-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G9hcvm/YkUzPd4Je56yaTEi/ZQwDqnPE9EWT4GorS6cSysyqOgK57eECgwuCECVc aS0p+dXJD6KmjcIMowpHMA== 0000950152-00-002296.txt : 20000411 0000950152-00-002296.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950152-00-002296 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN TELECOM INC CENTRAL INDEX KEY: 0000003721 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 380290950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06016 FILM NUMBER: 581964 BUSINESS ADDRESS: STREET 1: 25101 CHAGRIN BLVD # 350 CITY: BEACHWOOD STATE: OH ZIP: 44122-5619 BUSINESS PHONE: 2167655818 FORMER COMPANY: FORMER CONFORMED NAME: ALLEN GROUP INC DATE OF NAME CHANGE: 19920703 10-K 1 ALLEN TELECOM INC. 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1999 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 1-6016 ---------- ALLEN TELECOM INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-0290950 - ------------------------------- ------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 25101 CHAGRIN BOULEVARD, BEACHWOOD, OHIO 44122 - ---------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 216/765-5818 ---------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - ---------------------- ------------------------- Common Stock, $1 par value New York Stock Exchange Pacific Exchange Preferred Stock Purchase Rights New York Stock Exchange Pacific Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, 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. [ ] As of March 1, 2000, there were 27,901,910 shares of the Registrant's Common Stock issued and outstanding, and the aggregate market value, based upon the last sale price of the Registrant's Common Stock on the New York Stock Exchange Composite Tape on March 1, 2000 of $13.625, of the Registrant's Common Stock held by nonaffiliates of the Registrant was $359,053,439. Exhibit Index is on pages 19 to 27 of this Report. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Stockholders for fiscal year ended December 31, 1999 incorporated by reference into Parts I, II and IV hereof. Proxy Statement dated March 17, 2000 for Annual Meeting of Stockholders to be held April 28, 2000 incorporated by reference into Part III hereof. -1- 2 ALLEN TELECOM INC. ------------------ FORM 10-K --------- (For the fiscal year ended December 31, 1999) TABLE OF CONTENTS -----------------
PAGE PART I Item 1 - Business 3 Item 2 - Properties 8 Item 3 - Legal Proceedings 8 Item 4 - Submission of Matters to a Vote of Security Holders 8 Executive Officers of The Registrant 9 PART II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 10 Item 6 - Selected Financial Data 10 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 7A - Quantitative and Qualitative Disclosures about Market Risk 10 Item 8 - Financial Statements and Supplementary Data 11 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11 PART III Item 10 - Directors and Executive Officers of the Registrant 12 Item 11 - Executive Compensation 12 Item 12 - Security Ownership of Certain Beneficial Owners and Management 12 Item 13 - Certain Relationships and Related Transactions 12 PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13 SIGNATURES 17 EXHIBIT INDEX 19
-2- 3 ALLEN TELECOM INC. ------------------ FORM 10-K --------- PART I ------ ITEM 1 - BUSINESS ----------------- OVERALL GENERAL Allen Telecom Inc. ("Allen Telecom", the "Company" or the "Registrant") was incorporated under the laws of the State of Delaware on February 3, 1969. Its predecessor was Allen Electric and Equipment Company, incorporated under the laws of the State of Michigan on January 13, 1928, which merged into the Delaware corporation on May 1, 1969. On February 28, 1997, the name of the Company was changed from The Allen Group Inc. to Allen Telecom Inc., upon the merger of its wholly owned subsidiary, Allen Telecom Group, Inc. with and into the Company. The Company is a major supplier of telecommunications equipment, including site management products, systems expansion and optimization products, mobile and base station antennas, test and measurement equipment, and E911 geolocation products and services, and wireless engineering services to the worldwide wireless communications market. There have been no significant changes in the business, kinds of products produced or services rendered or in the markets or methods of distribution since the beginning of the last fiscal year. On March 1, 1999, the Company sold its MARTA Technologies, Inc. subsidiary, which operated its discontinued centralized automotive emissions testing programs, to a subsidiary of Environmental Systems Products, Inc. Additional information regarding this development is incorporated herein by reference to Note 9, "Acquisitions and Dispositions," of the Notes to Consolidated Financial Statements" on pages 24 and 25, and to the "Discontinued Operations" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 30 of Allen Telecom's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. TELECOMMUNICATIONS EQUIPMENT MANUFACTURING GENERAL The Company's Telecommunications Equipment Manufacturing business segment consists of three product lines: Systems Products, Site Management and Other Non-Antenna Products, and Mobile and Base Station Antennas. The Company's Systems Products support both coverage and capacity enhancement for GSM, TDMA, CDMA and analog wireless carriers. Products include high power and low power repeaters to fill coverage gaps caused by obstructions, such as mountains, tunnels, and buildings, and fiber optic-based radio frequency distribution systems, such as its Britecell(TM) product. Indoor coverage systems are provided generally using fiber as a means of distribution, including its Distributed Indoor Coverage Extension System ("DICE(TM)"), as well as a cable-based indoor system for smaller, lower cost installations. The Company also has developed a range of test equipment and software to test and optimize wireless networks, such as its I.Q. Analyzer(TM), Surveyor(TM) and Illuminator(TM) products. Many of the major wireless system infrastructure vendors incorporate components or subsystems from Allen Telecom's Site Management and Other Non-Antenna Products. The Company is one of the world's largest suppliers of cell site subsystems, supplying many different customized modules that are incorporated in original equipment manufacturer ("OEM") cell sites. Site Management products include sophisticated filters, which ensure that incoming signals are received and outgoing signals are transmitted clearly and without interference, -3- 4 duplexers, which are stationed at most cell site transceivers to allow one antenna to be used for both transmission and reception of radio signals simultaneously, and low noise, tower mounted, multicarrier and single carrier power amplifiers, which enhance the reception of weak signals or boost outgoing signals. Allen Telecom also manufacturers auto-tune combiners, which adjust instantly and automatically to new frequencies as the system is modified, among other products. Allen Telecom is a leading North American supplier of base station antennas to the global wireless OEMs and wireless service providers through its Mobile and Base Station Antennas product line. Products include antennas in frequency bands to cover all digital cellular and PCS networks, as well as the analog networks. New base station antenna models include, for example, the Decibel TripleTree(TM), which incorporates all six of the antennas required for a three sector site in a single 12 inch diameter housing, MaxFill(TM), which concentrates RF below the horizon and provides even radiation density, and MaxGain(TM), which focuses radiation energy to maximize geographic coverage. The Company is a leading supplier of mobile automobile antennas, which operate on both cellular, PCS and dual-band frequencies, as well as antennas for Global Positioning Systems ("GPS"). The Federal Communications Commission ("FCC") has mandated that by 2001 all providers of wireless phone services will begin to provide the location where an emergency 911 call originates. The Company has developed a geolocation technology solution, Geometrix(TM), to provide carriers with the equipment and software to locate subscribers in their system. This geolocation technology has been tested and is available for CDMA, TDMA, iDEN and analog systems. Further field trials will be conducted before this product is brought to market, and the Company is hopeful that this product and technology will achieve market acceptance. In 1999, the Company initiated a number of cost reduction efforts within the Telecommunications Equipment Manufacturing segment to improve and adjust operations to existing market conditions. These actions include, among others, the closure of a domestic manufacturing facility and the transfer of most of manufacturing operations of the closed plant to Italy. This will result in a reduction in force (and related termination costs) and the sale of this domestic manufacturing plant (resulting in the non-cash loss of various assets). In addition, the Company has discontinued several product lines at its Site Management, Antenna and Systems divisions, and has closed a sales and engineering office in Mexico City. As a result of asset write-offs, severance and other costs associated with such actions, this segment incurred before-tax charges for the year of $11.9 million. PRODUCTION, RAW MATERIALS, AND SUPPLIES Allen Telecom's telecommunications equipment products generally are manufactured or assembled by the Company. Outside of the United States, the Company's manufacturing operations are in Italy, Germany, France, Mexico, Australia, China and Brazil. Allen Telecom's European operations outsource a substantial portion of product manufacturing labor to third parties. Products are sold directly through salaried and commissioned sales employees or through distributors and sales representatives to OEMs, common carriers and other large users of telecommunications products. In addition to manufacturing certain products, Allen Telecom also assembles at its facilities certain components manufactured for it by non-affiliated companies. The principal materials used in the production and assembly of Allen Telecom's products are purchased electronic components and subassemblies, steel, aluminum, copper and plastics. These materials are purchased regularly from several producers and have been generally available in sufficient quantities to meet Allen Telecom's requirements, although occasionally shortages have occurred. The Company believes that the supplies of materials through the end of 2000 will be adequate. SEASONAL TRENDS Generally, sales and earnings for telecommunications equipment manufacturing tend to be slightly lower in the first fiscal quarter due to lower outdoor installations of its products in the northern climates. Due to the unsettled climate for the global wireless telecommunications market, such seasonal variability was not evident in 1999. -4- 5 WORKING CAPITAL The Company's products consist of manufactured products for which inventory levels are generally based on product demand. The Company produces sophisticated equipment that could be subject to technological obsolescence. The Company maintains and periodically revises reserves for excess inventory based on the most current information available of anticipated usage requirements. As previously indicated, a significant portion of the segment's revenues is derived from international sales, which has generally resulted in extended collection periods as compared to its domestic business. In 1996, the Company entered into an agreement with Nextwave Telecom Inc. ("Nextwave") whereby Nextwave had agreed to purchase from the Company $50,000,000 of equipment and services through December 31, 2001. In connection with this purchase commitment, subject to certain preconditions that have not occurred, the Company would make available up to $50,000,000 of product financing in the form of secured, interest-bearing loans to be used solely to finance the purchase price of the equipment and services supplied by the Company, of which approximately $2,000,000 was purchased and financed to date. In 1998, Nextwave and certain of its subsidiaries filed for relief under Chapter 11 of the United States Bankruptcy Code; accordingly, this commitment is unlikely to be fulfilled at this time. If the Company is successful in developing its E-911 geolocation business, it may be called upon to provide financing for a large equipment network or to develop a service bureau for one or more carriers. The Company believes that external financial resources should be available to support the successful development of this business. MAJOR CUSTOMERS Within the Telecommunications Equipment Manufacturing segment, there is no single customer the loss of which would have a material adverse effect on the Company. However, four major telecommunications equipment companies accounted for approximately 28% (none individually greater than 10%) of segment sales in 1999. The balance of the segment's sales were widely distributed among many customers. WIRELESS ENGINEERING SERVICES GENERAL Allen Telecom's Wireless Engineering Services is a leading supplier of frequency planning and coordinating services as well as system design and field engineering services for the wireless and PCS markets. The Company provides consulting services to assist with determining the appropriate system in light of the coverage required, topography and area demographics. Allen Telecom's engineering expertise in spectrum sharing, microwave interconnectivity, microwave migration and cell system design has enabled it to obtain orders from most major PCS carriers. The Company's spectrum sharing software, IQ.Clear(R), currently is licensed in most major domestic PCS markets, and its IQ.Link(TM) software for microwave interconnection is operational in several European PCS systems. Engineering services are distributed primarily through in-house salaried sales employees to telecom service providers. SEASONAL TRENDS Generally, sales and earnings for wireless engineering services are not subject to significant seasonal variations. -5- 6 MAJOR CUSTOMERS Within wireless engineering services, there is no single customer the loss of which would have a material adverse effect on the Company. However, four customers accounted for approximately 24% of segment sales in 1999 (none individually greater than 10%). The balance of the segment's sales was widely distributed among many customers. RESEARCH AND DEVELOPMENT The Company engages in research and development activities (substantially all of which are Company-sponsored) as part of its ongoing business. The Company emphasizes the development of new technologies, products and software for the wireless telecommunications markets. Currently, these development activities are not expected to require a material investment in assets. For information concerning these expenditures, see "Research and Development Costs" in Note 1 of Notes to Consolidated Financial Statements on page 17 of Allen Telecom's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. ENVIRONMENTAL CONTROLS The Company is subject to federal, state and local laws designed to protect the environment and believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and financial liability to the Company. Additional information regarding environmental issues is incorporated herein by reference to the last paragraph of Note 5, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements on page 21 of Allen Telecom's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. EMPLOYEES As of December 31, 1999, Allen Telecom had approximately 2,200 employees. BUSINESS SEGMENTS, FOREIGN OPERATIONS AND EXPORT SALES Information relating to the Company's business segments, foreign and domestic operations and export sales is incorporated herein by reference to "Geographic Data" in Note 8 of the Notes to Consolidated Financial Statements on page 24, and the information presented in the bar charts on page 28, of Allen Telecom's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. With the opportunities presented by the rapid deployment of wireless telecommunications systems throughout the world, international sales have become a majority of the Company's revenue. The Company's export sales from the United States were $39.6 in 1999, $71.6 million in 1998 and $103.9 million in 1997. In 1999, international sales constituted 62% of total Telecommunications Equipment Manufacturing sales, and 23% of total Wireless Engineering Services sales. The international opportunities for the Company's products have encouraged the Company to continue to expand the size and scope of its international operations. As seen in Item 2, "Properties," the Company's foreign manufacturing operations are located mainly in Europe. In the opinion of management, any financial risks inherent in Allen Telecom's existing foreign operations are not substantially different than the financial risks inherent in its domestic operations. In 1999, continued weakness in Asia and some parts of South America contributed to the overall weakness in sales. In addition, the domestic wireless market was weak for the company due to limited capital expenditures by certain wireless carriers. The Company is encouraged, however, by the quarter-to-quarter increases in sales throughout 1999, where second half 1999 sales were 18% higher than first half 1999 sales. -6- 7 PATENTS, LICENSES, AND FRANCHISES The Company's Telecommunications Equipment Manufacturing and Wireless Engineering Services segments own a number of patents, trademarks and copyrights and conduct certain operations under licenses granted by others. Although the Company does not believe that the expiration or loss of any one of these items would materially affect its business considered as a whole, it does consider certain of them to be important to the conduct of its business in certain product lines. Business franchises and concessions are not of material importance to Allen Telecom. BACKLOG The approximate order backlog as of December 31, 1999 and 1998 are as follows (amounts in thousands):
1999 1998 ---- ---- Telecommunications equipment manufacturing $83,600 $51,900 Wireless engineering services 1,300 900 ------- ------- Backlog (all expected to be filled within one year) $84,900 $52,800 ======= =======
In 1996, the Company entered into an agreement with Nextwave, whereby Nextwave agreed to purchase from the Company $50,000,000 of equipment and services through December 31, 2001. In 1998, Nextwave and certain of its subsidiaries filed for relief under Chapter 11 of the United States Bankruptcy Code; accordingly, this commitment is unlikely to be fulfilled at this time. This purchase commitment has been excluded from the above-mentioned order backlog amounts. COMPETITION Competition is vigorous for both the telecommunications equipment manufacturing and wireless engineering services segments. The Company believes that it is among the major manufacturers in its product lines, and that competition is widely distributed. Allen Telecom's principal methods of competition include performance, service, warranty, market availability, product research and development, innovation and price. In certain of its product lines, the Company has augmented its own resources through licensing agreements with companies possessing complementary resources and technologies. The demand for equipment and services is primarily a function of the development of new and expanded wireless communications systems throughout the world, and Allen Telecom's ability to develop new products and technologies related to system coverage and capacity and components for other manufacturers' wireless communications systems. -7- 8 ITEM 2 - PROPERTIES At December 31, 1999, Allen Telecom's operations were conducted in 51 facilities in 11 states and 20 countries. Allen Telecom's Telecommunications Equipment Manufacturing segment occupies approximately 850,000 square feet of space for manufacturing, assembly, warehousing, research and development, sales and administrative offices. Of this amount, approximately 632,000 square feet are rented under operating leases. The Company's principal manufacturing and service facilities for Telecommunications Equipment Manufacturing are located in Ohio, Texas, Virginia, Nevada, China, Brazil, Italy, Germany, France, and Mexico. The Company's Wireless Engineering Services are provided primarily at one leased facility in Virginia, as well as at customer locations. Information concerning the square footage of the Company's operations by segment at December 31, 1999 is as follows (amounts in thousands):
DOMESTIC FOREIGN -------- ------- OWNED LEASED OWNED LEASED TOTAL ----- ------ ----- ------ ----- Telecommunications equipment manufacturing 18 419 200 213 850 Wireless engineering services - 87 - - 87 Other 312 10 - - 322 --- --- --- --- ----- Total 330 516 200 213 1,259 === === === === =====
Allen Telecom's machinery, plants, warehouses and offices are in good condition, and are reasonably suited and adequate for the purposes for which they are presently used. Due to the economic uncertainty in the global wireless telecommunications markets, the Company's facilities are generally not fully utilized at December 31, 1999. The square footage of "other" properties above consists of a manufacturing facility of 84,000 square feet owned by the Company relating to a previously-owned operation (which is leased to a third party), two manufacturing facilities totalling 228,000 square feet owned by the Company which are not in use and are held for sale, and a lease for its Corporate office space. ITEM 3 - LEGAL PROCEEDINGS The information required by this Item is incorporated herein by reference to the fourth paragraph of Note 5, "Commitments and Contingencies," on page 21 of the Notes to Consolidated Financial Statements of Allen Telecom's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. -8- 9 EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ The following list sets forth the names of the executive officers (as defined under rules promulgated by the Securities and Exchange Commission) of Allen Telecom, their ages and business experience during at least the last five years. ROBERT G. PAUL - President and Chief Executive Officer; age 58. Mr. Paul has been President and Chief Executive Officer of the Company since February 1991. He was President and Chief Operating Officer of the Company from December 1989 to February 1991, Senior Vice President - Finance from April 1987 to December 1989, Vice President-Finance from January 1987 to April 1987 and a Vice President from 1974 to January 1987. He also was President of the Antenna Specialists Company (a division of the Company) from 1978 to June 1990. Mr. Paul joined the Company in 1970 as an Assistant to the President and also served as Assistant Treasurer from 1970 to 1972. He was elected Treasurer in 1972 and Vice President and Treasurer of the Company in 1974. Mr. Paul was appointed Vice President-Finance and Administration of the Antenna Specialists Company division in 1976, its Vice President-Operations in 1977 and its President in 1978, while continuing as a Vice President of the Company. ROBERT A. YOUDELMAN - Executive Vice President, Chief Financial Officer and Assistant Secretary; age 58. Mr. Youdelman joined the Company in 1977 as Director of Taxes and was elected Vice President-Taxation in February 1980. In December 1989, he was elected Senior Vice President-Finance, Chief Financial Officer and Assistant Secretary of the Company and was promoted to Executive Vice President in February 1997. Mr. Youdelman is an attorney. PETER G. DEVILLIERS - Vice President; age 46. Mr. deVilliers joined the Company in July 1992 upon the acquisition by the Company of Alliance Telecommunications Corporation ("Alliance"), Dallas, Texas, where he served as Vice President-Marketing and Sales since joining Alliance in March 1991. Mr. deVilliers served as Vice President- Strategic Planning for Allen Telecom Group, Inc. ("ATG") upon the merger of Alliance into ATG in June 1993 until February 1997. In February 1997, he was elected Vice President of Allen Telecom. JAMES L. LEPORTE, III - Vice President - Finance; age 45. Mr. LePorte joined the Company in 1981 as Senior Financial Analyst. In 1983, he was appointed Manager of Financial Analysis, and, in 1984, was named Assistant Controller. Mr. LePorte was elected Controller of the Company in April 1988; a Vice President in December 1990; and served as Treasurer of the Company from September 1995 to February 1999. Mr. LePorte was elected Vice President-Finance in April 1999. LAURA C. MEAGHER - Secretary and General Counsel; age 40. Ms. Meagher joined the Company in 1999 as Corporate Counsel and was elected Secretary and General Counsel in September 1999. Prior to joining Allen Telecom, Ms. Meagher was affiliated with the law firm of Benesch, Friedlander, Coplan and Aronoff, Cleveland, Ohio, from September 1989 to August 1999. Ms. Meagher is an attorney. ROGER L. SCHROEDER- Treasurer and Assistant Secretary; age 46. Mr. Schroeder joined the Company in 1981 as an Internal Auditor. In 1984, he was appointed Manager of Financial Analysis. He was promoted to Director of Financial Analysis in 1988 and named Director of Financial Analysis and Insurance in 1993. Mr. Schroeder was elected Assistant Secretary of the Company in December 1992 and Assistant Treasurer in April 1997, and was promoted to Treasurer and Assistant Secretary of the Company in February 1999. There is no family relationship between any of the foregoing officers. All officers of Allen Telecom hold office until the first meeting of directors following the annual meeting of stockholders and until their successors have been elected and qualified. -9- 10 PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated herein by reference to the last paragraph of Note 2, "Financing," of the Notes to Consolidated Financial Statements on page 18, and to "Exchange Listings," "Dividends Declared On Common Stock" and "Stockholders" on the inside back cover of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. The following table presents the high and low prices for the Company's Common Stock for the periods indicated (in dollars per share):
1999 1998 ---- ---- HIGH LOW HIGH LOW ---- --- ---- --- 1st Quarter 8 11/16 4 1/2 21 1/8 15 1/2 2nd Quarter 11 7/8 5 3/4 17 7/16 9 9/16 3rd Quarter 11 1/2 7 7/8 11 5/8 6 3/16 4th Quarter 12 3/8 8 8 3/8 4 11/16
ITEM 6 - SELECTED FINANCIAL DATA The information required by this Item is incorporated herein by reference to "Five Year Summary of Operations" on page 32, and to "Dividends Declared on Common Stock" on the inside back cover, of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated herein by reference to "Safe Harbor Cautionary Statement" on page 1 and to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 28 to 31 of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is incorporated herein by reference to page 31 of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. -10- 11 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated herein by reference to the Consolidated Statements of Operations, Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders' Equity on pages 12 to 15, the Notes to Consolidated Financial Statements on pages 16 to 26, and to the "Report of Independent Accountants" on page 27, of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required by this item is incorporated herein by reference to Allen Telecom's Current Report on Form 8-K dated September 28, 1999 reporting the engagement of Deloitte & Touche LLP as the Company's worldwide independent accountants, and the dismissal of PricewaterhouseCoopers LLP as the Company's principal independent accountants. -11- 12 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item relating to the Company's executive officers is included on page 9 hereof under "EXECUTIVE OFFICERS OF THE REGISTRANT" and is incorporated herein by reference to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT - Employment, Termination of Employment and Change of Control Arrangements" on pages 14 to 16 of the Registrant's definitive proxy statement dated March 17, 2000 and filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Act of 1934. Other information required by this Item is incorporated herein by reference to "ELECTION OF DIRECTORS - Information Regarding Nominees" on pages 1 to 3, and to "Compliance with Section 16(a) of the Securities Exchange Act" on page 21, Registrant's definitive proxy statement dated March 17, 2000 and filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934. ITEM 11 - EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to "ELECTION OF DIRECTORS - Compensation of Directors" on pages 4 to 5, and to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT" on pages 6 to 18, of the Registrant's definitive proxy statement dated March 17, 2000 and filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated herein by reference to "STOCK OWNERSHIP" on pages 18 to 20 of the Registrant's definitive proxy statement dated March 17, 2000 and filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated herein by reference to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT - Transactions with Executive Officers and Directors" on page 18 of the Registrant's definitive proxy statement dated March 17, 2000 and filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934. -12- 13 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS OF THE REGISTRANT The Consolidated Financial Statements of the Registrant listed below, together with the Report of Independent Accountants, dated February 16, 2000, is incorporated herein by reference to pages 12 to 27 of the Registrant's 1999 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to this Annual Report. Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Balance Sheets as of December 31, 1999 and 1998 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements Report of Independent Accountants (2) FINANCIAL STATEMENT SCHEDULES The following additional information should be read in conjunction with the Consolidated Financial Statements of the Registrant described in Item 14(a)(1) above: FINANCIAL STATEMENT SCHEDULES OF THE REGISTRANT Reports of Independent Accountants, on pages 14 and 15 of this Form 10-K Annual Report, relating to the financial statement schedule Valuation and Qualifying Accounts Schedule, on page 16 of this Form 10-K Annual Report Schedules other than the schedule listed above are omitted because they are not required, are not applicable or are included elsewhere in the Notes to Consolidated Financial Statement. (3) EXHIBITS* The information required by this Item relating to Exhibits to this Annual Report is included in the Exhibit Index on pages 19 to 27 hereof. (b) REPORTS ON FORM 8-K None. - ----------------- *A copy of any of the Exhibits to this Annual Report will be furnished to persons who request a copy upon the payment of a fee of $.25 per page to cover the Company's duplication and handling expenses. -13- 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Allen Telecom Inc.: We have audited the consolidated financial statements of Allen Telecom Inc. and its subsidiaries (the "Company") as of December 31, 1999 and for the year then ended, and have issued our report thereon dated February 16, 2000; such financial statements and report are included in your 1999 Annual Report to Stockholders and are incorporated herein by reference. Our audit also included the financial statement schedule of Allen Telecom Inc. for the year ended December 31, 1999, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opnion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP Cleveland, Ohio February 16, 2000 -14- 15 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Allen Telecom Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 13 present fairly, in all material respects, the financial position of Allen Telecom Inc. and its subsidiaries at December 31, 1998, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule for each of the two years in the period ended December 31, 1998 listed in the index appearing under Item 14(a)(2) on page 13 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Cleveland, Ohio February 16, 1999, except as to paragraph five of Note 9, which is as of March 1, 1999 -15- 16 ALLEN TELECOM INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
