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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-13279
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UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
360 NORTH CRESCENT DRIVE 90210-4867
BEVERLY HILLS, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 888-2500
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $0.01 per share New York Stock Exchange
Rights to Purchase Series A Junior Participating
Preferred Stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes / / No /X/
On February 26, 1999, the aggregate market value of the Registrant's voting
stock held by non-affiliates was $787.9 million.
On February 26, 1999, there were 54,943,391 shares of Common Stock outstanding,
exclusive of treasury shares.
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UNOVA, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
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PAGE
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PART I
Item 1: Business...................................................................................... 1
Item 2: Properties.................................................................................... 10
Item 3: Legal Proceedings............................................................................. 11
Item 4: Submission of Matters to a Vote of Security Holders........................................... 11
PART II
Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters..................... 11
Item 6: Selected Financial Data....................................................................... 12
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations......... 13
Item 7A: Quantitative and Qualitative Disclosures about Market Risk.................................... 18
Item 8: Financial Statements and Supplementary Data................................................... 19
Item 9: Disagreements on Accounting and Financial Disclosure.......................................... 19
PART III
Item 10: Directors and Executive Officers of the Registrant............................................ 19
Item 11: Executive Compensation........................................................................ 20
Item 12: Security Ownership of Certain Beneficial Owners and Management................................ 20
Item 13: Certain Relationships and Related Transactions................................................ 20
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 21
Signatures.................................................................................... 24
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PART I
ITEM 1. BUSINESS
UNOVA, Inc. (the "Company" or "UNOVA") operates in two business segments:
Industrial Automation Systems ("IAS") and Automated Data Systems ("ADS"). For
the year ended December 31,1998, IAS generated revenues and operating profits of
$833.3 million and $76.9 million, respectively, and ADS produced revenues and
operating profits of $829.4 million and $55.4 million, respectively. The Company
became an independent public company upon the distribution of its common stock
to the shareholders of Western Atlas Inc. ("WAI") on October 31, 1997.
See Note K to the consolidated and combined financial statements for financial
information by industry segment and by geographical area.
Information related to business acquisitions, investments, and dispositions is
set forth in Note B to the consolidated and combined financial statements.
GENERAL
The Company is an industrial technologies company providing global customers
with solutions for improving their efficiency and productivity. The Industrial
Automation Systems business segment includes integrated manufacturing systems,
metal-cutting and composite production systems, body welding and assembly
systems, precision grinding and abrasive operations and stand-alone machine
tools, primarily serving the worldwide automotive, off-road vehicle, diesel
engine and aerospace manufacturing industries. The Automated Data Systems
business segment comprises automated data collection, network and mobile
computing products and services, principally serving the industrial market.
Customers include global distribution and transportation companies, food and
beverage operations, manufacturing industries, health care providers and
government agencies.
PRODUCTS AND SERVICES
INDUSTRIAL AUTOMATION SYSTEMS. The Company is a major designer, producer and
integrator of manufacturing technologies, primarily for the global automotive,
off-road vehicle and diesel engine industries, but it also operates in the
aerospace, electronics, durable goods and the general job shop markets. Products
include integrated manufacturing systems for the production of powertrain
components such as engines, transmissions and connecting rods, and chassis
components such as steering knuckles, rear axle housings and brake calipers;
body welding and assembly systems; test and automation equipment for integration
into production lines; precision grinding and abrasives; multi-axis
manufacturing systems; profiling systems for composite materials; stand-alone
vertical and horizontal metal-cutting machining centers; the redesign,
remanufacturing and retooling of installed equipment; and design/ engineering
services.
During the fourth quarter of 1998, UNOVA acquired the machine tool business of
Cincinnati Milacron for approximately $180.0 million in cash, subject to
post-closing adjustments. The division, which was renamed Cincinnati Machine, A
UNOVA Company ("Cincinnati Machine"), is engaged in the design, manufacture,
sale and servicing of standard and advanced computer numerically controlled
metal cutting machine tools for the industrial component, aerospace, job shop,
fluid power and automotive industries.
During the third quarter of 1998, UNOVA acquired R & B Machine Tool Company, a
specialty machine and retooling company.
The Company's IAS segment includes the following divisions: Lamb Technicon
Machining Systems, Cincinnati Machine, Lamb Technicon Body & Assembly Systems,
Lamb Assembly & Test Systems,
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ITEM 1. BUSINESS (CONTINUED)
Modern Prototype, Lamb UK, Honsberg Lamb, Landis Gardner, Landis Lund, R & B
Machine Tool Company, Citco and Cranfield Precision.
The IAS segment's major offices and production facilities are located in
Illinois, Kentucky, Michigan, Ohio and Pennsylvania and internationally in
Canada, the United Kingdom and Germany.
INTEGRATED MANUFACTURING SYSTEMS. Manufacturing solutions are being designed and
integrated by the Company for auto and diesel customers, primarily for
powertrain components. Product lines include computer numeric control (CNC)
machines for low-volume applications, modular, flexible systems for
medium-volume production and transfer lines for high-volume production.
Integrated manufacturing systems, which include the operations of Cincinnati
Machine subsequent to the acquisition, accounted for 29%, 27% and 39% of the
Company's consolidated and combined revenues in fiscal 1998, 1997 and 1996,
respectively.
Virtual design, prototyping and simultaneous engineering techniques are used to
optimize solutions for complex automotive manufacturing projects. By working
closely with customers, especially during their product design and engineering
phase, the Company is able to develop machining processes that reduce capital
requirements, lower lifecycle costs, eliminate costly shop floor programming and
improve productivity by reducing downtime during operations.
Through its Assembly and Test Systems operations, the Company also designs and
builds specialized assembly and/or testing equipment and systems for a variety
of automotive manufacturing and other industries.
BODY AND ASSEMBLY SYSTEMS. The Company designs and integrates automated systems
to form, assemble and weld high-quality auto and truck bodies as well as other
industrial products. Robotic systems are integrated with high-precision holding
and alignment fixtures and high-volume welding equipment to produce components
and subassemblies. Proprietary processes have been developed specifically to
assemble doors, hoods and trunk lids, which historically represent the most
critical "fit and finish" manufacturing parts of car bodies.
Using 3-D computer simulations, UNOVA has established one of the broadest
process and tool design capabilities in the industry. Tool design and
prototyping are now linked into the product engineering process, reducing costs
and risks for automotive customers long before their programs move into the
capital investment stage. Body and Assembly Systems accounted for 8%, 14% and
12% of the Company's consolidated and combined revenues in fiscal 1998, 1997 and
1996, respectively.
PRECISION GRINDING AND ABRASIVES. The Company is an innovator of cylindrical
grinding products and processes that improve accuracy and reliability in
critical engine parts. These processes ultimately result in lower emissions,
better fuel economies and reduced maintenance for car owners. Combined with the
centerless grinding activities from Cincinnati Machine, the Company has moved
into a leading position as a provider of advanced grinding applications in
non-automotive markets. Precision Grinding and Abrasives accounted for 13%, 15%
and 17% of the Company's consolidated and combined revenues in fiscal 1998, 1997
and 1996, respectively.
Superabrasive grinding wheels, electronic controls, high-precision,
maintenance-free hydrostatic bearings and state-of-the-art, value-engineered
double disc grinding technologies enable today's car manufacturers to machine
parts with precision measured in the sub-micron range. Research into the
processing of new materials also has resulted in the development of
ultra-high-precision grinding and finishing techniques. These advances are being
applied to requirements of the microelectronics, computer, aerospace and optics
industries for the manufacture of materials such as composites, silicon, glass
and ceramics.
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ITEM 1. BUSINESS (CONTINUED)
CINCINNATI MACHINE. The addition of the Cincinnati Machine operations (acquired
from Cincinnati Milacron) directly complements UNOVA's existing product range
and brings an established global distribution network in non-automotive markets.
The new division provides advanced systems such as multi-axis and composite
manufacturing systems for the aerospace industry; production systems, including
horizontal machining centers and flexible manufacturing cells, for the general
metalworking industry; and standard CNC machines such as vertical machining and
horizontal turning centers for job shops.
TECHNOLOGIES/TRENDS. UNOVA continues to develop manufacturing technologies to
broaden its product offerings and respond to automotive customers' needs to
lower costs, improve fuel consumption and decrease car emissions. New modular,
multi-spindle machining centers are reducing cycle time, and flexible fixturing
systems are under development to cut costs of high-volume machining. Advances in
grinding technologies are beginning to allow UNOVA to move into other markets,
where the Company's machines can be applied to finish non-metallic materials
with extreme accuracy.
AUTOMATED DATA SYSTEMS. The Company's automated data collection ("ADC") and
mobile computing systems business comprise the Intermec, Norand and UBI
activities. Intermec was acquired in 1991; Norand and UBI were acquired early in
1997. In 1997, these three companies were consolidated into one organization
called Intermec Technologies Corporation, serving the global bar code, data
collection and mobile computing market, which has grown approximately 12% to 15%
annually over the past five years. This organization is divided into three
global product divisions: Local Area Systems, Norand Mobile Systems and
Identification Systems. ADS, which included only Intermec's results until the
1997 acquisitions of Norand and UBI, accounted for 50%, 44% and 32% of the
Company's consolidated and combined revenues in 1998, 1997 and 1996,
respectively.
In 1998, the Company acquired the radio frequency identification ("RFID")
business unit of Amtech Corporation known as the Amtech Systems Group ("Amtech
Systems"), which became a division of Intermec Technologies Corporation. Amtech
Systems is a supplier of wireless data technologies for electronic toll
collection, rail and motor fleet tracking, and access control to parking and
other structures. The Company had previously purchased $10.0 million of Amtech
Corporation's common stock which was applied towards the purchase price of
Amtech Systems. According to industry statistics, the U.S. RFID market grew over
20% in 1998 to $655 million.
This combination of companies and capabilities establishes the Company as a
leading participant in the growing ADC marketplace. Together, they offer a broad
range of products which are used to gather, organize, process, transmit and
exchange information between various field-based or in-premise locations and
central computers or information retrieval systems. By facilitating sales order
processes, and tracking parts, work-in-process, finished products and people
through manufacturing, distribution and other commercial operations, industrial
users are able to control inventory and to improve the productivity, quality and
responsiveness of their operations, from supply chain management and enterprise
resource planning ("ERP") to field sales and service.
Major offices and manufacturing facilities are located in the states of Iowa,
Ohio and Washington; and internationally in the United Kingdom, the Netherlands,
Sweden, France and Australia.
LOCAL AREA SYSTEMS. The Company has demonstrated market leadership in the
wireless Local Area Network (LAN) industry by being first to provide a network
architecture that allows customers to use multiple radio technologies within one
LAN system. This Radio Independent-TM- wireless LAN solution supports all major
radio technologies (including synthesized UHF, 900 MHz and 2.4 GHz direct
sequence and frequency-hopping, spread-spectrum radio technologies), giving
customers the ability to choose the most efficient radio technology for their
facilities to solve data rate, transmission speed and
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ITEM 1. BUSINESS (CONTINUED)
range issues in order to create a reliable communications environment. To ensure
compatibility with customer host systems, all major industry standard networks
are supported.
The Company has developed an extensive line of hand-held computers and
stationary and vehicle-mounted terminals that combine PC-type capability with
scanning and data transmission abilities. Intermec's family of products ranges
from low-cost, hand-held batch data collection devices to sophisticated and
powerful terminals, computers and network products. The Company's "open systems"
product design philosophy is to deliver maximum flexibility for customers with
diverse application requirements.
NORAND MOBILE SYSTEMS. As a leader in ruggedized mobile computing systems,
especially with its PEN*KEY-Registered Trademark- terminals, the Company
provides comprehensive data communications, wide-area networks, application
software, hand-held and truck-mounted PC-based products with peripherals and
printer solutions. These allow instant information exchange between companies'
field and central organizations, automating sales, distribution, electronic
billing, dispatching, routing and updating of customer information in real time.
Mobile computing refers to rugged PC-based devices for route accounting, meter
reading, field services and sales management, rather than general personal or
desktop computing applications. In combination with wireless communications,
mobile computing enables remote workers to have access to centralized computer
applications and databases and to send and receive information through wireless
networks for improved productivity, efficiency and accuracy of data.
IDENTIFICATION SYSTEMS. Intermec's Identification Systems products, which
include wands, imagers, charge-couple devices (CCD), badge and laser scanners,
as well as printers and media products, are able to read or collect data, and
then print the data on customized labels and tags.
The Company's line of flexible "on demand" bar code printers ranges from
low-cost, light- to heavy-duty industrial models that accommodate a wide array
of printing widths, materials and label configurations. A variety of specialty
printers provides custom capabilities including color printing, a global
language enabler and high-resolution (400 DPI) printing which ensures sharp
fonts and precise graphics, even on extremely small labels such as those used by
the electronics industry. The Company also supports its customers with a broad
range of label and tag solutions as well as other supplies for its printer
product range.
AMTECH SYSTEMS. Intermec's newest division, acquired in June 1998, is a leading
supplier of RFID solutions for intelligent transportation systems. Amtech
designs, manufactures, markets, integrates and supports innovative RFID products
and services for electronic toll and traffic management; rail, intermodal and
fleets; and access control for parking, security, airports and ground
transportation. Amtech formed a strategic business unit to develop the next
generation of low-cost RFID products for the transportation, security,
manufacturing and logistics markets. The division plans to offer its new
technology for integration with and to complement existing automatic
identification and data capture solutions such as bar code, mobile computing and
other enterprise-wide information systems.
TECHNOLOGIES/TRENDS. The Company is consistently broadening the application of
ADC and mobile computing by developing or integrating new technologies into its
product range. Recent examples include the Company's smart, vehicle-based
docking solution for pen-based computers as well as 2-D bar codes, smart cards
and RFID. Tags or labels based on RFID technology can be updated during their
use, making them an integral part of an electronic information network.
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ITEM 1. BUSINESS (CONTINUED)
BUSINESS STRATEGY
The Company's strategy is to develop products, processes and services that help
improve productivity and efficiency in a variety of manufacturing and
distribution applications. Both of the Company's business segments offer single
products as well as integrated solutions to their customers.
Future growth in these businesses is expected to result from expansion of the
Company's existing operations and its customer base, and through acquisitions.
In seeking acquisitions, the Company will concentrate on technologies, products
and services that enhance customer productivity and efficiency, and those that
can be characterized as growth drivers.
In its IAS business segment, the Company plans to continue to develop its
existing customer base by seeking a greater role in customer projects, by
continuing its emphasis on product development and by expanding its
international activities. The ongoing development of the Company's ADC/mobile
computing activities will depend primarily on the application of new
technologies and products to maintain its position in this technology-driven
market. The Company believes it has the necessary technical expertise to achieve
this goal. Future geographic opportunities have been identified outside North
America, particularly in Europe, South America and Asia, where the use of data
collection technology is less developed. To capitalize on these emerging
markets, the Company is expanding its international marketing, distribution and
support network, and is engaged in an ongoing program to locate Company-owned
resources in key markets worldwide.
The Company continues to explore ways to increase its presence in market
segments where it presently holds a smaller market share, such as the
application of lower-volume flexible manufacturing systems and CNC machines. In
some areas the Company also has developed high-precision manufacturing
technologies that should allow it to establish a presence in growth markets such
as microelectronics with its new generation of ultra-high-precision wafer
grinders.
In recent years, cost-cutting needs and quality requirements in the automotive
industry have affected the Company's relationships with its customers. The
carmakers' trend toward fewer suppliers has benefited the Company and allowed it
to expand its market participation. These market-driven changes also have forced
many smaller competitors either to withdraw from the market or to reduce their
role to that of second or third tier suppliers. The Company's strategy has been
to establish an extensive outsourcing network of qualified suppliers in North
America and overseas, thereby avoiding unnecessary vertical integration and
gaining flexibility in its market approach.
MARKETS AND CUSTOMERS
INDUSTRIAL AUTOMATION SYSTEMS. The Company participates in the automotive
manufacturing and general manufacturing markets. Investments by automotive
customers are driven by model changes, competitive pressures, government
regulations such as emission standards and gasoline consumption rates, and by
the customers' own internal spending cycles. Investments in diesel engine
manufacturing are influenced by the infrastructure needs of emerging industrial
nations and by the efficiency benefits diesel engines offer for heavy and light
trucks and utility vehicles.
Customers for the Company's integrated manufacturing systems products are the
major auto and diesel manufacturers and their Tier One suppliers. Although the
passenger car and light truck industries continue to represent this division's
largest market, business from diesel engine manufacturers has grown in recent
years.
The Company believes that its future growth in this business segment will be
dependent on its ability to broaden the scope of products and services that it
markets to its current customer base, which allows
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ITEM 1. BUSINESS (CONTINUED)
the Company to expand into other industrial manufacturing markets. This strategy
was further supported by the acquisition of Cincinnati Machine, which is already
participating in markets such as the aerospace and general metalworking
industries as well as the broad job shop market. Cincinnati Machine also brings
flexible CNC machine technology to the other IAS divisions, allowing them to
market these products and systems to the automotive supplies industry, while
products developed by the auto-related divisions can be sold through Cincinnati
Machine's global distribution network to other, non-automotive markets.
A substantial part of the IAS segment's total revenues is currently generated by
worldwide automotive and diesel engine industry purchases of automated
manufacturing systems, including integrated machining, body welding and assembly
and precision grinding systems. Among customers for such equipment, U.S. and
Canadian auto and auto-related manufacturers currently account for the majority
of Industrial Automation Systems sales. The remainder of sales represents
products manufactured and sold in Europe and those exported from the Company's
production facilities, mostly for installation in Latin America and Asia.
Recent major customers include U.S.-based Cummins, DaimlerChrysler, Ford,
General Motors, Navistar and Detroit Diesel; and Western Europe-based BMW/Rover,
Fiat, Mercedes Benz, Jaguar, Peugeot, Renault, Volkswagen, and the European
subsidiaries of the large U.S. manufacturers, as well as Tata (Telco) in India.
The Company has also won major systems contracts for the "transplant"
manufacturing facilities of foreign auto makers, including both European and
Japanese, and also serves the automotive components manufacturing market.
AUTOMATED DATA SYSTEMS. Because automated data systems represents technologies
that can be utilized by a company of any size, and small systems can be
installed at very low cost, the market is extensive. Worldwide sales of
automated data systems equipment reached over $5 billion in 1998, according to
estimates from independent research sources. These sources also predict that the
overall market will continue to grow at an annual rate of approximately 12% to
15% over the next several years.
Market growth is driven by the global need for technologies and solutions that
improve quality, productivity and cost-efficiency in business and government,
particularly through logistics automation, supply chain management and ERP
solutions. Worldwide coverage with a dedicated sales organization is therefore a
major advantage.
Through its application of technologies in the manufacturing,
warehouse-distribution, transportation, health care, government and other
non-retail markets, the Company maintains a strong position in the global
non-retail ADC/mobile computing market.
The Company sells and services its products through multiple sales and
distribution channels: a direct field sales force which concentrates on large,
complex systems sales; value added resellers that offer applications-specific
solutions; and alliances with major systems integrators. The Company's direct
sales organization serves customers from offices throughout North America and
Europe and in some selected countries outside these regions. An indirect sales
channel includes long-time exclusive relationships with value-added distributors
and master resellers.
Although the Company obtains approximately 60% of its sales through indirect
sales channels, no individual value-added distributor or reseller is material to
overall Company results. The Company also maintains contact with customers and
prospective users by having established user forums for automated data systems
applications and technologies.
The mobile computing systems market consists of several applications, such as
route accounting for the distribution and package/parcel delivery industries,
sales merchandising, remote delivery and field
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service. These applications are generally used in the consumer products, food,
beverage, wholesale, parcel delivery, freight, field service and home service
industries.
Manufacturing applications include the collection and communication of
information related to receipt of materials, work-in-progress, finished goods
inventory and other functions throughout the manufacturing process. Warehousing
and distribution center applications involve the collection and communication of
information related to receiving materials to be stored, storage locations,
materials retrieval and shipping. Retail applications include the automation of
shelf label maintenance and product shipping and receiving functions.
International sales opportunities exist in countries where mobile computing
systems market practices and other applications are similar to those in the U.S.
The extent of RF systems opportunities in any particular country is based on the
level of industrialization, the status of bar coding implementation and the RF
regulatory environment. The major markets for printers are manufacturing,
distribution, warehousing, transportation, health care, government and other
services.
COMPETITION
Strong competition exists both in the domestic and international markets for the
Company's products and services. Products are sold and projects are won in the
marketplace based on price, technology and service.
INDUSTRIAL AUTOMATION SYSTEMS. While product quality is a key determinate in
the competition to win market share, pricing is also a major criterion in the
global market. Integrated Manufacturing Systems' strength is the ability to
design reliable and efficient manufacturing processes for its customers and
combine them with cost-effective machining solutions in order to win orders
against strong competition.
The North American and European market for high-volume production systems for
engines and transmissions is divided among approximately ten major competitors
and numerous smaller participants. Major competitors are Thyssen, Ingersoll
Milling and Grob-Werke (Germany).
In the body welding and assembly systems market, the Company is faced with
competitors that are involved in a broad range of assembly equipment and other
competitors that provide "niche" machines. Primary competitors include DCT,
Progressive Industries (PICO) and Valiant in North America; Thyssen, FFT and
Kuka in Germany and Comau in Italy.
In the worldwide market for high-precision grinding of engine parts, the Company
has achieved a strong market position through innovative products that improve
customer efficiency while reducing their capital costs. Major competitors are
the foreign companies Koyo and Toyoda in Japan; the Schleifring Group, Junker in
Germany; and Giustina in Italy.
Cincinnati Machine faces separate competitors in its different product markets
such as Ingersoll Milling, DST (Germany) and Forrest Line (France) in aerospace
systems; Mazak, Okuma and Mori Seiki (all Japan) in production systems; and
Fadal (Thyssen) and Haas (both North America) in the market for stand-alone
machines.
AUTOMATED DATA SYSTEMS. The market for ADC/mobile computing systems is highly
fragmented. Based on independent market surveys, management believes that
Intermec Technologies Corporation is one of the largest participants measured by
revenues. The other two major participants are Symbol and Telxon. The Company
also faces strong competition for single product lines from specialized
suppliers.
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ITEM 1. BUSINESS (CONTINUED)
The Company competes on the basis of its open modular systems approach, network
and communications expertise, applications software, level of sales and support
services, and product functionality, performance, ruggedness and overall
quality.
The market for mobile computing and RF products is highly competitive and
rapidly changing. Some firms manufacture and market hand-held systems for route
accounting applications, including Telxon and Fujitsu. In addition, a number of
firms manufacture and market radio-linked data communication products, including
LXE, Teklogix, Symbol, and Telxon. On the printer side, the Company faces
competition from Zebra/Eltron, Datamax and many others, depending on the
geographic area.
RESEARCH AND DEVELOPMENT
Companywide expenditures on research and development activities amounted to
$71.5 million, $53.1 million and $29.7 million, substantially all of which was
sponsored by the Company, in the years ended December 31, 1998, 1997 and 1996,
respectively. The Company expensed a total of $211.5 million of acquired
in-process research and development in 1997. See further discussion in Note B to
the consolidated and combined financial statements.
PATENTS AND TRADEMARKS
The Company owns a large number of patents, trademarks and copyrights relating
to its manufactured products, which have been secured over a period of years.
These patents, trademarks and copyrights have been of value in the growth of the
Company's business and may continue to be of value in the future. However, the
Company's business generally is not dependent upon the protection of any patent,
patent application or patent license agreement, or group thereof, and would not
be materially affected by expiration thereof.
The Company has approximately 40 patent licenses under which it paid out or
received income in the year ended December 31, 1998. During 1998, the aggregate
amount of license fees paid by the Company was approximately $6.2 million, and
the aggregate amount of license fees received was approximately $7.8 million.
SEASONALITY; BACKLOG
Sales backlog was $831 million, $395 million and $595 million at December 31,
1998, 1997 and 1996, respectively. The operations of the Company are not
seasonal to any appreciable degree. The majority of the Company's backlog is
concentrated in the IAS segment. The ADS market typically operates without a
significant backlog of firm orders and does not consider backlog to be a
relevant measure of future sales.
EMPLOYEES
At December 31, 1998, the Company had approximately 10,361 full-time employees,
of which approximately 6,477 are engaged in the IAS segment, approximately 3,761
in the ADS business and approximately 123 in corporate and shared services.
ENVIRONMENTAL AND REGULATORY MATTERS
During 1998, the amounts incurred to comply with federal, state and local
legislation pertaining to environmental standards did not have a material effect
upon the capital expenditures or earnings of the Company.
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ITEM 1. BUSINESS (CONTINUED)
Radio emissions are the subject of governmental regulation in all countries in
which the Company currently conducts business. In North America, both the
Canadian and the U.S. governments publish relevant regulations, and changes to
these regulations are made only after public discussion. In some countries
regulatory changes can be introduced with little or no grace period for
implementing the specified changes. Furthermore, there is little consistency
among the regulations of various countries outside North America, and future
regulatory changes in North America are possible. These conditions introduce
uncertainty into the product planning process and could have an adverse effect
on the ADC/ Mobile Computing business.
The European Community ("EC") has passed a directive requiring its members to
adopt laws relating to electro-magnetic compatibility and emissions standards.
These standards will apply to ADC/Mobile Computing products sold in EC member
countries as those countries adopt the EC standards into law. Currently, the
Company believes that its products are in material compliance with the
regulations in force in each of the EC member countries.
RAW MATERIALS
The Company uses a wide variety of raw materials in the manufacture of its
products and obtains such raw materials from a variety of suppliers. No single
supplier provides 10% or more of the Company's raw materials, nor do raw
materials from any one supplier generate 10% or more of the Company's
consolidated revenues. The Company does not have any long-term supply agreements
relating to raw materials.
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ITEM 2. PROPERTIES
UNOVA's corporate headquarters building at 360 North Crescent Drive, Beverly
Hills, California was sold in December 1998. The Company is currently leasing
office space in the Beverly Hills building but plans to move the corporate
headquarters to a leased facility at 21900 Burbank Boulevard, Woodland Hills,
California in 1999.
Its principal plants and offices have an aggregate floor area of approximately
8,238,239 square feet, of which 7,209,484 square feet (88%) are located in the
United States, and 1,028,755 square feet (12%) are located outside of the United
States, primarily in the United Kingdom, Germany and Canada.
These properties are used by the business segments as follows:
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SQUARE FEET
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Industrial Automation Systems....................................................................... 7,042,646
Automated Data Systems.............................................................................. 863,043
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7,905,689
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Approximately 6,635,492 square feet (81%) of the principal plant, office and
commercial floor area is owned by the Company, and the balance is held under
lease.
