<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10/A
(AMENDMENT NO. 2)
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Lanier Worldwide, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware 59-2606737
- -------------------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2300 Parklake Drive, Atlanta, Georgia 30345
- -------------------------------------------- ----------------------------------
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code (770) 621-1588
--------------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------
Common Stock, par value $0.01 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities to be registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
EXPLANATORY NOTE
This Registration Statement has been prepared on a prospective basis on
the assumption that, among other things, the Distribution (as defined in the
Information Statement which is a part of this Registration Statement) and the
related transactions contemplated to occur prior to or contemporaneously with
the Distribution will be consummated as contemplated by the Information
Statement. There can be no assurance, however, that any or all of such
transactions will occur or will occur as so contemplated. Any significant
modifications or variations in the transactions contemplated will be reflected
in an amendment or supplement to this Registration Statement.
<PAGE> 2
CROSS REFERENCE
LANIER WORLDWIDE, INC.
I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM
10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
Item
No. Item Caption Location in Information Statement
<S> <C> <C>
1. Business "SUMMARY;" "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS;" and "LANIER'S BUSINESS."
2. Financial Information "SUMMARY - LANIER WORLDWIDE,
INC. AND SUBSIDIARIES SUMMARY
HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL DATA;"
"LANIER WORLDWIDE, INC. AND
SUBSIDIARIES HISTORICAL AND
PRO FORMA CONSOLIDATED
CAPITALIZATION;" "LANIER
WORLDWIDE, INC. UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL
STATEMENTS;" "LANIER
WORLDWIDE, INC. SELECTED
FINANCIAL DATA;" "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS;" and
"LANIER WORLDWIDE, INC. AND
SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS."
3. Properties "LANIER'S BUSINESS - Properties"
4. Security Ownership of Certain "SECURITY OWNERSHIP OF CERTAIN
Beneficial Owners and BENEFICIAL OWNERS."
Management
5. Directors and Executive "LANIER'S MANAGEMENT."
Officers
6. Executive Compensation "LANIER'S MANAGEMENT."
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
7. Certain Relationships and "SUMMARY;" "THE DISTRIBUTION -
Related Transactions Relationship Between Harris And
Lanier Following The Distribution."
8. Legal Proceedings "LANIER'S BUSINESS - Legal Proceedings."
9. Market Price of and Dividends "SUMMARY;" and "THE DISTRIBUTION -
on the Registrant's Common Listing and Trading of the Lanier
Equity and Related Stockholder Shares" and "DIVIDEND POLICIES."
Matters
11. Description of Registrant's "DESCRIPTION OF LANIER'S CAPITAL
Securities to be Registered STOCK."
12. Indemnification of Officers and "LIABILITY AND INDEMNIFICATION OF
Directors DIRECTORS AND OFFICERS."
13. Financial Statements and "SUMMARY;" "LANIER WORLDWIDE, INC.
Supplementary Data UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS," "LANIER
WORLDWIDE, INC. SELECTED FINANCIAL
DATA;" and "LANIER WORLDWIDE, INC.
AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS."
</TABLE>
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities.
None.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) List of Financial Statements. The following financial statements are
included in the Information statement:
Report of Independent Certified Public Accountants.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Balance Sheets as of July
2, 1999, July 3, 1998, and June 27, 1997.
<PAGE> 4
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Income for
the Fiscal Years ended July 2, 1999, July 3, 1998 and June 27, 1997.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Cash Flows
for the Fiscal Years ended July 2, 1999, July 3, 1998 and June 27, 1997.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Changes in
Shareholder Equity for the Fiscal Years ended July 2, 1999, July 3, 1998 and
June 27, 1997.
(b) Exhibits The following documents are filed as exhibits hereto:
Exhibit No.
- -----------
2.1 Form of Distribution Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of Lanier
Worldwide, Inc.**
3.2 Form of By-Laws of Lanier Worldwide, Inc.**
4.1 Form of Stockholder Protection Rights Agreement.**
4.2 Form of Certificate of Designation and Terms of Registrant's
Participating Preferred Stock.**
4.3 Form of certificate representing Lanier common stock.
10.1 Form of Tax Disaffiliation Agreement.
10.2 Form of Credit Agreement.*
10.3 Form of Transition Services Agreement.
10.4 Form of Distribution Agreement (filed as Exhibit 2.1).
10.5 Form of Employee Benefits Compensation and Allocation Agreement.*
10.6 Form of Registration Rights Agreement.**
10.7 Form of Stock Incentive Plan.*
10.8 Lanier Worldwide, Inc. Supplemental Retirement Savings Plan.
10.9 Lanier Worldwide, Inc. Supplemental Executive Retirement Plan.
12.1 Computation of Ratios of Earnings to Fixed Charges.**
21.1 List of Subsidiaries.*
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.**
- ------------
* To be filed by amendment
** Previously filed
<PAGE> 5
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment No. 2 to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
LANIER WORLDWIDE, INC.
By /s/ Wesley E. Cantrell
-----------------------
Name: Wesley E. Cantrell
Title: President and Chief
Executive Officer
Dated: September 28, 1999
<PAGE> 6
[HARRIS LOGO]
[HARRIS LOGO]
HARRIS CORPORATION
1025 West NASA Boulevard
Melbourne, Florida 32919
-, 1999
Dear Fellow Stockholder:
I am pleased to inform you that the Board of Directors of Harris
Corporation has approved a pro rata distribution to Harris stockholders of
approximately 90% of the outstanding shares of common stock of Lanier Worldwide,
Inc., a worldwide independent provider of office products and document
management solutions, which is currently a subsidiary of Harris. Harris will
retain approximately 10% of the Lanier shares.
The distribution will take place on -, 1999. Each Harris stockholder as of
- -, 1999 will receive one Lanier share for every Harris share held on that date.
The Lanier shares have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "LR."
We believe that the distribution will meaningfully enhance value for Harris
stockholders and will give Lanier the financial and operational flexibility to
take advantage of significant growth opportunities in the office products and
document management solutions business. We believe that separating the two
companies will enhance the ability of each of Lanier and Harris to focus on
strategic initiatives and new business opportunities, as well as to improve cost
structures and operating efficiencies and to design equity-based compensation
programs targeted to its own performance. In addition, we expect that the
transition to an independent company will heighten Lanier management's focus,
provide Lanier with greater access to capital, and allow the investment
community to better measure Lanier's performance relative to its peers.
The enclosed Information Statement describes the distribution and provides
important financial and other information about Lanier. Please read it
carefully.
You do not have to take any action to receive your Lanier shares. You will
not be required to pay anything or to surrender your Harris shares. Account
statements reflecting your ownership of Lanier shares will be mailed to record
holders of Harris stock shortly after -, 1999. If you are a participant in
Harris' dividend reinvestment program and are entitled to receive a fractional
Lanier share, you will receive a check for its cash value. If you are not a
record holder of Harris stock, your Lanier shares should be credited to your
account with your stockbroker or nominee on or about -, 1999. Following the
distribution, you may also request physical stock certificates if you wish.
Information for making that request will be furnished with your account
statement.
Sincerely,
/s/ Phillip W. Farmer
Phillip W. Farmer
Chairman and Chief Executive Officer
<PAGE> 7
Lanier Worldwide, Inc.
2300 Parklake Drive,
N.E.
Atlanta, Georgia
30345-2979
770/496-9500
-, 1999
Dear Stockholder:
We are very pleased that you will soon be a stockholder of Lanier
Worldwide, Inc. We are a worldwide independent provider of office products and
document management solutions, together with related service and support. Lanier
is truly a global company. In fact, we have over 1,600 sales and service centers
in over 100 countries around the world, through which we continually seek to
provide "best of breed" products to our customers.
As a subsidiary of Harris Corporation, Lanier has been known for its
customer focused strategy. As an independent company, our highest priority will
continue to be customer satisfaction. We continually train our sales people and
service force on new products, technologies and techniques, and we believe that
this training, coupled with our commitment to viewing business interactions
through the eyes of our customers, will allow us to maintain our coveted
reputation in our industry.
We believe that the separation of our business from the businesses of our
corporate parent, Harris Corporation, will enhance our ability to grow our
businesses aggressively, both internally and through selective acquisitions. For
the first time, we will have the ability to offer our employees incentive
opportunities linked to Lanier's performance as a stand-alone company, which we
believe will aid our efforts to enhance employee performance.
As an independent company, we can more effectively focus on our objectives,
support the capital needs of our company and thus bring value to you as a
stockholder.
The Lanier shares have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "LR."
Our board, management and employees are excited about our future as an
independent company and we look forward to your support and participation in our
success.
Sincerely,
/s/ Wesley E. Cantrell
Wesley E. Cantrell
President and Chief Executive Officer
LOGO
LOGO
<PAGE> 8
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1999
INFORMATION STATEMENT RELATING TO THE SPINOFF OF
LANIER WORLDWIDE, INC.
FROM HARRIS CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
Harris Corporation is sending you this information statement to describe
the pro rata distribution to Harris stockholders of approximately 90% of the
outstanding common stock of Lanier Worldwide, Inc. In this distribution, you
will receive one share of Lanier common stock, together with an associated
preferred stock purchase right, for every share of Harris common stock that you
hold at the close of business on -, 1999. Harris will retain approximately 10%
of Lanier's common stock. See "The Distribution" beginning on page 14.
Lanier is currently a wholly owned subsidiary of Harris and is a worldwide
independent provider of office products and document management solutions,
related services and support, with over 1,600 sales and service centers in over
100 countries around the world. See "Lanier's Business" beginning on page 37.
The distribution of Lanier shares will be effected at 11:59 p.m., Eastern
Daylight Time, on -, 1999. You do not have to take any action to receive your
Lanier shares. You will not be required to pay anything or to surrender your
Harris shares. Harris intends to distribute the Lanier shares by book entry. The
number of Harris shares that you own will not change as a result of the
distribution.
There is no current public trading market for the Lanier shares, although a
"when-issued" trading market may develop prior to completion of the
distribution. The Lanier shares have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance, under the symbol "LR."
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
------------------------
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY OR
YOUR SHARE CERTIFICATES.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED IN THIS
INFORMATION STATEMENT BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
INFORMATION STATEMENT OR DETERMINED IF THIS INFORMATION STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES.
THE DATE OF THIS INFORMATION STATEMENT IS -, 1999.
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION
The following section answers various questions that you may have with
respect to the pro rata distribution to Harris stockholders of approximately 90%
of the outstanding shares of Lanier common stock. We refer to this distribution
in this document as the "Distribution."
Q: WHY IS HARRIS EFFECTING THE DISTRIBUTION?
A: Harris' board of directors and management believe that the Distribution is
in the best interests of Harris, Lanier and Harris stockholders. Harris' board
of directors and management believe that separating Lanier from the rest of
Harris' businesses will allow both Lanier and Harris to focus on their
respective businesses and provide them with the flexibility to pursue different
strategies and react quickly to changing market environments. Lanier's business
is a distinct business with significant differences from Harris' other
operations with respect to its markets, products, capital needs and plans for
growth. Harris' board of directors and management believe that the Distribution
will enhance the ability of each of Lanier and Harris to focus on strategic
initiatives and new business opportunities, improve cost structures and
operating efficiencies and design equity-based compensation programs targeted to
its own performance. In addition, Harris' board of directors expects that the
transition to an independent company will heighten Lanier management's focus,
provide Lanier with greater access to capital, and allow the investment
community to measure Lanier's performance relative to its peers. For a more
detailed discussion of the reasons for the Distribution, see "The
Distribution -- Reasons for the Distribution" on page 14.
Q: WHY IS HARRIS RETAINING APPROXIMATELY 10% OF THE LANIER SHARES?
A: Harris will retain approximately 10% of the Lanier shares because the
contemplated future sale of these shares will provide Harris with a source of
cash following the Distribution. Harris intends to use this cash to make
acquisitions in the telecommunications equipment industry. See "The
Distribution -- Reasons for Harris' Retention of Lanier Shares" on page 15.
Q: WHEN WILL THE DISTRIBUTION OCCUR?
A: We currently anticipate completing the Distribution on -, 1999.
Q: WHAT BUSINESS WILL LANIER CONDUCT FOLLOWING THE DISTRIBUTION?
A: After the Distribution, Lanier will continue operating its current business.
See "Summary -- Lanier's Business" on page 1, "The Distribution -- Results of
the Distribution" beginning on page 15 and "Lanier's Business" beginning on page
37.
Q: WHAT WILL I RECEIVE AS A RESULT OF THE DISTRIBUTION?
A: For every share of Harris common stock that you own of record on -, 1999,
you will receive one share of Lanier common stock. For example, if you own 123
shares of Harris common stock on -, you will receive 123 shares of Lanier common
stock.
Harris currently intends to distribute the Lanier shares by book entry. If
you are a record holder of Harris stock, instead of physical stock certificates,
you will receive from Lanier's transfer agent shortly after -, 1999 a statement
of your book entry account for the Lanier shares distributed to you. Following
the Distribution, you may request physical stock certificates if you wish, and
instructions for making that request will be furnished with your account
statement. If you are a participant in Harris' dividend reinvestment plan and
are entitled to receive a fractional Lanier share, you will receive a check for
the cash value of the fractional Lanier share, which may be taxable to you. If
you are not a record holder of Harris stock because such shares are held on your
behalf by your stockbroker or other nominee, your Lanier shares should be
credited to your account with your stockbroker or nominee on or about -, 1999.
Associated with every share of Lanier common stock that you receive will be
one preferred stock purchase right. These rights are similar to the rights
associated with your existing shares of Harris common stock and may have certain
anti-takeover effects similar to Harris' current preferred stock purchase
rights. See "The Distribution -- Manner of Effecting the Distribution" on page
15, "Risk Factors -- Certain Provisions of Lanier's Restated Certificate of
Incorporation and Bylaws and Rights Plan and the Tax Disaffiliaton Agreement May
ii
<PAGE> 10
Discourage Takeovers" beginning on page 11 and "Certain Anti-Takeover Provisions
of Lanier's Certificate of Incorporation, Bylaws and Rights Agreement and
Delaware Law" beginning on page 59.
Q: WHAT DO I HAVE TO DO TO RECEIVE MY LANIER SHARES?
A: Nothing. Your Lanier shares will be either reflected in an account statement
that Lanier's transfer agent will send to you shortly after -, 1999 or credited
to your account with your broker or nominee on or about -, 1999.
Q: WHEN WILL I RECEIVE MY LANIER SHARES?
A: If you hold your Harris shares in your own name, your account statement will
be mailed to you on or about -, 1999. You should allow several days for the mail
to reach you.
If you hold your Harris shares through your stockbroker, bank or other
nominee, you are probably not a stockholder of record and your receipt of Lanier
shares depends on your arrangements with the nominee that holds your Harris
shares for you. Harris anticipates that stockbrokers and banks generally will
credit their customers' accounts with Lanier shares on or about -, 1999, but you
should check with your stockbroker, bank or other nominee. See "The
Distribution -- Manner of Effecting the Distribution" on page 15.
Q: HOW WILL THE DISTRIBUTION AFFECT THE MARKET PRICE OF MY HARRIS SHARES?
A: Following the Distribution, Harris shares will continue to be listed and
traded on the New York Stock Exchange under the symbol "HRS." As a result of the
Distribution, the trading price of Harris shares immediately following the
Distribution will likely be lower than immediately prior to the Distribution.
Until the market has fully analyzed the operations of Harris without the
operations of Lanier, the price of Harris shares may fluctuate significantly.
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
Q: WHERE WILL MY LANIER SHARES BE TRADED?
A: The Lanier shares have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "LR." Trading
of the Lanier shares may commence on a when-issued basis after the record date.
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
Q: HOW WILL THE CASH PAYMENT FOR FRACTIONAL SHARES BE DETERMINED AND PAID?
A: If your account with Harris' dividend reinvestment plan is credited with a
fractional share of Harris stock as of -, 1999, you will receive cash in lieu of
the fractional Lanier share that you are entitled to receive. Your fractional
Lanier share will be aggregated with the fractional Lanier shares of other
stockholders and sold in the open market by Harris' distribution agent. You will
receive a check for your share of the net proceeds of such sale. See "The
Distribution -- Manner of Effecting the Distribution" on page 15.
Q: WHAT IF I WANT TO SELL MY HARRIS SHARES OR MY LANIER SHARES?
A: You should consult with your own financial advisors, such as your
stockbroker, bank or tax advisor. Harris does not make recommendations on the
purchase, retention or sale of Harris shares or Lanier shares.
If you do decide to sell any shares, you should make sure your stockbroker,
bank or other nominee understands whether you want to sell your Harris shares or
your Lanier shares, or both. The following information may be helpful in
discussions with your stockbroker, bank or other nominee.
Beginning about -, 1999 and continuing until -, 1999, New York Stock
Exchange practices should generally allow you to sell your Harris shares either
together with the right to receive the Lanier shares in the Distribution or
without the right to receive the Lanier shares. If you sell your Harris shares
with the right to receive the Lanier shares, you (or your broker or bank) will
be required to deliver to the buyer the Lanier shares you receive in the
Distribution. You should also be able to sell your right to receive the Lanier
shares without selling your Harris shares.
Sales of Harris shares with the right to receive the Lanier shares should
generally settle in the three business day settlement period. Sales of Harris
shares without the right to receive the Lanier shares and sales of the Lanier
shares without Harris shares are expected to settle four business days following
the date account statements for
iii
<PAGE> 11
the Lanier shares are mailed. Check with your stockbroker, bank or other
nominee. Beginning about -, 1999, you may only sell your Harris shares and
Lanier shares separately. Once again, check with your stockbroker, bank or other
nominee. See "The Distribution -- Listing and Trading of the Lanier Shares"
beginning on Page 16.
Q: HOW WILL THE DISTRIBUTION AFFECT THE DIVIDENDS I CURRENTLY RECEIVE ON MY
HARRIS SHARES?
A: Following the Distribution, Harris intends to pay quarterly dividends at an
initial annual rate expected to be substantially below Harris' current annual
dividend rate of $.96 per share. No determination has been made by Harris' board
of directors with respect to the initial dividend rate that will be paid
following the Distribution. The declaration and payment of dividends is at the
discretion of Harris' board of directors and will be subject to Harris'
financial results and the availability of surplus funds to pay dividends. The
declaration of dividends and the amount thereof will depend on a number of
factors, including Harris' financial condition, capital requirements, results of
operations, future business prospects and other factors Harris' board of
directors may deem relevant. No assurance can be given that Harris will pay any
dividends. See "Dividend Policies" on page 23.
Q: WILL LANIER PAY DIVIDENDS?
A: Lanier intends to pay quarterly cash dividends, although the declaration and
payment of dividends is at the discretion of Lanier's board of directors and
will be subject to Lanier's financial results and the availability of surplus
funds to pay dividends. The amount of quarterly cash dividends will depend on a
number of factors, including Lanier's financial condition, capital requirements,
results of operations, future business prospects and other factors Lanier's
board of directors may deem relevant. No assurance can be given that Lanier will
pay any dividends. See "Risk Factors -- Uncertainty of Dividends" on page 11 and
"Dividend Policies" on page 23. Certain covenants set forth in the revolving
credit facility that Lanier will enter into in connection with the Distribution
may limit Lanier's ability to declare and pay dividends on the Lanier Shares.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Facility" beginning on page 32.
Q: WILL LANIER HAVE A DIVIDEND REINVESTMENT OR STOCK PURCHASE PLAN?
A: Lanier intends to establish a direct stock purchase and dividend
reinvestment plan that will enable holders to purchase additional Lanier shares
and to reinvest dividends into additional Lanier shares. See "Dividend Policies"
on page 23.
Q: WILL I HAVE TO PAY TAXES ON THE LANIER SHARES THAT I RECEIVE?
A: Based upon the opinion of Sullivan & Cromwell, special counsel to Harris,
Harris anticipates that the Distribution will be tax-free to Harris stockholders
for U.S. federal income tax purposes, except for any tax payable because of any
cash stockholders may receive in lieu of fractional Lanier shares. (You will be
entitled to receive cash in lieu of a fractional Lanier share only if you are a
participant in Harris' dividend reinvestment plan and your account with such
plan is credited with a fractional share of Harris common stock as of -, 1999).
In addition, you may have to pay taxes if you sell your Lanier shares. If you
have any questions, please consult your tax advisor. See "Risk
Factors -- Failure to Qualify as a Tax Free Transaction Could Result in
Substantial Liability" beginning on page 8 and "The Distribution -- Federal
Income Tax Consequences of the Distribution" beginning on page 17.
Q: WILL THERE BE ANY CHANGE IN THE UNITED STATES FEDERAL TAX BASIS OF MY HARRIS
SHARES AS A RESULT OF THE DISTRIBUTION?
A: Yes, your tax basis in your Harris shares will be reduced. If you are the
record holder of your Harris shares, you will receive information with your
account statement that will help you calculate the adjusted tax basis for your
Harris shares, as well as the tax basis for your Lanier shares. See "The
Distribution -- Federal Income Tax Consequences of the Distribution" beginning
on page 17.
iv
<PAGE> 12
Q: WHERE CAN I GET MORE INFORMATION?
A: If you have any questions relating to the mechanics of the Distribution and
the delivery of account statements or the trading of Harris or Lanier shares
prior to the Distribution, you can contact the Distribution Agent:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
(201) 296-4040
For other questions related to the Distribution, Harris or Lanier, please
contact:
Georgeson Shareholder Communications, Inc.
17 State Street
New York, New York 10004
(800) 223-2064
After the Distribution, Lanier stockholders with inquiries relating to the
Distribution or their investment in Lanier should contact:
Lanier Worldwide, Inc.
2300 Parklake Drive, N.E.
Atlanta, Georgia 30345
Attention: Corporate Secretary
(770) 621-1588
After the Distribution, Harris stockholders with inquiries relating to the
Distribution or their investment in Harris should contact:
Harris Corporation
1025 West NASA Boulevard
Melbourne, Florida 32919
Attention: Corporate Secretary
(407) 727-9100
v
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION................ ii
SUMMARY..................................................... 1
RISK FACTORS................................................ 7
INTRODUCTION................................................ 14
THE DISTRIBUTION............................................ 14
RELATIONSHIP BETWEEN HARRIS AND LANIER FOLLOWING THE
DISTRIBUTION.............................................. 19
LANIER WORLDWIDE, INC. AND SUBSIDIARIES HISTORICAL AND PRO
FORMA CONSOLIDATED CAPITALIZATION......................... 22
DIVIDEND POLICIES........................................... 23
LANIER WORLDWIDE, INC. UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS...................................... 24
LANIER WORLDWIDE, INC. SELECTED FINANCIAL DATA.............. 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 29
LANIER'S BUSINESS........................................... 37
LANIER'S MANAGEMENT......................................... 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 55
BENEFICIAL OWNERSHIP OF MANAGEMENT.......................... 57
DESCRIPTION OF LANIER'S CAPITAL STOCK....................... 57
CERTAIN ANTI-TAKEOVER PROVISIONS OF LANIER'S CERTIFICATE OF
INCORPORATION, BYLAWS AND RIGHTS AGREEMENT AND DELAWARE
LAW....................................................... 59
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS..... 64
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 65
ADDITIONAL INFORMATION...................................... 65
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-1
LANIER WORLDWIDE, INC. AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS...................................... F-2
</TABLE>
vi
<PAGE> 14
SUMMARY
This summary highlights selected information contained elsewhere in this
document. It is not complete and may not contain all of the information that is
important to you. To better understand the Distribution and Lanier, you should
read this entire document carefully, including the risks described beginning on
page 7 and the financial statements and the notes pertaining thereto beginning
on page F-1.
WHY WE SENT THIS DOCUMENT TO YOU
Harris Corporation ("Harris") sent you this document because you were an
owner of Harris common stock on -, 1999. This entitles you to receive a pro rata
distribution of one share of common stock of Lanier Worldwide, Inc. ("Lanier"),
which is currently a wholly owned subsidiary of Harris, for every Harris share
you owned on that date. We refer to this distribution in this document as the
"Distribution." No action is required on your part to participate in the
Distribution and you do not have to pay cash or other consideration to receive
your Lanier shares.
This document describes Lanier's business, the relationship between Harris
and Lanier, and how this transaction benefits Harris and its stockholders, and
provides other information to assist you in evaluating the benefits and risks of
holding or disposing of the Lanier shares that you will receive in the
Distribution. You should be aware of certain risks relating to the Distribution
and Lanier's business, which are described in this document beginning on page 7.
LANIER'S BUSINESS
Lanier is a worldwide independent supplier of copiers, facsimiles and other
related automated office imaging equipment. With over 1,600 sales and service
locations in more than 100 countries, Lanier markets these products and related
services, parts and supplies to customers both on a direct sales basis and
through a worldwide network of independent dealers. Lanier provides customers
with a wide array of customized document management solutions including black
and white digital and analog copiers, color copiers, facsimile machines,
multifunction devices, dictation equipment, computer based health care
information management systems, associated parts and supplies, and a variety of
related outsourcing services, including legal support services. Lanier sources
substantially all of these products from a variety of manufacturers, seeking out
the "best-of-breed." Selected products undergo rigorous testing by Lanier, and
upgrades are often recommended to the manufacturers in order to meet Lanier's
demanding standards.
Lanier targets sales of its products to four primary markets: (i)
global/national or "key" accounts; (ii) major accounts; (iii) commercial users;
and (iv) specific vertical industries, such as the health care and legal
industries. Some of Lanier's national account customers include Abbott
Laboratories, Corning, Inc., CountryWide Home Loans, Federal Express, Merck &
Company, Inc., Minnesota Mining & Manufacturing Co. and the National Aeronautics
& Space Administration (NASA). No national account customer represents more than
1% of Lanier's total sales.
Lanier's goal is to become the leading global provider of document
management solutions and related services and support. In order to accomplish
this goal, Lanier intends to use the following strategies:
- continue to cultivate its "best of breed" sourcing and distribution
relationships;
- deliver integrated document management solutions to its customers;
- focus on customer satisfaction and retention;
- maintain and develop its effective marketing initiatives;
- attract, retain and incentivize its high caliber employees; and
- continue to add revenue and operating income through selective
acquisitions.
1
<PAGE> 15
THE DISTRIBUTION
DISTRIBUTING COMPANY....... Harris Corporation, a Delaware corporation.
DISTRIBUTED COMPANY........ Lanier Worldwide, Inc., a Delaware corporation.
PRIMARY PURPOSES OF
DISTRIBUTION............. Harris' board of directors believes that separating
Lanier from the rest of Harris' businesses will
allow both Lanier and Harris to focus on their
respective businesses and provide them with the
flexibility to pursue different strategies and
react quickly to changing market environments.
Lanier's business is a distinct business with
significant differences from Harris' other
operations with respect to its markets, products,
capital needs and plans for growth. Harris' board
of directors believes that separating the two
companies will enhance the ability of each of
Lanier and Harris to focus on strategic initiatives
and new business opportunities, improve cost
structures and operating efficiencies and design
equity-based compensation programs targeted to its
own performance. In addition, Harris' board of
directors believes that Lanier will have greater
access to capital as an independent company and
that the investment community will be better able
to measure Lanier's performance relative to its
peers. For a more detailed discussion of the
reasons for the Distribution, see "The
Distribution -- Reasons for the Distribution" on
page 14 and "-- Reasons for Harris' Retention of
Lanier Shares" on page 15.
LANIER SHARES TO BE
DISTRIBUTED................ We will distribute to Harris stockholders
approximately 79,274,473 Lanier shares, par value
$.01 per share (together with the associated
preferred stock purchase rights, the "Lanier
Shares"), based on approximately 79,274,473 Harris
shares outstanding on September 24, 1999. The
Lanier Shares to be distributed will constitute
approximately 90% of the Lanier Shares outstanding
after the Distribution.
LANIER SHARES TO BE
RETAINED BY HARRIS......... Harris will retain approximately 10% of the Lanier
Shares and Lanier will grant Harris certain rights
to cause Lanier to register these Lanier Shares for
sale under the securities laws. Harris will retain
such Lanier Shares because the contemplated future
sale of these shares will provide Harris with a
source of cash following the Distribution. Harris
has agreed not to sell its Lanier Shares for six
months following the Distribution, but intends to
sell its Lanier Shares within two years following
the Distribution. In addition, Harris has agreed to
vote its Lanier Shares in proportion to votes cast
by other Lanier stockholders. See "Risk
Factors -- The Possibility of Substantial Sales May
Have an Adverse Impact on the Trading Price of the
Lanier Shares" on page 8, "The
Distribution -- Reasons for Harris' Retention of
Lanier Shares" on page 15 and "The
Distribution -- Listing and Trading of the Lanier
Shares" beginning on page 16.
TRADING MARKET AND
SYMBOL..................... There is no current trading market for the Lanier
Shares, although a when-issued market may develop
prior to completion of the Distribution. The Lanier
Shares have been approved for listing on the New
York Stock Exchange, subject to official notice of
issuance, under the symbol "LR."
RECORD DATE................ If you owned Harris shares at the close of business
on -, 1999 (the "Record Date"), then you will
receive Lanier Shares in the Distribution.
2
<PAGE> 16
DISTRIBUTION DATE.......... The Distribution will occur at 11:59 p.m., Eastern
Daylight Time, on -, 1999 (the "Distribution
Date"). If you are a record holder of Harris stock,
instead of physical stock certificates you will
receive from Lanier's transfer agent shortly after
-, 1999 a statement of your book entry account for
the Lanier Shares distributed to you. Following the
Distribution, you may request physical stock
certificates if you wish, and instructions for
making that request will be furnished with your
account statement. If you are not a record holder
of Harris stock because such shares are held on
your behalf by your stockbroker or other nominee,
your Lanier Shares should be credited to your
account with your stockbroker or other nominee on
or about -, 1999.
DISTRIBUTION RATIO......... You will receive one Lanier Share for every Harris
share you held on the Record Date.
DISTRIBUTION AGENT......... ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT AND
REGISTRAR FOR THE LANIER
SHARES................... ChaseMellon Shareholder Services, L.L.C.
FRACTIONAL SHARE
INTERESTS.................. Fractional Lanier Shares will not be issued. You
will be entitled to receive a fractional Lanier
Share only if you are a participant in Harris'
dividend reinvestment plan and your account with
such plan is credited with a fractional share of
Harris common stock as of the Record Date. Your
fractional Lanier Share will be aggregated with the
fractional Lanier Shares of other stockholders and
sold in the open market by Harris' Distribution
Agent. You will receive a check for your pro rata
share of the net proceeds of such sale. See "The
Distribution -- Manner of Effecting the
Distribution" on page 15.
TAX CONSEQUENCES........... Sullivan & Cromwell, special counsel to Harris,
will render an opinion to Harris that the
Distribution will be tax-free to you for U.S.
federal income tax purposes except to the extent of
any cash you receive in lieu of fractional Lanier
Shares. See "Risk Factors -- Failure to Qualify as
a Tax Free Transaction Could Result in Substantial
Liability" beginning on page 8 and "The
Distribution -- Federal Income Tax Consequences of
the Distribution" beginning on page 17.
RELATIONSHIP WITH HARRIS
AFTER THE DISTRIBUTION..... Immediately prior to the Distribution Date, Harris
and Lanier will enter into agreements to transfer
to Lanier selected assets and liabilities of Harris
related to Lanier's business, to transfer to Harris
selected assets and liabilities of Lanier related
to Harris' business, to arrange for the continued
provision of certain services by each company to
the other, to make arrangements for the
Distribution and to define the ongoing
relationships between Harris and Lanier. In
addition, Lanier will grant Harris registration
rights with respect to the Lanier Shares which
Harris will continue to own. Harris and Lanier will
also enter into an agreement providing for the
sharing of taxes incurred by them prior to the
Distribution and providing certain indemnification
rights with respect to tax matters. After the
Distribution, Harris and Lanier will not have any
other material contracts or other arrangements
between them other than arrangements made on an
arm's length basis. See "Relationship Between
Harris and Lanier Following the Distribution"
beginning on page 19.
3
<PAGE> 17
BOARD OF DIRECTORS OF
LANIER..................... After the Distribution, Lanier will have an initial
board of seven directors, classified into three
classes. After their initial term, directors of
each class will serve three-year terms. See
"Lanier's Management" beginning on page 44.
MANAGEMENT OF LANIER....... Lanier's current executive officers will continue
to serve as executive officers of Lanier after the
Distribution. See "Lanier's Management" beginning
on page 44.
CREDIT FACILITY............ Prior to the Distribution, Lanier will incur debt
under a credit facility to be entered into with
certain major financial institutions (the "Credit
Facility") in connection with the payment of a
dividend by Lanier to Harris immediately prior to
the Distribution. As a result of this incurrence of
debt and the assumption by Lanier of certain of
Harris' indebtedness relating to Lanier's business,
Lanier will have approximately $700 million of
indebtedness net of cash on the Distribution Date.
The terms of the Credit Facility will include
customary affirmative and negative covenants that
will, among other things, require Lanier to satisfy
certain financial tests and maintain certain
financial ratios, and will limit Lanier's ability
to declare and pay dividends on the Lanier Shares.
Lanier may also incur additional indebtedness from
time to time, for general corporate purposes,
including working capital requirements, capital
expenditures and future acquisitions. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Credit
Facility" beginning on page 32.
POST-DISTRIBUTION DIVIDEND
POLICIES................. Lanier. Following the Distribution, Lanier's
dividend policy will be set by Lanier's board of
directors. Lanier intends to pay quarterly cash
dividends, although the declaration and payment of
dividends is at the discretion of the Lanier Board
and will be subject to Lanier's financial results
and the availability of surplus funds to pay
dividends. The amount of quarterly cash dividends
will depend on a number of factors, including
Lanier's financial condition, capital requirements,
results of operations, future business prospects
and other factors Lanier's board of directors may
deem relevant. No assurance can be given that
Lanier will pay any dividends. See "Risk
Factors -- Uncertainty of Dividends" on page 11 and
"Dividend Policies" on page 23. Certain covenants
set forth in the Credit Facility will limit
Lanier's ability to declare and pay dividends and
distributions on the Lanier Shares. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Credit
Facility" on beginning page 32.
Harris. Following the Distribution, Harris intends
to pay quarterly dividends at an initial annual
rate expected to be substantially below Harris'
current annual dividend rate of $.96 per share. No
determination has been made by Harris' board of
directors with respect to the initial dividend rate
that will be paid following the Distribution. The
payment and level of dividends is at the discretion
of Harris' board of directors and will be subject
to Harris' financial results and the availability
of surplus funds to pay dividends. The declaration
of dividends and the amount thereof will depend on
a number of factors, including Harris' financial
condition, capital requirements, results of
operations, future business prospects and other
factors Harris' board of directors may deem
relevant. No assurance
4
<PAGE> 18
can be given that Harris will pay any dividends.
See "Dividend Policies" on page 23.
CERTAIN ANTI-TAKEOVER
EFFECTS.................... Certain provisions of Lanier's restated certificate
of incorporation and bylaws may have the effect of
making the acquisition of control of Lanier in a
transaction not approved by Lanier's board of
directors more difficult. The stockholder
protection rights agreement that Lanier will enter
into in connection with the Distribution also would
make such a transaction more difficult. Moreover,
certain provisions of the Tax Disaffiliation
Agreement that Lanier will enter into in connection
with the Distribution could discourage potential
acquisition proposals. See "Risk Factors -- Certain
Provisions of Lanier's Certificate of Incorporation
and Bylaws and Rights Plan and the Tax
Disaffiliation Agreement May Discourage Takeovers"
beginning on page 11 and "Certain Anti-Takeover
Provisions of Lanier's Certificate of
Incorporation, Bylaws and Rights Agreement and
Delaware Law" beginning on page 59.
RISK FACTORS............... You should review the risks relating to the
Distribution and Lanier's business described in
"Risk Factors" beginning on page 7.
5
<PAGE> 19
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary historical and pro forma consolidated financial data of Lanier
set forth below is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements of Lanier, including the
Notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this document. The income
statement data for each of the three fiscal years ended July 2, 1999 and the
balance sheet data as of July 2, 1999 and July 3, 1998 are derived from, and are
qualified by reference to, the consolidated financial statements included
elsewhere in this document that have been audited by Ernst & Young LLP, Lanier's
independent certified public accountants.
The summary pro forma consolidated financial data reflect adjustments to
the historical consolidated balance sheet of Lanier as if the Distribution had
occurred on July 2, 1999 and to the historical consolidated income statement of
Lanier as if the Distribution had occurred on July 4, 1998. The historical and
pro forma consolidated financial statements of Lanier do not necessarily reflect
the results of operations or financial position that Lanier would have had if
Lanier had been a separate, independent company for the periods indicated.
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------
FISCAL YEAR ENDED
------------------------------------------------------------------------------
PRO FORMA (A)
JUNE 30, JUNE 30, JUNE 30, JULY 3, JULY 2, JULY 2,
1995 1996 1997 1998 1999 1999
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue from sales,
rentals and
services............ $1,023,544 $1,115,962 $1,170,014 $1,254,777 $1,430,488 $1,430,488
Gross margin........... 414,101 448,075 488,267 495,908 533,111 533,111
Income before income
taxes............... 82,747 90,603 101,907 99,401 111,270 75,122
Income taxes........... 30,454 33,331 38,208 36,604 40,000 26,264
Net income............. 52,293 57,272 63,699 62,797 71,270 48,858
PRO FORMA INCOME PER
SHARE.................. $ 0.55(B)
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $1,011,404 $1,056,814 $1,075,307 $1,123,296 $1,337,708 $1,156,923
Long-term debt......... 4,192 4,103 3,990 3,660 4,622 545,616
Shareholder equity..... 635,113 689,240 750,157 803,657 882,738 133,251
</TABLE>
- ---------------
(A) The pro forma consolidated financial data reflect the allocation of
additional debt and related interest expense, pro forma income adjustments,
forgiveness of intercompany loans and a cash dividend to be paid by Lanier
to Harris immediately prior to the Distribution. The aggregate amount of
such cash dividend will be the sum of: (i) $700 million; plus (ii) any cash
and cash equivalents retained by Lanier on the Distribution Date; less (iii)
the amount of indebtedness for borrowed money retained or assumed by Lanier;
and less (iv) amounts owed by Lanier under Lanier's European asset
securitization facility. See "Lanier Worldwide, Inc. Pro Forma Consolidated
Financial Statements" beginning on page 24 and the Notes thereto. Pro forma
results do not reflect elimination of Harris' charge of $25.0 million and
inclusion of pro forma expenses of $7.0 million.
(B) Pro forma income per share for the fiscal year ended July 2, 1999 is
computed based on 88,857,000 shares, which represents the approximate number
of Lanier Shares expected to be distributed in the Distribution based on the
number of Harris shares outstanding as of July 2, 1999, the retention of
Lanier Shares by Harris and conversion of performance share awards.
6
<PAGE> 20
RISK FACTORS
This document contains forward-looking statements that reflect Lanier's
current assumptions and estimates of future performance and economic conditions.
Harris and Lanier may make these statements directly in this document or
incorporate such statements into this document by reference to other documents.
Harris and Lanier may also include statements pertaining to periods following
the Distribution. You can find many of these statements by looking for words
such as "believes," "expects," "anticipates," "estimates" or similar
expressions. Any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to differ
materially from those projected, stated, or implied by the forward-looking
statements.
Lanier's results and the accuracy of the forward-looking statements could
be affected by, among other things, general economic conditions in the markets
in which Lanier operates; economic developments that have a particularly adverse
effect on one or more of the markets served by Lanier; the ability to execute
management's internal operating plans; stability of key markets for office
products and document management solutions; fluctuation in foreign currency
exchange rates and the effectiveness of Lanier's currency hedging program;
worldwide demand and product and service pricing for office products and
document management solutions; and the other risk factors discussed below.
Lanier disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
In addition to the information contained elsewhere in this document, you
should carefully read the following risk factors related to the Distribution.
RISKS RELATING TO THE DISTRIBUTION
THERE HAS NOT BEEN ANY PRIOR TRADING MARKET FOR THE LANIER SHARES
There is no current trading market for the Lanier Shares, although a
when-issued trading market may develop prior to completion of the Distribution.
The Lanier Shares have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "LR." See "The
Distribution -- Listing and Trading of the Lanier Shares" beginning on page 16.
There can be no assurance as to whether the Lanier Shares will be actively
traded or as to the prices at which the Lanier Shares will trade. Some of the
Harris stockholders who receive Lanier Shares may decide that they do not want
shares in an office products and document management solutions company, and may
sell their Lanier Shares following the Distribution. This may delay the
development of an orderly trading market in the Lanier Shares for a period of
time following the Distribution. Until the Lanier Shares are fully distributed
and an orderly market develops, the prices at which the Lanier Shares trade may
fluctuate significantly and may be lower or higher than the price that would be
expected for a fully distributed issue. Prices for Lanier Shares will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for the shares, Lanier's results of
operations, what investors think of Lanier and the office products and document
management solutions industry, the amount of dividends that Lanier pays, changes
in economic conditions in the office products and document management solutions
industry and general economic and market conditions. In addition, the stock
market often experiences significant price fluctuations that are unrelated to
the operating performance of the specific companies whose stock is traded.
Market fluctuations could have a material adverse impact on the trading price of
the Lanier Shares. See "The Distribution -- Listing and Trading of the Lanier
Shares" beginning on page 16.
THE DISTRIBUTION MAY CAUSE FLUCTUATIONS IN TRADING PRICES OF HARRIS COMMON
STOCK
Following the Distribution, Harris common stock will continue to be listed
and traded on the New York Stock Exchange under the symbol "HRS." As a result of
the Distribution, the trading price of Harris common stock immediately following
the Distribution will likely be lower than the trading price of Harris common
stock immediately prior to the Distribution. The combined trading prices of
Harris common stock and the Lanier Shares after the Distribution may be less
than, equal to or greater than the trading prices of Harris common stock
immediately prior to the Distribution. Until the market has fully analyzed the
operations of Harris without the
7
<PAGE> 21
operations of Lanier, the prices at which Harris common stock trades may
fluctuate significantly. In addition, the stock market often experiences
significant price fluctuations that are unrelated to the operating performance
of the specific companies whose stock is traded. Market fluctuations could have
a material adverse effect on the trading price of Harris common stock. See "The
Distribution -- Listing and Trading of the Lanier Shares" beginning on page 16.
