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March 29, 2001
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Attention: Filing Desk
Gentlemen:
Re: Symbol Technologies, Inc.
Annual Report on Form 10-K
For Fiscal Year Ended
December 31, 2000
File No. 1-9802
On behalf of Symbol Technologies, Inc. (the
"Company"), I transmit for filing under the Securities and
Exchange Act of 1934 (the "Act"), the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000. I have
been advised by the Company that the financial statements
contained in the report do not reflect any changes from the
preceding year's financial statements with respect to accounting
principles or practices or in the method of applying such
principles or practices.
If you have any questions regarding the enclosed
materials, please call the undersigned by collect telephone at
(631) 738-4765.
Very truly yours,
S/Leonard H. Goldner_
Leonard H. Goldner
Executive Vice President
and General Counsel
LHG:dac
March 29, 2001
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
In connection with the undersigned's Annual Report on
Form 10-K for the year ended December 31, 2000 and pursuant to
Item 601(b)(4)(iii) of Regulation S-K, the undersigned has not
filed as an exhibit any agreement in which the total amount of
securities authorized thereunder does not exceed 10 percent of
the Registrant's total consolidated assets. The Registrant,
however, agrees to furnish a copy of such document to the
Commission if so requested.
Very truly yours,
SYMBOL TECHNOLOGIES, INC.
s/Kenneth V. Jaeggi
Kenneth V. Jaeggi
Senior Vice President-Finance
and Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission file number 1-9802
SYMBOL TECHNOLOGIES, INC.______________
(Exact name of Registrant as specified in its charter)
Delaware 11-2308681______________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Symbol Plaza
Holtsville, NY 11742-1300
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (631) 738-2400
`
Securities registered pursuant to
Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange___
(Title of each class) (Name of each Exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: 7 1/2% Convertible
Subordinated Debentures of Telxon Corporation, a wholly owned subsidiary of
the Registrant, Due 2012.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 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.____
The aggregate market value of the registrant's voting stock held by
persons other than officers and directors and affiliates thereof, as of March
1, 2001,was approximately $6,794,000,000.
The number of shares outstanding of each of the registrant's classes of
common stock, as of December 31, 2000, was as follows:
Class Number of Shares
Common Stock, par value $.01 149,424,103
Documents Incorporated by Reference: The registrant's Proxy Statement to be
used in conjunction with the Annual Meeting of Shareholders to be held on
May 21, 2001 (the "Proxy Statement") is incorporated into Part III.
PART I
Item 1. Business
The Company
Symbol Technologies, Inc. ("Symbol" and, together with its
subsidiaries, the "Company"), a Delaware corporation, is the
successor by merger in 1987 to Symbol Technologies, Inc., a New
York corporation which commenced operations in 1975. The Company
has evolved from a supplier of bar code verification products
into a leading global provider of wireless networking and
information systems that allow users of its products to access,
capture and transmit information at the point of activity over
local area networks (LAN), wide area networks (WAN) and the
Internet. The Company is the only corporation in its industry
with in-house technology for the design and manufacture of
products in its three core technologies: bar code reading
devices, mobile computing devices and network systems. The
Company is engaged in one reportable business segment-the design,
manufacture, marketing and servicing of scanner integrated mobile
and wireless information management systems. These systems are
used worldwide in diverse markets such as retail, transportation
and logistics, parcel delivery and postal service, warehousing
and distribution, industrial, health care, hospitality, education
and government.
On March 14, 2000, the Company was awarded the National
Medal of Technology, the nation's highest honor for technological
innovation. The award was given to the Company "for creating the
global market for laser bar code scanning and for technical
innovation and practical application of mobile computing and
wireless local area network (WLAN) technologies". The medal,
which recognizes exceptional U.S. scientific and engineering
innovations, has been awarded to only 12 corporations in its
history. Other corporate recipients of the award are AT&T Bell
Laboratories, The DuPont Company, IBM, Merck & Co. Inc., Amgen
Inc., Corning, Inc., The Proctor & Gamble Company, 3M, Johnson &
Johnson, Biogen, Inc. and Bristol-Meyers Squibb Company.
On December 8, 2000, the Company's common stock was added to
the S&P 500 index.
Telxon Acquisition
On November 30, 2000, a wholly owned subsidiary of the
Company was merged with and into Telxon Corporation ("Telxon") in
a stock-for-stock merger. The acquisition enhanced Symbol's
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opportunities in hand-held computing systems across many
industries and vertical applications. Telxon will be operated as
a wholly owned subsidiary, although portions of its operations
will be consolidated with Symbol in order to obtain operating
efficiencies and synergies by eliminating duplicate functions,
rationalizing manufacturing facilities and sales offices and
realizing purchasing, sales, manufacturing and other
efficiencies. As a result of these activities, the Company
expects to achieve annual cost synergies of at least $125
million, beginning in the third quarter of 2001, which is
anticipated to result in the acquisition of Telxon being
accretive for the full year 2001, including charges for goodwill.
Under the terms of the merger agreement, Telxon shareholders
received 0.5 of a share of Symbol common stock for each share of
Telxon common stock. As a result of the merger, Symbol has
issued to date approximately 8.8 million shares of common stock
to former Telxon shareholders and reserved up to approximately
1.7 million shares to cover stock options with an average post-
merger exercise price of approximately $28 per share. Also,
Telxon has $24.4 million principal amount outstanding of
convertible debentures with a post-merger conversion price of
$53.50 per share, and $82.5 million principal amount outstanding
of convertible notes with a post-merger conversion price of
$55.00 per share.
Company Products and Services
General
The Company develops, manufactures, sells and services
scanner integrated mobile and wireless information management
systems that consist of mobile computing devices, WLAN, bar code
reading devices, network appliance devices, peripheral devices,
software and programming tools and are designed to provide
solutions to customer specific needs in information transactions.
They are used in a variety of applications from collecting
information at remote locations and transmitting information
between these locations and the user's central data processing
facility to facilitating e-commerce transactions by accessing and
collecting price and product information at the point of activity
for storing or placing orders via the Internet. Several Symbol
devices also connect wirelessly to WANs.
The Company's mobile computing devices are microprocessor-
based, lightweight and battery-operated hand-held computers.
Information may be captured by a device that reads bar codes or
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may be manually entered via a keyboard, a touch screen or a pen
computer display/entry device. The information collected by the
mobile computing device can then be transmitted instantly to a
host computer across a WLAN or in some instances by modems (batch
file transfer mode). Over 90 percent of the Company's mobile
computing devices include an integrated bar code reader and
approximately 90 percent offer optional integrated WLAN or WAN
communication capability. Depending on the model, the Company's
mobile computing devices may have up to 32 megabytes of RAM for
information storage and multiple input and output capabilities
for the connection of printers, bar code readers and
communications devices.
The Company distributes the most complete line of bar code
reading equipment in the world. The Company's bar code reading
products consist of devices designed to capture and decode one-
and two-dimensional bar code symbols and store, process and
transmit information. The Company designs and manufactures
miniature scan engines, hand-held bar code readers, portable
presentation scanners and fixed station point-of-sale scanners
most of which employ laser technology to read information encoded
in bar code symbols. The Company's bar code reading equipment
is compatible with a wide variety of information collection and
retrieval systems, including computers, electronic cash
registers, portable information collection devices and the
Internet. Bar code readers are used to improve inventory
management, productivity and cycle time in retail, transportation
and logistics, parcel delivery and postal service, warehousing
and distribution, factory automation, e-commerce and many other
applications.
The Company provides wireless communication solutions that
connect its mobile computing devices and bar code reading
equipment to wireless LANs and WANs. Based on spread spectrum RF
technology, the Company's WLAN products provide real-time
wireless data communication at data rates of up to 11 Mbps and in
combination with the Company's telephony devices, provide
wireless voice and data communication over TCP/IP data networks.
Unlike traditional narrow band RF-based networks, installation of
the Company's spread spectrum systems requires no individual site
license from the U.S. Federal Communications Commission (FCC).
Design engineering and support for both the Company and OEM
wireless network systems is conducted in the Company's San Jose,
California facility. The focus of the group is the design of
wireless network transaction systems, the Company's Spectrum One
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and Spectrum 24 WLANs and support for the integration of those
high-performance networks into customers' data networks and
enterprise-wide information systems.
Products
The PDT family of mobile computing devices features advanced
technology including Application Specific Integrated Circuits
(ASIC) and Very Large Scale Integrated (VLSI) circuits, which
incorporate many standardized integrated circuits into one
computer chip allowing for size and cost reductions. Also, the
PDT family employs surface mounted component technology for
reduced size and increased performance and dependability, as well
as industry standard 8-, 16- and 32-bit microprocessors. The PDT
family includes a series of mobile computing devices that are
available with different features and at varying costs depending
on customer requirements and preferences. PDT mobile computing
devices feature up to 20 lines of liquid crystal display, slim,
lightweight design, multiple input and output ports and up to 16
megabytes of internal memory. PDT mobile computing devices have
various keyboard configurations, including a user configurable
keyboard and WLAN communication capability. The PDT family was
originally introduced in 1985.
In 1993, the Company introduced the PDT 3100, a 16-bit DOS
compatible mobile computing device incorporating a laser scan
engine and featuring a swivel-head scanner design that adjusts
instantly for right- or left- handed scanning applications. In
1996, the Company introduced a limited performance, lower cost
version of the PDT 3100 and a version with one- and two-
dimensional scanning capability. In 1998, the Company introduced
the PDT 6100 Series of mobile computing devices, a sleek,
compact, ergonomically designed version of the PDT 3100 featuring
a choice of display options.
As a result of the Telxon acquisition in 2000, the Company
also offers the PTC-710. The PTC-710 is a low-cost, hand-held
portable data terminal designed for sales order entry, inventory
control and other applications requiring batch data
communications.
The PDT 6800, introduced by the Company in 1998, is a
versatile mobile computing device combining ruggedized housing
for use in industrial settings with a small, light-weight,
ergonomic form factor suitable for scan intensive retail
applications. The PDT 6800 has a 35- or 46-key alphanumeric
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keypad for easy information input and a 16-line back-lit display
for greater data content and readability. In 2000, the PDT 6800
was the Company's largest selling mobile computing device.
As a result of the acquisition of Telxon, the Company added
several additional mobile computing devices. The PTC-960SL was
Telxon's best selling product and is a multi-purpose data
management terminal well suited to both retail and industrial
environments. This device is similar in performance and design
to the PDT 6800. The PTC-960SL employs a non-shift full
alphanumeric keyboard, a 16-line by 21-character graphic LCD
display, and offers a choice of three integrated scanners for
standard, long range, or high visibility scanning. An integrated
direct sequence or frequency working radio provides wireless
networking capability.
Introduced by the Company in 1999, the PDT 7500 is a sealed,
industrial use mobile computing device designed to withstand
extreme conditions in transportation and logistics environments.
Weighing only 19oz., the PDT 7500 is light enough for extended
periods of use. Color-coded keys facilitate information entry and
a 1/8 VGA screen with a 20-line back-lit display provides easy
viewing of information even in dimly lit areas. The PDT 7500's
486-based AMD Elan microprocessor supports accelerated
information processing and an integrated laser scan engine
provides both one- and two-dimensional scanning capability. The
Company introduced a wireless wide area network(WWAN) version of
the PDT 7500 in 2000.
In 1995, the Company introduced its first wearable scanning
system, the WSS 1000, an innovative hand-mounted bar code-based
information transaction system that allows mobile hands-free bar
code scanning, information collection and LAN connectivity. The
WSS 1000 wearable computer system was designed for users who rely
on the efficiency and accuracy of bar code scanning but require
the use of both hands to perform job functions. The system,
which consists of two components, combines the RS-1, a miniature
scanner worn as a ring that allows the user to simply touch a
thumb and index finger contact switch to scan a bar code and a
compact, light-weight, wrist mounted computer with display which
permits wireless communication to the host computer. In 1997,
the Company introduced the WS 1200, a back-of-the-hand mounted
scanner. Similar to the RS-1 wearable scanner, the WS 1200 is
triggered by a thumb-actuated switch mounted on the user's index
finger, however the WS 1200 is capable of scanning at longer
distances than the RS-1 ring scanner.
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The PTC-2134, PTC-2234 and PTC-710 are pen based mobile
terminals which were added to the Company's product offerings in
2000 as a result of the Telxon acquisition. The PTC-2134
features a diagonal full-VGA touch-screen and supports Windows
95r and Windows CEr. The PTC-2134 supports WLAN. The PTC-2234
extends the PTC-2134 series for use in hazardous locations and is
approved for use with a non-incendive rating.
In 1998, the Company and Palm Computing, Inc., developer of
the Palm line of hand-held computers, entered into an agreement
under the terms of which the Company manufacturers and
distributes touch- and pen-input personal productivity tools
utilizing the Palm operating system with an embedded bar code
reading device. The Company is currently in the process of
finalizing a new agreement with Palm. Introduced in 1998, the
SPT 1500, a pocket sized mobile computing device based upon the
Palm III architecture was the first of such products introduced
by the Company. In 1999, the Company introduced the SPT 1700, a
ruggedized version of the SPT 1500 with wireless LAN
communication capability. With an embedded laser scan engine,
the SPT 1700 provides users with the latest bar code scanning
technology for collecting information and the Palm operating
system allows programmers to easily build applications using
scan-embedded graphical development tools. Designed for use in
office workflow automation, route accounting, healthcare,
education, retail, industrial and warehouse settings, the SPT
1700 is suited for use in any application where mobile workers
need to collect and manage information at the point of activity.
The SPT 1700 has 2MB each of random access memory and flash
memory and is available in an optional 4MB of flash memory and
8MB of random access memory configuration to accommodate larger
application demands. In 2000, the Company introduced the SPT
1700-2D, which reads two-dimensional bar codes as well as one-
dimensional barcodes.
The Company also introduced two WWAN versions of the SPT
1700 in 2000, the SPT 1733 and SPT 1734. The SPT 1733 works with
the CDPD network while the SPT 1734 is based on the GSM standard.
Both products offer Internet connectivity and enable access to
web-based applications or corporate intranet data from any phone
where wireless IP service is available.
Introduced by the Company in 1999, the PPT 2700 mobile
computing device is substantially similar to the SPT 1700;
however, it is based on the Microsoft Windows CEr operating
system. Designed to work specifically with mobile computers, the
Windows CE? operating system allows PPT 2700 users to collect
information via a familiar Windows interface and allows
developers to create applications with standard 32-bit desktop
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tools. In 2000, the Company introduced a version of the PPT 2700
that runs on Microsoft's Pocket PC? operating system. The PPT
2700's ruggedized design, integrated laser scan engine and
Spectrum 24 WLAN connectivity allow users in harsh environments,
such as warehouse management, and in diverse applications, from
medical service providers to school administrators and teachers,
to access remote information at the point of activity. The
Company also introduced in 2000 a version of the PPT 2700 that
reads two-dimensional bar codes as well as WWAN versions of the
2700 that operate on the CDPD and GSM networks, respectively.
In 1999, the Company introduced the VRC 6900, a ruggedized
vehicle mounted or wall mounted touch screen computer capable of
withstanding extreme temperatures and harsh industrial
environments.
Due to the Telxon acquisition in 2000, the Company began
offering a fixed mount terminal, the PTC-860IM, which is an
industrial strength mobile computer that can be used on a
forklift or as a fixed mount device. It is designed to capture,
process and communicate information from virtually anywhere in
the mobile workplace. The PTC-860IM features large ergonomically
designed keys and a full alphanumeric keypad, and is compatible
with the Company's line of bar code reading devices.
Introduced by the Company in 1996, the Symbol Mobile Gateway
(SMG) is an industrialized, PC-based host computer designed for
installation in truck cabs and cars. A wireless WAN radio modem
provides communication across major wide area network systems to
a user's enterprise-wide network and Spectrum 24 LAN capability
connects the SMG to the Company's mobile computing devices,
providing in-vehicle connectivity and communication capabilities
for motor freight, parcel delivery and private fleet operations.
The Company sells several different hand-held laser
scanners, the most important of which is the LS 4000I. The LS
4000I was introduced in 1998. The LS 4000I is a trigger
operated, visible laser diode-based scanner capable of reading
PDF 417, a high-density, high-capacity portable data file storing
approximately one kilobyte of data in a machine-readable code and
all conventional linear bar codes. PDF 417 is a two-dimensional
bar code symbology that incorporates error correction capability
and has one hundred times the information capacity of a
traditional linear bar code. Unlike linear bar codes, PDF 417
can contain an entire data record reducing or eliminating the
need for an external system of linked information storage. PDF
417 may be read by either a laser-based bar code reader or a CCD
imager. Most other two-dimensional codes can only be read by a
CCD imager. The LS 4000I combines high-performance scanning and
an advanced ergonomic form factor making it ideal for price
scanning and inventory management in a wide variety of retail and
commercial applications.
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The Company offers several less expensive, lower performing
hand-held scanners. The LS 2100 Series, introduced in 1998, is a
trigger operated, medium range scanner primarily sold in the
indirect channel as a point-of-sale scanner. The LS 1000 Series,
introduced in 1996, is a small, lightweight trigger operated
scanner for light use scanning applications and the LT 1800,
Laser Touchr visible laser diode-based scanner, introduced in
1995, is useful for applications where near contact scanning is
sufficient.
In 1998, the Company introduced a new category of "smart
scanners", the P 460. The P 460 is a hand-held memory scanner
with up to 4 MB of total memory and an integrated keypad and LCD
display that provide enhanced input and output capabilities.
Designed for multiple uses primarily in the retail market, the P
460 is capable of operating interactively with a host as a corded
scanner for point-of-sale applications, while a wireless version,
the P 470, operates in batch mode under battery power for back-
office or in-store applications such as physical inventory, cycle
counts and gift registry.
The P 300 Series, introduced in 1999, is an extension of the
P 460 family of smart scanners. Ruggedized and ergonomically
designed, the P 300 is a hand-held scanner that meets stringent
industrial standards and can withstand harsh environments. An
integrated interface module provides scanner-to-host computer
communication and advanced data formatting allows users to easily
program the P 300 to match their host system's data input
formats. Versions of the P 300 can also read two-dimensional bar
codes and other versions transmit information wirelessly over the
Company's Spectrum 24 WLAN. The P 360, is a version of the P 300
featuring a top-mounted keypad and display for entering and
viewing data. The P 370 is a cordless version of the P 360.
In 1999, the Company introduced the Vision System 4000 (VS
4000) Series, the first in a series of CCD imaging devices. The
VS 4000 is a hand-held image scanner capable of reading bar code
symbologies presented in any orientation and digital image
capture. An embedded CCD imaging engine provides VGA resolution
images and user-selectable imaging options, and allows users to
choose image characteristics such as compression, quality,
transfer time and file size.
In 2000, due to the Telxon acquisition, the Company
introduced the P300 IMG Industrial Bar Code Imager, a rugged
hand-held imager for reading all major bar code symbologies.
This product is designed to meet stringent industrial standards
and can also capture images and signatures.
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Introduced in 1998, the LS 6000 Series is a trigger
operated, high visibility laser diode-based scanner capable of
omni-directional and single line scanning. The LS 6000's
ergonomic design provides for comfortable use either as a hand-
held scanner or with an optional fixed mount stand as a
presentation scanner; this flexibility allows for increased
throughput in high-volume, point-of-sale retail applications.
Introduced by the Company in 2000, the M 2000 Series is a
versatile countertop projection and hand-held scanner that allows
users to select from three different scan patterns depending upon
their scanning requirements. With an integrated laser scan
engine, the M 2000 is capable of scanning in a rotating omni-
directional scan pattern for reading linear bar codes in any
orientation, a smart raster scan pattern for reading two-
dimensional bar codes and a high density single line scan pattern
for reading poorly printed and damaged bar codes. Designed for
retail and light industrial use, the M 2000's ergonomic built-in
stand provides for both hand-held scanning and hands-free counter
top or wall mount scanning. Several major retailers initiated
rollouts of M 2000 products in 2000.
In addition to its hand-held scanners, the Company also
offers several families of "hands-free" scanners. Unlike the
Company's hand-held scanners, these scanners are usually
triggered by an object sensor to enable use in situations where
use of both hands is required.
In 1994, the Company introduced the LS 9100, a laser diode-
based projection scanner. The LS 9100 generates a large omni-
directional pattern of twenty interlocking laser lines that can
read bar codes at various angles for high productivity scanning.
The LS 5700 and the LS 5800 miniaturized slot scanners were
introduced by the Company in 1996. The LS 5700 was designed to
accommodate all vertical or "on counter" applications and
incorporates a full sleep mode function which allows the motor
and laser to turn off after a prolonged period of scanner
inactivity, extending scanner longevity and reducing power
consumption. The LS 5800 operates in horizontal or "in counter"
applications and features rugged housing and a sealed exit window
that resists spills and dirt.
In 2000, the Company introduced the Magellanr SLT Slimline
family of 360-degree scanners for high volume point of sale
environments such as supermarkets, hyper markets and mass
merchandisers. The Magellanr family includes a scanner/scale
version that provides added functionality and increases
productivity at the check-out counter.
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In 1990, the Company began marketing bar code laser scan
engines that are integrated by unaffiliated third parties into
their portable computing devices.
The SE 1200, introduced by the Company in 1996, measures
less than one cubic inch and weighs less than one ounce, enables
third party manufacturers to integrate high-performance laser
scanning into a variety of devices including hand-held computers,
medical instruments, diagnostic equipment, lottery terminals and
vending machines. The SE 1200 has a working range and ability to
read poor quality bar codes equal to that of hand-held scanners.
In 1997, the Company introduced a high density version of the SE
1200 capable of reading miniaturized bar codes.
The SE 900, introduced by the Company in 1998, is one of the
smallest, lightest scan engines available today. Measuring only
0.2 cubic inch, the SE 900 is 20 percent the size and 15 percent
the weight of the SE 1200, allowing third party manufacturers to
integrate bar code scanning capabilities into smaller devices
without compromising the ergonomic design of the device.
The SE 9100 Series scan engine, introduced in 1995, is a
high speed, omni-directional scan engine providing dense scan
line coverage from the face of the scanner up to a distance of
eight inches allowing quick "swipe" scanning as well as standard
presentation scanning.
Introduced by the Company in 1999, the SE 3223 scan engine
extends the capability of the Taut Band scan element. Scanning
at speeds of up to 640 scans per second, the SE 3223 supports
three modes of operation; single scan line mode, smart raster
mode for reading two-dimensional symbols and a "cyclone" pattern
for omni-directional scanning of linear bar codes in any
orientation.
In 1999, the Company introduced the SE 4200 series imaging
engine, a high-performing CCD image processor that is capable of
reading all major one-dimensional and two-dimensional bar code
symbologies and digital image capture.
In 1993, the Company introduced a self shopping system for
food and non-food retailers. The system, which is integrated
with the retailer's point-of-sale system, utilizes the Company's
CST 2000 or the CST 3000 mobile computing device with an
integrated laser scanner that allows shoppers to scan and
tabulate their purchases as they shop. The system has been
installed worldwide at selected mass merchandise, retail, food
and other retail operations. The CST 3000 enables distribution
of marketing and promotional content to consumers while they
shop.
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In 1996, the Company introduced a version of the self
shopping system capable of communicating via the Company's WLAN
which has substantially replaced the batch version of the system.
There are currently systems installed or ordered in over 500
stores in 40 chains in 20 countries on 5 continents.
In addition to being utilized in the Company's self-shopping
system, the CST 3000 Series, introduced in 1999, is a multi-
purpose, trigger operated wireless bar code scanner with flexible
configurations that also serves as a network scanning appliance
allowing users to communicate with an enterprise intranet or the
Internet via the Company's WLAN. The CST 3000 provides enhanced
user interface with an eight-line, 21-character text and graphics
display and a Motorola Power PC microprocessor for a variety of
consumer and industrial application requirements, including self-
shopping.
Introduced in 1998, the CyberPen is the Company's first
consumer-oriented network appliance designed for use in the home
or office. CyberPen combines the functionality of a contact bar
code scanner with memory and an A.T. Crossr writing instrument.
To read a bar code, the user simply presses a button on the side
of the CyberPen and sweeps the wand tip across the symbol. After
reading the bar code, the user returns the CyberPen to its holder
that uploads the data to a personal computer for transmission via
the Internet. The small, lightweight, portable design makes
CyberPen particularly adaptable for home-office automation,
catalog/Internet shopping and home grocery applications.
The CS 2000, introduced by the Company in 1999, is a
miniature, laser-based memory scanner and Internet appliance
designed for use in the consumer electronic retail market. The
pocket size CS 2000 allows consumers to browse through retailers'
printed catalogs, advertisements and documentation, scan a bar
code for items of interest, and quickly and efficiently order or
obtain additional information on the item through the Internet.
In addition, the CS 2000 can be used by shoppers in retail
establishments and malls to scan bar codes on items of interest,
capturing the item's description and price, and then to download
the information to an Internet web site for later retrieval.
The Company added to its consumer scanning product line in
2000 by introducing the CS-1504, a pocket sized laser scanner
that allows consumers to read bar codes and link to the web, or
create a shopping list. Up to 150 bar codes can be stored in its
internal memory. Its functionality includes scan, delete and
clear, and it can be linked to a computer with a cable
connection.
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The Company also introduced in 2000 the innovative CSM 150
Bar Code Scanner for HandspringT VisorT Handhelds. The Visor is
a well known hand-held computing device that runs on the Palm
operating system. The CSM 150 scan module plugs directly into
the SpringboardT expansion slot at the back of any visor and
transforms any Handspring Visor into a consumer bar code scanner.
The scanning enabled Visor can be used for electronic shopping
and other e-commerce applications.
The Company offers two spread spectrum-based, WLAN families
of products. In 1990, the Company introduced its Spectrum Oner
direct sequence cellular RF network for wireless data
transactions. The Company plans to discontinue its Spectrum One
models in 2001. Spectrum 24r, introduced in 1995, is a high-
performance, frequency hopping network that operates at 2.4 GHz
frequency. Based on spread spectrum RF technology, Spectrum One
and Spectrum 24 networks both provide real-time wireless data
communications with a host computer for hundreds of portable and
fixed-station computers and radio-integrated scanners. In 1998,
the Company introduced a 2Mb version of the Spectrum 24 network
and in 1999, the Company introduced a direct sequence, WLAN that
supports high throughput applications up to 11 Mbps. This high
data rate WLAN, based on the recently ratified IEEE 802.11b open
airwaves standard for 11 Mbps data transmission, now provides
users with high-speed wireless capabilities for rapid data
transfer from server to terminal, image transfer, Internet
communications, customer self-scanning services and streaming
video. In 2000, the Company introduced additional 802.11
compliant 11 MB radio cards and access points. Installation of
the Company's wireless networks at various customer sites began
in 1991 and these networks are now installed in over 50,000 sites
worldwide. The Spectrum-based systems work in tandem with a broad
range of the Company's wireless mobile computing and telephony
devices. Telxon also sold products using the Air-I/O? spread
spectrum radio technology (both 900 MHz and 2.4 GHz), which will
also be discontinued in 2001.
In 1998, the Company introduced the NetVision wireless LAN
telephone system. Based upon voice-over IP technology, the
telephone which looks like a standard cellular telephone, allows
users to place or receive calls worldwide, without additional
charge, between other telephones or PC-based telephones located
at any site served by an internal TCP/IP network. To date sales
of the NetVision telephone have not been material. The NetVision
system connects to a user's TCP/IP system via the Company's
Spectrum 24 WLAN. In 1999, the Company introduced a new network
appliance in the NetVision line, the NetVision Data Phone. The
NetVision Data Phone integrates voice communication, a bar code
scanner, a data entry keypad, a Web browser, a serial port for
printing and a Spectrum 24 WLAN radio card into a single
lightweight device that allows users to bridge the gap between
voice and data networks and the Internet. The combination of
-12-
communication capabilities makes the NetVision Data Phone a
useful productivity tool for a wide range of industries including
retail, warehouse, healthcare and education.
Product list prices for the Company's products range between
$125 to $10,594, depending on product configuration. The Company
offers discounts off list price for quantity orders and sales are
frequently made at prices below list price.
Software and Programming Tools
The Company's products and systems utilize software which
consists of a number of specialized applications and
communications software programs, that run under a variety of
operating platforms including Microsoft MS-DOS, Caldera DR-DOS,
Palm OS, Microsoft Windows?, Microsoft Windows CE? and Microsoft
Pocket PC?. A series of application development kits (ADKs) and
software development kits (SDKs) are available to allow the
Company's programmers, value added resellers (VARs) and end-user
customers to develop applications that fully utilize the
integrated features of the Company's family of mobile computing
devices. The ADKs and SDKs provide the software drivers and
libraries required to maximize product performance. Used in
conjunction with industry standard development tools, software
developers can easily create and support applications to meet
specific customer requirements.
The Company also provides scalable network management
software that allows users at local and remote sites to
administer, configure and manage the Company's Spectrum One and
Spectrum 24 wireless network systems.
The Company has also developed several communication
applications designed to facilitate transmission and reception of
data between mobile computers and stand-alone receivers or host
computers. These applications include a suite of terminal
emulation products, host enablers and various protocols. The
Company has entered into alliances with independent suppliers of
software who assist the Company in development of software.
Customer Support
The Company has a customer support organization that repairs
and maintains the Company's products.
The Company's domestic customer support operations include
locations in Arkansas, California, Indiana, Idaho, Illinois,
-13-
Kentucky, Michigan, Minnesota, New York and Texas. The Company's
foreign customer support offices include locations in Australia,
Austria, Belgium, Canada, China, Denmark, Finland, France,
Germany, Italy, Japan, Mexico, the Netherlands, Norway,
Singapore, South Africa, Spain, Sweden and the United Kingdom.
These centers enhance the Company's ability to respond to its
customers' requirements for fast, efficient service.
The Company currently offers a variety of service
arrangements to meet customer needs. The Company's on-site
service provides for maintenance and repairs at the customer's
location. Depot service includes maintenance and repairs at the
Company's service centers or through authorized service
providers. The Company's service contracts generally have a term
of from one to five years. In addition, the Company offers time-
and-materials service on a non-contract, as-needed basis.
The Company undertakes to correct defects in materials and
workmanship for a period of time after delivery of its products.
The period of time covered by these warranties varies depending
on the product involved as well as contractual arrangements but
is generally twelve months.
Maintenance and support revenues contributed less than 10
percent of the Company's total revenues for the years ended
December 31, 2000, 1999 and 1998.
Sales and Marketing
The Company presently markets its products domestically and
internationally through a variety of distribution channels,
including a direct sales force, original equipment manufacturers,
VARs and sales representatives and distributors. VARs distribute
the Company's products to customers while also selling to those
customers other products or services not provided by the Company.
The Company's sales organization includes domestic sales offices
located throughout the United States and foreign sales offices in
Argentina, Australia, Austria, Belgium, Canada, China, Denmark,
Finland, France, Germany, Italy, Japan, Mexico, the Netherlands,
Norway, Peru, Singapore, South Africa, South Korea, Spain, Sweden
and the United Kingdom.
The Company currently has contractual relationships and
strategic alliances with unaffiliated partners. Through these
relationships, the Company is able to broaden its distribution
-14-
network and participate in industries other than those serviced
by the Company's direct sales force and distributors.
Customers generally order products for delivery within 45
days. Accordingly, shipments made during any particular quarter
generally represent orders received either during that quarter or
shortly before the beginning of that quarter and generally
consist of products manufactured in the quarter. The Company
maintains significant levels of inventory to facilitate meeting
delivery requirements of its customers. The Company, pursuant to
contract or invoice, normally extends 30 to 45 day payment terms
to its customers. Actual payment terms vary from time-to-time
but generally do not exceed 90 days.
The following table sets forth certain information as to
international sales of the Company:
Year Ended
December 31,__________
(in thousands)
2000 1999 1998
Area
EMEA
(Europe, Middle East, Africa) $355,736 $343,507 $284,084
Asia Pacific $ 82,051 $ 64,577 $ 47,901
Other $ 95,861 $ 75,272 $ 67,687
The Company undertakes hedging activities to the extent of
known cash flow in an attempt to minimize the impact of foreign
currency fluctuations.
Manufacturing
The products that are manufactured by the Company are
manufactured at its Bohemia, New York and Reynosa, Mexico
facilities.
While components and supplies are generally available from a
variety of sources, the Company presently depends on a single
source or a limited number of suppliers for several components of
its equipment, certain subassemblies and certain of its products.
In 2000, unexpected demand for communication products caused
worldwide shortages of certain electronic parts and allocation of
such parts by suppliers that had an adverse impact on the
Company's ability to deliver its products as well as the cost of
producing such products. Although component availability appears
-15-
to be improving, such shortages may continue in 2001 and may have
an adverse effect on the Company's ability to deliver its
products or to deliver its products on time or to manufacture its
products at anticipated cost levels. While the Company has
increased inventory levels and entered into contracts with
suppliers of parts that it anticipates will be in short supply,
there can be no assurance that additional parts will not become
the subject of such shortages or that such suppliers will be able
to deliver the parts in fulfillment of their contracts.
Due to the general availability of components and supplies,
the Company does not believe that the loss of any supplier or
subassembly manufacturer would have a long-term material adverse
effect on its business although set-up costs and delays could
occur in the short-term if the Company changes any single source
supplier.
Certain of the Company's products are manufactured by third
parties, a majority of which are outside the United States. In
particular, the Company has a long term strategic relationship
with Olympus Optical, Inc. of Japan ("Olympus") pursuant to which
Olympus and the Company jointly develop selected products which
are manufactured by Olympus exclusively for sale by the Company.
The Company is currently selling several such products and the
Company expects the number of products developed in collaboration
with Olympus to increase in the future. The Company has the
right to manufacture such products if Olympus is unable or
unwilling to do so, but the loss of Olympus as a manufacturer
could have, at least, a temporary material adverse impact on the
Company's ability to deliver such products to its customers. The
Company has no reason to believe that Olympus will not continue
to manufacture products under this arrangement.
The failure of any other third party to supply products to
the Company could have an adverse affect on the Company's ability
to deliver such products to its customers. In 2000, third party
suppliers of products to the Company were subject to the same
shortages of electronic parts and allocation of such parts.
Although the Company believes that such parts shortage is
improving it may continue to be a factor in 2001. However, the
Company has no reason to believe that these suppliers will be
unable to meet their supply or delivery obligations to the
Company over any extended period.
The Company employs certain advanced manufacturing processes
that require highly sophisticated and costly equipment and are
-16-
continuously being modified in an effort to improve efficiency,
reduce manufacturing costs and incorporate product improvements.
Research and Product Development
The Company believes that its future growth depends, in
large part, upon its ability to continue to apply its technology
to develop new products, improve existing products and expand
market applications for its products. The Company's research and
development projects include, among others: improvements to the
reliability, quality and readability of its laser scanners at
increased working distances, faster speeds and higher density
codes (including, but not limited to, two-dimensional codes);
continued development of its solid state laser diode-based
scanners; development of solid state imager-based engines for bar
code data capture and general purpose imaging applications;
development of RFID engines for data capture applications;
improvements to packaging and miniaturization technology for bar
code data capture products, portable data collection appliances
and integrated bar code and RFID data capture products;
development of high-performance digital data radios, high-speed
radio frequency data communications networks and
telecommunications protocols and products; the addition of
application software to provide a complete line of high-
performance interface hardware.
The Company uses both its own associates and from time-to-
time unaffiliated consultants in its product engineering and
research and development programs. Dr. Jerome Swartz, Chairman
of the Board of Directors and Chief Scientist of the Company,
leads the Company's research, patent and new product development
programs. From time-to-time the Company has participated with
and/or partially funded research projects in conjunction with a
number of universities including the State University of New York
at Stony Brook, Polytechnic University of New York, Massachusetts
Institute of Technology, University of California at San Diego
and Tel Aviv University in Israel.
The Company expended (including overhead charges)
approximately $51,125,000, $38,426,000, and $31,030,000 for
research and development during the years ended December 31,
2000, 1999, and 1998, respectively.
-17-
Competition
The business in which the Company is engaged is highly
competitive and acutely influenced by advances in technology,
product improvements and new product introduction, and price
competition. To the Company's knowledge, many firms are engaged
in the manufacture and marketing of products in its three core
technologies, bar code reading equipment, wireless networks and
mobile computing devices. While some companies are engaged in
the manufacture and marketing of products in more than one of
these technologies, the Company is unaware of any other company
that is engaged in all three. Numerous companies, including
present manufacturers of scanners, lasers, optical instruments,
microprocessors, wireless networks, notebook computers, PDAs and
telephonic and other communication devices have the technical
potential to compete with the Company. Many of these firms have
far greater financial, marketing and technical resources than the
Company. The Company competes principally on the basis of
performance and the quality of its products and services.
The Company believes that its principal competitors are
BreezeCom, Inc., Casio, Inc., Cisco Systems, Inc., Fujitsu, Ltd.,
Hewlett-Packard Company, Intermec Technologies Corporation,
Lucent Technologies, Inc., LXE Inc., Matsushita Electric
Industrial Co., Ltd., Metrologic Instruments, Inc., Motorola,
Inc., NipponDenso Co., Opticon, Inc., Proxim, Inc., PSC Inc.,
Psion Teklogix Inc., and Welch Allyn, Inc.
Patent and Trademark Matters
The Company files domestic and foreign patent applications
to support its technology position and new product development.
The Company owns over 550 U.S. Letters Patents covering various
aspects of the technology used in the Company's principal
products, and has entered into cross-license agreements with
other companies. In addition, the Company owns numerous foreign
companion patents. The Company has also filed additional patent
applications in the U.S. Patent and Trademark Office as well as
in foreign patent offices. The Company will continue to file
patents, both United States and foreign, to cover its most recent
research developments in the scanning, information collection and
network communications fields. One of the Company's basic
patents covering hand-held laser scanning technology expired on
-18-
June 6, 2000, and a key companion patent will expire in June
2003. A key scanner integrated computer patent will expire in
2005. While it is possible that products might be designed that
would have infringed the patent which expired in 2000 but do not
infringe the patent which expires in 2003, the Company believes
that such products would be sufficiently inferior as compared to
current hand-held products that they would not gain meaningful
customer acceptance in the market place. Accordingly, the
Company does not believe that the introduction of such products
would have a material adverse effect on the Company or its
competitive position. Furthermore, the expiration of the patent
in 2000 has not diminished the Company's royalty income from
licensees because all of the Company's license agreements that
grant rights under these patents include both patents and the
products that licensees are selling. The license agreements are
structured so that there is no reduction in royalty payments upon
the expiration of any one patent.
The Company believes that its patent portfolio does provide
some competitive advantage in that such patents tend to limit the
number of unlicensed competitors and permit the Company to
manufacture products that may have features that provide better
performance and/or lower cost. Although management believes that
its patents provide some competitive advantage, the Company
depends more for its success upon its proprietary know-how,
innovative skills, technical competence and marketing abilities.
In addition, because of rapidly changing technology, the
Company's present intention is not to rely primarily on patents
or other intellectual property rights to protect or establish its
market position. Instead, the Company has established a program
to protect its investment in technology by enforcing and
licensing certain of its intellectual property rights. The
Company has entered into royalty-bearing license agreements with,
among others, Intermec Technologies Corporation, LXE Inc.,
Metrologic Instruments, Inc. and PSC, Inc.
On April 1, 1996, PSC, Inc. (PSC) commenced suit against the
Company in Federal District court for the Western District of New
York, asserting claims against the Company for alleged violations
of the federal antitrust laws, unfair competition and also
seeking a declaratory judgment of non-infringement and invalidity
as to certain of the Company's patents. PSC served a Third
Amended Complaint, which asserted essentially the same antitrust
and unfair competition claims against the Company, and also
-19-
sought a declaratory judgment of alleged non-infringement and
invalidity of nine of the Company's patents, and a declaratory
judgment that PSC had not breached its two agreements with the
Company and that those agreements had been terminated. The
Company also sued Data General Corporation (Data General), a
manufacturer of portable integrated scanning terminals which
incorporate scan engines from PSC, for infringement of the same
four patents and five additional patents. The nine patents
asserted against Data General were the same nine of the Company's
patents as to which PSC was seeking declaratory relief.
On November 20, 2000, the Company and PSC entered into a
global settlement resolving all litigation and disputes between
the parties. The parties also entered into product-supply
agreements for products that will begin shipping in the second
half of 2001. Under the terms of the supply agreements, PSC has
agreed to purchase hand-held laser scanners and scan engines from
Symbol. Symbol has agreed to purchase fixed-position retail
point-of-sale scanners from PSC.
The agreements also settled all disputed royalty payments,
and upheld all of the patents asserted by Symbol. In addition,
the parties have also amended and clarified PSC's existing
license agreement and included certain new patents. This
settlement also resolved the Company's litigation against Data
General.
In March 2001, Proxim Incorporated ("Proxim") sued the
Company, 3Com Corporation, Wayport Incorporated and SMC Networks
Incorporated in the United States District Court in the District
of Delaware for allegedly infringing three patents owned by
Proxim. Proxim did not identify any specific products of the
Company that allegedly infringe these three patents. Proxim also
filed a similar lawsuit in March 2001 in the United States
District Court in the District of Massachusetts against Cisco
Systems, Incorporated and Intersil, Incorporated. The complaint
against the Company seeks , among other relief, unspecified damages for
patent infringement, treble damages for willful infringement, and a
permanent injunction against the Company from infringing these three
patents. In a press conference held after the filing of the complaints,
Proxim indicated that it was interested in licensing the patents that are
the subject of the lawsuit against the Company. The Company believes that
the allegations of the lawsuit are meritless and intends to defend this
action vigorously.
-20-
On July 21, 1999, the Company and six other leading members
of the Automatic Identification and Data Capture industry jointly
initiated litigation against the Lemelson Medical, Educational, &
Research Foundation, Limited Partnership (the "Lemelson
Partnership"). The suit, which is entitled Symbol Technologies,
Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnerships, was commenced in the U.S.
District Court, District of Nevada in Reno, Nevada. In the
litigation, the Auto ID companies seek, among other remedies, a
declaration that certain patents, which have been asserted by the
Lemelson Partnership against end users of bar code equipment, are
invalid, unenforceable and not infringed. The other six Auto ID
companies who are plaintiffs in the lawsuit are Accu-Sort
Systems, Inc., Intermec Technologies Corporation, a wholly owned
subsidiary of UNOVA, Inc., Metrologic Instruments, Inc., PSC
Inc., Psion Teklogix Corporation, a wholly owned U.S. subsidiary
of Psion Teklogix International, Inc. and Zebra Technologies
Corporation. The Company has agreed to bear approximately half of
the legal and related expenses associated with the litigation,
with the remaining portion being borne by the other Auto ID
companies.
The Lemelson Partnership has contacted many of the Auto ID
companies' customers demanding a one-time license fee for certain
so-called "bar code" patents transferred to the Lemelson
Partnership by the late Jerome H. Lemelson. The Company and the
other Auto ID companies have received many requests from their
customers asking that they undertake the defense of these claims
using their knowledge of the technology at issue. Certain of
these customers have requested indemnification against the
Lemelson Partnership's claims from the Company and the other Auto
ID companies, individually and/or collectively with other
equipment suppliers. The Company, and we understand, the other
Auto ID companies believe that generally they have no obligation
to indemnify their customers against these claims and that the
patents being asserted by the Lemelson Partnership against their
customers with respect to bar code equipment are invalid,
unenforceable and not infringed. However, the Company and the
other Auto ID companies believe that the Lemelson claims do
concern the Auto ID industry at large and that it is appropriate
for them to act jointly to protect their customers against what
they believe to be baseless claims being asserted by the Lemelson
Partnership.
-21-
The Lemelson Partnership filed a motion to dismiss the
lawsuit, or in the alternative, to stay proceedings or to
transfer the case to the U.S. District Court in Arizona where
there are pending cases involving the Lemelson Partnership and
other companies in the semiconductor and electronics industries.
On March 21, 2000, the U.S. District Court in Nevada denied the
Lemelson Partnership's motion to dismiss, transfer, or stay the
action. It also struck one of the four counts.
On April 12, 2000, the Lemelson Partnership filed its Answer
to the Complaint in the Symbol et. al. v. Lemelson Partnership
case. In the Answer, the Lemelson Partnership included a
counterclaim against the Company and the other plaintiffs seeking
a dismissal of the case. Alternatively, the Lemelson
Partnership's counterclaim seeks a declaration that the Company
and the other plaintiffs have contributed to, or induced
infringement of particular method claims of the patents-in-suit
by the plaintiffs' customers. The Company believes there is no
merit to the Lemelson Partnership's counterclaim.
On May 15, 2000, the Auto ID companies filed a motion
seeking permission to file an interlocutory appeal of the Court's
decision to strike the fourth count of the complaint (which
alleged that the Lemelson Partnership's delays in obtaining its
patents rendered them unenforceable for laches). The motion was
granted by the Court on July 14, 2000. The Court entered a
clarifying, superseding order on July 25, 2000. On September 1,
2000, the U.S. Court of Appeals for the Federal Circuit granted
the petition of the Auto ID companies for permission to pursue
this interlocutory appeal. The Company believes the Federal
Court will hear oral argument on the motion later in 2001.
On July 24, 2000, the Auto ID companies filed a motion for
partial summary judgment arguing that almost all of the claims of
the Lemelson Partnership's patents are invalid for lack of
written description. On August 8, 2000, the Lemelson Partnership
filed a motion seeking an extension of approximately ten weeks in
which to file an answer to this motion. On August 31, 2000, the
Court granted the Lemelson Partnership's motion for such an
extension. On October 25, 2000, the Lemelson Partnership filed a
combined opposition to the motion of the Auto ID companies for
partial summary judgment and its own cross-motion for partial
summary judgment that many of the claims of the Lemelson
Partnership's patents satisfy the written description
requirement. On January 8, 2001, the Auto ID companies filed a
combined reply in support of their partial summary judgment
motion and opposition to the Lemelson Partnership's partial
summary judgment cross-motion. The Company believes that the
District Court will probably hear oral arguments on this motion
later in 2001.
-22-
Although the Company believes that its products and
technology do not infringe the proprietary rights of others,
there can be no assurance that third parties will not assert
infringement and other claims against the Company or that such
claims will not be successful. The Company has received and has
currently pending such claims and in the future may receive
additional such notices of claims of infringement of other
parties' rights. In such event, the Company has and will
continue to take reasonable steps to evaluate the merits of such
claims, take such action as it may deem appropriate, which action
may require that the Company enter into licensing discussions, if
available, and/or modify the affected products and technology, or
result in litigation against parties seeking to enforce a claim
which the Company reasonably believes is without merit. The
Company in the past has been involved in such litigation and
additional litigation may be filed in the future. Such parties
have and are likely to claim damages and/or seek to enjoin
commercial activities relating to the Company's products or
technology affected by such parties' rights. In addition to
subjecting the Company to potential liability for damages, such
litigation may require the Company to obtain a license in order
to manufacture or market the affected products and technology.
To date, such activities have not had a material adverse affect
on the Company's business and the Company has either prevailed in
all litigation, obtained a license on commercially acceptable
terms or otherwise been able to modify any affected products or
technology. However, there can be no assurance that the Company
will continue to prevail in any such actions or that any license
required under any such patent would be made available on
commercially acceptable terms, if at all. There are a
significant number of U.S. and foreign patents and patent
applications in the Company's areas of interest, and the Company
believes that there has been and is likely to continue to be
significant litigation in the industry regarding patent and other
intellectual property rights.
The Company has also obtained certain domestic and
international trademark registrations for its products and
maintains certain details about its processes, products and
strategies as trade secrets.
The Company regards its software as proprietary and
attempts to protect it with copyrights, trade secret law and
international nondisclosure safeguards, as well as restrictions
on disclosure and transferability that are incorporated into its
software license agreements. The Company licenses its software
products to customers rather than transferring title. Despite
these restrictions, it may be possible for competitors or users
to copy aspects of the Company's products or to obtain
information which the Company regards as trade secrets. Computer
software generally has not been patented and existing copyright
-23-
laws afford only limited practical protection. In addition, the
laws of foreign countries generally do not protect the Company's
proprietary rights in its products to the same extent as do the
laws of the United States.
Government Regulations
The use of lasers and radio emissions are subject to
regulation in the United States and in other countries in which
the Company does business. In the United States, various Federal
agencies, including the Center for Devices and Radiological
Health of the Food and Drug Administration, the FCC, the
Occupational Safety and Health Administration and various State
agencies, have promulgated regulations which concern the use of
lasers and/or radio/electromagnetic emissions standards. Member
countries of the European community have enacted or are in the
process of adopting standards concerning electrical and laser
safety and electromagnetic compatibility and emissions standards.
The Company believes that all of its products are in
material compliance with current standards and regulations;
however, regulatory changes in the United States and other
countries may require modifications to certain of the Company's
products in order for the Company to continue to be able to
manufacture and market these products.
The Company's RF mobile computing devices include various
models, all of which intentionally transmit radio signals as part
of their normal operation. Certain versions of the Company's
hand-held computers and its Spectrum One and Spectrum 24 cellular
networks utilize spread spectrum radio technology. The Company
has obtained certification from the FCC for its products that
utilize this radio technology. Such certification is valid for
the life of the product unless and until the circuitry of the
product is altered in material respects, in which case a new
certification may be required. Users of these products in the
United States do not require any license from the FCC to use or
operate the product. Certain of the Company's products transmit
narrow band radio signals as part of their normal operation. The
Company has obtained certification from the FCC for its narrow
band radio products. However, these models must not only be
accepted by the FCC prior to marketing but users of these devices
must themselves also obtain a site license from the FCC to
operate them.
-24-
Associates
At December 31, 2000, the Company had approximately 6,000
full-time associates. Of these, approximately 4,900 were
employed domestically. The Company expects the number of full-
time associates to decrease during 2001 as it completes its
restructuring of Telxon. The Company also employs temporary
production personnel. None of the Company's associates are
represented by a labor union. The Company considers its
relationship with its associates to be good.
Item 2. Properties
The following table states the location, primary use and
approximate size of all principal plants and facilities of the
Company and its subsidiaries and the duration of the Company's
tenancy with respect to each facility.
Location Principal Use Size Tenancy/Ownership
One Symbol Plaza World Headquarters 299,000 square Owned
Holtville, NY feet
McAllen, Texas* Distribution approximately Owned
Facility 320,000 square
feet
Houston, Texas** Manufacturing and 152,200 square Owned
Customer Service feet
Reynosa, Tamaulipas Manufacturing 140,000 square Owned
Mexico*** feet
116 Wilbur Place Manufacturing 92,000 square Owned
Bohemia, NY feet
110 Wilbur Place Manufacturing 30,000 square Owned
Bohemia, NY feet
12 & 13 Oaklands Pk. Customer Service 21,700 square Owned
Fishponds Road feet
Wokingham, Berkshire
England
-25-
110 Orville Drive Manufacturing 110,000 square Leased: expires
Bohemia, NY feet August 31, 2009
Valley Oak Network Systems 100,000 square Leased: expires
Technology Campus Engineering, feet August 12, 2009
San Jose, CA Marketing
1101 Lakeland Ave. Manufacturing, 90,400 square Leased: expires
Bohemia, NY Administration and feet August 31, 2009
Distribution
Woodlands, Texas** Technology Center 69,671 square Leased: expires
feet June 30, 2008
El Paso, Texas Customer Service 62,660 square Leased: expires
Center and Warehouse feet December 14,2007
Berkshire Place EMEA Headquarters, 55,500 square Leased: expires
Winnersh Triangle Marketing and feet December 31,2012
Winnersh, Wokingham Administration and
Berkshire, England U.K. Headquarters
Juarez, Mexico Customer Service 50,000 square Leased: expires
Center and Warehouse feet April 13, 2004
* This facility is under construction and is expected to become
operational in the fourth quarter of 2001.
** These are facilities of Telxon that will either be closed or sold
in 2001.
*** This facility is being expanded by approximately 150,000 square
feet. The expansion is expected to be completed by the fourth quarter
of 2001.
In addition to these principal locations, the Company and its
subsidiaries also lease other offices throughout the world, ranging in
size from approximately 150 to 40,000 square feet.
-26-
Item 3. Legal Proceedings
See Patent and Trademark Matters for a discussion of
certain other litigation involving the Company.
