facility.
32
Interest expense for the year ended December 31, 2002 increased by $11.9
million compared to the prior year. This increase was a result of higher average
outstanding bank borrowings attributable to our acquisition activity, offset in
part by somewhat lower interest rates.
Other Income (Expense)
We recorded a loss of $9.9 million for extinguishment of debt during the
year ended December 31, 2003 on the redemption of $171 principal amount of the
General Semiconductor notes and the repurchase of $97.0 million in accreted
principal amount of our LYONs. Also during 2003, we recorded a gain of $33.9
million on the receipt of insurance proceeds in excess of book value on account
of the destruction of the thin film resistor facility of our Electro-Films, Inc.
subsidiary in Providence, Rhode Island. That facility has now been completely
rebuilt into a state-of-the-art production center. No comparable losses or gains
were recorded in the prior year.
Excluding the items described above, other income was $2.3 million for the
year ended December 31, 2003, as compared to $8.7 million for the prior year.
This decrease was primarily due to higher foreign exchange losses in 2003.
Foreign exchange losses of $5.2 million were reported for 2003 as compared to
foreign exchange losses of $0.8 million for the comparable prior year period. In
2003, we also had losses of $2.5 million on the disposal of property and
equipment, compared to losses of $0.3 million in 2002. Interest income decreased
by $0.7 million for the year ended December 31, 2003 compared to the prior year,
primarily due to lower interest rates. We recognized a gain on expiration of an
interest rate swap of $3.8 million in 2003, compared to a loss on ineffective
interest rate swaps of $0.1 million in 2002. Additionally, 2002 included other
income of approximately $1.4 million received from the Chinese government as an
incentive for being a foreign partner in China.
Other income for the year ended December 31, 2002 was $8.7 million as
compared to $12.7 million for the prior year. Other income in both 2002 and 2001
consisted primarily of interest income, as well as gains on disposal of property
and equipment and foreign exchange gains.
Minority Interest
Minority interest in earnings decreased by $1.4 million for the year ended
December 31, 2003 as compared to the prior year, primarily due to the decrease
in net earnings of Siliconix, of which we own 80.4%. Minority interest increased
by $5.6 million for the year ended December 31, 2002 as compared to the prior
year, primarily due to the increase in net earnings of Siliconix.
Income Taxes
The effective tax rate for the year ended December 31, 2003 was 24.8%,
reflecting tax expense, as compared to 16.9% for the prior year, reflecting a
tax benefit. The effective tax rate in 2003 reflects the fact that we could not
recognize for accounting purposes the tax benefit of losses incurred in certain
jurisdictions, although these losses are available to offset future taxable
income. Under applicable accounting principles, we may not recognize deferred
tax assets for loss carryforwards in jurisdictions where there is a recent
history of cumulative losses, where there is no taxable income in the carryback
period, where there is insufficient evidence of future earnings to overcome the
loss history and where there is no other positive evidence, such as the likely
reversal of temporary timing differences, that would result in the utilization
of loss carryforwards for tax purposes.
We enjoy favorable tax rates on our income in Israel from specific
approved projects. The low rates, which generally are available for a period of
ten or fifteen years, ordinarily result in greater earnings than what they would
be if the Israeli income was subject to statutory United States tax rates.
However, due to losses reported in Israel, the low rates did not improve net
earnings for 2003 and 2002, respectively.
33
The effective tax rate for the year ended December 31, 2002 was 16.9%,
reflecting an income tax benefit, compared to 56.4% for the prior year,
reflecting income tax expense. The low effective rate in 2002 is primarily a
consequence of the losses before income taxes in low tax jurisdictions. While we
continue to benefit from low tax rates in Israel, we recognized a large taxable
loss in Israel in 2002, with the effect of reducing our overall tax benefit on
our losses. The more favorable Israeli tax rates are applied to specific
approved projects and are normally available for a period of ten or fifteen
years (see the discussion of our Israeli tax benefits in "Overview-Israeli
Government Incentives" above). Comparatively, in 2001, the high effective tax
rate was due to low net earnings and the non-tax deductibility of purchased
research and development expense related to the General Semiconductor
acquisition.
Financial Condition and Liquidity
Cash and cash equivalents were $556 million at December 31, 2003, of which
$279 million belonged to Siliconix. Of the remaining amount of $277 million,
approximately $180 million is held by our non-U.S. subsidiaries.
Our financial condition at December 31, 2003, continued to be strong, with
a current ratio (current assets to current liabilities) of 2.8 to 1, compared
with a ratio of 2.6 to 1 at December 31, 2002. Our ratio of long-term debt, less
current portion, to stockholders' equity was 0.33 to 1 at December 31, 2003,
compared to a ratio of 0.30 to 1 at December 31, 2002. The increase in long-term
debt ratio from December 31, 2002 reflects the debt issued in the third quarter
of 2003, net of debt repaid.
Cash flows from operations were $255.8 million for the year ended December
31, 2003 as compared to $366.9 million for the year ended December 31, 2002.
During 2003, accounts receivable attributable to our existing businesses and
inventory levels continued to decline as a result of the lingering effects of
the business slowdown that began in 2001, although the drop was substantially
less pronounced than in the prior year. The increase in accounts receivable at
December 31, 2003 versus December 31, 2002 was primarily due to the net sales of
BCcomponents, which was acquired in December 2002. Net purchases of property and
equipment for the year ended December 31, 2003 were $126.6 million, as compared
to $110.1 million in the prior year. The increase was primarily attributable to
spending to expand capacity in the active business and to shift manufacturing to
low labor cost regions in the passive business. We used $278.7 million in cash
for acquisitions in 2002, primarily for our acquisitions of BCcomponents in
December 2002 and other smaller acquisitions in our Measurements Group during
the year. The acquisitions were funded in part by our cash balances and in part
from borrowings. See Note 2 to our consolidated financial statements for
discussion of these acquisitions. Purchase of businesses, net of cash acquired,
of $41.2 million, for the year ended December 31, 2003 represents payments made
related to liabilities assumed from previous acquisitions.
Our debt levels have increased significantly since 2000. This is primarily
attributable to acquisition activity. Additionally, in 2003, we issued $500
million of convertible subordinated notes, using a majority of the proceeds to
repay other higher interest rate debt.
In connection with the acquisition of BCcomponents in December 2002, we
issued $105 million principal amount of floating rate unsecured loan notes due
2102. The notes bear interest at LIBOR plus 1.5% through December 31, 2006 and
at LIBOR thereafter. The interest payable on the notes may be further reduced to
50% of LIBOR after December 31, 2010 if the price of Vishay common stock trades
above a specified target price, as provided in the notes. The notes are subject
to a put and call agreement under which the holders may at any time put the
notes to us in exchange for 6,176,471 shares of Vishay common stock in the
aggregate, and we may call the notes in exchange for cash or for shares of
Vishay common stock after 15 years from the date of issuance.
34
On August 6, 2003, we sold $450 million aggregate principal amount of
3-5/8% convertible subordinated notes due 2023 and granted the initial
purchasers an option to purchase, within 30 days of the date of the offering
memorandum relating to the notes, an additional $50 million of the notes. This
option was exercised, and the additional $50 million of notes was issued on
September 3, 2003. The notes will pay interest semi-annually. Holders may
convert their notes into shares of Vishay common stock, subsequent to the
occurrence of certain conditions that had not occurred as of December 31, 2003,
at a conversion price of $21.28 per share. This conversion price is the
equivalent to a conversion rate of 46.9925 shares per $1,000 principal amount of
notes. The notes are subordinated in right of payment to all of our existing and
future senior indebtedness and are effectively subordinated to all existing and
future liabilities of its subsidiaries. The notes will be redeemable at our
option beginning August 1, 2010 at a redemption price equal to 100% of the
principal amount plus accrued and unpaid interest, if any. Holders of the notes
will have the right to require us to repurchase all or some of their notes at a
purchase price equal to 100% of their principal amount of the notes, plus
accrued and unpaid interest, if any, on August 1, 2008, August 1, 2010, August
1, 2013 and August 1, 2018. In addition, holders of the notes will have the
right to require us to repurchase all or some of their notes upon the occurrence
of certain events constituting a fundamental change. On any required repurchase,
we may choose to pay the purchase price in cash or shares of Vishay common stock
or any combination of cash and Vishay common stock. The proceeds of the offering
of these convertible subordinated notes were used to repay other outstanding
debt, as well as general corporate purposes. The early extinguishment of the
LYONs and the General Semiconductor notes, described below, resulted in a pretax
loss of $9.9 million in the third quarter of 2003. It is anticipated that the
early extinguishment will reduce interest expense by $3.5 million per year going
forward.
We used approximately $130 million of the proceeds of the offering of the
convertible subordinated notes to repay amounts outstanding under our revolving
credit facility. At the same time, we agreed with the lenders under this
facility to an amendment and restatement of the agreement governing the
facility. The maximum availability under the facility, in light of our
anticipated liquidity needs, was changed from $500 million to $400 million, and
the final maturity of the facility was extended from June 2005 to May 2007. The
restatement decreases our minimum tangible net worth requirement to $850 million
plus 50% of net income (without offset for losses) and 75% of net proceeds of
equity offerings from July 1, 2003, eliminates the covenant on minimum earnings
before interest and tax, permits securitization of up to $200 million of
non-U.S. accounts receivable, allows for the release of all collateral (other
than subsidiary stock and pledges by the Company and its subsidiaries of
intercompany notes) under certain circumstances and creates an event of default
upon the occurrence of a fundamental change as defined under our convertible
subordinated notes. At December 31, 2003, there were no borrowings outstanding
under this credit facility. Our tangible net worth at the end of 2003 stood at
$904 million, which is $45 million more than the minimum required under the
related credit facility covenant.
We used approximately $97.4 million of the proceeds of the offering of the
convertible subordinated notes to fund the purchase of approximately $97.0
million accreted principal amount ($165.0 million face amount) of our Liquid
Yield Option(TM) Notes (LYONs). Pursuant to the terms of the LYONs, on June 4,
2004, the remaining holders of the LYONs will have the right to "put" these
notes to us for an aggregate purchase price of $235 million. Holders may also
put these notes to us on June 4, 2006, June 4, 2011, and June 4, 2016 at various
prices set forth in the notes. If these notes are put to us, we expect to be
able to utilize our revolving credit facility or Vishay common stock to finance
the repurchase.
We used approximately $176.6 million of the proceeds of the offering of
the convertible subordinated notes to fund principal and premium in connection
with the redemption of all of the outstanding 5.75% convertible subordinated
notes due 2006 of our General Semiconductor subsidiary. Prior to redemption,
there was $171 million principal amount of the General Semiconductor notes
outstanding. The notes were redeemed at a price of 103.286% of their principal
amount, plus accrued but unpaid interest to the date of redemption of $2.3
million.
35
Commercial Commitments
We maintain a secured revolving credit facility of $400 million. As of
December 31, 2003, we had no amounts outstanding under the revolving credit
facility. Letters of credit totaling $6.1 million, were issued under the
revolving credit facility at December 31, 2003. At December 31, 2003, $393.9
million was available under the credit facility.
Borrowings under the revolving credit facility are secured by pledges of
stock in certain significant subsidiaries and certain guarantees by significant
subsidiaries. The subsidiaries would be required to perform under the guarantees
in the event that Vishay failed to make principal or interest payments under the
revolving credit facility. If any subsidiary were to borrow under the credit
facility, Vishay would provide a similar guarantee with respect to the
subsidiary. The credit facility restricts us from paying cash dividends and
requires us to comply with other covenants, including the maintenance of
specific financial ratios.
At December 31, 2003, we had committed and uncommitted short-term credit
lines with various U.S. and foreign banks aggregating approximately $69 million,
of which approximately $51 million was unused.
Contractual Commitments
As of December 31, 2003 we had contractual obligations as follows:
Payments due by period
(in thousands)
Total Less than 1-3 years 4-5 years After 5
----- ---------- --------- --------- -------
1 year years
------ -----
Long-term debt $ 837,888 $ 1,282 $ 1,569 $ 833 $834,204
Operating leases 75,250 24,106 32,779 14,774 3,591
Expected pension
funding 10,000 10,000 - - -
Estimated costs to
complete construction
in progress 14,500 14,500 - - -
Tantalum purchases 280,500 103,800 176,700 - -
--------------------------------------------------------------------
Total $1,218,138 $ 153,688 $211,048 $ 15,607 $837,795
====================================================================
Pursuant to the terms of the Liquid Yield Option(TM) Notes (LYONs), on
June 4, 2004, the remaining holders of the LYONs will have the right to "put"
these notes to us for an aggregate purchase price of $235 million. Holders may
also put these notes to us on June 4, 2006, June 4, 2011, and June 4, 2016 at
various prices set forth in the notes. If these notes are put to us, we expect
to be able to utilize our revolving credit facility or Vishay common stock to
finance the repurchase.
On December 31, 2003, the Company and Siliconix announced the signing of a
memorandum of understanding with Tower Semiconductor for a long-term
manufacturing and supply arrangement between Siliconix and Tower. Pursuant to
the terms of the memorandum of understanding, Siliconix would place with Tower
orders valued at approximately $200 million for the purchase of semiconductor
wafers to be manufactured in Tower's Fab 1 over a seven to ten year period, of
which approximately $53 million would be guaranteed and would be delivered over
the three year period starting at the first anniversary of the definitive
agreement. Siliconix would advance to Tower $20 million to be used for the
purchase of additional equipment required to satisfy Siliconix's orders, which
would be credited towards the purchase price of the wafers. The transaction is
subject to the approval of both companies' boards of directors, Tower's lending
bank and the Israeli investment center and to the negotiation of definitive
documentation. While there can be no assurances that a definitive agreement will
be reached, Vishay and Siliconix expect a definitive agreement to be signed
during the first half of 2004. If a definitive agreement is not reached, Vishay
and Siliconix will have no commitments related to this memorandum of
understanding.
36
Inflation
Normally, inflation does not have a significant impact on our operations
as our products are not generally sold on long-term contracts. Consequently, we
can adjust our selling prices, to the extent permitted by competition, to
reflect cost increases caused by inflation.
Recent Accounting Pronouncements
In November 2002, the Emerging Issues Task Force (EITF) issued EITF Issue
No. 00-21, Revenue Arrangements with Multiple Deliverables, which provides
guidance on the timing and method of revenue recognition for sales arrangements
that include the delivery of more than one product or service. EITF 00-21 is
effective prospectively for arrangements entered into in fiscal periods
beginning after June 15, 2003. The adoption of EITF 00-21 did not have a
material impact on our consolidated financial statements.
In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. In addition to other technical
provisions, this statement rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material, classified
as an extraordinary item, net of tax. The provisions of SFAS No. 145 were
adopted on January 1, 2003. Our early extinguishment of debt in 2003 was
accounted for and presented in our financial statements pursuant to the
requirements of SFAS No. 145.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement nullifies EITF Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred
rather than at the date of an entity's commitment to an exit plan. The
provisions of SFAS No. 146 were adopted for our exit or disposal activities
initiated after December 31, 2002.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34 ("FIN 45"). The
interpretation requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting by requiring identical accounting for guarantees issued with
separately identified consideration and guarantees issued without separately
identified consideration. The recognition and measurement provisions of FIN 45
are applicable to guarantees issued or modified after December 31, 2002. The
future impact will depend upon whether Vishay enters into or modifies any
material guarantee arrangements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition to SFAS No. 123's fair value method of accounting for stock-based
employee compensation. We have made the additional disclosures required by SFAS
No. 148. We are evaluating the potential impact of adopting the fair value
method of accounting for our stock-based employee compensation.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB 51. The
primary objectives of this interpretation are to provide guidance on the
identification of entities for which control is achieved through means other
than through voting rights ("variable interest entities") and how to determine
when and which business enterprise (the "primary beneficiary") should
consolidate the variable interest entity. This new model for consolidation
applies to an entity in which either (i) the equity investors (if any) do not
have a controlling financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. In addition, FIN 46 requires
that the primary beneficiary, as well as all other enterprises with a
significant variable interest in a variable interest entity, make additional
disclosures. Certain disclosure requirements of FIN 46 were effective for
financial statements issued after January 31, 2003. In December 2003, the FASB
issued FIN 46 (revised December 2003), Consolidation of Variable Interest
Entities ("FIN 46-R") to address certain FIN 46 implementation issues. The
effective dates and impact of FIN 46 and FIN 46-R are as follows: (i)
Special-purpose
37
entities ("SPEs") created prior to February 1, 2003: We must apply either the
provisions of FIN 46 or early adopt the provisions of FIN 46-R at the end of the
first interim or annual reporting period ending after December 15, 2003. (ii)
Non-SPEs created prior to February 1, 2003: We are required to adopt FIN 46-R at
the end of the first interim or annual reporting period ending after March 15,
2004. (iii) All entities, regardless of whether an SPE, that were created
subsequent to January 31, 2003: The provisions of FIN 46 were applicable for
variable interests in entities obtained after January 31, 2003. The adoption of
the provisions applicable to SPEs and all other variable interests obtained
after January 31, 2003 did not have a material impact on our financial position,
results of operations, or liquidity. We do not expect the adoption of FIN 46-R
provisions applicable to Non-SPEs created prior to February 1, 2003, to have a
material impact on our financial position, results of operations or liquidity.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which is effective for contracts
entered into or modified after June 30, 2003, with certain exceptions, and for
hedging relationships designated after June 30. The guidance is to be applied
prospectively. The adoption of this standard did not have a material impact on
our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. The
Standard specifies that instruments within its scope embody obligations of the
issuer and that, therefore, the issuer must classify them as liabilities. We
have not issued any such financial instruments.
In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. The revised
standard retains the disclosure requirement contained in the original standard
and requires additional disclosures about the assets, obligations, cash flows
and net period cost of defined pension plans and other defined benefit
postretirement plans. We adopted the disclosure requirements required by SFAS
No. 132 (revised 2003) for our U.S. pension and other postretirement plans. As
permitted by SFAS No. 132, certain disclosures regarding non-U.S. pension plans
and estimated future benefit payments for both U.S. and non-U.S. pension and
other postretirement benefit plans will be delayed until 2004.
Safe Harbor Statement
From time to time, information provided by us, including but not limited
to statements in this report, or other statements made by or on our behalf, may
contain "forward-looking" information within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements involve a number of
risks, uncertainties and contingencies, many of which are beyond our control,
which may cause actual results, performance or achievements to differ materially
from those anticipated. Set forth below are important factors that could cause
our results, performance or achievements to differ materially from those in any
forward-looking statements made by us or on our behalf.
Factors related to our business generally
- -----------------------------------------
Our business is cyclical and the recent decline in demand in the electronic
component industry may resume and may become more pronounced.
We and others in the electronic and semiconductor component industry have for
the past several years experienced a decline in product demand on a global
basis, resulting in order cancellations and deferrals, lower average selling
prices, and a material and adverse impact on our results of operations. This
decline was primarily attributable to a slowing of growth in the personal
computer and cellular telephone product markets. We have seen indications of
improvements in the economy and electronic and semiconductor component industry
and expect improvements in 2004. However, such improvements in the economy and
the electronic and semiconductor component industry may not materialize. The
slowdown may resume and may become more pronounced. A slowdown in demand, as
well as recessionary trends in the global economy, makes it more difficult for
us to predict our future sales, which also makes it more difficult to manage our
operations, and could adversely impact our results of operations.
38
We have incurred and may continue to incur restructuring costs.
To remain competitive, particularly when business conditions are difficult, we
attempt to reduce our cost structure through restructuring activities. This
includes acquisition-related restructuring, where we attempt to streamline the
operations of companies we acquire and achieve synergies between our
acquisitions and our existing business. It also includes restructuring our
existing businesses, where we seek to eliminate redundant facilities and staff
positions and move operations, where possible, to jurisdictions with lower labor
costs. In 2002, we recorded restructuring costs of approximately $48 million
related to acquisitions and $31 million related to our existing businesses. We
incurred approximately $29.6 million of additional restructuring and severance
costs in 2003 and expect to continue to incur such expenses during 2004.
In the past we have grown through acquisitions but this may not continue.
Our long-term historical growth in revenues and net earnings has resulted in
large part from our strategy of expansion through acquisitions. We cannot assure
you, however, that we will identify or successfully complete transactions with
suitable acquisition candidates in the future. We also cannot assure you that
acquisitions that we complete in the future will be successful. If an acquired
business fails to operate as anticipated or cannot be successfully integrated
with our other businesses, our results of operations, enterprise value, market
value and prospects could all be materially and adversely affected.
Our debt levels have recently increased, which could adversely affect the
perception in the financial markets of our financial condition.
Our outstanding debt increased from approximately $141 million at the end of
2000 to approximately $838 million at the end of 2003. The marketplace could
react negatively to our current debt levels which in turn could affect our share
price and also make it more difficult for us to obtain financing in the future.
In June 2004, holders of our Liquid Yield Option(TM) Notes (LYONs) will have the
right to "put" these notes to us at an aggregate price of approximately $235
million. We believe that, if necessary, we will have adequate cash resources to
finance the purchase of any LYONs that are put to us. Also, we may elect to pay
all or part of the purchase price for the LYONs that are put to us in shares of
our common stock. Nevertheless, our obligation to purchase the LYONs in June
2004 could be a cause of concern in the financial markets.
To remain successful, we must continue to innovate.
Our future operating results are dependent on our ability to continually
develop, introduce and market new and innovative products, to modify existing
products, to respond to technological change and to customize certain products
to meet customer requirements. There are numerous risks inherent in this
process, including the risks that we will be unable to anticipate the direction
of technological change or that we will be unable to develop and market new
products and applications in a timely fashion to satisfy customer demands. If
this occurs, we could lose customers and experience adverse effects on our
financial condition and results of operations.
Future acquisitions could require us to issue additional indebtedness or equity.
If we were to undertake a substantial acquisition for cash, the acquisition
would likely need to be financed in part through bank borrowings or the issuance
of public or private debt. This acquisition financing would likely decrease our
ratio of earnings to fixed charges and adversely affect other leverage criteria.
Under our existing credit facility, we are required to obtain the lenders'
consent for certain additional debt financing and to comply with other covenants
including the application of specific financial ratios. We are also restricted
from paying cash dividends on our capital stock. We cannot assure you that the
necessary acquisition financing would be available to us on acceptable terms
when required. If we were to undertake an acquisition for equity, the
acquisition may have a dilutive effect on the interests of the holders of our
common stock.
39
Our results are sensitive to raw material availability, quality and cost.
Many of our products require the use of raw materials that are produced in only
a limited number of regions around the world, may be available from only a
limited number of suppliers, and may be subject to price volatility. We are a
major consumer of the world's annual production of tantalum. Tantalum, a metal
purchased in powder or wire form, is the principal material used in the
manufacture of tantalum capacitors. There are currently three major suppliers
that process tantalum ore into capacitor grade tantalum powder. We also utilize
palladium, a metal used to produce multi-layered ceramic capacitors, which is
currently found primarily in South Africa and Russia. Palladium is a commodity
product subject to price volatility. Our results of operations may be materially
and adversely affected if we have difficulty obtaining these raw materials, the
quality of available raw materials deteriorates or there are significant price
increases for these raw materials. For periods in which the prices of these raw
materials are rising, we may be unable to pass on the increased cost to our
customers which would result in decreased margins for the products in which they
are used. For periods in which the prices are declining, we may be required to
write down our inventory carrying cost of these raw materials, since we record
our inventory at the lower of cost or market. Depending on the extent of the
difference between market price and our carrying cost, this write-down could
have a material adverse effect on our net earnings. We recorded write-downs of
our tantalum inventory in these years of $52.0 million, $25.7 million, and $5.4
million in 2001, 2002, and 2003 respectively, and write-downs of our palladium
inventory in these years of $18.0 million, $1.7 million, and $1.6 million,
respectively. Also, we took charges against our contractual commitments to
purchase tantalum of $106.0 million and $11.4 million in 2002 and 2003,
respectively.
From time to time there have been short-term market shortages of raw materials.
While these shortages have not historically adversely affected our ability to
increase production of products containing tantalum and palladium, they have
historically resulted in higher raw material costs for us. We cannot assure you
that any of these market shortages in the future would not adversely affect our
ability to increase production, particularly during periods of growing demand
for our products.
Our backlog is subject to customer cancellation.
As of December 31, 2003, our backlog was $532 million. Many of the orders that
comprise our backlog may be canceled by our customers without penalty. Our
customers may on occasion double and triple order components from multiple
sources to ensure timely delivery when backlog is particularly long. They often
cancel orders when business is weak and inventories are excessive, a situation
that we have experienced in the recent economic slowdown. Therefore, we cannot
be certain the amount of our backlog does not exceed the level of orders that
will ultimately be delivered. Our results of operations could be adversely
impacted if customers cancel a material portion of orders in our backlog.
We face intense competition in our business, and we market our products to an
increasingly concentrated group of customers.
Our business is highly competitive worldwide, with low transportation costs and
few import barriers. We compete principally on the basis of product quality and
reliability, availability, customer service, technological innovation, timely
delivery and price. The electronics components industry has become increasingly
concentrated and globalized in recent years and our major competitors, some of
which are larger than us, have significant financial resources and technological
capabilities.
Our customers have become increasingly concentrated in recent years, and as a
result, their buying power has increased and they have had greater ability to
negotiate favorable pricing. This trend has adversely affected our average
selling prices, particularly for commodity components.
40
We may not have adequate facilities to satisfy future increases in demand for
our products.
Our business is cyclical and in periods of a rising economy, we may experience
intense demand for our products. During such periods, we may have difficulty
expanding our manufacturing to satisfy demand. Factors which could limit such
expansion include delays in procurement of manufacturing equipment, shortages of
skilled personnel and capacity constraints at our facilities. If we are unable
to meet our customers' requirements and our competitors sufficiently expand
production, we could lose customers and/or market share. This loss could have an
adverse effect on our financial condition and results of operations.
Future changes in our environmental liability and compliance obligations may
harm our ability to operate or increase costs.
Our manufacturing operations, products and/or product packaging are subject to
environmental laws and regulations governing air emissions, wastewater
discharges, the handling, disposal and remediation of hazardous substances,
wastes and certain chemicals used or generated in our manufacturing processes,
employee health and safety labeling or other notifications with respect to the
content or other aspects of our processes, products or packaging, restrictions
on the use of certain materials in or on design aspects of our products or
product packaging and responsibility for disposal of products or product
packaging. We establish reserves for specifically identified potential
environmental liabilities which we believe are adequate. Nevertheless, we often
unavoidably inherit certain pre-existing environmental liabilities, generally
based on successor liability doctrines. Although we have never been involved in
any environmental matter that has had a material adverse impact on our overall
operations, there can be no assurance that in connection with any past or future
acquisition we will not be obligated to address environmental matters that could
have a material adverse impact on our operations. In addition, more stringent
environmental regulations may be enacted in the future, and we cannot presently
determine the modifications, if any, in our operations that any such future
regulations might require, or the cost of compliance with these regulations. In
order to resolve liabilities at various sites, we have entered into various
administrative orders and consent decrees, some of which may be, under certain
conditions, reopened or subject to renegotiations.
Our products may experience a reduction in product classification levels under
various military specifications.
We have qualified certain of our products under various military specifications,
approved and monitored by the United States Defense Electronic Supply Center,
and under certain European military specifications. These products are assigned
certain classification levels. In order to maintain the classification level of
a product, we must continuously perform tests on the product and the results of
these tests must be reported to governmental agencies. If any of our products
fails to meet the requirements of the applicable classification level, that
product's classification may be reduced to a lower level. A decrease in the
classification level for any of our products with a military application could
have an adverse impact on the net sales and earnings attributable to that
product.
Factors relating to Vishay's operations outside the United States
We obtain substantial benefits by operating in Israel, but these benefits may
not continue.
We have increased our operations in Israel over the past several years. The low
tax rates in Israel applicable to earnings of our operations in that country,
compared to the rates in the United States, have had the effect of increasing
our net earnings, although this was not the case in 2003 and 2002. Also, we have
benefited from employment incentive grants made by the Israeli government.
Recently, the Israeli government suspended payment on one of these grants after
we were forced to lay off a significant number of employees as a result of the
current economic downturn. Although we reached agreement with the Israeli
government to resume payment on this grant, there can be no assurance that we
will maintain our eligibility for this or other existing project grants. There
can also be no assurance in the future the Israeli government will continue to
offer new grant and tax incentive programs applicable to us or that, if it does,
such programs will provide the same level of benefits we have historically
received or that we will continue to be eligible to take advantage of them. Any
significant increase in the Israeli tax rates or reduction or elimination of the
Israeli grant programs that have benefited us could have an adverse impact on
our results of operations.
41
We attempt to improve profitability by operating in countries in which labor
costs are low, but the shift of operations to these regions may entail
considerable expense.
Our strategy is aimed at achieving significant production cost savings through
the transfer and expansion of manufacturing operations to and in countries with
lower production costs, such as Israel, Mexico, Portugal, the Czech Republic,
Malaysia, the Republic of China (Taiwan) and the People's Republic of China. In
this process, we may experience under-utilization of certain plants and
factories in high labor cost regions and capacity constraints in plants and
factories located in low labor cost regions. This under-utilization may result
initially in production inefficiencies and higher costs. These costs include
those associated with compensation in connection with work force reductions and
plant closings in the higher labor cost regions, and start-up expenses,
manufacturing and construction delays, and increased depreciation costs in
connection with the initiation or expansion of production in lower labor cost
regions.
As we implement transfers of certain of our operations we may experience strikes
or other types of labor unrest as a result of lay-offs or termination of our
employees in high labor cost countries.
We are subject to the risks of political, economic and military instability in
countries outside the United States in which we operate.
We have operations outside the United States, and approximately 74% of our
revenues during 2003 were derived from sales to customers outside the United
States. Some of the countries in which we operate have in the past experienced
and may continue to experience political, economic and military instability or
unrest. These conditions could have an adverse impact on our ability to operate
in these regions and, depending on the extent and severity of these conditions,
could materially and adversely affect our overall financial condition and
operating results. In particular, current tensions in the Middle East could
adversely affect our business operations in Israel and elsewhere.
Our business was affected by the outbreak of SARS in 2003 and the effects of
that outbreak may linger.
The outbreak of severe acute respiratory syndrome, or SARS, that began in the
People's Republic of China adversely affected our business during the first six
months of 2003, particularly in Asia where we derived approximately 36% and 38%
of our revenue in 2003 and 2002, respectively. This impact included disruptions
in the operations of our customers, a slowdown in customer orders and reduced
sales in certain end markets. If an outbreak of SARS or like disease were to
recur on a comparable scale in Asia, we could experience similar disruptions to
our business.
General Economic and Business Factors
- -------------------------------------
In addition to the factors relating specifically to our business, a variety of
other factors relating to general conditions could cause actual results,
performance, or achievements to differ materially from those expressed in any of
our forward-looking statements. These factors include:
o overall economic and business conditions;
o competitive factors in the industries in which we conduct our business;
o changes in governmental regulation;
o changes in tax requirements, including tax rate changes, new tax laws,
and revised tax law interpretations;
o changes in generally accepted accounting principles or interpretations
of those principles by governmental agencies and self-regulatory groups;
o interest rate fluctuations, foreign currency rate fluctuations, and
other capital market conditions; and
o economic and political conditions in international markets, including
governmental changes and restrictions on the ability to transfer capital
across borders.
Also, we operate in a continually changing business environment, and new factors
emerge from time to time. Other unknown and unpredictable factors also could
have material adverse effects on our future results, performance, or
achievements.
42
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Market Risk Disclosure
Our cash flows and earnings are subject to fluctuations resulting from
changes in foreign currency exchange rates and interest rates. We manage our
exposure to these market risks through internally established policies and
procedures and, when deemed appropriate, through the use of derivative financial
instruments. Our policies do not allow speculation in derivative instruments for
profit or execution of derivative instrument contracts for which there are no
underlying exposures. We do not use financial instruments for trading purposes
and we are not a party to any leveraged derivatives. We monitor our underlying
market risk exposures on an ongoing basis and believe that we can modify or
adapt our hedging strategies as needed.
We are exposed to changes in U.S. dollar LIBOR interest rates on our
floating rate revolving credit facility. At December 31, 2003, there were no
amounts outstanding under this facility. On a selective basis, we from time to
time enter into interest rate swap or cap agreements to reduce the potential
negative impact increases in interest rates could have on our outstanding
variable rate debt. The impact of interest rate instruments on our results of
operations in each of the three years ended December 31, 2003, 2002 and 2001 was
not significant. See Notes 6 and 14 to our consolidated financial statements for
components of our long-term debt and interest rate swap arrangements.
In August 1998, we entered into six interest rate swap agreements with a
total notional amount of $300 million to manage interest rate risk related to
our multicurrency revolving line of credit. As of December 31, 2002, five of
these six agreements had been terminated. The remaining agreement had a notional
amount of $100 million and required us to make payments to the counterparty at
variable rates based on USD-LIBOR-BBA rates. This agreement expired in 2003. At
December 2002 and 2001, we paid a weighted average fixed rate of 5.77% and
received a weighted average variable rate of 1.40% and 1.93%, respectively. The
fair value of our interest rate swap agreements, based on current market rates,
approximated a net payable of $3.3 million at December 31, 2002. During the year
ended December 31, 2003, we had a pre-tax gain of approximately $3.8 million
related to the expiration of the final swap agreement. During the years ended
December 31, 2002 and 2001, we recorded pre-tax losses of $3.7 million and $0.1
million, respectively, relating to an ineffective hedge for a portion of time
relating to an interest rate swap agreement (see Note 14 to our consolidated
financial statements).
Foreign Exchange Risk
We are exposed to foreign currency exchange rate risks. Our significant
foreign subsidiaries are located in Germany, France, Israel and Asia. In most
locations, we have introduced a "netting" policy where subsidiaries pay all
intercompany balances within thirty days. As of December 31, 2003, we did not
have any outstanding foreign currency forward exchange contracts.
In the normal course of business, our financial position is routinely
subjected to a variety of risks, including market risks associated with interest
rate movements, currency rate movements on non-U.S. dollar denominated assets
and liabilities and collectibility of accounts receivable.
43
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The following Consolidated Financial Statements of the Company and our
subsidiaries, together with the report of independent auditors thereon, are
presented under Item 15 of this report:
Report of Independent Auditors.
Consolidated Balance Sheets -- December 31, 2003 and 2002.
Consolidated Statements of Operations -- for the years ended
December 31, 2003, 2002 and 2001.
Consolidated Statements of Cash Flows -- for the years ended
December 31, 2003, 2002 and 2001.
Consolidated Statements of Stockholders' Equity -- for the years
ended December 31, 2003, 2002 and 2001.
Notes to Consolidated Financial Statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
Item 9A. DISCLOSURE CONTROLS AND PROCEDURES
- ------- -----------------------------------
An evaluation was performed under the supervision and with the
participation of our management, including the CEO and CFO, of the effectiveness
of the design and operation of our disclosure controls and procedures. Based on
that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are effective as of the end of the fourth quarter of 2003, including
for purposes of ensuring that all material information required to be filed in
this report has been made known to the Company's management, including the CEO
and CFO, in a timely fashion.
There has not been any change in our internal controls over financial
reporting during the fourth quarter of fiscal 2003 that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
44
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
We have a code of ethics applicable to our chief executive officer, chief
financial officer, principal accounting officer or controller and financial
managers. The text of this code has been posted on our website. To view the
code, go to our website at www.vishay.com, click on Company Info, then Investor
Relations and then Corporate Governance. You can obtain a printed copy of this
code, free of charge, by contacting us at the following address:
Corporate Investor Relations
Vishay Intertechnology, Inc
63 Lincoln Highway
Malvern, PA 19355-2143
It is the intention of the Company to satisfy the disclosure requirement
under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a
provision of this code by posting such information on our website, at the
aforementioned address and location.
Information required under this Item with respect to our Executive
Officers is set forth in Part I, Item 4A hereof under the caption, "Executive
Officers of the Registrant."
Other information required under this Item is contained in our definitive
proxy statement, which will be filed within 120 days of December 31, 2003, our
most recent fiscal year, and is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------
Information required under this Item is contained in our definitive proxy
statement, which will be filed within 120 days of December 31, 2003, our most
recent fiscal year, and is incorporated herein by reference.
45
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- ---------------------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan
information, as of December 31, 2003, with respect to both equity compensation
plans approved by security holders and equity compensation plans not approved by
security holders.
Number of
securities Number of securities
to be issued Weighted-average remaining available for
upon exercise future issuance
exercise of price of under equity
outstanding outstanding compensation plans
options, options, (excluding securities
warrants and warrants reflected in column
rights and rights (a)
Plan category (a) (b) (c)
- -------------
Equity compensation plans
approved by security
holders:
1997 Stock Option Program(1) 2,159,000 $12.51 -
1998 Stock Option Program(1) 2,820,000 $15.63 1,143,000
General Semiconductor Stock
Plan(2) 3,789,000 $18.65 -
-------------- ------------ ----------------
Subtotal 8,768,000 $16.17 1,143,000
Equity compensation plans not
approved by security holders:
None - - -
-------------- ------------ ----------------
Subtotal 8,768,000 $16.17 1,143,000
-------------- ------------ ----------------
Total 8,768,000 $16.17 1,143,000
============== ============ ================
- ------------------
(1) See Note 12 to our consolidated financial statements for further description
of these plans.
(2) The General Semiconductor Stock Plan was assumed in the Company's
acquisition of General Semiconductor Inc. on November 2, 2001. See Note 12
to our consolidated financial statements for further description of this
plan.
Security Ownership of Certain Beneficial Owners and Management
Information required under this caption is contained in our definitive
proxy statement, which will be filed within 120 days of December 31, 2003, our
most recent fiscal year, and is incorporated herein by reference.
46
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
Information required under this Item is contained in our definitive proxy
statement, which will be filed within 120 days of December 31, 2003, our most
recent fiscal year, and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
- ------- ----------------------------------------
Information required under this Item is contained in our definitive proxy
statement, which will be filed within 120 days of December 31, 2003, our most
recent fiscal year, and is incorporated herein by reference.
PART IV
-------
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a) (1) All Consolidated Financial Statements of the Company and
its subsidiaries for the year ended December 31, 2003 are filed
herewith. See Item 8 of this Report for a list of such financial
statements.
(2) All financial statement schedules for which provision is
made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions
or are inapplicable and therefore have been omitted.
(3) Exhibits -- See response to paragraph (c) below.
(b) Reports on Form 8-K:
(1) On October 29, 2003, the Company filed a current report
under Item 12 of Form 8-K, reporting the financial results
of the Company for the quarter and nine-months ended
September 30, 2003.
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of July 31, 2001, by and
among Vishay Intertechnology, Inc., Vishay Acquisition Corp., and
General Semiconductor, Inc. Incorporated by reference to Annex A
to the Joint Proxy Statement/Prospectus forming a part of the
Registration Statement on Form S-4 (No. 333-69004) filed on
September 6, 2001.
2.2 Share Sale and Purchase Agreement between Phoenix Acquisition
Company S.ar.l; Other Investors (as defined); Mezzanine Lenders
(as defined); Vishay Intertechnology, Inc.; Vishay Europe Gmbh;
and BCcomponents International B.V., dated as of November 10,
2002. Incorporated by reference to Exhibit 2.1 to Form 8-K File
filed December 23, 2002.
2.3 Amendment to the Share Sale and Purchase Agreement between Phoenix
Acquisition Company S.ar.l; Other Investors (as defined); Mezzanine
Lenders (as defined); Vishay Intertechnology, Inc.; Vishay Europe
Gmbh; and BCcomponents International B.V., dated as of December 4,
2002. Incorporated by reference to Exhibit 2.2 to Form 8-K File
filed December 23, 2002.
3.1 Composite Amended and Restated Certificate of Incorporation of the
Company dated August 3, 1995. Incorporated by reference to Exhibit
3.1 to the Company's quarterly report on Form 10-Q for the quarter
ended June 30, 1995 (the "1995 Form 10-Q"). Certificate of Amendment
of Composite Amended and Restated Certificate of Incorporation of
the Company. Incorporated by reference to Exhibit 3.1 to Form 10-Q
for the quarter ended June 30, 1997 (the "1997 Form 10-Q").
Certificate of Amendment of the Amended and Restated Certificate of
Incorporation of the Company. Incorporated by reference to Exhibit
3.1 to Form 8-K File filed November 13, 2001.
47
3.2 Amended and Restated Bylaws of Registrant. Incorporated by reference
to Exhibit 3.1 to the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 2001.
4.1 Indenture dated as of June 4, 2001 between Vishay Intertechnology,
Inc. and Bank of New York as Trustee. Incorporated by reference to
Exhibit 4.1 to the Company's current report on Form 8-K filed on
June 18, 2001 except that clause (x) of Section 5 thereof is
corrected to read "(x) 0.0625% of the average LYON Market Price for
the Five Day Period with respect to such Contingent Interest Period
and".
4.2 Indenture, dated as of August 6, 2003, by and between Vishay
Intertechnology, Inc. and Wachovia Bank, National Association.
Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (No. 333-110259) filed on
November 5, 2003.
10.1 Vishay Intertechnology Section 162(m) Cash Bonus Plan. Incorporated
by reference to Annex to the Company's Proxy Statement, dated April
21, 2003, for its 2003 Annual Meeting of Stockholders.
10.2 Second Amendment to Amended and Restated Vishay Intertechnology,
Inc. Long Term Revolving Credit Agreement and Consent, made as of
July 31, 2003, by and among Vishay Intertechnology, Inc., the
Permitted Borrowers (as defined), the Lenders signatory thereto and
Comerica Bank, as Co-lead Arranger Co-Book Running Manager and
Administrative agent, et al.
10.3 Employment Agreement, dated as of March 15, 1985, between the
Company and Dr. Felix Zandman. Incorporated by reference to Exhibit
10.12 to the Company's Registration Statement on Form S-2 (No.
33-13833).
10.4 Vishay Intertechnology, Inc. 1997 Stock Option Program. Incorporated
by reference to the Company's Definitive Proxy Statement on Schedule
14A filed April 16, 1998.
10.5 Vishay Intertechnology, Inc. 1998 Stock Option Program. Incorporated
by reference to the Company's Definitive Proxy Statement on Schedule
14A filed April 16, 1998.
10.6 General Semiconductor, Inc. Amended and Restated 1998 Long-Term
Incentive Plan as amended on February 7, 2001. Incorporated by
reference to Exhibit 10.9 to General Semiconductor's annual report
on Form 10-K for the year ended December 31, 2000.
10.8 Money Purchase Plan Agreement of Measurements Group, Inc.
Incorporated by reference to Exhibit 10(a)(6) to Amendment No. 1 to
the Company's Registration Statement on Form S-7 (No. 2-69970).
10.9 Agreement Amending Supply Agreements among Cabot Corporation through
its Cabot Performance Materials Division, Vishay Sprague, Inc. and
Vishay Intertechnology, Inc. dated as of June 6, 2002. Incorporated
by reference to Exhibit 10.10 to the Company's annual report on Form
10-K for the year ended December 31, 2002.
10.10 Severance and General Release Agreement, dated November 4, 2003,
between the Company and Avi D. Eden.
10.11 Consulting and Non-Competition Agreement, dated November 4, 2003,
between the Company and Avi D. Eden.
21 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
48
31.1 Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 - Dr. Felix Zandman, Chief
Executive Officer
31.2 Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 - Richard N. Grubb, Chief
Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Dr.
Felix Zandman, Chief Executive Officer
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Richard
N. Grubb, Chief Financial Officer
49
SIGNATURES
----------
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
VISHAY INTERTECHNOLOGY, INC.
March 15, 2004 /s/ Felix Zandman
------------------------
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amended report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated below.
March 15, 2004 /s/ Felix Zandman
-----------------------------
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
(Principal Executive Officer)
March 15, 2004 /s/ Richard N. Grubb
------------------------------
Richard N. Grubb, Executive
Vice President, Treasurer, and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
March 15, 2004 /s/ Marc Zandman
------------------------------
Marc Zandman, Vice-Chairman
of the Board, President-Vishay
Israel Ltd.
March 15, 2004 /s/ Gerald Paul
------------------------------
Gerald Paul, Director, President
and Chief Operating Officer
March 15, 2004 /s/ Phillipe Gazeau
------------------------------
Phillipe Gazeau, Director
March 15, 2004 /s/ Zvi Grinfas
------------------------------
Zvi Grinfas, Director
50
March 15, 2004 /s/ Eli Hurvitz
------------------------------
Eli Hurvitz, Director
March 15, 2004 /s/ Abraham Ludomirski
------------------------------
Abraham Ludomirski, Director
March 15, 2004 /s/ Edward B. Shils
------------------------------
Edward B. Shils, Director
March 15, 2004 /s/ Ziv Shoshani
------------------------------
Ziv Shoshani, Director
March 15, 2004 /s/ Mark I. Solomon
------------------------------
Mark I. Solomon, Director
March 15, 2004 /s/ Jean-Claude Tine
------------------------------
Jean-Claude Tine, Director
March 15, 2004 /s/ Ruta Zandman
------------------------------
Ruta Zandman, Director
51
Vishay Intertechnology, Inc.
Consolidated Financial Statements
Years ended December 31, 2003, 2002, and 2001
Contents
Report of Independent Auditors.............................................F-1
Audited Consolidated Financial Statements
Consolidated Balance Sheets................................................F-2
Consolidated Statements of Operations......................................F-4
Consolidated Statements of Cash Flows......................................F-5
Consolidated Statements of Stockholders' Equity............................F-6
Notes to Consolidated Financial Statements.................................F-8
Report of Independent Auditors
Board of Directors and Stockholders
Vishay Intertechnology, Inc.
We have audited the accompanying consolidated balance sheets of Vishay
Intertechnology, Inc. as of December 31, 2003 and 2002, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the three years in the period ended December 31, 2003. 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 consolidated financial position of Vishay
Intertechnology, Inc. at December 31, 2003 and 2002, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
As discussed in Note 1 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 5, 2004
F-1
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
2003 2002
---------------------------
Assets
Current assets:
Cash and cash equivalents $ 555,540 $ 339,938
Accounts receivable, less allowances of
$13,704 and $18,172 374,240 343,511
Inventories:
Finished goods 171,447 219,769
Work in process 154,532 142,846
Raw materials 189,413 191,451
Deferred income taxes 48,471 47,297
Prepaid expenses and other current assets 143,610 188,881
---------------------------
Total current assets 1,637,253 1,473,693
Property and equipment - at cost:
Land 110,021 118,000
Buildings and improvements 375,178 339,869
Machinery and equipment 1,644,270 1,609,931
Construction in progress 85,169 61,830
---------------------------
2,214,638 2,129,630
Less allowances for depreciation (994,843) (854,780)
---------------------------
1,219,795 1,274,850
Goodwill 1,466,714 1,356,293
Other intangible assets 128,955 122,417
Other assets 119,796 87,906
---------------------------
Total assets $ 4,572,513 $ 4,315,159
===========================
Continues on following page.
F-2
December 31
2003 2002
---------------------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 17,511 $ 18,161
Trade accounts payable 158,182 123,999
Payroll and related expenses 111,842 103,184
Other accrued expenses 288,432 303,609
Income taxes 10,112 8,734
Current portion of long-term debt 1,282 18,550
---------------------------
Total current liabilities 587,361 576,237
Long-term debt less current portion 836,606 706,316
Deferred income taxes 35,036 52,935
Deferred income 27,659 42,345
Other liabilities 248,652 266,893
Accrued pension and other post
retirement costs 239,950 235,661
Minority interest 83,215 75,985
Commitments and contingencies
Stockholders' equity:
Preferred Stock, par value $1.00 per share:
authorized - 1,000,000 shares; none issued
Common Stock, par value $.10 per share:
authorized - 300,000,000 shares;
144,668,594 and 144,297,101 shares
outstanding after deducting 332,850 shares
in treasury 14,467 14,429
Class B convertible Common Stock, par value
$.10 per share: authorized - 40,000,000
shares; 15,382,296 and 15,383,581 shares
outstanding after deducting 279,453 shares
in treasury 1,538 1,538
Capital in excess of par value 1,918,785 1,910,994
Retained earnings 550,196 523,354
Unearned compensation (306) (413)
Accumulated other comprehensive income
(loss) 29,354 (91,115)
---------------------------
Total stockholders' equity 2,514,034 2,358,787
---------------------------
Total liabilities and stockholders' equity $ 4,572,513 $ 4,315,159
===========================
See accompanying notes.
F-3
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
Year ended December 31
2003 2002 2001
------------------------------------------------------
Net sales $ 2,170,597 $ 1,822,813 $ 1,655,346
Costs of products sold 1,690,267 1,454,540 1,273,827
Loss on long-term purchase commitments 11,392 106,000 --
------------------------------------------------------
Gross profit 468,938 262,273 381,519
Selling, general, and administrative
expenses 381,406 311,251 278,171
Amortization of goodwill -- -- 11,190
Restructuring and severance costs 29,560 30,970 61,908
Purchased research and development -- -- 16,000
------------------------------------------------------
57,972 (79,948) 14,250
------------------------------------------------------
Other income (expense):
Interest expense (37,831) (28,761) (16,848)
Gain on insurance claim 33,906 -- --
Loss on extinguishment of debt (9,910) -- --
Other 2,289 8,664 12,701
------------------------------------------------------
(11,546) (20,097) (4,147)
------------------------------------------------------
Earnings (loss) before income taxes
(benefit) and minority interest 46,426 (100,045) 10,103
Income tax provision (benefit) 11,528 (16,900) 5,695
Minority interest 8,056 9,469 3,895
------------------------------------------------------
Net earnings (loss) $ 26,842 $ (92,614) $ 513
======================================================
Basic earnings (loss) per share $ 0.17 $ (0.58) $ 0.00
======================================================
Diluted earnings (loss) per share $ 0.17 $ (0.58) $ 0.00
======================================================
Weighted average shares
outstanding:
Basic 159,631,000 159,413,000 141,171,000
Diluted 160,443,000 159,413,000 142,514,000
See accompanying notes.
F-4
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31
2003 2002 2001
----------------------------------------
Operating activities
Net earnings (loss) $ 26,842 $ (92,614) $ 513
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization 194,055 180,748 163,387
Loss (gain) on disposal of property and equipment 2,521 296 (1,472)
Minority interest in net earnings of
consolidated subsidiaries 8,056 9,469 3,895
Purchased research and development -- -- 16,000
Noncash (credit) charge for change in
fair value of interest rate swap (3,783) 115 3,668
Accretion of interest on convertible
debentures 8,396 9,325 5,313
Write-downs of tantalum and palladium 6,991 27,400 70,000
Inventory write-offs for obsolescence 54,285 37,120 29,670
Gain on insurance claim (33,906) -- --
Loss on extinguishment of debt 9,910 -- --
Asset impairment charges included in
restructuring costs 1,014 12,363 20,974
Loss on long-term purchase commitments 11,392 106,000 --
Utilization of purchase commitment liability (28,000) -- --
Deferred grant income (12,359) (17,322) (19,064)
Changes in operating assets and liabilities,
net of effects of businesses acquired:
Accounts receivable (5,634) 102,322 120,095
Inventories (30,448) 42,298 (93,632)
Prepaid expenses and other current assets 51,367 6,257 (7,321)
Accounts payable 25,474 455 (71,761)
Other current liabilities (6,110) (29,766) (105,685)
Other (24,307) (27,595) 26,838
---------------------------------------
Net cash provided by operating activities 255,756 366,871 161,418
---------------------------------------
Investing activities
Purchases of property and equipment (126,635) (110,074) (162,493)
Proceeds from sale of property and equipment 19,349 20,621 9,911
Purchases of businesses, net of cash acquired (41,161) (278,735) (172,468)
---------------------------------------
Net cash used in investing activities (148,447) (368,188) (325,050)
---------------------------------------
Financing activities
Net payments on revolving credit lines (111,000) (14,000) (100,047)
Proceeds from long-term borrowings, net of
issuance costs 484,206 201 294,511
Principal payments on long-term debt (284,595) (17,217) (444)
Purchase of treasury stock -- -- (850)
Proceeds from stock options exercised 4,740 3,161 854
Net changes in short-term borrowings (316) (10,452) 3,274
---------------------------------------
Net cash provided by (used in) financing
activities 93,035 (38,307) 197,298
Effect of exchange rate changes on cash 15,258 12,447 (3,764)
---------------------------------------
Increase (decrease) in cash and cash
equivalents 215,602 (27,177) 29,902
Cash and cash equivalents at beginning
of year 339,938 367,115 337,213
---------------------------------------
Cash and cash equivalents at end of year $ 555,540 $ 339,938 $ 367,115
=======================================
See accompanying notes.
F-5
Vishay Intertechnology, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Class B Accumulated
Convertible Capital Other Total
Common Common in Excess Retained Unearned Compenhensive Stockholders'
Stock Stock of Par Value Earnings Compensation Income (loss) Equity
-----------------------------------------------------------------------------------------
Balance at January 1, 2001 $ 12,241 $ 1,552 $ 1,319,426 $ 615,455 $ (1,248) $ (113,571) $1,833,855
Net earnings -- -- -- 513 -- -- 513
Foreign currency translation adjustment -- -- -- -- -- (7,638) (7,638)
Pension liability adjustment -- -- -- -- -- (8,557) (8,557)
Cumulative effect of adoption of
SFAS No. 133 -- -- -- -- -- 51 51
Loss on derivative financial instruments -- -- -- -- -- (696) (696)
----------
Comprehensive loss (16,327)
----------
Stock issued (22,573 shares) 2 -- 443 -- (446) -- (1)
Stock options exercised (85,877 shares) 9 -- 845 -- -- -- 854
Conversions from Class B to common
(21,917 shares) 2 (2) -- -- -- -- --
Common stock repurchase (48,500 shares) (5) -- (846) -- -- -- (851)
Tax effects relating to stock plan -- -- 423 -- -- -- 423
Amortization of unearned compensation -- -- -- -- 773 -- 773
Stock issued - General Semiconductor
acquisition (21,305,127 shares) 2,131 -- 497,688 -- -- -- 499,819
Stock options issued - General
Semiconductor acquisition -- -- 48,000 -- -- -- 48,000
----------------------------------------------------------------------------------------
Balance at December 31, 2001 14,380 1,550 1,865,979 615,968 (921) (130,411) 2,366,545
Net loss -- -- -- (92,614) -- -- (92,614)
Foreign currency translation
adjustment -- -- -- -- -- 64,343 64,343
Pension liability adjustment -- -- -- -- -- (23,230) (23,230)
Loss on derivative financial
instruments -- -- -- -- -- (1,817) (1,817)
----------
Comprehensive loss (53,318)
----------
Stock issued (127,270 shares) 11 -- 2,124 -- (135) -- 2,000
Stock options exercised
(260,720 shares) 26 -- 3,135 -- -- -- 3,161
Conversions from Class B to common
(113,053 shares) 12 (12) -- -- -- -- --
Warrants issued - BCcomponents
acquisition -- -- 39,462 -- -- -- 39,462
Tax effects relating to stock plan -- -- 294 -- -- -- 294
Amortization of unearned compensation -- -- -- -- 643 -- 643
----------------------------------------------------------------------------------------
Balance at December 31, 2002 14,429 1,538 1,910,994 523,354 (413) (91,115) 2,358,787
Continues on Following Page.
F-6
Vishay Intertechnology, Inc.
Consolidated Statements of Stockholders' Equity (continued)
(In thousands, except share amounts)
Class B Accumulated
Convertible Capital Other Total
Common Common in Excess Retained Unearned Compenhensive Stockholders'
Stock Stock of Par Value Earnings Compensation Income (loss) Equity
--------------------------------------------------------------------------------------
Balance at December 31, 2002 $ 14,429 $ 1,538 $1,910,994 $ 523,354 $ (413) $ (91,115) $2,358,787
Net earnings -- -- -- 26,842 -- -- 26,842
Foreign currency translation adjustment -- -- -- -- -- 111,369 111,369
Pension liability adjustment -- -- -- -- -- 6,638 6,638
Gain on derivative financial instruments -- -- -- -- -- 2,462 2,462
----------
Comprehensive income 147,311
----------
Stock issued (14,000 shares) 2 -- 212 -- -- -- 214
Stock options exercised (356,313 shares) 36 -- 4,704 -- -- -- 4,740
Fair value of modifications to
nonemployee stock options -- -- 1,776 -- -- -- 1,776
Tax effects relating to stock plan -- -- 1,099 -- -- -- 1,099
Conversions from Class B to common
(1,018 shares) -- -- -- -- -- -- --
Amortization of unearned compensation -- -- -- -- 107 -- 107
--------------------------------------------------------------------------------------
Balance at December 31, 2003 $ 14,467 $ 1,538 $1,918,785 $ 550,196 $ (306) $ 29,354 $2,514,034
======================================================================================
See accompanying notes.
F-7
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 2003
Vishay Intertechnology, Inc. ("Vishay" or the "Company") is an international
manufacturer and supplier of passive and active electronic components, including
resistors, capacitors, inductors, strain gages, load cells, force measurement
sensors, displacement sensors, photoelastic sensors, power MOSFETS, power
conversion and motor control integrated circuits, transistors, diodes and
optoelectronic components. Electronic components manufactured by the Company are
used in virtually all types of electronic products, including those in the
computer, telecommunications, military/aerospace, instrument, automotive,
medical, and consumer electronics industries.
1. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ significantly from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Vishay and all of
its subsidiaries in which a controlling financial interest is maintained. For
those consolidated subsidiaries in which the Company's ownership is less than
100 percent, the outside stockholders' interests are shown as Minority Interest
in the accompanying consolidated balance sheets. Investments in affiliates over
which the Company has significant influence but not a controlling interest are
carried on the equity basis. Investments in affiliates over which the Company
does not have significant influence are accounted for by the cost method. All
significant intercompany transactions, accounts, and profits are eliminated.
Revenue Recognition
The Company recognizes revenue on product sales during the period when the sales
process is complete. This generally occurs when products are shipped to the
customer in accordance with terms of an agreement of sale, title and risk of
loss have been transferred, collectibility is reasonably assured and pricing is
fixed or determinable. The Company has agreements with distributors that
historically provided limited rights of product return. Beginning in 2002, the
Company modified these arrangements to allow distributors a limited credit for
unsaleable products, which it terms a "scrap allowance." Consistent with
industry practice, the Company also has a "stock, ship and debit" program
whereby it considers requests by distributors for credits on previously
purchased products that remain in distributors' inventory, to enable the
distributors to offer more competitive pricing. In addition, the Company has
contractual arrangements whereby it provides distributors with protection
against price reductions initiated by the Company after product is sold by the
Company to the distributor and prior to resale by the distributor.
The Company records a reduction of revenue during each period, and records a
related accrued expense for the period, based upon its estimate of product
returns, scrap allowances, "stock, ship and debit" credits and price protection
credits that will be attributable to sales recorded through the end of the
period. The Company makes these estimates based upon sales levels to its
distributors during the period, inventory levels at the distributors, current
and projected market conditions and historical experience under the programs.
While the Company utilizes a number of different methodologies to estimate the
accruals, all of the methodologies take into account sales levels to
distributors during the relevant period, inventory levels at the distributors,
current and projected market trends and conditions, recent and historical
activity under the relevant programs, changes in program policies and open
requests for credits. These procedures require the exercise of significant
judgments, but the Company believes that they allow the Company to reasonably
estimate future credits under the programs.
F-8
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Shipping and Handling Costs
Shipping and handling costs are included in costs of products sold.
Research and Development Expenses
Research and development costs are expensed as incurred. The amount charged to
expense for research and development (exclusive of purchased in-process research
and development) aggregated $45,377,000, $37,095,000, and $30,176,000, for the
years ended December 31, 2003, 2002, and 2001, respectively. The Company spends
additional amounts for the development of machinery and equipment for new
processes and for cost reduction measures.
Grants
Grants received by certain foreign subsidiaries from foreign governments,
primarily in Israel, are recognized as income in accordance with the purpose of
the specific contract and in the period in which the related expense is
incurred. Grants from the Israeli government recognized as a reduction of costs
of products sold were $12,359,000, $17,322,000, and $19,064,000, for the years
ended December 31, 2003, 2002, and 2001, respectively. Grants receivable of
$9,223,000 and $16,374,000 are included in other current assets at December 31,
2003 and 2002, respectively. Deferred grant income was $27,659,000 and
$42,345,000 at December 31, 2003 and 2002, respectively. The grants are subject
to certain conditions, including maintaining specified levels of employment for
periods up to ten years. Noncompliance with such conditions could result in the
repayment of grants. However, management expects that the Company will comply
with all terms and conditions of the grants.
Income Taxes
The provision for income taxes is determined using the asset and liability
approach of accounting for income taxes. Under this approach, deferred taxes
represent the future tax consequences expected to occur when the reported
amounts of assets and liabilities are recovered or paid. The provision for
income taxes represents income taxes paid or payable for the current year plus
the change in deferred taxes during the year. Deferred taxes result from
differences between the financial and tax bases of the Company's assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes
are enacted. Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be realized.
Cash Equivalents
Cash and cash equivalents includes demand deposits and highly liquid investments
with maturities of three months or less when purchased.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
allowance is determined through an analysis of the aging of accounts receivable
and assessments of risk that are based on historical trends and an evaluation of
the impact of current and projected economic conditions. The Company evaluates
the past-due status of its trade receivables based on contractual terms of sale.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required. Bad debt expense was $4,181,000, $6,672,000, and
$7,112,000 for the years ended December 31, 2003, 2002, and 2001, respectively.
F-9
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market. Inventories are adjusted for estimated obsolescence
and written down to net realizable value based upon estimates of future demand,
technology developments and market conditions.
Property and Equipment
Property and equipment is carried at cost and is depreciated principally by the
straight-line method based upon the estimated useful lives of the assets.
Machinery and equipment are being depreciated over useful lives of seven to ten
years. Buildings and building improvements are being depreciated over useful
lives of twenty to forty years. Construction in progress is not depreciated
until the assets are placed in service. The estimated cost to complete
construction in progress at December 31, 2003 was approximately $14.5 million.
Depreciation of capital lease assets is included in total depreciation expense.