THE POSSIBILITY OF SUBSTANTIAL SALES MAY HAVE AN ADVERSE IMPACT ON THE TRADING
PRICE OF THE LANIER SHARES
Based on the number of shares of Harris common stock outstanding on the
Record Date, Harris will distribute to its stockholders a total of approximately
- - million Lanier Shares. Under the United States federal securities laws, almost
all of these shares may be resold immediately in the public market, except for
Lanier Shares held by affiliates of Lanier. Lanier cannot predict whether
stockholders will resell large numbers of Lanier Shares in the public market
following the Distribution or how quickly they may resell these Lanier Shares.
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
Harris will retain approximately 10% of the Lanier Shares and Lanier will
grant Harris certain rights entitling Harris to cause Lanier to register its
Lanier Shares under the securities laws. Harris has agreed not to sell its
Lanier Shares for six months following the Distribution, but intends to sell
these shares within two years after the Distribution. If Harris or Lanier
stockholders sell large numbers of Lanier Shares over a short period of time, or
if investors anticipate large sales of Lanier Shares over a short period of
time, this could adversely affect the trading price of the Lanier Shares. See
"The Distribution -- Listing and Trading of the Lanier Shares" beginning on page
16.
FAILURE TO QUALIFY AS A TAX-FREE TRANSACTION COULD RESULT IN SUBSTANTIAL
LIABILITY
Harris and Lanier intend for the Distribution generally to be tax-free for
federal income tax purposes. In connection with the Distribution, Sullivan &
Cromwell, special counsel to Harris, will render an opinion that the
Distribution will be tax-free to you for federal income tax purposes except to
the extent of any cash you receive in lieu of fractional Lanier Shares. This
opinion of counsel will not be binding on the Internal Revenue Service and, as a
result, we cannot assure you that the Distribution will qualify as a tax-free
transaction. Additionally, even though the Distribution is tax-free to Harris
stockholders, it is possible that the Distribution could be rendered taxable to
Harris as a result of a subsequent acquisition of Harris or Lanier.
If the Distribution were not to qualify for tax-free treatment, then, in
general, a substantial corporate tax would be payable by the consolidated group
of which Harris is the common parent based upon the difference between (1) the
aggregate fair market value of the Lanier Shares distributed in the Distribution
and (2) Harris' adjusted basis in the Lanier Shares. The corporate level tax
would be payable by Harris. However, under certain circumstances, Lanier has
agreed to indemnify Harris for all or a portion of this tax liability. See
"Relationship Between Harris and Lanier Following the Distribution -- Tax
Disaffiliation Agreement" beginning on page 20. This indemnification obligation,
if triggered, would have a material adverse effect on the results of operations
and financial position of Lanier. In addition, under the consolidated return
regulations, each member of Harris' consolidated group (including Lanier) is
severally liable for such tax liability.
Furthermore, if the Internal Revenue Service determines that the
Distribution does not qualify as tax-free for any reason other than a
post-Distribution acquisition of Harris or Lanier, each Harris stockholder who
receives Lanier Shares in the Distribution would generally be taxed as if he or
she received a dividend equal to the fair market value of his or her Lanier
Shares.
Harris would also incur a substantial corporate tax liability under Section
355(e) of the Internal Revenue Code of 1986, as amended (the "Code"), if Harris
or Lanier were to be acquired by a third party within two years after the
Distribution and Harris fails to prove that the subsequent acquisition of Harris
or Lanier and the Distribution were not made pursuant to a plan or a series of
related transactions. Lanier would be obligated to indemnify Harris for all or a
portion of this substantial corporate tax liability under the Tax Disaffiliation
Agreement under certain circumstances. This indemnification obligation would
have a material adverse effect on the results of operations and financial
position of Lanier. However, Harris stockholders would not recognize gain
8
<PAGE> 22
or loss under Section 355(e) of the Code solely because either Harris or Lanier
is acquired by a third party after the Distribution. See "The
Distribution -- Federal Income Tax Consequences of the Distribution" beginning
on page 17 and "Relationship Between Harris and Lanier Following the
Distribution -- Tax Disaffiliation Agreement" beginning on page 20.
RISKS RELATING TO LANIER
LANIER HAS NO RECENT OPERATING HISTORY AS AN INDEPENDENT PUBLIC COMPANY
Lanier does not have a recent operating history as an independent public
company and since 1983 has relied on Harris for various financial,
administrative and managerial expertise in conducting its operations. Following
the Distribution, Lanier will maintain its own credit and banking relationships
and perform its own financial and investor relations functions. While Lanier has
been profitable as a subsidiary of Harris, there can be no assurance that as an
independent company profits will continue at the same level, if at all.
Additionally, there can be no assurance that Lanier will be able to put in place
successfully the financial, administrative and managerial structure necessary to
operate as an independent public company, or that the development of such
structure will not require a significant amount of management's time and other
resources.
HISTORICAL FINANCIAL INFORMATION MAY BE OF LIMITED RELEVANCE
The historical financial information included in this document does not
reflect the results of operations, financial position and cash flows of Lanier
in the future or the results of operations, financial position and cash flows of
Lanier operated as a separate stand-alone entity during the periods presented.
The financial information included herein does not reflect any changes that may
occur in the funding and operations of Lanier as a result of the Distribution.
LANIER'S CREDIT FACILITY AND OTHER INDEBTEDNESS MAY RESTRICT CERTAIN
ACTIVITIES
Prior to the Distribution, Lanier will incur debt under the Credit Facility
in connection with the payment of a cash dividend by Lanier to Harris
immediately prior to the Distribution and for general working capital purposes.
The amount of the dividend will be calculated based on the formula described
under "Relationship between Harris and Lanier Following the
Distribution -- Distribution Agreement" on page 19. If the Distribution had
taken place on August 27, 1999 the cash dividend would have been approximately
$540,500,000 and Lanier would have incurred debt under the Credit Facility of
approximately the same amount. In addition to the debt to be incurred under the
Credit Facility, Lanier will assume or retain certain indebtedness relating to
Lanier's business. As a result of the incurrence of debt under the Credit
Facility and the assumption or retention by Lanier of this indebtedness, Lanier
will have approximately $700 million of indebtedness net of cash on the
Distribution Date. The terms of the Credit Facility will include customary
affirmative and negative covenants that will, among other things, require Lanier
to satisfy certain financial tests and maintain certain financial ratios, and
will limit Lanier's ability to declare and pay dividends on the Lanier Shares.
Lanier may also incur additional indebtedness from time to time for general
corporate purposes, including working capital requirements, capital expenditures
and future acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Credit Facility" beginning on page 32.
ADVERSE ECONOMIC CONDITIONS COULD AFFECT LANIER'S ABILITY TO SERVICE DEBT
Lanier's ability to service its indebtedness will depend on its future
operating performance, which will be affected by prevailing economic conditions
and financial and other factors, certain of which Lanier cannot control. While
Lanier believes that future operating cash flow, together with financing
arrangements, will be sufficient to finance current operating requirements,
Lanier's leverage and debt service requirements may make Lanier more vulnerable
to economic downturns. If Lanier could not service its indebtedness, it would be
forced to pursue one or more alternative strategies such as reducing its capital
expenditures, selling assets, restructuring or refinancing its indebtedness or
seeking additional equity capital (which may substantially dilute the ownership
interest of holders of Lanier Shares). There can be no assurance that Lanier can
effect any of these strategies on
9
<PAGE> 23
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" on page 32.
CHANGES IN LANIER'S CREDIT STANDING COULD REDUCE LANIER'S ABILITY TO FINANCE
CUSTOMER PURCHASES
A portion of Lanier's operating income arises from the financing of its
customers' purchases of Lanier products. On average, 46% of Lanier's aggregate
sales in the United States, Puerto Rico, Canada and Australia are financed
through leases that typically have a term of 3 years. In Europe, 16% of Lanier's
sales derive from rental arrangements that differ from leases primarily because
customers may terminate the rental agreement more quickly and easily. Lanier's
ability to provide financing at competitive rates and realize operating income
is highly dependent upon its own costs of borrowing, which in turn depend upon
Lanier's credit standing. Significant changes in such standing could reduce the
profitability of Lanier's financing business and/or make Lanier's financing less
attractive to customers. Lanier cannot be certain that it can maintain credit
standing sufficient to realize profits on the portion of revenues derived from
financing arrangements.
LANIER OPERATES IN HIGHLY COMPETITIVE MARKETS
Lanier's competitors include the distribution units of large office
equipment manufacturers and independent distributors, as well as office
superstores and consumer electronics chains. As digital and other new technology
develops, Lanier may find itself competing with new distribution channels,
including computer distributors and value added resellers, for products
containing new technology. While Lanier is a significant distributor in the
office products and document management solutions market, certain competitors,
principally the distribution units of large office equipment manufacturers, may
have greater total financial, purchasing and/or sourcing power than Lanier.
Lanier believes that the principal competitive factors in the office products
and document management solutions market are price and product capabilities;
quality and speed of post-sales service support; availability of equipment,
parts and supplies; speed of delivery; financing terms; and availability of
financing, leasing or rental programs. See "Lanier's Business -- Lanier Products
and Services" beginning on page 38 and "-- Competition" on page 42.
LANIER'S SUCCESS WILL DEPEND ON ITS ABILITY TO RESPOND TO TECHNOLOGICAL
DEVELOPMENTS
The document imaging and management industry is undergoing an evolution in
product, moving toward digital technology in a multi-functional office
environment. Lanier's success will partly depend on its ability to respond to
this rapidly changing environment. There can be no assurance that Lanier will be
able to anticipate which products or technologies will gain market acceptance or
that, even if Lanier does correctly anticipate market demand, Lanier's suppliers
will be willing or able to supply such products to Lanier at competitive prices.
Further, there can be no assurance that Lanier will be able to obtain any
manufacturer's authorization necessary to market any newly developed equipment.
Additionally, new products containing new technology may be sold through other
channels of distribution. While it is possible that technological advancements,
including the lowered per unit cost that often accompanies technological
improvements, may enhance unit sales, this trend may reduce Lanier's sales
revenues, and reliability improvements may result in reduced service revenues.
Lanier will also incur increased expenses for the training of its sales and
service personnel to familiarize them with such new technologies. See "Lanier's
Business -- Industry Overview" beginning on page 37.
LANIER IS DEPENDENT ON OUTSIDE SUPPLIERS
Lanier relies on outside suppliers to manufacture the products that it
distributes, including Ricoh, Toshiba, Canon, Sharp and Okidata. Although Lanier
has long-term relationships with its suppliers, there can be no assurance that
products from Lanier's suppliers will continue to be available in the future.
Although Lanier has no reason to believe that access to current sources of
products will become restricted, loss of such access could have a material
adverse effect on Lanier's business, financial condition and results of
operations. See "Lanier's Business -- Suppliers" on page 42.
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LANIER IS DEPENDENT ON CERTAIN KEY PERSONNEL
Lanier's success depends to a significant extent on the continued service
of certain key management personnel. The loss or interruption of the services of
Lanier's senior management personnel or the inability to attract and retain
other qualified management, sales, marketing and technical employees could also
have an adverse effect on Lanier. Lanier intends to use a variety of incentive
plans to attract and retain key management personnel, including a stock
incentive plan, annual bonus plans, a pension plan and a 401(k) plan. See
"Lanier's Management" beginning on page 44.
LANIER IS SUBJECT TO RISKS RELATED TO INTERNATIONAL OPERATIONS
Lanier operates a multinational business and, accordingly, is subject to
risks inherent in international operations. Non-U.S. operations generated
approximately 39.2% of Lanier's fiscal year 1999 revenues and approximately
29.2% of Lanier's fiscal 1998 revenues. Due to the significant amount of
non-U.S. revenues, fluctuations in the value of foreign currencies relative to
the U.S. dollar could increase the volatility of Lanier's U.S.
dollar-denominated operating results. Lanier's non-U.S. operations are also
subject to political, economic and other risks inherent in operating in
countries outside the United States, including possible adverse government
regulation, imposition of import and export duties and quotas, currency
restrictions, price controls, potentially burdensome taxation and/or other
restrictive government actions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Market Risk" beginning on page
34.
LANIER IS SUBJECT TO RISKS RELATED TO FOREIGN CURRENCIES
Lanier purchases and sells a significant portion of its products using
currencies other than U.S. dollars. Approximately 39.5% of Lanier's fiscal year
1999 and 28.4% of Lanier's fiscal year 1998 cost of goods sold were denominated
in foreign currencies. Approximately 36.9% of Lanier's fiscal year 1999 and
25.8% of Lanier's fiscal year 1998 revenues were denominated in foreign
currencies. Due to the significant portion of products purchased and sold by
Lanier in foreign currencies, fluctuations in the value of foreign currencies
relative to the U.S. dollar could have a material adverse effect on Lanier's
U.S. dollar-denominated operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Impact of Foreign
Exchange" on page 33.
UNCERTAINTY OF DIVIDENDS
The payment of dividends is at the discretion of Lanier's board of
directors and will be subject to Lanier's financial results and the availability
of surplus funds to pay dividends. No assurance can be given that Lanier will
pay any dividends. See "Dividend Policies" on page 23.
CERTAIN PROVISIONS OF LANIER'S RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
AND RIGHTS PLAN AND THE TAX DISAFFILIATION AGREEMENT MAY DISCOURAGE TAKEOVERS
Lanier's restated certificate of incorporation and bylaws contain
provisions that may make more difficult or expensive or that may discourage a
tender offer, change in control or takeover attempt that is opposed by Lanier's
board of directors. In particular, Lanier's restated certificate of
incorporation and bylaws:
(1) classify Lanier's board of directors into three groups, so that
stockholders elect only one-third of the board each year;
(2) permit stockholders to remove directors only for cause and only by
the affirmative vote of at least 80% of Lanier's voting shares;
(3) permit a special stockholders' meeting to be called only by a
majority of the board of directors;
(4) do not permit stockholders to take action except at an annual or
special meeting of stockholders;
(5) require stockholders to give Lanier advance notice to nominate
candidates for election to Lanier's board of directors or to make
stockholder proposals at a stockholders' meeting;
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(6) permit Lanier's board of directors to issue, without stockholder
approval, preferred stock with such terms as the board may determine; and
(7) require the vote of the holders of at least 80% of Lanier's voting
shares for stockholder amendments to Lanier's bylaws.
The preferred stock purchase rights attached to the Lanier Shares would, in
effect, prevent a person or group from acquiring more than 15% of the Lanier
Shares without approval from Lanier's board of directors. In addition, Delaware
law generally restricts mergers and other business combinations between Lanier
and any holder of 15% or more of the Lanier Shares, unless the transaction or
the 15% acquisition is approved in advance by Lanier's board of directors. See
"Description of Lanier's Capital Stock" beginning on page 57 and "Certain
Anti-Takeover Provisions of Lanier's Certificate of Incorporation, Bylaws and
Rights Agreement and Delaware Law" beginning on page 59.
These provisions of Lanier's restated certificate of incorporation and
bylaws, Delaware law and the preferred stock purchase rights could discourage
potential acquisition proposals and could delay or prevent a change in control
of Lanier, even though a majority of Lanier's stockholders may consider such
proposals, if effected, desirable. Such provisions could also make it more
difficult for third parties to remove and replace the members of Lanier's board
of directors. Moreover, these provisions could diminish the opportunities for
stockholders to participate in certain tender offers, including tender offers at
prices above the then-current market value of the Lanier Shares, and may also
inhibit increases in the trading price of the Lanier Shares that could result
from takeover attempts or speculation.
In connection with the Distribution, Lanier has agreed to indemnify Harris
for all taxes and liabilities incurred solely because (1) Lanier breaches a
representation or covenant given to Sullivan & Cromwell in connection with
rendering its tax opinion, which contributes to an Internal Revenue Service
determination that the Distribution was not tax-free or (2) Lanier or an
affiliate's post-Distribution action or omission contributes to an Internal
Revenue Service determination that the Distribution was not tax-free. Unless
Harris effectively rebuts the presumption that a change in control transaction
involving Lanier or disposition of Lanier occurring prior to the second
anniversary of the Distribution Date is pursuant to the same plan or series of
related transactions as the Distribution, the Internal Revenue Service might
determine that the Distribution was not tax-free, giving rise to Lanier's
indemnification obligation. These provisions of the Tax Disaffiliation Agreement
may have the effect of discouraging or preventing an acquisition of Lanier or a
disposition of Lanier's businesses, which may in turn depress the market price
for the Lanier Shares. See "Relationship Between Harris and Lanier Following the
Distribution -- Tax Disaffiliation Agreement" beginning on page 20.
LANIER IS SUBJECT TO RISKS OF SIGNIFICANT EXPENSE AND BUSINESS DISRUPTION DUE
TO YEAR 2000 PROBLEMS
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, prior to January 1, 2000, computer systems
and/or software used by many companies (including Lanier) will need to be
upgraded to comply with such "Year 2000" requirements. Significant uncertainty
exists in the software industry concerning the potential consequences of the
Year 2000 problem. Although Lanier has determined that it needs to replace or
modify several of its software systems and is in the process of replacing or
outsourcing many of its time sensitive software systems, there can be no
assurance that the costs of these programs will not be significantly greater
than expected, that compliance will be achieved in a timely manner, or that
Lanier's suppliers, customers or other third parties will bring their systems
into Year 2000 compliance in a timely manner. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Impact of Year
2000" beginning on page 34.
EURO CONVERSION COULD ADVERSELY IMPACT LANIER'S SYSTEMS
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common currency, the Euro. For a three-year
transition period, both the Euro and the individual countries' currencies will
remain in circulation. After January 1, 2002, the Euro will represent the sole
legal
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tender for EMU countries. The adoption of the Euro affects a multitude of
financial systems and business applications, as EMU countries begin to conduct
commerce in the Euro and in their existing national currencies.
For the fiscal year ended July 2, 1999, Lanier derived 20.7% of its
revenues from EMU countries. Lanier is currently addressing Euro-related issues
and their impact on Lanier's information systems, currency exchange rate risk,
taxation, contracts, competition and pricing. Action plans being implemented are
expected to result in compliance with all applicable laws and regulations.
However, there can be no certainty that Lanier's plans to address Euro-related
issues are adequate or that they will be successfully implemented or that
external factors will not have a material adverse effect upon Lanier's
operations or business in the EMU or elsewhere. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Euro Conversion" on
page 36.
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INTRODUCTION
On -, 1999, Harris' board of directors declared a pro rata distribution
payable to the holders of record of Harris common stock at the close of business
on -, 1999 (the "Record Date"), of one share of common stock (the "Lanier Common
Stock") of Lanier, together with the associated preferred stock purchase right
(the shares of Lanier Common Stock and the associated preferred stock purchase
rights collectively, the "Lanier Shares"), for every share of Harris common
stock outstanding on the Record Date. The Distribution will be effected at 11:59
p.m., Eastern Daylight Time, on -, 1999 (the "Distribution Date"). As a result
of the Distribution, approximately 90% of the outstanding Lanier Shares will be
distributed to Harris stockholders, and Harris will retain ownership of
approximately 10% of the outstanding Lanier Shares. Harris intends to distribute
the Lanier Shares by book entry. Instead of stock certificates, each Harris
stockholder that is a record holder of Harris shares will receive a statement of
such stockholder's book entry account for the Lanier Shares distributed to such
stockholder. Account statements reflecting ownership of the Lanier Shares will
be mailed shortly after the Distribution Date. Lanier Shares should be credited
to accounts with stockbrokers, banks or nominees of Harris stockholders that are
not record holders on or about -, 1999.
Lanier was incorporated in 1985 as the successor to a business established
in 1935 and acquired by Harris in 1983. Lanier's principal executive offices are
located at 2300 Parklake Drive, N.E., Atlanta, Georgia 30345, and its telephone
number is (770) 496-9500.
The business of Lanier constitutes a significant part of the business of
Harris. Following the Distribution, which was first announced on April 13, 1999,
and following the unrelated sale of Harris' semiconductor business, which was
consummated on August 13, 1999, Harris will be a more focused organization with
five divisions, all focusing on communications. Harris will provide
communications equipment, systems and support services -- concentrating on the
wireless, broadcast, government systems and network support markets.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The board of directors and management of Harris believe that the
Distribution is in the best interests of Harris, Lanier and Harris stockholders.
Harris believes that the Distribution will meaningfully enhance value for Harris
stockholders and give Lanier the financial and operational flexibility to take
advantage of significant growth opportunities in the office products and
document management solutions business. Lanier's business is a distinct business
with significant differences from Harris' other operations with respect to its
markets, products, capital needs and plans for growth. Harris' board of
directors and management believe that the Distribution will enhance the ability
of each of Lanier and Harris to focus on strategic initiatives and new business
opportunities, improve cost structures and operating efficiencies and design
equity-based compensation programs targeted to its own performance. In addition,
Harris' board of directors expects that the transition to an independent company
will heighten Lanier management's focus, provide Lanier with greater access to
capital, and allow the investment community to measure Lanier's performance
relative to its peers.
In addition, the Distribution will give Lanier direct access to capital
markets. As part of Harris, Lanier competed with Harris' other core business
groups for capital to finance expansion and growth opportunities. As a separate
entity, Lanier will be free of Harris' capital structure restrictions and should
be in a better position to fund the implementation of its business strategy. The
Distribution will also enable Lanier to provide its management and employees
incentive compensation in the form of equity ownership in Lanier, enhancing
Lanier's ability to attract, retain and motivate key employees.
The separation will also enable Harris management to concentrate its
attention on the remaining Harris businesses. Harris management strongly
believes that these businesses may be expanded more effectively if Lanier is no
longer controlled by Harris.
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REASONS FOR HARRIS' RETENTION OF LANIER SHARES
Harris will retain approximately 10% of the Lanier Shares because the
contemplated future sale of these Lanier Shares will provide Harris with a
source of cash following the Distribution. Harris intends to use this cash to
make acquisitions in the telecommunications equipment industry.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution will be set
forth in an Agreement and Plan of Distribution (the "Distribution Agreement")
between Harris and Lanier. See "Relationship between Harris and Lanier Following
the Distribution -- Distribution Agreement" beginning on page 19.
The Distribution will be made on the basis of one Lanier Share for every
share of Harris common stock outstanding on the Record Date. The actual total
number of Lanier Shares to be distributed will depend on the number of Harris
shares outstanding on the Record Date. Based upon the number of Harris shares
outstanding on September 24, 1999, approximately 79,274,473 Lanier Shares will
be distributed to Harris stockholders. The Lanier Shares to be distributed will
constitute approximately 90% of the outstanding Lanier Shares. Harris will
retain approximately 10% of the outstanding Lanier Shares. Options to purchase
Harris shares ("Harris Options") held by Lanier employees or Harris employees
who will become Lanier employees will be replaced by options to purchase Lanier
Shares ("Lanier Options"). The option price and number of shares subject to each
option will be adjusted so that the aggregate difference between the market
price and the option price will be equal for the Harris Options and the Lanier
Options. See "Relationship Between Harris and Lanier Following the
Distribution -- Employee Benefits and Compensation Allocation Agreement" on page
21. Performance share awards of Harris shares previously granted to Lanier
employees under the Harris Stock Incentive Plan will be canceled and replaced by
Lanier performance shares granted under the Lanier Stock Incentive Plan (the
"Lanier Stock Plan"). The Lanier Shares will be fully paid and non-assessable
and the holders thereof will not be entitled to preemptive rights. See
"Description of Lanier's Capital Stock" beginning on page 57.
Harris intends to use a book entry system to distribute the Lanier Shares
in the Distribution unless the stockholder requests a stock certificate.
Following the Distribution, each record holder of Harris stock on the Record
Date will receive from ChaseMellon Shareholder Services, L.L.C. (the
"Distribution Agent") a statement of the Lanier Shares credited to the
stockholder's account. After the Distribution, stockholders may request stock
certificates from Lanier's transfer agent instead of participating in the book
entry system.
Fractional Lanier Shares will not be issued. If a stockholder's account
with Harris' dividend reinvestment program is credited with a fractional Harris
share as of the Record Date, the Distribution Agent will aggregate all
fractional Lanier Shares that would otherwise have been credited to a
stockholder's account into whole shares, and sell such whole shares in the open
market at then prevailing prices on behalf of all stockholders entitled to
receive fractional shares, who will receive cash in the amount of their pro rata
share of the total sale proceeds, net of brokerage commissions. Such sales are
expected to be made as soon as practicable after the mailing of the account
statements to Harris stockholders.
No Harris stockholder will be required to pay any cash or other
consideration for the Lanier Shares received in the Distribution, or to
surrender or exchange Harris shares in order to receive Lanier Shares. The
Distribution will not affect the number of, or the rights attaching to,
outstanding Harris shares. No vote of Harris stockholders is required or sought
in connection with the Distribution, and Harris stockholders will have no
appraisal rights in connection with the Distribution.
In order to receive Lanier Shares in the Distribution, Harris stockholders
must be stockholders at the close of business on the Record Date.
RESULTS OF THE DISTRIBUTION
After the Distribution, Lanier will be a separate public company operating
its current office products and document management solutions business.
Immediately after the Distribution, Lanier expects to have approximately 10,345
holders of record of Lanier Shares and approximately 88,082,748 Lanier Shares
outstanding, based on the number of stockholders of record and outstanding
Harris shares on September 24, 1999, the
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distribution ratio of one Lanier Share for every Harris share and the retention
by Harris of approximately 10% of the outstanding Lanier Shares. Harris Options
held by Lanier employees or Harris employees who will become Lanier employees
will be replaced by Lanier Options. Performance share awards granted to Lanier
employees under the Harris Stock Incentive Plan will be canceled and replaced by
Lanier performance shares granted under the Lanier Stock Plan. See "Relationship
Between Harris and Lanier Following the Distribution -- Employee Benefits and
Compensation Allocation Agreement" on page 21. The actual number of Lanier
Shares to be distributed will be determined as of the Record Date. The
Distribution will not affect the number of outstanding Harris shares or any
rights of Harris stockholders.
LISTING AND TRADING OF THE LANIER SHARES
The Lanier Shares have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "LR." A
stockholder who decides to sell any Lanier Shares or Harris shares should make
sure that such stockholder's stockbroker, bank or other nominee understands
whether such stockholder wants to sell Harris shares, Lanier Shares, or both.
Beginning on or about -, 1999 and continuing until -, 1999, New York Stock
Exchange practices should generally allow sales of Harris shares either together
with the right to receive the Lanier Shares in the Distribution or without the
right to receive the Lanier Shares. A stockholder that sells Harris shares with
the right to receive the Lanier Shares will be required to deliver to the buyer
the Lanier Shares received in respect of such Harris shares in the Distribution.
Stockholders should also be able to sell their rights to receive Lanier Shares
without selling Harris shares.
Sales of Harris shares with the right to receive the Lanier Shares should
generally settle in the three business day settlement period. Sales of Harris
shares without the right to receive the Lanier Shares and sales of the Lanier
Shares without Harris shares are expected to settle four business days following
the date account statements for the Lanier Shares are mailed. Beginning about -,
1999, stockholders should only be able to sell Harris shares and Lanier Shares
separately. Stockholders should check with their brokers or banks.
The Lanier Shares distributed to Harris stockholders will be freely
transferable, except for Lanier Shares received by persons who may be deemed to
be "affiliates" of Lanier under the Securities Act. Persons who may be deemed to
be affiliates of Lanier after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with
Lanier and may include certain directors, officers and significant stockholders
of Lanier. Persons who are affiliates of Lanier will be permitted to sell their
Lanier Shares only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemptions afforded by Section 4(1) of the
Securities Act and the brokerage sales provisions of Rule 144 thereunder. It is
believed that persons who may be deemed to be affiliates of Lanier after the
Distribution will beneficially own approximately - Lanier Shares, or less than
2% of the outstanding Lanier Shares.
Harris will retain approximately 10% of the outstanding Lanier Shares, and
Lanier will grant Harris certain rights entitling Harris to cause Lanier to
register Harris' Lanier Shares under the securities laws. Harris has agreed not
to sell its Lanier Shares for six months following the Distribution, but Harris
intends to sell its shares within two years after the Distribution. In addition,
Harris has agreed to vote its Lanier Shares in proportion to votes cast by other
Lanier stockholders. See "Relationship Between Harris and Lanier Following the
Distribution -- Registration Rights Agreement" on page 20.
There can be no assurance as to whether the Lanier Shares will be actively
traded or as to the prices at which Lanier Shares will trade. Some of the Harris
stockholders who receive Lanier Shares may decide that they do not want shares
in an office products and document management solutions company, and may sell
their Lanier Shares following the Distribution. This may delay the development
of an orderly trading market in the Lanier Shares for a period of time following
the Distribution. Until the Lanier Shares are fully distributed and an orderly
market develops, the prices at which the Lanier Shares trade may fluctuate
significantly and may be lower or higher than the price that would be expected
for a fully distributed issue. Prices for Lanier Shares will be determined in
the marketplace and may be influenced by many factors, including the depth and
liquidity of the market for the Lanier Shares, Lanier's results of operations,
what investors think of Lanier and the office products and document
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management solutions business, the amount of dividends that Lanier pays, changes
in economic conditions in the office products and document management solutions
business and general economic and market conditions.
Following the Distribution, Harris common stock will continue to be listed
and traded on the New York Stock Exchange under the symbol "HRS." As a result of
the Distribution, the trading price of Harris common stock immediately following
the Distribution will likely be lower than the trading price of Harris common
stock immediately prior to the Distribution. Until the market has fully analyzed
the operations of Harris without the operations of Lanier, the prices at which
Harris common stock trades may fluctuate significantly.
In addition, the stock market often experiences significant price
fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. Market fluctuations could have a material
adverse impact on the trading price of the Lanier Shares and/or Harris common
stock.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following summary of the material federal income tax consequences of
the Distribution is not a complete description of those consequences and, in
particular, may not address federal income tax considerations that affect the
treatment of a stockholder who acquired Harris stock pursuant to an employee
benefit plan. Each stockholder's individual circumstances may affect the tax
consequences of the Distribution to such stockholder. In addition, no
information is provided herein with respect to tax consequences under applicable
foreign, state or local laws. Consequently, each Harris stockholder is advised
to consult his or her own tax advisor as to the specific tax consequences of the
Distribution.
Neither Harris nor Lanier has requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Distribution.
GENERAL
Sullivan & Cromwell, special counsel to Harris, will render an opinion to
Harris and Lanier that the Distribution is a distribution described in Section
355 of the Code. As a consequence thereof, and assuming that Harris common stock
is a capital asset in the hands of a Harris stockholder:
- Except for any cash received in lieu of a fractional Lanier Share, a
Harris stockholder will not recognize any income, gain or loss as a
result of the receipt of Lanier Shares in the Distribution.
- A Harris stockholder's holding period for the Lanier Shares received in
the Distribution will include the period for which that stockholder's
Harris shares were held.
- A Harris stockholder's tax basis for Lanier Shares received in the
Distribution will be determined by allocating to the Lanier Shares, on
the basis of the relative fair market values of Harris shares and Lanier
Shares at the time of the Distribution, a portion of the stockholder's
basis in his or her Harris shares. The Harris stockholder's basis in his
or her Harris shares will be decreased by the portion allocated to the
Lanier Shares.
- The receipt of cash in lieu of a fractional Lanier Share will be treated
as a sale of the fractional Lanier Share, and a stockholder will
recognize gain or loss equal to the difference between the amount of cash
received and the stockholder's basis in the fractional Lanier Share, as
determined above. The gain or loss will be long-term capital gain or loss
if the holding period for the fractional Lanier Share, as determined
above, is more than one year.
- A Harris stockholder will not recognize any income, gain or loss as a
result of the receipt of the preferred stock purchase rights which are
attached to Lanier Common Stock in the Distribution, and the receipt of
such rights will have no effect on a stockholder's basis or holding
period in the Lanier Shares or the Harris shares. For federal income tax
purposes, the distribution of such rights will not occur unless and until
they become separately transferable.
- Neither Harris nor Lanier will recognize any gain or loss in the
Distribution other than deferred intercompany gains that may be triggered
as a result of the Distribution.
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Harris expects that the Distribution will trigger deferred gains resulting
in tax liabilities of less than $5 million that will be payable by Lanier under
the Tax Disaffiliation Agreement. Harris does not expect that the Distribution
will result in the recognition of any other deferred intercompany transactions
or excess loss accounts.
In rendering its opinion, Sullivan & Cromwell will rely upon analysis,
representations and future undertakings from Lanier and Harris and certain other
data, documentation and other materials that Sullivan & Cromwell deems necessary
for purposes of its opinion. The opinion of counsel will not be binding on the
Internal Revenue Service or the courts; accordingly, there can be no complete
assurance that the Distribution will qualify as a tax-free transaction to Harris
or Harris shareholders. In addition, the Distribution may become taxable to
Harris (but not Harris stockholders) if Harris or Lanier were to be acquired by
a third party within two years after the Distribution and Harris failed to prove
that the subsequent acquisition of Harris or Lanier and the Distribution were
not made pursuant to a plan or a series of related transactions.
INDEMNIFICATION
Lanier would be obligated to indemnify Harris under the Tax Disaffiliation
Agreement for the full amount of any liability of Harris incurred solely because
(1) Lanier breaches a representation or covenant given to Sullivan & Cromwell in
connection with rendering its tax opinion, which breach contributes to an
Internal Revenue Service determination that the Distribution was not tax-free,
or (2) Lanier or an affiliate's post-Distribution action or omission contributes
to an Internal Revenue Service determination that the Distribution was not
tax-free. Harris will indemnify Lanier for all taxes and liabilities incurred
solely because (1) Harris breaches a representation or covenant given to
Sullivan & Cromwell in connection with rendering its tax opinion, which breach
contributes to an Internal Revenue Service determination that the Distribution
was not tax-free, or (2) Harris or an affiliate's post-Distribution action or
omission contributes to an Internal Revenue Service determination that the
Distribution was not tax-free. If the Internal Revenue Service determines that
the Distribution was not tax-free for any other reason, Harris and Lanier will
indemnify each other against 50% of all taxes and liabilities. If triggered,
Lanier's indemnification obligation would have a material adverse effect on the
results of operations and financial position of Lanier.
Lanier will also indemnify Harris for any taxes resulting from any internal
realignment undertaken to facilitate the Distribution on or before the
Distribution Date. Any such taxes are not expected to be material.
For a description of the agreement pursuant to which Harris and Lanier have
provided for certain tax disaffiliation and other tax-related matters, see
"Relationship Between Harris and Lanier Following the Distribution -- Tax
Disaffiliation Agreement" beginning on page 20.
INFORMATION REPORTING
Current Treasury regulations require each Harris stockholder who receives
Lanier Shares pursuant to the Distribution to attach to his or her federal
income tax return for the year in which the Distribution occurs a detailed
statement setting forth such data as may be appropriate in order to show the
applicability of Section 355 of the Code to the Distribution. Harris will
provide appropriate information to each holder of record of Harris common stock
as of the Record Date.
REASONS FOR FURNISHING THIS DOCUMENT
This document is being furnished solely to provide information to Harris
stockholders who will receive Lanier Shares in the Distribution. It is not, and
is not to be construed as, an inducement or encouragement to buy or sell any
securities of Harris or Lanier. Neither Harris nor Lanier will update the
information contained in this document except in the normal course of their
respective public disclosure practices. However, we will amend this document if
there is any material change in the terms of the Distribution or if Sullivan &
Cromwell will not render the opinion described above under "-- Federal Income
Tax Consequences of the Distribution."
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RELATIONSHIP BETWEEN HARRIS AND LANIER
FOLLOWING THE DISTRIBUTION
For purposes of governing certain of the ongoing relationships between
Harris and Lanier after the Distribution and to provide for an orderly
transition to the status of two independent companies, Harris and Lanier have
entered or will enter into the agreements described in this section. The forms
of agreements summarized in this section are included as exhibits to the
Registration Statement on Form 10 (including any amendments thereto, the
"Registration Statement") that Lanier has filed with the Securities and Exchange
Commission (the "Commission"), and the following summaries are qualified in
their entirety by reference to the agreements as so filed. See "Additional
Information" beginning on page 65.
DISTRIBUTION AGREEMENT
Prior to the Distribution Date, Harris and Lanier will enter into the
Distribution Agreement, which will provide for, among other things, the
principal corporate transactions required to effect the Distribution and certain
other agreements relating to the continuing relationship between Lanier and
Harris after the Distribution.
The Distribution Agreement will provide that on or prior to the
Distribution Date, Lanier will issue to Harris a number of Lanier Shares so that
the total number of Lanier Shares owned by Harris immediately following
consummation of the Distribution will be one less than 10% of the outstanding
Lanier Shares. Harris will effect the Distribution by delivering a certificate
representing approximately 90% of such Lanier Shares to the Distribution Agent.
Although Harris and Lanier have generally held their assets separately,
Harris currently holds stock of business entities which are part of Lanier's
business, and Lanier currently holds stock of business entities which are a part
of Harris' business. Ownership of those entities will be transferred under the
Distribution Agreement so that their legal ownership reflects the way in which
they are reported financially. These transfers will have no accounting or
financial reporting impact upon either Harris or Lanier.
Under the Distribution Agreement and effective as of the Distribution Date,
Lanier will assume, and will agree to indemnify Harris against, all liabilities,
litigation and claims, including related insurance costs, arising out of
Lanier's business, and Harris will retain, and will agree to indemnify Lanier
against, all liabilities, litigation and claims, including related insurance
costs, arising out of Harris' businesses. The foregoing obligations will not
entitle an indemnified party to recovery to the extent any such liability is
covered by proceeds received by such party from any third party insurance
policy.
The Distribution Agreement will provide for the payment of a cash dividend
by Lanier or its affiliates to Harris or its affiliates immediately prior to the
Distribution, the assumption by Lanier of certain of Harris' indebtedness
relating to Lanier's business and the settlement of certain intercompany loans
between Harris and Lanier. The aggregate amount of such cash dividend will be
the sum of: (i) $700,000,000, plus (ii) any cash and cash equivalents retained
by Lanier on the Distribution Date; less (iii) the amount of indebtedness for
borrowed money retained or assumed by Lanier; and less (iv) amounts owed by
Lanier under Lanier's European asset securitization facility. If the
Distribution had taken place on August 27, 1999, the cash dividend would have
been $540,500,000, based on the assumed or retained debt, cash and asset
securitization balances as of that date, and Lanier would have incurred debt
under the Credit Facility of approximately the same amount. The amount of the
actual cash dividend to be paid to Harris is subject to change, but will be
determined by the above formula. The formula for determining the amount of the
dividend was determined based on Harris' goals of maximizing combined
stockholder value for Harris' present stockholders while providing Lanier with a
capital structure appropriate to its business. In addition to the cash dividend,
pursuant to the Distribution Agreement Lanier will forgive intercompany accounts
owed by Harris having an aggregate principal amount of approximately
$194,000,000.
The Distribution Agreement will provide that each of Harris and Lanier
shall be granted access to certain records and information in the possession of
the other, and will require the retention by each of Harris and Lanier for a
period of eight years following the Distribution Date of all such information in
its possession.
19
<PAGE> 33
TRANSITION SERVICES AGREEMENT
Harris and Lanier will enter into a Transition Services Agreement prior to
the Distribution Date under which, in exchange for the fees specified in such
agreement, Harris will agree to continue to provide certain administrative
services to Lanier, including tax filing assistance, information management
services and other services, and Lanier will agree to provide certain
administrative services to Harris. The Transition Services Agreement will
provide that each of Lanier and Harris will undertake to provide the same degree
of care and diligence as it uses in providing these services to itself and its
subsidiaries. Provision of services under the Transition Services Agreement will
terminate no later than one year following the Distribution Date. Lanier
believes that the terms and conditions of the Transition Services Agreement are
as favorable to Lanier as those available from unrelated parties for a
comparable arrangement.
REGISTRATION RIGHTS AGREEMENT
Harris and Lanier will enter into a Registration Rights Agreement prior to
the Distribution Date in which Harris will agree not to offer, sell, contract to
sell or otherwise transfer or dispose of any of the Lanier Shares retained by
Harris during the period ending on the 180th calendar day following the
Distribution Date. The Registration Rights Agreement will provide that Harris
will vote its Lanier Shares on all matters in proportion to the way in which the
other Lanier stockholders vote their Lanier Shares. The Registration Rights
Agreement will also provide that at any time during the period commencing on the
120th calendar day after the Distribution Date and terminating upon the second
anniversary of the Distribution Date, Harris will have the right on two
occasions to require Lanier to file with the Commission a registration statement
under the Securities Act registering all or a portion of the Lanier Shares held
by Harris. On one of these occasions, Harris will be entitled to cause Lanier to
file with the Commission a "shelf" registration statement covering the resale of
the Lanier Shares retained by Harris. Lanier has agreed to use its reasonable
efforts to keep any such registration statement continuously effective for the
period of time terminating upon the earlier of the date that Harris no longer
holds any Lanier Shares or the second anniversary of the Distribution Date. The
Registration Rights Agreement will also provide that Lanier will take certain
actions to assist Harris in offering, marketing and selling the Lanier Shares
retained by Harris and pay certain expenses in connection therewith. In
addition, the Registration Rights Agreement will also provide that Lanier will
indemnify Harris against certain losses, claims, damages and liabilities,
including liabilities under the federal securities laws.
TAX DISAFFILIATION AGREEMENT
Harris and Lanier will enter into a Tax Disaffiliation Agreement which sets
out each party's rights and obligations with respect to deficiencies and
refunds, if any, of federal, state, local or foreign taxes for periods before
and after the Distribution and related matters such as the filing of tax returns
and the conduct of Internal Revenue Service and other audits. Under the Tax
Disaffiliation Agreement, Lanier will indemnify Harris for any tax liability of
Lanier or its affiliates for any period. Lanier will also indemnify Harris for
all taxes and liabilities incurred solely because (1) Lanier breaches a
representation or covenant given to Sullivan & Cromwell in connection with
rendering its tax opinion, which breach contributes to an Internal Revenue
Service determination that the Distribution was not tax-free or (2) Lanier or an
affiliate's post-Distribution action or omission contributes to an Internal
Revenue Service determination that the Distribution was not tax-free. Harris
will indemnify Lanier for all taxes and liabilities incurred solely because (1)
Harris breaches a representation or covenant given to Sullivan & Cromwell in
connection with rendering its tax opinion, which breach contributes to an
Internal Revenue Service determination that the Distribution was not tax-free,
or (2) Harris or an affiliate's post-Distribution action or omission contributes
to an Internal Revenue Service determination that the Distribution was not
tax-free. If the Internal Revenue Service determines that the Distribution was
not tax-free for any other reason, Harris and Lanier will indemnify each other
against 50% of all taxes and liabilities.
Lanier will also indemnify Harris for any taxes resulting from any internal
realignment undertaken to facilitate the Distribution on or before the
Distribution Date. Any such taxes are not expected to be material.