Telxon Litigation
From December through March 1999, a total of 27 class
actions were filed in the United States District Court, Northern
District of Ohio, by certain alleged stockholders of Telxon on
behalf of themselves and purported classes consisting of Telxon
stockholders, other than the defendants and their affiliates, who
purchased stock during the period from May 21, 1996 through
February 23, 1999 or various portions thereof, alleging claims
for "fraud on the market" arising from alleged misrepresentations
and omissions with respect to Telxon's financial performance and
prospects and an alleged violation of generally accepted
accounting principles by improperly recognizing revenues. The
named defendants are Telxon, its former President and Chief
Executive Officer, Frank E. Brick, and its former Senior Vice
President and Chief Financial Officer, Kenneth W. Haver. The
actions were referred to a single judge. On February 9, 1999,
the plaintiffs filed a Motion to consolidate all of the actions
and the Court heard motions on naming class representatives and
lead class counsel on April 26, 1999.
On August 25, 1999, the Court appointed lead plaintiffs and
their counsel, ordered the filing of an Amended Complaint, and
dismissed 26 of the 27 class action suits without prejudice and
consolidated those 26 cases into the first filed action. The
lead plaintiffs appointed by the Court filed an Amended Class
Action Complaint on September 30, 1999. The Amended Complaint
alleges that the defendants engaged in a scheme to defraud
investors through improper revenue recognition practices and
concealment of material adverse conditions in Telxon's business
and finances. The Amended Complaint seeks certification of the
identified class, unspecified compensatory and punitive damages,
pre- and post-judgment interest, and attorneys' fees and costs.
Various appeals and writs challenging the District Court's August
25, 1999 rulings were filed by two of the unsuccessful plaintiffs
but have all been denied by the Court of Appeals.
On November 8, 1999, the defendants jointly moved to dismiss
the Amended Complaint, which was denied on September 29, 2000.
Following the denial, the parties filed a proposed joint case
-27-
schedule, discovery commenced, and the parties each filed their
initial disclosures. On October 30, 2000, defendants filed their
answer to the plaintiffs' amended complaint as well as a Motion
for Reconsideration or to Certify the Order Denying the Motion to
Dismiss for Interlocutory Appeal and request for oral argument,
and a memorandum of points and authorities in support of that
motion. On November 14, 2000, Plaintiffs filed a Memorandum in
Opposition of Defendants Motion. This Motion was denied on
January 19, 2001. On November 1, 2000, defendants filed a Motion
for Application of the Amended Federal Rules of Civil Procedure
to the case, and on November 16, 2000, the Court granted this
Motion in part and held that the Court will apply the new rules
of evidence and new rules of civil procedure except to the extent
those rules effectuate changes to Rule 26 of the Federal Rules
for Civil Procedure. Discovery is in its preliminary stages.
By letter dated December 18, 1998, the Staff of the Division
of Enforcement of the Securities and Exchange Commission (the
"Commission") advised Telxon that it was conducting a
preliminary, informal inquiry into trading of the securities of
Telxon at or about the time of Telxon's December 11, 1998 press
release announcing that Telxon would be restating the revenues
for its second fiscal quarter ended September 30, 1998. On
January 20, 1999, the Commission issued a formal Order Directing
Private Investigation and Designating Officers To Take Testimony
with respect to the referenced trading and specified accounting
matters, pursuant to which subpoenas have been served requiring
the production of specified documents and testimony.
By letter dated March 9, 2001, the Division of Enforcement
of the Commission informed Telxon that it had made a preliminary
determination to recommend that the Commission initiate an action
against Telxon for violation of various sections of the federal
securities laws and regulations and to seek permanent injunctive
relief and appropriate monetary penalties against Telxon. The
Division of Enforcement has also indicated that it intends to
recommend similar action against one current and two former
employees of Telxon. The Commission has given Telxon until April
23, 2001 to indicate in a written submission why Telxon believes
no action should be instituted against it. Telxon has not
accrued for any fines or penalties under Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies,"
because the amount of any such fine or penalty is not estimable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
-28-
Item 4A. Executive Officers of the Registrant
The following table sets forth the names, ages and all
positions and offices held by the Company's executive officers:
Tomo Razmilovic........ 58 President, Chief Executive Officer
and Director
Jerome Swartz.......... 60 Chairman of the Board of Directors,
Chief Scientist and Director
Leonard H. Goldner..... 53 Executive Vice President, General
Counsel and Secretary
Robert Blonk........... 54 Senior Vice President-Human
Resources
Frank J. Borghese...... 46 Senior Vice President and General
Manager, Worldwide Sales & Services
Brian T. Burke......... 54 Senior Vice President, Worldwide
Operations
Ron Goldman............ 40 Senior Vice President, General
Manager-Mobile Computing/
Scanning Marketing
Kenneth Jaeggi......... 55 Senior Vice President-Finance and
Chief Financial Officer
Joseph Katz............ 48 Senior Vice President, Research and
Development
Boris Metlitsky........ 53 Senior Vice President, General
Manager-Mobile Computing/Scanning
Engineering
Satya Sharma........... 60 Senior Vice President-Corporate
Quality and Wireless Systems
Engineering
Robert W. Korkuc....... 38 Vice President, Chief Accounting
Officer
-29-
Mr. Razmilovic had been the President and Chief Operating
Officer of the Company from October 1995. Effective July 1,
2000, Mr. Razmilovic assumed the position of Chief Executive
Officer. He was previously Senior Vice President-Worldwide Sales
and Services. He first joined the Company in September 1989.
From January 1989 to August 1989, he was President and Chief
Executive Officer of Cominvest Group, a Swedish multinational
high technology company. From August 1985 to December 1988, he
was President of ICL International, a major European computer
manufacturer and he also led its industry marketing and software
development divisions.
Dr. Swartz co-founded and has been employed by the
Company since it commenced operations in 1975. He has been
the Chairman of the Board of Directors for more than the past
fifteen years, and served as Chief Executive Officer of the
Company for more than fifteen years until July 1, 2000. Dr.
Swartz was an industry consultant for 12 years in the areas of
optical and electronic systems and instrumentation and has a
total of some 160 technical papers and issued and allowed U.S.
patents to his credit, including the Company's basic patents
in hand-held laser scanning. He is also a trustee of the
Polytechnic University of New York and an adjunct full
professor of Electrical Engineering at the State University of
New York at Stony Brook. He is also a fellow of the Institute
of Electrical and Electronic Engineering and a member elect to
the National Academy of Engineering.
Mr. Goldner joined the Company in September 1990. From
September 1979 until August 1990, he was a partner of the New
York law firm of Shereff, Friedman, Hoffman & Goodman, which
was securities counsel to the Company.
Mr. Blonk joined the Company in August 1997. Prior to
joining the Company, he had been employed for thirty years by
Lucent Technologies, Inc. in a number of positions, the most
recent of which was as its Director of Technical Business
Operations.
Mr. Borghese has been employed by the Company for more than
the past ten years in various sales and sales management
positions.
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Mr. Burke has been employed by the Company for more than the
past ten years in various managerial and financial positions.
Mr. Goldman joined the Company in February 1992 and has
served in various legal, managerial and business development
positions.
Mr. Jaeggi joined the Company in May 1997. From May 1996 to
May 1997, he was a member of the Office of the Chairman and the
Operating Committee of Electromagnetic Sciences in Atlanta, GA.
From December 1992 until May 1996, Mr. Jaeggi served as Senior
Vice President, Chief Financial Officer and consultant of
Scientific-Atlanta, Inc., a leading producer of cable network and
satellite communications systems. From June 1988 to December
1992, he was President and Chief Executive Officer of Imagraph
Corporation, a developer and manufacturer of graphics and imaging
hardware and software for application specific workstations. Mr.
Jaeggi served as Vice President, Chief Financial Officer and
consultant to Data General Corporation from June 1980 until June
1988.
Dr. Katz joined the Company in January 1989 and has held
several positions in Research and Development. From May 1981
until January 1989, Dr. Katz held a number of positions at the
Jet Propulsion Laboratory of the California Institute of
Technology, the most recent of which was as Technical Group
Supervisor.
Dr. Metlitsky joined the Company in March 1983 and has
served in various technical and managerial positions.
Dr. Sharma joined the Company in March 1995. Prior to
joining the Company, Dr. Sharma held various management positions
at AT&T. From April 1990 to March 1995, Dr. Sharma served as
Director of Quality of AT&T's Power Systems Division and from
January 1986 to April 1990 he was a Department Head at AT&T Bell
Labs.
Mr. Korkuc joined the Company in October 1990 and has served
in various finance and accounting positions. He is a member of
the American Institute of Certified Public Accountants and the
New York State Society of Certified Public Accountants.
-31-
PART II
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters
The Company's Common Stock is listed on the New York Stock
Exchange. The following table sets forth, for each quarter
period of the last two years, the high and low sales prices as
reported by the New York Stock Exchange and the dividend payments
declared by the Board of Directors and paid by the Company.
Year Ending: High* Low* Dividend
December 31, 1999 First Quarter 43.25 28.06
Second Quarter 38.13 26.00 $.02
Third Quarter 41.38 32.63
Fourth Quarter 65.00 29.63 $.015
December 31, 2000 First Quarter 69.00 34.29 $.015
Second Quarter 63.25 35.38
Third Quarter 55.75 31.19 $.01
Fourth Quarter 46.25 25.63
*Adjusted to reflect a three-for-two stock split, effective
June 14, 1999 and a three-for-two stock split, effective April 5,
2000.
As of March 1, 2001 there were 1,544 holders of record of
the Company's Common Stock.
Historically, changes in the Company's results of operations
or projected results of operations have resulted in significant
changes in the market price of the Company's Common Stock. As a
result, the market price of the Company's Common Stock has been
highly volatile. In addition, the stock prices of many well
known technology companies have recently experienced significant
volatility as a result of failing to meet revenue or earnings
forecasts. The Company's Common Stock may also experience
substantial volatility if its operational results do not meet
projections.
Payment of future dividends is subject to approval by the
Company's Board of Directors. Recurrent declaration of dividends
will be dependent on the Company's future earnings, capital
requirements and financial condition.
-32-
On May 12, 1999, February 14, 2000 and February 26, 2001,
the Board of Directors of the Company declared a three-for-two
stock split, payable as a 50 percent dividend, on June 14, 1999,
April 5, 2000 and April 16, 2001, respectively, to all
shareholders of record on June 1, 1999, March 13, 2000 and March
26, 2001, respectively.
-33-
Item 6. Selected Financial Data
(in thousands, except per share data)
Year Ended December 31,__________________
Operating Results: 2000(1) 1999 1998(2) 1997 1996(3)
Net Revenue $1,449,490 $1,139,290 $977,901 $774,345 $656,675
Net (Loss) Earnings ($68,966) $116,364 $92,964 $70,232 $50,256
(Loss) Earnings Per Share:
Basic ($0.50) $0.88 $0.70 $0.53 $0.38
Diluted ($0.50) $0.82 $0.66 $0.51 $0.37
Financial Position:
Total Assets $2,093,199 $1,047,944 $838,399 $679,190 $614,238
Working Capital $620,214 $351,613 $295,317 $241,846 $221,678
Long-Term Debt, less
Current Maturities $201,144 $99,623 $64,596 $40,301 $50,541
Stockholders' Equity $1,201,696 $640,460 $530,928 $453,742 $399,676
Weighted Average Number of Common
Shares Outstanding:
Basic 137,629 132,488 132,291 132,836 130,944
Diluted 137,629 141,572 140,481 137,781 137,088
(1) Includes pre-tax charges for costs associated with restructuring, impairment and
the acquisition of Telxon Corporation of $273,521 or ($1.46) diluted loss per share.
(2) Includes a pre-tax charge for costs associated with a terminated acquisition of $3,597 or
$0.02 diluted earnings per share.
(3) Includes a pre-tax charge for costs associated with acquisition related matters of
$12,341 or $0.06 diluted earnings per share.
-34-
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER SECURITIES
LITIGATION REFORM ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS
Sometimes, the Company makes forward-looking statements,
orally or in writing. These statements may be in press releases,
oral statements or in filings made by the Company with the
Securities and Exchange Commission, including this one. The
words or phrases "will likely result", "are expected to", "will
continue", "is anticipated", "estimate", "project" or similar
expressions identify "forward-looking statements" that are
covered by the Private Securities Litigation Reform Act of 1995
(the "Reform Act"). The Company wants to be sure that any
forward-looking statements are accompanied by meaningful
cautionary statements, so that the Company is protected by the
safe harbor established in the Reform Act. Therefore, any
forward-looking statements made by the Company are qualified by
the following discussion of factors that could cause actual
results to be different from forward-looking statements. The
Company has no obligation to update forward-looking statements.
The risks presented here may not be all of the risks the
Company may face. These are the factors that the Company believes
could cause actual results to be different from expected and
historical results. Other sections of this report include
additional factors that could have a negative effect on the
Company's business and financial performance. The industry that
the Company competes in is very competitive and changes rapidly.
Sometimes new risks emerge and management may not be able to
predict all of them, or be able to predict how they may cause
actual results to be different from those contained in any
forward-looking statements. You should not rely upon forward-
looking statements as a prediction of future results.
While the Company, from time to time, communicates with
securities analysts, you should not assume that the Company
agrees with any statement or report issued by any analyst
regardless of the content of the statement or report. The
Company has a policy against issuing financial forecasts or
projections or confirming the accuracy of forecasts or
projections issued by others. If reports issued by securities
analysts contain projections, forecasts or opinions, those
reports are not the responsibility of the Company.
Financial Performance. The Company's operating results may vary
in the future as a result of a number of factors, including:
- changes in technology
- new competition
-35-
- economic conditions
- customer demand
- a shift in the mix of the Company's products
- a shift in sales channels
- the market acceptance of new or enhanced versions of the
Company's products
- the timing of introduction of other products and
technologies
- any associated charges to earnings
- any cancellation or postponement of orders, or bookings
failing to materialize into orders
- - component shortages
- - acquisitions made by the Company
Economic Conditions. There has been significant evidence that
the United States economy has been slowing in the last quarter of
2000 and the first quarter of 2001. There has also been concern
expressed that the United States economy may be heading into a
recession, and that a decline in the United States economy could
have worldwide effects. The European economy has also
experienced weakness. Numerous well known high technology
companies have missed projected earnings forecasts and performed
below expectations in the last quarter of 2000 and the first
quarter of 2001. Some of these companies have attributed their
shortfalls in revenues and earnings to the slowing United States
economy or weakness in Europe. The Company's business and
operating results may be negatively affected if the growth rate
of the United States economy continues to decline, if the United
States economy experiences a recession, or if the European
economy does not improve. The Company's business and operating
results may also be negatively affected if the retail industry,
which accounts for a significant portion of the Company's
business, does not improve.
Acquisitions. The Company has in the past and may in the future
acquire businesses or product lines as a way of expanding its
product offerings and acquiring new technology. If the Company
does not identify future acquisition opportunities and/or
integrate businesses that it may acquire effectively, the
Company's growth may be negatively affected. In 2000, the
Company acquired Telxon, the largest acquisition in the Company's
history. If the Company does not realize the expected synergies
and efficiencies from acquiring Telxon, or realizes them more
slowly than anticipated, the Company's business and operating
results may be affected negatively. The Company's business and
operating results may also be affected negatively if the Company
does not effectively rationalize the assets, physical plant,
-36-
products, schedule, personnel, sales and marketing, purchasing,
and manufacturing efforts and strategies, of Telxon and Symbol.
The Company expects to realize annual synergies of $125 million
beginning in the third quarter of 2001, which is anticipated to
result in the acquisition of Telxon being accretive for the full
year 2001, including the effects of goodwill. However, there can
be no assurance that the Company will realize these objectives.
Forecasts. The volume and timing of orders the Company receives
during a fiscal quarter are difficult to forecast. Sometimes
customers have canceled orders or rescheduled shipments ordered
from the Company. The Company has operated with a relatively
small backlog. The Company monitors backlog. Because most
customers order products for delivery within 45 days, the Company
does not believe that backlog provides a good indication of
financial performance except for the then current fiscal quarter.
Shipments made during a fiscal quarter are usually in response to
orders received either during that quarter or shortly before the
beginning of that quarter. Shipments for orders received in a
fiscal quarter are usually from products manufactured in that
quarter. The Company maintains significant levels of raw
materials so it can meet delivery requirements of its customers.
The Company may not be able to procure the appropriate mix of raw
materials to accommodate all orders in a quarter. Because of the
levels of current and anticipated backlog, the Company's
financial performance in any quarter is dependent upon obtaining
orders in that quarter which can be manufactured and delivered to
its customers in that quarter. Financial performance for any
quarter is not known until near the end of that quarter. The
Company's expense levels are partly based on the level of future
revenues the Company expects. The Company's total operating
expenses have increased as it has expanded its operations.
Because of the difficulty of forecasting revenue and the
Company's planned growth in spending, operating expenses could be
unusually high for any quarter causing the Company's operating
profit to be negatively affected for that quarter.
Product Mix. The Company anticipates that in 2001:
- - it will sell more products with lower margins than it did
in the past; and
- - lower margin products will make up a larger portion of
sales than they have in the past.
If the Company does not increase sales and/or lower
operating expenses to compensate for lower overall margins,
operating profit will be negatively affected.
-37-
Foreign Sales. A large portion of the Company's net revenues
have been from foreign sales. In 2000, foreign sales accounted
for approximately 36.8 percent of net revenue. These sales are
subject to the normal risks of foreign operations, such as:
- currency fluctuations
- protective tariffs
- - trade barriers and export/import controls
- transportation delays and interruptions
- reduced protection for intellectual property rights in
some countries
- the impact of recessionary foreign economies
- long receivable collection periods
Most of the Company's equipment sales in Western Europe and
Asia are billed in foreign currencies and are subject to currency
exchange fluctuations. Since a significant portion of the
Company's products is manufactured in the United States, sales
and results of operations could be affected by fluctuations in
the U.S. dollar. Changes in the value of the U.S. dollar compared
to foreign currencies have in the past had an impact on the
Company's sales and margins. In 2000, results of operations
continued to be negatively affected by the appreciation of the
value of the U.S. dollar in relation to key foreign currencies.
The Company believes that its 2000 financial performance was
satisfactory despite the negative currency impact. However, the
Company cannot predict the direction or magnitude of currency
fluctuations, and the Company may not continue to perform
adequately if the value of the U.S. dollar in relation to key
foreign currencies increases. The Company cannot predict whether
the United States or any other country will impose new quotas,
tariffs, taxes or other trade barriers upon the importation of
the Company's products or supplies or the effect that new
barriers would have on its financial position or results of
operations.
Manufacturing. If use of the Company's manufacturing facilities
in Bohemia, New York or Reynosa, Mexico were interrupted by
natural disaster or otherwise, the Company's operations would be
negatively affected until the Company could establish alternative
production and service operations. The Company's operations may
also be negatively affected if the Company does not complete and
make operational the McAllen distribution center according to
schedule.
-38-
Many of the Company's products and subassemblies are manufactured
by third parties inside and outside the United States. The
Company anticipates that an increased percentage of new products
and subassemblies will be manufactured by third parties,
including Olympus. Many of these third parties are located in
foreign countries, as is the Company's Reynosa, Mexico facility.
The manufacture of these items is subject to risks common to all
foreign manufacturing activities such as:
- governmental regulation
- currency fluctuations
- transportation delays and interruptions
- - political and economic disruptions
- the risk of imposition of tariffs or other trade
barriers
The Company has experienced manufacturing problems that have
caused delivery delays. The Company may experience production
difficulties and product delivery delays in the future as a
result of:
- changing process technologies
- ramping production
- installing new equipment at its manufacturing facilities
- shortage of key components
Manufacturing of products in two locations subjects the
Company to normal risks of managing two separate manufacturing
facilities in two separate countries, including:
- administration of customs requirements
- coordination of procurement
- cross-border distribution
Sometimes, the Company experiences significant price
increases and limited availability of components that are
available from multiple sources. At times, the Company has been
unable to meet product orders because parts were not available.
While past shortages and delays have not had a negative effect on
the Company's reported revenues, shortages and delays could have
a negative effect on the Company's future operating results.
Although recent trends indicate that the availability of
components may be increasing, the Company cannot predict if
component shortages will continue. On occasion, the Company
acquires component inventory in anticipation of supply shortages.
If component availability is restored and as a result component
prices decline, operating results could be negatively affected.
-39-
Some components, subassemblies and products are purchased
from a single supplier or a limited number of suppliers. The
loss of any of these suppliers may cause the Company to incur
additional set-up costs and delays in manufacturing and delivery
of products.
The Company purchases a large number of parts, components
and third party products from Japan. The value of the yen in
relation to the U.S. dollar has declined in the last half of
2000. If the value of the yen strengthens relative to the dollar
in 2001, the Company's financial performance could be negatively
affected.
Competition. The Company is in a highly competitive industry
that is influenced by:
- advances in technology
- product improvements
- new product introduction
- marketing and distribution capabilities
- price competition
If the Company does not keep pace with product and
technological advances, the Company's competitive position and
prospects for growth could be negatively affected. In 1999 and
continuing in 2000, several of the Company's key competitors had
poor financial performance. There is likely to be continued
pricing pressure in 2001 as these competitors attempt to reverse
losses in their market share, which may negatively affect the
Company's revenues and/or gross margins.
New Competitors. The products that the Company and its
competitors manufacture and market are becoming more complex. As
the technological and functional capabilities of future products
increase these products will begin to compete with products being
offered by larger, traditional computer, network and
communications industry participants who have substantially
greater financial, technical, marketing and manufacturing
resources than the Company. The Company may not be able to
compete successfully against these new competitors and
competitive pressures may negatively affect its business or
operating results.
Price. The selling price of the Company's products usually
decreases over the life of the product. To lessen the effect of
price decreases, the Company attempts to reduce manufacturing
costs of existing products and to introduce new products,
functions and other price/performance-enhancing features. If
-40-
cost reductions, product enhancements and new product
introductions do not occur in a timely manner or are not accepted
in the marketplace, the Company's operating results could be
negatively affected.
Research and Development. The Company is active in research and
development of new products and technologies. The Company's
research and development efforts may not lead to the successful
introduction of new or improved products. The Company may
encounter delays or problems in connection with its research and
development efforts. New products often take longer to develop,
have fewer features than originally considered desirable and
achieve higher cost targets than initially estimated. There may
be delays in starting volume production of new products and new
products may not be commercially successful. Products under
development are often announced before introduction and these
announcements may cause customers to delay purchases of existing
products until the new or improved versions of those products are
available. Delays or deficiencies in development, manufacturing,
delivery of or demand for new products or of higher cost targets
could have a negative effect on the Company's business, operating
results or financial condition. The Company has made significant
investments to develop consumer scanning products. Consumer
scanning is a new and developing market. The Company's business
and operating results may be negatively affected if the consumer
scanning market does not grow and mature, or if consumers adopt
scanning products at lower rates than anticipated by the Company.
The Company's efforts in consumer scanning are also dependent, in
part, on applications developed and infrastructure deployed by
third parties. The Company's business and operating results may
also be negatively affected if third parties do not develop
robust, new or innovative applications, or create appropriate
infrastructure, for consumer scanning products.
System Sales. Historically, the Company has sold individual bar
code scanning devices and scanner integrated mobile computing
devices to customers. Increasingly, the Company's sales efforts
have focused on sales of complete data transaction systems.
System sales are more costly and require a longer selling cycle,
longer payment terms and more complex integration and
installation services.
Intellectual Property. The Company protects its proprietary
information and technology through contractual confidentiality
provisions and by applying for United States and foreign patents,
trademarks and copyrights. These applications may not result in
the issuance of patents, trademarks or copyrights. Third parties
-41-
may seek to challenge, invalidate or circumvent these
applications or resulting patents, trademarks or copyrights.
Competitors may independently develop equivalent or superior,
non-infringing technologies. The Company's licensing revenue
could be negatively affected if competing technologies avoid
infringement of the Company's licensed patents.
Third parties have and may again assert claims of
infringement of intellectual property rights against the Company.
These claims have in the past and may in the future lead to
litigation or require the Company to significantly modify or
discontinue sales of some of its products.
Third Party Products. Historically, the Company has manufactured
almost all of it products. Beginning in 1996, the Company began
to offer an increased number of third party products. The
Company hopes that sales of third party products will result in
higher operating income. Sales of third party products usually
generate lower margins which may not be fully offset by lower
expenses. If third party product suppliers become unable or
unwilling to manufacture products for the Company or do not meet
the Company's volume and quality requirements and delivery
schedules, the Company's ability to market these products could
be negatively affected. Many of the components and parts for
these third party products are purchased outside the United
States. Many of these third party products are manufactured
outside of the United States. Supply of these products could be
negatively affected by factors normally attendant to the conduct
of foreign trade, including:
- - imposition of duties, taxes, fees or other trade
restrictions
- fluctuation in currency exchange rates
- longer delivery times
Government Regulations. The Company is subject to the risks
associated with changes in United States and foreign regulatory
requirements. More stringent regulatory requirements or safety
and quality standards may be issued in the future and may have a
negative effect on the business of the Company. Sales of the
Company's products could be negatively affected if more stringent
safety standards are adopted by its customers such as electronic
cash register manufacturers.
The Company's Spectrum One and Spectrum 24 spread spectrum
wireless communication products operate through the transmission
-42-
of radio signals. These products are subject to regulation by
the FCC in the United States and corresponding authorities in
other countries. Currently, operation of these products in
specified frequency bands does not require licensing by
regulatory authorities. Regulatory changes restricting the use
of frequency bands or allocating available frequencies could have
a negative effect on the Company's business and its results of
operations.
Safety Risk. Recently, there has been some concern over the
potentially negative effects of electromagnetic emissions from
cellular telephones. While the Company's RF products do emit
electromagnetic radiation, the Company believes that due to the
low power output of its products and the logistics of their use,
there is no health risk to end-users in the normal operation of
its products. The Company's RF products may become the subjects
of safety concerns in the future. Safety issues and the
associated publicity could have a negative effect on the
Company's business and its results of operations.
Reliance on Resellers, Distributors and OEMs. The Company sells
a majority of its products through resellers, distributors and
original equipment manufacturers (OEMs). Reliance upon third
party distribution sources subjects the Company to risks of
business failure by these individual resellers, distributors and
OEMs, and credit, inventory and business concentration risks. In
addition, if there is a shortfall in demand from third party
distribution sources, the Company's operating results may be
affected negatively.
-43-
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table sets forth for the years indicated
certain revenue and expense items expressed as a percentage of net
revenue.
-44-
Percentage of Revenue
Year Ending December 31,
2000 1999 1998
Net Revenue 100.0% 100.0% 100.0%
Cost of Revenue 66.6 55.8 56.0
Amortization of Software
Development Costs 1.7 1.6 1.5
Gross Profit 31.8 42.5 42.5
Operating Expenses:
Engineering 6.7 7.2 7.3
Selling, General and Administrative 18.4 19.4 19.9
Restructuring and Impairment Charges 2.1 - -
In-Process Research and Development 6.0 - -
Merger Integration Charges 2.7 - -
Amortization of Excess of Cost Over Fair
Value of Net Assets Acquired 0.4 0.4 0.5
Charges Related to Terminated Acquisition - - 0.4
36.4 27.0 28.0
(Loss) Earnings from Operations (4.6) 15.5 14.5
Gain on Sale of Business - - 0.1
Net Interest Expense (0.8) (0.5) (0.4)
(Loss) Earnings Before Income Taxes (5.5) 15.0 14.2
(Benefit from)/Provision for Income Taxes (0.7) 4.8 4.7
Net (Loss) Earnings (4.8%) 10.2% 9.5%
-45-
For the year ended December 31, 2000 (Dollars in thousands)
Net revenue of $1,449,490 for the year ended December 31,
2000, increased 27.2 percent over 1999. The increase in net
revenue is primarily due to increased worldwide equipment sales.
Foreign exchange fluctuations unfavorably impacted the growth in
net revenue by approximately 2.8 percentage points and 0.6
percentage points for the years ended December 31, 2000 and 1999,
respectively.
Geographically, The Americas, EMEA and Asia Pacific revenue
increased 38.4 percent, 3.6 percent, and 27.1 percent,
respectively over the comparable prior year period. The Americas,
EMEA, and Asia Pacific revenue represent approximately 69.8
percent, 24.5 percent, and 5.7 percent, respectively, of net
revenue in 2000.
Cost of revenue (as a percentage of net revenue) of 66.6
percent for the year ended December 31, 2000, increased from 55.8
percent in 1999 due to a shift in product mix in the fastest
growing proportion of the Company's business to lower margin
products versus the historical mix of products, the continued
unfavorable impact of foreign exchange rate fluctuations on net
revenue, increased costs resulting from shortages and delivery
delays for the limited quantities of components and subassemblies
procured from suppliers and the dilutive effect of the Telxon
acquisition partially offset by increased royalty income.
Included in cost of revenue are restructuring and impairment
charges of $116,901 recorded in the fourth quarter of 2000,
related to the acquisition of Telxon. These charges include
inventory, capitalized software and other product related
impairment charges, as well as the severance costs of direct labor
employees of the Company.
Amortization of software development costs of $24,067 for the
year ended December 31, 2000, increased from $18,472 in the prior
year due to new product releases.
Engineering costs increased to $97,274 for the year ended
December 31, 2000, from $81,944 for 1999. This represents an
-46-
increase of 18.7 percent for the year ended December 31, 2000,
from the prior year. The increase is due to additional expenses
incurred in connection with the continuing research and
development of new products and the improvement of existing
products as well as a decrease in the amount of capitalized costs
incurred for internally developed product software where economic
and technological feasibility has been established. As a
percentage of revenue such expenses decreased to 6.7 percent for
the year ended December 31, 2000, from 7.2 percent for the prior
year.
Selling, general and administrative expenses increased to
$267,322 for the year ended December 31, 2000, from $220,753 in
1999. While in absolute dollars selling, general and
administrative expenses increased 21.1 percent for the year ended
December 31, 2000, from the prior year, as a percentage of revenue
such expenses decreased to 18.4 percent for the year ended
December 31, 2000, from 19.4 percent in 1999 due to ongoing cost
containment programs. The increase in absolute dollars reflects
expenses incurred to support a higher revenue base inclusive of
expenses associated with the Telxon acquisition.
Restructuring and impairment charges of $29,795, recorded in
the fourth quarter of 2000, related to the restructuring plan that
resulted from the Telxon acquisition. These charges, classified as
a component of operating expenses, include impaired fixed assets,
severance of engineering, selling, general and administrative
employees, and lease termination costs of redundant facilities.
The remaining employees to be terminated received notification
prior to year end and will be leaving the Company over the next
six months. Management expects to substantially complete the
Company's restructuring efforts by June 30, 2001.
In-process research and development charges of $87,600
related to the Telxon acquisition, which was accounted for using
the purchase method. A portion of the purchase price was
allocated to acquired in-process research and development and was
expensed immediately, since the technological feasibility of the
research and development projects had not been achieved and such
projects were believed to have no alternative future use.
Independent valuations were used in determining the fair value of
the identifiable intangible assets and in allocating the purchase
price among the acquired assets, including the portion of the
purchase price attributed to in-process research and development.
The Company recorded merger integration charges of $39,225 in
the fourth quarter of 2000. These charges relate to the Telxon
acquisition which was consummated on November 30, 2000. The
merger integration charges consist primarily of professional
services and consulting fees, marketing and advertising, travel
expenses and other related charges.
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Amortization of excess of cost over fair value of net assets
acquired of $6,475 for the year ended December 31, 2000 increased
from $5,092 in 1999 primarily due to the Telxon acquisition.
Net interest expense increased to $12,220 for the year ended
December 31, 2000, from $5,821 in 1999 primarily due to increased
borrowings under the Company's revolving credit facility partially
offset by a reduction in interest expense due to annual mandatory
repayments of indebtedness.
The Company's effective tax benefit for 2000 is 13.3 percent.
This differs from the statutory rate primarily as a result of non-
recurring restructuring and integration charges associated with
the Telxon acquisition previously mentioned.
At December 31, 2000, the Company had net deferred tax assets
of approximately $108,994 consisting of current deferred tax
assets of $197,019 and long-term deferred tax liabilities of
$88,025. The current deferred tax assets reflect a valuation
allowance of $6,958 relating to net operating loss carryforwards
and foreign tax credit carryforwards.
For the year ended December 31, 1999 (Dollars in thousands)
Net revenue of $1,139,290 for the year ended December 31,
1999, increased 16.5 percent over 1998. The increase in net
revenue is due to increased equipment sales, partially offset by
the decrease in revenue associated with the Company's contract
with the United States Postal Service which was substantially
completed during the quarter ended March 31, 1999. Foreign
exchange fluctuations unfavorably impacted the growth in net
revenue by approximately 0.6 percentage points and 1.5 percentage
points for the years ended December 31, 1999 and 1998,
respectively.
Geographically, The Americas, EMEA and Asia Pacific revenue
increased 13.2 percent, 20.9 percent, and 34.8 percent,
respectively, over the comparable prior year period. The
Americas, EMEA, and Asia Pacific revenue represent approximately
64.2 percent, 30.1 percent, and 5.7 percent, respectively, of net
revenue in 1999.
-48-
Cost of revenue (as a percentage of net revenue) of 55.8
percent for the year ended December 31, 1999, slightly decreased
from 56.0 percent in 1998 due to the completion of the Company's
contract with the United States Postal Service which represented a
lower margin order relative to historical orders, partially offset
by new product startup costs.
Amortization of software development costs of $18,472 for the
year ended December 31, 1999, increased from $14,592 in the prior
year due to new product releases.
Engineering costs increased to $81,944 for the year ended
December 31, 1999, from $71,090 for 1998. This represents an
increase of 15.3 percent for the year ended December 31, 1999,
from the prior year. The increase in is due to additional
expenses incurred in connection with the continuing research and
development of new products and the improvement of existing
products partially offset by increased capitalized costs incurred
for internally developed product software where economic and
technological feasibility has been established. As a percentage
of revenue such expenses decreased to 7.2 percent for the year
ended December 31, 1999, from 7.3 percent for the prior year.
Selling, general and administrative expenses increased to
$220,753 for the year ended December 31, 1999, from $194,775 in
1998. While in absolute dollars selling, general and
administrative expenses increased 13.3 percent for the year ended
December 31, 1999, from the prior year, as a percentage of revenue
such expenses decreased to 19.4 percent for the year ended
December 31, 1999, from 19.9 percent in 1998. The increase in
absolute dollars reflects expenses incurred to support a higher
revenue base and expenses incurred by three subsidiaries acquired
subsequent to June 30, 1998.
Amortization of excess of cost over fair value of net assets
acquired of $5,092 for the year ended December 31, 1999, increased
from $4,812 in 1998 due to the acquisition of three subsidiaries
after June 30, 1998 which resulted in an increase in the gross
value of excess of cost over fair value of net assets acquired.
Net interest expense increased to $5,821 for the year ended
December 31, 1999, from $3,450 in 1998 primarily due to increased
borrowings under the Company's revolving credit facility partially
offset by a reduction in interest expense due to annual mandatory
repayments of indebtedness.
-49-
The Company's effective tax rate for 1999 of 32.0 percent
decreased from 33.0 percent in the prior year period primarily due
to an increase in the federal tax credits and exempt earnings of
the foreign sales corporation.
At December 31, 1999, the Company had net deferred tax assets
of approximately $7,735 consisting of current deferred tax assets
of $44,794 and long-term deferred tax liabilities of $37,059.
Liquidity and Capital Resources (Dollars in thousands)
The Company utilizes a number of measures of liquidity
including the following:
Year Ended December 31,___
2000 1999 1998__
Working Capital
$620,214 $351,613 $295,317
Current Ratio (Current
Assets to Current
Liabilities) 2.4:1 2.5:1 2.6:1
Long-Term Debt
to Capital 14.3% 13.5% 10.8%
(Long-term debt to long-
term debt plus equity)
Current assets increased by $494,051 from December 31, 1999,
principally due to the acquisition of Telxon. Additionally,
current assets increased due to an increase in accounts
receivable resulting from increased revenue, an increase in
inventories and other current assets resulting from increased
operating levels as well as an increase in deferred income taxes
primarily resulting from the restructuring charges recorded in
2000.
Current liabilities increased $225,450 from December 31,
1999, primarily due to accrued restructuring expenses and
increases in accounts payable and other accrued expenses
primarily due to the Telxon acquisition.
The aforementioned activity resulted in a working capital
increase of $268,601 for the fiscal year ended December 31, 2000.
The Company's current ratio at December 31, 2000, of 2.4:1
decreased from 2.5:1 at December 31, 1999.
-50-
The Company used $50,534 in operating activities, but
experienced an overall increase in cash of $33,283 for the year
ended December 31, 2000. The positive cash flow provided by the
sale of 5,019,000 treasury shares in private placements, the net
proceeds from the issuance and repayments of notes payable and
long term debt and the exercise of stock options was partially
offset by cash used in operations, investments in AirClic Inc.
and others, and the repurchase of 784,000 shares of the Company's
common stock.
For the year ended December 31, 1999, the Company generated
positive cash flow from operations of $181,796 and experienced an
overall increase in cash of $13,844. The positive cash flow
provided by operations, borrowings under lines of credit, and
cash flow generated from the exercise of stock options was
partially offset by cash used in investing activities and various
financing activities, principally the repurchase of 1,592,000
shares of the Company's common stock, dividends paid, acquisition
of subsidiaries and other acquisition related payments and
expenditures for property, plant and equipment.
Property, plant and equipment expenditures for the year
ended December 31, 2000 totaled $79,736 compared to $70,041 for
the year ended December 31, 1999. During the fourth quarter of
2000, the Company substantially completed construction of a
140,000 square foot manufacturing and distribution facility in
Reynosa, Mexico. In February 2001, the Company began a 150,000
square foot expansion of this facility. The total cost for this
project is estimated to be $7,800 and is scheduled to be
completed in the fourth quarter of 2001. Additionally, in
February 2001, the Company began construction of a new 320,000
square foot distribution center and data center in McAllen,
Texas. The total cost for this project is estimated to be
$31,700 and is scheduled to be completed by the fourth quarter of
2001. The Company continues to make capital investments in major
systems and network conversions but does not have any other
material commitments for capital expenditures.
At December 31, 2000, the Company had $201,144 in long-term
debt outstanding, excluding current maturities. In March 1993,
the Company issued $25,000 of its 7.76 percent Series A Senior
Notes due February 15, 2003, and $25,000 of its 7.76 percent
Series B Senior Notes due February 15, 2003, to two insurance
companies for working capital and general corporate purposes.
The Series A Senior Notes are being repaid in equal annual
installments of $2,778 which began in February 1995. The Series B
-51-
Senior Notes are being repaid in equal annual installments of
$3,571 which began February 1997. The Senior Notes represent
$12,698 of the total long-term debt balance outstanding at
December 31, 2000. In September 1999, the Company expanded the
size of its revolving credit facility with a syndicate of U.S.
and International banks (the "Credit Agreement") from $200
million to $350 million. The terms of the Credit Agreement
extend to 2004. Use of the borrowings is unrestricted and the
borrowings are unsecured. At December 31, 2000, the Company had
$187,329 borrowings outstanding under the Credit Agreement, which
have been classified as long-term obligations. The remaining
$1,117 of long-term debt outstanding relates to various other
loans maturing through 2007.
In January 2001, the Company entered into a private
Mandatorily Exchangeable Securities Contract for Shared
Appreciation Income Linked Securities ("SAILS") with a highly
rated financial institution. The securities which underlie the
SAILS contract represent the Company's investment in Cisco common
stock, which was acquired in connection with the Telxon
acquisition. These securities have a seven-year maturity and pay
a cash coupon of 3.625 percent. The SAILS contain an equity
collar, which effectively manages a large portion of the
Company's exposure to fluctuations in the fair value of Cisco
common stock. At maturity, the SAILS will be exchangeable for
shares of Cisco common stock, or at the Company's option, cash in
lieu of shares. Net proceeds from the issuance of the SAILS and
termination of the existing collar were approximately $262,246
which were used for general corporate purposes, including the
repayment of debt outstanding under its revolving credit
facility. The Company will account for the embedded equity
collar as a derivative financial instrument in accordance with
the requirements of Statement of Financial Accounting Standards
No. 133, "Accounting for Certain Derivative Instruments and
Hedging Activities." The change in fair value of this derivative
between reporting dates will be recognized through earnings.
The Company's long-term debt to capital ratio increased to
14.3 percent at December 31, 2000, from 13.5 percent at December
31, 1999, primarily due to increased borrowings under the Credit
Agreement.
The Company has loan agreements with various banks pursuant
to which, the banks have agreed to provide lines of credit
totaling $96,000. As of December 31, 2000, the Company has
$3,405 outstanding under these lines. These agreements continue
until such time as either party terminates the agreements.
The Company believes that it has adequate liquidity to meet
its current and anticipated needs from the results of its
operations, working capital and existing credit facilities.
-52-
In the opinion of management, inflation has not had a
material effect on the operations of the Company.
Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133")as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Hedging Activities" establishes
accounting and reporting standards for derivative instruments and
for hedging activities. It requires companies to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
The change in fair value is recorded in earnings, except when
special hedge accounting rules are applied. The Company will
adopt SFAS 133 in the first quarter of fiscal 2001. The adoption
of SFAS 133 will not have a material impact on the Company's
consolidated financial statements.
Euro Conversion
As part of the European Economic and Monetary Union (EMU), a
single currency (the "Euro") will replace the national currencies
of most of the European countries in which the Company conducts
business. The conversion rates between the Euro and the
participating nations' currencies have been fixed irrevocably as
of January 1, 1999, with the participating national currencies
being removed from circulation between January 1, and June 30,
2002 and replaced by Euro notes and coinage. During the
"transition period" from January 1, 1999 through December 31,
2001, public and private entities as well as individuals may pay
for goods and services using either checks, drafts, or wire
transfers denominated in Euro or the participating country's
national currency.
Under the regulations governing the transition to a single
currency, there is a "no compulsion, no prohibition" rule which
states that no one is obliged to utilize the Euro until the notes
and coinage have been introduced on January 1, 2002. In keeping
with this rule, the Company is Euro "compliant" (able to receive
Euro denominated payments and able to invoice in Euro as
requested by vendors and suppliers, respectively) as of January
1, 1999 in the affected countries. Full conversion of all
affected country operations to Euro is expected to be completed
by the time national currencies are removed from circulation.
Phased conversion to the Euro is currently underway and the
effects on revenues, costs and various business strategies are
being assessed. The cost of software and business process
conversion is not expected to be material.
-53-
Market Risk Sensitivity
The Company is exposed to various market risks, including
changes in foreign currency exchange rates and interest rates.
Market risk is the potential loss arising from adverse changes in
market rates and prices, such as foreign currency exchange and
interest rates. The Company has a formal policy that prohibits
the use of currency derivatives or other financial instruments
for trading or speculative purposes. The policy permits the use
of financial instruments to manage and reduce the impact of
changes in foreign currency exchange rates that may arise in the
normal course of the Company's business. Currently, the Company
does not use interest rate derivatives. The counterparties in
derivative transactions are major financial institutions with
ratings of A or better, as determined by one of the major credit
rating operations services.
The Company enters into forward foreign exchange contracts
and foreign currency loans principally to hedge the currency
fluctuations in transactions denominated in foreign currencies,
thereby limiting the Company's risk that would otherwise result
from changes in exchange rates. During 2000, the principal
transactions hedged were short-term intercompany sales. The
periods of the forward foreign exchange contracts and foreign
currency loans correspond to the periods of the hedged
transactions. Gains and losses on forward foreign exchange
contracts and foreign currency loans and the offsetting losses
and gains on hedged transactions are reflected in the Company's
statement of operations.
A large percentage of the Company's sales are transacted in
local currencies. As a result, the Company's international
operating results are subject to foreign exchange rate
fluctuations. A 5.0 percent strengthening or weakening of the
U.S. dollar against every applicable currency could have had a
$20.8 million impact on the revenues of the Company. The Company
does not use foreign exchange contracts to hedge expected
revenues. However, the Company sources a portion of its raw
materials in local currencies. A 5.0 percent strengthening or
weakening of the U.S. dollar against every applicable local
content currency would act as a partial offset to the impact on
revenues.
The Company, which manufactures a significant portion of its
products in the United States, generally invoices its
international subsidiaries in their local currency for finished
and semi-finished goods. As a result, the Company's annual U.S.
-54-
dollar cash flow is subject to foreign exchange rate
fluctuations. A 5.0 percent strengthening or weakening of the
U.S. dollar against every applicable currency could have had a
$9.5 million impact on the value of the realized cash remittances
from its subsidiaries. The Company routinely uses foreign
exchange contracts to hedge cash flows that are either firm
commitments or those which may be forecasted to occur.
In an effort to hedge foreign currency losses on
intercompany receivables, the Company borrowed $16 million
equivalent in various foreign currencies. Substantially all of
the remaining Company debt is U.S. dollar denominated. At year-
end, about 60.0 percent of this indebtedness to third parties was
floating rate-based. Although the Company has exposure to rising
and falling rates, a 1.0 percent rise in rates on current year
floating rate-based borrowings would have had a $1.3 million
adverse impact on pre-tax earnings. During 2000, the Company did
not use interest rate derivatives to protect its exposure to
interest rate market movements.
The Company currently holds an investment in Cisco common
stock, which is accounted for in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." These equity
securities are classified as available-for-sale and are carried
at fair market value based on their quoted market price. As
such, the Company has exposure to market risk related to the
fluctuation of Cisco's stock price. The Company expects the
change in fair value of the Cisco stock price to be mitigated by
the change in fair value of the embedded equity collar.
While components and supplies are generally available from a
variety of sources, the Company presently depends on a single
source or a limited number of suppliers for several components of
its equipment, certain subassemblies and certain of its products.
This may have an adverse effect on the Company's ability to
deliver its products or to deliver its products on time or to
manufacture its products at anticipated cost levels. However,
due to the general availability of components and supplies, the
Company does not believe that the loss of any supplier or
subassembly manufacturer would have a long-term material adverse
effect on its business, although set-up costs and delays could
occur in the short-term if the Company changes any single source
supplier.
-55-
Item 8. Financial Statements and Supplementary Data
The following documents are filed on the pages
listed below, as part of Part II, Item 8 of this
report.
Document Page
1. Financial Statements and Accountants' Report:
Independent Auditors' Report F-1
Consolidated Financial Statements:
Balance Sheets as of December 31, 2000 and 1999 F-2
Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998 F-3
Statements of Stockholders' Equity for the
Years Ended December 31, 2000, 1999 and 1998 F-5
Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
2. Financial Statement Schedules:
Schedule II
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors:
The section entitled "Nominees for Election"
contained in the Proxy Statement is hereby
incorporated by reference.
(b) Identification of Executive Officers:
See PART I of this Form 10-K.
Item 11. Executive Compensation
The section entitled "Management Remuneration and
Transactions" contained in the Proxy Statement is hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The sections entitled "Principal Shareholders" and
"Security Ownership of Management" contained in the Proxy
Statement are hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The section entitled "Management Remuneration and
Transactions" contained in the Proxy Statement is hereby
incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a) 1. FINANCIAL STATEMENTS:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31,
2000 and 1999
Consolidated Statements of Operations for the
Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 2000, 1999 and
1998
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Schedules:
II. Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of
conditions under which they are required or because the required
information is given in the consolidated financial statements or
notes thereto.
Individual financial statements of the Company are omitted
as the Company is primarily an operating company and the
subsidiaries included in the consolidated financial statements
filed are substantially wholly owned and are not indebted to any
person other than the parent in amounts which exceed 5 percent of
total consolidated assets at the date of the latest balance sheet
filed, excepting indebtedness incurred in the ordinary course of
business which is not overdue and which matures within one year
from the date of its creation, whether evidenced by securities or
not, and indebtedness which is collateralized by the parent by
guarantee, pledge, assignment or otherwise.
3. Exhibits
Exhibit
3.1 Certificate of Incorporation of Symbol Technologies, Inc.
as amended. (Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 (the "1999 Form 10-K."))
3.3 By-laws of the Company as currently in effect.
(Incorporated by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1998 (the "1998 Form 10-K."))
4.1 Form of Certificate for Shares of the Common Stock of the
Company. (Incorporated by reference to Exhibit 4.1 to the
1998 Form 10-K.)
10.1 Form of 2008 Stock Purchase Warrant issued to certain
directors. (Incorporated by reference to Exhibit 10.1 to
the Company's Annual Report on Form 10K for the year ended
December 31,1997.)
10.2 1994 Directors' Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to Registration Statement No. 33-
78678 on Form S-8.)
10.3 2000 Directors' Stock Option Plan. (Incorporated by
reference to Exhibit 4 to Registration Statement No. 333-
78599 on Form S-8.)
10.4 1997 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit 4.2 to Registration Statement No.
333-26593 on Form S-8.)
10.5 1997 Employee Stock Option Plan.
(Incorporated by reference to Exhibit 16.5
to the 1998 Form 10-K.)
10.6 1991 Employee Stock Option Plan (Incorporated by reference
to Exhibit 10.1 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1991.)
10.7 1990 Non-Executive Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 Form 10-K."))
10.8 2001 Non-Executive Stock Option Plan.
10.9 Employment Agreement by and between the Company and Jerome
Swartz, dated as of July 1, 2000.
10.10 Employment Agreement by and between the Company and Tomo
Razmilovic, dated as of July 1, 2000.
10.11 Employment Agreement by and between the Company and
Leonard H. Goldner, dated as of December 15, 2000.
10.12 Employment Agreement by and between the Company and
Raymond Martino, dated as of February 15,2000.
(Incorporated by reference to Exhibit 10.10 to the 1999
Form l0-K.)
10.13 Executive Retirement Plan, as amended. (Incorporated by
reference to Exhibit 10.14 to 1989 Form 10-K.)
10.14 Symbol Technologies, Inc. Stock Ownership and Option
Retention Program.(Incorporated by reference to Exhibit
10.13 of the 1995 Form 10-K.)
10.15 Summary of Symbol Technologies, Inc. Executive Bonus Plan.
(Incorporated by reference to Exhibit 10.13 of the 1999
Form 10-K.)
10.16 Form of Note Agreements dated as of February 15, 1993
relating to the Company's 7.76 percent Series A and Series
B Senior Notes due February 15, 2003 (Incorporated by
reference to Exhibit 10.14 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.)
10.17 2000 Amended and Restated Credit Agreement dated as of
August 3, 2000 among Symbol Technologies, Inc., the
lending institutions identified in the Credit Agreement
and Bank of America, N.A., as agent and as letter of
credit issuing bank.
10.18 First Amendment dated March 28, 2001 to 2000 Amended and
Restated Credit Agreement among Symbol Technologies, Inc.,
the lending institutions identified in the Credit
Agreement and Bank of America, N.A., as agent and as
letter of credit issuing bank.
10.19 Indenture by and between Telxon Corporation and AmeriTrust
Company National Association, as Trustee, dated as of June
1, 1987, regarding Telxon Corporation's 7-1/2% Convertible
Subordinated Debentures Due 2012, incorporated herein by
reference to Exhibit 4.2 to Telxon Corporation's
Registration Statement on Form S-3, Registration No. 33-
14348, filed May 18, 1987.
10.19.1 Form of Telxon Corporation's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set forth in
the Indenture included as Exhibit 10.19 above).
10.20 Indenture by and between Telxon Corporation and Bank One
Trust Company, N.A., as Trustee, dated as of December 1,
1995, regarding Telxon Corporation's 5-3/4% Convertible
Subordinated Notes due 2003, incorporated herein by
reference to Exhibit 4.1 to Telxon Corporation's
Registration Statement on Form S-3, Registration
No. 333-1189, filed February 23, 1996.
10.20.1 Form of Telxon Corporation's 5-3/4% Convertible
Subordinated Notes due 2003 issued under the
Indenture included as Exhibit 10.20 above,
incorporated herein by reference to Exhibit 4.2
to Telxon Corporation's Registration Statement
on Form S-3, Registration No. 333-1189,filed
February 23, 1996.
10.20.2 Registration Rights Agreement by and among
Registrant and Hambrecht & Quist LLC and
Prudential Securities Incorporated, as the
Initial Purchasers of Registrant's 5-3/4%
Convertible Subordinated Notes due 2003, with
respect to the registration of said Notes under
applicable securities laws, incorporated herein
by reference to Exhibit 4.3 to Registrant's
Registration Statement on Form S-3, Registration
No. 333-1189, filed February 23, 1996.
22. Subsidiaries.
23. Consent of Deloitte & Touche LLP
(b) Reports on Form 8-K
Not Applicable
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.
SYMBOL TECHNOLOGIES, INC.