Depreciation expense was $180,706,000, $172,174,000, and $149,225,000, for the
years ended December 31, 2003, 2002, and 2001, respectively.
Goodwill and Other Intangible Assets
The Company adopted Statements of Financial Accounting Standards ("SFAS") No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002.
SFAS No. 142 requires that goodwill and indefinite-lived intangible assets no
longer be amortized. In addition, goodwill and indefinite-lived intangible
assets are tested for impairment at least annually. These tests will be
performed more frequently if there are triggering events. The Company has
assigned an indefinite useful life to its tradenames. Prior to adoption of SFAS
No. 142, goodwill was amortized over periods ranging from twenty to forty years.
Definite-lived intangible assets are amortized over their estimated useful
lives. Completed technology is being amortized over useful lives of seven to ten
years. Noncompete agreements are being amortized over a period of one to five
years. The Company continually evaluates the reasonableness of the useful lives
of these assets.
SFAS No. 142 prescribes a two-step method for determining goodwill impairment.
In the first step, the Company determines the fair value of the reporting unit
using a comparable companies market multiple approach. If the net book value of
the reporting unit were to exceed the fair value, the Company would then perform
the second step of the impairment test which requires allocation of the
reporting unit's fair value to all of its assets and liabilities in a manner
similar to a purchase price allocation, with any residual fair value being
allocated to goodwill. An impairment charge will be recognized only when the
implied fair value of a reporting unit's goodwill is less than its carrying
amount.
The Company completed the transitional goodwill impairment test as of January 1,
2002. Fair value of reporting units was determined using comparable company
market multiples. The Company determined that there was no goodwill impairment
as of January 1, 2002. The Company's required annual impairment test is
completed as of October 1 of each year. The Company also performed an additional
impairment test at September 30, 2002 because events and circumstances indicated
that goodwill of its passives reporting unit might be impaired. Management
concluded that no impairment existed at September 30, 2002. Additionally, it was
determined that no impairment existed based on the annual impairment tests for
2003 and 2002.
F-10
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The Company completed the transitional impairment test of its tradenames as of
January 1, 2002. The fair value of the tradenames was measured as the discounted
cash flow savings realized from owning such tradenames and not having to pay a
royalty for their use. No impairment of the tradenames was determined to exist
at January 1, 2002. The annual impairment test of tradenames is completed as of
October 1 of each year. It was determined that no impairment existed based on
the annual impairment tests for 2003 and 2002.
Impairment of Long-Lived Assets
The Company evaluates impairment of its long-lived assets, other than goodwill
and indefinite-lived intangible assets, in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which was
adopted by the Company as of January 1, 2002. Adoption of SFAS No. 144 had no
effect on the Company's financial position or its results of operations. The
carrying value of long-lived assets held and used, other than goodwill and
indefinite-lived intangible assets, is evaluated when events or changes in
circumstances indicate the carrying value may not be recoverable. The carrying
value of a long-lived asset is considered impaired when the total projected
undiscounted cash flows from such asset are separately identifiable and are less
than the carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived
asset. Fair market value is determined primarily using the projected cash flows
from the asset discounted at a rate commensurate with the risk involved. Losses
on long-lived assets held for sale, other than goodwill and indefinite-lived
intangible assets, are determined in a similar manner, except that fair market
values are reduced for disposal costs.
Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, encourages entities to
record compensation expense for stock-based employee compensation plans at fair
value but provides the option of measuring compensation expense using the
intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees. The Company accounts for
stock-based compensation in accordance with APB No. 25 and related
interpretations. The following is provided to comply with the disclosure
requirements of SFAS No. 123 as amended. If compensation cost for the Company's
stock option programs had been determined using the fair-value method prescribed
by SFAS No. 123, the Company's results would have been reduced to the pro forma
amounts indicated below (in thousands, except per share amounts):
Year ended December 31
2003 2002 2000
-------------- -------------- --------------
Net earnings (loss), as reported $ 26,842 $ (92,614) $ 513
Deduct: Total stock-based employee compensation expense
determined under fair value-based method for all
awards, net of related tax effects (1,612) (2,430) (3,742)
-------------- -------------- ---------
Pro forma net earnings (loss) $ 25,230 $ (95,044) $ (3,229)
============== ============== =========
Earnings (loss) per share:
Basic--as reported $ 0.17 $ (0.58) $ 0.00
============== ============== =========
Basic--pro forma $ 0.16 $ (0.60) $ (0.02)
============== ============== =========
Diluted--as reported $ 0.17 $ (0.58) $ 0.00
============== ============== =========
Diluted--pro forma $ 0.16 $ (0.60) $ (0.02)
============== ============== =========
F-11
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The weighted average fair value of the options granted was estimated using the
Black-Scholes option-pricing model, with the assumptions presented below.
Options granted in 2003 and 2002 had a weighted average fair value of $6.53 and
$8.62, respectively, and an exercise price equal to the market value. No options
were granted in 2001 under the Vishay stock option programs.
2003 2002
Grants Grants
---------------------------
Expected dividend yield - -
Risk-free interest rate 2.2% 3.5%
Expected volatility 61.2% 63.2%
Expected life (in years) 4.5 4.5
Derivative Financial Instruments
Derivative instruments are reported on the consolidated balance sheet at their
fair values. The accounting for changes in fair value depends upon the purpose
of the derivative instrument and whether it is designated and qualifies for
hedge accounting. For instruments designated as hedges, the effective portion of
gains or losses is reported in other comprehensive income and the ineffective
portion, if any, is reported in net earnings (loss). Changes in the fair values
of derivative instruments that are not designated as hedges are recorded in
current period earnings. The Company uses interest rate swap agreements to
modify variable rate obligations to fixed rate obligations, thereby reducing
exposure to market rate fluctuations. The interest rate swap agreements are
designated as hedges. At December 31, 2003, the Company had no outstanding
interest rate swap agreements. See Note 14.
In prior years, the Company used financial instruments such as forward exchange
contracts to hedge a portion, but not all, of its firm commitments denominated
in foreign currencies. The purpose of the Company's foreign currency management
is to minimize the effect of exchange rate changes on actual cash flows from
foreign currency denominated transactions. At December 31, 2003 and 2002, the
Company had no outstanding forward exchange contracts.
Foreign Currency Translation
The financial statements for most of the Company's foreign subsidiaries are
measured using the local currency as the functional currency. Foreign assets and
liabilities in the consolidated balance sheets have been translated at the rate
of exchange as of the balance sheet date. Revenues and expenses are translated
at the average exchange rate for the year. Translation adjustments do not impact
the results of operations and are reported as a separate component of
stockholders' equity. Foreign currency transaction gains and losses are included
in the results of operations.
For those foreign subsidiaries where the U.S. dollar is the functional currency,
all foreign currency financial statement amounts are remeasured into U.S.
dollars. Exchange gains and losses arising from remeasurement of foreign
currency-denominated monetary assets and liabilities are included in the results
of operations.
F-12
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs,
arising from claims, assessments, litigation, fines, penalties, and other
sources are recorded when it is probable that a liability has been incurred and
the amount of the assessment and/or remediation can be reasonably estimated.
Accrued liabilities for environmental matters recorded at December 31, 2003 and
2002 do not include claims against third parties and are not discounted.
Accounting Pronouncements Pending Adoption
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), Consolidation
of Variable Interest Entities, an interpretation of ARB 51. The primary
objectives of this interpretation are to provide guidance on the identification
of entities for which control is achieved through means other than through
voting rights ("variable interest entities") and how to determine when and which
business enterprise (the "primary beneficiary") should consolidate the variable
interest entity. This new model for consolidation applies to an entity in which
either (i) the equity investors (if any) do not have a controlling financial
interest; or (ii) the equity investment at risk is insufficient to finance that
entity's activities without receiving additional subordinated financial support
from other parties. In addition, FIN 46 requires that the primary beneficiary,
as well as all other enterprises with a significant variable interest in a
variable interest entity, make additional disclosures. Certain disclosure
requirements of FIN 46 were effective for financial statements issued after
January 31, 2003. In December 2003, the FASB issued FIN 46 (revised December
2003), Consolidation of Variable Interest Entities ("FIN 46-R") to address
certain FIN 46 implementation issues. The effective dates and impact of FIN 46
and FIN 46-R are as follows: (i) Special-purpose entities ("SPEs") created prior
to February 1, 2003: The Company must apply either the provisions of FIN 46 or
early adopt the provisions of FIN 46-R at the end of the first interim or annual
reporting period ending after December 15, 2003. (ii) Non-SPEs created prior to
February 1, 2003: The Company is required to adopt FIN 46-R at the end of the
first interim or annual reporting period ending after March 15, 2004. (iii) All
entities, regardless of whether an SPE, that were created subsequent to January
31, 2003: The provisions of FIN 46 were applicable for variable interests in
entities obtained after January 31, 2003. The adoption of the provisions
applicable to SPEs and all other variable interests obtained after January 31,
2003 did not have a material impact on our financial position, results of
operations, or liquidity. The Company does not expect the adoption of FIN 46-R
provisions applicable to Non-SPEs created prior to February 1, 2003, to have a
material impact on our financial position, results of operations or liquidity.
In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. The revised
standard retains the disclosure requirement contained in the original standard
and requires additional disclosures about the assets, obligations, cash flows
and net period cost of defined pension plans and other defined benefit
postretirement plans. The Company has adopted the disclosure requirements
required by SFAS No. 132 (revised 2003) for our U.S. pension and other
postretirement plans, as included in Note 11. As permitted by SFAS No. 132,
certain disclosures regarding non-U.S. pension plans and estimated future
benefit payments for both U.S. and non-U.S. pension and other postretirement
benefit plans will be delayed until 2004.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
financial statement presentation.
F-13
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions
As part of its growth strategy, the Company seeks to expand through the
acquisition of other manufacturers of electronic components that have
established positions in major markets, reputations for product quality and
reliability, and product lines with which the Company has substantial marketing
and technical expertise. In the past three years, the Company has taken
advantage of the downturn in the electronics industry and the strength of its
own balance sheet to acquire businesses for consideration that it believes was
lower than what it would have been required to pay in other economic
environments. In pricing an acquisition, the Company focuses primarily on the
target's revenues and customer base, the strategic fit of its product line with
the Company's existing product offerings, opportunities for cost cutting and
integration with the Company's existing operations and production and other
postacquisition synergies rather than on the target's assets, such as its
property, equipment and inventory. As a result, the fair value of the acquired
assets may correspond to a relatively smaller portion of the acquisition price,
with the Company recording a substantial amount of goodwill related to the
acquisition.
These principles apply in particular to acquisitions in the passive segment. The
passive electronics business is a mature industry that, in general, has a slow
organic growth rate linked to macro-economic trends. The Company's business
strategy for growth in the passive segment relies primarily upon the acquisition
of other electronic components manufacturers whose operations satisfy its
acquisition criteria. Rather than focusing on the assets of the acquired
company, the Company seeks to capture its sales and customers, which it expects
to service in substantial measure with its own long-term assets and personnel.
In this regard, the Company anticipates that, following the acquisition, it will
be able to maintain sales levels on the strength of its relationships with
original equipment manufacturers (OEMs), distributors and electronic
manufacturers' supply (EMS) companies. The Company also anticipates that it will
be able to achieve fairly rapid cost reductions by eliminating or combining
redundant sales offices, sales personnel, commission representatives and
administrative staff; eliminating or consolidating manufacturing facilities; and
transferring manufacturing operations from high-labor-cost countries to
low-labor-cost jurisdictions. These savings and synergies were made possible in
the recent environment of depressed activity in the electronics industry by low
utilization of manufacturing and distribution capacity in the passive segment.
The property and equipment of an acquired company are expected to be eliminated
or substantially reduced and are valued accordingly. The result for acquisitions
in the passive segment is recognition of a substantial amount of goodwill.
No acquisitions were made during the year ended December 31, 2003.
Year ended December 31, 2002
In January 2002, the Company acquired the transducer and strain gage businesses
of Sensortronics, Inc. The acquisition included the wholly owned subsidiary of
Sensortronics, JP Technologies, a manufacturer of strain gages, located in San
Bernardino, California. The purchase price was $10 million in cash. The purchase
price has been allocated, with resulting goodwill of $3,027,000. The results of
operations are included in the results of the passives segment from January 31,
2002.
In June 2002, the Company acquired Tedea-Huntleigh BV, a subsidiary of Tedea
Technological Development and Automation Ltd. Tedea-Huntleigh is engaged in the
production and sale of load cells used in digital scales by the weighing
industry. The purchase price was approximately $21 million in cash.
Additionally, Vishay is paying Tedea a $1 million consulting fee over a
three-year period and repaid a $9 million loan of Tedea to Tedea-Huntleigh.
Tedea-Huntleigh operates two plants in Israel, in Netanya and Carmiel, where it
employs approximately 350 people, as well as a number of facilities outside
Israel. Tedea-Huntleigh also has load cell operations in the People's Republic
of China. The purchase price has been allocated, with resulting goodwill of
$13,841,000. Results of operations are included in the passives segment
beginning July 1, 2002.
F-14
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
On July 31, 2002, the Company acquired the BLH and Nobel businesses of Thermo
Electron Corporation. BLH and Nobel are engaged in the production and sale of
load cell-based process weighing systems, weighing and batching instruments, web
tension instruments, weighing scales, servo control systems, and components
relating to load cells including strain gages, foil gages, and transducers. The
purchase price was $18.5 million in cash. The purchase price has been allocated,
with resulting goodwill of $11,262,000. The results of operations are included
in the passives segment beginning August 1, 2002.
In October 2002, the Company acquired Celtron Technologies. Celtron is engaged
in the production and sale of load cells used in digital scales for the weighing
industry, with manufacturing facilities and offices in Taiwan, the People's
Republic of China, and California. The purchase price of $13.5 million in cash
has been allocated with resulting goodwill of $4,711,000. Results of operations
are included in the passives segment beginning October 1, 2002.
On December 13, 2002, the Company acquired BCcomponents Holdings B.V., a leading
manufacturer of passive components with operations in Europe, India and the Far
East. The product lines of BCcomponents include linear and non-linear resistors;
ceramic, film and aluminum electrolytic capacitors; and switches and trimming
potentiometers. The acquisition of BCcomponents, and the recognition of
substantial goodwill in the acquisition, were consistent with the general
principles described above that guide the Company's acquisition activity and
their application in particular to acquisitions in the passive component
segment.
Vishay acquired the outstanding shares of BCcomponents in exchange for ten-year
warrants to acquire 7,000,000 shares of Vishay common stock at an exercise price
of $20.00 per share and ten-year warrants to acquire 1,823,529 shares of Vishay
common stock at an exercise price of $30.30 per share. The fair value of the
warrants ($39,462,000) was determined using the Black-Scholes option-pricing
model. Significant assumptions used included an expected dividend yield of 0%, a
risk-free interest rate of 3%, an expected volatility of 66%, and an expected
life of five years.
In the transaction, outstanding obligations of BCcomponents, including
indebtedness and transaction fees and expenses, in the amount of approximately
$224 million were paid ($191 million) or assumed ($33 million). Also, $105
million in principal amount of BCcomponents' mezzanine indebtedness and certain
other securities of BCcomponents were exchanged for $105 million principal
amount of floating rate unsecured loan notes of Vishay due 2102. The Vishay
notes bear interest at LIBOR plus 1.5% through December 31, 2006 and at LIBOR
thereafter. The interest rate could be further reduced to 50% of LIBOR after
December 31, 2010 if the price of Vishay common stock trades above a specified
target price, as provided in the notes. The notes are subject to a put and call
agreement under which the holders may at any time put the notes to Vishay in
exchange for 6,176,471 shares of Vishay common stock in the aggregate, and
Vishay may call the notes in exchange for cash or for shares of its common stock
after 15 years from the date of issuance. The purchase price was as follows (in
thousands):
Cash consideration $ 191,000
Warrants issued 39,462
Acquisition costs 3,000
-----------
Total purchase price $ 233,462
===========
F-15
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Under purchase accounting, the total purchase price is allocated to assets
acquired and liabilities assumed based on their estimated fair values. At
December 31, 2002, the purchase price allocation was preliminary, pending the
completion of asset appraisals and negotiations with labor councils regarding
planned restructuring. These matters were resolved in 2003, resulting in an
increase in goodwill of $66,347,000. The purchase price allocation is now final.
The purchase price was allocated to the acquired assets and liabilities based on
fair values as follows (in thousands):
Current assets $ 91,859
Property and equipment 68,762
Other assets 3,054
Tradenames 23,000
Completed technology 19,000
Current liabilities (118,425)
Long-term debt (126,328)
Other noncurrent liabilities (29,860)
Goodwill 302,400
---------
Total purchase price $ 233,462
=========
In connection with the BCcomponents acquisition, the Company recorded
restructuring liabilities of $47,794,000 under an exit plan that management
began to formulate prior to the acquisition date. Approximately $45,855,000 of
these liabilities relate to employee termination costs covering approximately
780 technical, production, administrative and support employees located in the
United States, Europe, and the Pacific Rim. This liability is recorded in other
accrued expenses and is expected to be paid by June 30, 2004. Future adjustments
to decrease the restructuring liabilities would increase goodwill. A rollforward
of the activity related to these restructuring liabilities is as follows (in
thousands, except number of employees):
Number of
Severance Employees
Costs Other Terminated Total
-------------------------------------------------------
Balance at December 31, 2002 $ 45,855 $ 1,939 780 $ 47,794
Utilized (30,018) (1,939) (624) (31,957)
Foreign currency translation 5,153 -- -- 5,153
Change in estimate (1,328) -- (13) (1,328)
--------------------------------------------------------
Balance at December 31, 2003 $ 19,662 $ -- 143 $ 19,662
========================================================
F-16
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Year ended December 31, 2001
In January 2001, the Company purchased Tansitor, a manufacturer of wet tantalum
electrolytic capacitors and miniature conformal coated solid tantalum
capacitors, for $18.3 million in cash. The acquisition was accounted for as a
purchase and included in the results of operations of the passives segment from
January 1, 2001.
On July 27, 2001, the Company agreed to purchase from Infineon Technologies AG,
Munich, the Infineon optoelectronic infrared components business. This business
produces optocouplers and optoelectric infrared data components transceivers
(IRDCs). Under the terms of the agreement, the Company purchased Infineon's U.S.
development, marketing, and distribution activities located in the San Jose,
California headquarters and a manufacturing facility located in Malaysia. The
total purchase price for this transaction was approximately $116 million in
cash. A partial payment of $78 million was made on July 27, 2001, and a second
payment of $38 million was made on December 31, 2001 to acquire the facility in
Malaysia. The results of operations of Infineon's U.S. infrared components
business are included in the results of the actives segment from July 27, 2001.
The results of operations of the Malaysia facility are included from December
31, 2001, its acquisition date. The purchase price was allocated to the acquired
assets and liabilities based on fair values as follows (in thousands):
Current assets $ 28,121
Property and equipment 27,575
Completed technology 8,000
Other assets 226
Current liabilities (14,200)
Goodwill 66,351
---------
Total purchase price $ 116,073
=========
On November 2, 2001, the Company acquired General Semiconductor, Inc., a leading
manufacturer of rectifiers and power management devices, following approval of
the transaction and related matters by stockholders of the two companies, for
$554.8 million, including acquisition expenses of $7.0 million. Stockholders of
General Semiconductor received 0.563 shares of Vishay common stock for each
General Semiconductor share in a tax-free exchange. The Company valued the stock
issued using an average closing price of its common stock for the period
beginning three trading days immediately prior to the date the acquisition was
announced (August 1, 2001) and ending the three trading days immediately
thereafter, or an average of $23.46 per share. The aggregate fair value was
determined by multiplying the total number of shares of Vishay common stock
issued (21,305,127) by $23.46 per share, or approximately $499,818,000. The
Company assumed General Semiconductor options that became exercisable for
approximately 4.3 million shares of Vishay common stock, with a fair value of
$48 million. The fair value of the options was determined using the
Black-Scholes option-pricing model. The significant assumptions used included an
expected dividend yield of 0.0%, a risk-free interest rate of 3%, an expected
volatility of 66%, and an expected life of five years. General Semiconductor
also had outstanding $172.5 million principal amount of 5.75% convertible notes,
of which $1.5 million principal amount was repurchased by the Company in January
2002. The remaining principal amount was repurchased by the Company in September
2003. See Note 6. The notes were convertible into approximately 6.2 million
shares of Vishay common stock. The results of operations of General
Semiconductor are included in the results of the actives segment from November
2, 2001.
F-17
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
The final purchase allocation is as follows (in thousands):
Current assets $ 153,115
Property and equipment 184,524
Other assets 7,896
Noncompete agreements 5,604
Tradenames 35,000
Completed technology 37,000
Purchased in-process technology 16,000
Current liabilities (188,410)
Long-term debt (255,502)
Other non-current liabilities (111,290)
Goodwill 670,909
---------
Total purchase price $ 554,846
=========
In connection with the General Semiconductor acquisition, the Company recorded
restructuring liabilities of $94,643,000 under an exit plan that management
began to formulate prior to the acquisition date. The exit plan includes
downsizing certain European and Taiwan facilities and moving production to
low-labor-cost areas such as Israel, the Czech Republic, and the People's
Republic of China. The plan also includes reducing selling, general and
administrative expenses through the integration or elimination of redundant
sales offices and administrative functions at General Semiconductor. The
Company's goal under the plan is to achieve significant production cost savings
through the transfer and expansion of manufacturing operations to regions such
as Israel, the Czech Republic, and the People's Republic of China, where the
Company can take advantage of lower labor costs and available tax and other
government-sponsored incentives. Approximately $88,242,000 of these
restructuring liabilities related to employee termination costs covering
approximately 1,460 technical, production, administrative and support employees
located in the United States, Europe, and the Pacific Rim. The remaining
$6,401,000 related to provisions for lease cancellations and other costs. The
liability is recorded in other accrued expenses and is expected to be paid by
June 30, 2004. Future adjustments to decrease the restructuring liabilities
would increase goodwill.
A rollforward of the activity in these restructuring liabilities is as follows
(in thousands, except number of employees):
Number of
Severance Employees
Costs Other Terminated Total
------------------------------------------------------------
Balance at January 1, 2002 $ 88,242 $ 6,401 1,460 $ 94,643
Utilized (52,118) (1,249) (426) (53,367)
Changes in estimate (7,900) -- (147) (7,900)
----------------------------------------------------------
Balance at December 31, 2002 $ 28,224 $ 5,152 887 $ 33,376
Utilized (6,563) (2,641) (118) (9,204)
Foreign currency translation 504 -- -- 504
Changes in estimate (271) -- -- (271)
----------------------------------------------------------
Balance at December 31, 2003 $ 21,894 $ 2,511 769 $ 24,405
==========================================================
F-18
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
The change in the estimate of restructuring liabilities for the acquisition of
General Semiconductor in 2002 resulted from a decision not to downsize one of
General Semiconductor's European facilities. At the time that the Company
formulated its exit plan, it did not anticipate the robust demand experienced in
2002 for the active components manufactured by that facility. Accordingly, the
Company did not terminate the 147 employees whose positions it had originally
expected to eliminate. The Company reduced restructuring liabilities (and
goodwill) by $7,900,000, the amount of the anticipated termination costs for
these employees that had been included in the purchase allocation. The remaining
liability is expected to be paid in 2004.
On November 7, 2001, the Company acquired Yosemite Investment, Inc. d/b/a North
American Capacitor Company, also known as Mallory, for approximately $45 million
in cash. With manufacturing facilities in Greencastle, Indiana and Glasgow,
Kentucky, Mallory is a leading manufacturer of wet tantalum electrolytic
capacitors, among other businesses. Subsequently, in February 2002, Vishay sold
the audible signal business of Mallory for $4,925,000, consisting of $3,925,000
in cash and a $1,000,000 promissory note and recognized no gain or loss. On
April 1, 2002, the Company sold the resale business of Mallory for $8.8 million,
consisting of $7.6 million in cash and a $1.2 million subordinated promissory
note and recognized no gain or loss. The purchase price was allocated to the
acquired assets and liabilities based on fair values as follows (in thousands):
Current assets $ 11,033
Property and equipment 6,347
Current liabilities (3,555)
Long-term debt (857)
Goodwill 31,684
--------
Total purchase price $ 44,652
========
The BLH, Tansitor, Celtron, Nobel, Tedea-Huntleigh, Sensortronics, Mallory and
Infineon acquisitions were funded with cash on hand and borrowings under
Vishay's revolving credit facility.
F-19
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Had all of the acquisitions previously described been made at the beginning of
the respective periods, the Company's pro forma unaudited results would have
been (in thousands, except per share amounts):
Year ended December 31
2002 2001
-----------------------------
Net sales $ 2,095,657 $ 2,415,651
Net loss (127,379) (82,166)
Basic and diluted loss per share (0.80) (0.52)
The pro forma information includes adjustments for interest expense that would
have been incurred to finance the acquisitions, adjustments to depreciation
based on the fair value of property and equipment acquired, write-off of
purchased in-process research and development, amortization of intangible assets
and related tax effects. Pro forma net loss for the year ended December 31, 2001
includes pretax restructuring charges of $88,846,000 recorded by General
Semiconductor and BCcomponents prior to acquisition. Goodwill related to the
acquisitions is not tax-deductible.
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisitions occurred at the beginning of
the periods presented.
F-20
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Goodwill and Other Intangible Assets
As discussed in Note 1, the Company adopted SFAS No. 142 on January 1, 2002. The
Company's net earnings and earnings per share adjusted to exclude goodwill
amortization for the year prior to adoption were as follows:
Year ended
December 31
2001
------------
Reported net earnings $ 513
Add back: Goodwill amortization, net of tax 10,414
----------
Adjusted net earnings $ 10,927
==========
Basic earnings per share:
Reported net earnings $ 0.00
Goodwill amortization, net of tax 0.08
----------
Adjusted net earnings $ 0.08
==========
Diluted earnings per share:
Reported net earnings $ 0.00
Goodwill amortization, net of tax 0.08
----------
Adjusted net earnings $ 0.08
==========
The changes in the carrying amounts of goodwill by segment for the years ended
December 31, 2003 and 2002 were as follows:
Actives Passives Total
-----------------------------------------------
(In thousands)
Balance at January 1, 2002 $ 864,375 $ 213,415 $ 1,077,790
Goodwill acquired during the year -- 276,606 276,606
Purchase price allocation adjustments (8,332) 830 (7,502)
Currency translation adjustments 5,158 4,241 9,399
----------- ----------- -----------
Balance at December 31, 2002 861,201 495,092 1,356,293
Purchase price allocation adjustments -- 66,347 66,347
Currency translation adjustments 22,191 21,883 44,074
----------- ----------- -----------
Balance at December 31, 2003 $ 883,392 $ 583,322 $ 1,466,714
=========== =========== ===========
Passives segment goodwill is allocated to the Other Passives and Measurements
Group reporting units for SFAS No. 142 evaluation purposes. Goodwill allocated
to the Other Passives reporting unit at December 31, 2003 is $541,909,000.
Goodwill allocated to the Measurements Group reporting unit at December 31, 2003
is $41,413,000.
F-21
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Goodwill and Other Intangible Assets (continued)
Other intangible assets were as follows:
December 31
2003 2002
---------------------------
(In thousands)
Intangible Assets Subject to Amortization (Definite Lived)
Patents and acquired technology $ 79,715 $ 67,000
Noncompete agreements 7,604 7,604
---------------------------
87,319 74,604
Accumulated amortization
Patents and acquired technology (15,330) (5,184)
Noncompete agreements (6,383) (3,003)
---------------------------
(21,713) (8,187)
---------------------------
Net Intangible Assets Subject to Amortization 65,606 66,417
Intangible Assets Not Subject to Amortization (Indefinite Lived)
Tradenames 63,349 56,000
---------------------------
$ 128,955 $ 122,417
===========================
Amortization expense was $13,029,000, $7,171,000, and $1,017,000, for the years
ended December 31, 2003, 2002, and 2001, respectively. Estimated annual
amortization expense for each of the next five years is as follows: 2004 -
$9,291,000; 2005 - $8,869,000; 2006 - $8,469,000; 2007 - $8,469,000; and 2008 -
$8,469,000.
F-22
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs
Restructuring and severance costs reflect the cost reduction programs currently
being implemented by the Company. These include the closing of facilities and
the termination of employees. Severance costs also include executive severance
and charges for the fair value of stock options of certain former employees
which were modified such that they did not expire at termination. Restructuring
costs are expensed during the period in which the Company determines it will
incur those costs and all requirements of accrual are met. Effective January 1,
2003, restructuring costs are accounted for under SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. This statement requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Because these costs are recorded
based upon estimates, actual expenditures for the restructuring activities may
differ from the initially recorded costs. If the initial estimates were too low
or too high, the Company could be required either to record additional expenses
in future periods or to reverse part of the previously recorded charges.
Year Ended December 31, 2003
The Company recorded restructuring and severance costs of $29,560,000 for the
year ended December 31, 2003. Restructuring of European and Asian operations
included $23,007,000 of employee termination costs covering 546 technical,
production, administrative and support employees located in Germany, France,
Hungary, Portugal, the United Kingdom, Austria and the Far East. The remaining
$6,553,000 of restructuring and severance costs relates to termination costs of
$5,539,000 for 162 technical, production, administrative and support employees
located in the United States, and $1,014,000 for asset write-downs. The
restructuring and severance costs were incurred as part of the cost reduction
programs currently being implemented by the Company. Activity related to these
costs for the year ended December 31, 2003 is as follows (in thousands, except
number of employees):
Number of
Severance Asset Employees
Costs Impairment Terminated Total
-------------------------------------------------------
Restructuring and severance costs $ 28,546 $ 1,014 708 $ 29,560
Utilized (14,195) (1,014) (653) (15,209)
Foreign currency translation 1,623 -- -- 1,623
-------------------------------------------------------
Balance at December 31, 2003 $ 15,974 $ -- 55 $ 15,974
======================================================
Substantially all of the remaining restructuring liability, currently shown in
other accrued expenses, is expected to be paid by December 31, 2004.
F-23
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs (continued)
Year ended December 31, 2002
Restructuring and severance costs were $30,970,000 for the year ended December
31, 2002. Restructuring of European and Israeli operations included $10,698,000
of employee termination costs covering approximately 778 technical, production,
administrative and support employees located in the Czech Republic, France,
Hungary, Israel, Portugal, and Austria. In the United States, $7,909,000 of
restructuring and severance costs related to termination costs for approximately
660 technical, production, administrative and support employees. The remaining
$12,363,000 of restructuring and severance costs related to the noncash
write-down of building and equipment that are no longer in use. The
restructuring and severance costs were incurred as part of the cost reduction
programs currently being implemented by the Company. The restructuring
activities related to existing business were designed to reduce both fixed and
variable costs, particularly in response to the reduced demand for our products
occasioned by the electronics industry downturn which began in 2001.
Activity related to these costs is as follows (in thousands, except number of
employees):
Number of
Severance Asset Employees
Costs Impairment Terminated Total
----------------------------------------------------
Restructuring and severance costs $ 18,607 $ 12,363 1,438 $ 30,970
Utilized (6,420) (12,363) (783) (18,783)
----------------------------------------------------
Balance at December 31, 2002 12,187 -- 655 12,187
Utilized (10,030) -- (639) (10,030)
Foreign currency effect 661 -- -- 661
----------------------------------------------------
Balance at December 31, 2003 $ 2,818 $ -- 16 $ 2,818
====================================================
The remaining $2,818,000 of severance costs, currently shown in other accrued
expenses, is expected to be paid by March 31, 2004.
Year ended December 31, 2001
Restructuring and severance costs were $61,908,000 for the year ended December
31, 2001. Restructuring of European, Asia Pacific, and Israeli operations
included $27,064,000 of employee termination costs covering approximately 3,778
technical, production, administrative and support employees located in France,
Hungary, Portugal, Austria, the Philippines, Germany, and Israel. The European
operations also recorded $2,191,000 of noncash costs associated with the
write-down of buildings and equipment that are no longer in use. In the United
States, $13,870,000 of restructuring and severance costs related to termination
costs for approximately 1,885 technical, production, administrative and support
employees. The remaining $18,783,000 of restructuring and severance costs
related to the noncash write-down of buildings and equipment that are no longer
in use.
F-24
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs (continued)
Activity related to these costs is as follows (in thousands, except number of
employees):
Number of
Severance Asset Employees
Costs Impairment Terminated Total
---------------------------------------------------------
Restructuring and severance costs $ 40,934 $ 20,974 5,663 $ 61,908
Utilized (18,114) (20,974) (4,913) (39,088)
----------------------------------------------------------
Balance at December 31, 2001 22,820 -- 750 22,820
Utilized (19,865) -- (612) (19,865)
Changes in estimate (1,391) -- -- (1,391)
----------------------------------------------------------
Balance at December 31, 2002 1,564 -- 138 1,564
Utilized (1,586) -- (50) (1,586)
Changes in estimate 22 -- (88) 22
----------------------------------------------------------
Balance at December 31, 2003 $ -- $ -- -- $ --
==========================================================
5. Income Taxes
Earnings (loss) before income taxes and minority interest consists of the
following components:
Year ended December 31
2003 2002 2001
------------------------------------------
(In thousands)
Domestic $ (20,119) $ (59,882) $ (55,598)
Foreign 66,545 (40,163) 65,701
------------------------------------------
$ 46,426 $(100,045) $ 10,103
==========================================
Significant components of income taxes are as follows:
Year ended December 31
2003 2002 2001
---------------------------------------------
(In thousands)
Current:
U.S $ (1,389) $(41,991) $ 6,194
Foreign 4,977 6,111 9,197
State 2,141 776 641
----------------------------------------------
5,729 (35,104) 16,032
Deferred:
U.S (8,640) 30,590 (12,392)
Foreign 12,767 (16,152) 4,031
State 1,672 3,766 (1,976)
----------------------------------------------
5,799 18,204 (10,337)
----------------------------------------------
$ 11,528 $(16,900) $ 5,695
==============================================
F-25
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
December 31
2003 2002
--------------------------
(In thousands)
Deferred tax assets:
Pension and other retiree obligations $ 48,229 $ 47,710
Net operating loss carryforwards 178,029 112,770
Tax credit carryforwards 19,204 11,766
Other accruals and reserves 69,873 68,792
--------------------------
Total deferred tax assets 315,335 241,038
Less valuation allowance (107,388) (63,192)
--------------------------
207,947 177,846
Deferred tax liabilities:
Tax over book depreciation 92,094 87,483
Intangible assets not subject to amortization 24,503 24,454
Other - net 31,487 30,359
--------------------------
Total deferred tax liabilities 148,084 142,296
--------------------------
Net deferred tax assets $ 59,863 $ 35,550
==========================
A reconciliation of income tax expense at the U.S. federal statutory income tax
rate to actual income tax provision (benefit) is as follows:
Year ended December 31
2003 2002 2001
-----------------------------------------
(In thousands)
Tax at statutory rate $ 16,249 $(35,016) $ 3,536
State income taxes, net of U.S. federal tax benefit 3,319 2,540 (382)
Effect of foreign operations (7,816) 11,090 (4,894)
Purchased research and development -- -- 5,600
Other (224) 4,486 1,835
----------------------------------------
$ 11,528 $(16,900) $ 5,695
========================================
F-26
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
At December 31, 2003, the Company had the following significant net operating
loss carryforwards for tax purposes (in thousands):
Expires
-----------------------------
Austria $ 7,086 No expiration
Belgium 115,969 No expiration
Czech Republic 1,508 2005 - 2010
France 13,697 No expiration
Germany 99,417 No expiration
Israel 57,692 No expiration
Netherlands 86,333 No expiration
Portugal 4,303 2005 - 2009
United States 160,824 2021 - 2023
Approximately $30,274,000 of the German carryforward resulted from the Company's
acquisition of Roederstein in 1993 and approximately $159,459,000 of the
carryforwards in Austria, Belgium, and the Netherlands resulted from the
Company's acquisition of BCcomponents in 2002.
In total, valuation allowances of $96,061,000 and $58,126,000 have been recorded
at December 31, 2003 and 2002, respectively, for deferred tax assets related to
foreign net operating loss carryforwards. Of this, $55,790,000 and $54,441,000,
as of December 31, 2003 and 2002, respectively, are valuation allowances,
recorded through goodwill, for the acquired net operating losses. If tax
benefits are recognized in the future for utilization of these acquired net
operating losses, the benefits of such loss utilization will be recorded as a
reduction to goodwill. In 2003 and 2002, tax benefits recognized through
reductions of the valuation allowance recorded through goodwill were $0 and
$491,000, respectively.
At December 31, 2003, the Company had the following tax credit carryforwards
available (in thousands):
Expires
------------------
Federal Alternative Minimum Tax $13,831 No expiration
California Investment Credit 3,961 2004 - 2010
California Research Credit 4,210 No expiration
At December 31, 2003, no provision had been made for U.S. federal and state
income taxes on approximately $941,286,000 of foreign earnings, which are
expected to be reinvested outside of the United States indefinitely. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to U.S. income taxes (subject to an adjustment for
foreign tax credits), state income taxes, and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities
associated with its hypothetical calculation.
Income taxes paid, net of amounts refunded, were a net refund of $31,626,000 for
the year ended December 31, 2003, and net payments of $2,910,000 and
$72,953,000, for the years ended December 31, 2002 and 2001, respectively.
The Company's U.S. income tax returns for the years ended 1999 through 2000 are
presently under examination by the Internal Revenue Service. Management believes
that potential tax assessment plus related interest and penalties, if any, have
been sufficiently provided for in the financial statements.
F-27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt
Long-term debt consists of the following:
December 31
2003 2002
------------------------
(In thousands)
Multicurrency revolving credit loans $ -- $111,000
Convertible subordinated notes, LYONs, due 2021 229,206 317,830
Convertible unsecured notes, BCcomponents, due 2102 105,000 105,000
Convertible subordinated notes, GSI, due 2006 -- 169,347
Convertible subordinated notes, due 2023 500,000 --
Other debt and capital lease obligations 3,682 21,689
----------------------
837,888 724,866
Less current portion 1,282 18,550
----------------------
$836,606 $706,316
======================
Convertible subordinated notes, due 2023
On August 6, 2003, the Company sold $450 million aggregate principal amount of
3-5/8% convertible subordinated notes due 2023 and granted the initial
purchasers an option to purchase, within 30 days of the date of the offering
memorandum relating to the notes, an additional $50 million of the notes. This
option was exercised, and the additional $50 million of notes was issued on
September 3, 2003. The notes pay interest semiannually.
Holders may convert the notes into Vishay common stock prior to the close of
business on August 1, 2023 if (1) the sale price of Vishay common stock reaches
130% of the conversion price for a specified period; (2) the trading price of
the notes falls below 98% of the average last reported sales price of Vishay
common stock multiplied by the conversion rate for a specified period; (3) the
notes have been called for redemption; (4) the credit ratings assigned to the
notes are lowered by two or more levels from their initial ratings; or (5)
specified corporate transactions occur. None of these conditions had occurred as
of December 31, 2003. The conversion price of $21.28 is equivalent to a
conversion rate of 46.9925 shares per $1,000 principal amount of notes.
The notes are subordinated in right of payment to all of the Company's existing
and future senior indebtedness and are effectively subordinated to all existing
and future liabilities of its subsidiaries. The notes will be redeemable at the
Company's option beginning August 1, 2010 at a redemption price equal to 100% of
the principal amount plus accrued and unpaid interest, if any. Holders of the
notes will have the right to require the Company to repurchase all or some of
their notes at a purchase price equal to 100% of their principal amount of the
notes, plus accrued and unpaid interest, if any, on August 1, 2008, August 1,
2010, August 1, 2013, and August 1, 2018. In addition, holders of the notes will
have the right to require the Company to repurchase all or some of their notes
upon the occurrence of certain events constituting a fundamental change. On any
required repurchase, the Company may choose to pay the purchase price in cash or
shares of Vishay common stock or any combination of cash and Vishay common
stock. The proceeds of the offering of the notes were used to repay other
outstanding debt, as well as for general corporate purposes.
The early extinguishment of a portion of the Liquid Yield Option(TM) Notes
(LYONs) and the General Semiconductor convertible subordinated notes, described
below, resulted in a pretax loss of $9,910,000 in 2003, which included a premium
on redemption of approximately $7.3 million and the write-off of deferred
financing costs of approximately $2.6 million.
F-28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
Revolving Credit Facility
In July 2003, Vishay agreed with the lenders under its secured revolving credit
facility to an amendment and restatement of the agreement governing the
facility. The maximum availability under the facility, in light of the Company's
anticipated liquidity needs, was changed from $500 million to $400 million, and
the final maturity of the facility was extended from June 2005 to May 2007. The
restatement decreases the Company's minimum tangible net worth requirement to
$850 million plus 50% of net income (without offset for losses) and 75% of net
proceeds of equity offerings from July 1, 2003, eliminates the covenant on
minimum earnings before interest and tax, permits securitization of up to $200
million of non-U.S. accounts receivable, allows for the release of all
collateral (other than subsidiary stock and pledges by the Company and its
subsidiaries of intercompany notes) under certain circumstances and creates an
event of default upon the occurrence of a fundamental change as defined under
the Company's convertible subordinated notes due 2023. The Company used
approximately $130 million of the proceeds of the offering of the convertible
subordinated notes to repay amounts outstanding under the revolving credit
facility.
Interest on the revolving credit facility is payable at prime or other variable
interest rate options. The Company is required to pay facility fees. As of
December 31, 2003 and 2002, the Company had $0 and $111,000,000, respectively,
outstanding under the revolving credit facility (interest rate of 3.03% at
December 31, 2002, or 5.77% after giving effect to interest rate swaps). Letters
of credit totaling $6,105,000 and $30,633,000 were issued under the revolving
credit facility at December 31, 2003 and 2002, respectively. At December 31,
2003, $393,895,000 was available under the credit facility.
Borrowings under the revolving credit facility are secured by pledges of stock
in certain significant subsidiaries and certain guarantees by significant
subsidiaries. The subsidiaries would be required to perform under the guarantees
in the event that the Company failed to make principal or interest payments
under the revolving credit facility. If any subsidiary were to borrow under the
credit facility, the Company would provide a similar guarantee with respect to
the subsidiary. The revolving credit facility restricts the Company from paying
cash dividends and requires the Company to comply with other covenants,
including the maintenance of specific financial ratios.
Liquid Yield Option(TM) Notes, due 2021
On June 4, 2001, the Company completed a private placement of $550,000,000 face
amount Liquid Yield Option(TM) Notes (LYONs) due 2021. In connection with the
sale of the LYONs, the Company received net proceeds of $294,096,000 and used
the proceeds to pay down existing bank debt. Each LYON has a $1,000 face amount
and was offered at a price of $551.26 (55.126% of the principal amount at
maturity). The Company will not pay interest on the LYONs prior to maturity
unless contingent interest becomes payable.
The issue price of each LYON represents a yield to maturity of 3.00%, excluding
any contingent interest. The LYONs are subordinated in right of payment to all
of the Company's existing and future senior indebtedness.
At any time on or before the maturity date, the LYONs are convertible into
Vishay common stock at a rate of 17.6686 shares of common stock per $1,000
principal amount at maturity. The conversion rate may be adjusted under certain
circumstances, but it will not be adjusted for accrued original issue discount.
F-29
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
The Company is required to pay contingent interest to the holders of the LYONs
during the six-month period commencing June 4, 2006 and during any six-month
period thereafter if the average market price of a LYON for a certain
measurement period immediately preceding the applicable six-month period equals
120% or more of the sum of the issue price and accrued original issue discount
for such LYON. The amount of contingent interest payable during any six-month
period will be the sum of any contingent interest payable in the first and
second three-month periods during such six-month period. During any three-month
period in which contingent interest becomes payable, the contingent interest
payable per LYON for such period will be equal to the greater of (1) 0.0625% of
the average market price of a LYON for the measurement period referred to above
or (2) the sum of all regular cash dividends paid by the Company per share on
its common stock during such three-month period multiplied by the number of
shares of common stock issuable upon conversion of a LYON at the then-applicable
conversion rate.
The holders of the LYONs may require the Company to repurchase all or a portion
of their LYONs on June 4, 2004, June 4, 2006, June 4, 2011, and June 4, 2016, at
various prices set forth in the notes. The Company may choose to pay the
purchase price in cash, Vishay common stock, or a combination of both. The
Company may redeem for cash all or a portion of the LYONs at any time on or
after June 4, 2006 at the prices set forth in the notes. If these notes are put
to the Company in 2004, the Company expects to be able to utilize its revolving
credit facility or stock to finance the transaction, and accordingly, the notes
are classified as long-term on the consolidated balance sheet.
The Company used approximately $97.4 million of the proceeds of the 2003
offering of the convertible subordinated notes to fund the purchase of
approximately $97.0 million accreted principal amount ($165.0 million face
amount) of its LYONs.
Convertible unsecured notes, BCcomponents, due 2102
On December 13, 2002, the Company completed the acquisition of BCcomponents
Holdings B.V. In connection with this acquisition, $105,000,000 in principal
amount of BCcomponents' mezzanine indebtedness and certain other securities of
BCcomponents were exchanged for $105,000,000 principal amount of floating rate
unsecured loan notes of the Company, due 2102. The notes bear interest at LIBOR
plus 1.5% through December 31, 2006 and at LIBOR thereafter. The interest rate
could be further reduced to 50% of LIBOR after December 31, 2010 if the price of
the Company's common stock trades above a specified target price, as provided in
the notes. The notes are subject to a put and call agreement under which the
holders may at any time put the notes to the Company in exchange for 6,176,471
shares of the Company's common stock in the aggregate, and the Company may call
the notes in exchange for cash or for shares of its common stock after 15 years
from the date of issuance.
Convertible subordinated notes, GSI, due 2006
General Semiconductor, which was acquired by the Company on November 2, 2001,
had outstanding $172.5 million principal amount of 5.75% convertible
subordinated notes due December 15, 2006. The notes were recorded at their fair
value of $170.5 million as of the November 2, 2001 acquisition date. Interest on
the convertible notes was payable semiannually on June 15 and December 15 of
each year. As a consequence of the Company's acquisition of General
Semiconductor, the convertible notes became convertible into approximately 6.2
million shares of the Company's common stock. The convertible notes were
redeemable at the Company's option, in whole or in part, at any time on or after
December 15, 2002 at a premium of 103.286% of par value declining annually to
100.821% at December 15, 2005 and thereafter.
F-30
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
The Company used approximately $176.6 million of the proceeds of the 2003
offering of convertible subordinated notes (exclusive of accrued interest of
approximately $2.3 million) to fund the redemption of all of the outstanding
convertible subordinated notes due 2006 of its General Semiconductor subsidiary.
These notes were redeemed at a price of 103.286% of their principal amount, plus
accrued but unpaid interest to the date of redemption.
Aggregate annual maturities of long-term debt, based on the terms stated in the
respective debt agreements, are as follows: 2004 - $1,282,000; 2005 -
$1,212,000; 2006 - $357,000; 2007 - $542,000; 2008 - $291,000; and thereafter -
$834,204,000. As described above, LYONs with an aggregate accreted principal
amount of $229,206,000, due by their terms in 2021, may be put to the Company in
2004 at an aggregate price of approximately $235,000,000.
At December 31, 2003, the Company had committed and uncommitted short-term
credit lines with various U.S. and foreign banks aggregating approximately $69
million, of which approximately $51 million was unused. The weighted average
interest rate on short-term borrowings outstanding as of December 31, 2003 and
2002 was 5.1% and 2.8%, respectively.
Interest paid was $30,760,000, $17,977,000, and $15,685,000, for the years ended
December 31, 2003, 2002, and 2001, respectively.
F-31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity
The Company's Class B common stock carries ten votes per share while the common
stock carries one vote per share. Class B shares are transferable only to
certain permitted transferees while the common stock is freely transferable.
Class B shares are convertible on a one-for-one basis at any time into shares of
common stock.
On November 2, 2001, the stockholders approved an increase in the authorized
capital stock of the Company. The total authorized common stock was increased
from 150,000,000 to 300,000,000 shares and the Class B common stock was
increased from 20,000,000 to 40,000,000 shares.
On August 10, 2000, the Board of Directors of the Company authorized the
repurchase of up to 5,000,000 shares of its common stock from time to time in
the open market. As of December 31, 2003, the Company had repurchased 248,500
shares for a total of $6,616,000.
Unearned compensation relating to common stock issued under employee stock plans
is being amortized over periods ranging from three to five years. At December
31, 2003, 305,126 shares were available for issuance under stock plans.
At December 31, 2003, the Company has reserved shares of common stock for future
issuance as follows:
Employee stock plan 305,126
Common stock options outstanding 8,768,000
Common stock options available to grant 1,143,000
Common stock warrants 8,823,529
Exchangeable unsecured notes, BCcomponents 6,176,471
Convertible subordinated notes, LYONs 6,802,000
Convertible subordinated notes, due 2023 23,496,250
Class B common stock 15,382,296
----------
70,896,672
==========
F-32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Other Income (Expense)
Other income (expense) consists of the following:
Year ended December 31
2003 2002 2001
-------------------------------------------------
(In thousands)
Foreign exchange (losses) gains $ (5,235) $ (777) $ 611
Gain (loss) on interest rate swaps 3,783 (115) (3,668)
Interest income 7,228 7,952 15,092
Dividend income 96 100 --
(Losses) gains on disposal of property and equipment (2,521) (296) 1,472
Other (1,062) 1,800 (806)
------------------------------------------------
$ 2,289 $ 8,664 $ 12,701
================================================
On February 13, 2002, a fire occurred at the Company's Electro-Films, Inc. (EFI)
facility located in Providence, Rhode Island causing a production stoppage of
the product line there. The Company received insurance proceeds based on its
costs to replace the assets, which were in excess of the book value of the
assets at the time of the fire. This insurance claim has been resolved, and the
Company recognized a gain of $33,906,000 in 2003.
As described in Note 6, on August 6, 2003, the Company issued 3-5/8% convertible
subordinated notes due 2023. The proceeds of the offering were utilized to
redeem a portion of the outstanding LYONs and all of the General Semiconductor
notes, which resulted in a pretax loss of $9,910,000 in 2003.
See Note 14 for a description of the interest rate swap agreements.
9. Other Accrued Expenses
Other accrued expenses consist of the following (in thousands):
2003 2002
---- ----
Restructuring $ 62,859 $ 95,127
Sales returns and allowances 47,914 39,803
Accrued loss on tantalum purchase commitment - current portion 31,675 25,334
Other 145,984 143,345
-------- --------
$288,432 $303,609
======== ========
F-33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
10. Other Comprehensive Income (Loss)
The cumulative balance of each component of other comprehensive income (loss)
and the income tax effects allocated to each component are as follows:
Tax
Beginning Before-Tax Benefit Net-of-Tax Ending
Balance Amount (Expense) Amount Balance
---------------------------------------------------------------------------
(In thousands)
December 31, 2003
Pension liability adjustment $ (36,924) $ 2,911 $ 3,727 $ 6,638 $ (30,286)
Currency translation adjustment (51,729) 111,369 -- 111,369 59,640
Derivative financial instruments:
Loss on derivative financial
instruments (2,462) (1,321) -- (1,321) (3,783)
Reclassification adjustment for gain
realized in 2003 -- 3,783 -- 3,783 3,783
-------------------------------------------------------------------------
$ (91,115) $ 116,742 $ 3,727 $ 120,469 $ 29,354
=========================================================================
December 31, 2002
Pension liability adjustment $ (13,694) $ (35,562) $ 12,332 $ (23,230) $ (36,924)
Currency translation adjustment (116,072) 64,343 -- 64,343 (51,729)
Loss on derivative financial instruments (645) (2,291) 474 (1,817) (2,462)
-------------------------------------------------------------------------
$(130,411) $ 26,490 $ 12,806 $ 39,296 $ (91,115)
=========================================================================
December 31, 2001
Pension liability adjustment $ (5,137) $ (13,281) $ 4,724 $ (8,557) $ (13,694)
Currency translation adjustment (108,434) (7,638) -- (7,638) (116,072)
Loss on derivative financial instruments -- (1,019) 374 (645) (645)
-------------------------------------------------------------------------
$(113,571) $ (21,938) $ 5,098 $ (16,840) $(130,411)
=========================================================================
F-34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits
U.S. Pension and Other Postretirement Benefits
The Company maintains several defined benefit pension and nonpension
postretirement plans which cover substantially all full-time U.S. employees. The
U.S. pension plans of General Semiconductor are included beginning on November
2, 2001. The U.S. pension plan of BLH is included beginning on July 31, 2002.
The Company maintains two unfunded nonpension postretirement plans funded as
costs are incurred. One plan is contributory, with employee contributions
adjusted for general inflation or inflation in costs under the plan. The plan
was amended in 1993 to cap employer contributions at 1993 levels. The second
plan covers all full-time U.S. General Semiconductor employees not covered by a
collective bargaining agreement who meet defined age and service requirements.
This plan is the primary provider of medical benefits for retirees up to age 65,
after which Medicare becomes the primary provider. The impact of a
one-percentage-point change in assumed health care cost trend rates on the net
periodic benefit cost and postretirement benefit obligation is immaterial.
Obligations and Funded Status (U.S. Plans)
Pension Benefits Other Benefits
----------------------------------------------------------------
2003 2002 2003 2002
----------------------------------------------------------------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 212,909 $ 193,273 $ 21,999 $ 20,286
Service cost 3,394 3,433 247 279
Interest cost 14,057 13,598 1,358 1,465
Employee contributions 1,641 1,680 -- --
Actuarial losses (gains) 9,689 11,141 (1,225) 1,909
Plan amendments -- -- -- (410)
Benefits paid (15,249) (16,090) (1,201) (1,530)
Acquisitions -- 5,874 -- --
----------------------------------------------------------------
Benefit obligation at end of year $ 226,441 $ 212,909 $ 21,178 $ 21,999
================================================================
Change in plan assets:
Fair value of plan assets at beginning
of year $ 147,296 $ 165,186
Actual return on plan assets 30,149 (11,224)
Company contributions 28,081 4,226
Plan participants' contributions 1,641 1,680
Benefits paid (15,249) (16,090)
Acquisitions -- 3,518
---------------------------
Fair value of plan assets at end of year $ 191,918 $ 147,296
===========================
Funded status $ (34,523) $ (65,613) $ (21,178) $ (21,999)
Unrecognized net actuarial loss 51,391 60,957 131 1,237
Unrecognized transition (asset) obligation -- (101) 1,734 1,934
Unamortized prior service cost 243 -- 134 182
----------------------------------------------------------------
Net amount recognized $ 17,111 $ (4,757) $ (19,179) $ (18,646)
================================================================
F-35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Pension Benefits Other Benefits
------------------------------------------------------
2003 2002 2003 2002
------------------------------------------------------
(In thousands)
Amounts recognized in the consolidated balance
sheets for U.S. plans consist of:
Intangible asset $ 243 $ -- $ -- $ --
Accrued benefit liability (24,743) (53,439) (19,179) (18,646)
Accumulated other comprehensive loss 41,611 48,682 -- --
-----------------------------------------------------
Net amount recognized $ 17,111 $ (4,757) $(19,179) $(18,646)
=====================================================
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the U.S. pension plans with accumulated and projected benefit
obligations in excess of plan assets were $226,441,000, $216,661,000, and
$191,918,000, respectively, as of December 31, 2003 and $212,909,000,
$200,634,000, and $147,296,000, respectively, as of December 31, 2002.
On December 8, 2003, the President of the United States signed the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). Among
the provisions of the Act is a provision granting a subsidy to sponsors of
retirement medical plans with prescription drug coverage when the benefit is at
least actuarially equivalent to the Medicare Part D benefit. In accordance with
FASB Staff Position No. FAS 106-1, measures of the benefit obligation and net
periodic postretirement benefit cost do not reflect the effects of the Act on
the plan. Specific authoritative accounting guidance on the accounting for the
federal subsidy is pending and that guidance, when issued, could require
companies, including Vishay, to change previously reported information.
Components of Net Periodic Benefit Cost (U.S. Plans)
Pension Benefits Other Benefits
-------------------------------------------------------------------------------
2003 2002 2001 2003 2002 2001
-------------------------------------------------------------------------------
(In thousands)
Annual service cost $ 5,035 $ 5,424 $ 5,388 $ 247 $ 279 $ 240
Less employee contributions 1,641 1,991 2,296 -- -- --
----------------------------------------------------------------------------------
Net service cost 3,394 3,433 3,092 247 279 240
Interest cost 14,057 13,598 9,023 1,358 1,466 678
Expected return on plan assets (12,521) (14,227) (10,048) -- -- --
Amortization of prior service
cost 32 -- 6 47 47 93
Amortization of transition
obligation (1) (201) 311 193 194 194
Amortization of losses 4,285 1,474 514 -- -- --
----------------------------------------------------------------------------------
Net periodic benefit cost $ 9,246 $ 4,077 $ 2,898 $ 1,845 $ 1,986 $ 1,205
==================================================================================
F-36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Weighted-average assumptions used to determine benefit obligations (U.S. Plans)
at December 31:
Pension Benefits Other Benefits
-------------------------------------------------------------
2003 2002 2003 2002
-------------------------------------------------------------
Discount rate 6.25% 6.75% 6.25% 6.75%
Rate of compensation increase 4.00% 4.50%-6.50%
Weighted-average assumptions used to determine net cost (U.S. Plans) for years
ended December 31:
Pension Benefits Other Benefits
-------------------------------------------------------------
2003 2002 2003 2002
-------------------------------------------------------------
Discount rate 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets 8.50%-8.75% 8.50%-9.50%
Rate of compensation increase 4.50%-6.50% 4.50%-6.50%
The plans' expected return on assets is based on management's expectations of
long-term average rates of return to be achieved by the underlying investment
portfolios. In establishing this assumption, management considers historical and
expected returns for the asset classes in which the plans are invested, advice
from pension consultants and investment advisors, and current economic and
capital market conditions.
Plan Assets (U.S. Plans)
Percentage of Plan Assets
-------------------------
Asset Category 2003 2002
-------------------------
Equity funds 65% 55%
Fixed income funds 30% 45%
Cash and cash equivalents 5% -
-------------------------
Total 100% 100%
=========================
The investment mix between equity securities and fixed income securities is
based upon achieving a desired return, balancing higher return, more volatile
equity securities, and lower return, less volatile fixed income securities. The
Company's domestic defined benefit plans are invested in diversified portfolios
of public-market equity and fixed income securities. Investment allocations are
made across a range of markets, industry sectors, capitalization sizes, and, in
the case of fixed income securities, maturities and credit quality. The plans do
not invest in securities of Vishay or its subsidiaries.
Cash Flows (U.S. Plans)
The Company expects to contribute approximately $10 million to its U.S. pension
plans in 2004.
Defined Contribution Plans Matching
Many of the Company's U.S. employees are eligible to participate in 401(k)
savings plans, some of which provide for Company matching under various
formulas. The Company's matching expense for the plans was $3,401,000,
$2,990,000, and $3,182,000, for the years ended December 31, 2003, 2002, and
2001, respectively.
F-37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Foreign Pension Plans
The Company provides pension and similar benefits to employees of certain
foreign subsidiaries consistent with local practices. Certain foreign
subsidiaries of the Company have defined benefit pension plans. The following
table sets forth a reconciliation of the benefit obligation, plan assets, and
accrued benefit cost related to the foreign defined benefit plans. The foreign
pension plans of General Semiconductor are included as of November 2, 2001. The
foreign pension plans of BCcomponents are included as of December 13, 2002.
Obligations and Funded Status (Foreign Plans)
2003 2002
-------------------------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 119,173 $ 93,397
Service cost 834 525
Interest cost 6,945 5,630
Actuarial losses (gains) 8,067 (1,572)
Benefits paid (6,794) (4,869)
Foreign currency translation 24,534 13,055
Curtailment gains (163) (1,336)
Acquisitions -- 14,343
-----------------------
Benefit obligation at end of year $ 152,596 $ 119,173
=======================
Change in plan assets:
Fair value of plan assets at beginning of year $ 14,645 $ 13,137
Actual return on plan assets 415 (894)
Company contributions 6,747 2,449
Benefits paid (6,794) (2,454)
Foreign currency translation 3,546 2,407
-----------------------
Fair value of plan assets at end of year $ 18,559 $ 14,645
=======================
Funded status $(134,037) $(104,528)
Unrecognized net actuarial losses (gains) 8,118 (636)
Unrecognized transition asset -- (3)
Unamortized prior service cost -- 21
-----------------------
Net amount recognized $(125,919) $(105,146)
=======================
F-38
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
2003 2002
------------------------
(In thousands)
Amounts recognized in the consolidated balance
sheets for foreign pension plans consist of:
Accrued benefit liability $(137,320) $(110,427)
Accumulated other comprehensive loss 11,401 5,281
------------------------
Net amount recognized $(125,919) $(105,146)
========================
Weighted-average assumptions as of December 31:
Discount rate 4.00% - 5.50% 6.00% - 6.25%
Rate of compensation increase 2.00% - 3.00% 2.60% - 3.00%
Components of Net Periodic Benefit Cost (Foreign Plans)
2003 2002 2001
(In thousands)
Components of net periodic benefit cost:
Service cost $ 834 $ 525 $ 391
Interest cost 6,945 5,630 5,301
Expected return on plan assets (461) (489) (444)
Amortization of prior service cost 23 -- 36
Amortization of transition asset (4) (3) (3)
Curtailment gains (163) (1,336) --
Amortization of (gains) losses (95) (94) 97
--------------------------------
Net periodic benefit cost $ 7,079 $ 4,233 $ 5,378
================================
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the foreign pension plans with accumulated benefit
obligations and projected benefit obligations in excess of plan assets were
$152,596,000, $150,487,000, and $18,559,000, respectively, as of December 31,
2003, and $119,173,000, $118,646,000, and $14,645,000, respectively, as of
December 31, 2002.
F-39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options
Under the 1997 Stock Option Program, certain executive officers, key employees,
and consultants of the Company were granted options on May 21, 1998, to purchase
2,687,000 shares of the Company's common stock. The options were fully vested on
the date of grant and expire June 1, 2008, with one-third exercisable at $10.89,
one-third exercisable at $12.53, and one-third exercisable at $13.61. As of
December 31, 2003, options to purchase 528,000 shares have been exercised under
this plan.