20
<PAGE> 34
EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT
Prior to the Distribution, Harris and Lanier will enter into the Employee
Benefits and Compensation Allocation Agreement (the "Employee Benefits
Agreement"), which will contain certain provisions relating to employee
compensation, benefits and labor matters and the treatment of options to
purchase and awards with respect to Harris shares held by Lanier employees or
Harris employees who will become Lanier employees. The Employee Benefits
Agreement will provide that Harris Options held by Lanier employees or Harris
employees who will become Lanier employees will be replaced by Lanier Options.
The option price and number of shares subject to each option will be adjusted so
that the aggregate difference between the market price and the option price will
be equal for the Harris Options and the Lanier Options. The number of shares
subject to each Lanier Option will be determined by multiplying (i) the number
of shares subject to each Harris Option by (ii) a number equal to (A) the
closing price of Harris shares on the New York Stock Exchange on the Record
Date, divided by (B) the opening price of the Lanier Shares on the New York
Stock Exchange on the day following the Distribution Date (such result, the
"Lanier Option Adjustment Ratio"). Similarly, the price of each Lanier Option
will be determined by dividing the price of each Harris Option by the Lanier
Option Adjustment Ratio. Performance share awards granted to Lanier employees
under Harris' Stock Incentive Plan will be canceled and replacement performance
shares will be awarded under the Lanier Stock Plan by multiplying the number of
performance shares by the Lanier Option Adjustment Ratio.
21
<PAGE> 35
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the historical and pro forma consolidated
debt and capitalization of Lanier at July 2, 1999. This data should be read in
conjunction with the historical consolidated balance sheet of Lanier and the
unaudited pro forma consolidated balance sheet and the notes thereto, and the
introduction to the unaudited pro forma consolidated financial statements
appearing elsewhere in this document. The pro forma information set forth below
gives effect to the Distribution as if it had occurred on July 2, 1999. The pro
forma information may not necessarily reflect the debt and capitalization of
Lanier in the future or as it would have been had Lanier been a separate,
independent company at July 2, 1999 or had the Distribution actually been
effected on such date.
<TABLE>
<CAPTION>
JULY 2, 1999
----------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt...................................... $ 138,011 -- $ 138,011
Current portion of long-term debt.................... 2,582 -- 2,582
Long-term debt....................................... 4,622 $ 540,994(A) 545,616
Shareholder Equity:
Preferred stock, par value $1.00; authorized
1,000,000 shares; issued none................... -- -- --
Common stock, par value $1.00; authorized 1,000,000
shares; issued 41,893 shares.................... 42 847(B) 889
Additional paid-in-capital......................... 329,679 (163,778)(C) 165,901
Retained earnings.................................. 586,556 (586,556)(C) --
Accumulated comprehensive loss..................... (33,539) -- (33,539)
---------- --------- ---------
Total shareholder equity............................. 882,738 (749,487) 133,251
---------- --------- ---------
Total capitalization................................. $1,027,953 $(208,493) $ 819,460
========== ========= =========
</TABLE>
NOTES TO PRO FORMA COMBINED CAPITALIZATION
The following adjustments were made to the balance sheet of Lanier as of July 2,
1999 to give effect to the Distribution as if it had occurred as of that date.
(A) To reflect additional debt of Lanier to be incurred on or prior to the
Distribution Date under the Credit Facility. Pro forma debt is subject to
change and the components may be revised prior to the Distribution Date.
(B) To reflect additional Lanier Shares to be distributed after giving effect to
the Distribution, Lanier Shares retained by Harris and the conversion of
performance share awards of Harris. Pro forma par value is $.01, 500,000,000
shares of Lanier Common Stock are authorized, and 88,857,000 shares of
Lanier Common Stock are assumed to be outstanding.
(C) To reflect pro forma income adjustments, settlement of intercompany accounts
and a dividend to be paid by Lanier to Harris immediately prior to the
Distribution. The aggregate amount of such dividend will be the sum of: (i)
$700 million; plus (ii) any cash and cash equivalents retained by Lanier on
the Distribution Date; less (iii) the amount of indebtedness for borrowed
money retained or assumed by Lanier; and less (iv) amounts owed by Lanier
under Lanier's European asset securitization facility. See "Notes to
Unaudited Pro Forma Consolidated Income Statement" on page 27 and "Notes to
Unaudited Pro Forma Consolidated Balance Sheet" on page 26.
22
<PAGE> 36
DIVIDEND POLICIES
Following the Distribution, Lanier's dividend policy will be set by
Lanier's board of directors. Lanier intends to pay quarterly cash dividends,
although the declaration and payment of dividends is at the discretion of
Lanier's board of directors and will be subject to Lanier's financial results
and the availability of surplus funds to pay dividends. Delaware law prohibits
Lanier from paying dividends or otherwise distributing funds to its
stockholders, except out of legally available funds. The amount of quarterly
cash dividends will depend on a number of factors, including Lanier's financial
condition, capital requirements, results of operations, future business
prospects and other factors the Lanier Board may deem relevant. No assurance can
be given that Lanier will pay any dividends. See "Risk Factors -- Uncertainty of
Dividends" on page 11. Certain covenants set forth in the Credit Facility may
limit Lanier's ability to declare and pay dividends and distributions on the
Lanier Shares. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Credit Facility" beginning on page 32. Lanier
intends to establish a direct stock purchase and dividend reinvestment plan that
will enable holders to purchase additional Lanier Shares and to reinvest
dividends into additional Lanier Shares.
Following the Distribution, Harris intends to pay quarterly dividends at an
initial annual rate substantially below Harris' current dividend rate of $.96
per share. No determination has been made by Harris' board of directors with
respect to the initial dividend rate that will be paid following the
Distribution. The payment and level of dividends is at the discretion of Harris'
board of directors and will be subject to Harris' financial results and the
availability of surplus funds to pay dividends. Delaware law prohibits Harris
from paying dividends or otherwise distributing funds to its stockholders,
except out of legally available funds. The declaration of dividends and the
amount thereof will depend on a number of factors, including Harris' financial
condition, capital requirements, results of operations, future business
prospects and other factors Harris' board of directors may deem relevant. No
assurance can be given that Harris will pay any dividends.
23
<PAGE> 37
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Lanier was acquired by Harris in 1983 and has no recent operating history
as an independent company. The historical consolidated financial statements of
Lanier contained in this document reflect periods during which Lanier did not
operate as an independent company, and certain assumptions were made in
preparing such financial statements. Therefore, the historical consolidated
financial statements may not necessarily reflect the consolidated results of
operations or financial position that would have existed had Lanier been an
independent company.
The following unaudited pro forma consolidated financial statements of
Lanier make adjustments to the historical consolidated balance sheet at July 2,
1999 as if the Distribution had occurred on July 2, 1999, and the historical
consolidated income statements for the fiscal year ended July 2, 1999, as if the
Distribution had occurred on July 4, 1998.
The unaudited pro forma consolidated financial statements of Lanier should
be read in conjunction with the historical Consolidated Financial Statements of
Lanier and the Notes thereto contained elsewhere in this document. The pro forma
consolidated financial information is presented for informational purposes only
and may not necessarily reflect the future earnings, results of operations or
financial position of Lanier or what the earnings, results of operations or
financial position would have been had Lanier's businesses been operated as an
independent company for the periods indicated.
24
<PAGE> 38
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 18,209 -- $ 18,209
Trade receivables................................... 348,604 -- 348,604
Receivables from parent............................. 194,521 $(194,521)(A) --
Inventories......................................... 166,404 -- 166,404
Prepaid expenses.................................... 17,107 -- 17,107
Deferred income taxes............................... 39,276 13,736(B) 53,012
---------- --------- ----------
TOTAL CURRENT ASSETS........................ 784,121 (180,785) 603,336
OTHER ASSETS
Rental equipment-net................................ 140,718 -- 140,718
Property, plant and equipment-net................... 42,755 -- 42,755
Notes receivables-net............................... 203,657 -- 203,657
Intangibles-net..................................... 125,504 -- 125,504
Other............................................... 40,953 -- 40,953
---------- ----------
TOTAL OTHER ASSETS.......................... 553,587 -- 553,587
---------- --------- ----------
TOTAL ASSETS.......................................... $1,337,708 $(180,785) $1,156,923
========== ========= ==========
LIABILITIES AND SHAREHOLDER EQUITY
CURRENT LIABILITIES
Notes payable....................................... $ 138,011 -- $ 138,011
Trade payables...................................... 86,815 -- 86,815
Retirement plan accounts............................ 38,964 -- 38,964
Accrued compensation................................ 39,066 -- 39,066
Accrued interest and sundry taxes................... 21,772 $ 27,708(B) 49,480
Other accrued items................................. 33,610 -- 33,610
Unearned service income............................. 57,898 -- 57,898
Income taxes........................................ 15,460 -- 15,460
Long-term debt-current portion...................... 2,582 -- 2,582
---------- --------- ----------
TOTAL CURRENT LIABILITIES................... 434,178 27,708 461,886
OTHER LIABILITIES
Deferred income taxes............................... 16,170 -- 16,170
Long-term debt...................................... 4,622 540,994(C) 545,616
SHAREHOLDER EQUITY
Common Stock, $1.00 par value, 1,000,000 shares
authorized; issued and outstanding 41,893
shares........................................... 42 847(D) 889
(194,521)(A)
8,440(B)
(540,994)(C)
(847)(D)
Additional paid-in capital.......................... 329,679 564,144(C) 165,901
(22,412)(B) --
Retained earnings................................... 586,556 (564,144)(C)
Accumulated comprehensive loss...................... (33,539) -- (33,539)
---------- --------- ----------
Total Shareholder Equity.................... 882,738 (749,487) 133,251
---------- --------- ----------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY.............. $1,337,708 $(180,785) $1,156,923
========== ========= ==========
</TABLE>
25
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The following adjustments were made to Lanier's July 2, 1999 historical
consolidated balance sheet to give effect to the Distribution as if it had
occurred on that date:
(A) Forgiveness of intercompany accounts between Harris and Lanier.
(B) Accruals for additional interest expense, elimination of interest income on
indebtedness loans to Harris and the related tax benefit resulting from
these expenses.
(C) To reflect additional new indebtedness of Lanier to be incurred on or prior
to the Distribution Date under the Credit Facility for the purpose of the
cash dividend to Harris. The aggregate amount of the cash dividend will be
the sum of (i) $700 million; plus (ii) any cash and cash equivalents
retained by Lanier on the Distribution Date; less (iii) the amount of debt
retained or assumed by Lanier; and less (iv) outstanding indebtedness under
Lanier's European asset securitization facility. The pro forma effect of the
cash dividend is as follows:
<TABLE>
<S> <C>
$700,000
Add: Cash retained or assumed............................. 18,209
Less:
Historical debt assumed or retained.................... 145,215
Asset securitization (off balance sheet)............... 32,000
--------
Cash Dividend............................................... $540,994
========
</TABLE>
The increment to long-term debt is equal to the cash dividend to Harris.
(D) To reflect additional Lanier Shares to be distributed after giving effect to
the Distribution, Lanier Shares retained by Harris and the conversion of
performance share awards of Harris. Pro forma par value is $.01, 500,000,000
shares of Lanier Common Stock are authorized, and 88,857,000 shares of
Lanier Common Stock are assumed to be outstanding.
26
<PAGE> 40
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUE
Product sales and rentals......................... $ 807,468 -- $ 807,468
Service income.................................... 623,020 -- 623,020
Finance income.................................... 38,132 -- 38,132
---------- ----------
1,468,620 -- 1,468,620
COSTS AND EXPENSES
Cost of product sales and rentals................. 547,929 -- 547,929
Cost of service................................... 349,448 -- 349,448
Selling and administrative expenses............... 438,516(F) -- 438,516
Interest expenses................................. 22,692(A) 27,708(B) 50,400
Other-net......................................... (1,235) 8,440(C) 7,205
---------- -------- ----------
1,357,350 36,148 1,393,498
---------- -------- ----------
Income before income taxes........................ 111,270 (36,148) 75,122
Income taxes...................................... 40,000 (13,736)(D) 26,264
---------- -------- ----------
NET INCOME........................................ $ 71,270 $(22,412) $ 48,858
========== ======== ==========
Net income per share.............................. $ 0.55(E)
==========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
The following adjustments were made to Lanier's historical consolidated income
statement for the fiscal year ended July 2, 1999.
(A) See discussion of "Other income and expense" on page 31.
(B) Adjustment to interest expense to reflect additional long-term debt of
Lanier using an annual estimated interest rate of 7.2% assuming $700 million
of indebtedness net of cash on July 4, 1998.
(C) Adjustment to eliminate interest income on loans from Lanier to Harris that
will be repaid to Lanier prior to the distribution date.
(D) Adjustment for income tax provision related to pretax adjustments.
(E) Net income per share is computed based on 88,857,000 shares, which
represents the approximate number of Lanier Shares expected to be
distributed in the Distribution based on the number of Harris shares
outstanding as of July 2, 1999, the retention of Lanier Shares by Harris and
conversion of Harris performance share awards.
(F) The pro forma statement does not include adjustments to administrative
expense to reflect the elimination of $25.0 million of costs charged to
Lanier by Harris or Lanier's estimate of $7.0 million for additional legal,
audit and other similar expenses that Lanier is expected to incur as a
publicly traded corporation. This charge by Harris was made based upon a
percentage of Lanier's net sales.
27
<PAGE> 41
LANIER WORLDWIDE, INC.
SELECTED FINANCIAL DATA
The selected historical consolidated financial data of Lanier set forth
below is qualified in its entirety by, and should be read in conjunction with,
the Consolidated Financial Statements of Lanier, including the Notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this document. The income statement data for
each of the three fiscal years ended July 2, 1999 and the balance sheet data as
of July 2, 1999 and July 3, 1998 are derived from, and are qualified by
reference to, the consolidated financial statements included elsewhere in this
document that have been audited by Ernst & Young LLP, Lanier's independent
certified public accountants.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 27, JULY 3, JULY 2, PROFORMA
1995 1996 1997 1998 1999 (A) JULY 2, 1999
---------- ---------- ---------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Product sales and
rentals.............. $ 674,694 $ 719,803 $ 704,282 $ 721,791 $ 807,468 $ 807,468
Service income.......... 348,850 396,159 465,732 532,986 623,020 623,020
Finance income.......... 27,543 28,760 29,871 33,558 38,132 38,132
---------- ---------- ---------- ---------- ---------- ----------
1,051,087 1,144,722 1,199,885 1,288,335 1,468,620 1,468,620
Costs and Expenses
Cost of product sales
and rentals.......... 415,121 448,845 426,042 453,968 547,929 547,929
Cost of service......... 194,322 219,042 255,705 304,901 349,448 349,448
Selling and
administrative
expenses............. 349,840 370,004 399,470 410,452 438,516 438,516
Restructuring
expenses............. -- -- -- 8,500(B) -- --
Interest expenses....... 11,485 11,010 8,797 8,236 22,692 50,400
Other -- net............ (2,428) 5,218 7,964 2,877 (1,235) 7,205
---------- ---------- ---------- ---------- ---------- ----------
968,340 1,054,119 1,097,978 1,188,934 1,357,350 1,393,498
---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................... 82,747 90,603 101,907 99,401 111,270 75,122
Income taxes.............. 30,454 33,331 38,208 36,604 40,000 26,264
---------- ---------- ---------- ---------- ---------- ----------
Net income................ $ 52,293 $ 57,272 $ 63,699 $ 62,797 $ 71,270 $ 48,858
========== ========== ========== ========== ========== ==========
Net income per share...... $ 0.55
==========
Financial Position (end of
period)
Total assets.............. $1,011,404 $1,056,814 $1,075,307 $1,123,296 $1,337,708 $1,156,923
Long-term debt............ 4,192 4,103 3,990 3,660 4,622 545,616
Shareholder equity........ 635,113 689,240 750,157 803,657 882,738 133,251
</TABLE>
- ---------------
(A) Includes the operations of the Copy System Division of Agfa-Gevaert Group
from the date of the July 9, 1998 acquisition.
(B) See "Fiscal year ended July 3, 1998 Compared to Fiscal year ended June 27,
1997 -- Restructuring Charge" on page 32.
28
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Statements," "Selected Financial Data," the
Consolidated Financial Statements of Lanier, including the Notes thereto, and
the other financial information appearing elsewhere in this document. Except for
the historical information contained herein, the discussions in this document
contain forward-looking statements that involve risks and uncertainties.
Lanier's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed under "Risk Factors" beginning on page 7, as well as
those discussed elsewhere in this document.
GENERAL
Lanier is a worldwide supplier of office equipment and facilities
management services. On April 13, 1999 Lanier's parent company, Harris,
announced that it would spin Lanier off into a separate publicly traded company.
Harris intends to accomplish this transaction through a U.S. tax-free
distribution of Lanier stock to Harris shareholders.
Lanier and its subsidiaries form a worldwide independent supplier of
copiers, facsimiles and other related automated office imaging equipment. With
over 1,600 sales and service locations in more than 100 countries, Lanier
markets these products and related services, parts and supplies to customers
both on a direct sales basis and through a worldwide network of independent
dealers, Lanier's centralized sales and service organizations give it a
competitive advantage in the pursuit of national and global account business.
Lanier provides customers with a wide array of customized document management
solutions including black and white digital and analog copiers, color copiers,
facsimile machines, multi-function devices, dictation equipment, computer based
health care information management systems, associated parts and supplies, and a
variety of related outsourcing services, including legal support services.
Lanier sources substantially all of these products from a variety of
manufacturers, seeking out the "best-of-breed."
In March 1997, Lanier acquired Quorum Group, Inc., a litigation services
company (the "Quorum Acquisition"). In July 1998, Lanier acquired the Copying
Systems Division of Agfa-Gevaert Group ("Agfa") for $168.3 million (the "Agfa
Acquisition"). The sale of Agfa private label products has added $201.5 million
in revenues for the year ended July 2, 1999. The combined effect of these sales
and the additional sales force presence provided by the Agfa Acquisition has
effectively doubled Lanier's sales and market size in the European office
equipment market.
In May 1999, Lanier sold its electronic medical transcription services
business to MedQuist Transcriptions, Ltd. for approximately $34.0 million. The
sale resulted in a pre-tax gain of $21.5 million. In June 1999, Lanier sold its
direct sales operations in France which resulted in a $4.0 million pre-tax loss.
In connection with its internal audit reviews in early 1999, Lanier
detected accounting misstatements by a former employee at one of its foreign
subsidiaries. These misstatements resulted in an overstatement of earnings over
the past five fiscal years in an aggregate amount of $10.0 million before income
taxes. The financial statements included in this document reflect the correction
of such misstatements. Lanier management has completed its investigation of
these matters and believes that no further correction will be required.
COMPONENTS OF NET INCOME
Lanier derives its revenues from three primary sources: (i) sales of
equipment and related supplies and rental equipment under operating lease
agreements; (ii) service of equipment under maintenance agreements, consulting,
facilities management and other professional services; and (iii) finance income
associated with leases. Revenues generated by these areas depend upon a number
of factors, such as the technological competitiveness of its product line,
demand for and price of equipment, Lanier's reputation for providing timely and
reliable service, Lanier's competition in the industry and general economic
conditions.
29
<PAGE> 43
Net Sales. Net sales consists of revenue from product sales, rentals and
service revenue, net of any returns and finance income.
Cost of Goods Sold. Cost of goods sold consists primarily of the cost of
new equipment, cost of supplies and parts, labor costs to provide services,
rental equipment depreciation and other direct operating costs. Lanier
depreciates its rental equipment primarily over periods of three to five years
on a straight-line basis.
Operating Expenses. Operating expenses consist of selling, administrative,
engineering and general expenses, including salaries, wages and related expenses
paid to employees, advertising costs, employee training costs, occupancy of
leased space directly related to sales or service, and other selling expenses.
Operating expenses also include all overhead expenses related to Lanier's
corporate offices, such as salaries, taxes and benefits, occupancy of corporate
leased space, training and travel expenses.
Other Income and Expense. Other income and expense consists of provisions
for bad debts, interest expense, amortization of goodwill, royalties and other
miscellaneous items of income and expense.
RESULTS OF OPERATIONS
Operating expenses include charges by Harris to Lanier for Lanier's
proportionate share of legal, financial, and other administrative expenses.
Following the Distribution, Lanier plans to acquire these services independently
of Harris. Although it is not possible to predict accurately what relationship
the future expense will bear to the historic expense for these items, Lanier
does not expect that the acquisition of these services from sources independent
of Harris will have any material adverse effect.
Interest expense reflected in the historical financial statements is
related to currently outstanding debt. Future interest expense will be
significantly higher as a result of debt incurred related to the Distribution.
See "-- Credit Facility" beginning on page 32.
FISCAL YEAR ENDED JULY 2, 1999 COMPARED TO FISCAL YEAR ENDED JULY 3, 1998
Net Sales. Net sales increased 14.0% to $1,430.5 million in fiscal year
1999 from $1,254.8 million in fiscal year 1998. This increase is primarily
attributable to the Agfa Acquisition, which was completed at the beginning of
the first quarter.
Product sales and rental revenue increased 11.9% to $807.5 million for the
fiscal year compared to $721.8 million for the prior fiscal year. Increased
sales and rentals resulting from the Agfa Acquisition were $101.3 million for
the fiscal year. The increase in product sales and rental revenues from the Agfa
Acquisition was partially offset by increased competition and by the continued
market transition from analog to digital copier technology. This transition has
resulted in a market-wide excess supply of analog copiers, which is driving down
prices on used and re-manufactured equipment.
Service revenue increased 16.9% to $623.0 million for the fiscal year from
$533.0 for the prior fiscal year. This increase is primarily due to the Agfa
Acquisition, which contributed $100.2 million of service revenue for the fiscal
year.
Sales from Lanier's operations outside of the United States increased by
53.2% to $569.2 million for the fiscal year compared to $371.5 million for the
prior fiscal year. Sales from Agfa private label products and services in Europe
and the United Kingdom provided $201.5 million for the fiscal year. Sales in the
United States decreased 2.5 % to $861.3 million for the fiscal year from $883.8
million for the prior fiscal year.
Gross Margin. Gross margin on product and rental revenue declined to 32.2%
of net sales for the fiscal year compared to 37.1% prior fiscal year. This
decline was primarily a result of increased price competition on analog products
coupled with lower overall margins on digital products. Margins were also
impacted by management's decision to record a pre-tax charge to cost of product
sales and rentals of $8.0 million in order to write down obsolete analog and
older generation digital product lines to their net realizable values. This
action was primarily a result of the fact that the shift in technology in the
document imaging industry from analog products to digital products has occurred
at a much more rapid rate than either the industry or Lanier's management had
anticipated, resulting in an excess supply of analog and older generation
digital products. Lanier's sales of used analog
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products decreased 33% in unit terms during fiscal year 1999, while placements
of digital products increased by over 300% in unit terms during the same period.
This trend has accelerated during the third and fourth quarters of fiscal year
1999. In the month of April 1999, for the first time, sales of Lanier's digital
products exceeded sales of its analog products. Additionally, in recent months,
Lanier has observed a dramatic decline in demand for analog products. Lanier
also recorded a $2.0 million inventory charge related to a discontinued product
line which is described below under "Other Income and Expense". Service margins
increased to 43.9% compared to 42.8% of net sales for the prior fiscal year.
This increase was the result of reductions in personnel and related compensation
expenses following Lanier's restructuring actions and cost containment programs,
which were initiated in fiscal year 1998 and completed in fiscal year 1999.
Operating Expenses. Selling and administrative expenses increased 6.8% to
$438.5 million for the fiscal year compared to $410.5 million for the prior
fiscal year. Selling and marketing expenses increased by $19.9 million in total
dollars as a result of the Agfa Acquisition, but decreased from 16.8% to 16.1%
of net sales. General and administrative expenses increased by $10.3 million in
total dollars as a result of the Agfa Acquisition, but decreased from 14.3% to
13.3% of net sales. This increase included $5.0 million of non-recurring
integration costs related to the Agfa Acquisition.
Other Income and Expense. Finance income increased $4.6 million for the
fiscal year over the prior fiscal year due to increased customer leasing.
Interest expense increased to $22.7 million as compared to $8.2 million during
the prior fiscal year primarily due to borrowings used to fund the Agfa
Acquisition. Other-net expense decreased $4.1 million for the fiscal year over
the prior fiscal year due primarily to the gain from sale of Lanier's electronic
medical transcription services to Medquist, offset by an increased provision for
doubtful accounts, loss from the sale of Lanier's direct sales operations in
France, and write-off of its investment in a technology-related company.
Lanier's management determined that its investment in this technology-related
company had been significantly impaired due to developments related to this
company and Lanier's decision to discontinue the product line which utilized the
software sold by the company. Lanier therefore recorded an impairment charge of
$7.7 million before tax relating to these assets in 1999.
Net Income. Net income increased 13.5% to $71.3 million for the fiscal year
compared to $62.8 million in the prior fiscal year. Net income for domestic
operations declined 8.1% to $48.7 million as compared to $53.0 million during
the prior fiscal year. Net income from international operations increased 130.6%
to $22.6 million from $9.8 million during the prior fiscal year. This increase
primarily resulted from the income generated by European operations from the
sale of Agfa products and services.
FISCAL YEAR ENDED JULY 3, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 27, 1997
Net Sales. Net sales increased 7.2% to $1,254.8 million in fiscal year 1998
from $1,170.0 million in fiscal year 1997. Product sales and rental revenue in
Lanier's core business increased by $17.5 million. Of this amount, $8.6 million
resulted from the acquisition of six copy and dictation companies. The remainder
of the increase resulted from internal growth.
Service related revenue increased by $67.3 million, or 14.4%, to $533.0
million. The facilities management product line contributed $36.2 million of
this increase, primarily as a result of having a full year of revenue in fiscal
year 1998 as a result of the Quorum Acquisition. The incremental fiscal year
1998 revenue over fiscal year 1997 revenue resulting from the Quorum
Acquisition, which was completed during the third quarter of fiscal year 1997,
was $20.5 million. Lanier also acquired two other facilities management
companies in fiscal year 1998 which resulted in $6.6 million of incremental
revenue for the period. The remainder of the service revenue increase was a
result of growth in equipment service revenue and transcription services.
Lanier's sales outside the United States increased 2.6% to $371.5 million
in fiscal 1998 compared to $362.2 million in fiscal year 1997. Lanier's European
operation experienced a $12.8 million decrease, while sales in the Latin
American region increased $11.8 million. Lanier's operations in Australia,
Canada and the United Kingdom contributed to a smaller increase.
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Gross Margin. Gross Margin decreased from 41.7% of net sales in fiscal year
1997 to 39.5% of net sales in fiscal year 1998. Gross margins were lower in
fiscal year 1998 as a result of increasing price competition throughout the
copier industry. Margin pressure has also resulted from the lower margin
outsourcing and service based businesses becoming a larger portion of Lanier's
revenue.
Operating Expenses. Selling, administrative and general expenses for fiscal
year 1998 remained relatively constant in absolute dollars but decreased as a
percentage of net sales from 34.1% in fiscal year 1997 to 32.7% in fiscal year
1998. Selling, administrative and general expenses all contributed to reduced
operating expenses as a percentage of net sales.
Restructuring Charge. In fiscal year 1998, Lanier recorded a charge to
income of $8.5 million ($5.3 million after tax) related to the restructuring of
the organization. Of the total amount, approximately $3.0 million was used in
the U.S. operations and approximately $5.5 million was used in the European
operations. These cash charges reflect the costs of severance payments and
out-placement services for approximately 350 terminated employees. These
employees were from the general/administrative and service groups.
Other Income and Expense. Finance income increased $3.7 million in fiscal
year 1998 due to increased customer leasing. Interest expense decreased by $0.6
million from fiscal year 1997 due to a favorable average interest rate of 8.4%
in 1998 as compared to 9.2% in 1997. Other-net expense decreased $5.1 million in
fiscal year 1998 due primarily to lower provisions for doubtful accounts and
prior year expenses associated with acquisitions of new businesses.
Net Income. Net income for fiscal year 1998 decreased 1.4% to $62.8 million
from $63.7 million in fiscal year 1997. Fiscal year 1998 net income attributable
to domestic operations increased 0.6% to $53.0 million from $52.7 million in the
prior year. Net income attributable to international operations in 1998
decreased 10.9% to $9.8 million compared to $11 million in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Lanier's net cash flow provided by operating activities was $57.6 million,
$146.4 million and $106.1 million in fiscal years 1999, 1998 and 1997,
respectively. The decrease in fiscal year 1999 operating cash flows was
primarily due to cash transfers and repayment of intercompany loans to Harris
offset by a $61.9 million reduction in inventory levels during the period.
Lanier used $222.1 million, $98.4 million and $107.5 million net cash in
investing activities during fiscal years 1999, 1998 and 1997 respectively.
During fiscal year 1999, Lanier used $171.1 million for acquiring new
businesses, $168.3 million of which related to the Agfa Acquisition.
Cash provided by financing activities was $90.1 million for the fiscal year
ended July 2, 1999, consisting of financing used in the Agfa Acquisition, net of
positive cash flows during the remainder of the fiscal year.
Lanier has no material commitments other than its supply agreements with
its vendors. Lanier will continue to make additional investment in facilities,
equipment and computer equipment in order to support its revenue growth.
Lanier's cash flow from operations, together with anticipated borrowing
arrangements, is expected to adequately finance its operating cash requirements
and capital expenditures for the next fiscal year. Lanier expects to fund future
acquisitions and long-term growth primarily with cash flows from operations,
borrowings under the Credit Facility and possible future sales of additional
equity or debt securities.
Capital expenditures for plant and equipment were $21.6 million for the
fiscal year ended July 2, 1999, up $2.6 million from the total fiscal year 1998
expenditures. For the fiscal year ended July 2, 1999, $63.5 million was invested
in equipment for rental to customers, which is slightly less than the amount
invested for the fiscal year ended July 3, 1998.
CREDIT FACILITY
Prior to the Distribution, Lanier will incur debt under the Credit Facility
in connection with the payment of a dividend by Lanier to Harris immediately
prior to the Distribution. As a result of this incurrence of debt and the
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assumption or retention by Lanier of certain indebtedness relating to Lanier's
business, Lanier will have approximately $700 million of indebtedness net of
cash on the Distribution Date.
Lanier has executed a commitment letter with ABN AMRO Bank N.V., SunTrust
Bank, Atlanta and SunTrust Equitable Securities Corporation, Wachovia
Securities, Inc. and Wachovia Bank N.A. and expects to have definitive loan
documents in place prior to the Distribution.
Lanier anticipates that the Credit Facility will contain financial
covenants. In particular, Lanier expects that the Credit Facility will require
(i) a covenant regarding maintenance of a leverage ratio, which will be defined
as total debt divided by EBITDA (earnings before interest, taxes, depreciation
and amortization), (ii) an interest coverage covenant, which will be defined as
EBITDAR (earnings before interest, taxes, depreciation, amortization and rental
expense) divided by interest and rental expense and (iii) a minimum net worth
covenant. The Credit Facility will restrict the ability of Lanier and its
subsidiaries to pay dividends or make other distributions and to redeem,
purchase or otherwise acquire shares of its capital stock, and will prohibit any
such dividend, distribution, redemption, purchase or other acquisition during
the existence of a default or event of default thereunder.
Additionally, Lanier anticipates that the Credit Facility will contain
covenants which, among other things, will require production of financial
statements, notice of material litigation and material governmental and
environmental proceedings, compliance with laws and contractual obligations,
payment of taxes, maintenance of insurance and Year 2000 compliance and will
limit the incurrence of additional indebtedness, mergers, consolidations and
sales of assets, dividends, stock redemptions and the prepayment of other debt,
investments and acquisitions, capital expenditures, sales and leaseback
transactions and transactions with affiliates. The Credit Facility also will
contain customary events of default, including payment defaults, inaccuracies of
representations and warranties, violation of covenants and cross defaults to
other indebtedness of Lanier.
Lanier's indebtedness under the Credit Facility will be guaranteed by
Lanier's significant subsidiaries.
Lanier may also incur additional indebtedness under the Credit Facility
from time to time for general corporate purposes, including working capital,
capital expenditures and future acquisitions.
In the fourth quarter of fiscal year 1999, Lanier sold receivables totaling
$36.5 million under its European asset securitization agreement. This
transaction is treated as a sale of receivables and therefore is not reflected
on the balance sheet. This amount is included in determining indebtedness as
stipulated in the dividend formula described in "Relationship Between Harris and
Lanier Following the Distribution -- Distribution Agreement" beginning on page
19.
IMPACT OF FOREIGN EXCHANGE
Lanier's international business is transacted in local currency. The impact
of translating the assets and liabilities of these operations to U.S. dollars is
included as a component of shareholder equity. At July 2, 1999 the cumulative
translation adjustment reduced Shareholder Equity by $33.5 million compared to a
reduction of $31.0 million at July 3, 1998.
Lanier utilizes exchange rate agreements with suppliers and foreign
currency hedging instruments to minimize the risks of international
transactions. Gains and losses resulting from currency rate fluctuations did not
have a material effect on Lanier's results in fiscal years 1999, 1998 or 1997.
SEASONALITY AND INFLATION
Lanier's management does not believe that Lanier's business is subject to
significant fluctuations based on seasonal effects.
Lanier's management does not believe that the rate of inflation has had a
material effect on the operating results of Lanier because, to the extent
feasible, Lanier has consistently followed a practice of adjusting its prices to
reflect the impact of inflation on wages and salaries for employees and costs of
purchased materials and services.
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MARKET RISK
Impact of Foreign Exchange. Lanier's international sales are generally
denominated in the currency of the customer, which exposes Lanier to
fluctuations in foreign currency exchange rates and to other material risks
associated with international operations. Lanier has not in the past suffered a
material adverse impact from currency fluctuations for any of the periods under
consideration. Lanier's risk from such activities has been reduced because
Lanier has been able to pay the expenses of its international operations in
local currencies, which has lessened the need for conversion into U.S. dollars.
In addition, Lanier utilizes exchange rate agreements which provided limited
protection against currency exchange risks. Factors that could impact the
effectiveness of Lanier's hedging program include volatility of currency markets
and the cost and availability of hedging instruments. A 10 percent adverse
change in currency exchange rates for Lanier's foreign currency derivatives held
at July 2, 1999 would have an impact of approximately $15.7 million on the fair
value of such instruments. This quantification of exposure to the market risk
associated with foreign exchange financial instruments does not take into
account the offsetting impact of changes in the fair value of Lanier's foreign
denominated assets, liabilities, and firm commitments.
Gains and losses resulting from currency rate fluctuations did not have a
material effect on Lanier's results of operations in fiscal years 1999, 1998 or
1997, but Lanier's risk in this area may increase in this regard as Lanier's
international sales increase in volume and geographic distribution. The impact
of translating the assets and liabilities of those operations into U.S. dollars
is included as a component of Shareholder Equity.
Interest Rate Risk. The financial statements included in this document were
prepared based upon Lanier's current financing structure. Under this structure,
Harris provides financing to Lanier via its own lines of credit. Following the
Distribution, Lanier will arrange its own capital structure independent of
Harris. Although it is not possible to predict accurately the exact nature of
this capital structure or its related expense, Lanier does not expect an adverse
effect from this change.
IMPACT OF YEAR 2000
The Year 2000 statements set forth below are designated as "Year 2000
Readiness Disclosures" pursuant to the Year 2000 Information and Readiness
Disclosure Act.
Certain software and hardware systems are time sensitive. Older
time-sensitive systems often use a two-digit dating convention (e.g., "00"
rather than "2000") that could result in system failure and disruption of
operations as the year 2000 approaches. The Year 2000 problem will impact
Lanier, its vendors and suppliers, customers, and other third parties that
interface with Lanier.
With regard to the Year 2000 problem, more than 40 project initiatives of
varying magnitudes have been identified throughout Lanier and its various
business operations. These initiatives relate to four basic aspects of Lanier
and its various business operations: internal information technology ("IT")
systems, including sales order processing, contract management, financial
systems and service management; internal non-IT systems, including office
equipment and test equipment; products; and material third-party relationships.
Each project has been assigned a leader and prioritized based on the size
of the task and the perceived business risk. Lanier has established a Year 2000
Task Force to manage Lanier's overall internal readiness and its business
continuity planning efforts, and has created a web site at www.lanier.com, on
which it provides detailed information and updates concerning Year 2000 issues,
Lanier's efforts to address such issues, and the Year 2000 compliance of its
products and internal systems. Lanier expects to have substantially completed
all of its Year 2000 initiatives by the end of the quarter ending October 1,
1999.
Internal IT Systems. Lanier has determined it needs to replace or modify
several of its software systems and is in the process of replacing or
outsourcing many of its time-sensitive software systems. In addition, Lanier has
programs for reprogramming other time-sensitive software and equipment. For
example, Lanier has replaced its accounts receivable and payable systems and its
internal purchasing system. Lanier has upgraded its general ledger system to be
Year 2000 compliant and has modified its sales order processing system, billing
system and
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its contract management system to be Year 2000 compliant. In October 1999,
Lanier will transfer the compliant service system software to a new Year 2000
compliant Unix platform. As a result, Lanier believes that it will be 100%
complete with its internal IT systems by October 31, 1999.
Internal Non-IT Systems. Lanier believes that a limited number of its
non-IT systems, such as office equipment and test equipment with date-sensitive
software and embedded microprocessors may be affected. Lanier believes that its
exposure related to non-IT systems is minimal and that a disruption of any of
these systems will not materially inhibit its ability to conduct business
operations.
Products. Lanier has initiated formal programs to advise and work with
customers to resolve Year 2000 problems. Lanier's current product offerings are
Year 2000 compliant, with limited exceptions. Customers who own older generation
products which are not Year 2000 compliant have been notified of the issue and,
wherever possible, been given suggestions for manual overrides of the particular
product. However, Lanier believes it has no material exposure to contingencies
related to the Year 2000 issue for the products it has sold. Lanier has Year
2000 exposure in its operating systems and business systems; including
engineering, order fulfillment, program management, financial and administrative
functions. It is Lanier's belief that the greatest potential risk from the Year
2000 issue could be its inability to meet commitment dates on delivery of
product and has focused the majority of Lanier's effort and dedicated resources
to address this issue. In addition, Lanier believes that a limited number of the
non-information technology systems, such as office equipment and test equipment
with date-sensitive software and embedded microprocessors may be affected, and
evaluation and remediation are underway.
Material Third-Party Relationships. Lanier has also initiated
communications with significant suppliers, customers, and other relevant third
parties to identify and minimize disruptions to Lanier's operations and to
assist in resolving Year 2000 issues. Lanier has identified 40 key suppliers and
performed an in-depth analysis of the product lines provided to Lanier in order
to ensure that such products are Year 2000 compliant. Additionally, Lanier has
identified critical parts and components necessary to support its existing
product lines and is building safety stocks of these items prior to the end of
the calendar year 1999. However, there can be no certainty that the systems and
products of other companies on which Lanier relies will not have an adverse
effect on Lanier's operations.
Lanier believes it has diligently addressed the Year 2000 issues and that
it will satisfactorily resolve significant Year 2000 problems. Lanier
anticipates completing substantially its Year 2000 projects by the end of the
quarter ending October 1, 1999. In the event Lanier falls short of these
milestones, additional internal resources will be focused on completing these
projects or developing contingency plans.
The estimated cost for resolving Year 2000 issues is approximately $11.5
million with an approximate remaining balance of $0.4 million planned for fiscal
year 2000. These costs are generally not incremental to existing information
technology budgets; internal resources were re-deployed and timetables for
implementation of replacement systems were accelerated. The largest portion of
this expenditure is being used to replace existing software and hardware.
Approximately $5.2 million of the above total is related to investments in
hardware or other capitalizable costs or operating leases which will be
amortized in current or future periods. Estimates of the Year 2000 related costs
are based on numerous assumptions and there is no certainty that estimates will
be achieved and actual costs could be materially greater than anticipated.
Specific factors that might cause such differences include, but are not limited
to, the continuing availability of personnel trained in this area, the ability
to timely identify and correct all relevant computer programs, and similar
uncertainties.
Lanier is working to identify and analyze the most likely worst-case
scenarios, any of which could have a material adverse effect on Lanier's ability
to provide products and services to its customers. These possible scenarios
include the failure of water and power supplies, the failure of communications
and financial systems, major transportation disruptions, and lack of Year 2000
readiness of third-party vendors and customers. Lanier continues to develop
contingency plans to address potential Year 2000 problems relating to the
infrastructure and Lanier's business partners as potential problems are
identified. Despite such efforts, an infrastructure problem or combination of
the above-mentioned Year 2000 problems not within Lanier's control could have a
material adverse impact on Lanier's business and its results of operations.
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EURO CONVERSION
On January 1, 1999, certain member nations of the EMU adopted a common
currency, the Euro. For a three-year transition period, both the Euro and
individual participants' currencies will remain in circulation. After January 1,
2002, the Euro will be the sole legal tender for EMU countries. The adoption of
the Euro affects a multitude of financial systems and business applications as
the commerce of these nations will be transacted in the Euro and the existing
national currency. For fiscal year 1999, approximately 20.7% of Lanier's
revenues were derived from EMU countries.
Lanier is currently addressing Euro-related issues and its impact on
information systems, currency exchange rate risk, taxation, contracts,
competition, and pricing. For the fiscal year ended July 2, 1999, Lanier did not
experience an adverse impact or material expense related to the adoption of the
Euro. All cost associated with the adoption of the Euro has been expensed by
Lanier as incurred. Lanier has completed the Euro-related information systems
conversion for all information systems except for its European financial
systems. Lanier has implemented the Euro-compliant version of its European
financial systems; however, several program inefficiencies remain which can be
resolved only by the financial systems' vendor. Lanier's management expects that
these inefficiencies will be corrected by the vendor so that Lanier's first
customer conversion will occur before November 30, 1999.
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LANIER'S BUSINESS
GENERAL
Lanier is a worldwide independent supplier of copiers, facsimiles and other
related automated office imaging equipment. With over 1,600 sales and service
locations in more than 100 countries, Lanier markets these products and related
services, parts and supplies to customers both on a direct sales basis and
through a worldwide network of independent dealers. Lanier provides customers
with a wide array of customized document management solutions including black
and white digital and analog copiers, color copiers, facsimile machines,
multi-function devices, dictation equipment, computer based health care
information management systems, associated parts and supplies, and a variety of
related outsourcing services, including legal support services. Lanier sources
substantially all of these products from a variety of manufacturers, seeking out
the "best-of-breed." Selected products undergo rigorous testing by Lanier, and
upgrades are often recommended to the manufacturers in order to meet Lanier's
demanding standards.