(Registrant)
By: S/Tomo Razmilovic
Tomo Razmilovic
President and
Chief Executive
Officer
Dated: March 29, 2001
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.
Signature Title Date
S/Tomo Razmilovic President and Director March 29, 2001
Tomo Razmilovic (Principal Executive
Officer)
S/Jerome Swartz Chairman of the March 29, 2001
Jerome Swartz Board and Director
S/Raymond R. Martino Director March 29, 2001
Raymond R. Martino
S/Harvey P. Mallement Director March 29, 2001
Harvey P. Mallement
S/George Bugliarello Director March 29, 2001
George Bugliarello
Director
Charles B. Wang
S/Leo A. Guthart Director March 29, 2001
Leo A. Guthart
S/James Simons Director March 29, 2001
James Simons
S/Kenneth V. Jaeggi Senior Vice President March 29, 2001
Kenneth V. Jaeggi Finance (Chief
Financial Officer)
S/Robert W. Korkuc Vice President March 29, 2001
Robert W. Korkuc (Chief Accounting
Officer)
SYMBOL TECHNOLOGIES, INC.
AND SUBSIDIARIES
------
CONSOLIDATED FINANCIAL STATEMENTS
COMPRISING ITEM 8 AND SCHEDULE II LISTED IN THE
INDEX AT ITEM 14(a)2 OF ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION FOR THE
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
I N D E X
PAGE
Independent auditors' report F-1
Consolidated financial statements:
Balance sheets F-2
Statements of operations F-3
Statements of stockholders' equity F-5
Statements of cash flows F-7
Notes to consolidated financial
statements (1-20) F-8
Additional financial information pursuant to the
requirements of Form 10-K:
Schedule:
II - Valuation and qualifying accounts S-1
Schedules not listed above have been omitted because they are
either not applicable or the required information has been
provided elsewhere in the consolidated financial statements or
notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Symbol Technologies, Inc.
Holtsville, New York
We have audited the accompanying consolidated balance sheets
of Symbol Technologies, Inc. and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 2000. Our
audits also included the financial statement schedule listed
in the index at Item 14(a)2. These financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Symbol Technologies, Inc. and subsidiaries as of
December 31, 2000 and 1999 and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 2000 in conformity with
generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 20, 2001 (February 26, 2001 as to Note 20)
F-1
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
December 31, December 31,
ASSETS 2000 1999____
CURRENT ASSETS:
Cash, including temporary investments of
$47,203 and $4,797, respectively $ 63,411 $ 30,128
Accounts receivable, less allowance for doubtful
accounts of $31,275 and $11,924, respectively 453,906 252,140
Inventories 285,413 216,709
Deferred income taxes 197,019 44,794
Other current assets 78,503 40,430
TOTAL CURRENT ASSETS 1,078,252 584,201
PROPERTY, PLANT AND EQUIPMENT, net 234,467 206,116
INVESTMENT IN MARKETABLE SECURITIES 263,305 17,713
INTANGIBLE ASSETS, net 386,492 130,566
SOFTWARE DEVELOPMENT COSTS, net 33,575 64,883
OTHER ASSETS 97,108 44,465
$2,093,199 $1,047,944
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 325,670 $ 188,178
Current portion of long-term debt 23,025 10,046
Income taxes payable 6,629 15,559
Deferred revenue 30,227 18,805
Accrued restructuring expenses 72,487 -
TOTAL CURRENT LIABILITIES 458,038 232,588
CONVERTIBLE SUBORDINATED NOTES AND DEBENTURES 106,913 -
LONG-TERM DEBT, less current maturities 201,144 99,623
DEFERRED REVENUE 11,182 12,833
DEFERRED INCOME TAXES 88,025 37,059
OTHER LIABILITIES 26,201 25,381
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00; authorized
10,000 shares, none issued or outstanding - -
Common stock, par value $0.01; authorized
300,000 shares; issued 164,863 shares and
101,788 shares, respectively 1,649 1,018
Additional paid-in capital 995,953 362,849
Accumulated other comprehensive loss (16,944) (2,352)
Deferred compensation (1,461) -
Retained earnings 408,098 479,806
1,387,295 841,321
Less:
Treasury stock at cost, 15,439 shares and
13,116 shares, respectively (185,599) (200,861)
1,201,696 640,460
$2,093,199 $1,047,944
See notes to consolidated financial statements
F-2
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
Year ended December 31,_______
2000 1999 1998__
NET REVENUE $1,449,490 $1,139,290 $977,901
COST OF REVENUE 965,070 636,084 547,328
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 24,067 18,472 14,592
GROSS PROFIT 460,353 484,734 415,981
OPERATING EXPENSES:
Engineering 97,274 81,944 71,090
Selling, general and
administrative 267,322 220,753 194,775
Restructuring and
impairment charges 29,795 - -
In-process research and
development 87,600 - -
Merger integration charges 39,225 - -
Amortization of excess of
cost over fair value of
net assets acquired 6,475 5,092 4,812
Charges related to
terminated acquisition - - 3,597
527,691 307,789 274,274
(LOSS) EARNINGS FROM
OPERATIONS (67,338) 176,945 141,707
OTHER (EXPENSE)/INCOME:
Gain on sale of business - - 494
Interest income 4,213 2,315 2,373
Interest expense (16,433) (8,136) (5,823)
(12,220) (5,821) (2,956)
(LOSS) EARNINGS BEFORE
INCOME TAXES (79,558) 171,124 138,751
(BENEFIT FROM)/PROVISION FOR
INCOME TAXES (10,592) 54,760 45,787
NET (LOSS) EARNINGS ($68,966) $ 116,364 $ 92,964
(LOSS) EARNINGS PER SHARE:
Basic ($0.50) $0.88 $0.70
Diluted ($0.50) $0.82 $0.66
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 137,629 132,488 132,291
Diluted 137,629 141,572 140,481
See notes to consolidated financial statements
F-3
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
Year ended December 31,_______
2000 1999 1998__
PRO FORMA (LOSS)EARNINGS
PER SHARE: (1)
Basic ($0.33) $0.59 $0.47
Diluted ($0.33) $0.55 $0.44
PRO FORMA WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 206,444 198,732 198,437
Diluted 206,444 212,358 210,722
(1) Represents the pro forma impact of a three for two split of
the Company's common stock approved by the Board of Directors
on February 26, 2001 to be effected as a 50 percent stock
dividend on April 16, 2001.
F-4
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(All amounts in thousands, except stock par value)
Common Stock
$0.01 Par Value Accumulated
Additional Other Total
Shares Paid-in Deferred Retained Treasury Comprehensive Comprehensive Stockholders'
Issued Amount Capital Compensation Earnings Stock Income (Loss) Income (Loss) Equity
BALANCE,
JANUARY 1, 1998 43,519 $ 435 $289,434 $ - $274,976 ($103,311) ($7,792) $453,742
Comprehensive income:
Net earnings - - - - 92,964 - 92,964 - 92,964
Translation
adjustments - - - - - 1,995 1,995 1,995
Total comprehensive
income 94,959
Exercise of stock
options 1,118 11 21,533 - - - - 21,544
Exercise of
warrants 43 - 461 - - - - 461
Reclassification
of common
equity put options
obligation - - 4,674 - - - - 4,674
Purchase of treasury
shares - - - - - (42,462) - (42,462)
Stock split 21,759 218 (218) - - - - -
Dividends paid - - - - (1,990) - - (1,990)
BALANCE,
DECEMBER 31, 1998 66,439 664 315,884 - 365,950 (145,773) (5,797) 530,928
Comprehensive income:
Net earnings - - - - 116,364 - 116,364 - 116,364
Translation
adjustments - - - - - - (3,704) (3,704) (3,704)
Unrealized gains on
marketable securities - - - - - - 7,149 7,149 7,149
Total comprehensive
income 119,809
Exercise of
stock options 2,089 21 46,880 - - - - 46,901
Exercise of warrants 51 1 417 - - 84 - 502
Purchase of
treasury shares - - - - - (55,172) - (55,172)
Stock split 33,209 332 (332) - - - - -
Dividends paid - - - - (2,508) - - (2,508)
BALANCE,
DECEMBER 31, 1999 101,788 1,018 362,849 - 479,806 (200,861) (2,352) 640,460
See notes to consolidated financial statements
F-5
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(All amounts in thousands, except stock par value)
Common Stock
$0.01 Par Value Accumulated
Additional Other Total
Shares Paid-in Deferred Retained Treasury Comprehensive Comprehensive Stockholders'
Issued Amount Capital Compensation Earnings Stock Income (Loss) Income (Loss) Equity
Comprehensive income:
Net loss - - - - (68,966) - (68,966) - (68,966)
Translation
adjustments - - - - - - (4,584) (4,584) (4,584)
Unrealized losses on
marketable securities - - - - - - (10,008) (10,008) (10,008)
Total comprehensive
income - - - - - - (83,558) - -
Exercise of stock
options 3,348 33 83,865 - - - - 83,898
Exercise of
warrants 38 1 381 - - - - 382
Issuance of common
stock and vested
stock options related
to acquisition 8,775 88 404,687 - - - - 404,775
Deferred compensation
expense on
remeasured unvested
stock options - - 1,869 (1,869) - - - -
Compensation expense
on remeasured
unvested stock
options - - - 408 - - - 408
Purchase of treasury
shares - - - - - (42,514) - (42,514)
Re-issuance of treasury
shares - - 142,811 - - 57,776 - 200,587
Stock split 50,914 509 (509) - - - - -
Dividends paid - - - - (2,742) - - (2,742)
BALANCE,
DECEMBER 31, 2000 164,863 $1,649 $995,953 ($1,461) $408,098 ($185,599) ($16,944) $1,201,696
See notes to consolidated financial statements
F-6
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
Year ended December 31,____
2000 1999 1998
Cash flows from operating activities:
Net (loss) earnings ($68,966) $116,364 $ 92,964
Adjustments to reconcile net (loss) earnings
to net cash (used in)/provided by operating
activities:
Depreciation and amortization of
property, plant and equipment 48,849 38,863 32,797
Other amortization 33,234 27,321 22,359
Provision for losses on accounts
receivable 2,975 3,288 2,921
Gain from sale of business - - (494)
Deferred income taxes (63,487) (3,627) 5,417
Tax benefit on exercise of stock
options and warrants 53,960 26,786 13,207
In-process research and development 87,600 - -
Non-cash restructuring and impairment charges 133,268 - -
Changes in assets and liabilities net of
effect of acquisitions and divestitures:
Accounts receivable (151,031) (50,541) (43,006)
Inventories (81,847) (19,481) (64,948)
Other current assets (34,306) (13,925) (2,446)
Accounts payable and accrued expenses 21,179 36,244 22,021
Income taxes payable (20,428) 5,650 7,217
Other liabilities and deferred revenue (11,534) 14,854 13,152
Net cash (used in)/provided by
operating activities (50,534) 181,796 101,161
Cash flows from investing activities:
Investment in AirClic Inc. (50,000) - -
Purchases for property, plant
and equipment (79,736) (70,041) (89,334)
Investments in intangible and
other assets (48,844) (77,238) (44,455)
Proceeds from sale of business, net - - 11,911
Cash acquired in acquisition 12,964 - -
Acquisition of subsidiaries ( 3,752) (15,066) (13,686)
Purchase of available-for-sale securities - (1,000) -
Net cash used in investing activities (169,368) (163,345) (135,564)
Cash flows from financing activities:
Net proceeds from issuance and repayments
of notes payable and long-term debt 69,242 34,479 24,505
Exercise of stock options and warrants 30,320 20,533 8,798
Reissuance of treasury shares 200,587 - -
Dividends paid (2,742) (2,508) (1,990)
Purchase of treasury shares (42,514) (55,088) (42,462)
Net cash provided by/(used in)
financing activities 254,893 (2,584) (11,149)
Effects of exchange rate changes on cash (1,708) (2,023) 1,866
Net increase/(decrease) in cash and
temporary investments 33,283 13,844 (43,686)
Cash and temporary investments,
beginning of year 30,128 16,284 59,970
Cash and temporary investments, end
of year $ 63,411 $ 30,128 $ 16,284
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 11,909 $ 4,905 $ 3,496
Income taxes $ 24,314 $ 14,714 $ 21,281
See notes to consolidated financial statements
F-7
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
The consolidated financial statements include the accounts of
Symbol Technologies, Inc. and its subsidiaries (the "Company" or
"Symbol"), substantially all of which are wholly-owned.
Significant intercompany transactions and balances have been
eliminated in consolidation.
b. Temporary Investments
Temporary investments include highly liquid investments with
original maturities of three months or less and consist primarily
of money market funds and time deposits at December 31, 2000 and
1999. Temporary investments are stated at cost, which approximates
market value. These investments are not subject to significant
market risk.
c. Inventories
Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market.
d. Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation
and amortization is provided on a straight-line basis over the
following estimated useful lives:
Buildings and improvements 15 to 40 years
Machinery and equipment 3 to 7 years
Furniture, fixtures and office equipment 5 to 10 years
Computer hardware and software 3 to 7 years
Leasehold improvements (limited to terms
of the leases) 2 to 10 years
The Company capitalized interest costs of $350 for the year ended
December 31, 1998. No interest was capitalized for the years
ended December 31, 2000 or 1999.
e. Intangible Assets
The excess of cost over fair value of net assets acquired is being
amortized on a straight-line basis over periods ranging from 7 to
40 years.
F-8
Patents and trademarks, including costs incurred in connection
with the protection of patents, are amortized over their estimated
useful lives, not exceeding 20 years, using the straight-line
method.
f. Software Development Costs
The Company capitalizes costs incurred for internally developed
product software where economic and technological feasibility has
been established and for qualifying purchased product software.
Capitalized software costs are amortized on a straight-line basis
over the estimated useful product lives (normally three years).
Software development costs which have been fully amortized for two
years or more are written off.
g. Marketable Securities
All marketable securities are classified as available-for-sale
under Statement of Financial Accounting Standards No. 115,
"Investments in Certain Marketable Equity Securities," ("SFAS No.
115"). Unrealized gains and losses, net of tax, are shown as
other comprehensive income or loss within stockholders' equity.
h. Long-Lived Assets
The Company reviews its long-lived assets, including property,
plant and equipment, identifiable intangibles and software
development costs for impairment whenever events or changes in
circumstances indicate that the carrying amounts of the assets may
not be fully recoverable. To determine recoverability of its
long-lived assets, the Company evaluates the probability that
future undiscounted net cash flows, without interest charges, will
be less than the carrying amount of the assets. Impairment is
measured at fair value. As a result of the Telxon acquisition,
the Company accrued for asset impairment charges as an incremental
cost to exit and consolidate activities for the year ended
December 31, 2000. Impairment measured at fair value had no
effect on the Company's consolidated financial statements for the
years ended December 31, 1999, and 1998.
i. Research and Development Expenses
The Company expenses all research and development costs as
incurred. The Company incurred research and development expenses
of approximately $51,125, $38,426, and $31,030, for the years
ended December 31, 2000, 1999, and 1998, respectively, which are
classified in engineering expenses.
j. Revenue Recognition
Revenue related to sales of the Company's products and systems is
generally recognized when products are shipped or services are
F-9
rendered, the risk of loss has passed to the customer, the sales
price is fixed or determinable, and collectibility is reasonably
assured. The Company accrues related product return reserves and
warranty expenses at the time of sale. Service and maintenance
sales are recognized over the contract term.
In accordance with Statement of Position ("SOP") 97-2, "Software
Revenue Recognition", as amended, and Staff Accounting Bulletin
("SAB") No. 101 "Revenue Recognition in Financial Statements", if
products, services or maintenance are bundled in a single
contract, revenue will be recognized once all elements of the
contract are completed unless the following criteria are met: (1)
the product has been delivered; (2) the undelivered services or
maintenance are not essential to the delivered products; (3) the
fee for the product is not subject to forfeiture, refund or
concession based on performance of the services or maintenance;
(4) the fair value of services and maintenance are determined
based on the price charged by Symbol, or the price charged by
competitors when similar services or maintenance are sold
separately; and (5) the revenue related to any element of the
contract is not subject to customer acceptance; in which case the
revenues for each element will be recognized independently, in
accordance with the Company's policy.
k. Income Taxes
Deferred income tax assets and liabilities were recognized for the
expected future tax consequences of events that have been included
in the Company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the differences between the financial accounting and tax bases
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Investment, research and development and other tax credits are
accounted for by the flow-through method.
The cumulative amount of undistributed earnings of foreign
subsidiaries at December 31, 2000, approximates $34,699. The
Company does not provide deferred taxes on undistributed earnings
of foreign subsidiaries since the Company anticipates no
significant incremental U.S. income taxes on the repatriation of
these earnings as tax rates in foreign jurisdictions generally
approximate or exceed the U.S. Federal rate.
l. Loss/Earnings Per Share
Basic earnings per share are based on the weighted average number
of shares of common stock outstanding during the period. For the
year ended December 31, 2000, stock options and warrants
F-10
outstanding and the effect of convertible subordinated notes and
debentures have not been included in the net loss per share
calculation since their effect would be antidilutive. For the
years ended December 31, 1999 and 1998, diluted earnings per share
are based on the weighted average number of shares of common stock
and common stock equivalents (options and warrants) outstanding
during the period, computed in accordance with the treasury stock
method. During each of the years ended December 31, 2000, 1999,
and 1998, the Board of Directors approved a three for two split
of the Company's common stock to be effected as a 50 percent
stock dividend. In these financial statements, all loss/earnings
per share amounts and the weighted average number of common
shares outstanding have been retroactively restated to reflect
each of the respective stock splits. In addition, the number of
common shares issued has been adjusted to reflect the stock split
and an amount equal to the par value of the additional shares
issued has been transferred from additional paid-in capital to
common stock.
m. Foreign Currency Translation and Transactions
Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates. Results of operations are translated
using the average exchange rates prevailing throughout the year.
Gains and losses from foreign currency transactions are included
in the statement of operations for the year and are not material.
Exchange rate changes arising from translation are included in the
accumulated other comprehensive income (loss) component of
stockholders' equity.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The
Company enters into foreign currency forward exchange contracts to
hedge a portion of its intercompany accounts receivable
transactions. The effect of this practice is to minimize the
impact of foreign exchange rate movements on the Company's
operating results. The Company's hedging activities do not subject
the Company to exchange rate risk because gains and losses on
these contracts offset losses and gains on the related
intercompany receivables being hedged.
As of December 31, 2000, the Company had $80,969 in forward
exchange contracts outstanding. The forward exchange contracts
generally have maturities that do not exceed 12 months and require
the Company to exchange foreign currencies for U.S. dollars at
maturity, at rates agreed to at inception of the contracts. These
contracts are primarily denominated in British pounds, European
currency units, Canadian dollars and Japanese yen and have been
marked to market as of December 31, 2000 with the resulting gains
and losses included in the statement of operations. The fair
value of these forward exchange contracts was $81,532 at December
31, 2000.
F-11
n. Pervasiveness of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
o. Reclassifications
Certain reclassifications have been made to prior consolidated
financial statements to conform with current presentations.
p. Recently Issued Accounting Pronouncements
During 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133")
amended by No. 138, "Accounting for Certain Derivative Instruments
and Hedging Activities". SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging
activities. It requires companies to recognize all derivatives as
either assets or liabilities in the statements of financial
position and measure those instruments at fair value. The Company
will adopt SFAS 133 in the first quarter of 2001. The adoption of
SFAS 133 will not have a material impact on the Company's
consolidated financial statements.
During 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," ("SFAS 140"). SFAS 140 requires new disclosures
as they relate to securitization transactions and residual
interests when the transaction is accounted for as a sale. It
also adds additional qualifications in order to be a Qualifying
Special Purpose Entity (QSPE) and defines the financial statement
treatment of the QSPE's assets and liabilities. SFAS 140 applies
to new transfers of financial assets occurring after March 31,
2001 and requires securitization disclosures effective for fiscal
year-ends before January 1, 2001.
In March 2000, the Financial Accounting Standards Board issued
FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation" ("FIN 44"). FIN 44 clarifies the
application of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". It does not address
issues related to the application of FASB Statement No. 123,
"Accounting for Stock Based Compensation". FIN 44 is generally
F-12
effective beginning July 1, 2000. The Company has complied with
the guidance contained within this Interpretation.
2. ACQUISITIONS AND DIVESTITURES
a. Telxon Acquisition
On November 30, 2000, the Company completed the acquisition of
Telxon through a merger of Telxon with a wholly owned subsidiary
of the Company. In the merger, each outstanding share of Telxon
common stock was converted into the right to receive 0.5 of a
share of the Company's common stock, resulting in the issuance of
8,775,000 shares, comprising approximately $378,300 of the total
purchase price.
In addition, each outstanding option to purchase Telxon common
stock was converted into an option to purchase 0.5 of a share of
the Company's common stock at an exercise price equal to two
times the pre-acquisition exercise price of the Telxon options.
This resulted in 1,740,000 options granted to replace Telxon
options. The fair value of vested stock options is $26,400. The
combined purchase price of shares issued and vested stock options
granted aggregated approximately $404,700. The fair value of
unvested stock options amounted to approximately $1,900 and is
accounted for as deferred compensation and excluded from the
total purchase price.
The acquisition has been accounted for by the purchase method of
accounting and, accordingly, the consolidated statements of
operations include the results of operations of Telxon beginning
December 1, 2000. The assets acquired and liabilities assumed
were recorded at estimated fair values as determined by the
Company's management based on information currently available and
on current assumptions as to future operations. The Company has
obtained independent appraisals of the acquired inventories,
property, plant and equipment, and identifiable intangible
assets, and their remaining useful lives. After allocating the
purchase price to net tangible assets, purchased technology which
has reached technological feasibility was valued at $22,800 using
a cash flow model, under which future cash flows were discounted
utilizing an assessment of its life expectancy. This purchased
technology has been capitalized and is being amortized over eight
years.
In addition, a portion of the purchase price was allocated to in-
process research and development ("IPR&D"). IPR&D of $87,600 was
charged to operations at the acquisition date as the IPR&D had
not reached technological feasibility and had no alternative
future use. Independent valuations were used in determining the
fair value of the identifiable intangible assets and in
allocating the purchase price among the acquired assets,
including the portion of the purchase price attributed to IPR&D.
F-13
As a result of the acquisition of Telxon, the Company incurred
incremental costs to exit and consolidate activities at Telxon
locations, to involuntarily terminate Telxon employees, and other
costs to integrate operating locations and other activities of
Telxon with the Company. Generally accepted accounting
principles require the portion of these expenses which are not
associated with the generation of future revenues and have no
future economic benefit to be reflected as assumed liabilities in
the allocation of the purchase price to the net assets acquired.
These restructuring costs, primarily severance and abandonment of
leased facilities, were recorded in the purchase price allocation
and amounted to $58,041 of which $594 was paid in 2000. Severance
relates to the termination of approximately 1,026 employees
primarily in manufacturing, management, sales and administrative
support. As of December 31, 2000, 265 employees had been
terminated. The remaining balance of accrued restructuring
expenses amounted to $57,447, most of which is expected to be
paid by June 30, 2001 (see Note 10).
The preliminary allocation resulted in an excess of cost over
fair value of net assets acquired that amounted to $217,690 and
is being amortized using the straight-line method over twenty
years. The preliminary purchase price allocation is subject to
adjustment in 2001 when finalized.
Unaudited pro forma results of operations for the years ended
December 31, 2000 and 1999, as if the Company acquired Telxon at
the beginning of each year and excluding the effect of non-
recurring pre-tax charges of $273,521 follow. The pro forma
results include estimates and assumptions which management
believes are reasonable. However, pro forma results do not
include the realization of cost savings from operating
efficiencies, synergies or other effects resulting from the
merger, and are not necessarily indicative of the actual
consolidated results of operations had the merger occurred on the
date assumed, nor are they necessarily indicative of future
consolidated results of operations.
Unaudited Pro forma
Year ended December 31,
2000(1) 1999(2)_
Net revenue $1,736,754 $1,484,610
Net earnings $ 245,743 $ 40,784
Diluted earnings per share $ 1.58 $ 0.27
(1) The fiscal 2000 unaudited pro forma results include
certain Telxon-related matters as follows: a gain on
exchange of Aironet shares of $396,161 or $1.73
diluted earnings per share, offset by pre-tax charges
for inventory obsolescence writeoffs, bad debt charges,
Akron to Cincinnati headquarter transition costs, loss
on a major domestic retailer sales contract, and the
repurchase of subsidiary minority interest aggregating
F-14
$51,900 or $0.23 diluted earnings per share.
(2) The fiscal 1999 unaudited pro forma results include Telxon-
related pre-tax charges for inventory obsolescence writeoffs
and bad debt charges aggregating $39,700 or $0.17 diluted
earnings per share.
b. Other Acquisitions
In addition to the aforementioned Telxon acquisition, the Company
has established wholly owned subsidiaries through the acquisition
of certain of its International distributors and developers of
various of the Company's products during the past three years.
These acquisitions have been accounted for as purchases and,
accordingly, the related acquisition costs have been allocated to
net assets acquired based upon fair values. The excess of cost
over net assets acquired related to these acquisitions is being
amortized over periods not exceeding twenty years.
The following table summarizes the terms of these acquisitions:
Initial Excess of
Purchase Cost over net
Year Ended Price assets acquired
2000 $ - $ -
1999 $11,392 $11,795
1998 $ 6,100 $ 3,650
Additional acquisition payments are contingent upon the
attainment of certain annual net revenue levels as defined in the
respective agreements during periods not exceeding five years
from the date of acquisition. The Company made additional
acquisition payments of $2,876 and $1,844 respectively during the
years ended December 31, 2000 and 1999 related to these
acquisitions which have been recorded as excess of cost over net
assets acquired.
Results of operations of these subsidiaries have been included in
consolidated operations as of their respective effective
acquisition dates. Pro forma results of operations, assuming
these acquisitions had been completed at the beginning of 2000,
1999 and 1998, would not differ materially from the reported
results.
During 1998 the Company incurred various pre-tax costs associated
with a publicly announced attempt to acquire another company. In
the fourth quarter of 1998 the Company formally terminated its
efforts to complete this acquisition. These one-time pre-tax
costs of $3,597 include legal, accounting, investment banking and
public relations fees which have been separately classified in the
Company's statement of operations for the year ended December 31,
1998.
F-15
In August, 1996, the Company acquired LIS Holdings Ltd., ("LIS")
headquartered in the United Kingdom. Effective May 31, 1998, the
Company sold all of the stock and certain assets of Symbol LIS
Limited, a wholly owned subsidiary, to a third party. Proceeds
from the sale of $15,000 were offset by the value of net assets
sold, various disposition expenses and the write-off of the
proportional share of excess of cost over net assets acquired,
relating to the original acquisition of LIS Holdings Ltd., in
1996. This resulted in a gain from the sale of business of $494
which is classified as non-operating income in the consolidated
statement of operations.
3. INVENTORIES
December 31, December 31,
2000 1999___
Raw materials $175,462 $102,637
Work-in-process 25,106 15,120
Finished goods 84,845 98,952
$285,413 $216,709
Included in the net inventory balance at December 31, 2000 is an
aggregate provision of approximately $63,904 recorded in December
2000 relating to management's decision to eliminate redundant and
discontinued products and product lines principally due to the
Telxon acquisition. This provision is recorded in cost of
revenue and is part of the restructuring of the Company. See
Note 10 for additional information relating to the restructuring
of the Company's operations.
4. PROPERTY, PLANT AND EQUIPMENT
December 31, December 31,
2000 1999___
Land $ 11,424 $ 10,680
Buildings and improvements 57,729 51,892
Machinery and equipment 112,901 106,246
Furniture, fixtures and office
equipment 46,934 39,472
Computer hardware and software 132,087 101,559
Leasehold improvements 16,692 13,197
Construction in progress 8,653 -
386,420 323,046
Less: Accumulated depreciation and
amortization 151,953 116,930
$234,467 $206,116
F-16
In the first quarter of 1999 the Company substantially completed
construction related to the expansion of its existing Worldwide
Headquarters facility, located in Holtsville, New York.
During the fourth quarter of 2000 the Company substantially
completed construction of a 140,000 square foot manufacturing and
distribution facility in Reynosa, Mexico. In February 2001, the
Company began a 150,000 square foot expansion of this facility.
The total cost for this project is estimated to be $7,800 and is
scheduled to be completed in the fourth quarter of 2001.
In February 2001, the Company also began construction of a new
320,000 square foot distribution center and data center in
McAllen, Texas. The total cost for this project is estimated to
be $31,700 and is scheduled to be completed in the fourth quarter
of 2001. The Company continues to make capital investments in
major systems and network conversions but does not have any other
material commitments for capital expenditures.
5. INVESTMENT IN MARKETABLE SECURITIES
Through the Company's acquisition of Telxon (see Note 2a.), it
obtained 4,166,086 shares of Cisco Systems, Inc. common stock (the
"Cisco shares"). Using the provisions of SFAS No. 115, the
Company classified this investment as available-for-sale, based
upon its intent to hold the securities for an extended length of
time and to not engage in frequent buying and selling of the
securities.
In conjunction with the Telxon acquisition, the Company also
obtained two derivative financial instruments related to the Cisco
shares (referred to collectively herein as the "Collar"). The
Collar essentially hedges the Company's risk of loss on the
marketable securities by utilizing purchased put options.
Conversely, the Collar arrangement also limits the potential gain
by employing written call options. By employing a hedging
alternative such as the Collar, the Company can be assured that
its gains and losses will reside within the range created by the
Collar.
This range is set in such a way that the initial Black Scholes
value of the call is equivalent to the Black Scholes value of the
put; therefore, utilizing this means of hedging is cost effective
for the Company since the premiums and costs related to the two
opposing features effectively net.
F-17
Information regarding the Collar is illustrated in the table
below:
Number of
Option Type Strike Price Number of Options shares Hedged
Call $106.99 20,800 2,080,000
Put $ 59.33 20,800 2,080,000
Call $ 94.25 20,800 2,080,000
Put $ 66.75 20,800 2,080,000
The effect of the Collar is to hedge 4,160,000 shares, or 99.9
percent, of the Company's investment in Cisco. The Collar limits
the Company's loss by placing a floor on the value at which the
shares may be potentially sold, on average, of $63.04 per share.
Conversely, the Collar also limits the Company's gain by creating
a ceiling on the value at which the shares may be potentially
sold, on average, of $100.62 per share. Therefore, the Company's
maximum potential gain or (loss) realized from the sale of its
hedged marketable securities at December 31, 2000 is on average
$156,031 or ($301), respectively. This potential gain or loss was
calculated by utilizing the average strike prices from above, and
the Company's original cost basis in its investment in Cisco of
$262,548. However, the options contained within the Collar
agreement have an expiration date of March 26, 2001 and may only
be exercised on this date. For each collar, the election of a
third party to exercise the call feature, or the Company's option
to exercise the put feature, will automatically terminate the
opposing component of the Collar agreement, and the owner of such
option agreement will have no further rights or obligations under
the agreement once this occurs (See Note 20 for subsequent event
information).
In addition to the aforementioned Cisco shares, the Company has
other investments which are classified as available-for-sale under
the provisions of SFAS No. 115. Information regarding all such
securities is illustrated in the table below:
December 31, December 31,
2000 1999____
Cost basis $268,048 $ 5,950
Gross unrealized holding (losses)
gains ( 4,743) 11,763
Aggregate fair market value $263,305 $ 17,713
F-18
6. INTANGIBLE ASSETS
December 31, December 31,
2000 1999____
Excess of cost over fair value
of net assets acquired $370,900 $140,978
Patents, trademarks, purchased
technologies and non-compete
covenants 86,344 41,336
Executive retirement plan
unrecognized prior service
costs 538 630
457,782 182,944
Less: Accumulated amortization 71,290 52,378
$386,492 $130,566
7. SOFTWARE DEVELOPMENT COSTS
Year Ended December 31,____
2000 1999 1998_
Beginning of year $64,883 $43,571 $26,649
Amounts capitalized 32,635 39,784 31,514
Impairment related
writeoffs (39,876) - -
57,642 83,355 58,163
Less: Amortization 24,067 18,472 14,592
End of year $33,575 $64,883 $43,571
Writeoffs relate to the rationalization of certain product lines
in connection with the Telxon acquisition completed in December
2000.
F-19
8. OTHER ASSETS
In November 2000, the Company invested $50,000 in and licensed
certain intellectual property to AirClic Inc. ("AirClic"). In
return, the Company received convertible preferred stock in
AirClic. The Company does not currently have the right to convert
its preferred stock into common stock of AirClic and its ability
to do so in the future is subject to certain contractual
restrictions. AirClic's business allows wireless devices to scan
bar codes and transmit data to the Internet. Under the terms of
the relevant agreements, if AirClic raises an additional $365,000
in private equity, $200,000 of which must be at per share prices
materially greater than the Company's original investment, and
satisfies certain other conditions, then the Company may be
required to invest up to an additional $150,000 in AirClic. To
date, the Company has not made any additional investments in
AirClic and the Company's obligation to invest additional amounts
expires upon an initial public offering of AirClic that meets
certain criteria. Because the Company does not have the ability
to exercise significant influence over AirClic, it accounts for
this investment using the cost method.
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31, December 31,
2000 1999____
Accounts payable $129,829 $104,127
Accrued compensation, fringe
benefits and related payroll taxes 86,962 52,924
Accrued merger integration charges 19,583 -
Other accrued expenses 89,296 31,127
$325,670 $188,178
See Note 10 for information on the details of the restructuring,
impairment and integration charges recorded by the Company.
F-20
10. RESTRUCTURING, IMPAIRMENT AND INTEGRATION CHARGES
In December 2000, the Company's management approved and adopted a
formal plan of restructuring as a result of the Telxon
acquisition (see Note 2a.). In connection with this acquisition,
the Company's operating results for the year ended December 31,
2000 reflect a $185,921 charge for restructuring, impairment and
integration related charges.
The restructuring charge of $146,696, of which $116,901 is
recorded as a component of cost of revenue, included workforce
reduction costs, asset impairments and lease termination costs.
The costs are not associated with the generation of future
revenues and have no future economic benefit.
An additional $39,225 of the charge recorded in December 2000
relates to the integration of Telxon's business and operations
resulting in revenue-producing activities. These merger
integration charges consist primarily of professional service and
consulting fees, marketing and advertising, travel expenses and
other related charges.
The Company's current exit plan, which focuses on the
consolidation of manufacturing operations, including plant
closings and elimination of redundant activities, is expected to
be substantially completed by June 30, 2001. As part of this
plan, the Company recorded a severance charge of $14,117 for
workforce reductions. The severance charge relates to the
termination of approximately 225 employees primarily in
manufacturing, management, sales and administrative support. As
of December 31, 2000, 83 employees have been terminated. Details
of the unutilized restructuring costs charged to expense as of
December 31, 2000 are as follows:
2000 Utilized December 31, 2000
Provision to date Accrual____
Work force
reductions $ 14,117 $ 3,867 $ 10,250
Inventory
impairment 63,904 63,904 -
Writeoff of
impaired software
development costs 39,876 39,876 -
Impaired fixed asset
and other writeoffs 28,320 23,989 4,331
Lease cancellation
costs 479 20 459
$146,696 $131,656 $ 15,040
F-21
In addition, accrued restructuring charges related to the Telxon
acquisition that are assumed liabilities and are a component of
the allocated purchase price are $57,447 at December 31, 2000
(Refer to Note 2a.). Accordingly, the Company has total
accrued restructuring expense of $72,487 at December 31, 2000.
11. CONVERTIBLE SUBORDINATED NOTES AND DEBENTURES
In conjunction with the Telxon acquisition, the Company assumed
$82,500 of 5-3/4% convertible subordinated notes (the "5-3/4%
notes"), and $24,413 of 7-1/2% convertible subordinated
debentures (the "7-1/2% debentures").
The 5-3/4% notes, issued December 12, 1995, pay interest semi-
annually and are due January 1, 2003. The conversion price for
these notes is $55 per common share and is subject to adjustment
in certain events. These notes are redeemable at any time at the
option of the Company, in whole or in part, at 101.643% and
100.821% during the years ended December 31, 2001 and 2002,
respectively.
The 7-1/2% debentures, issued June 1, 1987, pay interest semi-
annually and are due June 1, 2012. The conversion price for the
debentures is $53.50 per common share and is subject to
adjustment in certain events. The debentures are redeemable at
par value. The sinking fund requires annual payments of 5% of
the original $46,000 principal amount, calculated to retire 75%
of the issue prior to maturity. Prior to the acquisition, Telxon
purchased and retired debentures with a principal face value of
$21,266. This amount has been applied to the earliest of the
sinking fund obligations.
The combined aggregate amount of maturities and sinking fund
requirements for each of the years ended December 31 are as
follows:
2001 $ -
2002 -
2003 82,500
2004 -
2005 -
Thereafter 24,413
$106,913
These notes and debentures contain various non-financial
covenants with which the Company was in compliance at December
31, 2000.
F-22
12. LONG-TERM DEBT
December 31, December 31,
2000 1999_____
Revolving Credit Facility (a) $187,329 $57,000
Senior Notes (b) 19,048 25,397
Promissory Note(c) 10,000 -
Promissory Notes (d) - 20,372
Assumed Revenue Bond Financing (e) - 968
State Loan (f) 3,000 3,000
Other (g) 4,792 2,932
224,169 109,669
Less: Current maturities 23,025 10,046
$201,144 $99,623
(a) In September 1999, the Company expanded the size of its
unsecured revolving credit facility with a syndicate of U.S.
and International banks from $200,000 to $350,000. As of
December 31, 2000 the Company had outstanding borrowings of
$187,329 under this facility. These borrowings bear interest
at either LIBOR plus 87.5 basis points or the base rate of
the syndication agent bank, which approximated 9.5 percent at
December 31, 2000. Since the proceeds under the Credit
Agreement are committed until 2004, the Company has
classified these borrowings as long-term obligations. As of
December 31, 1999, the Company had outstanding borrowings of
$57,000 under this facility. The Company subsequently fully
repaid these borrowings in January 2001. This Credit
Agreement has certain restrictive covenants. Certain of the
covenants were waived in order to complete the Telxon
acquisition and such related transactions. Therefore, the
Company is in compliance with all debt covenants at December
31, 2000.
(b) In March 1993, the Company issued $25,000 of its 7.76
percent Series A Senior Notes due February 15, 2003, and
$25,000 of its 7.76 percent Series B Senior Notes due
February 15, 2003, to two insurance companies. The Series A
Senior Notes are being repaid in equal annual installments
of $2,778 which began in February 1995. The Series B Senior
Notes are being repaid in equal annual installments of
$3,571 which began February 1997. Interest is payable
quarterly for these notes. The financing agreements contain
certain covenants regarding the maintenance of a minimum
level of tangible net worth, as well as certain other
financial ratios, as defined, and certain restrictions
including limitations on indebtedness. The Company was in
compliance with these covenants at December 31, 2000.
F-23
(c) In conjunction with the Telxon acquisition, the Company
assumed a short-term promissory note of $10,000. This note
bears interest at LIBOR plus 30 basis points (6.86 percent at
December 31, 2000). The Company subsequently fully repaid
this note in January 2001.
(d) In November 1999, the Company entered into an agreement with
a commercial bank in the form of a note payable to borrow
2.1 billion Japanese yen bearing interest at LIBOR plus 1.0
percent. The Company fully repaid this note in February
2000. Under this agreement, the Company also has available
a $20,000 line of credit. At December 31, 2000, there were
no outstanding borrowings under this facility.
(e) In June 1995, the Company assumed a $7,282 New York
Industrial Development bond which was collateralized by its
facilities located in Holtsville, New York. The bond charged
interest at 12.3 percent and principal and interest were
being repaid in ten equal semi-annual installments of $997
which began in October 1995. Based upon borrowing rates of
6.7 percent available to the Company at the time the
transaction occurred, a bond premium of $1,274 had been
recorded in long-term debt and was being amortized over the
life of the bond. This bond was paid in full in March 2000.
(f) In 1994, the Company received a $3,000 loan from an agency of
New York State. The loan bears interest at 1.0 percent,
payable monthly, and the principal is to be repaid in two
installments in 2001. The interest rate is subject to a
covenant requiring a minimum level of full-time permanent
employees.
(g) The Company has available $76,000 in uncommitted U.S. dollar
and foreign currency lines of credit with several global
banks that continue until such time as either party wishes to
terminate the agreements. As of December 31, 2000 and 1999,
outstanding borrowings under these agreements amounted to
$3,405 and $2,076 respectively. The remaining balances in
other long-term debt of $1,387 and $856 at December 31, 2000
and 1999, respectively, represent various other loans
maturing through 2007.
Based on the borrowing rates currently available to the Company
for bank loans with similar terms, the fair values of borrowings
under the Credit Agreement, Senior Notes and Promissory note,
approximate their carrying values. The fair value of the State
Loan as of December 31, 2000 is approximately $2,841.
F-24
The combined aggregate amount of long-term debt maturities for
each of the years ended December 31 are as follows:
2001 $23,025
2002 7,316
2003 6,377
2004 187,358
2005 32
Thereafter 61
$224,169
13. INCOME TAXES
The (benefit from)/provision for income taxes consists of:
Year Ended December 31,_______
2000 1999 1998__
Current:
Federal $39,721 $42,875 $28,757
State and local 7,871 7,545 5,434
Foreign 5,303 7,967 6,179
52,895 58,387 40,370
Deferred:
Federal (55,087) (1,392) 5,483
State and local (9,499) (395) (396)
Foreign 1,099 (1,840) 330
(63,487) (3,627) 5,417
Total (benefit from)/
provision for
income taxes ($10,592) $54,760 $45,787
A reconciliation between the statutory U.S. Federal income tax
rate and the Company's effective tax rate is:
Year Ended December 31,______
2000 1999 1998__
Statutory U.S. Federal
rate (35.0%) 35.0% 35.0%
State taxes, net of
Federal tax effect (1.3) 2.7 2.4
Tax credits (17.8) (6.8) (3.0)
Amortization of excess of
cost over fair value of
net assets acquired 1.7 0.6 0.7
Write-off of In-Process
R&D 38.5 - -
Exempt income of foreign
sales corporation (2.1) (3.9) (3.5)
Income of foreign
subsidiaries taxed at
higher tax rates 4.1 0.9 0.5
Other, net (1.4) 3.5 0.9
(13.3%) 32.0% 33.0%
F-25
At December 31, 2000, 1999 and 1998, the Company had deferred
income taxes of $88,025, $37,059, and $28,088, respectively. The
deferred tax assets and liabilities at December 31, 2000, 1999
and 1998, respectively, are comprised of:
Year Ended December 31,
2000 1999 1998____
Deferred Tax Deferred Tax Deferred Tax
Assets/ Assets/ Assets/
(Liabilities) (Liabilities) (Liabilities)
Receivables $ 8,300 ($2,700) ($6,192)
Inventory 60,960 19,751 13,777
Net investment in
sales-type leases (8,759) (6,471) (4,240)
Accrued compensation
and associate benefits 9,045 5,296 5,692
Other accrued liabilities 26,488 8,803 14,196
Accrued restructuring
and severance costs 57,722 214 397
Deferred revenue - current 10,389 5,755 2,139
Deferred revenue - long term 4,783 14,835 4,209
Deferred patent and product
development costs (31,418) (33,618) (23,669)
Purchased technology &
other intangibles 4,629 3,932 3,938
Property, plant and
equipment (13,247) (18,254) (13,184)
Investments (96,290) (4,614) 158
Cumulative translation
adjustments 12,714 6,131 3,750
Net operating loss
carryforwards 32,958 - -
Tax credit carryforwards 27,562 3,651 2,883
Other, net 10,116 5,024 3,182
115,952 7,735 7,036
Less: Valuation allowance 6,958 - 696
Net Deferred Tax Asset $108,994 $7,735 $ 6,340
The valuation allowance increased by $6,958 during 2000,
decreased by $696 during 1999 and increased by $107 during 1998.
The valuation allowance at December 31, 2000 relates to net
operating loss carryforwards and foreign tax credit
carryforwards. The valuation allowance at December 31, 1998
related to state investment tax credit carryforwards which were
likely to be recaptured.
F-26
14. COMMITMENTS AND CONTINGENCIES
a. Lease Agreements
The combined aggregate amount of required future minimum rental
payments under non-cancelable operating leases for each of the
years ended December 31, are as follows:
2001 $14,923
2002 13,390
2003 11,167
2004 9,609
2005 8,008
Thereafter 34,505
$91,602
Rent expense under substantially all operating leases was
$13,198, $11,143, and $9,938, for the years ended December 31,
2000, 1999 and 1998, respectively.
b. Employment Contracts
The Company has executed employment contracts with certain senior
executives that vary in length, for which the Company has a
minimum commitment aggregating approximately $12,899 at December
31, 2000.
c. Legal Matters
The Company is currently involved in matters of litigation
arising from the normal course of business. Management is of the
opinion that such litigation will not have a material adverse
effect on the Company's consolidated financial position or
results of operations.
In March 2001, Proxim Incorporated ("Proxim") sued the Company,
3Com Corporation, Wayport Incorporated and SMC Networks
Incorporated in the United States District Court in the District
of Delaware for allegedly infringing three patents owned by
Proxim. Proxim did not identify any specific products of the
Company that allegedly infringe these three patents. Proxim
also filed a similar lawsuit in March 2001 in the United States
District Court in the District of Massachusetts against Cisco
F-27
Systems, Incorporated and Intersil, Incorporated. The
complaint against the Company seeks, among other relief,
unspecified damages for patent infringement, treble damages for
willful infringement, and a permanent injunction against the
Company from infringing these three patents. In a press
conference held after the filing of the complaints, Proxim
indicated that it was interested in licensing the patents that
are the subject of the lawsuit against the Company. The Company
believes that the allegations of the lawsuit are meritless and
intends to defend this action vigorously.
On July 21, 1999, the Company and six other leading members of
the Automatic Identification and Data Capture industry jointly
initiated a litigation against the Lemelson Medical, Educational,
& Research Foundation, Limited Partnership (the "Lemelson
Partnership"). The suit, which is entitled Symbol Technologies,
Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnerships, was commenced in the U.S.
District Court, District of Nevada in Reno, Nevada.
In the litigation, the Auto ID companies seek, among other
remedies, a declaration that certain patents, which have been
asserted by the Lemelson Partnership against end users of bar
code equipment, are invalid, unenforceable and not infringed.
The Company has agreed to bear approximately half of the legal
and related expenses associated with the litigation, with the
remaining portion being borne by the other Auto ID companies.
The Lemelson Partnership has contacted many of the Auto ID
companies' customers demanding a one-time license fee for certain
so-called "bar code" patents transferred to the Lemelson
Partnership by the late Jerome H. Lemelson. The Company and the
other Auto ID companies have received many requests from their
customers asking that they undertake the defense of these claims
using their knowledge of the technology at issue. Certain of
these customers have requested indemnification against the
Lemelson Partnership's claims from the Company and the other Auto
ID companies, individually and/or collectively with other
equipment suppliers. The Company, and we understand, the other
Auto ID companies believe that generally they have no obligation
to indemnify their customers against these claims and that the
patents being asserted by the Lemelson Partnership against their
customers with respect to bar code equipment are invalid,
unenforceable and not infringed. However, the Company and the
other Auto ID companies believe that the Lemelson claims do
concern the Auto ID industry at large and that it is appropriate
for them to act jointly to protect their customers against what
they believe to be baseless claims being asserted by the Lemelson
Partnership.
F-28
The Lemelson Partnership has filed a motion to dismiss the
lawsuit, or in the alternative, to stay proceedings or to
transfer the case to the U.S. District Court in Arizona where
there are pending cases involving the Lemelson Partnership and
other companies in the semiconductor and electronics industries.
On March 21, 2000, the U.S. District Court in Nevada denied the
Lemelson Partnership's motion to dismiss, transfer, or stay the
action. It also struck one of the four counts.
On April 12, 2000, the Lemelson Partnership filed its Answer to
the Complaint in the Symbol et. al. v. Lemelson Partnership case.
In the Answer, the Lemelson Partnership included a counterclaim
against the Company and the other plaintiffs seeking a dismissal
of the case. Alternatively, the Lemelson Partnership's
counterclaim seeks a declaration that the Company and the other
plaintiffs have contributed to, or induced infringement of
particular method claims of the patents-in-suit by the
plaintiffs' customers. The Company believes there is no merit to
the Lemelson Partnership's counterclaim.
On May 15, 2000, the Auto ID companies filed a motion seeking
permission to file an interlocutory appeal of the Court's
decision to strike the fourth count of the complaint (which
alleged that the Lemelson Partnership's delays in obtaining its
patents rendered them unenforceable for laches). The motion was
granted by the Court on July 14, 2000. The Court entered a
clarifying, superseding order on July 25, 2000. On September 1,
2000, the U.S. Court of Appeals for the Federal Circuit granted
the petition of the Auto ID companies for permission to pursue
this interlocutory appeal. The Company believes the Federal
Court will hear oral argument on the motion later in 2001.
On July 24, 2000, the Auto ID companies filed a motion for
partial summary judgment arguing that almost all of the claims of
the Lemelson Partnership's patents are invalid for lack of
written description. On August 8, 2000, the Lemelson Partnership
filed a motion seeking an extension of approximately ten weeks in
which to file an answer to this motion. On August 31, 2000, the
Court granted the Lemelson Partnership's motion for such an
extension. On October 25, 2000, the Lemelson Partnership filed a
combined opposition to the motion of the Auto ID companies for
partial summary judgment and its own cross-motion for partial
summary judgment that many of the claims of the Lemelson
Partnership's patents satisfy the written description
requirement. On January 8, 2001, the Auto ID companies filed a
combined reply in support of their partial summary judgment
motion and opposition to the Lemelson Partnership's partial
summary judgment cross-motion. The Company believes that the
District Court will probably hear oral arguments on this motion
later in 2001.
F-29
From December through March 1999, a total of 27 class actions
were filed in the United States District Court, Northern District
of Ohio, by certain alleged stockholders of Telxon on behalf of
themselves and purported classes consisting of Telxon
stockholders, other than the defendants and their affiliates, who
purchased stock during the period from May 21, 1996 through
February 23, 1999 or various portions thereof, alleging claims
for "fraud on the market" arising from alleged misrepresentations
and omissions with respect to Telxon's financial performance and
prospects and an alleged violation of generally accepted
accounting principles by improperly recognizing revenues. The
named defendants are Telxon, its former President and Chief
Executive Officer, Frank E. Brick, and its former Senior Vice
President and Chief Financial Officer, Kenneth W. Haver. The
actions were referred to a single judge. On February 9, 1999,
the plaintiffs filed a Motion to consolidate all of the actions
and the Court heard motions on naming class representatives and
lead class counsel on April 26, 1999.
On August 25, 1999, the Court appointed lead plaintiffs and their
counsel, ordered the filing of an Amended Complaint, and
dismissed 26 of the 27 class action suits without prejudice and
consolidated those 26 cases into the first filed action. The
lead plaintiffs appointed by the Court filed an Amended Class
Action Complaint on September 30, 1999. The Amended Complaint
alleges that the defendants engaged in a scheme to defraud
investors through improper revenue recognition practices and
concealment of material adverse conditions in Telxon's business
and finances. The Amended Complaint seeks certification of the
identified class, unspecified compensatory and punitive damages,
pre- and post-judgment interest, and attorneys' fees and costs.
Various appeals and writs challenging the District Court's August
25, 1999 rulings were filed by two of the unsuccessful plaintiffs
but have all been denied by the Court of Appeals.
On November 8, 1999, the defendants jointly moved to dismiss the
Amended Complaint, which was denied on September 29, 2000.
Following the denial, the parties filed a proposed joint case
schedule, discovery commenced, and the parties each filed their
initial disclosures. On October 30, 2000, defendants filed their
answer to the plaintiffs' amended complaint as well as a Motion
for Reconsideration or to Certify the Order Denying the Motion to
Dismiss for Interlocutory Appeal and request for oral argument,
and a memorandum of points and authorities in support of that
motion. On November 14, 2000, Plaintiffs filed a Memorandum in
Opposition of Defendants Motion. This Motion was denied on
January 19, 2001. On November 1, 2000, defendants filed a Motion
for Application of the Amended Federal Rules of Civil Procedure
F-30
to the case, and on November 16, 2000, the Court granted this
Motion in part and held that the Court will apply the new rules
of evidence and new rules of civil procedure except to the extent
those rules effectuate changes to Rule 26 of the Federal Rules
for Civil Procedure. Discovery is in its preliminary stages.