Under the 1998 Stock Option Program, certain executive officers and key
employees were granted options, as summarized in the following table:
Date of Grant Number of Exercise
Options Price Vesting Expiration
- ---------------------------------------------------------------------------------------------------------
October 6, 1998 1,598,000 $ 5.60 Evenly over 6 years March 16, 2008
October 8, 1999 1,334,000 15.33 Evenly over 6 years October 8, 2009
August 4, 2000 50,000 30.00 Evenly over 5 years, August 4, 2010
beginning August 4, 2003
October 12, 2000 1,114,000 25.13 Evenly over 6 years October 12, 2010
October 1, 2001 through July
20, 2003 27,000 13.46 - Evenly over 6 years October 1, 2011 through
25.07 July 20, 2013
On May 18, 2000, the stockholders of the Company approved an increase in the
number of shares available for grant under Vishay's 1998 Stock Option Program.
As a result, the number of shares available for grant under this program
increased from 2,953,500 to 4,453,500. As of December 31, 2003, options to
purchase 462,000 shares had been exercised under this plan.
On November 2, 2001, Vishay acquired General Semiconductor, which became a
wholly owned subsidiary of the Company. As a result of the acquisition, each
outstanding option to acquire General Semiconductor common stock became
exercisable for shares of Vishay common stock. Based on the conversion ratio in
the acquisition of 0.563 of a Vishay share for each General Semiconductor share,
the former General Semiconductor options become exercisable in the aggregate for
4,282,000 shares of Vishay common stock. All such options were immediately
vested and exercisable as a result of the merger but the terms of the options
otherwise remained unchanged. As of December 31, 2003, options to purchase
446,000 shares had been exercised under this plan.
F-40
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options (continued)
The following table summarizes the Company's stock option activity (number of
options in thousands):
2003 2002 2001
-------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
-------------------------------------------------------------------------------------
Outstanding at beginning of year 9,231 $ 16.07 9,569 $ 15.97 5,646 $ 14.29
Granted 12 14.00 15 17.75 -- --
Exercised (356) 13.30 (261) 12.12 (86) 9.99
Cancelled (119) 17.10 (92) 17.14 (273) 17.82
Acquisition of General
Semiconductor -- -- -- -- 4,282 18.10
--------- ------ -------
Outstanding at end of year 8,768 $ 16.17 9,231 $ 16.07 9,569 $ 15.97
========= ====== =======
Exercisable at end of year 7,725 $ 15.85 7,626 $ 15.79 7,358 $ 15.74
========= ====== =======
Available for future grants 1,143 1,036 958
========= ====== =======
The following table summarizes information concerning stock options outstanding
and exercisable at December 31, 2003 (number of options in thousands):
Options Outstanding
------------------------------------------------------
Weighted Average Options Exercisable
----------------------------------
Range of Number of Remaining Weighted Average Number of Weighted Average
Exercise Prices Options Contractual Life Exercise Price Options Exercise Price
- ---------------------------------------------------------------------------------------------------------------------
$2.64 3 0.57 $ 2.64 3 $ 2.64
$5.60 882 4.76 5.60 699 5.60
$10.89 - $12.53 1,289 4.39 11.76 1,289 11.76
$12.54 - $13.61 1,214 4.52 13.32 1,209 13.32
$14.40 - $14.99 26 7.15 14.69 15 14.85
$15.33 974 5.77 15.33 638 15.33
$15.43 - $16.41 1,220 6.82 16.03 1,220 16.03
$16.52 - $20.86 1,343 4.92 18.98 1,339 18.98
$21.43 - $25.07 585 2.26 22.43 582 22.42
$25.13 - $34.52 1,232 6.49 25.96 731 26.26
---------------- -----------------------------------------------------
Total 8,768 $ 16.17 7,725 $ 15.85
================ =====================================================
F-41
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies
Total rental expense under operating leases was $34,621,000, $27,652,000, and
$22,994,000, for the years ended December 31, 2003, 2002, and 2001,
respectively.
Future minimum lease payments for operating leases with initial or remaining
noncancelable lease terms in excess of one year are as follows: 2004 -
$24,106,000; 2005 - $17,961,000; 2006 - $14,818,000; 2007 - $12,735,000; 2008 -
$2,039,000; and thereafter - $3,591,000.
Environmental Matters
The Company is subject to various federal, state, local and foreign laws and
regulations governing environmental matters, including the use, discharge and
disposal of hazardous materials. The Company's manufacturing facilities are
believed to be in substantial compliance with current laws and regulations.
Complying with current laws and regulations has not had a material adverse
effect on the Company's financial condition.
The Company has engaged environmental consultants and attorneys to assist
management in evaluating potential liabilities related to environmental matters.
Management assesses the input from these consultants along with other
information known to the Company in its effort to continually monitor these
potential liabilities. Management assesses its environmental exposure on a
site-by-site basis, including those sites where the Company has been named as a
"potentially responsible party." Such assessments include the Company's share of
remediation costs, information known to the Company concerning the size of the
hazardous waste sites, their years of operation and the number of past users and
their financial viability.
As part of the acquisition of General Semiconductor by Vishay on November 2,
2001, the Company assumed ongoing environmental matters. The Company has accrued
$18,700,000 as of December 31, 2003 for environmental matters relating to
ongoing environmental matters at its General Semiconductor subsidiary, which it
acquired in November 2001. This accrual does not include potential liability in
connection with litigation relating to a former facility of General
Semiconductor in Hicksville, New York, as to which the Company does not believe
it is currently able to reasonably estimate the amount of any potential
liability. As part of the acquisition of BCcomponents in 2002, the Company has
recorded environmental liabilities of $8,400,000. The Company has also accrued
approximately $5,600,000 at December 31, 2003 for other environmental matters,
primarily at its Vitramon subsidiary in the United States. The liabilities
recorded for these matters total $32,700,000, of which $9,200,000 is included in
other accrued liabilities on the consolidated balance sheet, and $23,500,000 is
included in other non-current liabilities on the consolidated balance sheet.
While the ultimate outcome of these matters cannot be determined, management
does not believe that the final disposition of these matters will have a
material adverse effect on the Company's consolidated financial position,
results of operations, or cash flows beyond the amounts previously provided for
in the consolidated financial statements. The Company's present and past
facilities have been in operation for many years, and over that time in the
course of those operations, such facilities have used substances which are or
might be considered hazardous, and the Company has generated and disposed of
wastes which are or might be considered hazardous. Therefore, it is possible
that additional environmental issues may arise in the future, which the Company
cannot now predict.
Litigation
The Company is a party to various claims and lawsuits arising in the normal
course of business. The Company is of the opinion that these litigations or
claims will not have a material negative effect on its consolidated financial
position, results of operations, or cash flows.
F-42
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Financial Instruments
The Company uses financial instruments in the normal course of its business,
including derivative financial instruments, for purposes other than trading.
These financial instruments include debt and interest rate swap agreements. The
notional or contractual amounts of these commitments and other financial
instruments are discussed below.
Concentration of Credit Risk
Financial instruments with potential credit risk consist principally of cash and
cash equivalents and accounts receivable. The Company maintains cash and cash
equivalents with various major financial institutions. Concentrations of credit
risk with respect to receivables are generally limited due to the Company's
large number of customers and their dispersion across many countries and
industries. At December 31, 2003 and 2002, the Company had no significant
concentrations of credit risk.
Interest Rate Swap Agreements
In August 1998, the Company entered into six interest rate swap agreements, with
a total notional amount of $300,000,000 to manage interest rate risk related to
its multicurrency revolving line of credit. These interest rate swap agreements
required the Company to make payments to the counterparties at the fixed rate
stated in the agreements, and in return to receive payments from the
counterparties at variable rates. As of December 31, 2002, five of these six
agreements had been terminated. The final agreement expired in 2003. At December
31, 2002 and 2001, the Company paid a weighted average fixed rate of 5.77%, and
received a weighted average variable rate of 1.40%, and 1.93%, respectively. The
fair value of the interest rate swap agreements, based on current market rates,
approximated a net payable of $3,309,000 at December 31, 2002. During the year
ended December 31, 2003, the Company had a pretax gain of $3,783,000 related to
the expiration of the final swap agreement. During the years ended December 31,
2002 and 2001, the Company recorded pretax losses of $115,000 and $3,668,000,
respectively, relating to interest rate swap agreements that were ineffective
hedges. See Note 8.
Cash and Cash Equivalents, Accounts Receivable, Notes Payable, and Long-Term
Debt
The carrying amounts of cash and cash equivalents, accounts receivable, and
notes payable reported in the consolidated balance sheets approximate their fair
values. The fair value of the long-term debt is approximately $1,084,000,000, as
compared to its carrying value of $837,888,000. The fair value of long-term debt
was estimated based on trading prices and market prices of debt with similar
terms and features.
F-43
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Current Vulnerability Due to Certain Concentrations
Market Concentrations
A material portion of the Company's revenues is derived from the worldwide
communications and computer markets. These markets have historically experienced
wide variations in demand for end products. If demand for these end products
should decrease, the producers thereof could reduce their purchases of the
Company's products, which could have a material adverse effect on the Company's
results of operations and financial position.
Sources of Supply
Although most materials incorporated in the Company's products are available
from a number of sources, certain materials (particularly tantalum and
palladium) are available only from a relatively limited number of suppliers.
Many of Vishay's products require the use of raw materials that are produced in
only a limited number of regions around the world or are available from only a
limited number of suppliers. Vishay's consolidated results of operations may be
materially and adversely affected if Vishay has difficulty obtaining these raw
materials, the quality of available raw materials deteriorates or there are
significant price increases for these raw materials. For example, the prices for
tantalum and palladium, two raw materials that Vishay uses in its capacitors,
are subject to fluctuation. For periods in which the prices of these raw
materials are rising, Vishay may be unable to pass on the increased cost to
Vishay's customers, which would result in decreased margins for the products in
which they are used. For periods in which the prices are declining, Vishay may
be required to write down its inventory carrying cost of these raw materials
which, depending on the extent of the difference between market price and its
carrying cost, could have a material adverse effect on Vishay's net earnings.
Vishay is a major consumer of the world's annual production of tantalum.
Tantalum, a metal purchased in powder or wire form, is the principal material
used in the manufacture of tantalum capacitors. There are currently three major
suppliers that process tantalum ore into capacitor grade tantalum powder. Due to
the strong demand for its tantalum capacitors and difficulty in obtaining
sufficient quantities of tantalum powder from its suppliers, Vishay stockpiled
tantalum ore in 2000 and early 2001. During 2001, Vishay and its competitors
experienced a significant decline in the tantalum capacitor business. The market
prices for tantalum also decreased significantly during 2002 and 2003. As a
result, Vishay recorded, in costs of products sold, write-downs of $5,406,000,
$25,700,000, and $52,000,000, respectively, to reduce tantalum inventories on
hand to market value during the years ended December 31, 2003, 2002, and 2001,
respectively. The net book value of tantalum inventories was $95,432,000 and
$49,609,000 at December 31, 2003 and 2002, respectively. Amounts in excess of a
one-year supply are included in non-current assets. At December 31, 2003, other
assets included $28,724,000 of tantalum inventories in excess of quantities
expected to be used within one year. The Company also recorded losses on future
purchase commitments for tantalum of $11,392,000 and $106,000,000 for the years
ended December 31, 2003 and 2002, respectively. Vishay's purchase commitments
were entered into at a time when market demand for tantalum capacitors was high
and tantalum powder was in short supply. As a result of purchases during 2003,
the accrual for these purchase commitments decreased by approximately
$28,000,000. The balance of the purchase commitment liability at December 31,
2003 and 2002 was approximately $89,400,000 and $106,000,000, respectively. The
purchase commitment liability expected to be utilized within one year of
$31,675,000 and $25,334,000 at December 31, 2003 and 2002, respectively, is
recorded in other accrued expenses on the consolidated balance sheets. The
remaining purchase commitment liability is recorded in other liabilities on the
consolidated balance sheets. If the downward pricing trend were to continue, the
Company could again be required to write down the carrying value of its tantalum
inventory and record additional losses on its long-term purchase commitments.
F-44
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Current Vulnerability Due to Certain Concentrations (continued)
The Company is obligated to make purchases of tantalum of approximately
$103,800,000 in 2004; $116,600,000 in 2005, and $60,100,000 in 2006. The Company
purchased $107,906,000, $53,280,000, and $23,395,000, under these contracts
during the years ended December 31, 2003, 2002, and 2001, respectively. As long
as Vishay is in compliance with its purchase obligations under the Cabot
contracts, its minimum purchase commitments will not increase. If Vishay were to
default under its commitments, then the minimum requirements would revert to the
quantities specified in the contracts prior to their modification in July 2002,
and increase to $147,600,000 in 2004, $149,300,000 in 2005, and $81,300,000 in
2006. Vishay believes that the likelihood that it would default on its
obligations under the contracts is remote.
Palladium, a metal used to produce multi-layer ceramic capacitors, is currently
found primarily in South Africa and Russia. Palladium is a commodity product
that is subject to price volatility. The price of palladium has fluctuated in
the range of approximately $148 to $1,090 per troy ounce during the last three
years. As of December 31, 2003, the price of palladium was approximately $195
per troy ounce. During the years ended December 31, 2003, 2002, and 2001,
respectively, the Company recorded in costs of products sold write-downs of
$1,585,000, $1,700,000, and $18,000,000, respectively, to reduce palladium
inventories on hand to market value. The net book value of palladium inventories
was $4,384,000 and $5,644,000 at December 31, 2003 and 2002, respectively.
From time to time, there have been short-term market shortages of raw material
utilized by Vishay. While these shortages have not historically adversely
affected Vishay's ability to increase production of products containing tantalum
and palladium, they have historically resulted in higher raw material cost for
Vishay. Vishay cannot assure that any of these market shortages in the future
would not adversely affect Vishay's ability to increase production, particularly
during periods of growing demand for Vishay's products.
Geographic Concentration
To address the increasing demand for its products and to lower its costs, the
Company has expanded, and plans to continue to expand, its manufacturing
operations in Israel in order to take advantage of that country's lower wage
rates, highly skilled labor force, government-sponsored grants, and various tax
abatement programs. Israeli incentive programs have contributed substantially to
the growth and profitability of the Company. The Company might be materially and
adversely affected if these incentive programs were no longer available to the
Company or if events were to occur in the Middle East that materially interfered
with the Company's operations in Israel.
F-45
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data
Vishay designs, manufactures, and markets electronic components that cover a
wide range of products and technologies. The Company has two reportable
segments: Passive Electronic Components (Passives) consisting principally of
fixed resistors, solid tantalum surface mount chip capacitors, solid tantalum
leaded capacitors, wet/foil tantalum capacitors, multi-layer ceramic chip
capacitors, film capacitors and inductors, and Active Electronic Components
(Actives) consisting principally of diodes, transistors, power MOSFETs, power
conversion, motor control integrated circuits, optoelectronic components and
IRDCs. The Company evaluates business segment performance on operating income,
exclusive of certain items. Management believes that evaluating segment
performance excluding items such as restructuring, inventory write-downs, losses
on purchase commitments, losses on early extinguishment of debt, gains on
insurance proceeds, write-offs of in-process research and development, and other
charges is meaningful because its provides insight with respect to ongoing
operating results.
The Company evaluates performance and allocates resources based on several
factors, of which the primary financial measure is business segment operating
income excluding amortization of intangibles and special charges. The accounting
policies of the business segments are the same as those described in the summary
of significant accounting policies (see Note 1). The operating results of
Passives reflect the acquisitions of BCcomponents as of December 31, 2002,
Celtron as of October 1, 2002, BLH/Nobel as of August 1, 2002, Tedea-Huntleigh
BV as of June 1, 2002, and Sensortronics as of January 31, 2002. The operating
results of Actives reflect the acquisitions of Infineon Malaysia optoelectronic
infrared components business as of December 31, 2001, General Semiconductor as
of November 2, 2001, and Infineon U.S. optoelectronic infrared components
business as of July 27, 2001. Business segment assets are the owned or allocated
assets used by each business.
The corporate component of operating income represents corporate selling,
general, and administrative expenses. Corporate assets include corporate cash,
property and equipment, and certain other assets.
Business segment information 2003 2002 2001
---------------------------------------------------------
(In thousands)
Net sales:
Passives $ 1,104,856 $ 767,246 $ 1,010,634
Actives 1,065,741 1,055,567 644,712
----------- ----------- -----------
$ 2,170,597 $ 1,822,813 $ 1,655,346
=========== =========== ===========
Operating income (loss):
Passives $ 6,776 $ (61,317) $ 60,137
Actives 114,498 139,140 65,181
Corporate (22,350) (20,801) (21,970)
Restructuring and severance costs (29,560) (30,970) (61,908)
Purchased research and development -- -- (16,000)
Loss on long-term purchase commitments (11,392) (106,000) --
Amortization of goodwill -- -- (11,190)
----------- ----------- -----------
$ 57,972 $ (79,948) $ 14,250
=========== =========== ===========
Restructuring and severance costs:
Passives $ 26,288 $ 30,049 $ 57,498
Actives 3,272 921 4,410
----------- ----------- -----------
$ 29,560 $ 30,970 $ 61,908
=========== =========== ===========
F-46
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
2003 2002 2001
----------------------------------------------------
(In thousands)
Depreciation expense:
Passives $ 90,133 $ 80,084 $ 83,735
Actives 85,821 87,609 61,238
Corporate 4,752 4,481 4,252
----------- ----------- -----------
$ 180,706 $ 172,174 $ 149,225
=========== =========== ===========
Interest expense:
Passives $ 2,977 $ 963 $ 680
Actives 7,452 10,545 1,988
Corporate 27,402 17,253 14,180
----------- ----------- -----------
$ 37,831 $ 28,761 $ 16,848
=========== =========== ===========
Income tax provision (benefit):
Passives $ 6,422 $ (33,674) $ (2,912)
Actives 15,133 21,286 11,862
Corporate (10,027) (4,512) (3,255)
----------- ----------- -----------
$ 11,528 $ (16,900) $ 5,695
=========== =========== ===========
Total assets:
Passives $ 2,170,105 $ 2,125,443
Actives 2,280,737 2,046,944
Corporate 121,671 142,772
----------- -----------
$ 4,572,513 $ 4,315,159
=========== ===========
Capital expenditures:
Passives $ 53,500 $ 45,105 $ 91,028
Actives 72,051 62,933 68,463
Corporate 1,084 2,036 3,002
----------- ----------- -----------
$ 126,635 $ 110,074 $ 162,493
=========== =========== ===========
F-47
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
The following geographic area data include net sales based on revenues generated
by subsidiaries located within that geographic area and property and equipment
based on physical location:
2003 2002 2001
------------------------------------------------------
(In thousands)
Geographic area information
Net sales:
United States $ 444,952 $ 482,154 $ 638,326
Germany 534,019 382,932 452,839
Asia Pacific 595,241 542,859 315,550
France 156,124 69,635 85,046
Israel 130,852 75,238 32,646
Other 309,409 269,995 130,939
---------- ---------- ----------
$2,170,597 $1,822,813 $1,655,346
========== ========== ==========
Property and equipment - net:
United States $ 255,928 $ 307,783
Germany 152,722 154,288
Israel 312,632 328,315
Asia Pacific 278,109 253,937
France 38,200 37,687
Other 182,204 192,840
---------- ----------
$1,219,795 $1,274,850
========== ==========
F-48
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share
Basic earnings (loss) per share is computed using the weighted average number of
common shares outstanding during the periods presented. Diluted earnings (loss)
per share is computed using the weighted average number of common shares
outstanding adjusted to include the potentially dilutive effect of stock options
granted under the Company's 1997 and 1998 stock option plans (see Note 12),
stock options assumed in the acquisition of General Semiconductor (see Notes 2
and 12), and other potentially dilutive securities.
The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands, except per share amounts):
Year ended December 31
2003 2002 2001
-------- -------------- ---------
Numerator
Numerator for basic earnings (loss) per share - net
earnings (loss) $ 26,842 $ (92,614) $ 513
======== ============== ========
Denominator
Denominator for basic earnings (loss) per share -
weighted average shares outstanding 159,631 159,413 141,171
Effect of dilutive securities:
Employee stock options 729 -- 1,201
Other 83 -- 142
-------- -------------- --------
Dilutive potential common shares 812 -- 1,343
-------- -------------- --------
Denominator for diluted earnings (loss) per share -
adjusted weighted average shares 160,443 159,413 142,514
======== ============== ========
Basic earnings (loss) per share $ 0.17 $ (0.58) $ 0.00
======== ============== ========
Diluted earnings (loss) per share $ 0.17 $ (0.58) $ 0.00
======== ============== ========
F-49
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share (continued)
Diluted earnings per share do not reflect the following, as the effect would be
antidilutive for the periods presented:
o Assumed conversion of the Company's LYONs, due 2021. At December 31, 2002
and 2001, these notes were convertible into 9,717,730 shares of the
Company's common stock. As described in Note 6, the Company repurchased
some of these notes during 2003. At December 31, 2003, the outstanding
notes are convertible into approximately 6,802,000 shares of the Company's
common stock.
o Assumed conversion of the convertible subordinated notes of General
Semiconductor, acquired November 2, 2001. At December 31, 2002 and 2001,
these notes were convertible into 6,191,161 shares of the Company's common
stock. As described in Note 6, these notes were fully redeemed on
September 10, 2003.
o Assumed exchange of the convertible notes of Vishay from the December 13,
2002 acquisition of BCcomponents, for the years ended December 31, 2003
and 2002. These notes are exchangeable for 6,176,471 shares of the
Company's common stock.
o Weighted average outstanding warrants of 7,074,000 and 435,000, for the
years ended December 31, 2003 and 2002, respectively. The warrants were
issued on December 13, 2002 in connection with the acquisition of
BCcomponents.
o Weighted average outstanding stock options for the years ended December
31, 2003, 2002, and 2001, to purchase 5,663,000 shares, 9,231,000 shares,
and 1,164,000 shares, respectively, of common stock.
o Assumed conversion of the Company's 3-5/8% convertible subordinated notes,
due 2023. As described in Note 6, the Company issued subordinated notes in
the third quarter of 2003, which are convertible into 23,496,250 shares of
common stock upon the occurrence of certain events.
18. Related Party Transactions
On December 12, 2002, the Company's Board of Directors passed resolutions to
terminate the stock purchase programs for corporate officers and key employees
(together the "Plan") and to offer to all Plan participants the opportunity to
surrender to the Company the shares of Vishay common stock purchased with their
Plan loans in satisfaction of such loans and all accrued interest thereon. Under
the resolutions, the Company agreed that it would compensate the Plan
participants for any income tax that the participants are required to recognize
as a result of the surrender. Two directors of the Company are among the
participants in the Plan. For all Plan participants, the current market value of
the Vishay common stock purchased with Plan loans is significantly below the
outstanding balances of the loans. The Company recorded a write-down for the
loans and accrued interest, and an accrual for compensation expense attributable
to taxes owing by Plan participants on surrender, totaling $2,591,000 as of
December 31, 2002. This amount was recorded in selling, general, and
administrative expense in 2002.
F-50
19. Summary of Quarterly Financial Information (Unaudited)
Quarterly financial information for the years ended December 31, 2003 and 2002
is as follows (in thousands, except per share amounts):
First Quarter Second Quarter Third Quarter
2003(4)(10) 2002(1)(5) 2003(4)(11) 2002(1)(6) 2003(4)(12) 2002(1)(2)(7)
----------------------------------------------------------------------------------------------
Net sales $ 532,127 $ 434,140 $ 538,103 $ 457,877 $ 533,168 $ 471,419
Gross profit 118,510 86,937 123,299 107,565 102,463 107,227
Net earnings (loss) 6,848 2,420 2,880 15,617 6,775 13,114
Basic earnings (loss)
per share $ 0.04 $ 0.02 $ 0.02 $ 0.10 $ 0.04 $ 0.08
Diluted earnings (loss)
per share $ 0.04 $ 0.02 $ 0.02 $ 0.10 $ 0.04 $ 0.08
Fourth Quarter Total Year
2003(4)(13) 2002(1)(2)(3)(8) 2003(4)(14) 2002(1)(2)(3)(9)
-------------------------------------------------------------------
Net sales $ 567,199 $ 459,377 $ 2,170,597 $ 1,822,813
Gross profit 124,666 (39,456) 468,938 262,273
Net earnings (loss) 10,339 (123,765) 26,842 (92,614)
Basic earnings (loss)
per share $ 0.06 $ (0.78) $ 0.17 $ (0.58)
Diluted earnings (loss)
per share $ 0.06 $ (0.78) $ 0.17 $ (0.58)
(1) Includes the results of Sensortronics from January 31, 2002.
(2) Includes the results of Tedea-Huntleigh from July 1, 2002 and BLH and
Nobel from August 1, 2002.
(3) Includes the results of Celtron from October 1, 2002.
(4) Includes the results of BCcomponents, acquired December 13, 2002
(5) Includes restructuring and severance costs of $3,024,000.
(6) Includes restructuring and severance costs of $1,907,000.
(7) Includes restructuring and severance costs of $2,567,000 and write-down of
palladium inventory of $600,000.
(8) Includes restructuring and severance costs of $23,472,000, losses of
future purchase commitments of $106,000,000, and write-downs of tantalum
and palladium inventories of $25,700,000 and $1,100,000, respectively.
(9) Includes restructuring and severance costs of $30,970,000, losses of
future purchase commitments of $106,000,000, and write-downs of tantalum
and palladium inventories of $25,700,000 and $1,700,000, respectively.
(10) Includes restructuring and severance costs of $687,000.
(11) Includes restructuring and severance costs of $12,258,000.
(12) Includes restructuring and severance costs of $6,313,000, losses on future
purchase commitments of $11,392,000, write-down of tantalum inventory of
$4,185,000, loss on extinguishment of debt of $9,910,000, and gain on
insurance claim of $30,361,000.
(13) Includes restructuring and severance costs of $10,302,000, write-down of
tantalum inventory of $1,221,000, and gain on insurance claim of
$3,545,000.
(14) Includes restructuring and severance costs of $29,560,000, losses on
future purchase commitments of $11,392,000, write-downs of tantalum
inventory of $5,406,000, loss on extinguishment of debt of $9,910,000, and
gain on insurance claim of $33,906,000.
F-51
THIS PAGE INTENTIONALLY LEFT BLANK
Exhibit 10.2
================================================================================
VISHAY INTERTECHNOLOGY, INC.
SECOND AMENDED AND RESTATED
LONG TERM REVOLVING CREDIT AGREEMENT
DATED AS OF JULY 31, 2003
COMERICA BANK,
AS CO-LEAD ARRANGER, CO-BOOK RUNNING MANAGER AND ADMINISTRATIVE AGENT,
FLEET SECURITIES, INC., AS CO-LEAD ARRANGER, CO-BOOK RUNNING MANAGER AND
SYNDICATION AGENT,
WACHOVIA BANK, NATIONAL ASSOCIATION, J.P. MORGAN AND
BANK OF AMERICA, N.A.,
AS DOCUMENTATION AGENTS
AND
BANK LEUMI USA, AS MANAGING AGENT
================================================================================
TABLE OF CONTENTS
Page
----
1. DEFINITIONS............................................................1
1.1 Certain Defined Terms............................................1
1.2 Euro............................................................26
2. REVOLVING CREDIT......................................................27
2.1 Commitment......................................................27
2.2 Accrual of Interest and Maturity; Evidence of Indebtedness......28
2.3 Requests for and Refundings and Conversions of Advances.........29
2.4 Disbursement of Advances........................................32
2.5 (a) Swing Line Advances.........................................34
2.6 Prime-based Interest Payments...................................41
2.7 Eurocurrency-based Interest Payments and Quoted Rate
Interest Payments...............................................41
2.8 Interest Payments on Conversions................................42
2.9 Interest on Default.............................................42
2.10 Prepayment......................................................43
2.11 Determination, Denomination and Redenomination of
Alternative Currency Advances...................................43
2.12 Prime-based Advance in Absence of Election or Upon Default......44
2.13 Revolving Credit Facility Fee...................................45
2.14 Currency Appreciation; Mandatory Reduction of Indebtedness......45
2.15 Optional Reduction or Termination of Revolving Credit
Aggregate Commitment............................................47
2.16 Extensions of Revolving Credit Maturity Date....................48
2.17 Application of Advances.........................................49
3. LETTERS OF CREDIT.....................................................50
3.1 Letters of Credit...............................................50
3.2 Conditions to Issuance..........................................50
3.3 Notice..........................................................52
3.4 Letter of Credit Fees...........................................52
3.5 Other Fees......................................................53
3.6 Drawings and Demands for Payment Under Letters of Credit........53
3.7 Obligations Irrevocable.........................................56
3.8 Risk Under Letters of Credit....................................57
3.9 Indemnification.................................................58
3.10 Right of Reimbursement..........................................59
3.11 Existing Letters of Credit......................................59
4. MARGIN ADJUSTMENTS....................................................59
4.1 Margin Adjustments..............................................59
4.2 Margins.........................................................60
i
5. CONDITIONS............................................................60
5.1 Execution of this Agreement and the other Loan Documents........60
5.2 Corporate Authority.............................................60
5.3 Collateral Documents and Guaranties.............................60
5.4 Representations and Warranties-- All Parties....................61
5.5 Compliance with Certain Documents and Agreements................61
5.6 Opinion of Counsel..............................................62
5.7 Company's Certificate...........................................62
5.8 Payment of Agent's and Other Fees...............................62
5.9 New Convertible Subordinated Debt...............................62
5.10 Other Documents and Instruments.................................62
5.11 Continuing Conditions...........................................62
6. REPRESENTATIONS AND WARRANTIES........................................63
6.1 Corporate Existence.............................................63
6.2 Due Authorization-- Company.....................................63
6.3 Due Authorization-- Significant Subsidiaries....................64
6.4 Title to Material Property......................................64
6.5 Encumbrances....................................................64
6.6 Subsidiaries....................................................64
6.7 Taxes...........................................................64
6.8 No Defaults.....................................................64
6.9 Compliance with Laws............................................65
6.10 Enforceability of Agreement and Loan Documents..................65
6.11 Non-contravention-- Company.....................................65
6.12 Non-contravention-- Other Parties...............................65
6.13 No Litigation-- Company.........................................66
6.14 No Litigation-- Other Parties...................................66
6.15 Consents, Approvals and Filings, Etc............................67
6.16 Agreements Affecting Financial Condition........................67
6.17 No Investment Company; No Margin Stock..........................67
6.18 ERISA...........................................................67
6.19 Environmental Matters and Safety Matters........................68
6.20 Accuracy of Information.........................................69
7. AFFIRMATIVE COVENANTS.................................................70
7.1 Preservation of Existence, Etc..................................70
7.2 Keeping of Books................................................70
7.3 Reporting Requirements..........................................70
7.4 Tangible Net Worth..............................................72
7.5 Leverage Ratio..................................................72
7.6 Fixed Charge Coverage Ratio.....................................72
7.7 Inspections.....................................................72
7.8 Taxes...........................................................73
7.9 Further Assurances..............................................73
7.10 Insurance.......................................................73
7.11 Indemnification.................................................73
ii
7.12 Governmental and Other Approvals................................74
7.13 Compliance with Contractual Obligations and Laws................74
7.14 ERISA...........................................................74
7.15 Environmental Matters...........................................75
7.16 Significant Subsidiaries........................................76
7.17 Foreign Subsidiaries Security...................................78
7.18 Siliconix.......................................................79
7.19 Security and Defense of Collateral..............................79
7.20 Vishay Israel...................................................79
7.21 Prepayment of General Semiconductor Notes.......................79
7.22 Use of Proceeds.................................................80
8. NEGATIVE COVENANTS....................................................80
8.1 Capital Structure, Business Objects or Purpose..................80
8.2 Limitations on Fundamental Changes..............................80
8.3 Guaranties......................................................82
8.4 Debt............................................................82
8.5 Liens...........................................................83
8.6 Dividends.......................................................84
8.7 Investments.....................................................84
8.8 Accounts Receivable.............................................86
8.9 Transactions with Affiliates....................................86
8.10 Operations of Vishay Israel.....................................87
8.11 Prohibition Against Certain Restrictions........................87
8.12 Amendment of the BCc Acquisition Documents......................87
8.13 Amendment of Subordinated Debt and Other Debt Documents and
Permitted Securitizations.......................................87
8.14 Payment or Prepayment of Other Debts............................88
9. DEFAULTS..............................................................88
9.1 Events of Default...............................................88
9.2 Exercise of Remedies............................................91
9.3 Rights Cumulative...............................................91
9.4 Waiver by Company and Permitted Borrowers of Certain Laws;
JURY WAIVER.....................................................91
9.5 Waiver of Defaults..............................................92
10. PAYMENTS, RECOVERIES AND COLLECTIONS..................................92
10.1 Payment Procedure...............................................92
10.2 Application of Proceeds.........................................94
10.3 Pro-rata Recovery...............................................94
10.4 Set Off.........................................................94
11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS......................95
11.1 Reimbursement of Prepayment Costs...............................95
11.2 Eurocurrency Lending Office.....................................96
11.3 Availability of Alternative Currency............................96
iii
11.4 Refunding Advances in Same Currency.............................96
11.5 Circumstances Affecting Eurocurrency-based Rate Availability....96
11.6 Laws Affecting Eurocurrency-based Advance Availability..........97
11.7 Increased Cost of Eurocurrency-based Advances...................97
11.8 Indemnity.......................................................99
11.9 Judgment Currency...............................................99
11.10 Capital Adequacy and Other Increased Costs......................99
11.11 Substitution of Lenders........................................100
12. AGENTS...............................................................101
12.1 Appointment of Agent...........................................101
12.2 Deposit Account with Agent.....................................101
12.3 Exculpatory Provisions.........................................101
12.4 Successor Agent................................................102
12.5 Loans by Agent.................................................102
12.6 Credit Decisions...............................................102
12.7 Notices by Agent...............................................102
12.8 Agent's Fees...................................................103
12.9 Nature of Agency...............................................103
12.10 Authority of Agent to Enforce This Agreement...................103
12.11 Indemnification................................................103
12.12 Knowledge of Default...........................................104
12.13 Agent's Authorization; Action by Lenders.......................104
12.14 Enforcement Actions by the Agent...............................104
12.15 Collateral Matters.............................................105
12.16 Syndication Agent and Documentation Agents.....................105
13. MISCELLANEOUS........................................................106
13.1 Accounting Principles..........................................106
13.2 Consent to Jurisdiction........................................106
13.3 Law of Michigan................................................106
13.4 Interest.......................................................106
13.5 Closing Costs; Other Costs.....................................107
13.6 Notices........................................................107
13.7 Further Action.................................................108
13.8 Successors and Assigns; Assignments and Participations.........108
13.9 Indulgence.....................................................112
13.10 Counterparts...................................................112
13.11 Amendment and Waiver...........................................112
13.12 Taxes and Fees.................................................113
13.13 Confidentiality................................................113
13.14 Withholding Taxes..............................................114
13.15 ERISA Restrictions.............................................115
13.16 Effective Date.................................................116
13.17 Severability...................................................116
13.18 Table of Contents and Headings; Construction of Certain
Provisions.....................................................116
13.19 Independence of Covenants......................................116
iv
13.20 Reliance on and Survival of Various Provisions.................117
13.21 Lien Release and Revival.......................................117
13.22 Complete Agreement; Amendment and Restatements.................118
v
SCHEDULES
Schedule 1.1 - Percentages and Allowances
Schedule 1.4 - Existing Letters of Credit
Schedule 1.6 - Permitted Borrower Sublimit
Schedule 1.7 Syndication Agent Letters of Credit
Schedule 4.1 - Pricing Matrix
Schedule 5.3 - Jurisdictions to File Initial Financing Statements
Schedule 5.6 Legal Opinions
Schedule 6.6 - Subsidiaries
Schedule 6.6A - Significant Subsidiaries: Guarantors
Schedule 6.13 - Litigation - Company
Schedule 6.14 - Litigation - Other Parties
Schedule 6.19 Environmental Matters
Schedule 8.3 - Guaranties of Indebtedness
Schedule 8.4 Existing Debt
Schedule 8.5 - Existing Liens
Schedule 8.7 - Existing Investments
Schedule 8.13 Subordinated Debt
EXHIBITS
FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE............................A-1
FORM OF REQUEST FOR SWING LINE ADVANCE..................................A-2
FORM OF REVOLVING CREDIT NOTE -- COMPANY................................B-1
FORM OF REVOLVING CREDIT NOTE -- PERMITTED BORROWERS....................B-2
FORM OF SWING LINE NOTE -- COMPANY......................................C-1
FORM OF SWING LINE NOTE -- PERMITTED BORROWERS..........................C-2
FORM OF COMPLIANCE CERTIFICATE..........................................D
FORM OF ASSIGNMENT AGREEMENT............................................E
FORM OF NOTICE OF LETTER OF CREDIT......................................F
FORM OF PERMITTED BORROWER ADDENDUM.....................................H
FORM OF SECURITY AGREEMENT..............................................I
FORM OF REAFFIRMATION OF LOAN DOCUMENTS.................................J
FORM OF REAFFIRMATION OF SECURITY AGREEMENT.............................K
vi
SECOND AMENDED AND RESTATED LONG TERM
REVOLVING CREDIT AGREEMENT
--------------------------
THIS SECOND AMENDED AND RESTATED LONG TERM REVOLVING CREDIT AGREEMENT
("Agreement") is made as of the 31st day of July, 2003 by and among the Lenders
(as defined below), Comerica Bank, as Co-Lead Arranger, Co-Book Running Manager
and Administrative Agent for the Lenders (in its capacity as Administrative
Agent, "Agent"), Fleet Securities, Inc., as Co-Lead Arranger, Co-Book Running
Manager and Syndication Agent (in its capacity as Syndication Agent,
"Syndication Agent"), Vishay Intertechnology, Inc., a Delaware corporation
("Company") and the Permitted Borrowers (as defined below and collectively with
the Company, the "Borrowers") from time to time signatory hereto.
RECITALS
A. Company has requested that the Lenders amend, renew and/or extend to it
and the Permitted Borrowers revolving credit and letters of credit as previously
extended to Company and the Permitted Borrowers under that certain Amended and
Restated Long Term Revolving Credit Agreement dated as of June 1, 1999, by and
among Company, Agent and the Lenders, as amended (the "Prior Credit Agreement")
on the terms and conditions set forth herein.
B. The Lenders are prepared to extend such credit, as aforesaid, by
amendment, restatement and renewal (but not in novation) of the Prior Credit
Agreement, but only upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, COMPANY, PERMITTED BORROWERS, AGENT, AND THE LENDERS AGREE:
1. DEFINITIONS
1.1 Certain Defined Terms.
For the purposes of this Agreement the following terms will have the
following meanings:
"Account Party(ies)" shall mean, with respect to any Letter of Credit, the
account party or parties (which shall be Company and/or any Permitted Borrower
and/or any Significant Subsidiary which is not a Permitted Borrower hereunder
jointly and severally with the Company) as named in an application to the Agent
for the issuance of such Letter of Credit.
"Additional Debt Issuance Date" shall mean the date upon which the Company
issues the New Convertible Subordinated Debt.
"Advance(s)" shall mean, as the context may indicate, a borrowing
requested by Company or by a Permitted Borrower, and made by Lenders under
Section 2.1 of this Agreement, as the case may be, or requested by the Company
or by a Permitted Borrower and made by the Swing Line Bank under Section 2.5
hereof (including without limitation any
readvance, refunding or conversion of such borrowing pursuant to Section 2.3 or
2.5(c) hereof) and any advance in respect of a Letter of Credit under Section
3.6 hereof (including without limitation the unreimbursed amount of any draws
under Letters of Credit) and shall include, as applicable, a Eurocurrency-based
Advance, a Quoted Rate Advance, a Prime-based Advance and a Swing Line Advance.
"Affiliate" shall mean, with respect to any Person, any other Person or
group acting in concert in respect of the first Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agent" shall mean Comerica Bank, a Michigan banking corporation, acting
as administrative agent hereunder or any successor administrative agent
appointed in accordance with Section 12.4 hereof.
"Agents" shall mean Agent and Syndication Agent.
"Agent's Correspondent" shall mean for Advances in eurodollars, Agent's
Grand Cayman Branch (or for the account of said branch office, at Agent's main
office in Detroit, Michigan, United States); for Advances in other Alternative
Currencies, at such bank or banks as Agent may from time to time designate by
written notice to Company, the Permitted Borrowers and the Lenders.
"Agent's Fees" shall mean those fees and expenses required to be paid by
Company to Agent under Section 12.8 hereof.
"Alternate Base Rate" shall mean, for any day, an interest rate per annum
equal to the Federal Funds Effective Rate in effect on such day, plus one
percent (1%).
"Alternative Currency" shall mean each of the following currencies, as
applicable hereunder: the Euro, Japanese Yen ("(Y)") and British Pounds Sterling
("Sterling") and, subject to availability and to the terms and conditions of
this Agreement, such other freely convertible foreign currencies, as requested
by the Company or the Permitted Borrowers and acceptable to Agent and the
Lenders, in their reasonable discretion.
"Applicable Fee Percentage" shall mean, as of any date of determination
thereof, the applicable percentage used to calculate certain of the fees due and
payable hereunder, determined by reference to the appropriate columns in the
Pricing Matrix attached to this Agreement as Schedule 4.1.
"Applicable Interest Rate" shall mean the Eurocurrency-based Rate, the
Prime-based Rate or, with respect to Swing Line Advances, the Quoted Rate, as
selected by Company or a Permitted Borrower from time to time subject to the
terms and conditions of this Agreement.
2
"Applicable Margin" shall mean, as of any date of determination thereof,
the applicable interest rate margin, determined by reference to the appropriate
columns in the Pricing Matrix attached to this Agreement as Schedule 4.1.
"Arrangers' Fee" shall mean those certain fees payable to the Agents in
the amount set forth in the Fee Letter or such other fee letter as may be in
effect from time to time.
"Assignment Agreement" shall have the meaning ascribed to such term in
Section 13.8(c) hereof.
"Authorized Officer" shall mean the Chairman, any Vice Chairman,
President, Treasurer, CFO, or the Corporate Controller of the Company or any
applicable Subsidiary, as the case may be, or any person otherwise designated by
the Company or such Subsidiary, as the case may be, as having the authority to
act for the Company or such Subsidiary in the particular instance.
"BCc Acquisition" shall mean the acquisition by the Company, directly or
through its subsidiaries, of BCcomponents and its subsidiaries (and related
property and interests) pursuant, subject to the terms hereof, to the BCc
Acquisition Documents.
"BCc Acquisition Documents" shall mean the BCc Share Purchase Agreement,
together with all other related documents and instruments (including
conveyances) executed and delivered in connection with the BCc Acquisition, as
amended (subject to the terms hereof) from time to time.
"BCcomponents" shall mean BCcomponents Holdings B.V., a Dutch private
limited liability company.
"BCc Replacement Financing" shall mean the debt issued by the Company to
refinance the mezzanine debt issued by BCcomponents prior to the BCc
Acquisition.
"BCc Share Purchase Agreement" shall mean that certain Share Sale and
Purchase Agreement dated November 10, 2002 by and among the BCc Shareholders,
the Foundation, BCcomponents International BV (each such term being defined
therein), the Company and Vishay Europe, as amended (subject to the terms
hereof) from time to time.
"Borrowers" is defined in the preamble.
"Business Day" shall mean any day on which commercial banks are open for
domestic and international business (including dealings in foreign exchange) in
Detroit, London and New York, and if funds are to be paid or made available in
any Alternative Currency, on such day in the place where such funds are to be
paid or made available and, if the applicable Business Day relates to the
borrowing or payment of a Eurocurrency-based Advance denominated in Euros, on
which banks and foreign exchange markets are open for business in the city where
disbursements of or payments on such Advance are to be made which is a
Trans-European Business Day.
"Call Notices" shall have the meaning specified in Section 7.21 hereof.
3
"Capital Expenditures" shall mean, without duplication, any amounts paid
or accrued for a period in respect of any purchase or other acquisition for
value of fixed or capital assets net of the cash proceeds of any grant received
during such period by the Company or any of its Subsidiaries from the government
of Israel (or any agency or political subdivision thereof) under the Israeli
Capital Investment Act, up to the aggregate amount of capital additions in
Israel during such period; provided that, in no event shall Capital Expenditures
include amounts expended in respect of normal repair and maintenance of plant
facilities, machinery, fixtures and other like capital assets utilized in the
ordinary conduct of business (to the extent such amounts would not be
capitalized in preparing a balance sheet determined in accordance with GAAP).
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Lenders is
or has been granted or arises or has arisen, under or in connection with this
Agreement, the other Loan Documents, or otherwise.
"Collateral Documents" shall mean the Security Agreements and the Pledge
Agreements, in each case as may be amended or otherwise modified from time to
time.
"Company" is defined in the Preamble.
"Consolidated" or "Consolidating" shall, when used with reference to any
financial information pertaining to (or when used as a part of any defined term
or statement pertaining to the financial condition of) Company and its
Subsidiaries mean the accounts of Company and its Subsidiaries determined on a
consolidated or consolidating basis, as the case may be, all determined as to
principles of consolidation and, except as otherwise specifically required by
the definition of such term or by such statements, as to such accounts, in
accordance with GAAP, applied on a consistent basis and consistent with the
financial statements, if any, as at and for the fiscal year ended December 31,
2002.
"Consolidated EBITDA" shall mean the EBITDA of the Company and its
Subsidiaries on a Consolidated basis.
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Covenant Compliance Report" shall mean the report to be furnished by the
Company to the Agent, substantially in the form attached hereto as Exhibit D, as
such exhibit may be amended or otherwise modified from time to time by the
Required Lenders, and certified by the chief financial officer of the Company
pursuant to Section 7.3(c), hereof, for the purpose of monitoring the Company's
and each Permitted Borrower's compliance herewith and to notify the Lenders of
the acquisition or creation of new Subsidiaries.
"Current Dollar Equivalent" shall mean, as of any applicable date of
determination, with respect to any Advance or Letter of Credit made, issued or
carried in an Alternative Currency, the amount of Dollars which is equivalent to
the then outstanding principal amount of such Advance or Letter of Credit at the
most favorable spot exchange rate determined by the Agent to be available to it
for the sale of Dollars for such Alternative Currency for delivery at
approximately 11:00 A.M. (Detroit time) two (2) Business Days after such date.
Alternative
4
Currency equivalents of Advances in Dollars (to the extent used herein) shall be
determined by Agent in a manner consistent herewith.
"Debt" shall mean, as of any applicable date of determination, all items
of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities on a
balance sheet and/or in accompanying footnotes in accordance with GAAP.
"Default" shall mean any event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
"Dollar Amount" shall mean (i) with respect to each Advance or Letter of
Credit made, issued or carried (or to be made, issued or carried) in Dollars,
the principal amount thereof and (ii) with respect to each Advance or Letter of
Credit made, issued or carried (or to be made or carried) in an Alternative
Currency, the amount of Dollars which is equivalent to the principal amount of
such Advance or Letter of Credit at the most favorable spot exchange rate
determined by the Agent to be available to it for the sale of Dollars for such
Alternative Currency at approximately 11:00 A.M. (Detroit time) two (2) Business
Days before such Advance or Letter of Credit is made or issued (or to be made or
issued), as such Dollar Amount may be adjusted from time to time pursuant to
Section 2.11 hereof. When used with respect to any Alternative Currency portion
of an Advance or Letter of Credit being repaid or remaining outstanding at any
time or with respect to any other sum expressed in an Alternative Currency,
"Dollar Amount" shall mean the amount of Dollars which is equivalent to the
principal amount of such Advance or Letter of Credit, or the amount so expressed
in such Alternative Currency, at the most favorable spot exchange rate
determined by the Agent to be available to it for the sale of Dollars for such
Alternative Currency at the relevant time. Alternative Currency amounts of
Advances made, carried or expressed in Dollars (to the extent used herein) shall
be determined by Agent in a manner consistent herewith.
"Dollars" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Advance" shall mean any Advance other than a Eurocurrency-based
Advance or any other Advance denominated in an Alternative Currency.
"Domestic Guaranty" shall mean that certain Amended and Restated Domestic
Guaranty delivered to Agent covering all Indebtedness outstanding from the
Company and the Permitted Borrowers executed and delivered as of the date hereof
(or to be executed and delivered by joinder) by the Company and each of the
Significant Domestic Subsidiaries, as amended or otherwise modified from time to
time.
"Domestic Permitted Borrower" shall mean any Permitted Borrower which is
not a Foreign Permitted Borrower.
"Domestic Subsidiary" shall mean any Subsidiary of the Company
incorporated or organized under the laws of the United States of America, or any
state or other political subdivision thereof or which is considered to be a
"disregarded entity" for purposes of Section 956 of the Internal Revenue Code,
in each case provided such Subsidiary is owned by the Company or a Domestic
Subsidiary; and "Domestic Subsidiaries" shall mean any or all of them.
5
"EBITDA" shall mean, of any Person, for any period, the Net Income of such
Person for such period adjusted (A) to include, if applicable, the Net Income of
any Person accrued during such period but prior to the date it became a
Subsidiary of the Company or was merged into or consolidated with the Company
(based on financial information reasonably satisfactory to the Agent), and (B)
to exclude, without duplication, the following items of income or expense to the
extent that such items are included in the calculation of such Net Income: (a)
Interest Expense, (b) any non-cash expenses and charges, (c) total income tax
expense, (d) depreciation expense, (e) the expense associated with amortization
of intangible and other assets, (f) non-cash provisions for reserves for
discontinued operations, (g) any extraordinary, unusual or non-recurring gains
or losses or charges or credits, (h) any gain or loss associated with the sale
or write-down of assets, (i) any gain or loss from or attributable to minority
interests and (j) any gain or loss accounted for by the equity method of
accounting (except in the case of income to the extent of the amount of cash
dividends or cash distributions paid to such Person or any Subsidiary of such
Person by the entity accounted for by the equity method of accounting).
"Effective Date" shall mean August 5, 2003, or such later date (but not
later than September 30, 2003) on which all of the conditions precedent set
forth in Sections 5.1 through 5.10 hereof have been satisfied, as confirmed in
writing by the Agent.
"EMU" shall mean Economic and Monetary Union as contemplated in the Treaty
on European Union.
"EMU Legislation" shall mean legislative measures of the European Council
(including European Council regulations) for the introduction of, changeover to
or operation of a single or unified European currency (whether known as the Euro
or otherwise), being in part the implementation of the third stage of EMU.
"Environmental Auditors" shall mean, when selected or retained by the
Company or the Agents, as the case may be hereunder, such counsel, engineering
or testing firms or other experienced, reputable environmental consultants
reasonably acceptable to the Required Lenders.
"Equity Offering" shall mean the issuance and sale for cash, on or after
the date hereof, by Company or any of its Subsidiaries of additional capital
stock or other equity interests.
"Equity Offering Adjustment" shall mean that amount to be added to the
minimum Tangible Net Worth required to be maintained under Section 7.4 hereof
consisting of an amount equal to seventy-five percent (75%) of each Equity
Offering conducted by the Company or any of its Subsidiaries, net of costs of
issuance, on and after July 1, 2003, on a cumulative basis; provided, however,
that in the case of each Equity Offering by a Subsidiary, the amount of the
Equity Offering Adjustment shall not exceed 75% of the amount, if any, by which
such Equity Offering increases Tangible Net Worth.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor act or code, and the regulations in effect from time
to time thereunder.
6
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
would be treated as a single employer under Section 414 of the Internal Revenue
Code.
"Euro" or "Euro Unit" shall mean the currency unit of the Euro as defined
in the EMU Legislation.
"Eurocurrency Rate" shall mean with respect to each Eurocurrency-based
Advance carried in any Alternative Currency (and each Eurocurrency-Interest
Period pertaining thereto) the per annum interest rate determined by the Agent
(or, in case of Swing Line Advances, the Swing Line Bank) to be the offered rate
for deposits in such currency with a term comparable to such Interest Period
that appears on the applicable Telerate Page or the applicable British Bankers'
Association rate as reported by any generally recognized financial information
service, in each case as reported at approximately 11:00 a.m., London time, two
Business Days (or, in the case of a Eurocurrency-based Advance in Euros, on such
other date as is customary in the relevant offshore interbank market) prior to
the beginning of such Interest Period; provided, however, that if at any time
for any reason such offered rate for any such currency does not appear on a
Telerate Page or is not reported by any generally recognized financial
information service, "Eurocurrency Rate" shall mean, with respect to each such
Advance denominated in such currency, the per annum interest rate at which
deposits in the relevant currency are offered to Agent's Eurocurrency Lending
Office (or, in the case of Swing Line Advances, the Swing Line Bank's
Eurocurrency Lending Office) by other prime banks in the relevant offshore
interbank market in an amount comparable to the relevant Eurocurrency-based
Advance and for a period equal to the relevant Eurocurrency-Interest Period at
approximately 11:00 a.m. Detroit time two (2) Business Days prior to the first
day of such Eurocurrency-Interest Period.
"Eurocurrency-based Advance" shall mean any Advance (including a Swing
Line Advance) which bears interest at the Eurocurrency-based Rate.
"Eurocurrency-based Rate" shall mean a per annum interest rate which is
equal to the sum of the Applicable Margin (subject, if applicable, to adjustment
under Section 4.1 hereof), plus the quotient of:
(A) (a) in the case of Eurocurrency-based Advances carried
in Dollars, the Eurodollar Rate, or
(b) in the case of Eurocurrency-based Advances carried
in an Alternative Currency, the Eurocurrency Rate,
divided by
(B) a percentage equal to 100% minus the maximum rate on such
date at which Agent is required to maintain reserves on
`Eurocurrency Liabilities' as defined in and pursuant to
Regulation D of the Board of Governors of the Federal
Reserve System or, if such regulation or definition is
modified, and as long as Agent is required to maintain
reserves against a category of liabilities which
7
includes eurocurrency deposits or includes a category of
assets which includes eurocurrency loans, the rate at
which such reserves are required to be maintained on such
category,
all as conclusively determined by the Agent (absent manifest error), such sum to
be rounded upward, if necessary, to the nearest whole multiple of 1/100th of 1%.
"Eurocurrency-Interest Period" shall mean, (a) for Swing Line Advances
carried at the Eurocurrency-based Rate, an interest period of fourteen (14) days
or one month (or any lesser number of days agreed to in advance by Company or a
Permitted Borrower, Agent and the Swing Line Bank) and (b) for all other
Eurocurrency-based Advances, an interest period of one, two, three or six months
(or any lesser or greater number of days agreed to in advance by Company or a
Permitted Borrower, Agent and the Lenders) as selected by Company or such
Permitted Borrower, as applicable, for a Eurocurrency-based Advance pursuant to
Section 2.3 or 2.5 hereof, as the case may be.
"Eurocurrency Lending Office" shall mean, (a) with respect to the Agent,
Agent's office located at its Grand Caymans Branch or such other branch of
Agent, domestic or foreign, as it may hereafter designate as its Eurocurrency
Lending Office by written notice to Company, the Permitted Borrowers and the
Lenders and (b) as to each of the Lenders, its office, branch or affiliate
located at its address set forth on the signature pages hereof (or identified
thereon as its Eurocurrency Lending Office), or at such other office, branch or
affiliate of such Lender as it may hereafter designate as its Eurocurrency
Lending Office by written notice to Company and Agent.
"Eurodollar Rate" shall mean with respect to each Eurocurrency-based
Advance carried in Dollars (and each Eurocurrency-Interest Period pertaining
thereto) the per annum interest rate at which deposits in dollars are offered to
Agent's Eurocurrency Lending Office (or, in the case of Swing Line Advances, the
Swing Line Bank's Eurocurrency Lending Office) by other prime banks in the
eurocurrency market in an amount comparable to the relevant Eurocurrency-based
Advance and for a period equal to the relevant Eurocurrency-Interest Period at
approximately 11:00 a.m. Detroit time two (2) Business Days prior to the first
day of such Eurocurrency-Interest Period.
"Event of Default" shall mean any of the events specified in Section 9.1
hereof.
"Existing Letter of Credit" shall mean each letter of credit issued under
the Prior Credit Agreement, if any, which is outstanding on the Effective Date,
as set forth on Schedule 1.4 hereto.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by it.
8
"Fee Letter" shall mean the fee letter dated July 1, 2003 between the
Company and the Agent hereunder, as amended from time to time.
"Fees" shall mean the Agent's Fees, the Revolving Credit Facility Fee, the
Letter of Credit Fees, the Arrangers' Fee, and the other fees and charges
payable hereunder.
"Fixed Charge Coverage Ratio" shall mean, with respect to the Company and
its Consolidated Subsidiaries, as of any date of determination, a ratio, (i) the
numerator of which shall be equal to Consolidated EBITDA for the preceding four
fiscal quarters ending on the date of determination, minus Capital Expenditures
during such period and (ii) the denominator of which shall be the Interest
Expense of the Company and its Consolidated Subsidiaries for such period, in
each case determined in accordance with GAAP.
"Foreign Guaranty" shall mean that certain Foreign Guaranty dated March 2,
1998 covering all Indebtedness of the Foreign Permitted Borrowers hereunder (but
expressly excluding any Hedging Obligations) previously executed and delivered
(or to be executed and delivered by joinder) by the Significant Foreign
Subsidiaries as amended or otherwise modified from time to time.
"Foreign Permitted Borrower" shall mean any Permitted Borrower hereunder
which is a Foreign Subsidiary.
"Foreign Subsidiary" shall mean any of the Company's Subsidiaries, other
than a Domestic Subsidiary; and "Foreign Subsidiaries" shall mean any or all of
them.
"FPB Advance Notice" shall mean notice from the Company or the applicable
Foreign Permitted Borrower that such Foreign Permitted Borrower intends to
submit a Request for Advance (or for the issuance of a Letter of Credit) under
this Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Governmental Obligations" means noncallable direct general obligations of
the United States of America or obligations the payment of principal of and
interest on which is unconditionally guaranteed by the United States of America.
"Granting Lender" shall mean a Lender which elects to grant to an SPFV the
option to fund all or any part of any Advance that such Lender would otherwise
be obligated to fund pursuant to this Agreement, in each case in accordance with
Section 13.8(c) hereof; provided, however, that notwithstanding the funding by
an SPFV of an Advance (or a portion thereof) hereunder, the Granting Lender
shall retain all of its rights and obligations under this Agreement with respect
to such Advance or otherwise.
"Guarantee Obligation" shall mean as to any Person (the "guaranteeing
person") any obligation of the guaranteeing person in respect of any obligation
of another Person (including, without limitation, any bank under any letter of
credit), the creation of which was induced by a reimbursement agreement,
guaranty agreement, keepwell agreement, purchase agreement, counterindemnity or
similar obligation issued by the guaranteeing person, in either case
9
guaranteeing or in effect guaranteeing any Debt, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company or Subsidiary, as applicable, in good faith.
"Guaranties" shall mean the Domestic Guaranty and the Foreign Guaranty,
and "Guaranty" shall mean any or all of them.
"Guarantor(s)" shall mean each Significant Subsidiary which is required by
the Lenders to guarantee the obligations of the Company and/or the Permitted
Borrowers hereunder and under the other Loan Documents.
"Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in (or for purposes of)
the Hazardous Material Laws.
"Hazardous Material Law(s)" shall mean all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal, state,
provincial, local, foreign or other governmental or quasi-governmental authority
or body (or any agency, instrumentality or political subdivision thereof)
pertaining to Hazardous Material on or about any facilities owned, leased or
operated by Company or any of its Subsidiaries, or any portion thereof
including, without limitation, those relating to soil, surface, subsurface
ground water conditions and the condition of the ambient air; and any state and
local laws and regulations pertaining to Hazardous Material and/or asbestos; any
so-called "superfund" or "superlien" law; and any other federal, state,
provincial, foreign or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect.
"Hedging Obligation(s)" shall mean Interest Rate Protection Agreements and
any foreign currency exchange agreements (including without limitation foreign
currency hedges and swaps)
10
or other foreign exchange transactions, or any combination of such transactions
or agreements or any option with respect to any such transactions or agreements
entered into between Company and/or any of its Subsidiaries and a Lender or an
Affiliate of a Lender to manage existing or anticipated foreign exchange risk
and not for speculative purposes.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement in its entirety and not to any particular paragraph or provision of
this Agreement.
"Indebtedness" shall mean all indebtedness and liabilities whether direct
or indirect, absolute or contingent, owing by Company or any of the Permitted
Borrowers to the Lenders (or any of them) or to the Agent, in any manner and at
any time, under this Agreement or the Loan Documents, due or hereafter to become
due, now owing or that may hereafter be incurred by the Company, any of the
Permitted Borrowers or any of the Subsidiaries to, or acquired by, the Lenders
(or any of them) or by Agent, and all net obligations with respect to Hedging
Obligations entered into between Company and/or any of its Subsidiaries and a
Lender or an Affiliate of a Lender, any Special Letters of Credit, and any
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all consolidations, amendments, renewals,
replacements or extensions of any of the foregoing. For the purposes of Section
9.2(b), "Indebtedness" shall exclude any Hedging Obligations.
"Intercompany Loan" shall mean any loan (or advance in the nature of a
loan) by the Company or any Subsidiary to the Company or any Subsidiary,
provided that each such loan or advance to the Company or to a Subsidiary that
is an obligor on the Indebtedness shall be subordinated in right of payment and
priority to the Indebtedness of the Company or such Subsidiary, as applicable,
on terms and conditions satisfactory to Agent and the Required Lenders.
"Intercompany Loans, Advances or Investments" shall mean any Intercompany
Loan, and any advance or investment by the Company or any Subsidiary (including
without limitation any guaranty of obligations or indebtedness to third parties)
to or in the Company or any Subsidiary.
"Intercompany Notes" shall mean the promissory notes issued or to be
issued by any Subsidiary to Company or to any Significant Domestic Subsidiary to
evidence an Intercompany Loan.
"Interest Expense" shall mean, for any Person and with respect to any
period, the sum of the amount of interest paid or accrued in respect of such
period, determined in accordance with GAAP.