Lanier targets sales of its products to four primary markets: (i)
global/national or "key" accounts; (ii) major accounts; (iii) commercial users;
and (iv) specific vertical industries, such as the health care and legal
industries. Some of Lanier's national account customers include Abbott
Laboratories, Corning, Inc., CountryWide Home Loans, Federal Express, Merck &
Company, Inc., Minnesota Mining & Manufacturing Co. and the National Aeronautics
& Space Administration (NASA). No national account customer represents more than
1% of Lanier's total sales.
Lanier, headquartered in Atlanta, Georgia, was founded in 1934 as The
Lanier Company, a Southeastern distributor of "Ediphone" dictation machines.
Lanier entered the copier business in 1955 as an independent distributor of 3M
"Thermofax" dry process copiers. In 1977, Lanier was spun-off as a separate
public company from its then-parent corporation, Oxford Industries. Lanier, then
known as Lanier Business Products, was subsequently acquired by Harris in 1983.
In 1985, Lanier was incorporated in Delaware as Harris/3M Document Products,
Inc., a joint enterprise between Lanier Business Products, Inc., a subsidiary of
Harris, and the Minnesota Mining and Manufacturing Co. Harris purchased 3M's
interest in that venture in 1989 and changed the name of the company to Lanier
Worldwide, Inc.
INDUSTRY OVERVIEW
The document imaging and management industry consists of the production and
supply of various imaging products and supplies, as well as the provision of
pre-sale consulting services and after-market product services. Lanier's
competitors include the distribution units of large office equipment
manufacturers and other independent distributors. According to industry sources,
the total global market for its document imaging and management products and
services will grow from approximately $75 billion in 1999 to approximately $97
billion in 2002.
Companies in the document imaging industry sell products primarily through
three channels of distribution: (i) direct customer sales; (ii) dealer sales;
and (iii) retail sales. Direct customer sales include sales calls by sales force
personnel, sales through telephone marketing and internet sales. Dealer sales
result from customer calls performed by independent or company-owned dealer
outlets. Retail sales include sales of low-end products, typically through
national retail outlets or local smaller retailers.
Traditionally, the products offered by companies in the document imaging
industry have used analog technology. Lanier's management believes, however,
that customers' increasing use of digital technology will eventually lead to the
replacement of analog products with digital products. According to industry
sources, approximately 378,000 digital copiers were sold in the United States in
1998 (or approximately 19.6% of new copiers shipped in 1998), an increase of
1,114% since the end of 1996. Industry sources predict that, by the end of 2003,
approximately 87% of all new copier placements will be digital machines. Digital
products, unlike analog products, can connect and communicate with other office
imaging equipment, enabling customers to more efficiently connect and utilize
their document management solutions over a wide array of configurations. Digital
products may also offer a wider array of more useful features, such as higher
quality copies, color capability, finishing capability and multi-function
capability. The market trend toward digital technology has also led
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document management companies to include training for sales, service,
maintenance and help desk personnel with respect to the new digital products.
As document imaging products and services have become more complex and
service-intensive, customers have begun to seek outsourcing services, such as
facilities management services, and professional services that require expertise
in document imaging and management, such as consulting services and systems
integration services.
The document imaging industry as a whole remains highly fragmented, with
only a few large companies. Many customers purchase products through independent
dealers that operate only in a particular geographic area. As digital technology
replaces analog technology, many of these independent dealers may not have the
training to sell or service the new technology. Further, as customers
consolidate their accounts in order to integrate their document management
solutions, they may seek providers that have a larger geographic scope. Thus,
smaller independent dealers may determine to sell to larger companies in the
industry who have more training capability and cover a larger geographic area.
Further, the fragmented nature of the industry allows for consolidation in order
to achieve economies of scale and lower operating expenses on a company-wide
basis.
LANIER PRODUCTS AND SERVICES
Lanier offers its customers a comprehensive solution to their document
management needs through products and services that take advantage of
technological advancements and Lanier's experience in the document imaging and
management industry.
PRODUCTS
Lanier offers a full range of document copiers, from desktop units to high
speed and high volume systems. Within this range, Lanier offers both color
copiers and black and white copiers, as well as both analog and digital copiers.
Lanier offers several devices that perform more than one traditional function,
such as Hewlett-Packard "mopiers" that can print multiple original copies direct
from the customer's networked systems as a finished (i.e., stapled, collated,
etc.) document product.
Lanier also offers a full range of facsimile machines. Lanier offers
multi-function products that can meet customers' facsimile needs, as well as
traditional stand-alone machines.
Finally, Lanier offers a range of both digital and analog dictation
products.
SERVICES
Product Support. Lanier's service force provides a range of product-support
services from traditional on-site repairs to after-market supplies such as toner
and paper products. Lanier supports many of its customers with around the clock,
seven days a week on-site service, and supports all of its customers' service
and help needs with a sophisticated logistics, call reception/dispatch and
multi-level help desk and hotline. Additionally, Lanier provides customer
application training and support if needed by the customer.
Lanier has a worldwide service force of approximately 2,900 employees.
Lanier continually trains its sales force on new products, technologies, and
sales techniques. Because of the industry trend toward digital technology and
new systems, Lanier's management believes that its training and instruction
services, as well as its help desk and hotline, provide Lanier with an advantage
over its competitors.
Outsourcing Services. Lanier provides its customers with a wide range of
consulting and professional services, such as facilities management, systems
integration and other consulting services.
Through its facilities management services, Lanier can equip, staff and
manage most aspects of a customer's reprographic and document management needs
at the customer's facility. In addition to copying and printing, Lanier provides
file room maintenance, decentralized copier management, facility mail and
courier services and address list maintenance. Lanier seeks to work with the
customer to identify methods in which Lanier can help meet all of the customer's
document management needs, whether by implementation of new products or by
systems integration.
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Lanier's systems integration services offer customers the ability to
leverage Lanier's substantial experience in the areas of connectivity and
efficiency of document management networks. Lanier helps customers enhance the
performance of their network by either adding new or enhanced technology
products or increasing the efficiency of the current system. As an example,
Lanier offers its health care clients a system that allows its customers to
connect a digital dictation station with the hospital database containing
patient records in order to enable doctors to view a patient's information while
at the same time dictating a diagnosis or prescription for the patient.
DOCutivity(TM) Approach. Lanier has implemented its DOCutivity(TM) approach
in order to improve its customers' document management productivity by
strategically integrating Lanier's products and services. DOCutivity(TM)
streamlines the process for customers and allows Lanier to provide each customer
with customized document analysis that will allow the customer to improve its
document productivity and efficiency. Each member of the Lanier sales force is
trained in the DOCutivity(TM) approach and analysis.
Through the DOCutivity(TM) approach, Lanier assesses the customer's
document management challenges and goals, while extensively analyzing the
customer's existing capabilities. Lanier's sales personnel examine the
customer's office and workgroup functions and determine the financial impact of
implementing a new, more productive and efficient document management solution
for the customer. Lanier's sales personnel then offer solutions to the customer
based on Lanier's extensive industry knowledge and experience, for an improved
document management strategy.
For example, one recent oil refinery customer sought to replace its analog
copiers supplied by multiple vendors on a cost-effective basis. Lanier sales
personnel used the DOCutivity(TM) analysis to implement a strategy to: (i)
reduce the customer's high cost of copying and print cartridges associated with
multiple vendors; (ii) improve efficiency by eliminating manual distribution of
documents; and (iii) eliminate redundancy in the document management cycle.
Lanier proposed an all-digital, multi-function device configuration connected to
the customer's Local Area Network. Through this configuration, Lanier helped the
customer (i) reduce costs by capturing original prints and their corresponding
replication and (ii) eliminate redundancy by combining the creation of originals
with both duplication and distribution. Overall, Lanier estimated that the
DOCutivity(TM) approach saved the customer approximately $144,000 per year in
excess costs.
PRODUCT FINANCING
A portion of Lanier's operating income arises from the financing of its
customers' purchases of Lanier products. On average, 46% of Lanier's aggregate
sales in the United States, Puerto Rico, Canada and Australia are financed
through leases that typically have a term of 3 years. In Europe, 16% of Lanier's
sales derive from rental arrangements that differ from leases primarily because
customers may terminate the rental agreement more quickly and easily. Lanier's
ability to provide financing at competitive rates and realize operating income
is highly dependent upon its own costs of borrowing, which, in turn, depend upon
Lanier's credit standing. Significant changes in such standing could reduce the
profitability of Lanier's financing business and/or make Lanier's financing less
attractive to customers. Lanier cannot be certain that it can maintain credit
standing sufficient to realize profits on the portion of its revenues derived
from financing arrangements.
LANIER'S TARGET MARKETS
Lanier targets four primary markets: (i) global/national or "key" accounts;
(ii) major accounts; (iii) commercial accounts; and (iv) specific vertical
industry markets, such as the health care and legal industry.
National or "key" accounts are large corporations that tend to require full
document imaging and management throughout the customer's entire organization,
whether that organization is regional, national or global. Lanier management has
targeted these accounts with multiple sales and service entries as a growth
vehicle for Lanier because these accounts tend to generate substantial and
recurring revenues over longer-term contracts.
Some of Lanier's national or "key" accounts include Abbott Laboratories,
Corning, Inc., Countrywide Home Loans, Federal Express, Merck & Company, Inc.,
Minnesota Mining & Manufacturing Co. and the
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National Aeronautics & Space Administration (NASA). No national account customer
represents more than 1% of Lanier's total sales.
Lanier has set specific criteria to define major accounts and identified a
list of these accounts in each district. Management is then focused on these
accounts utilizing major account representatives and the DOCutivity(TM)
methodology.
Lanier has also targeted commercial accounts, which are local or small
businesses. Sales to commercial accounts typically consist of the sale of Lanier
products, coupled with a maintenance and supply agreement.
Lanier also targets specific vertical industries that tend to involve more
intensive use of Lanier's products, such as the health care and legal
industries. Because of its heavy use of documents, Lanier sales and service
personnel target the legal market for the full range of Lanier products and
services. Lanier management believes that Lanier has a reputation for quality
products and superior after-sales service and support within the legal market.
Because of the legal market's use of multiple products that Lanier sells and
services, Lanier management believes that the legal market represents a
significant source for cross-selling opportunities.
Similarly, Lanier targets the health care industry because Lanier's
management believes it offers continued growth opportunities. Over 50% of the
hospitals in the United States use Lanier digital dictation systems, often in
multiple areas of the hospital. As digital systems become more accepted in other
areas of Lanier products (particularly copiers), management believes that Lanier
can leverage its reputation for digital dictation systems with these hospitals
in order to become the provider of choice for other products. In addition, the
increased complexity and connective nature of these products will allow Lanier
to offer to its health care customers its expertise in systems integration and
other consulting services.
STRATEGY
Lanier's goal is to become the leading global provider of document imaging
products and related services and support. In order to accomplish this goal,
Lanier intends to use the following strategies:
- continue to cultivate its "best of breed" sourcing and distribution
relationships;
- deliver integrated document management solutions to its customers;
- focus on customer satisfaction and retention;
- maintain and develop its effective marketing initiatives;
- attract, retain and incentivize its employees; and
- continue to add revenue and operating income through selective
acquisitions.
Cultivate Sourcing and Distribution Relationships
Lanier has historically sought out the "best of breed" in its products by
sourcing products from a variety of manufacturers. Selected products undergo
rigorous testing by Lanier, and Lanier often recommends upgrades to its
suppliers. Lanier intends to continue to seek the best products available
throughout the world in order to offer the best possible products to its
customers. In particular, in order to maintain pace with the industry-wide shift
to digital products, Lanier intends to expand its offering of digital document
imaging products. Lanier believes that its current supplier relationships will
allow it to offer high-quality document imaging products in each segment of the
digital market. Lanier also intends to explore new relationships as
manufacturers develop new multi-function digital machines.
Deliver Integrated Document Management Solutions
Lanier sales personnel have been trained to approach every sales
opportunity using the DOCutivity(TM) sales method. Lanier seeks to offer its
customers a full range of products and services and to address its customers'
document production and management needs through an integrated document
solution. Management believes that this integrated DOCutivity(TM) approach
enables Lanier to be more successful in securing larger, national customers
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<PAGE> 54
that seek such comprehensive document solutions and generate substantial and
recurring revenues over longer term contracts. Management also believes that its
DOCutivity(TM) approach allows Lanier to cross sell its products and services,
as they comprise components of an integrated solution. Additionally, management
believes that as document management technology grows more complex, many
customers, particularly legal and other professional service providers, will
seek to outsource more of their document management functions. Lanier seeks to
continue to grow its facilities management business in order to meet the growth
in this document outsourcing market.
Focus on Customer Satisfaction
Lanier focuses on customer satisfaction as an opportunity to grow its
business through continuing and expanding its sales with existing customers.
Lanier analyzes its clients' document production and management needs and
challenges through the eyes of its customers, an approach Lanier refers to as
Customer Vision(TM). Management believes that this perspective allows Lanier to
align its business practices and processes with the way that its customers wish
to do business, build customer loyalty and foster long term customer
relationships. Lanier provides the Performance Promise(TM), which Lanier
believes is the document management industry's first and most comprehensive
product guarantee that covers all product lines and guarantees product
performance with 99% uptime, as well as a service availability guarantee. Lanier
also offers a 24 hour, seven day a week help desk to provide customer service
support by highly trained personnel that management believes helps contribute to
its reputation as a leading service provider in the industry. Lanier believes
that it has achieved customer satisfaction levels exceeding 90% in each of its
target markets in each of the last two fiscal years and has received customer
satisfaction awards from several of its customers, including Abbott
Laboratories, DuPont, Kinko's and Pacific Bell.
Maintain and Develop Effective Marketing Initiatives
Lanier believes that it has a high quality sales force that is trained in
effective sales techniques, sophisticated document imaging products, such as
digital and multi-function machines, and Lanier's DOCutivity(TM) sales approach.
Lanier seeks to capitalize on its trained sales force by cross selling its
products and services to its customers through the integrated DOCutivity(TM)
approach. Management also seeks to grow its business by marketing its global
presence to multi-national customers that seek a worldwide product and service
provider. Lanier is also expanding its low cost telemarketing initiative, which
currently accounts for a majority of the sales of its supplies and lower end
products. Lanier is also seeking to develop marketing and sales of its products
over the Internet.
Attract, Retain and Incentivize Employees
Management believes that Lanier can stimulate internal growth by continuing
to attract and retain high quality employees. Management also believes that
Lanier can increase the productivity of its sales personnel through the use of
performance benchmarks and other incentive opportunities. Lanier management
believes that the ability to offer equity incentives to its employees that match
Lanier's performance as a stand-alone company will aid its efforts to increase
its employees' productivity.
Grow through Selective Acquisitions
Lanier will actively seek strategic acquisitions that complement its
existing businesses, either in Lanier's existing markets or in new markets.
Lanier seeks acquisition targets that embody a similar culture to Lanier's and
that management believes it can successfully integrate into Lanier's existing
businesses. Lanier seeks to make acquisitions that will enable Lanier to
leverage cost saving opportunities and increase revenue and operating income.
During the last three fiscal years, Lanier has acquired 18 businesses, including
the Copying Systems Division of Agfa in July 1998. The Agfa Acquisition added
$201.5 million in revenues for the fiscal year ended July 2, 1999, and doubled
Lanier's sales and market size in the European office equipment market.
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EMPLOYEES
Lanier employs approximately 8,700 individuals throughout the world,
including 2,100 sales personnel. None of Lanier's United States employees is
covered by a collective bargaining agreement. Management believes that Lanier
has good relations with its employees.
SALES AND MARKETING
Lanier distributes its sales personnel both geographically and by target
market. Lanier operates domestically from 106 district offices in the United
States and operates internationally through subsidiaries and branches located in
27 countries throughout the world. Lanier is represented through independent
distributors in over 80 additional countries. Overall, Lanier operates over
1,600 sales and service locations throughout the world. Lanier's Global Accounts
Program enables its international customers to make supplier and equipment
selections on a worldwide basis through one agreement in order to improve the
customer's purchasing power, office productivity and operating efficiency.
Lanier has separate sales groups focused on each of its target markets, with
sales personnel dedicated to each of the global/national, major, commercial,
health care and legal target markets.
INTERNATIONAL OPERATIONS
Net sales from international operations were $569.2 million, or 39.8% of
Lanier's total net sales for fiscal year 1999 compared with $371.5 million, or
29.6%, for fiscal year 1998. Foreign operations represented 50.4% of long-lived
assets as of July 2, 1999, compared to 23.0% of long-lived assets as of July 3,
1998. Lanier's products are primarily produced in Asia.
The particular economic, social and political conditions for business
conducted outside of the United States differ from those encountered by domestic
operations. Management of Lanier believes that the composite business risk for
Lanier's international operations as a whole is somewhat greater than that faced
by its domestic operations as a whole. Lanier's international operations are
subject to political, economic and other risks inherent in operating in
countries outside the United States, including possible adverse government
regulation, imposition of import and export duties and quotas, currency
restrictions, price controls, potentially burdensome taxation and/or other
restrictive government actions. See "Risk Factors -- Lanier is Subject to Risks
Related to International Operations" on page 11. Nevertheless, Lanier's
management believes that these risks are offset by the diversification of
Lanier's international operations.
Financial information regarding Lanier's domestic and international
operations is contained in Note O to Lanier's Consolidated Financial Statements.
SUPPLIERS
Lanier sources its products from multiple suppliers throughout the world,
including Ricoh, Toshiba, Canon, Sharp and Okidata. Although Lanier has
contractual relationships with many of its suppliers, Lanier continually seeks
the best products to offer to its customers and does not enter into exclusive
arrangements with any of its suppliers. Management does not believe that Lanier
depends on any one particular supplier.
TRADEMARKS AND LICENSES
Lanier distributes its products principally under the Lanier trademark.
Lanier expects to begin selling and servicing Hewlett-Packard's Mopier line of
products under the Hewlett-Packard trademark, in addition to products sold under
the Lanier trademark.
COMPETITION
Lanier operates in highly competitive markets. Lanier's competitors include
the distribution units of large office equipment manufacturers and independent
distributors, as well as office superstores and consumer electronics chains. As
digital and other new technology develops, Lanier may find itself competing with
new distribution channels, including computer distributors and value added
resellers, for products containing new technology. Principal areas of
competition in these markets include price and product capabilities, quality and
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speed of post-sales service support, availability of equipment, parts and
supplies, speed of delivery, financing terms and availability of financing,
leasing or rental programs.
PROPERTIES
Lanier generally leases its business properties, with the exception of two
facilities that consist of a total of approximately 200,000 square feet located
in Wilmington, Delaware and Tucker, Georgia, neither of which are material to
the operations of Lanier as a whole. Lanier leases a total of approximately 1.6
million square feet of space for its business operations in the United States.
Management of Lanier believes that the properties Lanier occupies are, in
general, suitable and adequate for the purpose for which Lanier utilizes them.
LEGAL PROCEEDINGS
From time to time, as a normal incident of the nature and kind of business
in which Lanier is engaged, various claims or charges may be asserted and
litigation commenced against Lanier. In the opinion of Lanier's management, no
current claim or litigation would result in a material adverse effect on
Lanier's results of operations or financial condition.
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LANIER'S MANAGEMENT
BOARD OF DIRECTORS
The following table sets forth information as to the persons who are
expected to serve as directors of Lanier following the Distribution. As provided
in Lanier's restated certificate of incorporation, Lanier's board of directors
will be divided into three classes. The table sets forth the names of the
directors of each class and their original terms. Directors in each class
initially will serve until the annual meeting of shareholders held in the year
in which the term for such class expires and will serve thereafter for
three-year terms. Lanier initially intends to have a board of directors that
will consist of seven directors, two of whom are officers of Lanier. Information
concerning directors is set forth below:
<TABLE>
<CAPTION>
TERM POSITION WITH LANIER AND PRINCIPAL
NAME AGE EXPIRES POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ------- -------- --------------------------------------------
<S> <C> <C> <C> <C>
Wesley E. Cantrell............. 64 2002 Chairman of the Chief Executive Officer since March, 1987.
Board and Chief President, Lanier Business Products, 1977 to
Executive Officer 1987. Executive Vice President and National
Sales Manager, 1972 to 1977. Vice President,
1966 to 1972. Employed by Lanier since 1955.
Member of the board of directors of Ann
Taylor Stores Corp., Environmental Design
International Ltd. and Impact Ministries, a
not-for-profit organization, and member of
the advisory board of First Union National
Bank of Atlanta.
C. Lance Herrin................ 58 2001 President and Chief Chief Operating Officer since July, 1998.
Operating Officer Executive Vice President and General
Manager - U.S. Operations, 1993 to 1998.
Executive Vice President and General
Manager - Imaging Systems Division, 1987 to
1993. Executive Vice President, Lanier
Business Products, 1982 to 1987. Senior Vice
President, 1981 to 1982. Vice President,
1977 to 1981. Employed by Lanier since 1967.
Sidney E. Harris............... 49 2000 Director Dean, J. Mack Robinson College of Business,
Georgia State University since 1997. From
1987 through July 1997, Professor of
Management at the Peter F. Drucker Graduate
Management Center at the Claremont Graduate
School, Claremont, California. Director of
TransAmerica Investors, Inc., ServiceMaster
Company and Amresco, Inc.
David H. Hughes................ 55 2001 Director Chairman and Chief Executive Officer of
Hughes Supply, Inc. since November 1986.
Director of SunTrust Bank, Inc. and Brown &
Brown, Inc.
</TABLE>
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<TABLE>
<CAPTION>
TERM POSITION WITH LANIER AND PRINCIPAL
NAME AGE EXPIRES POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ------- -------- --------------------------------------------
<S> <C> <C> <C> <C>
Amos R. McMullian.............. 61 2000 Director Chairman and Chief Executive Officer of
Flowers Industries, Inc. Employed by Flowers
Industries, Inc. (or its predecessors) since
1963. Director of Keebler Foods Company.
Clarence B. Rogers, Jr......... 69 2002 Director Chairman of the Executive Committee of the
Board of Directors of Equifax, Inc. Director
of Sears Roebuck & Co., Morgan Stanley Dean
Witter & Co., Briggs & Stratton Corporation,
Oxford Industries, Inc. and ChoicePoint Inc.
John F. Ward................... 56 2002 Director Chairman, President and Chief Executive
Officer of Russell Corp. since April 1998.
President of J.F. Ward Group from September
1996 to April 1998. Chief Executive Officer
of Hanes Group and Senior Vice President of
Sara Lee Corp. from 1993 to September 1996.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
Lanier's board of directors will establish three standing committees to
assist in the discharge of its responsibilities. The principal functions of each
committee are described below.
AUDIT COMMITTEE
The Audit Committee will assist the board of directors in ensuring that
Lanier's financial, auditing and reporting practices, procedures and controls
are within acceptable limits of sound practice and in accordance with applicable
laws and regulations. The Audit Committee will meet periodically with the
independent auditors, together with representatives of management, as
appropriate, for the purpose of reviewing the scope and results of the annual
audit of the financial statements and the recommendations of the auditors. The
Audit Committee will also evaluate the professional competency of the financial
staff and internal auditors, review the scope of the internal audit program,
review the nature and extent of non-audit professional services performed by the
auditors and annually recommend to the board of directors the firm of
independent public accountants to be selected as auditors of Lanier. From time
to time the Audit Committee may also undertake special projects, such as
reviewing Lanier's environmental policies.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee will review and evaluate plans
for the development, training and utilization of Lanier's management resources;
review Lanier's compensation philosophy and will establish the compensation of
officers of Lanier other than the chief executive officer and president, whose
compensation will be recommended by the Nominating and Compensation Committee
and approved by all of the outside directors; and administer Lanier's stock
incentive and stock based compensation plans and other incentive plans. The
Nominating and Compensation Committee will also oversee the financial
administration and operation of Lanier's various retirement and pension plans,
including the selection and review of the performance of the investment funds
and the independent investment advisors for the plans.
The Nominating and Compensation Committee will manage succession at the
executive officer level and identify and promote candidates for and to executive
positions; identify, evaluate and recommend director nominees to the board of
directors to fill vacancies and to be elected at the annual meeting of the
stockholders; recommend directors' compensation and benefit plans to the board
of directors; recommend committees of the
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board of directors and committee members; set meeting schedules for the board of
directors and recommend meeting schedules for the committees; and facilitate the
board of directors' evaluation of its effectiveness. The committee will consider
suggestions for director nominees from all sources, including stockholders. Any
stockholder suggestion, together with an appropriate biographical summary,
should be sent to the Secretary of Lanier. In addition, Lanier's bylaws
establish certain requirements concerning stockholder nominations for election
of directors, including that notice of such nominations be delivered to the
Secretary of Lanier not less than 90 nor more than 120 days prior to the date of
the annual meeting of stockholders. Each notice of nomination is required to
contain the name and address of the stockholder who intends to make the
nomination; the name, address and written consent of the nominee and such other
nominee information as would be required to be disclosed in a proxy
solicitation.
EXECUTIVE COMMITTEE
The Executive Committee will be authorized to evaluate and review Lanier's
financial position, capital structure, significant capital asset transactions,
major acquisitions and divestitures, and during the intervals between the
meetings of the board of directors, to the extent permitted by law, to exercise
all of the powers of the board of directors (except for certain matters reserved
for the board of directors) in the management of the business of Lanier.
DIRECTORS' COMPENSATION
Non-employee directors will receive an annual retainer fee of $30,000. In
addition, non-employee directors who serve on the standing committees will
receive an additional annual fee of $1,500 for their services on each committee,
or $3,000 if serving as chairperson of a committee.
Each non-employee director will also receive $1,000 for attendance at each
board meeting. In addition, each non-employee director will receive $800 for
attendance at each committee meeting and for participation in a telephonic or
video conference meeting. Each non-employee director will also be reimbursed for
out-of-pocket expenses incurred in connection with attendance at board and
committee meetings. In addition, each non-employee director will be provided
travel, accident and disability insurance in the event that the director is
involved in an accident while traveling on business relating to Lanier.
Under the Lanier Stock Plan, which will be adopted in connection with the
Distribution, each non-employee director will be granted an option to purchase
10,000 Lanier Shares on the later of the Distribution Date or the date such
director joins Lanier's board of directors and thereafter, beginning in 2000,
will automatically be granted an option to purchase 2,000 Lanier Shares on the
first business day of the month following the month in which the annual meeting
is held. The options will be non-statutory options for tax purposes and will be
priced at 100% of the fair market value on the date of grant. Fifty percent of
the options will become exercisable on the first anniversary of the date of
grant and 25% on each of the next two succeeding anniversary dates; however, any
options outstanding for more than one year at the time a Change in Control (as
defined in the Lanier Stock Plan) of Lanier occurs will become immediately
exercisable. In the event of a director's retirement, vested options may be
exercised for three years thereafter; in the event of a director's termination
of service on the board of directors or upon expiration of the director's term
on the board prior to retirement, vested options may be exercised for three
months thereafter; and in the event of a director's death or disability, vested
options may be exercised for twelve months thereafter. In no event may such
options be exercisable more than ten years after the date of grant. Neither
Lanier's board of directors nor any committee of the board of directors has any
discretion with respect to options granted to non-employee directors.
Under the Lanier Directors Deferred Compensation Plan (the "Directors
Plan"), which will be adopted in connection with the Distribution, each
non-employee director may also elect to defer all or a portion of his or her
fees. A director's account will be credited with a number of units of Lanier
common stock equivalents based upon the fair market value of the Lanier Shares
on the date the fees otherwise would be paid. Once amounts are deferred they are
only payable following a director's resignation, retirement or death. Each
Lanier common stock unit will be credited with dividend equivalents, which are
deemed reinvested in additional Lanier common stock units on the dividend
payment date. Amounts deferred under the Directors Plan will be paid in whole
shares of
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Lanier common stock and in cash for any factional shares as soon as practicable
following resignation, retirement or death. Within ninety days following a
Change in Control (as defined in the Directors' Plan), Lanier shall pay to each
director (or former director) a cash lump sum payment equal to the then
remaining balance in each such director's account.
In connection with the Distribution, each of the directors and executive
officers (including those named in the Summary Compensation Table below) will
enter into an indemnification agreement with Lanier pursuant to which each
director and executive officer shall be indemnified against expenses (including
attorneys' fees, judgments, fines, and amounts paid in settlement) actually and
reasonably incurred in connection with any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal or administrative or
investigative, to which he or she was, is, or is threatened to be made a party
by reason of being or having been such a director or officer, to the full extent
allowable under Delaware law.
Lanier has adopted a policy that directors retire from the board of
directors effective at the end of the month in which they reach age seventy-two.
In addition, a director is expected to automatically tender his or her
resignation in the event of retirement or other significant change in status
from the positions held at the time of election to the board of directors,
although the board of directors may opt to have such director continue to serve
on the board of directors.
EXECUTIVE OFFICERS
Listed below is certain information concerning individuals who are expected
to serve as executive officers of Lanier following the Distribution. These
individuals are currently responsible for the management of Lanier's business as
conducted in its capacity as a subsidiary of Harris.
<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ---------------- --------------------------------------------
<S> <C> <C> <C>
Wesley E. Cantrell.......... 64 Chairman of the Board and Chief Executive Officer since March, 1987.
Chief Executive Officer President, Lanier Business Products, 1977 to
1987. Executive Vice President and National
Sales Manager, 1972 to 1977. Vice President,
1966 to 1972. Employed by Lanier since 1955.
Member of the board of directors of Ann
Taylor Stores Corp., Environmental Design
International Ltd. and Impact Ministries, a
not-for-profit organization, and member of
the advisory board of First Union National
Bank of Atlanta.
C. Lance Herrin............. 58 President and Chief Chief Operating Officer since July, 1998.
Operating Officer Executive Vice President and General
Manager -- U.S. Operations, 1993 to 1998.
Executive Vice President and General
Manager -- Imaging Systems Division, 1987 to
1993. Executive Vice President, Lanier
Business Products, 1982 to 1987. Senior Vice
President, 1981 to 1982. Vice President,
1977 to 1981. Employed by Lanier since 1967.
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ---------------- --------------------------------------------
<S> <C> <C> <C>
James A. MacLennan.......... 40 Executive Vice President, Executive Vice President and Chief Financial
Chief Financial Officer Officer since November, 1998. Vice
President, Finance, 1997 to 1998. Vice
President, Accounting, Noble Drilling Corp.,
1995 to 1997. Director-Risk/Audit, Noble
Drilling Corp., 1993 to 1995. Financial
Reporting Manager, Esso Australia, Ltd.,
1990 to 1993. Affiliate Advisor, Exxon Co.,
Intl., 1987 to 1990. Financial Analyst, Esso
UK, 1985 to 1987.
David J. Marini............. 45 Executive Vice President and General Manager, Worldwide Field Operations,
General Manager, Worldwide since July, 1998. Executive Vice President
Field Operations since 1991. Vice President, Scientific
Calculations Division of Harris Corporation,
1983 to 1991.
Paul M. Anderson............ 51 Vice President-Worldwide Vice President, Worldwide Marketing since
Marketing July, 1998. Vice President since 1989.
Employed by Lanier since 1972.
Vera M. Arthur.............. 44 Vice President-Human Vice President, Human Resources since April,
Resources 1999. Vice President, Marketing, 1993 to
1999. Various management positions, 1986 to
1993. International Marketing Services
Manager, Sangamo Weston, 1984 to 1986.
Export Operations Manager, Lanier Business
Products, 1979 to 1984.
Brian R. Bergin............. 52 Vice President-Worldwide Vice President, Worldwide Sourcing and
Sourcing and Development Development since November, 1998. Vice
President since 1992. Employed by Lanier
since 1976.
J. Michael Kelly............ 52 Vice President, General Corporate Secretary since January, 1999,
Counsel and Secretary Vice President since 1989. General Counsel
since 1987. Counsel, Harris Corporation,
1980 to 1987.
Timothy A. Vellek........... 44 Vice President-Worldwide Vice President, Worldwide Service since
Service August, 1998. Vice President since 1991.
Employed by Lanier since 1978.
</TABLE>
There is no family relationship between any of Lanier's executive officers
or directors and there are no arrangements or understandings between any of
Lanier's executive officers or directors and any other person pursuant to which
any of them was elected an officer or director, other than arrangements or
understandings with directors or officers of Lanier acting solely in their
capacities as such. Generally, following the Distribution, Lanier's executive
officers will be elected annually and will serve at the pleasure of Lanier's
board of directors.
Lanier has established suggested stock ownership guidelines for its
Chairman and Chief Executive Officer, President and Chief Operating Officer and
certain vice presidents. Target ownership levels are based on the officer's base
salary (three times base salary for the Chairman and Chief Executive Officer,
two and one half times base salary for the President and Chief Operating
Officer, two times base salary for executive vice presidents and up to one times
base salary for certain vice presidents). Attainment of the target levels may be
spread over a five year period and the suggested ownership level is 25% of
target after two years and an additional 25% each year thereafter. All shares
owned (or beneficially owned) by the officer will be counted towards the target,
including, for example, shares owned for the officer's account under a qualified
retirement plan.
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HISTORICAL COMPENSATION OF LANIER EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
annual and long-term compensation for services to Lanier for Lanier's chief
executive officer and the other four most highly compensated executives of
Lanier. During the fiscal years ended July 2, 1999, July 3, 1998 and June 27,
1997, the individuals were compensated in accordance with Harris' plans and
policies. All references in the following tables to stock and stock options
relate to awards of stock and stock options granted by Harris. Harris has not
granted stock appreciation rights. Such amounts do not reflect the compensation
such persons will receive following the Distribution. All share data have been
adjusted to reflect a two-for-one stock split effected by Harris in September
1997. Harris options held by Lanier employees will be replaced by Lanier
Options. The option price and number of shares subject to each Lanier Option
will be adjusted so that the aggregate difference between the market price and
the option price will be equal for the Harris Options and the Lanier Options.
The number of Lanier Shares subject to each Lanier Option will be determined by
multiplying the number of shares subject to each Harris Option by the Lanier
Option Adjustment Ratio, and the option price of each Lanier Option will be
determined by dividing the price of each Harris option by the Lanier Option
Adjustment Ratio.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------
AWARDS PAYOUT
---------- ------------
ANNUAL COMPENSATION UNDERLYING
-------------------------------------- OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL OTHER ANNUAL SARS PAYOUT(2)(3) COMPENSATION(4)
POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) (#) ($) ($)
------------------ ------ --------- -------- --------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell....... 1999 337,886 182,600 24,000 25,000 315,000 27,879
Chairman and 1998 312,115 352,501 26,400 25,986 407,100 26,386
Chief Executive Officer 1997 300,000 403,100 15,200 25,988 302,500 25,411
C. Lance Herrin.......... 1999 228,077 243,180 9,600 10,000 126,000 20,412
President and Chief 1998 218,077 255,585 10,560 8,000 159,300 20,046
Operating Officer 1997 206,154 292,320 6,080 8,000 176,000 7,677
James A. MacLennan(5).... 1999 165,385 44,886 0 1,800 0 8,281
Executive Vice President 1998 152,462 48,921 0 0 0 1,968
Chief Financial Officer 1997 43,269 12,499 0 0 0 132
David J. Marini.......... 1999 182,115 124,948 7,200 8,000 94,500 11,793
Executive Vice President 1998 169,038 181,070 7,920 13,658 119,475 11,538
and General Manager, 1997 161,539 174,825 4,560 11,040 137,500 3,451
Worldwide Field
Operations
Paul M. Anderson......... 1999 124,615 101,700 1,920 3,300 31,500 10,382
Vice President -- 1998 88,654 122,283 2,640 2,000 39,825 7,443
Worldwide Marketing 1997 81,200 123,468 1,520 2,000 63,800 4,141
</TABLE>
- ---------------
(1) None of the executive officers named in the Summary Compensation Table
received personal benefits in excess of the lesser of $50,000 or 10% of
annual salary and bonus for fiscal 1999, 1998, or 1997; the amounts reported
represent dividend equivalent payments on outstanding performance shares
granted under the Harris Stock Incentive Plan for which the performance
period had not expired.
(2) The value of performance shares earned for the three-year performance period
ended July 2, 1999 (Mr. Cantrell -- 8,000 shares; Mr. Herrin -- 3,200
shares; Mr. Marini -- 2,400 shares; and Mr. Anderson -- 800 shares) is based
upon the closing price of Harris common stock on July 1, 1999 (the last
trading day of fiscal year 1999).
(3)Payouts for fiscal 1997 and 1998 were made pursuant to grants under the
Lanier Long Term Incentive Plan for key employees. The payments reflected in
the table for fiscal years 1997 and 1998 are for performance during the
three-year performance periods ended June 27, 1997 and July 3, 1998,
respectively.
(4) Amounts reported include:
49
<PAGE> 63
(i) Contributions to the Lanier Savings Incentive Plan for fiscal year
1999: Mr. Cantrell -- $5,209; Mr. Herrin -- $5,258, Mr.
MacLennan -- $3,863, Mr. Marini -- $4,931 and Mr. Anderson -- $5,194; for
fiscal year 1998: Mr. Cantrell -- $5,935, Mr. Herrin -- $7,415, Mr.
MacLennan -- $847, Mr. Marini -- $6,403 and Mr. Anderson -- $6,034; for
fiscal year 1997: Mr. Cantrell -- $4,500, Mr. Herrin -- $4,500, Mr.
MacLennan -- $132, Mr. Marini -- $2,729 and Mr. Anderson -- $3,247.
(ii) Contributions to the Lanier Supplemental Executive Retirement
Savings Plan for fiscal year 1999: Mr. Cantrell -- $17,686, Mr.
Herrin -- $11,509, Mr. MacLennan -- $3,939, Mr. Marini -- $5,737 and Mr.
Anderson -- $3,529; for fiscal year 1998: Mr. Cantrell -- $15,537, Mr.
Herrin -- $7,681, Mr. MacLennan -- $920, Mr. Marini -- $4,398, and Mr.
Anderson -- $363.
(iii) The taxable portion of premiums on life insurance provided for
fiscal year 1999: Mr. Cantrell -- $4,984, Mr. Herrin -- $3,645, Mr.
MacLennan -- $479, Mr. Marini -- $1,125 and Mr. Anderson -- $1,659; for
fiscal year 1998: Mr. Cantrell -- $4,914, Mr. Herrin -- $4,950, Mr.
MacLennan -- $201, Mr. Marini -- $737, and Mr. Anderson -- $1,046; for
fiscal year 1997: Mr. Cantrell -- $4,914, Mr. Herrin -- $3,177, and Mr.
Anderson -- $894.
(5) Mr. MacLennan commenced employment with Lanier in March 1997; the amounts
reported for fiscal year 1997 reflect less than a full year of employment.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Shown below is additional information on grants of stock options made under
the Harris Stock Incentive Plan during Harris' fiscal year 1999. The amounts
shown for potential realizable values are based upon assumed annualized rates of
Harris stock price appreciation of five percent and ten percent over the full
ten year term (or shorter term) of the options, as required by the Commission,
and are not intended to represent or forecast possible future appreciation, if
any, of the price of Harris common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell... 25,000 3.23 34.06 8/28/08 535,543 1,357,171
C. Lance Herrin...... 10,000 1.29 34.06 8/28/08 214,217 542,869
James A. MacLennan... 1,800 0.23 38.56 11/24/08 43,653 110,626
David J. Marini...... 8,000 1.03 34.06 8/28/08 171,374 434,295
Paul M. Anderson..... 3,300 0.43 34.06 8/28/08 70,692 179,147
</TABLE>
- ---------------
(1) All stock option grants were made under the Harris Stock Incentive Plan. The
term of each stock option is generally ten years and is exercisable in
installments of 50% after one year, 75% after two years, and 100% after
three years. The exercise price is the closing price of a share of Harris
common stock on the date of the grant. The exercise price may be paid in
cash and/or shares of Harris common stock, or "cashless exercise" procedures
may be used. If shares of Harris common stock are delivered in payment of
the exercise price, a Restoration Stock Option ("RSO") is granted equal to
the number of shares used to exercise the stock option. The expiration date
of these options is the same as the expiration date of the underlying
options. RSO grants are non-qualified, and are exercisable commencing six
months after the date of grant at the market value on the grant date. In the
event of a change of control, outstanding options become immediately
exercisable.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Shown below is information with respect to the number of Harris shares
acquired upon exercise of stock options and the aggregate gains realized on
exercises during fiscal year 1999 for those executive officers of Lanier named
in the Summary Compensation Table. The table also sets forth the number of
shares covered by exercisable and unexercisable options held by such executives
on July 2, 1999 and the aggregate gains that would
50
<PAGE> 64
have been realized had these options been exercised on July 2, 1999, even though
these options were not exercised, and the unexercisable options could not have
been exercised on July 2, 1999. These options were granted under the Harris
Stock Incentive Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
HARRIS SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END(2)($)
ACQUIRED ON REALIZED(1) --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell.... 0 0 107,070 40,000 1,210,345 176,250
C. Lance Herrin....... 0 0 30,000 16,000 403,810 70,500
James A. MacLennan.... 0 0 0 1,800 0 1,463
David J. Marini....... 0 0 16,170 12,500 28,125 55,531
Paul M. Anderson...... 0 0 4,500 4,800 33,156 21,875
</TABLE>
- ---------------
(1) Market value on the date of exercise of Harris shares covered by exercised
options, less option exercise price.
(2) Market value of Harris shares underlying in-the-money options on July 2,
1999, less option exercise price. The market value is based on the July 2,
1999 closing price of $39.38 per share of the Harris common stock reported
as New York Exchange Composite Transactions.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Shown below is information with respect to awards of performance shares
granted under the Harris Stock Incentive Plan during Harris fiscal year 1999 to
those Lanier executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUT UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
OTHER PERIOD ------------------------------------------
UNTIL THRESHOLD MAXIMUM
NUMBER OF MATURATION HARRIS TARGET HARRIS
NAME HARRIS SHARES OR PAYOUT SHARES(#) HARRIS SHARES(#) SHARES(#)
---- ------------- -------------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Wesley E. Cantrell......... 5,000 6/30/01 0 5,000 10,000
C. Lance Herrin............ 2,000 6/30/01 0 2,000 4,000
James A. MacLennan......... 0 -- 0 0 0
David J. Marini............ 1,500 6/30/01 0 1,500 3,000
Paul M. Anderson........... 0 -- 0 0 0
</TABLE>
Awards of performance shares under the Harris Stock Incentive Plan to
participants are made at the beginning of each performance period and are earned
based on the performance of Lanier, Harris or some combination thereof. The
Harris Stock Incentive Plan is designed to motivate key employees to maximize
stockholder value by aligning their interests with stockholder interests. For
Lanier executives the payout is determined by the Management Development and
Compensation Committee of Harris' board of directors based upon financial
performance compared with strategic plan objectives. Performance criteria
include Lanier's net income and return on capital during the three-year
strategic plan cycle. Share payouts are made following the determination of the
committee and range from zero to a maximum of 200% of the original shares
awarded. Participants receive quarterly cash payments on the performance share
awards in an amount equal to dividends paid to stockholders on the Harris
shares.