By letter dated December 18, 1998, the Staff of the Division of
Enforcement of the Securities and Exchange Commission (the
"Commission") advised Telxon that it was conducting a
preliminary, informal inquiry into trading of the securities of
Telxon at or about the time of Telxon's December 11, 1998 press
release announcing that Telxon would be restating the revenues
for its second fiscal quarter ended September 30, 1998. On
January 20, 1999, the Commission issued a formal Order Directing
Private Investigation and Designating Officers To Take Testimony
with respect to the referenced trading and specified accounting
matters, pursuant to which subpoenas have been served requiring
the production of specified documents and testimony.
By letter dated March 9, 2001, the Division of Enforcement of the
Commission informed Telxon that it had made a preliminary
determination to recommend that the Commission initiate an action
against Telxon for violation of various sections of the federal
securities laws and regulations and to seek permanent injunctive
relief and appropriate monetary penalties against Telxon. The
Division of Enforcement has also indicated that it intends to
recommend similar action against one current and two former
employees of Telxon. The Commission gave Telxon until April 23,
2001 to indicate in a written submission why Telxon believes no
action should be instituted against it. Telxon has not accrued
for any fines or penalties under Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies,"
because the amount of any such fine or penalty is not estimable.
15. STOCKHOLDERS' EQUITY
a. Stock Option Plans
There are a total of 30,655,728 shares of common stock reserved
for issuance under the Company's stock option plans at December
31, 2000. Stock options granted to date generally vest over a one
to five year period, expire after ten years and have exercise
prices equal to the market value of the Company's common stock at
the date of grant.
F-31
A summary of changes in the stock option plans is:
Shares Under Option_____________
Number of Weighted Avg.
Option Price Shares Exercise
per Share (in thousands) Price____
Shares under option
at January 1, 1998 $ 1.79 to $12.26 21,876 $ 7.16
Granted $11.05 to $23.89 5,147 $13.76
Exercised $ 2.17 to $ 9.38 (2,517) $ 4.34
Cancelled $ 2.37 to $22.00 (558) $ 9.86
Shares under option
at December 31, 1998 $ 1.79 to $23.89 23,948 $ 8.81
Granted $21.04 to $37.83 4,634 $25.97
Exercised $ 2.17 to $12.26 (3,134) $ 6.39
Cancelled $ 3.68 to $25.78 (326) $13.59
Shares under option
at December 31, 1999 $ 1.79 to $37.83 25,122 $12.22
Granted $31.12 to $61.83 2,770 $47.38
Granted to
replace Telxon
options $15.94 to $59.25 1,740 $26.99
Exercised $ 2.17 to $22.00 (3,348) $ 8.01
Cancelled $ 5.18 to $53.75 (656) $24.02
Shares under option
at December 31, 2000 $ 1.79 to $61.83 25,628 $17.36
Shares exercisable
at December 31, 2000 $ 1.79 to $59.25 13,693 $10.55
F-32
The following table summarizes information concerning currently
outstanding and exercisable options:
Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Life Exercise Exercisable Exercise
Prices (in thousands) (years) Price (in thousands) Price__
$ 1.79 - $ 2.68 1,165 2.0 $ 2.46 1,165 $ 2.46
$ 2.69 - $ 4.03 558 1.8 $ 3.61 558 $ 3.61
$ 4.04 - $ 6.06 1,677 3.8 $ 5.27 1,677 $ 5.27
$ 6.07 - $ 9.10 3,859 5.2 $ 7.80 3,552 $ 7.81
$ 9.11 - $13.67 8,498 6.3 $10.69 4,776 $10.57
$13.68 - $20.52 1,579 6.6 $18.80 936 $18.45
$20.53 - $30.80 4,716 7.5 $25.17 459 $25.77
$30.81 - $46.22 1,823 7.7 $37.88 396 $37.25
$46.23 - $61.83 1,753 8.3 $52.88 174 $49.27
25,628 13,693
At December 31, 2000, an aggregate of 5,028,000 shares remain
available for grant under the stock option plans. The tax
benefits arising from stock option exercises during the years
ended December 31, 2000, 1999 and 1998, in the amount of $53,960,
$26,786, and $13,207, respectively, were recorded in stockholders'
equity as additional paid-in capital.
In accordance with the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), the Company applies the intrinsic
value based method as described in APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the fixed portion of its
plans.
If compensation cost for the Company's fixed stock options
(including outside directors' options and stock purchase warrants
discussed below) had been determined in accordance with the fair
value method described in SFAS No. 123, the Company's net (loss)
earnings and (loss) earnings per share would have been the pro
forma amounts indicated below:
Year Ended December 31,____
2000 1999 1998__
Net (Loss) Earnings:
As Reported ($68,966) $116,364 $92,964
Pro Forma ($86,262) $103,996 $85,529
Basic (Loss) Earnings Per Share:
As Reported ($0.50) $0.88 $0.70
Pro Forma ($0.63) $0.79 $0.65
Diluted (Loss) Earnings Per Share:
As Reported ($0.50) $0.82 $0.66
Pro Forma ($0.63) $0.73 $0.61
F-33
The weighted average fair value of options granted during 2000,
1999, and 1998 was $19.12, $9.15, and $4.57 per option,
respectively. In determining the fair value of options and outside
directors' options and stock purchase warrants granted in 2000,
1999 and 1998 for pro forma purposes the Company used the Black-
Scholes option pricing model and assumed the following: a risk
free interest rate of 5.5 percent, 5.5 percent, and 5.0 percent;
an expected option life of 4 years; an expected volatility of 43
percent, 35 percent, and 33 percent; and a dividend yield of 0.14
percent per year. As required by SFAS No. 123, the impact of
outstanding non-vested stock options granted prior to 1995 has
been excluded from the pro-forma calculation.
b. Outside Directors' Options and Stock Purchase Warrants
All options and stock purchase warrants issued to outside
directors vest over a two to four year period, expire after ten
years and have exercise prices equal to the market value of the
Company's common stock at the date of grant. The following table
indicates the number of common shares issuable upon exercise and
the exercise price per share of all outstanding outside Directors'
options and stock purchase warrants as of December 31, 2000:
Number of
Shares Shares
Issuable Exercise Vested at
Exercisable Upon Exercise Price December 31,2000
to (in thousands) per Share (in thousands)_
2004 76 $ 4.98 to $ 5.48 76
2005 25 $ 6.64 25
2006 38 $ 9.28 38
2007 25 $ 9.77 25
2008 118 $11.05 to $14.75 68
2009 100 $23.69 to $37.83 33
2010 350 $48.00 to $53.75 -
732 265
The weighted average exercise price for the number of shares
issuable upon exercise was $32.28, $13.70, and $8.93,
respectively, for the years ended December 31, 2000, 1999, and
1998. The weighted average exercise price of shares vested was
$10.81, $8.04, and $6.75, respectively, for the years ended
December 31, 2000, 1999, and 1998. The weighted average fair
value of outside directors options and stock purchase warrants
granted during 2000, 1999, and 1998 was $21.27, $8.42, and $3.89,
per share, respectively.
F-34
c. Employee Stock Purchase Plan
During 1997, the Company adopted an employee stock purchase plan
which was approved by the Company's stockholders at the annual
meeting of shareholders. Participants may purchase shares of stock
for an amount equal to 85 percent of the lesser of the closing price
of a share of stock on the first trading day of the period or the
last trading day of the period.
The stock sold to plan participants shall be authorized but
unissued common stock, treasury shares or shares purchased in the
open market. The aggregate number of shares which may be issued
pursuant to the plan is 1,265,625. As of December 31, 2000,
719,843 shares were issued to participants and subsequent to
December 31, 2000, 113,530 shares were issued to participants by
the Company all of which were purchased in the open market by the
Company. The weighted average fair value of the options granted
to purchase shares in 2000 was $13.26.
d. Treasury Stock
Treasury stock is comprised of 7,322,000 shares of common stock
purchased for a total cost of $107,380 from certain officers in
connection with the exercise of stock options, 13,136,000 shares
purchased in open market transactions for a total cost of $135,995
pursuant to the various stock repurchase programs authorized by
the Board of Directors, partially offset by 5,019,000 shares
reissued with a book value of $57,776 and proceeds of $200,587.
16. ASSOCIATE BENEFIT PLANS
a. Profit Sharing Retirement Plan
The Company maintains a 401(k) profit sharing retirement plan for all
U.S. associates meeting certain service requirements. The Company
contributes monthly, 50.0 percent of the first 6.0 percent of
associates' contributions, which results in a maximum Company
contribution of 3.0 percent of the associates' annual compensation.
Plan expense for the years ended December 31, 2000, 1999, and 1998
was $7,519, $6,182, and $5,339, respectively.
b. Health Benefits
The Company pays a portion of costs incurred in connection with
providing associate and dependant health benefits through programs
administered by various insurance companies. Such costs amounted
to $16,683, $14,161, and, $12,935, for the years ended December
31, 2000, 1999 and 1998, respectively.
F-35
c. Executive Retirement Plan
The Company maintains an Executive Retirement Plan (the "Plan") in
which certain highly compensated associates are eligible to
participate. Participants are selected by a committee of the
Board of Directors. Benefits vest after five years of service and
are based on a percentage of average compensation for the three
years immediately preceding termination of the participant's full-
time employment. As of December 31, 2000, 12 officers were
participants in the Plan. The Company's obligations under the Plan
are not funded apart from the Company's general assets.
Change in benefit obligation:
Year Ended December 31,__
2000 1999 1998__
Benefit obligation at beginning
of year $10,381 $9,817 $8,234
Service cost 1,086 1,063 806
Interest cost 885 792 711
Amortization of unrecognized prior
service cost 92 92 112
Actuarial loss 97 110 8
Recognition of SERP Swap Benefit (1,523) (1,439) -
Benefits paid (54) (54) (54)
Benefit obligation at end of year $10,964 $10,381 $9,817
Funded status (17,483) (13,730) (13,199)
Unrecognized actuarial loss 5,981 2,719 2,660
Unrecognized prior service cost 538 630 722
Net amount recognized ($10,964) ($10,381) ($9,817)
Year Ended December 31,__
2000 1999 1998__
Service cost $1,086 $1,063 $806
Interest cost 885 792 711
Amortization of unrecognized
Prior service cost 92 92 112
97 110 8
Net periodic benefit cost $2,160 $2,057 $1,637
F-36
The Plan had $11,717 and $10,846 of vested benefit obligations at
December 31, 2000 and 1999, respectively, which are included in
other liabilities. The projected benefit obligation at December
31, 2000, 1999, and 1998 was determined using an assumed weighted
average discount rate of 8.0 percent, 7.5 percent, and, 6.5
percent, respectively, and an assumed increase in the long-term
rate of compensation of 6.0 percent for December 31, 2000 and 5.0
percent for both December 31, 1999 and 1998.
17. RECONCILIATION OF BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE
Basic earnings per common share are computed based on the weighted
average number of common shares outstanding during each period.
Diluted earnings per common share are computed based on the
weighted-average number of common shares, after giving effect to
diluted common stock equivalents outstanding during each period.
The following table provides a reconciliation between basic and
diluted (loss)/earnings per share:
For The Year Ended___________________________
December 31, 2000 December 31, 1999 December 31, 1998___
Per Per Per
Loss Shares Share Income Shares Share Income Shares Share
Basic EPS
(Loss) Income available
to common
stockholders ($68,966)137,629 ($0.50) $116,364 132,488 $0.88 $92,964 132,291 $0.70
Effect of Dilutive
Securities
Options/Warrants(1) - - - - 9,084 ($0.06) - 8,190 ($0.04)
Diluted EPS
(Loss) Income available to
common stockholders
plus assumed
exercises ($68,966) 137,629 ($0.50)$116,364 141,572 $0.82 $92,964 140,481 $0.66
(1) For the year ended December 31, 2000, the impact of stock options and
warrants and convertible subordinated notes and debentures is
antidilutive and has therefore not been included herein.
F-37
18. BUSINESS SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS
The Company manages its business on a geographic basis. The
Company's reportable business segment has been aggregated into
three geographic segments, The Americas (which includes North and
South America), EMEA (which includes Europe, Middle East and
Africa) and Asia Pacific (which includes Japan, the Far East and
Australia).
Summarized financial information concerning the Company's
geographic segments is shown in the following table. Sales are
allocated to each of the geographic segments based upon the
location of the use of the products and services. The "Corporate"
column includes corporate related expenses (primarily various
indirect manufacturing operations costs, engineering and general
and administrative expenses) not allocated to geographic segments.
This has the effect of increasing reportable operating profit for
The Americas, EMEA and Asia Pacific. Indentifiable assets are
those tangible and intangible assets used in operations in each
geographic area. Corporate assets are principally temporary
investments and the excess of cost over fair value of net assets
acquired.
F-38
The Asia
Americas EMEA Pacific Corporate Consolidated
Year ended December 31, 2000:
Sales to unaffiliated
customers $1,011,703 $355,736 $82,051 $ - $1,449,490
Transfers between
geographic areas 274,600 - - (274,600) -
Total net revenue $1,286,303 $355,736 $82,051 ($274,600) $1,449,490
Interest income $3,620 $501 $92 - $4,213
Interest expense $15,879 $500 $54 - $16,433
Depreciation and
Amortization expense $75,224 $6,396 $463 - $82,083
(Loss) Earnings before
provision for income
taxes $316,034 $69,750 $26,100 ($491,442) $(79,558)
Income tax (benefit)
/expense ($16,152) $4,121 $1,439 - $(10,592)
Identifiable assets $1,482,683 $196,643 $53,021 $360,852 $2,093,199
Year ended December 31, 1999:
Sales to unaffiliated
customers $731,206 $343,507 $64,577 $ - $1,139,290
Transfers between
geographic areas 241,175 - - (241,175) -
Total net revenue $972,381 $343,507 $64,577 ($241,175) $1,139,290
Interest income $1,704 $568 $43 - $2,315
Interest expense $8,010 $126 - - $8,136
Depreciation and
Amortization expense $59,878 $5,993 $313 - $66,184
Earnings before
provision for income
taxes $273,968 $93,198 $23,419 ($219,461) $171,124
Income tax expense $49,783 $2,822 $2,155 - $54,760
Identifiable assets $771,305 $143,717 $23,832 $109,090 $1,047,944
Year ended December 31, 1998:
Sales to unaffiliated
customers $645,916 $284,084 $47,901 $ - $977,901
Transfers between
geographic areas 185,935 - - (185,935) -
Total net revenue $831,851 $284,084 $47,901 ($185,935) $977,901
Interest income $1,118 $1,005 $250 - $2,373
Interest expense $5,188 $536 $99 - $5,823
Depreciation and
Amortization expense $49,154 $5,732 $270 - $55,156
Earnings before
provision for income
taxes $176,358 $73,540 $16,965 ($128,112) $138,751
Income tax expense $41,123 $3,741 $923 - $45,787
Identifiable assets $588,131 $135,251 $17,719 $97,298 $838,399
F-39
19. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
The following tables set forth unaudited quarterly financial
information for the years ended December 31, 2000 and 1999:
Quarter Ended___________________
March 31 June 30 September 30 December 31
Year Ended
December 31, 2000:
Net revenue $320,011 $341,398 $373,249 $414,832
Gross profit 133,072 141,081 154,047 32,153
Net earnings (loss) 31,736 36,177 40,450 (177,329)(1)
Basic earnings
(loss) per share: $0.24 $0.26 $0.29 $(1.26)(1)
Diluted earnings
(loss) per share: $0.22 $0.25 $0.28 $(1.26)(1)
Year Ended
December 31, 1999:
Net revenue $259,690 $274,103 $293,030 $312,467
Gross profit 110,654 116,907 125,107 132,066
Net earnings 24,342 27,783 30,780 33,459
Basic earnings per share: $0.18 $0.21 $0.23 $0.25
Diluted earnings per share: $0.17 $0.20 $0.22 $0.23
(1) Includes pre-tax charges of $273,521 or ($1.42) diluted loss
per share for the quarter related to acquisition costs associated
with restructuring and impairment charges ($146,696), in-process
research and development ($87,600), and merger integration
charges ($39,225).
The quarterly earnings per share information is computed
separately for each period. Therefore, the sum of such quarterly
per share amounts may differ from the total for the year.
F-40
20. SUBSEQUENT EVENTS
In January 2001, the Company simultaneously terminated the existing
Collar on the Cisco shares (see Note 5) and entered into a private
Mandatorily Exchangeable Securities Contract for Shared Appreciation
Income Linked Securities ("SAILS") with a highly rated financial
institution. The securities which underlie the SAILS contract
represent the Company's investment in Cisco common stock, which was
acquired in connection with the Telxon acquisition. These
securities have a seven-year maturity and pay a cash coupon of 3.625
percent. The SAILS contain an equity collar, which effectively
manages a large portion of the Company's exposure to fluctuations in
the fair value of Cisco common stock. At maturity, the SAILS will
be exchangeable for shares of Cisco common stock, or at the
Company's option, cash in lieu of shares. Net proceeds from the
issuance of the SAILS and termination of the existing collar were
approximately $262,246 which were used for general corporate
purposes, including the repayment of debt outstanding under its
revolving credit facility. The Company will account for the
embedded equity collar as a derivative financial instrument in
accordance with the requirements of SFAS 133 and the change in fair
value of this derivative between reporting dates will be recognized
through earnings.
On February 26, 2001, the Board of Directors approved a three for
two split of the Company's common stock to be effected as a 50
percent stock dividend and a $.01 semi-annual cash dividend both of
which are payable on April 16, 2001 to shareholders of record on
March 26, 2001. Per share amounts contained herein have not been
adjusted to reflect this split.
F-41
SCHEDULE II
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(All amounts in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions_______
(1) (2)
Balance at Charged to Charged Balance
beginning cost and to other at end
Description of year expenses accounts Deductions of year
Allowance for doubtful
accounts:
December 31, 2000 $11,924 $2,975 $17,603(a) $1,227 (b) $31,275
December 31, 1999 $10,031 $3,288 $ - $1,395 (b) $11,924
December 31, 1998 $10,995 $2,921 $ - $3,885 (b) $10,031
(a) Telxon-related allowance for doubtful accounts.
(b) Uncollectible accounts written off.
S-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
ANNUAL REPORT
ON
FORM 10-K
FOR FISCAL YEAR ENDED
DECEMBER 31, 2000
__________________________________
SYMBOL TECHNOLOGIES, INC.
EXHIBITS
3. Exhibits
Exhibit
3.1 Certificate of Incorporation of Symbol Technologies, Inc. as
amended. (Incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1999 (the "1999 Form 10-K."))
3.3 By-laws of the Company as currently in effect. (Incorporated by
reference to Exhibit 3.3 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1998 (the "1998 Form 10-K."))
4.1 Form of Certificate for Shares of the Common Stock of the Company.
(Incorporated by reference to Exhibit 4.1 to the 1998 Form 10-K.)
10.1 Form of 2008 Stock Purchase Warrant issued to certain directors.
(Incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10K for the year ended December 31,1997.)
10.2 1994 Directors' Stock Option Plan. (Incorporated by reference to
Exhibit 4.1 to Registration Statement No. 33-78678 on Form S-8.)
10.3 2000 Director's Stock Option Plan. (Incorporated by reference to
Exhibit 4 to Registration Statement No. 333-78599 on Form S-8.)
10.4 1997 Employee Stock Purchase Plan. (Incorporated by reference to
Exhibit 4.2 to Registration Statement No. 333-26593 on Form S-8.)
10.5 1997 Employee Stock Option Plan.
(Incorporated by reference to Exhibit 16.5
to the 1998 Form 10-K.)
10.6 1991 Employee Stock Option Plan (Incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991.)
10.7 1990 Non-Executive Stock Option Plan, as amended. (Incorporated by
reference to Exhibit 10.1 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (the "1995 Form 10-K."))
10.8 2001 Non-Executive Stock Option Plan.
10.9 Employment Agreement by and between the Company and Jerome Swartz,
dated as of July 1, 2000.
10.10 Employment Agreement by and between the Company and Tomo
Razmilovic, dated as of July 1, 2000.
10.11 Employment Agreement by and between the Company and Leonard H.
Goldner, dated as of December 15, 2000.
10.12 Employment Agreement by and between the Company and Raymond
Martino, dated as of February 15,2000. (Incorporated by reference
to Exhibit 10.10 to the 1999 Form l0-K.)
10.13 Executive Retirement Plan, as amended. (Incorporated by reference
to Exhibit 10.14 to 1989 Form 10-K.)
10.14 Symbol Technologies, Inc. Stock Ownership and Option Retention
Program.(Incorporated by reference to Exhibit 10.13 of the 1995
Form 10-K.)
10.15 Summary of Symbol Technologies, Inc. Executive Bonus Plan.
(Incorporated by reference to Exhibit 10.13 of the 1999 Form 10-K.)
10.16 Form of Note Agreements dated as of February 15, 1993 relating to
the Company's 7.76 percent Series A and Series B Senior Notes due
February 15, 2003 (Incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.)
10.17 2000 Amended and Restated Credit Agreement dated as of August
13,2000 among Symbol Technologies, Inc., the lending institutions
identified in the Credit Agreement and Bank of America, N.A., as
agent and as letter of credit issuing bank.
10.18 First Amendment dated March 28, 2001 to 2000 Amended and
Restated Credit Agreement among Symbol Technologies, Inc.,
the lending institutions identified in the Credit
Agreement and Bank of America, N.A., as agent and as
Letter of credit issuing bank.
10.19 Indenture by and between Telxon Corporation and AmeriTrust Company
National Association, as Trustee, dated as of June 1, 1987,
regarding Telxon Corporation's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by reference to Exhibit
4.2 to Telxon Corporation's Registration Statement on Form S-3,
Registration No. 33-14348, filed May 18, 1987.
10.19.1 Form of Telxon Corporation's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set forth in
the Indenture included as Exhibit 10.19 above).
10.20 Indenture by and between Telxon Corporation and Bank One
Trust Company, N.A., as Trustee, dated as of December 1,
1995, regarding Telxon Corporation's 5-3/4% Convertible
Subordinated Notes due 2003, incorporated herein by
reference to Exhibit 4.1 to Telxon, Corporation's
Registration Statement on Form S-3, Registration
No. 333-1189, filed February 23, 1996.
10.20.1 Form of Telxon Corporation's 5-3/4% Convertible
Subordinated Notes due 2003 issued under the
Indenture included as Exhibit 10.20 above,
incorporated herein by reference to Exhibit 4.2
to Telxon Corporation's Registration Statement on Form S-
3, Registration No. 333-1189,filed February 23, 1996.
10.20.2 Registration Rights Agreement by and among
Registrant and Hambrecht & Quist LLC and
Prudential Securities Incorporated, as the Initial
Purchasers of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, with respect to the
registration of said Notes under applicable securities
laws, incorporated herein by reference to Exhibit 4.3
to Registrant's Registration Statement on Form S-3,
Registration No. 333-1189, filed February 23, 1996.
22. Subsidiaries.
23. Consent of Deloitte & Touche LLP
(b) Reports on Form 8-K
Not Applicable
- EXHIBIT 10.8 -
SYMBOL TECHNOLOGIES, INC.
2001 NON-EXECUTIVE STOCK OPTION PLAN
1. Purpose. The 2001 Non-Executive Stock Option
Plan (the "Plan") of Symbol Technologies, Inc. (the "Company"),
a Delaware corporation, is designed to aid the Company and its
subsidiaries in retaining and attracting personnel of
exceptional ability by enabling key employees to purchase a
proprietary interest in the Company, thereby stimulating in such
individuals an increased desire to render greater services which
will contribute to the continued growth and success of the
Company and its subsidiaries. Options granted under the Plan are
not intended to satisfy the requirements for classification as
"Incentive Stock Options" codified in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Amount and Source of Stock. The total number
of shares of Common Stock, par value $.01 per share, of the
Company which may be the subject of options granted pursuant to
the Plan shall not exceed 5,000,000 of the Company's Common
Stock, par value $.01 (the "Shares"), subject to adjustment as
1
provided in paragraph 10. Such Shares may be reserved or made
available from the Company's authorized and unissued Shares or
from Shares reacquired and held in the Company's treasury. In
the event that any option granted hereunder shall terminate
prior to its exercise in full for any reason, then the Shares
subject to such option shall be added to the Shares otherwise
available for issuance pursuant to the exercise of options under
the Plan.
3. Administration of the Plan. If all of the
members of the Board of Directors of the Company (the "Board")
are "disinterested persons" as that term is defined in Rule 16b-
3(c) (2) (or any successor provision) promulgated under the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act") ("Disinterested Persons"), then the Plan shall be
administered by the Board or, if so designated by resolution of
the Board by a committee of the Board comprised of two or more
members of the Board, selected by the Board, all of which
members shall be "Disinterested Persons" (the "Committee"). If
all of the members of the Board are not "Disinterested Persons"'
then the Board shall designate such a Committee to administer
the Plan. (The body which is administering the Plan pursuant to
2
this paragraph shall at times be referred to herein as the
"Administrative Body.")
The Administrative Body shall have full authority to
interpret the Plan, to establish and amend rules and regulations
relating to it, to determine the key employees to whom options
may be granted under the Plan, to select from among the eligible
individuals those to whom options are to be granted, to
determine the terms and provisions of the respective option
agreements (which need not be identical) and to make all other
determinations necessary or advisable for the administration of
the Plan. The date on which the Administrative Body adopts
resolutions granting an option to a specified individual shall
constitute the date of grant of such option (the "Date of
Grant"); provided, however, that if the grant of an option is
made subject to the occurrence of a subsequent event (such as,
for example, the commencement of employment), the date on which
such subsequent event occurs shall be the Date of Grant. The
adoption of any such resolution by the majority of the members
of the Administrative Body shall complete the necessary
corporate action constituting the grant of said option and an
offer of Shares for sale to said individual under the Plan.
3
4. Eligibility. All key employees of the Company
or any subsidiary of the Company (other than employees who are
directors or officers of the Company including any person who is
an "officer" of the Company as said term is defined in Rule 16a-
1(f) (or any successor provision) promulgated pursuant to the
Exchange Act), as determined by the Administrative Body, shall
be eligible to receive options hereunder. For purposes of the
Plan, a subsidiary shall mean any corporation of which the
Company owns or controls, directly or indirectly, fifty percent
(50%) or more of the outstanding shares of stock normally
entitled to vote for the election of directors including voting
securities issuable upon conversion of another security which
is, or may have been, convertible into such voting securities or
voting securities issuable upon the exercise of any warrant,
option or other similar right and any partnership of which the
Company or a corporate subsidiary is a general partner. From
time to time the Administrative Body shall, in its sole
discretion, within the applicable limits of the Plan, select
from among the eligible individuals those persons to whom
options shall be granted under the Plan, the number of Shares
subject to each option, and the exercise price, terms and
conditions of any options to be granted hereunder.
4
5. Option Price. The exercise price for the Shares
purchasable under any option granted pursuant to the Plan shall
not be less than 100% of the fair market value per share of the
Shares subject to option under the Plan at the Date of Grant,
solely as determined by the Administrative Body in good faith.
The exercise price for options granted pursuant to the Plan
shall be subject to adjustment as provided in paragraph 10. For
purposes of the Plan, the "fair market value per share" of the
Shares on a given date shall be: (i) if the Shares are listed on
a registered securities exchange or traded on the NASDAQ
National Market System, the closing price per share of the
Shares on such date (or, if there was no trading in the Shares
on such date, on the next preceding day on which there was
trading); (ii) if the Shares are not listed on a registered
securities exchange or traded on the NASDAQ National Market
System but the bid and asked prices per share for the Shares are
provided by NASDAQ, the National Quotation Bureau Incorporated
or any similar organization, the average of the closing bid and
asked price per share of the Shares on such date (or, if there
was no trading in the Shares on such date, on the next preceding
day on which there was trading) as provided by such
5
organization; and (iii) if the Shares are not listed on a
registered securities exchange or traded on the NASDAQ National
Market System and the bid and asked prices per share of the
Shares are not provided by NASDAQ, the National Quotation Bureau
Incorporated or any similar organization, as determined by the
Administrative Body in good faith.
6. Term of Option.
(a) Subject to the provisions of the Plan, the
Administrative Body shall have absolute discretion in
determining the period during which, the rate at which and the
terms and conditions upon which any option granted hereunder may
be exercised, and whether any option exercisable in installments
is to be exercisable on a cumulative or non-cumulative basis;
provided, however, that no option granted hereunder shall be
exercisable for a period exceeding ten (10) years from the Date
of Grant.
(b) The grant of options by the Administrative
Body shall be effective as of the date on which the
Administrative Body shall authorize the option; provided,
however, that no option granted hereunder shall be exercisable
unless and until the holder shall enter into an individual
6
option agreement with the Company that shall set forth the terms
and conditions of such option. Each such agreement shall
expressly incorporate by reference the provisions of this Plan
(a copy of which shall be made available for inspection by the
optionee during normal business hours at the principal office of
the Company), and shall state that in the event of any
inconsistency between the provisions hereof and the provisions
of such agreement, the provisions of this Plan shall govern.
7. Exercise of Options. An option shall be
exercised when written notice of such exercise, signed by the
person entitled to exercise the option, has been delivered or
transmitted by registered or certified mail to the Secretary of
the Company at its then principal office. Said notice shall
specify the number of Shares for which the option is being
exercised and shall be accompanied by (i) such documentation, if
any, as may be required by the Company as provided in
subparagraph 11(b), and (ii) payment of the aggregate option
price. Such payment shall be in the form of (i) cash or a
certified check (unless such certification is waived by the
Company) payable to the order of the Company in the amount of
the aggregate option price, (ii) certificates duly endorsed for
7
transfer (with all transfer taxes paid or provided for)
evidencing a number of Shares (provided, however, that with such
Shares have been owned by the Optionee for at least six months)
of which the aggregate fair market value on the date of exercise
is equal to the aggregate option exercise price of the Shares
being purchased, (iii) by delivering to the Company (a)
irrevocable instructions to deliver the stock certificates
representing the Shares for which the option is being exercised,
directly to a broker, and (b) instructions to the broker to sell
such Shares and promptly deliver to the Company the portion of
the sale proceeds equal to the aggregate option exercise price,
or (iv) a combination of these methods of payment. Delivery of
said notice shall constitute an irrevocable election to purchase
the Shares specified in said notice, and the date on which the
Company receives the last of said notice, documentation and the
aggregate option exercise price for all of the Shares covered by
the notice shall, subject to the provisions of paragraph 11
hereof, be the date as of which the Shares so purchased shall be
deemed to have been acquired. The Optionee shall not have the
right or status as a holder of the Shares to which such exercise
relates prior to receipt by the Company of the payment, notice
and documentation expressly referred to in this paragraph 7.
8
8. Exercise and Cancellation of Options Upon
Termination of Employment or Death. Except as set forth below,
if a holder shall voluntarily or involuntarily terminate his
service as an employee of the Company or any subsidiary of the
Company, the option of such holder shall terminate upon the date
of such termination of employment regardless of the expiration
date specified in such option. If the termination of employment
is due to retirement (as defined by the Administrative Body in
its sole discretion), the holder shall have the privilege of
exercising any option that the holder could have exercised on
the day upon which he ceased to be an employee of the Company or
any subsidiary of the Company, provided, however, that such
exercise must be accomplished within the term of such option and
within three (3) months of the holder's retirement. If the
termination of employment is due to disability (to the extent
and in a manner as shall be determined by the Administrative
Body in its sole discretion), he (or his duly appointed guardian
or conservator) shall have the privilege of exercising any
option that he could have exercised on the day upon which he
ceased to be an employee of the Company or any subsidiary of the
Company; provided, however, that such exercise must be
accomplished within the term of such option and within one (1)
9
year of the termination of his employment with the Company or
any subsidiary of the Company. If the termination of employment
is due to the death of the holder, the duly appointed executor
or administrator of his estate shall have the privilege at any
time of exercising any option that the holder could have
exercised on the date of his death; provided, however, that such
exercise must be accomplished within the term of such option and
within one (1) year of the holder's death. For all purposes of
the Plan, an approved leave of absence shall not constitute
interruption or termination of employment.
Nothing contained herein or in any option agreement
shall be construed to confer on any option holder any right to
be continued in the employ of the Company or any subsidiary of
the Company or derogate from any right of the Company or any
subsidiary of the Company to retire, request the resignation of
or discharge such option holder, or to lay off or require a
leave of absence of such option holder (with or without pay), at
any time, with or without cause.
9. Non-transferability of Options. No option
granted under the Plan shall be sold, pledged, assigned or
10
transferred in any manner except to the extent that options may
be exercised by an executor or administrator as provided in
paragraph 8 hereof. An option may be exercised, during the
lifetime of the holder thereof, only by such holder or his duly
appointed guardian or conservator in the event of his
disability.
10. Adjustments Upon Changes in Capitalization.
(a) If the outstanding Shares are subdivided,
consolidated, increased, decreased, changed into, or exchanged
for a different number or kind of shares or other securities of
the Company through reorganization, merger, recapitalization,
reclassification, capital adjustment or otherwise, or if the
Company shall issue additional Shares as a dividend or pursuant
to a stock split, then the number and kind of Shares available
for issuance pursuant to the exercise of options to be granted
under this Plan and all Shares subject to the unexercised
portion of any option theretofore granted and the option price
of such options shall be adjusted to prevent the inequitable
enlargement or dilution of any rights hereunder; provided,
however, that any such adjustment in outstanding options under
the Plan shall be made without change in the aggregate exercise
11
price applicable to the unexercised portion of any such
outstanding option except that the exercise price may be rounded
to the nearest one cent. Distributions to the Company's
shareholders consisting of property other than shares of Common
Stock of the Company or its successor and distributions to
shareholders of rights to subscribe for Common Stock shall not
result in the adjustment of the Shares purchasable under
outstanding options or the exercise price of outstanding
options. Adjustments under this paragraph shall be made by the
Administrative Body, whose determination thereof shall be
conclusive and binding. Any fractional Share resulting from
adjustments pursuant to this paragraph shall be eliminated from
any then outstanding option. Nothing contained herein or in any
option agreement shall be construed to affect in any way the
right or power of the Company to make or become a party to any
adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, consolidate,
dissolve, liquidate or otherwise transfer all or any part of its
business or assets.
(b) If, in the event of a merger or
consolidation, the Company is not the surviving corporation, and
in the event that the agreements governing such merger or
12
consolidation do not provide for the substitution of new options
or other rights in lieu of the options granted hereunder or for
the express assumption of such outstanding options by the
surviving corporation, or in the event of the dissolution or
liquidation of the Company, the holder of any option theretofore
granted under this Plan shall have the right not less than five
(5) days prior to the record date for the determination of
shareholders entitled to participate in such merger,
consolidation, dissolution or liquidation, to exercise his
option, in whole or in part, without regard to any installment
provision that may have been made part of the terms and
conditions of such option; provided that any conditions
precedent to such exercise set forth in any option agreement
granted under this Plan, other than the passage of time, have
been satisfied. In any such event, the Company will mail or
cause to be mailed to each holder of an option hereunder a
notice specifying the date that is to be fixed as of which all
holders of record of the Shares shall be entitled to exchange
their Shares for securities, cash or other property issuable or
deliverable pursuant to such merger, consolidation, dissolution
or liquidation. Such notice shall be mailed at least ten (10)
days prior to the date therein specified. In the event any then
13
outstanding option is not exercised in its entirety on or prior
to the date specified therein, all remaining outstanding options
granted hereunder and any and all rights thereunder shall
terminate as of said date.
11. General Restrictions.
(a) No option granted hereunder shall be
exercisable if the Company shall, at any time and in its sole
discretion, determine that (i) the listing upon any securities
exchange, registration or qualification under any state or
federal law of any Shares otherwise deliverable upon such
exercise, or (ii) the consent or approval of any regulatory body
or the satisfaction of withholding tax or other withholding
liabilities, is necessary or appropriate in connection with such
exercise. In any of such events, the exercisability of such
options shall be suspended and shall not be effective unless and
until such withholding, listing, registration, qualification or
approval shall have been effected or obtained free of any
conditions not acceptable to the Company in its sole discretion,
notwithstanding any termination of any option or any portion of
any option during the period when exercisability has been
suspended.
(b) The Administrative Body may require, as a
condition to the right to exercise an option, that the Company
14
receive from the option holder, at the time of any such
exercise, representations, warranties and agreements to the
effect that the Shares are being purchased by the holder only
for investment and without any present intention to sell or
otherwise distribute such Shares and that the option holder will
not dispose of such Shares in transactions which, in the opinion
of counsel to the Company, would violate the registration
provisions of the Securities Act of 1933, as then amended, and
the rules and regulations thereunder and any applicable "blue
sky" laws or regulations. The certificates issued to evidence
such Shares shall bear appropriate legends summarizing such
restrictions on the disposition thereof.
12. Withholding Tax Liability.
(a) A holder of an option granted hereunder may
elect to tender shares to the Company in order to satisfy
federal and state withholding tax liability (a "share
withholding election"), provided, (i) the Administrative Body,
shall not have revoked its advance approval of the holder's
share withholding election and (ii) the share withholding
election is made on or prior to the date on which the amount of
withholding tax liability is determined (the "Tax Date").
(b) A share withholding election shall be
deemed made when written notice of such election, signed by the
15
holder, has been received by the Secretary of the Company.
Delivery of said notice shall constitute an irrevocable election
to have shares so withheld.
(c) If a holder has made a share withholding
election pursuant to this paragraph 12, the Company shall
subtract from the number of Shares deliverable to the holder on
the date of exercise, the number of Shares having an aggregate
fair market value (as determined in good faith by the
Administrative Body) equal to the statutory minimum amount of
tax required to be withheld plus cash for any fractional amount.
(d) If a holder has made a share withholding
election, at the same time he may also elect to tender shares
having an aggregate fair market value equal to his estimated
incremental tax liability (determined using his marginal federal
and state and local tax rates) in excess of the statutory
minimum withholding tax liability provided that he has held said
shares for at least six months.
13. Amendment. The Board shall have full authority
to amend, modify, terminate or alter the Plan; provided,
however, that no amendment to the Plan shall, without the
consent of the holder of an existing option, materially and
adversely affect his rights under such option.
16
14. Termination. Unless the Plan shall theretofore
have been terminated as hereinafter provided, the Plan shall
terminate on March 31, 2011 and no options under the Plan shall
thereafter be granted, provided, however, the Board at any time
may, in its sole discretion, terminate the Plan prior to the
foregoing date. No termination of the Plan shall, without the
consent of the holder of an existing option, materially and
adversely affect his rights under such option.
17
- EXHIBIT 10.9 -
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made as of the 1st day of July, 2000
by and between SYMBOL TECHNOLOGIES, INC., a Delaware corporation (the
"Corporation"), and Jerome Swartz, (the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Executive and the Corporation are parties to an employment
agreement, dated as of June 30, 1995, (the "Prior Employment Agreement"),
setting forth the terms and conditions of the Executive's employment by the
Corporation; and
WHEREAS, the term of employment under the prior Employment Agreement
expired on June 30, 2000; and
WHEREAS, the Corporation desires to continue to employ the Executive and
the Executive desires to continue to be employed by the Corporation in the
manner and on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual and
dependent agreements and covenants herein set forth, the parties hereto agree as
follows:
1. EMPLOYMENT
----------
The Corporation hereby agrees to employ the Executive as its executive
Chairman of the Board and Chief Scientist and the Executive hereby agree to
accept such employment and to render services to the Corporation and its
subsidiaries, divisions and affiliates for the period and on the terms and
conditions set forth in this Agreement. The Corporation hereby agrees to use its
best efforts, undertaken in good faith, to ensure that the Executive shall be
nominated by the Board of Directors of the Corporation and elected by the
shareholders of the Corporation as a director of the Corporation, and that he
shall remain a director of the Corporation during the period of his employment
under this Agreement; provided, however, that, in the event that the Executive
is not so nominated and elected at any time during his employment under this
Agreement, such fact in and of itself shall not serve to accelerate, decrease,
increase or otherwise enlarge the benefits to which the Executive shall be
entitled under this Agreement.
2. TERM
----
The Executive's employment under this Agreement shall be for a term of five
(5) years, commencing as of July 1, 2000 and ending on June 30, 2005; provided,
however, that the term of the Executive's actual employment hereunder shall at
all times be subject to earlier termination in accordance with the provisions of
Section 12 hereof.
-1-
3. DUTIES
------
(a) So long as the Executive's employment under this Agreement shall
continue, pursuant to the provisions hereof, the Executive shall, subject to
periods of illness, vacation and other excused absences, devote his entire
business time, attention, and energies to the affairs of the Corporation and its
subsidiaries, divisions and affiliates, use his best efforts to promote its and
their best interests and perform such executive duties as may be assigned to him
by the Board of Directors of the Corporation; provided, however, that such
executive duties shall be consistent with and shall generally be of the nature
of the services ordinarily and customarily performed an executive Chairman of
the Board.
(b) So long as the Executive's employment under this Agreement shall
continue, the Executive shall, if elected or appointed, serve as an executive
officer and/or a director of the Corporation and of any subsidiary, division or
affiliate of the Corporation and shall hold, without any compensation other than
that provided for in this Agreement, the offices in the Corporation and in any
such subsidiary, division or affiliate to which he may, at any time or from time
to time, be elected or appointed. If the Executive serves on the Corporation's
Board of Directors during the term hereof, the Executive shall not be entitled
to receive any fees (other than reimbursement of covered expenses) that are
provided by the Corporation to its outside Directors, as it is contemplated that
the compensation provided to Executive, pursuant to Section 4 hereof, is
designed to compensate Executive for all services he may render to the
Corporation.
(c) The Executive shall be eligible to take, in addition to holidays
recognized by the Corporation, four (4) weeks per annum of vacation.
4. COMPENSATION
------------
(a) The Corporation hereby agrees to pay to the Executive, and the
Executive hereby agrees to accept, as compensation for services rendered under
this Agreement, a base salary at the rate of One Million Dollars ($1,000,000)
per annum for the period ending June 30, 2002 payable at such intervals as the
Corporation customarily pays the salaries of its executive officers. Effective
July 1, 2002 and July 1, 2004, the Executive and the Corporation shall
negotiate, in good faith, with respect to increasing said base salary for
additional two year periods in an amount mutually satisfactory to the
Corporation and the Executive.
(b) In addition to the base salary provided for in subsection 4(a) above,
the Executive shall participate in the Corporation's Executive Bonus Plan and
thereby be entitled to receive an annual bonus for each fiscal year during the
term of this Agreement in the amounts determined pursuant to such plan. The
target amount of the Executive's bonus under said plan shall be 100% of his base
salary actually earned in each fiscal year. Payment of the bonus provided herein
shall be paid to the Executive no later than ninety (90) days after the
completion of each fiscal year.
(c) In addition to the foregoing, it is hereby agreed that the Corporation
shall, at its sole expense, provide and the Executive shall be entitled to
receive, during his employment
-2-
hereunder, the employee fringe benefits provided by the Corporation, from time
to time, to its executive officers, but in no event less favorable to the
Executive than the benefits provided to him by the Corporation as of the date of
this Agreement, including, but not limited to, benefits relating to life,
medical and disability insurance, and participation in the Corporation's Section
401(k) Plan; provided, however, that as used in this Agreement, the term
"employee fringe benefits" shall not include any salary or other bonus plan,
except as set forth in this Agreement.
(d) In the event the Executive's employment with the Corporation is
terminated as provided in Section 12 hereof (other than cause as hereinafter
defined), the Corporation shall, to the extent that the Executive's continued
participation is possible under the general terms and provisions of such plans
and programs, if and to the extent requested by the Executive, continue to
indefinitely provide the Executive, at the Executive's sole expense with all of
the employee fringe benefits he was entitled to receive immediately prior to the
termination of his Employment, including but not limited to health, life and
disability insurance and use of the automobile referred to in section 5. This
subsection shall not affect the benefits to be provided to the Executive at the
Corporation's expense as provided in subsections 12(c), 12(d) or 12(f).
(e) Pursuant to a certain agreement, dated March 31, 1999, entered into
between the Corporation and the Jerome Swartz Irrevocable Family Trust No. 2
U/A/D 10/5/98, it is an obligation of this Trust to reimburse the Corporation
for all insurance premiums it paid in connection with any policies owned by the
Trust. However, if the Corporation's interest in any such policy is purchased
through a promissory note issued by the Trust, then the Executive personally
guarantees full payment of such debt.
5. AUTOMOBILE
----------
During the period of the Executive's employment under this Agreement, the
Corporation shall either (i) make available to the Executive the use of an
automobile, with a lease allotment of up to $1,250 per month as well as paying
the insurance expenses associated with such automobile, or (ii) reimburse the
Executive for comparable automobile expenses if the Executive chooses to lease
or own his own automobile. The Corporation will also reimburse the Executive for
gasoline and maintenance expenses associated with such automobile.
6. EXPENSES; OPTIONS
-----------------
(a) The Corporation shall pay or reimburse the Executive for all reasonable
travel and other expenses incurred or paid by him in connection with the
performance of his duties under this Agreement, upon presentation to the
Corporation of expense statements or vouchers and such other supporting
documentation as it may, from time to time, reasonably require; provided,
however, that the maximum amount available for such expenses may, at any time or
from time to time, be fixed in advance by the Board of Directors of the
Corporation.
(b) All outstanding options to purchase shares of Common Stock of the
Corporation now held by the Executive or hereafter awarded to the Executive
during the term of
-3-
this Agreement shall vest regardless of any conditions precedent to the vesting
of such options (such as the passage of time) if and when there is a "change in
control of the Corporation" as hereafter defined. As used in this Agreement, a
"change in control of the Corporation" shall mean a change in control of a
nature that would be required to be reported in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"); provided, that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Corporation or any
"person" who on the date hereof is a director or officer 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 25%
or more of the combined voting power of the Corporation's then outstanding
securities and the Corporation's Board of Directors, after having been advised
that such ownership level has been reached, does not, within fifteen (15)
business days, adopt a resolution approving the acquisition of that level of
securities ownership by such person; or (ii) during any period of two
consecutive years during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof, unless the election of each director
who was not a director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
(c) With respect to any options awarded to the Executive prior to the
termination of his employment with this Agreement which will have vested prior
to the date of such termination, the Executive shall have the right to exercise
any such options to the same extent that he could have prior to such termination
during this period where the Executive shall be receiving any payments or
benefits as otherwise provided in subsection 12(c) or 12(d), if applicable, and
during such period, the Executive agrees (in the event he is not otherwise
employed by the Corporation) for no additional consideration other than that
provided herein, he will make himself available, upon reasonable notice, from
time to time, to consult with senior executive officers of the Corporation,
provided such consultation is on a part time basis and does not preclude the
Executive from otherwise fulfilling any duties he may have to any subsequent
employer or subsequent business interests and that such consultation does not
require the Executive, without his consent, to travel more than 50 miles from
his home or the principal place of employment and during such period the
Executive shall be deemed to be a part time employee of the Corporation.
(d) Notwithstanding the then current state of the Corporation's By-Laws,
the Executive shall be entitled at all times to the benefit of the maximum
indemnification and advancement of expenses available from time to time under
the laws of the State of Delaware.
(e) The Corporation and/or any of its subsidiaries, divisions or affiliates
may, from time to time, apply for and obtain, for its or their benefit and at
its or their sole expense, key man life, health, accident, disability, or other
insurance upon the Executive, in any amounts that it or they may deem necessary
or desirable to protect its or their respective interests, and the Executive
agrees to cooperate with and assist the Corporation or such subsidiary, division
or affiliate in obtaining any and all such insurance by submitting to all
reasonable medical
-4-
examinations, if any, and by filling out, executing, and delivering any and all
such applications and other instrument as may reasonably be necessary.
7. INVENTIONS
----------
(a) The Executive agrees to and hereby does assign to the Corporation or
any subsidiary, affiliate or division of the Corporation designated by the
Corporation, all his right, title and interest throughout the world in and to
all ideas, methods, developments, products, inventions, processes, improvements,
modifications, techniques, designs and/or concepts relating directly or
indirectly to the business of the Corporation, its subsidiaries, affiliates or
divisions, whether patentable or unpatentable, which the Executive may conceive
and/or develop during his employment by the Corporation (whether pursuant to
this Agreement or otherwise) or which the Executive may conceive and/or develop
during a twenty-four (24) month period following the termination of his
employment if such concept and/or development during such twenty-four (24) month
period is a direct result of the Executive's activities while employed by the
Corporation, whether or not conceived and/or developed at the request of the
Corporation or any subsidiary, affiliate or division (the "Inventions");
provided, however, that if the Corporation or such subsidiary, affiliate or
division determine that it will not use any such Invention or that it will
license or transfer any such Invention to an unaffiliated third party, then it
will negotiate in good faith with the Executive, if the Executive so requests,
with respect to a transfer or license of such Invention to the Executive.
(b) The Executive further agrees to promptly communicate and disclose to
the Corporation any and all such Inventions as well as any other knowledge or
information which he may possess or obtain relating to any such Inventions.
(c) In furtherance of the foregoing, the Executive agrees that at the
request of the Corporation, and at its expense, he will make or cooperate in
making of applications for letters patent of the United States or elsewhere and
will execute such other agreements, documents or instruments which the
Corporation may reasonably consider necessary to transfer to and vest in the
Corporation or any subsidiary, affiliate or division, all right, title and
interest in any such Inventions, and all applications for any letters patent
issued in respect of any of the foregoing.
(d) The Executive shall assist, upon request, in locating writings and
other physical evidence of the making of the Inventions and provide unrecorded
information relating to them and give testimony in any proceeding in which any
of the Inventions or any application or patent directed thereto may be involved,
provided that reasonable compensation shall be paid the Executive for such
services and the Executive shall be reimbursed for any expenses incurred by him
in connection therewith, except that during such period of time as the Executive
is employed by the Corporation, the Corporation shall not be obligated to
compensate the Executive at a higher rate for the giving of testimony than the
rate established by law for the compensation of witnesses in the court or
tribunal where the testimony is given or in the district where the testimony is
taken. The Corporation shall give the Executive reasonable notice should it
require such services, and, to the extent reasonably feasible, the Corporation
shall use its best efforts to
-5-
request such assistance at times and places as will least interfere with any
other employment of the Executive.
(e) At the expense of the Corporation, the Executive shall assign to the
Corporation all his interest in copyrightable material which he produces,
composes, or writes, individually or in collaboration with others, which arises
out of work performed by him on behalf of the Corporation, and shall sign all
papers and do all other acts necessary to assist the Corporation to obtain
copyrights on such material in any and all jurisdictions.
8. CONFIDENTIAL INFORMATION
------------------------
The Executive hereby acknowledges that, in the course of his employment by
the Corporation, he will have access to secret and confidential information
which relates to or affects all aspects of the business and affairs of the
Corporation and its subsidiaries, affiliates and divisions, and which are not
available to the general public ("Confidential Information"). Without limiting
the generality of the foregoing, Confidential Information shall include
information relating to inventions (including, without limitation, Inventions),
developments, specifications, technical and engineering data, information
concerning the filing or pendency of patent applications, business ideas, trade
secrets, products under development, production methods and processes, sources
of supply, marketing plans, and the names of customers or prospective customers
or of persons who have or shall have traded or dealt with the Corporation.
Accordingly, the Executive agrees that he will not, at any time, without the
express written consent of the Corporation, directly or indirectly, disclose or
furnish, or negligently permit to be disclosed or furnished, any Confidential
Information to any person, firm, corporation or other entity except in
performance of his duties hereunder.
9. CONFIDENTIAL MATERIALS
----------------------
The Executive hereby acknowledges and agrees that any and all models,
prototypes, notes, memoranda, notebooks, drawings, records, plans, documents or
other material in physical form which contain or embody Confidential Information
and/or information relating to Inventions and/or information relating to the
business and affairs of the Corporation, its subsidiaries, affiliates and
divisions and/or the substance thereof, whether created or prepared by the
Executive or by others ("Confidential Materials"), which are in the Executive's
possession or under his control, are the sole property of the Corporation.
Accordingly, the Executive hereby agrees that, upon the termination of his
employment with the Corporation, whether pursuant to this Agreement or
otherwise, or at the Corporation's earlier request, the Executive shall return
to the Corporation all Confidential Materials and all copies thereof in his
possession or under his control and shall not retain any copies of Confidential
Materials.