Column A Column B Column C Column D Column E - ------------------------------------ -------------- -------------------------------- --------------- -------------- Balance Additions -------------------------------- Balance At Charged to Charged Deductions at End Beginning Costs and to Other from Of Description of Period Expenses Accounts Reserves Period - ------------------------------------ -------------- ------------------ --------------------------------------------------- Allowance for doubtful accounts 1999 $ 3,189 513 - 1,165 (1) $ 2,537 ======== ========== ======== ======= ======== 1998 $ 1,934 1,170 - (85) (1) $ 3,189 ======== ========= ======== ========== ======== 1997 $ 1,610 796 - 472 (1) $ 1,934 ======== ========== ======== ======== ======== Inventory reserves: 1999 $15,440 14,562 - 9,280 (2) $20,722 ======= ======== ======== ======= ======= 1998 $ 7,607 14,718 - 6,885 (2) $15,440 ======== ======== ======== ======== ======= 1997 $ 7,362 8,646 - 8,401 (2) $ 7,607 ======== ========= ======== ======== ========
(1) Represents the net amount of the write-off of uncollectible accounts (less recoveries), and foreign currency translation changes. (2) Represents the net amount of the write-off of inventory (less recoveries) and foreign currency translation changes. -16- 17 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLEN TELECOM INC. ------------------ (Registrant) By: /s/ Robert A. Youdelman ------------------------- Robert A. Youdelman Executive Vice President Chief Financial Officer and Assistant Secretary Date: March 28, 2000 -------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Robert G. Paul March 28, 2000 - ------------------------------------------------ Robert G. Paul, President, Chief Executive Officer and Director (Principal Executive Officer) /s/ Robert A. Youdelman March 28, 2000 - ------------------------------------------------ Robert A. Youdelman, Executive Vice President Chief Financial Officer (Principal Financial Officer) /s/ James L. LePorte March 28, 2000 - ------------------------------------------------ James L. LePorte, Vice President-Finance (Principal Accounting Officer) /s/ Philip W. Colburn March 28, 2000 - ------------------------------------------------ Philip W. Colburn, Chairman of the Board and Director /s/ Jill K. Conway March 28, 2000 - ------------------------------------------------ Jill K. Conway, Director 17 18 /s/ J. Chisholm Lyons March 28, 2000 - ------------------------------------------------ J. Chisholm Lyons, Vice Chairman of the Board and Director /s/ John F. McNiff March 28, 2000 - ------------------------------------------------ John F. McNiff, Director /s/ Charles W. Robinson March 28, 2000 - ------------------------------------------------ Charles W. Robinson, Director /s/ Martyn F. Roetter March 28, 2000 - ------------------------------------------------- Martyn F. Roetter, Director /s/ Gary B. Smith March 28, 2000 - ------------------------------------------------- Gary B. Smith, Director 18 19 EXHIBIT INDEX
EXHIBIT NUMBERS PAGES (3) Certificate of Incorporation and By Laws - (a) Second Restated Certificate of Incorporation (filed as Exhibit Number 4(a) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739, filed on May 4, 1998 (Commission file number 1-6016) and incorporated herein by reference)............................................................... - (b) Certificate of Designation, Preferences and Rights of Series C Junior Participating Preferred Stock (filed as Exhibit Number 4(c) to Registrant's Registration Statement on Form S-8 Registration No. 333-51739, filed on May 4, 1998 (Commission file number 1-6016) and incorporated herein by reference................................................................. - (c) By-Laws, as amended through February 16, 1999, filed as Exhibit Number 3(c) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1998 (Commission file number 1-6016 and incorporated herein by reference)................................................................ - (4) Instruments defining the rights of security holders - (a) Rights Agreement, dated as of January 20, 1998, between the Registrant and Harris Trust Company of New York, as Rights Agent (filed as Exhibit Number 4.1 to Registrant's Form 8-K Registration Statement on Form 8-A, filed on January 9, 1998 (Commission file number 1-6016) and incorporated herein by reference) ............................................................... - (b) Credit Agreement, dated as of December 31, 1998, among the Registrant, the Banks signatories thereto, NBD Bank, as Documentation Agent, and Key Bank National Association, as Swing Line Lender, Syndication Agent and Administrative Agent filed as Exhibit 4(b) to registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1998 (Commission file number 1-6016 and incorporated herein by reference....................... - (c) Amendment dated as of July 30, 1999 to the Credit Agreement dated as of December 31, 1998 among Registrant, the Banks signatories thereto, NBD Bank, as Documentation Agent, and Key Bank National Association, as Swing Line Lender, Syndication Agent and Administrative Agent.................................................................... 28 (d) Note Purchase Agreement, dated as of November 1, 1997, among the Registrant and the insurance companies signatories thereto (filed as Exhibit Number 4(c) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6-16) and incorporated herein by reference)................ - Additional information concerning Registrant's long-term debt is set forth in Note 2, "Financing," of the Notes to Consolidated Financial Statements on page 17 of Registrant's 1999 Annual
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Report to Stockholders, a copy of which is filed as Exhibit 13 to this Report. Other than the Credit Agreement and Note Purchase Agreement referred to above, no instrument defining the rights of holders of such long-term debt relates to securities having an aggregate principal amount in excess of 10% of the consolidated assets of Registrant and its subsidiaries; therefore, in accordance with paragraph (iii) of Item 4 of Item 601(b) of Regulation S-K, the other instruments defining the rights of holders of long-term debt are not filed herewith. Registrant hereby agrees to furnish a copy of any such other instrument to the Securities and Exchange Commission upon request. (10) Material contracts (Other than Exhibit 10(a), all of the exhibits listed as material contracts hereunder are management contracts or compensatory plans or arrangements required to be filed as exhibits to this Report pursuant to Item 14(c) of this Report.). - (a) Allen Telecom Inc. 1982 Stock Plan, as amended through November 3, 1987 (filed as Exhibit Number 10(c) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1987 (Commission file number 1-6016) and incorporated herein by reference)........................................ - (b) Amendment, dated as of December 4, 1990, to the Allen Telecom Inc. 1982 Stock Plan, as amended (filed as Exhibit Number 10(d) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference).................................... - (c) Amendment, dated as of June 14, 1995, to the Allen Telecom Inc. 1982 Stock Plan, as amended (filed as Exhibit Number 10.1 to Registrant's Form 10-Q Quarterly Report for the quarterly period ended June 30, 1995 (Commission file number 1-6016) and incorporated herein by reference)........................................ - (d) Amendment, dated as of February 28, 1997, to the Allen Telecom Inc. 1982 Stock Plan, as amended (filed as Exhibit Number 10(e) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)............................................................... - (e) Form of Restricted Stock Agreement pursuant to the Allen Telecom Inc. 1982 Stock Plan, as amended (filed as Exhibit Number 10(e) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference)............................ - (f) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as of May 1, 1998 (filed as Exhibit Number 4(e) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739, filed on May 4, 1998 (Commission file number 1-6016) and incorporated herein by reference)............................ - (g) Form of Restricted Stock Agreement pursuant to Allen Telecom Inc. 1992 Stock Plan (Salary Increase Deferral), dated April 28, 1992, entered into by the Registrant with certain executive and divisional
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officers (filed as Exhibit Number 10(g) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)............................................................... - (h) Form of Restricted Stock Agreement pursuant to Allen Telecom Inc. 1992 Stock Plan (Salary Increase Deferral), dated November 30, 1993, entered into by the Registrant with certain executive and divisional officers (filed as Exhibit Number 10(g) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1993 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (i) Amendment to Restricted Stock Agreements pursuant to 1992 Stock Plan (Salary Increase Deferral), dated February 22, 1995 (filed as Exhibit Number 10(l) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (Commission file number 1-6016) and incorporated herein by reference) ............................................................... - (j) Amendment to Restricted Stock Agreements pursuant to 1992 Stock Plan (Salary Increase Deferral), dated April 25, 1997 (filed as Exhibit Number 10 to Registrant's Form 10-Q Quarterly Report for the quarter ended March 31, 1997 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (k) Amendment to 1992 Restricted Stock Agreements pursuant to 1992 Stock Plan (Salary Increase Deferral), dated February 17, 1998 (filed as Exhibit Number 10(q) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated herein reference)................................................................ - (l) Form of Restricted Stock Agreement pursuant to Allen Telecom Inc. 1992 Stock Plan (Salary Increase Deferral), dated January 12, 1999, entered into by the Registrant with certain executive and divisional officers filed as Exhibit Number 10(l) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1998 (Commission file number 1-6016) and incorporated herein by reference...................................... - (m) Form of Non-Qualified Option to Purchase Stock granted to certain directors of the Registrant on September 12, 1989 (filed as Exhibit Number 10(e) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1989 (Commission file number 1-6016) and incorporated herein by reference) ............................................................... - (n) Form of Non-Qualified Option to Purchase Stock granted to certain directors of the Registrant on February 19, 1997 (filed as Exhibit Number 10(q) to Registrant's Form 10-K Annual Report for the Fiscal year ended December 31, 1996 (Commission filed number 1-6016) and incorporated herein by reference)................................................................ - (o) Allen Telecom Inc. 1994 Non-Employee Directors Stock Option Plan (filed as Exhibit A to Registrant's Proxy Statement dated March 17, 1994 (Commission file number 1-6016) and incorporated herein by reference)......................................... -
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(p) First Amendment, dated as of February 28, 1997, to the Allen Telecom Inc. 1994 Non-Employee Directors Stock Option Plan (filed as Exhibit Number 10(s) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (q) Second amendment, dated as of February 17, 1998, to the Allen Telecom Inc. 1994 Non-Employee Directors Stock Option Plan (filed as Exhibit Number 10(r) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (r) Form of Non-Qualified Option to Purchase Stock pursuant to the Allen Telecom Inc. 1994 Non-Employee Directors Stock Option Plan (filed as Exhibit Number 10(o) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (s) Allen Telecom Inc. Amended and Restated Key Management Deferred Bonus Plan (incorporating all amendments through February 27, 1992) (filed as Exhibit Number 10(i) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)......................................... - (t) Amendment, dated as of February 28, 1997, to the Allen Telecom Inc. Amended and Restated Key Management Deferred Bonus Plan (filed as Exhibit Number 10(v) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (u) Form of Restricted Stock Agreement pursuant to the Allen Telecom Inc. 1992 Stock Plan and Key Management Deferred Bonus Plan (filed as Exhibit Number 10(j) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (v) Form of Severance Agreement, dated as of September 8, 1999, entered into by the Registrant with certain executive officers, officers and division presidents................................ 34 (w) Allen Telecom Inc. Master Discretionary Severance Pay Plan, effective January 1, 1993 (filed as Exhibit Number 10(t) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (Commission file number 1-6016) and incorporated herein by reference)................................................................ - (x) First Amendment, dated as of February 28, 1997, to the Allen Telecom Inc. Master Discretionary Severance Pay Plan (filed as Exhibit Number 10(aa) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)................................................................ -
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(y) Allen Telecom Inc. Key Employee Severance Policy adopted by the Registrant on November 3, 1987 (filed as Exhibit Number 10(h) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1987 (Commission file number 1-6016) and incorporated herein by reference)............................. - (z) Amendment, dated May 14, 1991, to the Allen Telecom Inc. Key Employee Severance Policy adopted by the Registrant on November 3, 1987 (filed as Exhibit Number 10(n) to Registrant's Form 1-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference).......................................... - (aa) Amendment No. 2, dated February 22, 1996, to the Allen Telecom Inc. Key Employee Severance Policy (filed as Exhibit Number 10(x) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference)...................................... - (bb) Amendment No. 3, dated as of September 12, 1996, to the Allen Telecom Inc. Key Employee Severance Policy (filed as Exhibit Number 10 to Registrant's Form 10-Q Quarterly Report for the quarter ended September 30, 1996 (Commission file Number 1-6016) and incorporated herein by reference)....................... - (cc) Amendment No. 4, dated as of February 28, 1997, to the Allen Telecom Inc. Key Employee Severance Policy (filed as Exhibit Number 10(ff) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference).............................. - (dd) Employment Agreement, dated June 28, 1998, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(m) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1988 (Commission file number 1-6016) and incorporated herein by reference)...................................... - (ee) Amendment, dated as of February 27, 1992, of Employment Agreement, dated June 28, 1988, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(p) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)................................................................. - (ff) Amendment, dated as of February 26, 1991, of Employment Agreement, dated June 28, 1998, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(n) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference)................................................................. - (gg) Amendment and Restated Post Employment Consulting Agreement, dated as of December 20, 1990, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(o) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990
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(Commission file number 1-6016) and incorporated herein by reference).................................................................. - (hh) First Amendment to Amended and Restated Post Employment Consulting Agreement, dated as of February 19, 1997, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(kk) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)....................................... - (ii) Amended and Restated Supplemental Pension Benefit Agreement, dated as of December 20, 1990, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(p) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference)........................................... - (jj) Amendment, dated as of August 1, 1997, of Amended and Restated Supplemental Pension Benefit Agreement, dated as of December 20, 1990, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(pp) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated herein by reference................................................................ - (kk) Split Dollar Insurance Agreement, dated as of July 1, 1991, between the Registrant and Philip Wm. Colburn (filed as Exhibit Number 10(u) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)........................................... - (ll) Change in Control Agreement dated as of September 8, 1999, Between the Registrant and Philip Wm. Colburn............................... 45 (mm) Supplemental Pension Benefit Agreement, dated as of December 6, 1983, between the Registrant and J. Chisholm Lyons (filed as Exhibit Number 10 (r) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1983 (Commission file number 1-6016) and incorporated herein by reference)....................................... - (nn) Amendment, dated as of December 20, 1990, of Supplemental Pension Benefit Agreement, dated as of December 6, 1983, between the Registrant and J. Chisholm Lyons (filed as Exhibit Number 10(s) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference)....................... - (oo) Amendment, dated as of August 1, 1997 of Supplemental Pension Benefit Agreement, dated as of December 6, 1983 between the Registrant and J. Chisholm Lyons (filed as Exhibit No. 10(uu) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated hereby reference.................................. - (pp) Post Employment Consulting Agreement, dated as of September 12, 1989, between the Registrant and J. Chisholm
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Lyons (filed as Exhibit Number 10(s) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1989 (Commission file number 1-6016) and incorporated herein by reference).................................................................. - (qq) Amendment, dated as of December 20, 1990, of Post Employment Consulting Agreement, dated as of September 12, 1989 between the Registrant and J. Chisholm Lyons (filed as Exhibit Number 10(u) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1990 (Commission file number 1-6016) and incorporated herein by reference)................... - (rr) Change in Control Agreement dated as of September 8, 1999 between the Registrant and J. Chisholm Lyons................................ 49 (ss) Employment Agreement, dated June 25, 1991, between the Registrant and Robert G. Paul (filed as Exhibit Number 10(x) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1991 (Commission file number 1-6016) and incorporated herein by reference)............................... - (tt) Supplemental Target Pension Benefit Agreement, dated as of January 1, 1996, between the Registrant and Robert G. Paul (filed as Exhibit Number (kk) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference)................................................................... - (uu) Amendment, dated as of August 1, 1997, of Supplemental Target Pension Benefit Agreement, dated as of January 1, 1996, between the Registrant and Robert G. Paul (filed as Exhibit Number 10(zz) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated herein by reference)................................ - (vv) Form of Split Dollar Insurance Agreement, dated as of November 1, 1991, entered into by the registrant with certain executive and divisional officers (filed as Exhibit Number 10(bb) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1992 (Commission file number 1-6016) and incorporated herein by reference)............................................ - (ww) Allen Telecom Inc. Deferred Compensation Plan, effective December 1, 1995 (filed as Exhibit Number 10(mm) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference)........................................ - (xx) First Amendment to the Allen Telecom Inc. Deferred Compensation Plan dated as of February 28, 1997 (filed as Exhibit Number 10(ww) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference).................... - (yy) Allen Telecom Inc. Restoration Plan, effective January 1, 1996 (filed as Exhibit Number 10(nn) to Registrant's Form 10-K
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Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference).................................................................. - (zz) First Amendment to the Allen Telecom Inc. Restoration Plan, dated as of February 28, 1997 (filed as Exhibit Number 10(yy) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)........................................... - (aaa) Comsearch Division Supplemental Savings Plan, effective January 1, 1995 (filed as Exhibit Number 10(oo) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference).................................................................. - (bbb) First Amendment to the Comsearch Division Supplemental Savings Plan, dated as of February 28, 1997 (filed as Exhibit Number 10(aaa) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1996 (Commission file number 1-6016) and incorporated herein by reference)........................ - (ccc) Amendment No. 2 to Comsearch Division Supplemental Savings Plan, effective as of January 1, 2000....................................... 53 (ddd) Form of Supplemental Target Pension Benefit Agreement, dated as of January 1, 1996, entered into by the Registrant with certain executive and divisional officers (filed as Exhibit Number 10(pp) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995 (Commission file number 1-6016) and incorporated herein by reference)............................... - (eee) Form of Amendment, dated as of August 1, 1997, of Supplemental Target Pension Benefit Agreement, dated as of January 1, 1996, entered into by the Registrant with certain executive and divisional officers (filed as Exhibit Number 10(kkk) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incorporated herein by reference)............................... - (fff) Allen Telecom Inc. Executive Benefit Plan, as amended and restated effective October 15, 1997 (filed as Exhibit Number 10(jjj) to Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1997 (Commission file number 1-6016) and incor- porated herein by reference)................................................ - (ggg) Allen Telecom Inc. Executive Benefit Plan, as amended and restated effective June 16, 1999..................................................... 54 (13) 1999 Annual Report to Stockholders*................................................ 72 (21) Subsidiaries of the Registrant..................................................... 119 (23) Consents of Independent Accountants................................................ 121 (27) Financial Data Schedule............................................................
-26- 27 * Furnished for the information of the Securities and Exchange Commission and not to be deemed "Filed" as part of this Report except for the Consolidated Financial Statements of the Registrant and the Accountants' Report on pages 12 to 27 of said Annual Report to Stockholders and the other information incorporated by reference) in Items 1 and 3 of Part I hereof and Items 5 to 8 of Part II hereof. A copy of any of these Exhibits will be furnished to persons who request a copy upon the payment of a fee of $.25 per page to cover the Company's duplication and handling expenses. -27- EX-4.C 2 EXHIBIT 4.C 1 Exhibit 4(c) ================================================================================ ================================================================================ ALLEN TELECOM INC. AS BORROWER THE LENDERS NAMED HEREIN AS LENDERS NBD BANK AS DOCUMENTATION AGENT AND [KEYBANK LOGO] KEYBANK NATIONAL ASSOCIATION as a Lender, the Swing Line Lender, a Letter of Credit Issuer and as the Syndication Agent, the Administrative Agent and the Collateral Agent --------------------- AMENDMENT NO. 1 dated as of July 30, 1999 to CREDIT AGREEMENT dated as of December 31, 1998 --------------------- ================================================================================ ================================================================================ 2 AMENDMENT NO. 1 TO CREDIT AGREEMENT THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of July 30, 1999 ("THIS AMENDMENT"), among the following: (i) ALLEN TELECOM INC., a Delaware corporation (herein, together with its successors and assigns, the "BORROWER"); (ii) the Lenders party hereto; (iii) NBD BANK as a Lender and as Documentation Agent (the "DOCUMENTATION AGENT"); and (iv) KEYBANK NATIONAL ASSOCIATION, a national banking association, as a Lender, the Swing Line Lender, the Letter of Credit Issuer, and as the Syndication Agent, the Administrative Agent and the Collateral Agent under the Credit Agreement: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders named therein, the Swing Line Lender, the Letter of Credit Issuers, the Documentation Agent, the Syndication Agent and the Administrative Agent entered into the Credit Agreement, dated as of December 31, 1998 (the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of which are incorporated therein, being used herein as so defined). (2) The parties hereto desire to change certain of the terms and provisions of the Credit Agreement, all as more fully set forth below. NOW, THEREFORE, the parties hereby agree as follows: 10 AMENDMENTS, ETC. The dollar amount "$25,000,000" which appears in clause (x) of section 3.1(b) of the Credit Agreement is changed to "$50,000,000", but such change is effective only during the period from July 30, 1999 through December 31, 2000. For the avoidance of doubt the parties confirm that no Letter of Credit will be issued or increased in amount which could result in Letter of Credit Outstandings at any time after December 31, 2000 in excess of $25,000,000. 20 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lenders, the Swing Line Lender, the Letter of Credit Issuer, the Documentation Agent, the Administrative Agent and the Collateral Agent as follows: (a) AUTHORIZATION AND VALIDITY OF AMENDMENT, ETC. This Amendment has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed and delivered by a duly authorized officer of the Borrower, and constitutes the valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 3 (b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Credit Parties contained in the Credit Agreement or in the other Credit Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties are hereby reaffirmed as true and correct in all material respects as of the date when made. (c) NO EVENT OF DEFAULT. No condition or event has occurred or exists which constitutes or which, after notice or lapse of time or both, would constitute an Event of Default. (d) COMPLIANCE. The Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and the other Credit Documents to which it is a party; and without limitation of the foregoing, each Subsidiary of the Borrower which, as of the date hereof, is required to be a Subsidiary Guarantor, has as on or prior to the date hereof become a Subsidiary Guarantor under the Subsidiary Guaranty. (e) FINANCIAL STATEMENTS, ETC. The Borrower has furnished to the Lenders and the Administrative Agent complete and correct copies of: (i) the audited consolidated balance sheets of the Borrower and its consolidated subsidiaries as of December 31, 1997, and December 31, 1998, and the related audited consolidated statements of income, stockholders' equity, and cash flows for the fiscal years then ended, accompanied by the unqualified report thereon of the Borrower's independent accountants; and (ii) the unaudited condensed consolidated balance sheets of the Borrower and its consolidated subsidiaries as of March 31, 1999, and the related unaudited condensed consolidated statements of income and of cash flows of the Borrower and its consolidated subsidiaries for the fiscal quarter or quarters then ended, as contained in the Form 10-Q Quarterly Report of the Borrower filed with the SEC. All such financial statements have been prepared in accordance with GAAP, consistently applied (except as stated therein), and fairly present the financial position of the Borrower and its consolidated subsidiaries as of the respective dates indicated and the consolidated results of their operations and cash flows for the respective periods indicated, subject in the case of any such financial statements which are unaudited, to the absence of footnotes and to normal audit adjustments which the Borrower reasonably believes will not involve a Material Adverse Effect. 30 RATIFICATIONS. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. 40 BINDING EFFECT. This Amendment shall become effective on a date (the "EFFECTIVE DATE"), on or before July 30, 1999, if the following conditions shall have been satisfied on and as of such date: (a) this Amendment shall have been executed by the Borrower and the Administrative Agent, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; and 2 4 (b) the Administrative Agent shall have been notified by the Required Lenders that such Lenders have executed this Amendment (which notification may be by facsimile or other written confirmation of such execution); and thereafter this Amendment shall be binding upon and inure to the benefit of the Borrower, each Lender, the Swing Line Lender, the Letter of Credit Issuers, the Documentation Agent, the Syndication Agent, the Administrative Agent and the Collateral Agent and their respective successors and assigns. After this Amendment becomes effective, the Administrative Agent will promptly furnish a copy of this Amendment to each Lender and the Borrower and advise them of the Effective Date. 50 MISCELLANEOUS. 5.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment, and no investigation by the Administrative Agent or any Lender or any subsequent Loan or other Credit Event shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them. 5.2. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. 5.3. EXPENSES. As provided in the Credit Agreement, but without limiting any terms or provisions thereof, the Borrower shall pay on demand all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation the reasonable costs and fees of the Administrative Agent's special legal counsel, regardless of whether this Amendment becomes effective in accordance with the terms hereof, and all reasonable costs and expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby. 5.4. SEVERABILITY. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable. 5.5. APPLICABLE LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. 5.6. HEADINGS. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.7. ENTIRE AGREEMENT. This Amendment is specifically limited to the matters expressly set forth herein. This Amendment and all other instruments, agreements and documentation executed and delivered in connection with this Amendment embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by this Amendment, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement. 5.8. JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING 3 5 OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. 4 6 IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.