The Company's plants and offices in the United States are situated in 21
locations in the following states:
<TABLE>
<CAPTION>
STATE SQUARE FEET
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Ohio................................................................................................ 3,507,496
Michigan............................................................................................ 1,620,075
Pennsylvania........................................................................................ 495,662
California.......................................................................................... 332,550
Illinois............................................................................................ 306,158
Washington.......................................................................................... 312,000
Iowa................................................................................................ 259,820
Kentucky............................................................................................ 152,483
Other states........................................................................................ 223,240
------------
7,209,484
------------
------------
</TABLE>
The above-mentioned facilities are in satisfactory condition and suitable for
the particular purposes for which they were acquired or constructed and are
adequate for present operations.
The foregoing information excludes Company-held properties leased to others and
also excludes plants or offices which, when added to all other of the Company's
plants and offices in the same city, have a total floor area of less than 50,000
square feet.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is currently, and is from time to time, subject to claims and suits
arising in the ordinary course of its business. Although the results of
litigation proceedings cannot be predicted with certainty, the Company believes
that the ultimate resolution of these proceedings will not have a material
adverse effect on the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Quarterly Financial Information (unaudited) F-26
</TABLE>
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
UNOVA, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA AND
RATIOS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales and Service Revenues................... $ 1,662.7 $ 1,426.2 $ 1,164.7 $ 942.9 $ 971.1
--------- --------- --------- --------- ---------
Operating Costs and Expenses
Cost of sales.............................. 1,110.8 981.4 841.8 669.3 689.9
Selling, general and administrative (1).... 383.7 535.9 218.7 194.1 199.9
Depreciation and amortization.............. 57.0 40.6 27.0 26.1 28.7
--------- --------- --------- --------- ---------
Total.................................... 1,551.5 1,557.9 1,087.5 889.5 918.5
--------- --------- --------- --------- ---------
Other Income, Net............................ 31.5
---------
Earnings (Loss) before Interest and Taxes.... 142.7 (131.7) 77.2 53.4 52.6
Interest Expense, net (2).................... (25.7) (16.7) (7.1) (9.3) (15.7)
Taxes on Income.............................. (47.3) (23.0) (28.1) (17.9) (15.3)
--------- --------- --------- --------- ---------
Net Earnings (Loss).......................... $ 69.7 $ (171.4) $ 42.0 $ 26.2 $ 21.6
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Basic Net Earnings (Loss) per Share.......... $ 1.28 $ (3.17) $ 0.78 $ 0.49 $ 0.40
Diluted Net Earnings (Loss) per Share........ $ 1.27 $ (3.17) $ 0.78 $ 0.49 $ 0.40
Shares used for Basic Earnings (Loss) per
Share (3).................................. 54,620 54,056 53,892 53,892 53,892
Shares used for Diluted Earnings (Loss) per
Share (3).................................. 54,703 54,056 53,892 53,892 53,892
FINANCIAL POSITION (at end of year):
Total Assets................................. $ 1,979.2 $ 1,356.4 $ 1,073.8 $ 919.0 $ 860.8
Notes Payable and Current Portion of
Long-term Obligations...................... $ 237.3 $ 86.6 $ 27.5 $ 22.2 $ 41.7
Long-term Obligations........................ $ 366.5 $ 216.9 $ 14.5 $ 14.1 $ 9.0
Allocated Portion of Western Atlas Debt...... $ 109.6 $ 112.4 $ 112.8
Working Capital.............................. $ 392.2 $ 277.8 $ 266.0 $ 194.7 $ 115.2
Current Ratio................................ 1.5 1.6 1.6 1.6 1.3
Total Debt as a Percentage of Total
Capitalization............................. 46% 34% 21% 23% 27%
</TABLE>
- ------------------------
(1) General and Administrative Costs include allocated charges from Western
Atlas of $13.5 million, $22.2 million, $19.9 million and $27.6 million for
the years ended December 31, 1997, 1996, 1995 and 1994, respectively. The
year ended December 31, 1997 includes charges of $211.5 million, or $3.91
per share, for the value of acquired in-process research and development
activities resulting from acquisitions made during the year.
(2) Interest expense includes allocated charges from Western Atlas of $12.0
million, $8.3 million, $8.4 million and $12.1 million for the years ended
December 31, 1997, 1996, 1995 and 1994, respectively.
(3) In thousands. The number of common shares used to calculate basic and
diluted earnings per share prior to 1997 is based on the number of shares of
Western Atlas Common Stock that was outstanding as of June 30, 1997.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales and service revenues and segment operating profit for the years ended
December 31, 1998, 1997 (excluding the $211.5 million charges for acquired
in-process research and development) and 1996, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
SALES AND SERVICE REVENUES
Industrial Automation Systems................................ $ 833.3 $ 789.8 $ 797.4
Automated Data Systems....................................... 829.4 636.4 367.3
--------- --------- ---------
Total Sales and Service Revenues............................. $ 1,662.7 $ 1,426.2 $ 1,164.7
--------- --------- ---------
--------- --------- ---------
SEGMENT OPERATING PROFIT
Industrial Automation Systems................................ $ 76.9 $ 94.6 $ 69.5
Automated Data Systems....................................... 55.4 9.1 30.1
--------- --------- ---------
Total Segment Operating Profit............................... $ 132.3 $ 103.7 $ 99.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
Total sales and service revenues increased $236.5 million, or 17% for the year
ended December 31, 1998 compared with the corresponding prior period. Total
segment operating profit increased $28.6 million, or 28% for the year ended
December 31, 1998 compared to the corresponding prior period.
IAS revenues increased $43.5 million, or 6% while related operating profit
decreased $17.7 million, or 19% for the year ended December 31, 1998 compared
with the corresponding prior period. The increase in IAS revenues is primarily
attributable to the acquisitions of Cincinnati Machine and R&B Machine Tool,
which are discussed below. Startup issues on a new product line at Lamb Honsberg
in Germany impacted operating profit in 1998. In addition, the IAS segment began
several new projects in 1998 that are not expected to materially affect sales
and profits until next year. Delays caused by unexpected customer changes were
encountered in the engineering phase of these new projects. Conversely, during
the first half of 1997, the integrated manufacturing systems operations
experienced a higher level of sales and profits from contracts in the final
delivery and installation phase. IAS backlog increased from $332.0 million at
December 31, 1997 to $705.5 million at December 31, 1998.
ADS segment sales increased $193.0 million or 30% and operating profit increased
$46.3 or 509% for the year ended December 31, 1998 compared with the
corresponding prior period. The sales and operating profit increases are due
primarily to new licensing revenues, internal growth and the contribution of a
full year of operations and the realization of improved profitability from the
integration of the Norand and UBI acquisitions, offset by information system
problems that negatively impacted the results of the third and fourth quarter.
These problems, which were caused by the larger volume of business that resulted
from the integration, did not allow the ADS segment to fully realize the
benefits of its integration activities in 1998. A new information system,
designed to resolve these problems, will become operational during 1999.
In October 1998, UNOVA acquired the machine tool business of Cincinnati Milacron
for approximately $180.0 million in cash, subject to post-closing adjustments.
The division, which was renamed Cincinnati Machine, a UNOVA Company ("Cincinnati
Machine"), is engaged in the design, manufacture, sale and servicing of standard
and advanced computer numerically controlled metal cutting machine tools for the
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
industrial component, aerospace, job shop, fluid power and automotive
industries. Cincinnati Machine has become part of the Company's Industrial
Automation Systems ("IAS") segment. The acquisition cost has been allocated on a
preliminary basis to the net assets acquired based on their relative fair
values. The acquisition was funded using the Company's committed credit facility
and was accounted for under the purchase method of accounting.
During the third quarter of 1998, UNOVA acquired R&B Machine Tool Company ("R&B
Machine"), a specialty machine and retooling company. This acquisition was
funded using short-term uncommitted credit lines. In June 1998, the Company
acquired the radio frequency identification ("RFID") business unit of Amtech
Corporation known as the Amtech Systems Division ("Amtech Systems"). Amtech
Systems is a supplier of wireless data technologies for electronic toll
collection, rail and motor fleet tracking, and access control to parking and
other structures. The Company had previously purchased $10.0 million of Amtech
Corporation common stock which was applied towards the purchase price of Amtech
Systems.
Depreciation and amortization increased from $40.7 million to $57.0 million from
the year ended December 31, 1997 to the year ended December 31, 1998. This
increase is primarily due to higher amortization of goodwill and other
intangibles resulting from the Norand and UBI acquisitions, as well as
additional depreciation from capital expenditures and business acquisitions.
Selling, general and administrative ("SG&A") expense increased $59.3 million
from the year ended December 31, 1997 to the year ended December 31, 1998.
However, as a percentage of sales, SG&A remained constant at 23% in both years.
The increase in the amount is due primarily to 1998 acquisitions as well as the
increase in the Company's sales and service revenues over the prior year.
Net interest expense was $25.7 million and $16.7 million for the years ended
December 31, 1998 and 1997, respectively. The increase is attributable to an
increase in outstanding debt due primarily to the acquisitions of Norand and UBI
in 1997 and Cincinnati Machine, R&B Machine and Amtech Systems in 1998.
Other income, net consists of a gain of $35.5 million recognized on the sale of
UNOVA's corporate headquarters building, offset by other non-operating expenses.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
Total sales and service revenues increased $261.5 million, or 22% for the year
ended December 31, 1997 compared with the corresponding prior period. Total
segment operating profit, excluding the $211.5 million charges for acquired
in-process research and development, increased $4.1 million, or 4% for the year
ended December 31, 1997 compared to the corresponding prior period.
IAS revenues decreased $7.6 million, or 1% and related operating profit
increased $25.1 million, or 36% for the year ended December 31, 1997 compared
with the corresponding prior period. The decrease in IAS revenues is primarily
attributable to the sale of the Material Handling Systems ("MHS") division in
November 1996, which offsets an increase in integrated manufacturing systems
revenues. IAS experiences lower profit margins in the early stages of long-term
contracts until the development risks have been mitigated. During 1997 the
integrated manufacturing systems operations experienced a higher level of
revenues and profits from contracts in the final delivery and installation
phase. These projects contributed to an increase in operating margins for IAS
from 8.7% in 1996 to 12.0% in 1997. Accordingly, IAS backlog declined from
$545.0 million at December 31, 1996 to $332.0 million at December 31, 1997.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Also contributing to the increased operating profit are nonrecurring costs
recorded in 1996 associated with the MHS sale and the reorganization of the
Company's IAS European operations and domestic grinding businesses.
ADS revenues increased by $269.1 million, or 73% due to the acquisitions of
Norand Corporation ("Norand") and United Barcode Industries ("UBI"). However,
ADS operating profit declined by $21.0 million, or 70% due primarily to the
process of integrating the newly acquired companies with Intermec and the costs
of a long-term contract related to wireless RFID technology purchased from IBM
Corporation.
The Company acquired Norand on March 3, 1997, and UBI on April 4, 1997. Norand
designs, manufactures and markets mobile computing systems and wireless data
communications networks using radio frequency technology. UBI is a
European-based automated data collection company headquartered in Sweden. These
companies were integrated into Intermec Technologies Corporation. Both
transactions were funded by WAI borrowings and cash on hand, and have been
accounted for under the purchase method of accounting. Accordingly, the
acquisition costs (approximately $280.0 million and $107.0 million for Norand
and UBI, respectively) were allocated to the net assets acquired based upon
their relative fair values. Such allocation resulted in $203.3 million assigned
to in-process research and development activities; $154.1 million assigned to
goodwill (amortized over 25 years); and $29.0 million assigned to other
intangibles (amortized over periods ranging from 4 to 18 years). During the
second quarter of 1997, the Company expensed the amounts assigned to acquired
in-process research and development in accordance with Financial Accounting
Standards Board Interpretation No. 4.
The Company acquired the remaining 51% of Honsberg, a German machine tool maker,
in the second quarter of 1997. The original 49% of Honsberg was acquired during
1995. The Company acquired the stamping, engineering, and prototyping division
of Modern Prototype Company in September 1997. In December 1997, UNOVA acquired
Goldcrown Machinery, Inc., a manufacturer of precision centerless grinding
systems. Also, in November 1997, the Company acquired 13% of the common stock of
Amtech Corporation, which was applied toward the purchase price of Amtech's RFID
business in 1998.
SG&A expense as a percentage of sales and service revenues increased to 22.7%
for the year ended December 31, 1997, compared to 18.8% in 1996. This increase
is primarily due to a higher percentage of the Company's 1997 sales coming from
the ADS segment, where SG&A rates are historically higher than those experienced
in the IAS segment. ADS sales as a percentage of total Company sales increased
to 44.6% in 1997 from 31.5% in 1996.
Net interest expense was $16.7 million and $7.1 million for the years ended
December 31, 1997 and 1996, respectively. The increase is primarily due to an
increase in the level of Western Atlas allocated debt from $109.6 million at
December 31, 1996 to $230.0 million at October 31, 1997 (when the Company paid
this amount to WAI as an intercompany dividend). The increase in allocated debt
is primarily attributable to the 1997 acquisitions of Norand and UBI.
FOREIGN CURRENCY TRANSACTIONS
The Company is subject to the effects of international currency fluctuations due
to the global nature of its operations. Currency fluctuations did not have a
significant impact on operations during fiscal years 1998, 1997 and 1996. It is
not possible to predict the Company's exposure to foreign currency fluctuations
beyond the near term because revenues generated from particular foreign
jurisdictions vary widely over time. The Company hedges transactions from time
to time, but the amount and volume of such transactions are not material.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
For fiscal year 1998, the Company derived approximately 36% of its revenues and
approximately 26% of its operating profits (exclusive of corporate overhead)
from non-U.S. operations. At December 31, 1998, identifiable assets attributable
to foreign operations comprised 22% of total assets. As the largest components
of these foreign assets are attributable to European operations, the exposure of
identifiable assets to foreign currency fluctuations or expropriations is not
significant.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities increased from $13.7 million at December 31, 1997
to $17.7 million at December 31, 1998. Total debt increased from $303.6 million
at December 31, 1997 to $603.8 million at December 31, 1998 due to the
acquisitions of Cincinnati Machine, R&B Machine and Amtech Systems and the
normal capital expenditure and working capital needs of the operations.
In March 1998, the Company sold $200.0 million principal amount of senior
unsecured debt. The sale comprised $100.0 million of 6.875% seven-year notes, at
a price of 99.867 and $100.0 million of 7.00% ten-year notes, at a price of
99.856. Including underwriting fees, discounts and effects of forward rate
agreements entered into by the Company to hedge the interest rates on the debt,
the effective interest rates on the seven-year and ten-year notes are 7.125% and
7.175%, respectively. The net proceeds of approximately $198.0 million were used
by the Company to repay outstanding debt.
The Company has two unsecured committed credit facilities with a group of banks
from which it may borrow up to $500.0 million. Under these credit facilities,
the Company may borrow at the prime rate or at rates based on the London Inter
Bank Offered Rate, certificates of deposit or other rates that are mutually
acceptable to the banks and the Company. At February 12, 1999, $300.0 million of
these credit facilities was available for the Company's general use. In
addition, the Company maintains other uncommitted credit facilities and lines of
credit of which $89.3 million was available to the Company at February 12, 1999.
The Company expects that cash flow from operations, along with available
borrowing capacity, will be adequate to meet working capital requirements.
YEAR 2000
The Year 2000 issue is the result of computer programs designed to define a year
using two digits rather than four. As such, a date sensitive field using "00"
could be recognized as the year 1900 rather than the year 2000, potentially
causing the worst case scenario of a system failure or other business
disruption.
The operating segments of the Company formed internal review teams to address
the Year 2000 issue. The teams are monitored on an ongoing basis by executive
management. As a result of this review, the Company has identified its
significant information technology and non-information technology systems that
will require modification to ensure Year 2000 compliance. Internal and external
resources are being used to make the required modifications and test Year 2000
compliance. Although there can be no assurance that the Company will identify
and correct every Year 2000 problem, the Company believes that it has in place a
comprehensive program to identify and correct any such problems. The Company
plans to complete the internal modification and testing process prior to
December 31, 1999.
UNOVA is also actively working with its significant suppliers and customers to
assess their Year 2000 compliance efforts and the Company's exposure to them.
While the Company currently does not anticipate problems related to third party
Year 2000 issues, the Company will continue to assess potential risk from third
parties. However, there can be no assurance that Year 2000 problems originating
with a supplier or other third party will not occur.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company has also assessed the capability of its products to determine
whether they are Year 2000 compliant. The Company believes that all of its
current products are Year 2000 compliant. UNOVA has not tested products that are
no longer sold by the Company and the Company does not believe it is legally
responsible for costs incurred by customers related to ensuring their Year 2000
capability. However, the Company is providing customer support and customer
satisfaction services related to Year 2000 issues. UNOVA defines "Year 2000
compliant" as a product that, when used properly and in conformity with the
product information provided by the Company, will accurately transition data
between the twentieth and twenty-first centuries, including leap year
calculations, provided that all other technology used in combination with the
product properly exchanges data with the UNOVA product.
In addition, the Company has begun internal discussions concerning contingency
planning to address potential problem areas with internal systems and third
parties. If deemed necessary, these contingency plans will be developed prior to
December 31, 1999.
The Company estimates that the total incremental cost of these Year 2000
compliance activities will be approximately $7.0 million. Of these costs, it is
estimated that approximately $1.5 million are expense items and the remaining
$5.5 million are capitalizable. As of December 31, 1998, the Company has
incurred approximately $3.3 million of Year 2000 costs of which about $500
thousand was expensed and approximately $2.8 million was capitalized. These
costs and the date on which the Company plans to complete the Year 2000
modification are based on management's best estimates, which were derived
utilizing numerous assumptions of future events. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
from those plans. Based on currently available information, management does not
believe that Year 2000 issues will have a material adverse impact on the
Company's financial condition or results of operations. However, the Year 2000
problem has many aspects and potential consequences, some of which are not
reasonably foreseeable, and there can be no assurance that unforeseen
consequences will not arise.
INFLATION
In the opinion of management, inflation has not been a significant factor in the
markets in which the Company operates and has not had a significant impact upon
the results of its operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES, which is effective for fiscal years beginning after June
15, 1999. The Company is currently evaluating the impact of adopting this
statement.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that, in addition to the historical information
covered in this discussion and analysis, included are certain forward-looking
statements and information that are based on management's beliefs as well as on
assumptions made by and information currently available to management. They
include, but are not limited to, statements about the demand for the Company's
products and services, the Company's ability to profitably exploit new
technologies acquired or developed, and the Company's ability to realize its
intentions with respect to the future performance of operations being acquired.
Such forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which could cause the
Company's future results to differ materially from those expressed or implied in
any forward-looking statements made by, or on behalf of, the
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Company. Such factors include, but are not limited to, the following which are
beyond the Company's control: fluctuations in the strength of the automotive and
aerospace markets; technological changes and developments, particularly in the
ADC/Mobile Computing System industry; the presence of competitors with greater
financial and other resources; the availability and cost of materials and
supplies; relations with the Company's employees; the Company's ability to
manage its operating costs and to integrate acquired businesses in an effective
manner; worldwide political stability and economic conditions; regulatory
uncertainties; operating risks associated with international operations; and the
risk that the Company's due diligence procedures may have failed to reveal
undisclosed material information concerning acquired operations. Any
forward-looking statements should be considered in light of these factors, many
of which are beyond the Company's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements. The Company
disclaims any intent or obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily from its short-term and
long-term borrowings and to exchange rate risk with respect to its foreign
operations and from foreign currency transactions. The information presented
below summarizes the Company's cash flows for its borrowings and related
interest rates by dates of maturity. Variable interest rates disclosed represent
the weighted average rates of the borrowings at December 31, 1998. Fair values
have been determined based on quoted market prices. The information presented
below should be read in conjunction with Note C to the Consolidated and Combined
Financial Statements.
<TABLE>
<CAPTION>
DEBT 1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE
- ---------------------- ---------- --------- --------- ---------- --------- ----------- ---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $ 200,000 $ 200,000 $ 196,871
Average Interest Rate 6.94%
Variable Rate $ 237,276 $ 1,266 $ 181 $ 150,005 $ 15,035 $ 403,763 $ 403,763
Average Interest Rate 5.36% 7.03% 7.24% 5.37% 5.52%
</TABLE>
The Company from time to time enters into foreign currency exchange contracts to
hedge certain foreign currency transactions and commitments and to reduce its
exposure from investments in certain foreign operations. These contracts were
not significant at December 31, 1998. The Company does not enter into any
foreign currency contracts for trading purposes. A hypothetical 10% change in
the relevant currency rates at December 31, 1998 would not have a material
impact on the Company's results of operations or cash flows.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Management's Responsibility for Financial Reporting F-1
Independent Auditors' Report F-2
Consolidated and Combined Statements of Operations F-3
Years Ended December 31, 1998, 1997 and 1996
Consolidated Balance Sheets F-4
December 31, 1998 and 1997
Consolidated and Combined Statements of Cash Flows F-5
Years Ended December 31, 1998, 1997 and 1996
Consolidated and Combined Statements of Changes in Shareholders' Investment F-6
Years Ended December 31, 1998, 1997 and 1996
Notes to Consolidated and Combined Financial Statements F-7
Quarterly Financial Information (unaudited) F-26
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information relating to directors of the Company under "Item One.
Election of Directors" in the Company's definitive Proxy Statement relating to
the Annual Meeting of Shareholders to be held on May 7, 1999 (the "1999 Proxy
Statement"), which is incorporated herein by reference.
The executive officers of the Company are elected each year by the Board of
Directors at its first meeting following the Annual Meeting of Shareholders to
serve during the ensuing year and until their respective successors are elected
and qualify. There are no family relationships between any of the executive
officers of the Company. The following information indicates the positions and
ages of the Company's executive officers at February 13, 1999 and their business
experience during the prior five years:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL BUSINESS AFFILIATIONS DURING
NAME AGE PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Alton J. Brann 57 Chairman of the Board and Chief Executive Officer since October 31, 1997;
for prior business experience see the description of Directors in "Item
One. Election of Directors" in the 1999 Proxy Statement.
Charles A. Cusumano 52 Vice President, Finance since October 31, 1997. Prior thereto, Vice
President, Finance, of Western Atlas since October 1996. Vice President
and Controller of Western Atlas from March 1994 to September 1996.
Michael E. Keane 43 Senior Vice President and Chief Financial Officer since October 31, 1997.
Prior thereto, Senior Vice President and Chief Financial Officer of
Western Atlas since October 1996. Vice President and Treasurer of Western
Atlas from March 1994 to September 1996.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
Michael Ohanian 67 Senior Vice President and Group Executive, Automated Data Systems since
October 31, 1997. Prior thereto, Senior Vice President of Western Atlas
since July 1997, Vice President of Western Atlas from May 1996 to July
1997 and President of Intermec since May 1995. Independent consultant from
September 1994 to May 1995 and Vice President, Strategic and Government
Programs, of Intermec from April 1988 to September 1994.
Norman L. Roberts 64 Senior Vice President and General Counsel since October 31, 1997. Prior
thereto, Senior Vice President and General Counsel of Western Atlas since
March 1994.
Clayton A. Williams 65 Senior Vice President and Group Executive, Industrial Automation Systems
since October 31, 1997. Prior thereto, Senior Vice President of Western
Atlas since May 1996, and Group Executive of Western Atlas' Manufacturing
Systems Group since December 1995. Vice President of Western Atlas from
December 1995 to May 1996. Vice President of Litton from June 1992 to
December 1995 and President of its Applied Technology division from
January 1990 to December 1995.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
See the information relating to executive compensation under the captions
"Summary Compensation Table," "Stock Option Information," "Employment and Change
in Control Arrangements" and "Retirement Benefits" of the Company's 1999 Proxy
Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information with respect to beneficial ownership of the Company's voting
securities by each director, certain executive officers and all executive
officers and directors as a group, and by any person known to beneficially own
more than 5% of any class of voting security of the Company, under the caption
"Security Ownership by Certain Beneficial Owners and Management" of the
Company's 1999 Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information with respect to certain relationships and related
transactions under the caption "Certain Relationships and Related Transactions"
of the Company's 1999 Proxy Statement, which is incorporated herein by
reference.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
(a)(1) Financial Statements
See Part II
(a)(2) Financial Statement Schedules *
(a)(3) Executive Compensation Plans and Arrangements 20
(b) Reports on Form 8-K
In a report filed on Form 8-K dated October 2, 1998, the Company reported the acquisition of the
Machine Tool Group of Cincinnati Milacron Inc. In a report filed on Form 8-K dated December 24,
1998, the Company reported the sale of its executive offices.
(c) Index to Exhibits E-1
</TABLE>
* All schedules and notes specified under Regulation S-X are omitted because
they are either not applicable, not required or the information called for
therein appears in the consolidated and combined financial statements or notes
thereto.
21
<PAGE>
UNOVA, INC.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<CAPTION>
REPORT WITH WHICH
DESCRIPTION EXHIBIT NO. EXHIBIT WAS FILED
- ---------------------------------------------------------------------------- ------------- ----------------------
<S> <C> <C>
Employee Benefits Agreement dated October 31, 1997, between Western Atlas 10.3 September 30, 1997
Inc. and UNOVA, Inc. Form 10-Q
Change of Control Employment Agreements with Alton J. Brann, Michael E. 10.5 September 30, 1997
Keane, Norman L. Roberts and certain other officers of the Company, dated as Form 10-Q
of October 31, 1997.
Employment Agreement between Intermec Corporation and Michael Ohanian, dated 10.6 Form 10
May 18, 1995, as amended.
Amendment No. 1 to Employment Agreement between Intermec Corporation and 10.7 December 31, 1997 Form
Michael Ohanian, dated February 28, 1997. 10-K
Amendment No. 2 to Employment Agreement between Intermec Technologies 10.8 December 31, 1997 Form
Corporation and Michael Ohanian, dated February 28, 1998. 10-K
Amendment No. 3 to Employment Agreement between Intermec Corporation and 10.9 December 31, 1998 Form
Michael Ohanian, dated May 20, 1998. 10-K
Amendment No. 4 to Employment Agreement between Intermec Corporation and 10.10 December 31, 1998 Form
Michael Ohanian, dated February 28, 1999. 10-K
UNOVA, Inc. Restoration Plan. 10.12 Form 10
UNOVA, Inc. Supplemental Executive Retirement Plan. 10.13 Form 10 Amendment No.
1
Amendment No. 1 to UNOVA, Inc. Supplemental Executive Retirement Plan, dated 10.14 September 30, 1998
September 23, 1998. Form 10-Q
Amendment No. 2 to UNOVA, Inc. Supplemental Executive Retirement Plan, dated 10.15 December 31, 1998 Form
March 11, 1999. 10-K
Supplemental Executive Retirement Agreement between UNOVA, Inc. and Alton J. 10.16 Form 10 Amendment No.