"Interest Period" shall mean (a) with respect to a Eurocurrency-based
Advance, a Eurocurrency-Interest Period commencing on the day a
Eurocurrency-based Advance is made, or on the effective date of an election of
the Eurocurrency-based Rate made under Section 2.3 hereof, as the case may be,
and (b) with respect to a Swing Line Advance carried at the Quoted Rate, an
interest period of one month (or any lesser number of days agreed to in advance
by Company or a Permitted Borrower, Agent and the Swing Line Bank); provided,
however that (i)
11
any Interest Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day, except that as to a
Eurocurrency-Interest Period, if the next succeeding Business Day falls in
another calendar month, such Eurocurrency-Interest Period shall end on the next
preceding Business Day, and (ii) when a Eurocurrency-Interest Period begins on a
day which has no numerically corresponding day in the calendar month during
which such Eurocurrency-Interest Period is to end, it shall end on the last
Business Day of such calendar month, and (iii) no Interest Period shall extend
beyond the Revolving Credit Maturity Date.
"Interest Rate Protection Agreement(s)" shall mean any interest rate,
swap, cap, floor, collar, forward rate agreement or other rate protection
transaction, or any combination of such transactions or agreements or any option
with respect to any such transactions or agreements now existing or hereafter
entered into by Company or any of its Subsidiaries to manage existing or
anticipated interest rate risk and not for speculative purposes.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated thereunder.
"Investment" shall mean any loan or advance by Company or any of its
Subsidiaries to, or any other loan, advance or investment by Company or any of
its Subsidiaries in, any Person (including without limitation, the Company or
any Subsidiary), without offset, reduction or other adjustment, whether such
loan, advance or investment shall be in the nature of an investment in shares of
stock or other capital or securities, general or limited partnership, limited
liability company or joint venture interests, evidences of indebtedness or
otherwise.
"Issuing Office" shall mean Agent's office located at One Detroit Center,
500 Woodward Avenue, Detroit, Michigan 48275 or such other office as Agent shall
designate in writing as its Issuing Office.
"Joinder Agreement" shall mean a joinder agreement in the form attached as
Exhibit A to the form of the Domestic Guaranty or to the form of the Foreign
Guaranty, to be executed and delivered by any Person required to be a Guarantor
pursuant to Section 7.16 of this Agreement.
"Joint Venture" shall mean any corporation, partnership, association,
joint stock company, limited liability company, partnership, business trust or
other combined enterprise, other than a Subsidiary, in which (or to which) the
Company or any of its Subsidiaries has made a loan, investment or advance or has
an ownership stake or interest, whether in the nature of Share Capital or
otherwise (but expressly excluding Permitted Investments) to fund a business
enterprise.
"Lender(s)" shall mean each of the Lenders signatory to this Agreement and
any assignee which becomes a Lender pursuant to Section 13.8(c) hereof, and
shall include, as applicable, the Swing Line Bank.
"Letter(s) of Credit" shall mean any standby letters of credit issued by
Agent at the request of or for the account of an Account Party or Account
Parties pursuant to Article 3 hereof, including without limitation any Existing
Letters of Credit.
12
"Letter of Credit Agreement" shall mean, in respect of each Letter of
Credit, the application and related documentation satisfactory to the Agent of
an Account Party or Account Parties requesting Agent to issue such Letter of
Credit, as amended from time to time.
"Letter of Credit Fees" shall mean the fees payable to Agent for the
accounts of the Lenders in connection with Letters of Credit pursuant to Section
3.4 hereof.
"Letter of Credit Maximum Amount" shall mean, as of any date of
determination, the lesser of: (a) One Hundred Million Dollars ($100,000,000) and
(b) the Revolving Credit Aggregate Commitment as of such date, minus the
aggregate principal amount of Advances outstanding as of such date under the
Revolving Credit and under the Swing Line, minus, in each case the Letter of
Credit Reserve in effect on such date.
"Letter of Credit Obligation(s)" shall mean the obligation of an Account
Party or Account Parties under this Agreement and each Letter of Credit
Agreement to reimburse the Agent for each payment made by the Agent under the
Letter of Credit issued pursuant to such Letter of Credit Agreement, together
with all other sums, fees, charges and amounts which may be owing to the Agent
under such Letter of Credit Agreement.
"Letter of Credit Payment" shall mean any amount paid or required to be
paid by the Agent in its capacity hereunder as issuer of a Letter of Credit as a
result of a draft or other demand for payment under any Letter of Credit.
"Letter of Credit Reserve" shall mean Five Million Dollars ($5,000,000),
as decreased by the Company with the Agent's approval.
"Leverage Ratio" shall mean, as of any date of determination, with respect
to the Company and its Consolidated Subsidiaries, the ratio of (a) Total Debt as
of such date to (b) Consolidated EBITDA for the four consecutive fiscal quarters
then ending.
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, trust receipt, conditional sale
or title retaining contract, sale and leaseback transaction, or any other type
of lien, charge or encumbrance, whether based on common law, statute or
contract.
"Loan Documents" shall mean collectively, this Agreement, the Letter of
Credit Agreements, the Guaranties, the Collateral Documents, Hedging Obligations
entered into between Company and/or any of its Subsidiaries and a Lender or an
Affiliate of a Lender, and any other documents, instruments or agreements
executed pursuant to or in connection with any such document, the Indebtedness
or this Agreement as such documents may be amended or otherwise modified from
time to time. For the purposes of Section 13.11, "Loan Documents" shall exclude
any Hedging Obligations.
"LYONs" shall mean the Liquid Yield Option Notes (LYONs)TM issued under
and pursuant to that certain Indenture dated as of June 4, 2001 between The Bank
of New York, as trustee, and the Company, as issuer.
13
"LYONs Reserve" shall mean zero, until the Additional Debt Issuance Date,
whereupon the LYONs Reserve shall mean One Hundred Sixty Million Dollars
($160,000,000), such reserve being reduced from time to time (but not below
zero) by twice the accreted amount of the LYONs that the Company prepays,
purchases, redeems or defeases from and after the Agent's consent to the
issuance of the New Convertible Subordinated Debt dated July 29, 2003 issued
under the Prior Credit Agreement, or that is converted into shares of the
Company's common stock, any such reductions of the LYONs Reserve becoming
effective on the date the Agent receives written evidence, satisfactory in form
and substance to the Agent, of such prepayment, purchase, redemption, defeasance
or conversion of the LYONs.
"Moody's" means Moody's Investors Service, Inc., its successors and
assigns, and, if such organization shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Agent.
"Multiemployer Plan" shall mean any multiemployer plan within the meaning
of Section 4001(a)(3) of ERISA.
"National Currency Unit" shall mean a fraction or multiple of one Euro
Unit expressed in units of the former national currency of a Participating
Member State.
"Net Income" shall mean the net income (or loss) of a Person for any
period determined in accordance with GAAP.
"Net Income Adjustment" shall mean that amount to be added to the minimum
Tangible Net Worth required to be maintained under Section 7.4 hereof consisting
of fifty percent (50%) of Company's Consolidated Net Income for each of the
Company's fiscal quarters ending on or after September 30, 2003 (in each case,
only if a positive number), on a cumulative basis.
"New Convertible Subordinated Debt" means that certain new convertible
subordinated Debt of the Company in the amount of up to $500,000,000 to be
issued by the Company under an Indenture to be dated as of August 6, 2003
between the Company and Wachovia Bank, National Association, as Trustee on
substantially the terms and conditions contained in the Company's Offering
Memorandum relating to such debt dated July 31, 2003 (as determined in the
reasonable discretion of the Agent and confirmed by the Agent to the Company).
"Notes" shall mean the Revolving Credit Notes or the Swing Line Notes, or
any or all of the Revolving Credit Notes and the Swing Line Notes as the context
indicates, and in the absence of such indication, all such notes.
"Participating Member State" shall mean such country so described in any
EMU Legislation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation under ERISA, or
any successor corporation.
14
"PDD Restructuring" shall mean that certain reorganization and
restructuring of the Company's power diodes division, to the extent consummated
on substantially the terms described in documentation delivered by the Company
to the Agent on July 30, 2003.
"Pension Plan" shall mean each employee pension benefit plan, as defined
in Section 3(2) of ERISA, of the Company or an ERISA Affiliate but only to the
extent such Pension Plan is subject to ERISA, as provided in Section 4 of ERISA,
and is subject to Section 412 of the Internal Revenue Code and Section 302 of
ERISA other than a Multiemployer Plan.
"Percentage" shall mean, with respect to any Lender, its percentage share,
as set forth on Schedule 1.1 hereto, of the Letters of Credit or the Revolving
Credit, as the context indicates, as such Schedule may be revised from time to
time by Agent in accordance with Section 13.8(d) hereof.
"Permitted Acquisition" shall mean any acquisition by the Company or any
of its Subsidiaries of assets, businesses or business interests or shares of
stock or other ownership interests of or in any Person, conducted while no
Default or Event of Default has occurred and is continuing hereunder (both
before and after giving effect thereto) in accordance with the following
requirements:
(a) Such acquisition is of a business or Person primarily engaged in a
line of business in which the Company or any Subsidiary is permitted
to engage under Section 8.1(b) hereof;
(b) The board of directors (or other Person(s) exercising similar
functions) of the seller of the assets or issuer of the shares of
stock or other ownership interests being acquired shall have
approved such transaction or recommended that such transaction be
approved;
(c) in the event that the value of such proposed new acquisition,
computed on the basis of total acquisition consideration paid or
incurred, or to be paid or incurred, by the Company or its
Subsidiaries with respect thereto, including all indebtedness which
is assumed or to which such assets, businesses or business or
ownership interests or shares, or any Person so acquired, is
subject, but excluding the value of any common shares transferred as
a part of such acquisition, shall be
(i) greater than or equal to Fifty Million Dollars ($50,000,000),
determined as of the date of such acquisition, then not less
than fifteen (15) nor more than ninety (90) days prior to the
date each such proposed acquisition is scheduled to be
consummated, the Company provides written notice thereof to
Agent, accompanied by (A) the term sheet, purchase agreement
and, when available, drafts of all material documents
pertaining to such proposed acquisition, (B) historical
financial information (including, but not limited to, income
statements, balance sheets and cash flows) covering either the
three most recent complete fiscal years of the acquisition
target prior to the effective date of the acquisition or the
entire credit history of the acquisition target, whichever
period is shorter, and the quarterly
15
financial statements of the acquisition target for the most
recent eight consecutive fiscal quarters (provided however
that, if the financial information referred to in this
subparagraph (B) is not available, Company shall furnish Agent
with financial information otherwise reasonably satisfactory
to the Required Lenders) and (C) Pro Forma Projected Financial
Information, or
(ii) less than Fifty Million Dollars ($50,000,000) but greater than
or equal to Ten Million Dollars ($10,000,000), then not less
than ten (10) Business Days after date each such proposed
acquisition has been consummated, the Company provides written
notice thereof to Agent (with certified copies of all material
documents pertaining to such acquisition);
whereupon Agent shall promptly upon its receipt thereof distribute copies of all
notices and other materials received from Company under this clause (c) to each
Lender; and
(d) within thirty (30) days after any such acquisition has been
completed, the Company, its Subsidiaries and any of the other
business entities involved in such acquisition shall execute or
cause to be executed, and provide or cause to be provided to Agent,
any Loan Documents required under Section 7.16 hereof.
"Permitted Borrower Addendum" shall mean an addendum substantially in the
form attached hereto as Exhibit H, to be executed and delivered by each
Permitted Borrower which becomes a party to this Agreement after the date
hereof, as such Exhibit may be amended from time to time.
"Permitted Borrower Sublimit" shall mean the maximum aggregate amount of
Advances and Letters of Credit (including Letter of Credit Obligations)
available at any time to each of the Permitted Borrowers hereunder, as set forth
on Schedule 1.6 hereof.
"Permitted Borrower(s)" shall mean Vishay Europe and Vishay Electronic,
together with each of Vishay Asia and Siliconix (but solely upon each of Vishay
Asia's and Siliconix's compliance with the requirements set forth in Section 2.1
hereof), and any 100% Subsidiary which, after the Effective Date and with the
prior written approval of the Lenders, becomes a party hereto pursuant to the
requirements of Section 2.1 hereof.
"Permitted Company Encumbrances" shall mean, in addition to Permitted
Encumbrances, those liens and encumbrances of the Company identified in Schedule
8.5, hereto.
"Permitted Currencies" shall mean Dollars or any Alternative Currency.
"Permitted Encumbrances" shall mean, with respect to any Person:
(e) liens for taxes not yet due and payable or which are being contested
in good faith by appropriate proceedings diligently pursued,
provided that such provision for the payment of all such taxes known
to such Person has been made on the books of such Person as may be
required by GAAP;
16
(b) mechanics', materialmen's, bankers', carriers', warehousemen's and
similar liens and encumbrances arising in the ordinary course of
business and securing obligations of such Person that are not
overdue for a period of more than 60 days or are being contested in
good faith by appropriate proceedings diligently pursued, provided
that in the case of any such contest (i) any proceedings commenced
for the enforcement of such liens and encumbrances shall have been
duly suspended; and (ii) such provision for the payment of such
liens and encumbrances has been made on the books of such Person as
may be required by GAAP;
(c) liens arising in connection with worker's compensation, unemployment
insurance, old age pensions (subject to the applicable provisions of
this Agreement) and social security benefits which are not overdue
or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest
(i) any proceedings commenced for the enforcement of such liens
shall have been duly suspended; and (ii) such provision for the
payment of such liens has been made on the books of such Person as
may be required by GAAP;
(d) (i) liens incurred in the ordinary course of business to secure the
performance of statutory obligations arising in connection with
progress payments or advance payments due under contracts with the
United States or any foreign government or any agency thereof
entered into in the ordinary course of business and (ii) liens
incurred or deposits made in the ordinary course of business to
secure the performance of statutory obligations, bids, leases, fee
and expense arrangements with trustees and fiscal agents and other
similar obligations (exclusive of obligations incurred in connection
with the borrowing of money, any lease-purchase arrangements or the
payment of the deferred purchase price of property), provided that
full provision for the payment of all such obligations set forth in
clauses (i) and (ii) has been made on the books of such Person as
may be required by GAAP; and
(e) any minor imperfections of title, including but not limited to
easements, covenants, rights-of-way or other similar restrictions,
which, either individually or in the aggregate do not materially
adversely affect the present or future use of the property to which
they relate, which would have a material adverse effect on the sale
or lease of such property, or which would render title thereto
unmarketable.
"Permitted Encumbrances of the Subsidiaries" shall mean, in addition to
Permitted Encumbrances, those liens and encumbrances of the Subsidiaries
identified in Schedule 8.5, hereto.
"Permitted Investments" shall mean:
(a) Governmental Obligations;
(b) Obligations of a state of the United States, the District of
Columbia or any possession of the United States, or any political
subdivision thereof, which are
17
described in Section 103(a) of the Internal Revenue Code and are
rated in any of the highest 3 major rating categories as determined
by at least one nationally recognized Rating Agency; or secured, as
to payments of principal and interest, by a letter of credit
provided by a financial institution or insurance provided by a bond
insurance company which itself or its debt is rated in the highest 3
major rating categories as determined by at least one Rating Agency;
(c) Banker's acceptances, commercial accounts, certificates of deposit,
or depository receipts issued by a bank, trust company, savings and
loan association, savings bank or other financial institution whose
deposits are insured by the Federal Deposit Insurance Corporation
and whose reported capital and surplus equal at least $500,000,000;
(d) commercial paper with a minimum rating of "A-1" (or better) by S&P
or "P-1" (or better) by Moody's, full faith and credit direct
obligations of the United States of America or, with respect to the
Foreign Subsidiaries, of the central government of the applicable
jurisdiction, or any agency thereof, certificates of deposit, and
other short term investments (each of a duration of one year or
less), maintained by the Company or any of its Subsidiaries
consistent with the present investment practices of such parties (as
classified in the current financial statements of such parties);
(e) Secured repurchase agreements against obligations itemized in
paragraph (a) above, and executed by a bank or trust company or by
members of the association of primary dealers or other recognized
dealers in United States government securities, the market value of
which must be maintained at levels at least equal to the amounts
advanced and repurchase agreements entered into with counterparties
having ratings in either of the highest two rating categories by
Moody's or S&P, or the highest rating category by Fitch Investor
Services, Duff & Phelps or Thompson Bank Watch and providing for
underlying securities to be held by a third party;
(f) Any fund or other pooling arrangement which exclusively purchases
and holds the investments itemized in (a) through (e) above; and
(g) other short term investments (excluding investments in Subsidiaries,
Affiliates or Joint Ventures) made or maintained by any Foreign
Subsidiary outside of the United States of America in the ordinary
course of its business, consistent with the present investment
practices of the Company and its Subsidiaries as of the date hereof
(generally, and as to the individual and aggregate amounts and other
terms thereof).
"Permitted Securitization" shall mean the transfer or encumbrance of
certain foreign accounts receivable by any of the Foreign Subsidiaries to a
Special Purpose Subsidiary conducted in accordance with the following
requirements:
18
(a) The disposition of foreign accounts receivable will not result in
the aggregate principal amount of Debt at any time issued and
outstanding in respect of Permitted Securitizations being in excess
of Two Hundred Million Dollars ($200,000,000) in aggregate while the
Indebtedness remains outstanding;
(b) The Foreign Subsidiary disposing of foreign accounts receivable to a
Special Purpose Subsidiary pursuant to such Permitted Securitization
shall itself actually receive (substantially contemporaneously with
such disposition) cash in connection with any such Securitization
Transaction in an amount based on normal and customary advance rates
(and taking into account typical deductions for market-based,
arms-length Securitization Transactions);
(c) Each such disposition shall be without recourse to the Company or
its Domestic Subsidiaries and otherwise on normal and customary
terms and conditions for comparable asset-based Securitization
Transactions;
(d) Each such Securitization Transaction shall be structured on the
basis of the issuance of non-recourse (to the Company or its
Domestic Subsidiaries) Debt or other similar securities by a Special
Purpose Subsidiary;
(e) Both immediately before and immediately after each such disposition,
no Default or Event of Default (whether or not related to such
disposition) shall have occurred and be continuing; and
(f) Immediately prior to and immediately after conducting each such
Securitization Transaction, Company must have on its rated Senior
Debt a BB+ or better rating from S&P and a Ba1 rating or better from
Moody's.
"Permitted Transfer" shall mean (i) any disposition of inventory or worn
out or obsolete machinery, equipment or other such personal property in the
ordinary course of business, (ii) the transfer by Company or its Subsidiaries to
Vishay Israel or its wholly-owned direct subsidiaries existing under the laws of
Israel of machinery and equipment in an aggregate amount (valued on the basis of
the book value of such property on the date of transfer thereof) of up to Fifty
Million Dollars ($50,000,000) from and after the Effective Date (provided that
no Default or Event of Default has occurred and is continuing at the time of any
such transfer), and (iii) any transfers of intangible assets and share capital
pursuant to the PDD Restructuring (substantially as described in the materials
previously delivered to the Agent), provided that the Company comply with the
delivery of any required Collateral Documents under Section 7.16 hereof,
following such transfers.
"Permitted Transferee" shall mean a "Permitted Transferee" as defined in
the Company's current Certificate of Incorporation, and any subsequent amendment
of the definition of such term approved by the Required Lenders.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated organization, joint
venture, joint stock company, or a government or any agency or political
subdivision thereof or other entity of any kind.
19
"Pledge Agreement(s)" shall mean the various stock pledge agreements,
including any nantissements, notarial deeds, pledges of financial instrument
accounts, or other local law pledges (and any of them) previously executed and
delivered, executed and delivered as of the Effective Date or to be executed or
delivered pursuant to Sections 7.16 and/or 7.18 hereof all, in favor of the
Agent, for and on behalf of the Lenders under this Agreement and, except with
respect to those Pledge Agreements executed by or covering the share capital of
a Significant Foreign Subsidiary, on behalf of any Lenders or their Affiliates
(or any of them) under any Hedging Obligations, in each case as amended or
otherwise modified from time to time.
"Prime Rate" shall mean the per annum interest rate established by Agent,
or in the case of Swing Line Advances carried at the Prime-based Rate, by the
Swing Line Bank, as its prime rate for its borrowers, as such rate may vary from
time to time, which rate is not necessarily the lowest rate on loans made by
Agent or the Swing Line Bank at any such time.
"Prime-based Advance" shall mean an Advance (including a Swing Line
Advance) which bears interest at the Prime-based Rate.
"Prime-based Rate" shall mean that rate of interest which is the greater
of (i) the Prime Rate or (ii) the Alternate Base Rate.
"Prior Credit Agreement" is defined in the Preamble.
"Pro Forma Projected Financial Information" shall mean, as to any proposed
acquisition, a statement executed by an Authorized Officer of the Company
(supported by reasonable detail) setting forth the total consideration to be
paid or incurred in connection with the proposed acquisition and, pro forma
combined projected financial information for the Company and its Consolidated
Subsidiaries and the acquisition target (if applicable), consisting of projected
opening balance sheets and covenant calculations as of the proposed effective
date of the acquisition or the closing date and as of the end of at least the
next succeeding three (3) fiscal years of Company following the acquisition and
projected statements of income, balance sheets and cash flow statements for each
of those years based on historical financial information prepared in accordance
with GAAP, including sufficient detail to permit calculation of the amounts and
the financial covenants described in Sections 7.4 through 7.6 hereof and
evidencing projected compliance therewith, as projected as of the effective date
of the acquisition and for those fiscal years and accompanied by (i) a statement
setting forth a calculation of the ratios and amounts so described and (ii) a
statement in reasonable detail specifying all material assumptions underlying
the projections.
"Prohibited Transaction" shall mean any transaction involving a Pension
Plan which constitutes a "prohibited transaction" under Section 406 of ERISA or
Section 4975 of the Internal Revenue Code.
"Quoted Rate" shall mean the rate of interest per annum offered by the
Swing Line Bank in its sole discretion with respect to a Swing Line Advance.
"Quoted Rate Advance" means any Swing Line Advance which bears interest at
the Quoted Rate.
20
"Rating Agency" shall mean Fitch Investor Services, Inc., S&P, or Moody's,
or any of their respective successors, or any other nationally recognized rating
agency, and "Rating Agencies" shall be the collective reference to any or all of
the foregoing.
"Reaffirmation(s) of Certain Loan Documents" shall mean the
Reaffirmation(s) of Certain Loan Documents, executed and delivered pursuant to
Section 5.3 by the Company, the Permitted Borrowers and certain Significant
Subsidiaries, substantially in the form of Exhibit J attached hereto.
"Refunded Swing Line Advance" is defined in Section 2.5(e) hereof.
"Register" is defined in Section 13.8(f) hereof.
"Remaining Siliconix Acquisition" shall mean the purchase or other
acquisition by Company or any of its Domestic Subsidiaries of all or any portion
of the shares of stock of Siliconix.
"Reportable Event" shall mean a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations promulgated thereunder, which is
material to the Company and its Subsidiaries, taken as a whole.
"Request for Advance" shall mean a Request for Revolving Credit Advance or
a Request for Swing Line Advance, or either of them, as the context may indicate
or otherwise require.
"Request for Revolving Credit Advance" shall mean a request for Revolving
Credit Advance issued by the Company or by a Permitted Borrower and
countersigned by the Company under Section 2.3(c) hereof, as the case may be, in
the form attached annexed hereto as Exhibit A-1, as such form may be amended or
otherwise modified from time to time.
"Request for Swing Line Advance" shall mean a request for Swing Line
Advance issued by the Company or by a Permitted Borrower and countersigned by
the Company under Section 2.5(c) hereof, in the form attached annexed hereto as
Exhibit A-2, as such form may be amended or otherwise modified from time to
time.
"Required Lenders" shall mean at any time Lenders holding 51% of the
aggregate principal amount of the Indebtedness then outstanding hereunder
(provided that, for purposes of determining Required Lenders hereunder,
Indebtedness outstanding under the Swing Line shall be allocated among the
Lenders based on their respective Percentages of the Revolving Credit) or, if no
Indebtedness is then outstanding, Lenders holding 51% of the Percentages.
"Revolving Credit" shall mean the revolving credit loans to be advanced to
the Company or a Permitted Borrower by the Lenders pursuant to Section 2 hereof,
in an aggregate amount (subject to the terms hereof), not to exceed, at any one
time outstanding, the Revolving Credit Aggregate Commitment.
"Revolving Credit Aggregate Commitment" shall mean Four Hundred Million
Dollars ($400,000,000) less the LYONs Reserve, and subject to any reduction or
termination of the Revolving Credit Aggregate Commitment under Section 2.15 or
9.2 hereof.
21
"Revolving Credit Facility Fee" shall mean the facility fee payable to
Agent for distribution to the Lenders pursuant to Section 2.13, hereof.
"Revolving Credit Maturity Date" shall mean the earlier to occur of (i)
May 1, 2007, as such date may be extended from time to time pursuant to Section
2.16 hereof, and (ii) the date on which the Revolving Credit Aggregate
Commitment shall be terminated pursuant to Section 2.15 or 9.2 hereof.
"Revolving Credit Notes" shall mean the revolving credit notes which may
be issued by Company or a Permitted Borrower at the request of a Lender pursuant
to Section 2.2(e) hereof in the form annexed to this Agreement as Exhibit B-1 or
Exhibit B-2, as the case may be, as such Notes may be amended, renewed, replaced
or extended from time to time.
"Securitization Transaction(s)" shall mean a transfer of, or grant of a
Lien on, foreign accounts receivable by any Foreign Subsidiary to a Special
Purpose Subsidiary or other special purpose or limited purpose entity and the
issuance (whether by such Special Purpose Subsidiary or other special purpose or
limited purpose entity or any other Person) of Debt or of any securities secured
directly or indirectly by interests in, or of trust or a comparable certificates
or other securities directly or indirectly evidencing interests in, such foreign
accounts receivable.
"Security Agreement(s)" shall mean the security agreements executed and
delivered by the Company and each Significant Domestic Subsidiary and any
security agreements executed by certain Significant Foreign Subsidiaries
incorporated under the laws of the United States of America, or a state,
territory, possession or other political subdivision thereof after Agent's
receipt of a FPB Advance Notice pursuant to the requirements of Section 7.16
hereof (whether by execution thereof or by execution of a joinder agreement
attached to the form of such security agreement) in favor of the Agent
substantially in the form of the security agreements previously delivered under
this Agreement, as amended or otherwise modified from time to time.
"Senior Debt" shall mean, with respect to the Company and its Consolidated
Subsidiaries, Total Debt, excluding Subordinated Debt.
"Shares", "share capital", "capital stock", "stock" and words of similar
import shall mean and refer to the equity capital interest under applicable law
of any Person in a corporation or other business entity, howsoever such interest
is created or arises, whether such capital consists of common stock, preferred
stock or preference shares, or other stock, and whether such capital is
evidenced by a certificate, share register entry or otherwise.
"Significant Domestic Subsidiary(ies)" shall mean, on the Effective Date,
the domestic Permitted Borrowers, those Domestic Subsidiaries identified as
Significant Domestic Subsidiaries on Schedule 6.6A hereto and thereafter shall
mean the Significant Domestic Subsidiaries as of the Effective Date and all
other Domestic Subsidiaries, whether existing as of the Effective Date or
created or acquired by the Company thereafter, except any Subsidiary:
(a) the total assets of which, on an individual basis, on any date of
determination, are less than $5,000,000; and
22
(b) which has, as of the most recent fiscal quarter then ending, for the
four preceding fiscal quarters, an EBITDA of less than $1,000,000;
provided however that, notwithstanding the foregoing, neither Siliconix nor any
of its Subsidiaries shall be considered a Significant Domestic Subsidiary
hereunder unless and until Siliconix becomes a 100% Subsidiary or until
Siliconix complies with Section 2.1 and/or Section 7.16 hereof.
"Significant Foreign Subsidiary(ies)" shall mean, on the Effective Date,
the foreign Permitted Borrowers, those Foreign Subsidiaries which have executed
and delivered a Foreign Guaranty on or prior to the Effective Date, as
identified on Schedule 6.6A hereto, and thereafter shall mean the Significant
Foreign Subsidiaries as of the Effective Date and all other Foreign
Subsidiaries, whether existing as of the Effective Date or created or acquired
by the Company thereafter, except any Subsidiary:
(a) the total assets of which, on an individual basis, on any date of
determination, are, excluding goodwill, less than $30,000,000; and
(b) which has, as of the most recent fiscal quarter then ending, for the
four preceding fiscal quarters, an EBITDA of less than $2,500,000;
provided however that, notwithstanding the foregoing, neither Vishay Israel nor
any of its Subsidiaries organized under the laws of Israel shall be considered a
Significant Foreign Subsidiary hereunder and no Subsidiary of Siliconix shall be
a Significant Foreign Subsidiary unless and until Siliconix becomes a
Significant Domestic Subsidiary.
"Significant Subsidiary(ies)" shall mean the Significant Domestic
Subsidiaries and the Significant Foreign Subsidiaries.
"Siliconix" shall mean Siliconix Incorporated, a Delaware corporation.
"SPFV" shall mean a special purpose funding vehicle utilized by a Granting
Lender pursuant to Section 13.8 hereof to fund all or any part of any Advance
that such Lender would otherwise be obligated to fund under this Agreement.
"Special Letters of Credit" shall mean letters of credit issued by Agent
(or, with respect to the letter of credit issued by Syndication Agent, or its
affiliates, described on Schedule 1.7 hereto, and any extensions or renewals
thereof) as an administrative convenience for the account of the Company or its
Subsidiaries on its own behalf and not on behalf (by risk participation or
otherwise) of the other Lenders, in an aggregate amount at any time outstanding
not to exceed the Letter of Credit Reserve in effect at such time, each such
letter of credit being in an undrawn amount of less than $750,000.
"Special Purpose Subsidiary" shall mean any wholly-owned direct or
indirect Subsidiary of the Company established for the sole purpose of
conducting a Permitted Securitization and otherwise established and operated in
accordance with customary industry practices.
23
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., its successors and assigns, and, if such
organization shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency, "S&P" shall be deemed to refer to any
other nationally recognized securities rating agency designated by the Agent.
"Stockholder's Equity" shall mean (i) legal capital consisting of common
or preferred stock, (ii) paid-in capital to the extent of the excess over par or
stated value paid for capital stock and that created by a corporate readjustment
and (iii) retained earnings consisting of cumulative Net Income reduced by
dividends declared or paid.
"Subordinated Debt" shall mean all Debt of the Company and its
Subsidiaries which has been subordinated in right of payment and priority to the
Indebtedness, in each case on terms and conditions reasonably satisfactory to
the Agent and the Required Lenders, including, without limitation, the
Subordinated Debt existing on the Effective Date and identified (as such) on
Schedule 8.13 hereto.
"Subsidiary(ies)" shall mean any corporation, association, joint stock
company, limited liability company, partnership or business trust of which more
than fifty percent (50%) of the outstanding voting stock or other ownership
interests is owned either directly or indirectly by Company or one or more of
its Subsidiaries or by Company and one or more of its Subsidiaries, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by Company and/or its Subsidiaries. "100%
Subsidiary(ies)" shall mean any of the Company's Subsidiaries whose stock (other
than directors' or qualifying shares to the extent required under applicable
law) or other ownership interests is owned 100% by any other 100% Subsidiary
and/or the Company, and shall also include Vishay Israel.
"Swing Line" shall mean the revolving credit loan to be advanced to the
Company or a Permitted Borrower by the Swing Line Bank pursuant to Section 2.5
hereof, in an aggregate amount (subject to the terms hereof) not to exceed, at
any one time outstanding, the Swing Line Maximum Amount.
"Swing Line Advance" shall mean an Advance made by Swing Line Bank to
Company or a Permitted Borrower pursuant to Section 2.5 hereof.
"Swing Line Bank" shall mean Comerica Bank, and its successors and
assigns.
"Swing Line Maximum Amount" shall mean Forty Million Dollars
($40,000,000).
"Swing Line Notes" shall mean the swing line notes which may be issued by
Company or a Permitted Borrower at the request of Swing Line Bank pursuant to
Section 2.5(a) hereof in the form annexed hereto as Exhibit C-1 or C?2, as the
case may be, as such Notes may be amended or supplemented from time to time, and
any notes issued in substitution, replacement or renewal thereof from time to
time.
"Syndication Agent" shall mean Fleet Securities, Inc., or its permitted
successors and/or assigns.
24
"Tangible Net Worth" shall mean, as of any date of determination, the
total common shareholders' equity of the Company and its Subsidiaries on a
Consolidated basis, together with the amount, if any, of preferred stock which
is classified as part of shareholders' equity, as reflected on the most recent
regularly prepared quarterly balance sheet of the Company and such Subsidiaries,
which balance sheet shall be prepared in accordance with GAAP, minus the book
amount of intangible assets including, without limitation, such items as
goodwill, trademarks, trade names, copyrights, patents, licenses and rights in
any intangible assets, and unamortized debt discount and expense, as of such
date determined in accordance with GAAP, but excluding the effects of the
currency translation adjustment and of the pension adjustment under the
additional minimum liability section of FASB 87.
"Total Debt" shall mean, with respect to the Company and its Consolidated
Subsidiaries, as of any date of determination, the sum, without duplication, of
(a) the aggregate outstanding principal amounts of (i) Advances of the Revolving
Credit and Swing Line outstanding as of such date and any Letter of Credit
Obligations outstanding as of such date, (ii) all other Debt of the Company and
its Subsidiaries as of such date for borrowed money or which is evidenced by
debentures, notes or other similar instruments, (iii) all other obligations of
the Company and its Subsidiaries as of such date to reimburse the issuers of
letters of credit issued for their account for each payment made by such issuers
under such letters of credit (iv) all capitalized lease obligations of the
Company and its Subsidiaries as of such date (v) all obligations of Company and
its Subsidiaries under conditional sale or other title retention agreements
relating to property or assets purchased and (vi) any Debt or off balance sheet
obligations issued pursuant to a Securitization Transaction (whether by a
Special Purpose Subsidiary or otherwise), all determined on a Consolidated
basis.
"Trans-European Business Day" shall mean a day when the Trans-European
Settlement System is open for business.
"Trans-European Settlement System" shall mean the Trans-European Automated
Real-time Gross Settlement Express Transfer System or any successor.
"Treaty on European Union" shall mean the Treaty of Maastricht (which was
signed at Maastricht on February 7, 1992 and came into force on November 1,
1993), as amended by the Treaty of Amsterdam (which was signed on October 2,
1997 and came into force on May 1, 1999) and the Treaty of Nice (which was
signed on February 26, 2001 and came into force on February 1, 2003).
"Vishay Asia" shall mean Vishay Intertechnology Asia Limited Pte., a
company organized under the laws of Singapore.
"Vishay Europe" shall mean Vishay Europe GmbH, a company organized under
the laws of the Federal Republic of Germany, formerly known as Vishay
Beteiligungs GmbH.
"Vishay Electronic" shall mean Vishay Electronic GmbH, a company organized
under the laws of the Federal Republic of Germany.
"Vishay Israel" shall mean Vishay Israel Limited, a corporation organized
under the laws of Israel and a Subsidiary of the Company.
25
1.2 Euro.
(a) Redenomination of Eurocurrency-based Advances and other Advances
into Euro Units.
(i) Each obligation under this Agreement of a party hereto which
(A) was originally denominated in the former national currency
of a Participating Member State, or (B) would otherwise have
been denominated in such former national currency prior to
such date shall be denominated in, or redenominated into, as
applicable, the Euro Unit in accordance with EMU Legislation
and applicable state law, provided that, if and to the extent
that any EMU Legislation provides that amounts denominated in
the euro unit or the National Currency Unit of a Participating
Member State, that are payable by crediting an account of the
creditor within that country, may be made in either Euro or
National Currency Units, each party to this Agreement shall be
entitled to pay or repay any such amounts in either the Euro
Unit or such National Currency Unit.
(ii) Subject to any EMU Legislation, references in this Agreement
to a minimum amount (or an integral multiple thereof) in a
National Currency Unit to be paid to or by a party hereto
shall be deemed to be a reference to such reasonably
comparable and convenient amount (or an integral multiple
thereof) in the Euro Unit as the Agent may from time to time
specify.
(b) Payments.
(i) All payments by any Borrower or any Lender of amounts
denominated in the Euro or a National Currency Unit of a
Participating Member State, shall be made in immediately
available, freely transferable, cleared funds to the account
of the Agent in the principal financial center in such
Participating Member State, as from time to time designated by
the Agent for such purpose.
(ii) All amounts payable by the Agent to any party under this
Agreement in the National Currency Unit of a Participating
Member State shall instead be paid in the Euro Unit.
(iii) Subject in the case of any Lender to Section 12.3 hereof, the
Agent shall not be liable to any party to this Agreement in
any way whatsoever for any delay, or the consequences of any
delay, in the crediting to any account of any amount
denominated in the Euro or a National Currency Unit of a
Participating Member State.
(iv) All references herein to the London interbank or other
national market with respect to any National Currency Unit of
a Participating Member State shall be deemed a reference to
the applicable markets and locations referred to in the
definition of "Business Day" in Section 1.1.
26
(c) Increased Costs. The Borrowers shall, from time to time upon demand
of any Lender (with a copy to the Agent), pay to such Lender the
amount of any cost or increased cost incurred by, or of any
reduction in any amount payable to or in the effective return on its
capital to, or of interest or other return foregone by, such Lender
or any holding company of such Lender as a result of the
introduction of, changeover to or operation of the Euro in a
Participating Member State, other than any such cost or reduction or
amount foregone reflected in any interest rate hereunder.
(d) Inconsistent Practice. If the basis of accrual of interest or fees
expressed in this Agreement with respect to the currency of any
state that becomes a Euro Member shall be inconsistent with any
convention or practice in the London interbank market for the basis
of accrual of interest or fees in respect of Euros, such convention
or practice shall replace such expressed basis effective as of and
from the date on which such state becomes a Euro Member; provided,
that if any Advance in the currency of such state is outstanding
immediately prior to such date, such replacement shall take effect,
with respect to such Advance, at the end of the then current
Interest Period.
(e) Unavailability of Euro. If the Agent at any time determines that:
(i) the Euro has ceased to be utilized as the basic accounting unit
of the European Community; (ii) for reasons affecting the market in
Euros generally, Euros are not freely traded between banks
internationally; or (iii) it is illegal, impossible or impracticable
for payments to be made hereunder in Euro, then the Agent may, in
its discretion declare (such declaration to be binding on all the
parties hereto) that any payment made or to be made thereafter
which, but for this provision, would have been payable in the Euro
shall be made in a component currency of the Euro or Dollars (as
selected by the Agent (the "Selected ---------- Currency") and the
amount to be so paid shall be calculated on the basis of the
equivalent of the Euro in the Selected Currency).
(f) Additional Changes at Agent's Discretion. This section and other
provisions of this Agreement relating to Euros and the National
Currency Units of Participating Member States shall be subject to
such further changes (including changes in interpretation or
construction) as the Agent may from time to time in its reasonable
discretion notify to the Borrowers and the Lenders to be necessary
or appropriate to reflect the changeover to the Euro in
Participating Member States.
2. REVOLVING CREDIT
2.1 Commitment. Subject to the terms and conditions of this Agreement
(including without limitation Section 2.3 hereof), each Lender severally and for
itself alone agrees to make Advances of the Revolving Credit in any one or more
of the Permitted Currencies to the Company or to any of the Permitted Borrowers
from time to time on any Business Day during the period from the Effective Date
until (but excluding) the Revolving Credit Maturity Date in an aggregate amount,
based on the Dollar Amount of any Advances outstanding in Dollars and the
Current Dollar Equivalent of any Advances outstanding in Alternative Currencies,
not to exceed
27
at any one time outstanding such Lender's Percentage of the Revolving Credit
Aggregate Commitment. Except as provided in Section 2.12 hereof, for purposes of
this Agreement, Advances in Alternative Currencies shall be determined,
denominated and redenominated as set forth in Section 2.11 hereof. Subject to
the terms and conditions set forth herein, advances, repayments and readvances
may be made under the Revolving Credit. Advances of the Revolving Credit shall
be subject to the following additional conditions and limitations:
(a) No Permitted Borrower shall be entitled to request an Advance of the
Revolving Credit or the Swing Line or the issuance of a Letter of
Credit hereunder until (i) it has become a party to this Agreement,
either by execution and delivery of this Agreement, or by execution
and delivery of a Permitted Borrower Addendum to this Agreement,
(ii) it has become a party to the applicable Guaranty either by
execution and delivery of such Guaranty or by execution and delivery
of a Joinder Agreement to such Guaranty, (iii) in the case of each
Domestic Permitted Borrower, it has become a party to the applicable
Security Agreement, (iv) in the case of the first Advance to a
Foreign Permitted Borrower after the Effective Date, the Company, or
such Foreign Permitted Borrower, has submitted to the Agent, not
less than 90 days prior to date of such Advance, a FPB Advance
Notice and (v) in the case of each Permitted Borrower, the Company
has encumbered and/or delivered (or caused to be encumbered and/or
delivered), as the case may be, pursuant to a Pledge Agreement those
shares of stock issued by such Permitted Borrower and owned
(directly or indirectly) by the Company which are required to be
encumbered and/or delivered under the Prior Credit Agreement or
Section 7.16 or 7.18 hereof, as applicable, and accompanied in each
case by authority documents, legal opinions and other supporting
documents as reasonably required by Agent and the Required Lenders
hereunder;
(b) No Subsidiary which is a Permitted Borrower as of the Effective Date
nor any Foreign Subsidiary which becomes a Permitted Borrower after
the Effective Date shall be entitled to request or maintain (or, in
the case of any Eurocurrency-based Advance, maintain beyond any
applicable Interest Period then in effect) an Advance of the
Revolving Credit or the Swing Line or the issuance of a Letter of
Credit hereunder if it ceases to be a 100% Subsidiary of the
Company. Notwithstanding the foregoing, however, Siliconix (if it
shall become a Permitted Borrower) shall be entitled to request (or
maintain) Advances of the Revolving Credit and the Swing Line and
the issuance of Letters of Credit hereunder so long as at least 80%
of its common shares are owned directly or indirectly by the
Company.
2.2 Accrual of Interest and Maturity; Evidence of Indebtedness. (a) The
Company hereby unconditionally promises to pay to the Agent for the account of
each Lender the then unpaid principal amount of each Revolving Credit Advance of
such Lender made to the Company and each Permitted Borrower, and each Permitted
Borrower hereby unconditionally promises to pay to the Agent for the account of
each Lender the then unpaid principal amount of each Revolving Credit Advance of
such Lender made to such Permitted Borrower, on the Revolving Credit Maturity
Date and on such other dates and in such other amounts as may be required from
time to time pursuant to this Agreement.
28
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Company and each
Permitted Borrower to the appropriate lending office of such Lender
resulting from each Revolving Credit Advance made by such lending
office of such Lender from time to time, including the amounts of
principal and interest payable thereon and paid to such Lender from
time to time under this Agreement.
(c) The Agent shall maintain the Register pursuant to Section 13.8(f),
and a subaccount therein for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount and
applicable Permitted Currency of each Revolving Credit Advance made
hereunder, the type thereof and each Interest Period applicable to
any Eurocurrency-based Advance, (ii) the amount of any principal or
interest due and payable or to become due and payable from the
Company or the applicable Permitted Borrower, as the case may be, to
each Lender hereunder in respect of the Revolving Credit Advances
and (iii) both the amount of any sum received by the Agent hereunder
from the Company or the applicable Permitted Borrower in respect of
the Revolving Credit Advances and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to paragraphs (b) and (c) of this Section 2.1
shall absent manifest error, to the extent permitted by applicable
law, be conclusive evidence of the existence and amounts of the
obligations of the Company and the Permitted Borrowers therein
recorded; provided, however, that the failure of any Lender or the
Agent to maintain the Register or any such account, as applicable,
or any error therein, shall not in any manner affect the obligation
of each of the Company and each Permitted Borrower to repay the
Revolving Credit Advances (and all other amounts owing with respect
thereto) made to the Company or such Permitted Borrower by such
Lender in accordance with the terms of this Agreement.
(e) The Company agrees that, upon written request to the Administrative
Agent (with a copy to the Company) by any Lender, the Company and
each of the Permitted Borrowers will execute and deliver, to such
Lender, at the Company's (or such Permitted Borrower's) own expense,
a Revolving Credit Note of each of the Company and each of the
Permitted Borrowers evidencing the outstanding Revolving Credit
Advances owing to such Lender; provided, that the delivery of such
Revolving Credit Notes shall not be a condition precedent to the
Effective Date.
2.3 Requests for and Refundings and Conversions of Advances. Company or a
Permitted Borrower (with the countersignature of Company hereunder) may request
an Advance of the Revolving Credit, refund any such Advance in the same type of
Advance or convert any such Advance to any other type of Advance of the
Revolving Credit only after delivery to Agent of a Request for Revolving Credit
Advance executed by an Authorized Officer of Company or of such Permitted
Borrower (with the countersignature of an Authorized Officer of the Company),
subject to the following and to the remaining provisions hereof:
29
(a) each such Request for Revolving Credit Advance shall set forth the
information required on the Request for Advance form annexed hereto
as Exhibit A-1, including without limitation:
(i) the proposed date of such Advance, which must be a Business
Day;
(ii) whether such Advance is a refunding or conversion of an
outstanding Advance;
(iii) whether such Advance is to be a Prime-based Advance or a
Eurocurrency-based Advance, and, except in the case of a
Prime-based Advance, the first Interest Period applicable
thereto; and
(iv) in the case of a Eurocurrency-based Advance, the Permitted
Currency in which such Advance is to be made.
(b) each such Request for Revolving Credit Advance shall be delivered to
Agent by 12:00 noon (Detroit time) three (3) Business Days prior to
the proposed date of Advance, except in the case of a Prime-based
Advance, for which the Request for Advance must be delivered by
12:00 noon (Detroit time) on such proposed date;
(c) on the proposed date of such Advance, the Dollar Amount of the
principal amount of such requested Advance, plus the Dollar Amount
of the principal amount of any other Advances of the Revolving
Credit and of the Swing Line being requested on such date, plus the
principal amount of all other Advances of the Revolving Credit and
of the Swing Line then outstanding hereunder, in each case whether
to Company or the Permitted Borrowers (using the Current Dollar
Equivalent of any such Advances outstanding in any Alternative
Currency, determined pursuant to the terms hereof as of the date of
such requested Advance), plus the aggregate undrawn portion of any
Letters of Credit which shall be outstanding as of the date of the
requested Advance (based on the Dollar Amount of the undrawn portion
of any Letters of Credit denominated in Dollars and the Current
Dollar Equivalent of the undrawn portion of any Letters of Credit
denominated in any Alternative Currency), the aggregate face amount
of Letters of Credit requested but not yet issued (determined as
aforesaid) and the aggregate amount of all drawings made under any
Letter of Credit for which the Agent has not received full
reimbursement from the applicable Account Party (using the Current
Dollar Equivalent thereof for any Letters of Credit denominated in
any Alternative Currency), shall not exceed the Revolving Credit
Aggregate Commitment; provided however, that, in the case of any
Advance of the Revolving Credit being applied to refund an
outstanding Swing Line Advance, the aggregate principal amount of
Swing Line Advances to be refunded shall not be included for
purposes of calculating the limitation under this Section 2.3(c);
(d) in the case of a Permitted Borrower, on the proposed date of such
Advance, the principal amount of the Advance of the Revolving Credit
being requested by such Permitted Borrower (determined and tested as
aforesaid), plus the principal
30
amount of any other Advances of the Revolving Credit and of the
Swing Line being requested by such Permitted Borrower on such date,
plus the principal amount of any other Advances of the Revolving
Credit and all Advances of the Swing Line then outstanding to such
Permitted Borrower hereunder (determined as aforesaid), plus the
undrawn portion of any Letter of Credit which shall be outstanding
as of the date of the requested Advance for the account of such
Permitted Borrower, plus the aggregate face amount of Letters of
Credit requested but not yet issued for the account of such
Permitted Borrower (in each case determined as aforesaid), plus the
unreimbursed amount of any drawings under any Letters of Credit
(using the Current Dollar Equivalent thereof for any Letters of
Credit denominated in any Alternative Currency) issued for the
account of such Permitted Borrower, shall not exceed the applicable
Permitted Borrower Sublimit;
(e) in the case of a Prime-based Advance, the principal amount of the
initial funding of such Advance, as opposed to any refunding or
conversion thereof, shall be at least $10,000,000;
(f) in the case of a Eurocurrency-based Advance, the principal amount of
such Advance, plus the amount of any other outstanding Advance of
the Revolving Credit to be then combined therewith having the same
Applicable Interest Rate and Interest Period, if any, shall be at
least Fifteen Million Dollars ($15,000,000) or the equivalent
thereof in an Alternative Currency (or a larger integral multiple of
One Hundred Thousand Dollars ($100,000), or the equivalent thereof
in the applicable Alternative Currency) and at any one time there
shall not be in effect more than (x) for Advances to Company, ten
(10) Applicable Interest Rates and Interest Periods, and (y) for
Advances to each Permitted Borrower five (5) Applicable Interest
Rates and Interest Periods for each such currency;
(g) a Request for Revolving Credit Advance, once delivered to Agent,
shall not be revocable by Company or the Permitted Borrowers;
(h) each Request for Revolving Credit Advance shall constitute a
certification by the Company and the applicable Permitted Borrower,
if any, as of the date thereof that:
(i) both before and after such Advance, the obligations of the
Company and the Permitted Borrowers set forth in this
Agreement and the other Loan Documents to which such Persons
are parties are valid, binding and enforceable obligations of
the Company and the Permitted Borrowers, as the case may be;
(ii) all conditions to Advances of the Revolving Credit have been
satisfied, and shall remain satisfied to the date of such
Advance (both before and after giving effect to such Advance);
31
(iii) there is no Default or Event of Default in existence, and none
will exist upon the making of such Advance (both before and
after giving effect to such Advance);
(iv) the representations and warranties contained in this Agreement
and the other Loan Documents are true and correct in all
material respects and shall be true and correct in all
material respects as of the making of such Advance (both
before and after giving effect to such Advance); and
(v) the execution of such Request for Advance will not violate the
material terms and conditions of any material contract,
agreement or other borrowing of Company or the Permitted
Borrowers.
Agent, acting on behalf of the Lenders, may, at its option, lend
under this Section 2 upon the telephone request of an Authorized
Officer of Company or a Permitted Borrower and, in the event Agent,
acting on behalf of the Lenders, makes any such Advance upon a
telephone request, the requesting officer shall fax to Agent, on the
same day as such telephone request, a Request for Advance. Company
and Permitted Borrowers hereby authorize Agent to disburse Advances
under this Section 2.3 pursuant to the telephone instructions of any
person purporting to be a person identified by name on a written
list of persons authorized by the Company and delivered to Agent
prior to the date of such request to make Requests for Advance on
behalf of the Company and the Permitted Borrowers. Notwithstanding
the foregoing, the Company and each Permitted Borrower acknowledge
that Company and each such Permitted Borrower shall bear all risk of
loss resulting from disbursements made upon any telephone request.
Each telephone request for an Advance shall constitute a
certification of the matters set forth in the Request for Revolving
Credit Advance form as of the date of such requested Advance.
2.4 Disbursement of Advances.
(a) Upon receiving any Request for Revolving Credit Advance from Company
or a Permitted Borrower under Section 2.3 hereof, Agent shall
promptly notify each Lender by wire, telex or telephone (confirmed
by wire, telecopy or telex) of the amount and currency of such
Advance to be made and the date such Advance is to be made by said
Lender pursuant to its Percentage of such Advance. Unless such
Lender's commitment to make Advances of the Revolving Credit
hereunder shall have been suspended or terminated in accordance with
this Agreement, each such Lender shall make available the amount of
its Percentage of each Advance in immediately available funds in the
currency of such Advance to Agent, as follows:
(i) for Domestic Advances, at the office of Agent located at One
Detroit Center, Detroit, Michigan 48226, not later than 3:00
p.m. (Detroit time) on the date of such Advance; and
32
(ii) for Eurocurrency-based Advances, at the Agent's Correspondent
for the account of the Eurocurrency Lending Office of the
Agent, not later than 12 noon (the time of the Agent's
Correspondent) on the date of such Advance.
(b) Subject to submission of an executed Request for Revolving Credit
Advance by Company or a Permitted Borrower (with the
countersignature of the Company as aforesaid) without exceptions
noted in the compliance certification therein, Agent shall make
available to Company or to the applicable Permitted Borrower, as the
case may be, the aggregate of the amounts so received by it from the
Lenders in like funds and currencies:
(i) for Domestic Advances, not later than 4:00 p.m. (Detroit time)
on the date of such Advance by credit to an account of Company
or such Permitted Borrower maintained with Agent or to such
other account or third party as Company or such Permitted
Borrower may reasonably direct; and
(ii) for Eurocurrency-based Advances, not later than 4:00 p.m. (the
time of the Agent's Correspondent) on the date of such
Advance, by credit to an account of Company or such Permitted
Borrower maintained with Agent's Correspondent or to such
other account or third party as Company or such Permitted
Borrower may reasonably direct.
(c) Agent shall deliver the documents and papers received by it for the
account of each Lender to such Lender or upon its order. Unless
Agent shall have been notified by any Lender prior to the date of
any proposed Advance that such Lender does not intend to make
available to Agent such Lender's Percentage of such Advance, Agent
may assume that such Lender has made such amount available to Agent
on such date and in such currency, as aforesaid and may, in reliance
upon such assumption, make available to Company or to the applicable
Permitted Borrower, as the case may be, a corresponding amount. If
such amount is not in fact made available to Agent by such Lender,
as aforesaid, Agent shall be entitled to recover such amount on
demand from such Lender. If such Lender does not pay such amount
forthwith upon Agent's demand therefor, the Agent shall promptly
notify Company, and Company or the applicable Permitted Borrower
shall pay such amount to Agent. Agent shall also be entitled to
recover from such Lender or Company or the applicable Permitted
Borrower, as the case may be, but without duplication, interest on
such amount in respect of each day from the date such amount was
made available by Agent to Company or such Permitted Borrower, as
the case may be, to the date such amount is recovered by Agent, at a
rate per annum equal to:
(i) in the case of such Lender, for the first two (2) Business
Days such amount remains unpaid, with respect to Domestic
Advances, the Federal Funds Effective Rate, and with respect
to Eurocurrency-based Advances, Agent's aggregate marginal
cost (including the cost of maintaining any required reserves
or deposit insurance and of any fees, penalties, overdraft
33
charges or other costs or expenses incurred by Agent as a
result of such failure to deliver funds hereunder) of carrying
such amount and thereafter, at the rate of interest then
applicable to such Revolving Credit Advances; and
(ii) in the case of Company or such Permitted Borrower, the rate of
interest then applicable to such Advance of the Revolving
Credit.
The obligation of any Lender to make any Advance of the Revolving
Credit hereunder shall not be affected by the failure of any other
Lender to make any Advance hereunder, and no Lender shall have any
liability to the Company or any of its Subsidiaries, the Agent, any
other Lender, or any other party for another Lender's failure to
make any loan or Advance hereunder.
2.5 (a) Swing Line Advances. The Swing Line Bank shall, on the terms and
subject to the conditions hereinafter set forth (including without limitation
Section 2.5(c) hereof), make one or more advances in Dollars or in any
Alternative Currency (each such advance being a "Swing Line Advance") to Company
or any of the Permitted Borrowers (provided that any such Permitted Borrower has
become a party to this Agreement, either by execution and delivery of this
Agreement, or by complying with the terms and conditions set forth in Section
2.1(a) hereof), from time to time on any Business Day during the period from the
date hereof to (but excluding) the Revolving Credit Maturity Date in an
aggregate amount, based on the Dollar Amount of any such Advances outstanding in
Dollars and the Current Dollar Equivalent of any such Advances outstanding in
Alternative Currencies, not to exceed at any time outstanding the Swing Line
Maximum Amount. Swing Line Bank shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Company and each
of the Permitted Borrowers to Swing Line Bank resulting from each Swing Line
Advance of such Lender from time to time, including the amounts of principal and
interest payable thereon and paid to such Lender from time to time. The entries
made in such account or accounts of Swing Line Bank shall, to the extent
permitted by applicable law, be conclusive evidence, absent manifest error, of
the existence and amounts of the obligations of the Company and the Permitted
Borrower therein recorded; provided, however, that the failure of Swing Line
Bank to maintain such account, as applicable, or any error therein, shall not in
any manner affect the obligation of each of the Company and each Permitted
Borrower to repay the Swing Line Advances (and all other amounts owing with
respect thereto) made to the Company or such Permitted Borrower by Swing Line
Bank in accordance with the terms of this Agreement. Advances, repayments and
readvances under the Swing Line may be made, subject to the terms and conditions
of this Agreement. Each Swing Line Advance shall mature and the principal amount
thereof shall be due and payable by Company or the applicable Permitted Borrower
on the last day of the Interest Period applicable thereto (if any) and in the
case of any Prime-based Advance, on the Revolving Credit Maturity Date.
The Company agrees that, upon the written request of Swing Line Bank (with
a copy concurrently delivered to the Agent), the Company and each of the
Permitted Borrowers will execute and deliver to Swing Line Bank Swing Line Notes
of each of the Company and each of the Permitted Borrowers; provided, that the
delivery of such Swing Line Notes shall not be a condition precedent to the
Effective Date.
34
(b) Accrual of Interest. Each Swing Line Advance shall, from time to
time after the date of such Advance, bear interest at its Applicable
Interest Rate. The amount and date of each Swing Line Advance, its
Applicable Interest Rate, its Interest Period, if any, and the
amount and date of any repayment shall be noted on Swing Line Bank's
account maintained pursuant to Section 2.5(a), which records will be
conclusive evidence thereof, absent manifest error; provided,
however, that any failure by the Swing Line Bank to record any such
information shall not relieve Company or the applicable Permitted
Borrower of its obligation to repay the outstanding principal amount
of such Advance, all interest accrued thereon and any amount payable
with respect thereto in accordance with the terms of this Agreement
and the other Loan Documents.
(c) Requests for Swing Line Advances. Company or a Permitted Borrower
(with the countersignature of the Company) may request a Swing Line
Advance only after delivery to Swing Line Bank (with a copy
concurrently delivered to Agent) of a Request for Swing Line Advance
executed by an Authorized Officer of Company or such Permitted
Borrower, subject to the following and to the remaining provisions
hereof:
(i) each such Request for Swing Line Advance shall set forth the
information required on the Request for Advance form annexed
hereto as Exhibit A-2, including without limitation:
(A) the proposed date of such Swing Line Advance, which must
be a Business Day;
(B) whether such Swing Line Advance is to be a Prime-based
Advance, a Eurocurrency-based Advance or a Quoted Rate
Advance;
(C) the duration of the Interest Period applicable thereto;
and
(D) in the case of a Eurocurrency-based Advance, the
Permitted Currency in which such Advance is to be made.
(ii) the Dollar Amount of the principal amount of such requested
Swing Line Advance, plus the aggregate principal amount of all
other Swing Line Advances then outstanding hereunder
(including any other Swing Line Advances requested to be made
on such date) whether to Company or to any of the Permitted
Borrowers (using the Current Dollar Equivalent of any such
Advances outstanding in any Alternative Currency, determined
pursuant to the terms hereof as of the date of such requested
Advance) shall not exceed the Swing Line Maximum Amount;
(iii) as of the proposed date of such Swing Line Advance, the Dollar
Amount of the principal amount of such requested Swing Line
Advance, plus the aggregate principal amount of all other
Swing Line Advances and all Advances of the Revolving Credit
then outstanding hereunder (including
35
any Revolving Credit Advances or other Swing Line Advances
requested to be made on such date) whether to Company or to
any of the Permitted Borrowers (using the Current Dollar
Equivalent of any such Advances outstanding in any Alternative
Currency, determined pursuant to the terms hereof as of the
date of such requested Advance), and the aggregate undrawn
portion of any Letters of Credit which shall be outstanding as
of the date of the requested Swing Line Advance (based on the
Dollar Amount of the undrawn portion of any Letters of Credit
denominated in Dollars and the Current Dollar Equivalent of
the undrawn portion of any Letters of Credit denominated in
any Alternative Currency), plus the aggregate face amount of
Letters of Credit requested but not yet issued (determined as
aforesaid), plus the unreimbursed amount of any draws under
Letters of Credit (using the Current Dollar Equivalent thereof
for any Letters of Credit denominated in any Alternative
Currency) shall not exceed the Revolving Credit Aggregate
Commitment;
(iv) in the case of any Permitted Borrower, as of the proposed date
of such Swing Line Advance, the principal amount of the
requested Swing Line Advance to such Permitted Borrower
(determined as aforesaid), plus the aggregate principal amount
of any other Swing Line Advances and all other Advances then
outstanding to such Permitted Borrower hereunder (including,
without duplication, Revolving Credit Advances or Swing Line
Advances requested to be made on such date) determined as
aforesaid, plus the aggregate undrawn portion of any Letters
of Credit which shall be outstanding as of the date of the
requested Swing Line Advance for the account of such Permitted
Borrower, plus the aggregate face amount of any Letters of
Credit requested but not yet issued for the account of such
Permitted Borrower hereunder (in each case determined as
aforesaid), plus the unreimbursed amount of any drawings under
any Letters of Credit (using the Current Dollar Equivalent
thereof for any Letters of Credit denominated in any
Alternative Currency) issued for the account of such Permitted
Borrower, shall not exceed the applicable Permitted Borrower
Sublimit;
(v) in the case of a Prime-based Advance, the principal amount of
the initial funding of such Advance, as opposed to any
refunding or conversion thereof, shall be at least One Hundred
Thousand Dollars ($100,000);
(vi) in the case of a Eurocurrency-based Advance or a Quoted Rate
Advance, the principal amount of such Advance, the principal
amount of such Swing Line Advance plus the amount of any other
outstanding Advance of the Swing Line to be then combined
therewith having the same Applicable Interest Rate and
Interest Period, if any, shall be, at least Two Hundred Fifty
Thousand Dollars ($250,000), or the equivalent thereof in an
Alternative Currency (or a larger integral multiple of One
Hundred Thousand Dollars ($100,000), or the equivalent thereof
in the applicable Alternative Currency), and at any one time
there shall not be in effect
36
more than (x) for Advances in Dollars, Five (5) Applicable
Interest Rates and Interest Periods, and (y) for Advances in
any Alternative Currency (other than eurodollars), two (2)
Applicable Interest Rates and Interest Periods for each such
currency;
(vii) each such Request for Swing Line Advance shall be delivered to
the Swing Line Bank (with a copy concurrently delivered to
Agent) (x) for each Advance in Dollars, by 2:00 p.m. (eastern
time) (or such other time as Swing Line Bank shall specify to
Company or the applicable Permitted Borrower) on the proposed
date of the Advance and (y) for each Advance in any
Alternative Currency, by 10:00 a.m. (eastern time) two (2)
Business Days prior to the proposed date of Advance;
(viii) each Request for Swing Line Advance, once delivered to Swing
Line Bank, shall be irrevocable by Company, and shall
constitute and include a certification by the Company as of
the date thereof that:
(A) both before and after such Swing Line Advance, the
obligations of the Company set forth in this Agreement
and the Loan Documents, are valid, binding and
enforceable obligations of the Company;
(B) all conditions to the making of Swing Line Advances
have been satisfied (both before and after giving
effect to such Advance);
(C) both before and after the making of such Swing Line
Advance, there is no Default or Event of Default in
existence; and
(D) both before and after such Swing Line Advance, the
representations and warranties contained in this
Agreement and the other Loan Documents are true and
correct in all material respects.