10. NON-COMPETITION
---------------
(a) The Executive agrees that he shall not, so long as he shall be employed
by the Corporation in any capacity (whether pursuant to this Agreement or
otherwise), without the express written consent of the Corporation, directly or
indirectly, own, manage, operate, control
-6-
or participate in the ownership, management, operation or control or be employed
by or connected in any manner with, any business which is or may be in
competition, directly or indirectly, with the business of the Corporation or any
subsidiary, affiliate or division of the Corporation.
(b) The Executive agrees that for a period of thirty-six (36) months,
commencing on the effective date of the termination of his employment, whether
such termination is pursuant to the terms of this Agreement or otherwise, he
shall not, without the express written consent of the Corporation, directly or
indirectly, own, manage, operate control or participate in the ownership,
management, operation or control, or be employed by or connected in any manner
with, any business, firm or corporation which is engaged in any business
activity competitive with the business of the Corporation and its subsidiaries,
affiliates and divisions as such business is conducted during the period of his
employment by the Corporation (whether pursuant to this Agreement or otherwise)
and at the termination thereof.
(c) Anything to the contrary herein notwithstanding, the provisions of this
section shall not be deemed violated by the purchase and/or ownership by the
Executive of shares of any class of equity securities (or options, warrants or
rights to acquire such securities, or any securities convertible into such
securities) representing (together with any securities which would be acquired
upon the exercise of any such options, warrants or rights or upon the conversion
of any other security convertible into such securities) the lesser of (i) 1% or
less of the outstanding shares of any such class of equity securities of any
issuer whose securities are listed on a national securities exchange or traded
on NASDAQ, the National Quotation Bureau Incorporated or any similar
organization or (ii) securities having a market value of less than $100,000;
provided, however, that the Executive shall not be otherwise connected with or
active in the business of the issuers described in this subsection 10(c).
11. REMEDY FOR BREACH
-----------------
The Executive hereby acknowledges that in the event of any breach or
threatened breach by him of any of the provisions of sections 7, 8, 9 or 10 of
this Agreement, the Corporation would have no adequate remedy at law and could
suffer substantial and irreparable damage. Accordingly, the Executive hereby
agrees that, in such event, the Corporation shall be entitled, without the
necessity of proving damages, and notwithstanding any election by the
Corporation to claim damages, to obtain a temporary and/or permanent injunction
to restrain any such breach or threatened breach or to obtain specific
performance of any of such provisions, all without prejudice to any and all
other remedies which the Corporation may have at law or in equity.
12. TERMINATION
-----------
(a) This Agreement and the employment of the Executive by the Corporation
shall terminate upon the earliest of the dates specified below:
(i) the close of business on the date as of which the term of the
Executive's employment hereunder has terminated as provided in Section 2 hereof;
provided,
-7-
however, that such term is not extended by any other agreement between the
Executive and the Corporation; or
(ii) the close of business on the date of death of the Executive; or
(iii) the close of business on the effective date of the voluntary
termination by the Executive of his employment with the Corporation; or
(iv) the close of business on the day following the date on which the
Corporation provides the Executive with written notice of election of its Board
of Directors to terminate his employment for "cause" (as defined in subsection
12(b)(1) below); or
(v) the close of business on the last day of the month within which the
Board of Directors of the Corporation elects to terminate the Executive's
employment following and as a result of the inability of the Executive, by
reason of physical or mental disability, for six (6) months within any twelve
(12) month period during the term of this Agreement, to render services of the
character contemplated by this Agreement.
(b)(1) For purposes of this Agreement, the term "cause" shall mean a
determination made in good faith by vote of a majority of the members of the
Board of Directors of the Corporation then holding office (other than the
Executive if he shall then be a director) that one of the following conditions
exists or one of the following events has occurred;
(i) conviction of the Executive for a felony offense; or
(ii) the refusal (after receipt by him of notice from the Corporation)
by the Executive to perform such service as may reasonably be delegated or
assigned to him, consistent with his position, by the Board of Directors of the
Corporation; willful misconduct or gross negligence on his part in connection
with the performance of such duties.
(c) In the event of the termination of the Executive's employment for any
reason other than due to (i) his death or disability as provided in subsection
12(a)(ii) or (v); (ii) his voluntary termination of his employment with the
Corporation pursuant to subsection 12(a)(iii); or (iii) his termination for
cause as provided in subsection 12(a)(iv), the Executive shall be paid at the
time of such termination an amount equal to the annual base salary and the bonus
(as provided in subsection 4(b)) earned by him during the last completed fiscal
year immediately preceding any such termination and the Corporation shall, to
the extent that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs, continue to provide the
Executive, at the Corporation's sole expense, for one year after the termination
of his Employment, with all of the employee fringe benefits he was entitled to
receive immediately prior to the termination of his Employment including but not
limited to life, health, and disability insurance and the use of the automobile
referred to in Section 5. The Executive shall not be required to mitigate the
amount of any payments provided for in this subsection 12(c)
-8-
by seeking other employment. The provision of this subsection 12(c) shall not
apply if the Executive and the Corporation enter into the agreement referred to
in subsection 12(f) hereto.
(d) In the event of the termination of the Executive's employment prior to
July 1, 2002 for any reason other than due to (i) his death or disability as
provided in subsection 12(a)(ii) or (v); (ii) his voluntary termination of his
employment with the Corporation pursuant to subsection 12(a)(iii); or (iii) his
termination for cause as provided in subsection 12(a)(iv), the Executive shall
be paid, in addition to the payments provided in subsection 12(c), one year
after the date of such termination an amount equal to his annual base salary
immediately preceding any such termination and his target bonus and; to the
extent that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs, continue to provide the
Executive, at the Corporation's sole expense for an additional one year, all of
the employee fringe benefits referred to in paragraph 12(c). The Executive shall
not be required to mitigate the amount of any payments provided for in this
subsection 12(d) by seeking other employment.
(e) All the payments set forth in subsection 12(c) and 12(d) are contingent
upon the Executive first signing at the time of termination of the Corporation's
standard waiver and release agreement.
(f) In the event of the termination of the Executive's employment under
this Agreement for any reason other than due to (i) his death as provided in
subsection 12(a)(ii) or (ii) his termination for cause as provided in subsection
12(a)(iv), the Corporation and the Executive agree to enter into a new
employment agreement for a term of five years, in the form substantial similar
to the existing employment agreement between the Corporation and Corporation's
former President, which will provide for the Executive to be employed in a
part-time consultative and executive capacity, with a cash compensation of
$200,000 per annum plus the employee fringe benefits otherwise provided herein.
13. NO CONFLICTING AGREEMENTS
-------------------------
In order to induce the Corporation to enter into this Agreement and to
employ the Executive on the terms and conditions set forth herein, the Executive
hereby represents and warrants that he is not a party to or bound by any
agreement, arrangement or understanding, written or otherwise, which prohibits
or in any manner restricts his ability to enter into and fulfill his obligations
under this Agreement, to be employed by and serve as an executive of the
Corporation.
14. MISCELLANEOUS
-------------
(a) This Agreement shall become effective as of the date hereof and, from
and after that time, shall extend to and be binding upon the Executive, his
personal representative or representatives and testate or intestate
distributees, and upon the Corporation, its successors and assigns; and the term
Corporation, as used herein, shall include successors and assigns.
-9-
(b) Nothing contained in this Agreement shall be deemed to involve the
creation by the Corporation of a trust for the benefit of, or the establishment
by the Corporation of any other form of fiduciary relationship with the
Executive, his beneficiaries or any of their respective legal representatives or
distributees. To the extent that any person shall acquire the right to receive
any payments from the Corporation hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(c) Any notice required or permitted by this Agreement shall be given by
registered or certified mail, return receipt requested, addressed to the
Corporation at its then principal office or to the Executive at his residence
address, or to either party at such other address or addresses as it or he may
from time to time specify for the purpose in a notice similarly given to the
other party.
(d) This Agreement shall be construed and enforced in accordance with the
laws of the State of New York. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration in Suffolk County of the State of New York and shall proceed under
the rules then prevailing of the American Arbitration Association (AAA). The
dispute shall be referred to a single arbitrator if such arbitration is mutually
agreeable to the parties within twenty (20) days of the demand for arbitration,
otherwise to a single arbitrator appointed by the AAA upon application by either
party. Any award determined by an arbitrator must be in accordance with the
terms of this Agreement and shall be final and binding upon the parties.
Judgment upon any award made in such arbitration may be entered and enforced in
any court of competent jurisdiction. The Corporation and the Executive waive any
right of appeal with respect to any judgment entered on an arbitrator's award in
any court having jurisdiction. In the event that it is necessary for any party
hereto incur legal expenses in defending its or his rights hereunder, the losing
party shall reimburse the winning party for all reasonable legal fees and
expenses incurred by him or it as a result thereof.
(e) Except as stated otherwise herein, this instrument contains the entire
agreement of the parties relating to the subject matter hereof, and there are no
agreements, representations or warranties not herein set forth. No modification
of this Agreement shall be valid unless in writing and signed by the Corporation
and the Executive. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition.
(f) If any provision of this Agreement shall be held invalid, such
invalidity shall not affect any other provisions of this Agreement not held so
invalid, and all other such provisions shall remain in full force and effect to
the full extent consistent with the law.
-10-
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
SYMBOL TECHNOLOGIES, INC.
BY:
----------------------------
ATTEST: EXECUTIVE
- ------------------------- -------------------------------
JEROME SWARTZ
-11-
- EXHIBIT 10.10 -
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made as of the 1st day of July, 2000
by and between SYMBOL TECHNOLOGIES, INC., a Delaware corporation (the
"Corporation"), and Tomo Razmilovic, (the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Executive and the Corporation are parties to an employment
agreement, dated as of October 16, 1995, (the "Prior Employment Agreement"),
setting forth the terms and conditions of the Executive's employment by the
Corporation; and
WHEREAS, the term of employment under the prior Employment Agreement
expires on December 31, 2000 and provide for the Executive's employment in a
different position than that contemplated by the Agreement; and
WHEREAS, the Corporation desires to continue to employ the Executive and
the Executive desires to continue to be employed by the Corporation in the
manner and on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual and
dependent agreements and covenants herein set forth, the parties hereto agree as
follows:
1. EMPLOYMENT
----------
The Corporation hereby agrees to employ the Executive as its President and
Chief Executive Officer headquartered at the Corporation's Long Island
facilities and the Executive hereby agrees to accept such employment and to
render services to the Corporation and its subsidiaries, divisions and
affiliates for the period and on the terms and conditions set forth in this
Agreement. The Corporation hereby agrees to use its best efforts, undertaken in
good faith, to ensure that the Executive shall be nominated by the Board of
Directors of the Corporation and elected by the shareholders of the Corporation
as a director of the Corporation, and that he shall remain a director of the
Corporation during the period of his employment under this Agreement; provided,
however, that, in the event that the Executive is not so nominated and elected
at any time during his employment under this Agreement, such fact in and of
itself shall not serve to accelerate, decrease, increase or otherwise enlarge or
change the benefits to which the Executive shall be entitled under this
Agreement.
2. TERM
----
The Executive's employment under this Agreement shall be for a term of five
(5) years, commencing as of the date hereof and ending on June 30, 2005;
provided, however, that
-1-
the term of the Executive's actual employment hereunder shall at all times be
subject to earlier termination in accordance with the provisions of Section 12
hereof.
3. DUTIES
------
(a) So long as the Executive's employment under this Agreement shall
continue, pursuant to the provisions hereof, the Executive shall, subject to
periods of illness, vacation and other excused absences, devote his entire
business time, attention, and energies to the affairs of the Corporation and its
subsidiaries, divisions and affiliates, use his best efforts to promote its and
their best interests and perform such executive duties as may be reasonably
assigned to him by the Board of Directors of the Corporation; provided, however,
that such executive duties shall be consistent with and shall generally be of
the nature of the services ordinarily and customarily performed by a Chief
Executive Officer.
(b) So long as the Executive's employment under this Agreement shall
continue, the Executive shall, if elected or appointed, serve as an executive
officer and/or a director of the Corporation and of any subsidiary, division or
affiliate of the Corporation and shall hold, without any compensation other than
that provided for in this Agreement, the offices in the Corporation and in any
such subsidiary, division or affiliate to which he may, at any time or from time
to time, be elected or appointed. If the Executive serves on the Corporation's
Board of Directors during the term hereof, the Executive shall not be entitled
to receive any fees (other than reimbursement of covered expenses) that are
provided by the Corporation to its outside Directors, as it is contemplated that
the compensation provided to Executive, pursuant to Section 4 hereof, is
designed to compensate Executive for all services he may render to the
Corporation.
(c) The Executive shall be eligible to take, in addition to holidays
recognized by the Corporation, four (4) weeks per annum of vacation.
4. COMPENSATION
------------
(a) The Corporation hereby agrees to pay to the Executive, and the
Executive hereby agrees to accept, as compensation for services rendered under
this Agreement, a base salary at the rate of One Million Dollars ($1,000,000)
per annum for the period ending June 30, 2002 payable at such intervals as the
Corporation customarily pays the salaries of its executive officers. Effective
July 1, 2002 and every other July 1st thereafter, the Executive and the
Corporation shall negotiate, in good faith, with respect to increasing said base
salary for an additional two year period in an amount mutually satisfactory to
the Corporation and the Executive.
(b) In addition to the base salary provided for in subsection 4(a) above,
the Executive shall participate in the Corporation's Executive Bonus Plan and
thereby be entitled to receive an annual bonus for each fiscal year during the
term of this Agreement in the amounts determined pursuant to such plan. The
target amount of the Executive's bonus under said plan shall be 100% of his base
salary actually earned. Payment of the bonus provided herein shall be paid to
the Executive no later than ninety (90) days after the completion of each fiscal
year.
-2-
(c) In addition to the foregoing, it is hereby agreed that the Corporation
shall, at its sole expense, provide and the Executive shall be entitled to
receive, during his employment hereunder, the employee fringe benefits provided
by the Corporation, from time to time, to its executive officers including, but
not limited to, benefits equal to or substantially equivalent to the life,
medical (including UK health insurance) and disability insurance, and
participation in the Corporation's Executive Retirement Plan and Section 401(k)
Plan currently being provided to the Executive; provided, however, that as used
in this Agreement, the term "employee fringe benefits" shall not include any
salary or other bonus plan, except as set forth in this Agreement.
(d) In the event the Executive's employment with the Corporation is
terminated as provided in Section 12 hereof (other than for cause as hereinafter
defined), the Corporation shall, to the extent that the Executive's continued
participation is possible under the general terms and provisions of such plans
and programs, if and to the extent requested by the Executive, continue to
indefinitely provide the Executive, at the Executive's sole expense with all of
the employee fringe benefits he was entitled to receive immediately prior to the
termination of his Employment, including but not limited to health, life and
disability insurance and use of the automobile referred to in Section 5. This
subsection shall not affect the benefits to be provided to the Executive at the
Corporation's expense as provided in subsections 12(c), 12(d) or 12(f). In the
event there is an obligation of any trust established by the Executive for the
benefit of he or his family to reimburse the Corporation for any insurance
premiums it paid in connection with any policies owned by such trust and if the
Corporation's interest in any such policy is purchased through a promissory note
issued by the Trust, then the Executive personally guarantees full payment of
such debt.
5. AUTOMOBILE
----------
During the period of the Executive's employment under this Agreement, the
Corporation shall make available to the Executive the use of an automobile (for
personal and business use) with a lease allotment equal to the that currently
being paid on his behalf as well as paying the insurance expenses associated
with such automobile. The Corporation will also reimburse the Executive for
gasoline and maintenance expenses associated with such automobile.
6. EXPENSES; OPTIONS
-----------------
(a) The Corporation shall pay or reimburse the Executive for all reasonable
travel and other expenses incurred or paid by him in connection with the
performance of his duties under this Agreement, upon presentation to the
Corporation of expense statements or vouchers and such other supporting
documentation as it may, from time to time, reasonably require; provided,
however, that the maximum amount available for such expenses may, at any time or
from time to time, be fixed in advance by the Board of Directors of the
Corporation.
(b) All outstanding options to purchase shares of Common Stock of the
Corporation now held by the Executive or hereafter awarded to the Executive
during the term of
-3-
this Agreement shall vest regardless of any conditions precedent to the vesting
of such options (such as the passage of time) if and when there is a "change in
control of the Corporation" as hereafter defined. As used in this Agreement, a
"change in control of the Corporation" shall mean a change in control of a
nature that would be required to be reported in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"); provided, that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Corporation or any
"person" who on the date hereof is a director or officer 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 25%
or more of the combined voting power of the Corporation's then outstanding
securities and the Corporation's Board of Directors, after having been advised
that such ownership level has been reached, does not, within fifteen (15)
business days, adopt a resolution approving the acquisition of that level of
securities ownership by such person; or (ii) during any period of two
consecutive years during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof, unless the election of each director
who was not a director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
(c) With respect to any options awarded to the Executive prior to the
termination of his employment under this Agreement which will have vested prior
to the date of such termination, the Executive shall have the right to exercise
any such options to the same extent that he could have prior to such termination
during the period when the Executive shall be receiving any payments or benefits
as otherwise provided in subsections 12(c) or 12(d), if applicable, and during
such period, the Executive agrees for no additional consideration other than
that provided herein, he will be available, upon reasonable notice, from time to
time, to consult with the senior executive officers of the Corporation, provided
such consultation is on a part time basis and does not preclude the Executive
from otherwise fulfilling any duties he may have to any subsequent employer or
any subsequent business interests and that such consultation does not require
the Executive, without his consent, to travel more than 50 miles from his home
or then principal place of employment and during such period the Executive shall
be deemed to be a part-time employee of the Corporation.
(d) Notwithstanding the then current state of the Corporation's By-Laws,
the Executive shall be entitled at all times to the benefit of the maximum
indemnification and advancement of expenses available from time to time under
the laws of the State of Delaware.
(e) The Corporation and/or any of its subsidiaries, divisions or affiliates
may, from time to time, apply for and obtain, for its or their benefit and at
its or their sole expense, key man life, health, accident, disability, or other
insurance upon the Executive, in any amounts that it or they may deem necessary
or desirable to protect its or their respective interests, and the Executive
agrees to cooperate with and assist the Corporation or such subsidiary, division
or affiliate in obtaining any and all such insurance by submitting to all
reasonable medical
-4-
examinations, if any, and by filling out, executing, and delivering any and all
such applications and other instrument as may reasonably be necessary.
7. INVENTIONS
----------
(a) The Executive agrees to and hereby does assign to the Corporation or
any subsidiary, affiliate or division of the Corporation designated by the
Corporation, all his right, title and interest throughout the world in and to
all ideas, methods, developments, products, inventions, processes, improvements,
modifications, techniques, designs and/or concepts relating directly or
indirectly to the business of the Corporation, its subsidiaries, affiliates or
divisions, whether patentable or unpatentable, which the Executive may conceive
and/or develop during his employment by the Corporation (whether pursuant to
this Agreement or otherwise) or which the Executive may conceive and/or develop
during a twenty-four (24) month period following the termination of his
employment if such concept and/or development during such twenty-four (24) month
period is a direct result of the Executive's activities while employed by the
Corporation, whether or not conceived and/or developed at the request of the
Corporation or any subsidiary, affiliate or division (the "Inventions");
provided, however, that if the Corporation or such subsidiary, affiliate or
division determine that it will not use any such Invention or that it will
license or transfer any such Invention to an unaffiliated third party, then it
will negotiate in good faith with the Executive, if the Executive so requests,
with respect to a transfer or license of such Invention to the Executive.
(b) The Executive further agrees to promptly communicate and disclose to
the Corporation any and all such Inventions as well as any other knowledge or
information which he may possess or obtain relating to any such Inventions.
(c) In furtherance of the foregoing, the Executive agrees that at the
request of the Corporation, and at its expense, he will make or cooperate in
making of applications for letters patent of the United States or elsewhere and
will execute such other agreements, documents or instruments which the
Corporation may reasonably consider necessary to transfer to and vest in the
Corporation or any subsidiary, affiliate or division, all right, title and
interest in any such Inventions, and all applications for any letters patent
issued in respect of any of the foregoing.
(d) The Executive shall assist, upon request, in locating writings and
other physical evidence of the making of the Inventions and provide unrecorded
information relating to them and give testimony in any proceeding in which any
of the Inventions or any application or patent directed thereto may be involved,
provided that reasonable compensation shall be paid the Executive for such
services and the Executive shall be reimbursed for any expenses incurred by him
in connection therewith, except that during such period of time as the Executive
is employed by the Corporation, the Corporation shall not be obligated to
compensate the Executive at a higher rate for the giving of testimony than the
rate established by law for the compensation of witnesses in the court or
tribunal where the
-5-
testimony is given or in the district where the testimony is taken. The
Corporation shall give the Executive reasonable notice should it require such
services, and, to the extent reasonably feasible, the Corporation shall use its
best efforts to request such assistance at times and places as will least
interfere with any other employment of the Executive.
(e) At the expense of the Corporation, the Executive shall assign to the
Corporation all his interest in copyrightable material which he produces,
composes, or writes, individually or in collaboration with others, which arises
out of work performed by him on behalf of the Corporation, and shall sign all
papers and do all other acts reasonably necessary to assist the Corporation to
obtain copyrights on such material in any and all jurisdictions.
8. CONFIDENTIAL INFORMATION
------------------------
The Executive hereby acknowledges that, in the course of his employment by
the Corporation, he will have access to secret and confidential information
which relates to or affects all aspects of the business and affairs of the
Corporation and its subsidiaries, affiliates and divisions, and which are not
available to the general public ("Confidential Information"). Without limiting
the generality of the foregoing, Confidential Information shall include
information relating to inventions (including, without limitation, Inventions),
developments, specifications, technical and engineering data, information
concerning the filing or pendency of patent applications, business ideas, trade
secrets, products under development, production methods and processes, sources
of supply, marketing plans, and the names of customers or prospective customers
or of persons who have or shall have traded or dealt with the Corporation.
Accordingly, the Executive agrees that he will not, at any time, without the
express written consent of the Corporation, directly or indirectly, disclose or
furnish, or negligently permit to be disclosed or furnished, any Confidential
Information to any person, firm, corporation or other entity except in
performance of his duties hereunder.
9. CONFIDENTIAL MATERIALS
----------------------
The Executive hereby acknowledges and agrees that any and all models,
prototypes, notes, memoranda, notebooks, drawings, records, plans, documents or
other material in physical form which contain or embody Confidential Information
and/or information relating to Inventions and/or information relating to the
business and affairs of the Corporation, its subsidiaries, affiliates and
divisions and/or the substance thereof, whether created or prepared by the
Executive or by others ("Confidential Materials"), which are in the Executive's
possession or under his control, are the sole property of the Corporation.
Accordingly, the Executive hereby agrees that, upon the termination of his
employment with the Corporation, whether pursuant to this Agreement or
otherwise, or at the Corporation's earlier request, the Executive shall return
to the Corporation all Confidential Materials and all copies thereof in his
possession or under his control and shall not retain any copies of Confidential
Materials.
10. NON-COMPETITION
---------------
-6-
(a) The Executive agrees that he shall not, so long as he shall be employed
by the Corporation in any capacity (whether pursuant to this Agreement or
otherwise), without the express written consent of the Corporation, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control or be employed by or connected in any manner
with, any business which is or may be in competition, directly or indirectly,
with the business of the Corporation or any subsidiary, affiliate or division of
the Corporation.
(b) The Executive agrees that for a period of thirty-six (36) months,
commencing on the effective date of the termination of his employment, whether
such termination is pursuant to the terms of this Agreement or otherwise, he
shall not, without the express written consent of the Corporation, directly or
indirectly, own, manage, operate control or participate in the ownership,
management, operation or control, or be employed by or connected in any manner
with, any business, firm or corporation which is engaged in any business
activity competitive with the business of the Corporation and its subsidiaries,
affiliates and divisions as such business is conducted during the period of his
employment by the Corporation (whether pursuant to this Agreement or otherwise)
and at the termination thereof.
(c) Anything to the contrary herein notwithstanding, the provisions of this
section shall not be deemed violated by the purchase and/or ownership by the
Executive of shares of any class of equity securities (or options, warrants or
rights to acquire such securities, or any securities convertible into such
securities) representing (together with any securities which would be acquired
upon the exercise of any such options, warrants or rights or upon the conversion
of any other security convertible into such securities) the lesser of (i) 1% or
less of the outstanding shares of any such class of equity securities of any
issuer whose securities are listed on a national securities exchange or traded
on NASDAQ, the National Quotation Bureau Incorporated or any similar
organization or (ii) securities having a market value of less than $100,000;
provided, however, that the Executive shall not be otherwise connected with or
active in the business of the issuers described in this subsection 10(c).
11. REMEDY FOR BREACH
-----------------
The Executive hereby acknowledges that in the event of any material breach
or threatened material breach by him of any of the provisions of sections 7, 8,
9 or 10 of this Agreement, the Corporation would have no adequate remedy at law
and could suffer substantial and irreparable damage. Accordingly, the Executive
hereby agrees that, in such event, the Corporation shall be entitled, without
the necessity of proving damages, and notwithstanding any election by the
Corporation to claim damages, to obtain a temporary and/or permanent injunction
to restrain any such material breach or threatened material breach or to obtain
specific performance of any of such provisions, all without prejudice to any and
all other remedies which the Corporation may have at law or in equity.
12. TERMINATION
-----------
-7-
(a) This Agreement and the employment of the Executive by the Corporation
shall terminate upon the earliest of the dates specified below:
(i) the close of business on the date as of which the term of the
Executive's employment hereunder has terminated as provided in Section 2 hereof;
provided, however, that such term is not extended by any other agreement between
the Executive and the Corporation; or
(ii) the close of business on the date of death of the Executive; or
(iii) the close of business on the effective date of the voluntary
termination by the Executive of his employment with the Corporation; or
(iv) the close of business on the day following the date on which the
Corporation provides the Executive with written notice of election of its Board
of Directors to terminate his employment for "cause" (as defined in subsection
12(b)(1) below); or
(v) the close of business on the last day of the month within which the
Board of Directors of the Corporation elects to terminate the Executive's
employment following and as a result of the inability of the Executive, by
reason of physical or mental disability, for six (6) months within any twelve
(12) month period during the term of this Agreement, to render services of the
character contemplated by this Agreement.
(b)(1) For purposes of this Agreement, the term "cause" shall mean a
determination made in good faith by vote of a majority of the members of the
Board of Directors of the Corporation then holding office (other than the
Executive if he shall then be a director) that one of the following conditions
exists or one of the following events has occurred;
(i) conviction of the Executive by a court of law for a felony offense;
or
(ii) the refusal (after receipt by him of prior written notice from the
Corporation) by the Executive to perform such service as may reasonably be
delegated or assigned to him, consistent with his position, by the Board of
Directors of the Corporation; willful misconduct or gross negligence on his part
in connection with the performance of such duties.
(c) In the event of the termination of the Executive's employment for any
reason other than due to (i) his death or disability as provided in subsection
12(a)(ii) or (v); (ii) his voluntary termination of his employment with the
Corporation pursuant to subsection 12(a)(iii); or (iii) his termination for
cause as provided in subsection 12(a)(iv), the Executive shall be paid at the
time of such termination an amount equal to the annual base salary and the bonus
(as provided in subsection 4(b)) earned by him during the last completed fiscal
year immediately preceding any such termination, which payment shall be made in
a lump sum within ninety (90) days of the date of his termination of employment,
and (b) the Corporation shall, to the extent that the Executive's continued
participation is possible under the general terms and
-8-
provisions of such plans and programs, continue to provide the Executive, at the
Corporation's sole expense, for one year after the termination of his
Employment, with all of the employee fringe benefits he was entitled to receive
immediately prior to the termination of his Employment including but not limited
to life, health, and disability insurance and the use of the automobile referred
to in Section 5. The Executive shall not be required to mitigate the amount of
any payments provided for in this subsection 12(c) by seeking other employment.
The provisions of this subsection 12(c) shall not apply if the Executive and the
Corporation enter into the agreement referred to in subsection 12(f) hereof.
(d) In the event of the termination of the Executive's employment prior to
July 1, 2003 for any reason other than due to (i) his death or disability as
provided in subsection 12(a)(ii) or (v); (ii) his voluntary termination of his
employment with the Corporation pursuant to subsection 12(a)(iii); or (iii) his
termination for cause as provided in subsection 12(a)(iv), the Executive shall
be paid, in addition to the payments provided in subsection 12(c), one year
after the date of such termination an amount equal to his annual base salary
immediately preceding any such termination and his target bonus and, to the
extent that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs, continue to provide the
Executive, at the Corporation's sole expense for an additional one year, all of
the employee fringe benefits referred to in paragraph 12(c). The Executive shall
not be required to mitigate the amount of any payments provided for in this
subsection 12(d) by seeking other employment.
(e) All payments set forth in subsection 12(c) and 12(d) are contingent
upon the Executive first signing at the time of termination the Corporation's
standard waiver and release agreement.
(f) In the event of the termination of the Executive's employment under
this Agreement for any reason other than due to (i) his death as provided in
subsection 12(a)(ii) or (ii) his termination for cause as provided in subsection
12(a)(iv), the Corporation and the Executive agree to enter into a new
employment agreement for a term of five years, in the form substantial similar
to the existing employment agreement between the Corporation and the
Corporation's former President which will provide for the Executive to be
employed in a part-time consultative and executive capacity, with a cash
compensation of $200,000 per annum plus the employee fringe benefits otherwise
provided herein.
13. NO CONFLICTING AGREEMENTS
-------------------------
In order to induce the Corporation to enter into this Agreement and to
employ the Executive on the terms and conditions set forth herein, the Executive
hereby represents and warrants that he is not a party to or bound by any
agreement, arrangement or understanding, written or otherwise, which prohibits
or in any manner restricts his ability to enter into and fulfill his obligations
under this Agreement, to be employed by and serve as an executive of the
Corporation. This Agreement supersedes the Prior Employment Agreements in all
respects.
14. MISCELLANEOUS
-------------
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(a) This Agreement shall become effective as of the date hereof and, from
and after that time, shall extend to and be binding upon the Executive, his
personal representative or representatives and testate or intestate
distributees, and upon the Corporation, its successors and assigns; and the term
Corporation, as used herein, shall include successors and assigns.
(b) Nothing contained in this Agreement shall be deemed to involve the
creation by the Corporation of a trust for the benefit of, or the establishment
by the Corporation of any other form of fiduciary relationship with the
Executive, his beneficiaries or any of their respective legal representatives or
distributees. To the extent that any person shall acquire the right to receive
any payments from the Corporation hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(c) Any notice required or permitted by this Agreement shall be given by
registered or certified mail, return receipt requested, addressed to the
Corporation at its then principal office or to the Executive at his residence
address, or to either party at such other address or addresses as it or he may
from time to time specify for the purpose in a notice similarly given to the
other party.
(d) This Agreement shall be construed and enforced in accordance with the
laws of the State of New York. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration in Suffolk County of the State of New York and shall proceed under
the rules then prevailing of the American Arbitration Association (AAA). The
dispute shall be referred to a single arbitrator if such arbitration is mutually
agreeable to the parties within twenty (20) days of the demand for arbitration,
otherwise to a single arbitrator appointed by the AAA upon application by either
party. Any award determined by an arbitrator must be in accordance with the
terms of this Agreement and shall be final and binding upon the parties.
Judgment upon any award made in such arbitration may be entered and enforced in
any court of competent jurisdiction. The Corporation and the Executive waive any
right of appeal with respect to any judgment entered on an arbitrator's award in
any court having jurisdiction.
(e) Except as stated otherwise herein, this instrument contains the entire
agreement of the parties relating to the subject matter hereof, and there are no
agreements, representations or warranties not herein set forth. No modification
of this Agreement shall be valid unless in writing and signed by the Corporation
and the Executive. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition.
(f) If any provision of this Agreement shall be held invalid, such
invalidity shall not affect any other provisions of this Agreement not held so
invalid, and all other such provisions shall remain in full force and effect to
the full extent consistent with the law.
-10-
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
SYMBOL TECHNOLOGIES, INC.
BY:
----------------------------
ATTEST: EXECUTIVE
- ------------------------- -------------------------------
TOMO RAZMILOVIC
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- EXHIBIT 10.11 -
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made as of the 15th day of December,
2000 by and between SYMBOL TECHNOLOGIES, INC., a Delaware corporation (the
"Corporation") and Leonard H. Goldner, (the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Executive and the Corporation are parties to an employment
agreement, dated as of November 1, 1995 (the "Prior Employment Agreement"),
setting forth the terms and conditions of the Executive's employment by the
Corporation; and
WHEREAS, the term of employment under the prior Employment Agreement
expired on October 31, 2000; and
WHEREAS, the Corporation desires to continue to employ the Executive and
the Executive desires to continue to be employed by the Corporation in the
manner and on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual and
dependent agreements and covenants herein set forth, the parties hereto agree as
follows:
1. EMPLOYMENT
----------
The Corporation hereby agrees to employ the Executive as its Executive Vice
President, General Counsel and Secretary headquartered at the Corporation's Long
Island facility and the Executive hereby agrees to accept such employment and to
render services to the Corporation and its subsidiaries, divisions and
affiliates for the period and on the terms and conditions set forth in this
Agreement.
2. TERM
----
The Executive's employment under this Agreement shall be for a term of five
(5) years, commencing as of the date hereof and ending on December 31, 2005;
provided, however, that the term of the Executive's actual employment hereunder
shall at all times be subject to earlier termination in accordance with the
provisions of Section 12 hereof.
3. DUTIES
------
(a) So long as the Executive's employment under this Agreement shall
continue, pursuant to the provisions hereof, the Executive shall, subject to
periods of illness, vacation and other excused absences, devote his entire
business time, attention, and energies to the affairs of the Corporation and its
subsidiaries, divisions and affiliates, use his best efforts to
-1-
promote its and their best interests and perform such executive duties as may be
reasonably assigned to him by the Chief Executive Officer of the Corporation;
provided, however, that such executive duties shall be consistent with and shall
generally be of the nature of the services ordinarily and customarily performed
by the Executive prior to the date hereof. Nothing contained herein shall
preclude the Executive from serving as an attorney, a trustee, executor or
fiduciary or from engaging in charitable and community affairs provided that
such activities do not interfere with the regular performance of his duties and
responsibilities under this Agreement.
(b) So long as the Executive's employment under this Agreement shall
continue, the Executive shall, if elected or appointed, serve as an executive
officer and/or a director of the Corporation and of any subsidiary, division or
affiliate of the Corporation and shall hold, without any compensation other than
that provided for in this Agreement, the offices in the Corporation and in any
such subsidiary, division or affiliate to which he may, at any time or from time
to time, be elected or appointed.
(c) The Executive shall be eligible to take, in addition to holidays
recognized by the Corporation, four (4) weeks per annum of vacation.
4. COMPENSATION
------------
(a) The Corporation hereby agrees to pay to the Executive at such intervals
as the Corporation customarily pays the salaries of its executive officers and
the Executive hereby agrees to accept, as compensation for services rendered
under this Agreement, a base salary at the rate of Four Hundred Fifteen
Thousand, Eight Hundred Dollars ($415,800) per annum for the period beginning on
the date hereof and ending on December 31, 2000. Effective January 1, 2001 and
for the year ending December 31, 2001 said base salary be increased to Four
Hundred Fifty Seven Thousand, Three Hundred and Eighty Dollars ($457,380).
Effective January 1, 2002 and each year thereafter, the Executive and the
Corporation shall negotiate, in good faith, with respect to increasing said base
salary for additional one year period in an amount mutually satisfactory to the
Corporation and the Executive.
(b) In addition to the base salary provided for in subsection 4(a) above,
the Executive shall participate in the Corporation's Executive Bonus Plan and
thereby be entitled to receive an annual bonus for each fiscal year during the
term of this Agreement in the amounts determined pursuant to such plan. The
target amount of the Executive's bonus under said plan shall be 75% of his base
salary actually earned in each fiscal year. Payment of the bonus provided herein
shall be paid to the Executive no later than ninety (90) days after the
completion of each fiscal year.
(c) In addition to the foregoing, it is hereby agreed that the Corporation
shall, at its sole expense, provide and the Executive shall be entitled to
receive, during his employment hereunder, the employee fringe benefits provided
by the Corporation, from time to time, to its executive officers, but in no
event less favorable to the Executive than the benefits provided to him by the
Corporation as of the date of this Agreement, including, but not limited to,
benefits
-2-
relating to life, medical and disability insurance, and participation in the
Corporation's Executive Retirement Plan and Section 401(k) Plan; provided,
however, that as used in this Agreement, the term "employee fringe benefits"
shall not include any salary or other bonus plan, except as set forth in this
Agreement.
(d) In the event the Executive's employment with the Corporation is
terminated as provided in Section 12 hereof (other than cause as hereinafter
defined), the Corporation shall, to the extent that the Executive's continued
participation is possible under the general terms and provisions of such plans
and programs, if and to the extent requested by the Executive, continue to
indefinitely provide the Executive, at the Executive's sole expense with all of
the employee fringe benefits he was entitled to receive immediately prior to the
termination of his Employment, including but not limited to health, life and
disability insurance and use of the automobile referred to in section 5.
(e) In the event there is an obligation of any trust established by the
Executive for the benefit of he or his family to reimburse the Corporation for
any insurance premiums it paid in connection with any policy owned by such trust
and if the Corporation's interest in any such policy is purchased through a
promissory note issued by the trust, then the Executive personally guarantees
full payment of such debt.
5. AUTOMOBILE
----------
During the period of the Executive's employment under this Agreement, the
Corporation shall make available to the Executive the use of an automobile
comparable to that currently provided to him, as well as paying the insurance
expenses associated with such automobile. The Corporation will also reimburse
the Executive for gasoline and maintenance expenses associated with such
automobile.
6. EXPENSES; OPTIONS
-----------------
(a) The Corporation shall pay or reimburse the Executive for all reasonable
travel and other expenses incurred or paid by him in connection with the
performance of his duties under this Agreement, upon presentation to the
Corporation of expense statements or vouchers and such other supporting
documentation as it may, from time to time, reasonably require; provided,
however, that the maximum amount available for such expenses may, at any time or
from time to time, be fixed in advance by the Board of Directors of the
Corporation.
(b) All outstanding options to purchase shares of Common Stock of the
Corporation now held by the Executive or hereafter awarded to the Executive
during the term of this Agreement shall vest regardless of any conditions
precedent to the vesting of such options (such as the passage of time) if and
when there is a "change in control of the Corporation" as hereafter defined. As
used in this Agreement, a "change in control of the Corporation" shall mean a
change in control of a nature that would be required to be reported in response
to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"); provided, that, without limitation, such a change
in control shall be deemed to
-3-
have occurred if (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than the Corporation or any "person" who on
the date hereof is a director or officer 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 25% or more of the
combined voting power of the Corporation's then outstanding securities and the
Corporation's Board of Directors, after having been advised that such ownership
level has been reached, does not, within fifteen (15) business days, adopt a
resolution approving the acquisition of that level of securities ownership by
such person; or (ii) during any period of two consecutive years during the term
of this Agreement, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period.
(c) With any respect to any options awarded to the Executive prior to the
termination of his employment under this Agreement which will have vested prior
to the date of such termination, the Executive shall have the right to exercise
any such options to the same extent that the could have prior to such
termination during the period when the Executive shall be receiving any payments
or benefits as otherwise provided in subsections 12(c) or 12(d), if applicable,
and during such period, the Executive agrees (in the event he is not otherwise
employed by the Corporation) for no additional consideration other than that
provided herein, he will make himself available, upon reasonable notice, from
time to time to consult with the senior executive officers of the Corporation,
provided such consultation is on a part time basis and does not preclude the
Executive from otherwise fulfilling any duties he may have to any subsequent
employer or any subsequent business interests and that such consultation does
not require the Executive, without his consent, to travel more than 50 miles
from his home or then principal place of employment and during such period the
Executive shall be deemed to be a part time employee of the Corporation.
(d) Notwithstanding the then-current state of the Corporation's By-Laws,
the Executive shall be entitled at all times to the benefit of the maximum
indemnification and advancement of expenses available from time to time under
the laws of the State of Delaware.
(e) The Corporation and/or any of its subsidiaries, divisions or affiliates
may, from time to time, apply for and obtain, for its or their benefit and at
its or their sole expense, key man life, health, accident, disability, or other
insurance upon the Executive, in any amounts that it or they may deem necessary
or desirable to protect its or their respective interests, and the Executive
agrees to cooperate with and assist the Corporation or such subsidiary, division
or affiliate in obtaining any and all such insurance by submitting to all
reasonable medical examinations, if any, and by filling out, executing, and
delivering any and all such applications and other instrument as may reasonably
be necessary.
7. INVENTIONS
----------
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(a) The Executive agrees to and hereby does assign to the Corporation or
any subsidiary, affiliate or division of the Corporation designated by the
Corporation, all his right, title and interest throughout the world in and to
all ideas, methods, developments, products, inventions, processes, improvements,
modifications, techniques, designs and/or concepts relating directly or
indirectly to the business of the Corporation, its subsidiaries, affiliates or
divisions, whether patentable or unpatentable, which the Executive may conceive
and/or develop during his employment by the Corporation (whether pursuant to
this Agreement or otherwise) or which the Executive may conceive and/or develop
during a twenty-four (24) month period following the termination of his
employment if such concept and/or development during such twenty-four (24) month
period is a direct result of the Executive's activities while employed by the
Corporation, whether or not conceived and/or developed at the request of the
Corporation or any subsidiary, affiliate or division (the "Inventions");
provided, however, that if the Corporation or such subsidiary, affiliate or
division determine that it will not use any such Invention or that it will
license or transfer any such Invention to an unaffiliated third party, then it
will negotiate in good faith with the Executive, if the Executive so requests,
with respect to a transfer or license of such Invention to the Executive.
(b) The Executive further agrees to promptly communicate and disclose to
the Corporation any and all such Inventions as well as any other knowledge or
information which he may possess or obtain relating to any such Inventions.
(c) In furtherance of the foregoing, the Executive agrees that at the
request of the Corporation, and at its expense, he will make or cooperate in
making of applications for letters patent of the United States or elsewhere and
will execute such other agreements, documents or instruments which the
Corporation may reasonably consider necessary to transfer to and vest in the
Corporation or any subsidiary, affiliate or division, all right, title and
interest in any such Inventions, and all applications for any letters patent
issued in respect of any of the foregoing.
(d) The Executive shall assist, upon request, in locating writings and
other physical evidence of the making of the Inventions and provide unrecorded
information relating to them and give testimony in any proceeding in which any
of the Inventions or any application or patent directed thereto may be involved,
provided that reasonable compensation shall be paid the Executive for such
services and the Executive shall be reimbursed for any expenses incurred by him
in connection therewith, except that during such period of time as the Executive
is employed by the Corporation, the Corporation shall not be obligated to
compensate the Executive at a higher rate for the giving of testimony than the
rate established by law for the compensation of witnesses in the court or
tribunal where the testimony is given or in the district where the testimony is
taken. The Corporation shall give the Executive reasonable notice should it
require such services, and, to the extent reasonably feasible, the Corporation
shall use its best efforts to request such assistance at times and places as
will least interfere with any other employment of the Executive.
(e) At the expense of the Corporation, the Executive shall assign to the
Corporation all his interest in copyrightable material which he produces,
composes, or writes,
-5-
individually or in collaboration with others, which arises out of work performed
by him on behalf of the Corporation, and shall sign all papers and do all other
acts necessary to assist the Corporation to obtain copyrights on such material
in any and all jurisdictions.
8. CONFIDENTIAL INFORMATION
------------------------
The Executive hereby acknowledges that, in the course of his employment by
the Corporation, he will have access to secret and confidential information
which relates to or affects all aspects of the business and affairs of the
Corporation and its subsidiaries, affiliates and divisions, and which are not
available to the general public ("Confidential Information"). Without limiting
the generality of the foregoing, Confidential Information shall include
information relating to inventions (including, without limitation, Inventions),
developments, specifications, technical and engineering data, information
concerning the filing or pendency of patent applications, business ideas, trade
secrets, products under development, production methods and processes, sources
of supply, marketing plans, and the names of customers or prospective customers
or of persons who have or shall have traded or dealt with the Corporation.
Accordingly, the Executive agrees that he will not, at any time, without the
express written consent of the Corporation, directly or indirectly, disclose or
furnish, or negligently permit to be disclosed or furnished, any Confidential
Information to any person, firm, corporation or other entity except in
performance of his duties hereunder.
9. CONFIDENTIAL MATERIALS
----------------------
The Executive hereby acknowledges and agrees that any and all models,
prototypes, notes, memoranda, notebooks, drawings, records, plans, documents or
other material in physical form which contain or embody Confidential Information
and/or information relating to Inventions and/or information relating to the
business and affairs of the Corporation, its subsidiaries, affiliates and
divisions and/or the substance thereof, whether created or prepared by the
Executive or by others ("Confidential Materials"), which are in the Executive's
possession or under his control, are the sole property of the Corporation.
Accordingly, the Executive hereby agrees that, upon the termination of his
employment with the Corporation, whether pursuant to this Agreement or
otherwise, or at the Corporation's earlier request, the Executive shall return
to the Corporation all Confidential Materials and all copies thereof in his
possession or under his control and shall not retain any copies of Confidential
Materials.
10. NON-COMPETITION
---------------
(a) The Executive agrees that he shall not, so long as he shall be employed
by the Corporation in any capacity (whether pursuant to this Agreement or
otherwise), without the express written consent of the Corporation, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control or be employed by or connected in any manner
with, any business which is or may be in competition, directly or indirectly,
with the business of the Corporation or any subsidiary, affiliate or division of
the Corporation.
-6-
(b) The Executive agrees that for a period of twelve (12) months,
commencing on the effective date of the termination of his employment, whether
such termination is pursuant to the terms of this Agreement or otherwise, he
shall not, without the express written consent of the Corporation, directly or
indirectly, own, manage, operate control or participate in the ownership,
management, operation or control, or be employed by or connected in any manner
with, any business, firm or corporation which is engaged in any business
activity competitive with the business of the Corporation and its subsidiaries,
affiliates and divisions as such business is conducted during the period of his
employment by the Corporation (whether pursuant to this Agreement or otherwise)
and at the termination thereof.
(c) The Executive agrees that for a period of twelve (12) months,
commencing twelve (12) months after the effective date of the termination of his
employment, whether such termination is pursuant to the terms of this Agreement
or otherwise, he shall not, without the express written consent of the
Corporation, directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control, or be employed
by or connected in any manner with any business, firm or corporation which is
listed as a competitor of the Corporation in the Corporation's latest Annual
Report on Form 10-K filed with the Securities and Exchange Commission prior to
the date of termination of his employment.
(d) Anything to the contrary herein notwithstanding, the provisions of this
section shall not be deemed violated by the purchase and/or ownership by the
Executive of shares of any class of equity securities (or options, warrants or
rights to acquire such securities, or any securities convertible into such
securities) representing (together with any securities which would be acquired
upon the exercise of any such options, warrants or rights or upon the conversion
of any other security convertible into such securities) the lesser of (i) 1% or
less of the outstanding shares of any such class of equity securities of any
issuer whose securities are listed on a national securities exchange or traded
on NASDAQ, the National Quotation Bureau Incorporated or any similar
organization or (ii) securities having a market value of less than $100,000;
provided, however, that the Executive shall not be otherwise connected with or
active in the business of the issuers described in this subsection 10(d).
11. REMEDY FOR BREACH
-----------------
The Executive hereby acknowledges that in the event of any breach or
threatened breach by him of any of the provisions of sections 7, 8, 9 or 10 of
this Agreement, the Corporation would have no adequate remedy at law and could
suffer substantial and irreparable damage. Accordingly, the Executive hereby
agrees that, in such event, the Corporation shall be entitled, without the
necessity of proving damages, and notwithstanding any election by the
Corporation to claim damages, to obtain a temporary and/or permanent injunction
to restrain any such breach or threatened breach or to obtain specific
performance of any of such provisions, all without prejudice to any and all
other remedies which the Corporation may have at law or in equity.
12. TERMINATION
-----------
-7-
(a) This Agreement and the employment of the Executive by the Corporation
shall terminate upon the earliest of the dates specified below:
(i) the close of business on the date as of which the term of the
Executive's employment hereunder has terminated as provided in Section 2 hereof;
provided, however, that such term is not extended by any other agreement between
the Executive and the Corporation; or
(ii) the close of business on the date of death of the Executive; or
(iii) the close of business on the effective date of the voluntary
termination by the Executive of his employment with the Corporation; or
(iv) the close of business on the day following the date on which the
Corporation provides the Executive with written notice of election of its Board
of Directors to terminate his employment for "cause" (as defined in subsection
12(b)(1) below); or
(v) the close of business on the last day of the month within which the
Board of Directors of the Corporation elects to terminate the Executive's
employment following and as a result of the inability of the Executive, by
reason of physical or mental disability, for six (6) months within any twelve
(12) month period during the term of this Agreement, to render services of the
character contemplated by this Agreement.
(b)(1) For purposes of this Agreement, the term "cause" shall mean a
determination made in good faith by vote of a majority of the members of the
Board of Directors of the Corporation then holding office (other than the
Executive if he shall then be a director) that one of the following conditions
exists or one of the following events has occurred;
(i) conviction of the Executive for a felony offense; or
(ii) the refusal (after receipt by him of notice from the Corporation)
by the Executive to perform such service as may reasonably be delegated or
assigned to him, consistent with his position, by the Chief Executive Officer of
the Corporation; willful misconduct or gross negligence on his part in
connection with the performance of such duties.
(c) In the event of the termination of the Executive's employment (whether
pursuant to this Agreement or otherwise) for any reason (including the failure
to extend the terms of this Agreement) other than due to (i) his death or
disability as provided in subsection 12(a)(ii) or (v); (ii) his voluntary
termination of his employment with the Corporation pursuant to subsection
12(a)(iii); or (iii) his termination for cause as provided in subsection
12(a)(iv), the Executive shall be paid at the time of such termination an amount
equal to the annual base salary and the bonus (as provided in subsection 4(b))
earned by him during the last completed fiscal year immediately preceding any
such termination and the Corporation shall, to the extent that the Executive's
continued participation is possible under the general terms and provisions of
such
-8-
plans and programs, continue to provide the Executive, at the Corporation's sole
expense, for one year after the termination of his Employment, with all of the
employee fringe benefits he was entitled to receive immediately prior to the
termination of his Employment including but not limited to life, health, and
disability insurance and the use of the automobile referred to in Section 5,
provided, however, he will not be credited for this period with an additional
year of service under the Executive Retirement Plan referred to in subsection
4(c). The Executive shall not be required to mitigate the amount of any payments
provided for in this subsection 12(c) by seeking other employment.
(d) In the event of the termination of the Executive's employment prior to
January 1, 2004 for any reason other than due to (i) his death or disability as
provided in subsection 12(a)(ii) or (v); (ii) his voluntary termination of his
employment with the Corporation pursuant to subsection 12(a)(iii); or (iii) his
termination for cause as provided in subsection 12(a)(iv), the Executive shall
be paid, in addition to the payments provided in subsection 12(c), one year
after the date of such termination an amount equal to his annual base salary
immediately preceding any such termination and his target bonus. The Executive
shall not be required to mitigate the amount of any payments provided for in
this subsection 12(d) by seeking other employment.
(e) All payments set forth in subsection 12(c) and 12(d) are contingent
upon the Executive first signing at the time of termination the Corporation's
standard waiver and release agreement.
(f) In the event of the termination of the Executive's employment under
this Agreement for any reason other than due to (i) his death as provided in
subsection 12(a)(ii) or (ii) his termination for cause as provided in subsection
12(a)(iv), the Corporation and Executive agree to enter into a new employment
agreement for a term of five years, in the form substantial similar to the
existing employment between the Corporation and Corporation's former President
which will provide for the Executive to be employed in a part-time consultative
and executive capacity, with a cash compensation of $125,000 per annum plus the
employee fringe benefits otherwise provided herein.
13. NO CONFLICTING AGREEMENTS
-------------------------
In order to induce the Corporation to enter into this Agreement and to
employ the Executive on the terms and conditions set forth herein, the Executive
hereby represents and warrants that he is not a party to or bound by any
agreement, arrangement or understanding, written or otherwise, which prohibits
or in any manner restricts his ability to enter into and fulfill his obligations
under this Agreement, to be employed by and serve as an executive of the
Corporation.
14. MISCELLANEOUS
-------------
-9-
(a) This Agreement shall become effective as of the date hereof and, from
and after that time, shall extend to and be binding upon the Executive, his
personal representative or representatives and testate or intestate
distributees, and upon the Corporation, its successors and assigns; and the term
Corporation, as used herein, shall include successors and assigns.