LANIER DEFINED BENEFIT RETIREMENT PLANS
Lanier's domestic defined benefit retirement program consists of (i) a
tax-qualified, funded pension plan, the Lanier Pension Equity Plan (the "PEP"),
which is available to substantially all of the United States employees of Lanier
and its participating subsidiaries and affiliated companies, and (ii) for
executive officers and other key employees, one non-qualified, unfunded Lanier
Supplemental Executive Retirement Plan (the "SERP") that
51
<PAGE> 65
provides benefits which, but for certain limits imposed by the Internal Revenue
Code on tax-qualified plans, would be provided under the PEP. The PEP is a
defined benefit plan. The PEP and the SERP are fully paid by Lanier, and
employees become vested upon the completion of five years of service.
In July 1997, the PEP was amended to provide for a lump-sum retirement
benefit calculated by reference to a formula based upon final average pay, age
and years of service. However, if the determination of benefits payable to
individuals currently eligible for retirement or nearing retirement under the
revised PEP, including Mr. Cantrell and Mr. Herrin, would result in a reduction
of future benefit accruals under the PEP as in effect prior to the July 1997
amendment, the benefits payable to such a person would be as calculated under
the PEP without giving effect to the July 1997 amendment. Such employees will
receive annual pension benefits determined by adding (a) 1.22% of the average of
the employee's five highest consecutive years' compensation in the last ten
calendar years before retirement ("five-year average compensation") multiplied
by the lesser of the employee's years of service or 30 and (b) 0.33% of that
part of the employee's five-year average compensation in excess of a certain
amount, multiplied by the lesser of the employee's years of service or 30 (the
"Pre-July 1997 Formula"). Benefits are computed as a straight life annuity, but
may be converted to a lump sum or other form.
The pension benefits for Mr. MacLennan, Mr. Marini and Mr. Anderson under
the PEP is based on the July 1997 amendment and is stated as a lump sum benefit.
The formula for the lump sum benefit is the product of the employee's PEP
credits times the employee's five-year average compensation plus 50% of the
five-year average compensation in excess of a certain amount. PEP credits are
awarded for age and service performed on or after July 1, 1997 and for the
frozen accrued benefit calculated under Pre-July 1997 Formula described above
determined as of June 30, 1997. Benefits are computed as a lump sum but may be
converted to a straight life annuity or other form.
The following table sets forth the estimated annual benefits under the PEP
and the SERP for Mr. Cantrell and Mr. Herrin calculating annual benefits under
the terms of the PEP (as in effect prior to the July 1997 amendment) and the
SERP payable at age 65 or older.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
HIGHEST CONSECUTIVE FOR CREDITED YEARS OF SERVICE
5-YEAR AVERAGE --------------------------------------------
COMPENSATION 15 20 25 30
------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000...................................... $ 56,600 $ 75,400 $ 94,300 $113,200
500,000...................................... 114,700 152,900 191,200 229,400
750,000...................................... 172,800 230,400 288,100 345,700
1,000,000...................................... 231,000 307,900 384,900 461,900
1,250,000...................................... 289,100 385,400 481,800 578,200
</TABLE>
The following table sets forth the estimated annual benefits under the PEP
and the SERP for Mr. MacLennan, Mr. Marini and Mr. Anderson, calculating
benefits under the terms of the PEP (as in effect after the July 1997 amendment)
and the SERP payable at age 65 or older:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR
HIGHEST CONSECUTIVE CREDITED YEARS OF SERVICE
5-YEAR AVERAGE --------------------------------------------
COMPENSATION 15 20 25 30
------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000...................................... $ 51,260 $ 60,580 $ 69,900 $ 76,114
500,000...................................... 104,884 123,954 143,024 155,737
750,000...................................... 158,508 187,328 216,148 235,361
1,000,000...................................... 212,132 250,702 289,271 314,984
1,250,000...................................... 265,756 314,075 362,395 394,608
</TABLE>
Executives have estimated credited years of service under the PEP and the
SERP as follows:
Wesley E. Cantrell -- 30 years
C. Lance Herrin -- 28 years
James A. MacLennan -- 2 years
52
<PAGE> 66
David J. Marini -- 7 years
Paul M. Anderson -- 29 years
Executives have estimated five-year average compensation under the PEP and
the SERP as follows:
<TABLE>
<S> <C>
Wesley E. Cantrell.......................................... $880,962
C. Lance Herrin............................................. $509,811
James A. MacLennan.......................................... $207,817
David J. Marini............................................. $391,592
Paul M. Anderson............................................ $208,048
</TABLE>
Compensation as in effect prior to the July 1997 amendment consists of base
salary, bonuses and sales commissions and, for periods prior to 1998, income
recognized upon the exercise of Harris stock options. Compensation as in effect
after the July 1997 amendment consists of gross income, including salary,
bonuses, sales commissions, vacation pay, compensation received while on an
authorized leave of absence, and short-term disability payments, but excluding
severance pay, payments made in consideration of a release of employment with
Lanier, payments attributable to domestic or foreign assignment differential,
any contest payments, any expense-related reimbursement, and payments made under
any long-term incentive plan, including income for the exercise of stock options
or the value of life insurance includible in the participant's gross income. For
periods prior to 1998, income recognized upon the exercise of Harris stock
options is included. Base salary includes certain deferred amounts.
Benefits under the PEP and the SERP are not subject to any deduction for
Social Security or other offset amounts.
LONG-TERM COMPENSATION
Equity-based incentive compensation for Lanier executives will be provided
under the Lanier Stock Plan, which will be adopted by Harris as the sole
stockholder of Lanier prior to the Distribution. The Lanier Stock Plan will
permit the granting of (1) stock based on performance criteria, (2) restricted
stock, (3) stock options, including incentive stock options, (4) stock
appreciation rights (freestanding or in tandem with stock options) and (5) other
awards valued by reference to, or otherwise based on, Lanier common stock, as
determined and approved by a committee comprised solely of at least two outside
directors (the "Committee").
Stock options provide value to the executives only when the price of Lanier
Shares increases above the option grant price.
In connection with the Distribution, stock options granted to Lanier
employees under the Harris Stock Incentive Plan will be replaced by Lanier
Options. The option price and number of shares subject to each Lanier Option
will be adjusted so that the aggregate difference between the market price and
the option price will be equal for the Harris Options and the Lanier Options.
The number of Lanier Shares subject to each Lanier Option will be determined by
multiplying the number of shares subject to each Harris Option by the Lanier
Option Adjustment Ratio and the option price of each Lanier Option will be
determined by dividing the price of each Harris Option by the Lanier Option
Adjustment Ratio.
Incentives may also be awarded in the form of performance share awards. The
Lanier Stock Plan will provide for the Committee to determine the applicable
performance goals utilizing one or more of the performance criteria set forth in
the Lanier Stock Plan, Lanier's strategic planning process and a period of time
(generally, three fiscal years) during which Lanier's performance is to be
measured. The Committee then will assign to each participant a number of
performance shares and establish a mechanism for computing the number of
performance shares that can be earned during the period based on Lanier's
performance. If the performance goals are satisfied the participant will receive
a number of Lanier Shares equal to the number of performance shares.
53
<PAGE> 67
In connection with the Distribution, performance share awards granted to
Lanier employees under the Harris Stock Incentive Plan will be canceled and
replacement performance shares will be awarded under the Lanier Stock Plan by
multiplying the number of performance shares by the Lanier Option Adjustment
Ratio.
Cash-based long-term incentive compensation for Lanier executives will be
provided under the Lanier Long-Term Incentive Plan (the "LTIP"). The LTIP will
permit the granting of cash awards based on performance criteria. Awards granted
pursuant to the LTIP will be determined and approved by the Committee.
The LTIP will provide for the Committee to determine the applicable
performance criteria utilizing Lanier's strategic planning process and a period
of time (generally, three fiscal years) during which Lanier's performance is to
be measured. The Committee then will assign to each participant a cash award
target and establish a mechanism for computing the amount of the cash award that
can be earned during the period based on Lanier's performance.
The maximum amount that may be awarded to a participant each year is 200%
of such target award based on the degree of achievement of the performance
goals. The maximum incentive award payable to any executive officer in any year
will be $2,000,000. Upon the occurrence of a Change in Control (as defined in
the LTIP), Lanier will pay an amount not less than the target award for the
performance period. An employee may elect to defer all or a portion of any award
until normal retirement age. Interest will be paid on the amount deferred based
on the average long-term treasury bill rate. Stock options and performance share
awards made under the Lanier Stock Plan or cash awards paid under the LTIP are
intended to satisfy the exemption for performance-based compensation under
Section 162(m) of the Internal Revenue Code.
LANIER DEFINED CONTRIBUTION RETIREMENT PLANS
Lanier's defined contribution retirement program consists of (i) a
tax-qualified funded defined contribution plan, the Lanier Savings Incentive
Plan (the "SIP"), which is available to substantially all of the United States
employees of Lanier and its participating subsidiaries and affiliated companies
and (ii) for executive officers and other key employees the non-qualified
unfunded Lanier Supplemental Executive Retirement Savings Plan (the "SIP SERP")
that provides benefits, which, but for certain limits imposed by the Internal
Revenue Code on tax-qualified plans, would be provided under the SIP. The SIP
will be funded by employee contributions and matching contributions (with
certain limitations) by Lanier, which may be made in cash or Lanier common
stock. An employee's interest in Lanier's matching contributions will vest based
on the employee's years of service and a five-year vesting schedule.
Benefits payable to an employee upon retirement will be based on the
contributions made by the employee, the contributions made by Lanier, if any,
and the performance of the employee's chosen investments. Therefore, Lanier
cannot estimate the annual benefits which will be payable to participate in the
SIP and the SIP SERP upon retirement at normal retirement age.
KEY CONTRIBUTOR PLAN
Lanier's Key Contributor Plan (the "Key Contributor Plan") links a portion
of total compensation for certain key employees to the attainment of corporate
financial objectives as approved by the plan administrator. Under the Key
Contributor Plan, a target annual incentive award is established for each
participant with quarterly targets. The maximum incentive amount that may be
awarded to a participant each year is 150% of such target annual award based on
the degree of achievement of pre-established performance goals, which may
include any combination of the following: Lanier's revenue, earnings per share
of common stock, net income, return on equity, return on capital, return on
assets, total shareholder return, return on sales or cash flow. The maximum
annual incentive award payable to any executive officer of Lanier is $2,000,000.
The awards are paid quarterly dependent upon attainment of quarterly performance
targets or the annual performance targets. Upon the occurrence of a Change in
Control (as defined in the Key Contributor Plan), Lanier will pay any annual
incentive awards to participants as soon as practicable in an amount not less
than the target annual incentive award as
54
<PAGE> 68
approved for the fiscal year. It is intended that the incentive awards satisfy
the exemption for performance-based compensation under Section 162(m) of the
Internal Revenue Code.
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS
In connection with the Distribution, the executive officers of Lanier will
enter into Executive Severance Agreements (each, a "Severance Agreement") which
will provide certain officers of Lanier with severance benefits in the event the
officer's employment is terminated by Lanier without Cause or by the executive
for Good Reason within two years following a Change in Control (all terms as
defined in the Severance Agreement). Under the Severance Agreement, the
executive agrees not to voluntarily terminate his or her employment with Lanier
during the six-month period following a Change in Control. The lump sum
severance benefit payable under the Severance Agreement equals the sum of (a)
the executive's unpaid base salary through date of termination, a pro rata
annual bonus (as determined under the Severance Agreement) and any compensation
deferred by the executive other than under a tax-qualified plan; and (b) three
times the executive's highest annual rate of base salary during the 12-month
period prior to the date of termination and three times the greater of the
executive's highest annual bonus in the last three years, the executive's target
bonus for the year during which the Change in Control occurred, or the
executive's target bonus for the year in which the executive's employment is
terminated. In addition, the executive receives for a period of two years
following termination the same level of medical, dental, accident, disability,
life insurance and any similar benefits or the cash equivalent to the value of
such benefits if the executive is prevented from participating in the plans. The
executive also receives reimbursement for any relocation expense related to
pursuit of other business opportunities incurred within two years following the
date of termination, for recruitment or placement services of up to $4,000 and
for professional financial or tax planning services of up to $5,000. The
Severance Agreement also provides for a tax gross-up payment to the executive in
the event that payment of any severance benefits are subject to excise tax
imposed under Section 4999 of the Internal Revenue Code. In addition, Lanier
shall reimburse the executive for any legal fees and costs with respect to any
dispute arising under the Severance Agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the outstanding Lanier Shares are, and prior to the Distribution
will be, held beneficially and of record by Harris. After the Distribution,
Harris will retain approximately 10% of the outstanding Lanier Shares. The
following table sets forth each person or entity that is expected to own
beneficially more than 5% of the Lanier Shares outstanding immediately following
the Distribution, based on the ownership of Harris common stock as known to
Lanier.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- -------------------- -----------
<S> <C> <C>
Harris Corporation...................................... 8,808,274 9.99%
1025 West NASA Boulevard
Melbourne, FL 32919
The Prudential Insurance Company of America............. 7,965,692(2) 9.04%
751 Broad Street
Newark, NJ 07102-3777
J.P. Morgan & Co. Incorporated.......................... 4,971,371(3) 5.64%
60 Wall Street
New York, NY 10260
</TABLE>
- ---------------
(1) Based on the number of Lanier Shares expected to be outstanding on the
Distribution Date.
(2) The information is based on an Amended Schedule 13G with respect to Harris
common stock filed by The Prudential Insurance Company of America
("Prudential") with the Commission on May 7, 1999 in which Prudential states
that it has sole dispositive and voting power with respect to 1,095,000 of
the Harris shares,
55
<PAGE> 69
shared dispositive power with respect to 6,867,693 of the Harris shares and
shares voting power with respect to 6,843,035 of the Harris shares.
(3) The information is based on a Schedule 13G with respect to Harris common
stock filed by J.P. Morgan & Co. Incorporated ("J.P. Morgan") with the
Commission on February 22, 1999 in which J.P. Morgan states that it has sole
dispositive power with respect to 4,717,071 of the Harris shares, sole
voting power with respect to 3,509,011 of the Harris shares, shared
dispositive power with respect to 209,700 of the Harris shares and shared
voting power with respect to 99,300 of the Harris shares.
56
<PAGE> 70
BENEFICIAL OWNERSHIP OF MANAGEMENT
All of the outstanding Lanier Shares are, and prior to the Distribution
will be, held beneficially and of record by Harris and no director or executive
of Lanier owns any Lanier Shares. The following table sets forth information
concerning the Lanier Shares that are projected to be beneficially owned after
the Distribution by each of the directors and each of the executive officers
named in the Summary Compensation Table and by all directors and executive
officers as a group. The projections are based on the number of Harris shares
held by such persons as of June 18, 1999 and reflect the Distribution Ratio of
one Lanier Share for every share of common stock of Harris held on the Record
Date.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
SHARES DEFERRED EXERCISABLE
BENEFICIALLY STOCK WITHIN PERCENT
NAME OF BENEFICIAL OWNER OWNED(1)(2) UNITS(3) 60 DAYS(4) OF CLASS(5)
------------------------ ------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Wesley E. Cantrell..................... 74,692 445 22,500 *
C. Lance Herrin........................ 16,052 195 9,000 *
Sidney E. Harris....................... 0 0 0 *
David H. Hughes........................ 0 0 0 *
Amos R. McMullian...................... 0 0 0 *
Clarence B. Rogers, Jr................. 0 0 0 *
John F. Ward........................... 0 0 0 *
James A. MacLennan..................... 114 93 0 *
David J. Marini........................ 20,185 0 7,000 *
Paul M. Anderson....................... 2,942 76 2,650 *
All executive officers and directors
as a group (14 persons).............. 119,311 831 46,450 *
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, and subject to community property laws where
applicable, Lanier believes that each of the persons named in the table has
sole voting and investment power with respect to the Lanier Shares indicated
as beneficially owned. The information is based on information supplied by
the directors and executive officers.
(2) The Lanier Shares reported include performance shares expected to be awarded
under Lanier's Stock Plan to be adopted in connection with the Distribution,
as discussed above under "Long-Term Compensation," and assumes a Lanier
Option Adjustment Ratio of 1:1. Under the Lanier's Stock Plan, the named
individuals would have sole voting power but no investment power, as
follows: Mr. Cantrell -- 25,000; Mr. Herrin -- 10,000; Mr. Marini -- 7,500;
and Mr. Anderson -- 2,000.
(3) The Lanier Shares reported are amounts deferred in the form of stock
equivalent units under the Lanier Supplemental Executive Retirement Savings
Plan, as discussed above under "Lanier Defined Contribution Retirement
Plans." The deferred stock equivalent units are settled in cash following,
or under certain circumstances prior to, retirement, and may not be voted or
transferred.
(4) The Lanier Shares reported relate to Lanier Options expected to be awarded
under Lanier's Stock Plan, as discussed above under "Long-Term
Compensation," and assumes a Lanier Option Adjustment Ratio of 1:1. The
Lanier Shares reported can be acquired through exercise of such Lanier
Options on or prior to September 1, 1999.
(5) Based on the number of Lanier Shares expected to be outstanding on the
Distribution Date.
DESCRIPTION OF LANIER'S CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under Lanier's restated certificate of incorporation, the total number of
shares of all classes of stock that Lanier has authority to issue is
525,000,000, of which 25,000,000 are shares of preferred stock, without par
value, and 500,000,000 are shares of common stock, par value $0.01 per share.
Based on the number of Harris shares outstanding on September 24, 1999,
79,274,473 Lanier Shares, constituting approximately 90% of the Lanier Shares
outstanding as of the Distribution Date, will be issued to stockholders of
Harris. Harris will retain 8,808,274 Lanier Shares, or approximately 10% of the
outstanding Lanier Shares. All of the Lanier Shares to be
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distributed to Harris stockholders in the Distribution will be fully paid and
non-assessable. Eight million Lanier Shares have been reserved for issuance
under Lanier's Stock Plan. No shares of preferred stock have been issued,
although shares of preferred stock have been reserved for issuance under the
Rights Agreement (as defined below).
The following summary of certain terms of Lanier's capital stock describes
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, Lanier's restated certificate of incorporation
and Lanier's bylaws, the forms of which are included as exhibits to the
Registration Statement, and by applicable provisions of law.
COMMON STOCK
The holders of the Lanier Shares will be entitled to one vote for each
share on all matters voted on by stockholders, and the holders of such shares
will possess all voting power, except as otherwise required by law or provided
in any resolution adopted by Lanier's board of directors with respect to any
series of preferred stock of Lanier. There are no cumulative voting rights.
Accordingly, the holders of a majority of the Lanier Shares voting for the
election of directors can elect all of the directors, if they choose to do so,
subject to any rights of the holders of preferred stock to elect directors.
Subject to any preferential or other rights of any outstanding series of
preferred stock of Lanier that may be designated by Lanier's board of directors,
the holders of the Lanier Shares will be entitled to such dividends as may be
declared from time to time by Lanier's board of directors from funds available
therefor, and upon liquidation will be entitled to receive pro rata all assets
of Lanier available for distribution to such holders. See "Risk Factors --
Uncertainty of Dividends" on page 11 and "Dividend Policies" on page 23.
PREFERRED STOCK
Lanier's board of directors is authorized without further stockholder
approval (except as may be required by applicable law or New York Stock Exchange
regulations) to provide for the issuance of shares of preferred stock, in one or
more series, and to fix for each such series such voting powers, designations,
preferences and relative, participating, optional and other special rights, and
such qualifications, limitations or restrictions, as are stated in the
resolution adopted by Lanier's board of directors providing for the issuance of
such series and as are permitted by the Delaware General Corporation Law. See
"Certain Anti-Takeover Provisions of Lanier's Certificate of Incorporation,
Bylaws and Rights Agreement and Delaware Law -- Preferred Stock" beginning on
page 60. Should Lanier's board of directors elect to exercise this authority,
the rights and privileges of holders of the Lanier Shares could be made subject
to the rights and privileges of any such series of preferred stock. Presently,
Lanier has no plans to issue any preferred stock, except that Lanier's
Stockholder Protection Rights Agreement (the "Rights Agreement") provides for
the issuance of shares of participating preferred stock under the circumstances
specified in the Rights Agreement, upon exercise or exchange of rights (the
"Rights") issued thereunder. See "Certain Anti-Takeover Provisions of Lanier's
Certificate of Incorporation, Bylaws and Rights Agreement and Delaware
Law -- Stockholder Protection Rights Agreement" beginning on page 61.
NO PREEMPTIVE RIGHTS
No holder of any stock of Lanier of any class authorized at the
Distribution Date will have any preemptive right to subscribe to any securities
of Lanier of any kind or class.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for Lanier immediately following the
Distribution will be ChaseMellon Shareholder Services, L.L.C.
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CERTAIN ANTI-TAKEOVER PROVISIONS
OF LANIER'S CERTIFICATE OF INCORPORATION, BYLAWS AND
RIGHTS AGREEMENT AND DELAWARE LAW
GENERAL
Lanier's restated certificate of incorporation, Lanier's bylaws, the Rights
Agreement and the Delaware General Corporation Law contain certain provisions
that could delay or make more difficult an acquisition of control of Lanier not
approved by Lanier's board of directors, whether by means of a tender offer,
open market purchases, a proxy contest or otherwise. These provisions have been
implemented to enable Lanier, particularly (but not exclusively) in the initial
years of its existence as an independent, publicly owned company, to develop its
business in a manner which will foster its long-term growth without disruption
caused by the threat of a takeover not deemed by Lanier's board of directors to
be in the best interests of Lanier and its stockholders. See also
"-- Stockholder Protection Rights Agreement" beginning on page 61. These
provisions could have the effect of discouraging third parties from making
proposals involving an acquisition or change of control of Lanier, although such
a proposal, if made, might be considered desirable by a majority of Lanier's
stockholders. These provisions may also have the effect of making it more
difficult for third parties to cause the replacement of the current management
of Lanier without the concurrence of Lanier's board of directors. In addition,
certain provisions of the Tax Disaffiliation Agreement to be entered into by
Harris and Lanier may also have the effect of discouraging third parties from
making proposals involving an acquisition or change of control of Lanier prior
to the second anniversary of the Distribution Date. See "Relationship Between
Harris and Lanier Following the Distribution -- Tax Disaffiliation Agreement"
beginning on page 20. Set forth below is a description of the provisions
contained in Lanier's restated certificate of incorporation and bylaws, the
Rights Agreement and the Delaware General Corporation law that could impede or
delay an acquisition of control of Lanier that Lanier's board of directors has
not approved. This description is intended as a summary only and is qualified in
its entirety by reference to Lanier's restated certificate of incorporation,
Lanier's bylaws and the Rights Agreement, the forms of which are included as
exhibits to the Registration Statement, as well as the Delaware General
Corporation Law.
CLASSIFIED BOARD OF DIRECTORS
Lanier's restated certificate of incorporation provides for Lanier's board
of directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of Lanier's board of
directors will be elected each year. The first class of directors will initially
serve a one-year term, and the second class of directors will initially serve a
two-year term. Thereafter, each class of directors will be elected for a
three-year term. See "Lanier's Management -- Board of Directors" beginning on
page 44.
This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of Lanier's board of
directors until the second annual stockholders meeting following the date on
which the acquiror obtains the controlling stock interest and could have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of Lanier and could thus increase the
likelihood that incumbent directors will retain their positions.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
Lanier's restated certificate of incorporation and bylaws provide that the
number of directors shall be fixed only by resolution at Lanier's board of
directors from time to time. Lanier's restated certificate of incorporation
provides that the directors may be removed by stockholders only both for cause
and by the affirmative vote of at least 80% of the shares entitled to vote.
Lanier's restated certificate of incorporation and bylaws provide that
vacancies on the board of directors may be filled only by a majority vote of the
remaining directors or by the sole remaining director.
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STOCKHOLDER ACTION
Lanier's restated certificate of incorporation provides that stockholder
action may be taken only at an annual or special meeting of stockholders and
that stockholders may not act by written consent. Lanier's restated certificate
of incorporation and bylaws provide that special meetings of stockholders may be
called only by Lanier's board of directors. Stockholders are not permitted to
call a special meeting or to require Lanier's board of directors to call a
special meeting of stockholders.
ADVANCE NOTICE FOR STOCKHOLDER PROPOSALS OR NOMINATIONS AT MEETINGS
Lanier's bylaws establish an advance notice procedure for stockholder
proposals to be brought before any annual or special meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual meeting or a special meeting at which directors are to be elected.
Subject to any other applicable requirements, including, without limitation,
Rule 14a-8 under the Exchange Act, only such business may be conducted at a
meeting of stockholders as has been brought before the meeting by, or at the
direction of, Lanier's board of directors, or by a stockholder who has given
Lanier's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. The presiding officer at
such meeting has the authority to make such determinations. Only persons who are
nominated by, or at the direction of, Lanier's board of directors, or who are
nominated by a stockholder who has given timely written notice, in proper form,
to Lanier's Secretary prior to a meeting at which directors are to be elected
will be eligible for election as directors of Lanier.
To be timely, notice of nominations or other business to be brought before
any meeting must be delivered to Lanier's Secretary not less than 90 days nor
more than 120 days prior to the first anniversary date of the annual meeting for
the preceding year; provided, however, that if the annual meeting is not
scheduled to be held within a period that commences 30 days before and ends 30
days after such anniversary date, such advance notice shall be given by the
later of (i) the close of business on the date 90 days prior to the date of the
annual meeting or (ii) the close of business on the tenth day following the date
that the meeting date is first publicly announced or disclosed.
Any stockholder who gives notice of a proposal must provide the text of the
proposal to be presented, a brief written statement of the reasons why he or she
favors the proposal, the stockholder's name and address, the number and class of
all shares of each class of Lanier stock owned, any material interest the
stockholder may have in the proposal (other than as a Lanier stockholder) and,
in the case of any person that holds Lanier stock through a nominee or "street
name" holder of record of such stock, evidence establishing such person's
indirect ownership of Lanier stock and entitlement to vote on the matter
proposed at the annual meeting.
The notice of any nomination for election as a director must set forth the
name of the nominee, the number and class of all shares of each class of Lanier
capital stock beneficially owned by the nominee, the information regarding the
nominee required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K
adopted by the Commission, the signed consent of each nominee to serve as a
director if elected, the nominating stockholder's name and address, the number
and class of shares of Lanier stock owned by such nominating stockholder and, in
the case of any person that holds Lanier stock through a nominee or "street
name" holder of record of such stock, evidence establishing such person's
indirect ownership of Lanier stock and entitlement to vote on the matter
proposed at the annual meeting.
AMENDMENTS TO BYLAWS
Lanier's restated certificate of incorporation provides that only Lanier's
board of directors or the holders of 80% of the shares of Lanier's capital stock
entitled to vote at an annual or special meeting of stockholders have the power
to amend or repeal Lanier's bylaws.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Any proposal to amend, alter, change or repeal any provision of Lanier's
restated certificate of incorporation requires approval by the affirmative vote
of a majority of the voting power of all of the shares of Lanier's capital
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stock entitled to vote on such matters, with the exception of certain provisions
of Lanier's restated certificate of incorporation which require a vote of 80% or
more of such voting power.
PREFERRED STOCK
Lanier's restated certificate of incorporation authorizes Lanier's board of
directors by resolution to issue one or more series of Preferred Stock and to
determine, with respect to any series of preferred stock, the terms and rights
of such series.
Lanier believes that the availability of the preferred stock will provide
Lanier with increased flexibility in structuring possible future financing and
acquisitions and in meeting other corporate needs which might arise. Having such
authorized shares available for issuance will allow Lanier to issue shares of
preferred stock without the expense and delay of a special stockholders'
meeting. The authorized shares of preferred stock, as well as Lanier Shares,
will be available for issuance without further action by Lanier's stockholders,
unless such action is required by applicable law or the rules of the New York
Stock Exchange or any other stock exchange on which Lanier's securities may be
listed. Although Lanier's board of directors has no intention at the present
time of doing so, it would have the power (subject to applicable law) to issue a
series of preferred stock that could, depending on the terms of such series,
impede the completion of a merger, tender offer or other takeover attempt. For
instance, subject to applicable law, such series of preferred stock might impede
a business combination by including class voting rights which would enable the
holder to block such a transaction. See "-- Stockholder Protection Rights
Agreement" below.
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
Each share of Lanier Common Stock has attached to it one right (a "Right").
Each Right entitles its registered holder to purchase from Lanier, on or after
the Separation Time (as hereinafter defined), one one-hundredth of a share of
Participating Preferred Stock, no par value (the "Participating Preferred"), for
$- (the "Exercise Price"), subject to adjustment. The Rights will not trade
separately from the Lanier Common Stock until the Separation Time.
The Rights will be evidenced by common stock certificates until the earlier
of (either, the "Separation Time") (i) the close of business on the tenth
business day (or such later date as Lanier's board of directors may from time to
time fix by resolution adopted prior to the Separation Time that would otherwise
have occurred) after the date on which any Person (as defined in the Rights
Agreement) commences a tender or exchange offer which, if consummated, would
result in such Person's becoming an Acquiring Person (as defined below) and (ii)
the first date (the "Stock Acquisition Date") of public announcement by Lanier
(by any means) that a Person has become an Acquiring Person; provided that if a
tender or exchange offer referred to in clause (i) is canceled, terminated or
otherwise withdrawn prior to the Separation Time without the purchase of any
shares of stock pursuant thereto, such offer shall be deemed never to have been
made. An Acquiring Person is any Person who is the Beneficial Owner (as defined
in the Rights Agreement) of 15% or more of the outstanding Lanier Shares,
excluding (i) Lanier, any majority-owned subsidiary of Lanier or any employee
stock ownership or other employee benefit plan of Lanier or a subsidiary of
Lanier (or any entity or trustee holding shares of Lanier common stock pursuant
to the terms of any such plan or for the purpose of funding any such plan or
funding other employee benefits for employees of Lanier or any subsidiary of
Lanier), (ii) any Person who is the beneficial owner of 15% or more of the
outstanding shares of Lanier Common Stock on the date of the Rights Agreement or
any Person who became the Beneficial Owner of 15% or more of the outstanding
Lanier Shares solely as a result of an acquisition of Lanier Shares by Lanier,
until such time as such Person acquires additional Lanier Shares other than
through a dividend or stock split, (iii) any Person who becomes an Acquiring
Person without any plan or intent to seek or affect control of Lanier if such
Person, upon notice by Lanier, promptly divests sufficient securities to reduce
its Beneficial Ownership below 15% or (iv) any Person who Beneficially Owns
Lanier Shares that were solely (A) acquired upon exercise of an option granted
by Lanier in connection with an agreement to merge with, or acquire, Lanier
entered into prior to a Stock Acquisition Date, (B) owned by such Person and its
Affiliates and Associates (as defined in the Rights Agreement) at the time of
such grant or (C) amounting to less than 1% of the outstanding Lanier Shares,
acquired by Affiliates and Associates of such Person after the time of such
grant.
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The Rights Agreement provides that, until the Separation Time, the Rights
will be transferred with and only with the Lanier common stock. Lanier Share
certificates issued after the Record Time but prior to the Separation Time shall
evidence one Right for each share of Lanier common stock represented thereby and
shall contain a legend incorporating by reference the terms of the Rights
Agreement (as it may be amended from time to time). Promptly following the
Separation Time, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of Lanier Shares at the
Separation Time.
The Rights will not be exercisable until the Separation Time. The Rights
will expire on the earliest of (i) the Exchange Time (as defined below), (ii)
the close of business on the tenth anniversary of the Record Time, unless
extended by action of Lanier's board of directors, (iii) the date on which the
Rights are redeemed as described below and (iv) immediately prior to the
effective time of a consolidation, merger or share exchange of Lanier (A) into
another corporation or (B) with another corporation where Lanier is the
surviving corporation but Lanier Shares are converted into cash or securities of
another corporation, in either case pursuant to an agreement that Lanier entered
into prior to a Stock Acquisition Date (in any such case, the "Expiration
Time").
The Exercise Price and the number of Rights outstanding, or in certain
circumstances the securities purchasable upon exercise of the Rights, may be
adjusted from time to time to prevent dilution in the event of a common stock
dividend on, or a subdivision or a combination into a smaller number of shares
of, Lanier Common Stock, or the issuance or distribution of any securities or
assets in respect of, in lieu of or in exchange for Lanier Common Stock.
In the event that prior to the Expiration Time a Flip-in Date (as defined
below) occurs, each Right (other than Rights Beneficially Owned by the Acquiring
Person or any affiliate or associate thereof, which Rights shall become void)
shall constitute the right to purchase from Lanier, upon the exercise thereof in
accordance with the terms of the Rights Agreement, that number of shares of
Lanier Common Stock having an aggregate market price (as defined in the Rights
Agreement), on the Stock Acquisition Date equal to twice the Exercise Price for
an amount in cash equal to the then current Exercise Price. In addition,
Lanier's board of directors may, at its option, at any time after a Flip-in Date
and prior to the time that an Acquiring Person becomes the Beneficial Owner of
more than 50% of the outstanding shares of Lanier Common Stock, elect to
exchange all (but not less than all) the then outstanding Rights (other than
Rights Beneficially Owned by the Acquiring Person or its Affiliates or
Associates, which Rights become void) for shares of Lanier Common Stock at an
exchange ratio of one share of Lanier Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Separation Time (the "Exchange Ratio").
Immediately upon such action by Lanier's board of directors (the "Exchange
Time"), the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive a number of shares of Lanier
Common Stock equal to the Exchange Ratio. A "Flip-In Date" is defined in the
Rights Agreement as any Stock Acquisition Date or such later date as Lanier's
board of directors may from time to time fix by resolution adopted prior to the
Flip-In Date that would otherwise have occurred.
Whenever Lanier becomes obligated under the preceding paragraph to issue
shares of Lanier Common Stock upon exercise of or in exchange for Rights,
Lanier, at its option, may substitute shares of participating preferred stock
for shares of Lanier Common Stock, at a ratio of one one-hundredth of a share of
the Participating Preferred for each share of Lanier Common Stock.
In the event that prior to the Expiration Time Lanier enters into,
consummates or permits to occur a transaction or series of transactions after
the time an Acquiring Person has become such in which, directly or indirectly,
(i) Lanier shall consolidate, merge or participate in a statutory share exchange
with any other Person if, at the time of the consolidation, merger or statutory
share exchange or at the time Lanier enters into any agreement with respect to a
consolidation, merger or share exchange, the Acquiring Person is the Beneficial
Owner of 90% or more of the outstanding shares of Lanier Common Stock or
controls Lanier's board of directors and either (A) any term of or arrangement
concerning the treatment of shares of Lanier Common Stock in such consolidation,
merger or statutory share exchange relating to the Acquiring Person is not
identical to the terms and arrangements relating to other holders of Lanier
Common Stock or (B) the person with whom the transaction or transactions occur
is the Acquiring Person or an affiliate or associate of the Acquiring Person or
(ii) Lanier or one or more of its subsidiaries sells or otherwise transfers
assets (A) aggregating more than 50% of the assets
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(measured by either book value or fair market value) or (B) generating more than
50% of the operating income or cash flow of Lanier and its subsidiaries taken as
a whole to any other Person (other than Lanier or one or more of its wholly
owned subsidiaries) or to two or more such Persons which are affiliated or
otherwise acting in concert, if, at the time of such sale or transfer of assets
or at the time Lanier (or any such subsidiary) enters into an agreement with
respect to such sale or transfer, the Acquiring Person controls Lanier's board
of directors (a "Flip-over Transaction or Event"), Lanier shall take such action
as shall be necessary to ensure, and shall not enter into, consummate or permit
to occur such Flip-over Transaction or Event until it shall have entered into a
supplemental agreement with the Person engaging in such Flip-over Transaction or
Event or the parent corporation thereof (the "Flip-over Entity"), for the
benefit of the holders of the Rights, provided that upon consummation or
occurrence of the Flip-over Transaction or Event (i) each Right shall thereafter
constitute the right to purchase from the Flip-over Entity, upon exercise
thereof in accordance with the terms of the Rights Agreement, that number of
shares of common stock of the Flip-over Entity having an aggregate market price
on the date of consummation or occurrence of such Flip-over Transaction or Event
equal to twice the Exercise Price for an amount in cash equal to the then
current Exercise Price and (ii) the Flip-over Entity shall thereafter be liable
for, and shall assume, by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of Lanier pursuant to the
Rights Agreement.
Lanier's board of directors may, at its option, at any time prior to the
Flip-in Date, redeem all (but not less than all) the then outstanding Rights at
a redemption price of $.01 per Right. Immediately upon the action of Lanier's
board of directors to redeem the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive the redemption price in cash or
securities of Lanier.
The holders of Rights will, solely by reason of their ownership of Rights,
have no rights as stockholders of Lanier, including the right to vote or to
receive dividends.
Lanier and the Rights Agent may from time to time supplement or amend the
Rights Agreement without the approval of any holders of Rights (i) prior to the
Flip-In Date, in any respect and (ii) on or after the Flip-In Date, to make any
changes that Lanier may deem necessary or desirable and which shall not
materially adversely affect the interests of the holders of Rights generally or
in order to cure any ambiguity or correct or supplement any inconsistent or
defective provision contained therein.
The Rights will not prevent a takeover of Lanier. However, the Rights may
cause substantial dilution to a person or group that acquires 15% or more of the
Lanier Shares unless the Rights are first redeemed by Lanier's board of
directors. Nevertheless, the rights should not interfere with a transaction that
is in the best interests of Lanier and its stockholders because the Rights can
be terminated on or prior to the Flip-in Date and before the transaction is
consummated.
As long as the rights are attached to Lanier Common Stock, Lanier will
issue one Right with each new share of Lanier Common Stock so that all shares
will have Rights attached. Lanier's board of directors has reserved - shares of
participating preferred stock for issuance upon exercise of the Rights.
The Rights Agreement (which includes as Exhibit A the forms of Rights
Certificate and Election to Exercise and as Exhibit B the form of Certificate of
Designation and Terms of the Participating Preferred Stock) is filed as an
exhibit to the Registration Statement. The foregoing description of the Rights
is qualified in its entirety by reference to the Rights Agreement and such
exhibits.
DELAWARE LAW
Under Section 203 of the Delaware General Corporation Law ("Section 203"),
which will be applicable to Lanier after the Distribution, certain "business
combinations" (defined generally to include mergers or consolidations between
the Delaware corporation and an interested stockholder and transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase the interested
stockholder's percentage ownership of stock) between a publicly held Delaware
corporation and an "interested stockholder" (defined generally as those
stockholders who become beneficial owners of 15% or more of a Delaware
corporation's voting stock or their affiliates) are prohibited for a
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three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation not to be so governed, (ii) either the business combination or the
proposed acquisition of stock resulting in the person becoming an interested
stockholder was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by officers who are also directors or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the board of
directors of the corporation and also ratified by two-thirds of the voting stock
which the interested stockholder did not own.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. Lanier's restated certificate of incorporation does not exclude
Lanier from restrictions imposed under Section 203. The provisions of Section
203 may encourage companies interested in acquiring Lanier to negotiate in
advance with Lanier's board of directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approved either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the management of Lanier. It is possible
that such provisions could make it more difficult to accomplish transactions
which stockholders may otherwise deem to be in their best interests.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION ON LIABILITY OF DIRECTORS
Pursuant to authority conferred by Section 102 of the Delaware General
Corporation Law, Article Eleventh of Lanier's restated certificate of
incorporation ("Article Eleventh") eliminates the personal liability of Lanier's
directors to Lanier or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as it may hereafter be amended. Under
the Delaware General Corporation Law as in effect on the date hereof, Lanier's
directors remain liable for (i) any breach of the duty of loyalty to Lanier or
its stockholders, (ii) any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (iii) any violation of
Section 174 of the Delaware General Corporation Law, which proscribes the
payment of dividends and stock purchases or redemptions under certain
circumstances and (iv) any transaction from which directors derive an improper
personal benefit.
Article Eleventh provides that any future repeal or amendment of its terms
(including any amendment or repeal of this Article Eleventh made by virtue of
any change in the Delaware General Corporation Law) will not adversely affect
any rights of directors existing thereunder with respect to acts or omissions
occurring prior to such repeal or amendment.
INDEMNIFICATION
Lanier's bylaws and Section 145 of the Delaware General Corporation Law,
which allows, and in some cases requires, the indemnification of directors and
officers under certain circumstances, grant Lanier's directors and officers a
right to indemnification to the fullest extent permitted by law for all expenses
relating to civil, criminal, administrative or investigative procedures to which
they are a party (i) by reason of the fact that they are or were directors or
officers of Lanier or (ii) by reason of the fact that, while they are or were
directors or officers of Lanier, they are or were serving at the request of
Lanier as a director, officer or employee of another enterprise. Lanier's bylaws
further provide that an advancement for any such expenses shall only be made
upon delivery to Lanier by the indemnitee of an undertaking to repay all amounts
so advanced if it is ultimately determined that such indemnitee is not entitled
to be indemnified by Lanier.
64
<PAGE> 78
INDEMNIFICATION AGREEMENTS
In connection with the Distribution, Lanier will enter into indemnification
agreements with certain of its directors and officers. These agreements will
require Lanier to indemnify these directors and officers with respect to their
activities as directors or officers of Lanier or when serving at Lanier's
request as a director, officer or trustee of another corporation, trust or other
enterprise against expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by them in any
threatened, pending or completed suit or proceeding to which they are, or are
threatened to be made, parties as a result of their service to Lanier. Lanier
will agree to indemnify each indemnitee for any one or a combination of the
following, whichever is most advantageous to the indemnitee: (i) the benefits
provided by Lanier's restated certificate of incorporation and bylaws in effect
on the date of the indemnification agreement; (ii) the benefits provided by
Lanier's restated certificate of incorporation and bylaws at the time expenses
are incurred by the indemnitee; (iii) the benefits allowable under Delaware law
in effect on the date of the indemnification agreement; (iv) the benefits
allowable under the law of the jurisdiction under which Lanier exists at the
time expenses are incurred by the indemnitee; (v) the benefits available under
liability insurance obtained by Lanier; and (vi) such other benefits as may be
otherwise available to indemnitee under Lanier's existing practices. Under the
indemnification agreements, each indemnitee will continue to be indemnified even
after ceasing to occupy a position as an officer, director, employee or agent of
Lanier with respect to suits or proceedings arising out of acts or omissions
during his or her service to Lanier.