(ix) At the option of the Swing Line Bank, subject to revocation by
Swing Line Bank at any time and from time to time, the Company
may utilize the Swing Line Bank's "Sweep to Loan" automated
system for obtaining Swing Line Advances. Each time a Swing
Line Advance is made using the "Sweep to Loan" system, the
Company shall be deemed to have certified to the Swing Line
Bank and the Lenders each of the matters set forth in clause
(viii) of this Section. Swing Line Bank may revoke the
Company's privilege to use the "Sweep to Loan" system at any
time and from time to time for any reason, and, immediately
upon any such revocation, the "Sweep to Loan" system shall no
longer be available to the Company for the funding of Swing
Line Advances hereunder (or otherwise) and regular procedures
set forth for the making of Swing Line Advances shall be
deemed immediately to apply. If the Swing Line Bank makes any
Swing Line Advances such that (i) the total amount of the
Advances and outstanding Letters of Credit exceeds the
Revolving Credit Aggregate Commitment or (ii) the total of
Swing Line Advances exceeds
37
the Swing Line Maximum Amount as a result, in either case, of
the Company's use of the "Sweep to Loan" system, no Lender
shall be required to participate in any such excess Swing Line
Advances.
(d) Disbursement of Swing Line Advances. Unless otherwise notified in
writing by Agent promptly following each receipt of Request for
Swing Line Advance hereunder, Swing Line Bank may assume that all
conditions precedent to the disbursement of such requested Swing
Line Advance have been satisfied, including without limitation that
no Default or Event of Default has occurred and is continuing and
that the entirety of the Swing Line Maximum Amount less any
outstanding Swing Line Advances is available hereunder (provided
that Agent shall have no responsibility whatsoever to Swing Line
Bank or to any other Lender to give any notice hereunder, except as
set forth in Section 12.12 of this Agreement), and subject to the
proper submission of an executed Request for Swing Line Advance by
Company or a Permitted Borrower without exceptions noted in the
compliance certification therein and to the other terms and
conditions hereof, Swing Line Bank shall make available to Company
or the applicable Permitted Borrower the amount so requested, in
like funds and currencies, not later than:
(i) for Prime-based Advances or Quoted Rate Advances, not later
than 5:00 p.m. (eastern time) on the date of such Advance by
credit to an account of Company or the applicable Permitted
Borrower maintained with the Swing Line Bank or with Agent or
to such other account or third party as Company or the
Permitted Borrower may reasonably direct in writing; and
(ii) for Eurocurrency-based Advances, not later than 4:00 p.m. (the
time of the office of Swing Line Bank funding such Advance) on
the date of such Advance, by credit to an account of Company
or the Permitted Borrower maintained with the Swing Line
Bank's or the Agent's Correspondent or to such other account
or third party as Company or the applicable Permitted Borrower
may reasonably direct.
Swing Line Bank shall promptly notify Agent of any Swing Line
Advance by telephone, telex or telecopier.
(e) Refunding of or Participation Interest in Swing Line Advances.
(i) Acting through Agent (which shall, subject to the terms
hereof, comply with the Swing Line Bank's request), the Swing
Line Bank, at any time in its sole and absolute discretion,
may on behalf of the Company or the applicable Permitted
Borrower (each of which hereby irrevocably directs the Swing
Line Bank and the Agent to act on its behalf) request each of
the Lenders (including the Swing Line Bank in its capacity as
a Lender) to make an Advance of the Revolving Credit to each
of Company and the applicable Permitted Borrowers, for each
Permitted Currency in which Swing Line Advances are
outstanding to such party, in an amount (in the
38
applicable Permitted Currency, determined in accordance with
Section 2.11(b) hereof) equal to such Lender's Percentage of
the principal amount of the aggregate Swing Line Advances
outstanding in each Permitted Currency to each such party on
the date such notice is given (the "Refunded Swing Line
Advances"); provided however that Swing Line Advances which
are carried at the Quoted Rate or the Eurocurrency-based Rate
which are converted to Revolving Credit Advances at the
request of the Swing Line Bank at a time when no Default or
Event of Default has occurred and is continuing, shall not be
subject to Section 11.1 and no losses, costs or expenses may
be assessed by the Swing Line Bank against the Company, a
Permitted Borrower or the other Banks as a consequence of such
conversion. In the case of each Refunded Swing Line Advance
outstanding in Dollars, the applicable Advance of the
Revolving Credit used to refund such Swing Line Advance shall
be a Prime-based Advance. In the case of each Refunded Swing
Line Advance outstanding in any Alternative Currency, the
applicable Advance of the Revolving Credit used to refund such
Swing Line Advance shall be an Advance in the applicable
Alternative Currency, with an Interest Period of one month (or
any lesser number of days selected by Agent in consultation
with the Lenders). In connection with the making of any such
Refunded Swing Line Advances or the purchase of a
participation interest in Swing Line Advances under Section
2.5(e)(ii) hereof, the Swing Line Bank shall retain its claim
against the Company or the applicable Permitted Borrower for
any unpaid interest or fees in respect thereof. Unless any of
the events described in Section 9.1(j) hereof shall have
occurred (in which event the procedures of subparagraph (ii)
of this Section 2.5(e) shall apply) and regardless of whether
the conditions precedent set forth in this Agreement to the
making of an Advance of the Revolving Credit are then
satisfied, but subject to Section 2.5(e)(iii), each Lender
shall make the proceeds of its Advance of the Revolving Credit
available to the Agent for the benefit of the Swing Line Bank
at the office of the Agent specified in Section 2.4(a) hereof
prior to 11:00 a.m. Detroit time (for Domestic Advances) on
the Business Day next succeeding the date such notice is
given, and, in the case of any Eurocurrency-based Advance,
prior to 2:00 p.m. Detroit time on the third Business Day
following the date such notice is given, in each case in
immediately available funds in the applicable Permitted
Currency. The proceeds of such Advances of the Revolving
Credit shall be promptly delivered by Agent to the Swing Line
Bank for application to repay the Refunded Swing Line Advances
in accordance with the terms and conditions of this Agreement.
(ii) If, prior to the making of an Advance of the Revolving Credit
pursuant to subparagraph (i) of this Section 2.5(e), one of
the events described in Section 9.1(j) hereof shall have
occurred, each Lender will, on the date such Advance of the
Revolving Credit was to have been made, purchase from the
Swing Line Bank an undivided participating interest in each
Refunded Swing Line Advance in an amount equal to its
Percentage of
39
such Refunded Swing Line Advance. Each Lender within the time
periods specified in Section 2.5(e)(i) hereof, as applicable,
shall immediately transfer to the Swing Line Bank, in
immediately available funds in the applicable Permitted
Currency of such Swing Line Advance, the amount of its
participation and upon receipt thereof the Swing Line Bank
will deliver to such Lender a participation certificate
evidencing such participation.
(iii) Each Lender's obligation to make Advances of the Revolving
Credit and to purchase participation interests in accordance
with clauses (i) and (ii) of this Section 2.5(e) shall be
absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such
Lender may have against Swing Line Bank, the Company, the
Permitted Borrowers or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of any Default
or Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Company, any Permitted
Borrower or any other Person; (iv) any breach of this
Agreement by the Company, any Permitted Borrower or any other
Person; (v) any inability of the Company or the Permitted
Borrowers to satisfy the conditions precedent to borrowing set
forth in this Agreement on the date upon which such Advance is
to be made or such participating interest is to be purchased;
(vi) the termination of the Revolving Credit Aggregate
Commitment hereunder; or (vii) any other circumstance,
happening or event whatsoever, whether or not similar to any
of the foregoing. If any Lender does not make available to the
Agent or the Swing Line Bank, as applicable the amount
required pursuant to clause (i) or (ii) above, as the case may
be, the Agent or the Swing Line Bank, as the case may be,
shall be entitled to recover such amount on demand from such
Lender, together with interest thereon for each day from the
date of non-payment until such amount is paid in full (x) for
the first two (2) Business Days such amount remains unpaid, at
the Federal Funds Effective Rate for Advances in Dollars
(other than eurodollars) and for Eurocurrency-based Advances,
the Agent's marginal cost (including the cost of maintaining
any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses
incurred by Agent as a result of such failure to deliver funds
hereunder) of carrying such amount and (y) thereafter, at the
rate of interest then applicable to such Swing Line Advances.
The obligation of any Lender to make available its pro rata
portion of the amounts required pursuant to clause (i) or (ii)
above shall not be affected by the failure of any other Lender
to make such amounts available, and no Lender shall have any
liability to the Company or any Permitted Borrower, the Agent,
the Swing Line Bank, or any other Lender or any other Person
for another Lender's failure to make the amounts required
under clause (i) or (ii) available.
40
Notwithstanding the foregoing, however, no Lender shall be
required to make any Revolving Credit Advance to refund a
Swing Line Advance or to purchase a participation in a Swing
Line Advance (including without limitation any Swing Line
Advance funded under the "Sweep to Loan" system) if, prior to
the making of the Swing Line Advance, the Swing Line Bank had
received written notice that an Event of Default had occurred
and was continuing, or that the conditions to the making of
such Swing Line Advances had not been satisfied; provided,
however that the obligation of the Lenders to make such
Revolving Credit Advances or to purchase participations in
Swing Line Advances shall be reinstated upon the date which
such Event of Default has been waived by the Required Lenders
or all Lenders, as applicable.
2.6 Prime-based Interest Payments. Interest on the unpaid balance of all
Prime-based Advances of the Revolving Credit and all Swing Line Advances carried
at the Prime-based Rate from time to time outstanding shall accrue from the date
of such Advance to the Revolving Credit Maturity Date (and until paid), at a per
annum interest rate equal to the Prime-based Rate, and shall be payable in
immediately available funds (a) with respect to Swing Line Advances, quarterly
commencing on the first day of the calendar quarter next succeeding the calendar
quarter during which the initial Swing Line Advance is made and on the first day
of each calendar quarter thereafter, and (b) with respect to Advances of the
Revolving Credit, quarterly commencing on the first day of the calendar quarter
next succeeding the calendar month during which the initial Advance of the
Revolving Credit is made and on the first day of each calendar quarter
thereafter. Interest accruing at the Prime-based Rate shall be computed on the
basis of a 360 day year and assessed for the actual number of days elapsed, and
in such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
2.7 Eurocurrency-based Interest Payments and Quoted Rate Interest
Payments.
(a) Interest on each Eurocurrency-based Advance of the Revolving Credit
and all Swing Line Advances carried at the Eurocurrency-based Rate
shall accrue at its Applicable Interest Rate and shall be payable in
immediately available funds on the last day of the Interest Period
applicable thereto (and, if any Interest Period shall exceed three
months, then on the last Business Day of the third month of such
Interest Period, and at three month intervals thereafter). Interest
accruing at the Eurocurrency-based Rate shall be computed on the
basis of a 360 day year (except that any such Advances made in
Sterling or any other Alternative Currency with respect to which
applicable law or market custom so requires shall be calculated
based on a 365 day year, or as otherwise required under applicable
law or market custom) and assessed for the actual number of days
elapsed from the first day of the Interest Period applicable thereto
to but not including the last day thereof. Interest due on a
Eurocurrency-based Advance made in an Alternative Currency shall be
paid in such Alternative Currency.
(b) Interest on each Quoted Rate Advance of the Swing Line shall accrue
at its Quoted Rate and shall be payable in immediately available
funds on the last day
41
of the Interest Period applicable thereto. Interest accruing at the
Quoted Rate shall be computed on the basis of a 360 day year (except
that any such Advances made in any Alternative Currency with respect
to which applicable law or market custom so requires shall be
calculated based on a 365 day year, or as otherwise required under
applicable law or market custom) and assessed for the actual number
of days elapsed from the first day of the Interest Period applicable
thereto to, but not including the last day thereof.
(c) If the basis of accrual of interest or fees expressed in this
Agreement with respect to the National Currency Unit of a
Participating Member State shall be inconsistent with any convention
or practice in the London interbank market or other applicable
interbank market, as the case may be, for the basis of accrual of
interest or fees with respect to the Euro, such convention or
practice shall replace such expressed basis, effective as of and
from the date on which such country becomes a Participating Member
State; provided that if any Eurocurrency-based Advance in the
currency of such country is outstanding immediately prior to such
date, such replacement shall take effect, with respect to such
Advance, at the end of the then current Interest Period.
2.8 Interest Payments on Conversions. Notwithstanding anything to the
contrary in the preceding sections, all accrued and unpaid interest on any
Advance converted pursuant to Section 2.3 hereof shall be due and payable in
full on the date such Advance is converted.
2.9 Interest on Default. In the event and so long as any Event of Default
under Section 9.1(a) or 9.1(b) shall exist, interest shall be payable daily on
all Eurocurrency-based Advances of the Revolving Credit, Swing Line Advances
carried at the Eurocurrency-based Rate and Quoted Rate Advances from time to
time outstanding at a per annum rate equal to the Applicable Interest Rate plus
three percent (3%) for the remainder of the then existing Interest Period, if
any, and at all other such times, with respect to Prime-based Advances from time
to time outstanding, at a per annum rate equal to the Prime-based Rate plus
three percent (3%), and, with respect to Eurocurrency-based Advances thereof in
any Alternative Currency from time to time outstanding, (i) at a per annum rate
calculated by the Agent, whose determination shall be conclusive absent manifest
error, on a daily basis, equal to three percent (3%) above the interest rate per
annum at which one (1) day deposits (or, if such amount due remains unpaid for
more than three (3) Business Days, then for such other period of time as the
Agent may elect which shall in no event be longer than six (6) months) in the
relevant eurocurrency in the amount of such overdue payment due to the Agent are
offered by the Agent's Eurocurrency Lending Office for the applicable period
determined as provided above, or (ii) if at any such time such deposits are not
offered by Eurocurrency Lending Office, then at a rate per annum equal to three
percent (3%) above the rate determined by the Agent to be its aggregate marginal
cost (including the cost of maintaining any required reserves or deposit
insurance) of carrying the amount of such Eurocurrency-based Advance.
2.10 Prepayment. (a) Company or the Permitted Borrowers may prepay all or
part of the outstanding balance of any Prime-based Advance(s) of the Revolving
Credit at any time, provided that the amount of any partial prepayment shall be
at least One Million Dollars ($1,000,000) and, after giving effect to any such
partial prepayment, the aggregate balance of
42
Prime-based Advance(s) of the Revolving Credit remaining outstanding, if any,
shall be at least Five Million Dollars ($5,000,000). Subject to Section 11.1
hereof, Company or the Permitted Borrowers may prepay all or part of any
Eurocurrency-based Advance (subject to not less than two (2) Business Days'
notice to Agent) provided that the amount of any such partial prepayment shall
be at least One Million Dollars ($1,000,000), or the Current Dollar Equivalent
thereof in an Alternative Currency, and, after giving effect to any such partial
prepayment, the unpaid portion of such Advance which is refunded or converted
under Section 2.3 hereof shall be at least Fifteen Million Dollars ($15,000,000)
or the Current Dollar Equivalent thereof in an Alternative Currency.
(b) Company may prepay all or part of the outstanding balance of any
Swing Line Advance carried at the Prime-based Rate at any time,
provided that, unless the "Sweep to Loan" system shall be in effect
hereunder, the amount of any partial prepayment shall be at least
Twenty Five Thousand Dollars ($25,000) and, after giving effect to
any such partial prepayment, the aggregate balance of such Swing
Line Advances remaining outstanding, if any, shall be at least One
Hundred Thousand Dollars ($100,000). Subject to Section 11.1 hereof,
Company may prepay all or part of any Swing Line Advances carried at
the Eurocurrency-based Rate or Quoted Rate (subject to not less than
two (2) Business Days' notice to Swing Line Bank and Agent) only on
the last day of the Interest Period therefor, provided that the
amount of any such partial payment shall be at least Twenty Five
Thousand Dollars ($25,000) and, after giving effect to any such
partial prepayment, the unpaid portion of such Advance which is
refunded or converted under Section 2.5(c) hereof shall be at least
Two Hundred Fifty Thousand Dollars ($250,000).
(c) Any prepayment made in accordance with this Section shall be subject
to Section 11.1 hereof, but otherwise without premium, penalty or
prejudice to the right to readvance under the terms of this
Agreement.
2.11 Determination, Denomination and Redenomination of Alternative
Currency Advances. Whenever, pursuant to any provision of this Agreement:
(a) an Advance of the Revolving Credit or a Swing Line Advance is
initially funded, as opposed to any refunding or conversion thereof,
in an Alternative Currency, the amount to be advanced hereunder will
be the equivalent in such Alternative Currency of the Dollar Amount
of such Advance;
(b) an existing Advance of the Revolving Credit or a Swing Line Advance
denominated in an Alternative Currency is to be refunded, in whole
or in part, with an Advance denominated in the same Alternative
Currency, the amount of the new Advance shall be continued in the
amount of the Alternative Currency so refunded;
(c) an existing Advance of the Revolving Credit denominated in an
Alternative Currency is to be converted, in whole or in part, to an
Advance denominated in another Alternative Currency, the amount of
the new Advance shall be that
43
amount of the Alternative Currency of the new Advance which may be
purchased, using the most favorable spot exchange rate determined by
Agent to be available to it for the sale of Dollars for such other
Alternative Currency at approximately 11:00 a.m. (Detroit time) two
(2) Business Days prior to the last day of the Eurocurrency Interest
Period applicable to the existing Advance, with the Dollar Amount of
the existing Advance, or portion thereof being converted; and
(d) an existing Advance of the Revolving Credit denominated in an
Alternative Currency is to be converted, in whole or in part, to an
Advance denominated in Dollars, the amount of the new Advance shall
be the Dollar Amount of the existing Advance, or portion thereof
being converted (determined as aforesaid).
2.12 Prime-based Advance in Absence of Election or Upon Default. If, (a)
as to any outstanding Eurocurrency-based Advance of the Revolving Credit, or any
Swing Line Advance carried at the Eurocurrency-based Rate, Agent has not
received payment of all outstanding principal and accrued interest on the last
day of the Interest Period applicable thereto, or does not receive a timely
Request for Advance meeting the requirements of Section 2.3 or 2.5(c) hereof
with respect to the refunding or conversion of such Advance, or (b) if any
Advance denominated in an Alternative Currency or any deemed Advance under
Section 3.6 hereof in respect of a Letter of Credit denominated in an
Alternative Currency cannot be refunded or made, as the case may be, in such
Alternative Currency by virtue of Section 11.3 hereof, or (c) subject to Section
2.9 hereof, if on such day a Default or an Event of Default shall have occurred
and be continuing, then the principal amount thereof which is not then prepaid
in the case of a Eurocurrency-based Advance shall, absent a contrary election of
the Required Lenders, be converted automatically to a Prime-based Advance and
the Agent shall thereafter promptly notify Company of said action. If a
Eurocurrency-based Advance converted hereunder is payable in an Alternative
Currency, the Prime-based Advance shall be in an amount equal to the Dollar
Amount of such Eurocurrency-based Advance at such time and the Agent and the
Lenders shall use said Prime-based Advance to fund payment of the Alternative
Currency obligation, all subject to the provisions of Section 2.14 hereof. The
Company and the Permitted Borrowers, if applicable, shall reimburse the Agent
and the Lenders on demand for any costs incurred by the Agent or any of the
Lenders, as applicable, resulting from the conversion pursuant to this Section
2.12 of Eurocurrency-based Advances payable in an Alternative Currency to
Prime-based Advances.
2.13 Revolving Credit Facility Fee. From the Effective Date to the
Revolving Credit Maturity Date, the Company shall pay to the Agent, for
distribution to the Lenders (as set forth below), a Revolving Credit Facility
Fee determined by multiplying the Applicable Fee Percentage per annum times the
Revolving Credit Aggregate Commitment then applicable under Section 2.15 hereof
(whether used or unused) then in effect without giving effect to any reductions
therein based on the amount of the LYONs Reserve, computed on a daily basis. The
Revolving Credit Facility Fee shall be payable quarterly in arrears commencing
October 1, 2003 (in respect of the prior calendar quarter or portion thereof),
and on the first day of each calendar quarter thereafter and on the Revolving
Credit Maturity Date, and shall be computed on the basis of a year of three
hundred sixty (360) days and assessed for the actual number of days elapsed.
Whenever any payment of the Revolving Credit Facility Fee shall be due on a day
which is not a Business Day, the date for payment thereof shall be extended to
the next Business Day. Upon
44
receipt of such payment Agent shall make prompt payment to each Lender of its
share of the Revolving Credit Facility Fee based upon its respective Percentage.
2.14 Currency Appreciation; Mandatory Reduction of Indebtedness.
(a) Revolving Credit Aggregate Commitment. If at any time and for any
reason, the aggregate principal amount of all Advances of the
Revolving Credit hereunder to the Company and to the Permitted
Borrowers made in Dollars and the aggregate Current Dollar
Equivalent of all Advances of the Revolving Credit outstanding
hereunder to the Company and to the Permitted Borrowers in any
Alternative Currency as of such time, plus the aggregate principal
amount of Swing Line Advances outstanding hereunder as of such time
(determined as aforesaid), plus the aggregate undrawn portion of any
Letters of Credit which shall be outstanding (based on the Dollar
Amount of the undrawn portion of any Letters of Credit denominated
in Dollars and the Current Dollar Equivalent of the undrawn portion
of any Letters of Credit denominated in any Alternative Currency),
plus the face amount of all Letters of Credit requested but not yet
issued (determined as aforesaid), plus the unreimbursed amount of
any draws under any Letters of Credit (using the Current Dollar
Equivalent thereof for any Letters of Credit denominated in any
Alternative Currency), as of such time exceeds the Revolving Credit
Aggregate Commitment (as used in this clause (a), the "Excess"), the
Company and the Permitted Borrowers shall:
(i) immediately repay that portion of such Indebtedness then
carried as a Prime-based Advance, if any, by the Dollar Amount
of such Excess, and/or reduce any pending request for an
Advance in Dollars on such day by the Dollar Amount of the
Excess, to the extent thereof; and
(ii) on the last day of each Interest Period of any
Eurocurrency-based Advance outstanding as of such time, until
the necessary reductions of Indebtedness under this Section
2.14(a) have been fully made, repay the Indebtedness carried
in such Advances and/or reduce any requests for refunding or
conversion of such Advances submitted (or to be submitted) by
the Company or the applicable Permitted Borrower in respect of
such Advances, by the amount in Dollars or the applicable
Alternative Currency, as the case may be, of the Excess, to
the extent thereof.
Compliance with this Section 2.14(a) shall be tested on a daily or
other basis satisfactory to Agent in its sole discretion, provided
that, so long as no Default or Event of Default has occurred and is
continuing, at any time while the aggregate Advances of the
Revolving Credit available to be borrowed hereunder (based on the
Revolving Credit Aggregate Commitment then in effect) equal or
exceed Fifty Million Dollars ($50,000,000), compliance with this
Section 2.14(a) shall be tested as of the last day of each calendar
quarter. Notwithstanding the foregoing, upon the occurrence and
during the continuance of any Default or Event of Default, or if any
Excess remains after recalculating said Excess based on ninety-five
percent (95%) of the Current Dollar Equivalent of any Advances or
Letters of
45
Credit denominated in Alternative Currencies (and one hundred
percent (100%) of any Advances or Letters of Credit denominated in
Dollars), Company and the Permitted Borrowers shall be obligated
immediately to reduce the foregoing Indebtedness hereunder by an
amount sufficient to eliminate such Excess.
(b) Permitted Borrower Sublimit. If at any time and for any reason with
respect to any Permitted Borrower, the aggregate principal amount
(tested in the manner set forth in clause (a) above) of all Advances
of the Revolving Credit and of the Swing Line outstanding hereunder
to such Permitted Borrower, plus the aggregate undrawn portion of
any Letters of Credit, plus the face amount of any Letters of Credit
requested but not yet issued, plus the unreimbursed amount of any
drawings under any Letters of Credit to or for the account of such
Permitted Borrower (tested in the manner set forth in clause (a)
above), which Advances and Letters of Credit are made or issued, or
to be made or issued, in Dollars and ninety percent (90%) of the
aggregate Current Dollar Equivalent of all such Advances and Letters
of Credit (including unreimbursed draws) hereunder for the account
of such Permitted Borrower in any Alternative Currency as of such
time, exceeds the applicable Permitted Borrower Sublimit (as used in
this clause (b), the "Excess"), then in each case, such Permitted
Borrower shall
(i) immediately repay that portion of the Indebtedness outstanding
to such Permitted Borrower then carried as a Prime-based
Advance, if any, by the Dollar Amount of such Excess, and/or
reduce on such day any pending request for an Advance in
Dollars submitted by such Permitted Borrower by the Dollar
Amount of such Excess, to the extent thereof; and
(ii) on the last day of each Interest Period of any
Eurocurrency-based Advance outstanding to such Permitted
Borrower as of such time, until the necessary reductions of
Indebtedness under this Section 2.14(b) have been fully made,
repay such Indebtedness carried in such Advances and/or reduce
any requests for refunding or conversion of such Advances
submitted (or to be submitted) by such Permitted Borrower in
respect of such Advances, by the amount in Dollars or the
applicable Alternative Currency, as the case may be, of such
Excess, to the extent thereof.
Provided that no Default or Event of Default has occurred and is continuing,
each Permitted Borrower's compliance with this Section 2.14(b) shall be tested
as of the last day of each calendar quarter or, upon the written request of the
Company from time to time, as of the last day of each calendar month, provided
the Company furnishes Agent with current monthly financial statements complying
with the requirements set forth in subparagraphs (i) and (ii) of Section 7.3(c)
hereof. Upon the occurrence and during the continuance of any Default or Event
of Default, compliance with this Section 2.14(b) shall be tested on a daily or
other basis satisfactory to Agent in its sole discretion.
2.15 Optional Reduction or Termination of Revolving Credit Aggregate
Commitment. Provided that no Default or Event of Default has occurred and is
continuing, the Company may upon at least five (5) Business Days' prior written
notice to the Agent, permanently reduce the
46
Revolving Credit Aggregate Commitment in whole at any time, or in part from time
to time, without premium or penalty, provided that: (i) each partial reduction
of the Revolving Credit Aggregate Commitment shall be in an aggregate amount
equal to Twenty Million Dollars ($20,000,000) or a larger integral multiple of
One Million Dollars ($1,000,000); (ii) each reduction shall be accompanied by
the payment of the Revolving Credit Facility Fee, if any, accrued to the date of
such reduction; (iii) the Company or any Permitted Borrower, as applicable,
shall prepay in accordance with the terms hereof the amount, if any, by which
the aggregate unpaid principal amount of Advances (using the Current Dollar
Equivalent of any such Advance outstanding in any Alternative Currency) of the
Revolving Credit, plus the aggregate principal amount of Swing Line Advances
outstanding hereunder (using the Current Dollar Equivalent of any such Advance
outstanding in an Alternative Currency), plus the aggregate undrawn amount of
outstanding Letters of Credit (using the Current Dollar Equivalent thereof for
any Letters of Credit denominated in any Alternative Currency), plus the
unreimbursed amount of any draws under any Letters of Credit (determined as
aforesaid), exceeds the amount of the Revolving Credit Aggregate Commitment as
so reduced, together with interest thereon to the date of prepayment; (iv) if
the termination or reduction of the Revolving Credit Aggregate Commitment
requires the prepayment of a Eurocurrency-based Advance or a Quoted Rate
Advance, the termination or reduction may be made only on the last Business Day
of the then current Interest Period applicable to such Eurocurrency-based
Advance or such Quoted Rate Advance; and (v) no reduction shall reduce the
Revolving Credit Aggregate Commitment to an amount which is less than the
aggregate undrawn amount of any Letters of Credit outstanding at such time.
Reductions of the Revolving Credit Aggregate Commitment and any accompanying
prepayments of Advances of the Revolving Credit shall be distributed by Agent to
each Lender in accordance with such Lender's Percentage thereof, and will not be
available for reinstatement by or readvance to the Company or any Permitted
Borrower, and any accompanying prepayments of Advances of the Swing Line shall
be distributed by Agent to the Swing Line Bank and will not be available for
reinstatement by or readvance to the Company. Any reductions of the Revolving
Credit Aggregate Commitment hereunder shall reduce each Lender's portion thereof
proportionately (based on the applicable Percentages), and shall be permanent
and irrevocable. Any payments made pursuant to this Section shall be applied
first to outstanding Prime-based Advances under the Revolving Credit, next to
Swing Line Advances carried at the Prime-based Rate, next to Eurocurrency-based
Advances of the Revolving Credit and then to Swing Line Advances carried at the
Eurocurrency-based Rate or the Quoted Rate.
2.16 Extensions of Revolving Credit Maturity Date. (a) Provided that no
Default or Event of Default has occurred and is continuing, Company may, by
written notice to Agent and each Lender (which notice shall be irrevocable and
which shall not be deemed effective unless actually received by Agent and each
Lender) prior to April 30 but not before March 31st of 2004 (provided in no
event shall the Company request an extension of the Revolving Credit Maturity
Date beyond the first put date for the New Convertible Subordinated Debt),
request that the Lenders extend the then applicable Revolving Credit Maturity
Date to a date that is one year later than the Revolving Credit Maturity Date
then in effect (such request, a "Request").
(b) Each Lender shall, within 30 days of receipt of such request, notify
the Agent in writing whether such Lender consents to the extension
of the Revolving Credit Maturity Date, such consent to be in the
sole discretion of such Lender. If any Lender does not so notify the
Agent of its decision within such 30 day period,
47
such Lender shall be deemed to have not consented to such request of
the Borrower.
(c) The Agent shall promptly notify the Company whether the Lenders have
consented to such request. If the Agent does not so notify the
Company within 30 days of the Agent's receipt such Request, the
Agent shall be deemed to have notified the Company that the Lenders
have not consented to the Company's request.
(d) Each Lender which elects not to extend the Revolving Credit Maturity
Date or fails to so notify the Agent of such consent (a
"Non-Consenting Lender") hereby agrees that if any other Lender or
financial institution acceptable to the Company and the Agents
offers to purchase such Non-Consenting Lender's Percentage of the
Revolving Credit Aggregate Commitment within 180 days after receipt
of the related Request for a purchase price equal to the sum of all
amounts then owing with respect to the outstanding Advances (and
participations in any Swing Line Advances or any Letters of Credit)
and all other amounts accrued for the account of such Non-Consenting
Lender, such Non-Consenting Lender will promptly assign, sell and
transfer all of its right, title, interest and obligations with
respect to the foregoing to such other Lender or financial
institution pursuant to and on the terms specified in the form of
Assignment Agreement attached hereto as Exhibit E. Before assigning
to a financial institution other than a Lender pursuant to this
clause (d), each Lender that has elected to extend the Revolving
Credit Maturity Date (a "Consenting Lender") shall have the right,
but not any obligation, pro rata with all other Consenting Lenders
which elect to purchase a pro rata share of such non-consenting
Lender's Percentage of the Revolving Credit Aggregate Commitment
(and participations in Swing Line Advances and Letters of Credit) to
purchase each such Non-Consenting Lender's Percentage thereof
pursuant to this clause (d). The Consenting Lenders which elect to
exercise their purchase options hereunder shall by mutual agreement
determine the amount of each Non-Consenting Lender's Percentage of
the Revolving Credit Aggregate Commitment being purchased by each
Consenting Lender, provided that if there is any dispute among the
Consenting Lenders such purchase shall be based upon a pro rata
sharing of each Non-Consenting Lender's Percentage thereof. Only if
the Consenting Lenders have determined not to purchase all of the
Non-Consenting Lender's Revolving Credit Aggregate Commitment may
financial institutions other than a Consenting Lender then purchase
such Non-Consenting Lender's Revolving Credit Aggregate Commitment.
(e) Except as set forth in subparagraph (f) hereof, notwithstanding
anything herein to the contrary, the Revolving Credit Maturity Date
will not be extended unless all Lenders have consented to the
extension or if another Lender or financial institution has
purchased each such Non-Consenting Lender's Revolving Credit
Aggregate Commitment pursuant to the terms of clause (d) above.
(f) In the event, after giving effect to any assignments to Consenting
Lenders under Section 2.16(d) hereof or otherwise, Lenders holding
eighty percent (80%) or
48
more of the Percentages (the "Approving Percentages") have consented
to an extension of the Revolving Credit Maturity Date hereunder,
such extension shall become effective, notwithstanding that all of
the Lenders have failed to approve such extension in accordance with
this Section 2.16, so long as Company, within forty five (45) days,
reduces the Revolving Credit Aggregate Commitment to an amount not
greater than the product of the Approving Percentages times the
Revolving Credit Aggregate Commitment then in effect and repays the
Indebtedness then outstanding hereunder (and, if necessary causes
any outstanding Letters of Credit to be terminated or discharged) to
the extent such Indebtedness exceeds the Revolving Credit Aggregate
Commitment as so reduced, such that the entire Indebtedness
outstanding to the Non-Consenting Lenders shall have been paid and
discharged in full. Reductions may be made without regard to the
notice provisions set forth in Section 2.15 hereof, but shall
otherwise comply with said Section 2.15, except that any amounts
repaid by the Company against the Indebtedness pursuant to this
subparagraph (f) shall be first applied to the Indebtedness
outstanding to the Non-Consenting Lenders still holding Indebtedness
hereunder at such time, with any remaining amounts applied in
accordance with Section 2.15 hereof and the Percentages held by such
Non-Consenting Lenders shall be reallocated to the Consenting
Lenders (giving effect to any assignments, as aforesaid), pro rata,
based on the Percentages then in effect and Agent shall distribute
to the remaining Lenders a revised Schedule 1.1 reflecting such
reallocated Percentages.
2.17 Application of Advances. Advances of the Revolving Credit (including
Swing Line Advances) shall be available, subject to the terms hereof, to fund
working capital needs, or other general corporate purposes of the Company and
the Permitted Borrowers.
3. LETTERS OF CREDIT.
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Agent shall through the Issuing Office, at any time and from time to
time from and after the date hereof until thirty (30) days prior to the
Revolving Credit Maturity Date, upon the written request of an Account
Party(ies) accompanied by a duly executed Letter of Credit Agreement and such
other documentation related to the requested Letter of Credit as the Agent may
require, issue Letters of Credit for the account of such Account Party(ies), in
an aggregate amount for all Letters of Credit issued hereunder at any one time
outstanding not to exceed the Letter of Credit Maximum Amount. Each Letter of
Credit shall be in a minimum face amount of Five Hundred Thousand Dollars
($500,000) and each Letter of Credit (including any renewal thereof) shall
expire on the earlier to occur of (x) 1 year from the date of issuance and (y)
not later than ten (10) Business Days prior to the Revolving Credit Maturity
Date in effect on the date of issuance thereof. The submission of all
applications in respect of and the issuance of each Letter of Credit hereunder
shall be subject in all respects to the Uniform Customs and Practices for
Documentary Credits of the International Chamber of Commerce, 1993 Revisions,
ICC Publication No. 500, or, if applicable, ISP 98, and any successor
documentation thereto, as selected by the Agent. In the event of any conflict
between this Agreement and any Letter of Credit Document other than a Letter of
Credit, this Agreement shall control.
49
3.2 Conditions to Issuance. No Letter of Credit shall be issued at the
request and for the account of any Account Party(ies) unless, as of the date of
issuance of such Letter of Credit:
(a) the face amount of the Letter of Credit requested (based on the
Dollar Amount of the undrawn portion of any Letter of Credit
denominated in Dollars and the Current Dollar Equivalent of the
undrawn portion of any Letter of Credit denominated in any
Alternative Currency), plus the face amount of all other Letters of
Credit of all Account Parties requested on such date, plus the
aggregate undrawn portion of all other Letters of Credit of all
Account Parties as of such date, plus the face amount of all Letters
of Credit of all Account Parties requested but not yet issued as of
such date, plus the unreimbursed amount of any draws under Letters
of Credit of all Account Parties (in each case, determined as
aforesaid), does not exceed the Letter of Credit Maximum Amount;
(b) the face amount of the Letter of Credit requested, plus the face
amount of all other Letters of Credit of all Account Parties
requested on such date, plus the aggregate undrawn portion of all
other Letters of Credit of all Account Parties as of such date, plus
the face amount of all Letters of Credit of all Account Parties
requested but not yet issued as of such date, plus the unreimbursed
amount of any drawings under Letters of Credit of all Account
Parties as of such date, (in each case determined as aforesaid),
plus the aggregate principal amount of all Advances outstanding
under the Revolving Credit and the Swing Line, including any
Advances requested to be made on such date (determined on the basis
of the Current Dollar Equivalent of any Advances denominated in any
Alternative Currency, and the Dollar Amount of any Advances in
Dollars), do not exceed the then applicable Revolving Credit
Aggregate Commitment;
(c) whenever the Account Party is a Permitted Borrower, the face amount
of the Letter of Credit requested by such Permitted Borrower, plus
the face amount of all other Letters of Credit requested by such
Permitted Borrower on such date, plus the aggregate undrawn portion
of all other outstanding Letters of Credit issued for the account of
such Permitted Borrower (in each case determined as aforesaid), plus
the unreimbursed amount of any drawings under Letters of Credit
(using the Current Dollar Equivalent thereof for any such Letters of
Credit denominated in any Alternative Currency) issued for the
account of such Permitted Borrower, plus the aggregate outstanding
principal amount of all Advances of the Revolving Credit and of the
Swing Line to such Permitted Borrower, including any Advances
requested to be made on such date (in each case determined as
aforesaid), do not exceed the applicable Permitted Borrower
Sublimit;
(d) whenever the Account Party is a Permitted Borrower, it shall not be
entitled to request a Letter of Credit hereunder until it has
complied in all respects with the provisions of Section 2.1(a) or
(b) hereof, as applicable;
(e) the obligations of Company and the Guarantors set forth in this
Agreement and the other Loan Documents are valid, binding and
enforceable obligations of Company and Guarantors and the valid,
binding and enforceable nature of this
50
Agreement and the other Loan Documents has not been disputed by
Company or the Guarantors;
(f) the representations and warranties contained in this Agreement and
the other Loan Documents are true in all material respects as if
made on such date, and both immediately before and immediately after
issuance of the Letter of Credit requested, no Default or Event of
Default exists;
(g) the execution of the Letter of Credit Agreement with respect to the
Letter of Credit requested will not violate the terms and conditions
of any contract, agreement or other borrowing of the relevant
Account Party;
(h) the Account Party requesting the Letter of Credit shall have
delivered to Agent at its Issuing Office, not less than three (3)
Business Days prior to the requested date for issuance (or such
shorter time as the Agent, in its sole discretion, may permit), the
Letter of Credit Agreement related thereto, together with such other
documents and materials as may be required pursuant to the terms
thereof, and the terms of the proposed Letter of Credit shall be
satisfactory to Agent;
(i) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin or
restrain Agent from issuing the Letter of Credit requested, or any
Lender from taking an assignment of its Percentage thereof pursuant
to Section 3.6 hereof, and no law, rule, regulation, request or
directive (whether or not having the force of law) shall prohibit or
request that Agent refrain from issuing, or any Lender refrain from
taking an assignment of its Percentage of, the Letter of Credit
requested or letters of credit generally;
(j) there shall have been no introduction of or change in the
interpretation of any law or regulation that would make it unlawful
or unduly burdensome for the Agent to issue or any Lender to take an
assignment of its Percentage of the requested Letter of Credit, no
suspension of or material limitation on trading on the New York
Stock Exchange or any other national securities exchange, no
declaration of a general banking moratorium by banking authorities
in the United States, Michigan or the respective jurisdictions in
which the Lenders, the applicable Account Party and the beneficiary
of the requested Letter of Credit are located, and no establishment
of any new restrictions on transactions involving letters of credit
or on banks materially affecting the extension of credit by banks;
and
(k) Agent shall have received the issuance fees required in connection
with the issuance of such Letter of Credit pursuant to Section 3.4
hereof.
Each Letter of Credit Agreement submitted to Agent pursuant hereto shall
constitute the certification by the Company and any other Account Party of the
matters set forth in Section 3.2 (a) through (g) hereof. The Agent shall be
entitled to rely on such certification without any duty of inquiry.
3.3 Notice. Agent shall give notice, substantially in the form attached as
Exhibit F, to each Lender of the issuance of each Letter of Credit, not later
than three (3) Business Days after
51
issuance of each Letter of Credit, specifying the amount thereof and the amount
of such Lender's Percentage thereof.
3.4 Letter of Credit Fees. Company shall pay to the Agent for distribution
to the Lenders in accordance with their Percentages, letter of credit fees as
follows:
(a) A non-refundable per annum letter of credit fee with respect to the
undrawn amount of each Letter of Credit issued pursuant hereto
(based on the Dollar Amount of any Letters of Credit denominated in
Dollars and the Current Dollar Equivalent of any Letters of Credit
denominated in any Alternative Currency) in the amount of the
Applicable Fee Percentage (determined with reference to Schedule 4.1
to this Agreement).
(b) A letter of credit facing fee in the amount specified in the Fee
Letter to be retained by Agent for its own Account.
(c) If any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose,
modify or cause to be deemed applicable any reserve, special
deposit, limitation or similar requirement against letters of credit
issued or participated in by, or assets held by, or deposits in or
for the account of, Agent or any Lender or (ii) impose on Agent or
any Lender any other condition regarding this Agreement, the Letters
of Credit or any participations in such Letters of Credit, and the
result of any event referred to in clause (i) or (ii) above shall be
to increase the cost or expense to Agent or such Lender of issuing
or maintaining or participating in any of the Letters of Credit
(which increase in cost or expense shall be determined by the
Agent's or such Lender's reasonable allocation of the aggregate of
such cost increases and expenses resulting from such events), then,
upon demand by the Agent or such Lender, as the case may be, the
Company shall, within thirty (30) days following demand for payment,
pay to Agent or such Lender, as the case may be, from time to time
as specified by the Agent or such Lender, additional amounts which
shall be sufficient to compensate the Agent or such Lender for such
increased cost and expense, together with interest on each such
amount from ten days after the date demanded until payment in full
thereof at the Prime-based Rate. A certificate as to such increased
cost or expense incurred by the Agent or such Lender, as the case
may be, as a result of any event mentioned in clause (i) or (ii)
above, submitted to the Company, shall be conclusive evidence,
absent manifest error, as to the amount thereof.
(d) All payments by the Company or the Permitted Borrowers to the Agent
or the Lenders under this Section 3.4 shall be made in Dollars and
in immediately available funds at the Issuing Office or such other
office of the Agent as may be designated from time to time by
written notice to the Company and the Permitted Borrowers by the
Agent. The fees described in clause (a) and (b) above shall be
nonrefundable under all circumstances, shall be payable quarterly in
advance (or such lesser period, if applicable, for Letters of Credit
issued with stated expiration dates of less than three months) upon
the issuance of each such Letter of Credit,
52
and shall be calculated on the basis of a 360 day year and assessed
(on a quarterly basis as aforesaid) as of the beginning of each
quarter as of which such Letter of Credit is outstanding commencing
on the date of issuance thereof, for the actual number of days from
the beginning of such quarter to the earlier of the beginning of the
next quarter or the stated expiration thereof.
3.5 Other Fees. In connection with the Letters of Credit, and in addition
to the Letter of Credit Fees, the Company and any other applicable Account
Party(ies) shall pay, for the sole account of the Agent, standard documentation,
administration, payment and cancellation charges assessed by Agent or the
Issuing Office, at the times, in the amounts and on the terms set forth or to be
set forth from time to time in the standard fee schedule of the Issuing Office
in effect from time to time and delivered to the relevant Account Party(ies).
3.6 Drawings and Demands for Payment Under Letters of Credit.
(a) The Company and each other applicable Account Party agree to pay to
the Agent, on the day on which the Agent shall honor a draft or
other demand for payment presented or made under any Letter of
Credit, an amount equal to the amount paid by the Agent in respect
of such draft or other demand under such Letter of Credit and all
expenses paid or incurred by the Agent relative thereto. Unless the
Company or the other applicable Account Party shall have made such
payment to the Agent on such day, upon each such payment by the
Agent, the Agent shall be deemed to have disbursed to the Company or
the other applicable Account Party, and the Company or the other
applicable Account Party shall be deemed to have elected to
substitute for its reimbursement obligation, with respect to Letters
of Credit denominated in Dollars, a Prime-based Advance of the
Revolving Credit and, with respect to Letters of Credit denominated
in any Alternative Currency, a Eurocurrency-based Advance of the
Revolving Credit in the applicable Alternative Currency with an
Interest Period, commencing three (3) Business Days following the
date of Agent's payment pursuant to the applicable Letter of Credit,
of one month (or, if unavailable, such other Interest Period as
selected by Agent in its sole discretion), in each case for the
account of the Lenders in an amount equal to the amount so paid by
the Agent in respect of such draft or other demand under such Letter
of Credit. Such Prime-based Advance or Eurocurrency-based Advance
shall be deemed disbursed notwithstanding any failure to satisfy any
conditions for disbursement of any Advance set forth in Section 2
hereof and, to the extent of the Advances so disbursed, the
reimbursement obligation of the Company or the other applicable
Account Party under this Section 3.6 shall be deemed satisfied,
provided that, with respect to any such Eurocurrency-based Advance
deemed to have been made hereunder, Company or the applicable
Permitted Borrower shall also be obligated to pay to the Agent, for
Agent's sole account, interest on the aggregate amount paid by the
Agent under the applicable draft or other demand for payment at
Agent's aggregate marginal cost (including the cost of maintaining
any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses incurred by
Agent as a result of such failure to deliver funds hereunder) of
carrying such amount plus the Applicable Margin then in effect for
Eurocurrency-based Advances, from the date
53
of Agent's payment pursuant to any Letter of Credit to the date of
the commencement of the Interest Period for the applicable
Eurocurrency-based Advance deemed to have been made, as aforesaid,
such interest (the "Gap Interest") to be due and payable on the last
day of the initial Interest Period established for such deemed
Advance.
(b) If the Agent shall honor a draft or other demand for payment
presented or made under any Letter of Credit, the Agent shall
provide notice thereof to the Company and the other applicable
Account Party on the date such draft or demand is honored, and to
each Lender on such date unless the Company or other applicable
Account Party shall have satisfied its reimbursement obligation
under Section 3.6(a) hereof by payment to the Agent on such date.
The Agent shall further use reasonable efforts to provide notice to
the Company or other applicable Account Party prior to honoring any
such draft or other demand for payment, but such notice, or the
failure to provide such notice, shall not affect the rights or
obligations of the Agent with respect to any Letter of Credit or the
rights and obligations of the parties hereto, including without
limitation the obligations of the Company or other applicable
Account Party under Section 3.6(a) hereof.
(c) Upon issuance by the Agent of each Letter of Credit hereunder, each
Lender shall automatically acquire a pro rata participation interest
in such Letter of Credit and each related Letter of Credit Payment
based on its respective Percentage. Each Lender, on the date a draft
or demand under any Letter of Credit is honored (or the next
succeeding Business Day if the notice required to be given by Agent
to the Lenders under Section 3.6(b) hereof is not given to the
Lenders prior to 2:00 p.m. (Detroit time) on such date of draft or
demand) or three (3) Business Days thereafter in respect of draws or
demands under Letters of Credit issued in any Alternative Currency,
shall make its Percentage of the amount paid by the Agent, and not
reimbursed by the Company or other applicable Account Party on such
day, available in the applicable Permitted Currency and in
immediately available funds at the principal office of the Agent for
the account of the Agent. If and to the extent such Lender shall not
have made such pro rata portion available to the Agent, such Lender,
the Company and any other applicable Account Party severally agree
to pay to the Agent forthwith on demand such amount together with
interest thereon, for each day from the date such amount was paid by
the Agent until such amount is so made available to the Agent at a
per annum rate equal to the interest rate applicable during such
period to the related Advance deemed to have been disbursed under
Section 3.6(a) in respect of the reimbursement obligation of the
Company and any other applicable Account Party, as set forth in
Section 2.4(c)(i) or 2.4(c)(ii) hereof, as the case may be. If such
Lender shall pay such amount to the Agent together with such
interest, such amount so paid shall be deemed to constitute an
Advance by such Lender disbursed in respect of the reimbursement
obligation of the Company or other applicable Account Party under
Section 3.6(a) hereof for purposes of this Agreement, effective as
of the dates applicable under said Section 3.6(a). The failure of
any Lender to make its pro rata portion of any such amount paid by
the Agent available to the Agent shall not relieve any other Lender
of its obligation to
54
make available its pro rata portion of such amount, but no Lender
shall be responsible for failure of any other Lender to make such
pro rata portion available to the Agent. Furthermore, in the event
of the failure by Company or the Permitted Borrowers to pay the Gap
Interest required under the proviso to Section 3.6(a) hereof, each
of the Lenders shall pay to Agent, within one Business Day following
receipt from Agent of written request therefor, its pro rata portion
of said Gap Interest, excluding any portion thereof attributable to
the Applicable Margin.
Notwithstanding the foregoing however, no Lender shall acquire a pro rata
risk participation in a Letter of Credit or related Letter of Credit Payment if
the Agent had obtained actual knowledge that an Event of Default had occurred
and was continuing at the time of the issuance of such Letter of Credit;
provided, however that each Lender shall acquire a pro rata risk participation
in such Letter of Credit and the related Letter of Credit Payment upon the date
on which such Event of Default is waived by the Required Lenders or all Lenders,
as applicable.
(d) Nothing in this Agreement shall be construed to require or authorize
any Lender to issue any Letter of Credit, it being recognized that
the Agent shall be the sole issuer of Letters of Credit under this
Agreement.
3.7 Obligations Irrevocable. The obligations of Company and any other
Account Party to make payments to Agent or the Lenders with respect to Letter of
Credit Obligations under Section 3.6 hereof, shall be unconditional and
irrevocable and not subject to any qualification or exception whatsoever,
including, without limitation:
(a) Any lack of validity or enforceability of any Letter of Credit or
any documentation relating to any Letter of Credit or to any
transaction related in any way to any Letter of Credit (the "Letter
of Credit Documents");
(b) Any amendment, modification, waiver, consent, or any substitution,
exchange or release of or failure to perfect any interest in
collateral or security, with respect to or under any of the Letter
of Credit Documents;
(c) The existence of any claim, setoff, defense or other right which the
Company or any other Account Party may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any
persons or entities for whom any such beneficiary or any such
transferee may be acting), the Agent or any Lender or any other
person or entity, whether in connection with any of the Letter of
Credit Documents, the transactions contemplated herein or therein or
any unrelated transactions;
(d) Any draft or other statement or document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate
in any respect;
(e) Payment by the Agent to the beneficiary under any Letter of Credit
against presentation of documents which do not comply with the terms
of such Letter of
55
Credit, including failure of any documents to bear any reference or
adequate reference to such Letter of Credit;
(f) Any failure, omission, delay or lack on the part of the Agent or any
Lender or any party to any of the Letter of Credit Documents to
enforce, assert or exercise any right, power or remedy conferred
upon the Agent, any Lender or any such party under this Agreement,
any of the other Loan Documents or any of the Letter of Credit
Documents, or any other acts or omissions on the part of the Agent,
any Lender or any such party; or
(g) Any other event or circumstance that would, in the absence of this
Section 3.7, result in the release or discharge by operation of law
or otherwise of Company or any other Account Party from the
performance or observance of any obligation, covenant or agreement
contained in Section 3.6 hereof.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Company or any other Account Party has or
may have against the beneficiary of any Letter of Credit shall be available
hereunder to Company or any other Account Party against the Agent or any Lender.
Nothing contained in this Section 3.7 shall be deemed to prevent Company or the
other Account Parties, after satisfaction in full of the absolute and
unconditional obligations of Company and any other Account Parties hereunder,
from asserting in a separate action any claim, defense, set off or other right
which they (or any of them) may have against Agent or any Lender.
3.8 Risk Under Letters of Credit. (a) In the administration and handling
of Letters of Credit and any security therefor, or any documents or instruments
given in connection therewith, Agent shall have the sole right to take or
refrain from taking any and all actions under or upon the Letters of Credit.
(b) Subject to other terms and conditions of this Agreement, Agent shall
issue the Letters of Credit and shall hold the documents related
thereto in its own name and shall make all collections thereunder
and otherwise administer the Letters of Credit in accordance with
Agent's regularly established practices and procedures and, except
pursuant to Section 12.3 hereof, Agent will have no further
obligation with respect thereto. In the administration of Letters of
Credit, Agent shall not be liable for any action taken or omitted on
the advice of counsel, accountants, appraisers or other experts
selected by Agent with due care and Agent may rely upon any notice,
communication, certificate or other statement from Company, any
Account Party, beneficiaries of Letters of Credit, or any other
Person which Agent believes to be authentic. Agent will, upon
request, furnish the Lenders with copies of Letter of Credit
Agreements, Letters of Credit and documents related thereto.
(c) In connection with the issuance and administration of Letters of
Credit and the assignments hereunder, Agent makes no representation
and shall have no responsibility with respect to (i) the obligations
of Company or any Account Party or the validity, sufficiency or
enforceability of any document or instrument given
56
in connection therewith, or the taking of any action with respect to
same, (ii) the financial condition of, any representations made by,
or any act or omission of, Company, any other applicable Account
Party or any other Person, or (iii) any failure or delay in
exercising any rights or powers possessed by Agent in its capacity
as issuer of Letters of Credit in the absence of its gross
negligence or willful misconduct. Each of the Lenders expressly
acknowledges that they have made and will continue to make their own
evaluations of Company's and the Account Parties' creditworthiness
without reliance on any representation of Agent or Agent's officers,
agents and employees.
(d) If at any time Agent shall recover any part of any unreimbursed
amount for any draw or other demand for payment under a Letter of
Credit, or any interest thereon, Agent shall receive same for the
pro rata benefit of the Lenders in accordance with their respective
Percentages and shall promptly deliver to each Lender its share
thereof, less such Lender's pro rata share of the costs of such
recovery, including court costs and attorney's fees. If at any time
any Lender shall receive from any source whatsoever any payment on
any such unreimbursed amount or interest thereon in excess of such
Lender's Percentage of such payment, such Lender will promptly pay
over such excess to Agent, for redistribution in accordance with
this Agreement.
3.9 Indemnification. (a) The Company and each other Account Party hereby
indemnifies and agrees to hold harmless the Lenders and the Agent, and their
respective officers, directors, employees and agents, from and against any and
all claims, damages, losses, liabilities, costs or expenses of any kind or
nature whatsoever which the Lenders or the Agent or any such person may incur or
which may be claimed against any of them by reason of or in connection with any
Letter of Credit, and neither any Lender nor the Agent or any of their
respective officers, directors, employees or agents shall be liable or
responsible for: (i) the use which may be made of any Letter of Credit or for
any acts or omissions of any beneficiary in connection therewith; (ii) the
validity, sufficiency or genuineness of documents or of any endorsement thereon,
even if such documents should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (iii) payment by the Agent to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of any Letter of Credit (unless such payment
resulted from the gross negligence or willful misconduct of the Agent); (iv) any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit; or (v) any other event or circumstance whatsoever arising in connection
with any Letter of Credit; provided, however, that Company and any other Account
Parties shall not be required to indemnify the Lenders and the Agent and such
other persons, and the Agent shall be liable to the Company and any other
Account Parties to the extent, but only to the extent, of any direct, as opposed
to consequential or incidental, damages suffered by Company and any other
Account Parties which were caused by the Agent's gross negligence, willful
misconduct or wrongful dishonor of any Letter of Credit after the presentation
to it by the beneficiary thereunder of a draft or other demand for payment and
other documentation strictly complying with the terms and conditions of such
Letter of Credit.
57
(b) It is understood that in making any payment under a Letter of Credit
the Agent will rely on documents presented to it under such Letter
of Credit as to any and all matters set forth therein without
further investigation and regardless of any notice or information to
the contrary. It is further acknowledged and agreed that Company or
other Account Party may have rights against the beneficiary or
others in connection with any Letter of Credit with respect to which
Agent or the Lenders are alleged to be liable and it shall be a
condition of the assertion of any liability of Agent or the Lenders
by the Company or any other Account Party under this Section that
Company or the other applicable Account Party shall
contemporaneously pursue all remedies in respect of the alleged loss
against such beneficiary and any other parties obligated or liable
in connection with such Letter of Credit and any related
transactions.
3.10 Right of Reimbursement. Each Lender agrees to reimburse the Agent on
demand, pro rata in accordance with its respective Percentage, for (i) the
reasonable out-of-pocket costs and expenses of the Agent to be reimbursed by
Company or any other Account Party pursuant to any Letter of Credit Agreement or
any Letter of Credit, to the extent not reimbursed by Company or any other
Account Party and (ii) any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, fees, reasonable out-of-pocket
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against Agent (in its capacity as issuer of any
Letter of Credit) in any way relating to or arising out of this Agreement, any
Letter of Credit, any documentation or any transaction relating thereto, or any
Letter of Credit Agreement, to the extent not reimbursed by Company or any
Account Party, except to the extent that such liabilities, losses, costs or
expenses were incurred by Agent as a result of Agent's gross negligence or
willful misconduct or by the Agent's wrongful dishonor of any Letter of Credit
after the presentation to it by the beneficiary thereunder of a draft or other
demand for payment and other documentation strictly complying with the terms and
conditions of such Letter of Credit.
3.11 Existing Letters of Credit. Each Existing Letter of Credit shall be
deemed for all purposes of this Agreement to be a Letter of Credit, and each
application or other documentation submitted in connection with each Existing
Letter of Credit shall be deemed for all purposes of this Agreement to be a
Letter of Credit Agreement. On the date of execution of this Agreement, the
Agent shall be deemed automatically to have sold and transferred, and each other
Lender shall be deemed automatically, irrevocably, and unconditionally to have
purchased and received from the Agent, without recourse or warranty, an
undivided interest and participation (on the terms set forth herein), to the
extent of such other Lender's Percentage, in each Existing Letter of Credit and
the applicable Letter of Credit Obligations with respect thereto and any
security therefor or guaranty pertaining thereto. Letter of Credit Fees paid
under the Prior Credit Agreement shall not be recalculated, redistributed or
reallocated by Agent to the Lenders; provided that the Company shall pay to any
new Lenders becoming parties hereto on the Effective Date (or any existing
Lender increasing its Percentage on such date) a special letter of credit fee on
the Existing Letters of Credit, calculated on the basis of the Letter of Credit
Fees which would be applicable to such Existing Letters of Credit if issued on
the Effective Date (but in the case of any existing Lender, computed only to the
extent of the applicable increase in its Percentage) for the period from the
Effective Date to the expiration date of such Existing Letters of Credit.
58
4. MARGIN ADJUSTMENTS.
4.1 Margin Adjustments. Adjustments to the Applicable Margin and the
Applicable Fee Percentages, based on Schedule 4.1, shall be implemented on a
quarterly basis as follows: such adjustments shall be given prospective effect
only, effective as to all Advances outstanding hereunder and as to each
Applicable Fee Percentage, upon the date of delivery of the financial statements
under Sections 7.3(b) and 7.3(c) hereunder, in each case establishing
applicability of the appropriate adjustment, in each case with no retroactivity
or claw-back.
4.2 Margins. In the event Company fails timely to deliver the financial
statements required under Section 7.3(b) or 7.3(c), then from the date delivery
of such financial statements was required until such financial statements are
delivered, the margins and fee percentages shall be at the highest level on the
Pricing Matrix attached to this Agreement as Schedule 4.1.
5. CONDITIONS.
The obligations of Lenders to make Advances or to issue Letters of Credit,
pursuant to this Agreement are subject to the following conditions, provided
however that Sections 5.1 through 5.9 below shall only apply to the initial
Advances or Letters of Credit hereunder:
5.1 Execution of this Agreement and the other Loan Documents. The Company
and the Permitted Borrowers shall have executed and delivered to the Agent for
the account of each Lender, this Agreement (including all schedules, exhibits,
certificates, opinions, financial statements and other documents to be delivered
pursuant hereto) and the other Loan Documents, and, this Agreement and the other
Loan Documents shall be in full force and effect.
5.2 Corporate Authority. Agents shall have received (i) certified copies
of resolutions of the Board of Directors of the Company, the Permitted
Borrowers, Vishay Asia and each of the Significant Subsidiaries party to any
Loan Document evidencing approval of the form of this Agreement and each of the
other Loan Documents to which such Person is a party and authorizing the
execution and delivery thereof and, if applicable, the borrowing of Advances and
requesting of Letters of Credit hereunder; (ii) (A) certified copies of the
Company's, the Permitted Borrowers, Vishay Asia and the Significant
Subsidiaries' articles of incorporation and bylaws or other constitutional
documents certified as true and complete as of a recent date by the appropriate
official of the jurisdiction of incorporation of each such entity (or, if
unavailable in such jurisdiction, by a responsible officer of such entity); and
(B) a certificate of good standing from the state or other jurisdictions of the
Company's incorporation, and from the applicable states of incorporation or
other jurisdictions of the Permitted Borrowers, Vishay Asia, the Significant
Subsidiaries and from every state or other jurisdiction in which the Company,
the Permitted Borrowers, Vishay Asia or any of such Significant Subsidiaries is
qualified to do business, if issued by such jurisdictions, subject to the
limitations (as to qualification and authorization to do business) contained in
Section 6.1, hereof.