Brann dated October 1997. 1
Amendment No. 1 to Supplemental Executive Retirement Agreement between 10.17 September 30, 1998
UNOVA, Inc. and Alton J. Brann, dated September 23, 1998 Form 10-Q
Amendment No. 2 to Supplemental Executive Retirement Agreement between 10.18 December 31, 1998 Form
UNOVA, Inc. and Alton J. Brann, dated March 11, 1999. 10-K
Employment Agreement between UNOVA, Inc. and Clayton A. Williams, dated 10.19 Form 10 Amendment No.
August 1997. 1
Amendment No. 1 to Employment Agreement between UNOVA, Inc. and Clayton A. 10.20 December 31, 1997 Form
Williams, dated March 24, 1998. 10-K
Amendment No. 2 to Employment Agreement between UNOVA, Inc. and Clayton A. 10.21 December 31, 1998 Form
Williams, dated May 18, 1998. 10-K
UNOVA, Inc. 1997 Stock Incentive Plan. 10.22 September 30, 1997
Form 10-Q
UNOVA, Inc. Executive Severance Plan. 10.23 September 30, 1997
Form 10-Q
Form of Promissory Notes in favor of the Company given by certain 10.24 September 30, 1997
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
REPORT WITH WHICH
DESCRIPTION EXHIBIT NO. EXHIBIT WAS FILED
- ---------------------------------------------------------------------------- ------------- ----------------------
officers and key employees. Form 10-Q
<S> <C> <C>
Board resolution dated September 24, 1997 establishing the UNOVA, Inc. 10.25 September 30, 1997
Incentive Loan Program. Form 10-Q
UNOVA, Inc. Management Incentive Compensation Plan. 10.26 December 31, 1997 Form
10-K
UNOVA, Inc. Executive Survivor Benefit Plan. 10.27 December 31, 1997 Form
10-K
UNOVA, Inc. 1999 Stock Incentive Plan. 10.28 1999 Proxy Statement
UNOVA, Inc. Management Incentive Compensation Plan. 10.29 1999 Proxy Statement
UNOVA, Inc. Executive Medical Benefit Plan. 10.30 December 31, 1998 Form
10-K
</TABLE>
23
<PAGE>
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.
<TABLE>
<S> <C>
UNOVA, INC.
/s/ MICHAEL E. KEANE
------------------------------------------
Michael E. Keane
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
March 11, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<C> <S> <C>
/s/ PAUL BANCROFT, III
- ------------------------------ Director March 11, 1999
Paul Bancroft, III
/s/ ALTON J. BRANN Director, Chairman of the
- ------------------------------ Board and Chief March 11, 1999
Alton J. Brann Executive Officer
/s/ JOSEPH T. CASEY
- ------------------------------ Director March 11, 1999
Joseph T. Casey
/s/ WILLIAM C. EDWARDS
- ------------------------------ Director March 11, 1999
William C. Edwards
/s/ STEPHEN E. FRANK
- ------------------------------ Director March 11, 1999
Stephen E. Frank
/s/ CLAIRE W. GARGALLI
- ------------------------------ Director March 11, 1999
Claire W. Gargalli
/s/ ORION L. HOCH
- ------------------------------ Director March 11, 1999
Orion L. Hoch
/s/ STEVEN B. SAMPLE
- ------------------------------ Director March 11, 1999
Steven B. Sample
/s/ WILLIAM D. WALSH
- ------------------------------ Director March 11, 1999
William D. Walsh
/s/ CHARLES A. CUSUMANO Vice President, Finance
- ------------------------------ (Chief Accounting March 11, 1999
Charles A. Cusumano Officer)
</TABLE>
24
<PAGE>
UNOVA, INC.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated and combined financial statements of UNOVA, Inc. and
subsidiaries and related financial information included in this Annual Report,
have been prepared by the Company, whose management is responsible for their
integrity. These statements, which necessarily reflect estimates and judgments,
have been prepared in conformity with generally accepted accounting principles.
The Company maintains a system of internal controls to provide reasonable
assurance that assets are safeguarded and transactions are properly executed and
recorded. As part of this system, the Company has an internal audit staff to
monitor compliance with and the effectiveness of established procedures.
The consolidated and combined financial statements have been audited by Deloitte
& Touche LLP, independent auditors, whose report appears on page F-2.
The Audit and Compliance Committee of the Board of Directors, which consists
solely of directors who are not employees of the Company, meets periodically
with management, the independent auditors and the Company's internal auditors to
review the scope of their activities and reports relating to internal controls
and financial reporting matters. The independent and internal auditors have full
and free access to the Audit and Compliance Committee and meet with the
Committee both with and without the presence of Company management.
/s/ Michael E. Keane
Senior Vice President and
Chief Financial Officer
February 12, 1999
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
UNOVA, Inc.
Beverly Hills, California
We have audited the accompanying consolidated and combined balance sheets of
UNOVA, Inc. and subsidiaries (as described in Note A) as of December 31, 1998
and 1997, and the related consolidated and combined statements of operations,
changes in shareholders' investment, and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 and combined financial statements present
fairly, in all material respects, the financial position of UNOVA, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
February 12, 1999
F-2
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Sales and Service Revenues............................. $1,662,663 $1,426,247 $1,164,682
---------- ---------- ----------
Costs and Expenses
Cost of sales........................................ 1,110,799 981,380 841,820
Selling, general and administrative.................. 383,663 324,405 218,672
Depreciation and amortization........................ 57,043 40,672 27,043
Acquired in-process research and development
charges............................................ 211,500
Interest, net........................................ 25,715 16,689 7,111
---------- ---------- ----------
Total Costs and Expenses........................... 1,577,220 1,574,646 1,094,646
---------- ---------- ----------
Other Income, Net...................................... 31,523
----------
Earnings (Loss) before Taxes on Income................. 116,966 (148,399) 70,036
Taxes on Income........................................ (47,253) (22,968) (28,014)
---------- ---------- ----------
Net Earnings (Loss).................................... $ 69,713 $ (171,367) $ 42,022
---------- ---------- ----------
---------- ---------- ----------
Basic Earnings (Loss) per Share........................ $ 1.28 $ (3.17) $ .78
---------- ---------- ----------
---------- ---------- ----------
Diluted Earnings (Loss) per Share...................... $ 1.27 $ (3.17) $ .78
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-3
<PAGE>
UNOVA, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........................................ $ 17,708 $ 13,685
Accounts receivable, net of allowance for doubtful accounts of
$24,021 (1998) and $19,719 (1997).............................. 662,885 448,079
Inventories, net of progress billings............................ 336,005 150,537
Deferred tax assets.............................................. 141,773 106,694
Other current assets............................................. 21,129 30,072
---------- ----------
Total Current Assets......................................... 1,179,500 749,067
Property, Plant and Equipment, Net................................. 286,171 157,680
Goodwill and Other Intangibles, Net of Accumulated Amortization of
$70,244 (1998) and $54,266 (1997)................................ 400,164 366,098
Other Assets....................................................... 113,381 83,513
---------- ----------
Total Assets....................................................... $1,979,216 $1,356,358
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable and accrued expenses............................ $ 456,812 $ 311,759
Payroll and related expenses..................................... 93,199 72,909
Notes payable and current portion of long-term obligations....... 237,276 86,645
---------- ----------
Total Current Liabilities.................................... 787,287 471,313
---------- ----------
Long-term Obligations.............................................. 366,487 216,938
---------- ----------
Deferred Tax Liabilities........................................... 42,154 22,918
---------- ----------
Other Long-term Liabilities........................................ 81,863 55,700
---------- ----------
Commitments and Contingencies......................................
Shareholders' Investment
Preferred stock; 50,000,000 shares authorized....................
Common stock; shares outstanding:
54,942,655 (1998) and 54,510,193 (1997)........................ 549 545
Additional paid-in capital....................................... 645,054 603,743
Retained earnings (deficit)...................................... 61,672 (8,041)
Accumulated other comprehensive income:
Cumulative currency translation adjustment..................... (5,850) (6,758)
---------- ----------
Total Shareholders' Investment............................... 701,425 589,489
---------- ----------
Total Liabilities and Shareholders' Investment..................... $1,979,216 $1,356,358
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-4
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash and Cash Equivalents at Beginning of Year............ $ 13,685 $ 149,467 $ 103,501
--------- --------- ---------
Cash Flows from Operating Activities:
Net earnings (loss)..................................... 69,713 (171,367) 42,022
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities (net of
acquisitions):
Acquired in-process research and development
charges........................................... 211,500
Depreciation and amortization....................... 57,043 40,672 27,043
Gain on sale of property plant and equipment, net... (35,043)
Deferred taxes...................................... (437) 2,162 (9,803)
Change in accounts receivable....................... (109,096) 39,752 (142,159)
Change in inventories............................... (67,223) (9,167) 21,986
Change in other current assets...................... 13,889 (12,540) (804)
Change in accounts payable and accrued expenses..... 69,922 (53,830) 73,701
Change in payroll and related expenses.............. 13,493 6,238 (2,382)
Change in prepaid pension costs, net................ (14,620) (11,217) (6,983)
Other operating activities.......................... 6,823 (1,247) 6,537
--------- --------- ---------
Net cash provided by operating activities........... 4,464 40,956 9,158
--------- --------- ---------
Cash Flows from Investing Activities:
Acquisition of businesses net of cash acquired.......... (287,350) (400,754)
Capital expenditures.................................... (83,776) (30,310) (22,541)
Proceeds from sale of property, plant and equipment..... 71,118 7,198
Investment in unconsolidated companies.................. (8,500)
Investment in radio frequency identification
technology............................................ (8,200)
Proceeds from sale of businesses and investments........ 4,671 31,100
Other investing activities.............................. (9,162) (81) 1,049
--------- --------- ---------
Net cash (used in) provided by investing
activities........................................ (304,499) (440,647) 9,608
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from borrowings................................ 754,780 276,698 11,551
Repayment of borrowings................................. (457,271) (95,607) (7,243)
Dividend paid to Western Atlas Inc...................... (230,000)
Net transactions with Western Atlas Inc................. 190,338 25,747
Change in due to Western Atlas Inc...................... 120,426 (2,855)
Other financing activities.............................. 6,549 2,054
--------- --------- ---------
Net cash provided by financing activities........... 304,058 263,909 27,200
--------- --------- ---------
Resulting in Increase (Decrease) in Cash and Cash
Equivalents............................................. 4,023 (135,782) 45,966
--------- --------- ---------
Cash and Cash Equivalents at End of Year.................. $ 17,708 $ 13,685 $ 149,467
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-5
<PAGE>
UNOVA, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN
SHAREHOLDERS' INVESTMENT
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED ACCUMULATED OTHER NET INVESTMENT
COMMON PAID-IN EARNINGS COMPREHENSIVE BY WESTERN
TOTAL STOCK CAPITAL (DEFICIT) INCOME ATLAS
--------- ------------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.............. $ 502,659 $ 502,659
---------
Comprehensive Income:
Net earnings........................ 42,022 42,022
Currency translation adjustment..... 4,080 4,080
---------
Comprehensive Income.............. 46,102
---------
Net transactions with Western Atlas
Inc................................. 25,747 25,747
--------- ---------------
BALANCE, DECEMBER 31, 1996............ 574,508 574,508
---------
Comprehensive Loss before Distribution
Date:
Net loss to Distribution Date....... (163,326) (163,326)
Currency translation adjustment to
Distribution Date................. (3,699) (3,699)
---------
Comprehensive Loss before
Distribution Date............... (167,025)
---------
Net transactions with Western Atlas
Inc................................. 190,338 190,338
---------
Distribution of common stock to UNOVA
shareholders........................ $ 545 $ 601,689 $ (4,413) (597,821)
Comprehensive Loss from Distribution
Date to December 31, 1997:
Net loss from Distribution Date to
December 31, 1997................. (8,041) $ (8,041)
Currency translation adjustment from
Distribution Date to December 31,
1997.............................. (2,345) (2,345)
---------
Comprehensive Loss from
Distribution Date to December
31, 1997........................ (10,386)
---------
Other................................. 2,054 2,054
--------- ----- ----------- ----------- ------- ---------------
BALANCE, DECEMBER 31, 1997............ 589,489 545 603,743 (8,041) (6,758)
---------
Comprehensive Income:
Net earnings........................ 69,713 69,713
Currency translation adjustment..... 908 908
---------
Comprehensive Income.............. 70,621
---------
Distribution-related tax benefit...... 34,809 34,809
Other................................. 6,506 4 6,502
--------- ----- ----------- ----------- ------- ---------------
BALANCE, DECEMBER 31, 1998............ $ 701,425 $ 549 $ 645,054 $ 61,672 $ (5,850) $ --
--------- ----- ----------- ----------- ------- ---------------
--------- ----- ----------- ----------- ------- ---------------
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-6
<PAGE>
UNOVA, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION. UNOVA, Inc. ("UNOVA" or the "Company") became an
independent public company on October 31, 1997 (the "Distribution Date"), when
all of the UNOVA common stock was distributed to holders of common stock of
Western Atlas Inc. ("WAI"), in the form of a dividend (the "Distribution").
Every WAI shareholder of record on October 24, 1997 was entitled to receive one
share of UNOVA common stock for each WAI share of common stock held.
NATURE OF OPERATIONS. UNOVA is an industrial technologies company providing
global customers with solutions for improving their efficiency and productivity.
The Automated Data Systems business segment comprises automated data collection
("ADC") and mobile computing products and services, principally serving the
industrial market. Customers are global distribution and transportation
companies, food and beverage operations, manufacturing industries, health care
providers and government agencies. The Industrial Automation Systems business
segment includes integrated manufacturing systems, body welding and assembly
systems, precision grinding and abrasives operations, and machining systems and
stand-alone machine tools primarily serving the worldwide automotive, off-road
vehicle, diesel engine and aerospace manufacturing industries.
PRINCIPLES OF CONSOLIDATION AND COMBINATION. The consolidated and combined
financial statements include those of the Company, its subsidiaries and
companies in which UNOVA has a controlling interest. Investments in companies
over which UNOVA has influence but not a controlling interest are accounted for
using the equity method. Investments in other companies are carried at cost. All
material intercompany transactions have been eliminated.
The combined financial statements for all periods presented prior to the
Distribution Date include the historical accounts and operations of the former
WAI businesses that now comprise the Company. They include, at their historical
amounts, the assets, liabilities, revenues and expenses directly related and
those allocated to the businesses that now comprise the Company's operations. A
pro rata share of certain general and administrative corporate costs incurred by
WAI prior to the Distribution Date have been allocated to the Company based on
the relative ratio of such projected costs to be incurred by WAI and the Company
individually. Such costs include general management, legal, tax, treasury,
insurance, financial audit, financial reporting, human resources and real estate
services.
The Company's debt prior to the Distribution Date includes an allocation of a
portion of WAI's corporate debt, based on the Company's estimated past capital
requirements. Interest expense related thereto has been included in the
Company's statements of operations at WAI's estimated blended historical rate of
interest on long-term borrowings of 7.5%.
Management believes the above stated allocations were made on a reasonable
basis; however, they do not necessarily reflect the results of operations which
would have occurred had the Company been an independent entity nor are they
necessarily indicative of future expenses or income (see Note J).
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. 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 for each reporting period. Actual results could differ
from those estimates.
CASH EQUIVALENTS. The Company considers time deposits and commercial paper
purchased within three months of their date of maturity to be cash equivalents.
F-7
<PAGE>
NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out or last-in, first-out method.
REVENUE RECOGNITION. Revenues are generally recognized when products are
shipped or as services are performed. Revenues and profits on long-term
contracts are recorded under the percentage-of-completion, cost to cost method
of accounting. Any anticipated losses on contracts are charged to operations as
soon as they are determinable. General and administrative costs are expensed as
incurred.
RESEARCH AND DEVELOPMENT. Research and development costs are charged to expense
as incurred. Total expenditures on research and development activities amounted
to $71.5 million, $53.1 million and $29.7 million, in the years ended December
31, 1998, 1997, and 1996, respectively. The Company expensed a total of $211.5
million of acquired in-process research and development in 1997. See further
discussion in Note B.
OTHER INCOME, NET. In the year ended December 31, 1998, other income, net
consists of a gain of $35.5 million recognized on the sale of UNOVA's corporate
headquarters building, offset by other non-operating expenses.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated at cost.
Depreciation, computed generally by the straight-line method for financial
reporting purposes, is provided over the estimated useful lives of the related
assets.
INCOME TAXES. The Company accounts for income taxes using the asset and
liability approach, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. See
further discussion in Note G.
The Company's domestic operations and their foreign branches were included in
WAI's consolidated tax returns (for periods prior to the Distribution Date). Any
tax benefits related to these operations have been recorded in these financial
statements if such were realizable by WAI on a consolidated basis. Foreign
entities included in these financial statements pay taxes in accordance with
local laws and regulations.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash and cash
equivalents and trade receivables. The Company places its cash and cash
equivalents with high credit quality institutions and limits the amount of
credit exposure with any one institution. Concentrations of credit risk with
respect to trade receivables are limited because a large number of
geographically diverse customers make up the Company's customer base, thus
spreading the trade credit risk. The Company evaluates the creditworthiness of
its customers and maintains an allowance for anticipated losses.
No customer was significant to the Company's revenues in 1998. In 1997, one
automotive customer represented 13% of revenues, while in 1996 another
automotive customer represented 15% of revenues.
FOREIGN CURRENCIES. The currency effects of translating the financial
statements of the Company's foreign entities that operate in local currency
environments are included in the "cumulative currency translation adjustment"
component of shareholders' investment. Currency transaction gains and losses are
included in the consolidated and combined statements of operations and were not
material for any periods presented herein.
FINANCIAL INSTRUMENTS. The Company from time to time enters into foreign
currency exchange contracts to hedge certain foreign currency transactions and
commitments and to reduce its exposure from
F-8
<PAGE>
NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
investments in certain foreign operations. The amount and volume of such
transactions are not material. The Company does not enter into any foreign
currency contracts for trading purposes.
GOODWILL AND OTHER INTANGIBLES. Goodwill is amortized on a straight-line basis
over periods ranging from 15 to 40 years. Other intangibles are amortized on a
straight-line basis over periods ranging from four to 18 years.
IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL. The Company assesses the
recoverability of long-lived assets and goodwill at the end of each fiscal year
or as circumstances indicate that the carrying amount of an asset may not be
fully recoverable. Factors considered in evaluating recoverability include
management's plans for the operations to which the asset relates and the
historical earnings and projected undiscounted cash flows of such operations. An
impairment is recorded to writedown long-lived assets and goodwill to their
estimated fair value if the undiscounted cash flows estimated to be generated by
the asset are less than its carrying amount.
ENVIRONMENTAL COSTS. Provisions for environmental costs are recorded when the
Company determines its responsibility for remedial efforts and such amounts are
reasonably estimable.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal
years beginning after June 15, 1999. The Company is currently evaluating the
impact of adopting this statement.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform
to the current year presentation.
F-9
<PAGE>
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS
ACQUISITIONS AND INVESTMENTS
In October 1998, UNOVA acquired the machine tool business of Cincinnati Milacron
for approximately $180.0 million in cash, subject to post-closing adjustments.
The division, which was renamed Cincinnati Machine, a UNOVA Company ("Cincinnati
Machine"), is engaged in the design, manufacture, sale and servicing of standard
and advanced computer numerically controlled metal cutting machine tools for the
industrial component, aerospace, job shop, fluid power and automotive
industries. Cincinnati Machine has become part of the Company's Industrial
Automation Systems ("IAS") segment. The acquisition cost has been allocated to
the net assets acquired based on the relative fair values. The acquisition was
funded using the Company's committed credit facility and was accounted for under
the purchase method of accounting.
During the third quarter of 1998, UNOVA acquired R & B Machine Tool Company
("R&B Machine"), a specialty machine and retooling company. This acquisition was
funded using short-term uncommitted credit lines. In June 1998, the Company
acquired the radio frequency identification ("RFID") business unit of Amtech
Corporation known as the Amtech Systems Division ("Amtech Systems"). Amtech
Systems is a supplier of wireless data technologies for electronic toll
collection, rail and motor fleet tracking, and access control to parking and
other structures. The Company had previously purchased $10.0 million of Amtech
Corporation common stock which was applied towards the purchase price of Amtech
Systems. Although these acquisitions are integral to the Company's business
strategy, they are not material in the aggregate to UNOVA's consolidated and
combined financial statements.
The allocation of the acquisition costs of Cincinnati Machine, R&B Machine and
Amtech Systems is preliminary and subject to revision upon receipt of pending
information, such as final assessment of certain legal and environmental
exposures and the completion of certain appraisals. Any such revisions are not
expected to have a material impact on the Company's consolidated and combined
financial statements.
The Company acquired Norand Corporation ("Norand") on March 3, 1997, and United
Barcode Industries ("UBI") on April 4, 1997. Norand designs, manufactures and
markets mobile computing systems and wireless data communications networks using
radio frequency technology. UBI, a European-based ADC company, manufactures bar
code on-demand printers with labels and ribbons as well as hand-held scanners.
These two companies were consolidated in Intermec Technologies Corporation, the
Company's Automated Data Systems subsidiary. Both acquisitions were funded by
Western Atlas borrowings and cash on hand, and have been accounted for under the
purchase method of accounting. Accordingly, the acquisition costs (approximately
$280.0 million and $107.0 million for Norand and UBI, respectively) were
allocated to the net assets acquired based upon their relative fair values. Such
allocation resulted in $203.3 million assigned to acquired in-process research
and development activities; $154.1 million assigned to goodwill (amortized over
25 years using the straight-line method); and $29.0 million assigned to other
intangibles (amortized over periods ranging from four to 18 years using the
straight-line method). During the second quarter of 1997, the Company expensed
the amounts assigned to acquired in-process research and development projects
that had not yet achieved technological feasibility in accordance with Financial
Accounting Standards Board Interpretation No. 4 ("FIN 4").
The Company acquired the remaining 51% of Honsberg, a German machine tool maker,
in the second quarter of 1997. The original 49% of Honsberg was acquired during
1995. The Company purchased the stamping, engineering and prototyping division
of Modern Prototype Company in September 1997. In December 1997, UNOVA acquired
Goldcrown Machinery, Inc., a manufacturer of precision centerless grinding
systems. Although these acquisitions are integral to the Company's business
strategy, they are not material in the aggregate to UNOVA's consolidated and
combined financial statements.
In December 1997, the Company acquired radio frequency identification ("RFID")
technology from IBM Corporation. In connection with this acquisition, the
Company recorded a $13.0 million after-tax charge
F-10
<PAGE>
NOTE B: BUSINESS ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS (CONTINUED)
in 1997 to expense acquired in-process research and development in accordance
with FIN 4 and the anticipated loss on a related long-term contract. The Company
is using this acquired technology to further develop its own RFID technology.
CASH FLOW DISCLOSURE
The fair values of acquired assets and liabilities, at their respective
acquisition dates, are presented below for supplemental cash flow disclosure
purposes. The 1998 balances include the assets and liabilities of Cincinnati
Machine, R&B Machine and Amtech Systems while the 1997 balances include Norand,
UBI, Honsberg, Modern Prototype and Goldcrown Machinery.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
-------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets............................................................................ $263,266 $164,153
Property, plant and equipment............................................................. 111,593 29,093
Goodwill and intangibles.................................................................. 50,983 201,380
Other non-current assets.................................................................. 17,864 55,956
Total debt................................................................................ (29,221) (84,163)
Other current liabilities................................................................. (85,049) (146,724)
Other non-current liabilities............................................................. (9,154) (11,642)
In-process research and development....................................................... 203,300
-------- --------
Purchase price............................................................................ 320,282 411,353
Less non-cash payment of Amtech common stock.............................................. (10,000)
Less cash acquired........................................................................ (22,932) (10,599)
-------- --------
Cash paid for acquisitions, net of cash acquired.......................................... $287,350 $400,754
-------- --------
-------- --------
</TABLE>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma information for the year ended December 31, 1998 in the following
paragraph gives effect to the acquisition of Cincinnati Machine as if it had
occurred on January 1, 1998. The pro forma information for the year ended
December 31, 1997 gives effect to the acquisitions of Cincinnati Machine and
Norand as if they had occurred on January 1, 1997. The financial information has
been prepared from the historical financial statements of the Company,
Cincinnati Machine and Norand after giving effect to certain pro forma
adjustments, including depreciation on the fair market value of the acquired
property, plant, and equipment and interest expense associated with the increase
in debt.
Unaudited pro forma sales and service revenues, net earnings and earnings per
diluted share for the year ended December 31, 1998 are $2,009.1 million, $68.2
million and $1.25, respectively, reflecting the Cincinnati Machine acquisition
as if it had occurred on January 1, 1998. Unaudited pro forma sales and service
revenues, net earnings and earnings per diluted share for the year ended
December 31, 1997 are $1,921.0 million, $27.4 million and $0.51, respectively,
reflecting the Cincinnati Machine and Norand acquisitions as if they had
occurred on January 1, 1997.
The unaudited pro forma financial information is not necessarily indicative of
what the results of operations would have been if the combination had occurred
on the above-mentioned dates. Additionally, such information may not be
predictive of future results of operations.
DISPOSITIONS
The Company sold its Material Handling Systems operations in November of 1996.
The activities of the division were not considered a core business of the
Company.
F-11
<PAGE>
NOTE C: CASH AND CASH EQUIVALENTS, DEBT AND INTEREST
Cash and cash equivalents amounted to $17.7 million and $13.7 million at
December 31, 1998 and December 31, 1997, respectively, and consisted mainly of
time deposits and commercial paper.
Notes payable and long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Borrowings under revolving credit facility, with
average interest at 5.4% (1998) and 6.0% (1997), due
2002................................................ $ 200,000 $ 200,000
Debentures, with interest at 6.875%, due 2005......... 100,000
Debentures, with interest at 7.00%, due 2008.......... 100,000
Notes payable, with average interest at 5.3% (1998)
and 5.1% (1997), due 1999........................... 186,024 86,411
Industrial revenue bonds, with average interest at
5.5% (1998) and 5.6% (1997), due through 2005....... 13,500 13,500
Other, with average interest at 6.9% (1998) and 6.2%
(1997), due through 2002............................ 4,239 3,672
--------- ---------
603,763 303,583
Less notes payable and current portion of long-term
obligations......................................... (237,276) (86,645)
--------- ---------
Long-term obligations................................. $ 366,487 $ 216,938
--------- ---------
--------- ---------
</TABLE>
At December 31, 1998 the Company classified $150.0 million of borrowings under
the revolving credit facility as long-term, as the Company intends to refinance
such obligations on a long-term basis. At December 31, 1997 the Company
classified $200.0 million of short-term debt as long-term to reflect the debt
offering that occurred in March 1998, which is described below.