ALLEN TELECOM INC. KEYBANK NATIONAL ASSOCIATION, INDIVIDUALLY AS THE SWING LINE LENDER, A LENDER, A LETTER OF CREDIT ISSUER, AND AS THE SYNDICATION AGENT AND BY:_______________________________ THE ADMINISTRATIVE AGENT VICE PRESIDENT--FINANCE BY:_______________________________ SENIOR VICE PRESIDENT BANK ONE, MICHIGAN FIRSTAR BANK, NATIONAL (SUCCESSOR TO NBD BANK), ASSOCIATION (FORMERLY STAR BANK, INDIVIDUALLY AS A LENDER AND NATIONAL ASSOCIATION) AS DOCUMENTATION AGENT BY:_______________________________ BY:_______________________________ TITLE: TITLE: DRESDNER BANK AG, SANPAOLO IMI, S. p. A., NEW YORK AND GRAND CAYMAN BRANCHES, NEW YORK BRANCH INDIVIDUALLY AS A LENDER AND AS A LETTER OF CREDIT ISSUER BY:_______________________________ TITLE: BY:_______________________________ TITLE: BY:_______________________________ TITLE: FIFTH THIRD BANK, NORTHEASTERN LaSALLE NATIONAL BANK OHIO BY:_______________________________ BY:_______________________________ TITLE: TITLE:
5 EX-10.V 3 EXHIBIT 10.V 1 Exhibit 10(v) ALLEN TELECOM INC. 25101 Chagrin Boulevard Beachwood, Ohio 44122 September 8, 1999 - ----------------------- - ----------------------- - ----------------------- Dear _____________: Allen Telecom Inc. (the "Corporation") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Corporation (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Corporation may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation. It is also the intention of the Board to provide financial assistance to you in certain other circumstances under which your employment with the Corporation terminates. In order to induce you to remain in the employ of the Corporation, the Corporation agrees that you shall receive the severance benefits set forth in this letter agreement (this "Agreement") in the event your employment with the Corporation is terminated under the circumstances described below. 1. TERM OF AGREEMENT. This term of this Agreement (the "Term") shall commence on September 8, 1999, and shall continue through December 31, 2002; PROVIDED, HOWEVER, that commencing on January 1, 2000, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; and PROVIDED, FURTHER, that if a change in control of the Corporation, as defined in Section 3, shall have occurred during the original or extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than 24 months beyond the month in which such change in control occurred. In no event, however, shall the term of this Agreement extend beyond the end of the calendar month in which your 65th birthday occurs. 2 2. COMPENSATION UPON TERMINATION PRIOR TO A CHANGE IN CONTROL. (i) Prior to a change in control of the Corporation, if your employment by the Corporation shall be terminated by the Corporation other than for Cause or Disability (as these terms are defined in Subsections 4(iii) and 2(ii), respectively) during the Term, then you shall be entitled to the benefits provided below: (a) the Corporation shall pay to you your full base salary through the Date of Termination, at the rate in effect at the time Notice of Termination is given (as these terms are defined in Subsections 4(vi) and 4(v), respectively), no later than the fifth day following the Date of Termination, plus accrued vacation pay and all other amounts to which you are entitled under any compensation plan of the Corporation, at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you, in regular pay periods until completely disbursed, total severance pay equal to the sum of (1) six months of your monthly base salary as in effect as of the Date of Termination and (2) the amount of such monthly base salary multiplied by the number of your completed years of full-time employment with the Corporation as of the Date of Termination; PROVIDED, HOWEVER, that in no event shall the severance payments exceed 18 months' base salary; and (c) during the period in which you are receiving the severance payments the Corporation shall arrange to provide you with life, disability, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to the Notice of Termination; PROVIDED, HOWEVER, that you will no longer be deemed to be an "employee" for purposes of the Corporation's 1992 Stock Plan, 1982 Stock Plan, Employee Before-Tax Savings Plan, Restricted Shares of common stock awarded under the 1992 Stock Plan or Corporate Retirement Plan or any successor plans thereto. Benefits otherwise receivable by you pursuant to this paragraph (c) shall be reduced to the extent comparable benefits are actually received by you from any other source during such period, and any such benefits actually received by you shall be reported to the Corporation. The use of any automobile furnished to you by the Corporation shall continue until the earlier of (1) the date that is six months after the Date of Termination or (2) the date you obtain employment with another employer, and you agree that you will not remove such automobile from the state in which you were last employed by the Corporation, and that upon any such removal the Corporation shall be entitled to immediate possession of such automobile and shall no longer furnish the use of such automobile to you. (ii) DISABILITY. Your employment may be terminated for "Disability" pursuant to this Section 2 (x) if, as a result of your incapacity due to accident or physical or mental illness, you shall not have substantially performed your duties with the Corporation on a full-time basis for six consecutive months, or (y) if you become disabled in a manner that shall prevent you from performing your duties with the Corporation, and within 30 days after written notice of termination is given you shall not have returned to the full-time performance of your duties. (iii) NONCOMPETITION. Benefits payable under this Section 2 shall be forfeitable and shall be discontinued in the event that you engage in a "Competitive Activity" or engage in conduct which is materially injurious to the Corporation, monetarily or otherwise. A "Competitive Activity" shall mean activity, without the written consent of an authorized officer 2 3 of the Corporation, consisting of your participation in the management of, or acting as a consultant for or employee of, any business operation of any enterprise if such operation (a "Competitive Operation") is then in substantial and direct competition with a principal business operation of the Corporation, at the Date of Termination. A "Competitive Activity" shall not include (a) the ownership of securities in any enterprise or of not more than five percent of the outstanding securities of a "Competitive Operation", or (b) the participation in the management of, or acting as a consultant for or employee of, any enterprise or any business operation thereof, other than in connection with a "Competitive Operation" of such enterprise. (iv) MITIGATION. Severance benefits payable under Section 2(i)(b) in excess of six months' salary shall be reduced by any salary received by you from another employer and any consulting compensation received by you from a prospective employer (other than consulting compensation received by an independent consulting business conducted by you) during the period during which you are receiving benefits under Section 2(i)(b), and any such salary or consulting compensation received by you shall be reported by you to the Corporation. 3. CHANGE IN CONTROL. Except as provided in Section 2, no benefits shall be payable hereunder unless there shall have been a change in control of the Corporation during the Term, as set forth below. For purposes of this Agreement, a "change in control of the Corporation" shall be deemed to have occurred if: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30 percent or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii) or (iv) of this Section) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than (a) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80 percent of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (b) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as hereinabove defined) 3 4 acquires more than 30 percent of the combined voting power of the Corporation's then outstanding securities; or (iv) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. 4. TERMINATION FOLLOWING CHANGE IN CONTROL. (i) GENERAL. If any of the events described in Section 3 constituting a change in control of the Corporation shall have occurred during the Term, you shall be entitled to the benefits provided in Section 5(iii) upon the subsequent termination of your employment during the term of this Agreement unless such termination is (a) because of your death or Disability (as such term is defined in Subsection 4(ii) below), (b) by the Corporation for Cause, or (c) by you other than for Good Reason. (ii) DISABILITY. Notwithstanding Subsection 4(i), you may not be terminated for "Disability" pursuant to this Section 4 unless, as a result of your incapacity due to accident or physical or mental illness, you shall not have substantially performed your duties with the Corporation on a full-time basis for six consecutive months following the occurrence of a change of control of the Corporation. (iii) CAUSE. Termination by the Corporation of your employment for "Cause" shall mean termination (a) upon the willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your death or incapacity due to accident or physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination (as defined in Subsection 4(v)) by you for Good Reason (as defined in Subsection 4(iv))), after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, (b) the willful engaging by you in an act or acts of dishonesty constituting a felony under the laws of the United States or any state thereof and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Corporation, or your conviction of a felony under the laws of the United States or any state thereof, or (c) the willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Subsection and specifying the particulars thereof in detail. (iv) GOOD REASON. Termination by you of your employment for "Good Reason" for purposes of Section 5(iii) shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances 4 5 unless, in the case of paragraphs (a), (e), (f), (g) or (h), such circumstances are fully corrected prior to the Date of Termination (as defined in Section 4(vi)) given in respect thereof: (a) the assignment to you of any duties inconsistent with the position with the Corporation that you held immediately prior to the change in control of the Corporation, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately prior to such change in control; (b) a reduction by the Corporation in your annual base salary as in effect on the date hereof or as it may be increased from time to time, except for across-the-board salary reductions similarly affecting all management personnel of the Corporation and all management personnel of any person in control of the Corporation; (c) the relocation of the Corporation's offices at which you are principally employed immediately prior to the date of the change in control of the Corporation to a location more than 25 miles from such location, or the Corporation's requiring you to be based anywhere other than the Corporation's offices at such location, except for required travel on the Corporation's business to an extent substantially consistent with your business travel practices immediately prior to the date of the change in control of the Corporation; (d) the failure by the Corporation to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation within seven days of the date such compensation is due; (e) the failure by the Corporation to continue in effect any material compensation or benefit plan in which you participate immediately prior to the change in control of the Corporation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control of the Corporation; (f) the failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporation's life, medical, health and accident, or disability insurance or plans in which you were participating at the time of the change in control of the Corporation, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation's normal vacation policy in effect at the time of the change in control of the Corporation; 5 6 (g) the failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6 hereof; or (h) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii) hereof), which purported termination shall not be effective for purposes of this Agreement. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to accident or physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) NOTICE OF TERMINATION. Any purported termination of your employment by the Corporation or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period), and (b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof, or pursuant to Section 2, or for any other reason (other than Disability), the date specified in the Notice of Termination ( which, in the case of a termination for Cause shall not be less than 30 days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than 15 nor more than 60 days from the date such Notice of Termination is given); PROVIDED, HOWEVER, that if within 30 days after any Notice of Termination is given following a change in control of the Corporation, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, whether by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and PROVIDED, FURTHER, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, if the Notice of Termination is given following a change in control of the Corporation, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection; PROVIDED, HOWEVER, that you will no longer be deemed to be an "employee" for purposes of the Corporation's 1992 Stock Plan, 1982 Stock Plan, Employee Before-Tax Savings Plan, Restricted Shares of common stock awarded under the 1992 Stock Plan or Corporate 6 7 Retirement Plan or any successor plans thereto. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. 5. COMPENSATION UPON TERMINATION OR DURING DISABILITY FOLLOWING A CHANGE IN CONTROL. Following a change in control of the Corporation during the Term, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to accident or physical or mental illness, you shall receive all compensation payable to you under the Corporation's disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 4(ii) hereof. Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Corporation's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, the Corporation shall pay you your full base salary through the Date of Termination, at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination, plus accrued vacation pay and all other amounts to which you are entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement. (iii) If your employment by the Corporation shall be terminated by you for Good Reason or by the Corporation other than for Cause or Disability, then you shall be entitled to the benefits provided below: (a) the Corporation shall pay to you your full base salary through the Date of Termination, at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination, plus accrued vacation pay and all other amounts to which you are entitled under any compensation plan of the Corporation at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you, at the time specified in Subsection (v), a lump sum severance payment (together with the payments provided in paragraph (c) below, the "Severance Payments") equal to the sum of : (1) one year of your annual base salary as in effect as of the Date of Termination or immediately prior to the change in control of the Corporation, whichever is greater; (2) an amount equal to the highest annual incentive compensation paid to you in the three years prior to the Date of Termination; (3) if the Board in its sole discretion shall determine, an additional discretionary bonus payment; and (4) fifteen percent of the sum of the amounts set forth in clauses (1) and (2), multiplied by the number of your completed years of full-time employment with the Corporation as of the Date of Termination; 7 8 (c) in lieu of shares of common stock of the Corporation ("Common Shares") issuable upon exercise of outstanding options, other than options qualifying as incentive stock options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), which ISOs were granted on or before the date hereof ("Options"), and stock appreciation rights ("SARs"), if any, granted to you under the Corporation's 1982 Stock Plan or 1992 Stock Plan, or any successor plan thereto (which Options shall be canceled upon the making of the payment referred to below), the Corporation shall pay to you, at the time specified in Subsection (v), an amount in cash equal to the product of (1) the excess of, in the case of an ISO granted after the date hereof, the closing price of Common Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in the Common Shares is highest) and, in the case of all other options, the higher of such closing price or the highest per share price for Common Shares actually paid in connection with any change in control of the Corporation, over the per share option price of each Option held by you (whether or not then fully exercisable), and (2) the number of Common Shares covered by each such Option; (d) the Corporation shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder); and (e) for a period of months after such termination that is equal in number to the sum of (1) twelve, plus (2) the product of (x) 0.15, multiplied by (y) the number of your completed years of full-time employment with the Corporation as of the Date of Termination, multiplied by (z) 12, but in no event exceeding 36 months, the Corporation shall arrange to provide you with life, disability, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this paragraph (e) shall be reduced to the extent comparable benefits are actually received by you from any other source during such period following your termination, and any such benefits actually received by you shall be reported to the Corporation. (iv) Notwithstanding anything to the contrary contained in this Agreement, in the event that, by reason of Section 280G of the Code, any payment or benefit received or to be received by you in connection with a change in control of the Corporation or the termination of your employment whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement (the "Contract Payments") with the Corporation, its successors, any person whose actions result in a change in control or any corporation affiliated (or which, as a result of the completion of the transactions causing a change in control will become affiliated) (an "Affiliate") with the Corporation within the meaning or Section 1504 of the Code (collectively with the Contract Payments, "Total Payments")), would not be deductible (in whole or in part) by the Corporation, an Affiliate or other person making such payment or providing such benefit, the Severance Payments shall be reduced (and, if Severance Payments are reduced 8 9 to zero, other Contract Payments shall first be reduced and other Total Payments shall thereafter be reduced) until no portion of the Total Payments is not deductible by reason of Section 280G of the Code. For purposes of this limitation (a) no portion of the Total Payments the receipt or enjoyment of which you shall have effectively waived in writing prior to the date of payment of the Severance Payments shall be taken into account, (b) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code (without regard to Subsection (A)(ii) thereof), (c) the Severance Payments (and, thereafter, other Contract Payments and other Total Payments) shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (a) and (b)), in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in clause (b), and (d) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (v) The payments provided for in paragraphs (b) and (c) above shall be made not later than the fifth day following the Date of Termination; PROVIDED, HOWEVER, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the 30th day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you, payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (vi) Except as provided in Subsection (iii)(e) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise. (vii) NONCOMPETITION. Benefits payable under this Section 5 shall be forfeitable and shall be discontinued in the event that during the one-year period following the Date of Termination you (A) engage in a Competitive Activity (as defined in Section 2(iii)) or (B) engage in conduct which is materially injurious to the Corporation, monetarily or otherwise. 6. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms to which you would be entitled hereunder if you terminate 9 10 your employment for Good Reason following a change in control of the Corporation, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. NOTICES. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, or by recognized overnight delivery service, in each case addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior to subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law principles. All references to Sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Corporation under Sections 2 and 5 shall survive the expiration of the term of this Agreement. 9. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. ARBITRATION. Following a change in control of the Corporation, any dispute or controversy between the Corporation and you arising under or in connection with this Agreement 10 11 shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; PROVIDED, HOWEVER, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all other agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto including, without limitation, the Corporation's Key Employee Severance Policy; and any other agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, ALLEN TELECOM INC. By: _____________________________ Robert G. Paul President and Chief Executive Officer Agreed to as of the date first above written. - ---------------------------------- [Employee's Name] 11 EX-10.L.L 4 EXHIBIT 10(LL) 1 Exhibit 10(ll) CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (this "Agreement"), dated as of September 8, 1999, is by and between Allen Telecom Inc., a Delaware corporation (the "Corporation"), and Philip William Colburn ("Colburn"). RECITALS: A. The Board of Directors of the Corporation (the "Board") has recognized that the Corporation may be vulnerable to a change in control transaction. B. In order to induce Colburn to remain as a consultant to the Corporation, the Corporation agrees to pay to Colburn a Change in Control Payment (as defined in Section 2(a)) in the event that a Change in Control (as defined in Section 2(b)) of the Corporation occurs during the Term (as defined in Section 1) as described below. AGREEMENT: NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Colburn and the Corporation agree as follows: 1. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall commence on September 8, 1999, and shall continue through December 31, 2002; PROVIDED, HOWEVER, that commencing on January 1, 2000, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; and PROVIDED, FURTHER, that this Agreement shall automatically terminate in the event that Colburn ceases to be a consultant to the Corporation for any reason. 2. CHANGE IN CONTROL PAYMENT. (a) AMOUNT. If a Change in Control of the Corporation shall occur during the Term, the Corporation shall pay to Colburn $1,000,000.00 (or such higher amount as the Board may determine in its sole discretion) (the "Change in Control Payment"), subject to the conditions and pursuant to the terms set forth in this Section 2. (b) CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Corporation during the Term as set forth below. For purposes of this Agreement, a "Change in Control" of the Corporation shall be deemed to have occurred if: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation 2 representing 30% or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new Director (other than a Director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii) or (iv) of this Section 2(b)) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than (a) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (b) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as defined in Section 2(b)(i)) acquires more than 30% of the combined voting power of the Corporation's then outstanding securities; or (iv) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. (c) REDUCTION. Notwithstanding anything to the contrary contained in this Agreement, in the event that, by reason of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), any payment or benefit received or to be received by Colburn in connection with a change in control of the Corporation whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control or any corporation affiliated (or which, as a result of the completion of the transactions causing a change in control will become affiliated) (an "Affiliate") with the Corporation within the meaning or Section 1504 of the Code (collectively, "Total Payments"), would not be deductible (in whole or in part) by the Corporation, an Affiliate or other person making such payment or providing such benefit, the Change in Control Payment shall be reduced until no portion of the Total Payments is not deductible by reason of Section 280G of the Code. (d) TIME OF PAYMENT. The payments provided for in this Section 2 shall be made not later than the fifth business day following the date that the Change in Control is consummated (the "Closing Date"). 3. SUCCESSORS; BINDING AGREEMENT. (a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would 2 3 be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by Colburn and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees or legatees. If Colburn should die after the occurrence of a Change in Control while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Colburn's devisee, legatee or other designee or, if there is no such designee, to his estate. 4. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Colburn and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior to subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law principles. All references to Sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Corporation under Section 2 shall survive the expiration of the term of this Agreement. 5. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 6. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 7. ARBITRATION. Following a Change in Control of the Corporation, any dispute or controversy between the Corporation and Colburn arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 3 4 IN WITNESS WHEREOF, Colburn has executed, and the Corporation has caused its duly authorized representative to execute, this Agreement as of the date first above written. ALLEN TELECOM INC. By: /s/ Robert G. Paul -------------------------------- Name: Robert G. Paul Title: President PHILIP WILLIAM COLBURN /s/ Philip Wm. Colburn ---------------------------------- 4 EX-10.R.R 5 EXHIBIT 10(RR) 1 Exhibit 10(rr) CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (this "Agreement"), dated as of September 8, 1999, is by and between Allen Telecom Inc., a Delaware corporation (the "Corporation"), and J. Chisholm Lyons ("Lyons"). RECITALS: A. The Board of Directors of the Corporation (the "Board") has recognized that the Corporation may be vulnerable to a change in control transaction. B. In order to induce Lyons to remain as a consultant to the Corporation, the Corporation agrees to pay to Lyons a Change in Control Payment (as defined in Section 2(a)) in the event that a Change in Control (as defined in Section 2(b)) of the Corporation occurs during the Term (as defined in Section 1) as described below. AGREEMENT: NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lyons and the Corporation agree as follows: 1. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall commence on September 8, 1999, and shall continue through December 31, 2002; PROVIDED, HOWEVER, that commencing on January 1, 2000, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; and PROVIDED, FURTHER, that this Agreement shall automatically terminate in the event that Lyons ceases to be a consultant to the Corporation for any reason. 2. CHANGE IN CONTROL PAYMENT. (a) AMOUNT. If a Change in Control of the Corporation shall occur during the Term, the Corporation shall pay to Lyons $250,000.00 (or such higher amount as the Board may determine in its sole discretion) (the "Change in Control Payment"), subject to the conditions and pursuant to the terms set forth in this Section 2. (b) CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Corporation during the Term as set forth below. For purposes of this Agreement, a "Change in Control" of the Corporation shall be deemed to have occurred if: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation 2 representing 30% or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new Director (other than a Director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii) or (iv) of this Section 2(b)) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than (a) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (b) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as defined in Section 2(b)(i)) acquires more than 30% of the combined voting power of the Corporation's then outstanding securities; or (iv) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. (c) REDUCTION. Notwithstanding anything to the contrary contained in this Agreement, in the event that, by reason of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), any payment or benefit received or to be received by Lyons in connection with a change in control of the Corporation whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control or any corporation affiliated (or which, as a result of the completion of the transactions causing a change in control will become affiliated) (an "Affiliate") with the Corporation within the meaning or Section 1504 of the Code (collectively, "Total Payments"), would not be deductible (in whole or in part) by the Corporation, an Affiliate or other person making such payment or providing such benefit, the Change in Control Payment shall be reduced until no portion of the Total Payments is not deductible by reason of Section 280G of the Code. (d) TIME OF PAYMENT. The payments provided for in this Section 2 shall be made not later than the fifth business day following the date that the Change in Control is consummated (the "Closing Date"). 3. SUCCESSORS; BINDING AGREEMENT. (a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would 2 3 be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by Lyons and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees or legatees. If Lyons should die after the occurrence of a Change in Control while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Lyons's devisee, legatee or other designee or, if there is no such designee, to his estate. 4. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Lyons and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior to subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law principles. All references to Sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Corporation under Section 2 shall survive the expiration of the term of this Agreement. 5. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 6. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 7. ARBITRATION. Following a Change in Control of the Corporation, any dispute or controversy between the Corporation and Lyons arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 3 4 IN WITNESS WHEREOF, Lyons has executed, and the Corporation has caused its duly authorized representative to execute, this Agreement as of the date first above written. ALLEN TELECOM INC. By: /s/ Robert G. Paul ------------------------------- Name: Robert G. Paul Title: President J. CHISHOLM LYONS /s/ J. Chisholm Lyons ---------------------------------- 4 EX-10.CCC 6 EXHIBIT 10(CCC) 1 Exhibit 10(ccc) AMENDMENT NO. 2 TO COMSEARCH DIVISION SUPPLEMENTAL SAVINGS PLAN (EFFECTIVE JANUARY 1, 1996) WHEREAS, Allen Telecom Inc. sponsors the Comsearch Division Supplemental Savings Plan (the "Plan"); NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as of January 1, 2000: I. Section 2.8 of the Plan is hereby amended to provide as follows: SECTION 2.8. EXECUTIVE shall mean, for a particular Plan Year, either: (i) an Employee of the Comsearch Division of the Company, or (ii) effective for the 1999 Plan Year, a Northern Virginia Participant (a) for whom Additional Employer Contributions under the Savings Plan are limited by Section 401(a)(17) or 415 of the Code, or (b) who elects to make "Executive Deferrals" under the Allen Telecom Inc. Deferred Compensation Plan. IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to be executed this day _______ of ___________________, 2000. ALLEN TELECOM INC. By__________________________ Its_________________________ EX-10.GGG 7 EXHIBIT 10(GGG) 1 Exhibit 10(ggg) ALLEN TELECOM INC. EXECUTIVE BENEFIT PLAN AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1999 2
TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 DEFINITIONS........................................................................1 ARTICLE 2 SELECTION, ENROLLMENT AND ELIGIBILITY 2.1 SELECTION BY COMMITTEE.....................................................5 2.2 ENROLLMENT REQUIREMENTS....................................................5 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION.................................5 ARTICLE 3 VESTING; ACCOUNT BALANCE 3.1 VESTING IN CHANGE IN CONTROL BENEFIT.......................................5 3.2 FORFEITURE.................................................................6 3.3 ACCOUNT BALANCE............................................................6 ARTICLE 4 BENEFITS 4.1 CHANGE IN CONTROL BENEFIT..................................................6 4.2 EMPLOYER BENEFIT...........................................................7 4.3 WITHHOLDING AND PAYROLL TAXES..............................................7 ARTICLE 5 BENEFICIARY 5.1 BENEFICIARY................................................................7 5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT...........................7 5.3 ACKNOWLEDGMENT.............................................................7 5.4 NO BENEFICIARY DESIGNATION.................................................8 5.5 DOUBT AS TO BENEFICIARY....................................................8 5.6 DISCHARGE OF OBLIGATIONS...................................................8 ARTICLE 6 TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN 6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE CHANGE IN CONTROL...................................................8 6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE IN CONTROL OR FOLLOWING CHANGE IN CONTROL..................................8 6.3 TERMINATION OF PLAN AGREEMENT..............................................9 ARTICLE 7 OTHER BENEFITS AND AGREEMENTS 7.1 COORDINATION WITH OTHER BENEFITS...........................................9 ARTICLE 8 TRUST 8.1 ESTABLISHMENT OF THE TRUST.................................................9 8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST................................9 8.3 ACCOUNTS...................................................................9 ARTICLE 9 INSURANCE POLICIES 9.1 POLICIES..................................................................11
i 3 9.2 DOCUMENTS REQUIRED BY INSURER............................................11 ARTICLE 10 ADMINISTRATION 10.1 COMMITTEE DUTIES.........................................................11 10.2 AGENTS...................................................................11 10.3 BINDING EFFECT OF DECISIONS..............................................11 10.4 INDEMNITY OF COMMITTEE...................................................11 10.5 EMPLOYER INFORMATION.....................................................12 ARTICLE 11 CLAIMS PROCEDURES 11.1 PRESENTATION OF CLAIM....................................................12 11.2 NOTIFICATION OF DECISION.................................................12 11.3 REVIEW OF A DENIED CLAIM.................................................12 11.4 DECISION ON REVIEW.......................................................13 11.5 LEGAL ACTION.............................................................13 ARTICLE 12 MISCELLANEOUS 12.1 UNSECURED GENERAL CREDITOR...............................................13 12.2 EMPLOYER'S LIABILITY.....................................................13 12.3 NONASSIGNABILITY.........................................................13 12.4 NOT A CONTRACT OF EMPLOYMENT.............................................14 12.5 FURNISHING INFORMATION...................................................14 12.6 TERMS....................................................................14 12.7 CAPTIONS.................................................................14 12.8 GOVERNING LAW............................................................14 12.9 VALIDITY.................................................................14 12.10 NOTICE...................................................................14 12.11 SUCCESSORS...............................................................15 12.12 SPOUSE'S INTEREST........................................................15 12.13 INCOMPETENT..............................................................15 12.14 DISTRIBUTION IN THE EVENT OF TAXATION....................................15
ii 4 ALLEN TELECOM INC. EXECUTIVE BENEFIT PLAN As Amended and Restated Effective June 16, 1999 Allen Telecom Inc. hereby amends and restates the Allen Telecom Inc. Executive Benefit Plan, effective June 16, 1999, on the terms hereinafter set forth. PURPOSE The purpose of this Plan is to provide specified benefits for the purpose of motivating and retention of a select group of management and highly compensated employees who contribute materially to the continued growth, development, and future success of Allen Telecom Inc., a Delaware corporation (the "Company"). The Plan generally is intended to provide benefits to covered employees in the event of a "Change of Control" of the Company (as defined herein) and is not intended to constitute an "employee pension benefit plan" within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Benefits, if payable under the Plan, generally will be payable prior to termination of employment. ARTICLE 1 DEFINITIONS ----------- For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meaning: 1.1 "Administrative Account" shall mean an account established in accordance with Section 8.3(a)(ii) below. 1.2 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 5 below, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.3 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.4 "Board" shall mean the Board of Directors of the Company. 1.5 "Change in Control" shall mean the occurrence of any of the following with respect to the Company: 1 5 (a) Any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding securities; (b) During any period of two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this subsection) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of the Company's then outstanding securities; (d) The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; (e) The Company voluntarily files a petition for bankruptcy under federal bankruptcy law, or an involuntary bankruptcy petition is filed against the Company under federal bankruptcy law, which involuntary petition is not dismissed within 120 days of the filing; (f) The Company makes a general assignment for the benefit of creditors; or (g) The Company seeks or consents to the appointment of a trustee, receiver, liquidator or similar person. 2 6 1.6 "Change in Control Benefit" shall mean the benefit set forth in Section 4.1 below. 1.7 "Claimant" shall have the meaning set forth in Section 11.1 below. 1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.9 "Committee" shall mean the administrative committee appointed to manage and administer the Plan in accordance with the provisions of Article 10 below. 1.10 "Company" shall mean Allen Telecom Inc., a Delaware corporation. 1.11 "Disability" shall mean a period of disability during which a Participant qualifies for benefits under the Employer's long-term disability program by which the Participant is covered. 1.12 "Effective Date" shall mean March 2, 1997. The effective date of this amendment and restatement shall be June 16, 1999. 1.13 "Employer" shall mean the Company and any other subsidiary that adopts the Plan with the consent of the Company. 1.14 "Employer Benefit" shall mean the benefit set forth in Section 4.2 below. 1.15 "Forfeiture" shall mean a forfeiture of a Participant's rights to benefits under this Plan as set forth in Section 3.2 below. 1.16 "Insurer" shall mean the insurance company or companies that issue one or more Policies. 1.17 "Participant" shall mean any employee of an Employer (a) who is selected to participate in the Plan, (b) who elects to participate in the Plan, (c) who signs a Plan Agreement and a Beneficiary Designation Form, (d) whose signed Plan Agreement and Beneficiary Designation Form are accepted by the Committee, and (e) whose Plan Agreement has not terminated. 1.18 "Participant's Account" shall mean an account established in accordance with Section 8.3(a)(i) below. 1.19 "Plan" shall mean the Allen Telecom Inc. Executive Benefit Plan, which is defined by this instrument and by each Plan Agreement, all as may be amended from time to time. 1.20 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled under the Plan, and the Plan Agreement bearing the latest date of acceptance by the Committee shall govern such entitlement. 3 7 1.21 "Plan Year" shall begin on January 1 of each year and continue through December 31 of that year. The first Plan Year began on March 2, 1997 and ended on December 31, 1997. 1.22 "Policy" or "Policies" shall mean the policy or policies issued in the name of the Trustee in accordance with the terms and conditions of this Plan and each respective Plan Agreement. 1.23 "Reserve Account" shall mean an account established in accordance with Section 8.3(a)(iii) below. 1.24 "Retirement," "Retires" or "Retired" shall mean a Participant's severance from employment from all Employers for any reason, other than a leave of absence, death or Disability, on or after the later of Participant's (a) attaining age 65, or (b) fifth anniversary of participation in the Allen Telecom Inc. Corporate Retirement Plan. 1.25 "Supplemental Retirement Plan" or "Supplemental Retirement Plans" shall mean, as the context requires, the Allen Telecom Inc. Restoration Plan, each Supplemental Target Pension Benefit Agreement entered into between the Company and a Participant and each other nonqualified deferred compensation plan or arrangement designated by the Committee as a Supplemental Retirement Plan for purposes of this Plan. 1.26 "Termination of Employment" shall mean the ceasing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. 1.27 "Trust" shall mean the trust established pursuant to that certain Trust Agreement for the Allen Telecom Inc. Executive Benefit Plan, dated as of August 1, 1997, between the Company and the Trustee, as may be amended from time to time. 1.28 "Trustee" shall mean the trustee named in the Trust and any successor trustee. 1.29 "Vesting Date" shall mean the date upon which a Participant becomes 100% vested in his or her Change in Control Benefit in accordance with Section 3.1 below. ARTICLE 2 SELECTION, ENROLLMENT AND ELIGIBILITY ------------------------------------- 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated employees of the Employers. From that group, the Committee shall select, in its sole discretion, employees to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected employee shall complete, execute and return to the Committee a Plan Agreement and a Beneficiary Designation Form. In addition, the Committee, in its sole discretion, shall 4 8 establish from time to time such other enrollment requirements as it determines are necessary. 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, that employee shall commence participation in the Plan on the date specified by the Committee. If a selected employee fails to meet all such requirements prior to that date, that employee shall not be eligible to participate in the Plan until the completion of those requirements. ARTICLE 3 VESTING; ACCOUNT BALANCE ------------------------ 3.1 VESTING IN CHANGE IN CONTROL BENEFIT. Subject to Section 3.2 below: (a) General Rule. If a Participant has not forfeited his or her benefits pursuant to Section 3.2(a)(i) below, or experienced a Termination of Employment, prior to 90 days prior to a Change in Control, the Participant shall become 100% vested in his or her Change in Control Benefit on the date six months following the Change in Control (the "Vesting Date"). (b) Early Vesting. If at any time on or after 90 days prior to a Change in Control and prior to the Vesting Date a Participant Retires, dies, suffers a Disability or experiences an involuntarily termination of employment with all Employers, the Participant (or the Participant's Beneficiary in the event of the Participant's death) shall become 100% vested in his or her Change in Control Benefit on the later of (i) the date of the Change in Control or (ii) the date of such Retirement, death, Disability or involuntary termination of employment, and such date (rather than the date six months following a Change in Control) shall be considered the "Vesting Date" for purposes of this Plan. 3.2 FORFEITURE. Notwithstanding Section 3.1 above, a Participant shall forfeit any right to benefits under this Plan in accordance with this Section 3.2: (a) A Participant shall forfeit any right to benefits under this Plan if he or she: (i) Retires, dies, suffers a Disability, or experiences a Termination of Employment, in each case prior to 90 days before a Change in Control, or receives lump sum distributions from the Supplemental Retirement Plans that permanently ends his or her participation in the Supplemental Retirement Plans (a "Termination Distribution") at any time; or (ii) Voluntarily terminates his or her employment (other than by Retirement or Disability) with all of his or her Employers or receives a Termination Distribution from the Supplemental Retirement Plans at any time on or 5 9 after the date of a Change in Control and prior to the date six months following the Change in Control. (b) A Participant receiving payments or other partial distributions from the Supplemental Retirement Plans before his or her Vesting Date described in Section 3.1(a) hereof shall forfeit a portion of his or her Change in Control Benefit which bears the same proportion to all of such benefit as the payment or partial distribution bears to his or her total interest in the Supplemental Retirement Plans. 3.3 ACCOUNT BALANCE. Each year, as soon as administratively practicable, each Participant shall receive a statement setting forth the balance of his or her Participant's Account as of the end of the preceding Plan Year. ARTICLE 4 BENEFITS --------- 4.1 CHANGE IN CONTROL BENEFIT. (a) Eligibility. On the Vesting Date, the Participant or the Participant's Beneficiary, as the case may be, shall become entitled to the "Change in Control Benefit" described in Section 4.1(b). (b) Benefit and Payment. The "Change in Control Benefit" shall be the dollar amount that is credited to the Participant's Account as of the Vesting Date. This benefit shall be paid to the Participant, or his or her Beneficiary, within 90 days of the Vesting Date. 4.2 EMPLOYER BENEFIT. (a) Eligibility. Subject to Section 4.4 below, the Participant's Employer shall be entitled to the Employer Benefit if and to the extent a Participant forfeits his or her Change in Control Benefit under Section 3.2 above. (b) Benefit and Payment. The "Employer Benefit" shall be (i) a distribution of the dollar amount that is allocated to the Participant's Account as of the date of the event described in Section 3.2 above, after taking into account any distributions made or to be made in accordance with Section 4.1 above, plus any earnings allocated to that account from that date to the date of payment of the Employer Benefit and (ii) a distribution of any amount allocated to the Reserve Account in accordance with Section 8.3(a)(iii) below. This benefit shall be paid to the Participant's Employer by December 31 of the Plan Year following that event. 4.3 WITHHOLDING AND PAYROLL TAXES. The Trustee shall withhold from any and all benefit payments made under this Article 4, all federal, state and local income, employment and other taxes required to be withheld in connection with the payment of benefits 6 10 hereunder, in amounts to be determined in the sole discretion of the Participant's Employer. ARTICLE 5 BENEFICIARY ----------- 5.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant. 5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee before his or her death. 5.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent. 5.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 5.1, 5.2 and 5.3 above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 5.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, before a Change in Control, to cause the Trustee to withhold such payments until this matter is resolved to the Committee's satisfaction. 5.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. ARTICLE 6 7 11 TERMINATION, AMENDMENT OR ------------------------- MODIFICATION OF THE PLAN ------------------------ 6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE CHANGE IN CONTROL. Subject to Section 6.2, each Employer reserves the right to terminate, amend or modify the Plan or any related Plan Agreement, in whole or in part, with respect to Participants whose services are retained by that Employer. Notwithstanding the foregoing, no termination, amendment or modification shall be effective to decrease or reduce a Participant's potential benefits under this Plan below the amount allocated to the Participant's Account as of the effective date of the termination, amendment or modification. 6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE IN CONTROL OR FOLLOWING CHANGE IN CONTROL. Within one year before a Change in Control and thereafter, neither the Company, any subsidiary of the Company nor any corporation, trust or other person that succeeds to all or any substantial portion of the assets of the Company shall have the right to terminate, amend or modify the Plan and/or any Plan Agreement in effect prior to such Change in Control, and all benefits under the Plan and any such Plan Agreement shall thereafter be paid in accordance with the terms of the Plan and such Plan Agreement, as in effect immediately prior to such Change in Control. If the Plan is terminated, amended, or modified within one year before a Change in Control, such termination, amendment or modification shall be considered void as of the date of the termination, amendment or modification. Any provision of this Plan or any Plan Agreement to the contrary shall be construed in accordance with this Section 6.2. 6.3 TERMINATION OF PLAN AGREEMENT. Absent the earlier termination, modification or amendment of the Plan, or a Participant's Forfeiture of his or her benefits under this Plan, the Plan Agreement of any Participant shall terminate upon the full payment of the applicable benefit provided under Article 4. ARTICLE 7 OTHER BENEFITS AND AGREEMENTS ----------------------------- 7.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 8 TRUST --------- 8.1 ESTABLISHMENT OF THE TRUST; PREMIUMS. The Company shall establish the Trust and the Employers shall, at least annually, transfer over to the Trust such assets, if any, as the Company determines, in its sole discretion, to contribute or cause to be contributed 8 12 to the Trust prior to a Change in Control. The Committee may direct, prior to a Change in Control, payment of any and all Policy premiums and other costs relating to insurance policies owned by the Trust. In addition, if the Trust incurs any tax liability, the Employers shall contribute to the Trust sufficient funds to allow the Trustee to pay any such tax liability. 8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and each Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Trustee, Participant and a Participant's Beneficiary as to the assets of the Trust. The Employers shall at all times remain liable to carry out their obligations under the Plan. The Employers and the Trustee shall cooperate with each other as is necessary to minimize the Trust's tax liability. 8.3 ACCOUNTS. -------- (a) The Trustee shall establish and maintain the following separate accounts: (i) A "Participant's Account" for each Participant (A) to which the Employers' contributions, or a portion thereof, may be allocated and held, and (B) to which earnings on amounts allocated pursuant to (A) shall be allocated, the assets of which are to be used to pay the Change in Control Benefit or the Employer Benefit in accordance with the Plan and Trust; (ii) An "Administrative Account" for the administrative expenses of the Trust to which a portion of the Employers' contributions and earnings thereon may be allocated and held, the assets of which are to be used to pay the administrative expenses, including all taxes, of the Trust in accordance with the terms and provisions of this Plan and the Trust that are not paid directly by the Employers; and (iii) A "Reserve Account" to which shall be allocated all gains described in this subsection. In the event of the death of a Participant or former Participant whose life is insured by a Policy, the excess of (a) the life insurance proceeds received from such Policy over (b) the cash value of such Policy as of the date immediately preceding the Participant's death shall constitute a gain allocable to the Reserve Account. Any such gain allocated to the Reserve Account shall be distributed as an Employer Benefit pursuant to Section 4.2(b). (b) Prior to a Change in Control, the Committee shall, in its sole discretion, direct the Trustee in writing as to the allocation of (i) the Employers' contributions to the Participant's Accounts and the Administrative Account, (ii) the earnings on the amounts held in the Participant's Accounts and the Administrative Account, and (iii) the gains allocated to the Reserve Account in accordance with Section 8.3(a)(iii). After a Change in Control, the Trustee shall make such allocations in accordance with the terms of the Plan and the Trust. Notwithstanding the foregoing, and except for a payment of benefits in accordance with Article 4 or a 9 13 Forfeiture of benefits, a Participant's Account balance shall not be reduced. Allocations of earnings shall be made as of such date (at least annually) as is specified by the Committee or the Trustee, but shall not be required to be made more frequently than annually. (c) All allocations shall be made in such manner so that the accounts hereunder shall qualify for and be treated as a separate share under Code Section 663(c). ARTICLE 9 INSURANCE POLICIES ------------------ 9.1 POLICIES. The Committee may direct the Trustee in writing to acquire one or more Policies in the Trustee's name. The Trustee shall be the sole and absolute owner and beneficiary of each Policy, with all rights of an owner and beneficiary, including without limitation, the right to surrender Policies for their cash surrender values and to take one or more loans against one or more Policies. Notwithstanding the foregoing, the Trustee shall exercise its ownership rights in each Policy only in accordance with the terms of this Plan, the respective Plan Agreements and the Trust. 9.2 DOCUMENTS REQUIRED BY INSURER. The Trustee, the Participant's Employer and the Participant shall sign such documents and provide such information as may be required from time to time by the Insurer. ARTICLE 10 ADMINISTRATION -------------- 10.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which shall consist of the Board or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the sole and absolute discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and (ii) interpret where necessary all provisions of this Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies in, the language of this Plan), as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 10.2 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 10.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and 10 14 application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 10.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members. 10.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE 11 CLAIMS PROCEDURES ----------------- 11.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 11.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within 60 days of receipt of that claim, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) the specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and 11 15 (iv) an explanation of the claim review procedure set forth in Section 11.3 below. 11.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 11.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 11.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 11 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE 12 MISCELLANEOUS ------------- 12.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of an Employer. Any and all of an Employer's assets shall be, and remain, the general, unpledged and unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 12.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer 12 16 and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 12.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 12.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, with or without cause, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be employed in the service of any Employer, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 12.5 FURNISHING INFORMATION. A Participant will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 12.6 TERMS. Whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 12.7 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 12.8 GOVERNING LAW. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Ohio. 12.9 VALIDITY. In case any provision of this Plan shall be illegal, invalid or ineffective for any reason, said illegality, invalidity or ineffectiveness shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal, invalid and/or ineffective provision had never been inserted herein. 13 17 12.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail or recognized overnight courier, to the address below: Allen Telecom Inc. 25101 Chagrin Boulevard Beachwood, OH 44122-5169 Attention: General Counsel Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 12.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant, the Participant's Beneficiaries, and their permitted successors and assigns. 12.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 12.13 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetency, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 14 18 12.14 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any portion of a Participant's benefit under this Plan becomes taxable to the Participant prior to the Vesting Date, a Participant may petition the Committee, if prior to a Change in Control, or the Trustee, after a Change in Control, for a distribution of assets sufficient to meet the Participant's tax liability (including additions to tax, penalties and interest). Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Trustee shall distribute to the Participant from the Trust immediately available funds in an amount equal to that Participant's federal, state and local tax liability associated with such taxation, which liability shall be measured by using that Participant's then current highest federal, state and local marginal tax rate, plus the rates or amounts for the applicable additions to tax, penalties and interest. If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. IN WITNESS WHEREOF the Company has signed this Plan document as of the ____ day of _________, 1999. ALLEN TELECOM INC. By:___________________________________ Its:______________________________ 15 EX-13 8 EXHIBIT 13 1 ALLEN TELECOM 1999 ANNUAL REPORT 2 ALLEN TELECOM IS . . . Allen Telecom Inc.(http://www.allentele.com) is a leading supplier of wireless equipment to the global telecommunications infrastructure market. FOREM supplies sophisticated filters, duplexers, combiners, amplifiers and microwave radios to an array of OEM customers. MIKOM focuses on providing repeaters, in-building systems and other products that enhance both the coverage and the capacity of a wireless system. Decibel Products and Antenna Specialists manufacture land based and mobile antennas in frequency bands that cover all of the traditional wireless networks. Grayson Wireless supplies state-of-the-art measurement and signal processing systems for testing the overall performance of a wireless network and providing geolocation services. Comsearch offers engineering and consulting services for wireless operators. Tekmar Sistemi provides integrated low power fiber optic and cable distributed antenna systems for indoor coverage systems. Telia designs and manufactures single and multi-channel power amplifiers for OEMs and carriers. Board of Directors Philip Wm. Colburn Chairman of the Board, Allen Telecom Inc. J. Chisholm Lyons Vice Chairman of the Board, Allen Telecom Inc., Counsel to Smith Lyons, Toronto, Ontario, Canada Jill K. Conway Visiting Scholar, Program in Science, Technology and Society, Massachusetts Institute of Technology, Cambridge, Massachusetts John F. McNiff Vice President - Finance and Director, Dover Corporation, New York, New York Robert G. Paul President and Chief Executive Officer, Allen Telecom Inc. Martyn F. Roetter Vice President, Communications and Information Technology, Arthur D. Little, Inc., Cambridge, Massachusetts Charles W. Robinson Chairman, Robinson & Associates Inc., Santa Fe, New Mexico Gary B. Smith Management Consultant Cornelius, North Carolina Management Robert G. Paul President and Chief Executive Officer Robert A. Youdelman Executive Vice President and Chief Financial Officer James L. LePorte, III Vice President - Finance Peter de Villiers Vice President, Strategic Development Laura C. Meagher Secretary and General Counsel Roger Schroeder Treasurer and Assistant Secretary Andrea Casini Managing Director, Tekmar Sistemi S.r.l. Terry N. Garner President, Grayson Wireless F. Kim Goryance President, Antenna Specialists Peter Mailandt President, Decibel Products Jack Powell Chairman, Telia S.A. Douglass R. Hall President, Comsearch Karl-Heinz Schmidt President, MIKOM Gianpiero Villa President, FOREM 3 The Year at a Glance 1999 1998 Financial Highlights Sales $333,697,000 $388,004,000 Loss Before Income Taxes and Minority Interests ($ 5,412,000) ($ 8,554,000) Loss From Continuing Operations ($ 5,218,000) ($ 5,512,000) Net Loss ($ 2,855,000) ($ 10,222,000) Return On Equity (1.2%) (4.0%) - -------------------------------------------------------------------------------- Financial position, year-end: Stockholders' Equity $240,912,000 $250,081,000 Working Capital $128,062,000 $133,465,000 Shares Outstanding 27,882,000 27,473,000 Per common share: Basic: Loss From Continuing Operations ($ .19) ($ .21) Net Loss ($ .10) ($ .38) Diluted: Loss From Continuing Operations ($ .19) ($ .21) Net Loss ($ .10) ($ .38) Book Value per share $8.64 $9.10 - -------------------------------------------------------------------------------- [PICTURE] Table of Contents The Year at a Glance 1 Letter to Shareholders 2 Business Review 5 Consolidated Financial Statements 12 Notes to Consolidated Financial Statements 16 Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Five-year Summary of Operations 32 Directors and Management Inside front cover Shareholder Information Inside back cover SAFE HARBOR CAUTIONARY STATEMENT Statements included in this Annual Report, which are not historical in nature, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements regarding the Company's future performance and financial results are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Allen Telecom Inc.'s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain certain detailed factors that could cause the Company's actual results to materially differ from forward-looking statements made by the Company, including, among others, the costs and timetable for new product development, the health and economic stability of the world and national markets, the uncertain level of purchases by current and prospective customers of the Company's products and services, the impact of competitive products and pricing, the future utilization of the Company's tax loss carry forwards, the impact of U.S. and foreign government legislative and regulatory actions, including, for example, the scope and timing of E911 geolocation requirements and spectrum availability for new wireless applications, the financing availability for geolocation projects, and other transactions. 