5.3 Collateral Documents and Guaranties.
(a) The Agent shall have received the Domestic Guaranty, an amended and
restated Pledge Agreement (pledging the share capital of each of the
Significant Domestic Subsidiaries) executed by the Company and
certain of the Significant Domestic
59
Subsidiaries as well as stock certificates and blank stock powers
for all shares subject to such Pledge Agreement;
(b) The Agent shall have received a Reaffirmation of Certain Loan
Documents or such new or updated Pledge Agreements and/or Guaranties
as the Agent determines necessary executed by the Foreign Permitted
Borrowers, Vishay Asia and the other Significant Foreign
Subsidiaries in connection with those Pledge Agreements and the
Foreign Guaranties as previously executed and delivered to Agent;
and
(c) Company and each of the Significant Domestic Subsidiaries shall have
previously executed and delivered the Security Agreement or joined
thereto and any documents (including, without limitation, financing
statements, amendments to financing statements and assignments of
financing statements) required to be filed in connection with the
Security Agreement to create, in favor of the Agent (for and on
behalf of the Lenders), a perfected security interest in the
Collateral thereunder shall have been delivered to the Agent in a
proper form for filing in each office in each jurisdiction listed in
Schedule 5.3, or other office, as the case may be; provided,
however, (i) that the Company shall have a period of ninety days
following the Effective Date to deliver, or cause to be delivered,
documentation satisfactory to the Agent to perfect the security
interest and lien in patents, trademarks and other intellectual
property and proprietary rights, and (ii) that the Company shall
have a period of thirty days following the Effective Date to
deliver, or cause to be delivered, the joinders of Vishay Infared
Components, Inc., Vishay Cera-mite, Inc., Vishay BLH, Inc., and
Vishay Transducers Ltd. to the Security Agreement and any related
documents required to perfect a security interest in the Collateral
thereunder.
5.4 Representations and Warranties -- All Parties. The representations and
warranties made by the Company, each of the Significant Subsidiaries or any
other party to any of the Loan Documents under this Agreement or any of the
other Loan Documents (excluding the Agents and the Lenders), and the
representations and warranties of any of the foregoing which are contained in
any certificate, document or financial or other statement furnished at any time
hereunder or thereunder or in connection herewith or therewith shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects on and as of the date of the making of the
initial Advance hereunder.
5.5 Compliance with Certain Documents and Agreements. The Company and the
Significant Subsidiaries (and any of their respective Subsidiaries or
Affiliates) shall have each performed and complied with all agreements and
conditions contained in this Agreement, the other Loan Documents, or any
agreement or other document executed hereunder or thereunder and required to be
performed or complied with by each of them (as of the applicable date) and none
of such parties shall be in default in the performance or compliance with any of
the terms or provisions hereof or thereof.
5.6 Opinion of Counsel. The Company, the Permitted Borrowers and the
Significant Subsidiaries, to the extent applicable, shall furnish the opinions
of counsel listed on Schedule 5.6
60
hereto, such opinions to be substantially in the form of the opinions of counsel
previously delivered under the Prior Credit Agreement, with such changes as
shall be acceptable to Agent.
5.7 Certificates. The Agent shall have received a the following
certificates: (a) a certificate of an Authorized Officer, dated the date of the
making of the initial Advances or the issuance of the initial Letters of Credit
hereunder stating that the conditions of paragraphs 5.4, 5.5, 5.9, and 5.11
hereof have been fully satisfied, (b) casualty and liability insurance
certificates for the Company and each Significant Domestic Subsidiary in form
and substance acceptable to the Agent, and (c) insurance disclosure certificates
for the Company and each Significant Domestic Subsidiary in form and substance
acceptable to the Agent.
5.8 Payment of Agent's and Other Fees. Company shall have paid to Agent,
for distribution to the Lenders under the Prior Credit Agreement (based on the
Percentages in effect under the Prior Credit Agreement) the Facility Fee accrued
under the Prior Credit Agreement to the Effective Date of this Agreement. In
addition, Company shall have paid to the Agents (for Agents' sole accounts), the
Agent's Fees and all costs and expenses required hereunder, and any related
Letter of Credit Fees as required under Section 3.11 hereof.
5.9 New Convertible Subordinated Debt. The Additional Debt Issuance Date
shall have occurred and the Company shall have received the proceeds of the New
Convertible Subordinated Debt in an amount not less than $400,000,000, and in
connection therewith, the Company shall have delivered to Agent copies of any
documents related thereto which the Agent may reasonably request, including
copies of all notices for prepayment or redemption issued in order for the
Company to prepay or redeem the outstanding General Semiconductor Notes.
5.10 Other Documents and Instruments. The Agents shall have received, with
a photocopy for each Lender, such other instruments and documents as the
Required Lenders may reasonably request in writing in connection with the making
of Advances or the issuing of any Letters of Credit hereunder, and all such
instruments and documents shall be satisfactory in form and substance to the
Agents and the Required Lenders.
5.11 Continuing Conditions. The obligations of the Lenders to make any of
the Advances or loans or of the Agent to issue any Letters of Credit under this
Agreement, including but not limited to the initial Advances of the Revolving
Credit or the Swing Line hereunder, shall be subject to the following continuing
conditions:
(a) No Default or Event of Default shall have occurred and be continuing
as of the making of the proposed Advance (both before and after
giving effect thereto);
(b) The representations and warranties contained in this Agreement and
the other Loan Documents are true and correct in all material
respects as of the making of the applicable Advance; and
(c) There shall have been no material adverse change in the condition
(financial or otherwise), properties, business, results or
operations of the Company and its Subsidiaries (taken as a whole)
from December 31, 2002 (or any subsequent December 31st, if the
Agent determines, with the concurrence of the Required Lenders,
based on the Company's financial statements for such subsequent
fiscal
61
year that no material adverse change has occurred during such year,
such determination being made solely for purposes of determining the
applicable date under this paragraph) to the date of the proposed
Advance hereunder.
6. REPRESENTATIONS AND WARRANTIES
Company and the Permitted Borrowers represent and warrant and such
representations and warranties as applicable shall be deemed to be continuing
representations and warranties during the entire life of this Agreement:
6.1 Corporate Existence. The Company and each of the Significant
Subsidiaries is duly organized and validly existing in good standing under the
laws of the applicable jurisdiction of organization, charter or incorporation;
the Company and each of the Significant Subsidiaries is duly qualified and
authorized to do business in each jurisdiction where the character of its assets
or the nature of its activities makes such qualification necessary, except where
such failure to qualify and be authorized to do business will not have a
material adverse impact on the Company and its Subsidiaries, taken as a whole.
6.2 Due Authorization -- Company. Execution, delivery and performance of
this Agreement, the other Loan Documents, and any other documents and
instruments required under or in connection with this Agreement, and extensions
of credit to the Company are within its corporate or other organizational
powers, have been duly authorized, are not in contravention of law or the terms
of the Company's certificate of incorporation or bylaws or other organic
documents, and, except as have been previously obtained or as referred to in
Section 6.15, below, do not require the consent or approval, material to the
transactions contemplated by this Agreement, or the Loan Documents, of any
governmental body, agency or authority.
6.3 Due Authorization -- Significant Subsidiaries. Execution, delivery and
performance of this Agreement, the other Loan Documents, and any other documents
and instruments required under or in connection with this Agreement by each of
the Significant Subsidiaries, and extensions of credit to Permitted Borrowers,
are (or will be, on the applicable date of delivery of such Loan Documents)
within their respective corporate or other organizational powers, have been (or
will be, as aforesaid) duly authorized, are not (or will not be, as aforesaid)
in contravention of law or the terms of their articles of incorporation or
bylaws or other organic documents of the parties thereto, as applicable, and,
except as have been previously obtained (or as referred to in Section 6.15,
below), do not (or will not, as aforesaid) require the consent or approval,
material to the transactions contemplated by this Agreement, or the other Loan
Documents, of any governmental body, agency or authority.
6.4 Title to Material Property. Each of the Company and each of the
Significant Subsidiaries has good and valid title to the property owned by it,
which property (individually or in the aggregate) is material to the business or
operations of the Company and its Subsidiaries, taken as a whole, excluding
imperfections in title not material to the ownership, use and/or enjoyment of
any such property.
62
6.5 Encumbrances. There are no security interests in, Liens, mortgages or
other encumbrances on and no financing statements on file with respect to any
property of Company or any of the Subsidiaries, except for those Liens permitted
under Section 8.5 hereof.
6.6 Subsidiaries. As of the Effective Date, there are no directly or
indirectly owned Subsidiaries of the Company, except for those Subsidiaries
identified in Schedule 6.6, attached hereto.
6.7 Taxes. The Company and its Subsidiaries each has filed on or before
their respective due dates, all federal, state and foreign tax returns which are
required to be filed or has obtained extensions for filing such tax returns and
is not delinquent in filing such returns in accordance with such extensions and
has paid all taxes which have become due pursuant to those returns or pursuant
to any assessments received by any such party, as the case may be, to the extent
such taxes have become due, except (a) where the failure to file tax returns or
pay taxes shall not have a material adverse effect on the Company and its
Subsidiaries taken as a whole, or (b) to the extent such tax payments are being
actively contested in good faith by appropriate proceedings and with respect to
which adequate provision has been made on the books of the Company or its
Subsidiaries, as applicable, as may be required by GAAP.
6.8 No Defaults. There exists no default under the provisions of any
instrument evidencing any permitted Debt of the Company or its Subsidiaries or
connected with any of the Permitted Company Encumbrances or the Permitted
Encumbrances of the Subsidiaries, or of any agreement relating thereto, except
where such default would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole and would not violate this Agreement or any of
the other Loan Documents according to the terms thereof.
6.9 Compliance with Laws. The Company and its Significant Subsidiaries
each has complied with all applicable laws, including without limitation,
Hazardous Material Laws, to the extent that failure to comply therewith would
materially interfere with the conduct of the business of the Company or any of
its Subsidiaries taken as a whole, or would have a material adverse effect upon
Company or any of its Subsidiaries taken as a whole, or upon any property
(whether personal or real) owned by any of them.
6.10 Enforceability of Agreement and Loan Documents. (a) This Agreement
and each of the other Loan Documents to which the Company is a party, including
without limitation, all other certificates, agreements and documents executed
and delivered by Company under or in connection herewith or therewith have each
been duly executed and delivered by duly Authorized Officers of the Company and
constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditor's rights generally and by
general principles of equity (whether enforcement is sought in a proceeding in
equity or at law).
(b) This Agreement and each of the other Loan Documents to which any of
the Subsidiaries is a party, and all certificates, documents and
agreements executed in connection herewith or therewith by the
Subsidiaries have each been duly executed and delivered by duly
Authorized Officers of the applicable Subsidiary
63
and constitute the valid and binding obligations of the
Subsidiaries, enforceable in accordance with their respective terms,
except as enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity (whether enforcement is sought in a
proceeding in equity or at law).
6.11 Non-contravention -- Company. The execution, delivery and performance
of this Agreement and the other Loan Documents and any other documents and
instruments required under or in connection with this Agreement by the Company
are not in contravention of the terms of any indenture, material agreement or
material undertaking to which the Company is a party or by which it or its
properties are bound or affected, except to the extent such terms have been
waived or are not material to the transactions contemplated by this Agreement
and the other Loan Documents or to the financial performance of the Company and
its Subsidiaries, taken as a whole.
6.12 Non-contravention -- Other Parties. The execution, delivery and
performance of this Agreement, those other Loan Documents signed by any of the
Subsidiaries, and any other documents and instruments required under or in
connection with this Agreement by any of the Subsidiaries are not in
contravention of the terms of any indenture, material agreement or material
undertaking to which any of the Subsidiaries is a party or by which it or its
properties are bound or affected, except to the extent such terms have been
waived or are not material to the transactions contemplated by this Agreement
and the other Loan Documents or to the financial performance of the Company and
its Subsidiaries, taken as a whole.
6.13 No Litigation -- Company. There is no suit, action, proceeding,
including, without limitation, any bankruptcy proceeding, or governmental
investigation pending against or, to the best knowledge of the Company,
threatened or otherwise affecting the Company (other than any suit, action or
proceeding in which the Company is the plaintiff and in which no counterclaim or
cross-claim against Company has been filed), nor has the Company or any of its
officers or directors been subject to any suit, action, proceeding or
governmental investigation as a result of which any such officer or director is
or may be entitled to indemnification by Company, except as otherwise disclosed
in Schedule 6.13 attached hereto and except for miscellaneous suits, actions and
proceedings which (i) do not have a reasonable likelihood of being adversely
determined or (ii) have a reasonable likelihood of being adversely determined
but, if resolved adversely to the Company would not in the aggregate have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
Except as so disclosed, there is not outstanding against the Company any
judgment, decree, injunction, rule, or order of any court, government,
department, commission, agency, instrumentality or arbitrator, nor, to the best
knowledge of the Company, is the Company in violation of any applicable law,
regulation, ordinance, order, injunction, decree or requirement of any
governmental body or court where such judgment, decree, injunction, rule, order
or violation would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
6.14 No Litigation -- Other Parties. There is no suit, action, proceeding
(other than any suit, action or proceeding in which any such party is the
plaintiff and in which no counterclaim or cross-claim against any such party has
been filed), including, without limitation,
64
any bankruptcy proceeding, or governmental investigation pending against or, to
the best knowledge of the Company, threatened or otherwise affecting any of the
Subsidiaries nor has any such party or any of its officers or directors been
subject to any suit, action, proceeding or governmental investigation as a
result of which any such officer or director is or may be entitled to
indemnification by such party, except as otherwise disclosed in Schedule 6.14
attached hereto and except for miscellaneous suits, actions and proceedings
which (i) do not have a reasonable likelihood of being adversely determined, or
(ii) have a reasonable likelihood of being adversely determined but, if resolved
adversely to such party, would not in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Except as so
disclosed, there is not outstanding against any such party any judgment, decree,
injunction, rule, or order of any court, government, department, commission,
agency, instrumentality or arbitrator nor, to the best knowledge of the Company,
is any such party in violation of any applicable law, regulation, ordinance,
order, injunction, decree or requirement of any governmental body or court where
such judgment, decree, injunction, rule or order or violation would have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
6.15 Consents, Approvals and Filings, Etc. Except as have been previously
obtained, no authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any court,
governmental agency or regulatory authority or any securities exchange or any
other person or party (whether or not governmental) is required in connection
with the execution, delivery and performance: (i) by the Company, of this
Agreement, any of the other Loan Documents to which it is a party, or any other
documents or instruments to be executed and/or delivered by the Company in
connection therewith or herewith; (ii) by each of the Subsidiaries, of this
Agreement, the other Loan Documents to which it is a party or any other
documents or instruments to be executed and/or delivered by the Subsidiaries in
connection therewith or herewith; and (iii) by Company or any of its
Subsidiaries, of the liens, pledges, mortgages, security interests or other
encumbrances granted, conveyed or otherwise established (or to be granted,
conveyed or otherwise established) by or under this Agreement or other Loan
Documents, except for such filings to be made concurrently herewith as are
required by the Collateral Documents to perfect liens in favor of the Agent and
the Lenders. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations which have
previously been obtained or made, as the case may be, are in full force and
effect and are not the subject of any attack, or to the knowledge of the
Company, threatened attack (in any material respect) by appeal or direct
proceeding or otherwise.
6.16 Agreements Affecting Financial Condition. Neither the Company, nor
any of its Subsidiaries is, as of the Effective Date, party to any agreement or
instrument or subject to any charter or other corporate restriction which
materially adversely affects the financial condition or operations of the
Company and its Subsidiaries, taken as a whole.
6.17 No Investment Company; No Margin Stock. Neither the Company, nor any
of its Subsidiaries is engaged principally, or as one of its important
activities, directly or indirectly, in the business of extending credit for the
purpose of purchasing or carrying margin stock. None of the Letters of Credit
and none of the proceeds of any of the Advances will be used by Company or any
of the Subsidiaries to purchase or carry margin stock or will be made available
by the Company or any of the Subsidiaries in any manner to any other Person to
enable or assist such
65
Person in purchasing or carrying margin stock. Terms for which meanings are
provided in Regulation U of the Board of Governors of the Federal Reserve System
or any regulations substituted therefor, as from time to time in effect, are
used in this paragraph with such meanings. Neither the Company, nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6.18 ERISA. Neither a Reportable Event which is material to the Company
and its Subsidiaries, taken as a whole, nor an Accumulated Funding Deficiency
(herein as defined in Section 412 of the Internal Revenue Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Pension Plan. Each
Pension Plan has complied in all material respects with the applicable
provisions of ERISA and the Internal Revenue Code and any applicable regulations
thereof (and, if applicable, any comparable foreign law provisions), except to
the extent that any noncompliance, individually or in the aggregate, would not
have a material adverse effect upon the Company and its Subsidiaries, taken as a
whole. No termination of a Pension Plan has occurred, and no Lien in favor of
the PBGC or a Pension Plan has arisen, during such five-year period. Neither the
Company nor any ERISA Affiliate has had a complete or partial withdrawal from
any Multiemployer Plan within the five year period prior to the date of this
Agreement, nor does the Company or any ERISA Affiliate presently intend to
completely or partially withdraw from any Multiemployer Plan. To the best of
Company's knowledge, no such Multiemployer Plan is in bankruptcy or
reorganization or insolvent. There is no pending or, to the best of Company's
knowledge, threatened litigation or investigation questioning the form or
operation of any Pension Plan, nor, to the best of the Company's knowledge, is
there any basis for any such litigation or investigation which if adversely
determined could have a material adverse effect upon the Company and its
Subsidiaries, taken as a whole, as of the valuation date most closely preceding
the date of this Agreement.
6.19 Environmental Matters and Safety Matters. Except as set forth on
Schedule 6.19: (a) The Company and each Subsidiary is in compliance with all
federal, state, provincial and local laws, ordinances and regulations relating
to safety and industrial hygiene or the environment, including without
limitation all applicable Hazardous Materials Laws in jurisdictions in which the
Company or any such Subsidiary owns or operates, a facility or site, or arranges
for disposal or treatment of Hazardous Materials, solid waste, or other wastes,
accepts for transport any Hazardous Materials, solid wastes or other wastes or
holds any interest in real property or otherwise, except for matters which,
individually or in the aggregate, would not have a material adverse effect upon
the financial condition or business of the Company and its Subsidiaries, taken
as a whole.
(b) All federal, state, provincial, local and foreign permits, licenses
and authorizations required for present or (to the best of the
Company's knowledge) past use of the facilities and other properties
or activities of the Company and each Subsidiary have been obtained,
are presently in effect, and there is and has been full compliance
with all such permits, licenses or authorizations, except, in all
cases, where the failure to comply with the foregoing would not have
a material adverse effect on the Company and its Subsidiaries taken
as a whole.
66
(c) No demand, claim, notice, suit (in law or equity), action,
administrative action, investigation or inquiry (including, without
limitation, the listing of any property by any domestic or foreign
governmental entity which identifies sites for remedial, clean-up or
investigatory action) whether brought by any governmental authority,
private person or entity or otherwise, arising under, relating to or
in connection with any applicable Hazardous Materials Laws is
pending or, to the best of the Company's knowledge, threatened
against the Company or any of its Subsidiaries in connection with
any real property in which the Company or any such Subsidiary holds
or, to the best of the Company's knowledge, has held an interest or
any present or, to the best of the Company's knowledge, past
operation of the Company or any such Subsidiary, except for such
matters which, individually or in the aggregate, would not have a
material adverse effect on the financial condition or business of
the Company and its Subsidiaries, taken as a whole.
(d) Neither the Company nor any of its Subsidiaries whether with respect
to present or, to the best of the Company's knowledge, past
operations or properties, (i) is, to the best of the Company's
knowledge, the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a
release of any Hazardous Materials into the environment, (ii) has
received any notice of any Hazardous Materials in, or upon any of
its properties in violation of any applicable Hazardous Materials
Laws, or (iii) knows of any basis for any such investigation or
notice under, or the existence of a violation of, Hazardous
Materials Laws except for such matters which, individually or in the
aggregate, would not have a material adverse effect on the financial
condition or business of the Company and its Subsidiaries, taken as
a whole.
(e) No release, threatened release or disposal of Hazardous Materials,
solid waste or other wastes is occurring or has occurred on, under
or to any real property in which the Company or any of its
Subsidiaries holds any interest or performs any of its operations,
in violation of any applicable Hazardous Materials Laws, except for
any such matters which, individually or in the aggregate, would not
have a material adverse effect on the financial condition or
business of the Company and its Subsidiaries, taken as a whole.
6.20 Accuracy of Information. Each of the Company's audited or unaudited
financial statements furnished to Agents and the Lenders by the Company prior to
the date of this Agreement, is complete and correct in all material respects and
fairly presents the financial condition of the Company and its Subsidiaries,
taken as a whole, and the results of their operations for the periods covered
thereby; any projections of operations for future years previously furnished by
Company to Agents or the Lenders have been prepared as the Company's good faith
estimate of such future operations, taking into account all relevant facts and
matters known to Company; since December 31, 2002 there has been no material
adverse change in the financial condition of the Company or its Subsidiaries,
taken as a whole; neither the Company, nor any of its Subsidiaries has any
contingent obligations (including any liability for taxes) not disclosed by or
reserved against in the December 31, 2002 balance sheet which is likely to have
a material adverse effect on the Company and its Subsidiaries, taken as a whole.
67
7. AFFIRMATIVE COVENANTS
Company and each of the Permitted Borrowers covenants and agrees that it
will, and, as applicable, it will cause its Subsidiaries (excluding any Special
Purpose Subsidiaries and, for purposes of Section 7.1, any Subsidiary that is
not a Significant Subsidiary) to, so long as any of the Lenders are committed to
make any Advances or issue any Letters of Credit under this Agreement and
thereafter so long as any Indebtedness remains outstanding under this Agreement:
7.1 Preservation of Existence, Etc.
Except as otherwise specifically permitted hereunder, preserve and
maintain its corporate existence and such of its rights, licenses, and
privileges as are material to the business and operations conducted by it; and
qualify and remain qualified to do business in each jurisdiction in which such
qualification is material to the business and operations or ownership of
properties, in each case of the Company and its Subsidiaries, taken as a whole.
7.2 Keeping of Books. Keep proper books of record and account in which
full and correct entries shall be made of all of its financial transactions and
its assets and businesses so as to permit the presentation of the Consolidated
financial statements of the Company prepared in accordance with GAAP.
7.3 Reporting Requirements. Furnish Agent with copies for each Lender:
(a) as soon as possible, and in any event within five (5) calendar days
after becoming aware of the occurrence of each Default or Event of
Default, a written statement of the chief financial officer of the
Company (or in his/her absence, another Authorized Officer of the
Company) setting forth details of such Event of Default or event and
the action which the Company has taken or has caused to be taken or
proposes to take or cause to be taken with respect thereto;
(b) as soon as available, and in any event within one hundred twenty
(120) days after and as of the end of each of Company's fiscal
years, a detailed Consolidated audit report of Company certified to
by independent certified public accountants satisfactory to Lenders
together with an unaudited Consolidating report of Company and its
Subsidiaries certified by the chief financial officer of Company (or
in his/her absence, another Authorized Officer of the Company) as to
consistency (with prior financial reports and accounting periods),
accuracy and fairness of presentation, and a Covenant Compliance
Report;
(c) as soon as available, and in any event within sixty (60) days after
and as of the end of each of the first three quarters of each year,
a Consolidated and Consolidating balance sheet and a statement of
profit and loss and surplus reconciliation of Company and its
Subsidiaries certified by the chief financial officer of Company (or
in his/her absence, another Authorized Officer of the Company) as to
consistency (with prior financial reports and accounting periods),
accuracy and fairness of presentation, and a Covenant Compliance
Report.
68
(d) as soon as possible, and in any event within five (5) calendar days
after becoming aware (i) of any material adverse change in the
financial condition of the Company, any of its Significant
Subsidiaries or any of the Permitted Borrowers, a certificate of the
chief financial officer of Company (or in his/her absence, another
Authorized Officer of the Company) setting forth the details of such
change or (ii) of the taking by the Internal Revenue Service or any
foreign taxing jurisdiction of a tax position (verbal or written)
which could have a material adverse effect upon the Company or any
of its Subsidiaries (or any such tax position taken by the Company
or any of its Subsidiaries) setting forth the details of such
position and the financial impact thereof;
(e) (i) as soon as available, the Company's 8-K, 10-Q and 10-K Reports
filed with the federal Securities and Exchange Commission, and in
any event, with respect to the 10-Q Report, within sixty (60) days
of the end of each of the Company's fiscal quarters, and with
respect to the 10-K Report, within one hundred twenty (120) days
after the end of each of Company's fiscal years; and (ii) as soon as
available, copies of all filings, reports or other documents filed
by the Company or any of its Subsidiaries with the federal
Securities and Exchange Commission or, as the Agent may reasonably
request, other federal regulatory or taxing agencies or authorities
in the United States, or comparable agencies or authorities in
England, Canada, France, Germany, the Netherlands or Israel, or any
stock exchanges in such jurisdictions;
(f) promptly as issued, all press releases, notices to shareholders and
all other material communications transmitted by the Company or any
of its Subsidiaries to the Company's stockholders generally, and
promptly following a Permitted Securitization, copies of the
principal transaction documents relating to such Permitted
Securitization;
(g) together with the financial statements delivered pursuant to Section
7.3(b) hereof, annual financial projections for the Company and its
Significant Subsidiaries covering the period at least through
Revolving Credit Maturity Date then in effect and otherwise in form
and content reasonably acceptable to the Agent and the Lenders;
(h) provide Agent (i) within 60 days of the end of each fiscal quarter,
with written evidence of the Moody's and S&P rating on the Company's
rated Senior Debt, and (ii) with written notice to Agent of any
changes in the Moody's or S&P rating on the Company's rated Senior
Debt within five (5) days of such change, and if such written notice
states that the rating by S&P has fallen below BB+ or the rating by
Moody's has fallen below Ba1, such written notice shall be
accompanied by an executed copy of the Reaffirmation of Security
Agreement in the form attached hereto as Exhibit L if any Liens have
been released pursuant to Section 13.21 hereof.
69
(i) promptly, and in form reasonably satisfactory to Agent and the
requesting Lender or Lenders, such other information as Agent or any
of the Lenders (acting through Agent) may request from time to time.
7.4 Tangible Net Worth. Maintain, on a Consolidated basis, as of the last
day of each fiscal quarter, beginning with the fiscal quarter ending June 30,
2003, Tangible Net Worth in an amount not less than Eight Hundred Fifty Million
Dollars ($850,000,000), plus the sum of the Net Income Adjustment and the Equity
Offering Adjustment.
7.5 Leverage Ratio. Maintain, as of the last day of each fiscal quarter
during the periods specified below, a Leverage Ratio of not more than the
following amounts during the periods specified below:
----------------------------------------------------------------
Period Ratio
----------------------------------------------------------------
Effective Date through December 30, 2003 3.50
----------------------------------------------------------------
December 31, 2003 through December 30, 2004 3.25
----------------------------------------------------------------
December 31, 2004 and thereafter 3.00
----------------------------------------------------------------
7.6 Fixed Charge Coverage Ratio. Maintain, as of the last day of each
fiscal quarter, a Fixed Charge Coverage Ratio of not less than 2.5 to 1.0.
7.6A Senior Debt Ratio. Maintain, as of the last day of each fiscal
quarter ending during the periods specified below, for the four fiscal quarters
then ending, a ratio of Senior Debt to Consolidated EBITDA of not more than the
following amounts during the periods specified below:
----------------------------------------------------------------
Period Ratio
----------------------------------------------------------------
Effective Date through December 30, 2003 1.75
----------------------------------------------------------------
December 31, 2003 and thereafter 1.50
----------------------------------------------------------------
7.7 Inspections. Permit Agent and each Lender, through their authorized
attorneys, accountants and representatives to examine Company's and each of the
Subsidiaries' books, accounts, records, ledgers and assets and properties of
every kind and description wherever located at all reasonable times during
normal business hours, upon oral or written request of Agent; and permit Agent
and each Lender or their authorized representatives, at reasonable times and
intervals, to visit all of its offices, discuss its financial matters with its
officers and independent certified public accountants, and by this provision
Company authorizes such accountants to discuss the finances and affairs of
Company and its Subsidiaries (provided that Company is given an opportunity to
participate in such discussions) and examine any of its or their books and other
corporate records. An examination of the records or properties of Company or any
of its Subsidiaries may require revealment of proprietary and/or confidential
data and information, and the Agent and each of the Lenders agrees upon request
of the inspected party to execute a confidentiality agreement (satisfactory to
Agent or the inspecting Lender, as the case may be, and such party) on behalf of
the Agent or such inspecting Lender and all parties making such inspections or
examinations under its authorization; provided however that such confidentiality
agreement shall not prohibit Agent from revealing such information to Lenders or
prohibit the inspecting Lender from revealing such information to Agent or
another Lender.
70
7.8 Taxes. Pay and discharge all taxes and other governmental charges, and
all material contractual obligations calling for the payment of money, before
the same shall become overdue, unless and to the extent only that such payment
is being contested in good faith by appropriate proceedings and is adequately
reserved for, as may be required by GAAP on its books, or where the failure to
pay any such matter would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
7.9 Further Assurances. Execute and deliver or cause to be executed and
delivered within a reasonable time following Agent's request, and at the
Company's expense, such other documents or instruments as Agent may reasonably
require to effectuate more fully the purposes of this Agreement or the other
Loan Documents.
7.10 Insurance. Maintain insurance coverage on its physical assets and
against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature, and in the event of
acquisition of additional property, real or personal, or of occurrence of
additional risks of any nature, increase such insurance coverage in such manner
and to such extent as prudent business judgment and then current practice would
dictate; and with all said policies or copies thereof, including all
endorsements thereon and those required hereunder, to be deposited with the
Agent. In the case of all policies covering any Collateral, all such insurance
policies shall provide that the loss payable thereunder shall be payable to
Company and its Domestic Subsidiaries, as applicable, and the Agent for the
benefit of the Lenders (Agent as lender loss payee) as their respective
interests may appear. Upon the request of Agent or any Lender, certificates
evidencing such policies shall be delivered to Agent or such Lender, as the case
may be.
7.11 Indemnification. With respect to the Company, indemnify and save each
Agent and the Lenders harmless from all reasonable loss, cost, damage, liability
or expenses, including reasonable attorneys' fees and disbursements, incurred by
each of the Agents and the Lenders by reason of an Event of Default or enforcing
the obligations of the Company or the Permitted Borrowers under this Agreement,
or the other Loan Documents, or in the prosecution or defense of any action or
proceeding concerning any matter growing out of or connected with this
Agreement, or any of the other Loan Documents or any mortgage, stock pledge or
security agreement released by Agents or the Lenders from time to time
hereunder, or relating in any way to the imposition (or attempted imposition) on
Agents or Lenders (or any of them) of any liability for the violation of or
non-compliance by any Person (or purported violation or
71
non-compliance) with Hazardous Material Laws, other than in any case resulting
from the gross negligence or willful misconduct of Agents or the Lenders; and,
with respect to each of the Permitted Borrowers, indemnify and save each Agent
and the Lenders harmless from all reasonable loss, cost, damage, liability or
expenses, including reasonable attorneys' fees and disbursements, incurred by
each of the Agents and the Lenders with respect to a Permitted Borrower by
reason of an Event of Default or enforcing the obligations of the Permitted
Borrowers under this Agreement, or the other Loan Documents or in the
prosecution or defense of any action or proceeding concerning any matter growing
out of or connected with this Agreement, or any of the other Loan Documents or
any mortgage, stock pledge or security agreement released by Agents or the
Lenders from time to time hereunder, or relating in any way to the imposition
(or attempted imposition) on Agents or Lenders (or any of them) of any liability
for the violation of or non-compliance by any Person (or purported violation or
non-
72
compliance) with Hazardous Material Laws, other than in any case resulting from
the gross negligence or willful misconduct of Agents or the Lenders.
7.12 Governmental and Other Approvals. Apply for, obtain and/or maintain
in effect, as applicable, all material authorizations, consents, approvals,
licenses, qualifications, exemptions, filings, declarations and registrations
(whether with any court, governmental agency, regulatory authority, securities
exchange or otherwise) which are necessary in connection with the execution,
delivery and performance: (i) by the Company, of this Agreement, the Loan
Documents, or any other documents or instruments to be executed and/or delivered
by the Company in connection therewith or herewith; and (ii) by each of the
Significant Subsidiaries, of this Agreement and the Loan Documents.
7.13 Compliance with Contractual Obligations and Laws. Comply in all
material respects with all Contractual Obligations, and with all applicable
laws, rules, regulations and orders of any governmental authority, whether
federal, state, local or foreign (including without limitation Hazardous
Materials Laws), in effect from time to time, except to the extent that failure
to comply therewith could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the business, operations, property
or financial or other condition of the Company and the Permitted Borrowers and
their respective Subsidiaries, taken as a whole, and could not reasonably be
expected to materially adversely affect the ability of the Company or any of the
Significant Subsidiaries to perform their respective obligations under any of
the Loan Documents to which they are a party.
7.14 ERISA. Comply in all material respects with all requirements imposed
by ERISA as presently in effect or hereafter promulgated or the Internal Revenue
Code (or comparable laws in applicable jurisdictions outside the United States
of America relating to foreign pension plans) and promptly notify Lenders upon
the occurrence of any of the following events:
(a) the termination of any Pension Plan pursuant to Subtitle C of Title
IV of ERISA or otherwise (other than any defined contribution plan
not subject to Section 412 of the Code and any Multiemployer Plan);
(b) the appointment of a trustee by a United States District Court to
administer any Pension Plan pursuant to ERISA;
(c) the commencement by the PBGC, or any successor thereto, of any
proceeding to terminate any Pension Plan;
(d) the failure of the Company or any ERISA Affiliate to make any
payment in respect of any Pension Plan required under Section 412 of
the Internal Revenue Code;
(e) the withdrawal of the Company or any ERISA Affiliate from any
Multiemployer Plan;
(f) the occurrence of an Accumulated Funding Deficiency or a Reportable
Event; or
73
(g) the occurrence of a Prohibited Transaction which could have a
material adverse effect upon the Company and its Subsidiaries, taken
as a whole.
7.15 Environmental Matters.
(a) (i) Not permit any of its property (whether real or personal, or any
portion thereof) to be involved in the use, generation, manufacture,
storage, disposal or transportation of Hazardous Material, except in
compliance with Hazardous Material Laws, and (ii) keep and maintain
all of its other property (whether real or personal, and any portion
thereof) in compliance with, and shall not cause or permit any
activity at or condition of the Collateral, or any of its other
property (whether real or personal, or any portion thereof) to be in
violation of any Hazardous Material Laws, unless the failure to
comply therewith or violation thereof will not materially adversely
affect the Company and its Subsidiaries, taken as a whole.
(b) Promptly notify the Agent in writing of: (i) any and all
enforcement, cleanup, removal or other governmental or regulatory
actions instituted or completed pursuant to any applicable Hazardous
Material Laws; (ii) any and all claims made by any Person against
the Company, any of its Subsidiaries, or the Permitted Borrowers, or
any of its other property (whether real or personal, or any portion
thereof) relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Material
which could reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries, taken as a whole; and (iii)
Company's discovery of any occurrence or condition on any real
property or fixtures constituting a part of, adjoining or in the
vicinity of any of its property that could cause any such property
(or any part thereof) to be subject to any material restrictions on
the ownership, occupancy, transferability or use thereof under any
Hazardous Material Laws. The Agent, on behalf of the Lenders, shall
have the right to join and participate in, as a party if it or they
so elect, any legal proceedings or actions initiated in connection
with any of the matters described in subparagraphs (b) (i) or (b)
(ii), above, and the Company agrees to pay the Agent's reasonable
attorneys fees in connection therewith.
(c) Take any material remedial action as may be required under
applicable law in response to the presence of any Hazardous Material
on, under, or about any of its property (whether real or personal,
or any part thereof), and, pursuant thereto, may enter into
settlement agreements, consent decrees, or other compromises in
respect of any of the matters described in subparagraphs (b) (i)
through (iii), above, provided that, in each case, Company has given
Lenders not less than thirty (30) days prior written notice thereof,
except, however, in the event remedial action is necessary on an
emergency basis or is required by any governmental authority with
jurisdiction over the Company or its Subsidiaries, in which case the
Company shall provide Lenders with reasonable notice promptly
thereafter.
74
(d) Agent may retain (on its own behalf and on behalf of the Lenders,
but at Company's sole expense) such Environmental Auditors as
reasonably necessary to evaluate and/or confirm Company's
environmental responses, reports or other matters, including
Company's compliance with Hazardous Material Laws generally, under
this Section 7.15, or elsewhere herein.
7.16 Significant Subsidiaries.
(a) With respect to the share capital (or other ownership interests) of
each Person which is a Significant Foreign Subsidiary on the
Effective Date, within 120 days following the Effective Date (or 180
days in the case of Vishay Asia or General Semiconductor of Taiwan),
the Company shall execute or cause to be executed, and delivered to
the Agent a Pledge Agreement encumbering subject to Section 7.17
hereof with a first priority Lien, 65% of the share capital (or
other ownership interests) of each such Significant Foreign
Subsidiary, but only with respect to, and only to the extent of,
share capital or other ownership interests that is directly owned by
the Company and/or one or more of the Domestic Subsidiaries, to
secure the Indebtedness of the Company and the Domestic Permitted
Borrowers;
(b) (i) With respect to each Person which becomes a Significant Domestic
Subsidiary subsequent to the Effective Date, cause such new
Significant Domestic Subsidiary to execute and deliver to the Agent
(x) a Joinder Agreement whereby such Significant Domestic Subsidiary
becomes obligated as a Guarantor under the Domestic Guaranty and (y)
except where Liens for the benefit of the Agent and the Lenders are
not required on certain Collateral under the terms of Section 13.21
hereof, a Joinder Agreement whereby such Significant Domestic
Subsidiary becomes obligated under the applicable Security
Agreement, such documents to be executed and delivered within thirty
days of the date such Person becomes a Significant Subsidiary and
(ii) with respect to each Person which becomes a Significant Foreign
Subsidiary subsequent to the Effective Date or is a Significant
Foreign Subsidiary on the Effective Date, and is also a Significant
Foreign Subsidiary on the date of Agent's receipt of the applicable
FPB Advance Notice, (a) a Joinder Agreement whereby such Significant
Foreign Subsidiary becomes obligated as a Guarantor under the
Foreign Guaranty and (b) if such Significant Foreign Subsidiary is
incorporated under the laws of the United States of America, a
Security Agreement or a Joinder Agreement whereby such Significant
Foreign Subsidiary becomes obligated under the applicable Security
Agreement, as the case may be, such documents to be executed and
delivered within eighty days of the Agent's receipt of a FPB Advance
Notice; and
(c) (i) With respect to the share capital (or other ownership interests)
of each Person which becomes a Significant Foreign Subsidiary
subsequent to the Effective Date, within sixty days of the date such
Person becomes a Significant Foreign Subsidiary, the Company shall
execute, or cause to be executed, and deliver to the Agent a Pledge
Agreement encumbering subject to Section 7.17 hereof, with a first
priority Lien, 65% of the share capital (or other ownership
interests) of each such Significant Foreign Subsidiary, but only
with respect to, and only to the
75
extent of, share capital that is directly owned by the Company
and/or one or more Domestic Significant Subsidiaries, to secure the
Indebtedness of the Company and the Domestic Permitted Borrowers;
and (ii) with respect to the share capital (or other ownership
interests) of each Person which becomes a Significant Foreign
Subsidiary subsequent to the Effective Date, and with respect to
each Person which is a Significant Foreign Subsidiary on the
Effective Date and which also is a Significant Foreign Subsidiary on
the date of Agent's receipt of the applicable FPB Notice, within
eighty days of the Agent's receipt of a FPB Advance Notice, the
Company shall execute, or cause to be executed, and deliver to the
Agent a Pledge Agreement encumbering subject to Section 7.17 hereof,
with a first priority Lien on 65% of the share capital of each such
Significant Foreign Subsidiary, but only with respect to, and only
to the extent of, share capital that is directly owned by the
Company and/or one or more Domestic Subsidiaries, to secure the
Indebtedness of the Company and the Domestic Permitted Borrowers and
100% of the share capital of each such Significant Foreign
Subsidiary to the extent owned, directly or indirectly, by the
Company to secure the Indebtedness of the Foreign Permitted
Borrowers hereunder; and
(d) With respect to the share capital (or other ownership interests) of
each Person, which becomes a Significant Domestic Subsidiary
subsequent to the Effective Date, within thirty days of the date
such Person becomes a Significant Domestic Subsidiary, the Company
shall execute, or cause to be executed, and deliver to the Agent a
stock pledge encumbering, 100% of the share capital (or other
ownership interests) of each such Significant Domestic Subsidiary to
the extent owned, directly or indirectly, by the Company to secure
the Indebtedness of the Company and the Permitted Borrowers.
All Collateral Documents delivered pursuant to this Section shall be in
form satisfactory to the Agent and the Required Lenders, in their reasonable
discretion, together with such supporting documentation, including without
limitation financing statements, acknowledgments, stock powers, registrations
and like documents, corporate authority items, certificates and opinions of
counsel, as reasonably required by the Agent and the Required Lenders and the
Company shall take, or cause to be taken, such steps as are necessary or
advisable under applicable law to perfect the liens granted under clauses (a)
through (d) hereof.
7.17 Foreign Subsidiaries Security. (a) If, following a change in the
relevant sections of the Internal Revenue Code or the regulations, published
rulings, notices or other official pronouncements issued or promulgated
thereunder, counsel for the Company and the Permitted Borrowers acceptable to
the Required Lenders does not within 30 days after a request from the Agent or
the Required Lenders deliver evidence, in form and substance mutually
satisfactory to the Required Lenders and the Company, that, with respect to each
Significant Foreign Subsidiary whose entire share capital, to the extent owned,
directly or indirectly, by the Company has not been encumbered in favor of the
Lenders (i) a pledge of 66-2/3 % or more of the total combined voting power of
all classes of capital stock of such Foreign Subsidiary entitled to vote and
(ii) the entering into a guaranty in substantially the form of the Domestic
Guaranty by such Significant Foreign Subsidiary, in either such case would cause
such Significant Foreign Subsidiary's United States parent for Federal income
tax purposes to include in income all or a portion of the
76
undistributed earnings of such Significant Foreign Subsidiary as determined for
Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Significant Foreign
Subsidiary's outstanding capital stock so issued by such Significant Foreign
Subsidiary not theretofore pledged pursuant to a Pledge Agreement shall, to the
extent owned, directly or indirectly, by the Company, be pledged to the Agent
for the benefit of the Lenders pursuant to a Pledge Agreement (or another pledge
agreement in substantially similar form, if needed) and, in the case of failure
to deliver the evidence described in clause (ii) above, such Significant Foreign
Subsidiary shall execute and deliver the Domestic Guaranty (or another guaranty
in substantially the same form, if needed), in each case to the extent that
entering into a Pledge Agreement or such Guaranty is permitted under the laws of
the respective foreign jurisdiction and all such documents delivered pursuant to
this Section 7.17 shall be satisfactory to the Required Lenders, provided,
however, that absent the occurrence and continuance of a Default or an Event of
Default, any pledge or Domestic Guaranty made or provided pursuant to this
Section 7.17 may be removed if counsel for the Company and the Permitted
Borrowers subsequently delivers evidence reasonably satisfactory to Agent and
the Required Lenders that such pledge or Domestic Guaranty would cause such
Significant Foreign Subsidiary's United States parent for Federal income tax
purposes to include all or a portion of the undistributed earnings of such
Significant Foreign Subsidiary, it being understood that the parties intend that
the share capital of any Foreign Subsidiary shall not be required to be pledged
and no Foreign Subsidiary shall be required to issue a Guaranty if and to the
extent that such Guaranty or Pledge Agreement would cause the Company or any
Domestic Subsidiary to be required to include in income (for Federal income tax
purposes) all or a portion of the undistributed earnings of such Foreign
Subsidiary.
(b) Upon written notice received from the Company that it wishes to
change its tax election with respect to a Subsidiary treated under
this Agreement as a Domestic Subsidiary by virtue of its status as a
disregarded entity under Section 956 of the Internal Revenue Code,
such that the Subsidiary, following such election, would be
considered as a Foreign Subsidiary hereunder, Agent and Lenders
agree (at Company's sole expense), so long as no Default or Event of
Default shall have occurred and be continuing, to enter into such
amendments or supplements to and/or releases of the Collateral
Documents as may be necessary to prevent such Foreign Subsidiary's
United States parent for federal income tax purposes from being
required to include in income all or a portion of the undistributed
earnings of such Foreign Subsidiary.
7.18 Siliconix. Upon the purchase or other acquisition of any additional
shares of stock of Siliconix, shall cause such shares to be encumbered as
security for the Indebtedness of the Company and the Permitted Borrowers
according to the terms of the applicable Pledge Agreement; and within thirty
(30) days of the date on which Siliconix shall become a 100% Subsidiary, cause
Siliconix to become a party, by execution of Joinder Agreements, to the Domestic
Guaranty and to the applicable Security Agreement in each case according to the
requirements set forth in Section 7.16 hereof.
7.19 Security and Defense of Collateral. Except while Liens for the
benefit of the Agent and the Lenders are not required on certain Collateral
under the terms of Section 13.21 hereof, take such actions as the Agent or the
Required Lenders may from time to time reasonably request to establish and
maintain first perfected security interests in and Liens on all of its
77
Collateral in favor of the Agent on behalf of the Lenders, subject only to Liens
permitted under Section 8.5 hereof; and defend the Collateral from any Liens
other than Liens permitted by Section 8.5.
7.20 Vishay Israel. Within forty-five (45) days following the end of each
fiscal year ending after the Effective Date, cause Vishay Israel to request from
Israel's Comptroller of Foreign Exchange authorization to increase the limit on
the Pledge Agreement executed and delivered by Vishay Israel encumbering the
shares of Vishay Europe, to the extent of any increases after the Effective Date
in the amount of Vishay Israel's investment in Vishay Europe and as soon as
reasonably practicable following receipt of such approval, execute and deliver
an amendment in form satisfactory to the Agent and the Required Lenders, in
their reasonable discretion, together with such supporting documentation,
including without limitation corporate authority items, certificates and
opinions of counsel, as reasonably required by the Agent and the Required
Lenders and the Company shall take, or cause to be taken, such steps as are
necessary or advisable under applicable law to perfect the liens granted under
such Pledge Agreement as amended thereby.
7.21 Prepayment of General Semiconductor Notes. Issue such notices of
prepayment or redemption ( the "Call Notices") to the holders of the General
Semiconductor Notes (or any trustee or other representative) as may be necessary
to allow the Company or its applicable Subsidiary to prepay or redeem, in their
entirety, all of the issued and outstanding General Semiconductor Notes
according to the terms thereof; and use certain of the proceeds of the New
Convertible Subordinated Debt (net of reasonable and customary costs and
expenses of issuance) to redeem, defease or otherwise prepay within 45 days of
the date of issuance of the Call Notices all outstanding principal, premium and
interest on the General Semiconductor Notes.
7.22 Use of Proceeds. Use the Advances of the Revolving Credit made to the
Company or any Permitted Borrower solely for general corporate purposes,
including without limitation working capital and acquisitions. None of the
proceeds of the Advances made under this Agreement will be used in violation of
any applicable law or regulation including, without limitation, Regulation U of
the Board of Governors of the Federal Reserve System.
8. NEGATIVE COVENANTS
Company and each of the Permitted Borrowers covenant and agree that, so
long as any of the Lenders are committed to make any Advances or issue any
Letters of Credit under this Agreement and thereafter so long as any
Indebtedness remains outstanding, it will not, and it will not allow its
Subsidiaries excluding, for purposes of Section 8.2, any Subsidiary that is not
a Significant Subsidiary, a Guarantor or any party obligated under any Security
Agreement or Pledge Agreement, to:
8.1 Capital Structure, Business Objects or Purpose. Except as otherwise
specifically permitted under this Agreement,
(a) purchase, acquire or redeem any of its capital stock (whether in
connection with the conversion of any Debt to stock or otherwise),
except for (i) non-vested stock granted to participants under the
Vishay Stock Plan (ii) repurchases by the
78
Company of its common stock in an aggregate amount, from and after
August 31, 2000, not to exceed five percent (5%) of Tangible Net
Worth (determined, in the case of each such repurchase of shares, on
the date of repurchase), and (iii) repurchases by Siliconix of its
common stock prior to the time that Siliconix becomes a Significant
Subsidiary, provided, however, that both before and after giving
effect to each such repurchase, no Default or Event of Default has
occurred and is continuing; and
(b) make any material change in its capital structure or in its general
business objects or purpose or enter into any business, directly or
through any Subsidiary except for those businesses in which the
Company and its Subsidiaries are engaged on the date of this
Agreement or other businesses in the electronic components industry
or which are directly related thereto which could reasonably be
expected to have a material adverse effect on (i) the Company and
the Subsidiaries taken as a whole or (ii) the rights or interests of
the Agent and Lenders hereunder.
8.2 Limitations on Fundamental Changes. Enter into any transaction of
merger, consolidation or amalgamation, or purchase or otherwise acquire or
become obligated for the purchase of all or substantially all of the assets,
business interests or shares of capital stock of any Person or in any other
manner effectuate an expansion of present business of the Company and its
Subsidiaries by acquisition or liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all, substantially all or any part of its property,
business or assets, or make any material change in its present method of
conducting business, except:
(a) any Subsidiary may be merged or consolidated with or into the
Company (so long as Company shall be the continuing or surviving
corporation); any Domestic Subsidiary may be merged or consolidated
with or into any 100% Domestic Subsidiary (so long as such 100%
Domestic Subsidiary shall be the continuing or surviving
corporation); and any Foreign Subsidiary may be merged or
consolidated with or into any 100% Domestic Subsidiary or into any
100% Foreign Subsidiary (excluding Vishay Israel) so long as such
100% Domestic Subsidiary or such 100% Foreign Subsidiary shall be
the continuing or surviving corporation);
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of any
or all of its assets (upon voluntary liquidation or otherwise) to
the Company;
(c) any Domestic Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to any other Domestic Subsidiary which is a 100%
Subsidiary and any Foreign Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to any Domestic Subsidiary or to any other
Foreign Subsidiary (excluding Vishay Israel), provided that such
Subsidiary is a 100% Subsidiary;
79
(d) any Person other than a Subsidiary may merge or consolidate with and
into the Company or any 100% Subsidiary (excluding Vishay Israel) so
long as (i) the Company or such 100% Subsidiary shall be the
surviving corporation and (ii) immediately before and immediately
after giving effect to such merger or consolidation, no Default or
Event of Default shall have occurred and be continuing;
(e) Permitted Transfers and any Permitted Securitization;
(f) other sales, transfers or other dispositions of any assets of the
Company and its Subsidiaries from and after the Effective Date in an
aggregate amount not to exceed (i) 15% of Tangible Net Worth in any
fiscal year and (ii) 20% of Tangible Net Worth for any period of
three consecutive fiscal years (or portion thereof) beginning with
fiscal year 2001, determined on the basis of Tangible Net Worth for
the fiscal quarter ending immediately prior to the date of
determination; and
(g) Permitted Acquisitions and, provided that no Default or Event of
Default has occurred and is continuing at the time of such
reorganization and restructuring, the PDD Restructuring.
8.3 Guaranties. Guarantee, endorse, or otherwise become liable for or upon
the obligations of others, except by endorsement of cash items for deposit in
the ordinary course of business and except for (i) the Guaranties, (ii)
guaranties by the Company of Hedging Obligations entered into by any Foreign
Subsidiary or of reimbursement obligations in respect of Special Letters of
Credit issued for the account of any Subsidiary, and (iii) guaranties of
indebtedness as set forth on Schedule 8.3 attached hereto or as permitted under
clauses (d), (e), (f) or (g) of Section 8.7 hereof and (iv) customary clean up
call provisions under any Permitted Securitization.
8.4 Debt. Become or remain obligated for any Debt for borrowed money, or
for any Debt incurred in connection with the acquisition of any property, real
or personal, tangible or intangible, except:
(a) Indebtedness to Lenders (or their Affiliates) hereunder, including
without limitation, Hedging Obligations and Special Letters of
Credit;
(b) Debt not otherwise permitted hereunder which is in existence as of
the Effective Date and disclosed on Schedule 8.4 attached hereto,
and any renewals or refinancing of such Debt in amounts not
exceeding the scheduled amounts (less any required amortization
according to the terms thereof), on terms no less favorable to the
Company and its Subsidiaries than in effect on the Effective Date
and otherwise in compliance with this Agreement, regardless of any
less favorable terms which may result from changes in market rates;
(c) current unsecured trade, utility or non-extraordinary accounts
payable arising in the ordinary course of business and any unsecured
letters of credit undertaken by such parties in the ordinary course
of business outside the United States of
80
America (and necessary under local customs and practices) to support
such accounts payable;
(d) purchase money Debt for fixed assets (including capitalized leases
or other non-cancelable leases having a term of 12 months or
longer), provided that the aggregate amount of all such purchase
money Debt outstanding at any time shall not exceed seven and
one-half percent (7.5%) of Tangible Net Worth;
(e) any Debt assumed pursuant to an acquisition conducted in compliance
with this Agreement, provided that such Debt was not entered into,
extended or renewed in contemplation of such acquisition and
provided further that the aggregate amount of all such Debt at any
time outstanding shall not exceed six percent (6%) of Tangible Net
Worth;
(f) Debt to third parties issued by any Foreign Subsidiary of the
Company in an aggregate amount at any time outstanding not to exceed
$55,000,000; provided that such Debt be issued and at all times
maintained on a pari passu basis with the Indebtedness, if any, of
such Foreign Subsidiary, or on a basis subordinate thereto, and
pursuant to documentation containing covenants not more restrictive
in the aggregate than the covenants contained in this Agreement (as
determined by the Agent and Required Lenders in their reasonable
discretion) and provided further, however, that immediately before
and immediately after such Debt is incurred, and giving effect
thereto, no Default or Event of Default has occurred and is
continuing (it being understood that for purposes of this Section
8.4(f), the granting of Liens which are permitted under Section 8.5
hereof shall not be deemed to constitute the entry into more
restrictive covenants or to be other than on a pari passu basis);
(g) Intercompany Loans, but only to the extent permitted under the other
applicable terms and limitations of this Agreement, including but
not limited to Section 8.7 hereof;
(h) unsecured Debt issued under Rule 144A of the Securities Act of 1933
or pursuant to a private placement in an aggregate amount for all
such Debt issued under this subparagraph (but without giving effect
to any repayments or principal reductions thereof) not to exceed Two
Hundred Million Dollars ($200,000,000); provided that such Debt be
issued and all times maintained on a basis subordinate hereto, and
pursuant to documentation containing covenants not more restrictive
in the aggregate than the covenants contained in this Agreement (as
determined by the Agent and the Required Lenders in their reasonable
discretion); provided further, however, that immediately before and
immediately after such Debt is incurred, and giving effect thereto,
no Default or Event of Default has occurred and is continuing; and
provided further that prior to or concurrently with the issuance of
such Debt, the Revolving Credit Aggregate Commitment is permanently
reduced by an amount equal to not less than 75% of the proceeds of
such Debt, net of normal and customary expenses of issuance payable
to third parties;
81
(i) any reimbursement obligations arising in connection with the letters
of credit described in Schedule 8.3 attached hereto; and
(j) the BCc Replacement Financing, the New Convertible Subordinated Debt
and any other Subordinated Debt disclosed on Schedule 8.13 attached
hereto.
8.5 Liens. Permit or suffer any Lien to exist on any of its properties,
real, personal or mixed, tangible or intangible, whether now owned or hereafter
acquired, except:
(a) Liens in favor of the Agent, as security for the Indebtedness
hereunder, and, including without limitation, any Indebtedness under
any Hedging Obligations or to secure Special Letters of Credit;
(b) purchase money security interests in fixed assets to secure purchase
money Debt permitted under Section 8.4(d) hereof, provided that such
security interest is created substantially contemporaneously with
the acquisition of such fixed assets and does not extend to any
property other than the fixed assets so financed;
(c) any lien securing third-party indebtedness assumed pursuant to any
Permitted Acquisition conducted in compliance with this Agreement,
provided that such lien is limited to the property so acquired and
was not entered into, extended or renewed in contemplation of such
acquisition;
(d) Permitted Company Encumbrances and Permitted Encumbrances of the
Subsidiaries;
(e) Liens securing Debt of a Foreign Subsidiary (and not supported by a
guaranty or a similar obligation by the Company or any Domestic
Subsidiary) for overdraft or similar credit facilities permitted
under clause (f) of Section 8.4 hereof encumbering cash or cash
equivalents owned by any Foreign Subsidiary that do not exceed, in
the aggregate, Thirty Million Dollars ($30,000,000);
(f) Liens securing Debt otherwise permitted hereunder, provided that the
aggregate principal amount of all such Debt which is secured by a
Lien shall not exceed Five Million Dollars ($5,000,000); and
(g) any Lien encumbering property interests, rights or proceeds which
are subject of a transfer or encumbrance pursuant to a Permitted
Securitization.
8.6 Dividends. Declare or pay any dividends on or make any other
distribution with respect to (whether by reduction of Stockholders' Equity or
otherwise) any shares of its capital stock, except for stock dividends and
except for (a) cash dividends by any 100% Subsidiary to the Company or any other
100% Subsidiary which has executed a Guaranty hereunder, (b) dividends paid in
cash or in kind by any Subsidiary which is not a 100% Subsidiary or by any Joint
Venture, provided that such dividends are paid to each holder of share capital
therein (including Company or any of its other Subsidiaries) on a pro rata basis
(based on the relative amounts of share capital held by each such holder) and
provided further that such dividends are paid to the Company or its other
Subsidiaries on substantially the same (or better) terms as (and
82
contemporaneously with) any dividends paid to Persons other than the Company and
its Subsidiaries, (c) cash dividends by Vishay Europe which are reinvested in
Vishay Europe by its shareholders in compliance with Section 8.7 hereof and (d)
cash dividends by Vishay Electronic which are reinvested in Vishay Electronic by
Vishay Europe in compliance with Section 8.7, hereof.
8.7 Investments. Make or allow to remain outstanding any investment
(whether such investment shall be of the character of investment in shares of
stock, evidences of indebtedness or other securities or otherwise) in, or any
loans or advances to, any Person, firm, corporation or other entity or
association, other than:
(a) Company's and its Subsidiaries' equity ownership interests in the
Subsidiaries as of the Effective Date;
(b) Additional cash investment in Vishay Europe by its shareholders or
in Vishay Electronic by Vishay Europe, which is applied by Vishay
Europe or Vishay Electronic, as the case may be, concurrently with
such investment to reduce its Indebtedness under this Agreement, in
substantially the amount of such additional investment;
(c) The existing investments, loans and/or advances in or to
Subsidiaries set forth or referred to on Schedule 8.7 hereto, in
addition to any other matters set forth in this Section 8.7;
(d) Intercompany Loans, Advances, or Investments made on or after the
Effective Date hereunder to Company, or by Company or any Subsidiary
to Company or any 100% Subsidiary (excluding Vishay Israel),
provided that any Intercompany Loan included therein be evidenced by
and funded under an Intercompany Note encumbered pursuant to a
Pledge Agreement and further provided that both before and after
giving effect to any such loans, advances or investments, no Default
or Event of Default has occurred and is continuing under this
Agreement;
(e) Intercompany Loans, Advances or Investments made on or after the
Effective Date by Company or any Subsidiary to Vishay Israel or to
any Subsidiary which does not constitute a 100% Subsidiary other
than Siliconix (provided that any Intercompany Loan included therein
be evidenced by and funded under an Intercompany Note encumbered
pursuant to a Pledge Agreement), provided that at the time any such
loan, advance or investment is made (before and after giving effect
thereto) no Default or Event of Default has occurred and is
continuing and provided further that the aggregate amount of all
such loans, advances and investments shall not exceed, at any time
outstanding, 10% of Tangible Net Worth;
(f) Intercompany Loans to Siliconix, but only to the extent evidenced by
and funded under an Intercompany Note encumbered pursuant to a
Pledge Agreement, provided that both before and after giving effect
to any such loans, advances or
83
investments, no Default or Event of Default has occurred and is
continuing under this Agreement;
(g) loans, advances or investments made on or after the Effective Date
(without regard to any repayment of such loans, advances or
investments, other than the repayment of capital or principal) to
any Joint Venture or other Person, including without limitation
guaranties by the Company or any Subsidiary (valued on the basis of
the aggregate amount of indebtedness covered by a guaranty) of
third-party indebtedness of any such Joint Venture or other Person,
which loans, advances or investments are not otherwise permitted
under this Section 8.7, in an aggregate amount at any time
outstanding not to exceed seven and one-half percent (7.5%) of
Tangible Net Worth;
(h) the Remaining Siliconix Acquisition, subject to the terms and
conditions of this Agreement;
(i) investments, whether by acquisition of shares of Capital Stock,
indebtedness or other obligations or security of, any Person (other
than a Subsidiary or an Affiliate) which is a customer of the
Company or any Subsidiary, which investment was made in exchange for
amounts owed by such customer to the Company or any Subsidiary (and
incurred in the ordinary course of business) or as an advance on the
provision of goods and services in the ordinary course of business;
(j) Hedging Obligations and guaranties by the Company of Hedging
Obligations entered into by any Foreign Subsidiary;
(k) Permitted Investments; and
(l) Investments in any Subsidiary (including, without limitation, any
Special Purpose Subsidiary) from and after the date hereof
consisting of (x) dispositions of specific foreign accounts
receivable made pursuant to any Permitted Securitization and the
resultant Debt issued by a Special Purpose Subsidiary to another
Subsidiary as part of such Permitted Securitization, in each case to
the extent constituting Investments hereunder; and (y) the
repurchase or replacement from and after the date hereof of accounts
receivable pursuant to any representations or warranties or clean up
call provisions included in such Permitted Securitization in
accordance with the definition thereof.