Each indemnitee will agree to notify Lanier promptly of any proceeding
brought or threatened and not to make any admission or settlement without
Lanier's consent, unless the indemnitee determines to undertake his or her own
defense and waives the benefits of the indemnification agreement.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The consolidated financial statements of Lanier Worldwide, Inc. and its
subsidiaries at July 2, 1999 and July 3, 1998, and for each of the three years
in the period ended July 2, 1999, appearing in this Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
Lanier has filed with the Commission the Registration Statement under the
Securities Exchange Act of 1934, as amended, with respect to the Lanier Common
Stock and the preferred stock purchase rights associated with each share of
Lanier Common Stock. This document does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto, to
which reference is hereby made. Statements made in this document as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by Lanier with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Securities and Exchange
Commission at Seven World Trade Center, Thirteenth Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such information can be obtained by mail from the
Public Reference Branch of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a website that contains reports, proxy and information statements and
other information regarding statements regarding registrants that file
electronically with the Commission. The address of the Commission's website is
http://www.sec.gov. The address of Lanier's website is http://www.lanier.com.
65
<PAGE> 79
After the Distribution, Lanier will be required to comply with the
reporting requirements of the Exchange Act and to file with the Commission
reports, proxy statements and other information as required by the Exchange Act.
Additionally, Lanier will be required to provide annual reports containing
audited financial statements to its stockholders in connection with its annual
meetings of stockholders. After the Distribution, these reports, proxy
statements and other information will be available to be inspected and copied at
the public reference facilities of the Commission or obtained by mail or over
the Internet from the Commission, as described above. After the Distribution,
the Lanier Shares will be listed on the New York Stock Exchange. When the Lanier
Shares commence trading on the New York Stock Exchange, such reports, proxy
statements and other information will be available for inspection at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
66
<PAGE> 80
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholder
Lanier Worldwide, Inc.
We have audited the accompanying consolidated balance sheets of Lanier
Worldwide, Inc. and subsidiaries as of July 2, 1999 and July 3, 1998, and the
related consolidated statements of income, changes in shareholder equity and
cash flows for each of the three fiscal years in the period ended July 2, 1999.
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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Lanier
Worldwide, Inc. and subsidiaries as of July 2, 1999 and July 3, 1998, and the
related consolidated statements of their operations and their cash flows for
each of the three fiscal years in the period ended July 2, 1999, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Orlando, Florida
July 27, 1999
F-1
<PAGE> 81
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 2, JULY 3,
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 18,209 $ 87,096
Trade receivables......................................... 348,604 319,048
Receivables from parent................................... 194,521 14,327
Inventories............................................... 166,404 201,642
Prepaid expenses.......................................... 17,107 8,899
Deferred income taxes..................................... 39,276 36,243
---------- ----------
TOTAL CURRENT ASSETS.............................. 784,121 667,255
OTHER ASSETS
Rental equipment, less allowance for depreciation
($205,232 in 1999 and $158,792 in 1998)................ 140,718 109,567
Property, plant and equipment, less allowance for
depreciation ($76,053 in 1999 and $65,830 in 1998)..... 42,755 45,839
Notes receivables-net..................................... 203,657 179,989
Intangibles, less accumulated amortization ($38,610 in
1999 and $28,241 in 1998).............................. 125,504 100,452
Other..................................................... 40,953 20,194
---------- ----------
TOTAL OTHER ASSETS................................ 553,587 456,041
---------- ----------
TOTAL ASSETS................................................ $1,337,708 $1,123,296
========== ==========
LIABILITIES AND SHAREHOLDER EQUITY
CURRENT LIABILITIES
Notes payable............................................. $ 138,011 $ 52,918
Trade payables............................................ 86,815 44,606
Retirement plan accounts.................................. 38,964 32,833
Accrued compensation...................................... 39,066 27,187
Accrued interest and sundry taxes......................... 21,772 13,681
Other accrued items....................................... 33,610 31,833
Unearned service income................................... 57,898 67,004
Income taxes.............................................. 15,460 5,659
Long-term debt-current portion............................ 2,582 2,192
---------- ----------
TOTAL CURRENT LIABILITIES......................... 434,178 277,913
OTHER LIABILITIES
Deferred income taxes..................................... 16,170 38,066
Long-term debt............................................ 4,622 3,660
SHAREHOLDER EQUITY
Preferred Stock, without par value: authorized 1,000,000
shares, issued-none.................................... -- --
Common Stock, $1.00 par value, 1,000,000 shares
authorized; issued and outstanding 41,893 shares in
1999 and 1998.......................................... 42 42
Additional paid-in capital................................ 329,679 313,054
Retained earnings......................................... 586,556 521,578
Accumulated other comprehensive loss...................... (33,539) (31,017)
---------- ----------
TOTAL SHAREHOLDER EQUITY.......................... 882,738 803,657
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY.................... $1,337,708 $1,123,296
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-2
<PAGE> 82
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Product sales and rentals................................ $ 807,468 $ 721,791 $ 704,282
Service income........................................... 623,020 532,986 465,732
Finance income........................................... 38,132 33,558 29,871
---------- ---------- ----------
1,468,620 1,288,335 1,199,885
COST AND EXPENSES
Cost of product sales and rentals........................ 547,929 453,968 426,042
Cost of service.......................................... 349,448 304,901 255,705
Selling and administrative expenses...................... 438,516 410,452 399,470
Restructuring expenses................................... -- 8,500 --
Interest expense......................................... 22,692 8,236 8,797
Other-net................................................ (1,235) 2,877 7,964
---------- ---------- ----------
1,357,350 1,188,934 1,097,978
---------- ---------- ----------
Income before income taxes............................... 111,270 99,401 101,907
Income taxes............................................. 40,000 36,604 38,208
---------- ---------- ----------
NET INCOME................................................. $ 71,270 $ 62,797 $ 63,699
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 83
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
--------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $ 71,270 $ 62,797 $ 63,699
Adjustments to Net Income:
Gain on sale of business................................ (21,532) -- --
Depreciation............................................ 109,832 72,838 62,641
Amortization............................................ 9,910 6,326 5,571
Non-current deferred income taxes....................... (21,896) 5,270 3,970
Changes in assets and liabilities:
Trade receivables....................................... 31,749 8,730 (78,421)
Receivable from parent.................................. (180,194) 54,637 97,109
Inventories............................................. 61,897 3,151 (51,799)
Prepaid expenses........................................ (8,345) (1,077) (1,743)
Trade payables and accrued liabilities.................. (12,387) (13,559) 13,372
Unearned service income................................. (42,199) (19,194) 843
Income taxes............................................ 25,775 (11,574) (1,006)
Other................................................... 33,689 (21,985) (8,147)
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 57,569 146,360 106,089
INVESTING ACTIVITIES
Proceeds from sale of business............................ 34,030 -- --
Capital expenditures:
Cash paid for acquired business......................... (171,117) (13,966) (12,459)
Plant and equipment..................................... (21,557) (15,837) (34,527)
Rental equipment........................................ (63,466) (68,622) (60,529)
--------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES..................... (222,110) (98,425) (107,515)
FINANCING ACTIVITIES
Proceeds from borrowings.................................. 108,026 62,596 101,149
Payments of borrowings.................................... (17,963) (46,856) (91,469)
--------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 90,063 15,740 9,680
Effect of exchange rates on cash and cash equivalents..... 5,591 4,774 (1,263)
--------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... (68,887) 68,449 6,991
Cash and cash equivalents at beginning of year............ 87,096 18,647 11,656
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................. $ 18,209 $ 87,096 $ 18,647
========= ======== =========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE> 84
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
------------------ ------------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of year........ $ 42 $ 42 $ 41
Shares issued to affiliates (1,000
shares in 1997).................. -- -- 1
-------- -------- --------
Balance at end of year.............. 42 42 42
ADDITIONAL PAID IN CAPITAL
Balance at beginning of year........ 313,054 313,054 306,658
Capital contribution from parent.... 16,625 -- 6,396
-------- -------- --------
Balance at end of year.............. 329,679 313,054 313,054
RETAINED EARNINGS
Balance at beginning of year........ 521,578 458,781 395,082
Net income.......................... 71,270 $71,270 62,797 $62,797 63,699 $63,699
Dividend paid to parent............. (6,292) -- --
-------- -------- --------
Balance at end of year.............. 586,556 521,578 458,781
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of year........ (31,017) (21,720) (12,541)
Change in cumulative translation
adjustments...................... (2,522) (2,522) (9,297) (9,297) (9,179) (9,179)
------- ------- -------
Total comprehensive income.......... $68,748 $53,500 $54,520
-------- ======= -------- ======= -------- =======
Balance at end of year.............. (33,539) (31,017) (21,720)
-------- -------- --------
Total Shareholder Equity.............. $882,738 $803,657 $750,157
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 85
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 1999
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Lanier Worldwide, Inc. and Subsidiaries ("Lanier"), including
certain subsidiaries partially or wholly owned by Harris that will be
transferred to Lanier prior to the distribution to shareholders. Lanier is a
wholly owned subsidiary of Harris Corporation ("Harris") that sells and leases
office equipment products and provides related services to this marketplace.
These statements have been prepared in conformity with generally accepted
accounting principles and require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant intercompany
transactions and accounts have been eliminated.
Corporate expense allocations charged by Harris are based on a percentage of
Lanier's net sales. These amounts were $25.0 million in 1999, $22.6 million in
1998 and $21.1 million in 1997. Lanier's management estimates that its cost to
perform these services on a stand-alone basis will be approximately $7.0
million. Estimated charges include administration expenses such as legal and
audit services, risk management, investor relations and board of director
charges. Interest expense is provided on direct borrowings of Lanier. Interest
expense of Harris has not been allocated to Lanier. It is not practicable to
estimate what shareholder equity would have been if Lanier had operated as an
unaffiliated entity. In the opinion of management, the allocation methods used
are reasonable.
Lanier sells products to other affiliated operations of Harris. Sales to these
operations were not material.
FISCAL YEAR -- Fiscal years end on the Friday nearest June 30. The 1999 and 1997
fiscal years included 52 weeks while 1998 fiscal year included 53 weeks.
CASH EQUIVALENTS -- Cash equivalents are temporary cash investments with a
maturity of three months or less when purchased. These investments include
accrued interest and are carried at the lower of cost or market.
CREDIT POLICY -- Lanier performs periodic credit evaluations of its customers'
financial positions and generally does not require collateral, except in the
case of certain leases in which Lanier maintains a security interest in the
leased equipment.
INVENTORIES -- Inventories are carried at the lower of cost, determined by the
First-In-First-Out (FIFO) method, or market.
RENTAL EQUIPMENT -- Rental equipment and service parts are carried on the basis
of cost. Depreciation is computed by the straight-line method using estimated
useful lives of up to five years.
BUILDINGS, MACHINERY AND EQUIPMENT -- Buildings, machinery and equipment are
carried on the basis of cost. Depreciation is computed by the straight-line
method using the estimated useful lives of the assets.
REVENUE RECOGNITION -- Revenue is recognized from sales when a product is
shipped, from rentals as they accrue, and from services and maintenance when
performed. Unearned income on service contracts is amortized by the
straight-line method over the term of the contracts.
ADVERTISING -- Advertising and promotional costs are expensed when incurred.
Advertising expense was $15.6 million in 1999, $13.5 million in 1998 and $15.5
million in 1997.
INCOME TAXES -- Lanier follows the liability method of accounting for income
taxes and is included with its parent, Harris, in a consolidated federal income
tax return. Harris requires each of its businesses to provide taxes on financial
statement pre-tax income or loss at applicable statutory tax rates. Amounts
receivable or payable for current and prior years' income taxes are treated as
intercompany transactions in accordance with Harris policy. Deferred income
taxes resulting from temporary differences between the financial statements and
the tax basis of assets and liabilities are separately classified on the balance
sheets.
F-6
<PAGE> 86
ASSET IMPAIRMENT -- Lanier accounts for long-lived asset impairment under
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, Lanier estimates
the future cash flows expected to result from the use of the asset. If the sum
of the estimated expected cash flows is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement of an impairment loss is
based on the estimated fair value of the asset. Long-lived assets to be disposed
of are recorded at the lower of their carrying amount or estimated fair value
less cost to sell.
INTANGIBLES -- Intangibles resulting from acquisitions are being amortized by
the straight-line method principally over periods between 15 and 40 years.
NEW ACCOUNTING STANDARDS -- In June 1998, the Financial Accounting Standards
Board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The statement establishes standards for recording derivative
financial instruments and the recognition of gains or losses resulting from
changes in the fair values of those instruments. Lanier plans to adopt the new
standard in fiscal 2000, however, Lanier has not determined the anticipated
impact of FAS No. 133.
FUTURES AND FORWARD CONTRACTS -- When Lanier sells products outside the United
States or enters into purchase commitments, transactions are frequently
denominated in currencies other than U.S. dollars. To minimize the impact on
revenue and cost from currency fluctuations, Lanier enters into currency
exchange agreements that qualify for hedge accounting treatment. It is Lanier's
policy not to speculate in foreign currencies. Currency exchange agreements are
designated as, and are effective as, hedges of foreign currency commitments. In
addition, these agreements are consistent with the designated currency of the
underlying transaction and mature on or before the underlying transaction. Gains
and losses on currency exchange agreements that qualify as hedges are deferred
and recognized as an adjustment of the carrying amount of the hedged asset,
liability or commitment. Gains and losses on currency exchange agreements that
do not qualify as hedges are recognized in income based on changes in the fair
market value of the currency exchange agreement.
FOREIGN CURRENCY TRANSLATION -- The functional currency for international
subsidiaries is the local currency. Assets and liabilities are translated at
current rates of exchange, and income and expense items are translated at the
weighted average exchange rate for the year. The resulting translation
adjustments are recorded as a separate component of accumulated other
comprehensive loss.
NOTE B -- ACQUISITION
On July 9, 1998, Lanier acquired the Copying Systems Division of the
Agfa-Gevaert Group which is a member of the Bayer Group, Leverkusen, Germany
(the "Agfa Acquisition"). The transaction was accounted for as a purchase. The
purchase price, which is subject to adjustment, was $168.3 million in cash. The
purchase price exceeded the fair value of net assets acquired by approximately
$46.0 million, which is being amortized on a straight-line basis over 20 years.
The results of the Agfa Acquisition are included in the accompanying
consolidated financial statements from the date of acquisition.
In connection with the Agfa Acquisition, Lanier accrued as a cost of the
purchase approximately $8.6 million in connection with the planned termination
of approximately 160 employees of Agfa, principally sales and technical
personnel. Lanier paid approximately $6.6 million in 1999 related to such
terminations.
The following summarized unaudited pro forma combined financial information
assumes the acquisition had occurred at the beginning of each period:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
ENDED ENDED
JULY 2, 1999 JULY 3, 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,430,448 $1,519,754
Net income.................................................. $ 71,270 $ 66,021
</TABLE>
F-7
<PAGE> 87
Pro forma results include the effects of purchase accounting adjustments and
additional interest expense as if the debt incurred in connection with the
acquisition had been outstanding from the beginning of each period. The pro
forma financial information is not necessarily indicative of either the results
of operations that would have occurred had the acquisition taken place at the
beginning of the periods presented or of future results of combined operations.
NOTE C -- SALE OF BUSINESS
In May 1999, Lanier sold its electronic medical transcription services business
for approximately $34 million. The resulting pre-tax gain of $21.5 million is
reflected in Other Income in the accompanying Consolidated Statement of Income.
NOTE D -- RESTRUCTURING
In 1998, Lanier recorded a $8.5 million charge ($5.3 million after income tax)
for the restructuring of its operations. Restructuring provisions are for the
reduction of approximately 350 employees, primarily service and administrative.
All employee terminations occurred and costs totaling $8.5 million were paid
during fiscal 1999.
NOTE E -- RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable......................................... $280,749 $245,120
Notes receivable due within one year-net.................... 89,075 83,038
-------- --------
369,824 328,158
Less allowances for collection losses....................... 21,220 9,110
-------- --------
$348,604 $319,048
======== ========
</TABLE>
In May 1999, Lanier entered into an asset-backed securitization program with a
bank which provides for the sale of up to $100 million of eligible trade
receivables of designated European subsidiaries. Lanier accounts for the sale of
receivables under this securitization program in accordance with Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." Receivables sold under
this program are excluded from accounts receivable in the Consolidated Balance
Sheet. As of July 2, 1999, Lanier had sold approximately $36.5 million of trade
accounts receivable, without recourse, to a third party. Amounts received from
the sale of those receivables are net of applicable interest and an allowance
for credit losses. To the extent that actual credit losses are less than the
allowance for credit losses, the remaining amount will be paid to Lanier. Lanier
has retained the responsibility for servicing accounts receivable sold.
NOTE F -- INVENTORIES
Inventories are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $109,082 $152,980
Parts....................................................... 53,766 47,223
Raw materials and supplies.................................. 3,556 1,439
-------- --------
$166,404 $201,642
======== ========
</TABLE>
At July 2, 1999, Lanier was committed to purchase $3.4 million of inventory from
suppliers. Management believes the cost of this inventory approximates current
market value.
F-8
<PAGE> 88
NOTE G -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 854 $ 854
Buildings................................................... 20,073 18,982
Machinery and equipment..................................... 97,881 91,833
-------- --------
118,808 111,669
Less allowances for depreciation............................ 76,053 65,830
-------- --------
$ 42,755 $ 45,839
======== ========
</TABLE>
NOTE H -- CREDIT ARRANGEMENTS
Lanier has lines of credit for short-term borrowings aggregating $198.7 million
from various U.S. and foreign banks, of which $60.7 million was available on
July 2, 1999. These arrangements provide for borrowing at various interest
rates, are reviewed annually for renewal, and may be used on such terms as
Lanier and the banks mutually agree. These lines do not require compensating
balances. Short-term debt outstanding under these lines on July 2, 1999 was
$138.0 million. The weighted average interest rate for short-term debt was 5.1
percent at July 2, 1999 and 8.4 percent at July 3, 1998.
NOTE I -- LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank notes.................................................. $ 919 $ 870
Other notes................................................. 2,094 1,624
Capital leases.............................................. 1,309 766
Revenue bonds............................................... 300 400
-------- --------
$ 4,622 $ 3,660
======== ========
</TABLE>
The weighted average interest rate for long-term debt was 7.4 percent at July 2,
1999 and 7.8 percent at July 3, 1998. Maturities of long-term debt for the five
years following 1999 are: $2.6 million in 2000, $2.2 million in 2001, $0.9
million in 2002, $0.6 million in 2003 and $0.1 million in 2004.
NOTE J -- INTEREST EXPENSE
Total interest expense was $22.7 million in 1999, $8.2 million in 1998 and $8.8
million in 1997. Interest paid was $22.4 million in 1999, $8.2 million in 1998
and $8.5 million in 1997.
NOTE K -- LEASE COMMITMENTS
Total rental expense amounted to $45.8 million in 1999, $40.9 million in 1998
and $33.2 million in 1997. Future minimum rental commitments under
non-cancelable operating leases, primarily used for land and buildings, amounted
to approximately $89.7 million at July 2, 1999. These commitments for the years
following 1999 are: 2000 -- $37.2 million, 2001 -- $21.0 million, 2002 -- $15.1
million, 2003 -- $10.2 million, 2004 -- $3.7 million and $2.5 million
thereafter.
F-9
<PAGE> 89
NOTE L -- CUSTOMER LEASING
Lanier's net investment in sales-type leases is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total minimum lease payments receivables.................... $347,759 $316,717
Residual value of equipment................................. 11,967 5,700
Less unearned finance income................................ 63,146 57,258
-------- --------
Present value of minimum lease payments receivable.......... 296,580 265,159
Less allowance for collection losses........................ 3,848 2,132
Less current portion........................................ 89,075 83,038
-------- --------
$203,657 $179,989
======== ========
</TABLE>
The amount of minimum rental payments receivable for sales-type leases for each
of the next five years are: 2000 -- $110.2 million, 2001 -- $108.6 million,
2002 -- $73.2 million, 2003 -- $36.3 million, and 2004 -- $19.5 million.
NOTE M -- RETIREMENT BENEFITS
Lanier has noncontributory defined benefit pension plans which cover employees
in the United States. Pension benefits are based principally on an employee's
years of service and compensation near retirement. Lanier's pension funding
policy is to deposit with an independent trustee amounts at least equal to those
required by law. A trust fund is maintained to provide pension benefits to plan
participants and beneficiaries.
F-10
<PAGE> 90
The projected benefit obligations, fair value of plan assets and net periodic
pension cost of Lanier's domestic pension plan include the following components:
(in thousands)
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
BENEFIT OBLIGATION AT THE BEGINNING OF
YEAR................................. $106,667 $ 94,692 $ 24,669 $ 24,126
Service cost........................... 5,365 3,903 1,678 1,129
Interest cost.......................... 7,544 7,391 1,908 1,474
Actuarial gain......................... 795 6,875 541 (570)
Benefits paid.......................... (577) (6,194) (1,146) (500)
Settlements............................ (17,057) -- (397) --
Acquisition............................ -- -- 10,132 --
Foreign currency exchange rate
changes.............................. -- -- (1,665) (990)
-------- -------- -------- --------
BENEFIT OBLIGATION AT THE END OF
YEAR................................. $102,737 $106,667 $ 35,720 $ 24,669
======== ======== ======== ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year.............................. $111,334 $ 86,981 $ 21,812 $ 19,317
Actual return on plan assets........... 6,811 26,032 1,160 3,059
Employer contribution.................. -- 4,515 1,549 619
Benefits paid.......................... (577) (6,194) (476) (490)
Settlements............................ (17,057) -- 234 113
Acquisition............................ -- -- 6,009 --
Foreign currency exchange rate
changes.............................. -- -- (1,351) (806)
-------- -------- -------- --------
FAIR VALUE OF PLAN ASSETS AT END OF
YEAR................................. $100,511 $111,334 $ 28,937 $ 21,812
======== ======== ======== ========
Funded status.......................... $ (2,226) $ 4,667 $ (6,783) $ (2,857)
Unamortized prior service cost......... (96) (106) (2) (41)
Unrecognized net actuarial loss........ (12,092) (16,973) (4,374) (5,581)
Unrecognized transition obligation..... (1,092) (1,367) -- --
-------- -------- -------- -------- -------- --------
PREPAID (ACCRUED) BENEFIT COST......... $(15,506) $(13,779) $(11,159) $ (8,479)
======== ======== ======== ========
DOMESTIC FOREIGN
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost........................... $ 5,365 $ 3,903 $ 5,265 $ 1,678 $ 1,129 $ 1,109
Interest cost.......................... 7,544 7,391 6,843 1,908 1,474 1,690
Expected return on plan assets......... (8,707) (7,552) (6,177) (1,535) (1,366) (1,137)
Amortization of unrecognized transition
obligation........................... (275) (275) (275) 2 2 9
Prior service cost recognized.......... (10) (10) (10) (278) (59) (185)
Gain due to settlement................. (2,189) -- -- -- -- --
Net periodic pension cost.............. $ 1,728 $ 3,457 $ 5,646 $ 1,775 $ 1,180 $ 1,486
======== ======== ======== ======== ======== ========
</TABLE>
F-11
<PAGE> 91
The significant weighted-average assumptions used in determining the actuarial
present value of projected benefit obligations and the net pension expense are
as follows:
<TABLE>
<CAPTION>
DOMESTIC
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount Rate............................................. 7.3% 8.0% 7.8%
Expected increase in compensation levels.................. 4.0% 4.0% 4.5%
Expected long-term rate of return of assets............... 10.0% 10.0% 9.0%
</TABLE>
<TABLE>
<CAPTION>
FOREIGN
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount Rate............................................. 6.2% 4.5% 6.9%
Expected increase in compensation levels.................. 3.8% 3.0% 4.7%
Expected long-term rate of return of assets............... 6.7% 4.9% 7.2%
</TABLE>
The accumulated benefit obligation and the fair value of plan assets for foreign
pension plans with accumulated benefit obligations in excess of plan assets were
$14.7 million and $11.1 million, respectively, as of July 2, 1999 and $8.8
million and $7.1 million, respectively, as of July 3, 1998.
The projected benefit obligation and the fair value of plan assets for foreign
pension plans with projected benefit obligations in excess of plan assets were
$34.0 million and $26.9 million, respectively, as of July 2, 1999 and $19.5
million and $15.9 million, respectively, as of July 3, 1998.
Lanier is subject to statutory employee termination, retirement and death
indemnity obligations in certain foreign locations. This unfunded obligation was
approximately $6.6 million and $3.9 million at July 2, 1999 and July 3, 1998,
respectively. Lanier expensed approximately $1.0 million, $0.6 million, and $0.5
million associated with these obligations in the years ended July 2, 1999, July
3, 1998, and June 30, 1997, respectively.
Lanier has a Supplemental Executive Retirement Plan ("SERP") which provides
unfunded supplemental retirement benefits to certain executives. The SERP
provides for incremental pension payments partially to offset the reduction in
the amounts that would have been payable from Lanier's principal pension plan if
it were not for limitations imposed by federal income tax regulations. Expenses
of $1.0 million, $0.7 million, and $0.9 million were recognized in the fiscal
years ended July 2, 1999, July 3, 1998, and June 27, 1997, respectively. Amounts
accrued as of July 2, 1999 and July 3, 1998 related to the plan were $4.1
million and $3.0 million, respectively.
Retirement benefits include a fully funded savings plan for U.S. employees.
Employees may participate in the savings plan by contributing a portion of their
compensation. During the fiscal year ended June 27, 1997, Lanier matched 50% of
employee contributions up to 3 percent of each participating employee's
compensation. In fiscal year 1998, Lanier began matching 50 percent of employee
contributions up to 6 percent of each participating employee's compensation.
Matching contributions for the fiscal years ended July 2, 1999, July 3, 1998,
and June 27, 1997 were $4.9 million, $4.0 million, and $1.8 million,
respectively.
Retirement benefits also include an unfunded limited healthcare plan for
U.S.-based retirees and employees. Lanier accrues the estimated cost of these
medical benefits during an employee's active service life. Benefit obligations
and cost under this plan are not material.
F-12
<PAGE> 92
NOTE N -- INCOME TAXES
The provisions for income taxes are summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
United States...................................... $ 33,007 $22,516 $25,115
International...................................... 23,969 3,039 5,548
State and local.................................... 7,952 4,418 5,478
-------- ------- -------
64,928 29,973 36,141
-------- ------- -------
Deferred:
United States...................................... (12,575) 3,571 989
International...................................... (9,864) 2,159 1,092
State and local.................................... (2,489) 901 (14)
-------- ------- -------
(24,928) 6,631 2,067
-------- ------- -------
$ 40,000 $36,604 $38,208
======== ======= =======
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- -----------
(IN THOUSANDS)
--------------
<S> <C> <C> <C> <C>
Inventory valuations.......................... $23,118 $ -- $14,850 $ --
Accruals...................................... 8,160 1,325 15,680 1,091
Depreciation.................................. -- 13,247 -- (37,915)
Leases........................................ (656) 8,873 (2,926) (12,595)
International tax loss carryforwards.......... -- 21,595 -- 6,501
All other-net............................... 8,654 (45,341) 8,639 11,353
------- -------- ------- --------
39,276 301 36,243 (31,565)
Valuation allowance........................... -- (15,869) -- (6,501)
------- -------- ------- --------
$39,276 $(16,170) $36,243 $(38,066)
======= ======== ======= ========
</TABLE>
A reconciliation of the statutory United States income tax rate to the effective
income tax rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory U.S. income tax rate.............................. 35.0% 35.0% 35.0%
State taxes................................................. 3.2 3.5 3.5
Foreign Income.............................................. (1.5) (2.0) --
Other items................................................. (0.8) 0.3 (1.0)
----- ----- -----
Effective income tax rate................................... 35.9% 36.8% 37.5%
----- ----- -----
</TABLE>
United States income taxes have not been provided on $163.0 million of
undistributed earnings of international subsidiaries because of the Lanier's
intention to reinvest these earnings. The determination of unrecognized deferred
U.S. tax liability for the undistributed earnings of international subsidiaries
is not practicable.
At July 2, 1999, Lanier had net international income tax loss carryforwards of
approximately $57.0 million. Loss carryforwards of $29.1 million will expire
between the years 2000 and 2009. The remaining $27.9 million of loss
carryforwards available for an indefinite period of time.
F-13
<PAGE> 93
Pretax income of international subsidiaries was $24.8 million in 1999, $21.4
million in 1998 and $20.5 million in 1997.
Income taxes paid were $39.0 million in 1999, $43.0 million in 1998 and $35.4
million in 1997.
NOTE O -- GEOGRAPHIC INFORMATION
Lanier operates exclusively in the office equipment industry. Substantially all
revenues result from the sale and rental of office equipment and related
services. All intercompany revenues are eliminated in computing revenues.
A summary of Lanier's operations by geographic area is summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
--------------
<S> <C> <C> <C>
United States Operations
Net sales.............................................. $875,532 $902,034 $823,947
Long-lived assets...................................... $173,749 $212,461 $194,686
International
Net sales.............................................. $554,956 $352,743 $346,067
Long-lived assets...................................... $176,181 $ 63,591 $ 57,588
</TABLE>
Export sales included in U.S. Operations were $14.2 million in 1999, $18.3
million in 1998, and $16.1 million in 1997.
NOTE P -- FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, accounts receivable, notes receivable,
accounts payable, short-term debt and long-term debt approximate fair value.
Lanier uses foreign exchange contracts and options to hedge intercompany
accounts and off-balance-sheet foreign currency commitments. Specifically, these
foreign exchange contracts offset foreign currency denominated inventory and
purchase commitments from suppliers, accounts receivable from and future
committed sales to customers. Management believes the use of foreign currency
financial instruments should reduce the risks that arise from doing business in
international markets. Contracts are generally one year or less. At July 2,
1999, open foreign exchange contracts were $163.1 million (as described below),
of which $7.4 million were to hedge off-balance-sheet commitments. Additionally,
for the year ended July 2, 1999, Lanier purchased and sold $814.4 million of
foreign exchange forward and option contracts.
Deferred gains and losses are included on a net basis in the Consolidated
Balance Sheet as other assets and are recorded in income as part of the
underlying transaction when it is recognized.
At July 2, 1999, Lanier had $5.0 million in open option contracts. Total open
foreign exchange contracts at July 2, 1999, are described in the table below:
COMMITMENTS TO BUY FOREIGN CURRENCIES
(in millions)
<TABLE>
<CAPTION>
CONTRACT AMOUNT
--------------------- DEFERRED
FOREIGN GAINS MATURITIES
CURRENCY CURRENCY U.S. AND (LOSSES) (IN MONTHS)
-------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Canadian Dollar............................... 1.4 0.9 -- 6
Swiss Franc................................... 40.5 27.5 (1.3) 3
Euro.......................................... 26.9 30.0 (2.1) 10
French Franc.................................. 1.0 0.2 -- 3
Italian Lira.................................. 10,123.0 5.4 -- 3
Japanese Yen.................................. 604.8 4.9 -- 1-3
Norwegian Krone............................... 13.3 1.7 -- 6
</TABLE>
F-14
<PAGE> 94
COMMITMENTS TO SELL FOREIGN CURRENCIES
(in millions)
<TABLE>
<CAPTION>
CONTRACT AMOUNT
--------------------- DEFERRED
FOREIGN GAINS MATURITIES
CURRENCY CURRENCY U.S. AND (LOSSES) (IN MONTHS)
-------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Austrian Schilling............................ 57.0 4.3 -- 3
Australian Dollar............................. 0.5 0.4 -- 12
Canadian Dollar............................... 25.7 16.8 (0.6) 1-6
Swiss Franc................................... 84.7 61.3 6.7 3
Czech Republic Koruna......................... 27.5 0.9 0.1 6
Danish Krone.................................. 19.2 2.9 0.2 10
Euro.......................................... 3.8 4.0 0.1 10
French Franc.................................. 3.7 0.6 -- 3
Swedish Krona................................. 10.7 1.3 -- 12
</TABLE>
NOTE Q -- DISTRIBUTION OF LANIER STOCK
On April 13, 1999, Harris announced that it would spin Lanier off as a separate
publicly traded company. Harris intends to accomplish this transaction through a
distribution of Lanier stock to Harris shareholders that is expected to be tax
free to such shareholders for U.S. federal income tax purposes. The transaction
is expected to take place in the first quarter of fiscal year 2000.
NOTE R -- IMPAIRMENT CHARGES
In the fourth quarter of fiscal year 1999, Lanier recorded a $7.7 million
impairment charge related to its investment in a technology-related company.
The investment in the technology-related company (the "investee") was divided
into three components: (i) a $4.0 million equity investment; (ii) a $1.7 million
licensing agreement; and (iii) $2.0 million in inventory of a product line which
utilized software developed by the investee. In the fourth quarter of fiscal
year 1999, Lanier management decided to exit this product line because a
competitor's software technology had become the industry standard, the
investee's product technology had become obsolete, and Lanier's product line was
no longer marketable, rendering Lanier's equity investment not marketable. On
the basis of APB No. 18. paragraph 6, Lanier concluded that the decline in the
fair value of the equity investment was permanent, and accordingly wrote off the
investment to other expense in the fourth quarter of fiscal year 1999.
Additionally, Lanier expensed the unamortized portion of the licensing agreement
to selling and administrative expenses and wrote off the remaining inventory
less scrap value, to cost of product sales in connection with the decision to
exit the product line.
F-15
<PAGE> 95
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
EXHIBITS TO FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------------
LANIER WORLDWIDE, INC.
EXHIBIT INDEX
-------------
Exhibit No.
- -----------
2.1 Form of Distribution Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of
Lanier Worldwide, Inc.**
3.2 Form of By-Laws of Lanier Worldwide, Inc.**
4.1 Form of Stockholder Protection Rights Agreement.**
4.2 Form of Certificate of Designation and Terms of Registrant's
Participating Preferred Stock.**
4.3 Form of certificate representing Lanier common stock
10.1 Form of Tax Disaffiliation Agreement.
10.2 Form of Credit Agreement.*
10.3 Form of Transition Services Agreement.
10.4 Form of Distribution Agreement (filed as Exhibit 2.1).
10.5 Form of Employee Benefits Compensation and Allocation
Agreement.*
10.6 Form of Registration Rights Agreement.**
10.7 Form of Stock Incentive Plan.*
10.8 Lanier Worldwide, Inc. Supplemental Retirement Savings Plan.
10.9 Lanier Worldwide, Inc. Supplemental Executive Retirement Plan.
12.1 Computation of Ratios of Earnings to Fixed Charges.**
21.1 List of Subsidiaries.*
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.**
- -------------
* To be filed by Amendment
** Previously filed.
<PAGE> 1
Exhibit 2.1
FORM OF
AGREEMENT AND PLAN OF DISTRIBUTION
BY AND BETWEEN
HARRIS CORPORATION
AND
LANIER WORLDWIDE, INC.
DATED AS OF O, 1999
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I.
DEFINITIONS
<S> <C> <C>
SECTION 1.1. General....................................................................................2
SECTION 1.2. Reference; Interpretation.................................................................14
ARTICLE II.
DISTRIBUTION AND OTHER TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.1 The Distribution and Other Transactions...................................................15
SECTION 2.2 Cash Dividend.............................................................................19
SECTION 2.3 Post-Distribution Adjustment..............................................................19
SECTION 2.4 Intercompany Receivables..................................................................21
SECTION 2.5 Assumption and Satisfaction of Liabilities................................................21
SECTION 2.6 Resignations..............................................................................21
SECTION 2.7 Further Assurances........................................................................22
SECTION 2.8 Limited Representations or Warranties.....................................................22
SECTION 2.9 Removal of Certain Guarantees; Releases from Liabilities..................................22
SECTION 2.10 Witness Services..........................................................................23
SECTION 2.11 Transfers Not Effected Prior to the Distribution;
Transfers Deemed Effective as of the Distribution Date....................................24
SECTION 2.12 Conveyancing and Assumption Instruments...................................................24
SECTION 2.13 Ancillary Agreements......................................................................24
SECTION 2.14 Corporate Names...........................................................................25
SECTION 2.15 Non-Solicitation..........................................................................25
ARTICLE III.
INDEMNIFICATION
SECTION 3.1 Indemnification by Harris.................................................................26
SECTION 3.2 Indemnification by Lanier.................................................................26
SECTION 3.3 Procedures for Indemnification............................................................26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.4 Indemnification Payments..................................................................28
ARTICLE IV.
ACCESS TO INFORMATION
SECTION 4.1 Provision of Corporate Records............................................................28
SECTION 4.2 Access to Information.....................................................................29
SECTION 4.3 Reimbursement; Other Matters..............................................................29
SECTION 4.4 Confidentiality...........................................................................29
SECTION 4.5 Privileged Matters........................................................................30
SECTION 4.6 Ownership of Information..................................................................32
SECTION 4.7 Retention of Records......................................................................32
SECTION 4.8 Limitation of Liability; Release..........................................................32
SECTION 4.9 Other Agreements Providing for Exchange of Information....................................33
ARTICLE V.
DISPUTE RESOLUTION
SECTION 5.1 Negotiation...............................................................................33
SECTION 5.2 Mediation.................................................................................33
SECTION 5.3 Arbitration...............................................................................34
SECTION 5.4 Continuity of Service and Performance.....................................................34
SECTION 5.5 Other Remedies............................................................................35
ARTICLE VI.
INSURANCE
SECTION 6.1 Policies and Rights Included Within Assets................................................35
SECTION 6.2 Post-Distribution Date Claims.............................................................35
SECTION 6.3 Administration; Other Matters.............................................................36
SECTION 6.4 Agreement for Waiver of Conflict and Shared Defense.......................................38
SECTION 6.5 Cooperation...............................................................................38
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VII.
MISCELLANEOUS
<S> <C> <C>
SECTION 7.1 Complete Agreement; Construction..........................................................39
SECTION 7.2 Ancillary Agreements......................................................................39
SECTION 7.3 Counterparts..............................................................................39
SECTION 7.4 Survival of Agreements....................................................................39
SECTION 7.5 Distribution Expenses.....................................................................39
SECTION 7.6 Notices...................................................................................40
SECTION 7.7 Waivers...................................................................................40
SECTION 7.8 Amendments................................................................................40
SECTION 7.9 Assignment................................................................................41
SECTION 7.10 Successors and Assigns....................................................................41
SECTION 7.11 Termination...............................................................................41
SECTION 7.12 Subsidiaries..............................................................................41
SECTION 7.13 Third Party Beneficiaries.................................................................41
SECTION 7.14 Title and Headings........................................................................41
SECTION 7.15 Exhibits and Schedules....................................................................41
SECTION 7.16 GOVERNING LAW.............................................................................42
SECTION 7.17 Consent to Jurisdiction...................................................................42
SECTION 7.18 Severability..............................................................................42
SECTION 7.19 Consolidation, Merger, Etc. Involving Lanier..............................................42
SECTION 7.20 Consolidation, Merger, Etc. Involving Harris..............................................43
Exhibit A Corporate Restructuring Transactions
Exhibit B Employee Benefits and Compensation Allocation Agreement
Exhibit C Intellectual Property Agreement
Exhibit D Lanier Pro Forma Balance Sheet
Exhibit E Lanier Subsidiaries
Exhibit F Registration Rights Agreement
Exhibit G Tax Disaffiliation Agreement
Exhibit H Transition Services Agreement
Exhibit I Harris Information Statement Indemnification Statements
Exhibit J List of Contracts Between Harris and Lanier
Schedule 1.1(a) Litigation
Schedule 2.2(a) Estimated Cash and Estimated Debt
Schedule 1.1(b) Exclusions from Third Party Debt
Schedule 2.9(a) Guarantees
Schedule 6.3(e) Deductibles
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF DISTRIBUTION
This AGREEMENT AND PLAN OF DISTRIBUTION (this "AGREEMENT"), is
dated as of o, 1999, by and between Harris Corporation, a Delaware corporation
("HARRIS"), and Lanier Worldwide, Inc., a Delaware corporation and, prior to the
Distribution (as defined herein), a wholly owned subsidiary of Harris
("LANIER").
WHEREAS, Harris, acting through the Lanier Group (as defined
herein), currently conducts a number of businesses, including providing office
products and document management solutions, and in the past has conducted a
number of other businesses through the Lanier Group or its predecessors which
have been discontinued, sold or transferred (all such businesses collectively,
the "LANIER BUSINESS");
WHEREAS, Harris has determined to take certain steps to
transfer certain Assets (as defined herein) to Lanier and have Lanier assume
certain Liabilities (as defined herein) of Harris and Lanier has determined to
take certain steps to transfer certain Assets to Harris and have Harris assume
certain Liabilities of Lanier;
WHEREAS, the Board of Directors of Harris has authorized the
distribution to the holders of the issued and outstanding shares of common
stock, par value $1.00 per share, of Harris (the "HARRIS COMMON STOCK") as of
the record date of approximately 90% of the issued and outstanding shares of
common stock, par value $0.01 per share, of Lanier (the "LANIER COMMON STOCK"),
together with the associated preferred stock purchase rights (each share of such
stock, together with the associated preferred stock purchase right, a "LANIER
SHARE"), on the basis of one Lanier Share for each share of Harris Common Stock
(the "DISTRIBUTION"); and
WHEREAS, the parties hereto have determined to set forth the
principal corporate and other transactions required to effect the Distribution
and to set forth other agreements that will govern certain other matters prior
to and following the Distribution.
NOW, THEREFORE, in consideration of the mutual covenants
contained in this Agreement, the parties hereby agree as follows:
<PAGE> 6
ARTICLE I.
DEFINITIONS
SECTION 1.1. GENERAL. Unless otherwise defined herein or
unless the context otherwise requires, as used in this Agreement, the following
terms shall have the following meanings:
"ACTION" shall mean any demand, action, suit, arbitration,
inquiry, proceeding or investigation by or before any Governmental
Authority or any arbitration or mediation tribunal.
"ACTUARIAL STATEMENT" shall have the meaning set forth in
Section 6.3(f)(i) of this Agreement.