1 4 LETTER TO SHAREHOLDERS [picture] Robert G. Paul (left) and Philip Wm. Colburn Despite two very difficult years of reduced revenue and unacceptable profit performance, we believe the upward trend of operating results in the latter half of 1999 provides strong evidence that Allen Telecom has turned the corner. The continuing improvement in quarterly operating performance throughout 1999 should leave us well positioned in 2000 to improve results significantly over the prior two years. Sales for 1999 were $333.7 million, down 14% from 1998 and down 23% from the peak sales of $432.5 million in 1997. The net loss for 1999 was $2.9 million after-tax or $.10 per share, compared to a loss of $10.2 million after-tax or $.38 per share in 1998. While the results of the last two full years are not all that different, the trends within each of these years could not be more disparate. The charts to the right show Allen Telecom's quarterly sales and backlog for the last eight quarters as well as the quarterly operating profit before restructuring charges, discontinued operations and one-time gains or losses on telecom investments. As can be seen from these charts, the trend in sales was downward through the first quarter of 1999 and the trends of backlog and profit were lower through the fourth and third quarters of 1998, respectively. The trends for all of these indicators have moved continuously upward ever since. The attached charts also illustrate how the major restructuring efforts have significantly lowered our cost structure and breakeven point. This has allowed Allen Telecom to return to profitability (excluding restructuring charges and one-time gains and losses) in the third and fourth quarters of 1999 on significantly lower sales levels than would have been possible in 1998. While we are pleased with the improvement in the quarterly trend in revenues during 1999, our sales levels were nevertheless disappointing. Of the major geographic markets, only the GSM and DCS 1800 market in Europe provided the sales levels that we expected and that were needed to make 1999 a more successful year. Despite a robust overall economy in the United States, there were only limited capital expenditures made by 2 5 [Bar graph] SALES BY QUARTER (MILLIONS OF DOLLARS) 1998 First Quarter 113 Second Quarter 98 Third Quarter 91 Fourth Quarter 86 1999 First Quarter 76 Second Quarter 77 Third Quarter 90 Fourth Quarter 91 EARNINGS PER SHARE BY QUARTER (EXCLUDING SPECIAL ITEMS) 1998 First Quarter $ .21 Second Quarter $ .05 Third Quarter ($ .12) Fourth Quarter ($ .05) 1999 First Quarter ($ .05) Second Quarter $ .00 Third Quarter $ .03 Fourth Quarter $ .06 BACKLOG BY QUARTER (MILLIONS OF DOLLARS) 1998 First Quarter 104 Second Quarter 83 Third Quarter 61 Fourth Quarter 53 1999 First Quarter 65 Second Quarter 70 Third Quarter 72 Fourth Quarter 85 wireless carriers to provide coverage improvements, quality enhancements and capacity expansion for their wireless networks. The South American markets, particularly Brazil where Allen Telecom has invested in a new plant, were growing slower than we had expected despite the pent up consumer demand for telecommunications in a number of countries. Many of the Southeast Asian countries, which were so strongly battered economically in late 1997 and 1998, did begin to show some modest recovery in 1999, but nowhere near the levels seen prior to their collapse in 1997. While we are expecting improvement for the year 2000 in the South American and Southeast Asian markets, and while there were already some signs of an increased build out of wireless networks in the U.S. in the latter half of 1999, we are basing our expense levels on the expectation that revenues will increase gradually, and we will not recognize dramatic jumps in revenues from these markets. As a result of this more conservative outlook, in the fourth quarter of 1999, Allen Telecom announced that it will close its Solon, Ohio manufacturing facility and discontinue certain product offerings in order to better match our cost structure with projected revenues. This resulted in a restructuring charge in the fourth quarter of approximately $8.0 million after-tax. An additional charge of $.5 - $1.0 million after-tax is expected to be realized in the first quarter of 2000 to complete this restructuring. The benefits of this restructuring will reduce our costs by $1.5 million to $2.0 million per quarter beginning in the second quarter of 2000. In addition to the positive trend in quarterly results and a lower breakeven point, other significant signs of progress were also evident in the Company. The backlog improved 61% from $52.8 million at the beginning of the year to $84.9 million at the end of 1999. This backlog was stronger in all four of our product lines. We were able to improve our gross profit margins through restructuring and other efforts to 28.5% for 1999 as compared to 27.6% for 1998 (excluding restructuring costs). In addition, we were able to reduce SG&A expenses (excluding one-time restructuring costs) by 13%. Research and development expenses were reduced more modestly while still maintaining sufficient resources to pursue those opportunities we consider essential for Allen Telecom's future. In a year without profits, the Company generated cash internally and reduced net debt, primarily by limiting capital expenditures in 1999 to $11.4 million, which is 48% below the prior year level and 46% of depreciation and amortization. We also saw our share price increase 73% during the year as the success of our turnaround became evident. The Company announced many new products in all our divisions in 1999, but perhaps none was more promising than Radio Link(TM). This family of robust, low capacity microwave radios was announced in August 1999. Its major use is for connecting cell sites to their Base Station Controllers (BSC) and these radios have been well received in the market. We announced our first commercial orders in November 1999, after initial field testing. (Continued on next page.) 3 6 During the year the company continued to invest in its existing businesses and committed approximately $17.6 million to purchase the remaining minority interests of MIKOM GmbH, along with the majority interests of two related European companies. In this year's Annual Report we have emphasized Allen Telecom's developing geolocation business. This is due to both our continued progress in bringing this product to market, and because the opening of this new market is one year closer. We believe the opportunities are substantial for Geometrix(TM), our network overlay solution that can locate cellular callers placing E911 calls. We believe that our technology is better than the competition and hope that we will be able to announce some specific contracts later in the year 2000. Allen Telecom has invested approximately $14 million in this project since its inception and established our own private network in the Washington, D.C. area where we have been able to demonstrate its proficiency in providing accurate geolocation information for AMPS, TDMA, CDMA, and iDEN technologies for a large number of carriers. Probably the most exciting part of Allen Telecom's longer-term future will be with the rollout of some form of wide-band CDMA as the next major wireless technology. This technology for broadband wireless telephony is sometimes referred to as 3G, for Third Generation, and sometimes as UMTS (Universal Mobile Telephone Service). 3G will allow wireless users to utilize a mobile wireless handset for Internet accessibility, video and other high volume data or digital services which require high bandwidth. Allen Telecom is presently engaged in development efforts to ensure that we have the products and services available for this next generation of wireless products. The opportunity that will be presented when these systems are launched will be dramatic. We do not expect significant revenues from third generation products until late 2001 or 2002. It should be noted, however, that an initial 3G system is up and operating in the Japanese market, licenses have been issued in Finland, and auctions for licenses in the U.K. and Italy are expected to be conducted in the first quarter of the year 2000. We expect to participate in the growth of 3G, and plan to turn that revenue growth into much improved profitability with our lower cost structure. We would like to express our gratitude to our employees and management team throughout the world who responded so well in the face of the disappointments which we have had over the last 24 months. This team, which has remained substantially intact over this period, has had to deal with some very difficult business situations and take tough actions in order to protect the short-term economic integrity and the long-term future of Allen Telecom. At a time when most of their incentive plans are not going to give rise to any near term benefit, their willingness to go the extra mile and get the job done has allowed us to get to the more favorable position that we are in today. /s/Philip Wm. Colburn Philip Wm. Colburn Chairman of the Board /s/Robert G. Paul Robert G. Paul President and Chief Executive Officer 4 7 WHAT WE DO: WIRELESS EVOLUTION The road into the future is paved with technology. Terms such as geolocation, microwave radio backbone, indoor coverage systems and 3G wireless (Third Generation) inundate the everyday workplace in the wireless industry. Allen Telecom is focused on creating the new products necessary to build a global wireless network for the next century. Since the first cellular system was installed in 1983, there has been an incredible evolution in wireless technology. The first systems were analog and covered only major metropolitan areas. The digital movement began in earnest in 1987 with the implementation of GSM in Europe and was followed in the U.S. several years later as cellular carriers began phasing in CDMA and TDMA. These cellular systems were followed by DCS systems (predominantly GSM) in Europe and PCS in the U.S. (CDMA, TDMA and GSM). Recently, we've seen the initial movement to higher capacity EDGE technology. This rapidly changing environment for wireless technology closely parallels the full-scale roll out of the Internet and leads to the much proclaimed "convergence" which is driving the push to 3G. 3G technology is the next major step in wireless infrastructure and its potential is greater than all previous technologies combined. The new 3G technology will replace analog and digital cellular systems with expanded capability and with features well beyond those offered today. In addition to traditional voice, 3G cellular will provide wireless data services at a speed of up to two megabits per second - fast enough to support several channels of full-motion video and lightning-fast Internet access. According to market research, the worldwide market for 3G cellular terminals will total $1.5 billion in the year 2001 and grow to $9.2 billion in 2005, requiring similar increases in the infrastructure equipment necessary to support this projected growth rate. 3G service will be available first in Japan, followed by Europe and then by North America. The Finnish government granted the first 3G licenses to four different operators in March 1999. Auctions for licenses in other European countries are scheduled for the year 2000. The future of the mobile wireless office, a workplace where data communication, video and voice are available without wires, requires ubiquitous RF coverage. However, the need for high quality voice and data is not limited to office space. In fact, it is likely that all indoor and outdoor areas are destined to be "unwired". This continuing evolution of technology will benefit all of Allen Telecom's divisions. In the following pages we explain where and how our divisions are investing in cutting edge technology to ensure that we have the necessary products to build the wireless systems of today and tomorrow. [PICTURE] 5 8 HOW IT WORKS: GEOLOCATION NEW TECHNOLOGY Every day close to 100,000 people dial 911 on their wireless phones to report emergencies, yet no system exists today to determine the location of these callers. In 1994, the Federal Communications Commission (FCC) issued a report and order requiring that a wireless Enhanced 911 (E911) system be available by October 1, 2001 to locate mobile handsets placing emergency calls in the United States. Responding to the FCC mandate, Allen Telecom's Grayson Wireless division developed Geometrix(TM), a wireless location system that is a voice channel based, technically scalable, cost effective solution for providing location based E911 services. The system uses a network overlay model where wireless location sensors situated at the carrier's base stations measure certain characteristics of the wireless handset signal. Based on TDOA (Time Difference of Arrival) and AOA (Angle of Arrival) triangulation techniques, Geometrix exceeds the accuracy and reliability requirements set by the FCC in any deployment area: urban, suburban or rural. The voice channel approach used by Geometrix enables the caller to be located repeatedly during the call. This capability can be used to enhance location accuracy or adapted for moving vehicles and fleet management applications. TDOA triangulation works by measuring the time of arrival of a radio signal at three or more separate cell sites. TDOA systems have the advantage of using mature, high accuracy timing technology and connecting to the existing cell site antennas. AOA uses antenna arrays to determine the angle of arrival of the incoming signal. Geometrix can be [PICTURE] 6 9 configured using a combination of TDOA and AOA to provide accurate position calculations from as few as two sites in the presence of multi-path signal interference, challenging tower geometry or in areas of poor signal strength. Geometrix provides E911 services to carriers utilizing almost all air interfaces including AMPS, TDMA (IS-136), CDMA (IS-95), iDEN and dual-mode/dual-band networks. The system can locate calls which transition between analog and digital sites, and calls in which the caller is a subscriber, roamer, or even a non-subscriber. Geometrix equipment is a software-based, open architecture. The system can be field upgraded to accept 3G and other future air interfaces, to increase coverage or to increase capacity with maximum reuse of existing hardware. The system was designed to accommodate a variety of location-based, value-added services, including fleet management, concierge services, personal security and other location dependent information. Geometrix can also operate as a service bureau in which one network supports multiple carriers using different air interfaces. Through shared capital costs, service bureaus represent the lowest cost solution to the geolocation mandate. The Geometrix solution can efficiently and effectively serve multiple carriers in a service bureau environment due to the flexible, non-invasive nature of the product design. The system's open architecture can locate multiple users on multiple air interfaces with only software additions to the equipment. Allen Telecom's Geometrix system is backed by a large organization with the proven ability to deliver products to market and to service and maintain those products in the future. In addition to the manufacturing skill and capacity necessary to supply geolocation equipment to multiple carriers, Allen Telecom can deliver knowledgeable network planning (to determine the optimal placement of geolocation equipment in the network), equipment installation expertise, qualified test and measurement techniques and years of experience in technical, systems operation, maintenance and data base support functions. Geometrix technology has been field-tested in multiple environments including testing with the Federal Highway Administration in northern Virginia. Additional field trial activities are planned with several major carriers. These trials, along with continuing private network tests and demonstrations, confirm Geometrix' performance and value in providing the basis for location related services. Industry estimates of the market potential for geolocation equipment range from $1-3 billion. Including ancillary location based services, the estimates reach $2-8 billion. Geometrix is well positioned to take advantage of this rapidly approaching market opportunity. Carriers are required by the FCC to announce their technology choice by October 2000 and to begin offering E911 services in October 2001. This has created a sense of urgency in what had been a slowly developing market. Our system is easy to install, non-invasive, operates with all air interfaces, is scalable, can be upgraded, offers value-added services and is backed by the collective strengths of a company which has been in the wireless business for nearly 50 years. [PICTURE} How geolocation works 1. The location process is initiated by a wireless phone user calling 911 for emergency services. 2. While the call is being processed through to the emergency dispatch center, the Geometrix(TM) cell site equipment is activated to find the caller. 3. Two or three cell sites perform time or angle of arrival calculations to determine precise longitude and latitude of the emergency caller. 4. The location information is passed up to emergency dispatch and displayed on maps. 5. Emergency dispatch center sends appropriate assistance to the specific location determined by the Geometrix system. 7 10 [PICTURE] INNOVATION: RESEARCH & DEVELOPMENT Antennas provide the critical link between handsets and the base station for all wireless systems. Decibel is currently engaged in the development of a new generation of base station antennas. Decibel's years of experience, coupled with the carriers' expertise in frequency management software and the improved communications hardware lead to demands for a new standard of performance from base station antennas. These new requirements include consistent radiation from antenna to antenna and across the frequency spectrum, as well as radiation patterns that favor communications with subscribers in a designated sector to the exclusion of communications beyond these bounds. Radiation patterns often need to be tailored to specific environments. In urban and highly populated suburban areas, precise vertical radiation patterns support several carrier goals, such as a high rate of frequency reuse within a small geographic area, excellent coverage to the foot of the base station and adequate levels of RF in targeted buildings. These exacting requirements are met by Decibel's MaxFill(TM) family of antennas that concentrate the RF below the horizon and provide even radiation density within a designated sector by filling in the radiation "nulls" typically exhibited by traditional antennas. In areas of medium to light subscriber density, another set of antennas developed by Decibel meets the demand of carriers to provide optimum coverage with the least number of base stations. These MaxGain(TM) antennas are designed specifically to focus radiation energy onto the horizon with maximum gain to achieve the greatest geographic coverage. The introduction of 3G technology requires further technologically advanced antennas. New 3G base stations will have higher bandwidth than existing systems. To provide ultimate flexibility in the future, carriers will demand dual-band, independently adjustable, remote control antennas, which help carriers to optimize the coverage performance for their PCS and 3G customers using a single antenna. These antennas are already under development at Decibel Products. Antenna Specialists recently introduced a family of dual-band "On Glass" vehicular antennas with both cellular AMPS (800 MHz)/ PCS (1900 MHz) and GSM (900 MHz)/ DCS (1800 MHz) capability in a common antenna feed configuration. The advent of dual frequency mode portable phones (expected to be even more common with 3G) and continuing pressures from state and local governments to legislate "hands free" operation while driving has resulted in the development of these state-of-the-art antennas. The antenna, when installed with a car kit, facilitates "hands free" operation of the mobile phone and significantly enhances signal quality inside the vehicle. Cellular telephones operate at ultrahigh frequencies, especially those using PCS and DCS 1800 and ultimately 3G frequencies, which make their performance extremely sensitive to surrounding objects such as car roofs, doors and window posts. The most efficient antenna placement is one that elevates the signal above these obstacles and results in a circular or omnidirectional signal pattern. The unique dual-band design incorporates the latest in antenna technology. A dual-band, two element, co-linear antenna ensures maximum radiation in both frequency bands, provides proper phasing between the elements and achieves the transfer of energy from the vehicle's antenna through the windshield to the mobile phone. The flexibility of this new antenna provides high reliability and optimal performance for dual-mode portable phone operation within a vehicle anywhere in a base station's service area. 8 11 WIDEBAND SOLUTIONS As the world's major OEMs prepare to roll out the first 3G systems by 2001, FOREM is already designing new generation technology solutions and manufacturing products with 3G-compatible technology. Proprietary dual-mode filters and duplexers will facilitate higher performance in a compact size for 3G applications, and reduce manufacturing costs. New metal alloys have been created to reduce the cost of base station component parts. Ceramic filters and combiners, based on special transmission modes, were developed to enable the use of low cost ceramics where dual-mode solutions are not usable. In addition, innovative low noise amplifiers with advanced circuitry techniques have been developed which allow the base station processing equipment to process signals more effectively. FOREM is developing Tower Mounted Amplifiers, including both uplink (to increase base station receive sensitivity) and downlink (to increase the coverage area). These products are fully monitored and controlled by the BTS via a powerful bidirectional communication link, which enables easy installation and full control of the system during operation. FOREM has also introduced a new product family of microwave radios in the 2GHz to 40GHz range. These robust low to medium capacity digital microwave radios are used for fixed wireless connections. The main application is to connect the base station to the base station controller at speeds ranging from 2Mbits to 32Mbits. The high-tech system modulation scheme developed by FOREM allows the product to compete with more sophisticated modulation schemes, but at a significant advantage in terms of cost, power consumption and reliability. The system is locally and remotely controlled with a simple network management protocol that allows easy interfaces and low cost maintenance. In the future, transmitting data using 3G technology will require a higher number of channels for multiple data communications. To address this demand, FOREM and Telia have been working together to produce a cost effective, reliable, high powered, multi-channel amplifier for downlink (signal from the base station to the mobile unit) applications. These solid state, ultra-linear power amplifiers offer greater spectrum efficiency, higher network capacity, less signal interference and lower system cost. FOREM's and Telia's designs are compatible with all air interface standards, including 3G. Given the 3G technology requirements, a number of OEMs are now seriously considering outsourcing the development and manufacture of amplifiers and other components to a much greater extent than they do currently. This represents a major opportunity for FOREM to become a larger, more integrated OEM supplier. [PICTURE] 9 12 INVESTING FOR THE FUTURE Many of today's wireless subscribers utilize their mobile phones to call from within buildings, tunnels, or other structures. Inside these structures, the quality of wireless conversations is often degraded significantly or terminated due to a lack of coverage. Places such as airports, subways, car and railway tunnels, shopping malls, hotels, campuses, industrial plants and high-rise office buildings all need effective indoor coverage solutions. The availability and convenience of wireless communications has resulted in an increase in both subscribers and subscriber usage, which in turn is forcing wireless systems to better control their frequency utilization through both higher frequency reuse patterns and reduced RF power, both indoors and outside. Outdoor "off the air" repeaters receive signals from mobile phone users and then transmit those signals back to the base station. High signal strength will be more important for 3G than any previous technology because of the high data rate transmission. High data rates with low errors require strong signals, which repeaters deliver economically. In addition, since 3G will be implemented at frequencies even higher than PCS, propagation losses will be worse than those experienced by networks today. As such, repeaters are likely to be used extensively in 3G applications. MIKOM has implemented a breakthrough feature that eliminates some of the restrictions that currently exist with repeaters. I.C.E. (Interference Cancellation Equipment) repeaters from MIKOM reduce the need for isolation by more than 20dB, thus making installations universal and even more cost effective. This feature, coupled with diversity and multiple power options, makes MIKOM repeaters an ideal choice for all 3G networks. [PICTURE] 10 13 [PICTURE} DIGITAL UBIQUITOUS COVERAGE The most effective way to achieve both strong signal levels and well controlled RF indoors is through the use of an RF distribution system. Allen Telecom produces a number of products to meet this growing demand. For simple, small area coverage enhancement, MIKOM provides DICETM (Distributed Indoor Coverage Enhancement) products. These products are band selective, low power, off-air, bidirectional amplifiers that may be connected to several antennas via coaxial cable. It is typically used to cover a deep storefront or a small office area. As required coverage increases, a more powerful device may be required. For this situation, MIKOM produces the MR (MIKOM Repeater) series of products. This higher power, higher gain, off-air repeater may be connected to a larger number of distributed antennas (4-10), again via coaxial cable. The MR units may be channel or band selective and come in several power levels. Applications include multiple offices, small manufacturing centers and hotel lobbies. When both capacity and coverage are important, Tekmar Sistemi's Brite-Cell(TM), an active, low power, fiber-optic distribution system, may be an excellent alternative. This band selective product distributes the signal of the donor base station (or Micro/Picocell) to which it is connected by fiber optics to multiple, remote, low power antenna units that are placed throughout a structure in a star configuration. This system efficiently manages increased traffic capacity without degrading the signal. Typically, this system is implemented in areas such as high-rise buildings, convention centers with multiple rooms and hotels. The largest, highest power, most flexible distribution product from MIKOM is the MOR series of optical repeaters (MIKOM Optical Repeaters). These optical products have a greater range and higher output power than any other product and come in either band or channel selective variations with multiple power options. They are comparable in performance to a microcell. The MOR system is comprised of a master unit located at a base station and multiple remote units located throughout a structure, and may be configured in either a daisy chain or star configuration in order to maximize fiber usage and increase base station trunking efficiency. All adjustments and alarms involving the remote units may be made from the master unit. This product is used primarily for covering large areas such as tunnels, airports, railroads, and convention centers. All systems are either 3G compliant or 3G upgradeable and are capable of supporting all standards including GSM, CDMA, TDMA, Analog, Tetra and iDEN. In addition, the systems are multi-band and multi-user ready for use in shared systems operating from 100 MHz to 2.4 GHz. The products are tied together in a state-of-the-art Operations and Maintenance package (OMC), which allows remote control, alarming and monitoring of the various repeaters from a single location. Wireless or wireline modems complete the connection package. MIKOM and Tekmar Sistemi are well positioned to connect the wireless offices of the future. 11 14 CONSOLIDATED STATEMENTS OF OPERATIONS ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 & 1997 1999 1998 1997 SALES $ 333,697 $ 388,004 $ 432,508 Costs and Expenses: Cost of sales 244,548 293,404 281,591 Selling, general and administrative expenses 61,839 71,672 72,671 Research and development and product engineering costs 27,946 30,742 30,367 Other Income, net 3,370 6,065 1,885 Interest and Financing Expenses: Interest expense (9,632) (8,276) (4,505) Interest income 1,486 1,471 1,454 - -------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE TAXES AND MINORITY INTERESTS (5,412) (8,554) 46,713 Benefit from (Provision for) Income Taxes 1,844 5,310 (17,723) - -------------------------------------------------------------------------------------------------- Income (Loss) Before Minority Interests (3,568) (3,244) 28,990 Minority Interests (1,650) (2,268) (5,009) - -------------------------------------------------------------------------------------------------- Income (Loss) from Continuing Operations (5,218) (5,512) 23,981 Discontinued Operations - gain (loss) from discontinued emissions testing business 2,363 (4,710) -- - ------------------------------------------------------------------------------------------------- Income (Loss) Before Extraordinary Item (2,855) (10,222) 23,981 Extraordinary Item - Extinguishment of Debt -- -- (632) - -------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (2,855) $ (10,222) $ 23,349 - -------------------------------------------------------------------------------------------------- EARNINGS (LOSS) PER COMMON SHARE Basic: Income (loss) from continuing operations ($.19) ($.21) $.89 Discontinued emissions testing business .09 (.17) -- Extraordinary item - extinguishment of debt -- -- (.02) ----------------------------------------------------------------------------------------- Net Income (Loss) ($.10) ($.38) $.87 ----------------------------------------------------------------------------------------- Diluted: Income (loss) from continuing operations ($.19) ($.21) $.88 Discontinued emissions testing business .09 (.17) -- Extraordinary item - extinguishment of debt -- -- (.02) ----------------------------------------------------------------------------------------- Net Income (Loss) ($.10) ($.38) $.86 ----------------------------------------------------------------------------------------- Weighted average common shares outstanding: Basic 27,480 27,220 26,920 Diluted 27,660 27,370 27,340 - --------------------------------------------------------------------------------------------------
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 12 15 CONSOLIDATED BALANCE SHEETS ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS) AS OF DECEMBER 31, 1999 & 1998