In valuing any investments, loans and advances for the purpose of applying the
limitations set forth in this Section 8.7 (except as otherwise expressly
provided herein), such investments, loans and advances shall be taken at the
original cost thereof, without allowance for any subsequent write-offs or
appreciation or depreciation therein, but less any amount repaid or recovered on
account of capital or principal.
8.8 Accounts Receivable. Sell or assign any account, note or trade
acceptance receivable, except to Agent on behalf of the Lenders, and except the
sale or assignment of foreign accounts receivable pursuant to any Permitted
Securitization.
84
8.9 Transactions with Affiliates. Enter into any transaction with any of
its or their stockholders or officers or its or their affiliates, except in the
ordinary course of business and on terms not less favorable than would be usual
and customary in similar transactions between Persons dealing at arm's length
and except for (i) transactions otherwise permitted by this Agreement and (ii)
transactions between the Company and any 100% owned Subsidiary (other than
Vishay Israel or its Israeli Subsidiaries) or between any 100% owned Subsidiary
and any other 100% owned Subsidiary (other than Vishay Israel or its Israeli
Subsidiaries).
8.10 Operations of Vishay Israel. Permit the normal manufacturing or other
operations of Vishay Israel (or of Company or any of its other Subsidiaries
conducted in Israel) to be interrupted, stopped or delayed for any period of
fourteen (14) consecutive days, excluding regularly scheduled vacations and
holidays in the ordinary course of such operations.
8.11 Prohibition Against Certain Restrictions. (a) Enter into or otherwise
become subject to any agreement or arrangement (excluding this Agreement and
excluding any such agreement by a Special Purpose Subsidiary pursuant to a
Permitted Securitization, but only to the extent such agreement applied only to
such Special Purpose Subsidiary) with any lender or other third party (i) which
prohibits, restricts or otherwise limits the ability of Company to make loans,
advances or investments to its Subsidiaries or which prohibits, restricts or
otherwise limits the ability of any Subsidiary to make loans, advances or
investments in any other Subsidiary (ii) which prohibits, restricts or otherwise
limits the ability of any Subsidiary to declare or pay any dividends on or make
any other distribution with respect to any shares of its capital stock, or (iii)
which prohibits, restricts or otherwise limits the execution, delivery or
performance by Company or any Subsidiary of any guaranty, indemnity or similar
undertaking in favor of Agent or the Lenders.
(b) Except in connection with Liens permitted by Section 8.5, to the
extent of the property encumbered by such Liens, enter into any
agreement, document or instrument which would restrict or prevent
Company and its Subsidiaries from granting Agent on behalf of
Lenders liens upon, security interests in and pledges of their
respective assets which are senior in priority to all other Liens.
8.12 Amendment of the BCc Acquisition Documents. Amend, modify or
otherwise alter (or suffer to be amended, modified or altered) any of the
material terms and conditions of the BCc Acquisition Documents in any respect
which is materially adverse to the Company, as determined by Company in its
reasonable discretion, without the prior written approval of Agent and the
Required Lenders; provided that promptly following any amendment to any of such
documents, Company shall provide Agent with copies of such amendments, for
distribution to the Lenders.
8.13 Amendment of Subordinated Debt and Other Debt Documents and Permitted
Securitizations. Amend, modify or otherwise alter (or suffer to be amended,
modified or altered) any of the terms and conditions of those documents or
instruments evidencing or otherwise related to any Debt set forth on Schedule
8.13 or any other Subordinated Debt (including the New Convertible Subordinated
Debt) or any Permitted Securitization, except for those amendments,
modifications or other alterations which could not reasonably be determined to
have a material adverse effect on (a) the business, operations, property or
condition (financial or
85
otherwise) of the Company and its Subsidiaries, taken as a whole, (b) the
ability of the Company or any of its Subsidiaries to perform their respective
obligations under this Agreement or any other Loan Document to which any of them
is a party, or (c) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights or remedies of the Agent or the Lenders
hereunder or thereunder, or except as may be approved by Agent and the Required
Lenders.
8.14 Payment or Prepayment of Other Debts. Prepay, purchase, redeem or
defease the New Subordinated Convertible Debt, any Subordinated Debt or any
other Debt set forth on Schedule 8.13 (whether in connection with the conversion
of any such Debt or otherwise), except for (a) prepayment, purchase, redemption
or defeasance of the LYONs, including the redemption of the LYONs at the option
of the holders thereof pursuant to their terms on June 4, 2004 and June 4, 2006,
(b) the prepayment of all outstanding principal, premium and interest on those
certain notes issued under and pursuant to that certain Indenture dated as of
December 14, 1999 between The Bank of New York, as trustee and General
Semiconductor, Inc., as issuer (the "General Semiconductor Notes"), and (c) the
conversion of the BCC Replacement Financing into stock pursuant to the put
rights relating thereto; and except for regularly scheduled payments of
interest, make any payments, prepayments or purchase, redeem or otherwise
defease the BCc Replacement Financing in cash or cash equivalents, prior to the
Revolving Credit Maturity Date.
9. DEFAULTS
9.1 Events of Default. Any of the following events is an "Event of
Default":
(a) non-payment when due of the principal or interest of any Advance in
accordance with the terms thereof or of any reimbursement obligation
under Section 3.6 hereof, and in the case of interest payments,
continuance thereof for three (3) days;
(b) default in the payment of any money by Company or any of the
Permitted Borrowers under this Agreement (other than as set forth in
subsection (a), above) or the other Loan Documents, and continuance
thereof for three (3) days of the date the same is due and payable;
(c) default in the observance or performance of any of the other
conditions, covenants or agreements set forth in this Agreement or
any of the other Loan Documents by any party thereto (provided that,
with respect to the covenants set forth in Sections 7.8, 7.10, 7.12,
7.13 and 7.14 hereof, such event has continued for thirty (30)
consecutive days) or the occurrence of any other default or Event of
Default, as the case may be hereunder or thereunder;
(d) any representation or warranty made by Company or any of the
Permitted Borrowers herein or in any instrument submitted pursuant
hereto or by any other party to the Loan Documents proves untrue in
any material adverse respect when made; provided that, with respect
to any misrepresentation or breach of warranty arising subsequent to
the date hereof under Sections 6.7, 6.8, 6.13 through 6.15 and 6.18
of this Agreement solely by virtue of the nature of the
representations
86
and warranties hereunder as continuing, (i) as to Section 6.8,
hereof, any applicable cure period existing in respect of such
matters shall have expired and (ii) as to the remaining Sections of
this Agreement specified in this subparagraph (d), such
misrepresentation or breach of warranty hereunder shall have
continued for a period of thirty (30) consecutive days;
(e) any provision of any Guaranty, or any Collateral Document shall at
any time for any reason (other than in accordance with its terms or
the terms of this Agreement) cease to be valid and binding and
enforceable against the Company or the Significant Subsidiaries, as
applicable, or the validity, binding effect or enforceability
thereof shall be contested by any Person, or the Company or any of
the Significant Subsidiaries shall deny that it has any or further
liability or obligation under any Guaranty, or any Collateral
Document, as applicable, or any Guaranty, or any Collateral Document
shall be terminated, invalidated or set aside or in any way cease to
give or provide to the Lenders and the Agent the benefits purported
to be created thereby;
(f) default in the payment of any other obligation of Company, its
Significant Subsidiaries, any Guarantor or any Person obligated
under a Security Agreement or Pledge Agreement for borrowed money in
excess of Ten Million Dollars ($10,000,000) (or the equivalent
thereof in an Alternative Currency), individually or in the
aggregate; or default in the observance or performance of any
conditions, covenants or agreements related or given with respect to
any other obligations for borrowed money in an aggregate amount in
excess of Ten Million Dollars ($10,000,000) (or the equivalent
thereof in an Alternative Currency), which is sufficient to permit
the holder thereof to accelerate the maturity of such obligation;
(g) the rendering of any judgment or judgments for the payment of money
in excess of the sum of Ten Million Dollars ($10,000,000) (or the
Alternative Currency equivalent thereof) in the aggregate against
Company, any of its Significant Subsidiaries, any Guarantor, or any
Person obligated under a Security Agreement or Pledge Agreement, and
such judgments shall remain unpaid, unvacated, unbonded or unstayed
by appeal or otherwise for a period of thirty (30) consecutive days,
except as covered by adequate insurance with a reputable carrier and
an action is pending in which an active defense is being made with
respect thereto;
(h) any Person shall engage in any Prohibited Transaction involving any
Pension Plan, (ii) any Accumulated Funding Deficiency, whether or
not waived, shall exist with respect to any Pension Plan or any Lien
in favor of the PBGC or a Pension Plan shall arise on the assets of
the Company or any ERISA Affiliate, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA or (v) the
Company or any ERISA Affiliate shall, or in the reasonable opinion
of the Required Lenders is likely to,
87
incur any liability in connection with a withdrawal from, or the
insolvency, bankruptcy or reorganization of, a Multiemployer Plan
and in each case in clauses (i) through (v) above, (x) a period of
sixty (60) days, or more, has elapsed from the occurrence of such
event or condition and (y) such event or condition, together with
all other such events or conditions, if any, could reasonably be
expected to subject the Company or any of its Subsidiaries to any
tax, penalty or other liabilities in the aggregate material in
relation to the business, operations, property or financial or other
condition of the Company and its Subsidiaries taken as a whole;
(i) (A) any one Person or group of Persons acting in concert shall
acquire or control, directly or indirectly, whether by ownership,
proxy, voting trust or otherwise, twenty percent (20%) or more of
the voting power of the issued and outstanding stock of Company,
other than (x) any Person or group of Persons beneficially owning,
directly or indirectly, as of the date hereof capital stock of the
Company with twenty percent (20%) or more of such voting power or
(y) any Permitted Transferee; or (B) individuals who constitute the
Continuing Directors cease for any reason to constitute at least a
majority of the Company's directors (for purposes of this Section
9.1(i)(B), "Continuing Director" means any director who is currently
a director and any director who is nominated or elected by a
majority of Continuing Directors who are then directors);
(j) If a creditors' committee shall have been appointed for the business
of Company, any of its Significant Subsidiaries, any Guarantor or
any Person obligated under a Security Agreement or Pledge Agreement;
or if Company, any Significant Subsidiary, any Guarantor or any
Person obligated under a Security Agreement or Pledge Agreement
shall have made a general assignment for the benefit of creditors or
shall have been adjudicated bankrupt, or shall have filed a
voluntary petition in bankruptcy or for reorganization or to effect
a plan or arrangement with creditors or shall fail to pay its debts
generally as such debts become due in the ordinary course of
business (except as contested in good faith and for which adequate
reserves are made in such party's financial statements); or shall
file an answer to a creditor's petition or other petition filed
against it, admitting the material allegations thereof for an
adjudication in bankruptcy or for reorganization; or shall have
applied for or permitted the appointment of a receiver or trustee or
custodian for any of its property or assets; or such receiver,
trustee or custodian shall have been appointed for any of its
property or assets (otherwise than upon application or consent of
Company, any Significant Subsidiary, any Guarantor or any Person
obligated under a Security Agreement or Pledge Agreement) and such
appointment has not been dismissed or stayed within thirty (30) days
from the date of appointment or if an order for relief or otherwise
approving any petition for reorganization of Company, any
Significant Subsidiary, any Guarantor or any Person obligated under
a Security Agreement or Pledge Agreement shall be entered; or if an
involuntary petition is filed against Company, any Significant
Subsidiary, any Guarantor or any Person obligated under a Security
Agreement or Pledge Agreement and shall not be dismissed or stayed
within thirty (30) days from the date of filing thereof; and
88
(k) if any "Fundamental Change" shall have occurred as defined in that
certain Indenture entered into by the Company in connection with the
New Convertible Subordinated Debt without giving effect to any
amendments thereto or modifications thereof subsequent to the
Effective Date.
9.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder: (a) the Agent shall, if directed to do so by the Required
Lenders, declare any commitment of the Lenders to extend credit hereunder
immediately terminated; (b) the Agent shall, if directed to do so by the
Required Lenders, declare the entire unpaid Indebtedness immediately due and
payable, without presentment, notice or demand, all of which are hereby
expressly waived by Company and the Permitted Borrowers; (c) upon the occurrence
of any Event of Default specified in Section 9.1(j) above, and notwithstanding
the lack of any declaration by Agent under the preceding clause (a) or (b), the
Lenders' commitments to extend credit hereunder shall immediately and
automatically terminate and the entire unpaid Indebtedness shall become
automatically due and payable without presentment, notice or demand; (d) the
Agent shall, upon being directed to do so by the Required Lenders, demand
immediate delivery of cash collateral, and the Company and each Account Party
agree to deliver such cash collateral upon demand, in an amount equal to the
maximum amount that may be available to be drawn at any time prior to the stated
expiry of all outstanding Letters of Credit; and (e) the Agent shall, if
directed to do so by the Required Lenders or the Lenders, as applicable (subject
to the terms hereof), exercise any remedy permitted by this Agreement, the other
Loan Documents or law.
9.3 Rights Cumulative. No delay or failure of Agent and/or Lenders in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof, or the exercise of any other power, right
or privilege. The rights of Lenders under this Agreement are cumulative and not
exclusive of any right or remedies which Lenders would otherwise have.
9.4 Waiver by Company and Permitted Borrowers of Certain Laws; JURY
WAIVER. To the extent permitted by applicable law, Company and each of the
Permitted Borrowers hereby agree to waive, and do hereby absolutely and
irrevocably waive and relinquish the benefit and advantage of any valuation,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist, which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, on any claim for interest
on any principal of any Advance, AND FURTHER HEREBY IRREVOCABLY AGREE TO WAIVE
THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS IN
WHICH AGENT OR THE LENDERS (OR ANY OF THEM), ON THE ONE HAND, AND THE COMPANY OR
ANY OF THE PERMITTED BORROWERS, ON THE OTHER HAND, ARE PARTIES, WHETHER OR NOT
SUCH ACTIONS OR PROCEEDINGS ARISE OUT OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR OTHERWISE. These waivers have been voluntarily given, with full
knowledge of the consequences thereof.
9.5 Waiver of Defaults. No Event of Default shall be waived by the Lenders
except in a writing signed by an officer of the Agent in accordance with Section
13.11 hereof. No single or partial exercise of any right, power or privilege
hereunder, nor any delay in the exercise
89
thereof, shall preclude any other or further exercise of the Lenders' rights by
Agent. No waiver of any Event of Default shall extend to any other or further
Event of Default. No forbearance on the part of the Agent in enforcing any of
the Lenders' rights shall constitute a waiver of any of their rights. Company
and the Permitted Borrowers expressly agree that this Section may not be waived
or modified by the Lenders or Agent by course of performance, estoppel or
otherwise.
10. PAYMENTS, RECOVERIES AND COLLECTIONS.
10.1 Payment Procedure.
(a) All payments by Company and/or by any of the Permitted Borrowers of
principal of, or interest on, Advances of the Revolving Credit or
the Swing Line or of Letter of Credit Obligations or Fees shall be
made without setoff or counterclaim on the date specified for
payment under this Agreement not later than 11:00 a.m. (Detroit
time) in Dollars in immediately available funds to Agent, for the
ratable account of the Lenders, at Agent's office located at One
Detroit Center, Detroit, Michigan 48226, in respect of Domestic
Advances or Fees payable in Dollars. Payments made in respect of any
Advance in any Alternative Currency or any Fees payable in any
Alternative Currency shall be made in such Alternative Currency in
immediately available funds for the account of Agent's Eurocurrency
Lending Office, at the Agent's Correspondent, for the ratable
account of the Lenders, not later than 11:00 a.m. (the time of
Agent's Correspondent). Upon receipt of each such payment, the Agent
shall make prompt payment to each Lender, or, in respect of
Eurocurrency-based Advances, such Lender's Eurocurrency Lending
Office, in like funds and currencies, of all amounts received by it
for the account of such Lender.
(b) Unless the Agent shall have been notified by the Company prior to
the date on which any payment to be made by the Company or any of
the Permitted Borrowers is due that the Company or such Permitted
Borrower does not intend to remit such payment, the Agent may, in
its discretion, assume that the Company or such Permitted Borrower
has remitted such payment when so due and the Agent may, in reliance
upon such assumption, make available to each Lender on such payment
date an amount equal to such Lender's share of such assumed payment.
If the Company or any of the Permitted Borrowers has not in fact
remitted such payment to the Agent, each Lender shall forthwith on
demand repay to the Agent in the applicable currency the amount of
such assumed payment made available to such Lender, together with
the interest thereon, in respect of each day from and including the
date such amount was made available by the Agent to such Lender to
the date such amount is repaid to the Agent at a rate per annum
equal to (i) for Prime-based Advances, the Federal Funds Effective
Rate, as the same may vary from time to time, and (ii) with respect
to Eurocurrency-based Advances, Agent's aggregate marginal cost
(including the cost of maintaining any required reserves or deposit
insurance and of any fees, penalties, overdraft charges or other
costs or expenses incurred by Agent) of carrying such amount.
90
(c) Whenever any payment to be made hereunder (other than payments in
respect of any Eurocurrency-based Advance or a Quoted Rate Advance)
shall otherwise be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing interest, if any,
in connection with such payment. Whenever any payment of principal
of, or interest on, a Eurocurrency-based Advance or a Quoted Rate
Advance shall be due on a day which is not a Business Day the date
of payment thereof shall be extended to the next succeeding Business
Day unless as a result thereof it would fall in the next calendar
month, in which case it shall be shortened to the next preceding
Business Day and, in the case of a payment of principal, interest
thereon shall be payable for such extended or shortened time, if
any.
(d) All payments to be made by the Company or the Permitted Borrowers
under this Agreement (including without limitation payments under
the Swing Line) shall be made without set-off or counterclaim, as
aforesaid, and without deduction for or on account of any present or
future withholding or other taxes of any nature imposed by any
governmental authority or of any political subdivision thereof or
any federation or organization of which such governmental authority
may at the time of payment be a member, unless Company or any of the
Permitted Borrowers, as the case may be, is compelled by law to make
payment subject to such tax. In such event, Company and such
Permitted Borrower shall:
(i) pay to the Agent for Agent's own account and/or, as the case
may be, for the account of the Lenders (and, in the case of
any Swing Line Advances, pay to the Swing Line Bank which
funded such Advances) such additional amounts as may be
necessary to ensure that the Agent and/or such Lender or
Lenders receive a net amount in the applicable Permitted
Currency equal to the full amount which would have been
receivable had payment not been made subject to such tax; and
(ii) remit such tax to the relevant taxing authorities according to
applicable law, and send to the Agent such certificates or
certified copy receipts as the Agent or any Lender shall
reasonably require as proof of the payment by the Company or
such Permitted Borrower of any such taxes payable by the
Company or such Permitted Borrower.
As used herein, the terms "tax", "taxes" and "taxation" include all
taxes, levies, imposts, duties, charges, fees, deductions and
withholdings and any restrictions or conditions resulting in a
charge together with interest (and any taxes payable upon the
amounts paid or payable pursuant to this Section 10.1) thereon and
fines and penalties with respect thereto which may be imposed by
reason of any violation or default with respect to the law regarding
such tax, assessed as a result of or in connection with the
transactions in any Alternative Currency hereunder, or the payment
and/or receipt of funds in any Alternative Currency hereunder, or
the payment or delivery of funds into or out of any jurisdiction
other than the United
91
States (whether assessed against Company, the Permitted Borrower,
Agent or any of the Lenders).
10.2 Application of Proceeds. Subject to the Collateral Documents, but
notwithstanding anything to the contrary in this Agreement or other Loan
Document, after an Event of Default, the proceeds of any Collateral, together
with any offsets, voluntary payments by the Company or the Permitted Borrowers
or others and any other sums received or collected in respect of the
Indebtedness, shall be applied, first, to payment of principal and interest of
outstanding Advances, any reimbursement obligations under Section 3.6 hereof and
any net obligations with respect to Hedging Obligations entered into between the
Company or its Subsidiaries and a Lender or an affiliate of a Lender, on a pro
rata basis, next, to any other Indebtedness on a pro rata basis, and then, if
there is any excess, to the Company or the Permitted Borrowers, as the case may
be. The application of such proceeds and other sums to the outstanding
Indebtedness hereunder shall be based on each Lender's Percentage of the
aggregate Indebtedness.
10.3 Pro-rata Recovery. If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise)
on account of principal of, or interest on, any of the outstanding Advances (or
on account of its participation in any Letter of Credit) in excess of its pro
rata share of payments then or thereafter obtained by all Lenders upon principal
of and interest on all outstanding Advances (or such participation), such Lender
shall purchase from the other Lenders such participations in the outstanding
Advances (or subparticipations in the Letters of Credit) held by them as shall
be necessary to cause such purchasing Lender to share the excess payment or
other recovery ratably in accordance with the Percentages of the Revolving
Credit with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.
10.4 Set Off. Upon the occurrence and during the continuance of any Event
of Default, each Lender may at any time and from time to time, without notice to
the Company but subject to the provisions of Section 10.3 hereof, (any
requirement for such notice being expressly waived by the Company) set off and
apply against any and all of the obligations of the Company or any Permitted
Borrower now or hereafter existing under this Agreement, whether owing to such
Lender or any other Lender or the Agent, any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Company or such Permitted Borrower and any property of the
Company or such Permitted Borrower from time to time in possession of such
Lender, irrespective of whether or not such deposits held or indebtedness owing
by such Lender may be contingent and unmatured and regardless of whether any
Collateral then held by Agent or any Lender is adequate to cover the
Indebtedness, provided, however, that a Lender may not set off and apply against
any obligations of the Company or any Domestic Permitted Borrower any deposits
or property of, or other indebtedness owing to, or for the credit or account of
any Foreign Permitted Borrower. Promptly following any such setoff, such Lender
shall give written notice to Agent and to Company and the applicable Permitted
Borrower of the occurrence thereof. Each of the Company and each Permitted
Borrower hereby grants to the Lenders and the Agent a lien on and security
interest in all such deposits, indebtedness and property as collateral
92
security for the payment and performance of all of the obligations of the
Company and the Permitted Borrowers under this Agreement. The rights of each
Lender under this Section 10.4 are in addition to the other rights and remedies
(including, without limitation, other rights of setoff) which such Lender may
have.
11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.
11.1 Reimbursement of Prepayment Costs. If Company or any Permitted
Borrower makes any payment of principal with respect to any Eurocurrency-based
Advance or Quoted Rate Advance on any day other than the last day of the
Interest Period applicable thereto (whether voluntarily, by acceleration, or
otherwise), or if Company or any Permitted Borrower converts or refunds (or
attempts to convert or refund) any such Advance on any day other than the last
day of the Interest Period applicable thereto; or if Company or any Permitted
Borrower fails to borrow, refund or convert into any Eurocurrency-based Advance
or Quoted Rate Advance after notice has been given by Company or such Permitted
Borrower to Agent in accordance with the terms hereof requesting such Advance,
or if Company or any Permitted Borrower fails to make any payment of principal
or interest in respect of a Eurocurrency-based Advance or Quoted Rate Advance
when due, Company and the applicable Permitted Borrower shall reimburse Agent
for itself and/or on behalf of any Lender, as the case may be, on demand for any
resulting loss, cost or expense incurred (excluding the loss of any Applicable
Margin) by Agent and Lenders, as the case may be as a result thereof, including,
without limitation, any such loss, cost or expense incurred in obtaining,
liquidating, employing or redeploying deposits from third parties, whether or
not Agent and Lenders, as the case may be, shall have funded or committed to
fund such Advance. Such amount payable by Company to Agent for itself and/or on
behalf of any Lender, as the case may be, may include, without limitation, an
amount equal to the excess, if any, of (a) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, refunded or
converted, for the period from the date of such prepayment or of such failure to
borrow, refund or convert, through the last day of the relevant Interest Period,
at the applicable rate of interest for said Advance(s) provided under this
Agreement, over (b) the amount of interest (as reasonably determined by Agent
and Lenders, as the case may be) which would have accrued to Agent and Lenders,
as the case may be, on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank eurocurrency market.
Calculation of any amounts payable to any Lender under this paragraph shall be
made as though such Lender shall have actually funded or committed to fund the
relevant Advance through the purchase of an underlying deposit in an amount
equal to the amount of such Advance and having a maturity comparable to the
relevant Interest Period; provided, however, that any Lender may fund any
Eurocurrency-based Advance or Quoted Rate Advance, as the case may be, in any
manner it deems fit and the foregoing assumptions shall be utilized only for the
purpose of the calculation of amounts payable under this paragraph. Upon the
written request of Company, Agent and Lenders shall deliver to Company a
certificate setting forth the basis for determining such losses, costs and
expenses, which certificate shall be conclusively presumed correct, absent
manifest error.
11.2 Eurocurrency Lending Office. For any Advance to which the
Eurocurrency-based Rate is applicable, if Agent or a Lender, as applicable,
shall designate a Eurocurrency Lending Office which maintains books separate
from those of the rest of Agent or
93
such Lender, Agent or such Lender, as the case may be, shall have the option of
maintaining and carrying the relevant Advance on the books of such Eurocurrency
Lending Office.
11.3 Availability of Alternative Currency. The Agent and the Lenders shall
not be required to make any Advance in an Alternative Currency if, at any time
prior to making such Advance, the Agent or the Required Lenders (after
consultation with Agent) shall determine, in its or their sole discretion, that
(i) deposits in the applicable Alternative Currency in the amounts and
maturities required to fund such Advance will not be available to the Agent and
the Lenders; (ii) a fundamental change has occurred in the foreign exchange or
interbank markets with respect to the applicable Alternative Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls); or (iii) it has become otherwise materially impractical for the Agent
or the Lenders, as applicable, to make such Advance in the applicable
Alternative Currency. The Agent or the applicable Lender, as the case may be,
shall promptly notify the Company and Lenders of any such determination.
11.4 Refunding Advances in Same Currency. If pursuant to any provisions of
this Agreement, the Company or any of the Permitted Borrowers repays one or more
Advances and on the same day borrows an amount in the same currency, the Agent
(or the Swing Line Bank, in the case of a Swing Line Advance) shall apply the
proceeds of such new borrowing to repay the principal of the Advance or Advances
being repaid and only an amount equal to the difference (if any) between the
amount being borrowed and the amount being repaid shall be remitted by the Agent
to the Company or such Permitted Borrower, or by the Company or such Permitted
Borrower to the Agent, as the case may be.
11.5 Circumstances Affecting Eurocurrency-based Rate Availability. If with
respect to any Interest Period, Agent or the Required Lenders (after
consultation with Agent) shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars or in any applicable Alternative Currency, as the case may be, in
the applicable amounts are not being offered to the Agent or such Lenders for
such Interest Period, then Agent shall forthwith give notice thereof to the
Company and the Permitted Borrowers. Thereafter, until Agent notifies Company
and the Permitted Borrowers that such circumstances no longer exist, (i) the
obligation of Lenders to make Eurocurrency-based Advances (other than in any
applicable Alternative Currency with respect to which deposits are available, as
required hereunder), and the right of Company and the Permitted Borrowers to
convert an Advance to or refund an Advance as a Eurocurrency-based Advance, as
the case may be (other than in any applicable Alternative Currency with respect
to which deposits are available, as required hereunder), shall be suspended, and
(ii) the Company and the Permitted Borrowers shall repay in full (or cause to be
repaid in full) the then outstanding principal amount of each such
Eurocurrency-based Advance covered hereby in the applicable Permitted Currency,
together with accrued interest thereon, any amounts payable under Sections 11.1
and 11.8 hereof, and all other amounts payable hereunder on the last day of the
then current Interest Period applicable to such Advance. Upon the date for
repayment as aforesaid and unless Company notifies Agent to the contrary within
two (2) Business Days after receiving a notice from Agent pursuant to this
Section, such outstanding principal amount shall be converted to a Prime-based
Advance as of the last day of such Interest Period.
94
11.6 Laws Affecting Eurocurrency-based Advance Availability. If, after the
date of this Agreement, the introduction of, or any change in, any applicable
law, rule or regulation or in the interpretation or administration thereof by
any governmental authority charged with the interpretation or administration
thereof, or compliance by any of the Lenders (or any of their respective
Eurocurrency Lending Offices) with any request or directive (whether or not
having the force of law) of any such authority, shall make it unlawful or
impossible for any of the Lenders (or any of their respective Eurocurrency
Lending Offices) to honor its obligations hereunder to make or maintain any
Advance with interest at the Eurocurrency-based Rate, or in an Alternative
Currency, such Lender shall forthwith give notice thereof to Company and to
Agent. Thereafter, (a) the obligations of Lenders to make Eurocurrency-based
Advances or Advances in any such Alternative Currency and the right of Company
or any Permitted Borrower to convert an Advance into or refund an Advance as a
Eurocurrency-based Advance or as an Advance in any such Alternative Currency
shall be suspended and thereafter Company and the Permitted Borrowers may select
as Applicable Interest Rates or as Alternative Currencies only those which
remain available and which are permitted to be selected hereunder, and (b) if
any of the Lenders may not lawfully continue to maintain an Advance to the end
of the then current Interest Period applicable thereto as a Eurocurrency-based
Advance or in such Alternative Currency, the applicable Advance shall
immediately be converted to a Prime-based Advance (in the Dollar Amount thereof)
and the Prime-based Rate shall be applicable thereto for the remainder of such
Interest Period. For purposes of this Section, a change in law, rule,
regulation, interpretation or administration shall include, without limitation,
any change made or which becomes effective on the basis of a law, rule,
regulation, interpretation or administration presently in force, the effective
date of which change is delayed by the terms of such law, rule, regulation,
interpretation or administration.
11.7 Increased Cost of Eurocurrency-based Advances. If the adoption after
the date of this Agreement of, or any change after the date of this Agreement
in, any applicable law, rule or regulation of or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any of the Lenders (or any of their respective Eurocurrency Lending
Offices) with any request or directive (whether or not having the force of law)
made by any such authority, central bank or comparable agency after the date
hereof:
(a) shall subject any of the Lenders (or any of their respective
Eurocurrency Lending Offices) to any tax, duty or other charge with
respect to any Advance or shall change the basis of taxation of
payments to any of the Lenders (or any of their respective
Eurocurrency Lending Offices) of the principal of or interest on any
Advance or any other amounts due under this Agreement in respect
thereof (except for changes in the rate of tax on the overall net
income of any of the Lenders or any of their respective Eurocurrency
Lending Offices imposed by the jurisdiction in which such Lender's
principal executive office or Eurocurrency Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any of the Lenders (or any of their
95
respective Eurocurrency Lending Offices) or shall impose on any of
the Lenders (or any of their respective Eurocurrency Lending
Offices) or the foreign exchange and interbank markets any other
condition affecting any Advance;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any part of the Indebtedness hereunder as a
Eurocurrency-based Advance or as an Advance in any Alternative Currency or to
reduce the amount of any sum received or receivable by any of the Lenders under
this Agreement in respect of a Eurocurrency-based Advance or any Advance in an
Alternative Currency, whether with respect to Advances to Company or to any of
the Permitted Borrowers, then such Lender shall promptly notify Agent (or, in
the case of a Swing Line Advance, shall notify Company and the applicable
Permitted Borrower directly, with a copy of such notice to Agent), and Agent (or
such Lender, as aforesaid) shall promptly notify Company and Permitted Borrowers
of such fact and demand compensation therefor and, within fifteen (15) days
after such notice, Company agrees to pay to such Lender such additional amount
or amounts as will compensate such Lender or Lenders for such increased cost or
reduction. Agent will promptly notify Company and the Permitted Borrowers of any
event of which it has knowledge which will entitle Lenders to compensation
pursuant to this Section, or which will cause Company or Permitted Borrowers to
incur additional liability under Sections 11.1 and 11.8 hereof, provided that
Agent shall incur no liability whatsoever to the Lenders, Company or Permitted
Borrowers in the event it fails to do so. A certificate of Agent (or such
Lender, if applicable) setting forth the basis for determining such additional
amount or amounts necessary to compensate such Lender or Lenders shall be
conclusively presumed to be correct save for manifest error. For purposes of
this Section, a change in law, rule, regulation, interpretation, administration,
request or directive shall include, without limitation, any change made or which
becomes effective on the basis of a law, rule, regulation, interpretation,
administration, request or directive presently in force, the effective date of
which change is delayed by the terms of such law, rule, regulation,
interpretation, administration, request or directive.
11.8 Indemnity. The Company will indemnify Agent and each of the Lenders
against any loss or expense (but excluding loss of any Applicable Margin) which
may arise or be attributable to the Agent's and each Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain the Advances (a) as a consequence of any failure by the Company or any
of the Permitted Borrowers to make any payment when due of any amount due
hereunder in connection with a Eurocurrency-based Advance, (b) due to any
failure of the Company or any Permitted Borrower to borrow, refund or convert on
a date specified therefor in a Request for Advance or (c) due to any payment,
prepayment or conversion of any Eurocurrency-based Advance on a date other than
the last day of the Interest Period for such Advance. Such loss or expense shall
be calculated based upon the present value, as applicable, of payments due from
the Company or such Permitted Borrower with respect to a deposit obtained by the
Agent or any of the Lenders in order to fund such Advance to the Company or to
such Permitted Borrower. The Agent's and each Lender's, as applicable,
calculations of any such loss or expense shall be furnished to the Company and
shall be conclusive, absent manifest error.
11.9 Judgment Currency. The obligation of the Company and Permitted
Borrowers to make payments of the principal of and interest on the outstanding
Advances and any other amounts payable hereunder in the currency specified for
such payment herein shall not be
96
discharged or satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted into any other currency, except to the extent
that such tender or recovery shall result in the actual receipt by each of the
Lenders of the full amount of the particular Permitted Currency expressed to be
payable herein. The Agent (or the Swing Line Bank, as applicable) shall, using
all amounts obtained or received from the Company and from Permitted Borrowers
pursuant to any such tender or recovery in payment of principal of and interest
on the outstanding Advances, promptly purchase the applicable Permitted Currency
at the most favorable spot exchange rate determined by the Agent to be available
to it. The obligation of the Company and the Permitted Borrowers to make
payments in the applicable Permitted Currency shall be enforceable as an
alternative or additional cause of action solely for the purpose of recovering
in the applicable Permitted Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Permitted Currency expressed
to be payable herein.
11.10 Capital Adequacy and Other Increased Costs. In the event that after
the Effective Date the adoption of or any change in any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to any Lender or Agent, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Lender
or Agent with any guideline, request or directive of any such authority (whether
or not having the force of law), including any risk based capital guidelines,
affects or would affect the amount of capital required or expected to be
maintained by such Lender or Agent (or any corporation controlling such Lender
or Agent) and such Lender or Agent, as the case may be, determines that the
amount of such capital is increased by or based upon the existence of such
Lender's or Agent's obligations or Advances hereunder and such increase has the
effect of reducing the rate of return on such Lender's or Agent's (or such
controlling corporation's) capital as a consequence of such obligations or
Advances hereunder to a level below that which such Lender or Agent (or such
controlling corporation) could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender or Agent to be material (collectively, "Increased Costs"),
then Agent or such Lender shall notify the Company, and thereafter the Company
shall pay to such Lender or Agent, as the case may be, from time to time, upon
request by such Lender or Agent, additional amounts sufficient to compensate
such Lender or Agent (or such controlling corporation) for any increase in the
amount of capital and reduced rate of return which such Lender or Agent
reasonably determines to be allocable to the existence of such Lender's or
Agent's obligations or Advances hereunder; provided, however that the Company
shall not be obligated to reimburse any Lender for any Increased Costs pursuant
to this Section 11.10 unless such Lender notifies Company and the Agent within
180 days after such affected Lender has obtained actual knowledge of such
Increased Costs (but in any event within 365 days after such affected Lender is
required to comply with the applicable change in law). A statement as to the
amount of such compensation, prepared in good faith and in reasonable detail by
such Lender or Agent, as the case may be, shall be submitted by such Lender or
by Agent to the Company, reasonably promptly after becoming aware of any event
described in this Section 11.10 and shall be conclusive, absent manifest error
in computation.
11.11 Substitution of Lenders. If (a) the obligation of any Lender to make
Eurocurrency-based Advances has been suspended pursuant to Section 11.5 or 11.6
or (b) any
97
Lender has demanded compensation under Section 11.1 or 11.7, (in each case, an
"Affected Lender"), then Company shall have the right (subject to Section 13.8
hereof), with the assistance of the Agent, to seek a substitute lender or
lenders (which may be one or more of the Lenders (the "Purchasing Lender" or
"Purchasing Lenders") to purchase the Advances of the Revolving Credit and
assume the commitments (including without limitation its participations in Swing
Line Advances and Letters of Credit) under this Agreement of such Affected
Lender. The Affected Lender shall be obligated to sell its Advances of the
Revolving Credit and assign its commitments to such Purchasing Lender or
Purchasing Lenders within fifteen days after receiving notice from Company
requiring it to do so, at an aggregate price equal to the outstanding principal
amount thereof, plus unpaid interest accrued thereon up to but excluding the
date of the sale. In connection with any such sale, and as a condition thereof,
Company shall pay to the Affected Lender all fees accrued for its account
hereunder to but excluding the date of such sale, plus, if demanded by the
Affected Lender within ten Business Days after such sale, (i) the amount of any
compensation which would be due to the Affected Lender under Section 11.1 if
Company (or the applicable Permitted Borrower) has prepaid the outstanding
Eurocurrency-based Advances of the Affected Lender on the date of such sale and
(ii) any additional compensation accrued for its account under Sections 3.4,
11.7 and 11.10 to but excluding said date. Upon such sale, the Purchasing Lender
or Purchasing Lenders shall assume the Affected Lender's commitment, and the
Affected Lender shall be released from its obligations hereunder to a
corresponding extent. If any Purchasing Lender is not already one of the
Lenders, the Affected Lender, as assignor, such Purchasing Lender, as assignee,
Company and the Agent, with the required consent of the Swing Line Bank shall
enter into an Assignment Agreement pursuant to Section 13.8 hereof, whereupon
such Purchasing Lender shall be a Lender party to this Agreement, shall be
deemed to be an assignee hereunder and shall have all the rights and obligations
of a Lender with a Percentage equal to its ratable share of the then applicable
Revolving Credit Aggregate Commitment. In connection with any assignment
pursuant to this Section 11.11, Company or the Purchasing Lender shall pay to
the Agent the administrative fee for processing such assignment referred to in
Section 13.8.
12. AGENTS
12.1 Appointment of Agent. Each Lender appoints and authorizes the Agent
to act on behalf of such Lender under the Loan Documents and appoints and
authorizes the Agent to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent, as the case may be, by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender agrees (which agreement shall survive any
termination of this Agreement) to reimburse Agent for all reasonable
out-of-pocket expenses (including in-house and outside attorneys' fees) incurred
by Agent hereunder or in connection herewith or with an Event of Default or in
enforcing the obligations of Company or any of the Permitted Borrowers under
this Agreement or the other Loan Documents or any other instrument executed
pursuant hereto (to the extent of Agent's powers hereunder or thereunder, as
aforesaid), and for which Agent is not reimbursed by Company or such Permitted
Borrower, pro rata according to such Lender's Percentage, but excluding any such
expenses resulting from the gross negligence or willful
98
misconduct of such Agent, as applicable. Agent shall not be required to take any
action under the Loan Documents, or to prosecute or defend any suit in respect
of the Loan Documents, unless indemnified to their respective satisfaction by
the Lenders against loss, costs, liability and expense (excluding liability
resulting from its gross negligence or willful misconduct). If any indemnity
furnished to Agent shall become impaired, it may call for additional indemnity
and cease to do the acts indemnified against until such additional indemnity is
given.
12.2 Deposit Account with Agent. Each of Company and the Permitted
Borrowers hereby authorizes Agent to charge its general deposit account, if any,
maintained with Agent for the amount of any principal, interest, or other
amounts or costs due under this Agreement when the same becomes due and payable
under the terms of this Agreement.
12.3 Exculpatory Provisions. The Agent agrees to exercise its rights and
powers, and to perform its duties, as an agent hereunder and under the other
Loan Documents in accordance with its usual customs and practices in bank-agency
transactions, but only upon and subject to the express terms and conditions of
this Section 12 (and no implied covenants or other obligations shall be read
into this Agreement against the Agent); neither the Agent nor any of its
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it or them under this Agreement or any
document executed pursuant hereto, or in connection herewith or therewith,
except for its or their own willful misconduct or gross negligence, nor be
responsible for any recitals or warranties herein or therein, or for the
effectiveness, enforceability, validity or due execution of this Agreement or
any document executed pursuant hereto, or any security thereunder, or to make
any inquiry respecting the performance by Company, any of its Subsidiaries or
any of the Permitted Borrowers of its obligations hereunder or thereunder. Agent
shall not have, or be deemed to have, a fiduciary relationship with any Lender
by reason of this Agreement. Agent shall be entitled to rely upon advice of
counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which it believes to be genuine and to have been presented
by a proper person.
12.4 Successor Agent. The Agent may resign as such at any time upon at
least 30 days prior notice to Company and all Lenders. If Agent at any time
shall resign or if a vacancy shall occur in the office of the Agent for any
other reason, Required Lenders shall, by written instrument, appoint a successor
Agent (consisting of any other Lender or financial institution satisfactory to
such Required Lenders) which shall thereupon become Agent hereunder and shall be
entitled to receive from the prior agent such documents of transfer and
assignment as such successor agent may reasonably request. Such successor Agent
shall succeed to all of the rights and obligations of the retiring agent as if
originally named. The retiring agent shall duly assign, transfer and deliver to
such successor Agent all moneys at the time held by the retiring agent hereunder
after deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor agent, the retiring agent
shall be discharged from its duties and obligations hereunder, except for its
gross negligence or willful misconduct arising prior to its retirement
hereunder, and the provisions of this Section 12 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as an agent hereunder.
12.5 Loans by Agent. The Agent shall have the same rights and powers with
respect to the credit extended by it as any Lender and may exercise the same as
if it were not an agent hereunder, and the term "Lender" and, when appropriate,
"holder" shall include the Agent in its individual capacity.
99
12.6 Credit Decisions. Each Lender acknowledges that it has, independently
of Agents and each other Lender and based on the financial statements of
Company, the Permitted Borrowers and the Subsidiaries and such other documents,
information and investigations as it has deemed appropriate, made its own credit
decision to extend credit hereunder from time to time. Each Lender also
acknowledges that it will, independently of Agents and each other Lender and
based on such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any document executed pursuant hereto.
12.7 Notices by Agent. Agent shall give prompt notice to each Lender of
its receipt of each notice or request required or permitted to be given to Agent
by Company or a Permitted Borrower pursuant to the terms of this Agreement and
shall promptly distribute to the Lenders any reports received from the Company
or any of its Subsidiaries or any of the Permitted Borrowers under the terms
hereof, or other material information or documents received by Agent, in its
capacity Agent, from the Company, its Subsidiaries or the Permitted Borrowers.
12.8 Agent's Fees. Until the Indebtedness has been repaid and discharged
in full and no commitment to fund any loan hereunder is outstanding, the Company
shall pay to the Agent, as applicable, an agency fee(s) set forth (or to be set
forth from time to time) in the Fee Letter on the terms set forth therein. The
Agent's Fees described in this Section 12.8 shall not be refundable under any
circumstances.
12.9 Nature of Agency. The appointment of Agent as Agent is for the
convenience of Lenders, Company and the Permitted Borrowers in making Advances
of the Revolving Credit or any other Indebtedness of Company or the Permitted
Borrowers hereunder, collecting fees, and principal and interest on the
Indebtedness, and otherwise administering this Agreement and the other Loan
Documents according to the express terms hereof and thereof. No Lender is
purchasing any Indebtedness from Agents (or either of them) and this Agreement
is not intended to be a purchase or participation agreement (except to the
extent of risk participations acquired pursuant to Section 3.6(c) hereof).
12.10 Authority of Agent to Enforce This Agreement. Each Lender, subject
to the terms and conditions of this Agreement (including, without limitation,
any required approval or direction of the Required Lenders or the Lenders, as
applicable, to be obtained by or given to the Agent hereunder), authorizes the
Agent with full power and authority as attorney-in-fact to institute and
maintain actions, suits or proceedings for the collection of the Indebtedness
and enforcement of this Agreement and the other Loan Documents and to file such
proofs of debt or other documents as may be necessary to have the claims of the
Lenders allowed in any proceeding relative to the Company, any of its
Subsidiaries, any of the Permitted Borrowers or its creditors or affecting its
properties, and to take such other actions which Agent considers to be necessary
or desirable for the protection, collection and enforcement of the Indebtedness,
this Agreement or the other Loan Documents, but in each case only to the extent
of any required approval or direction of the Required Lenders or the Lenders, as
applicable, obtained by or given to the Agent hereunder.
100
12.11 Indemnification. The Lenders agree to indemnify each of the Agents
in their respective capacities as such, to the extent not reimbursed by the
Company or the Permitted Borrowers, pro rata according to their respective
Percentages, from and against any and all claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, and reasonable
out-of-pocket expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agents in any way
relating to or arising out of this Agreement or any of the other Loan Documents
or any action taken or omitted to be taken or suffered in good faith by the
Agents, or either of them, as the case may be, hereunder, provided that no
Lender shall be liable to Agent or Syndication Agent, as the case may be, for
any portion of any of the foregoing items resulting from the gross negligence or
willful misconduct of such agent, or any of its officers, employees, directors
or agents. For purposes of this Section 12.11, "Agent" shall be deemed to
include Comerica Bank in its capacity as Swing Line Bank.
12.12 Knowledge of Default. It is expressly understood and agreed that
Agent (whether in the capacity of Swing Line Bank or otherwise) shall be
entitled to assume that no Default or Event of Default has occurred and is
continuing, unless the officers of Agent immediately responsible for matters
concerning this Agreement shall have actual (rather than constructive) knowledge
of such occurrence or shall have been notified in writing by Company or a Lender
that the Company or such Lender considers that a Default or an Event of Default
has occurred and is continuing, and specifying the nature thereof. Upon
obtaining actual knowledge of any Default or Event of Default as described
above, the Agent shall promptly, but in any event within three (3) Business Days
after obtaining actual knowledge thereof, notify each Lender of such Default or
Event of Default and the action, if any, the Agent proposes be taken with
respect thereto.
12.13 Agent's Authorization; Action by Lenders. Except as otherwise
expressly provided herein, whenever the Agent is authorized and empowered
hereunder on behalf of the Lenders to give any approval or consent, or to make
any request, or to take any other action, on behalf of the Lenders (including
without limitation the exercise of any right or remedy hereunder or under the
other Loan Documents), the Agent shall be required to give such approval or
consent, or to make such request or to take such other action only when so
requested in writing by the Required Lenders or the Lenders, as applicable
hereunder. Action that may be taken by Required Lenders or all of the Lenders,
as the case may be (as provided for hereunder), may be taken (i) pursuant to a
vote at a meeting (which may be held by telephone conference call) as to which
all of the Lenders have been given reasonable advance notice (subject to the
requirement that amendments, waivers or consents under Section 13.11 hereof be
made in writing by the Required Lenders or all the Lenders, as applicable), or
(ii) pursuant to the written consent of the requisite Percentages of the Lenders
as required hereunder, provided that all of the Lenders are given reasonable
advance notice of the requests for such consent.
12.14 Enforcement Actions by the Agent. Except as otherwise expressly
provided under this Agreement or in any of the other Loan Documents and subject
to the terms hereof, Agent will take such action, assert such rights and pursue
such remedies under this Agreement and the other Loan Documents as the Required
Lenders or all of the Lenders, as the case may be (as provided for hereunder),
shall direct. Except as otherwise expressly provided in any of the Loan
Documents, Agent will not (and will not be obligated to) take any action, assert
any rights or pursue any remedies under this Agreement or any of the other Loan
Documents in violation or
101
contravention of any express direction or instruction of the Required Lenders or
all of the Lenders, as the case may be (as provided for hereunder). Agent may
refuse (and will not be obligated) to take any action, assert any rights or
pursue any remedies under this Agreement or any of the other Loan Documents in
the absence of the express written direction and instruction of the Required
Lenders or all of the Lenders, as the case may be (as provided for hereunder).
In the event Agent fails, within a commercially reasonable time, to take such
action, assert such rights, or pursue such remedies as the Required Lenders or
all of the Lenders, as the case may be (as provided for hereunder), shall direct
in conformity with this Agreement, the Required Lenders or all of the Lenders,
as the case may be (as provided for hereunder), shall have the right to take
such action, to assert such rights, or pursue such remedies on behalf of all of
the Lenders unless the terms hereof otherwise require the consent of all the
Lenders to the taking of such actions (in which event all of the Lenders must
join in such action). Except as expressly provided above or elsewhere in this
Agreement or the other Loan Documents, no Lender (other than the Agent, acting
in its capacity as Agent) shall be entitled to take any enforcement action of
any kind under any of the Loan Documents.
12.15 Collateral Matters.
(a) The Agent is authorized on behalf of all the Lenders, without the
necessity of any notice to or further consent from the Lenders, from
time to time to take any action with respect to any Collateral or
the Collateral Documents which may be necessary to perfect and
maintain a perfected security interest in and Liens upon the
Collateral granted pursuant to the Loan Documents.
(b) The Lenders agree to release, and hereby irrevocably authorize the
Agent to release, (x) any Lien granted to or held by the Agent upon
any Collateral (i) upon termination of the Revolving Credit
Aggregate Commitment and payment in full of all Indebtedness payable
under this Agreement and under any other Loan Document; or (ii)
constituting property sold or to be sold or disposed of as part of
or in connection with any express disposition permitted hereunder;
(y) the Guaranty of any Subsidiary, but only in connection with the
sale of all of the share capital of such Subsidiary and only to the
extent that such sale is expressly permitted hereunder, and (z) any
Lien granted to or held by the Agent upon any Collateral or any
Guaranty issued hereunder, but only if and to the extent (i)
required to be released under Section 7.17(b) hereof, or (ii)
approved, authorized or ratified in writing by the Required Lenders,
or all the Lenders, as the case may be, as provided in Section
13.11. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's authority to release particular types
or items of Collateral pursuant to this Section 12.15(b).
12.16 Syndication Agent and Documentation Agents. Each of the following
Lenders (or their affiliates) have been designated by the Company as a
"Documentation Agent" under this Agreement: Wachovia Bank, National Association,
Bank of America, N.A. and J.P. Morgan Chase Bank. Fleet Securities, Inc. has
been designated by the Company as "Syndication Agent" under this Agreement. Bank
Leumi has been designated a "Managing Agent" under this Agreement. Other than
their respective rights and remedies as Lenders hereunder, such Documentation
Agents, the Managing Agent and the Syndication Agent shall have no
102
administrative, collateral or other rights or responsibilities, provided,
however, that each such Documentation Agent and Syndication Agent shall be
entitled to the benefits afforded to the Agents under Sections 12.5, 12.6 and
12.11 hereof.
13. MISCELLANEOUS
13.1 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP.
13.2 Consent to Jurisdiction. Each of the Company and the Permitted
Borrowers hereby irrevocably submits to the non-exclusive jurisdiction of any
United States Federal or Michigan state court sitting in Detroit in any action
or proceeding arising out of or relating to this Agreement or any of the other
Loan Documents and each of the Company and the Permitted Borrowers hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in any such United States Federal or Michigan state
court. Each of the Permitted Borrowers irrevocably appoints the Company as its
agent for service of process. Each of the Company and the Permitted Borrowers
irrevocably consents to the service of any and all process in any such action or
proceeding brought in any court in or of the State of Michigan by the delivery
of copies of such process to the Company at its address specified on the
signature page hereto or by certified mail directed to such address. Nothing in
this Section shall affect the right of the Lenders and the Agent to serve
process in any other manner permitted by law or limit the right of the Lenders
or the Agent (or any of them) to bring any such action or proceeding against the
Company or the Permitted Borrowers or any of its or their property in the courts
of any other jurisdiction. Each of the Company and the Permitted Borrowers
hereby irrevocably waives any objection to the laying of venue of any such suit
or proceeding in the above described courts.
13.3 Law of Michigan. This Agreement has been delivered at Detroit,
Michigan, and shall be governed by and construed and enforced in accordance with
the laws of the State of Michigan. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.4 Interest. In the event the obligation of the Company or any of the
Permitted Borrowers to pay interest on the principal balance of the outstanding
Advances is or becomes in excess of the maximum interest rate which the Company
or any Permitted Borrower is permitted by law to contract or agree to pay,
giving due consideration to the execution date of this Agreement, then, in that
event, the rate of interest applicable with respect to any Lender's Percentage
of the Revolving Credit, as applicable, shall be deemed to be immediately
reduced to such maximum rate and all previous payments in excess of the maximum
rate shall be deemed to have been payments in reduction of principal and not of
interest.
103
13.5 Closing Costs; Other Costs. Company shall pay or reimburse Agents for
their own accounts or on behalf of the Lenders for payment of, on demand (a) all
closing costs and expenses, including, by way of description and not limitation,
in-house and outside attorney fees and advances, appraisal and accounting fees,
title and lien search fees, and required travel costs, incurred by Agents (and
either of them) in connection with the commitment, consummation and closing of
the loans contemplated hereby, or in connection with any refinancing or
restructuring of the loans or advances provided under this Agreement or the
other Loan Documents, or any amendment thereof or waiver or consent with respect
thereto requested by Company; and (b) all stamp and other taxes and fees payable
or determined to be payable (by either of the Agents or any Lender) in
connection with the execution, delivery, filing or recording of this Agreement
and the Loan Documents and the consummation of the transactions contemplated
hereby, and any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes or fees. Furthermore, all reasonable
costs and expenses, including without limitation attorney fees, and costs and
expenses to Environmental Auditors retained by Agent hereunder, incurred by
Agents (and either of them) in revising, preserving, protecting, exercising or
enforcing any of its or any of the Lenders' rights against Company or any of the
Permitted Borrowers, or otherwise incurred by Agents and by the Lenders (using a
single law firm retained by Agent, with the approval of the Required Lenders) in
connection with any Event of Default or the enforcement of the loans (whether
incurred through negotiations, legal proceedings or otherwise), including by way
of description and not limitation, such charges in any court or bankruptcy
proceedings or arising out of any claim or action by any person against Agents
(and either of them) or any Lender which would not have been asserted were it
not for the Agents' or such Lender's relationship with Company and the Permitted
Borrowers hereunder or otherwise, shall also be paid by Company and the
Permitted Borrowers. All of said amounts required to be paid by Company
hereunder and not paid forthwith upon demand, as aforesaid, shall bear interest,
from the date incurred to the date payment is received by Agents, as applicable,
at the Prime-based Rate, plus three percent (3%).
13.6 Notices. Except as otherwise expressly set forth in this Agreement,
all notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing and shall be given by
personal delivery, by mail, by reputable overnight courier, by telex or by
facsimile and addressed or delivered to it at its address set forth on the
Administrative Detail forms on file with the Agent or at such other address as
may be designated by such party in a notice to the other parties that complies
as to delivery with the terms of this Section 13.6. Any notice, if personally
delivered or if mailed and properly addressed with postage prepaid and sent by
registered or certified mail, shall be deemed given when received or when
delivery is refused; any notice, if given to a reputable overnight courier and
properly addressed, shall be deemed given two (2) Business Days after the date
on which it was sent, unless it is actually received sooner by the named
addressee; and any notice, if transmitted by telex or facsimile, shall be deemed
given when received (answer back confirmed in the case of telexes and receipt
confirmed in the case of telecopies). Agents may, but, except as specifically
provided herein, shall not be required to, take any action on the basis of any
notice given to it by telephone, but the giver of any such notice shall promptly
confirm such notice in writing or by telex or facsimile, and such notice will
not be deemed to have been received until such confirmation is deemed received
in accordance with the provisions of this Section set forth above. If such
telephonic notice conflicts with any such confirmation, the terms of such
telephonic notice shall control.
104
13.7 Further Action. Company and the Permitted Borrowers, from time to
time, upon written request of Agents will make, execute, acknowledge and deliver
or cause to be made, executed, acknowledged and delivered, all such further and
additional instruments, and take all such further action, as may be required to
carry out the intent and purpose of this Agreement, and to provide for Advances
under this Agreement, according to the intent and purpose herein and therein
expressed.
13.8 Successors and Assigns; Assignments and Participations.
(a) This Agreement shall be binding upon and shall inure to the benefit
of Company and the Permitted Borrowers and the Lenders and their
respective successors and assigns.
(b) The foregoing shall not authorize any assignment by Company or any
of the Permitted Borrowers, of its rights or duties hereunder, and
no such assignment shall be made (or effective) without the prior
written approval of the Lenders.
(c) The Company, Permitted Borrowers and Agents acknowledge that each of
the Lenders may at any time and from time to time, subject to the
terms and conditions hereof (including Section 13.14 hereof), (i)
assign or grant participations in such Lender's rights and
obligations hereunder and under the other Loan Documents to any
commercial bank, savings and loan association, insurance company,
pension fund, mutual fund, commercial finance company or other
similar financial institution, the identity of which institution is
approved by Company and the Agent, such approval not to be
unreasonably withheld or delayed; provided, however, that (x) the
approval of Company shall not be required upon the occurrence and
during the continuance of a Default or Event of Default and (y) the
approval of Company and Agent shall not be required for any such
sale, transfer, assignment or participation to the Affiliate of an
assigning Lender, any other Lender or any Federal Reserve Bank and
(ii) grant to an SPFV the option to fund all or any part of any
Advance that the Granting Lender would otherwise be obligated to
fund pursuant to this Agreement; provided, however, that (A) nothing
herein shall constitute a commitment by any SPFV to fund any
Advance, but if an SPFV elects not to fund all or any part of an
Advance hereunder, the Granting Lender shall be obligated to fund
such Advance pursuant to the terms hereof; (B) the funding of any
Advance by an SPFV hereunder shall be credited against the
applicable commitment of the Granting Lender to fund such Advance to
the same extent as, and as if, such Advance were funded by such
Granting Lender and any payments in respect of an Advance (or
portion thereof) previously funded by any SPFV shall be paid, for
the account of such SPFV, to its Granting Lender, as agent for such
SPFV; (C) each SPFV shall have all the rights that a Lender making
such Advances or any portion thereof would have had under this
Agreement (provided that each SPFV shall have granted to its
Granting Lender an irrevocable power of attorney to deliver and
receive all communications and notices under this Agreement and the
other Loan Documents and to exercise on behalf of such SPFV all such
SPFV's voting rights under this Agreement) and no additional Note or
other instrument shall be required to
105
evidence the Advances or portion thereof funded by any SPFV, each
related Granting Lender being deemed to hold its Note as agent for
such SPFV to the extent of the Advances or portion thereof funded by
such SPFV; (D) Company and Agent agree that no SPFV shall be liable
for any indemnity or payment under this Agreement for which a
Granting Lender would otherwise be liable so long as, and to the
extent, the Granting Lender provides such indemnity or makes such
payment, as the case may be; and (E) an SPFV may, at any time and
without paying any processing fee therefor, assign or participate
all or a portion of its interest in any Advances to the Granting
Lender or to any financial institutions providing liquidity and/or
credit support to or for the account of SPFV to support the funding
or maintenance of Advances (provided that the rights of any such
assignee or participant shall be subject to and limited as set forth
in this clause (ii) of Section 13.8(c)). The Company and each of
Permitted Borrowers authorize each Lender to disclose to any
prospective assignee or participant, once approved by Company and
Agent and to any assignee under an assignment not required to be
approved by the Company pursuant to clauses (x) and (y) of the first
proviso of this Section 13.8(c) and to an SPFV (and on a
confidential basis to any Rating Agency, commercial paper dealer or
provider of any surety or guaranty to such SPFV), any and all
financial information in such Lender's possession concerning the
Company and such Permitted Borrower which has been delivered to such
Lender pursuant to this Agreement; provided that each such
prospective participant shall execute a confidentiality agreement
consistent with the terms of Section 13.13 hereof. Clause (ii), the
definition of "Granting Lender," and the immediately preceding
sentence of this Section 13.8(c) may not be amended without the
prior written consent of each Granting Lender, all or any part of
whose Advances are being funded by an SPFV at the time of any such
amendment; and each party hereto agrees (which agreement shall
survive the termination of this Agreement) that, prior to the date
that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any
SPFV, it will not, on the basis of any claim or matter arising under
or in connection with or otherwise relating to this Agreement,
institute against, or join any other person in instituting against
such SPFV any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States of
America or any state or political subdivision thereof.
(d) Each assignment by a Lender of any portion of its rights and/or
obligations hereunder and under the other Loan Documents, other than
assignments to such Lender's Affiliates or to a Federal Reserve Bank
under Section 13.8(c)(ii) hereof, shall be made pursuant to an
Assignment Agreement ("Assignment Agreement") substantially (as
determined by Agent), in the form attached hereto as Exhibit E (with
appropriate insertions acceptable to Agent) and shall be subject to
the terms and conditions hereof, and to the following restrictions:
(i) each partial assignment shall be made as an assignment of a
part of all of the assigning Lender's rights and obligations
hereunder;
106
(ii) each assignment shall be in a minimum amount of the lesser of
(x) Five Million Dollars ($5,000,000) and (y) the entire
remaining amount of assigning Lender's interest in the
Revolving Credit (and participations in any outstanding
Letters of Credit); provided however that, after giving effect
to such assignment, in no event shall the entire remaining
amount (if any) of assigning Lender's interest in the
Revolving Credit (and participations in any outstanding
Letters of Credit) be less than $5,000,000;
(iii) no assignment shall be effective unless Agent has received
from the assignee (or from the assigning Lender) an assignment
fee of $3,500 for each such assignment.