Notes payable and long-term obligations at December 31, 1998 mature as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, (THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------- ----------------------
<S> <C>
1999.................................................................. $ 237,276
2000.................................................................. 1,266
2001.................................................................. 181
2002.................................................................. 150,005
2003.................................................................. --
Thereafter............................................................ 215,035
----------
$ 603,763
----------
----------
</TABLE>
The Company has an unsecured committed credit facility with a group of banks
from which it may borrow up to $400.0 million. Under this credit facility, which
expires in September 2002, the Company may borrow at the prime rate or at rates
based on the London Inter Bank Offered Rate, certificates of deposit or other
rates that are mutually acceptable to the banks and the Company. At February 12,
1999, $200.0 million of the credit facility was available for the Company's
general use.
F-12
<PAGE>
NOTE C: CASH AND CASH EQUIVALENTS, DEBT AND INTEREST (CONTINUED)
In January 1999, the Company entered into a new unsecured committed credit
facility with a group of banks from which it may borrow up to $100.0 million.
Under this credit facility, which expires in January 2000, the Company may
borrow at the prime rate or at rates based on the London Inter Bank Offered
Rate, certificates of deposit or other rates that are mutually acceptable to the
banks and the Company. At February 12, 1999, $100.0 million of the credit
facility was available for the Company's general use.
In addition, the Company maintains other uncommitted credit facilities and lines
of credit of which $89.3 million was available to the Company at February 12,
1999.
The Company is in compliance with its various debt covenants the most
restrictive of which relate to the Company's incurrence of debt, mergers,
consolidations and sale of assets and which require the Company to satisfy
certain leverage ratios.
In March 1998, the Company sold $200.0 million principal amount of senior
unsecured debt. The sale comprised $100.0 million of 6.875% seven-year notes, at
a price of 99.867 and $100.0 million of 7.00% ten-year notes, at a price of
99.856. Including underwriting fees, discounts and effects of forward rate
agreements entered into by the Company to hedge the interest rates on the debt,
the effective interest rates on the seven-year and ten-year notes are 7.125% and
7.175%, respectively. The net proceeds of approximately $198.0 million were used
by the Company to repay outstanding short-term debt.
Financial instruments on the Company's consolidated balance sheets include
accounts receivable, notes payable, and accounts payable which approximate their
market values due to their short maturity. The $366.5 million of long term
obligations had an estimated fair market value of $363.4 million as of December
31, 1998, based primarily on quoted market prices. UNOVA also has
off-balance-sheet guarantees and letter-of-credit reimbursement agreements with
respect to liabilities totaling a maximum amount of $228.8 million at December
31, 1998. These agreements primarily relate to the guarantee of performance on
contracts.
Net interest expense is composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest expense..................................... $ 28,182 $ 20,234 $ 11,533
Interest income...................................... (2,467) (3,545) (4,422)
--------- --------- ---------
Net interest expense................................. $ 25,715 $ 16,689 $ 7,111
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company made interest payments to non-related parties of $25.3 million, $6.6
million, and $2.6 million in the years ended December 31, 1998, 1997 and 1996,
respectively. Capitalized interest costs in each of the periods presented were
not material. Interest expense of $12.0 million and $8.3 million on the
allocated portion of WAI's corporate debt for the years ended December 31, 1997
and 1996, respectively, has been included in the Company's consolidated and
combined statements of operations at WAI's estimated blended historical rate of
interest on long-term borrowings of 7.5%.
F-13
<PAGE>
NOTE D: ACCOUNTS RECEIVABLE AND INVENTORIES
Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Trade receivables, net............................................ $ 365,232 $ 202,890
Receivables related to long-term contracts
Amounts billed.................................................. 125,920 116,865
Unbilled costs and accrued profit on progress completed and
retentions.................................................... 171,733 128,324
--------- ---------
Accounts receivable, net.......................................... $ 662,885 $ 448,079
--------- ---------
--------- ---------
</TABLE>
The unbilled costs and retentions at December 31, 1998 are expected to be
entirely billed and collected during 1999.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Raw materials and work in process................................. $ 232,010 $ 94,845
Finished goods.................................................... 82,434 38,074
Inventoried costs related to long-term contracts.................. 56,823 29,656
Less progress billings............................................ (35,262) (12,038)
--------- ---------
Inventories, net of progress billings............................. $ 336,005 $ 150,537
--------- ---------
--------- ---------
</TABLE>
F-14
<PAGE>
NOTE E: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Property, plant and equipment, at cost
Land..................................................... $ 27,313 $ 23,418
Buildings and improvements............................... 120,142 102,462
Machinery and equipment.................................. 316,932 213,582
Less accumulated depreciation.............................. (178,216) (181,782)
--------- ---------
Net property, plant and equipment.......................... $ 286,171 $ 157,680
--------- ---------
--------- ---------
</TABLE>
Depreciation expense was $40.9 million, $27.4 million and $20.7 million for the
years ended December 31, 1998, 1997 and 1996, respectively.
The range of estimated useful lives of the major classes of assets are:
<TABLE>
<S> <C>
Buildings............................................................ 10-45 years
Building improvements................................................ 2-20 years
Machinery and equipment.............................................. 2-15 years
</TABLE>
As of December 31, 1998, minimum rental commitments under noncancellable
operating leases were:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, OPERATING LEASES
- ------------------------------------------------------------------------------------------ ---------------------
(THOUSANDS OF DOLLARS)
<S> <C>
1999...................................................................................... $17,517
2000...................................................................................... 12,904
2001...................................................................................... 7,793
2002...................................................................................... 5,191
2003...................................................................................... 3,781
Thereafter................................................................................ 15,468
--------
$62,654
--------
--------
</TABLE>
Rental expense for operating leases, including amounts for short-term leases
with nominal, if any, future rental commitments, was $20.5 million, $17.9
million and $10.4 million, for the years ended December 31, 1998, 1997 and 1996,
respectively.
In 1998, proceeds totaling approximately $71.1 million were received on the sale
of the Company's corporate headquarters building and three operations
facilities.
F-15
<PAGE>
NOTE F: SHAREHOLDERS' INVESTMENT
CAPITAL STOCK
At December 31, 1998, there were authorized 250 million shares of common stock,
par value $0.01, and 50 million shares of preferred stock, par value $0.01.
SHAREHOLDER RIGHTS PLAN
On September 24, 1997, the Company's Board of Directors adopted a Share Purchase
Rights Plan (the "Plan") and, in accordance with such Plan, declared a dividend
of one preferred share purchase right (the "Right") for each outstanding share
of Company common stock, payable to shareholders of record on October 31, 1997.
The Plan will cause substantial dilution to a party that attempts to acquire the
Company in a manner or on terms not approved by the Board of Directors. Each
Right entitles the holder to purchase from the Company one one-hundredth of a
share of Series A Preferred Stock at a price of seventy dollars. The Rights
become exercisable if a person other than a person which presently holds more
than 15 percent of the Company's common stock acquires 15 percent or more, or
announces a tender offer for 15 percent or more, of the Company's outstanding
common stock. If a person acquires 15 percent or more of the Company's
outstanding common stock, each right will entitle the holder to purchase the
Company's common stock having a market value of twice the exercise price of the
Right. The Rights, which expire in September 2007, may be redeemed by UNOVA at a
price of one cent per Right at any time prior to a person acquiring 15 percent
or more of the outstanding common stock.
EARNINGS PER SHARE
For the year ended December 31, 1998, basic earnings per share is calculated
using the weighted average number of common shares outstanding for the period
while diluted earnings per share is computed on the basis of the weighted
average number of common shares outstanding plus the effect of outstanding stock
options using the "treasury stock" method. For the year ended December 31, 1997,
basic earnings per share is calculated using the weighted average balance of the
number of shares outstanding for post-Distribution Date periods and the
outstanding shares of WAI common stock at June 30, 1997 for periods prior to the
Distribution Date, while diluted earnings per share is computed by adding the
effect of outstanding stock options using the "treasury stock" method to the
basic weighted average balance.
Shares used for basic and diluted earnings per share were computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- -------------------
<S> <C> <C>
Weighted average common shares -- Basic 54,620,208 54,056,243
Dilutive effect of stock options 82,859 --
------------------- -------------------
Weighted shares--Diluted 54,703,067 54,056,243
------------------- -------------------
------------------- -------------------
</TABLE>
The Company used 53,891,534 shares, the outstanding shares of WAI common stock
at June 30, 1997, to calculate both basic and diluted earnings per share in the
year ended December 31, 1996.
At December 31, 1998, Company employees and directors held options to purchase
3,937,750 shares of Company common stock that were antidilutive to the diluted
earnings per share computation. These options could become dilutive in future
periods if the average market price of the Company's common stock exceeds the
exercise price of the outstanding options.
F-16
<PAGE>
NOTE F: SHAREHOLDERS' INVESTMENT (CONTINUED)
STOCK OPTIONS
The UNOVA, Inc. 1997 Stock Incentive Plan (the "1997 Plan") provides for the
grant of incentive awards to officers and other key employees. Incentive awards
may be granted in the form of stock options, with or without related stock
appreciation rights, or in the form of restricted stock. Under the 1997 Plan,
stock options may not be granted at a price less than the market value of the
Company's common stock on the date of grant. The 1997 Plan options usually vest
in equal increments over five years. The Company also has a Director Stock
Option and Fee Plan (the "Director Plan") which provides for the grant of stock
options to the Company's non-employee directors. Under the Director Plan, stock
options are granted annually at the market value of the Company's common stock
on the date of grant. The number of options granted annually is fixed by the
plan. Such options become fully exercisable on the first anniversary of their
grant. Under the 1997 Plan and Director Plan, there were 582,700 options
exercisable and 2,045,250 options available for grant as of December 31, 1998.
No options were exercisable as of December 31, 1997.
The following table summarizes the activity of the Company's stock option
plans:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
EXERCISE PRICE
NUMBER OF SHARES PER SHARE
------------------ ------------------
<S> <C> <C>
1997
Granted 2,504,500 $ 18.80
----------
Outstanding at December 31, 1997 2,504,500 18.80
----------
1998
Granted 1,706,200 16.97
Canceled (255,950) 18.37
----------
Outstanding at December 31, 1998 3,954,750 18.04
----------
----------
</TABLE>
Outstanding stock option data as of December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------ --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF REMAINING EXERCISE EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- ---------------- ----------- ----------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$14.56 to $17.56 1,620,500 9.81 $ 16.62 103,000 $ 17.48
18.81 to 22.00 2,334,250 8.88 19.02 479,700 18.88
</TABLE>
The weighted-average fair value of stock options granted during 1998 and 1997
were $7.10 per option and $7.76 per option, respectively. The fair value of each
stock option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1998 and 1997, respectively; risk-free interest rates of 4.63% and
5.80%, expected life of five years for both years; and expected volatility of
39.6%, determined from historical UNOVA stock price fluctuations, and 36.0%,
determined from historical industry stock price fluctuations. There is no
assurance that the assumptions used in determining the fair values of stock
options will prove true in the future. The actual value of the options depends
on several factors, including the actual market price of the common stock on the
date of exercise. Changes in any of these factors as well as fluctuations in the
market price of the Company's common stock will cause the actual value of these
options to vary from the theoretical value indicated above.
F-17
<PAGE>
NOTE F: SHAREHOLDERS' INVESTMENT (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1998, UNOVA adopted an Employee Stock Purchase Plan under
which the Company is authorized to sell up to five million shares of common
stock to its eligible full-time employees. Under the terms of the plan, which is
intended to qualify under Section 423 of the Internal Revenue Code, employees
can choose to have up to 8% of their annual earnings (up to a maximum amount of
$21,250 per calendar year) withheld to purchase the Company's common stock. The
purchase price of the stock is 85% of the lower of the market price on the first
day or last day of the applicable offering period, which is normally six months
in duration. The Company sold 433,506 shares under the Plan in 1998, with
approximately 30% of eligible employees participating. The weighted-average fair
value of purchase rights granted in 1998 was $5.14 per share. The fair value of
the stock purchase rights were determined using the same method and parameters
for stock option grants described above, except for the use of an expected life
equal to the applicable offering period. As previously noted, the actual value
of purchase rights may vary from the theoretical value determined using the
Black-Scholes option pricing model.
PRO FORMA COMPENSATION COST DISCLOSURE
The Company accounts for its stock-based compensation plans in accordance with
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized at the grant of stock options. Had compensation cost for these
plans been determined consistent with Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the Company's pro
forma net income and diluted earnings per share for 1998 would have been $64.6
million and $1.18, respectively. In 1997 the Company's pro forma net loss and
diluted loss per share would have been $173.6 million and $3.21, respectively.
F-18
<PAGE>
NOTE G: TAXES ON INCOME
Earnings (loss) before taxes on income by geographic area are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
United States.......................................... $ 90,976 $(113,075) $ 47,470
Other nations.......................................... 25,990 (35,324) 22,566
--------- --------- ---------
$ 116,966 $(148,399) $ 70,036
--------- --------- ---------
--------- --------- ---------
</TABLE>
Taxes on income consist of the following provisions (benefits):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Currently Payable:
U.S. taxes.............................................. $ 20,416 $ 13,821 $ 31,619
International taxes..................................... 12,451 10,124 6,446
--------- --------- ---------
32,867 23,945 38,065
--------- --------- ---------
Deferred:
U.S. taxes.............................................. 13,689 242 (9,685)
International taxes..................................... 697 (1,219) (366)
--------- --------- ---------
14,386 (977) (10,051)
--------- --------- ---------
$ 47,253 $ 22,968 $ 28,014
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred taxes result from the effect of transactions which are recognized in
different periods for financial and tax reporting purposes. The primary
components of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- --------------------
ASSET LIABILITY ASSET LIABILITY
--------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Accrued liabilities....................... $ 56,863 $ 49,194
Receivables and inventories............... 18,872 14,431
Retiree medical benefits.................. 10,176 6,255
Intangibles............................... 12,963 9,025
Tax credit carryforwards.................. 6,395 4,887
Deferred income........................... 2,718 10,195
Net operating loss carryforwards.......... 41,511 13,572
Pensions.................................. $ 23,588 $ 14,251
Accelerated depreciation.................. 18,566 6,123
Other items............................... 1,220 3,571 2,544
--------- --------- --------- ---------
Total before valuation allowance.......... 150,718 42,154 111,130 22,918
Valuation allowance....................... (8,945) (4,436)
--------- --------- --------- ---------
$ 141,773 $ 42,154 $ 106,694 $ 22,918
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The Company has available at December 31, 1998, a net operating tax loss
carryforward in the United States of approximately $69.4 million. Approximately
$7.7 million, $13.9 million, $4.2 million and
F-19
<PAGE>
NOTE G: TAXES ON INCOME (CONTINUED)
$43.6 million of the net operating tax loss carryforwards will expire in 2010,
2011, 2017 and 2018, respectively. The Company also has general business credit
and other tax credits of approximately $6.4 million to offset future tax
liability in the United States through 2018. The Company has foreign net
operating tax loss carryforwards of $17.9 million and $31.4 million in Germany
and the U.K. respectively.
Valuation allowances of $8.9 million and $4.4 million as of December 31, 1998
and 1997, respectively, were established for deferred income tax benefits
related to the German loss carryforwards that may not be realized. Included in
the valuation allowance is $4.4 million that relates to the acquired German net
operating loss carryforwards; any tax benefits subsequently recognized for the
acquired German net operating loss carryforwards will be allocated to goodwill.
With the exception of the German tax loss carryforward, the Company believes it
will utilize all other U.S. and foreign carryforward benefits.
The following is a reconciliation of income taxes at the U.S. statutory rate to
the provision for income taxes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax at U.S. statutory rate........................... $ 40,938 $ (51,940) $ 24,513
Nondeductible acquired in-process research and
development........................................ 71,050
State income taxes net of federal benefit............ 3,055 1,625 1,382
Amortization of nondeductible goodwill............... 4,272 4,431 1,916
Foreign operating losses with no tax benefit
provided........................................... 4,556
Tax credits and FSC benefit.......................... (3,276) (1,250)
Foreign earnings taxed at other than U.S. statutory
rate............................................... (316) (223) 60
Other items.......................................... (1,976) (725) 143
--------- --------- ---------
$ 47,253 $ 22,968 $ 28,014
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company made net tax payments of $4.5 million, $44.4 million and $26.1
million in the years ended December 31, 1998, 1997 and 1996, respectively.
The Company has provided for federal income taxes and foreign withholding taxes
on the undistributed earnings of foreign subsidiaries.
F-20
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company has retirement and pension plans which cover most of its employees.
Most of the Company's U.S. employees are covered by a contributory defined
benefit plan, under which annual contributions are made to the extent such
contributions are actuarially determined to adequately fund the plan.
There are also defined contribution voluntary savings programs generally
available for U.S. employees, which are intended to qualify under Sections
401(a) and 401(k) of the Internal Revenue Code. These plans are designed to
enhance the retirement programs of participating employees. Under these plans,
the Company matches up to 50% of a certain portion of participants'
contributions.
Certain of the Company's non-U.S. subsidiaries also have a retirement plan for
employees. The pension liabilities and their related costs are computed in
accordance with the laws of the individual nations and appropriate actuarial
practices.
U.S. PENSION PLANS
The following table sets forth the change in benefit obligations and plan assets
of the Company's U.S. pension plans and the amounts recognized in the Company's
balance sheets at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligation at beginning of year.................... $ 151,649 $ 139,026
Service cost............................................... 6,140 5,988
Interest cost.............................................. 10,982 10,075
Plan participants' contributions........................... 431 922
Actuarial loss............................................. 22,149 5,770
Benefits paid.............................................. (10,019) (10,132)
Other...................................................... 510
--------- ---------
Benefit obligation at end of year.......................... 181,842 151,649
--------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year............. 345,347 267,956
Actual return on plan assets............................... (11,858) 88,571
Plan participants' contributions........................... 431 922
Benefits paid.............................................. (9,554) (9,739)
Spin-off adjustment........................................ (8,125) (2,363)
--------- ---------
Fair value of plan assets at end of year................... 316,241 345,347
--------- ---------
Funded status.............................................. 134,399 193,698
Unrecognized net actuarial gain............................ (76,901) (148,576)
Unrecognized prior service cost............................ 4,201 3,526
Unrecognized transition asset.............................. (9,381) (12,769)
--------- ---------
Prepaid pension cost....................................... $ 52,318 $ 35,879
--------- ---------
--------- ---------
</TABLE>
F-21
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
The preceding table includes prepaid pension cost presented net of pension
liabilities for plans in which accumulated benefits exceed plan assets. As of
December 31, 1998 and 1997, these liabilities amounted to $17.1 million and
$16.2 million, respectively.
Actuarial assumptions for the Company's U.S. defined benefit plans included an
expected long-term rate of return on plan assets of 9 1/4% for fiscal years 1998
and 1997. The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7% and 7 1/2% at December
31, 1998 and 1997, respectively. The rate of increase in future compensation
levels was 4 1/2% and 5% at December 31, 1998 and 1997, respectively.
Plan assets consist primarily of equity securities and U.S. Government
securities. The excess of plan assets over the projected benefit obligation at
August 1, 1986 (when the Company adopted SFAS No. 87) and subsequent
unrecognized gains and losses are fully amortized over the average remaining
service period of active employees expected to receive benefits under the plans,
generally 15 years.
A summary of the components of net periodic pension income for the U.S. defined
benefit plans and defined contribution plans for the years ended December 31,
1998, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
COMPONENTS OF NET PERIODIC PENSION INCOME 1998 1997 1996
- -------------------------------------------------------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost............................................ $ 6,140 $ 5,988 $ 6,507
Interest cost........................................... 10,982 10,075 10,107
Expected return on plan assets.......................... (24,203) (20,784) (18,518)
Amortization of prior service cost...................... 461 406 404
Recognized net actuarial gain........................... (5,641) (3,043) (1,765)
Amortization of transition asset........................ (2,477) (2,477) (2,477)
--------- --------- ---------
(14,738) (9,835) (5,742)
Defined contribution plans.............................. 4,500 4,160 2,983
--------- --------- ---------
Net periodic pension income............................. $ (10,238) $ (5,675) $ (2,759)
--------- --------- ---------
--------- --------- ---------
</TABLE>
NON-U.S. PENSION PLANS
For the principal non-U.S. pension plans located in the United Kingdom, the
weighted-average discount rate used was approximately 6% at December 31, 1998.
The rate of increase in future compensation used was approximately 3 1/2%, and
the rate of return on assets was 6 1/2% at December 31, 1998.
Pension costs for non-U.S. pension plans were not material for any of the
periods presented herein. The actuarial present value of projected benefits at
December 31, 1998 was $107.2 million compared with net assets available for
benefits of $111.6 million.
F-22
<PAGE>
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, certain of the Company's U.S. employees are
covered by postretirement health care and life insurance benefit plans provided
by UNOVA. These benefit plans are unfunded. The following table sets forth the
change in benefit obligation of the Company's other postretirement benefits and
amounts recognized in the Company's balance sheets at December 31, 1998 and
1997.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
CHANGE IN POSTRETIREMENT BENEFIT OBLIGATIONS 1998 1997
- -------------------------------------------------------------- --------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Benefit obligation at beginning of year....................... $ 27,789 $ 18,664
Service cost.................................................. 292 586
Interest cost................................................. 2,037 1,688
Acquisitions.................................................. 11,423
Actuarial loss................................................ 104 7,959
Benefits paid................................................. (1,237) (1,108)
--------- ---------
Benefits obligation at end of year............................ 40,408 27,789
--------- ---------
Funded status................................................. (40,408) (27,789)
Unrecognized net actuarial loss............................... 8,198 8,828
Unrecognized transition obligation............................ 2,316
Other......................................................... (2,187) (603)
--------- ---------
Accrued postretirement benefit obligation..................... $ (32,081) $ (19,564)
--------- ---------
--------- ---------
</TABLE>
The following table sets forth the status of the Company's net periodic
postretirement benefit cost for the years ended December 31, 1998, 1997 and
1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
COMPONENTS OF NET PERIODIC POSTRETIREMENT BENEFIT COST 1998 1997 1996
- -------------------------------------------------------------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost.................................................. $ 620 $ 586 $ 212
Interest cost................................................. 2,037 1,688 1,576
--------- --------- ---------
Net periodic postretirement benefit cost...................... $ 2,657 $ 2,274 $ 1,788
--------- --------- ---------
--------- --------- ---------
</TABLE>
Actuarial assumptions used to measure the accumulated benefit obligation include
a discount rate of 7% and 7 1/2% at December 31, 1998 and 1997. The assumed
health care cost trend rate for fiscal year 1998 was 12% and is projected to
decrease over 18 years to 6%, where it is expected to remain thereafter. The
effect of a one-percentage-point increase or decrease in the assumed health care
cost trend rate on the service cost and interest cost components of the net
periodic postretirement benefit cost is not material. A one-percentage-point
increase in the assumed health care cost trend rate on the accrued
postretirement benefit obligation results in an increase of approximately $1.9
million, while a one-percentage point decrease results in a decrease of $1.7
million.
F-23
<PAGE>
NOTE I: LITIGATION, COMMITMENTS AND CONTINGENCIES
The Company is currently, and is from time to time, subject to claims and suits
arising in the ordinary course of its business. In the opinion of the Company's
General Counsel, the ultimate resolution of currently pending proceedings will
not have a material adverse effect on the Company's consolidated and combined
financial statements.
NOTE J: RELATED PARTY TRANSACTIONS
Included in other assets are amounts due from certain Company officers and other
related parties of $1.9 million and $2.1 million at December 31, 1998 and 1997,
respectively.
In 1999, the Company intends to move its executive offices to a leased facility
that is owned by the UNOVA Master Trust, a vehicle which holds the assets of the
Company's major U.S. pension plans ("UNOVA Master Trust"). The Company is
currently awaiting Department of Labor approval of the transaction under
provisions of the Employment Retirement Income Security Act of 1974 governing
transactions between pension plans and related parties before it executes a
long-term lease with the UNOVA Master Trust, which is expected to be consummated
on terms equivalent to an arm's-length transaction.
Immediately prior to the Distribution in 1997, the Company paid a dividend of
$230.0 million to WAI with funds borrowed under the Company's revolving credit
facility.
Included in general and administrative expenses are allocated charges from WAI
of $13.5 million and $22.2 million, for the years ended December 31, 1997 and
1996, respectively.
Included in interest expense are allocated charges from WAI of $12.0 million and
$8.3 million, for the years ended December 31, 1997 and 1996, respectively.
F-24
<PAGE>
NOTE K: BUSINESS SEGMENT REPORTING
The Company manages and reports its operations in two business segments: the
Automated Data Systems segment and the Industrial Automation Systems segment.
Material Handling Systems was sold during the fourth quarter of 1996. Figures
for this division were reported as part of the Industrial Automation Systems
segment. The Company uses operating profit, which is computed by adding net
interest expense to earnings before taxes on income, to evaluate performance.
Corporate and other amounts include corporate operating costs and currency
transaction gains and losses (see Notes A and J). Assets classified as corporate
and other amounts consist of cash and cash equivalents and other corporate
assets. Activities are primarily product sales oriented. Export sales are not
material. All material intercompany transactions have been excluded.
OPERATIONS BY BUSINESS SEGMENT
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
INDUSTRIAL AUTOMATED CORPORATE
YEAR ENDED AUTOMATION DATA AND OTHER
DECEMBER 31, SYSTEMS SYSTEMS AMOUNTS TOTAL
------------ ---------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Sales.................................................. 1998 $ 833 $ 830 $1,663
1997 790 636 1,426
1996 798 367 1,165
Operating profit (loss)................................ 1998 77 55 $ 11(B) 143(B)
1997 95 (202)(A) (25) (132)(A)
1996 70 30 (23) 77
Capital expenditures................................... 1998 38 46 84
1997 14 16 30
1996 14 9 23
Depreciation and amortization expense.................. 1998 19 38 57
1997 15 25 1 41
1996 15 11 1 27
Total assets at year end............................... 1998 1,128 775 76 1,979
1997 650 642 64 1,356
1996 620 277 177 1,074
</TABLE>
(A) Includes the $211.5 million charges for acquired in-process research and
development.
(B) Includes gain of $35.5 million on sale of UNOVA's corporate headquarters
building.