(b) Nothing contained in this Agreement shall be deemed to involve the
creation by the Corporation of a trust for the benefit of, or the establishment
by the Corporation of any other form of fiduciary relationship with the
Executive, his beneficiaries or any of their respective legal representatives or
distributees. To the extent that any person shall acquire the right to receive
any payments from the Corporation hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(c) Any notice required or permitted by this Agreement shall be given by
registered or certified mail, return receipt requested, addressed to the
Corporation at its then principal office or to the Executive at his residence
address, or to either party at such other address or addresses as it or he may
from time to time specify for the purpose in a notice similarly given to the
other party.
(d) This Agreement shall be construed and enforced in accordance with the
laws of the State of New York. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration in Suffolk County of the State of New York and shall proceed under
the rules then prevailing of the American Arbitration Association (AAA). The
dispute shall be referred to a single arbitrator if such arbitration is mutually
agreeable to the parties within twenty (20) days of the demand for arbitration,
otherwise to a single arbitrator appointed by the AAA upon application by either
party. Any award determined by an arbitrator must be in accordance with the
terms of this Agreement and shall be final and binding upon the parties.
Judgment upon any award made in such arbitration may be entered and enforced in
any court of competent jurisdiction. The Corporation and the Executive waive any
right of appeal with respect to any judgment entered on an arbitrator's award in
any court having jurisdiction. In the event that it is necessary for any party
hereto incur legal expenses in defending its or his rights hereunder, the losing
party shall reimburse the winning party for all reasonable legal fees and
expenses incurred by him or it as a result thereof.
(e) Except as stated otherwise herein, this instrument contains the entire
agreement of the parties relating to the subject matter hereof, and there are no
agreements, representations or warranties not herein set forth. No modification
of this Agreement shall be valid unless in writing and signed by the Corporation
and the Executive. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition.
(f) If any provision of this Agreement shall be held invalid, such
invalidity shall not affect any other provisions of this Agreement not held so
invalid, and all other such provisions shall remain in full force and effect to
the full extent consistent with the law.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
SYMBOL TECHNOLOGIES, INC.
BY:
-------------------------------
EXECUTIVE
-------------------------------
LEONARD H. GOLDNER
- EXHIBIT 10.17 -
2000 AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF AUGUST 3, 2000
AMONG
SYMBOL TECHNOLOGIES, INC.,
BANK OF AMERICA, N.A.,
AS AGENT,
AND
FRONTING BANK AND LETTER OF CREDIT ISSUING BANK,
THE CHASE MANHATTAN BANK,
AS DOCUMENTATION AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
BANC OF AMERICA SECURITIES LLC,
SOLE LEAD ARRANGER AND SOLE BOOK MANAGER
================================================================================
TABLE OF CONTENTS
SECTION PAGE
Article I. DEFINITIONS 1
1.01 Certain Defined Terms...........................................................................1
1.02 Other Interpretive Provisions..................................................................20
1.03 Accounting Principles..........................................................................21
1.04 Currency Equivalents Generally.................................................................22
Article II. THE CREDITS 22
2.01 Amounts and Terms of Commitments...............................................................22
2.02 Loan Accounts..................................................................................22
2.03 Procedure for Committed Borrowing..............................................................23
2.04 Conversion and Continuation Elections for Committed Borrowings.................................26
2.05 Bid Borrowings.................................................................................28
2.06 Procedure for Bid Borrowings...................................................................28
2.07 The Fronted Loans..............................................................................32
2.08 Voluntary Termination or Reduction of Commitments..............................................33
2.09 Optional Prepayments...........................................................................33
2.10 Mandatory Cash Collateralization of Letters of Credit; Mandatory Prepayments of Loans..........34
2.11 Repayment......................................................................................34
2.12 Interest.......................................................................................34
2.13 Fees...........................................................................................35
2.14 Computation of Fees and Interest...............................................................36
2.15 Payments by the Company........................................................................36
2.16 Payments by the Banks to the Agent.............................................................37
2.17 Sharing of Payments, Etc.......................................................................38
2.18 Guaranty.......................................................................................38
Article III. THE LETTERS OF CREDIT 38
3.01 The Letter of Credit Subfacility...............................................................38
3.02 Issuance, Amendment and Renewal of Letters of Credit...........................................40
3.03 Risk Participations, Drawings and Reimbursements...............................................42
3.04 Repayment of Participations....................................................................43
3.05 Role of the Issuing Bank.......................................................................44
3.06 Obligations Absolute...........................................................................44
3.07 Cash Collateral Pledge.........................................................................45
3.08 Letter of Credit Fees..........................................................................46
3.09 Uniform Customs and Practice and International Standby Practices...............................46
Article IV. TAXES, YIELD PROTECTION AND ILLEGALITY 46
i
4.01 Taxes..........................................................................................46
4.02 Illegality.....................................................................................47
4.03 Increased Costs and Reduction of Return........................................................48
4.04 Funding Losses.................................................................................48
4.05 Inability to Determine Rates...................................................................49
4.06 Reserves on Offshore Rate Loans................................................................49
4.07 Certificates of Banks..........................................................................50
4.08 Substitution of Banks..........................................................................50
4.09 Survival.......................................................................................51
Article V. CONDITIONS PRECEDENT 51
5.01 Conditions of Amendment and Restatement and to Additional Credit Extensions....................51
5.02 Conditions to Amendment and Restatement and to all Credit Extensions...........................52
Article VI. REPRESENTATIONS AND WARRANTIES 52
6.01 Corporate Existence and Power..................................................................52
6.02 Corporate Authorization; No Contravention......................................................53
6.03 Binding Effect.................................................................................53
6.04 Litigation.....................................................................................53
6.05 No Default.....................................................................................54
6.06 ERISA Compliance...............................................................................54
6.07 Use of Proceeds; Margin Regulations............................................................54
6.08 Title to Properties............................................................................54
6.09 Taxes..........................................................................................55
6.10 Financial Condition............................................................................55
6.11 Environmental Matters..........................................................................55
6.12 Regulated Entities.............................................................................55
6.13 No Burdensome Restrictions.....................................................................56
6.14 Copyrights, Patents, Trademarks and Licenses, Etc..............................................56
6.15 Subsidiaries...................................................................................56
6.16 Insurance......................................................................................56
6.17 Swap Obligations...............................................................................56
6.18 Full Disclosure................................................................................56
Article VII. AFFIRMATIVE COVENANTS 57
7.01 Financial Statements...........................................................................57
7.02 Certificates; Other Information................................................................57
7.03 Notices........................................................................................58
7.04 Preservation of Corporate Existence, Etc.......................................................59
7.05 Maintenance of Property........................................................................59
7.06 Insurance......................................................................................59
7.07 Payment of Obligations.........................................................................59
7.08 Compliance with Laws...........................................................................60
ii
7.09 Compliance with ERISA..........................................................................60
7.10 Inspection of Property and Books and Records...................................................60
7.11 Use of Proceeds................................................................................60
7.12 Additional Guarantors..........................................................................60
Article VIII. NEGATIVE COVENANTS 61
8.01 Limitation on Liens............................................................................61
8.02 Disposition of Assets..........................................................................62
8.03 Consolidations and Mergers.....................................................................63
8.04 Loans and Investments..........................................................................63
8.05 Limitation on Indebtedness.....................................................................64
8.06 Transactions with Affiliates...................................................................64
8.07 Use of Proceeds................................................................................64
8.08 Swap Obligations...............................................................................65
8.09 Capital Expenditures...........................................................................65
8.10 Restricted Payments............................................................................65
8.11 ERISA..........................................................................................65
8.12 Change in Business.............................................................................65
8.13 Accounting Changes.............................................................................65
8.14 Subordinated Debt..............................................................................66
8.15 Leverage Ratio.................................................................................66
8.16 Fixed Charge Coverage Ratio....................................................................66
8.17 Tangible Net Worth.............................................................................66
Article IX. EVENTS OF DEFAULT 67
9.01 Event of Default...............................................................................67
9.02 Remedies.......................................................................................69
9.03 Rights Not Exclusive...........................................................................70
Article X. THE AGENT 70
10.01 Appointment and Authorization; "Agent".........................................................70
10.02 Delegation of Duties...........................................................................70
10.03 Liability of Agent.............................................................................71
10.04 Reliance by Agent..............................................................................71
10.05 Notice of Default..............................................................................71
10.06 Credit Decision................................................................................72
10.07 Indemnification of Agent.......................................................................72
10.08 Agent in Individual Capacity...................................................................72
10.09 Successor Agent................................................................................73
10.10 Withholding Tax................................................................................73
10.11 Documentation Agent............................................................................74
Article XI. MISCELLANEOUS 74
11.01 Amendments and Waivers.........................................................................75
iii
11.02 Notices........................................................................................75
11.03 No Waiver; Cumulative Remedies.................................................................76
11.04 Costs and Expenses.............................................................................76
11.05 Company Indemnification........................................................................77
11.06 Payments Set Aside.............................................................................77
11.07 Successors and Assigns.........................................................................78
11.08 Assignments, Participations, Etc...............................................................78
11.09 Confidentiality................................................................................79
11.10 Set-off........................................................................................80
11.11 Notification of Addresses, Lending Offices, Etc................................................80
11.12 Counterparts...................................................................................80
11.13 Severability...................................................................................80
11.14 No Third Parties Benefited.....................................................................81
11.15 Governing Law and Jurisdiction.................................................................81
11.16 Waiver of Jury Trial...........................................................................81
11.17 Judgment Currency..............................................................................82
11.18 Entire Agreement...............................................................................82
11.19 Amendment and Restatement......................................................................82
iv
ANNEX I
Pricing Grid
SCHEDULES
Schedule 2.01 Commitments
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinions of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F-1 Form of Committed Loan Note
Exhibit F-2 Form of Bid Loan Note
Exhibit G Form of Guarantor Acknowledgment and Consent
Exhibit H Form of Competitive Bid Request
Exhibit I Form of Invitation for Competitive Bids
Exhibit J Form of Competitive Bid
Exhibit K Form of Notice of Prepayment
v
CREDIT AGREEMENT
----------------
This 2000 AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
August 3, 2000, among Symbol Technologies, Inc., a Delaware corporation (the
"Company"), the several financial institutions from time to time party to this
Agreement (the "Banks"), and Bank of America, N.A., as letter of credit issuing
bank, fronting bank for certain offshore currency loans and as agent for the
Banks (in such capacity, the "Agent").
WHEREAS, the Company, the Banks and the Agent are parties to the 1999
Amended and Restated Credit Agreement dated as of September 30, 1999 (as in
effect as of the date of this Agreement, the "Original Credit Agreement")
pursuant to which the Banks have agreed to make available to the Company a
revolving multicurrency credit facility with letter of credit subfacility upon
the terms and conditions set forth therein; and
WHEREAS, the parties hereto desire to amend and restate the Original Credit
Agreement in its entirety to read as set forth herein, subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Absolute Rate" has the meaning specified in Subsection 2.06(c).
"Absolute Rate Auction" means a solicitation of Competitive Bids
setting forth Absolute Rates pursuant to Section 2.06.
"Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate
determined with reference to the Absolute Rate.
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of
any business or division of a Person, (b) the acquisition of in excess of
50% of the capital stock, partnership interests, membership interests or
equity of any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other combination with
another Person (other than a Person that is a Subsidiary) provided that the
Company or the Subsidiary is the surviving entity.
"Acquisition Charges" means any charges against income in respect of
any Acquisition permitted hereunder which is consummated by the Company or
any Subsidiary after the date hereof, to the extent that such amounts are
charged against income within two fiscal quarters of the quarter in which
the relevant Acquisition is consummated.
1
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as administrative agent for the
Banks hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent arising
under Section 10.09 and any successor letter of credit issuing bank
hereunder, together with their respective Affiliates (including, in the
case of BofA, the Lead Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means (i) in respect of payments in Dollars,
the address for payments set forth on Schedule 11.02 or such other address
as the Agent may from time to time specify, and, (ii) in the case of
payments in any Offshore Currency, such address as the Agent may from time
to time specify.
"Agreement" means this 2000 Amended and Restated Credit Agreement.
"Alternative Currency" has the meaning specified in Subsection 2.03(h).
"Applicable Amount" means, with respect to the fees set forth in
Subsections 2.13(b) and 3.08(a) and all Offshore Rate Committed Loans and
Base Rate Committed Loans, the amount set forth opposite the indicated
Level in the chart set forth on Annex I in accordance with the parameters
for calculations of such amounts also set forth on Annex I.
"Applicable Offshore Time" means, with respect to any borrowings and
payments in Offshore Currencies, the local times in the country of
settlement for such Offshore Currencies as specified from time to time by
the Agent to the parties hereto.
"Applicable Currency" means, as to any particular payment or Loan,
Dollars or the Offshore Currency in which it is denominated or is payable.
"Approved Subordinated Indebtedness" means indebtedness of the Company
which is subordinated to the Obligations and the terms and conditions of
which have been approved (in their sole discretion) in writing by the Agent
and the Majority Banks. As of the Closing Date, there is no Approved
Subordinated Indebtedness.
"Assignee" has the meaning specified in Subsection 11.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements
of internal counsel.
2
"Bank" means each lender from time to time party hereto. References to
the "Banks" shall include BofA, including in its capacity as Fronting Bank
and Issuing Bank; for purposes of clarification only, to the extent that
BofA may have any rights or obligations in addition to those of the Banks
due to its status as Fronting Bank or Issuing Bank, its status as such will
be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (Sections)101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect
for such day as publicly announced from time to time by BofA as its prime
rate. The prime rate is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate.
Any change in the prime rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Committed Loan" means a Committed Loan, or an L/C Advance,
that bears interest based on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder consisting of one or more
Bid Loans made to the Company on the same day by one or more Bid Loan
Lenders.
"Bid Loan" means a Loan by a Bank to the Company under Section 2.05,
which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
"Bid Loan Lender" means, in respect of any Bid Loan, the Bank making
such Bid Loan to the Company.
"Bid Loan Note" has the meaning specified in Section 2.02.
"BofA" means Bank of America, N.A., a national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of the same
Type made to the Company on the same day by the Banks under Article II, and
may be a Committed Borrowing or a Bid Borrowing and, other than in the case
of Base Rate Committed Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.03 or 2.06.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or San Francisco are authorized
or required by law to close and,
3
(a) if the applicable Business Day relates to any Offshore Rate Loan
in Dollars, means such a day on which dealings are carried on in the
applicable offshore Dollar interbank market;
(b) if the applicable Business Day relates to an Obligation
denominated in the euro or NCU, any such day which is:
(i) for payments or purchases of the euro or NCU, a TARGET
Business Day; and
(ii) for all other purposes, including the giving and receiving
of notices hereunder, a TARGET Business Day on which banks are
generally open for business in London, Frankfurt and in any other
principal financial center as the Agent may from time to time determine
for this purpose; and
(c) if the applicable Business Day relates to an Obligation
denominated in any other Offshore Currency, a day on which commercial
banks are open for foreign exchange business in London, England, and on
which dealings in the relevant Offshore Currency are carried on in the
applicable offshore foreign exchange interbank market in which
disbursement of or payment in such Offshore Currency will be made or
received hereunder.
A "TARGET Business Day" is a day when TARGET (Trans-European
Automated Real-time Gross settlement Express Transfer system), or any
successor thereto, is scheduled to be open for business.
"Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule
or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
"Capital Expenditures" means expenditures by a Person (whether by
leasing, the acquisition of securities of another Person, or otherwise) in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired (a) in connection with normal
replacement and maintenance programs properly charged to current
operations, (b) with the proceeds of casualty insurance and (c) pursuant to
an Acquisition not prohibited hereunder).
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agent, the Issuing Bank and the Banks, as
collateral for the L/C Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to the Agent
and the Issuing Bank (which documents are hereby consented to by the
Banks). Derivatives of such term shall have corresponding meaning.
"Closing Date" means December 21, 1998.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
4
"Commitment", as to each Bank, has the meaning specified in Section
2.01.
"Committed Borrowing" means a Borrowing hereunder consisting of
Committed Loans made on the same day by the Banks ratably according to
their respective Pro Rata Shares, or made by the Fronting Bank on the same
day under Subsection 2.03(m), and, in the case of Offshore Rate Committed
Loans, having the same Interest Periods.
"Committed Loan" means a Loan by a Bank to the Company under Section
2.01 or by the Fronting Bank to the Company under Subsection 2.03(m), and
may be an Offshore Rate Committed Loan or a Base Rate Committed Loan (each,
a "Type" of Committed Loan).
"Committed Loan Note" has the meaning specified in Section 2.02.
"Competitive Bid" means an offer by a Bank to make a Bid Loan in
accordance with Subsection 2.06(b).
"Competitive Bid Request" has the meaning specified in Subsection
2.06(a).
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C.
"Consolidated Capital Expenditures" means, for any period, the Capital
Expenditures of the Company and its Subsidiaries, determined on a
consolidated basis.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) the consolidated cash interest expense of the Company
and its Subsidiaries, determined on a consolidated basis, plus (ii)
Consolidated Lease Expense plus (iii) the required amortization of
Indebtedness for the Company and its Subsidiaries, determined on a
consolidated basis, for the period involved and discount or premium
relating to any such Indebtedness for any period involved, whether expensed
or capitalized. For purposes of clarification, required prepayments of
Indebtedness under revolving credit facilities shall not constitute
amortization thereof unless required to be accompanied by a reduction of
the related credit commitment.
"Consolidated Lease Expense" means, for any period, the aggregate
amount of fixed and contingent rentals payable by the Company and its
Subsidiaries for such period, determined on a consolidated basis, with
respect to leases of real and personal property.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person
(the "primary obligor"), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
5
securities or services primarily for the purpose of assuring the owner of
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person
is otherwise liable for reimbursement of drawings or payments; (c) to
purchase any materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other related
document or obligation requires that payment for such materials, supplies
or other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever made
or tendered, or such services are ever performed or tendered; (d) in
respect of any Swap Contract; or (e) in respect of any synthetic leases
(also known as "off balance sheet" leases). The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to
the stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof, and in the case of other Contingent Obligations other than in
respect of Swap Contracts or synthetic leases, shall be equal to the
maximum reasonably anticipated liability in respect thereof and, in the
case of Contingent Obligations in respect of Swap Contracts, shall be equal
to the Swap Termination Value and, in the case of Contingent Obligations in
respect of synthetic leases, shall be determined by discounting such
obligations to present value at the interest rate implicit in each such
lease in effect at any date of determination.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
"Conversion/Continuation Date" means any date on which, under Section
2.04, the Company (a) converts Committed Loans of one Type to another Type,
or (b) continues as Committed Loans of the same Type, but with a new
Interest Period, Committed Loans having Interest Periods expiring on such
date.
"Credit Extension" means and includes (a) the making of any Committed
Loans, Fronted Loans or Bid Loans hereunder, and (b) the Issuance of any
Letters of Credit hereunder.
"Currency Settlement Date" means (a) with respect to any Borrowing of
Offshore Currency Loans, the date such Borrowing is made, and (b) with
respect to outstanding Obligations denominated in an Offshore Currency, any
applicable payment date relevant thereto or any additional and more
frequent dates as the Agent may, in its sole discretion or at the direction
of the Majority Banks, select from time to time.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
6
"Dollar Equivalent Amount" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to any
amount denominated in an Offshore Currency, the equivalent amount in
Dollars as determined by the Agent at such time on the basis of the Spot
Rate for the purchase of Dollars with such Offshore Currency as of the most
recent Currency Settlement Date with respect thereto.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States.
"EBITDA" means, for any period, for the Company and its Subsidiaries on
a consolidated basis, the sum of (a) Operating Income for such period plus
(b) all amounts treated as expenses for depreciation and the amortization
of intangibles of any kind to the extent included in the determination of
Operating Income for such period.
"EMU Legislation" means legislative measures of the European Council
for the introduction of, changeover to or operation of a single or unified
European currency.
"Effective Amount" means (i) with respect to any Committed Loans,
Fronted Loans and Bid Loans on any date, the aggregate outstanding
principal amount thereof after giving effect to any Borrowings and
prepayments or repayments of such Loans occurring on such date; and (ii)
with respect to any outstanding L/C Obligations on any date, the amount of
such L/C Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any
Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"Effective Date" means the date on which all conditions precedent set
forth in Section 5.01 are satisfied or waived in accordance with the
provisions of Section 11.01 (or, in the case of Subsection 5.01(e), waived
by the Person entitled to receive such payment).
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $500,000,000; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $500,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c) a Person
that is primarily engaged in the business of originating or holding
performing commercial loans and that is (i) a Subsidiary of a Bank, (ii) a
Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person
of which a Bank is a Subsidiary.
7
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"euro" means the single currency of Participating Member States.
"Euro Transition Cutoff Date" means December 31, 2001, or such other
date as may be established by EMU Legislation.
"Event of Default" means any of the events or circumstances specified
in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
8
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") with respect to the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if for any relevant
day such rate is not so published with respect to any such preceding
Business Day, the rate for such day will be the arithmetic mean as
determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day
by each of three leading brokers of Federal funds transactions in New York
City selected by the Agent.
"Fee Letter" has the meaning specified in Subsection 2.13(a).
"Fixed Charge Coverage Ratio" means, as of the end of any fiscal
quarter, the ratio of (i) EBITDA plus Consolidated Lease Expense less
Consolidated Capital Expenditures to (ii) Consolidated Fixed Charges, in
each case calculated on a four quarter rolling basis for such fiscal
quarter and the three immediately preceding fiscal quarters.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"Fronted Loan" means any extension of credit in an Offshore Currency by
the Fronting Bank pursuant to Subsection 2.03(m).
"Fronting Bank" means Bank of America, N.A., as Bank, in its capacity
as maker of the Fronted Loans hereunder, together with any replacement
lender of Fronted Loans arising hereunder.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges (including net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"FX Trading Office" means the Foreign Exchange Trading Center, Los
Angeles, California, of BofA, or such other of BofA's offices as BofA may
designate from time to time.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time, except that for purposes of Sections
8.15, 8.16 and 8.17, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used in
the preparation of the most recent audited financial statements referenced
in Section 6.10. In the event that any "Accounting Change" (as defined
below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement,
then the Company and the Agent agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
the Company's financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. Until such time as
such an amendment shall have been executed and delivered by
9
the Company, the Agent and the Majority Banks, all financial covenants,
standards and terms in this Agreement shall continue to be calculated or
construed as if such Accounting Changes had not occurred. "Accounting
Changes" refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the
Financial Accounting Standards Board (or of the American Institute of
Certified Public Accountants) or, if applicable, the SEC.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guarantor" means each current and future, direct and indirect,
Domestic Subsidiary of the Company which is a Wholly-Owned Subsidiary.
"Guaranty" means the Guaranty of the Guarantors in favor of the Agent
and the Banks, dated as of December 21, 1998.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Honor Date" has the meaning specified in Subsection 3.03(b).
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets
or businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement; (f) all obligations
with respect to capital leases; (g) all unpaid obligations under Swap
Contracts after the termination thereof (including by virtue of the
occurrence of an Early Termination Date, as defined in each such Swap
Contract); (h) all Indebtedness referred to in clauses (a) through (g)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and contracts rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses
(a) through (g) above. For purposes of this Agreement, the amount of any
Indebtedness described in clause (h) above (to the extent that such Person
has not assumed or become liable for the payment of such Indebtedness)
shall be deemed to be the lesser of (i) the amount of such Indebtedness or
(ii) the book value of the property which is or may be subject to such
Lien.
10
For all purposes of this Agreement, the Indebtedness of any Person
shall include all Indebtedness of any partnership or joint venture or
limited liability company in which such Person is a general partner or a
joint venturer or a member to the extent of the lesser of (a) the recourse
to such Person on account thereof and (b) the book value of the assets of
such Person.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
"Indemnified Person" has the meaning specified in Section 11.05.
"Independent Auditor" has the meaning specified in Subsection 7.01(a).
"Insolvency Proceeding" means, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or
other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal, state or foreign
law, including the Bankruptcy Code.
"Intangibles" means, at any date of determination, any goodwill,
licensing agreements, patents, trademarks, trade names, organization
expenses, treasury stock, unamortized debt discount and premium, deferred
charges and other like intangibles; provided, however, that any such
intangible assets which are acquired by the Company and its consolidated
Subsidiaries on or after September 30, 1998 in Acquisitions not prohibited
hereunder shall be deemed not to constitute "Intangibles" and shall be
counted (at book value) as assets of the Company and its consolidated
Subsidiaries for purposes of determining Tangible Net Worth.
"Interest Payment Date" means, as to any Offshore Rate Loan, the last
day of each Interest Period applicable to such Loan and, as to any Base
Rate Committed Loan, the last Business Day of each calendar quarter and the
Revolving Termination Date, provided, however, that (a) if any Interest
Period for an Offshore Rate Committed Loan exceeds three months, the date
that falls three months (as the case may be) after the beginning of such
Interest Period and after each Interest Payment Date thereafter is also an
Interest Payment Date, and (b) as to any Bid Loan, such intervening dates
prior to the maturity thereof as may be specified by the Company and agreed
to by the applicable Bid Loan Lender in the applicable Competitive Bid
shall also be Interest Payment Dates.
"Interest Period" means, (a) as to any Offshore Rate Loan, the period
commencing on the date such Loan is disbursed, or (in the case of any
Offshore Rate Committed Loan) on the Conversion/Continuation Date on
which the Loan is converted into or continued as an Offshore Rate Committed
Loan, and ending on the date one, two, three or six or (if available to all
of the Banks in the given instance) nine or 12 months thereafter as
selected by the Company in its Notice of Borrowing, Notice of Conversion/
Continuation or Notice of Bid Request, as the case may be; and (b) as to
any Absolute
11
Rate Bid Loan, a period of not less than 14 days and not more than 365 days
as selected by the Company in the applicable Competitive Bid Request;
provided that:
(i) if any Interest Period would otherwise end on a day that is not
a Business Day, that Interest Period shall be extended to the following
Business Day unless, in the case of an Offshore Rate Loan, the result
of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the
preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the date
set forth in clause (a) of the definition of "Revolving Termination
Date."
"Invitation for Competitive Bids" means a solicitation for Competitive
Bids, substantially in the form of Exhibit I.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in Subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement Letter of Credit
issuer arising hereunder.
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal arrangement
(whether created by contract or conducted through a separate legal entity)
now or hereafter formed by the Company or any of its Subsidiaries with
another Person in order to conduct a common venture or enterprise with such
Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment of
outstanding standby letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
12
"L/C Application" means an application form for issuances of standby
letters of credit as shall at any time be in use at the Issuing Bank, as
the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date
when made nor converted into a Borrowing of Committed Loans under
Subsection 3.03(b).
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and
the commitment of the Banks severally to participate in, Letters of Credit
from time to time Issued or outstanding under Article III, in an aggregate
amount not to exceed on any date the amount of $50,000,000, as the same
shall be reduced as a result of a reduction in the L/C Commitment pursuant
to Section 2.08; provided that the L/C Commitment is a part of the combined
Commitments, rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Lead Arranger" means Banc of America Securities LLC, a Delaware
limited liability company, in its capacity as Sole Lead Arranger and Sole
Book Manager.
"Lending Office" means, as to any Bank, the office or offices of such
Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 11.02, or such
other office or offices as such Bank may from time to time notify the
Company and the Agent.
"Letters of Credit" means any standby letters of credit Issued by the
Issuing Bank pursuant to Article III.
"Leverage Ratio" means, as of the end of any fiscal quarter, the ratio
of (i) the consolidated Leverage Ratio Indebtedness of the Company and its
Subsidiaries plus, without duplication, all Contingent Obligations of the
Company and its Subsidiaries on a consolidated basis, to (ii) EBITDA,
calculated on a four quarter rolling basis for such fiscal quarter and the
three immediately preceding fiscal quarters.
"Leverage Ratio Indebtedness" of any Person means, without duplication,
(a) all indebtedness for borrowed money; (b) all non-contingent
reimbursement or payment obligations with respect to Surety Instruments;
(c) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses; (d) all indebtedness
created or arising under any conditional sale or other title retention
agreement; (e) all obligations with respect to capital leases; (f) all
unpaid obligations under Swap Contracts after the termination thereof
(including by virtue of the occurrence of an Early
13
Termination Date, as defined in each such Swap Contract); (g) all
Indebtedness referred to in clauses (a) through (f) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (a) through
(f) above. For purposes of this Agreement, the amount of any Indebtedness
described in clause (g) above (to the extent that such Person has not
assumed or become liable for the payment of such Indebtedness) shall be
deemed to be to the lesser of (i) the amount of such Indebtedness or (ii)
the book value of the property which is or may be subject to such Lien.
For all purposes of this Agreement, the Indebtedness of any Person
shall include all Indebtedness of any partnership or joint venture or
limited liability company in which such Person is a general partner or a
joint venturer or a member to the extent of the lesser of (a) the recourse
to such Person on account thereof and (b) the book value of the assets of
such Person.
"LIBO Rate" means, for any Interest Period with respect to a LIBOR Bid
Loan or Offshore Rate Committed Loan, the rate of interest per annum
determined by the Agent as the rate for deposits in the Applicable Currency
for a period equal to the applicable Interest Period which appears on
Telerate Page 3740 or 3750 as of 11:00 a.m. (London time) on the day that
is two Business Days prior to the commencement of such Interest Period.
(For purposes hereof, "Telerate Page 3740 or 3750" means the display
designated as "3740" or "3750" by Bridge Information Systems, Inc.
(formerly known as Dow Jones Market Service) or any replacement page
thereof.) If the Agent is unable to obtain any quotation as provided above,
the LIBO Rate shall be the rate of interest per annum determined by the
Agent to be the rate at which deposits in the Applicable Currency in the
approximate amount of the amount of, in the case of LIBOR Bid Loans, the
LIBOR Bid Loans to be borrowed in such Bid Loan Borrowing, and, in the case
of Offshore Rate Committed Loans, the Offshore Rate Committed Loan to be
made or continued as, or converted into, an Offshore Rate Committed Loan by
BofA and having a maturity comparable to such Interest Period would be
offered by BofA to major banks in the London interbank market at their
request at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.
"LIBOR Auction" means a solicitation of Competitive Bids setting forth
a LIBOR Bid Margin pursuant to Section 2.06.
"LIBOR Bid Loan" means any Bid Loan that bears interest at a rate based
upon the LIBO Rate.
"LIBOR Bid Margin" has the meaning specified in Subsection
2.06(c)(ii)(C).
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any
14
property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having substantially the
same economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable law)
and any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an operating lease (regardless
of whether a financing statement has been filed with respect thereto).
"Loan" means an extension of credit by a Bank to the Company under
Article II or Article III in the form of a Committed Loan, Bid Loan,
Fronted Loan or L/C Advance.
"Loan Documents" means this Agreement, the Guaranty, any Notes, the Fee
Letters, the L/C-Related Documents, and all other documents delivered to
the Agent or any Bank in connection herewith.
"Majority Banks" means (a) at any time prior to the Revolving
Termination Date, or after the Revolving Termination Date if no Loans are
then outstanding, Banks then holding more than 50% of the Commitments, and
(b) otherwise, Banks then holding more than 50% of the then aggregate
unpaid principal amount of the Loans. In the case of any L/C Advance or
Fronted Loan, a Bank shall be deemed to hold a Loan in the principal amount
of its participation in the L/C Advance or Fronted Loan, as the case may
be. For purposes of determining whether the Majority Banks have approved
any amendment, waiver or consent or taken any other action hereunder, the
Dollar Equivalent Amount of all unpaid Offshore Currency Loans shall be
based upon the Dollar Equivalent Amount thereof as of the most recent
Currency Settlement Date with respect to the Offshore Currency Loans.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the business, assets, liabilities (actual or
contingent), operations or condition (financial or otherwise) of the
Company or the Company and its Subsidiaries taken as a whole; or (b) a
material adverse effect upon the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Loan Document.
"Material Subsidiary" means any current or future, direct or indirect,
Subsidiary that has (a) total assets or that has one or more Subsidiaries
that, in the aggregate, have total assets, equal to or greater than 5% of
the consolidated total assets of the Company and its Subsidiaries or (b)
total revenues or that has one or more Subsidiaries that, in the aggregate,
have total revenues, equal to or greater than 10% of the consolidated total
revenues of the Company and its Subsidiaries, such revenues determined on a
four quarter rolling basis for the most recently ended fiscal quarter and
the three immediately preceding fiscal quarters, in each case based upon
the Company's most recent financial statements delivered under Section
7.01.
15
"Multiemployer Plan" means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the
preceding three calendar years, has made, or been obligated to make,
contributions.
"NCU" means the national currency unit (other than the euro) of a
Participating Member State. From and after the Euro Transition Cutoff Date,
all references to NCU shall mean instead the euro.
"Net Issuance Proceeds" means, in respect of any issuance of equity
(other than pursuant to the exercise of stock options issued to directors,
employees and officers pursuant to stock compensation or benefit plans) by
the Company or any Subsidiary on or after October 1, 1998, the amount equal
to (a) the cash proceeds and the fair market value of non-cash proceeds
received or receivable in connection therewith minus (b) the reasonable
out-of-pocket costs and expenses paid or incurred in connection therewith.
"Notes" means the Committed Loan Notes and the Bid Loan Notes.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit B.
"Notice of Prepayment" means a notice in substantially the form of
Exhibit K.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
to any Bank, the Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising.
"Offshore Currency" means Canadian dollars, Australian dollars,
Japanese yen, English pounds sterling, the euro, and any Alternative
Currency permitted in accordance with Section 2.03(h). From and after the
Alternative Euro Transition Cutoff Date, Loans denominated in an NCU shall
be automatically redenominated into the euro as of the close of business or
such date at the applicable rate adopted and irrevocably fixed by the
European Council (in accordance with Article 1091(4) of the Treaty on
European Union) on December 31, 1998 as the official exchange rate between
the euro and such NCU.
"Offshore Currency Loan" means any Offshore Rate Committed Loan
denominated in an Offshore Currency or any Fronted Loan.
"Offshore Currency Sublimit" means the Dollar Equivalent Amount of
$50,000,000.
"Offshore Rate Committed Loan" means any Loan (other than a Bid Loan)
that bears interest based on the LIBO Rate and may be an Offshore Currency
Loan or denominated in Dollars.
16
"Offshore Rate Loan" means any LIBOR Bid Loan or any Offshore Rate
Committed Loan.
"Operating Income" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, earnings (or loss) from operations,
calculated in accordance with the methodology used for calculating
"Earnings from Operations" in the financial statements referenced in
Section 6.10.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
"Original Credit Agreement" has the meaning set forth in the recitals
hereto.
"Other Taxes" means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.
"Overnight Rate" means, for any day, in the case of any Offshore
Currency Loans, the rate of interest per annum at which overnight deposits
in the Applicable Currency, in an amount approximately equal to the amount
with respect to which such rate is being determined, would be offered for
such day by BofA's London Branch to major banks in the London or other
applicable offshore interbank market.
"Participant" has the meaning specified in Subsection 11.08(d).
"Participating Member State" means each country which from time to time
becomes a Participating Member State as described in EMU Legislation.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or
in the case of a multiple employer plan (as described in Section 4064(a) of
ERISA) has made contributions at any time during the immediately preceding
five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a)
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating
17
risks associated with liabilities, commitments or assets held by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;"
and (b) such Swap Contracts do not contain any provision ("walk-away"
provision) exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Commitment divided by the combined Commitments of
all Banks.
"Replacement Bank" has the meaning specified in Section 4.08.
"Reportable Event" means, any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of
a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"Responsible Officer" means the chief executive officer, the president,
the chief financial officer, the treasurer or the controller of the
Company, or any other officer having substantially the same authority and
responsibility.
"Revolving Termination Date" means the earlier to occur of:
(a) January 2, 2004; and
(b) the date on which the Commitments terminate in accordance with
the provisions of this Agreement.
"Same Day Funds" means (i) with respect to disbursements and payments
in Dollars, immediately available funds, and (ii) with respect to
disbursements and payments in an Offshore Currency, same day or other funds
as may be determined by the Agent to be customary in the place of
disbursement or payment for the settlement of international banking
transactions in the relevant Offshore Currency.
18
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Spot Rate" for a currency means the rate determined by the Agent to be
the rate quoted by BofA as the spot rate for the purchase by BofA of such
currency with another currency through its FX Trading Office at
approximately 8:00 a.m. (San Francisco time) on the date as of which the
foreign exchange computation is made; provided that if at the time of any
such determination, no such spot rate can reasonably be quoted, the Agent
may use any reasonable method as it deems applicable to determine such rate
hereunder, and such determination shall be conclusive absent manifest
error.
"Strategic Investor Transaction" means the consummation by the Company
and its Subsidiaries of:
(a) the sale by the Company and its Subsidiaries of capital stock of
the Company to either (i) a strategic investor who is purchasing such
capital stock as a component of a partnership, joint venture or similar
arrangement between the Company and such investor or (ii) any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) who acquire such shares
other than through a registered, public offering; and
(b) the repurchase by the Company and its Subsidiaries of capital
stock of the Company in order to reduce or eliminate the dilution which
would otherwise be caused by the transaction described in clause (a)
above.
"Subsequent Participant" means each country that adopts the euro as its
lawful currency after January 1, 1999.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests or
other equity interests (in the case of Persons other than corporations), is
owned or controlled directly or indirectly by the Person, or one or more of
the Subsidiaries of the Person, or a combination thereof. Unless the
context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or
any combination
19
of the foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and termination
value(s) determined in accordance therewith, such termination value(s), and
(b) for any date prior to the date referenced in clause (a), the amount(s)
determined as the mark-to-market value(s) for such Swap Contracts, as
determined in good faith by the Company based upon one or more mid-market
or other readily available quotations provided by any recognized dealer in
such Swap Contracts (which may include any Bank).
"Tangible Net Worth" means, as of the date of determination, the amount
equal to (a) the gross book value of the assets of the Company and its
consolidated Subsidiaries minus (b) the sum of (i) all applicable reserves
and liabilities (including accrued and deferred income taxes and all
liabilities whether or not by their terms they are subordinated
liabilities) and (ii) the book value of all Intangibles.
"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and
the Agent, respectively, taxes imposed on or measured by its net income by
the jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Agent, as the case may be, is organized or maintains
a Lending Office.
"Type" has the meaning specified in the definition of "Committed Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"United States" and "U.S." each means the United States of America.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of
each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination
is being made, is owned, beneficially and of record, by the Company, or by
one or more of the other Wholly-Owned Subsidiaries, or both.
"Year 2000 problem" means the inability of computers, as well as
embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999.
1.02 Other Interpretive Provisions.
20
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Subsection, Section, Article, Annex, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting terms
not expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied.
21
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
1.04 Currency Equivalents Generally. Except to the extent expressly
provided otherwise herein (including for purposes of any redenomination of any
Offshore Currency Loan into a Loan in Dollars but not for purposes of the
preparation of any financial statements delivered pursuant hereto or any
exchange rate determinations expressly required to be done using a different
method), the equivalent in any Offshore Currency (or any other currency) of an
amount in Dollars, and the equivalent in Dollars of an amount in any Offshore
Currency (or any other currency), shall be determined at the Spot Rate.
ARTICLE II.
THE CREDITS
2.01 Amounts and Terms of Commitments. Subject to Section 2.03 and the
other terms and conditions hereof, each Bank severally agrees, on the terms and
conditions set forth herein, to make Committed Loans in Dollars or any Offshore
Currency to the Company from time to time on any Business Day during the period
from the Effective Date to the Revolving Termination Date, in an aggregate
Dollar Equivalent Amount not to exceed at any time outstanding the Dollar amount
set forth on Schedule 2.01 (such amount, as the same may be reduced under
Section 2.08 or increased or reduced as a result of one or more assignments
under Section 11.08, such Bank's "Commitment"); provided, however, that, after
giving effect to any Committed Borrowing, the Dollar Equivalent Amount of the
Effective Amount of all outstanding Committed Loans and Bid Loans and the
Effective Amount of all L/C Obligations, shall not at any time exceed the
combined Commitments and the Dollar Equivalent Amount of all Obligations
denominated in an Offshore Currency shall not exceed the Offshore Currency
Sublimit at any time; and provided further, that the Dollar Equivalent Amount of
the Effective Amount of the Committed Loans of any Bank plus the participation
of such Bank in the Effective Amount of all L/C Obligations shall not at any
time exceed such Bank's Commitment. Within the limits of each Bank's Commitment,
and subject to the other terms and conditions hereof, the Company may borrow
under this Section 2.01, prepay under Section 2.09 and reborrow under this
Section 2.01.
2.02 Loan Accounts.
(a) The Loans made by each Bank and the Letters of Credit Issued by the
Issuing Bank shall be evidenced by one or more accounts or records maintained by
such Bank or Issuing Bank, as the case may be, in the ordinary course of
business. The accounts or records maintained by the Agent, the Issuing Bank and
each Bank shall be conclusive absent manifest error of the amount of the Loans
made by the Banks to the Company and the Letters of Credit Issued for the
account of the Company, and the interest and payments thereon. Any failure so to
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Company hereunder or under any other Loan Document to pay
any amount owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the Agent, the Committed
Loans made by such Bank may be evidenced by one or more notes in the form of
Exhibit F-1 (a
22
"Committed Loan Note"), and the Bid Loans made by such bank may be evidenced by
one or more notes in the form of Exhibit F-2 (a "Bid Loan Note"), in each case
instead of or in addition to loan accounts. Each such Bank shall endorse on the
schedules annexed to its Note(s) the date, amount and maturity of each Loan made
by it and the amount of each payment of principal made by the Company with
respect thereto. Each such Bank is irrevocably authorized by the Company to
endorse its Note(s) and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder or under any such Note to such
Bank or under any other Loan Document.
2.03 Procedure for Committed Borrowing.
(a) Each Committed Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Agent in the form of a Notice of
Borrowing, which notice must be received by the Agent prior to (i) the
Applicable Offshore Time four Business Days prior to the requested Borrowing
Date, in the case of Offshore Currency Loans; (ii) 9:00 a.m. (San Francisco
time) three Business Days prior to the requested Borrowing Date, in the case of
Offshore Rate Committed Loans in Dollars; and (ii) 8:00 a.m. (San Francisco
time) on the requested Borrowing Date, in the case of Base Rate Committed Loans,
specifying:
(A) the amount of the Committed Borrowing, which in the case of any
Dollar Committed Borrowing shall be in an aggregate minimum amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof,
and in the case of any Committed Borrowing of Offshore Currency Loans
shall be in an aggregate minimum amount equal to the lesser of (1)
1,000,000 units of the Applicable Currency or (2) the Dollar Equivalent
Amount of $5,000,000, or any integral multiple of the lesser of (1)
1,000,000 units of the Applicable Currency or (2) the Dollar Equivalent
Amount of $1,000,000 in excess of the Dollar Equivalent Amount of
$5,000,000;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the Committed Borrowing;
(D) in the case of a Committed Borrowing comprised of Offshore
Currency Loans, the Applicable Currency; and
(E) the duration of the Interest Period applicable to such Committed
Loans included in such notice. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Committed Borrowing
comprised Offshore Rate Loans, such Interest Period shall be three
months.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing denominated in Dollars and of the amount of such Bank's Pro
Rata Share of that Committed Borrowing. The Agent will also promptly notify each
Bank of its receipt of any Notice of Borrowing denominated in an Offshore
Currency and of the amount of such Bank's Pro Rata Share of that Committed
Borrowing in such Offshore Currency, the Dollar Equivalent
23
Amount thereof and the applicable Spot Rate used by the Agent to determine such
Dollar Equivalent Amount.
(c) Each Bank will make the amount of its Pro Rata Share of each
Committed Borrowing denominated in Dollars available to the Agent for the
account of the Company at the Agent's Payment Office by 11:00 a.m. (San
Francisco time) on the Borrowing Date requested by the Company in Same Day
Funds. Each Bank will make the amount of its Pro Rata Share of each Committed
Borrowing denominated in an Offshore Currency available to the Agent for the
account of the Company at the Agent's Payment Office by the Applicable Offshore
Time on the Borrowing Date requested by the Company in Same Day Funds. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BofA with the aggregate of the amounts made available to the Agent by the Banks
and in like funds as received by the Agent or by wire transfer in accordance
with written instructions provided to the Agent by the Company of like funds as
received by the Agent.
(d) After giving effect to any Committed Borrowing, unless the Agent
shall otherwise consent, there may not be more than 10 different Interest
Periods in effect for Committed Loans and Bid Loans then outstanding.
(e) If any Bank determines that it is unable, in its sole discretion
and for any reason, to fund any Committed Borrowing of Offshore Currency Loans
in a requested Offshore Currency, it shall notify the Agent (who shall notify
Company and the other Banks) as promptly as practicable and in any event prior
to the time specified by the Agent for setting the rate for such Offshore
Currency Loan, and the Notice of Borrowing for such Offshore Currency Loans
shall be deemed a request for a Fronted Loan in the amount of the requested
Committed Borrowing, unless the affected Bank shall be the Fronting Bank, in
which case the Notice of Borrowing for such Offshore Currency Loans shall be
deemed withdrawn.
(f) During the existence of a Default or Event of Default, no Committed
Loans may be requested as Offshore Rate Loans without the consent of the
Majority Banks.
(g) If a Committed Loan is to be made on the same date that another
Committed Loan in the same currency is due and payable, Company or Banks, as the
case may be, shall, unless the Agent otherwise requests, make available to the
Agent the net amount of funds giving effect to both such Loans and the effect
for purposes of this Agreement shall be the same as if separate transfers of
funds had been made with respect to each such Loan.
(h) Company may from time to time request Loans denominated in
currencies other than those listed in the definition of Offshore Currency (an
"Alternative Currency") so long as (in the reasonable judgment of the Agent) the
Alternative Currency is freely traded in the offshore interbank foreign exchange
markets and freely transferable and freely convertible into Dollars. Company
shall request any Alternative Currency not later than the Applicable Offshore
Time at least 15 Business Days in advance of the date of any Committed Borrowing
hereunder proposed to be made in such Alternative Currency. Each Bank shall
promptly notify Company whether it can, in its sole discretion, make a Loan in
the Alternative Currency. If all Banks consent to such Alternative Currency,
such Alternative Currency shall thereafter be deemed for
24
all purposes an Offshore Currency hereunder available for Committed Borrowings
of Offshore Currency Loans.
(i) Without prejudice and in addition to any method of conversion or
rounding prescribed by an EMU Legislation and without prejudice to (i) the
liabilities for indebtedness of the Company to the Banks under or pursuant to
this Agreement or (ii) the Banks' Commitments, any reference in this Agreement
to a minimum amount (or an integral multiple thereof) in a national currency of
a Subsequent Participant to be paid to or by the Agent shall immediately, upon
it becoming a Subsequent Participant, be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple thereof) in
the euro unit as the Agent may specify.
(j) The Agent may from time to time further modify the terms of, and
practices contemplated by, this Agreement with respect to the euro to the extent
the Agent determines, in its reasonable discretion, that such modifications are
necessary or convenient to reflect new laws, regulations, customs, or practices
developed in connection with the euro. The Agent may effect such modifications,
and this Agreement shall be deemed so amended, without the consent of the
Company or the Banks to the extent such modifications are not materially
disadvantageous to the Company and the Banks, upon notice thereto.
(k) The failure of any Bank to make any Committed Loan on any date
shall not relieve any other Bank of any obligation to make a Committed Loan on
such date, but no Bank shall be responsible for the failure of any other Bank to
so make its Committed Loan.
(l) If any Bank at any time becomes aware that it is reasonably likely
that, if requested, it would be unable to fund a Committed Borrowing of Offshore
Currency Loans in any Offshore Currency, or to continue to fund any Offshore
Currency Loans in any Offshore Currency as part of any continuation thereof,
such Bank will as promptly as practicable notify the Company thereof; provided
that such failure to provide such notice shall not result in any liability of
such Bank hereunder or in any way affect the applicability to such Bank of
Subsections 2.03(e) or 2.04(f).
(m) If any Bank has given notice under Subsection (e) or Subsection (l)
and has not withdrawn such notice, any request for a Committed Borrowing of
Offshore Currency Loans shall be deemed a request to the Fronting Bank to make a
loan in the requested Offshore Currency in the aggregate amount requested (each
a "Fronted Loan" and, collectively, the "Fronted Loans"), in lieu of any such
Committed Borrowing from all the Banks. A Fronted Loan shall constitute a
Committed Loan and the making of a Fronted Loan shall constitute a Committed
Borrowing. The provisions set forth herein (including in this Section 2.03 and
in Section 2.04) relating to Offshore Currency Loans made as part of a Committed
Borrowing shall otherwise apply to the Fronted Loans, mutatis mutandis, unless
the context otherwise requires and, accordingly, any Notice of Borrowing or
Notice of Conversion/Continuation will be deemed to be a request made directly
to the Fronting Bank in respect of a Fronted Loan. The Fronting Bank agrees, on
the terms and conditions set forth herein, to make Fronted Loans to the Company
from time to time on any Business Day during the period from the Effective Date
to the Revolving Termination Date, in an aggregate Dollar Equivalent Amount not
to exceed at any time the Offshore Currency Sublimit, notwithstanding the fact
that such Fronted Loans, when
25
aggregated with any other Credit Extensions made by or participated in by the
Fronting Bank, may exceed the Fronting Bank's Commitment; provided, however,
that, after giving effect to any Committed Borrowing of a Fronted Loan, the
Dollar Equivalent Amount of the Effective Amount of all outstanding Committed
Loans and Bid Loans and the Effective Amount of all L/C Obligations, shall not
at any time exceed the combined Commitments and the Dollar Equivalent Amount of
all Obligations denominated in an Offshore Currency shall not exceed the
Offshore Currency Sublimit at any time; and provided further, that the Dollar
Equivalent Amount of the Effective Amount of the Committed Loans of any Bank
plus the participation of such Bank in the Effective Amount of all L/C
Obligations shall not at any time exceed such Bank's Commitment. The Fronted
Loans and the participations of the Banks therein also shall be subject to the
provisions of Section 2.07.
2.04 Conversion and Continuation Elections for Committed Borrowings.
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with Subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Committed Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Committed Loans denominated in
Dollars, to convert any such Loans (or any part thereof in an amount
not less than the Dollar Equivalent Amount of $5,000,000, or that is in
an integral multiple of the Dollar Equivalent Amount of $1,000,000 in
excess thereof) into Loans of the other Type; or
(ii) elect as of the last day of the applicable Interest Period, to
continue any Offshore Rate Committed Loans having Interest Periods
expiring on such day as Offshore Rate Committed Loans in the same
currency (or any part thereof (A) in the case of Offshore Rate
Committed Loans in Dollars, in an aggregate amount not less than
$5,000,000, or that is in an integral multiple of the $1,000,000 in
excess thereof, and (B) in the case of any Offshore Currency Loans in
an aggregate minimum amount equal to the lesser of (1) 1,000,000 units
of the Applicable Currency or (2) the Dollar Equivalent Amount of
$5,000,000, or that is an integral multiple of the lesser of (1)
1,000,000 units of the Applicable Currency or (2) the Dollar Equivalent
Amount of $1,000,000 in excess of the Dollar Equivalent Amount of
$5,000,000);
provided, that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Committed Borrowing in Dollars is reduced, by payment,
prepayment, or conversion of part thereof to be less than $5,000,000, such
Offshore Rate Committed Loans in Dollars shall automatically convert into Base
Rate Committed Loans, and on and after such date the right of the Company to
continue such Offshore Rate Committed Loans as Offshore Rate Committed Loans
shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than (i) the Applicable Offshore Time at
least four Business Days in advance of the Conversion/Continuation Date, if
the Committed Loans are to be
26
converted into or continued as Offshore Currency Loans; (ii) 9:00 a.m. (San
Francisco time) at least three Business Days in advance of the Conversion/
Continuation Date, if Committed Loans are to be converted into or continued as
Offshore Rate Committed Loans in Dollars; and (iii) 8:00 a.m. (San Francisco
time) on the Conversion/Continuation Date, if the Committed Loans are to be
converted into Base Rate Committed Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Committed Loans to be converted or
continued;
(C) the Type of Committed Loans (and currency) resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions into Base Rate Committed
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Committed Loans in Dollars, the Company has failed to select
timely a new Interest Period to be applicable to such Offshore Rate Committed
Loans, or if any Default or Event of Default then exists and the Agent or the
Majority Banks so require, the Company shall be deemed to have elected to
convert such Offshore Rate Committed Loans into Base Rate Committed Loans
effective as of the expiration date of such Interest Period. If the Company has
failed to select a new Interest Period to be applicable to any Offshore Currency
Loans prior to the fourth Business Day in advance of the expiration date of the
current Interest Period applicable thereto as provided in Subsection 2.04(b),
the Company shall be deemed to have elected to continue such Offshore Currency
Loans on the basis of a one month Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a Notice
of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the existence
of a Default or Event of Default, the Company may not elect to have any
Committed Loans converted into or continued as an Offshore Rate Committed Loans,
and any outstanding Offshore Currency Loans shall be deemed prepaid as of the
end of the Interest Period applicable thereto and reborrowed as Base Rate Loans
in the principal Dollar Equivalent Amount of such Offshore Currency Loans on
such Conversion/Continuation Date, and any interest owing at such time (to the
extent unpaid) will be redenominated into Dollars. Additionally, during the
existence of a Default or Event of Default, Majority Banks may demand at any
time during an Interest Period that any or all of the then outstanding Offshore
Rate Loans and any interest accrued thereon be redenominated into Dollars, in
which case such outstanding Offshore Currency Loans will be deemed prepaid
immediately and reborrowed as Base Rate Loans in the principal Dollar Equivalent
Amount of such Offshore Currency Loans and any accrued interest will be due and
payable in Dollars.