"AFFILIATE" shall mean, when used with respect to any
specified Person, a Person that directly or indirectly controls, is
controlled by, or is under common control with such specified Person;
PROVIDED, HOWEVER, that for purposes of this Agreement, any Person who
was a member of both Groups prior to the Distribution shall be deemed
to be an Affiliate only of the Group of which such Person is a member
following the Distribution. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or other interests, by
contract or otherwise. Any contrary provision of this Agreement
notwithstanding, neither Harris nor any of its Subsidiaries shall be
deemed to be an Affiliate of Lanier.
"AGENT" shall have the meaning set forth in Section 2.1(b) of
this Agreement.
"AGREEMENT" shall have mean this Agreement.
"AGREEMENT DISPUTES" shall have the meaning set forth in
Section 5.1 of this Agreement.
"ANCILLARY AGREEMENTS" shall mean all of the written
agreements, instruments, understandings, assignments or other
arrangements (other than this Agreement) entered into by the parties
hereto or any other member of their respective Groups in connection
with the transactions contemplated hereby, including the Conveyancing
and Assumption Instruments, the Employee Benefits Compensation and
Allocation Agreement, the Intellectual Property Agreement, the
Registration Rights Agreement, the Tax Disaffiliation Agreement and the
Transition Services Agreement.
-2-
<PAGE> 7
"APPLICABLE RATE" shall mean the rate of interest per annum
announced from time to time by Citibank, N.A., as its prime lending
rate.
"ASSETS" shall mean assets, properties and rights, wherever
located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or
financial statements of any Person, including the following:
(i) all accounting and other books, records and files
whether in paper, microfilm, microfiche, computer tape or
disc, magnetic tape or any other form;
(ii) all apparatus, computers and other electronic
data processing equipment, fixtures, machinery, equipment,
furniture, office equipment, automobiles, trucks, aircraft and
other transportation equipment, special and general tools,
test devices, prototypes and models and other tangible
personal property;
(iii) all inventories of materials, parts, raw
materials, supplies, work-in-process and finished goods and
products;
(iv) all interests in real property of whatever
nature, including easements, whether as owner, mortgagee or
holder of a security interest in real property, lessor,
sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other
equity interests of any Subsidiary or any other Person, all
bonds, notes, debentures or other securities issued by any
Subsidiary or any other Person, all loans, advances or other
extensions of credit or capital contributions to any
Subsidiary or any other Person and all other investments in
securities of any Person;
(vi) all license agreements, leases of personal
property, open purchase orders for raw materials, supplies,
parts or services, unfilled orders for the manufacture and
sale of products and other contracts, agreements or
commitments (collectively, "CONTRACTS");
(vii) all deposits, letters of credit and performance
and surety bonds;
(viii) all written technical information, data,
specifications, research and development information,
engineering drawings, operating and maintenance manuals, and
materials and analyses prepared by consultants and other Third
Parties;
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(ix) all domestic and foreign patents, copyrights,
trade names, trademarks, service marks and registrations and
applications for any of the foregoing, mask works, trade
secrets, inventions, data bases, other proprietary information
and licenses from Third Parties granting the right to use any
of the foregoing;
(x) all computer applications, programs and other
software, including operating software, network software,
firmware, middleware, design software, design tools, systems
documentation and instructions;
(xi) all cost information, sales and pricing data,
customer prospect lists, supplier records, customer and
supplier lists, customer and vendor data, correspondence and
lists, product literature, artwork, design, development and
manufacturing files, vendor and customer drawings,
formulations and specifications, quality records and reports
and other books, records, studies, surveys, reports, plans and
documents;
(xii) all prepaid expenses, trade accounts and other
accounts and notes receivable;
(xiii) all rights under contracts or agreements, all
claims or rights against any Person arising from the ownership
of any asset, all rights in connection with any bids or offers
and all claims, choses in action or similar rights, whether
accrued or contingent;
(xiv) all rights under insurance policies and all
rights in the nature of insurance, indemnification or
contribution;
(xv) all licenses, permits, approvals and
authorizations which have been issued by any Governmental
Authority;
(xvi) cash or cash equivalents, bank accounts, lock
boxes and other deposit arrangements; and
(xvii) interest rate, currency, commodity or other
swap, collar, cap or other hedging or similar agreements or
arrangements.
"ASSIGNEE" shall have the meaning set forth in Section 2.1(f)
of this Agreement.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which commercial banking institutions located in The
City of New York are authorized or obligated by law or executive order
to close.
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"CALCULATION" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"CASH" shall mean the aggregate cash and cash equivalents of
Lanier and any member of the Lanier Group as of the Distribution Date.
"CLAIMS ADMINISTRATION" shall mean the processing of claims
made under the Harris Shared Policies, including the reporting of
claims to the insurance carriers, management and defense of claims and
providing for appropriate releases upon settlement of claims.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including
any successor legislation.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"CONTRACTS" shall have the meaning set forth in the definition
of Assets.
"CONVEYANCING AND ASSUMPTION INSTRUMENTS" shall mean,
collectively, the various agreements, instruments and other documents
to be or heretofore entered into to effect the Corporate Restructuring
Transactions or otherwise to effect the transfer of Assets and the
assumption of Liabilities in the manner contemplated by this Agreement,
the Ancillary Agreements and the Corporate Restructuring Transactions.
"CORPORATE RESTRUCTURING TRANSACTIONS" shall mean,
collectively, (a) each of the mergers, transfers, conveyances,
contributions, assignments, dividends, assumptions and other
transactions described and set forth on EXHIBIT A attached hereto, and
(b) such other mergers, transfers, conveyances, contributions,
assignments, dividends, assumptions and other transactions that may be
appropriate or required to be accomplished, effected or consummated by
Harris or Lanier or any of their respective Subsidiaries and Affiliates
so that: (i) the Lanier Assets, Lanier Liabilities and Lanier Business
shall be owned, directly or indirectly, by Lanier after giving effect
to the Distribution; and (ii) the Harris Assets, Harris Liabilities and
Harris Business shall be owned, directly or indirectly, by Harris after
giving effect to the Distribution.
"CORRECT AMOUNT" shall mean the sum of (a) $700,000,000, plus
(b) Cash, minus (c) Third Party Debt.
"DISTRIBUTION" shall have the meaning set forth in the
recitals to this Agreement.
"DISTRIBUTION DATE" shall mean such date as may be determined
by the Board of Directors of Harris, or such committee of such Board of
Directors as shall be designated
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by the Board of Directors of Harris, as the date as of which the
Distribution shall be effected.
"DISTRIBUTION RECORD DATE" shall mean such date as may be
determined by the Board of Directors of Harris, or such committee of
such Board of Directors as shall be designated by the Board of
Directors of Harris, as the record date for the Distribution.
"DIVIDEND AMOUNT" shall have the meaning set forth in Section
2.2(b) of this Agreement.
"EFFECTIVE TIME" shall mean 11:59 p.m., New York City time, on
the Distribution Date.
"EMPLOYEE BENEFITS COMPENSATION AND ALLOCATION AGREEMENT"
shall mean the Employee Benefits Compensation and Allocation Agreement
by and between Harris and Lanier, which agreement shall be entered into
prior to or on the Distribution Date in the form attached hereto as
EXHIBIT B.
"ESTIMATED CASH" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"ESTIMATED DEBT" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
principles of common law, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other
governmental restrictions (including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601, ET SEQ.), whether now or hereafter in existence,
relating to the environment, natural resources, human health or safety,
endangered or threatened species of fish, wildlife and plants, or to
emissions, discharges or releases of pollutants, contaminant, petroleum
or petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes into the environment (including without limitation
indoor or outdoor air, surface water, groundwater and surface or
subsurface soils), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or
wastes or the investigation, cleanup or other remediation thereof.
"ERNST & YOUNG" shall have the meaning set forth in Section
2.3(a) of this Agreement.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated
thereunder.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local,
foreign or international court, government, department, commission,
board, bureau, agency, official, the NYSE or other regulatory,
administrative or governmental authority.
"GROUP" shall mean with respect to Harris, the Harris Group
and, with respect to Lanier, the Lanier Group.
"HARRIS" shall have the meaning set forth in the preamble to
this Agreement.
"HARRIS ACCOUNTS PAYABLE" shall mean all of the accounts
payable arising from or out of the provision of goods or services to
any member of the Harris Group by any member of the Lanier Group under
the contracts or agreements set forth in Exhibit J.
"HARRIS ASSETS" shall mean, collectively, all the rights and
Assets owned or held by Harris or any Harris Subsidiary after giving
effect to the Corporate Restructuring Transactions, except the Lanier
Assets.
"HARRIS BUSINESS" shall mean each and every business conducted
at any time by Harris or any subsidiary controlled by Harris, except
the Lanier Business.
"HARRIS COMMON STOCK" shall have the meaning set forth in the
recitals to this Agreement.
"HARRIS GROUP" shall mean Harris and each Person (other than
any member of the Lanier Group) that is a Harris Subsidiary.
"HARRIS INDEMNITEE" shall mean:
(i) Harris and each Affiliate thereof after giving
effect to the Corporate Restructuring Transactions and the
Distribution; and
(ii) each of the respective past, present and future
directors, officers, members, employees and agents of any of
the entities described in the immediately preceding clause (i)
and each of the heirs, executors, successors and assigns of
any of such directors, officers, members, employees and
agents, except in the case of clauses (i) and (ii), the Lanier
Indemnitees.
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"HARRIS LIABILITIES" shall mean collectively, all obligations
and Liabilities of Harris or any Harris Subsidiary after giving effect
to the Corporate Restructuring Transactions, except the Lanier
Liabilities.
"HARRIS POLICIES" shall mean all Policies, current or past,
that are owned or maintained by or on behalf of Harris or any Harris
Subsidiary that do not relate to the Lanier Business.
"HARRIS SHARED POLICIES" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of Harris or any
Harris Subsidiary which provide coverage for the Lanier Business, other
than Lanier Policies.
"HARRIS SUBSIDIARIES" shall mean all of the Subsidiaries of
Harris other than Lanier and the Lanier Subsidiaries.
"INDEMNIFIABLE LOSSES" shall mean any and all losses,
liabilities, claims, damages, demands, costs or expenses (including
reasonable attorneys' fees and any and all out-of-pocket expenses)
reasonably incurred in investigating, preparing for or defending
against any Actions or potential Actions or in settling any Action or
potential Action or in satisfying any judgment, fine or penalty
rendered in or resulting from any Action.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 3.3 of this Agreement.
"INDEMNITEE" shall have the meaning set forth in Section 3.3
of this Agreement.
"INFORMATION STATEMENT" shall mean the Information Statement
filed with the Commission as part of the Registration Statement and
mailed to the holders of shares of Harris Common Stock in connection
with the Distribution, including any amendments or supplements thereto.
"INSURANCE ADMINISTRATION" shall mean, with respect to each
Harris Shared Policy, the accounting for premiums,
retrospectively-rated premiums, defense costs, indemnity payments,
deductibles and retentions, as appropriate, under the terms and
conditions of each of the Harris Shared Policies; and the reporting to
excess insurance carriers of any losses or claims which may cause the
per-occurrence, per claim or aggregate limits of any Harris Shared
Policy to be exceeded, and the distribution of Insurance Proceeds as
contemplated by this Agreement.
"INSURANCE PROCEEDS" shall mean those monies (i) received by
an insured from an insurance carrier or (ii) paid by an insurance
carrier on behalf of an insured.
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"INSURED CLAIMS" shall mean those Liabilities that,
individually or in the aggregate, are covered within the terms and
conditions of any of the Harris Shared Policies, whether or not subject
to deductibles, co-insurance, uncollectibility or retrospectively-rated
premium adjustments.
"INTELLECTUAL PROPERTY AGREEMENT" shall mean the Intellectual
Property Agreement by and between Harris and Lanier, which Agreement
shall be entered into prior to or on the Distribution Date in the form
attached hereto as EXHIBIT C.
"IRS" shall mean the Internal Revenue Service.
"LANIER ASSETS" shall mean collectively, all the rights and
Assets that are owned by Lanier or any Lanier Subsidiaries as of the
close of business on the Distribution Date and after giving effect to
the Corporate Restructuring Transactions, including:
(i) the capital stock of the Lanier Subsidiaries;
(ii) all of the Assets reflected on the Lanier Pro
Forma Balance Sheet or the accounting records supporting such
balance sheet that are to be owned by Lanier or any of the
Lanier Subsidiaries as of the close of business on the
Distribution Date;
(iii) all of the Assets expressly allocated to Lanier
or any of the Lanier Subsidiaries under this Agreement or any
of the Ancillary Agreements; and
(iv) any other Asset acquired by Harris or any of the
Harris Subsidiaries from the date of the Lanier Pro Forma
Balance Sheet to the close of business on the Distribution
Date that is owned by Harris, any of the Harris Subsidiaries,
Lanier or any of the Lanier Subsidiaries as of the close of
business on the Distribution Date and that is of a nature or
type that would have resulted in such Asset being included as
an Asset on the Lanier Pro Forma Balance Sheet had it been
acquired on or prior to the date of the Lanier Pro Forma
Balance Sheet, determined on a basis consistent with the
determination of the Assets included on the Lanier Pro Forma
Balance Sheet. No Asset shall be deemed a Lanier Asset solely
as a result of this clause (iv) unless a claim with respect
thereto is made by Lanier on or prior to the first anniversary
of the Distribution Date. As a clarification, no asset or
portion thereof held by Harris in any "rabbi trust" shall be
deemed to be a Lanier Asset.
"LANIER BUSINESS" shall have the meaning set forth in the
recitals to this Agreement.
"LANIER COMMON STOCK" shall have the meaning set forth in the
recitals to this Agreement.
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"LANIER GROUP" shall mean Lanier, the Lanier Subsidiaries and
the corporations, partnerships and other entities which are
contemplated to remain or become a Subsidiary of Lanier in connection
with the Corporate Restructuring Transactions and the Distribution.
"LANIER INDEMNITEES" shall mean:
(i) Lanier and each Affiliate thereof after giving
effect to the Corporate Restructuring Transactions and the
Distribution; and
(ii) each of the respective past, present and future
directors, officers, members, employees and agents of any of
the entities described in the immediately preceding clause (i)
and each of the heirs, executors, successors and assigns of
any of such directors, officers, members, employees and
agents.
"LANIER LIABILITIES" shall mean:
(i) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary Agreement (or
the Schedules hereto or thereto) as Liabilities to be assumed
by Lanier or any member of the Lanier Group, and all
agreements, obligations and Liabilities of any member of the
Lanier Group under this Agreement or any of the Ancillary
Agreements;
(ii) all Liabilities (other than Taxes and any
employee-related Liabilities which are specifically covered by
the Tax Disaffiliation Agreement and the Employee Benefits
Compensation and Allocation Agreement, respectively),
primarily relating to, arising out of or resulting from:
(A) the operation of the Lanier Business
(including any discontinued business or any business
which has been sold or transferred), as conducted at
any time prior to, on or after the Distribution Date
(including any Liability relating to, arising out of
or resulting from any act or failure to act by any
director, officer, employee, agent or representative
(whether or not such act or failure to act is or was
within such Person's authority));
(B) the operation of any business conducted
by Lanier or any Lanier Subsidiary at any time after
the Distribution Date (including any Liability
relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such Person's
authority)); or
(C) any Lanier Assets; whether arising
before, on or after the Distribution Date; or
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(iii) all Liabilities reflected as liabilities or
obligations on the Lanier Pro Forma Balance Sheet or the
accounting records supporting such balance sheet, and all
Liabilities arising or assumed after the date of such balance
sheet which, had they arisen or been assumed on or before such
date and been retained as of such date, would have been
reflected on such balance sheet, subject to any discharge of
such Liabilities subsequent to the date of the Lanier Pro
Forma Balance Sheet.
Notwithstanding the foregoing, the Lanier Liabilities shall
not include: (y) any Liabilities that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Liabilities to be retained or assumed by Harris or any
member of the Harris Group; or (z) all agreements and obligations of
any member of the Harris Group under this Agreement or any of the
Ancillary Agreements. Any contrary provision of this Agreement
notwithstanding, any Liabilities or Losses in respect of any litigation
or similar proceeding relating to the Lanier Business, including
without limitation the matters set forth on Schedule 1.1, shall
constitute Lanier Liabilities.
"LANIER OBJECTION" shall have the meaning set forth in Section
6.3(f) of this Agreement.
"LANIER POLICIES" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of Harris or any Harris
Subsidiary, which relate specifically to the Lanier Business but do not
relate to the Harris Business, and which Policies are either maintained
by Lanier or a member of the Lanier Group or assignable to Lanier or a
member of the Lanier Group.
"LANIER PRO FORMA BALANCE SHEET" shall mean the combined pro
forma balance sheet of the Lanier Group, including the notes thereto,
as of [date of latest pro forma balance sheet of the Lanier Group
included in the Information Statement], attached hereto as EXHIBIT D.
"LANIER SHARE" shall have the meaning set forth in the
recitals to this Agreement.
"LANIER SUBSIDIARIES" shall mean all of the Subsidiaries
listed on EXHIBIT E.
"LAW" shall mean all laws, statutes and ordinances and all
regulations, rules and other pronouncements of Governmental Authorities
having the effect of law of the United States, any foreign country, or
any domestic or foreign state, province, commonwealth, city, country,
municipality, territory, protectorate, possession or similar
instrumentality, or any Governmental Authority thereof.
"LIABILITIES" shall mean any and all debts, liabilities,
obligations, responsibilities, response actions, losses, damages
(whether compensatory, punitive or treble), fines, penalties
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and sanctions, absolute or contingent, matured or unmatured, liquidated
or unliquidated, foreseen or unforeseen, joint, several or individual,
asserted or unasserted, accrued or unaccrued, known or unknown,
whenever arising, including without limitation those arising under or
in connection with any Law (including any Environmental Law), Action,
threatened Action, order or consent decree of any Governmental
Authority or any award of any arbitration tribunal, and those arising
under any contract, guarantee, commitment or undertaking, whether
sought to be imposed by a Governmental Authority, private party, or
party to this Agreement, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, or
otherwise, and including any costs, expenses, interest, attorneys'
fees, disbursement and expense of counsel, expert and consulting fees
and costs related thereto or to the investigation or defense thereof.
"LOSSES" shall mean all losses, liabilities, damages, claims,
demands, judgments or settlements of any nature or kind, known or
unknown, fixed, accrued, absolute or contingent, liquidated or
unliquidated, including all reasonable costs and expenses (legal,
accounting or otherwise as such costs are incurred) relating thereto,
suffered by an Indemnitee.
"NOTICES" shall have the meaning set forth in Section 7.6 of
this Agreement.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PERSON" shall mean any natural person, corporation, business
trust, limited liability company, joint venture, association, company,
partnership or government, or any agency or political subdivision
thereof.
"POLICIES" shall mean insurance policies and insurance
contracts of any kind (other than life and benefits policies or
contracts), including primary, excess and umbrella policies, master
comprehensive general liability policies, director and officer
liability, fiduciary liability, automobile, aircraft, property and
casualty, workers' compensation and employee dishonesty insurance
policies, bonds and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges
thereunder.
"POST-DISTRIBUTION ADJUSTMENT" shall have the meaning set
forth in Section 2.3(a) of this Agreement.
"RECORDS" shall have the meaning set forth in Section 4.1 of
this Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement by and between Harris and Lanier, which agreement
shall be entered into prior to or on the Distribution Date in the form
attached hereto as EXHIBIT F.
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"REGISTRATION STATEMENT" shall mean the registration statement
on Form 10 to effect the registration of the Lanier Common Stock
pursuant to the Exchange Act.
"REPRESENTATIVE" shall mean, with respect to any Person, any
of such Person's directors, officers, employees, agents, consultants,
advisors, accountants, attorneys and representatives.
"RESOLUTION PERIOD" shall have the meaning set forth in
Section 2.3(a) of this Agreement.
"RETAINED SHARES" shall have the meaning set forth in Section
2.1(b) of this Agreement.
"RULES" shall have the meaning set forth in Section 5.3 of
this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
"SUBSIDIARY" shall mean with respect to any specified Person,
any corporation or other legal entity of which such Person or any of
its Subsidiaries controls or owns, directly or indirectly, more than
50% of the stock or other equity interest entitled to vote on the
election of members to the board of directors or similar governing
body.
"TAX" shall have the meaning set forth in the Tax
Disaffiliation Agreement.
"TAX DISAFFILIATION AGREEMENT" shall mean the Tax
Disaffiliation Agreement by and between Harris and Lanier, which
agreement shall be entered into prior to or on the Distribution Date in
the form attached hereto as EXHIBIT G.
"THIRD PARTY" shall mean a Person who is not a party hereto or
a Subsidiary thereof.
"THIRD PARTY CLAIM" shall have the meaning set forth in
Section 3.3 of this Agreement.
"THIRD PARTY DEBT" shall mean the aggregate principal amount
of such portion of the indebtedness for money borrowed of Harris and
its consolidated subsidiaries from non-affiliated third parties
(including indebtedness for money borrowed of Lanier and any member of
the Lanier Group) incurred prior to the last Business Day of O, 1999 as
will not constitute indebtedness for borrowed money of Harris or any
member of the Harris Group after giving effect to the Distribution
(notwithstanding the fact that a member of the Harris Group may be a
guarantor or obligor of such indebtedness). Third Party Debt shall
include
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<PAGE> 18
amounts not to exceed $ O under Lanier's European asset securitization
facility and shall include but not be limited to amounts incurred in
respect of the indebtedness set forth on Schedule 1.1(b).
"TRANSITION SERVICES AGREEMENT" shall mean the Transition
Services Agreement by and between Harris and Lanier, which agreement
shall be entered into prior to or on the Distribution Date in the form
attached hereto as EXHIBIT H.
"UNRESOLVED CHANGES" shall have the meaning set forth in
Section 2.3(a) of this Agreement.
SECTION 1.2. REFERENCE; INTERPRETATION. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation." Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any particular
Article, Section or provision of this Agreement. Neither this Agreement nor any
Ancillary Agreement shall be construed against either party as the principal
draftsperson hereof or thereof.
ARTICLE II.
DISTRIBUTION AND OTHER TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.1. THE DISTRIBUTION AND OTHER TRANSACTIONS. (a)
CERTAIN TRANSACTIONS. On or prior to the Distribution Date:
(i) Harris shall, on behalf of the Harris Group,
transfer or cause to be transferred to Lanier or another member of the
Lanier Group by means of the Corporate Restructuring Transactions,
effective prior to or as of the Effective Time, all of Harris' and the
Harris Subsidiaries' right, title and interest in the Lanier Assets.
(ii) Lanier shall, on behalf of the Lanier Group,
transfer or cause to be transferred to Harris or another member of the
Harris Group by means of the Corporate Restructuring Transactions,
effective prior to or as of the Effective Time, all of Lanier's and the
Lanier Subsidiaries' right, title and interest in the Harris Assets.
(iii) To the extent not indicated by the Corporate
Restructuring Transactions or otherwise agreed by the parties hereto,
Harris shall be entitled to designate the entity
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<PAGE> 19
within each party's respective Group to which any Assets are to be
transferred pursuant to this Section 2.1(a).
(b) ISSUANCE TO HARRIS. (i) On or prior to the Distribution
Date, Lanier shall issue and deliver to Harris a certificate or certificates
registered in the name of Harris required to effect the transactions set forth
on Schedule A. Each Lanier Share delivered by Lanier to Harris shall be validly
issued, fully paid and nonassessable and free of any preemptive (or similar)
rights. Lanier hereby represents and warrants that on the Distribution Date and
prior to the Effective Time, Harris will own all of the outstanding Lanier
Shares.
(ii) Harris shall deliver to Harris' stock transfer
agent (the "Agent") the share certificates representing the Lanier
Shares issued to Harris by Lanier pursuant to Section 2.1(b)(i) which
are to be issued in the Distribution, endorsed by Harris in blank, for
the benefit of the holders of Harris Common Stock, and Harris shall
instruct the Agent to distribute, on or as soon as practicable
following the Distribution Date, such Common Stock to holders of record
of shares of Harris Common Stock on the Distribution Record Date as
further contemplated by the Information Statement and hereby. Lanier
shall provide any share certificates that the Agent shall require in
order to effect the Distribution.
(iii) The Lanier Shares issued in the Distribution
will be distributed only pursuant to a book entry system. Harris shall
instruct the Agent to deliver the Lanier Shares previously delivered to
the Agent to a depositary and to mail to each holder of record of
Harris Common Stock on the Distribution Record Date, a statement of the
whole Lanier Shares credited to such holder's account. If following the
Distribution a holder of Lanier Common Stock requests physical
certificates instead of participating in the book entry system, the
Agent will issue certificates for such shares, but only for whole
numbers of Lanier Shares. Cash will be given to holders of fractional
shares of Harris Common Stock on the Distribution Date in lieu of any
fractional Lanier Shares. The Agent will aggregate all fractional
Lanier Shares into whole Lanier Shares and sell the whole Lanier Shares
obtained thereby in the open market at then prevailing prices as soon
as practicable after the Distribution Date on behalf of holders who
would otherwise be entitled to receive such fractional share interests
and will distribute to each such holder such holder's ratable share of
the proceeds of such sale, net of brokerage commission incurred in such
sales, as soon as practicable after the Distribution Date.
(iv) The shares to be retained by Harris (the
"Retained Shares") will initially be held by Harris or one of its
Affiliates pursuant to the book entry system. Harris shall instruct the
Agent to deliver the Retained Shares to a depositary and to mail to
Harris a statement of the shares of Lanier Common Stock credited to
Harris' account.
(c) CHARTER; BYLAWS; RIGHTS PLAN. On or prior to the
Distribution Date, Lanier and Harris shall have taken all necessary actions to
provide for the adoption of the form of Restated
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Certificate of Incorporation and Bylaws and the execution and delivery of a
Stockholder Protection Rights Agreement, between Lanier and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, in substantially the form filed
by Lanier with the Commission as exhibits to the Registration Statement.
(d) DIRECTORS. On or prior to the Distribution Date, Harris
and Lanier shall have taken all necessary action to cause the Board of Directors
of Lanier to consist of the individuals identified in the Information Statement
as directors of Lanier.
(e) CERTAIN LICENSES AND PERMITS. Without limiting the
generality of the obligations set forth in Section 2.1(a), on or prior to the
Distribution Date or as soon as reasonably practicable thereafter:
(i) Harris shall use its commercially reasonable best
efforts to transfer or cause to be transferred all transferable
licenses, permits and authorizations issued by any Governmental
Authority which relate solely to the Lanier Business but which are held
in the name of any member of the Harris Group, or in the name of any
employee, officer, director, stockholder or agent of any such member,
or otherwise, on behalf of a member of the Lanier Group to the
appropriate member of the Lanier Group; and
(ii) Lanier shall use its commercially reasonable
best efforts to transfer or cause to be transferred all transferable
licenses, permits and authorizations issued by Governmental Authorities
which relate primarily to the Harris Business but which are held in the
name of any member of the Lanier Group, or in the name of any employee,
officer, director, stockholder, or agent of any such member, or
otherwise, on behalf of a member of the Harris Group to the appropriate
member of the Harris Group.
(f) TRANSFER AND ASSIGNMENT OF CERTAIN AGREEMENTS. Without
limiting the generality of the obligations set forth in Section 2.1(a):
(i) Harris hereby agrees that on or prior to the
Distribution Date or as soon as reasonably practicable thereafter,
subject to the limitations set forth in this Section 2.1(f), it will,
and it will cause each member of the Harris Group to, assign, transfer
and convey to the appropriate member of the Lanier Group all of Harris'
or such member of the Harris Group's respective right, title and
interest in and to any and all Contracts primarily related to the
Lanier Business.
(ii) Lanier hereby agrees that on or prior to the
Distribution Date or as soon as reasonably practicable thereafter,
subject to the limitations set forth in this Section 2.1(f), it will,
and it will cause each member of the Lanier Group to, assign, transfer
and convey to the appropriate member of the Harris Group all of
Lanier's or such member of the Lanier
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<PAGE> 21
Group's respective right, title and interest in and to any and all
Contracts primarily related to the Harris Business.
(iii) Subject to the provisions of this Section
2.1(f), any agreement to which any of the parties hereto or any of
their Subsidiaries is a party that inures to the benefit of more than
one of the Harris Business and Lanier Business shall be assigned in
part so that each party shall be entitled to the rights and benefits
inuring to its business under such agreement.
(iv) The assignee of any agreement assigned, in whole
or in part, hereunder (an "ASSIGNEE") shall assume and agree to pay,
perform, and fully discharge all obligations of the assignor under such
agreement or, in the case of a partial assignment under paragraph
(f)(iii), such Assignee's related portion of such obligations as
determined in accordance with the terms of the relevant agreement,
where determinable on the face thereof, and otherwise as determined in
accordance with the practice of the parties prior to the Distribution.
(v) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign
any agreement, in whole or in part, or any rights thereunder if the
agreement to assign or attempt to assign, without the consent of a
Third Party, would constitute a breach thereof or in any way adversely
affect the rights of the assignor or Assignee thereof. Until such
consent is obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of any party hereto so
that the intended Assignee would not, in fact, receive all such rights,
the parties will cooperate with each other in any arrangement designed
to provide for the intended Assignee the benefits of, and to permit the
intended Assignee to assume liabilities under, any such agreement.
(g) CONSENTS. The parties hereto shall use their commercially
reasonable efforts to obtain required consents to transfer and/or assignment of
licenses, permits and authorizations of Governmental Authorities and consents to
transfer and/or assignment of Contracts from Third Parties.
(h) CERTAIN LIABILITIES. For purposes of this Agreement,
including Article III hereof, Harris and Lanier agree that (i) any and all
Liabilities arising from or based upon misstatements in or omissions from the
Registration Statement or the Information Statement under the captions set forth
on EXHIBIT I to this Agreement (insofar as such information relates to Harris or
the terms of the Distribution) shall be deemed to be Harris Liabilities and not
Lanier Liabilities and (ii) any and all Liabilities arising from or based upon
misstatements in or omissions from the Registration Statement or the Information
Statement other than those specified in Section 2.1(h)(i) shall be deemed to be
Lanier Liabilities and not Harris Liabilities.
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(i) ELECTION OF OFFICERS. On or prior to the Distribution
Date, Lanier shall take all actions necessary and desirable so that as of the
Distribution Date the officers of Lanier will be as set forth in the Information
Statement.
(j) STATE SECURITIES LAWS. Prior to the Distribution Date,
Harris and Lanier shall take all such action as may be necessary or appropriate
under the securities or blue sky laws of states or other political subdivisions
of the United States in order to effect the Distribution.
(k) LISTING APPLICATION; NOTICE TO NYSE. (i) Prior to the
Distribution Date, Harris and Lanier shall prepare and file with the NYSE a
listing application and related documents and shall take all such other actions
with respect thereto as shall be necessary or desirable in order to cause the
NYSE to list on or prior to the Distribution Date, subject to official notice of
issuance, the Lanier Shares.
(ii) Prior to the Distribution, Harris shall, to the
extent possible, give the NYSE not less than ten days advance notice of
the Distribution Record Date in compliance with Rule 10b-17 under the
Exchange Act.
(l) OTHER TRANSACTIONS. On or prior to the Distribution Date,
the parties hereto shall have consummated those other transactions in connection
with the Corporate Restructuring Transactions and the Distribution that are
contemplated by the Information Statement and not specifically referred to in
this Section 2.1.
SECTION 2.2 CASH DIVIDEND.
(a) Not fewer than five Business Days prior to the
Distribution Date, Harris shall prepare and deliver to Lanier, solely for the
purpose of determining the Dividend Amount (as hereinafter defined), an estimate
of the amount of Cash (such estimated amount, the "ESTIMATED CASH") and an
estimate of the amount of Third Party Debt (such estimated amount, the
"ESTIMATED DEBT") which estimates shall be prepared in good faith on a basis
consistent with the methods, principles, practices and policies set forth in
Schedule 2.2(a), and shall be binding on the parties with respect to the
determination of the Dividend Amount.
(b) On the Business Day prior to the Distribution Date, Lanier
shall, or shall cause its Affiliates to, pay to Harris or, at the designation of
Harris, to Harris' Affiliates, cash in respect of a cash dividend on the Lanier
Common Stock in an aggregate amount (the "DIVIDEND AMOUNT") equal to the sum of
(a) $700,000,000, plus (b) the Estimated Cash, minus (c) the Estimated Debt.
SECTION 2.3 POST-DISTRIBUTION ADJUSTMENT.
(a) (i) As soon as practicable, but in no event later than 90
days following the Distribution Date, Harris shall, on a basis
consistent with the methods, principles, practices
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and policies set forth in Schedule 2.2(a), prepare and deliver to
Lanier a calculation of the Correct Amount (the "CALCULATION").
(ii) During the preparation of the Calculation and
the period of any review or dispute thereof, (A) Harris shall (i)
provide Lanier and Lanier's authorized representatives with full access
to the books, records, facilities and employees of Harris relating to
the determination of the Correct Amount, and (ii) cooperate fully with
Lanier and Lanier's authorized representatives, including the provision
on a timely basis of all information reasonably requested by Lanier,
and (B) Lanier shall (i) provide Harris and Harris' authorized
representatives with full access to the books, records, facilities and
employees of Lanier, and (ii) cooperate fully with Harris and Harris'
authorized representatives, including the provision on a timely basis
of all information reasonably requested by Harris relating to the
determination of the Correct Amount.
(iii) After receipt of the Calculation, Lanier shall
have 30 days to review the Calculation, together with the workpapers
used in the preparation thereof. In connection therewith, Lanier and
its authorized representatives shall have full access to all relevant
books, records and employees of Harris relating to the determination of
the Correct Amount. Unless Lanier delivers written notice to Harris on
or prior to the 30th day after Lanier's receipt of the Calculation
stating that Lanier has objections to the Calculation and describing
any such objections with particularity, Lanier shall be deemed to have
accepted and agreed to the Correct Amount set forth therein. If Lanier
notifies Harris in writing of its objections to the Calculation, Lanier
and Harris shall, within 30 days (or such longer period as the parties
may agree in writing) following the delivery of such written notice
(the "RESOLUTION PERIOD"), attempt to resolve their differences, and
any resolution by them as to any disputed amounts shall be final,
binding and conclusive on the parties for all purposes.
(iv) Any amounts remaining in dispute at the
conclusion of the Resolution Period ("UNRESOLVED CHANGES") shall be
submitted to the office of Ernst & Young LLP located in New York,
New York ("ERNST & YOUNG") within 10 days after the expiration of the
Resolution Period. Each party agrees to execute, if requested by Ernst
& Young, an engagement letter containing reasonable terms. All fees and
expenses relating to the work, if any, to be performed by Ernst & Young
shall be borne pro rata by Harris and Lanier in proportion to the
allocation of the dollar amount of the Unresolved Changes between
Harris and Lanier made by Ernst & Young, such that the prevailing party
shall pay the lesser portion of such fees and expenses. Ernst & Young
shall act as an arbitrator to determine, based on the provisions of
this Section 2.3(a), only the Unresolved Changes. Ernst & Young's
determination of the Unresolved Changes shall be made within 30 days of
the submission to Ernst & Young of the Unresolved Changes, shall be set
forth in a written
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statement delivered by Ernst & Young to Harris and Lanier and shall be
final, binding and conclusive on the parties for all purposes.
(v) In the event that Harris and Lanier agree or are
deemed to agree as to the Correct Amount, then within five Business
Days following such agreement (A) Lanier shall pay to Harris the
amount, if any, by which the Correct Amount exceeds the Dividend
Amount, or (B) Harris shall pay to Lanier the amount, if any, by which
the Dividend Amount exceeds the Correct Amount (any such payment, the
"POST-DISTRIBUTION ADJUSTMENT"). In the event that there are Unresolved
Changes at the end of the Resolution Period, then (i) if Harris and
Lanier agree that a Post-Distribution Adjustment is owed to one party
regardless of the ultimate resolution of any Unresolved Changes, then
the minimum amount which Harris and Lanier agree is owed to such party
shall be paid within five Business Days after the end of the Resolution
Period and any additional amounts owing to such party with respect to
the Unresolved Changes shall be paid within five Business Days after
resolution thereof by Ernst & Young and (ii) in all other cases, any
and all payments shall be made within five Business Days after
resolution of the Unresolved Changes by Ernst & Young.
(vi) Any payments made pursuant to this Section
2.2(b) shall be accompanied by interest at the Applicable Rate from the
Distribution Date up to and including the date of payment, and payments
not made when due accrue at the Applicable Rate plus 4% per annum.
SECTION 2.4 INTERCOMPANY RECEIVABLES. Prior to the Effective
Time, (i) Lanier shall cause all intercompany receivables, payables and loans
(other than receivables, payables and loans otherwise specifically provided for
hereunder, including without limitation the Harris Accounts Payable, or under
any Ancillary Agreement, including payables created or required hereby or by any
Ancillary Agreement) (collectively, "Intercompany Receivables") owed by Harris
or any other member of the Harris Group located in the United States to Lanier
or any member of the Lanier Group to be forgiven, canceled and terminated as of
the Distribution Date, without the payment of any consideration therefor; (ii)
Harris shall cause all Intercompany Receivables owed by Lanier or any member of
the Lanier Group located in the United States to Harris or any other member of
the Harris Group to be forgiven, canceled and terminated as of the Distribution
Date without the payment of any consideration therefor; (iii) Lanier shall cause
all Intercompany Receivables owed by any other member of the Harris Group
located outside the United States to Lanier or any member of the Lanier Group to
be paid and discharged in full in accordance with their respective terms; and
(iv) Harris shall cause all Intercompany Receivables owed by any member of the
Lanier Group located outside the United States to Harris or any member of the
Harris Group to be paid and discharged in full in accordance with their
respective terms.
SECTION 2.5 ASSUMPTION AND SATISFACTION OF LIABILITIES.
Except as otherwise specifically set forth in any Ancillary Agreement, from and
after the Effective Time, (i) Harris shall,
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and shall cause each member of the Harris Group to, assume, pay, perform and
discharge all Harris Liabilities in the ordinary course of business, consistent
with past practice, and (ii) Lanier shall, and shall cause each member of the
Lanier Group, to assume, pay, perform and discharge all Lanier Liabilities in
the ordinary course of business, consistent with past practice. To the extent
reasonably requested to do so by another party hereto, each party hereto agrees
to execute and deliver such documents, in a form reasonably satisfactory to such
party, as may be reasonably necessary to evidence the assumption of any
Liabilities hereunder.
SECTION 2.6 RESIGNATIONS. Harris shall cause all its employees
to resign, effective as of the Effective Time, from all positions as officers or
directors of any member of the Lanier Group in which they serve, and Lanier
shall cause all its employees to resign, effective as of the Effective Time,
from all positions as officers or directors of any members of the Harris Group
in which they serve.
SECTION 2.7 FURTHER ASSURANCES. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement and the Ancillary Agreements, the proper
officers of each party to this Agreement shall take all such necessary action.
Without limiting the foregoing, Harris and Lanier shall use their commercially
reasonable efforts promptly to obtain all consents and approvals, to enter into
all agreements and to make all filings and applications that may be required for
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, including, without limitation, all applicable governmental
and regulatory filings.
SECTION 2.8 LIMITED REPRESENTATIONS OR WARRANTIES. Each of the
parties hereto agrees that no party hereto is, in this Agreement or in any other
agreement or document contemplated by this Agreement or otherwise, making any
representation or warranty whatsoever, as to title or value of Assets being
transferred. It is also agreed that, notwithstanding anything to the contrary
otherwise expressly provided in the relevant Conveyancing and Assumption
Instrument, all Assets either transferred to or retained by the parties, as the
case may be, shall be "as is, where is" and that (subject to Section 2.7) the
party to which such Assets are to be transferred hereunder shall bear the
economic and legal risk that such party's or any of the Subsidiaries' title to
any such Assets shall be other than good and marketable and free from
encumbrances. Similarly, each party hereto agrees that, except as otherwise
expressly provided in the relevant Conveyancing and Assumption Instrument, no
party hereto is representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any agreements and the
making of any filings or applications contemplated by this Agreement will
satisfy the provisions of any or all applicable agreements or the requirements
of any or all applicable laws or judgments, it being agreed that the party to
which any Assets are transferred shall bear the economic and legal risk that any
necessary consents or approvals are not obtained or that any requirements of
laws or judgments are not complied with.
SECTION 2.9 REMOVAL OF CERTAIN GUARANTEES; RELEASES FROM
LIABILITIES.
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(a) Except as otherwise specified in any Ancillary Agreement,
Lanier shall use its commercially reasonable efforts to have, on or prior to the
Distribution Date, or as soon as practicable thereafter, any member of the
Harris Group removed as guarantor of or obligor for any Lanier Liability,
including in respect of those guarantees set forth on SCHEDULE 2.9(A) of this
Agreement.
(b) If Lanier is unable to obtain, or to cause to be obtained,
any such required removal as set forth in clause (a) of this Section 2.9, the
applicable guarantor or obligor shall continue to be bound as such and, unless
not permitted by law or the terms thereof, the relevant beneficiary shall or
shall cause one of its Subsidiaries, as agent or subcontractor for such
guarantor or obligor to pay, perform and discharge fully all the obligations or
other liabilities of such guarantor or obligor thereunder from and after the
date hereof.
(c) If (i) Lanier is unable to obtain, or to cause to be
obtained, any such required removal as set forth in clause (a) of this Section
2.9, or (ii) Lanier Liabilities arise from and after the Effective Time but
before a member of the Harris Group which is a guarantor or obligor with
reference to any such Lanier Liability is removed pursuant to Section 2.9(a),
then such guarantor or obligor shall be indemnified by Lanier for all Lanier
Liabilities incurred by it in its capacity as guarantor or obligor. Without
limiting the foregoing, Lanier shall, or shall cause a member of the Lanier
Group to, reimburse any such member of the Harris Group which is a guarantor or
obligor as soon as practicable (but in no event later than 30 days) following
delivery by Harris to Lanier of notice of a payment made pursuant to this
Section 2.9 in respect of Lanier Liabilities.
(d) In the event that at any time before or after the
Distribution Date Harris identifies any letters of credit, interest rate or
foreign exchange contracts or other Contracts (excluding guarantees) that relate
primarily to the Lanier Business but for which a member of the Harris Group has
contingent, secondary, joint, several or other Liability of any nature
whatsoever, Lanier shall, at its expense, take such actions and enter into such
agreements and arrangements as Harris may reasonably request to effect Harris'
(or a member of the Harris Group's ) release or substitution.