OPERATIONS BY GEOGRAPHIC AREA
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CORPORATE
YEAR ENDED UNITED AND OTHER
DECEMBER 31, STATES EUROPE OTHER AMOUNTS TOTAL
----------------- --------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales......................................... 1998 $ 1,064 $ 442 $ 157 $ 1,663
1997 989 363 74 1,426
1996 950 193 22 1,165
Operating profit (loss)....................... 1998 98 28 6 $ 11 143
1997 (78) (35) 6 (25) (132)
1996 78 22 (23) 77
Total assets at year end...................... 1998 1,470 388 45 76 1,979
1997 1,015 261 16 64 1,356
1996 751 136 10 177 1,074
</TABLE>
F-25
<PAGE>
UNOVA, INC.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
BASIC
EARNINGS DILUTED COMMON STOCK
GROSS NET PER EARNINGS SALES PRICE
SALES PROFIT EARNINGS SHARE PER SHARE HIGH/LOW (1)
------ ------ -------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1998
First Quarter..................................... $333.4 $110.1 $ 7.8 $ 0.14 $ 0.14 $20 9/16 13 7/8
Second Quarter.................................... 345.2 117.8 9.2 0.17 0.17 $24 19 15/16
Third Quarter..................................... 405.7 133.2 13.3 0.24 0.24 $22 15 1/2
Fourth Quarter.................................... 578.4 166.2 39.4(2) 0.72 0.72 $18 1/4 12 3/8
YEAR ENDED DECEMBER 31, 1997
First Quarter..................................... $323.1 $ 88.9 $ 11.6 $ 0.21 $ 0.21
Second Quarter.................................... 409.3 122.7 (189.1)(3) (3.51) (3.51)
Third Quarter..................................... 361.8 116.4 11.7 0.22 0.22
Fourth Quarter.................................... 332.0 99.9 (5.6)(4) (0.10) (0.10) $19 1/4 14 1/8
</TABLE>
As of January 31, 1999 there were approximately 20,246 holders of record of the
Company's common stock.
(1) The common stock began trading on the New York Stock Exchange under the
symbol "UNA" on October 22, 1997 on a "when issued" basis, and "regular way"
on November 3, 1997. Prior to October 31, 1997, the Company was a wholly
owned subsidiary of Western Atlas Inc.
(2) In December 1998, the Company recognized a gain of $35.5 million on the sale
of its corporate headquarters building.
(3) In June 1997, the Company expensed $203.3 million of in-process research and
development activities in connection with the acquisitions of Norand and
UBI.
(4) In December 1997, the Company expensed $4.9 million (net of tax) of
in-process research and development activities in connection with the
acquisition of RFID technology.
F-26
<PAGE>
UNOVA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Purchase and Sale Agreement dated August 20, 1998, between UNOVA, Inc., UNOVA
Industrial Automation Systems, Inc., and UNOVA UK Limited, on the one hand, and Cincinnati Milacron
Inc., on the other hand, filed on October 2, 1998 as Exhibit 2 to the Company's Current Report on
Form 8-K, and incorporated herein by reference.
3.1 Certificate of Incorporation of UNOVA, Inc., filed on October 22, 1997 as Exhibit 3A to Amendment No.
2 to the Company's Registration Statement on Form 10 No. 001-13279, and incorporated herein by
reference.
3.2 By-laws of UNOVA, Inc., as amended on February 5, 1999.*
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among UNOVA, Inc., the Banks listed therein,
and Morgan Guaranty Trust Company of New York, as Agent, filed on October 1, 1997 as Exhibit 10M to
Amendment No. 1 to the Company's Registration Statement on Form 10 No. 001-13279, and incorporated
herein by reference.
4.2 Amendment No. 1 to the $400,000,000 Credit Agreement, dated January 15, 1998, filed as Exhibit 4.4 to
the Company's 1997 Annual Report on Form 10-K, and incorporated herein by reference.
4.3 Amendment No. 2 to the $400,000,000 Credit Agreement, dated May 15, 1998, filed as Exhibit 4.7 to the
Company's June 30, 1998 Quarterly Report on Form 10-Q, and incorporated herein by reference.
4.4 Amendment No. 3 to the $400,000,000 Credit Agreement, dated September 24, 1998, filed as Exhibit 4.8
to the Company's September 30, 1998 Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.5 Rights Agreement dated September 24, 1997, between UNOVA, Inc. and The Chase Manhattan Bank, as
Rights Agent, to which is annexed the form of Right Certificate as Exhibit A, filed on October 22,
1997 as Exhibit 3C to Amendment No. 2 to the Company's Registration Statement on Form 10 No.
001-13279, and incorporated herein by reference.
4.6 Indenture dated as of March 11, 1998 between the Company and The First National Bank of Chicago,
Trustee, providing for the issuance of securities in series, filed as Exhibit 4.5 to the Company's
1997 Annual Report on Form 10-K, and incorporated herein by reference.
4.7 Form of 6.875% Notes due March 15, 2005 issued by the Company under such indenture, filed as Exhibit
4.6 to the Company's 1997 Annual Report on Form 10-K, and incorporated herein by reference.
4.8 Form of 7.00% Notes due March 15, 2008 issued by the Company under such indenture, filed as Exhibit
4.7 to the Company's 1997 Annual Report on Form 10-K, and incorporated herein by reference.
4.9 $100,000,000 Credit Agreement dated January 13, 1999, among UNOVA, Inc., the Banks listed therein,
and Morgan Guaranty Trust Company of New York, as Agent.*
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS (CONTINUED)
<C> <S>
Instruments defining the rights of holders of other long-term debt of the Company are not filed as
exhibits because the amount of debt authorized under any such instrument does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries. The Company hereby undertakes to
furnish a copy of any such instrument to the Commission upon request.
10.1 Distribution and Indemnity Agreement dated October 31, 1997, between Western Atlas Inc. and UNOVA,
Inc, filed as Exhibit 10.1 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.2 Tax Sharing Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc., filed as
Exhibit 10.2 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.3 Employee Benefits Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc.,
filed as Exhibit 10.3 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.4 Intellectual Property Agreement dated October 31, 1997, between Western Atlas Inc., and UNOVA, Inc.,
filed as Exhibit 10.4 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.5 Change of Control Employment Agreements with Alton J. Brann, Michael E. Keane, Norman L. Roberts and
certain other officers of the Company, dated as of October 31, 1997, filed as Exhibit 10.5 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.6 Employment Agreement between Intermec Corporation and Michael Ohanian, dated May 18, 1995, as
amended, filed on August 18, 1997 as exhibit 10J to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.7 Amendment No. 1 to Employment Agreement between Intermec Corporation and Michael Ohanian, dated
February 28, 1997, filed as Exhibit 10.18 to the Company's 1997 Annual Report on Form 10-K, and
incorporated herein by reference.
10.8 Amendment No. 2 to Employment Agreement between Intermec Technologies Corporation and Michael
Ohanian, dated February 28, 1998, filed as Exhibit 10.19 to the Company's 1997 Annual Report on Form
10-K, and incorporated herein by reference.
10.9 Amendment No. 3 to Employment Agreement betweeen Intermec Technologies Corporation and Michael
Ohanian, dated May 20, 1998.*
10.10 Amendment No. 4 to Employment Agreement between Intermec Technologies Corporation and Michael
Ohanian, dated February 28, 1999.*
10.11 UNOVA, Inc. Director Stock Option and Fee Plan, filed as Exhibit 10.7 to the Company's September 30,
1997 Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.12 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as Exhibit 10I to the Company's Registration
Statement on Form 10 No. 001-13279 and incorporated herein by reference.
10.13 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on October 1, 1997 as Exhibit 10H to
Amendment No. 1 to the Company's Registration Statement on Form 10 No. 001-13279 and incorporated
herein by reference.
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS (CONTINUED)
<C> <S>
10.14 Amendment No. 1 to UNOVA, Inc. Supplemental Executive Retirement Plan, dated September 23, 1998,
filed as Exhibit 10.22 to the Company's September 30, 1998 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.15 Amendment No. 2 to UNOVA, Inc. Supplemental Executive Retirement Plan, dated March 11, 1999.*
10.16 Supplemental Executive Retirement Agreement between UNOVA, Inc. and Alton J. Brann, dated October
1997, filed on October 1, 1997 as Exhibit 10L to Amendment No. 1 to the Company's Registration
Statement on Form 10 No. 001-13279 and incorporated herein by reference.
10.17 Amendment No. 1 to Supplemental Executive Retirement Agreement between UNOVA, Inc. and Alton J.
Brann, dated September 23, 1998, filed as Exhibit 10.21 to the Company's September 30, 1998 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
10.18 Amendment No. 2 to Supplemental Executive Retirement Agreement between UNOVA, Inc. and Alton J.
Brann, dated March 11, 1999.*
10.19 Employment Agreement dated August 1997, between UNOVA, Inc., and Clayton A. Williams, filed on
October 1, 1997 as Exhibit 10K to Amendment No. 1 to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.20 Amendment No. 1 to Employment Agreement between UNOVA, Inc. and Clayton A. Williams, dated March 24,
1998, filed as Exhibit 10.20 to the Company's 1997 Annual Report on Form 10-K, and incorporated
herein by reference.
10.21 Amendment No. 2 to Employment Agreement between UNOVA, Inc. and Clayton A. Williams, dated May 18,
1998.*
10.22 UNOVA, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.12 to the Company's September 30, 1997
Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.23 UNOVA, Inc. Executive Severance Plan, filed as Exhibit 10.13 to the Company's September 30, 1997
Quarterly Report on Form 10-Q, and incorporated herein by reference.
10.24 Form of Promissory Notes in favor of the Company given by certain officers and key employees, filed
as Exhibit 10.14 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.25 Board resolution dated September 24, 1997 establishing the UNOVA, Inc. Incentive Loan Program, filed
as Exhibit 10.15 to the Company's September 30, 1997 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.26 UNOVA, Inc. Management Incentive Compensation Plan, filed as Exhibit 10.16 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
10.27 UNOVA, Inc. Executive Survivor Benefit Plan, filed as Exhibit 10.17 to the Company's 1997 Annual
Report on Form 10-K, and incorporated herein by reference.
10.28 UNOVA, Inc. 1999 Stock Incentive Plan, filed as Annex A to the Company's 1999 Proxy Statement, and
incorporated herein by reference.
10.29 UNOVA, Inc. Management Incentive Compensation Plan, filed as Annex B to the Company's 1999 Proxy
Statement, and incorporated herein by reference.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS (CONTINUED)
<C> <S>
10.30 UNOVA, Inc. Executive Medical Benefit Plan.*
21 Subsidiaries of the Registrant included herein on page E-5.
23 Independent Auditors' Consent included herein on page E-6.
27 Financial Data Schedule (filed only electronically with the Securities and Exchange Commission).
</TABLE>
- ------------------------
* Copies of these documents have been included in this Annual Report on Form
10-K filed with the Securities and Exchange Commission.
E-4
<PAGE>
EXHIBIT 3.2
BY-LAWS OF
UNOVA, INC.
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE.
The principal office of the Corporation in the State of Delaware shall be
located in the City of Wilmington, County of New Castle, and the name and
address of its registered agent is Corporation Service Company, 1013 Centre
Road, Wilmington, Delaware.
SECTION 1.2. OTHER OFFICES.
The Corporation may have such other offices, either within or without the
State of Delaware, as the Board of Directors may designate or as the business
of the Corporation may from time to time require.
SECTION 1.3. BOOKS AND RECORDS.
The books and records of the Corporation may be kept outside the State of
Delaware at such place or places as may from time to time be designated by
the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING.
The annual meeting of the stockholders of the Corporation shall be held on
such date commencing in the year 1999 and at such place and time as may be
fixed by resolution of the Board of Directors.
SECTION 2.2. SPECIAL MEETING.
Subject to the rights of the holders of any series of stock having a
preference over the Common Stock of the Corporation as to dividends or upon
liquidation ("Preferred Stock") with respect to such series of Preferred
Stock, special meetings of the stockholders may be called only by the
Chairman of the Board or by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of directors which the Corporation
would have if there were no vacancies (the "Whole Board").
SECTION 2.3. PLACE OF MEETING.
<PAGE>
The Board of Directors or the Chairman of the Board, as the case may be, may
designate the place of meeting for any annual meeting or for any special
meeting of the stockholders called by the Board of Directors or the Chairman
of the Board. If no designation is so made, the place of meeting shall be
the principal office of the Corporation.
SECTION 2.4. NOTICE OF MEETING.
Written or printed notice, stating the place, day, and hour of the meeting
and the purpose or purposes for which the meeting is called, shall be
delivered by the Corporation not less than ten (10) days nor more than sixty
(60) days before the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid, addressed to the stockholder at his, her,
or its address as it appears on the stock transfer books of the Corporation.
Such further notice shall be given as may be required by law. Only such
business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting. Meetings may be held without notice if all stockholders entitled to
vote are present, or if notice is waived by those not present in accordance
with Section 7.4 of these By-Laws. Any previously scheduled meeting of the
stockholders may be postponed, and (unless the Certificate of Incorporation
otherwise provides) any special meeting of the stockholders may be canceled,
by resolution of the Board of Directors upon public notice given prior to the
date previously scheduled for such meeting of stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT.
Except as otherwise provided by law or by the Certificate of Incorporation,
the holders of a majority of the outstanding shares of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock"),
represented in person or by proxy, shall constitute a quorum at a meeting of
stockholders, except that when specified business is to be voted on by a
class or series of stock voting as a class, the holders of a majority of the
shares of such class or series shall constitute a quorum of such class or
series for the transaction of such business. The Chairman of the meeting or
a majority of the shares so represented may adjourn the meeting from time to
time, whether or not there is such a quorum. No notice of the time and place
of adjourned meetings need be given except as required by law. The
stockholders present at a duly called meeting at which a quorum is present
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed in
writing (or in such other manner prescribed by the General Corporation Law of
the State of Delaware) by the stockholder, or by his duly authorized attorney
in fact.
SECTION 2.7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the
Board of Directors, or (c) by any stockholder of the Corporation who was a
stockholder of record at the time of giving of notice provided for in this
By-Law, who is entitled to vote at the meeting, and who complies with the
notice procedures set forth in this By-Law.
2
<PAGE>
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph
A.(1) of this By-Law, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
more than 30 days before or more than 60 days after such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 120th day prior to such annual meeting
and not later than the close of business on the later of the 90th day prior
to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Corporation.
In no event shall the public announcement of an adjournment of an annual
meeting commence a new time period for the giving of a stockholder's notice
as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (b) as to any other business that
the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting, and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (i) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
A.(2) of this By-Law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board
of Directors at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
By-Law shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the Corporation not
later than the close of business on the 10th day following the day on which
such public announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the Corporation's
notice of meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or
at the direction of the Board of Directors or (b) provided that the Board of
Directors has determined that directors shall be elected at such meeting, by
any stockholder of the Corporation who is a stockholder of record at the time
of giving of notice provided for in this By-Law, who shall be entitled to
vote at the meeting and who complies with the notice procedures set forth in
this By-Law. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a
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person or persons (as the case may be), for election to such position(s) as
specified in the Corporation's notice of meeting, if the stockholder's notice
required by paragraph A.(2) of this By-Law shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier
than the close of business on the 120th day prior to such special meeting and
not later than the close of business on the later of the 90th day prior to
such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
In no event shall the public announcement of an adjournment of a special
meeting commence a new time period for the giving of a stockholder's notice
as described above.
C. GENERAL.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this By-Law. Except as otherwise provided by law,
the Chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this By-Law and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press, or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-Law. Nothing in this By-Law shall be deemed
to affect any rights (a) of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (b) of the holders of any series of Preferred Stock to
elect directors under specified circumstances.
SECTION 2.8. PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE.
Election of directors at all meetings of the stockholders at which directors
are to be elected shall be by ballot, and, subject to the rights of the
holders of any series of Preferred Stock to elect directors under specified
circumstances, a plurality of the votes cast thereat shall elect directors.
Except as otherwise provided by law, the Certificate of Incorporation, or
these By-Laws, in all matters other than the election of directors, the
affirmative vote of a majority of the shares present in person or represented
by proxy at the meeting and entitled to vote on the matter shall be the act
of the stockholders.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
The Board of Directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives, to act at the meetings of stockholders
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate has been appointed to act or is able to act at a
meeting of stockholders, the Chairman of the meeting shall appoint one or
more inspectors to act at the meeting. Each inspector, before discharging
his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict
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impartiality and according to the best of his or her ability. The
inspector(s) shall have the duties prescribed by law.
The Chairman or the Secretary of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting.
SECTION 2.10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT.
Subject to the rights of the holders of any series of Preferred Stock with
respect to such series of Preferred Stock, any action required or permitted
to be taken by the stockholders of the Corporation must be effected at an
annual or special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS.
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. In addition to the powers and
authorities by these By-Laws expressly conferred upon them, the Board of
Directors may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws required to be exercised or done by the
stockholders.
SECTION 3.2. NUMBER, TENURE, AND QUALIFICATIONS.
Subject to the rights of the holders of any series of Preferred Stock to
elect directors under specified circumstances, the number of directors shall
be fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the Whole Board. The directors, other than those who may be
elected by the holders of any series of Preferred Stock under specified
circumstances, shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as is
reasonably possible, with the term of office of the first class to expire at
the 1999 annual meeting of stockholders, the term of office of the second
class to expire at the 2000 annual meeting of stockholders and the term of
office of the third class to expire at the 2001 annual meeting of
stockholders, with each director to hold office until his or her successor
shall have been duly elected and qualified. At each annual meeting of
stockholders, commencing with the 1999 annual meeting, (i) directors elected
to succeed those directors whose terms then expire shall be elected for a
term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified, and (ii) if
authorized by a resolution of the Board of Directors, directors may be
elected to fill any vacancy on the Board of Directors, regardless of how such
vacancy shall have been created.
SECTION 3.3. REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held immediately after
the annual meeting of stockholders without other notice than this By-Law.
Regular meetings of the directors may be held without notice at such place
and times as shall be determined from time to time by the Board of Directors.
SECTION 3.4. SPECIAL MEETINGS.
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Special meetings of the Board of Directors shall be called at the request of
the Chairman of the Board, the President, or a majority of the Board of
Directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix the place and time of the meetings.
SECTION 3.5. NOTICE.
Notice of any special meeting of directors shall be given to each director at
his or her business or residence in writing by hand delivery, first-class or
overnight mail or courier service, telegram or facsimile transmission,
electronic mail, or orally by telephone. If mailed by first-class mail, such
notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five (5)
days before such meeting. If by telegram, overnight mail, or courier
service, such notice shall be deemed adequately delivered when the telegram
is delivered to the telegraph corporation or the notice is delivered to the
overnight mail or courier service corporation at least twenty-four (24) hours
before such meeting. If by facsimile transmission or electronic mail, such
notice shall be deemed adequately delivered when the notice is transmitted at
least twelve (12) hours before such meeting. If by telephone or by hand
delivery, the notice shall be given at least twelve (12) hours prior to the
time set for the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice of such meeting, except for amendments to these
By-Laws, as provided under Section 8.1. A meeting may be held at any time
without notice if all the directors are present or if those not present waive
notice of the meeting in accordance with Section 7.4 of these By-Laws.
SECTION 3.6. ACTION BY CONSENT OF BOARD OF DIRECTORS.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
SECTION 3.7. CONFERENCE TELEPHONE MEETINGS.
Members of the Board of Directors, or any committee thereof, may participate
in a meeting of the Board of Directors or such committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such
meeting.
SECTION 3.8. QUORUM.
Subject to Section 3.9, a whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. The directors present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
SECTION 3.9. VACANCIES.
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Subject to applicable law and the rights of the holders of any series of
Preferred Stock with respect to such series of Preferred Stock, and unless
the Board of Directors otherwise determines, vacancies resulting from death,
resignation, retirement, disqualification, removal from office or other
cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of
a majority of the remaining directors, though less than a quorum of the Board
of Directors, and directors so chosen shall hold office for a term expiring
at the annual meeting of stockholders at which the term of office of the
class to which they have been elected expires and until any such director's
successor shall have been duly elected and qualified. No decrease in the
number of authorized directors constituting the Whole Board shall shorten the
term of any incumbent director.
SECTION 3.10. EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors may, by resolution adopted by a majority of the Whole
Board, designate an Executive Committee to exercise, subject to applicable
provisions of law, all the powers of the Board in the management of the
business and affairs of the Corporation when the Board is not in session,
including without limitation the power to declare dividends, to authorize the
issuance of the Corporation's capital stock and to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law
of the State of Delaware, and may, by resolution similarly adopted, designate
one or more other committees. The Executive Committee and each such other
committee shall consist of two or more directors of the Corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. Any such committee, other than the Executive Committee
(the powers of which are expressly provided for herein), may to the extent
permitted by law exercise such powers and shall have such responsibilities as
shall be specified in the designating resolution. In the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix the time and
place of its meetings, unless the Board shall otherwise provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in Section 3.5 of these By-Laws. The Board shall have power at
any time to fill vacancies in, to change the membership of, or to dissolve
any such committee. Nothing herein shall be deemed to prevent the Board from
appointing one or more committees consisting in whole or in part of persons
who are not directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board.
SECTION 3.11. REMOVAL.
Subject to the rights of the holders of any series of Preferred Stock with
respect to such series of Preferred Stock, any director, or the entire Board
of Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 80 percent of the
voting power of all of the then outstanding shares of Voting Stock, voting
together as a single class.
SECTION 3.12. RECORDS.
The Board of Directors shall cause to be kept a record containing the minutes
of the proceedings of the meetings of the Board and of the stockholders,
appropriate stock books and registers and such books of records and accounts
as may be necessary for the proper conduct of the business of the Corporation.
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SECTION 3.13. ADVISORY DIRECTORS.
The Board of Directors may elect one or more advisory directors who shall
have such powers and shall perform such duties as the directors shall assign
to them. Advisory directors shall, upon election, serve until the next annual
meeting of stockholders. Advisory directors shall receive notices of all
meetings of the Board of Directors in the same manner and at the same time as
the directors. They shall attend said meetings referred to in said notices in
an advisory capacity, but will not cast a vote or be counted to determine a
quorum. Any advisory directors may be removed either with or without cause,
by a majority of the directors at the time in office, at any regular or
special meeting of the Board of Directors.
Nothing herein contained shall be construed to preclude any advisory director
from serving the Corporation in any other capacity as an officer, agent, or
otherwise.
ARTICLE IV
OFFICERS
SECTION 4.1. OFFICERS.
The officers of the Corporation shall consist of a Chairman of the Board, a
Chief Executive Officer, a Secretary, a Treasurer, and, if deemed necessary,
expedient, or desirable by the Board of Directors, a President, a Vice
Chairman of the Board, one or more Chief Operating Officers, one or more Vice
Presidents (one or more of whom may be designated Executive or Senior Vice
President), one or more Assistant Secretaries, and one or more Assistant
Treasurers. Except as may otherwise be provided in the resolution of the
Board of Directors choosing him or her, no officer other than the Chairman or
Vice Chairman of the Board, if any, need be a director. Except as may be
limited by law, any number of offices may be held by the same person, as the
directors may determine.
Unless otherwise provided for in the resolution choosing him or her, each
officer shall be chosen for a term that shall continue until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until his or her successor shall have been chosen and qualified.
All officers of the Corporation shall have such authority and perform such
duties as shall be prescribed in the By-Laws or in the resolutions of the
Board of Directors designating and choosing such officers and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. Any officer may
be removed, with or without cause, by the Board of Directors. Any vacancy in
any office may be filled by the Board of Directors.
SECTION 4.2. OTHER OFFICERS AND AGENTS.
The Board of Directors may appoint such other officers and agents as it may
deem advisable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board of Directors. The Chief Executive Officer may appoint
key executives to the position of staff vice president. Such staff vice
presidents shall not be corporate officers and shall exercise such powers and
perform such duties as are assigned to them by the Chief Executive Officer or
the President, if any, or by any other officer of the Corporation designated
for such purpose by the Chief Executive Officer or President, if any.
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ARTICLE V
CAPITAL STOCK
SECTION 5.1. SHARES.
The shares of the capital stock of the Corporation shall be represented by
certificates or shall be uncertificated. Each registered holder of shares of
capital stock, upon request to the Corporation, shall be provided with a
stock certificate, representing the number of shares owned by such holder.
Absent specific request for such a certificate by the registered owner or
transferee thereof, all shares shall be uncertificated upon the original
issuance thereof by the Corporation or upon the surrender for transfer of the
certificate representing such shares to the Corporation or its transfer agent.
SECTION 5.2. CERTIFICATES FOR SHARES OF STOCK.
The certificates for shares of stock of the Corporation shall be in such
form, not inconsistent with the Certificate of Incorporation, as shall be
approved by the Board of Directors. All certificates shall be signed,
countersigned, and registered in such manner as the Board of Directors may by
resolution prescribe, which resolution may permit any of all of the
signatures on such certificates to be in facsimile.
In case any officer, transfer agent, or registrar who shall have signed or
whose facsimile signature has been placed upon any such certificate or
certificates shall cease to be such officer, transfer agent, or registrar of
the Corporation, whether because of death, resignation, or otherwise, before
such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates had not ceased to be such officer, transfer agent, or registrar
of the Corporation.
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be canceled and no new certificates or
uncertificated shares shall be issued until former certificates for the same
number of shares have been surrendered and canceled.
SECTION 5.3. LOST, STOLEN, OR DESTROYED CERTIFICATES.
No certificate for shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, destroyed, or stolen,
except on production of such evidence of such loss, destruction, or theft and
on delivery to the Corporation of a bond of indemnity in such amount, upon
such terms, and secured by such surety, as the Board of Directors or the
Secretary of the Corporation may in its, his, or her discretion require.
SECTION 5.4. TRANSFER OF SHARES.
Upon surrender to the Corporation or to the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence
of succession, assignation, or authority to transfer, the Corporation shall
issue or cause to be issued uncertificated shares or, if requested by the
appropriate person, a new certificate to the person entitled thereto, cancel
the surrendered certificate, and record the transaction upon its books. Upon
receipt of proper transfer instructions from the registered owner of
uncertificated shares, such uncertificated shares shall be canceled
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and issuance of new equivalent uncertificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
Corporation.
SECTION 5.5. REGULATIONS.
The Board of Directors shall have power and authority to make such rules and
regulations as it may deem expedient concerning the issue, transfer, and
registration of uncertificated shares or certificates for shares of stock of
the Corporation.
SECTION 5.6. STATEMENTS RELATING TO UNCERTIFICATED SECURITIES.