(f) If any Bank determines that it is unable, in its sole discretion
and for any reason, to continue funding any Offshore Currency Loans in an
Offshore Currency as part of any
27
requested continuation thereof, it shall notify the Agent (who shall notify
Company and the other Banks) prior to the time specified by the Agent for
setting the rate for such Offshore Currency Loan in connection with the
requested continuation, and the Notice of Conversion/Continuation for such
Offshore Currency Loans shall be deemed withdrawn such Offshore Currency Loans
shall be redenominated into Dollars. Such outstanding Offshore Currency Loans
shall be deemed prepaid as of the end of the Interest Period applicable thereto
and reborrowed as Base Rate Loans in the principal Dollar Equivalent Amount of
such Offshore Currency Loans on such Conversion/Continuation Date. Any unpaid
interest thereon shall also be redenominated into Dollars at such time.
(g) The Agent will promptly notify the Company and the Banks of any
redenomination under Subsection 2.04(e) or 2.04(f) and the redenomination date
and in such notice by the Agent to each Bank the Agent will state the aggregate
Dollar Equivalent Amount of the redenominated Offshore Currency Loans as of the
Currency Settlement Date with respect thereto and such Bank's Pro Rata Share
thereof.
(h) After giving effect to any conversion or continuation of Committed
Loans, unless the Agent shall otherwise consent, there may not be more than 10
different Interest Periods in effect for Committed Loans and Bid Loans then
outstanding.
2.05 Bid Borrowings. In addition to Committed Borrowings pursuant to
Section 2.03, each Bank severally agrees that the Company may, as set forth in
Section 2.06, from time to time request the Banks prior to the Revolving
Termination Date to submit offers to make Bid Loans in Dollars to the Company;
provided, however, that the Banks may, but shall have no obligation to, submit
such offers and the Company may, but shall have no obligation to, accept any
such offers; and provided, further, that at no time shall (a) the Dollar
Equivalent Amount of the Effective Amount of all outstanding Committed Loans and
Bid Loans and the Effective Amount of all L/C Obligations exceed the combined
Commitments; or (b) unless the Agent shall otherwise consent, the number of
Interest Periods for Bid Loans then outstanding plus the number of Interest
Periods for Committed Loans then outstanding exceed ten.
2.06 Procedure for Bid Borrowings.
(a) When the Company wishes to request the Banks to submit offers to
make Bid Loans hereunder, it shall transmit to the Agent by telephone call
followed promptly by facsimile transmission a notice in substantially the form
of Exhibit H (a "Competitive Bid Request") so as to be received no later than
7:00 a.m. (San Francisco time) (x) four Business Days prior to the date of a
proposed Bid Borrowing in the case of a LIBOR Auction, or (y) one Business Day
prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate
Auction, specifying:
(i) the date of such Bid Borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Bid Borrowing, which shall be a
minimum amount of $5,000,000 or in integral multiples of $1,000,000 in
excess thereof and shall be limited to Dollars only;
28
(iii) whether the Competitive Bids requested are to be for LIBOR Bid
Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of "Interest Period" herein.
Subject to Subsection 2.06(c), the Company may not request Competitive Bids for
more than three Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will promptly
send to the Banks by facsimile transmission an Invitation for Competitive Bids,
which shall constitute an invitation by the Company to each Bank to submit
Competitive Bids offering to make the Bid Loans to which such Competitive Bid
Request relates in accordance with this Section 2.06.
(c) (i) Each Bank may at its discretion submit a Competitive Bid
containing an offer or offers to make Bid Loans in response to any
Invitation for Competitive Bids. Each Competitive Bid must comply with the
requirements of this Subsection 2.06(c) and must be submitted to the Agent
by facsimile transmission at the Agent's office for notices set forth on
the signature pages hereto not later than (1) 6:30 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing, in the
case of a LIBOR Auction or (2) 6:30 a.m. (San Francisco time) on the
proposed date of Borrowing, in the case of an Absolute Rate Auction;
provided that Competitive Bids submitted by the Agent (or any Affiliate of
the Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such Affiliate notifies the Company of the terms
of the offer or offers contained therein not later than (A) 6:15 a.m. (San
Francisco time) three Business Days prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (B) 6:15 a.m. (San Francisco
time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction.
(ii) Each Competitive Bid shall be in substantially the form of
Exhibit J, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan for which such Competitive
Bid is being made, which principal amount (x) may be equal to, greater
than or less than the Commitment of the quoting Bank, (y) must be
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, and
(z) may not exceed the principal amount of Bid Loans for which
Competitive Bids were requested;
(C) in case the Company elects a LIBOR Auction, the margin above or
below LIBOR (the "LIBOR Bid Margin") offered for each such Bid Loan,
expressed in multiples of 1/1000th of one basis point to be added to or
subtracted from the applicable LIBOR and the Interest Period applicable
thereto;
29
(D) in case the Company elects an Absolute Rate Auction, the rate of
interest per annum expressed in multiples of 1/1000th of one basis
point (the "Absolute Rate") offered for each such Bid Loan; and
(E) the identity of the quoting Bank.
A Competitive Bid may contain up to three separate offers by the
quoting Bank with respect to each Interest Period specified in the
related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with Exhibit J or does not
specify all of the information required by Subsection (c)(ii) of this
Section;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Competitive Bids; or
(D) arrives after the time set forth in Subsection (c)(i).
(d) Promptly on receipt and not later than 7:00 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing in the case of
a LIBOR Auction, or 7:00 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction, the Agent will notify the
Company of the terms (i) of any Competitive Bid submitted by a Bank that is in
accordance with Subsection 2.06(c), and (ii) of any Competitive Bid that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid submitted
by such Bank with respect to the same Competitive Bid Request. Any such
subsequent Competitive Bid shall be disregarded by the Agent unless such
subsequent Competitive Bid is submitted solely to correct a manifest error in
such former Competitive Bid and only if received within the times set forth in
Subsection 2.06(c). The Agent's notice to the Company shall specify (1) the
aggregate principal amount of Bid Loans for which offers have been received for
each Interest Period specified in the related Competitive Bid Request; and (2)
the respective principal amounts and LIBOR Bid Margins or Absolute Rates, as the
case may be, so offered. Subject only to the provisions of Sections 4.02, 4.05
and 5.02 and the provisions of this Subsection (d), any Competitive Bid shall be
irrevocable except with the written consent of the Agent given on the written
instructions of the Company.
(e) Not later than 7:30 a.m. (San Francisco time) three Business Days
prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or 7:30
a.m. (San Francisco time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction, the Company shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to Subsection 2.06(d).
The Company shall be under no obligation to accept any offer and may choose to
reject all offers. In the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest Period that is accepted.
The Company may accept any Competitive Bid in whole or in part; provided that:
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(i) the aggregate principal amount of each Bid Borrowing may not
exceed the applicable amount set forth in the related Competitive Bid
Request;
(ii) the principal amount of each Bid Borrowing must be $5,000,000
or in any integral multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis of
ascending LIBOR Bid Margins or Absolute Rates within each Interest Period,
as the case may be; and
(iv) the Company may not accept any offer that is described in
Subsection 2.06(c)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(f) If offers are made by two or more Banks with the same LIBOR Bid
Margins or Absolute Rates, as the case may be, for a greater aggregate principal
amount than the amount in respect of which such offers are accepted for the
related Interest Period, the principal amount of Bid Loans in respect of which
such offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in such integral multiples, not less than $1,000,000, as the
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determination by the Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Agent will promptly notify each Bank having submitted a
Competitive Bid if its offer has been accepted and, if its offer has been
accepted, of the amount of the Bid Loan or Bid Loans to be made by it on
the date of the Bid Borrowing.
(ii) Each Bank which has received notice pursuant to Subsection
2.06(g)(i) that its Competitive Bid has been accepted shall make the
amounts of such Bid Loans available to the Agent for the account of the
Company at the Agent's Payment Office, by 11:00 a.m. (San Francisco time)
in the case of Absolute Rate Bid Loans, and by 11:00 a.m. (San Francisco
time) in the case of LIBOR Bid Loans, on such date of Bid Borrowing, in
funds immediately available to the Agent for the account of the Company at
the Agent's Payment Office.
(iii) Promptly following each Bid Borrowing, the Agent shall notify
each Bank of the ranges of bids submitted and the highest and lowest Bids
accepted for each Interest Period requested by the Company and the
aggregate amount borrowed pursuant to such Bid Borrowing.
(iv) From time to time, the Company and the Banks shall furnish such
information to the Agent as the Agent may request relating to the making of
Bid Loans, including the amounts, interest rates, dates of borrowings and
maturities thereof, for purposes of the allocation of amounts received from
the Company for payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of Borrowing, the Commitments
have not been terminated and if, on such proposed date of Borrowing all
applicable conditions to
31
funding referenced in Sections 4.02, 4.05 and 5.02 are satisfied, the Banks
whose offers the Company has accepted will fund each Bid Loan so accepted.
Nothing in this Section 2.06 shall be construed as a right of first offer in
favor of the Banks or to otherwise limit the ability of the Company to request
and accept credit facilities from any Person (including any of the Banks),
provided that no Default or Event of Default would otherwise arise or exist as a
result of the Company executing, delivering or performing under such credit
facilities.
2.07 The Fronted Loans.
(a) The Fronting Bank irrevocably agrees to grant, and hereby grants,
to each Bank, and, to induce the Fronting Bank to make Fronted Loans hereunder,
each Bank irrevocably agrees to accept and purchase, and hereby accepts and
purchases, from the Fronting Bank, on the terms and conditions hereinafter
stated, for such Bank's own account and risk, an undivided participation
interest equal to such Bank's Pro Rata Share in the Fronting Bank's rights under
each Fronted Loan made by the Fronting Bank hereunder.
(b) If all or any part of any Fronted Loan, or any interest thereon, is
not repaid on the due date therefor, then such unpaid amount shall be
redenominated into Dollars, in which case any such outstanding Fronted Loan will
be deemed prepaid immediately and reborrowed as Base Rate Loans from the Banks
in the principal Dollar Equivalent Amount of such Fronted Loan, and any such
unpaid interest will be deemed to be owing to each of the Banks in the amount of
their Pro Rata Shares therein.
(c) Each Bank unconditionally and irrevocably agrees with the Fronting
Bank that, if the principal of, or interest on, a Fronted Loan is not paid when
due, such Bank shall pay to the Fronting Bank upon demand (made through the
Agent) in accordance with the Fronting Bank's payment instructions, an amount
(in Dollars and in Same Day Funds) equal to such Bank's Pro Rata Share of the
amount of such principal or interest which is not so paid. Such due date is
hereinafter referred to as the "Funding Date".
(d) Each Bank's obligation to purchase participating interests pursuant
to this Section 2.07 shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Fronting
Bank, the Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; (iii) any fluctuations in value of any Offshore Currency in
which a Fronted Loan is denominated; or (iv) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing.
(e) If any Bank so notified fails to make available to Fronting Bank
the amount required to be paid by such Bank to the Fronting Bank pursuant to
Subsection 2.07(c) by no later than 12:00 noon (San Francisco time) on the
Funding Date, then interest shall accrue on such Bank's obligation to make such
payment, from the Funding Date to the date such Bank makes such payment, at the
Federal Funds Rate, as in effect for each day during the period such amount
remains unpaid. A certificate of the Fronting Bank submitted to any Bank with
respect to any amounts owing under this Subsection shall be conclusive in the
absence of manifest error. The Agent will promptly give notice of the occurrence
of the Funding Date, but failure of the
32
Agent to give any such notice on the Funding Date or in sufficient time to
enable any Bank to effect such payment on such date shall not relieve such Bank
from its obligations under this Section 2.07.
(f) Except to the extent expressly provided herein, until the Funding
Date the Fronting Bank shall retain for its own account all payments of
principal and interest and other amounts payable in respect of the Fronted
Loans.
(g) The determinations to be made by the Majority Banks or all the
Banks, as the case may be, under Sections 2.03 and 2.04 with respect to Offshore
Currency Loans shall instead be made by the Fronting Bank with respect to any
Fronted Loan.
2.08 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, (a) the Dollar Equivalent Amount of the Effective Amount
of all Committed Loans, Bid Loans and L/C Obligations together would exceed the
amount of the combined Commitments then in effect, or (b) the Effective Amount
of all L/C Obligations (net of any Cash Collateral provided on account thereof)
then outstanding would exceed the L/C Commitment. Once reduced in accordance
with this Section, the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro Rata Share. If
and to the extent specified by the Company in the notice to the Agent, some or
all of the reduction in the combined Commitments shall be applied to reduce the
L/C Commitment. All accrued commitment, utilization and letter of credit fees
to, but not including, the effective date of any termination of Commitments,
shall be paid on the effective date of such termination.
2.09 Prepayments.
(a) Subject to Section 4.04, the Company may, at any time or from time
to time, upon delivering irrevocable written notice to the Agent in the form of
a Notice of Prepayment, which notice must be received by the Agent prior to (i)
8:00 a.m. (San Francisco time) on the requested prepayment date in the case of a
prepayment of Base Rate Committed Loans, (ii) the Applicable Offshore Time four
Business Days' prior to the requested prepayment date in the case of a
prepayment of Offshore Currency Loans, and (iii) 9:00 a.m. (San Francisco time)
three Business Days' prior to the requested prepayment date in the case of a
prepayment of Offshore Rate Committed Loans in Dollars, ratably prepay Committed
Loans in whole or in part, in minimum amounts of the Dollar Equivalent Amount of
$5,000,000 or any integral multiple of the Dollar Equivalent Amount of
$1,000,000 in excess thereof. Such notice of prepayment shall specify the date
and amount of such prepayment and the Type(s) (and currency) of Committed Loans
to be prepaid. The Agent will promptly notify each Bank of its receipt of any
such notice, and of such Bank's Pro Rata Share of such prepayment. If such
notice is given by the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest (other than in the case of any
Base Rate Loans) to each such date on the amount of Offshore Rate Committed
Loans prepaid and any amounts required pursuant to Section 4.04.
33
(b) Subject to Section 4.04, if on any Currency Settlement Date the
Agent shall have determined that the Dollar Equivalent Amount of the Effective
Amount of all outstanding Committed Loans and Bid Loans and the Effective Amount
of all L/C Obligations shall exceed the combined Commitments or the Dollar
Equivalent Amount of all Obligations denominated in an Offshore Currency shall
exceed the Offshore Currency Sublimit by more than $1,000,000, due to a change
in applicable rates of exchange between Dollars and Offshore Currencies, then
the Agent shall give notice to the Company that a prepayment is required under
this Section, and the Company agrees thereupon to make prepayments of Loans not
later than the Business Day following the Company's receipt of such notice such
that, after giving effect to such prepayment, the Effective Amount of all
outstanding Committed Loans and Bid Loans and the Effective Amount of all L/C
Obligations shall not exceed the combined Commitments and the Dollar Equivalent
Amount of all Obligations denominated in an Offshore Currency shall not exceed
the Offshore Currency Sublimit.
(c) Bid Loans may not be voluntarily prepaid other than with the
consent of the applicable Bid Loan Lender.
2.10 Mandatory Cash Collateralization of Letters of Credit; Mandatory
Prepayments of Loans. If on any date the Effective Amount of L/C Obligations
exceeds the L/C Commitment, the Company shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
maximum amount then available to be drawn under the Letters of Credit over the
Aggregate L/C Commitment. Subject to Section 4.04, if on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence, the Dollar Equivalent Amount of the Effective Amount of all Committed
Loans and Bid Loans then outstanding plus the Effective Amount of all L/C
Obligations exceeds the combined Commitments, the Company shall immediately, and
without notice or demand, prepay the outstanding principal amount of the
Committed Loans and L/C Advances by an amount equal to the applicable excess.
2.11 Repayment. The Company shall repay each Bid Loan on the last day of
the relevant Interest Period, and shall repay in full on the Revolving
Termination Date the aggregate principal amount of Loans outstanding on such
date.
2.12 Interest.
(a) Each Committed Loan (other than a Fronted Loan) shall bear interest
on the outstanding principal amount thereof from the applicable Borrowing Date
at a rate per annum equal to the LIBO Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.04), plus the Applicable Amount. Each Fronted Loan shall bear interest
on the outstanding principal amount thereof from the applicable Borrowing Date
at such rate as shall separately be agreed by the Fronting Bank and the Company
on or prior to the Borrowing Date therefor (it being understood that no Fronted
Loan shall be made hereunder in the absence of such agreement). Each Bid Loan
shall bear interest on the outstanding principal amount thereof from the
relevant Borrowing Date at a rate per annum equal to the LIBO Rate plus (or
minus) the LIBOR Bid Margin, or at the Absolute Rate, as the case may be.
34
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Committed Loans (other than in the case of any Base Rate Loans) under Section
2.09 for the portion of the Committed Loans so prepaid and upon payment
(including prepayment) in full thereof (other than in the case of any Base Rate
Loans) and, during the existence of any Event of Default, interest shall be paid
on demand of the Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding Subsection (a) of this Section, while any Event of
Default exists or after acceleration, the Company shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the
principal amount of all outstanding Obligations, at a rate per annum which is
determined by adding 2% per annum to the Applicable Amount then in effect for
such Loans and, in the case of Obligations not subject to an Applicable Amount,
at a rate per annum equal to the Base Rate plus 2%; provided, however, that, on
and after the expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations of
the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.13 Fees. In addition to certain fees described in Section 3.08:
(a) Arrangement, Administrative Fees. The Company shall pay certain
arrangement fees to the Lead Arranger for the Lead Arranger's own account, and
shall pay certain administrative fees to the Agent for the Agent's own account,
as required by the letter agreement ("Fee Letter") between the Company and the
Lead Arranger and Agent dated October 27, 1998.
(b) Commitment Fees. The Company shall pay to the Agent for the account
of each Bank a commitment fee on the actual daily unused portion of such Bank's
Commitment, computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon the daily utilization for that quarter as
calculated by the Agent, at a per annum rate equal to the Applicable Amount. For
purposes of calculating utilization under this Subsection, the Commitments shall
be deemed used to the extent of the Dollar Equivalent Amount of the Effective
Amount of Committed Loans then outstanding, plus the Effective Amount of L/C
Obligations then outstanding. Fronted Loans shall not constitute utilization for
the purpose of calculating commitment fees. Such commitment fee shall accrue
from the Closing Date to the Revolving Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each calendar quarter
through the Revolving Termination Date, with the final payment to be made on the
Revolving Termination Date. The commitment fees provided in this
35
Subsection shall accrue at all times after the above-mentioned commencement
date, including at any time during which one or more conditions in Article V are
not met.
(c) Utilization Fees. The Company shall pay to the Agent for the
account of each Bank a utilization fee on the actual daily Dollar Equivalent
Amount of the Effective Amount of such Bank's Committed and Bid Loans and Pro
Rata Share of the Effective Amount of L/C Obligations outstanding hereunder with
respect to each day on which the Dollar Equivalent Amount of the Effective
Amount of Committed Loans, Bid Loans and L/C Obligations then outstanding exceed
50% of the combined Commitments (each such day, a "Utilization Fee Day"). Such
fee shall be computed with respect to each Utilization Fee Day at a rate equal
to 0.10% per annum, and shall accrue with respect to each Utilization Fee Day
occurring on and after the Closing Date to the later to occur of (i) the
Revolving Termination Date and (ii) the date on which all Loans and L/C
Obligations and interest thereon are paid in full, and, to the extent accrued
during such period, shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter (commencing on March 31, 1999) through the
later to occur of (x) the Revolving Termination Date and (y) the date on which
all Loans and L/C Obligations and interest thereon are paid in full, with the
final payment to be made on the latest to occur of such dates.
2.14 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Committed Loans when the
Base Rate is determined by BofA's "prime rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year), except that interest shall accrue on
the basis of the actual number of days elapsed and a year of 365 days or 366
days, as the case may be, in the case of Offshore Currency Loans denominated in
any Offshore Currency in respect to which interest is calculated on a
365/366-day basis in accordance with customary practice in the applicable
interbank market. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) For purposes of determining utilization of each Bank's Commitment
in order to calculate the commitment fee due under Section 2.13(b) and 2.13(c)
the amount of any outstanding Offshore Currency Loans on any date shall be
determined based upon the Dollar Equivalent Amount thereof as of the most recent
Currency Settlement Date with respect to such Offshore Currency Loan.
(c) Each determination of an interest rate and any Dollar Equivalent
Amount by the Agent, and each determination of an interest rate by the Fronting
Bank, shall be conclusive and binding on the Company and the Banks in the
absence of manifest error. The Agent will, at the request of the Company or any
Bank, deliver to the Company or the Bank, as the case may be, a statement
showing the quotations used by the Agent in determining any interest rate and
the resulting interest rate and in determining any Dollar Equivalent Amount.
2.15 Payments by the Company.
36
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Agent for the account
of the Banks at the Agent's Payment Office, and, with respect to principal of,
interest on, and any other amounts relating to, any Offshore Currency Loan,
shall be made in the Offshore Currency in which such Loan is denominated or
payable, and, with respect to all other amounts payable hereunder, shall be made
in Dollars. Such payments shall be made in Same Day Funds, and (A) in the case
of any Offshore Currency payments, no later than the Applicable Offshore Time,
and (B) in the case of any Dollar payments, no later than 11:00 a.m. (San
Francisco time) on the date specified herein. The Agent will promptly distribute
to each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such principal, interest, fees or other amounts, in like funds as
received. Any payment which is received by the Agent later than 11:00 a.m. (San
Francisco time) (in the case of any Dollar payments), or later than the
Applicable Offshore Time (in the case of Offshore Currency payments), shall
(unless the Agent shall otherwise agree) be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue. Notwithstanding any other provisions of this Agreement, if and to the
extent that EMU Legislation provides that amounts denominated in the euro or an
NCU may be paid within a country in either the euro or the NCU of that country
by crediting an account of the creditor in that country, payments may be made in
either the euro or such NCU.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Agent receives notice from the Company prior to the date
on which any payment in Dollars or any Applicable Currency is due to the Banks
that the Company will not make such payment in full as and when required, the
Agent may assume that the Company has made such payment in full to the Agent on
such date in Same Day Funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the Company
has not made such payment in full to the Agent, each Bank shall repay to the
Agent on demand such amount distributed to such Bank, together with interest
thereon at the Federal Funds Rate or, in the case of a payment in an Offshore
Currency, the Overnight Rate, for each day from the date such amount is
distributed to such Bank until the date repaid.
2.16 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or prior to the
Effective Date or, with respect to any Borrowing after the Effective Date, no
later than (i) one Business Day prior to the date of such Borrowing, in the case
of a Borrowing of Offshore Rate Committed Loans or (ii) 10:00 a.m. (San
Francisco time) on the requested date of Borrowing, in the case of a Borrowing
of any other type of Loans, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Company the amount of
that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank
has made such amount available to the Agent in Same Day Funds on the Borrowing
Date and the Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Company on such
37
date a corresponding amount. If and to the extent any Bank shall not have made
its full amount available to the Agent in Same Day Funds and the Agent in such
circumstances has made available to the Company such amount, that Bank shall on
the Business Day following such Borrowing Date make such amount available to the
Agent, together with interest at the Federal Funds Rate or, in the case of any
Borrowing consisting of Offshore Currency Loans, the Overnight Rate, for each
day during such period. A notice of the Agent submitted to any Bank with respect
to amounts owing under this Subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on the Business Day
following the Borrowing Date, the Agent will notify the Company of such failure
to fund and, upon demand by the Agent, the Company shall pay such amount to the
Agent for the Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.17 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks and the Company following any such purchases or repayments.
2.18 Guaranty. The Obligations shall be unconditionally and irrevocably
guaranteed by the Guarantors pursuant to the Guaranty.
ARTICLE III.
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
38
(a) On the terms and conditions set forth herein (i) the Issuing Bank
agrees, (A) from time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date to issue Letters of Credit for
the account of the Company, and to amend or renew Letters of Credit previously
issued by it, in accordance with Subsections 3.02(c) and 3.02(d), and (B) to
honor drafts under the Letters of Credit; and (ii) the Banks severally agree to
participate in Letters of Credit Issued for the account of the Company;
provided, that the Issuing Bank shall not be obligated to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "Issuance Date") (1) the Effective Amount
of all L/C Obligations plus the Dollar Equivalent Amount of the Effective Amount
of all Committed Loans and Bid Loans exceeds the combined Commitments, (2) the
participation of any Bank in the Effective Amount of all L/C Obligations plus
the Dollar Equivalent Amount of the Effective Amount of the Committed Loans of
such Bank exceeds such Bank's Commitment, or (3) the Effective Amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Company's ability to obtain
Letters of Credit shall be fully revolving, and, accordingly, the Company may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the Issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Issuing Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuing Bank in good faith deems material to it;
(ii) the Issuing Bank has received written notice from any Bank, the
Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is (A) more
than one year after the date of Issuance, unless the Majority Banks have
approved such expiry date in writing, or (B) after the Revolving
Termination Date, unless all of the Banks have approved such expiry date in
writing;
(iv) unless agreed to by the Issuing Bank in the given instance, the
expiry date of any requested Letter of Credit is prior to the maturity date
of any financial obligation to be supported by the requested Letter of
Credit;
39
(v) any requested Letter of Credit does not provide for drafts, or
is not otherwise in form and substance acceptable to the Issuing Bank, or
the Issuance of a Letter of Credit shall violate any applicable policies of
general application of the Issuing Bank;
(vi) unless agreed to by the Issuing Bank in the given instance, any
standby Letter of Credit is for the purpose of supporting the issuance of
any letter of credit by any other Person; or
(vii) such Letter of Credit is in a face amount less than $2,500,000
or to be denominated in a currency other than Dollars.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of issuance. Each such request for issuance of a Letter of Credit
shall be by facsimile, confirmed immediately in an original writing, in the form
of an L/C Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the proposed date of issuance of the Letter of Credit (which
shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; and (vii) such other matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under Subsection 3.01(a) as a result of the limitations set forth
in clauses (1) through (3) thereof or Subsection 3.01(b)(ii); or (B) that one or
more conditions specified in Article V are not then satisfied; then, subject to
the terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and prior
to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of amendment, amend any Letter of Credit issued by it. Each such
request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in
40
form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be
amended; (ii) the proposed date of amendment of the Letter of Credit (which
shall be a Business Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as the Issuing Bank may require. The Issuing Bank shall be
under no obligation to amend any Letter of Credit if: (A) the Issuing Bank would
have no obligation at such time to issue such Letter of Credit in its amended
form under the terms of this Agreement; or (B) the beneficiary of any such
letter of Credit does not accept the proposed amendment to the Letter of Credit.
The Agent will promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of Credit
is outstanding and prior to the Revolving Termination Date, at the option of the
Company and upon the written request of the Company received by the Issuing Bank
(with a copy sent by the Company to the Agent) at least four days (or such
shorter time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of notification of renewal, the Issuing
Bank shall be entitled to authorize the renewal of any Letter of Credit issued
by it. Each such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form of an L/C
Amendment Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Letter of Credit; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation so to renew any Letter of Credit if: (A) the Issuing Bank would have
no obligation at such time to issue or amend such Letter of Credit in its
renewed form under the terms of this Agreement; or (B) the beneficiary of any
such Letter of Credit does not accept the proposed renewal of the Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
Issuing Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal the Issuing Bank would be entitled to authorize the automatic renewal
of such Letter of Credit in accordance with this Subsection 3.02(d) upon the
request of the Company but the Issuing Bank shall not have received any L/C
Amendment Application from the Company with respect to such renewal or other
written direction by the Company with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and the
Company and the Banks hereby authorize such renewal, and, accordingly, the
Issuing Bank shall be deemed to have received an L/C Amendment Application from
the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the Agent
at the direction of the Majority Banks), deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent and the Company,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal
41
of a Letter of Credit, to an advising bank or a beneficiary, a true and complete
copy of each such Letter of Credit or amendment to or renewal of a Letter of
Credit.
3.03 Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of Credit, each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
Section 2.01, each Issuance of a Letter of Credit shall be deemed to utilize the
Commitment of each Bank by an amount equal to the amount of such participation.
(b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Bank will promptly notify
the Company. The Company shall reimburse the Issuing Bank prior to 10:00 a.m.
(San Francisco time), on each date that any amount is paid by the Issuing Bank
under any Letter of Credit (each such date, an "Honor Date"), in an amount equal
to the amount so paid by the Issuing Bank. In the event the Company fails to
reimburse the Issuing Bank for the full amount of any drawing under any Letter
of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, the Issuing Bank
will promptly notify the Agent and the Agent will promptly notify each Bank
thereof, and the Company shall be deemed to have requested that Base Rate
Committed Loans be made by the Banks to be disbursed on the Honor Date under
such Letter of Credit, subject to the amount of the unutilized portion of the
Commitments and subject to the conditions set forth in Section 5.02. Any notice
given by the Issuing Bank or the Agent pursuant to this Subsection 3.03(b) may
be oral if immediately confirmed in writing (including by facsimile); provided
that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice. The parties acknowledge that
the failure of the Company to timely reimburse the Issuing Bank for the full
amount of the amount of any drawing under any Letter of Credit shall not
constitute a Default or Event of Default where such drawing is funded in
accordance with the provisions of this Section 3.03 by the making of Base Rate
Committed Loans.
(c) Each Bank shall upon any notice pursuant to Subsection 3.03(b) make
available to the Agent for the account of the relevant Issuing Bank an amount in
Dollars and in Same Day Funds equal to its Pro Rata Share of the amount of the
drawing, whereupon the participating Banks shall (subject to Subsection 3.03(d))
each be deemed to have made a Loan consisting of a Base Rate Committed Loan to
the Company in that amount. If any Bank so notified fails to make available to
the Agent for the account of the Issuing Bank the amount of such Bank's Pro Rata
Share of the amount of the drawing by no later than 12:00 noon (San Francisco
time) on the Honor Date, then interest shall accrue on such Bank's obligation to
make such payment, from the Honor Date to the date such Bank makes such payment,
at a rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Agent will promptly give notice of the occurrence of the
Honor Date, but failure of the Agent to give any such notice on the Honor Date
or in sufficient time to enable any Bank to effect such payment on such date
shall not relieve such Bank from its obligations under this Section 3.03.
42
(d) With respect to any unreimbursed drawing that is not converted into
Loans consisting of Base Rate Committed Loans to the Company in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 5.02 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of such drawing,
which L/C Borrowing (together with interest thereon) shall be due and payable by
the Company on demand of the Agent or the Issuing Bank, in each case at the
request of or with the consent of the Majority Banks (provided, that for
purposes of this Subsection (d), any Bank which has failed to make payment to
the Issuing Bank pursuant to Subsection 3.03(c) shall be disregarded in the
determination of the Majority Banks). Such L/C Borrowing shall bear interest at
a rate per annum equal to the Base Rate plus 2% per annum, and each Bank's
payment to the Issuing Bank pursuant to Subsection 3.03(c) shall be deemed
payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its participation
obligation under this Section 3.03. The parties acknowledge that the incurrence
of an L/C Borrowing by the Company and the funding of L/C Advances as a result
thereof by the Banks shall not in itself constitute a Default or Event of
Default.
(e) Each Bank's obligation in accordance with this Agreement to make
the Committed Loans or L/C Advances, as contemplated by this Section 3.03, as a
result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing Bank, the
Company or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Bank's obligation
to make Committed Loans under this Section 3.03 is subject to the conditions set
forth in Section 5.02.
3.04 Repayment of Participations.
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of Same Day Funds from the Company (i) in reimbursement of any
payment made by the Issuing Bank under the Letter of Credit with respect to
which any Bank has paid the Agent for the account of the Issuing Bank for such
Bank's participation in the Letter of Credit pursuant to Section 3.03 or (ii) in
payment of interest thereon, the Agent will pay to each Bank, in the same funds
as those received by the Agent for the account of the Issuing Bank, the amount
of such Bank's Pro Rata Share of such funds, and the Issuing Bank shall receive
the amount of the Pro Rata Share of such funds of any Bank that did not so pay
the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to return
to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of the Issuing Bank pursuant to Subsection
3.04(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Agent or the Issuing Bank plus interest thereon from
the date such demand is
43
made to the date such amounts are returned by such Bank to the Agent or the
Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect from
time to time.
3.05 Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in paying any drawing under a
Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft and certificates expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Bank for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Banks (including the Majority Banks, as applicable); (ii)
any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Company, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Company which the
Company proves were caused by the Issuing Bank's willful misconduct or gross
negligence or the Issuing Bank's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Committed Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
44
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of the Company in respect
of any Letter of Credit or any other amendment or waiver of or any consent
to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Company may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C-Related Documents or any unrelated
transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit; or any payment made by the
Issuing Bank under any Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
other guarantee, for all or any of the obligations of the Company in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Company or a guarantor.
The foregoing provisions of this Section 3.06 are not intended to waive any
claim the Company may have against the Issuing Bank as set forth and limited in
Subsection 3.05(c).
3.07 Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if the
Issuing Bank has honored any full or partial drawing request on any Letter of
Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B) if,
as of the Revolving Termination Date, any Letters of Credit may for any reason
remain outstanding and partially or wholly undrawn, or (ii) the occurrence of
the circumstances described in Section 2.10 requiring the Company to Cash
Collateralize Letters of Credit, then, the Company shall immediately Cash
Collateralize the L/C Obligations in an amount equal to the L/C Obligations.
45
3.08 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account of each of the
Banks a letter of credit fee with respect to the Letters of Credit at a rate per
annum equal to the Applicable Amount times the actual daily maximum amount
available to be drawn of the outstanding Letters of Credit, computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon Letters of Credit outstanding for that quarter as calculated by the
Agent. Such letter of credit fees shall be due and payable quarterly in arrears
on the last Business Day of each calendar quarter during which Letters of Credit
are outstanding, commencing on March 31, 1999, through the Revolving Termination
Date (or such later date upon which the outstanding Letters of Credit shall
expire), with the final payment to be made on the Revolving Termination Date (or
such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to
0.125% of the face amount (or increase in face amount, as the case may be) of
such Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable on each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.09 Uniform Customs and Practice and International Standby Practices.
Unless otherwise expressly agreed by the Issuing Bank and the Borrower when a
Letter of Credit is issued and subject to applicable laws, performance under
Letters of Credit by the Issuing Bank, its correspondents, and beneficiaries
will be governed by (i) with respect to standby Letters of Credit, the rules of
the "International Standby Practices 1998" (ISP98) or such later revision as may
be published by the International Chamber of Commerce (the "ICC"), and (ii) with
respect to commercial Letters of Credit, the rules of the Uniform Customs and
Practice for Documentary Credits, as published in its most recent version by the
ICC on the date any commercial Letter of Credit is issued, and including the ICC
decision published by the Commission on Banking Technique and Practice on April
6, 1998 regarding the European single currency (euro).
ARTICLE IV.
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) Any and all payments by the Company to each Bank or the Agent under
this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that, after
making all required deductions and withholdings (including deductions and
withholdings
46
applicable to additional sums payable under this Section), such Bank or the
Agent, as the case may be, receives and retains an amount equal to the sum
it would have received and retained had no such deductions or withholdings
been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to each Bank or the Agent for the
account of such Bank, at the time interest is paid, Further Taxes in the
amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and the
Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or the
Agent pursuant to Subsection (a), (b) or (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
4.02 Illegality.
(a) If any Bank determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make Offshore Rate Loans, or
any central bank or other Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take
deposits of, Dollars or the applicable Offshore Currency in the applicable
offshore interbank market, then, on notice thereof by the Bank to the Company
through the Agent, any obligation of that Bank to make Offshore Rate Loans
(including in respect of any LIBOR Bid Loan as to which the Company has accepted
such Bank's Competitive Bid, but as to which the disbursement date has not
arrived) or Offshore Currency Loans, as the case may be, shall be suspended
until the Bank notifies the Agent and the Company that the circumstances giving
rise to such determination no longer exist.
47
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), convert all such Offshore Rate Loans
of that Bank then outstanding to Base Rate Loans, and shall pay to such Bank all
interest accrued thereon and amounts required under Section 4.04, either on the
last day of the Interest Period thereof, if the Bank may lawfully continue to
maintain such Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loan.
4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the introduction
after the date hereof of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or request
received after the date hereof from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Bank of agreeing to make or making, funding or maintaining
any Offshore Rate Committed Loans or participating in Letters of Credit, or, in
the case of the Issuing Bank, any increase in the cost to the Issuing Bank of
agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing to
make or making, funding or maintaining any unpaid drawing under any Letter of
Credit, then the Company shall be liable for, and shall from time to time, upon
demand (with a copy of such demand to be sent to the Agent), pay to the Agent
for the account of such Bank, additional amounts as are sufficient to compensate
such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction after
the date hereof of any Capital Adequacy Regulation, (ii) any change after the
date hereof in any Capital Adequacy Regulation, (iii) any change after the date
hereof in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation promulgated or changed after the date hereof, affects or
would affect the amount of capital required or expected to be maintained by the
Bank or any corporation controlling the Bank and (taking into consideration such
Bank's or such corporation's policies with respect to capital adequacy and such
Bank's desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Company through the
Agent, the Company shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank for such increase.
4.04 Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any reasonable loss or expense (other than lost profit) which
the Bank may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely basis any payment of
principal of any Offshore Rate Loan;
48
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.09;
(d) the prepayment (including pursuant to Section 2.10 or Section 4.08)
or other payment (including after acceleration thereof) of an Offshore Rate Loan
or Absolute Rate Bid Loan on a day that is not the last day of the relevant
Interest Period;
(e) the automatic conversion under Section 2.04 of any Offshore Rate
Committed Loan to a Base Rate Committed Loan on a day that is not the last day
of the relevant Interest Period; or
(f) any redenomination of an Offshore Currency Loan into Dollars, as
provided for in Article II;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained.
4.05 Inability to Determine Rates. If the Agent reasonably determines that
for any reason adequate and reasonable means do not exist for determining the
LIBO Rate for any requested Interest Period with respect to a proposed Offshore
Rate Loan, that deposits in Dollars or the applicable Offshore Currency are not
being offered to banks in the applicable offshore market for the applicable
amount and Interest Period of the requested Offshore Rate Loan, or that the LIBO
Rate applicable pursuant to Subsection 2.12(a) for any requested Interest Period
with respect to a proposed Offshore Rate Loan does not adequately and fairly
reflect the cost to the Banks of funding such Loan, the Agent will promptly so
notify the Company and each Bank. Thereafter, the obligation of the Banks to
make or maintain Offshore Rate Loans, as the case may be, hereunder shall be
suspended until the Agent revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of Conversion /
Continuation then submitted by it. In the case of any Dollar Loans, if the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Committed Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Committed Loans shall be
made, converted or continued as Base Rate Committed Loans instead of Offshore
Rate Loans. In the case of any Offshore Currency Loans, the Committed Borrowing
or continuation shall be in an aggregate amount equal to the Dollar Equivalent
Amount of the originally requested Committed Borrowing or continuation in the
Offshore Currency, and to that end any outstanding Offshore Currency Loans which
are the subject of any continuation shall be redenominated and converted into
Base Rate Loans in Dollars with effect from the last day of the Interest Period
with respect to any such Offshore Currency Loans.
4.06 Reserves on Offshore Rate Loans. The Company shall pay to each Bank,
as long as such Bank shall be required under regulations of the FRB to maintain
reserves with respect to
49
liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as "Eurocurrency liabilities"), and, in respect of any Offshore
Currency Loans, under any applicable regulations of the central bank or other
relevant Governmental Authority in the country in which the Offshore Currency of
such Offshore Rate Loan circulates, additional costs on the unpaid principal
amount of each Offshore Rate Committed Loan equal to the actual costs of such
reserves allocated to such Committed Loan by the Bank (as determined by the Bank
in good faith, which determination shall be conclusive), payable on each date on
which interest is payable on such Committed Loan, provided the Company shall
have received at least 15 days' prior written notice (with a copy to the Agent)
of such additional interest from the Bank. If a Bank fails to give notice 15
days prior to the relevant Interest Payment Date, such additional interest shall
be payable 15 days from receipt of such notice.
4.07 Certificates of Banks. Any Bank claiming reimbursement or compensation
under this Article IV shall deliver to the Company (with a copy to the Agent) a
certificate setting forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be conclusive and binding on the Company in
the absence of manifest error. If such Bank fails to notify the Company that the
Bank intends to claim any such reimbursement or compensation within 180 days
after the Bank has knowledge of its claim therefor, the Company shall not be
obligated to compensate the Bank for the amount of the Bank's claim accruing
prior to the date which is 180 days before the date on which the Bank first
notifies the Company that it intends to make such claim; it being understood
that the calculation of the actual amounts may not be possible within such
period and the Bank may provide such calculation as soon as reasonably
practicable thereafter without affecting or limiting the Company's payment
obligations hereunder, and that the Company shall be liable to such Bank
therefor notwithstanding the replacement or termination of such Bank's
Commitment pursuant to Section 4.08.
4.08 Substitution of Banks. Upon the receipt by the Company from any Bank
(an "Affected Bank") of a claim for compensation (or notice from such Bank of
its intent to make such a claim) under Section 4.01, Section 4.03 or Section
4.06, the Company may: (i) request the Affected Bank (at its sole discretion) to
attempt to obtain a replacement bank or financial institution satisfactory to
the Company to acquire and assume all or a ratable part of all of such Affected
Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one more of the
other Banks (at their sole discretion) to acquire and assume all or part of such
Affected Bank's Commitment and Loans and its Pro Rata Share of the L/C
Obligations pursuant to the procedures set forth in Section 11.08; (iii)
designate a Replacement Bank; or (iv) provided that there shall not have
occurred and be continuing any Event of Default, repay in full of all of the
Affected Bank's Loans, along with interest thereon, any fees then accrued and
unpaid for the account of the Affected Bank and any other amounts then due to
the Affected Bank hereunder (including any amounts due under Section 4.04) and
terminate the Affected Bank's Commitment. In the event of a termination of an
Affected Bank's Commitment under clause (iv), the Company shall notify the Agent
of such termination prior to its effective date, and, on the date of such
termination, this Agreement shall be deemed amended to the extent, but only to
the extent, necessary to reflect the deletion of such Affected Bank as a Bank
party to this Agreement and the resulting adjustment of the Commitments arising
therefrom and the adjustment described in the next sentence. Effective on the
date of such termination, the amount of each Bank's risk participation in all
outstanding Letters of Credit shall be deemed to be automatically increased or
decreased, as applicable, to reflect any changes in such Bank's Pro Rata Share
after giving effect
50
to the decrease in the aggregate Commitments effective thereon. The Agent shall
promptly notify the Banks and the Company of any decrease in the aggregate
Commitments under clause (iv) of this Section and of each Bank's Pro Rata Share
after giving effect to any such decrease. Each Replacement Bank shall be an
Eligible Assignee and shall become a party to this Agreement pursuant to the
procedures set forth in Section 11.08, and any designation of a Replacement Bank
under clause (i) or (iii) shall be subject to the prior written consent of the
Agent (which consent shall not be unreasonably withheld).
4.09 Survival. The agreements and obligations of the Company in this
Article IV shall survive the termination of the Commitments and the payment of
all other Obligations.
ARTICLE V.
CONDITIONS PRECEDENT
5.01 Conditions of Amendment and Restatement and to Additional Credit
Extensions. The obligation of each Bank to amend and restate the Original Credit
Agreement as provided herein and to make any Credit Extension hereunder is
subject to the condition that the Agent shall have received on or before the
Effective Date all of the following, in form and substance satisfactory to the
Agent and each Bank:
(a) Credit Agreement, Guaranty and Notes. This Agreement, the Guarantor
Acknowledgment and Consent in substantially the form of Exhibit G and, to the
extent requested by any Bank, replacement Notes, executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
the Effective Date by the Secretary or an Assistant Secretary; and
(ii) A certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers authorized
to execute, deliver and perform, as applicable, this Agreement, and all
other Loan Documents to be delivered by it hereunder;
(c) (reserved)
(d) Legal Opinion. An opinion of Leonard Goldner, General Counsel of
the Company and addressed to the Agent and the Banks, substantially in the form
of Exhibit D-1;
(e) Payment of Fees. Evidence of payment by the Company of all accrued
and unpaid fees, costs and expenses to the extent then due and payable on the
Effective Date, together with Attorney Costs of BofA to the extent invoiced
prior to or on the Effective Date, including any such costs, fees and expenses
arising under or referenced in Sections 2.13 and 11.04; and
(f) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may request.
51
5.02 Conditions to Amendment and Restatement and to all Credit Extensions.
The obligation of each Bank to amend and restate the Original Credit Agreement
as provided herein and to make any Committed Loan to be made by it, or any Bid
Loan as to which the Company has accepted the relevant Competitive Bid and the
obligation of the Issuing Bank to Issue any Letter of Credit is subject to the
satisfaction of the following conditions precedent on the relevant disbursement
date or Issuance Date:
(a) Notice, Application. As to any Committed Loan, the Agent shall have
received a Notice of Borrowing or in the case of any Issuance of any Letter of
Credit, the Issuing Bank and the Agent shall have received an L/C Application or
L/C Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The representations
and warranties of the Company in Article VI and of the Guarantors in the
Guaranty shall be true and correct in all material respects on and as of such
borrowing date or Issuance Date, both before and after giving effect to the
proposed Borrowing or Issuance and to the application of the proceeds therefrom,
with the same effect as if made on and as of such borrowing date or Issuance
Date (except to the extent such representations and warranties expressly refer
to an earlier date, in which case they shall be true and correct in all material
respects as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist or
shall result from such Borrowing or Issuance.
Each Notice of Borrowing, Competitive Bid Request and L/C Application or L/C
Amendment Application submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder, as of the date of each
such notice or request and as of each disbursement date or Issuance Date, as
applicable, that, before and after giving effect to the proposed Borrowing or
Issuance and to the application of the proceeds therefrom, the conditions in
this Section 5.02 are satisfied.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
6.01 Corporate Existence and Power.
(a) The Company and each of its Material Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
(b) The Company and each of its Subsidiaries has the power and
authority and all governmental licenses, authorizations, consents and approvals
necessary to (i) own its assets, (ii) carry on its business and (iii) execute,
deliver, and perform its obligations under the Loan Documents;
(c) The Company and each of its Subsidiaries is duly qualified as a
foreign corporation and is licensed and in good standing under the laws of each
jurisdiction where its
52
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) The Company and each of its Subsidiaries is in compliance with all
Requirements of Law;
except, in each case referred to in clause (b)(i), (b)(ii), (c) or (d), to the
extent that the failure to do so would not reasonably be expected to have a
Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the Guarantors and the Company
of each other Loan Document to which such Person is party, have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which such Person is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject; or
(c) violate any Requirement of Law;
except, in each case referred to in clause (b) or (c), to the extent that the
failure to do so would not reasonably be expected to have a Material Adverse
Effect.
6.03 Binding Effect. This Agreement and each other Loan Document to which
the Company and each Guarantor is a party constitute the legal, valid and
binding obligations of the Company and such Guarantor to the extent it is a
party thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.04 Litigation. Except as specifically disclosed in Schedule 6.04 to the
Original Credit Agreement and in the filings of the Company with the SEC which
are publicly available on the date hereof, there are no actions, suits,
proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in arbitration or before
any Governmental Authority, against the Company, or its Subsidiaries or any of
their respective properties which:
(a) purport to affect or directly pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) as to which there exists a substantial likelihood of an adverse
determination, which determination would reasonably be expected to have a
Material Adverse Effect. No injunction, writ, temporary restraining order or any
order of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any other Loan Document, or directing
53
that the transactions provided for herein or therein not be consummated as
herein or therein provided.
6.05 No Default. No Default or Event of Default exists. As of the Closing
Date, neither the Company nor any Subsidiary is in default under or with respect
to any Contractual Obligation in any respect which, individually or together
with all such defaults, would reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under Subsection 9.01(e).
6.06 ERISA Compliance. Except as specifically disclosed in Schedule 6.06 to
the Original Credit Agreement:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code (or, in the
case of prototype Plans, the provider thereof) has received a favorable
determination letter from the IRS and to the best knowledge of the Company,
nothing has occurred which would cause the loss of such qualification. The
Company and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the
Company nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the
Company nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6.07 Use of Proceeds; Margin Regulations. The proceeds of the Loans and the
Letters of Credit are to be used solely for the purposes set forth in and
permitted by Section 7.11 and Section 8.07. Neither the Company nor any
Subsidiary is generally engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or carrying Margin
Stock.
6.08 Title to Properties. The Company and each Subsidiary have good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title and
54
leasehold interests as could not, individually or in the aggregate, have a
Material Adverse Effect. The property of the Company and its Subsidiaries is
subject to no Liens, other than Permitted Liens.
6.09 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. The Company has not received notice of any proposed tax
assessment against the Company or any Subsidiary that would, if made, have a
Material Adverse Effect, except any such assessment which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP.
6.10 Financial Condition.
(a) The audited consolidated financial statements of the Company and
its consolidated Subsidiaries dated December 31, 1999, and the unaudited
consolidated financial statements of the Company and its consolidated
Subsidiaries dated March 31, 2000, and the related consolidated statements of
income or operations, shareholders' equity and cash flows for the fiscal year
ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein and, in the case of the financial statements dated March 31, 2000,
subject to good faith year-end audit adjustments and the absence of
footnotes;
(ii) fairly present the financial condition of the Company and its
consolidated Subsidiaries as of the date thereof and results of operations
for the period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.10 to the
Original Credit Agreement, show all material indebtedness and other
liabilities, direct or contingent, of the Company and its consolidated
Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Contingent Obligations.
(b) Since September 30, 1998, there has been no Material Adverse
Effect.
6.11 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.11 to the Original Credit Agreement, such Environmental
Laws and Environmental Claims would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.12 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding
55
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
6.13 No Burdensome Restrictions. Neither the Company nor any Subsidiary is
a party to or bound by any Contractual Obligation, or subject to any restriction
in any Organization Document, or any Requirement of Law, which would reasonably
be expected to have a Material Adverse Effect.
6.14 Copyrights, Patents, Trademarks and Licenses, Etc. The Company and its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. Except as specifically disclosed in Schedule 6.04 to the
Original Credit Agreement and in the filings of the Company with the SEC which
are publicly available on the date hereof, no claim or litigation regarding any
of the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
would reasonably be expected to have a Material Adverse Effect.
6.15 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries
other than those specifically disclosed in Schedule 6.15 to the Original Credit
Agreement, which identifies as of the Closing Date each Domestic Subsidiary and
each Material Subsidiary as such.
6.16 Insurance. Except as specifically disclosed in Schedule 6.16 to the
Original Credit Agreement, the properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Company or such Subsidiary
operates.
6.17 Swap Obligations. Neither the Company nor any of its Subsidiaries has
incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations.
6.18 Full Disclosure. None of the representations or warranties made by the
Company or any Guarantor in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Guarantor pursuant to the Loan Documents,
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading in any
material respect as of the time when made or delivered.
56
ARTICLE VII.