In connection with any assignment subject to this Section 13.8(d),
Company, each of the Permitted Borrowers and Agents shall be
entitled to continue to deal solely and directly with the assigning
Lender in connection with the interest so assigned until the Agent
shall have received a notice of assignment duly executed by the
assigning Lender and an Assignment Agreement (with respect thereto)
duly executed by the assigning Lender and each assignee; and (y) the
assigning Lender shall have delivered to the Agent the original of
each Note, if any, issued to such Lender, held by the assigning
Lender under this Agreement. From and after the date on which the
Agents shall notify Company and the Lender which has accepted an
assignment subject to this Section 13.8(d) that the foregoing
conditions shall have been satisfied and all consents (if any)
required shall have been given, the assignee thereunder shall be
deemed to be a party to this Agreement. To the extent that rights
and obligations hereunder shall have been assigned to such assignee
as provided in such notice of assignment (and Assignment Agreement),
such assignee shall have the rights and obligations of a Lender
under this Agreement and the other Loan Documents (including without
limitation the right to receive fees payable hereunder in respect of
the period following such assignment). In addition, the assigning
Lender, to the extent that rights and obligations hereunder shall
have been assigned by it as provided in such notice of assignment
(and Assignment Agreement), but not otherwise, shall relinquish its
rights and be released from its obligations under this Agreement and
the other Loan Documents. Schedule 1.1 to this Agreement shall be
deemed to be amended to reflect the applicable new Percentages of
the Lenders (including the assignee Lender), taking into account
such assignment.
(e) Each Lender agrees that any participation agreement permitted
hereunder shall comply with all applicable laws and shall be subject
to the following restrictions (which shall be set forth in the
applicable participation agreement):
(i) such Lender shall remain the holder of its interest in the
Indebtedness hereunder, notwithstanding any such
participation;
107
(ii) except as expressly set forth in this Section 13.8(e) with
respect to rights of setoff and the benefits of Section 11
hereof, a participant shall have no direct rights or remedies
hereunder;
(iii) such Lender shall retain the sole right and responsibility to
enforce the obligations of the Company and Permitted Borrowers
relating to this Agreement and the other Loan Documents,
including, without limitation, the right to proceed against
any Guarantors, or cause Agent to do so (subject to the terms
and conditions hereof), and the right to approve any
amendment, modification or waiver of any provision of this
Agreement without the consent of the participant, except in
the case of participations granted to an Affiliate of such
Lender and except for those matters covered by Section
13.11(a) through (e) and (h) hereof (provided that a
participant may exercise approval rights over such matters
only on an indirect basis, acting through such Lender, and
Company, Permitted Borrowers, Agent and the other Lenders may
continue to deal directly with such Lender in connection with
such Lender's rights and duties hereunder).
Company and each of the Permitted Borrowers each agrees that each
participant shall be deemed to have the right of setoff under
Section 10.4 hereof in respect of its participation interest in
amounts owing under this Agreement and the other Loan Documents to
the same extent as if the Indebtedness were owing directly to it as
a Lender under this Agreement, shall be subject to the pro rata
recovery provisions of Section 10.3 hereof and shall be entitled to
the benefits of Section 11 hereof. The amount, terms and conditions
of any participation shall be as set forth in the participation
agreement between the issuing Lender and the Person purchasing such
participation, and the Company, the Permitted Borrowers, the Agents
and the other Lenders shall not have any responsibility or
obligation with respect thereto, or to any Person to whom any such
participation may be issued. No such participation shall relieve any
issuing Lender of any of its obligations under this Agreement or any
of the other Loan Documents, and all actions hereunder shall be
conducted as if no such participation had been granted.
(f) The Agent shall maintain at its principal office a copy of each
Assignment Agreement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders, the
Percentages of such Lenders and the principal amount of each type of
Advance owing to each such Lender from time to time. The entries in
the Register shall be conclusive evidence, absent manifest error,
and the Company, the Permitted Borrowers, the Agent, and the Lenders
may treat each Person whose name is recorded in the Register as the
owner of the Advances recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the
Company, the Permitted Borrowers or any Lender upon reasonable
notice to the Agent and a copy of such information shall be provided
to any such party on their prior written request. The Agent shall
give prompt written notice to the Company of the making of any entry
in the Register or any change in such entry.
108
(g) Nothing in this Agreement, or the other Loan Documents, expressed or
implied, is intended to or shall confer on any Person other than the
respective parties hereto and thereto and their successors and
assignees and participants permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under
this Agreement, or the other Loan Documents.
13.9 Indulgence. No delay or failure of Agents and the Lenders in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege nor shall any single or partial exercise thereof preclude any
other or further exercise thereof, or the exercise of any other right, power or
privilege. The rights of Agents and the Lenders hereunder are cumulative and are
not exclusive of any rights or remedies which Agents and the Lenders would
otherwise have.
13.10 Counterparts. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same instrument.
13.11 Amendment and Waiver. No amendment or waiver of any provision of
this Agreement or any other Loan Document, or consent to any departure by the
Company or the Permitted Borrowers therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders (or
signed by the Agent at the direction of the Required Lenders), and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (X) no amendment,
waiver or consent shall increase the Percentage or the stated commitment amounts
applicable to any Lender unless approved, in writing, by the affected Lender and
(Y) no amendment, waiver or consent shall, unless in writing and signed by all
the Lenders, do any of the following: (a) increase the Revolving Credit
Aggregate Commitment to an amount greater than $400,000,000, (b) reduce the
principal of, or interest on, the Advances or any Fees or other amounts payable
hereunder, (c) postpone any date fixed for any payment of principal of, or
interest on, the outstanding Advances or any Fees or other amounts payable
hereunder, (d) waive any Event of Default specified in Section 9.1(a) or (b)
hereof, (e) release or defer the granting or perfecting of a lien or security
interest in any Collateral or release any guaranty or similar undertaking
provided by any Person or modify any indemnity provided to the Lenders,
hereunder or under the other Loan Documents, except as shall be otherwise
expressly provided in this Agreement or any other Loan Document, (f) take any
action which requires the signing of all Lenders pursuant to the terms of this
Agreement or any other Loan Document, (g) change the aggregate unpaid principal
amount of the outstanding Advances which shall be required for the Lenders or
any of them to take any action under this Agreement or any other Loan Document,
(h) change this Section 13.11, or (i) change the definition of "Required
Lenders", "Interest Periods", "Alternative Currencies", "Permitted Borrower" or
"Percentage"; and provided further, however, that no amendment, waiver or
consent hereunder shall, unless in writing and signed (x) by the Agent, in
addition to all the Lenders, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, whether in its capacity as Agent or the
issuing bank or (y) by the Swing Line Bank, in addition to all the Lenders,
affect the rights or duties of the Swing Line Bank under this Agreement or any
other Loan Documents, in its capacity as Swing Line Bank. All references in this
Agreement to "Lenders" or "the Lenders" shall refer to all Lenders, unless
expressly stated to refer to "Required Lenders.
109
13.12 Taxes and Fees. Should any tax (other than a tax based upon the net
income of any Lender or Agents (or either of them) by any jurisdiction where a
Lender or Agent is located), recording or filing fee become payable in respect
of this Agreement or any of the other Loan Documents or any amendment,
modification or supplement hereof or thereof, the Company and each of the
Permitted Borrowers agree to pay the same together with any interest or
penalties thereon and agree to hold the Agent and the Lenders harmless with
respect thereto.
13.13 Confidentiality. Each Lender agrees that without the prior consent
of Company, it will not disclose (other than to its employees or to employees of
any of its Affiliates, to another Lender or to any of their respective auditors
or counsel) any information with respect to the Company or any of its
Subsidiaries or any of the Permitted Borrowers which is furnished pursuant to
the terms and conditions of this Agreement or any of the other Loan Documents or
which is designated (in writing) by Company or any of the Permitted Borrowers to
be confidential; provided that any Lender may disclose any such information (a)
as has become generally available to the public or has been lawfully obtained by
such Lender from any third party under no duty of confidentiality to the Company
or such Permitted Borrower known to such Lender after reasonable inquiry, (b) as
may be required or appropriate in any report, statement or testimony submitted
to, or in respect of any inquiry by, any municipal, state or federal regulatory
body having or claiming to have jurisdiction over such Lender, including the
Board of Governors of the Federal Reserve System of the United States or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required or
appropriate in respect of any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Lender, and (e) to any permitted transferee or assignee or to
any approved participant of, or with respect to, an interest in this Agreement
and the other Loan Documents, as aforesaid, and (f) with respect to the "tax
treatment" and "tax structure," in each case, within the meaning of I.R.C.
Regulation Section 1.6011-4, of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are
provided to Agent or such Bank relating to such tax treatment and tax structure,
to the extent required to be disclosed pursuant to such regulation or the
Internal Revenue Code, provided that with respect to any document or similar
item that in either case contains information concerning the tax treatment or
tax structure of the transaction as well as other information, this sentence
shall only apply to such portions of the document or similar item that relate to
the tax treatment or tax structure of the transactions contemplated hereby.
13.14 Withholding Taxes. If any Lender is not incorporated under the laws
of the United States or a state thereof, such Lender shall deliver to the Agent
and the Company promptly upon becoming a Lender hereunder and from time to time
as reasonably requested by the Company (but in any event prior to the initial
payment of interest hereunder) two executed copies of (i) Internal Revenue
Service Form W-8 BEN or applicable successor form specifying the applicable tax
treaty between the United States and the jurisdiction of such Lender's domicile
which provides for the exemption from withholding on interest payments to such
Lender, (ii) Internal Revenue Service Form W-8 ECI or applicable successor form
evidencing that the income to be received by such Lender hereunder is
effectively connected with the conduct of a trade or business in the United
States or (iii) other evidence satisfactory to the Agent that such Lender is
exempt from United States income tax withholding with respect to such income;
provided, however, that such Lender shall not be required to deliver to Agent
the aforesaid forms
110
or other evidence with respect to (i) Advances to any Foreign Subsidiary which
is or becomes a Permitted Borrower hereunder or (ii) with respect to Advances to
the Company or any Domestic Subsidiary which subsequently becomes a Permitted
Borrower hereunder, if such Lender has assigned its interest in the Revolving
Credit (including any outstanding Advances thereunder and participations in
Letters of Credit issued hereunder) and any Notes issued to it by the Company,
or any Domestic Subsidiary (if any) which subsequently becomes a Permitted
Borrower hereunder, to an Affiliate which is incorporated under the laws of the
United States or a state thereof, and so notifies the Agent. Such Lender shall
amend or supplement any such form or evidence as required to insure that it is
accurate, complete and non-misleading at all times. Promptly upon notice from
the Agent of any determination by the Internal Revenue Service that any payments
previously made to such Lender hereunder were subject to United States income
tax withholding when made, such Lender shall pay to the Agent the excess of the
aggregate amount required to be withheld from such payments over the aggregate
amount actually withheld by the Agent. In addition, from time to time upon the
reasonable request and at the sole expense of the Company or the Permitted
Borrowers, each Lender and each of the Agents shall (to the extent it is able to
do so based upon applicable facts and circumstances), complete and provide the
Company or the Permitted Borrowers with such forms, certificates or other
documents as may be reasonably necessary to allow the Company or the Permitted
Borrowers, as applicable, to make any payment under this Agreement or the other
Loan Documents without any withholding for or on the account of any tax under
Section 10.1(d) hereof (or with such withholding at a reduced rate), provided
that the execution and delivery of such forms, certificates or other documents
does not adversely affect or otherwise restrict the right and benefits
(including without limitation economic benefits) available to such of the Lender
or the Agents, as the case may be, under this Agreement or any of the other Loan
Documents, or under or in connection with any transactions not related to the
transactions contemplated hereby.
13.15 ERISA Restrictions. To the extent any Advance hereunder is funded by
or on behalf of an insurance company, bank, or other Person deemed to hold
assets of any employee benefit plan subject to ERISA or other plan as defined in
and subject to the prohibited transaction provisions of Section 4975 of the
Internal Revenue Code pursuant to applicable Department of Labor regulations
(the "Plan Asset Regulations"), or any such plan acting on its own behalf, such
insurance company, bank, entity or plan warrants and represents that at least
one of the following statements is an accurate representation as to each source
of funds (a "Source") to be used by such insurance company, bank, entity or plan
to fund the Advance(s) hereunder:
(a) the Source consists of plan assets subject to the discretionary
authority or control of an in-house asset manager ("INHAM") as such
term is defined in Section IV(a) of Prohibited Transaction Class
Exemption 96-23 (issued April 10, 1996) ("PTCE 96-23"), and the
funding of the Advance(s) hereunder is exempt under the provisions
of PTCE 96-23; or
(b) the Source is an "insurance company general account" as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption
95-60 (issued July 12, 1995) ("PTCE 95-60"), and the funding of the
Advance(s) hereunder is exempt under the provisions of PTCE 95-60;
or
111
(c) the Source is either (x) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Class
Exemption 90-1 (issued January 29, 1990) ("PTCE 90-1") or (y) a bank
collective investment fund, within the meaning of Prohibited
Transaction Class Exemption 91-38 (issued July 12, 1991) ("PTCE
91-38") and, except as such insurance company or bank has disclosed
to the Company in writing pursuant to this paragraph (ii), no plan
or group of plans maintained by the same employer or employee
organization, beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; and, in either such case, all records necessary to establish
the availability of each exemption by reason thereof will be
maintained and made available as required by the terms of such
exemption; or
(d) the Source is an "investment fund" (within the meaning of Part V of
Prohibited Transaction Class Exemption 84-14 (issued March 13, 1984)
(the "QPAM Exemption")) managed by a "qualified professional asset
manager" ("QPAM") within the meaning of Part V of the QPAM
exemption) which has been identified pursuant to this paragraph
(iii), such that the funding of the Advance(s) by or on behalf of
such investment fund is exempt from the application of the
prohibited transaction rules of ERISA and Section 4975 of the
Internal Revenue Code, provided that no party to the transactions
described in this Agreement and no affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such party has, or at any
time during the immediately preceding year exercised, the authority
to appoint or terminate the identified QPAM as manager of the assets
of any employee benefit plan that has an interest in such investment
fund (which plans have been identified pursuant to this paragraph
(iii)) or to negotiate the terms of said QPAM's management agreement
on behalf of any such identified plan; or
(e) the Source is a "governmental plan" as defined in Title 1, Section
3(32) of ERISA; or
(f) the Source is one or more "employee benefit plans" (or other plan as
defined in and subject to Section 4975 of the Internal Revenue Code)
or a separate account, trust fund, or other entity comprised of one
or more such plans (determined after giving effect to the Plan Asset
Regulations) each of which has been identified to the Company in
writing pursuant to this paragraph (v); or
(g) the Source does not include assets of any employee benefit plan or
other plan, other than a plan exempt from coverage under ERISA and
from the prohibited transactions of Section 4975 of the Internal
Revenue Code.
13.16 Effective Date. This Agreement shall become effective upon the
Effective Date, and shall remain effective until the Indebtedness has been
repaid and discharged in full and no commitment to extend any credit hereunder
remains outstanding. Those Permitted Borrowers not signatories to this Agreement
on the Effective Date shall become obligated hereunder (and shall be deemed
parties to this Agreement) upon the execution and delivery, according to the
terms and conditions set forth in Section 2.1 hereof, of the Permitted Borrower
Addendum.
112
13.17 Severability. In case any one or more of the obligations of the
Company or any of the Permitted Borrowers under this Agreement, or any of the
other Loan Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Company or such Permitted Borrower shall not in any way be
affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Company or such Permitted Borrower
under this Agreement or any of the other Loan Documents in any other
jurisdiction.
13.18 Table of Contents and Headings; Construction of Certain Provisions.
The table of contents and the headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify or affect any of
the terms or provisions hereof. If any provision of this Agreement or any of the
other Loan Documents refers to any action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, whether or
not expressly specified in such provision.
13.19 Independence of Covenants. Each covenant hereunder shall be given
independent effect (subject to any exceptions stated in such covenant) so that
if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or such condition exists.
13.20 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company or any
party to any of the Loan Documents made herein or in any of the other Loan
Documents or in any certificate, report, financial statement or other document
furnished by or on behalf of the Company, any such party in connection with this
Agreement or any of the other Loan Documents shall be deemed to have been relied
upon by the Lenders, notwithstanding any investigation heretofore or hereafter
made by any Lender or on such Lender's behalf, and those covenants and
agreements of the Company and the Permitted Borrowers set forth in Section 11.8
hereof (together with any other indemnities of the Company or the Permitted
Borrowers contained elsewhere in this Agreement or in any of the other Loan
Documents and of Lenders set forth in Sections 12.1, 12.12 and 13.13 hereof
shall, notwithstanding anything to the contrary contained in this Agreement,
survive the repayment in full of the Indebtedness and the termination of any
commitments to make Advances hereunder.
13.21 Lien Release and Revival. Agent, on behalf of the Lenders, shall be
entitled to retain a first perfected security interest in and Liens on all
Collateral until the occurrence of the following events: (a) the Debt issued
pursuant to the BCc Replacement Refinancing has been converted into equity, and
(b) the rated Senior Debt of the Company (following such conversion) has a
rating of BB+ or better from S&P and a rating of Ba1 or better from Moody's.
Upon the occurrence of the events specified in subsections (a) and (b), as
aforesaid, and so long as no Default or Event of Default shall have occurred and
be continuing, the Agent, on behalf of the Lenders, shall release its security
interest in and Liens on Collateral (excluding any pledge of or Lien on any
equity interests of the Company or any of its Subsidiaries and any Lien on
113
Intercompany Notes), and shall promptly file appropriate UCC-3 termination
statements evidencing such release in all applicable jurisdictions. If, at any
time after the Agent's initial release of Liens, the Company is no longer in
compliance with the condition specified in subsection (b) above, the grant of
Lien and other obligations of the Company and its Subsidiaries under the
Security Agreements, to the extent previously released, shall again
automatically be effective without any further action or consent on the part of
the Company, any Subsidiary or any party thereto. In addition, the Company and
each Subsidiary hereby irrevocably authorizes the Agent at any time and from
time to time to re-file in any filing office in any UCC jurisdiction any
financing statements and amendments thereto that (x) indicate any or all of the
Collateral upon which the Company and its Subsidiaries have granted a Lien, and
(y) provide any other information required by Part 5 of Article 9 of the Uniform
Commercial Code, upon the Company's failure to satisfy, at any time, the
requirements set forth in subsection (b) above. The Company and its Subsidiaries
shall provide the Agent with any information it may require in order to prepare
and re-file such financing statements. Following such re-filing, the Agent, on
behalf of the Lenders, shall have a first perfected security interest in and
Lien on all Collateral. In addition, upon the Company's failure to satisfy, at
any time, the requirements set forth in subsection (b) above, Company hereby
agrees that it will, and will cause its Subsidiaries to, execute such additional
documentation, including Security Agreements or Reaffirmation of Security
Agreements as Agent or the Required Lenders shall reasonably require to ensure
the Agent's Lien on all Collateral.
13.22 Complete Agreement; Amendment and Restatements. This Agreement, the
Notes (if issued), any Requests for Advance or Letters of Credit hereunder, the
other Loan Documents and any agreements, certificates, or other documents given
to secure the Indebtedness, contain the entire agreement of the parties hereto,
and none of the parties hereto shall be bound by anything not expressed in
writing. This Agreement constitutes an amendment and restatement of the Prior
Credit Agreement, which Prior Credit Agreement is fully superseded and amended
and restated in its entirety hereby; provided, however, that the Indebtedness
governed by the Prior Credit Agreement shall remain outstanding and in full
force and effect and provided further that this Agreement does not constitute a
novation of such Indebtedness.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
114
WITNESS the due execution hereof as of the day and year first above
written.
COMPANY: AGENT:
VISHAY INTERTECHNOLOGY, INC. COMERICA BANK, As Agent
By: /s/ Richard N. Grubb By: /s/
---------------------------- ---------------------------------
Its: Executive Vice President, Its: Vice President
Chief Financial Officer and One Detroit Center
Director 500 Woodward Avenue
63 Lincoln Highway Detroit, Michigan 48226
Malvern, Pennsylvania 19355 Attention: Corporate Finance
PERMITTED BORROWERS:
VISHAY EUROPE GmbH
By: /s/ Richard N. Grubb
----------------------------
Its: Vice President
VISHAY ELECTRONIC GmbH
By: /s/ Richard N. Grubb
----------------------------
Its: Vice President
115
COMERICA BANK, individually, as
Swing Line Bank and as Issuing Bank
By: /s/
---------------------------------
Its: Vice President
--------------------------------
FLEET NATIONAL BANK
By: /s/
---------------------------------
Its: Director
--------------------------------
JP Morgan Chase Bank
By: Robert M. Stanchak
---------------------------------
Its: Vice President
--------------------------------
WACHOVIA BANK, NATIONAL ASSOCIATION
By: /s/
---------------------------------
Its: Director
--------------------------------
BANK OF AMERICA N.A.
By: /s/
--------------------------------
Its: Principal
-------------------------------
BANK LEUMI USA
By: /s/ /s/
---------------------------------
Its: AVP SVP
--------------------------------
BANK HAPOALIM B.M.,
NEW YORK BRANCH
By: /s/ Boaz Dan
---------------------------------
Its: First Vice President
--------------------------------
By: /s/ Maxie Levy
---------------------------------
Its: Vice President
--------------------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/
---------------------------------
Its: Vice President
--------------------------------
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ K. Ossolinski
---------------------------------
Its: Vice President
--------------------------------
THE BANK OF NOVA SCOTIA
By: /s/
---------------------------------
Its: Managing Director
--------------------------------
WESTLB AG, New York Branch
By: /s/ Salvator Battinelli
---------------------------------
Its: Managing Director
--------------------------------
By: /s/ Pascal Kabemba
---------------------------------
Its: Associate Director
--------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Stephen R. Shapiro
---------------------------------
Its: FVP
--------------------------------
By: /s/ Mel Altman
---------------------------------
Its: OP
--------------------------------
Exhibit 10.10
SEVERANCE AND GENERAL RELEASE AGREEMENT
---------------------------------------
This SEVERANCE AND GENERAL RELEASE AGREEMENT ("Agreement") is made
and entered into as of November 4, 2003, by and between Vishay Intertechnology,
Inc., a Delaware corporation ("Vishay"), and Avi Eden, an individual (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently a member of the Board of Directors,
a Vice Chairman of the Board of Directors and an Executive Vice President of
Vishay;
WHEREAS, Executive desires to resign his employment with Vishay,
effective as of the date hereof, and Vishay desires to accept such resignation,
subject to the terms and conditions set forth below;
NOW, THEREFORE, Vishay and Executive, each intending to be legally
bound, hereby mutually covenant and agree as follows:
1. Resignation. In consideration of the terms and conditions of this
Agreement, Executive will cease to serve in any executive positions of Vishay,
including as a member of the Board of Directors, a Vice Chairman of the Board of
Directors and an Executive Vice President of Vishay, and will terminate his
employment with Vishay, effective as of the date hereof. In addition, Executive
shall resign from all positions with any subsidiaries of Vishay as and when
requested by Vishay from time to time following the date hereof.
2. Consideration. In consideration of Executive's past services to Vishay,
and in consideration for entering into this Agreement, Vishay agrees to pay
Executive the consideration set forth below.
(a) Bonus. Vishay shall pay Executive three-quarters (3/4) of the
performance-based annual cash and/or stock bonus that would otherwise have been
payable to Executive for the calendar year ended December 31, 2003, as described
in the "Report on Executive Compensation" in Vishay's proxy statement dated
April 21, 2003 under the section entitled "Executive Officers and Key
Management" and at the time that such bonus would otherwise have been payable.
(b) Additional Payments.
(i) Vishay shall pay Executive a lump sum cash payment of
$1,000,000, payable within fifteen (15) days of the date hereof.
(ii) Vishay shall pay Executive an aggregate of $1,400,000, payable
in 108 equal monthly installments of $12,962.96 commencing in January, 2004, in
accordance with Vishay's standard payroll practices for employees in Malvern,
Pennsylvania (i.e. monthly, bi-monthly or bi-weekly as the case may be).
1
(c) Automobile Lease. Executive shall be permitted to use the BMW
automobile which Vishay has leased for Executive's use, and Vishay shall pay or
reimburse Executive for all expenses related thereto, until the lease expires,
at which time Executive shall immediately return such automobile to Vishay.
(d) Restricted Shares. On the later of November 3, 2003 and two days
after the release of Vishay's earnings for the fiscal quarter ended September
30, 2003, all contractual restrictions on shares of common stock of Vishay held
by Executive pursuant to the Vishay Employee Stock Plan shall lapse and such
shares of common stock shall become fully vested and nonforfeitable. At
Executive's request, Vishay shall promptly remove any legends on Executive's
shares of common stock relating to the foregoing restrictions.
(e) Continuation of Benefits. From the date hereof until December 31,
2003, Vishay shall continue to include Executive in its group welfare plans,
including term life insurance, medial insurance and long-term disability
insurance. If, however, Vishay is unable to include Executive in its group
welfare plans under the terms of such plans, Vishay shall reimburse Executive
for the reasonable cost of obtaining substantially equivalent coverage during
such period.
(f) No Impairment of Accrued Benefits. Nothing in this Agreement shall
adversely affect Executive's right to receive any benefits earned prior to the
date hereof under any employee benefit plan of Vishay, including, but not
limited to, any pension profit sharing or deferred compensation plan, whether or
not "qualified" under the Internal Revenue Code. All such benefits shall be paid
to Executive in accordance with the terms of each plan in which Executive
participates prior to the date hereof.
3. Acceleration of Payments. All amounts payable to Executive pursuant to
Section 2(b)(ii) shall be accelerated and the entire balance shall become
immediately due and payable upon written notice from Executive to Vishay upon
the occurrence of any of the following events:
(a) Vishay defaults in its obligation to make payment when due of any
of the installments provided for in Section 2(b)(ii), and fails to cure said
payment default within thirty (30) days after receipt of notice thereof;
(b) Vishay declares itself bankrupt or insolvent under any federal or
state bankruptcy or insolvency law, or an involuntary petition in bankruptcy is
filed against Vishay and is not withdrawn or dismissed within thirty (30) days
of filing thereof; or
(c) A "Fundamental Change" has occurred, as defined in Section 4.09(a)
of the indenture governing Vishay's 3-5/8% Convertible Subordinated Notes due
2003, as in effect on the date hereof (without giving effect, however, to the
exclusions provided in the final clauses (i) and (ii) of such definition), and
such Fundamental Change has not been approved by a majority of the "Continuing
Directors" of Vishay, as defined Section 1.01 of such indenture.
4. Withholding Taxes. Vishay may withhold from all payments due to
Executive under this Agreement all taxes which, by applicable federal, state,
local or other law, Vishay is required to withhold therefrom.
2
5. Payments Upon Death. In the event of Executive's death, all unpaid
amounts due to Executive under this Agreement shall be paid to Executive's
surviving spouse or to Executive's estate if Executive has no surviving spouse
in accordance with the terms of this Agreement, without acceleration, except as
provided in Section 3.
6. Indemnification. Executive shall be indemnified by Vishay, to the
fullest extent permitted under applicable law and Vishay's Certificate of
Incorporation and By-laws as in effect on the date hereof, against reasonable
expenses, including attorney's fees, actually and necessarily incurred by him in
connection with the defense of any action, suit, investigation or proceeding or
similar legal activity, regardless of whether criminal, civil or investigative
in nature, to which he is made a party by reasons of his employment by Vishay.
In addition, for a period of not less than six (6) years following the date
hereof, Vishay shall use its commercially reasonable efforts to continue to
include Executive as a named insured under Vishay's director and officer
insurance policy for all periods during which Executive served or serves as a
director or officer of Vishay or any of its subsidiaries with coverage at least
equal to that applicable to directors and officers of Vishay and its
subsidiaries generally.
7. Releases.
(a) Executive. In exchange for and in consideration of the promises,
covenants and agreements set forth herein, and as a material inducement to
Vishay to enter into this Agreement, Executive, for himself and his executors,
administrators, heirs and assigns, unconditionally and forever releases and
discharges Vishay, together with its past, present and future parents,
subsidiaries (whether wholly- or partially-owned, direct or indirect),
affiliates and divisions, and each of their respective past, present and future
officers, directors, agents, employees, shareholders, predecessors, successors
and assigns, in their respective capacities, as officers, directors, agents,
employees, shareholders, predecessors, successors and assigns (in each case,
where applicable, in both their personal and corporate capacities)
(collectively, the "Company Released Persons"), jointly and severally, to the
maximum extent permitted by law, from any and all Claims (as defined below)
which any of them has or may have for any period up to and including the date
hereof.
(b) Vishay. In exchange for and in consideration of the promises,
covenants and agreements set forth herein, and as a material inducement to
Executive to enter into this Agreement, Vishay, for itself and its respective
past, present and future corporate parents, subsidiaries and controlled
affiliates, unconditionally and forever releases and discharges Executive and
his executors, administrators, heirs and assigns (collectively, the "Executive
Covered Persons"), jointly and severally, to the maximum extent permitted by
law, from any and all Claims (as defined below) which any of them has or may
have for any period up to and including the date hereof.
(c) Claims. For purposes of this Section 7, "Claims" means any and all
manner of claims, demands, causes of action, suits, judgments, executions,
obligations, damages or liabilities whatsoever of every kind and nature, at law
or in equity, known or unknown, suspected or unsuspected and whether or not
discoverable, that Executive or Vishay now have, may have, or at any time had,
against any Company Released Person or Executive Released Person. The foregoing
notwithstanding, the term "Claims" does not include (i) any claims arising out
of or
3
based upon this Agreement or the Consulting and Non-Competition Agreement, of
even date herewith, between Vishay and Executive (the "Consulting Agreement"),
(ii) any rights Executive may have to indemnification under Vishay's Certificate
of Incorporation, By-laws, directors and officers liability insurance, this
Agreement or the Consulting Agreement, or (iii) any claims arising out of
criminal acts that as a matter of law cannot be released as against public
policy.
(d) Unenforceability of Release. Upon a finding by a court of competent
jurisdiction or arbitrator that a release or waiver of Claims provided for by
this Section 7 is illegal, void or unenforceable, Vishay or Executive, as the
case may be, may require the other party to promptly execute a release that is
legal and enforceable, so long as said release does not expand the scope of the
initial release found to be unenforceable.
8. Representation of Counsel; Reliance. Executive acknowledges and agrees
that (i) Executive has had the opportunity to consult with and be advised by the
attorneys of his choice prior to executing this Agreement, (ii) the signing of
this Agreement by Executive is voluntary, (iii) Executive fully understands all
of the provision of this Agreement, and (iv) in executing this Agreement,
Executive does not rely on any representation or statement not set forth in this
Agreement made by any representative of Vishay with regard to the subject
matter, basis, or effect of this Agreement.
9. Miscellaneous.
(a) No Liability. In executing this Agreement, Executive and Vishay do
not admit any liability or wrongdoing, and the considerations exchanged herein
do not constitute an admission of any liability, error, contract violation or
violation of any federal, state or local law, rule or regulation.
(b) Notices. Any notice, consent, request or other communication made
or given in accordance with this Agreement shall be in writing and shall be sent
either (i) by personal delivery to the party entitled thereto, (ii) by facsimile
with confirmation of receipt, or (iii) by registered or certified mail, return
receipt requested. The notice, consent request or other communication shall be
deemed to have been received upon personal delivery, upon confirmation of
receipt of facsimile transmission, or, if mailed, three (3) days after mailing.
Any notice, consent, request or other communication made or given in accordance
with the Agreement shall be made to those listed below at their following
respective addresses or at such other address as each may specify by notice to
the other:
To Vishay:
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, Pennsylvania 19355
Attention: Secretary
Facsimile No.: (610) 889-2161
4
To Executive:
Avi Eden
[Personal address omitted]
(c) Fees and Expenses. Each of the parties shall bear its own fees and
expenses incurred in connection with the negotiation of this Agreement.
(d) Full Settlement. Vishay's obligation to make any payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which Vishay may have against Executive or others. In no
event shall Executive be obligated to take any action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not Executive obtains other
employment or compensation.
(e) Successors.
(i) This Agreement is personal to Executive and, without the prior
written consent of Vishay, shall not be assignable by Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by Executive's heirs and legal
representatives.
(ii) This Agreement shall inure to the benefit of and be binding
upon Vishay and its successors and assigns.
(iii) Vishay shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of Vishay expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that Vishay would have been required to perform if no such succession had taken
place. As used in this Agreement, "Vishay" shall mean both Vishay as defined
above and any such successor that assumes and agrees to perform this Agreement,
by operation of law or otherwise.
(f) Complete Understanding; Amendment; Waiver. This Agreement
constitutes the complete understanding between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and no statement, representation, warranty or covenant
has been made by either party with respect thereto except as expressly set forth
herein. This Agreement shall not be altered, modified, amended or terminated
except by a written instrument signed by each of the parties hereto. Any waiver
of any term or provision hereof, or of the application of any such term or
provision to any circumstances, shall be in writing signed by the party charged
with giving such waiver. Waiver by either party hereto of any breach hereunder
by the other party shall not operate as a waiver of any other breach, whether
similar to or different from the breach waived. No delay on the part of Vishay
or Executive in the exercise
5
of any of their respective rights or remedies shall operate as a waiver thereof,
and no single or partial exercise by Vishay or Executive of any such right or
remedy shall preclude other or further exercise thereof.
(g) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be wholly performed within that State, without regard to the principles
of conflicts of law.
(i) Further Assurances. Each of the parties hereto shall execute and
deliver such documents, instruments and agreements and take such further actions
as may be reasonably required or desirable to carry out the provisions of this
Agreement and the transactions contemplated hereby, and each of the parties
hereto shall cooperate with each other in connection with the foregoing.
(j) Titles and Captions. All Section titles or captions in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any provision hereof.
(k) Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute but one and the same instrument.
6
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Severance and General Release Agreement as of the day and year first above
written.
VISHAY INTERTECHNOLOGY, INC.
/s/ Felix Zandman
----------------------------------
By: Felix Zandman
Title: Chairman of the Board and
Chief Executive Officer
EXECUTIVE:
/s/ Avi Eden
---------------------------------
Avi Eden
7
Exhibit 10.11
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
This CONSULTING AND NON-COMPETITION AGREEMENT ("Agreement") is made
and entered into as of November 4, 2003, by and between Vishay Intertechnology,
Inc., a Delaware corporation ("Vishay"), and Avi Eden, an individual (the
"Consultant").
W I T N E S S E T H:
WHEREAS, Consultant was a member of the Board of Directors, a Vice
Chairman of the Board of Directors and an Executive Vice President of Vishay;
WHEREAS, Vishay now desires to retain Consultant as a consultant to
Vishay in such matters as shall from time to time hereafter be requested by
Vishay, on the terms and conditions set forth herein;
NOW, THEREFORE, Vishay and Consultant, each intending to be legally
bound, hereby mutually covenant and agree as follows:
ARTICLE I
Consultancy Engagement
----------------------
1.1 Engagement. Vishay hereby engages Consultant to provide such
advice to, and perform such consultative services for, Vishay as the parties may
mutually agree (collectively, the "Services"), subject to Consultant's
reasonable availability. Without limiting the foregoing, Consultant shall (i)
provide advice to Vishay with respect to mergers and acquisitions and
environmental matters and (ii) make himself available as reasonably requested by
Vishay to provide assistance to Vishay, including testimony, in any action or
proceeding to which Vishay or any subsidiary is or may become a party.
1.2 Term. The term of this Agreement shall commence on the date
hereof (the "Commencement Date") and shall end on January 1, 2007 (the "Initial
Term"). Thereafter, the term of this Agreement shall automatically be renewed
for subsequent twelve (12) month periods, unless terminated by either party, by
written notice to the other party, not less than thirty (30) days prior to the
end of the then current term (each an "Additional Term," and, together with the
Initial Term, the "Term"). This Agreement shall terminate upon Consultant's
death or, if as a result of Consultant's permanent disability, Consultant is
unable to perform the Services.
1.3 Performance. During the Term, Consultant shall take such actions
as are reasonably necessary to provide the Services consistent with his
engagement as set forth in Section 1.1 hereof; provided, however, Consultant may
engage in outside business activities so long as such activities would be
permitted by Section 3.1.
1
1.4 Independent Contractor Status. Consultant shall perform the
Services under this Agreement as an independent contractor and not as an
employee of Vishay. Except to the extent set forth in Article II hereof,
Consultant shall not be entitled to social security, unemployment or other
benefits made available to employees of Vishay.
ARTICLE II
Remuneration
2.1 Consulting Fee.
(a) From the Commencement Date until December 31, 2003, as
consideration for Consultant's agreement to provide the Services pursuant to
this Agreement, Vishay shall pay Consultant a consulting fee equal to the base
salary (including benefits) that would have otherwise been payable to Consultant
during such period had he remained an employee of Vishay.
(b) Commencing January 1, 2004, and for the remainder of the Term,
as consideration for Consultant's agreement to provide the Services pursuant to
this Agreement, Vishay shall pay Consultant a consulting fee of $1,700 per day
for any day (or a pro-rated portion thereof for any partial day) during which
Consultant provides the Services, payable in accordance with Vishay's regular
payroll practices; provided, however, that Vishay shall pay Consultant a minimum
non-refundable fee of $100,000 per annum, such minimum fee to be payable in full
on January 2 of each calendar year during the Term, to be credited towards the
daily fee otherwise payable to Consultant during such calendar year under this
Section 2.1.
2.2 Insurance. During the Term, Consultant and his spouse shall be
entitled to participate in his current medical insurance plan. In the event
Consultant and his spouse shall not be eligible for coverage under such plan
pursuant to contractual terms with a third party insurance provider, Consultant
and his spouse, at Consultant's option, may participate in any medical insurance
plan available to Vishay's senior executives (including any self-insurance plan)
or in any other medical insurance plan available to Vishay's United States
employees generally, in each case for which Consultant is eligible, provided
that Consultant's participation in such other plan is not more expensive to
Vishay.
2.3 Stock Options. Consultant shall be considered to be an Employee
of Vishay until the end of the Term for purposes of all stock options heretofore
granted or awarded to Consultant, whether vested or unvested, under Vishay's
1997 Stock Option Program, 1998 Stock Option Program or otherwise.
2.4 Automobile Lease. Consultant shall be permitted to use the BMW
automobile which Vishay has leased for Consultant's use, and Vishay shall pay or
reimburse Consultant for all expenses related thereto, until the lease expires,
at which time Consultant shall immediately return such automobile to Vishay.
2
2.5 Access to Facilities and Employees. During the Term, Consultant
may make use of Vishay's facilities and of the time and services of Vishay's
employees, in each case as the Company shall determine.
2.6 Reimbursement of Expenses. Vishay shall reimburse Consultant,
for such reasonable and documented out-of-pocket expenses as may be incurred by
Consultant during the Term in providing the Services; provided, however, that
Consultant shall not be entitled to reimbursement of first class airfare.
2.7 Indemnification. Consultant shall be indemnified by Vishay
against reasonable expenses, including attorney's fees, actually and necessarily
incurred by him in connection with the defense of any action, suit,
investigation or proceeding or similar legal activity, regardless of whether
criminal, civil, administrative or investigative in nature, to which he is made
a party by reason of his then providing or having provided Services to Vishay
hereunder; provided, however, that no indemnification shall be provided in
respect of any matter as to which (i) Consultant shall have been finally
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his action was in, or not opposed to, the best interests of Vishay,
and with respect to any criminal action or proceeding, as to which Consultant
had reasonable cause to believe that his conduct was unlawful or (ii)
Consultant's action or inaction constituted gross negligence or willful
misconduct. Such right of indemnification will not be deemed exclusive of any
other rights to which Consultant may be entitled under Vishay's Certificate of
Incorporation or By-laws, as in effect from time to time, any agreement or
otherwise. Vishay shall (upon receipt by Vishay of an undertaking by or on
behalf of the Consultant to repay the expenses described in this Section 2.7 if
it shall ultimately be determined that he is not entitled to be indemnified by
Vishay against such expenses) pay reasonable expenses, including attorney's
fees, incurred by Consultant in defending any threatened, pending or completed
action, suit or proceeding or appearing as a witness at a time when he has not
been named as a defendant or respondent with respect thereto in advance of the
final disposition of any such action, suit or proceeding.
2.8 Withholding Taxes. Vishay may withhold from all payments due to
Consultant under this Agreement all taxes which, by applicable federal, state,
local or other law, Vishay is required to withhold therefrom.
ARTICLE III
Restrictive Covenants
3.1 Non-Competition. During the Term and for two years following the
termination of this Agreement, Consultant shall not, without the prior written
consent of the Company, directly or indirectly, own, manage, operate, join,
control, participate in, invest in or otherwise be connected or associated with,
in any manner, including as an officer, director,
3
employee, independent contractor, subcontractor, stockholder, member, manager,
partner, principal, consultant, advisor, agent, proprietor, trustee or investor,
any Competing Business (as defined below); provided, however, that nothing in
this Agreement shall prevent Consultant from (A) owning five percent (5%) or
less of the stock or other securities of a publicly held corporation, so long as
Consultant does not in fact have the power to control, or direct the management
of, and is not otherwise associated with, such corporation, or (B) performing
Services for an investment bank, investment advisor or investment fund that may,
directly or indirectly, own, manage, operate, join, control, participate in,
invest in or otherwise be connected or associated with, in any manner, any
Competing Business, provided that Consultant shall not, directly or indirectly,
have any responsibility whatsoever for, provide any services whatsoever to, or
otherwise be connected or associated with such Competing Business.
Notwithstanding the foregoing, if a company has separate divisions or
subsidiaries, some of which conduct a Competing Business and some of which
conduct other businesses which are not Competing Businesses, then the
restrictions imposed hereunder with respect to Competing Businesses shall apply
only to the divisions or subsidiaries of such company that conduct the Competing
Businesses, provided that (A) Consultant shall not, directly or indirectly, have
any responsibility whatsoever for, provide any services whatsoever to, or
otherwise be connected or associated with any Competing Business of the same
company, and (B) Consultant obtains the prior written consent of the Company,
which consent shall not be unreasonably with held. As used in this Section 3.1,
"Competing Business" means any business or venture located anywhere in the world
that is engaged in the manufacture and supply of passive and discrete active
electronic components and/or strain gages, strain gage transducers or strain
gage instrumentation to the extent Vishay or any subsidiary of Vishay is engaged
in such activities on the Commencement Date.
3.2 Non-Solicitation. During the Term and for two years following
the termination of this Agreement, Consultant shall not, directly or indirectly
solicit for employment, or recruit any person who at the relevant time is an
officer, director, employee, independent contractor, subcontractor, manager,
partner, principal, consultant, or agent of Vishay or any of its subsidiaries or
affiliates, or induce or encourage any of the foregoing to terminate their
employment, contractual or other relationship (as appropriate) with Vishay or
any of its subsidiaries or affiliates, or attempt to do any of the foregoing
either on Consultant's own behalf or for the benefit of any third person or
entity.
3.3 Confidential Information. Consultant agrees that he shall not,
directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any person, other than in the course of providing the Services
hereunder and for the benefit of Vishay, either during the Term or at any time
thereafter, any nonpublic, proprietary or confidential information, knowledge or
data relating to Vishay, any of its subsidiaries, affiliated companies or
businesses, which shall have been obtained by Consultant during Consultant's
prior employment by Vishay or during the Term. The foregoing shall not apply to
information that (i) was known to the public prior to its disclosure to
Consultant; (ii) becomes known to the public subsequent to disclosure to
Consultant through no wrongful act of Consultant or any representative of
Consultant; or (iii) Consultant is required to disclose by applicable law,
regulation or legal process (provided that Consultant provides Vishay with prior
notice of the contemplated disclosure and reasonably cooperates with Vishay at
its expense in seeking a protective order or other appropriate protection of
such information). Notwithstanding clauses (i) and (ii) of the preceding
sentence,
4
Consultant's obligation to maintain such disclosed information in confidence
shall not terminate where only portions of the information are in the public
domain.
3.4 Non-Disparagement. Each of Consultant and Vishay (for purposes
hereof, Vishay shall mean only the executive officers and directors thereof and
not any other employees) agrees not to make any public statements that disparage
the other party or, in the case of Vishay, its respective affiliates, employees,
officers, directors, products or services. Notwithstanding the foregoing,
statements made in the course of sworn testimony in administrative, judicial or
arbitral proceedings (including, without limitation, depositions in connection
with such proceedings) shall not be subject to this Section 3.4.
3.5 Acknowledgements Respecting Restrictive Covenants.
(a) Consultant has carefully read and considered the provisions of
this Article III and, having done so, agrees that:
(i) the restrictive covenants contained in this Article III,
including, without limitation, the scope and time period of such restrictions,
are reasonable, fair and equitable in light of Consultant's duties and
responsibilities under this Agreement and the benefits to be provided to him
under this Agreement; and
(ii) such restrictive covenants are reasonably necessary to
protect the legitimate business interests of Vishay.
(b) The parties acknowledge that it is impossible to measure in
money the damages that will accrue to one party in the event that the other
party breaches any of the restrictive covenants contained in this Article III
and that any such damages, in any event, would be inadequate and insufficient.
Therefore, if one party breaches any restrictive covenant contained in this
Article III, the non-breaching party shall be entitled to an injunction
restraining the breaching party from violating such restrictive covenant;
provided, however, that a party must provide the other party with not less than
five (5) days written notice prior to instituting an action or proceeding to
enforce any restrictive covenant contained in this Article III. If the
non-breaching party shall institute any action or proceeding to enforce a
restrictive covenant contained in this Article III, the breaching party hereby
waives, and agrees not to assert in any such action or proceeding, the claim or
defense that the non-breaching party has an adequate remedy at law.
(c) In the event of a breach of any of the restrictive covenants
contained in this Article III, the parties agree that the non-breaching party,
in addition to any injunctive relief as described in Section 3.5(b), shall be
entitled to any other appropriate legal or equitable remedy.
(d) If any of the restrictive covenants contained in this Article
III are deemed by a court of competent jurisdiction to be unenforceable by
reason of their extent, duration or geographical scope or otherwise, the parties
contemplate that the court shall revise such extent, duration, geographical
scope or other provision but only to the extent required in order to render such
restrictions enforceable, and enforce any such restriction in its revised form
for all purposes in the manner contemplated hereby.
5
3.6 Consideration. Each of the covenants of this Article III is
given by Consultant as part of the consideration for this Agreement and as an
inducement to Vishay to enter into this Agreement and accept the obligations
hereunder.
ARTICLE IV
Miscellaneous
4.1 Survival. Notwithstanding anything to the contrary herein,
Section 2.6 ("Indemnification"), Article III ("Restrictive Covenants") and
Article IV ("Miscellaneous") of this Agreement shall survive termination of this
Agreement for any reason whatsoever.
4.2 Notices. Any notice, consent, request or other communication
made or given in accordance with this Agreement shall be in writing and shall be
sent either (i) by personal delivery to the party entitled thereto, (ii) by
facsimile with confirmation of receipt, or (iii) by registered or certified
mail, return receipt requested. The notice, consent request or other
communication shall be deemed to have been received upon personal delivery, upon
confirmation of receipt of facsimile transmission, or, if mailed, three (3) days
after mailing. Any notice, consent, request or other communication made or given
in accordance with the Agreement shall be made to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the other:
To Vishay:
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, Pennsylvania 19355
Attention: Secretary
Facsimile No.: (610) 889-2161
To Consultant:
Avi Eden
[Personal address omitted]
4.3 Successors.
(a) This Agreement is personal to Consultant and, without the prior
written consent of Vishay, shall not be assignable by Consultant otherwise than
(i) to an affiliate of Consultant or (ii) by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
Consultant's heirs and legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
Vishay and its successors and assigns.
6
(c) Vishay shall require any successor (whether direct or indirect,
by purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of Vishay expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that Vishay would have
been required to perform if no such succession had taken place. As used in this
Agreement, "Vishay" shall mean both Vishay as defined above and any such
successor that assumes and agrees to perform this Agreement, by operation of law
or otherwise.
4.4 Complete Understanding; Amendment; Waiver. This Agreement
constitutes the complete understanding between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and no statement, representation, warranty or covenant
has been made by either party with respect thereto except as expressly set forth
herein. This Agreement shall not be altered, modified, amended or terminated
except by a written instrument signed by each of the parties hereto. Any waiver
of any term or provision hereof, or of the application of any such term or
provision to any circumstances, shall be in writing signed by the party charged
with giving such waiver. Waiver by either party hereto of any breach hereunder
by the other party shall not operate as a waiver of any other breach, whether
similar to or different from the breach waived. No delay on the part of Vishay
or Consultant in the exercise of any of their respective rights or remedies
shall operate as a waiver thereof, and no single or partial exercise by Vishay
or Consultant of any such right or remedy shall preclude other or further
exercise thereof.
4.5 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement. If any provision of this Agreement shall
be held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
4.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be wholly performed within that State, without regard to the principles
of conflicts of law.
4.7 Titles and Captions. All Section titles or captions in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any provision hereof.
4.8 Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute but one and the same instrument.
7
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Consulting and Non-Competition Agreement as of the day and year first above
written.
VISHAY INTERTECHNOLOGY, INC.
/s/ Felix Zandman
---------------------------------
By: Felix Zandman
Title: Chairman of the Board and
Chief Executive Officer
CONSULTANT:
/s/ Avi Eden
---------------------------------
Avi Eden
8
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Note: Names of Subsidiaries are indented under name of Parent. Directors' or
other shares required by statute in foreign jurisdictions and totaling less than
1% of equity are omitted.
Percentage of
Name Jurisdiction Equity
Vishay Americas, Inc. Delaware 100%
Vishay Cera-Mite Inc. Wisconsin 100%
Vishay EFI, Inc. Rhode Island 100%
Vishay Infrared Components Inc. California 100%
Yosemite Investment, Inc. Indiana 100%
North American Capacitor Company Indiana LLC Indiana 100%
North American Capacitor Company Kentucky LLC Indiana 100%
Vishay Intertechnology Asia PTE Ltd. Singapore 100%
Vishay Japan K.K. Japan 100%
Vishay Hong Kong Ltd. Hong Kong 100%
Vishay Korea Co. Ltd. Korea 100%
Vishay Taiwan Taiwan 100%
Vishay Pte. Ltd. Singapore 100%
BCcomponents Taiwan Limited Taiwan 100%
Vishay Temic Semiconductor Acquisition Holding Corporation Delaware 100%
Siliconix, Inc. Delaware 80.4%
Siliconix Technology C.V. Netherlands 100%
Siliconix Technology B.V. Netherlands 100%
Siliconix Israel Ltd. Israel 100%
Shanghai Simconix Electronic Company Ltd. China 95.4%
Siliconix Ltd. England 100%
Siliconix Taiwan Ltd. Taiwan 100%
Siliconix, Ltd. Taiwan Taiwan 100%
Vishay Pte. Ltd. Singapore Singapore 100%
Vishay Siliconix, LLC Delaware 100%
Siliconix Sales Corp. U.S. Virgin Islands 100%
Siliconix Semiconductor, Inc. Delaware 100%
General Semiconductor, Inc. Delaware 100%
General Semiconductor International Corp. New York 100%
General Semiconductor Japan, Ltd. Japan 50% by General
Semiconductor
International, 50% by
General Semiconductor
Inc.
ATC Corp. Delaware 100%
Century Components Inc. Delaware 100%
General Semiconductor PSD (China) Holdings, Inc. Delaware 100%
General Semiconductor (China) Co., Ltd. China 100%
GSI-General Semiconductor Ireland Ireland 100%
GSI-General Semiconductor (Europe) Ltd. Ireland 100%
General Semiconductor of Taiwan, Ltd. Taiwan 100%
General Semiconductor Korea Co., Ltd. Korea 100%
General Semiconductor France S.A. France 100%
General Semiconductor (Singapore) Pte. Ltd. Singapore 100%
General Semiconductor Hongkong Ltd. Hong Kong 100%
SUBSIDIARIES OF THE REGISTRANT, continued
Percentage of
Name Jurisdiction Equity
General Semiconductor (UK) Ltd. United Kingdom 100%
General Instrument Europe, N.V. Netherlands 100%
General Semiconductor (Deutschland) GmbH Germany 100%
Vishay BCcomponents Holdings Ltd. Delaware 100%
BCcomponents Holdings B.V. Netherlands 100%
BCcomponents Lux Sarl Luxembourg 100%
BCcomponents Holdings (Netherlands) B.V. Netherlands 100%
BCcomponents B.V. Netherlands 100%
BCcomponents International B.V. Netherlands 100%
BCcomponents SAS France 100%
BCcomponents Estate NV Belgium 100%
BCcomponents NV Belgium 100%
BCcomponents UK Ltd United Kingdom 100%
Valen Ltd. Hong Kong 100%
BCcomponents Shanghai Company, Ltd China 95.8%
BCcomponents South Europe SRL Italy 100%
Vishay Components India Pvt Ltd India 100%
BCcomponents Hong Kong Ltd. Hong Kong 100%
BCcomponents China Ltd Hong Kong 100%
BCcomponents Singapore Pte Ltd. Singapore 100%
BCcomponents Trading (Shanghai) Co. Ltd China 100%
Nippon Vishay, K.K. Japan 100%
Vishay F.S.C., Inc. Barbados 100%
Vishay VSH Holdings, Inc. Delaware 100%
Vishay Roederstein Electronics, Inc. Delaware 100%
Vishay Measurements Group, Inc. Delaware 100%
Vishay Transducers Ltd. Delaware 100%
JP Technologies Inc. Illinois 100%
Sensortronica de Costa Rica, S.A. Costa Rica 100%
Vishay BLH Inc. Delaware 100%
Pharos De Costa Rica S.A. Costa Rica 100%
Celtron Technologies, Inc. Taiwan 100%
High Goals Investments Limited British Virgin 100%
Islands
Billion Way Industrial Limited Samoa 100%
UCC Investment Co. Ltd. Samoa 100%
Triumph Electronics (Shanghai) Ltd. China 100%
Celtron Technologies (U.S.A.) Inc. California 100%
Celtron Technologies (Tianjin) Inc. China 68% by Celtron U.S.A.,
32% by UCC Investment
Vishay Israel Limited Israel 100%
Z.T.R. Electronics Ltd. Israel 100%
Vishay International Trade Ltd. Israel 100%
Dale Israel Electronics Ltd. Israel 100%
Draloric Israel Ltd. Israel 100%
V.I.E.C. Ltd. Israel 100%
Vishay Advance Technology, Ltd. Israel 100%
Vilna Equities Holding, B.V. Netherlands 100%
SUBSIDIARIES OF THE REGISTRANT, continued
Percentage of
Name Jurisdiction Equity
Measurements Group (U.K.) Ltd. England & Wales 100%
Vishay Europe GmbH Germany 85.9% by Vishay Israel;
13.1% by Vishay; 1% by
Dale
BCcomponents Austria GmbH Austria 100%
BCcomponents Holding Gmbh Germany 100%
BCcomponents Beyschlag Gmbh Germany 100%
BCcomponents Vertriebs GmbH Germany 100%
Vishay Electronic GmbH Germany 100%
Roederstein Electronics Portgual Lda. Portugal 100%
ECOMAL Deutschland GmbH Germany 100%
Grupo Da Medidas Iberica S.L. Spain 100%
ECOMAL Schweiz A.G. Switzerland 100%
ECOMAL Austria Ges.mbH Austria 100%
Klevestav-Roederstein Festigheter AB Sweden 50%
Vishay Components, S.A. Spain 100%
ECOMAL Nederland BV Netherlands 100%
ECOMAL Belgium N.V. Belgium 100%
ECOMAL Denmark A/S Denmark 100%
ECOMAL Finland OY Finland 100%
ECOMAL France S.A. France 100%
ECOMAL S.r.O. Czech Republic 100%
ECOMAL UK England 100%
Okab Roederstein Finland OY Finland 44.4%
Rogin Electronic S.A. Spain 33%
Roederstein-Hilfe-GmbH Germany 100%
Vishay Electronic SPOL S RO Czech Republic 100%
Vishay S.A. France 99.8%
Ultronix, Inc. Delaware 100%
Vishay Thin Film, Inc. New York 100%
Vishay Techno Components Corp. Delaware 100%
Tedea-Huntleigh B.V. Netherlands 100%
Tedea-Huntleigh International Ltd Israel 100%
T-H Technology Ltd Israel 100%
Vishay Measurements Group France, S.A. France 100%
T-H Industrial Properties Ltd Israel 100%
Tedea-Huntleigh Europe Ltd England 100%
Tedea-Huntleigh Sensortechnic GmbH Germany 100%
Tedea-Huntleigh, Inc. California 100%
Beijing Tedea-Huntleigh Electronics Co. Ltd China 100%
E-Sil Components Ltd. England & Wales 100%
Vishay Roederstein Limited England 100%
Vitramon Limited England 100%
Vishay Ltd. England & Wales 100%
Spectrol GmbH Germany 100%
Grued Corporation Delaware 100%
Con-Gro Corp. Delaware 100%
Gro-Con, Inc. Delaware 100%
SUBSIDIARIES OF THE REGISTRANT, continued
Percentage of
Name Jurisdiction Equity
Angstrohm Precision, Inc. Delaware 100%
Angstrohm Holdings, Inc. Delaware 100%
Sfernice, Ltd. England & Wales 100%
Heavybarter, Unlimited England & Wales 100%
Dale ACI Components England 100%
Vishay Nobel AB Sweden 100%
AB Givareteknik Sweden 100%
Vishay Nobel Ltd. England 100%
Vishay Nobel Oy AB Finland 100%
Vishay Nobel SARL France 100%
Vishay Nobel AS Norway 100%
Measurements Group GmbH Germany 100%
Facility Services, GmbH Germany 50%
Vishay Semiconductor GmbH Germany 100%
Vishay Semiconductor Itzehoe GmbH Germany 100%
Vishay (Phils.) Inc. Philippines 100%
Vishay Semiconductor GES.M.B.H. Austria 100%
Shanghai Vishay Discrete Semiconductors Ltd. China 100%
Shanghai Vishay Opto Semiconductors Ltd. China 100%
Vishay Hungary Hungary 100%
Vishay Semiconductor Malaysia Sdn Bhd Malaysia 100%
Vishay Dale Holdings, Inc. Delaware 100%
Vishay Dale Electronics, Inc. Delaware 100%
Components Dale de Mexico S.A. de C.V. Mexico 100%
Electronica Dale de Mexico S.A. de C.V. Mexico 100%
Vishay Electronic Components Asia Pte.,Ltd. Singapore 100%
Vishay Bradford Electronics, Inc. Delaware 100%
Vishay Angstrohm Precision, Inc. Maryland 100%
Vishay Sprague Holdings Corp. Delaware 100%
Vishay Service Center, Inc. Massachusetts 100%
Vishay Sprague Sanford, Inc. Maine 100%
Vishay Sprague, Inc. Delaware 100%
Vishay Sprague Canada Holdings Inc. Canada 100%
Sprague Electric of Canada Limited Canada 100%
Sprague France S.A. France 100%
Vishay Sprague Palm Beach, Inc. Delaware 100%
Vishay Sprague Limited England 100%
Vishay Tansitor Electronics, Inc. Delaware 100%
Tansitor Barbados Limited Barbados 100%
Vishay Acquisition Holdings Corp. Delaware 100%
Vishay Vitramon, Inc. Delaware 100%
Vishay Do Brazil Ltda. Brazil 100%
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the following registration
statements of Vishay Intertechnology, Inc. and in the related Prospectuses of
our report dated February 5, 2004, with respect to the consolidated financial
statements of Vishay Intertechnology, Inc. included in this Annual Report (Form
10-K) for the year ended December 31, 2003.
Registration
Statement Number Form Description
---------------- ---- -----------
33-7850 S-8 1986 Employee Stock Plan of
Vishay Intertechnology, Inc.
33-7851 S-8 1986 Employee Stock Plan of
Dale Electronics, Inc.
333-78045 S-8 1997 Stock Option Program and
1998 Employee Stock Option
Program of Vishay
Intertechnology, Inc.
333-68090 S-3/A $550,000,000 Liquid Yield
Option Notes Due 2021
333-89614 S-3 6,191,166 Shares of Common
Stock upon Conversion of
General Semiconductor, Inc.
5.75% Convertible Notes due
2006
333-73496 S-8 Amended and Restated General
Semiconductor, Inc. 1993
Long-Term Incentive Plan and
General Semiconductor, Inc.
Amended and Restated 1998
Long-Term Incentive Plan
333-52594 S-3/A 2,887,134 Common Shares and
$945,779,624 Other Securities
333-102507 S-3/A Class A Warrants to Purchase
7,000,000 Shares of Common
Stock; Class B Warrants to
Purchase 1,823,529 Shares of
Common Stock; 6,176,467 Shares
of Common Stock Issuable Upon
Exchange of $105,000,000
Floating Rate Unsecured Notes
due 2102; and 8,823,529 Shares
of Common Stock Issuable Upon
Exercise of Class A Warrants
and Class B Warrants
333-110259 S-3/A $500,000,000 Principal Amount
of 3 5/8% Convertible
Subordinated Notes Due 2023;
and Shares of Common Stock
Issuable Upon Conversion of
$500,000,000 Principal Amount
of 3 5/8% Convertible
Subordinated Notes due 2023.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 12, 2004
Exhibit 31.1
CERTIFICATIONS
I, Dr. Felix Zandman, certify that:
1. I have reviewed this annual report on Form 10-K of Vishay Intertechnology,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) [Intentionally omitted]
c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and materially weaknesses in the design
or operation of internal control over financial reporting which
could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 15, 2004
/s/ Dr. Felix Zandman
- ------------------------
Dr. Felix Zandman
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Richard N. Grubb, certify that:
1. I have reviewed this annual report on Form 10-K of Vishay Intertechnology,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) [Intentionally omitted]
c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and materially weaknesses in the design
or operation of internal control over financial reporting which
could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 15, 2004
/s/ Richard N. Grubb,
- -------------------------
Richard N. Grubb,
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vishay Intertechnology, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dr.
Felix Zandman, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Dr. Felix Zandman
- ---------------------------
Dr. Felix Zandman
Chief Executive Officer
March 15, 2004
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vishay Intertechnology, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Richard
N. Grubb, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Richard N. Grubb
- --------------------------
Richard N. Grubb
Chief Financial Officer
March 15, 2004