Within two business days after an issuance, transfer, pledge, or release from
a pledge of uncertificated shares has been registered, the Corporation shall
send to the registered owner thereof and, if shares are or were subject to a
registered pledge, to the registered pledgee, a written notice, signed in
such manner as the Board of Directors may prescribe stating (a) that the
Corporation shall furnish to such person(s) upon request and without charge a
full statement of the designation, relative rights, preferences and
limitations of the shares of each class of the Corporation's stock authorized
to be issued and the designation, relative rights, preferences and
limitations of each series of preferred stock so far as the same has been
fixed and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series; (b) the number
of shares and a description of the issue of which such shares are a part
including the class of shares, and the designation of the series, if any,
which have been issued, transferred, pledged or released from a pledge, as
the case may be; (c) the name, address, and taxpayer identification number,
if any, of the person or persons to which such shares have been issued or
transferred, and, in the case of registration of a pledge or a release from a
pledge, of the registered owner and the registered pledgee whose interest is
being granted or released, (d) any liens or restrictions of the Corporation,
and any adverse claims (i) which are embodied in a restraining order,
injunction, or other legal process served upon the Corporation at a time and
in a manner which afforded it a reasonable opportunity to act on it in
accordance with applicable law, (ii) of which the Corporation has received
written notification from the registered owner or the registered pledgee at a
time and in a manner which afforded it a reasonable opportunity to act on it
in accordance with applicable law, (iii) to which the registration of
transfer to the present registred owner was subject and so noted in a
statement sent to such person under this paragraph including restrictions on
transfer not imposed by the Corporation, and (iv) of which the Corporation is
charged with notice from a controlling instrument which the Corporation has
elected to require as assurance that a necessary endorsement or instruction
is genuine and effective, to which the shares are subject or a statement that
there are no such liens, restrictions, or adverse claims; and (e) the date
the issuance, transfer, pledge, or release from a pledge, as the case may be,
was registered. The Corporation shall maintain a printed copy of the most
recent statement sent to a person with respect to uncertificated shares
pursuant to this paragraph.
Within two business days after a transfer of uncertificated shares has been
registered, the Corporation shall send to the former registered owner and the
former registered pledgee, if any, a written notice stating (a) the number of
shares and a description of the issue of which such shares are a part,
including the class of shares, and the designation of the series, if any,
which have been transferred; (b) the name, address and taxpayer
identification number, if any, of the former registered owner and of the
former registered pledgee, if any; and (c) the date the transfer was
registered.
The Corporation shall send to each registered holder and registered pledgee
of uncertificated shares, no less frequently than annually, and at any time
upon the written request of any such person, a dated written notice stating
(a) if such notice is to the registered owner, the number of shares and a
description of the issue of which such shares are a part, including the class
of shares, and the designation of the series, if any, registered in the name
of such registered owner
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on the date of the statement; (b) the name, address, and taxpayer
identification number, if any, of the registered owner; (c) the name, address
and taxpayer identification number, if any, of any registered pledgee and the
number of shares subject to the pledge; and (d) any liens or restrictions of
the Corporation and any adverse claims (i) which are embodied in a
restraining order, injunction, or other legal process served upon the
Corporation at a time and in a manner which afforded it a reasonable
opportunity to act on it in accordance with applicable law, (ii) of which the
Corporation has received written notification from the registered owner or
the registered pledgee at a time and in a manner which afforded it a
reasonable opportunity to act on it in accordance with applicable law, (iii)
to which the registration of transfer to the present registered owner was
subject and so noted in a statement sent to such person under this paragraph,
including restrictions on transfer not imposed by the Corporation, and (iv)
of which the Corporation is charged with notice from a controlling instrument
which the Corporation has elected to require as assurance that a necessary
endorsement or instruction is genuine and effective, to which the shares are
subject or a statement that there are no such liens, restrictions or adverse
claims.
Each notice sent pursuant to this Section 5.6 shall bear a legend
substantially as follows: This statement is merely a record of the rights of
the addressee as of the time of its issuance. Delivery of the statement, of
itself, confers no rights upon the recipient. This statement is neither a
negotiable instrument nor a security.
ARTICLE VI
INDEMNIFICATION; ADVANCE OF EXPENSES
SECTION 6.1. RIGHT TO INDEMNIFICATION.
A. Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter a "proceeding") by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or
was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation or of a partnership, joint venture,
trust, or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Corporation, whether the basis
of such proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as a
director, officer, employee, or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability, and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure
to the benefit of his or her heirs, executors, and administrators; PROVIDED,
HOWEVER, that except as provided in Section 6.2.B. of this Article VI, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors.
B. Each person referred to in Section 6.1.A. of this Article VI shall be paid
by the Corporation the expenses incurred in connection with any proceeding in
advance of its final disposition, such advances to be paid by the Corporation
within 20 days after the receipt by the Corporation of a statement or
statements from the claimant requesting such advance or advances from time to
time; PROVIDED, HOWEVER, that if the General Corporation Law of the State of
Delaware requires,
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the advancement of such expenses incurred by a director or officer in his or
her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) prior to
the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified
under this Article VI or otherwise.
C. The right to indemnification conferred in this Article VI and the right to
be paid by the Corporation the expenses incurred in connection with any such
proceeding in advance of its final disposition conferred in this Article VI
each shall be a contract right.
SECTION 6.2. PROCEDURE TO OBTAIN INDEMNIFICATION.
A. To obtain indemnification under this Article VI, a claimant shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and
is reasonably necessary to determine whether and to what extent the claimant
is entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 6.2.A., a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the
claimant, by Independent Counsel (as hereinafter defined) or (2) if no
request is made by the claimant for a determination by Independent Counsel,
(a) by the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined) or (b) if a quorum of the
Board of Directors consisting of Disinterested Directors is not obtainable
or, even if obtainable, such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the claimant, or (c) if a quorum of Disinterested
Directors so directs, by the stockholders of the Corporation. In the event
the determination of entitlement to indemnification is to be made by
Independent Counsel at the request of the claimant, the Independent Counsel
shall be selected by the Board of Directors unless there shall have occurred
within six years prior to the date of the commencement of the action, suit,
or proceeding for which indemnification is claimed a "Change of Control" as
defined in the Corporation's 1997 Stock Incentive Plan, in which case the
Independent Counsel shall be selected by the claimant unless the claimant
shall request that such selection be made by the Board of Directors. If it
is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 10 days after such determination.
B. If a claim under Section 6.1 of this Article VI is not paid in full by the
Corporation within 30 days after a written claim pursuant to Section 6.2.A.
of this Article VI has been received by the Corporation or, in the case of a
claim pursuant to Section 6.1.B., within the 20-day period provided therein,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that
the claimant has not met the standard of conduct which makes it permissible
under the General Corporation Law of the State of Delaware for the
Corporation to indemnify the claimant for the amount of the claims, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, Independent
Counsel, or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware,
nor an actual determination by the Corporation (including its Board of
Directors, Independent Counsel, or stockholders) that the claimant has not
12
<PAGE>
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
C. If a determination shall have been made pursuant to Section 6.2.A. of this
Article VI that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to Section 6.2.B. of this Article VI.
D. The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to Section 6.2.B. of this Article VI that the
procedures and presumptions of this Article VI are not valid, binding, and
enforceable and shall stipulate in such proceeding that the Corporation is
bound by all the provisions of this Article VI.
SECTION 6.3. NO DIMINUTION OF RIGHTS.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article VI shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or Disinterested
Directors, or otherwise. No repeal or modification of this Article VI shall
in any way diminish or adversely affect the rights of any director, officer,
employee, or agent of the Corporation hereunder in respect of any occurrence
of matter arising prior to any such repeal or modification.
SECTION 6.4. INSURANCE.
The Corporation may maintain insurance, at its expense, to protect itself and
any director, officer, employee, or agent of the Corporation or any person
serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability, or loss under the General Corporation Law of the State of
Delaware. To the extent that the Corporation maintains any policy or policies
providing such insurance, each such director or officer, and each such agent
or employee to which rights to indemnification have been granted as provided
in Section 6.5 of this Article VI, shall be covered by such policy or
policies in accordance with its or their terms to the maximum extent of the
coverage thereunder for any such director, officer, employee, or agent.
SECTION 6.5. DISCRETIONARY INDEMNIFICATION.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification, and rights to be paid by the
Corporation and the expenses incurred in defending any proceeding in advance
of its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article VI with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
SECTION 6.6. ENFORCEABILITY.
If any provision or provisions of this Article VI shall be held to be
invalid, illegal, or unenforceable for any reason whatsoever: (a) the
validity, legality, and enforceability of the remaining provisions of this
Article VI (including, without limitation, each portion of any section of
this Article VI containing any such provision held to be invalid, illegal, or
unenforceable, that is not itself held to be invalid, illegal, or
unenforceable) shall not in any way be affected or impaired thereby; and (b)
to the fullest extent possible, the provisions of this Article VI (including,
without limitation, each such portion of any section of this Article VI
containing any such provision held to be invalid, illegal, or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal, or unenforceable.
13
<PAGE>
SECTION 6.7. CERTAIN DEFINITIONS.
For purposes of this Article VI:
(a) "Disinterested Director" means a director of the Corporation who is not
and was not a party to the matter in respect of which indemnification is
sought by the claimant.
(b) "Independent Counsel" means a law firm that is nationally recognized for
its experience in matters of Delaware corporation law and shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or the claimant in an action to determine the claimant's rights
under this Article VI.
SECTION 6.8. NOTICES.
Any notice, request, or other communication required or permitted to be given
to the Corporation under this Article VI shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, electronic mail,
overnight mail or courier service, or certified or registered mail, postage
prepaid, return receipt requested, to the Secretary of the Corporation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. FISCAL YEAR.
The fiscal year of the Corporation shall begin on the first day of January and
end on the thirty-first day of December of each year.
SECTION 7.2. DIVIDENDS.
The Board of Directors may from time to time declare, and the Corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law and the Certificate of Incorporation.
SECTION 7.3. SEAL.
The corporate seal shall have inscribed thereon the words "Corporate Seal,"
the year of incorporation and around the margin thereof the words "UNOVA,
Inc. -Delaware."
SECTION 7.4. WAIVER OF NOTICE.
Whenever any notice is required to be given to any stockholder or director of
the Corporation under the provisions of the General Corporation Law of the
State of Delaware or these By-Laws, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Neither the business to be transacted at, nor the purpose of, any annual or
special meeting of the stockholders or the Board of Directors or committee
thereof need be specified in any waiver of notice of such meeting.
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<PAGE>
SECTION 7.5. AUDITS.
The accounts, books, and records of the Corporation shall be audited upon the
conclusion of each fiscal year by an independent certified public accountant
selected by the Board of Directors, and it shall be the duty of the Board of
Directors to cause such audit to be done annually.
SECTION 7.6. RESIGNATIONS.
Any director of any officer, whether elected or appointed, may resign at any
time by giving written notice of such resignation to the Chairman of the
Board, the President, if any, or the Secretary, and such resignation shall be
deemed to be effective as of the close of business on the date said notice is
received by the Chairman of the Board, the President, if any, or the
Secretary, or at such later time as is specified therein. No formal action
shall be required of the Board of Directors or the stockholders to make any
such resignation effective.
SECTION 7.7. PROXIES.
Unless otherwise provided by resolution adopted by the Board of Directors,
the Chairman of the Board, the President, if any, or any Vice President may
from time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or
other securities of such other corporation, or to consent in writing, in the
name of the Corporation as such holder, to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause
to be executed in the name and on behalf of the Corporation and under its
corporate seal or otherwise, all such written proxies or other instruments as
he or she may deem necessary or proper in the premises.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. AMENDMENTS.
These By-Laws may be altered, amended, or repealed at any meeting of the
Board of Directors or of the stockholders, provided notice of the proposed
change was given in the notice of the meeting and, in the case of a meeting
of the Board of Directors, in a notice given not less than two days prior to
the meeting; provided, however, that, in the case of amendments by
stockholders, notwithstanding any other provisions of these By-Laws or any
provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law, the
Certificate of Incorporation or these By-Laws, the affirmative vote of the
holders of at least 80 percent of the voting power of all the then
outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend, or repeal any provision of these By-Laws.
15
<PAGE>
EXHIBIT 4.9
$100,000,000
CREDIT AGREEMENT
dated as of
January 13, 1999
among
UNOVA, Inc.
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
_______________________________________________________
J.P. Morgan Securities Inc.,
Arranger
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<C> <S> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . 16
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. Notice of Committed Borrowings. . . . . . . . . . . . . . . . 17
SECTION 2.03. Money Market Borrowings . . . . . . . . . . . . . . . . . . . 17
SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . 22
SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.07. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.08. Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.09. Optional Termination or Reduction of Commitments. . . . . . . 27
SECTION 2.10. Scheduled Termination or Reduction of Commitments . . . . . . 27
SECTION 2.11. Optional Prepayments. . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . 28
SECTION 2.13. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.14. Computation of Interest and Fees. . . . . . . . . . . . . . . 29
SECTION 2.15. Regulation D Compensation . . . . . . . . . . . . . . . . . . 29
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.02. Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 31
2
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . 31
SECTION 4.02. Corporate and Governmental Authorization;
No Contravention. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.03. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.05. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.09. Material Subsidiaries . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . 34
SECTION 4.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.12. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.13. Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.02. Maintenance of Property; Insurance. . . . . . . . . . . . . . 37
SECTION 5.03. Conduct of Business and Maintenance of Existence. . . . . . . 37
SECTION 5.04. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.05. Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.06. Maintenance of Certain Operations . . . . . . . . . . . . . . 38
SECTION 5.07. Limitation on Subsidiary Debt.. . . . . . . . . . . . . . . . 38
SECTION 5.08. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.09. Consolidations, Mergers and Sales of Assets . . . . . . . . . 39
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . 42
3
<PAGE>
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization.. . . . . . . . . . . . . . . . 42
SECTION 7.02. Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . 42
SECTION 7.05. Liability of Agent. . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.09. Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. . . 44
SECTION 8.02. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . 45
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans . . 48
SECTION 8.06. Substitution of Bank. . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.02. No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . 50
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.05. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 51
SECTION 9.06. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 51
SECTION 9.07. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . . . . . 52
SECTION 9.09. Counterparts; Integration . . . . . . . . . . . . . . . . . . 52
SECTION 9.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 52
4
<PAGE>
Schedule I - Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Assignment and Assumption Agreement
</TABLE>
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of January 13, 1999 among UNOVA, INC., the BANKS
party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
W I T N E S S E T H:
The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to the Borrower) duly completed by such Bank.
"Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Borrower. For the purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means Morgan Guaranty Trust Company of New York in its capacity
as agent for the Banks under the Financing Documents, and its successors in
such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
<PAGE>
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each financial institution listed on the signature pages
hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and
their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan made or to be made by a Bank as
a Base Rate Loan in accordance with the applicable Notice of Committed
Borrowing or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by any member of the
ERISA Group.
"Borrower" means UNOVA, Inc., a Delaware corporation, and its successors.
"Borrower's 1997 Form 10-K" means the Borrower's annual report on Form 10-K
for the fiscal year ended December 31, 1997, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended September 30, 1998, as filed with the
Securities Exchange Commission pursuant to the Securities Exchange Act of 1934,
as amended.
"Borrowing" has the meaning set forth in Section 1.03.
"Capital Lease" means a lease that would be capitalized on a balance sheet
of the lessee prepared in accordance with generally accepted accounting
principles.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan made or to be made by a Bank as a CD Loan
in accordance with the applicable Notice of Committed Borrowing.
2
<PAGE>
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Citibank, N.A., Deutsche Bank AG New York
Branch and Morgan Guaranty Trust Company of New York, or such other bank or
banks as the Borrower and the Agent may from time to time mutually designate.
"Change of Control" means any of the following:
(a) An acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30 percent
or more of either (i) the then outstanding shares of common stock of the
Borrower (the "Outstanding Borrower Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Borrower
entitled to vote generally in the election of directors (the "Outstanding
Borrower Voting Securities"); excluding, however, the following acquisitions
of Outstanding Borrower Common Stock and Outstanding Borrower Voting
Securities: (i) any acquisition by the Borrower, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Borrower or any corporation controlled by the Borrower, or (iii) any
acquisition by any Person pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this definition; or
(b) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Borrower (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; PROVIDED, however, that any
individual who becomes a member of the Board subsequent to the Effective Date
whose election, or nomination for election by the Borrower's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but PROVIDED FURTHER that any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the Incumbent
Board; or
(c) The approval by the shareholders of the Borrower of a reorganization,
merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Borrower (a "Business Combination"), or if
consummation of such Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency, obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a
3
<PAGE>
Business Combination pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Borrower Common Stock and Outstanding Borrower Voting Securities
immediately prior to such Business Combination will beneficially own,
directly or indirectly, more than 60 percent of, respectively, the then
outstanding shares of common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Borrower or all or substantially all of
the Borrower's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Borrower Common Stock and
Outstanding Borrower Voting Securities, as the case may be, (ii) no Person
(other than any employee benefit plan (or related trust) sponsored or
maintained by the Borrower or any corporation controlled by the Borrower or
such corporation resulting from such Business Combination) will beneficially
own, directly or indirectly, 30 percent or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed with respect to
the Borrower prior to the Business Combination and (iii) at least a majority
of the members of the board of directors of the corporation resulting from
such Business Combination will have been members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) The approval by the shareholders of the Borrower of a complete
liquidation or dissolution of the Borrower.
"Commitment" means (i) with respect to each Bank listed on the signature
pages hereof, the amount set forth opposite the name of such Bank on the
signature pages of this Agreement and (ii) with respect to each Assignee
which becomes a Bank pursuant to Section 9.06(c), the amount of the Commitment
thereby assumed by it, in each case as such amount may be changed from time to
time pursuant to Sections 2.09 and 9.06(c).
"Committed Loan" means a loan made or to be made by a Bank pursuant to
Section 2.01.
"Consolidated Current Liabilities" means at any date the consolidated
current liabilities of the Borrower and its Consolidated Subsidiaries
determined as of such date.
4
<PAGE>
"Consolidated Debt" means, at any date, the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in the determination of such
Consolidated Net Income, (i) interest expense for such period, (ii) the
provision for income taxes for such period, (iii) depreciation and
amortization expense for such period and (iv) non-cash write-offs of
in-process research and development costs during such period in connection
with acquisitions; PROVIDED that the aggregate amount of such write-offs
subsequent to the date of this Agreement added pursuant to this clause (iv)
during the term of this Agreement shall not exceed $250,000,000.
"Consolidated Net Assets" means at any date Consolidated Total Assets
less Consolidated Current Liabilities, all determined as of such date.
"Consolidated Net Income" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries for such period, determined on a
consolidated basis.
"Consolidated Net Worth" means at any date the shareholders' investment
in the Borrower and its Consolidated Subsidiaries determined on a consolidated
basis of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements if such statements were prepared as
of such date.
"Consolidated Total Assets" means at any date the total assets of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis as of such date.
"D&P" means Duff & Phelps Credit Rating Co., and its successors.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable and deferred employee
compensation obligations arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in accordance with
generally accepted accounting principles, (v) all unpaid reimbursement
obligations of such Person in respect of letters of credit or similar
instruments but only to the extent that either
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(x) the issuer has honored a drawing thereunder or (y) payment of such
obligation is otherwise due under the terms thereof, (vi) all Debt secured by
a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vii) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Agent; PROVIDED that any Bank may so
designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer
to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date the Commitments become effective in
accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the
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effect of the environment on human health or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"Equity Security" means any capital stock or other equity security, or
any warrant or other right to purchase such an equity security.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan made or to be made by a Bank
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices of
Citibank, N.A., Deutsche Bank AG and Morgan Guaranty Trust Company of New
York, or such other bank or banks as the Borrower and the Agent may from time
to time mutually designate.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
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Reserve System in New York City with deposits exceeding five billion dollars
in respect of "Eurocurrency liabilities" (or in respect of any other category
of liabilities which includes deposits by reference to which the interest
rate on Euro-Dollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
any Bank to United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day (the "accrual date"), the rate
per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers
on the accrual date, as published by the Federal Reserve Bank of New York on
the Domestic Business Day next succeeding such day, PROVIDED that (i) if the
accrual date is not a Domestic Business Day, the Federal Funds Rate for the
accrual date shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic
Business Day, and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for the accrual date
shall be the average rate quoted to Morgan Guaranty Trust Company of New York
on the accrual date (or next preceding Domestic Business Day) on such
transactions as determined by the Agent.
"Financing Documents" means this Agreement and the Notes.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
"Foreign Debt" means Debt incurred by a Subsidiary organized under the
laws of a jurisdiction outside the United States (or incurred through a
branch or office outside the United States of a Subsidiary organized under
the laws of a jurisdiction within the United States) which Debt is incurred
with a view to obtaining financial or tax benefits associated with the
foreign operations of such Subsidiary (including without limitation currency
hedging).
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of
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assuring in any other manner the holder of such Debt of the payment thereof
or to protect such holder against loss in respect thereof (in whole or in
part), PROVIDED that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending
one, two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business Day
of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date;
(2) with respect to each CD Borrowing, the period commencing on the
date of such Borrowing and ending 30, 60, 90 or 180 days thereafter,
as the Borrower may elect in the applicable Notice of Borrowing;
PROVIDED that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
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<PAGE>
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date;
(3) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending 30 days thereafter; PROVIDED
that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date;
(4) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending such whole number
of months thereafter as the Borrower may elect in accordance with
Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business Day
of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date;
(5) with respect to each Money Market Absolute Rate Borrowing, the
period commencing on the date of such Borrowing and ending such number of
days thereafter (but not less than 7 days) as the Borrower may elect in
accordance with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
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(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Leverage Ratio" means, at any date, the ratio of Consolidated Debt at
such date to Consolidated EBITDA for the period of four consecutive fiscal
quarters most recently ended on or prior to such date; PROVIDED that if there
shall have been an acquisition or disposition of operations during such
period, Consolidated EBITDA shall be calculated on a pro forma basis giving
effect thereto as if such acquisition or disposition had occurred on the
first day of such period.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement relating to
such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Adverse Effect" means (i) any material adverse effect on the
business, financial position, results of operations or prospects of the
Borrower and its Subsidiaries, taken as a whole or (ii) any material adverse
effect on any of the rights and remedies of the Agent and the Banks under
this Agreement and the Notes.
"Material Debt" means Debt (other than the Notes) of the Borrower and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal amount exceeding $25,000,000.
"Material Financial Obligations" means a principal amount of Debt and/or
payment or collateralization obligations in respect of Derivatives Obligations
of
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the Borrower and/or one or more of its Subsidiaries, arising in one or more
related or unrelated transactions, exceeding in the aggregate $25,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"Material Subsidiary" means any Subsidiary, including its Subsidiaries,
which meets any of the following conditions:
(1) the Borrower's and its other Subsidiaries' investments in and
advances to such Subsidiary exceed 5 percent of the total assets of
the Borrower and its Subsidiaries consolidated as of the end of the
most recently completed fiscal year; or
(2) the Borrower's and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of such Subsidiary
exceeds 5 percent of the total assets of the Borrower and its
Subsidiaries consolidated as of the end of the most recently completed
fiscal year; or
(3) the Borrower's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principle of such
Subsidiary exceeds 5 percent of such income of the Borrower and its
Subsidiaries consolidated for the most recently completed fiscal year.
Computational note: For purposes of making the prescribed income test
the following guidance should be applied:
1. When a loss has been incurred by either the Borrower and its
Subsidiaries consolidated or the tested Subsidiary, but not both, the equity
in the income or loss of the tested Subsidiary should be excluded from the
income of the Borrower and its Subsidiaries consolidated for purposes of the
computation.
2. If income of the Borrower and its Subsidiaries consolidated for the
most recent fiscal year is at least 5 percent lower than the average of the
income for the last five fiscal years, such average income should be
substituted for purposes of the computation. Any loss years should be
omitted for purposes of computing average income.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
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"Money Market Absolute Rate Loan" means a loan made or to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; PROVIDED that any Bank may from time to time by
notice to the Borrower and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which case all references
herein to the Money Market Lending Office of such Bank shall be deemed to
refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions in
an amount exceeding $1,000,000 per annum or has within the preceding five
plan years made such contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year period.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined
in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
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"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto identified as such.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Rating Agencies" means D&P, Moody's and S&P.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any
one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 60% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 60% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
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"S&P" means Standard & Poor's Ratings Services, and its successors.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are
at the time directly or indirectly owned by the Borrower (or, if such term is
used with reference to another Person, by such other Person).
"Termination Date" means January 12, 2000 (or if such date is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day).
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; PROVIDED that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Borrower that the Required Banks wish to
amend Article V for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting
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principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Borrower and the Required
Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks made or to be made to the Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference
to the pricing of Loans comprising such Borrowing (E.G., a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to
the provisions of Article II under which participation therein is determined
(I.E., a "Committed Borrowing" is a Borrowing under Section 2.01 in which
all Banks participate in proportion to their Commitments, while a "Money
Market Borrowing" is a Borrowing under Section 2.03 in which the Bank
participants are determined on the basis of their bids in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Subject to the terms and conditions
set forth in this Agreement, each Bank severally agrees to make loans to the
Borrower from time to time during the Revolving Credit Period in an aggregate
principal amount at any time outstanding not to exceed the amount of such
Bank's Commitment. Each Borrowing under this Section 2.01 shall be in an
aggregate principal amount of $10,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in an aggregate amount
equal to the amount available in accordance with Section 3.02(b)) and shall
be made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, repay, or to the extent permitted by Section 2.11, prepay loans and
reborrow under this Section at any time during the Revolving Credit Period.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 10:30
A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y)
the second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case
of a Euro-Dollar Borrowing,
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(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans, Base
Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Committed Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings pursuant
to Section 2.01, the Borrower may, as set forth in this Section, request the
Banks during the Revolving Credit Period to make offers to make Money Market
Loans to the Borrower. The Banks may, but shall have no obligation to, make
such offers and the Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Domestic Business Day next preceding the date of Borrowing proposed therein,
in the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-
Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth
a Money Market Margin or a Money Market Absolute Rate.
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The Borrower may request offers to make Money Market Loans for more than
one Interest Period in a single Money Market Quote Request. No Money Market
Quote Request shall be given within five Euro-Dollar Business Days (or such
other number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money
Market Quote Request, the Agent shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes substantially in the form of
Exhibit C hereto, which shall constitute an invitation by the Borrower to each
Bank to submit Money Market Quotes offering to make the Money Market Loans to
which such Money Market Quote Request relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES.
(i) Each Bank may submit a Money Market Quote containing an
offer or offers to make Money Market Loans in response to any
Invitation for Money Market Quotes. Each Money Market Quote must
comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x)
2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR
Auction or (y) 9:30 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction
or Absolute Rate Auction for which such change is to be effective);
PROVIDED that Money Market Quotes 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
Borrower of the terms of the offer or offers contained therein not
later than (x) 1:00 P.M. (New York City time) on the fourth
Euro-Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on
the proposed date of Borrowing, in the case of an Absolute Rate
Auction. Subject to Articles III and VI, any Money Market Quote so
made shall be irrevocable except with the written consent of the Agent
given on the instructions of the Borrower.