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
7.01 Financial Statements. The Company shall deliver to the Agent and each
Bank, in form and detail satisfactory to the Agent and the Majority Banks:
(a) as soon as available, but not later than 100 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the opinion of Deloitte
& Touche or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified as to (i) any limitation in the scope
of the audit, or (ii) possible errors generated by financial reporting and
related systems due to the Year 2000 problem unless the Independent Auditor has
adopted a general policy of qualifying its opinions with respect thereto for
companies in similar industries as the Company and its Subsidiaries; and
(b) as soon as available, but not later than 55 days after the end of
each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter, and
certified by a Responsible Officer as fairly presenting, in accordance with GAAP
(subject to good faith year-end audit adjustments and the absence of footnotes),
the financial position and the results of operations of the Company and the
Subsidiaries.
7.02 Certificates; Other Information. The Company shall furnish to the
Agent and each Bank:
(a) concurrently with the delivery of the financial statements referred
to in Subsections 7.01(a) and (b), a Compliance Certificate executed by a
Responsible Officer;
(b) promptly, copies of all financial statements and reports that the
Company sends to its shareholders, and copies of all publicly available
financial statements and regular, periodical or special reports (including Forms
10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with,
the SEC; and
(c) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time reasonably request.
57
Reports required to be delivered pursuant to clauses (a) and (b) of Section
7.01 and clause (b) of this Section 7.02 shall be deemed to have been delivered
on the date on which Company posts such reports on Company's website on the
Internet at the website address listed on Schedule 11.02 or when such report is
posted on the SEC's website at www.sec.gov.; provided that (x) Company shall
deliver paper copies of the reports referred to in clauses (a) and (b) of
Section 7.01 and clause (b) of this Section 7.02 to the Agent or any Bank who
requests Company to deliver such paper copies until written request to cease
delivering paper copies is given by the Agent or such Bank, (y) the Company
shall notify the Agent and the Banks of the posting of any such new material,
and (z) in every instance the Company shall provide the original signed
Compliance Certificate required by clause (a) of this Section 7.02 to the Agent
and paper copies thereof to each of the Banks. Except for the Compliance
Certificate referred to in such clause (a) of this Section 7.02, the Agent shall
have no obligation to request the delivery or to maintain copies of the reports
referred to in clauses (a) and (b) of Section 7.01 and clause (b) of this
Section 7.02, and in any event shall have no responsibility to monitor
compliance by the Company with any such request for delivery, and each Bank
shall be solely responsible for requesting delivery to it or maintaining its
copies of such reports.
7.03 Notices. The Company shall promptly notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that in the reasonable
judgment of the Company is likely to become a Default or Event of Default;
(b) of any matter that has resulted or that in the reasonable judgment
of the Company is likely to result in a Material Adverse Effect, including, to
the extent it has so resulted or in the reasonable judgment of the Company is
likely to so result, (i) breach or non-performance of, or any default under, a
Contractual Obligation of the Company or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between the Company or any
Subsidiary and any Governmental Authority; or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting the Company or
any Subsidiary; including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with respect
to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of any
Pension Plan;
(iii) the adoption of, or the commencement of contributions to, any
Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
58
(iv) the adoption of any amendment to a Plan subject to Section 412
of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; and
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action the Company or any affected Subsidiary proposes to take
with respect thereto and at what time. Each notice under Subsection 7.03(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been (or in the reasonable judgment
of the Company are likely to be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. The Company shall:
(a) and shall cause each Material Subsidiary to, preserve and maintain
in full force and effect its corporate existence and good standing under the
laws of its state or jurisdiction of incorporation, except in connection with
transactions permitted by Section 8.03 and sales of assets permitted by Section
8.02;
(b) and shall cause each Material Subsidiary to, preserve and maintain
in full force and effect all governmental rights, privileges, qualifications,
permits, licenses and franchises necessary for the normal conduct of its
business, except in connection with transactions permitted by Section 8.03 and
sales of assets permitted by Section 8.02; and
(c) and shall cause each Subsidiary to, preserve or renew all of its
registered patents, trademarks, trade names and service marks, the
non-preservation of which could reasonably be expected to have a Material
Adverse Effect.
7.05 Maintenance of Property. The Company shall maintain, and shall cause
each Subsidiary to maintain, and preserve all its property which is used in its
business in good working order and condition, ordinary wear and tear excepted
and make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect, except as permitted by Section 8.02 or Section 8.03.
7.06 Insurance. The Company shall maintain, and shall cause each Material
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
7.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect or (b) to the
extent that such obligation or liability is being disputed or contested
59
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP with respect thereto are being maintained by the Company or such
Subsidiary.
7.08 Compliance with Laws. The Company shall comply, and shall cause each
Subsidiary to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act and all Environmental Laws),
except such as may be contested in good faith or as to which a bona fide dispute
may exist or where the failure to so comply would not reasonably be expected to
have a Material Adverse Effect .
7.09 Compliance with ERISA. The Company shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
of the Agent or any Bank (coordinating through the Agent) to visit and inspect
any of their respective properties, to examine their respective corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss their respective affairs, finances and accounts with their
respective directors, officers, and independent public accountants, at
reasonable times during normal business hours and upon reasonable advance notice
to the Company; provided, however, when an Event of Default exists the Agent or
any Bank may do any of the foregoing at the expense of the Company.
7.11 Use of Proceeds. The Company shall use the proceeds of the Loans for
working capital and other general corporate purposes (including undertaking
Acquisitions, capital expenditures, and stock repurchases) not in contravention
of any Requirement of Law or of any provision of this Agreement or any other
Loan Document.
7.12 Additional Guarantors. If the Company shall, after the Closing Date,
form or acquire any Domestic Subsidiary which is a Wholly-Owned Subsidiary (or
if any Domestic Subsidiary not previously wholly-owned shall become a
Wholly-Owned Subsidiary), the Company shall cause each such Subsidiary to become
a party to the Guaranty in the manner specified therein and shall deliver or
cause to be delivered such proof of corporate action, incumbency of officers,
opinions of counsel and other documents as are consistent with those delivered
as to each Guarantor pursuant to Section 5.01 upon the Closing Date as the Agent
may request, in each case in form and substance satisfactory to the Agent.
60
ARTICLE VIII.
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any Subsidiary on
the Closing Date and set forth in Schedule 8.01 to the Original Credit Agreement
securing Indebtedness outstanding on such date or incurred in connection with
the extension, renewal or refinancing of the Indebtedness secured by such
existing Liens; provided that any extension, renewal or replacement Lien shall
be limited to the property encumbered by the existing Lien and the principal
amount of the Indebtedness being extended, renewed or refinanced does not
increase. For purposes of this clause (a), Indebtedness shall be deemed to be
outstanding on the Closing Date if the facility under which it is incurred
exists on the Closing Date (even if no amounts are then outstanding under such
facility);
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.07, provided that no notice
of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens consisting of pledges or deposits required in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other social security legislation;
(f) Liens on the property of the Company or its Subsidiary securing (i)
the non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the ordinary course of business;
(g) Liens consisting of judgment or judicial attachment liens which do
not constitute a Default or Event of Default under Subsection 9.01(i);
61
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after the
date of this Agreement, provided, however, that such Liens existed at the time
the respective corporations became Subsidiaries and were not created in
anticipation thereof;
(j) purchase money security interests on any property acquired or held
by the Company or its Subsidiaries in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring or improving such property; provided that (i) any such
Lien attaches to such property concurrently with or within 180 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction and any improvements thereto, and (iii) the principal amount
of the debt secured thereby does not exceed 100% of the cost of such property;
(k) Liens securing obligations in respect of capital leases on assets
subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that such deposit account is not a dedicated
cash collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the FRB;
(m) Liens on the Company's headquarters building (located at One Symbol
Plaza, Holtsville, New York), securing Indebtedness in an aggregate principal
amount not to exceed $40,000,000 at any one time outstanding; and
(n) Liens not otherwise permitted hereunder securing Indebtedness and
other liabilities in an aggregate amount not to exceed at any one time
outstanding the amount of 5% of the net book value of the Company and its
Subsidiaries' consolidated assets.
8.02 Disposition of Assets. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
any property (including accounts and notes receivable, with or without recourse)
or enter into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus property or
assets, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment; and
62
(c) dispositions of property by the Company or any Subsidiary to the
Company or any Subsidiary pursuant to reasonable business requirements;
(d) the sale of lease receivables; and
(e) dispositions not otherwise permitted hereunder which are made for
fair market value; provided, that (i) at the time of any disposition, no Event
of Default shall exist or shall result from such disposition, and (ii) the
aggregate value of all assets so sold by the Company and its Subsidiaries,
together, shall not exceed in any fiscal year 10% of Tangible Net Worth as of
the end of the immediately preceding fiscal year.
8.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of related transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries; and
(b) any Subsidiary may sell, transfer or otherwise convey all or
substantially all of its assets (upon voluntary liquidation or otherwise), to
the Company or another Subsidiary; and
(c) any Subsidiary may sell, transfer or otherwise convey all or
substantially all of its assets pursuant to one or more transactions which are
not prohibited by Section 8.02.
8.04 Loans and Investments. The Company shall not purchase or acquire, or
suffer or permit any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan, extension of credit
or capital contribution to or any other investment in, any Person including any
Affiliate of the Company (together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in the form of cash
equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(c) extensions of credit by the Company to any of its Subsidiaries or
by any of its Subsidiaries to another of its Subsidiaries or to the Company;
(d) Investments incurred in order to consummate Acquisitions otherwise
permitted herein, provided that (i) the consideration paid in cash and by
assumption of Indebtedness for such Acquisition, together with such
consideration for all prior Acquisitions undertaken by the Company and its
Subsidiaries after the Closing Date, shall not exceed at the time of such
Investment 20% of Tangible Net Worth as calculated immediately prior to such
Acquisition; (ii) such Acquisitions are undertaken in accordance with all
applicable
63
Requirements of Law; and (iii) immediately after giving effect to any such
Acquisition, no Default or Event of Default would exist and the Company shall be
in pro forma compliance with the covenants set forth in Sections 8.15, 8.16 and
8.17;
(e) Investments in Joint Ventures entered into in the ordinary course
of business; and
(f) Investments constituting Permitted Swap Obligations or payments or
advances under Swap Contracts relating to Permitted Swap Obligations.
8.05 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08;
(c) Indebtedness existing on the Closing Date and set forth in Schedule
8.05 to the Original Credit Agreement and Indebtedness incurred pursuant to
credit facilities existing on the Closing Date and set forth in such Schedule or
incurred in connection with the extension, renewal or refinancing of such
Indebtedness; provided that the principal amount of the Indebtedness being
extended, renewed or refinanced does not increase;
(d) Indebtedness secured by Liens permitted by Subsections 8.01(j) and
(m);
(e) Approved Subordinated Indebtedness; and
(f) other Indebtedness in an aggregate principal amount outstanding at
any time not to exceed 10% of Tangible Net Worth as of the end of the
immediately preceding fiscal quarter.
8.06 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
8.07 Use of Proceeds. The Company shall not, and shall not suffer or permit
any Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly:
(a) Except as the same will not result in a violation of Regulation T,
U or X of the FRB or any other applicable Requirement of Law or any other
provision of the Loan Documents, (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise refinance indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act; or
64
(b) to make any Acquisition unless the prior, effective written consent
or approval to such Acquisition of the board of directors or equivalent
governing body of the acquiree has been obtained.
8.08 Swap Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create, incur, assume or suffer to exist any
outstanding obligations under Swap Contracts, other than Permitted Swap
Obligations and Guaranty Obligations with respect to Permitted Swap Obligations.
8.09 Capital Expenditures. The Company shall not, and shall not suffer or
permit any Subsidiary to, make or commit to make any Capital Expenditures,
except for Capital Expenditures not exceeding, in the aggregate for the Company
and its Subsidiaries, determined on a consolidated basis, during any fiscal
year, the amount of $125,000,000.
8.10 Restricted Payments. The Company shall not declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding, or make any principal payment or prepayment on or
redemption, defeasance or purchase of any subordinated Indebtedness or give
notice to or deposit any funds with any trustee to effectuate any such actions;
except that the Company may:
(a) declare and make dividend payments or other distributions payable
solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its common stock or
warrants or options to acquire any such shares with the proceeds received from
the substantially concurrent issue of new shares of its common stock; and
(c) declare or pay cash dividends to its stockholders, purchase, redeem
or otherwise acquire shares of its capital stock or warrants, rights or options
to acquire any such shares for cash; provided, that, immediately after giving
effect to such proposed action, no Default or Event of Default would exist and
the Company shall be in pro forma compliance with the covenants set forth in
Sections 8.15, 8.16 and 8.17.
8.11 ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably expected to result in liability of the Company in an
aggregate amount in excess of $10,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
8.12 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
8.13 Accounting Changes. Except to the extent that such changes are
permitted by GAAP and concurred with by the Independent Auditor and that the
Company shall have provided reasonably detailed reconciliations of the effect of
such changes to the Agent and the
65
Banks, the Company shall not, and shall not suffer or permit any Subsidiary to,
make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of the Company or of any
Subsidiary.
8.14 Subordinated Debt. The Company shall not agree to or enter into any
amendment, waiver or modification of, supplement to or other change to any
document or instrument evidencing or given in connection with any Approved
Subordinated Indebtedness which would reasonably be expected to be adverse to
the rights or interests of the Banks.
8.15 Leverage Ratio. The Company shall not suffer or permit as of the end
of any fiscal quarter the Leverage Ratio to exceed 2.50 to 1.00.
8.16 Fixed Charge Coverage Ratio. The Company shall not suffer or permit as
of the end of any fiscal quarter the Fixed Charge Coverage Ratio to be less than
2.50 to 1.00.
8.17 Tangible Net Worth. The Company shall not permit its Tangible Net
Worth at the last day of any fiscal quarter to be less than the amount equal to:
(a) the sum of (i) 75% of Tangible Net Worth as of the quarter ended
September 30, 1998, (ii) 75% of the Company's consolidated net income
(calculated without deduction for any Acquisition Charges, but not less any net
losses for any period) earned in each fiscal quarter starting with the quarter
commencing October 1, 1998 and (iii) the sum of the Net Issuance Proceeds from
each equity issuance consummated on or after October 1, 1998; minus
(b) the sum of (i) the aggregate amount paid from and after October 1,
1998 by the Company and its consolidated Subsidiaries for the repurchase of
capital stock of the Company and (ii) 100% of any Acquisition Charges arising
from and after October 1, 1998.
Notwithstanding the foregoing:
(x) the maximum amount to be deducted pursuant to clause (b)(i)
above shall not exceed the amount equal to (i) $60,000,000 for each fiscal
year end which will have occurred from October 1, 1998 through (and
including) the last day of the fiscal year in which the calculation date
occurs plus (ii) the aggregate amount of Net Issuance Proceeds received
during the 12 consecutive month period ended on the date of determination;
and
(y) in calculating the amount of repurchases of capital stock for
purposes of clause (b)(i) above, and in addition to amounts permitted to be
deducted pursuant to clause (x) above, the Company may exclude at each
calculation date after December 31, 1999, up to $25,000,000 of such
repurchases; provided that (A) the failure to exclude such amounts would
cause the Company to be in violation of the provisions of this Section 8.17
and (B) the Company certifies to the Agent and each Bank that each
repurchase which is so excluded was a component of a Strategic Investor
Transaction which the Company believes in good faith will be completed
within 12 months of the date of such stock repurchase (it being understood
that such repurchase shall be counted for purposes of clause (b)(i) from
and after the end of such 12-month period and the failure to complete such
Strategic Investor Transaction within the 12-month period shall not
constitute a Default or an Event of Default hereunder unless the Tangible
Net Worth
66
of the Company immediately after the end of such 12-month period does not
comply with the provisions of this Section 8.17).
ARTICLE IX.
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required to
be paid herein, any amount of principal of any Loan or of any L/C Obligation or
any amount of interest on any Bid Loan, or (ii) within five Business Days after
the same becomes due, any other interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Section 7.03 or in Article VIII; or
(d) Other Defaults. The Company or any Subsidiary party thereto fails
to perform or observe any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue unremedied for a period
of 30 days after the earlier of (i) the date upon which a Responsible Officer
has actual knowledge of such failure or (ii) the date upon which written notice
thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Material Subsidiary (A) fails
to make any payment in respect of any Indebtedness or Contingent Obligation
(other than in respect of Swap Contracts), having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
$20,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from any event of default under such Swap Contract
as to which the Company or any Material
67
Subsidiary is the Defaulting Party (as defined in such Swap Contract) and the
Swap Termination Value owed by the Company or such Material Subsidiary as a
result thereof is greater than $20,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding
is commenced or filed against the Company or any Material Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Material
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Material Subsidiary admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Material Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $20,000,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $20,000,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$20,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $10,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 60 days after
the entry thereof; or
(j) Change of Control. (i) Any Person or two or more Persons acting in
concert acquires beneficial ownership (within the meaning of Rule 13d-3 of the
SEC under the Exchange Act), directly or indirectly, of securities of the
Company (or other securities convertible into such securities) representing 30%
or more of the combined voting power of all securities of the Company entitled
to vote in the election of directors; or (ii) during any period of up to 12
consecutive months, individuals who at the beginning of such 12-month period
were
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directors of the Company ceasing for any reason to constitute a majority of the
Board of Directors of the Company unless the Persons replacing such individuals
were nominated by the Board of Directors of the Company; or (iii) any Person or
two or more Persons acting in concert acquiring by contract or otherwise, or
entering into a contract or arrangement which upon consummation will result in
its or their acquisition of, or control over, securities of the Company (or
other securities convertible into such securities) representing 30% or more of
the combined voting power of all securities of the Company entitled to vote in
the election of directors; or
(k) Invalidity of Subordination Provisions. The subordination
provisions of any document or instrument given in connection with or evidencing
any Approved Subordinated Indebtedness shall for any reason be revoked or
invalidated, or otherwise cease to be in full force and effect, or the
Obligations are for any reason subordinated or do not have the priority
contemplated by this Agreement or such subordination provisions; or
(l) Guaranty Events. The Guaranty is for any reason partially
(including with respect to future advances or with respect to less than all of
the Guarantors thereunder) or wholly revoked or invalidated, or otherwise ceases
to be in full force and effect, or any Guarantor denies in writing that it has
any further liability or obligation thereunder.
9.02 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks, do any or all of
the following:
(a) declare the commitment of each Bank to make Committed Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) with respect to any and all undrawn Letters of Credit, require that
the Company Cash Collateralize the L/C Obligations in an amount equal to the
maximum aggregate amount that is or at any time thereafter may become available
for drawing under any outstanding Letters of Credit (whether or not any
beneficiary shall have presented, or shall be entitled at such time to present,
the drafts or other documents required to draw under such Letters of Credit) in
which case the Company shall immediately Cash Collateralize such amounts,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company;
(c) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(d) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in Subsection
(f) or (g) of Section 9.01 (in the case of clause (i) of Subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of
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all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent, the
Issuing Bank or any Bank.
9.03 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X.
THE AGENT
10.01 Appointment and Authorization; "Agent".
(a) Each Bank hereby irrevocably (subject to Section 10.09) appoints,
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Agent may agree at the request of the
Majority Lenders to act for such Issuing Bank with respect thereto; provided,
however, that the Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in this Article X with respect to any acts taken or
omissions suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent", as used in this Article X, included the Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.
10.02 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
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10.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Majority Banks as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Agent for the account of the Banks, unless the Agent shall have received
written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
IX; provided, however, that unless and until the
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Agent has received any such request, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the Agent-
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company and its Subsidiaries.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company or any Subsidiary which may come
into the possession of any of the Agent-Related Persons.
10.07 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the termination of the Commitments, the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing
Bank hereunder and without notice to or consent of the Banks. The Banks
acknowledge that,
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pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company, its Subsidiaries or its Affiliates (including information
that may be subject to confidentiality obligations in favor of the Company or
such Subsidiary or Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent or the Issuing Bank.
10.09 Successor Agent. The Agent may resign as Agent upon 30 days' notice
to the Banks. If the Agent resigns under this Agreement, the Majority Banks
shall appoint from among the Banks a successor agent for the Banks, which
successor agent shall be approved by the Company. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Banks and the Company, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X and Sections 11.04 and 11.05 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust" within
the meaning of the Code and such Bank claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees
with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly
completed and executed copies of IRS Form W-8 BEN before the payment of
any interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two
properly completed and executed copies of IRS Form W-8 ECI before the
payment of any interest is due in the first taxable year of such Bank
and in each succeeding taxable year of such Bank during which interest
may be paid under this Agreement; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
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Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form W-8 BEN and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form W-8 BEN as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form W-8 ECI with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
Subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that the Agent did not properly withhold
tax from amounts paid to or for the account of any Bank (because the appropriate
form was not delivered or was not properly executed, or because such Bank failed
to notify the Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this Subsection shall survive
the payment of all Obligations and the resignation or replacement of the Agent.
10.11 Documentation Agent. The Bank identified on the facing page or
signature pages of this Agreement or elsewhere herein or in the other Loan
Documents as the "documentation agent" shall not have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, the Bank
so identified as a "documentation agent" shall not have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on the Bank so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder or under any other
Loan Document.
ARTICLE XI.
MISCELLANEOUS
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11.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by the Agent at the written request of the Majority Banks) and the Company
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by each Bank directly affected thereby and the
Company and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (iii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of them to
take any action hereunder;
(e) amend this Section or Section 2.17, or any provision herein
providing for consent or other action by all Banks or by each Bank directly
affected thereby; or
(f) terminate the Guaranty or release all or substantially all of the
Guarantors from their obligations under the Guaranty;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by all of the Banks and the Company and acknowledged by the
Agent increase the aggregate amount of the Commitments, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the Issuing Bank in
addition to the Majority Banks or each Bank directly affected thereby or all
Banks, as the case may be, affect the rights or duties of the Issuing Bank under
this Agreement or any L/C-Related Document relating to any Letter of Credit
Issued or to be Issued by it, (iii) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Banks or
each Bank directly affected thereby or all Banks, as the case may be, affect the
rights or duties of the Agent under this Agreement or any other Loan Document,
(iv) no amendment, waiver or consent shall, unless in writing and signed by the
Fronting Bank in addition to the Majority Banks or each Bank directly affected
thereby or all Banks, as the case may be, affect the rights or duties of the
Fronting Bank under this Agreement , and (iv) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
11.02 Notices.
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(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.02, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.02; or, as directed to the Company or the Agent, to such
other address as shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Company and the
Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the mails, or if delivered, upon delivery; except that notices
pursuant to Article II, III or X to the Agent shall not be effective until
actually received by the Agent, notices pursuant to Article III to the Issuing
Bank shall not be effective until actually received by the Issuing Bank at the
address specified for the "Issuing Bank" on Schedule 11.02, and notices pursuant
to Article II to the Fronting Bank shall not be effective until actually
received by the Fronting Bank at the address specified for such Person on
Schedule 11.02.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Company to
give such notice and the Agent and the Banks shall not have any liability to the
Company or other Person on account of any action taken or not taken by the Agent
or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
11.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) promptly (subject to Subsection 5.01(e)) for all reasonable costs
and expenses incurred by BofA (including in its capacity as Agent and Issuing
Bank) in connection with the development, preparation, delivery, administration
and execution of, and any amendment, supplement, waiver or modification to (in
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each case, whether or not consummated), this Agreement, any Loan Document and
any other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
Attorney Costs incurred by BofA (including in its capacity as Agent and Issuing
Bank) with respect thereto; and
(b) pay or reimburse the Agent, the Lead Arranger and each Bank within
10 Business Days after demand (subject to Subsection 5.01(e)) for all reasonable
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement or preservation of any rights or remedies under this
Agreement or any other Loan Document during the existence of an Event of Default
or after acceleration of the Loans (including in connection with any "workout"
or restructuring regarding the Loans, and including in any Insolvency Proceeding
or appellate proceeding). The agreements in this Section shall survive the
termination of the Commitments and the payment of all other Obligations.
11.05 Company Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify, defend and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments and suits, and any
and all reasonable costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans, the termination of the
Letters of Credit and the termination, resignation or replacement of the Agent
or replacement of any Bank) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or Letters
of Credit or the use of the proceeds thereof, or related to any Offshore
Currency transactions entered into in connection herewith whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities to
the extent resulting from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive the termination
of the Commitments and the payment of all other Obligations.
11.06 Payments Set Aside. To the extent that the Company makes a payment to
the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
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11.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
11.08 Assignments, Participations, Etc.
(a) Any Bank may, with the written consent of the Company at all times
other than during the existence of an Event of Default and the Agent, the
Fronting Bank and the Issuing Bank, which consents shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company, the Agent, the Fronting Bank
or the Issuing Bank shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank)
(each an "Assignee") all, or any ratable part of all, of the Loans, the
Commitments, the L/C Obligations and the other rights and obligations of such
Bank hereunder, in a minimum amount of the Dollar Equivalent Amount of
$10,000,000 or, if less, the entire amount of such Bank's Commitment; provided,
however, that the Company and the Agent may continue to deal solely and directly
with such Bank in connection with the interest so assigned to an Assignee until
(i) written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Company and the Agent by such Bank and the Assignee; (ii) such Bank
and its Assignee shall have delivered to the Company and the Agent an Assignment
and Acceptance in the form of Exhibit E ("Assignment and Acceptance"), together
with any Note or Notes subject to such assignment and (iii) the assignor Bank,
the Assignee or, in the case of an assignment made pursuant to Section 4.08, the
Company, has paid to the Agent a processing fee in the amount of $3,500. In
connection with any assignment by BofA, its obligation to make Fronted Loans may
be assigned in whole (and not part) and only in connection with an assignment
transaction involving an assignment of all of its Commitment and Loans, and the
Assignment and Acceptance may be appropriately modified to include an assignment
and delegation of its obligation to make Fronted Loans and any outstanding
Fronted Loans.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, (ii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents, and (iii) this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Bank pro tanto.
(c) Within five Business Days after its receipt of notice by the Agent
that it has received an executed Assignment and Acceptance and payment of the
processing fee (and provided that it has granted any requisite consent to such
assignment in accordance with
78
Subsection 11.08(a)), the Company shall (if so requested) execute and deliver to
the Agent, new Notes evidencing such Assignee's assigned Loans and Commitment
and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes in the principal amount of the Loans retained by
the assignor Bank (such Notes to be in exchange for, but not in payment of, the
Notes held by such Bank).
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company, the
Issuing Bank and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 11.01. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections
4.01, 4.03, 4.04, 4.06 and 11.05 as though it were also a Bank hereunder and, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement and the Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR (Section)203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
11.09 Confidentiality. Each Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by
the Company and provided to it by the Company or any Subsidiary, or by the Agent
on the Company's or such Subsidiary's behalf, under this Agreement or any other
Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any Subsidiary; except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
79
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Bank or such Affiliate; and (I)
to its Affiliates to the extent necessary for the administration of such Bank's
Loans and other extensions of credit hereunder. In the event of disclosure
pursuant to clauses (A) through (E) of the immediately preceding proviso (other
than in connection with bank examinations), the Bank shall, if allowed to do so
under applicable Requirements of Law) make commercially reasonable efforts to
notify the Company of the disclosure in advance thereof and shall (at no cost to
the Bank) cooperate to the extent commercially reasonable with the Company in
seeking to have the materials to be disclosed sealed or otherwise given
confidential treatment by the applicable court or Governmental Authority.
11.10 Set-off. In addition to any rights and remedies of the Banks provided
by law, if the Loans have been accelerated, each Bank is authorized at any time
and from time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Bank agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Bank; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
80
11.14 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Banks, the Agent
and the Agent-Related Persons, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT AND
THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE
BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
11.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
81
11.17 Judgment Currency. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or any other Loan Document
in one currency into another currency, the rate of exchange used shall be that
at which in accordance with normal banking procedures the Agent could purchase
the first currency with such other currency on the Business Day preceding that
on which final judgment is given. The obligation of the Company in respect of
any such sum due from it to the Agent hereunder or under the other Loan
Documents shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in accordance with
the applicable provisions of this Agreement (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by the
Agent of any sum adjudged to be so due in the Judgment Currency, the Agent may
in accordance with normal banking procedures purchase the Agreement Currency
with the Judgment Currency. If the amount of the Agreement Currency so purchased
is less than the sum originally due to the Agent in the Agreement Currency, the
Company agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Agent or the Person to whom such obligation was owing against
such loss. If the amount of the Agreement Currency so purchased is greater than
the sum originally due to the Agent in such currency, the Agent agrees to return
the amount of any excess to the Company (or to any other Person who may be
entitled thereto under applicable law).
11.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
11.19 Amendment and Restatement. From and after the Effective Date, the
Original Credit Agreement is amended and restated in its entirety to read as set
forth herein (with the exception of the Schedules thereto specifically
incorporated by reference herein). The Original Credit Agreement (as amended and
restated by this Agreement) is hereby ratified and confirmed in all respects.
[remainder of page intentionally left blank;
signature pages follow]
82
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
SYMBOL TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK OF AMERICA, N.A., as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK OF AMERICA, N.A., as a Bank, as
Fronting Bank and as Issuing Bank
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE CHASE MANHATTAN BANK, as
Documentation Agent and as a Bank
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANCA COMMERCIALE ITALIANA, NEW
YORK BRANCH
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK HAPOALIM BM
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BNP PARIBAS
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
COMERICA BANK
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG, CAYMAN
ISLAND BRANCH
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
FLEET BANK N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
MELLON BANK, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE BANK OF NEW YORK
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE BANK OF NOVA SCOTIA
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
WACHOVIA BANK, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ANNEX 1
APPLICABLE AMOUNT
==============================================================================================================
Level Leverage Ratio Applicable Margin Applicable Margin for Commitment Fee
for Offshore Rate Base Rate Committed
Committed Loans and Loans
Letter of Credit Fees
- --------------------------------------------------------------------------------------------------------------
Level I Less than 0.50 to 0.7500% 0.0000% 0.2500%
1.00
- --------------------------------------------------------------------------------------------------------------
Level II Greater than or 0.8750% 0.0000% 0.2750%
equal to 0.50 to
1.00 but less than
1.00 to 1.00
- --------------------------------------------------------------------------------------------------------------
Level III Greater than or 1.0000% 0.0000% 0.3000%
equal to 1.00 to
1.00 but less than
1.50 to 1.00
- --------------------------------------------------------------------------------------------------------------
Level IV Greater than or 1.1250% 0.0000% 0.3500%
equal to 1.50 to
1.00 but less than
2.00 to 1.00
- --------------------------------------------------------------------------------------------------------------
Level V Greater than or 1.2500% 0.1250% 0.4000%
equal to 2.00 to
1.00
==============================================================================================================
The Leverage Ratio shall be that set forth in the most recent Compliance
Certificate received by the Agent and the Banks pursuant to Subsection 7.02(a)
and shall be effective from the date which is five Business Days after the date
on which the Agent receives such Compliance Certificate until the date which is
five Business Days after which the Agent receives the next such Compliance
Certificate. If the Agent does not receive a Compliance Certificate by the date
required in Subsection 7.02(a), and if such Compliance Certificate if timely
delivered would have shown a Level less favorable to the Company then that in
effect for the immediately preceding period, then the Applicable Amount shall,
effective as of the date required by Subsection 7.02(a), be based on such Level
and the Agent shall adjust retroactively to such date interest and fees, based
on such less favorable Level. Any such adjustment in interest and fees shall be
payable by the Company to the Agent for the account of the Banks within five
Business Days of the Agent's notice to the Company that such amounts are due and
payable hereunder.
1
SCHEDULE 2.01
-------------
COMMITMENTS AND PRO RATA SHARES
-------------------------------
Bank Commitment Pro Rata Share
Bank of America, N.A. $ 47,500,000 13.571428571%
The Chase Manhattan Bank 40,000,000 11.428571429
Fleet Bank N.A. 47,500,000 13.571428571
Mellon Bank, N.A. 40,000,000 11.428571429
Comerica Bank 25,000,000 7.142857143
The Bank of New York 25,000,000 7.142857143
BNP Paribas 25,000,000 7.142857143
Wachovia Bank, N.A. 25,000,000 7.142857143
DG Bank Deutsche Genossenschaftsbank AG,
Cayman Island Branch 20,000,000 5.714285714
Banca Commerciale Italiana, New York
Branch 17,500,000 5.000000000
Bank of Tokyo-Mitsubishi Trust Company 17,500,000 5.000000000
Bank Hapoalim BM 10,000,000 2.857142857
The Bank of Nova Scotia 10,000,000 2.857142857
---------- -----------
TOTAL $350,000,000 100.000000000%
============ =============
1
SCHEDULE 11.02
--------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
--------------------------------------
ADDRESSES FOR NOTICES
---------------------
SYMBOL TECHNOLOGIES, INC.
- -------------------------
One Symbol Plaza
Holtsville, New York 11742
Attention: Chief Financial Officer
Telephone: 516-738-3909
Facsimile: 516-738-4127
Website: www.symbol.com
BANK OF AMERICA, N.A.,
- ----------------------
as Agent
Funding Notices:
Agency Administrative Services
Mail Code: CA4-706-05-09
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attention: Sally Escosa
Telephone: 925-675-8421
Facsimile: 925-969-2901
Other Notices:
Technology Group
Mail Code: CA5-705-41-01
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: James P. Johnson, Managing Director
Telephone: 415-622-6177
Facsimile: 415-622-4585
Agent's Payment Office:
1850 Gateway Boulevard
Concord, CA 94520
Attention: Credit Services - Agency
Reference: Symbol Technologies
For Credit to Acct. No. 3750836479
ABA NO. 111000012
1
BANK OF AMERICA, N.A.,
- ----------------------
as Issuing Bank
Address for Notices:
International Trade Finance - Standby L/C
Mail Code CA9-703-19-23
333 S. Beaudry Avenue, 19th Floor
Los Angeles, CA 90017
Attention: Sandra Leon, Vice President/Manager
Telephone: 213-345-5231
Facsimile: 213-345-6694
BANK OF AMERICA, N.A., Notices (other than Funding Notices):
- ----------------------
as Fronting Bank and as a Bank
Domestic and Offshore Lending Office: Technology Group
Agency Administrative Services Mail Code: CA5-705-41-01
Mail Code: CA4-706-05-09 555 California Street, 41st Floor
1850 Gateway Boulevard, 5th Floor San Francisco, CA 94104
Concord, CA 94520 Attention: James P. Johnson,
Attention: Sally Escosa Managing Director
Telephone: 925-675-8421
Facsimile: 925-969-2901 Telephone: 415-622-6177
Facsimile: 415-622-4585
THE CHASE MANHATTAN BANK
- ------------------------
Domestic and Offshore Lending Office: 395 North Service Road, Suite 302
270 Park Avenue Melville, NY 11747
New York, NY 10017 Attention: Emelia K. Teige,
Vice President
Address for Funding Notices (other than Telephone: 631-755-5046
Competitive Bids): Facsimile: 631-755-5184
395 North Service Road, Suite 302
Melville, NY 11747
Attention: Ann Woessner,
Customer Services Rep.
Telephone: 631-755-5046
Facsimile: 631-755-5184
2
Address for Notices regarding Competitive Notices (other than Funding Notices):
Bids:
395 North Service Road, Suite 302
Melville, NY 11747
Attention: Emelia K. Teige,
Vice President
Telephone: 631-755-5046
Facsimile: 631-755-5184
BANCA COMMERCIALE ITALIANA,
- ---------------------------
NEW YORK BRANCH
- ---------------
Domestic and Offshore Lending Office:
One William Street
New York, NY 10004-2506 One William Street, Sixth Floor
Attention: Alex Papace New York, NY 10004-2506
Telephone: 212-607-3531 Attention: Brigitte Sacin,
Facsimile: 212-607-3897 Assistant Treasurer
Telephone: 212-607-3852
Facsimile: 212-809-2124
Address for Notices regarding Competitive
Bids:
One William Street, Sixth Floor
New York, NY 10004-2506
Attention: Anthony O'Mahony,
Assistant Treasurer
Telephone: 212-607-3852
Facsimile: 212-809-2124
BANK HAPOALIM BM
- ----------------
Domestic and Offshore Lending Office:
1177 Avenue of the Americas 1177 Avenue of the Americas
New York, NY 10036-2790 New York, NY 10036-2790
Attention: Ivelis Cruz, Attention: Shaun Breidbart
Telephone: 215-782-2183 Telephone: 212-782-2186
Facsimile: 215-782-2187 Facsimile: 212-782-2187
3
BANK OF TOKYO-MITSUBISHI TRUST
- ------------------------------
COMPANY Notices (other than Funding Notices):
- -------
Domestic and Offshore Lending Office:
1251 Avenue of the Americas, 12th Floor 1251 Avenue of the Americas, 12th Floor
New York, NY 10020-1104 New York, NY 10020-1104
Attention: Mr. Rolando Uy, Attention: Tom Fennessey, Vice President
Operations Officer Telephone: 212-782-4358
Telephone: 212-782-5637 Facsimile: 212-782-6445
Facsimile: 212-782-5635/5636
BNP PARIBAS
- -----------
Domestic and Offshore Lending Office:
San Francisco Branch 180 Montgomery Street
180 Montgomery Street San Francisco, CA 94104
San Francisco, CA 94104 Attention: Jean Plassard, Senior VP,
Telephone: 415-956-0707 High Tech Group
Facsimile: 415-296-8954 Telephone: 415-956-0707
Facsimile: 415-772-9125
Address for Funding Notices (including and
Competitive Bids):
180 Montgomery Street
San Francisco, CA 94104 499 Park Avenue, 9th Floor
Attention: Donald A. Hart, Treasurer New York, NY 10022
Telephone: 415-956-2511 Attention: Richard Pace
Facsimile: 415-989-9041 Telephone: 212-415-9720
Facsimile: 212-415-9606
COMERICA BANK
- -------------
Domestic and Offshore Lending Office:
U.S. Banking East
500 Woodward Avenue, 9th Floor, MC 3280 U.S. Banking East
Detroit, MI 48725-3280 500 Woodward Avenue, 9th Floor, MC 3280
Attention: Diana Pascoe, Detroit, MI 48725-3280
Customer Assistant Attention: Joel Gordon,
Telephone: 313-222-3678 Account Officer
Facsimile: 313-222-3330 Telephone: 313-222-3647
Facsimile: 313-222-3330
4
DG BANK DEUTSCHE
- ----------------
GENOSSENSCHAFTSBANK, AG,
- ------------------------
CAYMAN ISLAND BRANCH
- --------------------
Domestic and Offshore Lending Office:
609 Fifth Avenue
New York, NY 10017-1021 609 Fifth Avenue, 8th Floor
New York, NY 10017-1021
Address for Funding Notices (other than Attention: Steve Santora
Competitive Bids):
609 Fifth Avenue
New York, NY 10017-1021 Telephone: 212-745-1575
Attention: Ed Thome, Assistant Vice Facsimile: 212-745-1556
President
Telephone: 212-745-1464
Facsimile: 212-745-1422
Address for Notices regarding Competitive Bids: Notices (other than Funding Notices):
609 Fifth Avenue
New York, New York 10017-1021
Attention: Stefanie Gaensslen,
Assistant Vice President
Telephone: 212-745-1583
Facsimile: 212-745-1556/1550
FLEET BANK, N.A.
- ----------------
Domestic and Offshore Lending Office:
300 Broad Hollow Road 300 Broad Hollow Road
Melville, N.Y. 11747 Melville, N.Y. 11747
Attention: Michele Arena Attention: Christopher Mendelsohn
Banking Officer Vice President
Telephone: 631-547-7611 Telephone: 631-547-7777
Facsimile: 631-547-7595 Facsimile: 631-547-7815
5
MELLON BANK, N.A.
- -----------------
Domestic and Offshore Lending Office:
701 Market Street 176 EAB Plaza
P.O. Box 7899 West Tower
Philadelphia, PA 19101-7899 Uniondale, NY 11556
Attention: Jeffrey B. Carstens,
Address for Funding Notices (other than Vice President
Competitive Bids): Telephone: 516-338-3012
176 EAB Plaza Facsimile: 516-338-3070
West Tower
Uniondale, NY 11556
Attention: Kathleen Uhl,
Portfolio Administrator
Telephone: 516-338-3011
Facsimile: 516-338-3070
Address for Notices regarding Competitive
Bids:
One Mellon Bank Center
Room 410
Pittsburgh, PA 15258
Telephone: 412-234-1492
Facsimile: 412-234-8913
THE BANK OF NEW YORK Notices (other than Funding Notices):
- --------------------
Domestic and Offshore Lending Office:
One Wall Street, 22nd Floor One Wall Street, 22nd Floor
New York, NY 10286 New York, NY 10268
Attention: Kathy Albert, Administrator Attention: Roger Grossman
Telephone: 212-635-6720 Telephone: 212-635-1309
Facsimile: 212-635-6397 Facsimile: 212-635-1480
Address for Notices regarding Competitive
Bids:
32 Old Slip, 15th Floor
New York, NY 10286
Attention: Wilson Mastrandreg
Telephone: 212-804-2050
Facsimile: 212-809-5272
6
THE BANK OF NOVA SCOTIA
- -----------------------
Domestic and Offshore Lending Office:
One Liberty Plaza One Liberty Plaza, 26th Floor
New York, NY 10006 New York, NY 10006
Attention: Catherone Lozada, Loan Admin. Attention: Michael Kus
Officer
Telephone: 212-225-5212 Telephone: 212-225-5027
Facsimile: 212-225-5145 Facsimile: 212-225-5090
WACHOVIA BANK, N.A.
- -------------------
Domestic and Offshore Lending Office:
191 Peachtree Street, N.E. 191 Peachtree Street, N.E.
Atlanta, GA 30303 Atlanta, GA 30303
Attention: Peaches Brown, Loan Specialist Attention: Jane C. Deaver,
Telephone: 404-332-6688 Senior Vice President
Facsimile: 404-332-4320 Telephone: 404-332-5219
Facsimile: 414-332-6898
7
- EXHIBIT 10.18 -
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of March 28, 2001
(the "Amendment"), is entered into by and among Symbol Technologies, Inc., a
Delaware corporation (the "Company"), the several financial institutions party
to the Credit Agreement (collectively, the "Banks"), and Bank of America, N.A.,
as agent for the Banks (in such capacity, the "Agent").
RECITALS
A. The Company, Banks and Agent are parties to that certain 2000
Amended and Restated Credit Agreement dated as of August 3, 2000 (the "Credit
Agreement") pursuant to which the Banks have extended certain credit facilities.
B. The Company has requested that the Majority Banks agree to a
one-time amendment to the Credit Agreement to permit and allow the Company to
add back the non-recurring charges related to the Company's acquisition of
Telxon Corporation (the "Telxon Acquisition") in the fiscal quarter ended
December 31, 2000 to its calculation of Operating Income solely for the purposes
of complying with the financial covenants set forth in Sections 8.15 and 8.16 of
the Credit Agreement for the fiscal quarters ending December 31, 2000, March 31,
2001, June 30, 2001 and September 30, 2001.
C. The Majority Banks are willing to amend the Credit Agreement,
subject to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein (including in the Recitals hereof) shall have the meanings, if any,
assigned to them in the Credit Agreement.
2. Amendment to Credit Agreement. The definition of "Operating Income"
as set forth in Section 1.01 of the Credit Agreement shall be amended as
follows:
"Operating Income" means, for any period, for the Company and
its Subsidiaries on a consolidated basis, earnings (or losses) from
operations, calculated in accordance with the methodology used for
calculating "Earnings from Operations" in the financial statements
referenced in Section 6.10; provided, however, that only for the fiscal
quarters ending December 31, 2000, March 31, 2001, June 30, 2001 and
September 30, 2001, and solely for the purposes of complying with the
financial covenants set forth in Sections 8.15 and 8.16 of the Credit
Agreement (Leverage Ratio and Fixed Charge Coverage Ratio) for the
foregoing fiscal quarters, the Company shall be permitted to add back
to the calculation thereof the Telxon Special Charges. As used in this
definition, "Telxon Special Charges" means an amount
1
(not exceeding $274,000,000 before taxes) equal to the aggregate of
special charges associated with the Company's acquisition of Telxon
Corporation, to extent deducted in arriving at Operating Income for the
fiscal quarter ended December 31, 2000.
3. Representations and Warranties. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability, without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in the
Credit Agreement are true and correct on and as of the date hereof.
(d) The Company is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Agent, the
Banks or any other Person.
4. Effectiveness. Upon receipt by the Agent of counterparts of this
Amendment executed by the Company and the Majority Banks, this Amendment shall
become effective as of the date hereof (the "Effective Date").
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Agent and the Banks of this Amendment shall not be
deemed to create a course of dealing or otherwise obligate the Agent or the
Banks to enter into amendments under the same, similar or any other
circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein and in the other Loan Documents to such Credit
Agreement shall henceforth refer to the Credit Agreement as amended by this
Amendment. This Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement. This Amendment is a Loan Document.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and to the Credit Agreement and their respective successors
and assigns. No third party beneficiaries are intended in connection with this
Amendment.
2
(c) This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Bank or
the Company shall bind such Bank or the Company, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent, and the Agent is hereby authorized to make sufficient photocopies
thereof to assemble complete counterparty documents.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior drafts
and communications with respect thereto. This Amendment may not be amended
except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay or reimburse the Agent, upon demand,
for all reasonable out-of-pocket costs and expenses (including the reasonable
fees, charges and disbursements of counsel (including the allocated costs and
expenses of in-house counsel)) incurred by the Agent in connection with the
development, preparation, negotiation, execution and delivery of this Amendment.
(remainder of page intentionally left blank)
3
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date first above written.
THE BORROWER
SYMBOL TECHNOLOGIES, INC.
By:
Name:
Title:
THE AGENT
BANK OF AMERICA, N.A.
By:
Name:
Title:
THE BANKS
BANK OF AMERICA, N.A., as
a Bank, as Fronting Bank
and as Issuing Bank
By:
Name:
Title:
THE CHASE MANHATTAN BANK,
as Documentation Agent and
as a Bank
By:
Name:
Title:
BANK HAPOALIM BM
By:
Name:
Title:
By:
Name:
Title:
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By:
Name:
Title:
By:
Name:
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By:
Name:
Title:
BNP PARIBAS
By:
Name:
Title:
By:
Name:
Title:
COMERICA BANK
By:
Name:
Title:
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG,
CAYMAN ISLAND BRANCH
By:
Name:
Title:
By:
Name:
Title:
FLEET NATIONAL BANK
(formerly known as FLEET
BANK N.A.)
By:
Name:
Title:
MELLON BANK, N.A.
By:
Name:
Title:
THE BANK OF NEW YORK
By:
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
WACHOVIA BANK, N.A.
By:
Name:
Title:
- EXHIBIT 22 -
SYMBOL TECHNOLOGIES, INC
LIST OF SUBSIDIARIES AS OF 12/31/2000
Symbol Technologies, Inc. owns directly or indirectly 100% of the
stock of the following corporations:
Subsidiaries of Symbol Technologies, Inc.:
U.S. CORPORATIONS
Symbol Technologies International, Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: New York
Symbol Technologies International, Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: Delaware
Symbolease Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: Delaware
Symbol Technologies Asia, Inc.
230 Victoria Street
04-05 Bugis Junction Office Tower
Singapore 0718
State of Incorporation: Delaware
Symbolease Canada, Inc.
2540 Matheson Blvd. East
Mississauga, Ontario
Canada L4W 4Z2
State of Incorporation: Delaware
The Retail Technology Group, Inc.
One Symbol Plaza
Holtsville, NY 11742-1300
State of Incorporation: Delaware
Telxon Corporation
One Symbol Plaza
Holtsville, NY 11742-1300
State of Incorporation: Delaware
Telxon System Services, Inc.
One Symbol Plaza
Holtsville, NY 11742-1300
State of Incorporation: Delaware
Subsidiaries of Symbol Technologies, Inc.
FOREIGN CORPORATIONS
Olympus Symbol, Inc.
San-Ei Building, 4F, 1-22-2, Nishi - Shinjuku
Shinjuku-Ku, Tokyo-160
Japan
Country of Incorporation: Japan
Symbol Technologies Mexico, Limited
Blvd. Manuel Avila, Camacho # 88, Piso 3, Col. Lomas de
Chapultapec
C.P. 11000 Mexico, D.F. Mexico
Country of Incorporation: Mexico
Symbol De Mexico, S, De R, L, De C.V.
Avila Camacho, 1325 Altos Col.
Medardo Gonzalez. Reynosa, Tomaulipas, Mexico
Country of Incorporation: Mexico
Inmobiliaria Symbol De Mexico, S, De R, L, De C.V.
Avila Camacho, 1325 Altos Col.
Medardo Gonzalez. Reynosa, Tomaulipas, Mexico
Country of Incorporation: Mexico
Symbol Technologies Netherlands, Inc.
Kerkplein 2, 7051 CX, Postbus 24 7050 AA
Varsseveld, Netherlands
Country of Incorporation: The Netherlands
Subsidiaries of Symbol Technologies International, Inc.
U.S. CORPORATIONS
Symbol Technologies Africa, Inc.
Block BZ Rutherford Estate
1 Scott Street
Waverly 209
Republic of South Africa
State of Incorporation: Delaware
FOREIGN CORPORATIONS
Symbol Technologies Pty. Ltd.
9TH Floor
432 Street, Kilda Road
Melbourne, VIC 3004
Australia
Country of Incorporation: Australia
Symbol Technologies GmbH
2 Haus - 5 Stock
Prinz-Eugenstrasse 70
1040 Wein
Austria
Country of Incorporation: Austria
Symbol Technologies Canada, Inc.
2540 Matheson Blvd. East
Mississauga, Ontario, Canada L4W 4Z2
Country of Incorporation: Canada
Symbol Technologies A/S
Gydevang 2,
DK-3450 Allerod
Denmark
Country of Incorporation: Denmark
Symbol Technologies S.A.
Centre d'Affaire d'Anthony
3 Rue de la Renaissance
92184 Antony Cedex, France
Country of Incorporation: France
Symbol Technologies GmbH
Waldstrasse 68
6057 Dietzenbach
Germany
Country of Incorporation: Germany
Symbol Technologies S.R.L.
Via Cristoforo Colombo, 49
20090 Trezzano S/L Naviglio,
Milan, Italia
Country of Incorporation: Italy
O.Y. Symbol Technologies AB
Vattuniemenkatu 14
00210
Helsinki, Finland
Country of Incorporation: Finland
Symbol Technologies AB
Albygatan 109D
Solna, Sweden
Country of Incorporation: Sweden
Symbol Technologies S.A.
Edificioi la Piovera Azul
C. Peonias, No.2 - Sexta Planta
28042 Madrid
Spain
Country of Incorporation: Spain
Symbol Technologies Limited
Symbol Place, Winnersh Triangle,
Berkshire, England RG415TP
Country of Incorporation: United Kingdom
Subsidiaries of Telxon Corporation
U.S. CORPORATIONS
Metanetics Corporation
One Symbol Plaza
Holtsville, NY 11742-1300
State of Incorporation: Delaware
Penright! Corporation
6480 Via Del Oro
San Jose, California 95119
State of Incorporation: Delaware
RTG Holdings, Inc.
One Symbol Plaza
Holtsville, NY 11742-1300
State of Incorporation: Ohio
FOREIGN CORPORATIONS
Productos Y Servicios De Telxon, S.A. de CV (Mexico)
Juarez, Mexico
Country of Incorporation: Mexico
Telxon Foreign Sales Corporation
One Symbol Plaza
Holtsville, NY 11742-1300
EIN: 34-1474811
Country of Incorporation: Virgin Islands
- EXHIBIT 23 -
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 333-44202 on Post-Effective Amendment No.1 on Form
S-8 to Form S-4, No. 333-78599 on Form S-8, No. 333-78599, No.
333-48159, No. 333-26593, No. 333-01769, No. 2-81405, No. 2-
94868, No. 2-94876, No. 33-3771, No. 33-13009, No. 33-18748,
No.33-25509, No. 33-25484, No. 33-25567, No. 33-35821, No. 33-
43580, No.33-48025, No. 35-48026, No. 33-78622, No. 33-78678,
No.33-59333 and No.333-01769 on Form S-8 and No. 33-18745, No.
33-25432, No. 33-43581, No.33-43584 and No. 33-45016 on Form S-3
of Symbol Technologies, Inc. of our report dated February 20,
2001, appearing in this Annual Report on Form 10-K of Symbol
Technologies, Inc. for the year ended December 31, 2000.
s/Deloitte & Touche LLP
New York, New York
March 28, 2001