1999 1998 ASSETS Current Assets: Cash and cash equivalents$ $ 22,085 $ 19,900 Accounts receivable, less allowance for doubtful accounts - 1999, $2,537; 1998, $3,189 87,394 83,739 Inventories 82,713 84,735 Current assets of discontinued emissions testing business - 848 Deferred income taxes 6,966 7,989 Other current assets 4,992 5,752 -------------------------------------------------------------------------------------------------- Total Current Assets 204,150 202,963 -------------------------------------------------------------------------------------------------- Property, Plant and Equipment, net 49,253 61,582 Excess of Cost Over Net Assets of Businesses Acquired 134,723 131,939 Assets of Discontinued Emissions Testing Business - 24,950 Deferred Income Taxes 30,281 16,186 Other Assets 33,023 27,965 - ------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $451,430 $ 465,585 - ------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current maturities of long-term obligations $ 2,181 $ 11,556 Accounts payable 41,139 25,501 Accrued expenses (including accrued wages and commissions - 1999, $10,951; 1998, $14,108) 27,943 29,998 Income taxes payable 2,464 837 Deferred income taxes 2,361 1,606 --------------------------------------------------------------------------------------------------- Total Current Liabilities 76,088 69,498 --------------------------------------------------------------------------------------------------- Long-Term Debt 120,905 128,677 Deferred Income Taxes 3,455 429 Other Liabilities 10,070 16,900 -------------------------------------------------------------------------------------------------- Total Liabilities 210,518 215,504 - ------------------------------------------------------------------------------------------------------------------- Commitments and Contingencies (Note 5) - - - ------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Common Stock, par value $1.00; authorized - 50,000 shares; issued - 1999, 30,010; 1998, 29,759; outstanding - 1999, 27,882; 1998, 27,473 30,010 29,759 Paid-in capital 181,335 180,604 Retained earnings 57,014 59,869 Accumulated other comprehensive loss (10,685) (2,255) Less: Treasury stock - common shares, at cost, 1999, 2,128; 1998, 2,286 shares (14,978) (15,985) Unearned compensation (1,784) (1,911) -------------------------------------------------------------------------------------------------- Total Stockholders' Equity 240,912 250,081 - ------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $451,430 $465,585 - -------------------------------------------------------------------------------------------------------------------
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 13 16 CONSOLIDATED STATEMENTS OF CASH FLOWS ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 & 1997 1999 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) from continuing operations $ (5,218) $ (5,512) $ 23,981 Extraordinary item - extinguishment of debt -- -- (632) --------------------------------------- (5,218) (5,512) 23,349 Adjustments to reconcile income (loss) to operating cash flow: Depreciation 14,914 15,615 12,808 Amortization of goodwill 7,020 6,295 3,404 Amortization of capitalized software 2,776 2,038 2,950 Other amortization 220 685 571 Deferred income taxes 172 (10,315) (8,157) Non-cash loss on write-off of capital assets 3,983 17,010 6,337 Gain on sale of investments (3,378) (16,486) Changes in operating assets and liabilities: Receivables (10,350) 24,496 (14,309) Inventories (1,370) 9,928 (23,954) Accounts payable and accrued expenses 7,344 (26,902) 16,627 Income taxes payable (10,717) (19,287) (1,712) Other, net (520) 169 1,814 - -------------------------------------------------------------------------------------------------------- Cash provided (used) by operating activities 4,876 (2,266) 18,032 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Investments in telecommunications subsidiaries (9,042) (42,103) (46,135) Capital expenditures (9,491) (18,094) (22,247) Capitalized software product costs (1,927) (3,942) (5,307) Sales of investments 9,686 16,833 1,709 Sale of discontinued emissions testing business 9,387 -- -- Sales and retirements of fixed assets 504 334 845 - -------------------------------------------------------------------------------------------------------- Cash used by investing activities (883) (46,972) (71,135) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from (repayment of) long-term borrowings (3,214) 36,676 65,381 Repayment of long-term notes -- -- (15,000) Exercise of stock options 1,059 342 1,428 Treasury stock sold to employee benefit plans 871 1,531 1,651 - -------------------------------------------------------------------------------------------------------- Cash provided (used) by financing activities (1,284) 38,549 53,460 - -------------------------------------------------------------------------------------------------------- Net cash provided (used) by discontinued operations 1,810 (2,081) 7,808 - -------------------------------------------------------------------------------------------------------- NET CASH PROVIDED (USED) 4,519 (12,770) 8,165 Effect of exchange rate changes on cash (2,334) 1,895 (1,269) Cash and cash equivalents at beginning of year 19,900 30,775 23,879 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 22,085 $ 19,900 $ 30,775 - --------------------------------------------------------------------------------------------------------
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 14 17 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS)
COMPREHENSIVE ACCUMULATED FOR THE YEARS ENDED COMMON PAID-IN INCOME RETAINED COMPREHENSIVE TREASURY UNEARNED DECEMBER 31, 1999, 1998 & 1997: TOTAL STOCK CAPITAL (LOSS) EARNINGS INCOME (LOSS) STOCK COMPENSATION - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JANUARY 1, 1997 $225,951 $29,614 $170,945 $46,742 $(510) $(17,932) $(2,908) Comprehensive income: Net income 23,349 -- -- $ 23,349 23,349 -- -- -- --------- Other comprehensive income: Unrealized gain on securities 9,588 -- -- 9,588 -- -- -- -- Less tax on unrealized gain on securities (4,027) -- -- (4,027) -- -- -- -- --------- Net unrealized gain on securities -- -- -- 5,561 -- -- -- -- Minimum pension liability adjustment 206 -- -- 206 -- -- -- -- Foreign currency translation adjustments (5,050) -- -- (5,050) -- -- -- -- --------- Other comprehensive income -- -- -- 717 -- 717 -- -- --------- Comprehensive income -- -- -- $ 24,066 -- -- -- -- ========= Exercise of stock options 1,428 110 1,889 -- -- (571) -- Stock option tax benefits 653 -- 653 -- -- -- -- Treasury stock reissued, 92,268 common shares 1,651 -- 969 -- -- 682 -- Restricted stock, net (126) 22 393 -- -- -- (541) Amortization of unearned compensation 681 -- -- -- -- -- 681 Common stock issued in acquisitions 6,514 -- 5,716 -- -- 798 -- Other 4 -- (27) -- -- 31 -- - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 31, 1997 260,822 29,746 180,538 70,091 207 (16,992) (2,768) Comprehensive loss: Net loss (10,222) -- -- $ (10,222) (10,222) -- -- -- --------- Other comprehensive loss: Unrealized gain on securities in income (9,588) -- -- (9,588) -- -- -- Less tax on unrealized gain in income 4,027 -- -- 4,027 -- -- -- -- --------- Net unrealized gain on securities in income -- -- -- (5,561) -- -- -- -- Minimum pension liability adjustment (240) -- -- (240) -- -- -- -- Foreign currency translation adjustments 3,339 -- -- 3,339 -- -- -- -- --------- Other comprehensive loss -- -- -- (2,462) -- (2,462) -- -- --------- Comprehensive loss -- -- -- $ (12,684) -- -- -- -- ========= Exercise of stock options 342 56 286 -- -- -- -- Stock option tax benefits 138 -- 138 -- -- -- -- Treasury stock reissued, 163,073 common shares 1,531 -- 288 -- -- 1,243 -- Restricted stock, net (557) (43) (646) -- -- (236) 368 Amortization of unearned compensation 489 -- -- -- -- -- 489 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 31, 1998 250,081 29,759 180,604 59,869 (2,255) (15,985) (1,911) Comprehensive loss: Net loss (2,855) -- -- $ (2,855) (2,855) -- -- -- ---------- Other comprehensive loss: Minimum pension liability adjustment 240 -- -- 240 -- -- -- -- Foreign currency translation adjustments (8,670) -- -- (8,670) -- -- -- -- --------- Other comprehensive loss -- -- -- (8,430) -- (8,430) -- -- --------- Comprehensive loss -- -- -- $ (11,285) -- -- -- -- ========= Exercise of stock options 1,059 219 765 -- -- 75 -- Stock option tax benefits 414 -- 414 -- -- -- -- Treasury stock reissued, 131,285 common shares 871 -- (61 -- -- 932 -- Restricted stock, net (619) 32 (387) -- -- -- (264) Amortization of unearned compensation 391 -- -- -- -- -- 391 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 $240,912 $30,010 $181,335 $57,014 $(10,685) $(14,978) $(1,784) ===================================================================================================================================
THE NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 15 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting policies followed by the Company that materially affect the determination of financial position and results of operations are described below. ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. BASIS OF CONSOLIDATION: The Company's consolidated financial statements include the accounts of all wholly owned and majority owned subsidiaries. Intercompany accounts and transactions have been eliminated. To facilitate preparation of financial statements, the Company's principal European operations are included in the consolidated financial statements on a two-month delayed basis. REVENUE RECOGNITION: Revenues are recorded at the time products are shipped or services are performed. Revenues from software licenses for the Company's Wireless Engineering Services business are recognized upon delivery of the software if vendor obligations are insignificant and if collectibility is probable. Revenues from post-contract support that are significant and/or unbundled with regards to the initial licensing fee are recognized ratably over the post-contract period. CASH AND CASH EQUIVALENTS: Cash equivalents consist of temporary bank deposits and money market instruments with an original maturity of three months or less at the date of purchase. The Company invests its domestic excess cash in bank deposits, money market, and tax-exempt securities, which are afforded one of the two highest ratings by nationally recognized ratings firms. Cash held at the Company's foreign subsidiaries is principally invested in bank deposits and money market instruments with maturities less than one month. VALUATION OF INVENTORIES: The Company values inventories including materials, labor and overhead at the lower of cost (first-in, first-out) or market. Inventories consisted of the following at December 31, 1999 and 1998 (amounts in thousands): 1999 1998 Raw material $ 43,608 $ 45,936 Work-in-process 19,343 19,634 Finished goods 19,762 19,165 - ----------------------------------------------------------- $ 82,713 $ 84,735 Certain of these inventories pertain to the production of sophisticated equipment that could be subject to technological obsolescence. The Company maintains and periodically revises reserves for excess inventory based on the most current information available of anticipated usage requirements. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded at cost, less accumulated depreciation and amortization. Land improvements, buildings and machinery and equipment are depreciated over their estimated useful lives under the straight-line method. The provision for amortization of leasehold improvements is based on the term of the related lease or the estimated useful lives, whichever is shorter. Property, plant and equipment consisted of the following at December 31, 1999 and 1998 (amounts in thousands): 1999 1998 Land and improvements $ 2,729 $ 2,806 Buildings 25,684 27,447 Machinery and equipment 76,821 83,701 Leasehold improvements 6,148 6,921 - ----------------------------------------------------------- 111,382 120,875 Less accumulated depreciation and amortization (62,129) (59,293) - ----------------------------------------------------------- $ 49,253 $ 61,582 COMPUTER SOFTWARE COSTS: The Company's policy is to capitalize costs incurred in creating computer software products once technological feasibility is established and to amortize such costs over periods ranging from three to ten years. The Company also capitalizes costs incurred in the development of computerized databases, which are amortized over periods of three to twenty years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. In 1999, 1998 and 1997, approximately $1,927,000, $3,658,000, and $5,307,000, respectively, of these costs were capitalized and approximately $2,776,000, $1,630,000, and $2,950,000, respectively, were amortized (excluding impairment writedowns of $5,359,000 in 1998 and $5,955,000 in 1997). 16 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED (GOODWILL): The excess of investments in consolidated subsidiaries over the net asset value at acquisition is being amortized on a straight-line basis over periods not exceeding forty years. The Company's policy is to evaluate goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss, if required, would be recorded in the period such determination is made based on the fair value of the related businesses. Goodwill is net of accumulated amortization of $24,896,000 and $18,057,000 as of December 31, 1999 and 1998, respectively. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at the current rate of exchange, while revenues and expenses are translated at the average exchange rate during the year. Adjustments from translating foreign subsidiaries' financial statements are excluded from the results of operations and are reported as a component of Accumulated other comprehensive loss. RESEARCH AND DEVELOPMENT COSTS: Expenditures relating to the development of new products and processes, including significant improvements to existing products, are expensed as incurred. Research and development expenses were $26,317,000, $28,812,000, and $26,137,000 in 1999, 1998, and 1997, respectively. In addition, the Company incurred other engineering expenses relating to product development (that do not meet the accounting definition of "Research and Development") in the amount of $1,629,000, $1,930,000, and $4,230,000, in 1999, 1998, and 1997, respectively. STOCK BASED COMPENSATION: The Company accounts for stock based compensation awards pursuant to Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations which prescribe the use of the intrinsic value based method. Accordingly, no compensation cost has been recognized for its fixed stock option plans. However, the Company presents the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation." See Note 4 for additional information. INCOME TAXES: Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. EARNINGS PER COMMON SHARE: Basic earnings per share are based on the weighted average number of common shares outstanding during the period. Diluted earnings per common share are based on the weighted average number of common shares outstanding during the period plus, if dilutive, the incremental number of common shares issuable on a pro forma basis upon the exercise of employee stock options, assuming the proceeds are used to repurchase outstanding shares at the average market price during the year. A reconciliation of the Basic and Diluted shares are provided below (in thousands): 1999 1998 1997 Weighted average common shares outstanding - Basic 27,480 27,220 26,920 Additional common shares issuable for stock options 180 150 420 - -------------------------------------------------------------------------------- Common shares - Diluted 27,660 27,370 27,340 DERIVATIVES FINANCIAL INSTRUMENTS: The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June 1998, which will now be effective for financial statements for all fiscal quarters of all fiscal years beginning after June 15, 2000. Accordingly, the Company will adopt the provisions of the standard on January 1, 2001. The Company utilizes hedging activities primarily in its foreign subsidiaries to limit foreign currency exchange rate risk on receivables. The Company has not yet determined the effect, if any, of the adoption of this Statement on results of operations and financial position. NOTE 2: FINANCING Long-term obligations consisted of the following (amounts in thousands): 1999 1998 Credit agreement borrowings $ 46,235 $ 39,282 Floating rate industrial revenue bonds due 2012 - 2025 11,900 15,500 Senior notes payable due 2001 - 2007 65,000 65,000 Capital lease obligation -- 12,659 Other 350 706 Unamortized debt expense (1,070) (1,400) - -------------------------------------------------------------------------------- 122,415 131,747 Less current maturities (1,510) (3,070) - -------------------------------------------------------------------------------- $ 120,905 $ 128,677 17 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. The Company has a domestic revolving credit agreement in the aggregate amount of $100,000,000 expiring December 31, 2001. Of the total $100,000,000 commitment at December 31, 1999, $19,300,000 has been utilized for the issuance of letters of credit relating principally to the Company's industrial revenue bonds and a deferred payment relating to the Company's acquisition of Mikom G.m.b.H., together with most of the shares of two related European entities. The outstanding borrowings under this domestic revolving credit agreement totalled $41,500,000 at December 31, 1999. The balance of funds available under the revolving credit agreement may be utilized for borrowings or other letters of credit; however, a maximum of $50,000,000 may be allocated to such letters of credit. At December 31, 1999, $39,200,000 was available under this agreement. This obligation is collateralized by substantially all domestic assets. The Company has also pledged 65% of the stock of applicable foreign subsidiaries in support of this obligation. Interest may be determined on a LIBOR or prime rate basis at the Company's option. The Company has agreed to pay a facility fee in the range of .2% to .4% per annum on the total amount of the commitment. During 1999, the average interest rate for all domestic credit agreement borrowings was 7.5%. The Company also has short-term credit lines utilized by its European subsidiaries. At year-end, direct borrowings under these agreements totalled $671,000; an additional $39,500,000 remained unused. These credit lines bear interest based on LIBOR. Foreign long-term debt includes long-term arrangements at fixed and variable rates with the Industry Ministry of Italy totalling $1,192,000 (due 2000 - 2008), and variable rate borrowings with various international banks of $3,799,000 (due 2000 - 2005). Further, two of the aforementioned arrangements are mortgage notes, under which the Company has pledged the respective land and buildings as collateral. These facilities had an aggregate net book value of $8,551,000 at year-end 1999. During 1999, the average interest rate for all foreign credit arrangements approximated 5.3%. The floating rate industrial revenue bonds bear interest at rates based upon a short-term tax exempt bond index, as defined in the bonds, which approximated 5.6% at December 31, 1999. The average interest rate for all industrial revenue borrowings approximated 3.3% during 1999. In 1997, the Company issued $65,000,000 of notes in a private placement transaction. These notes have a weighted average life of 7 1/2 years and a weighted average interest rate of 6.65%. The notes are collateralized and rank equally with the Company's other secured indebtedness. A portion of the proceeds was used to prepay a $15,000,000 note payable. As a result of such prepayment, the differences between the call premium and costs of reacquisition and net carrying amount of the debt in the pretax amount of $996,000, or $.02 per basic and diluted share after related income tax benefit, has been reported as an "Extraordinary item" in the Consolidated Statement of Operations. The aggregate maturities of long-term obligations for the years 2000 through 2004 are as follows (amounts in thousands): 2000 2001 2002 2003 2004 --------------------------------------- $1,510 $45,388 $11,502 $11,369 $8,206 The Company's borrowing agreements include various restrictive covenants as to the amount and type of indebtedness, investments and guarantees, maintenance of net worth, working capital, earnings before interest, taxes, depreciation and amortization, the purchase or redemption of the Company's shares and the disposition of assets of the Company not in the ordinary course of business. NOTE 3: OTHER ASSETS, LIABILITIES AND INCOME Other assets consisted of the following (amounts in thousands): 1999 1998 Capitalized computer software and database files $ 7,365 $ 8,894 Insurance deposits 7,765 5,850 Other 17,893 13,221 - ---------------------------------------------------------------------- $33,023 $27,965 Other liabilities consisted of the following (amounts in thousands): 1999 1998 Minority interests $ 563 $ 6,297 Long-term pension and postretirement benefits 5,973 6,212 Other 3,534 4,391 - ---------------------------------------------------------------------- $10,070 $16,900 18 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. The components of Other income, net pertains principally to gains and losses from telecommunication investments and is comprised of the following (amounts in thousands): 1999 1998 1997 RF Micro Devices Inc. $ (165) $ 14,400 $ 300 NextWave Telecom Inc. 3,500 (6,638) -- Other 35 (1,697) 1,585 - --------------------------------------------------------------------- $ 3,370 $ 6,065 $ 1,885 In 1998, the Company sold its investment in RF Micro Devices. This investment was accounted for pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Accordingly, in 1997, such investment was adjusted to fair value with the resultant unrealized appreciation, net of related income tax effects, and included in Stockholders Equity as "Accumulated other comprehensive income (loss)". Also, in 1998, the Company recognized an impairment in the entire carrying value of its investment in and receivable from NextWave Inc. (a C-Block wireless communications carrier) as certain subsidiaries of NextWave filed for relief under Chapter 11 of the United States Bankruptcy Code. In 1999, the Company sold its investment in NextWave and recognized the above noted gain. Also in 1998, the Company wrote off its investment in Windata Inc. as a result of that company's decision to liquidate with no recovery to the Company. Other income in 1997 relates primarily to a gain from the sale of an investment in a telecommunications company. NOTE 4: CAPITAL STOCK AND STOCK COMPENSATION PLANS The Company is authorized to issue up to 50,000,000 shares of common stock, $1.00 par value, and 3,000,000 shares of preferred stock, without par value, in one or more series. In addition, 500,000 shares of Series C Junior Participating Preferred Stock are authorized for issuance under the Company's Stockholder Rights Plan. The Company can fix the powers, designations, preferences and rights of each of the preferred stock series. The Company has two active stock option plans, the 1992 Stock Plan and the 1994 Non-Employee Directors Stock Option Plan. The 1982 Stock Plan, under which options still remain outstanding, was terminated in 1992. The Company's 1992 Stock Plan provides for the granting of options (and restricted shares as discussed below) to key employees as determined by the Management Compensation Committee of the Board of Directors. The total number of shares for which the Company may grant options and award restricted shares of common stock under the 1992 Stock Plan cannot exceed 3,528,221 shares, subject to certain adjustments. Options are awarded at a price not less than the fair market value on the date the option is granted, have a ten-year term whereby 50% of the option shares vest after two years and an additional 25% in each of years three and four. Options may contain stock appreciation rights under which the Company, upon request of the optionee, may, at its discretion, purchase the exercisable portion of an option for cash and/or shares at a price equal to the difference between the option price and the market price of the shares covered by such portion of the option in lieu of issuing shares upon exercise. There were no exercises of stock appreciation rights in 1999, 1998 and 1997. Pursuant to the 1994 Non-Employee Directors Stock Option Plan, the total number of shares to be issued may not exceed 278,528 shares. Each Non-Employee Director who previously had not been employed by the Company automatically receives an option to purchase 3,000 shares of common stock per year ("Formula Awards"). No Non-Employee Director who previously has been employed by the Company is eligible to receive Formula Awards. Non-Employee Directors who have been previously employed by the Company are eligible to receive discretionary awards of options to purchase shares of common stock under the 1994 Stock Plan. Formula awards and discretionary awards granted under the 1994 Stock Plan have a ten-year term and vest in the same manner as the 1992 Stock Plan, subject to certain accelerated vesting upon the cessation of service. In addition to the foregoing, certain Non-Employee Directors may receive non-qualified discretionary awards of options to purchase shares of common stock which are not pursuant to the 1994 Stock Plan. The options which are not pursuant to the 1994 Stock Plan are awarded at a price not less than the fair market value on the date the option is granted, have a ten-year term and either vest ~33 1/3% on each of the first, second and third anniversaries of the grant or vest in the same manner as the 1992 and 1994 Stock Plans, depending upon the grant. Additionally, the non-qualified awards are subject to certain accelerated vesting upon cessation of service. 19 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. The following table summarizes the status of outstanding options as of December 31, 1999: STOCK OPTIONS OUTSTANDING ------------------------------------ WEIGHTED AVERAGE STOCK OPTIONS EXERCISABLE ---------------- ------------------------- RANGE OF CONTRACTUAL EXERCISE WEIGHTED AVERAGE EXERCISE PRICES SHARES LIFE PRICE SHARES EXERCISE PRICE $ 4.79 - $10.77 1,155,555 7.83 years $ 7.37 185,555 $ 6.58 $11.27 - $19.97 1,025,448 6.53 years $15.91 547,773 $15.59 $20.00 - $28.00 442,761 6.17 years $21.55 362,553 $21.59 - ---------------------------------------------------- --------- ------ $ 4.79 - $28.00 2,623,764 7.04 years $13.10 1,095,881 $16.05 Stock option activity for the three years ended December 31, 1999 is summarized as follows: WEIGHTED AVERAGE EXERCISE SHARES PRICE -------------------------- Balance, December 31, 1996 1,709,464 $14.19 Granted (weighted average fair value $9.97) 498,500 $18.11 Exercised (146,872) $12.07 Terminated and cancelled (92,389) $19.61 - -------------------------------------------------------------------------- Balance, December 31, 1997 1,968,703 $15.08 Granted (weighted average fair value $8.79) 558,600 $15.55 Exercised (56,094) $ 6.06 Terminated and cancelled (353,110) $18.02 - -------------------------------------------------------------------------- Balance, December 31, 1998 2,118,099 $14.96 Granted (weighted average fair value $4.63) 1,032,500 $ 7.58 Exercised (246,246) $ 4.30 Terminated and cancelled (280,589) $14.51 - -------------------------------------------------------------------------- Balance, December 31, 1999 2,623,764 $13.10 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for stock option grants: expected volatility of 56%, 51% and 47%, risk free interest rates of 5.49%, 5.31% and 6.38%, and expected lives of 7.1 years, 6.3 years and 6.2 years for 1999, 1998 and 1997, respectively. The calculations assume no future dividend payments for grants in 1999, 1998 and 1997. Restricted stock awards made to date under the 1992 Stock Plan were issued at no cash cost to the recipients; however, such employees generally agreed to forego salary increases and new stock option grants for a period of two years, other than for exceptional promotions. The restricted shares generally vest in 25% increments in the seventh, eight, ninth and tenth year from the year of award. An accelerated vesting schedule may be triggered if certain performance targets are achieved. Specifically, the vesting of 50% of such shares may be accelerated (but not sooner than three years from the award year) based upon the average sale price of the Company's stock price during a period of 91 consecutive calendar days exceeding specified target levels. The remaining 50% of such shares may be accelerated based on average earnings per common share over three consecutive fiscal years exceeding specified target levels beginning with the award year. Restricted shares are subject to forfeiture in certain circumstances as defined in the 1992 Stock Plan. Restricted stock activity for the three years ended December 31, 1999 is summarized as follows: SHARES Balance, December 31, 1996 274,930 Granted (weighted average fair value $18.94) 40,000 Vested (11,848) Terminated and cancelled (17,626) - -------------------------------------------------------------------------------- Balance, December 31, 1997 285,456 Granted (weighted average fair value $16.50) 20,000 Vested (37,365) Terminated and cancelled (62,841) - -------------------------------------------------------------------------------- Balance, December 31, 1998 205,250 Granted (weighted average fair value $8.00) 50,000 Vested (2,517) Terminated and cancelled (18,434) - -------------------------------------------------------------------------------- Balance, December 31, 1999 234,299 Unearned compensation with respect to restricted shares, representing the fair value of the restricted shares at the date of award, is charged to income over a ten-year period or the period of actual vesting whichever is shorter. Compensation expense with respect to restricted shares, net of forfeitures, amounted to $193,000 in 1999, $26,000 in 1998, and $424,000 in 1997. At December 31, 1999 and 1998, 3,773,797 and 3,823,344 common shares, respectively, were reserved for outstanding stock options and for future grants of stock options and restricted shares under all Stock Plans. If the Company had elected to recognize compensation cost for its stock based compensation plans based on the fair value at the grant dates for awards under those plans in accordance with SFAS No. 123, net income and earnings per common share would have been reduced to the pro forma amounts below (amounts in thousands, except per share data): 1999 1998 1997 Net income (loss): As reported ($2,855) ($10,222) $23,349 Pro forma ($5,035) ($12,042) $21,562 Earnings (loss) per common share: Basic: As reported ($.10) ($.38) $.87 Pro forma ($.18) ($.44) $.80 Diluted: As reported ($.10) ($.38) $.86 Pro forma ($.18) ($.44) $.80 20 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. NOTE 5: COMMITMENTS AND CONTINGENCIES The Company's leases consist primarily of facilities and equipment and expire principally between 2000 and 2004. A number of leases require that the Company pay certain executory costs (taxes, insurance and maintenance) and contain renewal and purchase options. Annual rental expense for operating leases approximated $4,400,000 in 1999, $3,900,000 in 1998 and $4,600,000 in 1997. Future minimum payments under noncancelable operating leases as of December 31, 1999 were as follows (amounts in thousands): 2000 2001 2002 2003 2004 Total --------------------------------------------------------- $3,051 $3,046 $2,818 $2,655 $1,365 $12,935 The Company is self-insured for health care and workers compensation up to predetermined amounts above which third party insurance applies. The Company is fully insured through third party insurance for general liability and product liability. The Company is contingently liable to insurance carriers under its workers compensation and liability policies and has provided letters of credit in favor of these carriers in the amount of $1,045,000. In 1996, the Company entered into an agreement to make an equity investment in NextWave Telecom Inc. ("NextWave"), and whereby NextWave agreed to purchase $50,000,000 of equipment and services over a five-year period from the Company. In connection with this agreement, subject to certain preconditions that have not yet occurred, the Company agreed to provide secured product financing in addition to its investment. In 1998, certain subsidiaries of NextWave filed for relief under Chapter 11 of the United States Bankruptcy Code and in 1999 the Company sold its equity investment in NextWave; accordingly, this commitment is, at this time, unlikely to be fulfilled. In the normal course of business the Company is subject to legal proceedings, lawsuits and other claims involving such matters as product liability, casualty claims and employment practices. In the opinion of management, after review and consultation with counsel, the Company is not presently party to any such litigation that would have a material adverse effect on its business, consolidated financial position, results of operations or cash flow. The Company is subject to federal, state and local laws designed to protect the environment and believes that, as a general matter, its policies, practices, and procedures are properly designed to reasonably prevent risk of environmental damage and financial liability to the Company. The Company has identified potential environmental damage at one formerly occupied manufacturing facility. In this regard, the Company engaged a contractor to evaluate the site and determine the cost, if any, to resolve environmental damage at this site. While the ultimate cost cannot yet be specifically determined, the Company currently believes the costs of remediation will not exceed $200,000. The Company also believes it is reasonably possible that environmental related liabilities may exist with respect to one industrial site formerly occupied by the Company. Based upon environmental site assessments, the Company believes that the cost of any potential remediation, for which the Company may ultimately be responsible, will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. NOTE 6: PENSION AND POSTRETIREMENT BENEFIT PLANS The Company has noncontributory pension plans covering the majority of its full-time domestic employees. Plans covering salaried employees provide benefits that are based on years of service and compensation during the ten-year period prior to retirement, while for hourly employees it typically provides benefits based on specified amounts for each year of service. In 1999, the Company merged its Corporate and Hourly pension plans. Domestic pension costs are funded in compliance with the requirements of the Employee Retirement Income Security Act of 1974, as amended, as employees become eligible to participate, generally upon employment. Net periodic pension cost of continuing operations for the Company's plans included the following components (amounts in thousands): 1999 1998 1997 Service cost benefits earned during the year $ 1,413 $ 1,549 $ 1,204 Interest cost on the projected benefit obligation 2,404 2,261 2,244 Actual income on plan assets (5,970) (1,779) (5,602) Net settlement gain 13 (29) -- Net amortization and deferral 3,395 (880) 3,576 - ------------------------------------------------------------------------------- Net periodic pension cost $ 1,255 $ 1,122 $ 1,422 Plan assets consist principally of equity securities (including 92,000 common shares of the Company). 