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(ii) Each Money Market Quote shall be in substantially the form
of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or
less than the Commitment of the quoting Bank, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may not exceed the principal
amount of Money Market Loans for which offers were requested and (z)
may be subject to an aggregate limitation as to the principal amount
of Money Market Loans for which offers being made by such quoting Bank
may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language (other than
the limitation set forth in clause (ii)(B)(z) above);
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
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(e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower of
the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted solely to correct a manifest error in
such former Money Market Quote. The Agent's notice to the Borrower shall
specify (A) the aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified in the related
Money Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so offered
and (C) if applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
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(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks with the
same Money Market Margins or Money Market 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 Money Market Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Banks as nearly as possible (in multiples of
$1,000,000, as the Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share (if any) of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the Borrower
is to repay all or any part of an outstanding Loan from such Bank, such Bank
shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (b), or remitted by the Borrower to the Agent as provided
in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
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corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and, if such Bank shall
fail to do so within one Domestic Business Day, the Borrower severally agree
to repay to the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent,
at the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.
SECTION 2.05. NOTES. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each
such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans
of the relevant type. Each reference in this Agreement to the "Note" of such
Bank shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, type and maturity of each Loan made by it, and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding; PROVIDED that the failure of any Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
under any Financing Document. Each Bank is hereby irrevocably authorized by
the Borrower so to endorse its Note and to attach to and make a part of its
Note a continuation of any such schedule as and when required.
SECTION 2.06. MATURITY OF LOANS. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on
the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base
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Rate for such day. Such interest shall be payable for each Interest Period
on the last day thereof. Any overdue principal of or interest on any Base
Rate Loan shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the rate otherwise applicable to
Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto,
at a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; PROVIDED that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such CD Loan shall bear
interest during such Interest Period at the rate applicable to Base Rate
Loans during such period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than 90
days, at intervals of 90 days after the first day thereof. Any overdue
principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the higher of (i) the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base
Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate
of deposit dealers of
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recognized standing for the purchase at face value from each CD Reference
Bank of its certificates of deposit in an amount comparable to the principal
amount of the CD Loan of such CD Reference Bank to which such Interest Period
applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of new non-personal time deposits in dollars in New York City
having a maturity comparable to the related Interest Period and in an amount
of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on
and as of the effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect
on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or
a comparable successor assessment risk classification) within the meaning of
12 C.F.R. Section 327.4(a) (or any successor provision) to the Federal
Deposit Insurance Corporation (or any successor) for such Corporation's (or
such successor's) insuring time deposits at offices of such institution in
the United States. The Adjusted CD Rate shall be adjusted automatically on
and as of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business
Days before the first day of such Interest Period in an amount approximately
equal to the
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principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank
to which such Interest Period is to apply and for a period of time comparable
to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan and (ii) the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than three months as the Agent
may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause
(a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum
of 2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance
with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the Money Market Absolute Rate quoted by the Bank making such Loan
in accordance with Section 2.03. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
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participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations furnished
by the remaining Reference Bank or Banks or, if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. FACILITY FEE. The Borrower shall pay to the Agent for
the account of the Banks ratably in proportion to their Commitments a
facility fee at the Facility Fee Rate determined daily in accordance with the
Pricing Schedule. Such facility fee shall accrue (i) from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the daily aggregate
amount of the Commitments (whether used or unused) and (ii) from and
including the Termination Date or earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans. Accrued fees under this
Section shall be payable quarterly in arrears on the last Euro-Dollar
Business Day of each March, June, September and December, and upon the date
of termination of the Commitments in their entirety (and, if later, the date
the Loans shall be repaid in their entirety).
SECTION 2.09. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The
Borrower may, upon at least three Domestic Business Days' notice to the Agent
(which shall promptly notify the Banks), (i) terminate the Commitments at any
time, if no Loans are outstanding at such time or (ii) ratably reduce from
time to time by an aggregate amount of $10,000,000 or any larger multiple
thereof, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
SECTION 2.11. OPTIONAL PREPAYMENTS. (a) The Borrower may (i) upon at
least one Domestic Business Day's notice to the Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)), (ii) upon at least three Domestic Business
Days' notice to the Agent, subject to Section 2.13, prepay any CD Borrowing
and (iii) upon at least three Euro-Dollar Business Days' notice to the Agent,
subject to
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Section 2.13, prepay any Euro-Dollar Borrowing, in whole at any time, or from
time to time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Except as provided in Section 2.11(a), the Borrower may not prepay
all or any portion of the principal amount of any Money Market Loan prior to
the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City,
to the Agent at its address referred to in Section 9.01. The Agent will
promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall
be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or interest
on, the Money Market Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent that the Borrower shall not have so made such payment, each
Bank shall repay to the
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Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent, at the
Federal Funds Rate.
SECTION 2.13. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the last day of an applicable period fixed pursuant to
Section 2.07(d), or if the Borrower fails to borrow or prepay any Fixed Rate
Loans after notice has been given to any Bank in accordance with Section
2.04(a) or 2.11(c), the Borrower shall reimburse each Bank within 15 days
after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any
such payment or failure to borrow or prepay, PROVIDED that such Bank shall
have delivered to the Borrower a certificate as to the amount of such loss or
expense, setting forth the basis of calculation thereof, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
facility fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
SECTION 2.15. REGULATION D COMPENSATION. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category
of liabilities which includes deposits by reference to which the interest
rate on Euro-Dollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
such Bank to United States residents), and as a result the cost to such Bank
(or its Euro-Dollar Lending Office) of making or maintaining its Euro-Dollar
Loans is increased, then such Bank may require the Borrower to pay,
contemporaneously (or at such other time or times as the Borrower and such
Bank may mutually agree) with each payment of interest on the Euro-Dollar
Loans, additional interest on the related Euro-Dollar Loan of such Bank at a
rate per annum up to but not exceeding the excess of (i) (A) the applicable
London Interbank Offered Rate divided by (B) one MINUS the Euro-Dollar
Reserve Percentage over (ii) the applicable London Interbank Offered Rate.
Any Bank wishing to require payment of such additional interest (x) shall so
notify the Borrower and the Agent, in which case such additional interest on
the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place
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indicated in such notice with respect to each Interest Period commencing at
least three Euro-Dollar Business Days after the giving of such notice and (y)
shall furnish to the Borrower at least five Euro-Dollar Business Days prior
to each date on which interest is payable on the Euro-Dollar Loans (or at
such other time or times as the Borrower and such Bank may mutually agree) an
officer's certificate setting forth the amount to which such Bank is then
entitled under this Section (which shall be consistent with such Bank's good
faith estimate of the level at which the related reserves are maintained by
it). Each such certificate shall be accompanied by such information as the
Borrower may reasonably request as to the computation set forth therein.
ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. The Commitments shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the principal legal officer
of the Borrower, substantially in the form of Exhibit E hereto and covering
such additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of evidence satisfactory to it of the payment
of fees as heretofore mutually agreed; and
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(f) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower, the corporate authority for and
the validity of the Financing Documents, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent;
PROVIDED that the Commitments shall not become effective unless all of the
foregoing conditions are satisfied not later than January 31, 1999. The
Agent shall promptly notify the Borrower and each Bank of the Effective Date,
and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in the Financing Documents (except (x) in the case of a Refunding
Borrowing and (y) in the case of any other Borrowing, solely if on the date
of such Borrowing, the Borrower's senior unsecured long-term debt is rated,
without third-party credit enhancement, A- or higher by S&P and A3 or higher
by Moody's, the representations and warranties set forth in Section 4.04(c)
as to any matter which has theretofore been disclosed in writing by the
Borrower to the Banks) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
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SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Borrower of the
Financing Documents are within its corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable
law or regulation or of its certificate of incorporation or by-laws or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or any of its Subsidiaries or result in the creation or
imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and the Notes, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower, in each case enforceable against the Borrower in
accordance with its terms.
SECTION 4.04. FINANCIAL INFORMATION.
(a) The consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 1997 and the related consolidated statements
of operations and cash flows for the fiscal year then ended, reported on by
Deloitte & Touche LLP and set forth in the Borrower's 1997 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and cash flows for
such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of September 30, 1998 and the related unaudited
consolidated statements of operations and cash flows for the nine months then
ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such nine month period
(subject to normal year-end adjustments).
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(c) Since September 30, 1998 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower.
SECTION 4.05. LITIGATION.
(a) There is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which could reasonably be expected to materially and
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries taken as
a whole.
(b) There is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which in any manner questions the validity or enforceability
of any Financing Document.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. ENVIRONMENTAL MATTERS. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or
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reduction in the level of or change in the nature of operations conducted
thereat, any costs or liabilities in connection with off-site disposal of
wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On
the basis of this review, and based upon conditions of which the Borrower has
knowledge and upon its estimates of the costs of compliance with and/or
remediation mandated by Environmental Laws, the Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial condition, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.08. TAXES. All United States federal income tax returns and all
other material tax returns which are required to be filed by or in respect of
the Borrower or any Subsidiary have been filed by the Borrower or a Subsidiary
thereof, and all taxes due pursuant to such returns or pursuant to any
assessment received in respect thereof have been paid.
SECTION 4.09. MATERIAL SUBSIDIARIES. Each of the Borrower's Material
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. USE OF PROCEEDS. The proceeds of the loans under this
Agreement will be used by the Borrower for general corporate purposes, including
acquisitions and stock repurchases. None of such proceeds will be used in
violation of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
SECTION 4.12. FULL DISCLOSURE. All information heretofore furnished by
the Borrower to the Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Borrower to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Borrower has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the ability of the
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Borrower to perform its obligations under this Agreement or any other
Financing Document.
SECTION 4.13. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of the
Borrower and each of its Subsidiaries (including those areas affected by
suppliers and vendors) that could be adversely affected by the "YEAR 2000
PROBLEM" (that is, the risk that computer applications used by it or any of its
Subsidiaries (or their respective suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis and (iii) to
date, implemented such plan in accordance with such timetable. The Borrower
reasonably believes that all computer applications (including those of suppliers
and vendors) that are material to the business or operations of the Borrower or
any of its Subsidiaries will on a timely basis be able to perform properly date-
sensitive functions for all dates before and from and after January 1, 2000
(that is, be "YEAR 2000 COMPLIANT"), except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS
The Borrower agrees that, from and after the Effective Date for so long as
any Bank has any Commitment hereunder or any amount payable under any Note
remains unpaid:
SECTION 5.01. INFORMATION. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated financial statements in the form then required to be filed
with the Securities and Exchange Commission on Form 10-K or its then equivalent,
all reported on by independent public accountants of nationally recognized
standing;
(b) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Borrower, a
consolidated
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balance sheet of the Borrower and its Consolidated Subsidiaries as of the end
of such quarter and the related consolidated financial statements in the form
then required to be filed with the Securities and Exchange Commission on Form
10-Q or its then equivalent, all certified (subject to normal year-end audit
adjustments) by the chief financial officer or the chief accounting officer
of the Borrower;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer or the chief accounting officer of the Borrower (i) setting forth in
reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.05 to 5.07, inclusive, on
the date of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent public
accountants which reported on such statements whether anything has come to their
attention to cause them to believe that any Default existed on the date of such
statements;
(e) within five days after any officer of the Borrower obtains knowledge
of any Default, if such Default is then continuing, a certificate of the chief
financial officer or the chief accounting officer of the Borrower setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Material Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Material Plan has given or is required to give notice of
any such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
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Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer, any Material Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Material Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Material Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or contribution
to any Material Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Material Plan or Benefit Arrangement
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take;
(i) forthwith, notice of any change of which the Borrower becomes aware in
the rating by any Rating Agency of the Borrower's long-term debt; and
(j) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE.
(a) The Borrower will keep, and will cause each Subsidiary to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts and against at least such
risks (and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business; and will furnish to the Banks, upon request from the Agent,
information presented in reasonable detail as to the insurance so carried.
SECTION 5.03. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue, and will cause each Material Subsidiary to continue, to
engage in business of the same general type as now conducted by the Borrower and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and
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will cause each Material Subsidiary to preserve, renew and keep in full
force and effect their respective existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business; PROVIDED that nothing in this Section 5.03 shall prohibit (i) the
merger of a Subsidiary into the Borrower or the merger or consolidation of a
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the existence of any Subsidiary if the Borrower in good faith
determines that such termination is in the best interest of the Borrower and is
not materially disadvantageous to the Banks.
SECTION 5.04. COMPLIANCE WITH LAWS. The Borrower will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
SECTION 5.05. LEVERAGE RATIO. The Leverage Ratio will at no time exceed
3.5 to 1.0.
SECTION 5.06. MAINTENANCE OF CERTAIN OPERATIONS. The Borrower will at all
times maintain direct or indirect ownership of 80% of the Equity Securities of
Intermec Technologies Corporation and UNOVA Industrial Automation Systems, Inc.
SECTION 5.07. LIMITATION ON SUBSIDIARY DEBT. The aggregate outstanding
principal amount of Debt of the Subsidiaries of the Borrower (exclusive of (i)
Debt owing to the Borrower or another Subsidiary and (ii) Foreign Debt) shall at
no time exceed 15% of Consolidated Net Assets.
SECTION 5.08. NEGATIVE PLEDGE. The Borrower will not, and will not permit
any Consolidated Subsidiary to, create, assume or suffer to exist any Lien
securing Debt or Derivatives Obligations on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal amount not exceeding
$20,000,000;
(b) any Lien existing on the assets of any Person at the time such Person
becomes a Consolidated Subsidiary;
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(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the purchase price or cost of
construction of such asset, PROVIDED that such Lien attaches to such asset
within 270 days after the acquisition or completion of construction and
commencement of full operations thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is acquired by, merged into or consolidated with the Borrower or a
Consolidated Subsidiary;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Consolidated Subsidiary and not created in contemplation of
such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that such Debt is not increased and is not
secured by any additional assets;
(g) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $20,000,000; and
(h) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any time
outstanding not exceeding 10% of Consolidated Net Worth.
SECTION 5.09. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as
a whole, to any other Person; PROVIDED that the Borrower may merge with
another Person if the Borrower is the surviving corporation and, after giving
effect thereto, no Default exists.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
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(a) the Borrower (i) shall fail to pay when due any principal of any
Loan or (ii) shall fail to pay any interest on any Loan, any fees or any
other amount payable hereunder within five days after the due date thereof;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.05 through 5.09, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in any Financing Document (other than those covered by
clause (a) or (b) above) for 30 days after notice thereof has been given to
the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made (or
deemed made) by the Borrower in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document shall prove to have been incorrect in any material respect
when made (or deemed made) or delivered;
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (with the giving
of appropriate notice if required) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such relief or
to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Material Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding
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shall remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Material Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $25,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer, any Material
Plan; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of $10,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Material Subsidiary
and such judgment or order shall continue unsatisfied and unstayed for a
period of 30 days; or
(k) a Change of Control shall occur;
then, and in every such event, the Agent shall (i) if requested by Banks
having more than 50% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, and
(ii) if requested by Banks holding Notes evidencing more than 50% in
aggregate principal amount of the Loans, by notice to the Borrower declare
the Notes (together with accrued interest thereon) to be, and the Notes
(together with accrued interest thereon) shall thereupon become, immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower; PROVIDED that in the
case of any of the Events of Default specified in clause (g) or (h) above
with respect to the Borrower, without any notice to the Borrower or any
other act by the Agent or any Bank, the Commitments shall thereupon terminate
and the Notes (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
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SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Financing Documents as are delegated to
the Agent by the terms thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under the Financing Documents
as any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder
are only those expressly set forth in the Financing Documents. Without
limiting the generality of the foregoing, the Agent shall not be required to
take any action with respect to any Default, except as expressly provided in
Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its
affiliates nor any of the directors, officers, agents or employees of the
foregoing shall be liable for any action taken or not taken by it or them in
connection herewith (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its or their own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of the
directors, officers, agents or employees of the foregoing shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance
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or observance of any of the covenants or agreements of the Borrower; (iii)
the satisfaction of any condition specified in Article III, except receipt of
items required to be delivered to the Agent; or (iv) the validity,
effectiveness or genuineness of the Financing Documents or any other
instrument or writing furnished in connection herewith. The Agent shall not
incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties. Without limiting the generality of the foregoing, 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.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by
the Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that
such indemnitees may suffer or incur in connection with the Financing
Documents or any action taken or omitted by such indemnitees thereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving
notice thereof to the Banks and the Borrower. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent, subject to the
approval of the Borrower. If no successor Agent shall have been so appointed by
the Required Banks, with the approval of the Borrower, and shall have accepted
such appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a Bank, if any Bank is willing to accept such
appointment, and in any event shall be a commercial bank organized or licensed
under the laws of the United States of America or of any State thereof and
having
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a combined capital and surplus of at least $50,000,000. Upon the acceptance
of its appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEES. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted CD
Rate or the London Interbank Offered Rate, as the case may be, as determined
by the Agent will not adequately and fairly reflect the cost to such Banks of
funding their CD Loans or Euro-Dollar Loans, as the case may be, for such
Interest Period, the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended. Unless the Borrower notifies the Agent at least
two Domestic Business Days before the date of any Fixed Rate Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is a Committed
Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and
(ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the
Money Market LIBOR Loans comprising such Borrowing shall bear interest for
each day from and including the first day to but excluding the last day of
the Interest Period applicable thereto at the Base Rate for such day.
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SECTION 8.02. ILLEGALITY. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the
Agent shall forthwith give notice thereof to the other Banks and the
Borrower, whereupon until such Bank notifies the Borrower and the Agent that
the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Agent pursuant to this Section 8.02, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will
avoid the need for giving such notice and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued
interest thereon. Concurrently with prepaying each such Euro-Dollar Loan,
the Borrower shall borrow a Base Rate Loan in an equal principal amount from
such Bank (on which interest and principal shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks), and such Bank shall
make such a Base Rate Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (i) with respect to any CD Loan any such requirement
included in an applicable Domestic Reserve Percentage and (ii) with respect to
any Euro-Dollar Loan any
44
<PAGE>
such requirement with respect to which such Bank is entitled to compensation
during the relevant Interest Period under Section 2.15), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on
any Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Note or its obligation to make
Fixed Rate Loans and the result of any of the foregoing is to increase the
cost to such Bank (or is Applicable Lending Office) of making or maintaining
any Fixed Rate Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending Office) under this
Agreement or under its Note with respect thereto, by an amount deemed by such
Bank to be material, then, within 15 days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency (including any determination by any such
authority, central bank or comparable agency that, for purposes of capital
adequacy requirements, the Commitments hereunder do not constitute
commitments with an original maturity of one year or less), has or would have
the effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank
to be material, then from time to time, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent) for
such reduction; PROVIDED that the Borrower shall not be liable for any such
amounts attributable to a period more than three months prior to the date of
notice by such Bank to the Borrower of its intention to seek compensation
under this subsection (b).
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate
a different Applicable Lending Office if such designation will avoid the need
for, or
45
<PAGE>
reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section, setting forth the additional amount
or amounts to be paid to it hereunder and the basis of calculation thereof,
shall be conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. TAXES. (a) Any and all payments by the Borrower to or
for the account of any Bank or the Agent hereunder or under any Note shall be
made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges and withholdings,
and all liabilities with respect thereto, EXCLUDING, in the case of each Bank
and the Agent, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Bank or the Agent (as
the case may be) is organized or any political subdivision thereof and, in
the case of each Bank, taxes imposed on its income, and franchise or similar
taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
duties, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes"). If the Borrower shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder or
under any Note to any Bank or the Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 8.04) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions, (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Borrower shall
furnish to the Agent, at its address referred to in Section 9.01, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges
or similar levies which arise from any payment made hereunder or under any
Note or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes and
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.04) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
46
<PAGE>
respect thereto. This indemnification shall be made within 15 days from the
date such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and
on or prior to the date on which it becomes a Bank in the case of each other
Bank, and from time to time thereafter if requested in writing by the
Borrower (but only so long as such Bank remains lawfully able to do so),
shall provide the Borrower with Internal Revenue Service form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Bank is entitled to benefits under an income
tax treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States. If the form provided by
a Bank at the time such Bank first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from "Taxes" as
defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the form required pursuant to Section 8.04(d), if any
(unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which a form originally was required to
be provided), such Bank shall not be entitled to indemnification under
Section 8.04(a) with respect to Taxes imposed by the United States; PROVIDED,
HOWEVER, that should a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.04, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS.
If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended
pursuant to Section 8.02 or (ii) any Bank has demanded compensation under
Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such
Bank through the Agent, have elected that the provisions of this Section shall
47
<PAGE>
apply to such Bank, then, unless and until such Bank notifies the Borrower
that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD Loans or
Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate
Loans (on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
SECTION 8.06. SUBSTITUTION OF BANK. If (i) the obligation of any Bank
to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03 or 8.04, the Borrower
shall have the right, with the assistance of the Agent, to seek a mutually
satisfactory substitute bank or banks (which may be one or more of the Banks)
to purchase the Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(x) in the case of the Borrower or the Agent, at its address or facsimile or
telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or facsimile or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address or facsimile or telex number as such party may hereafter specify for
the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and
the appropriate answerback is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other means, when
delivered at the address specified in this Section; PROVIDED that notices to
the Agent under Article II or Article VIII shall not be effective until
received.
48
<PAGE>
SECTION 9.02. NO WAIVERS. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege under any Financing Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies therein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
SECTION 9.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements
of special counsel for the Agent, in connection with the preparation and
administration of the Financing Documents, any waiver or consent thereunder
or any amendment thereof or any Default or alleged Default thereunder and
(ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent or any Bank, including fees and disbursements of outside counsel
(or, in lieu thereof, the allocated cost of in-house counsel), in connection
with such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought
or threatened relating to or arising out of the Financing Documents, or any
actual or proposed use of proceeds of Loans hereunder; PROVIDED that no
Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct.
SECTION 9.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal
and interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; PROVIDED that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment
of
49
<PAGE>
indebtedness of the Borrower other than its indebtedness under the Notes.
The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation
as fully as if such holder of a participation were a direct creditor of the
Borrower, in the amount of such participation.
SECTION 9.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the
Agent); PROVIDED that no such amendment or waiver shall, unless signed by all
the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of, accrued interest on or
rate of interest on any Loan or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for any scheduled termination of any Commitment or (iv) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Notes, or the number of Banks, which shall be required for the Banks
or any of them to take any action under this Section or any other provision
of the Financing Documents.
SECTION 9.06. SUCCESSORS AND ASSIGNS. (a) 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 Borrower
may not assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or in any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement
pursuant to which any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; PROVIDED that such participation agreement may
provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii) or (iii) of Section
9.05 without the
50
<PAGE>
consent of the Participant. The Borrower agrees that each Participant shall,
to the extent provided in its participation agreement, be entitled to the
benefits of Section 2.15 and Article VIII with respect to its participating
interest. An assignment or other transfer which is not permitted by
subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
a Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment and Assumption
Agreement in substantially the form of Exhibit G hereto executed by such
Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower and the Agent (which consents shall not be
unreasonably withheld); PROVIDED that if an Assignee is another Bank
immediately prior to such assignment or is an affiliate of such transferor
Bank, no such consent shall be required; and PROVIDED FURTHER that such
assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the
transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$2,500. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall deliver to the Borrower and
the Agent certification as to exemption from deduction or withholding of any
United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by
51
<PAGE>
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances.
SECTION 9.07. COLLATERAL. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
the Financing Documents or the transactions contemplated thereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.09. COUNTERPARTS; INTEGRATION. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
UNOVA, INC.
By: /s/ Elmer C. Hull, Jr.
----------------------------------
Title: Treasurer
360 North Crescent Drive
Beverly Hills, California 90210
Telex number:
Telecopy number: (310) 888-2927
53
<PAGE>
COMMITMENTS
$20,000,000 ABN AMRO BANK N.V.
By: /s/ John A. Miller
--------------------------------
Title: Group Vice President
By: /s/ Judith M. Bresnen
--------------------------------
Title: Vice President
$20,000,000 CITICORP USA, INC.
By: /s/ Walter L. Larson
--------------------------------
Title: Attorney-in-Fact
$20,000,000 DEUTSCHE BANK AG
NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By: /s/ Hans-Joseph Thiele
--------------------------------
Title: Director
By: /s/ Stephan A. Wiedemann
--------------------------------
Title: Director
54
<PAGE>
$8,000,000 CREDIT SUISSE FIRST BOSTON
By: /s/ Thomas G. Muoio
--------------------------------
Title: Vice President
By: /s/ William S. Lutkins
--------------------------------
Title: Vice President
$8,000,000 DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN
BRANCHES
By: /s/ A. Richard Morris
--------------------------------
Title: First Vice president
By: /s/ B. Craig Erickson
--------------------------------
Title: Vice President
$8,000,000 MELLON BANK, N.A.
By: /s/ L. C. Ivey
--------------------------------
Title: Vice President
55
<PAGE>
$8,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Robert Bottamendi
--------------------------------
Title: Vice President
$8,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Mark A. Isley
--------------------------------
Title: First Vice President
- -----------------
Total Commitments
$100,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Robert Bottamedi
--------------------------------
Title: Vice president
60 Wall Street
New York, New York 10260-0060
Attention:
Telex number: 177615
56
<PAGE>
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any
day are the respective percentages set forth below in the applicable row
under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level Level Level Level Level Level
Status I II III IV V VI
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar Margin .285% .37% .41% .65% .75% .85%
- -------------------------------------------------------------------------------
CD Margin .41% .495% .535% .775% .875% .975%
- -------------------------------------------------------------------------------
Facility Fee Rate .065% .08% .09% .10% .125% .15%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the
Borrower's long-term debt is rated A/A2 or higher by at least two Rating
Agencies.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A-/A3 or higher by at least two
Rating Agencies and (ii) Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+/Baa1 or higher by at least two
Rating Agencies and (ii) neither Level I Status nor Level II Status
exists at such date.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB/Baa2 or higher by at least two
Rating Agencies and (ii) none of Level I Status, Level II Status or
Level III Status exists at such date.
"Level V Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB-/Baa3 or higher by at least two
Rating Agencies and (ii) none of Level I Status, Level II Status, Level
III Status or Level IV Status exists at such date.
"Level VI Status" exists at any date, if at the close of business
on such date, none of Level I Status, Level II Status, Level III Status,
Level IV Status or Level V Status exists.
<PAGE>
"Status" refers to the determination of which of Level I Status,
Level II Status, Level III Status, Level IV Status, Level V Status or
Level VI Status exists at any date.
The credit ratings to be utilized for purposes of determining a
Status hereunder are those assigned to the senior unsecured long-term
debt of the Borrower without third-party credit enhancement, and any
rating assigned to any other debt of the Borrower shall be disregarded;
PROVIDED that if at any time the Borrower's senior unsecured long-term
debt is rated by exactly two Rating Agencies and the ratings assigned to
such debt by such two Rating Agencies are more than one full rating
category apart, Status shall be determined based on a rating one
category higher than the lower of such two ratings (e.g., if the S&P
rating is A+, the Moody's rating is Baa1 and there is no D&P rating,
then Level II Status shall exist); provided further that if at any time
the Borrower's senior unsecured long-term debt, without third party
credit enhancement, is not rated by at least two Rating Agencies, then
Status shall be Level VI Status. The rating in effect at any date is
that in effect at the close of business on such date.
2
<PAGE>
EXHIBIT A
NOTE
New York, New York
January 13, 1999
For value received, UNOVA Inc., a Delaware corporation (the
"Borrower"), promises to pay to the order of (the
"Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Credit Agreement referred to below on the last day of the Interest
Period relating to such Loan. The Borrower promises to pay interest on the
unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal
or other immediately available funds at the office of Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York.
Each Loan made by the Bank, the type and maturity thereof, and all
repayments of the principal thereof, shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to
each Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made
a part hereof; PROVIDED that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under any other Financing Document.
This note is one of the Notes referred to in the Credit Agreement
dated as of January 13, 1999 among the Borrower, the banks parties thereto
and Morgan Guaranty Trust Company of New York, as Agent (as the same may be
amended from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
UNOVA, INC.
By:
-------------------------------------
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
From: UNOVA, Inc. (the "Borrower")
Re: Credit Agreement (as amended from time to time, the "Credit
Agreement") dated as of January 13, 1999 among the Borrower, the Banks
parties thereto and Morgan Guaranty Trust Company of New York, as
Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount* Interest Period*
----------------- ----------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- --------------------------
* Amount must be $10,000,000 or a larger multiple of $1,000,000.
* Not less than one month (LIBOR Auction) or not less than 7 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE>
Terms used herein have the meanings assigned to them in the Credit
Agreement.
UNOVA, INC.
By:
-------------------------------------
Title:
2
<PAGE>
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to UNOVA, Inc. (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement (as amended from time to
time, the "Credit Agreement") dated as of January 13, 1999 among the Borrower,
the Banks parties thereto and the undersigned, as Agent, we are pleased on
behalf of the Borrower to invite you to submit Money Market Quotes to the
Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount Interest Period
---------------- ---------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[9:30 A.M.](New York City time) on [date].
Terms used herein have the meanings assigned to them in the Credit
Agreement.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
---------------------------------
Authorized Officer
<PAGE>
EXHIBIT D
FORM OF MONEY MARKET QUOTE
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
60 Wall Street
New York, New York 10260-0060
Attention:
Re: Money Market Quote to
UNOVA, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- ------------ --------------------
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $____________.]**
__________
* As specified in the related Invitation.
(notes continued on following page)
<PAGE>
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in
the Credit Agreement (as amended from time to time, the "Credit
Agreement") dated as of January 13, 1999 among the Borrower, the Banks
parties thereto and yourselves, as Agent, irrevocably obligates us to
make the Money Market Loan(s) for which any offer(s) are accepted, in
whole or in part.
Terms used herein have the meanings assigned to them in the
Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
*** Not less than one month or not less than 7 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest 1/10,000
of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT E
OPINION OF COUNSEL FOR THE BORROWER
__, 1999
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am Senior Vice President and General Counsel of UNOVA, Inc. (the
"Borrower") and have acted in that capacity in connection with the Credit
Agreement (the "Credit Agreement") dated as of January 13, 1999 among the
Borrower, the banks listed on the signature pages thereof and Morgan Guaranty
Trust Company of New York, as Agent. Terms defined in the Credit Agreement
are used herein as therein defined.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate powers
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Financing Documents are within its corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable
law or regulation or of the Borrower's Certificate of Incorporation or
by-laws or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any of its Subsidiaries or result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
<PAGE>
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes constitute valid and binding obligations of the
Borrower.
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any of
its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which could reasonably be expected to materially and
adversely affect the business, consolidated financial position or
consolidated results of operations of the Borrower and its Consolidated
Subsidiaries, taken as a whole.
(b) There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any of
its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which in any manner questions the validity or
enforceability of any Financing Document.
5. Each of the Borrower's Material Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
I am a member of the Bar of the State of California, and the foregoing
opinion is limited to the laws of the State of California, the General
Corporation Law of the State of Delaware and the Federal laws of the United
States of America. Inasmuch as the Credit Agreement and the Notes are
governed by the law of the State of New York, I have assumed for purposes of
the foregoing opinion that such law is the same as the law of the State of
California.
Very truly yours,
2
<PAGE>
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
------------------
__, 1999
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of January 13, 1999 among UNOVA, Inc., a
Delaware corporation (the "Borrower"), the banks listed on the signature
pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as
Agent (the "Agent"), and have acted as special counsel for the Agent for the
purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit
Agreement. Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Financing Documents are within the Borrower's corporate powers and have been
duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as
the same may be limited by
<PAGE>
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by general principles of equity.
3. The documents delivered to the Agent by the Borrower pursuant to
Section 3.01 of the Credit Agreement are substantially responsive to the
requirements of said Section.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor")
and [ASSIGNEE] (the "Assignee").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of January 13, 1999 among the
Borrower, the Assignor and the other Banks party thereto, as Banks, and the
Agent (as amended from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and
assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement and the
other Financing Documents to the extent of the Assigned Amount, and the Assignee
hereby accepts such assignment from the Assignor and assumes all of the
obligations of the Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of the corresponding
portion of the principal amount of the Committed
<PAGE>
Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor and the Assignee
[and the Borrower and the Agent](*) and the payment of the amounts specified
in Section 3 required to be paid on the date hereof (i) the Assignee shall,
as of the date hereof, succeed to the rights and be obligated to perform the
obligations of a Bank under the Credit Agreement and the other Financing
Documents with a Commitment in an amount equal to the Assigned Amount, and
(ii) the Commitment of the Assignor shall, as of the date hereof, be reduced
by a like amount and the Assignor released from its obligations under the
Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to
the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.
It is understood that facility fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof in respect of the Assigned Amount are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement or any other Financing Document which is
for the account of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
[SECTION 4. CONSENT OF THE BORROWER AND THE AGENT. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by the
Borrower and the Agent is evidence of this consent.]
[SECTION 5. NOTE. Pursuant to Section 9.06(c) the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.](*)
SECTION 6. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of any Financing Document. The
Assignee acknowledges that it has, independently and without reliance on the
Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue
__________________
* Delete if consent is not required.
* Delete if the Assignee is already a Bank, since it already has a Note.
2
<PAGE>
to be responsible for making its own independent appraisal of the business,
affairs and financial condition of the Borrower.
SECTION 7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By:
----------------------------------------------
Title:
[ASSIGNEE]
By:
----------------------------------------------
Title:
[The undersigned consent to the foregoing assignment.
UNOVA, INC.
By:
----------------------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
3
<PAGE>
By:
----------------------------------------------
Title: ]
4
<PAGE>
EXHIBIT 10.9
AMENDMENT NO. 3
TO
EMPLOYMENT AGREEMENT
This Amendment No. 3, effective the 20th day of May 1998, is made to
that certain Employment Agreement between Intermec Technologies Corporation
and Michael Ohanian dated the 18th day of May 1995 as amended ("the
Agreement").
WHEREAS, Intermec Technologies Corporation is a wholly owned subsidiary
of UNOVA, Inc.; and
WHEREAS, Michael Ohanian also serves as a Senior Vice President of
UNOVA, Inc. and
WHEREAS, the Compensation Committee of the Board of Directors of UNOVA,
Inc., has approved including Michael Ohanian in the UNOVA Supplemental
Executive Retirement Plan (hereinafter called "SERP"), under specified terms
and conditions.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is
hereby further amended as follows:
1. TERM OF AGREEMENT:
Michael Ohanian hereby agrees to retire from employment with Intermec
Technologies Corporation and as an officer of UNOVA, Inc. on February 28,
1999.
2. RETIREMENT:
Upon retirement on February 28, 1999 Michael Ohanian will receive the
retirement benefits as provided in the UNOVA, Inc. SERP. For purposes of
determining UNOVA, Inc. SERP benefits, Michael Ohanian will be considered to
be vested with 15 years of service on February 28, 1999, assuming that
during the period between May 20, 1998 and February 28, 1999, he continues
to serve as an officer of UNOVA, Inc. and of Intermec Technologies
Corporation.
<PAGE>
3. OTHER TERMS AND CONDITIONS:
Except as modified herein all other terms and conditions of the
Agreement as amended by Amendments No. 1 and 2 shall remain in full force
and effect as originally written.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Amendment No. 3 as of the date first written above.
INTERMEC TECHNOLOGIES EXECUTIVE
CORPORATION
By: /S/ VIRGINIA S. YOUNG By: /S/ MICHAEL OHANIAN
--------------------- -------------------
Virginia S. Young Michael Ohanian
Vice President and Secretary
<PAGE>
EXHIBIT 10.10
AMENDMENT NO. 4
To
EMPLOYMENT AGREEMENT
This Amendment No. 4, effective the 28th day of February, 1999, is made
to that certain Employment Agreement between Intermec Technologies
Corporation and Michael Ohanian, dated the 18th day of May, 1995 as amended
(the "Agreement").
WHEREAS, the parties to the Agreement wish to extend the Employment
Period described in the Agreement from February 28, 1999 to December 31,
1999.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is
hereby amended as follows:
1. TERM OF AGREEMENT:
Michael Ohanian hereby agrees to retire from Employment with Intermec
Technologies Corporation and as an officer of UNOVA, Inc. on December 31,
1999, or at such earlier date as requested by Michael Ohanian or the Chief
Executive Officer of UNOVA, Inc. upon at least sixty days notice delivered
by either of them to the other.
2. COMPENSATION:
The base annual salary set forth in numbered Paragraph 3, BASE PAY,
shall be increased from $325,000 to $350,000 for the period of March 1, 1999
through the end of the Term of Agreement described in Paragraph 1 of this
Amendment No. 4.
3. EXECUTIVE FLEX BENEFIT:
Numbered Paragraph 6, EXECUTIVE FLEX BENEFIT, is amended to read as
follows: "The Executive will receive an Executive Flex Benefit of $10,000
for calendar year 1999, irrespective of whether he is employed for the full
calendar year."
4. RETIREMENT/SERP:
Upon retirement as described in Paragraph 1 of this Amendment No. 4,
Michael Ohanian will receive the retirement benefits provided in the UNOVA,
Inc. Supplemental Employee Retirement Plan ("SERP"). For purposes of
determining such benefits, Michael Ohanian will be considered to be vested
with 15 years of service on the retirement date. The parties agree that the
extension of the Employment Period described
<PAGE>
in Paragraph 1 of this Amendment No. 4 will not have the effect of
increasing such vesting beyond 15 years.
5. OTHER TERMS AND CONDITIONS:
Except as modified herein all other terms and conditions of the
Agreement as amended by Amendments No. 1, 2, and 3 shall remain in full
force and effect as originally written.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Amendment No. 4 as of the date first written above.
INTERMEC TECHNOLOGIES EXECUTIVE
CORPORATION
By: ___________________________ By: __________________________
Virginia S. Young Michael Ohanian
Vice President and Secretary
<PAGE>
EXHIBIT 10.15
AMENDMENT NO. 2 TO UNOVA, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, UNOVA, Inc. (the "Company") has previously adopted the UNOVA,
Inc. Supplemental Executive Retirement Plan as amended by Amendment No. 1
thereto dated September 23, 1998 (the "Plan"); and
WHEREAS, the Board of Directors of the Company deems it desirable that
the Plan be further amended in the manner set forth hereinafter;
NOW THEREFORE, this Amendment No. 2 to the Plan is hereby adopted by
the Company with the following effect:
1. Section 2.7 of the Plan is hereby amended so that such Section 2.7
shall read in its entirety as follows:
SECTION 2.7 "Bonus" or "Bonuses" shall mean the full amount of the
bonus or similar cash incentive determined and awarded by the Committee (or
any other body or individual having authority to award such Bonus) to a
Participant with respect to any given fiscal year or portion thereof and
shall be deemed, for purposes of the calculation of Average Earnings, to
have been paid by the Company to the Participant in equal monthly
installments during the fiscal year or portion thereof with respect to which
the Bonus was awarded (except, for a Retired Participant receiving a
Retirement Benefit as of the Distribution Date, Bonus or Bonuses shall mean
gross cash payments of Bonuses), under Company-sponsored, formal or
informal, incentive compensation or bonus plans, excluding, however, any
payments under stock-based option or award plans; provided, however, that,
for purposes of calculating Average Earnings any portion of a Bonus, the
payment of which is deferred at the election of the Participant, shall be
treated as paid in equal monthly installments during the fiscal year or
portion thereof with respect to which the Bonus was awarded, notwithstanding
such elected deferral, and payment of the deferred portion shall be
disregarded for purposes of calculating Average Earnings. "Bonus or
Bonuses" shall not include any bonus, commission or fee paid to a
Participant for the accomplishment of a particular non-ordinary achievement,
transaction, or circumstance as determined by the Committee prior to or at
the time of the award thereof.
Notwithstanding the foregoing, the following additional provisions
shall be applicable to the definition of "Bonus" or "Bonuses" in the case of
an award or awards made under the UNOVA, Inc. Management Incentive
Compensation Plan or any other annual incentive plan which provides that a
portion of an annual award shall be deposited in a so-called "Bonus Bank"
and shall remain "at risk." The Bonus, in such case, shall comprise ONLY
the portion of the annual award which is paid to the Participant on a
current basis and shall NOT include any amount of the award required to be
deposited to a Bonus Bank; however, the Bonus shall also include any amount
paid to the Participant as a periodic payment from the Bonus Bank during the
year with respect to which the amount was made (but shall not include any
payment from the Bonus Bank made solely as a result of termination of
employment).
<PAGE>
2. Except as specifically provided in this Amendment No. 2, each and every
provision of the Plan is hereby ratified, approved, and confirmed.
3. This Amendment No. 2 shall be deemed effective for all purposes on and
as of the date hereof, except that this Amendment No. 2 shall not be
effective with respect to any Participant who retired from the Company
subsequent to the Distribution Date and commenced receiving a Retirement
Benefit under the Plan prior to the date hereof.
4. This Amendment No. 2 shall be governed by the laws of Delaware except
to the extent preempted by ERISA.
5. Capitalized terms used in this Amendment No. 2 and not defined herein
shall have the meaning assigned to such terms in the Plan.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to be
executed by its duly authorized officers this 11th day of March, 1999.
UNOVA, INC.
WITNESS: ______________________ By: _____________________________
Michael E. Keane
WITNESS: ______________________ By: _____________________________
Charles A. Cusumano
<PAGE>
EXHIBIT 10.18
AMENDMENT NO. 2 TO
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This Amendment No. 2 to Supplemental Executive Retirement Agreement
(this "Amendment"), made and entered into as of this 11th day of March,
1999, by and between UNOVA, Inc., a Delaware corporation (the "Company"),
and Alton J. Brann, its Chairman and Chief Executive Officer (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have previously entered into a
certain Supplemental Executive Retirement Agreement dated as of October 31,
1997, as amended by Amendment No. 1 thereto dated September 23, 1998 (as so
amended, the "Retirement Agreement"); and
WHEREAS, the Company and the Executive deem it desirable that the
Retirement Agreement be further amended as hereinafter set forth;
NOW THEREFORE, the Company and the Executive hereby agree as follows:
1. Section 2.6 of the Retirement Agreement is hereby further amended
so that said Section 2.6 shall read in its entirety as follows:
SECTION 2.6 "BONUS" or "BONUSES" shall mean the full amount of the
bonus or similar cash incentive determined and awarded to the Executive by
the Committee (or any other body or individual having authority to award
such Bonus) with respect to any given fiscal year or portion thereof and
shall be deemed, for purposes of the calculation of Average Earnings, to
have been paid by the Company to the Executive in equal monthly installments
during the fiscal year or portion thereof with respect to which the Bonus
was awarded under Company-sponsored, formal or informal, incentive
compensation or bonus plans, excluding, however, any payments under
stock-based option or award plans; provided, however, that, for purposes of
calculating Average Earnings any portion of a Bonus, the payment of which is
deferred at the election of the Executive, shall be treated as having been
paid in equal monthly installments during the fiscal year or portion thereof
with respect to which the Bonus was awarded, notwithstanding such elected
deferral, and payment of the deferred portion shall be disregarded for
purposes of calculating Average Earnings. "Bonus or Bonuses" shall not
include any bonus, commission or fee paid to the Executive for the
accomplishment of a particular non-ordinary achievement, transaction, or
circumstance as determined by the Committee prior to or at the time of the
award thereof.
Notwithstanding the foregoing, the following additional provisions
shall be applicable to the definition of "Bonus" or "Bonuses" in the case of
an award or awards made under the UNOVA, Inc. Management Incentive
Compensation Plan or any other annual incentive plan which provides that a
portion of an annual award shall be deposited in a so-called "Bonus Bank"
and shall remain "at risk." The Bonus, in such case, shall comprise ONLY
the portion of the annual award which is paid to the Executive
<PAGE>
on a current basis and shall NOT include any amount of the award required to
be deposited to a Bonus Bank; however, the Bonus shall also include any
amount paid to the Executive as a periodic payment from the Bonus Bank
during the year with respect to which the amount was made (but shall not
include any payment from the Bonus Bank made solely as a result of
termination of employment).
2. Except as specifically amended hereby, each and every term of the
Retirement Agreement is hereby ratified, approved, and confirmed.
3. This Amendment shall be deemed effective for all purposes on and
as of the date hereof.
4. This Amendment shall be governed by the laws of Delaware.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
UNOVA, INC.
By:
-----------------------
Title:
-----------------------
-----------------------------
Alton J. Brann
<PAGE>
EXHIBIT 10.21
AMENDMENT NO. 2
TO
EMPLOYEMENT AGREEMENT
THIS AMENDMENT NO. 2, EFFECTIVE THE 18TH DAY OF MAY, 1998, IS MADE TO
THAT CERTAIN EMPLOYMENT AGREEMENT BETWEEN UNOVA, INC. ("UNOVA") AND CLAYTON
A. WILLIAMS (HEREINAFTER CALLED "EXECUTIVE"), DATED AUGUST 1997 (HEREINAFTER
CALLED "THE AGREEMENT"), AS PREVIOUSLY AMENDED ON MARCH 24, 1998.
WHEREAS, the Compensation Committee of the Board of Directors of UNOVA
has approved including Executive in the UNOVA, Inc. Supplemental Employee
Retirement Plan (hereinafter call "SERP"), under specified terms and
conditions.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is
hereby further amended as follows:
1. Paragraph 1.1 EMPLOYMENT, of the Agreement is further amended to
extend the term of employment from February to December 31, 1999.
Upon reaching that date, Executive shall retire as an employee and
officer of UNOVA and its subsidiaries or affiliates.
2. Upon retirement Executive shall be entitled to receive retirement
benefits under the UNOVA, Inc. SERP offset by company-provided pension
benefits payable from Litton Industries, Inc., (Qualified, Part I,
Restoration and SERP). However, there will be no offset for company-
provided pension benefits that would have been available during
Executive's non-participation periods under the UNOVA, Inc. and
Western Atlas Inc. retirement plans. Executive shall on December 31,
1999 be considered as vested under the UNOVA, Inc. SERP with 20 years
of service.
3. Except as hereby amended, the remaining terms and conditions of the
Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
UNOVA, Inc. EXECUTIVE
By: /S/ VIRGINIA S. YOUNG By: /S/ CLAYTON A. WILLIAMS
--------------------- -----------------------
Virginia S. Young Clayton A. Williams
Vice President and Secretary
<PAGE>
EXHIBIT 10.30
- ----------------------------------------------------------------------------
EXECUTIVE MEDICAL BENEFITS
Covered Payment will be made for 100% of the Covered Expenses incurred
Services and by a Covered Person while covered under this Plan.
Supplies
Covered Expenses are the actual cost to you for services and
supplies given for Medical Care.
4
<PAGE>
"Medical Care" means the diagnosis, care, mitigation,
treatment or prevention of disease, or treatment affecting
any structure or function of the body due to defect, illness, or
accidental injury or care during and following pregnancy
including treatment of any condition caused by the pregnancy.
Medical Care includes prescription drugs, dental and
vision care.
The Covered Expense must be an allowable tax deductible item
as defined under Section 213(d) of the Internal Revenue Code
of 1954 and as may be amended from time to time.
Payment will be made if the Covered Expenses are more than the
benefits payable under both of the following:
- The Base Plan whether or not the person is covered under
the Base Plan.
- Benefits paid for Medical Care under any Workers
Compensation Act or similar law.
"Base Plan" means the Unova, Inc. Welfare Benefit Plan
(Contract No. 186522) or any other medical, surgical or
hospital plan; Health Maintenance Organization or prescription
drug, dental or vision plan(s) which the Employer (or any
designated subsidiary of the Employer) contributes to or
otherwise sponsors.
Benefits are payable for pregnancy on the same basis as
sickness under this Plan. Pregnancy benefits are payable for
at least:
- 48 hours of inpatient care for the mother and newborn child
following a normal vaginal delivery.
- 96 hours of inpatient care for the mother and newborn child
following a cesarean section.
The hospital or other provider is not required to get
authorization from the Company for the time periods stated
above.
Hearing aid services, including full cost of hearing aids and
exams to prescribe and fit them.
Medical Expense Benefits will be determined on the same basis
for the following routine exams as benefits due to a sickness.
1. Cancer screening; Such services will include pap smears
which are ordered or provided by a doctor of medicine (M.D.)
in accordance with generally accepted medical standards.
2. A mammographic exam for a Covered Person who: resides in
Delaware; or is principally employed in Delaware, as
follows:
A periodic exam in accordance with the following schedule;
or as declared appropriate by the Delaware State Board of
Health.
a. A base line mammogram for a Covered Person who is at
least age 35.
b. One mammogram every two Calendar Years for a Covered
Person who is age 40 to 49, inclusive; provided such
mammogram occurs no sooner than two Calendar Years
after the Covered Person's base line exam as per a
above.
c. One mammogram per Calendar Year for a Covered Person
who is 50 years of age or older.
5
<PAGE>
Upon the recommendation of a Covered Person's physician, any
mammogram received by a Covered Person who has
been determined by that physician to be at risk for breast
cancer.
3. A prostate antigen test for a Covered Person
age 50 or older who is:
(i) a resident of Delaware; or
(ii) principally employed in Delaware.
provided the test is ordered by a doctor of
medicine (M.D.) in accordance with generally accepted
medical standards.
4. Services and supplies received for the routine
care of a newborn Dependent child while such child is confined
as an inpatient in a Hospital
5. Routine health examinations
Any Copayments, Deductibles and any percentage
penalties for not obtaining services from a Network Provider
under the other Employer sponsored group plan are not payable
under this Plan.
MAXIMUM BENEFIT
There is a Unlimited Maximum Benefit per
family for the Executive Medical Benefits. The Unlimited
Maximum Benefit is shown in the Schedule of Benefits. It
applies to you and all of your Dependents each Calendar Year.
NOT COVERED
Expenses for the following are not covered
under Executive Medical Benefits:
- Injury or Sickness caused by war or
international armed conflict, except in
the case of an innocent bystander taking
no active part in the war or
international armed conflict.
- Services of a person who is a member of your
immediate family (your spouse, child, brother, sister,
parent or grandparent; your spouse's child, brother,
sister, parent or grandparent).
- Services of a person who resides in your
home.
- Expenses not directly involved with
Medical Care (as defined in Section 213(d) of the Internal
Revenue Code).
- Any service or supply that is not
allowable as a tax deduction under the Internal Revenue
Code.
- injury which happens during work at any
job for pay or profit.
- Expenses incurred before you or your
Dependent becomes covered.
- Expenses for long term care.
- Cosmetic or reconstructive surgery or
treatment. (This is surgery or treatment primarily to change
appearance.) It does not matter whether or not it is for
psychological or emotional reasons. However, the following
will be covered if it is for:
- Reconstructive surgery in connection
with surgical treatment of injury or Sickness.
- Correction of deformities caused by
Sickness.
6
<PAGE>
- Correction of damage caused by accidental injury
sustained by you or a Dependent while the injured person
is covered.
- Correction of birth defects which are outside the normal
range of human variation.
- Custodial Care. This is care made up of services and
supplies that meets one of the following conditions:
- Care furnished mainly to train or assist in personal
hygiene or other activities of daily living, rather
than to provide medical treatment.
- Care that can safely and adequately be provided by
persons who do not have the technical skills of a covered
health care professional.
- Care that meets one of these conditions is custodial
care regardless of any of the following:
- Who recommends, provides or directs the care.
- Where the care is provided
- Whether or not the patient or another caregiver can be
or is being trained to care for himself or herself.
- Education, training and bed and board while confined in
an institution which is mainly a school or other
institution for training, a place of rest, a place for
the aged or a nursing home.
- Expenses and associated expenses incurred for services
and supplies for Experimental, Investigational or Unproven
Services, except for services which are otherwise
Experimental, Investigational, or Unproven that are
deemed to be, in the Company's judgment, covered
transplant services. The fact that an Experimental,
Investigational or Unproven Service, is the only available
treatment for a particular condition will not result in
coverage if the procedure is considered to be
Experimental, Investigational or Unproven for the
treatment of that particular condition.
- Services and supplies which the Covered
Person is not legally required to pay.
- Services or supplies which are not Medically Necessary,
including any confinement or treatment given in connection
with a service or supply which is not Medically Necessary.
- Treatment for infertility, including but not limited to
in-vitro fertilization (IVF), gamete intrafallopian tube
transfers (GIFT), and artificial insemination.
7
<PAGE>
EXHIBIT 21
UNOVA, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE
OF OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- ------------------------------------------------------------------------------------ -------------- ---------------
<S> <C> <C>
Intermec Technologies Corporation Washington 100
UNOVA Industrial Automation Systems, Inc. Delaware 100
</TABLE>
The Registrant has additional operating subsidiaries which, considered in the
aggregate as a single subsidiary, do not constitute a significant subsidiary.
All above-listed subsidiaries have been consolidated in the Registrant's
financial statements.
E-5
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to registration
statement No. 333-42839 of UNOVA, Inc. on Form S-3 and registration statements
Nos. 333-39003, 333-39005, and 333-39007 of UNOVA, Inc. each filed on Form S-8,
of our report dated February 12, 1999, appearing in this Annual Report on Form
10-K of UNOVA, Inc. for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 26, 1999
E-6
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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0
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