21 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. A reconciliation of the plans' projected benefit obligation, fair value of plan assets, and funding status is as follows (amounts in thousands): 1999 1998 Projected benefit obligation: Balance, beginning of year $ 35,348 $ 31,341 Service cost 1,413 1,549 Interest cost 2,404 2,261 Benefits paid (2,241) (2,076) (Gain)/Loss recognized (4,215) 2,856 Settlements and other 1,170 (583) - ------------------------------------------------------------------------------- $ 33,879 $ 35,348 Fair value of plan assets: Balance, beginning of year $ 28,312 $ 28,086 Return on assets 5,970 1,779 Employer contributions 485 523 Benefits paid and plan expenses (2,241) (2,076) - ------------------------------------------------------------------------------- $ 32,526 $ 28,312 Funding Status: Projected benefit obligation $(33,879) $(35,348) Fair value of plan assets 32,526 28,312 - ------------------------------------------------------------------------------- Unfunded obligation (1,353) (7,036) Unrecognized: Net (gain)/loss (4,842) 2,190 Prior service cost 1,942 1,739 Transition assets (76) (135) Additional minimum liability -- (694) - ------------------------------------------------------------------------------- Accrued liability $ (4,329) $ (3,936) With respect to certain of the Company's pension plans, the accumulated pension obligation exceeds the fair value of the plan assets, as follows (amounts in thousands): 1999 1998 Accumulated benefit obligation $4,282 $7,502 Related fair value of plan assets - 2,767 The weighted average rates used in determining pension cost for the plans are: 1999 1998 Discount rate 7 3/4% 6 3/4% Expected rate of increase in compensation 5% 5% Expected long-term rate of return on plan assets 9 3/4% 9 3/4% The Company provides health care and life insurance benefits for certain retired employees who reach retirement age while working for the Company. The components of the expense for postretirement health care and life insurance benefits from continuing operations are as follows (amounts in thousands): 1999 1998 1997 Service cost benefits attributed to service during period $ 3 $ 4 $ 6 Interest cost on accumulated postretirement benefit obligation 101 105 110 Amortization of (gain) loss (1) 2 (3) - -------------------------------------------------------------------------------- Net postretirement health care cost $ 103 $ 111 $ 113 The components of the accumulated postretirement benefit obligations (all of which are unfunded) are as follows (amounts in thousands): 1999 1998 1997 Retirees $1,409 $1,403 $1,319 Fully eligible active plan participants 125 69 96 Other active plan participants -- 72 87 Unrecognized net gain 110 60 74 - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligations $1,644 $1,604 $1,576 A reconciliation of the accumulated postretirement benefit obligation is as follows (amounts in thousands): 1999 1998 Balance as of January 1 $ 1,604 $ 1,576 Net postretirement benefit cost: Service cost 3 4 Interest Cost 101 105 Amortization of gains/(losses) (1) 2 Actual benefits paid (63) (83) - -------------------------------------------------------------------------------- Balance as of December 31 $ 1,644 $ 1,604 The actuarial calculation assumed a health care cost trend rate of 8.4% for 1999 (9.2% in 1998 and 9.6% in 1997). The assumed trend rate was reduced based on the most current data. The assumed rate decreases approximately .4% per year through the year 2009 to 5.0% and remains constant beyond that point. Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage-point change (plus or minus) in the assumed health care cost trend rules would have the following effects (amounts in thousands): Plus 1% Point Minus 1% Point Effect on total of service and interest cost components $ 4 $ (4) Effect of postretirement benefit obligation $ 47 $ (42) The weighted average discount rate used in determining the accumulated postretirement benefit obligations was 7.75% in 1999, 6.75% in 1998 and 7.25% in 1997. 22 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. NOTE 7: INCOME TAXES Information with respect to income taxes in continuing operations is as follows (amounts in thousands): 1999 1998 1997 Income (loss) before taxes and minority interests: Domestic $(21,804) $(22,892) $ 5,351 Foreign 16,392 14,338 41,362 - -------------------------------------------------------------------------------- $ (5,412) $ (8,554) $ 46,713 (Benefit) Provision for income taxes: Current: Federal $(11,779) $ (6,206) $ 2,247 Foreign 9,363 10,661 22,867 State and local 400 550 766 - -------------------------------------------------------------------------------- (2,016) 5,005 25,880 - -------------------------------------------------------------------------------- Deferred: Federal (946) (5,472) (5,275) Foreign 1,740 (4,571) (542) State and local (622) (272) (2,340) - -------------------------------------------------------------------------------- 172 (10,315) (8,157) - -------------------------------------------------------------------------------- $ (1,844) $ (5,310) $ 17,723 A reconciliation of the (benefit) provision for income taxes at the U.S. Federal statutory rate of 35% to the reported tax is as follows (amounts in thousands): 1999 1998 1997 (Benefit) provision computed at the U.S. Federal statutory rate $ (1,894) $ (2,994) $ 16,350 State and local income taxes, net of Federal income tax effect 246 311 (1,023) Net higher tax rates on foreign income 1,229 406 7,016 Benefit of foreign sales corporation and other tax credits (1,025) (1,513) (2,115) Impact of tax rate change on prior undistributed foreign earnings (998) (3,670) -- Other, net 598 2,150 (2,505) - -------------------------------------------------------------------------------- $ (1,844) $ (5,310) $ 17,723 The following table summarizes the Company's total provision (benefit) for income taxes (amounts in thousands): 1999 1998 1997 Continuing operations $ (1,844) $ (5,310) $ 17,723 Discontinued operations 1,403 (2,640) -- Extraordinary item -- -- (364) Tax benefit of carryforward allocated to goodwill -- -- 6,085 Allocated to equity: Unrealized appreciation on investment securities -- -- 4,027 Stock options (415) (139) (653) Pension gain (loss) 148 (148) 149 - -------------------------------------------------------------------------------- $ (708) $ (8,237) $ 26,967 The components of deferred tax assets (liabilities) are comprised of the following as of December 31, 1999 and 1998 (amounts in thousands): 1999 1998 Gross deferred tax assets: Inventory $ 7,108 $ 5,718 Bad debt reserves 802 3,506 Pensions and deferred compensation 1,910 1,605 Tax credit carryforwards 3,280 2,546 Plant consolidation reserve 2,330 4,405 Net operating loss carryforwards 20,268 11,512 Unremitted foreign earnings 6,268 4,747 Other 941 1,724 - -------------------------------------------------------------------------------- 42,907 35,763 Gross deferred tax liabilities: Intangible assets (1,543) (1,808) Depreciation (320) (1,370) Deferred start-up costs -- (1,850) Other (9,613) (8,595) - -------------------------------------------------------------------------------- (11,476) (13,623) - -------------------------------------------------------------------------------- Net deferred tax asset $ 31,431 $ 22,140 During 1999, 1998, and 1997, general business tax credits of approximately $600,000, $835,000 and $900,000 generated in the respective years were used to reduce the provision for income taxes. At December 31, 1999, the Company has available alternative minimum tax credits in the amount of $476,000 available to reduce future Federal income tax liabilities. United States income taxes are not provided on undistributed earnings of the Company's foreign subsidiaries because of the intent to reinvest these earnings. The amount of undistributed earnings which are considered to be indefinitely reinvested is approximately $55,000,000 at December 31, 1999. While the amount of federal income taxes, if such earnings are distributed in the future, cannot now be determined, such taxes may be reduced by tax credits and other deductions. The Company has U.S. net operating loss carryforwards totalling approximately $58,000,000 available to reduce future taxable income. Of such carryforwards, $4,800,000 expires in 2011 and $53,200,000 in 2018 through 2019. At December 31, 1999, the Company has recorded a net U.S. deferred tax asset pertaining to the recognition of the benefit on the aforementioned operating loss carryforwards, net deductible temporary differences and tax credits in the amount of approximately $31,200,000 and has not provided any valuation allowance with respect thereto. The Company believes the realization of this asset is "more likely than not." 23 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. NOTE 8: INDUSTRY SEGMENT AND GEOGRAPHIC DATA The Company conducts its business through two segments, based on products provided and services rendered: Telecommunications Equipment Manufacturing and Wireless Engineering Services. Telecommunications Equipment Manufacturing consists of three product lines: Systems Products, Site Management and Other Non-Antenna Products, and Mobile and Base Antennas. The following shows the operating results and asset positions for each of the reportable segments for the years ended December 31, 1999, 1998, and 1997 (amounts in thousands). 1999 1998 1997 Results of Operations: Segment Results: Telecommunications equipment manufacturing $ 11,098 $ 12,256 $ 60,812 Wireless engineering services 1,034 (7,867) (2,573) - -------------------------------------------------------------------------------- 12,132 4,389 58,239 Other income, net 3,370 6,065 1,885 Goodwill amortization (7,020) (6,295) (3,404) General corporate expenses (5,748) (5,908) (6,956) Interest expense, net (8,146) (6,805) (3,051) - -------------------------------------------------------------------------------- Income (loss) before taxes and minority interests $ (5,412) $ (8,554) $ 46,713 Assets: Segment Assets: Telecommunications equipment manufacturing $ 248,148 $ 244,487 $ 271,046 Wireless engineering services 14,579 16,527 20,918 - -------------------------------------------------------------------------------- 262,727 261,014 291,964 Goodwill 134,723 131,939 126,923 Assets of discontinued emissions testing business -- 25,799 33,363 Deferred income taxes 37,247 24,175 7,244 Other general corporate assets 16,733 22,658 54,939 - -------------------------------------------------------------------------------- Total assets $ 451,430 $ 465,585 $ 514,433 Sales to external customers: Telecommunications equipment manufacturing $ 311,137 $ 360,589 $ 396,828 Wireless engineering services 22,560 27,415 35,680 - -------------------------------------------------------------------------------- Total sales $ 333,697 $ 388,004 $ 432,508 Depreciation and software amortization: Telecommunications equipment manufacturing $ 14,296 $ 13,990 $ 12,072 Wireless engineering services 3,264 3,510 3,532 Fixed asset and capitalized software additions: Telecommunications equipment manufacturing $ 10,730 $ 18,361 $ 24,220 Wireless engineering services 643 3,635 3,296 The distribution of the Company's geographic sales and long-lived assets (excluding deferred income tax) is as follows (amounts in thousands): Sales: 1999 1998 1997 United States $ 177,256 $ 230,997 $ 272,346 Italy 110,701 113,401 117,607 Germany 55,055 50,905 48,622 Other 59,429 71,115 69,309 Intergeographic (68,744) (78,414) (75,376) - -------------------------------------------------------------------------- $ 333,697 $ 388,004 $ 432,508 Long-lived assets: 1999 1998 1997 United States $ 190,950 $ 220,505 $ 249,071 Italy 12,650 13,347 12,484 Germany 8,181 7,487 7,014 Other 5,218 5,097 3,828 - -------------------------------------------------------------------------- $ 216,999 $ 246,436 $ 272,397 Sales by product line for the Telecommunications Equipment Manufacturing segment are presented in the bar charts on page 28. NOTE 9: ACQUISITIONS AND DISPOSITIONS In 1999, the Company acquired the remaining outstanding 26% minority interest in its Mikom G.m.b.H. ("Mikom") subsidiary, together with most of the shares in two related European entities. Total consideration was approximately $17,556,000, including $9,290,000 paid in cash in 1999 and $8,266,000 payable, in cash, in the future (included in Accounts Payable). In 1998, the Company acquired additional minority interests in several subsidiaries. In June 1998, the Company acquired an additional 10% of Telia S.A. ("Telia") in France bringing its ownership interest to 72%. In July 1998, the Company acquired the remaining 40% minority interest of Mikom Vertriebs und Service G.m.b.H., in Austria. In October 1998, the Company acquired an additional 12% interest in Mikom, bringing its total interest to 74%. In November 1998, the Company acquired the remaining outstanding 35.7% minority interest in Tekmar Sistemi S.r.l. in Italy. All such transactions were in cash and aggregated approximately $15,400,000. In 1997, the Company acquired the remaining 20% minority interest in FOR.E.M. S.r.l. ("FOREM"). In a series of transactions to acquire this 20% minority interest, the Company paid $31,297,000 in cash and 261,014 shares of the Company's common stock with an aggregate value of approximately $6,000,000. The final purchase price was contingent upon the net income of FOREM's 1997 fiscal year. The final cash payment in the amount of approximately $26,400,000 was paid in 1998. In 1997, the Company acquired 62% of the stock of Telia for a purchase price comprised of approximately $3,000,000 in cash and shares of the Company's stock. This transaction was recorded under the purchase 24 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. method of accounting. The remaining 28% ownership interests of Telia, which are held by senior Telia management, is subject to put and call options, which provide for a purchase price based upon future operating results. On March 1, 1999, the Company sold its MARTA Technologies, Inc. ("Marta") subsidiary, which operated its discontinued centralized automotive emissions testing business, to a subsidiary of Environmental Systems Products, Inc. (ESP). Pursuant to the terms of the agreement, the Company received cash of $9,387,000 and a three year, $3,000,000, 12% installment note in exchange for the outstanding capital stock of Marta. Previously contingent purchase price in the amount of $2,000,000 was earned, when, in February 2000, ESP was awarded an emissions testing contract. The additional purchase price consideration is in the form of a 12% installment note. Accordingly, the Company expects, in the first quarter of 2000, to report additional gain from disposal of discontinued operations, as finally determined, net of related income taxes. The gain on sale of this discontinued operation, in the amount of $2,363,000 is net of related income taxes in the amount of $1,403,000. In 1998, the Company recognized an additional loss for this business in the pretax amount of $7,350,000, $4,710,000 after related income tax benefit of $2,640,000, relating principally to the diminution in the estimated value of an emissions testing program. NOTE 10: FAIR VALUES OF FINANCIAL INSTRUMENTS Financial Accounting Standards Board ("FASB") Statements No. 107, "Disclosure about Fair Value of Financial Instruments," and No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," are part of a continuing process by the FASB to improve information regarding financial instruments. The following methods and assumptions were used by the Company in estimating its fair value disclosures for such financial instruments as defined by the Statements. CASH AND SHORT-TERM INVESTMENTS: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. LONG-TERM INVESTMENTS: It is not practicable to estimate the fair value of the Company's 8% investment in the common stock of its former specialty rubber products business including certain other investments in telecommunications companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. However, management believes that the carrying amounts recorded at December 31, 1999 and December 31, 1998 reflect the corresponding fair value. LONG-TERM DEBT: The fair values of the Company's long-term debt either approximate fair value or are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. OFF-BALANCE-SHEET INSTRUMENTS: The Company utilizes letters of credit to back certain financing instruments, insurance policies and payment obligations. The letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined. The Company enters into foreign currency contracts to offset the impact of currency rate changes related to accounts receivable and certain payment obligations. The fair value of such contracts are based on quoted market prices of comparable contracts. The carrying amounts and fair values of financial instruments at December 31, 1999 and 1998 are as follows (amounts in thousands):
Carrying Amount Fair Value ----------------------------------------- 1999 1998 1999 1998 Cash and cash equivalents $ 22,085 $ 19,900 $ 22,085 $ 19,900 Non-current investments 4,334 5,195 4,334 5,195 Long-term debt 124,156 141,633 124,156 145,175 Off balance sheet financial instruments: Letters of credit 6,933 1,220 6,933 1,220 Foreign currency net sales contracts 14,746 5,523 14,204 5,519
NOTE 11: SUPPLEMENTAL CASH FLOW DISCLOSURE The following non-cash items were effected and are not reflected in the Consolidated Statement of Cash Flows: As described in Note 9, the Company sold Marta assets of $22,958,000 and, further, the purchaser assumed a $12,436,000 capital lease obligation. In 1999, the Company purchased the remaining outstanding interest in Mikom and two affiliated European companies. This acquisition resulted in additional Goodwill of $9,608,000. This acquisition also increased Accounts Payables by $8,266,000 and eliminated minority interest liability of $6,500,000. There were no significant non-cash transactions in 1998. In 1997, the Company acquired 62% of Telia and the remaining 20% minority interest in FOREM, in exchange for, in part, 289,389 shares of its common stock. In 1997, the Company owned common stock and warrants in RF Micro Devices, Inc. On December 31, 1997, the Company increased its investment value to reflect its current trading value on that date of $12,668,000, and recorded the related unrealized appreciation in the pretax amount of $9,588,000 ($5,561,000 after related income tax effect) to Stockholders' Equity as "Accumulated other comprehensive income (loss)." Information with respect to cash paid during the year for interest and taxes is as follows: 1999 1998 1997 Interest paid $ 9,240,000 $ 8,020,000 $ 4,097,000 Interest capitalized -- 286,000 220,000 Income taxes paid, net 8,605,000 24,096,000 27,514,000 25 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ALLEN TELECOM INC. NOTE 12: SPECIAL CHARGES In 1999, 1998 and 1997, the Company incurred special charges pertaining to the discontinuation of certain product lines, the closing and consolidation of manufacturing facilities and other items. Such costs are included in the Consolidated Statement of Operations as follows (amounts in thousands):
1999 1998 1997 Cost of sales $ 6,109 $12,539 $ 3,957 Selling, general and administrative expenses 5,877 6,886 5,693 Research and development and product engineering costs 325 -- -- - ------------------------------------------------------------------------------------ $12,311 $19,425 $ 9,650
In 1999, such costs included provisions for the closure of a manufacturing facility, the termination of substantially all employees (principally direct labor) and for a loss on the sale of the facility and disposal of equipment. The following is a summary of the exit costs incurred (amounts in thousands, except employee data): Severance --------------------- Sale of Number of Building Accrual Employees And Equipment Other Accrual $1,531 115 $3,764 $1,110 Charged against accrual (157) (22) (1,493) (593) - -------------------------------------------------------------------------------- Balance, December 31, 1999 $1,374 93 $2,271 $ 517 The Company's plans call for the complete discontinuance of operations for the facility in early 2000. NOTE 13: UNAUDITED QUARTERLY FINANCIAL DATA Quarterly financial data are summarized as follows (amounts in thousands, except per share amounts):
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 1999 Sales $ 75,913 $ 77,501 $ 89,536 $ 90,747 Gross profit 22,230 23,357 25,848 17,714 Income (loss) from continuing operations (1,436) 17 2,632 (6,431) Gain from discontinued operations 2,363 -- -- -- Net income (loss) 927 17 2,632 (6,431) - ---------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share Basic and Diluted: Continuing operations $ (.05) -- $ .10 $ (.23) Discontinued operations .08 -- -- -- Net income .03 -- .10 (.23) - ---------------------------------------------------------------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 1998 Sales $113,369 $ 98,013 $ 90,955 $ 85,667 Gross profit 35,748 17,662 21,928 19,262 Income (loss) from continuing operations 6,338 (11,134) 2,598 (3,314) Loss from discontinued operations -- -- (4,710) -- Net income (loss) 6,338 (11,134) (2,112) (3,314) - ---------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share Basic and Diluted: Continuing operations $ .23 $ (.41) $ .10 $ (.12) Discontinued operations -- -- (.17) -- Net income (loss) .23 (.41) (.07) (.12) - ----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations in the third quarter of 1999 includes net gains in the amount of $3,013,000 ($.07 per basic and diluted share) pertaining principally to a gain on the sale of a telecommunications investment. Net income for the three months ended December 31, 1999 includes a $998,000 deferred tax benefit, or $.04 per basic and diluted share, with respect to a change in the applicable income tax rate on the undistributed earnings (prior to 1999) of a foreign subsidiary. In the fourth quarter of 1999, the Company recorded a $12,311,000 before-tax special charge to earnings, or $.29 per basic and diluted share after related income taxes. (See Note 12 for additional information.) In the second quarter of 1998, the Company recorded a $15,800,000 before-tax special charge to earnings, or $.38 per basic and diluted share after related income taxes. Of this amount, $12,200,000 is recorded in cost of sales, and $3,600,000 in selling, general and administrative expenses. In the fourth quarter of 1998, the Company recorded a $3,600,000, before-tax special charge to earnings, or $.09 per basic and diluted share after related income taxes, of this amount, $300,000 is recorded in cost of sales, and $3,300,000 in selling, general and administrative expenses. Such charges relate to inventory, other asset write-off and employee terminations. Income (loss) from continuing operations in the third quarter of 1998, includes net gains in the amount of $7,797,000, $.17 per basic and diluted share after related income taxes, from the sale of investments in telecommunication companies and the recognition of losses in other telecommunication ventures. Similar to that mentioned above, net income for the three months ended September 30, 1998, includes a $3,700,000 deferred tax benefit, or $.13 per basic and diluted share, with respect to a change in the applicable income tax rate on the undistributed earnings (prior to 1998) of a foreign subsidiary. 26 29 REPORT of INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Allen Telecom Inc. We have audited the accompanying consolidated balance sheet of Allen TeIecom Inc. and its subsidiaries (the "Company") as of December 31,1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. 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 audit. The financial statements of Allen Telecom Inc. and its subsidiaries as of December 31, 1998 and for the years ended December 31, 1998 and 1997 were audited by other auditors whose report, dated February 16, 1999 (except as to paragraph five of Note 9, which is as of March 1, 1999), expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the financial position of Allen Telecom Inc. and its subsidiaries as of December 31, 1999, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Cleveland, Ohio February 16, 2000 REPORT OF MANAGEMENT To the Board of Directors and Stockholders of Allen Telecom Inc. The Company maintains accounting and related internal control systems which are intended to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and to produce records necessary for the preparation of financial information. There are limits inherent in all systems of internal control, and the cost of the systems should not exceed the expected benefits. Through the use of a program of internal audits and discussions with and recommendations from its independent accountants, the Company periodically reviews these systems and controls and compliance therewith. The Audit Committee of the Board of Directors, comprised entirely of non-employee directors, meets regularly with management, the internal auditors and the independent accountants to review the results of their work and to satisfy itself that their responsibilities are being properly discharged. The internal auditors and independent accountants have full and free access to the Audit Committee and may have discussions regarding appropriate matters with and without the presence of management. The primary responsibility for the integrity of financial information rests with management. Certain valuations contained herein result, of necessity, from estimates and judgments of management. Actual results could differ from these estimates. The accompanying consolidated financial statements, notes thereto and other related information were prepared in conformity with generally accepted accounting principles. /s/ Robert G. Paul Robert G. Paul President and Chief Executive Officer /s/ Robert A. Youdelman Robert A. Youdelman Executive Vice President and Chief Financial Officer /s/ James L. LePorte James L. LePorte, III Vice President - Finance 27 30 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC.
Results of Operations OVERVIEW ($ millions) 1999 1998 1997 Sales $ 333.7 $ 388.0 $ 432.5 Operating income (before financing costs, special charges and credits discussed below) 12.0 11.6 57.1 Income (loss) before taxes and minority interests (5.4) (8.5) 46.7
In 1999, sales declined by $54.3 million, or 14%, due primarily to decreases in the sales of Site Management and Antenna products. Continued weakness in Asia and some parts of South America contributed to the weakness in sales. In addition, while the U.S. economy remained robust throughout 1999, the domestic wireless market saw only limited capital expenditures by wireless carriers to expand capacity, enhance quality, and increase coverage. These limited capital expenditures contributed to soft domestic sales for the Company. The Company has been encouraged by the quarter to quarter increases in sales throughout 1999. Second half 1999 sales, at $180.3 million, were $26.9 million or 18% greater than first half 1999. The Company's backlog of orders increased from $52.8 million at year-end 1998 to $84.9 million at year-end 1999. With the increase in sales over the last six months, and the 61% improvement in year-over-year backlog, the Company is optimistic of continued sales improvement in the year 2000. The 10% decrease in sales in 1998 to $388.0 million from 1997 was due primarily to the unsettled climate for the global wireless telecommunications market. During 1998, economic dislocations in Asia were followed by economic disruption in South America, notably Brazil. In addition, European original equipment manufacturers ("OEMs") had excess inventory at a time when worldwide demand had decreased. The development of wireless networks in the U.S. had also slowed, affecting domestic sales. In 1999, international sales constituted approximately 59% of total sales, compared with 58% in 1998, and 60% in 1997. Export sales from the U.S. are primarily to major wireless telephony companies and are typically payable in U.S. dollars. European sales are primarily to major OEMs and wireless operators in European currencies. Operating income, representing income before financing costs and special charges and credits (as discussed below), increased from $11.6 million in 1998, or 3.1% of sales, to $12.0 million in 1999, or 3.6% of sales. Results were impacted by higher gross profit margins and reduction of costs attributable to the restructuring efforts in 1998. Operating income for 1998 decreased $45.5 million, or 80%, from 1997. This decline was attributable to lower gross profit margins and the impact of fixed costs on lower sales (sales were down $44.5 million from 1997 to 1998). As discussed below, in the fourth quarter of 1999, the Company announced the restructuring of certain operations. As a result, the Company incurred a $12.3 million before-tax special charge to earnings, or $.29 per basic and diluted share after related income taxes. These costs were offset, in part, by net gains from the sales of telecommunications investments in the amount of $3.0 million, or $.07 per basic and diluted share after related income taxes. In 1998, the Company initiated a number of cost reduction efforts to improve and adjust operations to market conditions. These actions included, among others, the discontinuation of product development and marketing efforts on certain products, the consolidation of two manufacturing operations of the Systems product line, the formation of a worldwide Systems business, and the reorganization of the Company's North American-based sales force and Wireless Engineering Services business. As a result of these asset write-offs, severance and other costs associated with such actions, the Company incurred before-tax charges for the year of $19.4 million, or $.47 per basic and diluted share after related taxes. Such costs were offset, in part, by net gains from the sale of telecommunication investments as well as the recognition of loss reserves on other investments in the amount of $6.0 million, or $.14 per basic and diluted share after related income taxes.
RESULTS OF OPERATIONS BY SEGMENT TELECOMMUNICATIONS EQUIPMENT MANUFACTURING ($ millions) 1999 1998 1997 Sales $ 311.1 $ 360.6 $ 396.8 Gross profit, % of sales 26.7% 25.0% 36.4% Operating expenses, % of sales 14.1% 13.3% 13.5% Research and development and product engineering, % of sales 9.0% 8.3% 7.6% Operating income $ 11.1 $ 12.3 $ 60.8
Sales of telecommunications equipment declined 14% in 1999 from 1998 to $311.1 million. This sales decline was due essentially to the decrease in sales of the Site Management and Antenna Product lines. Sales of foreign operations were negatively impacted by the strong U.S. dollar in relation to the Euro. As a result of exchange differences, reported sales in the year ended December 31, 1999 were $2.8 million lower than the corresponding prior year period, assuming the exchange rates had remained the same. In 1998, reported sales were $6.7 million lower, as compared with 1997, due to similar exchange differences. Sales decreased 9% in 1998 to $360.6 million from 1997, due essentially to weakness in international sales, which decreased approximately $32 million, or 13%. The Site Management and Systems product lines were primarily affected by this decrease. Sales of Systems products, which generally are comprised of booster and repeater products for cellular and Personal Communication Systems (PCS), test and measurement products, as well as indoor coverage products, increased 1% in 1999 to $93.4 million, as compared with $92.6 million in 1998. Systems products benefited in 1999 from large installation contracts in Switzerland, Italy, Brazil, and the United States. (PRODUCT LINE SALES IN MILLIONS OF DOLLARS) SYSTEMS PRODUCTS 95 .................... $95.1 96 .................... $94.1 97 .................... $111.0 98 .................... $92.6 99 .................... $93.4 SITE MANAGEMENT AND OTHER NON-ANTENNA PRODUCTS 95 .................... $112.9 96 .................... $159.3 97 .................... $197.3 98 .................... $184.5 99 .................... $143.3 MOBILE AND BASE STATION ANTENNAS 95 ................... $73.8 96 ................... $80.6 97 ................... $88.5 98 ................... $83.5 99 ................... $74.4 WIRELESS ENGINEERING SERVICES 95 ................... $24.8 96 ................... $35.5 97 ................... $35.7 98 ................... $27.4 99 ................... $22.6 28 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC. These contracts substantially offset the 45% decrease in sales of the Extend-A-Cell(R) frequency translating repeater product in 1999. The 17% decrease in sales in 1998 to $92.6 million, as compared with $111.0 million in 1997, is primarily attributable to lower sales of the Extend-A-Cell(R) frequency translating repeater and microcell products. Sales of Site Management and Other Non-antenna products, which include tower mounted amplifiers, filters, combiners and duplexers, decreased 22% to $143.3 million from 1998 sales of $184.6 million. Sales were adversely affected by the slowdown in OEM's production levels, particularly in the first half of 1999, a drop in sales of site management products to one specific wireless carrier, as well as lower tower mounted amplifier sales. The 6% decrease in 1998 to $184.6 million, compared with $197.3 million in 1997, was due to the slowdown in OEM production levels due to the Asian crisis as well as the OEMs having a high level of inventory at a time of decreasing worldwide demand. The sales of Mobile and Base Station Antennas decreased 11% from $83.5 million in 1998 to $74.4 million in 1999. This decrease is primarily associated with lower sales of base station antennas, which were down 13% from 1998 levels, in both international and domestic markets. The 6% decrease in 1998 sales to $83.5 million, compared with $88.5 million in 1997, occurred mainly in the domestic market, as sales of base station antennas and land mobile antennas slowed significantly in the fourth quarter of 1998. At December 31, 1999, the Company had an order backlog for the Telecommunications Equipment segment of $83.6 million, up from approximately $51.9 million at December 31, 1998, but below the $112.5 million backlog at December 31, 1997. Gross profit margins improved slightly in 1999 as compared with 1998. Excluding the aforementioned special charges for the plant closing and discontinuance of product development efforts of $5.7 million in 1999 and $12.5 million in 1998, 1999 gross profit margins would have been flat with 1998 levels at 28.5%. Savings from previous restructuring efforts, as well as lower costs from in-country production in China, Mexico, and Brazil, offset continued pricing pressure during 1999. In 2000, the Company expects to see an improvement in margins due to savings from restructuring efforts and increased in-country production in China, Mexico, and Brazil. The 8.4 percentage point decline in profit margins from 1997 to 1998 was due primarily to pricing pressure, product mix, higher inventory obsolescence and warranty provisions. Operating expenses, which consist of selling, general and administrative expenses, but exclude amortization of goodwill, decreased $4.0 million in 1999, due primarily to the aforementioned restructuring efforts during 1998 which reduced expenses. Special charges associated with these restructuring efforts were $5.9 million in 1999 and $4.3 million in 1998. Excluding these special charges the operating expenses would have been 12% of sales in both 1999 and 1998. In the past few years, the Company has significantly increased its research and development (R&D) and product engineering costs in order to keep pace with the technological advances in the industry. While 1999 R&D spending was slightly lower than 1998, spending was maintained at a level which will provide sufficient resources to pursue opportunities considered essential for the Company's future. The Company anticipates that this trend of increased R&D spending will continue as PCS and cellular systems are implemented and expanded to encompass third generation broad band technology, and the Company strives to develop ancillary products, including emergency 911 geolocation systems and software products for the wireless telephony industry. WIRELESS ENGINEERING SERVICES ($ millions) 1999 1998 1997 Sales $22.6 $27.4 $35.7 Gross profit, % of sales 27.4% 16.6% 17.6% Operating expenses, % of sales 22.8% 42.3% 24.6% Operating income (loss) $1.0 ($7.9) ($2.6) Wireless Engineering Services provides engineering and consulting services to major wireless operators. In 1999, sales decreased 18% from $27.4 million in 1998 to $22.6 million in 1999. This decline was due to the discontinuance of certain products and services, as well as a general slowdown in the pace of development of wireless networks. Gross profit increased from 16.6% of sales in 1998 to 27.4% in 1999, due to improved deployment of engineers and better software margins. In addition, efficiencies gained from the year-end 1998 restructuring contributed to this improvement. Gross profit decreased from 17.6% of sales in 1997 to 16.6% in 1998, due to fixed engineering costs on lower sales and pricing pressures. Operating expenses as a percentage of sales was 22.8% in 1999, 42.3% in 1998 and 24.6% in 1997. The decrease in 1999 was attributable to the restructuring actions taken at the end of 1998 and the focus of management on its core business of engineering and microwave coordination services. In 1998, the Company incurred a one-time charge of $2.6 million due to a realignment of the business. Additionally, the Company incurred costs of $.7 million in 1997 related to the discontinuation of a software product line. Excluding these one-time charges, operating costs as a percentage of sales were 22.8% in 1999, 32.7% in 1998 and 22.6% in 1997. The spending increase in 1998 over 1997 was due to fixed costs on substantially lower sales. Backlog for the Wireless engineering services segment was $1.3 million in 1999, $.9 million in 1998 and $2.5 million in 1997. SPECIAL CHARGES The Company announced on October 26, 1999, a restructuring of certain domestic operations, including the consolidation of manufacturing operations for its Site Management Products division with its facility in Italy. This will result in a reduction in force and the sale of the Company's Site Management Products domestic manufacturing plant which operated at a substantial loss for the last two years. The Company will continue to maintain its U.S. Site Management Products sales and customer service operations, as well as a research and development facility to support its domestic OEM customer base. The Company plans to sell its manufacturing plant within the next year and relocate continuing employees in April 2000. In addition, the Company has discontinued several product lines at its Site Management, Antenna and Systems divisions, and has closed a sales and engineering office in Mexico City. As a result of these actions, the Company has taken a before-tax charge of $12.3 million in the fourth quarter 1999. (See Note 12 for additional information.) In addition, the Company expects to incur an incremental pretax charge of approximately $1.0 to $1.5 million in the first quarter 2000 for certain expenses that were not accruable at December 31, 1999. These charges include termination costs of employees notified subsequent to December 31, 1999, relocation costs, and other termination-related benefits. Of the $12.3 million charge, $4.0 million relates to a non-cash write-off of capital assets, $4.9 million to other non-cash losses, primarily on inventory, and $3.4 million are cash related charges. Approximately $.7 million was expended in the fourth quarter 1999, approximately 29 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC. $.6 million is estimated to be spent in the first quarter 2000, an additional $1.4 million later in the year 2000, and $.7 million in 2001. The Company has estimated cost savings resulting from these restructuring actions to be in the pretax range of $6.0 to $8.0 million on an annual basis. These savings are expected to be realized beginning in the second quarter 2000, coincident with the closedown of its domestic manufacturing facility. Of the projected cost savings, approximately $4.4 million relate to cost of sales, $1.9 million to selling, general and administrative costs, and $.7 million to R&D costs. FINANCING COSTS ($ millions) 1999 1998 1997 Financing expenses: Interest expense $(9.6) $(8.3) $(4.5) Interest income 1.5 1.5 1.5 The increase in interest expense in 1999, as compared with 1998, is due to the higher cost of borrowings as well as higher outstanding borrowings incurred in connection with the acquisitions of minority interests in subsidiaries (See Liquidity and Capital Resources) during 1999 and 1998 offset, in part, by proceeds from the sale of investments and discontinued operations. The increase in interest expense in 1998 over 1997 was similarly due to higher outstanding borrowings for acquisitions of minority interests in subsidiaries. INCOME TAXES ($ millions) 1999 1998 1997 Benefit from (provision for) income taxes $1.8 $5.3 $(17.7) Effective tax rate 34.1% 62.1% 37.9% The effective tax benefit rate in 1999 includes the impact of a $1.0 million deferred tax benefit ($.04 per basic and diluted share) with respect to a change in the applicable income tax rate on the Company's pro rata share of undistributed earnings (prior to 1999) of a foreign subsidiary as a result of the Company's acquisition of an additional interest in such subsidiary. The acquisition allows for the Company's pro rata earnings (when distributed) of this foreign subsidiary to be taxed at a lower rate. The significantly higher effective tax benefit rate in 1998, is due, in large part, to the impact of a similar $3.7 million deferred tax benefit ($.13 per basic and diluted share) with respect to the then change in the applicable income tax rate on the Company's pro rata share of undistributed earnings (prior to 1998) of such foreign subsidiary as a result of the Company's acquisition of an additional interest in the same subsidiary. Through December 31, 1999, the Company has recorded a net U.S. deferred tax asset pertaining to the recognition of net operating loss carryforwards, related temporary differences and tax credits in the amount of approximately $31.2 million and has not provided a valuation allowance with respect thereto. The Company believes the realization of this asset is "more likely than not". This determination is based upon anticipated future U.S. taxable income as well as available tax planning strategies, should they be necessary, to utilize such losses in the future. This asset is not necessarily assured and could be subject to future valuation allowances if circumstances change. The taxable losses may be carried forward principally over a twenty year period. DISCONTINUED OPERATIONS As described in Note 9 of the Notes to Consolidated Financial Statements, the Company sold its Marta Technologies Inc. ("Marta") subsidiary which operated its discontinued automotive emissions testing programs. Pursuant to the sale agreement, the Company received cash of $9.4 million and a $3.0 million three year 12% installment note. In addition, the purchaser assumed (among other liabilities) $12.4 million in long-term capital lease debt, in exchange for the outstanding capital stock of Marta. See Note 9 for information concerning additional purchase price consideration earned in February 2000. The sale of Marta is the reason for the reduction in "Assets of discontinued emissions testing business" in the Consolidated Balance Sheets. ENVIRONMENTAL The Company is subject to federal, state and local laws designed to protect the environment and believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and financial liability. (See also Note 5 of Notes to Consolidated Financial Statements.) LIQUIDITY AND CAPITAL RESOURCES ($ millions) 1999 1998 1997 Cash flow from operations $4.9 $ (2.3) $18.0 Total debt $123.1 $140.2 $104.0 Stockholders' equity $240.9 $250.1 $260.8 Debt to equity ratio .51:1 .56:1 .40:1 The Company generated $4.9 million in cash flow from operations in 1999. The decline in cash flow from operations from 1997 of $18.0 million to a cash usage of $2.3 million in 1998 was due primarily to a decline of approximately $28.9 million in income from continuing operations. The decline in income was offset, in part, by a lower level of investment in working capital of $9.9 million, principally in receivables. While the Company continued to make investments in the telecommunications industry in 1999, it did so at a significantly reduced rate. Capital expenditures (fixed assets and software) were $11.4 million in 1999 as compared with $22.0 million and $27.6 million in 1998 and 1997, respectively. Cash investments in telecommunication subsidiaries in 1999 was $9.0 million as compared to $42.1 million and $46.1 million in 1998 and 1997, respectively. The 1998 amount included $26.4 million for the acquisition of the outstanding minority interest of its Forem subsidiary. In addition to the cash payments made in 1999, the Company is committed to additional payments of $8.3 million in 2000. This liability is included in accounts payable and is the primary reason for the increase in that balance sheet item at December 31, 1999. These investments increased goodwill by approximately $9.6 million and significantly reduced the minority interest liability, the latter being the primary reason for the decline in Other liabilities in the Consolidated Balance Sheets from 1998 to 1999. As more fully described in Note 2 to the Consolidated Financial Statements, the Company has a $100.0 million domestic revolving credit agreement expiring on December 31, 2001. Borrowings under this facility are collateralized by substantially all domestic assets of the Company as well as a pledge of 65% of the stock of applicable domestic and foreign subsidiaries. At December 31, 1999, $39.2 million is available for borrowings under this agreement and $39.5 million is available under existing foreign lines of credit. In 1996, the Company entered into an agreement with NextWave Telecom Inc. ("NextWave"), whereby NextWave agreed to purchase $50.0 million of equipment and services over a five-year period from the Company. In connection with this agreement, subject to certain preconditions that have not yet occurred, the Company has agreed to provide secured product financing. In 1998, NextWave and certain of its subsidiaries filed for relief under Chapter 11 of the U.S. Bankruptcy code; accordingly, this commitment is, at this time, unlikely to be filled. 30 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ALLEN TELECOM INC. Capital expenditures in 2000 are estimated at $17.0 million, of which $.7 million was committed at December 31, 1999. The Company's working capital ratio remains strong at 2.7:1 and its debt to equity ratio declined slightly in 1999 to .51:1 as compared to .56:1 in the prior year despite the weak operating performance in 1999. The Company believes it has adequate cash liquidity resources (through available borrowing capacity both domestically and in Europe) in the near term to fund operations and capital expenditures. Improvements in operations and borrowings under available domestic and European credit lines are expected to be the primary source of liquidity throughout 2000. If the Company is very successful in developing its E-911 geolocation business, it may be called upon to provide financing for a large equipment network or to develop a service bureau for one or more carriers. The Company has had preliminary discussions and believes that external financial resources should be available to support the successful development of this business. YEAR 2000 STATUS REVIEW The Company substantially achieved its Year 2000 (Y2K) remediation plan and did not experience any significant malfunctions or errors in its operating or business systems when the date changed from 1999 to 2000. Based on operations since January 1, 2000, the Company does not expect any significant impact to its on-going business as a result of the "Y2K issue." However, it is possible that the full impact of the date change, which was of concern due to computer programs that use two digits instead of four digits to define years, has not been fully recognized. For example, it is possible that Y2K or similar issues such as leap year related problems may occur. The Company believes that any such problems are likely to be minor and correctable. In addition, the Company could still be negatively impacted if its customers or suppliers are adversely affected by the Y2K or similar issues. The Company currently is not aware of any significant Y2K or similar problems that have arisen for its customers and suppliers. The Company expended $1.4 million on Y2K remediation efforts from 1997 to 1999. These efforts included replacing some outdated noncompliant hardware and software, as well as identifying and remediating Y2K problems. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure relating to derivatives results from the use of foreign currency forward contracts to offset the impact of currency rates against certain assets related to accounts receivable. The contracts entered into at year-end all expire within one year. The Company also entered into two foreign currency forward contracts in October 1999 to offset the impact of currency rate changes with regard to foreign denominated purchase obligations relating to the Company's purchase of the remaining minority interest of certain European companies. The Company does not enter into derivative instrument transactions for trading or speculative purposes. The Company's on-balance sheet instruments which are subject to interest rate fluctuations are various components of its long-term debt. The Company believes the risks are minimal. Approximately 57% of the Company's long-term debt is fixed rate debt and not subject to interest rate fluctuation. The variable rate debt is primarily made up of the Company's domestic revolving credit facility and industrial revenue bonds. The revolving credit debt interest is determined on a LIBOR or prime rate basis, at the Company's option. The industrial development bonds carry interest rates which are established based on the low yield, tax free bond market. The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in exchange and interest rates. For derivative instruments, the table presents contract amounts and related average contractual exchange rates by expected maturity date as of December 31, 1999 and 1998. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates as of December 31, 1999. ANTICIPATED TRANSACTIONS AND RELATED DERIVATIVES
Carrying Value Fair Value --------------------------- ----------------------------- 2000 1999 2000 1999 (US $ Equivalent in Thousands) Lira Functional Currency Foreign Exchange Agreements: Receive Lira/Pay USD Contract Amount $2,004.0 -- $2,050.0 -- Avg. Contractual Exchange Rate 1,810.6 -- 1,852.3 -- Receive Lira/Pay LST Contract Amount $4,476.4 -- $4,496.5 -- Avg. Contractual Exchange Rate 2,817.5 -- 3,028.7 -- Receive Lira/Pay DM Contract Amount -- $291.4 -- $291.1 Avg. Contractual Exchange Rate -- 990.0 -- 989.3 Receive Lira/Pay EURO Contract Amount -- $3,667.2 -- $3,664.9 Avg. Contractual Exchange Rate -- 1,947.0 -- 1,945.8 Receive Lira/Pay FF Contract Amount -- $1,564.5 -- $1,562.9 Avg. Contractual Exchange Rate -- 295.3 -- 295.0 Deutschmark Functional Currency Foreign Exchange Agreements: Receive DM/Pay USD Contract Amount $8,265.7 -- $7,723.6 -- Avg. Contractual Exchange Rate 1.8148 -- 1.9421 -- DEBT OBLIGATIONS Expected Maturity Date ------------------------------------------------------------------------------ 2000 2001 2002 2003 2004 Thereafter Total Fair Value (US $ Equivalent in Thousands) Long Term Debt: Fixed Rate (US) $ 6 $ 3,007 $10,841 $10,841 $ 7,841 $32,558 $65,094 $65,094 Avg. interest rate 9% 6% 6% 6% 6% 6% 6% 6% Fixed Rate (Lira) 651 425 484 468 365 963 3,356 3,356 Avg. interest rate 5% 4% 4% 4% 5% 5% 5% 5% Fixed Rate (DM) 472 420 177 60 -- -- 1,129 1,129 Avg. interest rate 4% 4% 4% 3% -- -- 4% 4% Fixed Rate (FF) 90 36 -- -- -- -- 126 126 Avg. interest rate 9% 9% -- -- -- -- 9% 9% Variable Rate (US) -- 41,500 -- -- -- 11,900 53,400 53,400 Avg. interest rate -- 7% -- -- -- 3% 6% 6% Variable Rate (Lira) 290 -- -- -- -- -- 290 290 Avg. interest rate 5% -- -- -- -- -- 5% 5%
31 34
FIVE YEAR SUMMARY OF OPERATIONS ALLEN TELECOM INC. (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) FIVE YEARS ENDED DECEMBER 31, 1998 1999 1998 1997 1996 1995 OPERATING RESULTS SALES $ 333,697 $ 388,004 $ 432,508 $ 369,498 $ 306,556 Cost of sales (244,548) (293,404) (281,591) (238,401) (189,103) Selling, general and administrative expenses (61,839) (71,672) (72,671) (59,053) (49,464) Research & development and product engineering (27,946) (30,742) (30,367) (21,023) (17,006) Write-off of in-process research and development costs -- -- -- (2,662) -- Other income, net 3,370 6,065 1,885 952 1,556 Interest and financing expense (8,146) (6,805) (3,051) (2,785) (2,098) - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before taxes and minority interests (5,412) (8,554) 46,713 46,526 50,441 Benefit from (provision for) income taxes 1,844 5,310 (17,723) (19,665) (20,138) - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before minority interest (3,568) (3,244) 28,990 26,861 30,303 Minority interests (1,650) (2,268) (5,009) (6,305) (3,027) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM CONTINUING OPERATIONS (5,218) (5,512) 23,981 20,556 27,276 Discontinued operations: Income (loss) from discontinued operations -- -- -- (3,766) 5,363 Gain (loss) on disposal of emissions testing business 2,363 (4,710) -- (3,724) -- - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before extraordinary item (2,855) (10,222) 23,981 13,066 32,639 Extraordinary item - extinguishment of debt -- -- (632) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME (LOSS) $ (2,855) $ (10,222) $ 23,349 $ 13,066 $ 32,639 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS (LOSS) PER COMMON SHARE: Basic: Income (loss) from continuing operations ($.19) ($.21) $.89 $.78 $1.05 Discontinued operations: Income (loss) from discontinued operations -- -- -- (.14) .20 Gain (loss) on disposal of emissions testing business .09 (.17) -- (.14) -- Extraordinary item - extinguishment of debt -- -- (.02) -- -- -------------------------------------------------------------------------------------------------------------------------- Net income (loss) ($.10) ($.38) $.87 $.50 $1.25 -------------------------------------------------------------------------------------------------------------------------- Diluted: Income (loss) from continuing operations ($.19) ($.21) $.88 $.76 $1.02 Discontinued operations: Income (loss) from discontinued operations -- -- -- (.14) .20 Gain (loss) on disposal of emissions testing business .09 (.17) -- (.14) -- Extraordinary item - extinguishment of debt -- -- (.02) -- -- -------------------------------------------------------------------------------------------------------------------------- Net income (loss) ($.10) ($.38) $.86 $.48 $1.22 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL CONDITION Total assets $ 451,430 $ 465,585 $ 514,433 $ 410,512 $ 363,565 Working capital 128,062 133,465 111,015 94,378 93,371 Current ratio 2.68 2.92 1.85 1.90 2.11 Total debt 123,086 140,223 104,034 55,955 55,799 Stockholders' equity 240,912 250,081 260,822 225,951 210,377 Debt to equity ratio .51 .56 .40 .25 .27 Book value per common share 8.64 9.10 9.55 8.44 7.92 Shares outstanding at year end 27,882 27,473 27,298 26,763 26,570 Return on stockholders' equity (1.2%) (4.0%) 9.4% 6.0% 14.7% Capital expenditures 9,491 18,094 22,247 20,992 24,498 Depreciation 14,914 15,615 12,808 12,231 8,896 Number of employees 2,200 3,000 3,300 2,900 2,800
32 35 SHAREHOLDER INFORMATION EXCHANGE LISTINGS Common Stock (Ticker Symbol - ALN) New York Stock Exchange Pacific Exchange TRANSFER AGENT AND REGISTRAR Fifth Third Bank MD 1090D2 38 Fountain Square Plaza Cincinnati, Ohio 45263 (513) 744-8676 AUDITORS Deloitte & Touche LLP Cleveland, Ohio FORM 10-K OR ADDITIONAL INFORMATION ABOUT THE COMPANY Stockholders and others interested in obtaining additional information about the Company may do so by writing or calling Allen Telecom Inc., 25101 Chagrin Blvd., Beachwood, Ohio, 44122-5687, (216) 765-5855. The Form 10-K Annual Report, including financial statements and schedules, will be furnished without charge. Information concerning the Company can also be found on the Internet at http://www.allentele.com. AFFIRMATIVE ACTION POLICY It is the policy of Allen Telecom Inc. that all employees will be judged on the basis of qualifications and ability, without regard to age, sex, race, creed, color or national origin, in all personnel actions. No employee or applicant for employment will receive discriminatory treatment because of physical or mental handicap in regard to any position for which the employee or applicant for employment is qualified. STOCKHOLDERS As of March 1, 2000, Allen Telecom Inc. had 27,901,910 outstanding shares of Common Stock owned by 1,708 holders of record. ANNUAL STOCKHOLDERS' MEETING The Annual Meeting of Stockholders will be held at the Cleveland Marriott East at 3663 Park East Drive, Beachwood, Ohio 44122, on Friday, April 28, 2000 at 9:30 AM. DIVIDENDS DECLARED ON COMMON STOCK (DOLLARS PER SHARE) 1999 1998 1997 1996 1995 1st Quarter - - - - $.05 2nd Quarter - - - - $.05 3rd Quarter - - - - $.05 4th Quarter - - - - - STOCK PRICE 95 $21.25 $39.38 96 $14.00 $28.75 97 $16.00 $30.00 98 $4.69 $21.13 99 $5.75 $11.63 MARKET PRICE RANGE OF COMMON STOCK (DOLLARS PER SHARE) 1999 1998 1997 High Low High Low High Low ------------------------------------------------------------------------------ 1st Quarter 6 1/2 5 3/4 21 1/8 15 1/2 26 3/8 16 2nd Quarter 11 5/16 10 9/16 17 7/16 9 9/16 24 1/8 16 1/2 3rd Quarter 9 15/16 9 3/8 11 5/8 6 3/16 29 1/8 18 3/4 4th Quarter 11 5/8 10 1/2 8 3/8 4 11/16 30 16 EX-21 9 EXHIBIT 21 1 EXHIBIT 21 ---------- SUBSIDIARIES OF ALLEN TELECOM INC. ---------------------------------- The following is a list of the subsidiaries of Allen Telecom Inc. (Delaware, 02-03-69), and indented, subsidiaries of such subsidiaries, including in each case the state or other jurisdiction in which each subsidiary was incorporated or organized, and indicating in each case the percentage of voting securities owned by the immediate parent.
STATE/COUNTRY OF NAME OF CORPORATION INCORPORATION DATE % - ------------------- ------------- ---- - The Allen Group Canada Limited Ontario, Canada 04-19-72 100 The Allen Group Internat'l Sales Corp. Barbados 09-15-94 100 The Allen Group International, Inc. Delaware 07-19-73 100 Allen Telecom Holdings G.m.b.H. Germany 100 (Herkules Vierte Verwaltungs G.m.b.H.) Allen Telecom GmbH Germany 07-28-90 100 Allen Telecom Canada, Inc. Ontario 04-14-93 100 Allen Telecom Civil Law Partnership GbR(2) Germany 10-01-98 100 Allen Telecom (France) S.A. (3) France 04-09-97 100 Telia S.A. (4) France 10-19-90 72 Allen Telecom Group Limited (1) U.K. 05-08-72 100 Allen Telecom (Holdings) Pty Limited Australia 07-18-96 100 Allen Telecom (Australia) Pty Limited Australia 07-23-96 100 Allen Telecom (Hong Kong) Limited (5) Hong Kong 04-25-97 100 Allen Telecom Investments, Inc. Delaware 04-01-97 100 Allen Telecom (Mauritius) Holdings Ltd. Mauritius 11-25-97 100 Decibel Products (Guangzhou) Ltd. China 01-19-98 100 Allen Telecom (Singapore) Pte Limited Singapore 06-03-97 100 Allen Telecomunicacoes do Brasil Ltda (6) Brazil 11-95 100 Antenna Specialists Co., Inc. Delaware 10-07-88 100 Antespec, S.A. de C.V. Mexico 11-14-88 100 ATI International, Inc. Delaware 12-10-97 100 Allen International (Netherlands) BV Netherlands 06-19-98 100 Allen Telecom (Netherlands) BV Netherlands 07-21-98 100 Mikom Schweiz AG (7) Switzerland 04-20-99 100 Allen Telecom Italia Europe S.r.l. Italy 10-10-97 100 FOREM S.r.l. Italy 11-14-94 100 FOREM France E.u.r.l. France 1993 100 FOREM (UK) Limited U.K. 1988 100 Mikom G.m.b.H. (8) Germany 05-07-85 100 Mikom Vertriebs und Service Austria 10-18-96 100 GmbH (9) Mikom Slovakia, s.r.o. (10) Slovakia 05-30-97 60 Mitras Ltd. (1) Hungary 1992 100 C-com, spol. s.r.o. Czech Republic 02-26-96 80
2 Tekmar Sistemi S.r.l. Italy 09-20-80 100 Comsearch Holdings Inc. Delaware 08-22-97 100 Comsearch UK Limited U.K. 03-06-98 100 Telespectro de Mexico, S.A. de C.V. (11) Mexico 11-97 100 Decibel Mobilcom Limited (1) England 01-31-91 100 Orion Far East Management Inc. (1) Delaware 07-16-81 100 Orion Industries, Inc., Limited (1) Hong Kong 06-01-71 100 Orion Imports & Exports Limited (1) Hong Kong 09-07-73 100 Orion Industries, Inc. Japan (1) Japan 09-73 100 Orion Industries Taiwan Limited (1) Taiwan 10-73 100 Allen SSI, Inc. (12) California 09-25-74 100
(1) These subsidiaries are not significant in the aggregate and are no longer active. (2) 90% of this partnership is owned by Allen Telecom Inc. and the remaining 10% is owned by Allen Telecom investments, Inc. (3) Of the 2,500 shares issued and outstanding, 2,494 shares are owned by Allen Telecom Inc. and the remaining 6 shares are owned in name only by Allen employees. (4) Of the 10,000 shares issued and outstanding, 7,196 shares are owned by Allen Telecom (France) S.A., 4 shares are owned by Allen employees, and Allen Telecom (France) SA. owns options to acquire the remaining 2,800 shares. (5) Of the 1,000 shares issued and outstanding, 999 shares are owned by Allen Telecom Inc. and 1 share is owned by Allen Telecom Investments, Inc. (6) 95% of the outstanding capital stock of this subsidiary is owned by Allen Telecom Inc. and the remaining 5% is owned by Allen Telecom Investments, Inc. (7) Option to purchase 100% of the shares of Mikom Schweiz AG entered on October 21, 1999, letter of credit for purchase price placed in an irrevocable escrow. Final transfer took place on March 8, 2000. (8) 62% of the outstanding capital stock of this subsidiary is owned by FOREM S.r.l., 12% is owned by Allen Telecom G.m.b.H., and the remaining 26% is owned by Herkules Vierte Verwaltungs G.m.b.H. (9) 60% of the outstanding capital stock is owned by Mikom G.m.b.H. and the remaining 40% is owned by Herkules Vierte Verwaltungs G.m.b.H. (10) 60% of the outstanding capital stock is owned by Mikom Vertreibs und Service G.m.b.H. and the remaining 40% is owned by the partners of Mikom Vertreibs und Service G.m.b.H. in the venture. (11) 98% of the outstanding capital stock of this subsidiary is owned by Comsearch Holdings, Inc. and the remaining 2% is owned by Allen Telecom Investments, Inc. (12) Allen SSI, Inc. (fka Signal Science, Incorporated) sold substantially all its assets to Condor Systems Inc. on October 15, 1999. March 16, 2000 EX-23 10 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement on Form S-3 (File NO. 333-51969) and on the Registration Statements on Form S-8 (File Nos. 33-58951, 33-53499, 33-53487, 33-52420, 33-8658 (Amendment No. 1), 2-09919, 333-51739, 333-68369 and 333-80913) of Allen Telecom Inc. of our report dated February 16, 2000, appearing in this Annual Report on Form 10-K for the year ended December 31, 1999. /s/DELOITTE & TOUCHE LLP Cleveland, Ohio March 27, 2000 2 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-51969) and on the Registration Statements on Form S-8 (File Nos. 33-58951, 33-53499, 33-53487, 33-52420, 33-8658, 2-99919, 333-51739, 333-68369 and 333-80913) and the related Prospectuses of Allen Telecom Inc. of our report dated February 16, 1999, except as to paragraph five of Note 9, which is as of March 1, 1999, on our audits of the consolidated financial statements and financial statement schedule of Allen Telecom Inc, which appears under Item 14 on page 13. We also consent to the references to our firm in the above-mentioned Prospectuses under the caption "EXPERTS". /s/ PricewaterhouseCoopers LLP Cleveland, Ohio March 27, 2000 EX-27 11 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN TELECOM'S DECEMBER 31, 1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1999 DEC-31-1999 22,085 0 89,931 (2,537) 82,713 204,150 111,382 (62,129) 451,430 76,088 120,905 0 0 30,010 210,902 451,430 333,697 333,697 (244,548) (244,548) (89,402) (383) (8,146) (5,412) 1,844 (5,218) 2,363 0 0 (2,855) (.10) (.10) The Earnings per Share amounts have been calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share".
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