(e) The parties hereto shall use commercially reasonable
efforts to obtain, or cause to be obtained, any consent, substitution or
amendment required to novate or assign all obligations under any Contracts or
Liabilities of any nature whatsoever transferred under this Agreement, or to
obtain in writing the unconditional release of the assignor so that in each such
case, Harris shall be solely responsible for the Harris Liabilities and Lanier
shall be solely responsible for the Lanier Liabilities; PROVIDED, HOWEVER, that
no party shall be obligated to pay any consideration therefor (except for filing
fees or other similar charges) to any Third Party from whom such consent,
substitution, amendment or release is requested. Whether or not any such
consent, substitution, amendment or release is obtained, nothing in this Section
2.9(e) shall in any way limit the obligations of the parties under Article III.
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SECTION 2.10 WITNESS SERVICES. At all times from and after the
Distribution Date, each of Harris and Lanier shall use their commercially
reasonable efforts to make available to the other, upon reasonable written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that (i) such persons may reasonably be required in
connection with the prosecution or defense of any Action in which the requesting
party from time to time be involved and (ii) there is no conflict in the Action
between the requesting party and Harris and Lanier, as applicable. A party
providing witness services to the other party under this Section shall be
entitled to receive from the recipient of such services, upon the presentation
of invoices therefor, payments for such amounts, relating to disbursements and
other out-of-pocket expenses (which shall be deemed to exclude the costs of
salaries and benefits of employees who are witnesses), as may be reasonably
incurred in providing such witness services.
SECTION 2.11 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION;
TRANSFERS DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any
transfers contemplated by this Article II shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
transfers as promptly following the Distribution Date as shall be practicable.
Nothing herein shall be deemed to require the transfer of any Assets or the
assumption of any Liabilities which by their terms or operation of law cannot be
transferred; PROVIDED, HOWEVER, that the parties hereto and their respective
Subsidiaries shall cooperate to seek to obtain any necessary consents or
approvals for the transfer of all Assets and Liabilities contemplated to be
transferred pursuant to this Article II. In the event that any such transfer of
Assets or Liabilities has not been consummated, from and after the Distribution
Date the party retaining such Asset or Liability shall hold such Asset in trust
for the use and benefit of the party entitled thereto (at the expense of the
party entitled thereto) or retain such Liability for the account of the party by
whom such Liability is to be assumed pursuant hereto, as the case may be, and
take such other action as may be reasonably requested by the party to whom such
Asset is to be transferred, or by whom such Liability is to be assumed, as the
case may be, in order to place such party, insofar as is reasonably possible, in
the same position as would have existed had such Asset or Liability been
transferred as contemplated hereby. As and when any such Asset or Liability
becomes transferable, such transfer shall be effected forthwith. The parties
agree that, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the Assets,
together with all rights, powers and privileges incident thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement. In the event that a Harris Asset or Harris Liability is
transferred to Lanier, then promptly upon the request of either party, the
parties shall cooperate to transfer such asset or liability to Harris. In the
event that a Lanier Asset or Lanier Liability is transferred to Harris, then
promptly upon the request of either party, the parties shall cooperate to
transfer such asset or liability to Lanier.
SECTION 2.12 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In
connection with the transfers of Assets and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or cause to be
executed by the appropriate entities the Conveyancing and Assumption
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Instruments in substantially the form contemplated hereby for transfers to be
effected pursuant to New York law or the Laws of one of the other states of the
United States or, if not appropriate for a given transfer, and for transfers to
be effected pursuant to non-U.S. Laws, in such other form as the parties shall
reasonably agree. The transfer of capital stock shall be effected by means of
delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporation or other legal entities involved, or by
such other means as may be required in any non- U.S. jurisdiction to transfer
title to stock and, to the extent required by applicable Law, by notation on
public registries.
SECTION 2.13 ANCILLARY AGREEMENTS. Prior to the Distribution
Date, each of Harris and Lanier shall enter into, and/or (where applicable)
shall cause members of their respective Groups to enter into, the Ancillary
Agreements and any other agreements in respect of the Distribution reasonably
necessary or appropriate in connection with the transactions contemplated hereby
and thereby.
SECTION 2.14 CORPORATE NAMES. Except as otherwise specifically
provided in any Ancillary Agreement:
(a) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, Lanier will, at its own
expense, remove (or, if necessary, on an interim basis, cover up) any and all
exterior signs and other identifiers located on any of its property or premises
or on the property or premises used by it or its Subsidiaries which refer or
pertain to Harris or which include the Harris name, logo or other trademark or
other Harris intellectual property; and
(b) as soon as is reasonably practicable after the
Distribution Date but in any event within six months thereafter, Lanier will,
and will cause the Lanier Subsidiaries to, remove from all letterhead,
envelopes, invoices and other communications media of any kind, all references
to Harris, including the "Harris Corporation" name, logo and any other trademark
or other Harris intellectual property (except that Lanier shall not be required
to take any such action with respect to materials in the possession of
customers).
SECTION 2.15 NON-SOLICITATION. (a) For a period of two years
following the Distribution Date, Lanier will not and will not permit its agents
or any member of the Lanier Group to, directly or indirectly, solicit or recruit
for its employment any employee of the Harris Group as of the Distribution
without the prior written consent of Harris; PROVIDED, HOWEVER, that nothing in
this Section 2.15(a) shall (i) prohibit the hiring of any Person who applied for
employment with the Lanier Group solely in response to any public medium
advertising or (ii) prohibit the hiring of any Person referred by any Person
whose principal business is the recruiting of prospective employees, provided
that such Person has been instructed in writing by Lanier prior to the referral
not to recruit any employees of the Harris Group.
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(b) For a period of two years following the Distribution Date,
Harris will not and will not permit its agents or any member of the Harris Group
to, directly or indirectly, solicit or recruit for its employment any employee
of the Lanier Group as of the Distribution without the prior written consent of
Lanier; PROVIDED, HOWEVER, that nothing in this Section 2.15(b) shall (i)
prohibit the hiring of any Person who applied for employment with the Harris
Group solely in response to any public medium advertising or (ii) prohibit the
hiring of any Person referred by any Person whose principal business is the
recruiting of prospective employees, provided that such Person has been
instructed in writing by Harris prior to the referral not to recruit any
employees of the Lanier Group.
ARTICLE III.
INDEMNIFICATION
SECTION 3.1 INDEMNIFICATION BY HARRIS. Except as otherwise
specifically set forth in any provision of this Agreement, Harris shall
indemnify, defend and hold harmless the Lanier Indemnitees from and against any
and all Indemnifiable Losses of the Lanier Indemnitees arising out of, by reason
of or otherwise in connection with the Harris Liabilities or alleged Harris
Liabilities, including any breach by Harris of any provision of this Section
3.1. Subject to the last sentence of Section 7.1, this Agreement is not intended
to address, and should not be interpreted to address, the matters specifically
and expressly covered by the Ancillary Agreements.
SECTION 3.2 INDEMNIFICATION BY LANIER. Except as otherwise
specifically set forth in any provision of this Agreement, Lanier shall
indemnify, defend and hold harmless the Harris Indemnitees from and against any
and all Indemnifiable Losses of the Harris Indemnitees arising out of, by reason
of or otherwise in connection with the Lanier Liabilities or alleged Lanier
Liabilities, including any breach by Lanier of any provision of this Section
3.1. Subject to the last sentence of Section 7.1, this Agreement is not intended
to address, and should not be interpreted to address, the matters specifically
and expressly covered by the Ancillary Agreements.
SECTION 3.3 PROCEDURES FOR INDEMNIFICATION.
(a) THIRD PARTY CLAIMS. If a claim or demand is made against a
Lanier Indemnitee or a Harris Indemnitee (each, an "INDEMNITEE") by any Person
who is not a party to this Agreement (a "THIRD PARTY CLAIM") as to which such
Indemnitee is entitled to indemnification pursuant to this Agreement, such
Indemnitee shall notify the party which is or may be required pursuant to
Section 3.1 or Section 3.2. hereof to make such indemnification (the
"INDEMNIFYING PARTY") in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 15 Business Days) after receipt by such
Indemnitee of written notice of the Third Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred
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during the period in which the Indemnitee failed to give such notice).
Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly
(and in any event within ten Business Days) after the Indemnitee's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall, within 30 days (or sooner if
the nature of the Third Party Claim so requires), notify the Indemnitee of its
intent to do so, and the Indemnifying Party shall thereafter not be liable to
the Indemnitee for legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, that such
Indemnitee shall have the right to employ counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim
which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, subject to the proviso of the preceding sentence,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the period
prior to the time the Indemnitee shall have given notice of the Third Party
Claim as provided above). If the Indemnifying Party so elects to assume the
defense of any Third Party Claim, all of the Indemnitees shall cooperate with
the Indemnifying Party in the defense or prosecution thereof, including by
providing or causing to be provided, Records and witnesses as soon as reasonably
practicable after receiving any request therefor from or on behalf of the
Indemnifying Party.
If the Indemnifying Party acknowledges in writing
responsibility for a Third Party Claim, then in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the Indemnifying Party's prior written consent;
PROVIDED, HOWEVER, that the Indemnitee shall have the right to settle,
compromise or discharge such Third Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases the Indemnifying Party from its
indemnification obligation hereunder with respect to such Third Party Claim and
such settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party. If the Indemnifying Party acknowledges in writing
liability for a Third Party Claim, the Indemnitee will agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and releases
the Indemnitee completely in connection with such Third Party Claim and that
would not otherwise
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adversely affect the Indemnitee. If an Indemnifying Party elects not to assume
the defense of a Third Party Claim, or fails to notify an Indemnitee of its
election to do so as provided herein, such Indemnitee may compromise, settle or
defend such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense of any Third Party Claim (and shall be
liable for the fees and expenses of counsel incurred by the Indemnitee in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnitee which the Indemnitee reasonably determines, after
conferring with its counsel, cannot be separated from any related claim for
money damages. If such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the Indemnifying
Party shall be entitled to assume the defense of the portion relating to money
damages.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(c) The remedies provided in this Article III shall be
cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
SECTION 3.4 INDEMNIFICATION PAYMENTS. (a) Indemnification
required by this Article III shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or loss, liability, claim, damage or expense is incurred. If the
Indemnifying Party fails to make an indemnification payment required by this
Article III within 30 days after receipt of a bill therefore or notice that a
loss, liability, claim, damage or expense has been incurred, the Indemnifying
Party shall also be required to pay interest on the amount of such
indemnification payment, from the date of receipt of the bill or notice of the
loss, liability, claim, damage or expense to, but not including the date of
payment, at the Applicable Rate.
(b) The amount of any claim by an Indemnitee under this
Agreement shall be reduced to reflect any actual tax savings received by any
Indemnitee that result from the Indemnifiable Losses that gave rise to such
indemnity.
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ARTICLE IV.
ACCESS TO INFORMATION
SECTION 4.1 PROVISION OF CORPORATE RECORDS.
(a) Other than in circumstances in which indemnification is
sought pursuant to Article III (in which event the provisions of such Article
will govern), after the Distribution Date, upon the prior written request by
Lanier for specific and identified agreements, documents, books, records or
files (collectively, "RECORDS") which relate to (x) Lanier or the conduct of the
Lanier Business up to the Effective Time, or (y) any Ancillary Agreement (other
than the Tax Disaffiliation Agreement), Harris shall arrange, as soon as
reasonably practicable following the receipt of such request, to provide
appropriate copies of such Records (or the originals thereof if Lanier has a
reasonable need for such originals) in the possession or control of Harris or
any of the Harris Subsidiaries, but only to the extent such items are not
already in the possession or control of the requesting party.
(b) Other than in circumstances in which indemnification is
sought pursuant to Article III (in which event the provisions of such Article
will govern), after the Distribution Date, upon the prior written request by
Harris for specific and identified Records which relate to (x) Harris or the
conduct of the Harris Business up to the Effective Time, or (y) any Ancillary
Agreement (other than the Tax Disaffiliation Agreement), Lanier shall arrange,
as soon as reasonably practicable following the receipt of such request, to
provide appropriate copies of such Records (or the originals thereof if Harris
has a reasonable need for such originals) in the possession or control of Lanier
or any of the Lanier Subsidiaries, but only to the extent such items are not
already in the possession or control of the requesting party.
SECTION 4.2 ACCESS TO INFORMATION. Other than in circumstances
in which indemnification is sought pursuant to Article III (in which event the
provisions of such Article will govern), from and after the Distribution Date,
each of Harris and Lanier shall afford to the other and its authorized
Representatives reasonable access during normal business hours, subject to
appropriate restrictions for classified, privileged or confidential information,
to the personnel, properties, books and records of such party and its
Subsidiaries insofar as such access is reasonably required by the other party
and relates to (x) such other party or the conduct of its business prior to the
Effective Time or (y) any Ancillary Agreement.
SECTION 4.3 REIMBURSEMENT; OTHER MATTERS. Except to the extent
otherwise contemplated by any Ancillary Agreement, a party providing Records or
access to information to the other party under this Article IV shall be entitled
to receive from the recipient, upon the presentation of invoices therefor,
payments for such amounts, relating to supplies, disbursements and other
out-of-pocket expenses, as may be reasonably incurred in providing such Records
or access to information.
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SECTION 4.4 CONFIDENTIALITY. Neither (i) Harris nor the Harris
Subsidiaries nor (ii) Lanier nor the Lanier Subsidiaries shall use or permit the
use of (without the prior written consent of the other) and shall keep, and
shall cause its consultants and advisors to keep, confidential all information
concerning the other party in its possession, its custody or under its control
(except to the extent that (A) such information has been in the public domain
through no fault of such party or (B) such information has been later lawfully
acquired from other sources by such party or (C) this Agreement or any other
Ancillary Agreement or any other agreement entered into pursuant hereto permits
the use or disclosure of such information) to the extent such information, (w)
relates to or was acquired during the period up to the Effective Time, (x)
relates to any Ancillary Agreement, (y) is obtained in the course of performing
services for the other party pursuant to any Ancillary Agreement, or (z) is
based upon or is derived from information described in the preceding clauses
(w), (x) or (y), and each party shall not (without the prior written consent of
the other) otherwise release or disclose such information to any other Person,
except such party's auditors, attorneys consultants and advisors, unless
compelled to disclose such information by judicial or administrative process or
unless such disclosure is required by Law and such party has used commercially
reasonable efforts to consult with the other affected party or parties prior to
such disclosure.
SECTION 4.5 PRIVILEGED MATTERS. The parties hereto recognize
that legal and other professional services that have been and will be provided
prior to the Distribution Date have been and will be rendered for the benefit of
each of the members of the Harris Group, and the members of the Lanier Group,
and that each of the members of the Harris Group, and each of the members of the
Lanier Group should be deemed to be the client for the purposes of asserting all
privileges which may be asserted under applicable Law. Except as otherwise
specifically provided in the Tax Disaffiliation Agreement with respect to tax
matters, to allocate the interests of each party in the information as to which
any party is entitled to assert a privilege, the parties agree as follows:
(a) Harris shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the Harris Business, whether or not the privileged
information is in the possession of or under the control of Harris or Lanier.
Harris shall also be entitled, in perpetuity, to control the assertion or waiver
of all privileges in connection with privileged information that relates solely
to the subject matter of any claims constituting Harris Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Harris, whether or not the privileged information is in
the possession of or under the control of Harris or Lanier.
(b) Lanier shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the Lanier Business, whether or not the privileged
information is in the possession of or under the control of Harris or Lanier.
Lanier shall also be entitled, in perpetuity, to control the assertion or waiver
of all privileges in connection with privileged information which relates solely
to the subject matter of any claims constituting Lanier Liabilities, now pending
or which may be asserted in the future, in any lawsuits
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or other proceedings initiated against or by Lanier, whether or not the
privileged information is in the possession of Lanier or under the control of
Harris or Lanier.
(c) The parties hereto agree that they shall have a shared
privilege, with equal right to assert or waive, subject to the restrictions in
this Section 4.5, with respect to all privileges not allocated pursuant to the
terms of Sections 4.5(a) and (b). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve Harris and
Lanier in respect of which such parties retain any responsibility or liability
under this Agreement, shall be subject to a shared privilege among them.
(d) No party hereto may waive any privilege which could be
asserted under any applicable Law, and in which any other party hereto has a
shared privileged, without the consent of the other party, which consent shall
not be unreasonably withheld or delayed, except to the extent reasonably
required in connection with any litigation with Third Parties or as provided in
subsection (e) below. Consent shall be in writing, or shall be deemed to be
granted unless written objection is made within twenty (20) days after notice
upon the other party requesting such consent.
(e) In the event of any litigation or dispute between or among
any of the parties hereto, any party and a Subsidiary of another party hereto,
or a Subsidiary of one party hereto and a Subsidiary of another party hereto,
either such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party, provided that such
waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the relevant
parties and/or their Subsidiaries, and shall not operate as a waiver of the
shared privilege with respect to Third Parties.
(f) If a dispute arises between or among the parties hereto or
their respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
(g) Upon receipt by any party hereto or by any Subsidiary
thereof of any subpoena, discovery or other request which arguably calls for the
production or disclosure of information subject to a shared privilege or as to
which another party has the sole right hereunder to assert a privilege, or if
any party obtains knowledge that any of its or any of its Subsidiaries' current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such privileged information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the information and to assert any rights it or
they may have under this Section 4.5 or otherwise to prevent the production or
disclosure of such privileged information.
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(h) The transfer of all Records and other information pursuant
to this Agreement is made in reliance on the agreement of Harris and Lanier, as
set forth in Sections 4.4 and 4.5, to maintain the confidentiality of privileged
information and to assert and maintain all applicable privileges. The access to
information being granted pursuant to Sections 4.1 and 4.2 hereof, the agreement
to provide witnesses and individuals pursuant to Sections 2.10 and 3.3 hereof,
the furnishing of notices and documents and other cooperative efforts
contemplated by Section 3.3 hereof, and the transfer of privileged information
between and among the parties and their respective Subsidiaries pursuant to this
Agreement shall not be deemed a waiver of any privilege that has been or may be
asserted under this Agreement or otherwise.
SECTION 4.6 OWNERSHIP OF INFORMATION. Any information owned by
one party or any of its Subsidiaries that is provided to a requesting party
pursuant to Article III or this Article IV shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such information.
SECTION 4.7 RETENTION OF RECORDS. Harris shall deliver to
Lanier upon Lanier's request all Records that are specifically identified by
Lanier and known by Harris, after reasonable inquiry, to be in its control or
possession relating to Lanier Assets, Lanier Liabilities or the Lanier Business.
Except (a) as provided in the Tax Disaffiliation Agreement or (b) when a longer
retention period is otherwise required by Law or agreed to in writing, the
Harris Group and the Lanier Group shall retain, for a period of at least eight
years, all Records relating to the Lanier Business as of the Effective Time.
Notwithstanding the foregoing, in lieu of retaining any specific Records, Harris
or Lanier may offer in writing to deliver such Records to the other and, if such
offer is not accepted within 90 days, the offered Records may be destroyed or
otherwise disposed of at any time. If a recipient of such offer shall request in
writing prior to the scheduled date for such destruction or disposal that any of
Records proposed to be destroyed or disposed of be delivered to such requesting
party, the party proposing the destruction or disposal shall promptly arrange
for delivery of such of the Records as was requested (at the cost of the
requesting party).
SECTION 4.8 LIMITATION OF LIABILITY; RELEASE. (a) No party
shall have any liability to any other party in the event that any information
exchanged or provided pursuant to this Agreement which is an estimate or
forecast, or which is based on an estimate or forecast, is found to be
inaccurate.
(b) Effective upon the Distribution and except as otherwise
specifically set forth in this Agreement, each of Harris and Lanier releases and
forever discharges the other and its Representatives and Subsidiaries, of and
from all debts, demands, actions, causes of action, suits, accounts, covenants,
contracts, agreements, damages, and any and all claims, demands and liabilities
whatsoever of every name and nature, both in law and in equity, against such
other party, its Representatives and Subsidiaries or any of its assigns, which
the releasing party has or ever had, which arise out of or relate to events,
circumstances or actions taken by such other party prior to the
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Distribution; PROVIDED, HOWEVER, that the foregoing general release shall not
apply to this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby or to the Harris Accounts Payable and shall not
affect either party's right to enforce this Agreement, any of the Ancillary
Agreements or any of the agreement or contracts set forth on Exhibit J, under
which the Harris Accounts Payable are owed, in accordance with their terms.
SECTION 4.9 OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF
INFORMATION. The rights and obligations granted under this Article IV are
subject to any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of information set forth in any
Ancillary Agreement.
ARTICLE V.
DISPUTE RESOLUTION
SECTION 5.1 NEGOTIATION. In the event of a controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement
or the transactions contemplated hereby, including, without limitation, any
claim based on contract, tort, statute or constitution (but excluding any
controversy, dispute or claim arising out of any agreement relating to the use
or lease of real property if any Third Party is a party to such controversy,
dispute or claim) (collectively, "AGREEMENT DISPUTES"), the management of the
parties shall negotiate in good faith for a reasonable period of time to settle
such Agreement Dispute, PROVIDED such reasonable period shall not, unless
otherwise agreed by the parties in writing, exceed 30 days from the time the
parties began such negotiations; PROVIDED, FURTHER, that in the event of any
mediation or arbitration in accordance with Sections 5.2 and 5.3 hereof, the
parties shall not assert the defenses of statute of limitations and laches
arising for the period beginning after the date the parties began negotiations
hereunder, and any contractual time period or deadline under this Agreement or
any Ancillary Agreement to which such Agreement Dispute relates shall not be
deemed to have passed until such Agreement Dispute has been resolved.
SECTION 5.2 MEDIATION. If after such reasonable period such
management are unable to settle such Agreement Dispute (and in any event, unless
otherwise agreed in writing by the parties, after 60 days have elapsed from the
time the parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of less than $500,000, such Agreement Dispute
shall be determined, at the request of any party, by binding mediation conducted
in Orlando, Florida or at another location which the parties mutually select,
before a retired judge sitting on the panel of Judicial Arbitration & Mediation
Services, Inc. The mediation process shall continue as the exclusive method of
resolving the Agreement Dispute (other than negotiation between the parties)
until the earlier of the Agreement Dispute being resolved and the mediator
finding in good faith that all settlement possibilities have been exhausted and
that the matter is not resolvable
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through mediation. If the mediator makes such a finding, at the request of any
party, the Agreement Dispute shall then be determined by binding arbitration in
accordance with Section 5.3 hereof.
SECTION 5.3 ARBITRATION. If after such reasonable period such
management are unable to settle such Agreement Dispute (and in any event, unless
otherwise agreed in writing by the parties, after 60 days have elapsed from the
time the parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of $500,000 or more, such Agreement Dispute shall
be determined, at the request of any party, by binding arbitration conducted in
Orlando, Florida or at another location which the parties mutually select,
before and in accordance with the then-existing International Arbitration Rules
of the American Arbitration Association (the "RULES"). In any dispute between
the parties hereto, the numbers of arbitrators shall be three. Any judgment or
award rendered by the arbitrator shall be final, binding and nonappealable
(except upon grounds specified in 9 U.S.C. Section 10(a) as in effect on the
date hereof). If the parties are unable to agree on an arbitrator or
arbitrators, the arbitrator or arbitrators shall be selected in accordance with
the Rules. Any controversy concerning whether an Agreement Dispute is an
arbitrable Agreement Dispute, whether arbitration has been waived, whether an
assignee of this Agreement is bound to arbitrate, or as to the interpretation of
enforceability of this Article V shall be determined by the arbitrator or
arbitrators. In resolving any dispute, the parties intend that the arbitrator or
arbitrators apply the substantive laws of the State of New York, without regard
to the choice of law principles thereof. The parties intend that the provisions
to arbitrate set forth herein be valid, enforceable and irrevocable. The parties
agree to comply with any award made in any such arbitration proceedings that has
become final in accordance with the Rules and agree to enforcement of or entry
of judgment upon such award, by any court of competent jurisdiction, including
(a) the state courts of the State of Florida, located in Orlando, or (b) the
United States District Court for the Middle District of Florida, in accordance
with Section 7.17 hereof. The arbitrator or arbitrators shall be entitled, if
appropriate, to award any remedy in such proceedings, including, without
limitation, monetary damages, specific performance and all other forms of legal
and equitable relief; PROVIDED, HOWEVER, the arbitrator or arbitrators shall not
be entitled to award punitive damages. Without limiting the provisions of the
Rules, unless otherwise agreed in writing by or among the parties or permitted
by this Agreement, the undersigned shall keep confidential all matters relating
to the arbitration or the award, provided such matters may be disclosed (i) to
the extent reasonably necessary in any proceeding brought to enforce the award
or for entry of a judgment upon the award and (ii) to the extent otherwise
required by Law. Nothing contained herein is intended to or shall be construed
to prevent any party, in accordance with Article 22(3) of the Rules or
otherwise, from applying to any court of competent jurisdiction for interim
measures or other provisional relief in connection with the subject matter of
any Agreement Disputes.
SECTION 5.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement and each Ancillary Agreement
during the course of dispute resolution pursuant to the provisions of this
Article V with respect to all matters not subject to such dispute, controversy
or claim.
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SECTION 5.5 OTHER REMEDIES. Nothing in this Article V shall
limit the right that any party may otherwise have to seek to obtain (a)
preliminary injunctive relief in order to preserve the status quo pending the
resolution of a dispute or (b) temporary or permanent injunctive relief from any
breach of any provisions of this Agreement.
ARTICLE VI.
INSURANCE
SECTION 6.1 POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. The
Lanier Assets shall include (a) any and all rights of an insured party under
each of the Harris Shared Policies, subject to the terms of such Harris Shared
Policies and any limitations or obligations of Lanier contemplated by this
Article VI, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, with respect to all claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses
incurred or claimed to have been incurred prior to the Distribution Date by any
party in or in connection with the conduct of the Lanier Business or, to the
extent any claim is made against Lanier or any of the Lanier Subsidiaries, the
conduct of the Harris Business, and which claims, suits, actions, proceedings,
injuries, losses, liabilities, damages and expenses may arise out of an insured
or insurable occurrence under one or more of such Harris Shared Policies;
PROVIDED, HOWEVER, that nothing in this clause shall be deemed to constitute (or
to reflect) an assignment or transfer of such Harris Shared Policies, or any of
them, to Lanier, and (b) the Lanier Policies.
SECTION 6.2 POST-DISTRIBUTION DATE CLAIMS. (a) If, subsequent
to the Distribution Date, any Person shall assert a claim against Lanier or any
of the Lanier Subsidiaries (including where Lanier or the Lanier Subsidiaries
are joint defendants with other Persons) with respect to any claim, suit,
action, proceeding, injury, loss, liability, damage or expense incurred or
claimed to have been incurred prior to the Distribution Date in or in connection
with the conduct of the Lanier Business or, to the extent any claim is made
against Lanier or any of the Lanier Subsidiaries (including where Lanier or the
Lanier Subsidiaries are joint defendants with other Persons), the conduct of the
Harris Business and which claim, suit, action, proceeding, injury, loss,
liability, damage or expense may arise out of an insured or insurable occurrence
under one or more of the Harris Shared Policies, Harris shall assert and collect
any related Insurance Proceeds under such Harris Shared Policy on behalf of
Lanier and remit promptly to Lanier any Insurance Proceeds so collected, and
Harris shall further on behalf of Lanier assert any and all rights of an insured
party under such Harris Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; PROVIDED, HOWEVER, that nothing in this Section 6.2 shall be deemed
to constitute (or to reflect) an assignment or transfer of the Harris Shared
Policies, or any of them, to Lanier.
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SECTION 6.3 ADMINISTRATION; OTHER MATTERS. (a) ADMINISTRATION.
From and after the Distribution Date, Harris shall be responsible for (i)
Insurance Administration of the Harris Shared Policies and (ii) Claims
Administration (except as provided below) under such Harris Shared Policies with
respect to Harris Liabilities and Lanier Liabilities; PROVIDED that the
retention of such responsibilities by Harris is in no way intended to limit,
inhibit or preclude any right to insurance coverage for any Insured Claim of a
named insured under such Policies as contemplated by the terms of this
Agreement; and PROVIDED FURTHER that Harris' retention of the administrative
responsibilities for the Harris Shared Policies shall not relieve the party
submitting any Insured Claim of the primary responsibility for reporting such
Insured Claim accurately, completely and in a timely manner or of such party's
authority to settle any such Insured Claim within any period permitted or
required by the relevant Policy. Harris may discharge its administrative
responsibilities under this Section 6.3 by contracting for the provision of
services by independent parties. Each of the parties hereto shall administer and
pay any costs relating to defending its respective Insured Claims under Harris
Shared Policies to the extent such defense costs are not covered under such
Policies and shall be responsible for obtaining or reviewing the appropriateness
of releases upon settlement of its respective Insured Claims under Harris Shared
Policies. Lanier shall reimburse Harris promptly for all disbursements,
out-of-pocket expenses and direct and indirect costs of employees or agents of
Harris relating to Claims Administration and Insurance Administration
contemplated by this Section 6.3(a) on behalf of Lanier.
(b) EXCEEDING POLICY LIMITS.
(i) Where Lanier Liabilities are specifically covered
under a Harris Shared Policy for periods prior to the Distribution
Date, or covering claims made after the Distribution Date with respect
to an occurrence prior to the Distribution Date, then from and after
the Distribution Date Lanier may claim coverage for Insured Claims
under such Harris Shared Policy as and to the extent that such
insurance is available up to the full extent of the applicable limits
of liability of such Harris Shared Policy (and may receive any
Insurance Proceeds with respect thereto as contemplated by Section 6.2
or Section 6.3(c) hereof), subject to the terms of this Section 6.3.
(ii) Except as set forth in this Section 6.3(b),
Harris and Lanier shall not be liable to one another for claims not
reimbursed by insurers for any reason not within the control of Harris
or Lanier, as the case may be, including coinsurance provisions,
deductibles, quota share deductibles, self-insured retentions,
bankruptcy or insolvency of an insurance carrier, Harris Shared Policy
limitations or restrictions, any coverage disputes, any failure to
timely claim by Harris or Lanier or any defect in such claim or its
processing.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds
received with respect to claims, costs and expenses under the Harris Shared
Policies shall be paid to Harris, which shall thereafter administer the Harris
Shared Policies by paying the Insurance Proceeds, as appropriate, to Harris with
respect to Harris Liabilities and to Lanier with respect to the Lanier
Liabilities.
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Payment of the allocable portions of indemnity costs of Insurance Proceeds
resulting from such Policies will be made by Harris to the appropriate party
upon receipt from the insurance carrier. In the event that the aggregate limits
on any Harris Shared Policies are exceeded by the aggregate of outstanding
Insured Claims by the relevant parties hereto, such parties agree to allocate
the Insurance Proceeds received thereunder based upon their respective
percentage of the total of their bona fide claims which were covered under such
Harris Shared Policy (their "allocable portion of Insurance Proceeds"), and any
party who has received Insurance Proceeds in excess of such party's allocable
portion of Insurance Proceeds shall pay to the other party the appropriate
amount so that each party will have received its allocable portion of Insurance
Proceeds pursuant hereto. Each of the parties agrees to use commercially
reasonable efforts to maximize available coverage under those Harris Shared
Policies applicable to it, and to take all commercially reasonable steps to
recover from all other responsible parties in respect of an Insured Claim to the
extent coverage limits under a Harris Shared Policy have been exceeded or would
be exceeded as a result of such Insured Claim.
(d) ALLOCATION OF DEDUCTIBLES. In the event that the parties
have bona fide claims under any Harris Shared Policy for which a deductible is
payable, the parties agree that the aggregate amount of the deductible paid
shall be borne by the parties in the same proportion which the Insurance
Proceeds received by each such party bears to the total Insurance Proceeds
received under the applicable Harris Shared Policy (their "allocable share of
the deductible"), and any party who has paid more than its allocable share of
the deductible shall be entitled to receive from the other party an appropriate
amount so that each party has borne its allocable share of the deductible
pursuant hereto. [Should the premiums be allocated as well?]
(e) Lanier shall be responsible for the full amount of the
deductible for general liability and automobile liability claims as set forth in
SCHEDULE 6.3(E).
(f) WORKERS' COMPENSATION.
(i) With respect to any workers' compensation claims
for the period prior to the Effective Time which would constitute
Lanier Liabilities except as provided in this Section 6.3(f), Harris
shall no later than six months following the Effective Time have an
actuary, which actuary shall be selected by Harris and shall be
reasonably acceptable to Lanier, calculate and prepare an actuarial
determination of the amount of such pre-Effective Time workers'
compensation claims, and Harris shall deliver to Lanier a statement
setting forth such actuarial determination (the "ACTUARIAL STATEMENT").
(ii) Lanier shall, within 30 days after the delivery
by Harris of the Actuarial Statement, complete its review thereof. In
the event that Lanier does not agree with the actuarial determination
set forth in the Actuarial Statement, Lanier shall, on or before the
last day of such 30-day period, so inform Harris in writing (the
"LANIER OBJECTION"), setting forth a specific description of the basis
of the Lanier Objection. If no Lanier Objection is received by Harris
on or before the last day of such 30-day period, then the Actuarial
Statement shall
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be final. Harris shall have 30 days from its receipt of the Lanier
Objection to review and respond to the Lanier Objection.
(iii) If Harris and Lanier are unable to resolve the
disagreements contained in the Lanier Objection within 15 days
following the completion of Harris' 30-day review of the Lanier
Objection, they shall refer any remaining disagreements to an actuarial
firm, mutually agreed upon by Harris and Lanier, who, acting as experts
and not as arbitrators, shall determine whether and to what extent, if
any, the Actuarial Statement delivered by Harris requires adjustment.
Such actuarial firm's determination shall (in the absence of manifest
error) be conclusive and binding upon Harris and Lanier and their
respective Affiliates. The fees and disbursements of such actuarial
firm shall be borne equally by Harris and Lanier. Harris and Lanier
shall make readily available to the actuarial firm all relevant Records
relating to the Actuarial Statement and the Lanier Objection and all
other items reasonably requested by the actuarial firm in connection
therewith.
(iv) Lanier shall within 15 days of the determination
of the "final" Actuarial Statement pay to Harris the actuarially
determined amount of pre-Effective Time workers' compensation claims
set forth in such "final" Actuarial Statement, by wire transfer of
immediately available funds to an account designated by Harris. Upon
receipt by Harris of such amount, all workers' compensation claims
covered by such "final" Actuarial Statement shall cease to be Lanier
Liabilities and shall be Harris Liabilities.
SECTION 6.4 AGREEMENT FOR WAIVER OF CONFLICT AND SHARED
DEFENSE. In the event that Insured Claims of more than one of the parties hereto
exist relating to the same occurrence, the parties shall jointly defend and
waive any conflict of interest necessary to the conduct of the joint defense.
Nothing in this Article VI shall be construed to limit or otherwise alter in any
way the obligations of the parties to this Agreement, including those created by
this Agreement, by operation of Law or otherwise.
SECTION 6.5 COOPERATION. The parties agree to use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated by this Agreement.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any
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<PAGE> 42
inconsistency between this Agreement and any Schedule hereto, the Schedule shall
prevail. Other than Section 2.8, Section 4.5 and Article V, which shall prevail
over any inconsistent or conflicting provisions in any Ancillary Agreement,
notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the provisions of any Ancillary Agreement, such Ancillary
Agreement shall control.
SECTION 7.2 ANCILLARY AGREEMENTS. Subject to the last sentence
of Section 7.1, this Agreement is not intended to address, and should not be
interpreted to address, the matters specifically and expressly covered by the
Ancillary Agreements.
SECTION 7.3 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 7.4 SURVIVAL OF AGREEMENTS. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 7.5 DISTRIBUTION EXPENSES. Except as otherwise set
forth in this Agreement or any Ancillary Agreement, all costs and expenses
incurred on or prior to the Distribution Date (whether or not paid on or prior
to the Distribution Date) in connection with the preparation, execution,
delivery, printing and implementation of this Agreement and any Ancillary
Agreement, the Information Statement (including the Registration Statement) and
the Distribution and the consummation of the transactions contemplated thereby,
excluding the fees and expenses of Sullivan & Cromwell and Morgan Stanley Dean
Witter & Co. shall be charged to and paid by Lanier. Such expenses shall be
deemed to be Lanier Liabilities. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, each party shall bear its own costs and expenses
incurred after the Distribution Date. Any amount or expense to be paid or
reimbursed by any party hereto to any other party hereto shall be so paid or
reimbursed promptly after the existence and amount of such obligation is
determined and written demand therefor is made.
SECTION 7.6 NOTICES. All notices and other communications
hereunder shall be in writing, shall reference this Agreement and shall be hand
delivered or mailed by registered or certified mail (return receipt requested)
or sent by any means of electronic message transmission with delivery confirmed
(by voice or otherwise) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice) and will be
deemed given on the date on which such notice is received ("NOTICES"):
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<PAGE> 43
To Harris:
Harris Corporation
1025 West NASA Blvd.
Melbourne, Florida 32919
Attention: Corporate Secretary
Telephone: (407) 727-9163
Facsimile: (407) 727-9222
With a copy to:
Harris Corporation
1025 West NASA Blvd.
Melbourne, Florida 32919
Attention: Scott T. Mikuen
Telephone: (407) 727-9125
Facsimile: (407) 727-9234
To Lanier:
Lanier Worldwide, Inc.
2300 Parklake Drive, N.E.
Atlanta, Georgia 30345
Attention: General Counsel
Telephone: (770) 621-1063
Facsimile: (770) 621-1073
SECTION 7.7 WAIVERS. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 7.8 AMENDMENTS. Subject to the terms of Section 7.11
hereof, this Agreement may not be modified or amended except by an agreement in
writing signed by each of the parties hereto.
SECTION 7.9 ASSIGNMENT. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other party hereto, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
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<PAGE> 44
SECTION 7.10 SUCCESSORS AND ASSIGNS. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 7.11 TERMINATION. This Agreement (including Article
III hereof) may be terminated and the Distribution may be amended, modified or
abandoned at any time prior to the Distribution by and in the sole discretion of
Harris without the approval of Lanier or the stockholders of Harris. In the
event of such termination, no party shall have any liability of any kind to any
other party or any other person. After the Distribution, this Agreement may not
be terminated except by an agreement in writing signed by the parties; PROVIDED,
HOWEVER, that Article III shall not be terminated or amended after the
Distribution in respect of the Third Party beneficiaries thereto without the
consent of such persons.
SECTION 7.12 SUBSIDIARIES. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.
SECTION 7.13 THIRD PARTY BENEFICIARIES. Except as provided in
Article III relating to Indemnitees, this Agreement is solely for the benefit of
the parties hereto and their respective Subsidiaries and Affiliates and should
not be deemed to confer upon Third Parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 7.14 TITLE AND HEADINGS. Titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 7.15 EXHIBITS AND SCHEDULES. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 7.16 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 7.17 CONSENT TO JURISDICTION. Without limiting the
provisions of Article V hereof, each of the parties irrevocably submits to the
exclusive jurisdiction of (a) the state courts of the State of Florida, located
in the City of Orlando, and (b) the United States District Court for the Middle
District of Florida, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence
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<PAGE> 45
any action, suit or proceeding relating hereto either in the United States
District Court for the Middle District of Florida or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the state courts of the State of Florida, located in the City of Orlando. Each
of the parties further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Florida with respect to any matters to which it has submitted to jurisdiction
in this Section 7.17. Each of the parties irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in (i) the state
courts of the State of Florida, located in the City of Orlando, or (ii) the
United States District Court for the Middle District of Florida, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 7.18 SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7.19 CONSOLIDATION, MERGER, ETC. INVOLVING LANIER.
Lanier shall not consolidate with or merge into any other Person or convey,
transfer or lease all or any substantial portion of its properties and assets to
any Person, and Lanier shall not permit any Person to consolidate with or merge
into Lanier or convey, transfer or lease all or any substantial portion of its
properties and assets to Lanier, unless, in each case Lanier shall consolidate
with or merge into another Person or convey, transfer or lease all or any
substantial portion of its properties and assets to any Person, the Person
formed by such consolidation or into which Lanier is merged or the Person which
acquires by conveyance or transfer, or which leases, all or any substantial
portion of properties and assets of Lanier shall be a corporation, partnership,
limited liability company or trust and shall expressly assume, by a written
agreement, executed and delivered to Harris, in form reasonably satisfactory to
Harris, all of the liabilities, obligations and expenses to be assumed by Lanier
under this Agreement and the due and punctual performance or observance of every
agreement and covenant of this Agreement on the part of Lanier to be performed
or observed.
SECTION 7.20 CONSOLIDATION, MERGER, ETC. INVOLVING HARRIS.
Harris shall not consolidate with or merge into any other Person or convey,
transfer or lease all or any substantial portion of its properties and assets to
any Person, and Harris shall not permit any Person to consolidate with or merge
into Harris or convey, transfer or lease all or any substantial portion of its
properties and assets to Harris, unless, in each case Harris shall consolidate
with or merge into another Person or convey, transfer or lease all or any
substantial portion of its properties and assets to any Person, the Person
formed by such consolidation or into which Harris is merged or the Person
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<PAGE> 46
which acquires by conveyance or transfer, or which leases, all or any
substantial portion of properties and assets of Harris shall be a corporation,
partnership, limited liability company or trust and shall expressly assume, by a
written agreement, executed and delivered to Lanier, in form reasonably
satisfactory to Lanier, all of the liabilities, obligations and expenses to be
assumed by Harris under this Agreement and the due and punctual performance or
observance of every agreement and covenant of this Agreement on the part of
Harris to be performed or observed.
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<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
HARRIS CORPORATION
By______________________________
Name:
Title:
Witness: _______________________
Name:
LANIER WORLDWIDE, INC.
By______________________________
Name:
Title:
Witness: ________________________
Name:
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<PAGE> 1
EXHIBIT 4.3
INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF DELAWARE PAR VALUE $.01
NUMBER
LA
THIS CERTIFICATE IS TRANSFERABLE CUSIP 51589L 10 5
IN NEW YORK, NEW YORK AND SEE REVERSE FOR CERTAIN DEFINITIONS
RIDGEFIELD PARK, NEW JERSEY
LANIER WORLDWIDE, INC.
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Lanier Worldwide, Inc. (hereinafter called the "Corporation") transferable on
the books of the Corporation in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
[LANIER LOGO]
Dated:
Countersigned and Registered:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT
AND REGISTRAR
By: /s/ J.M. Kelly /s/ Wesley E. Cantrell
AUTHORIZED SIGNATURE. VICE PRESIDENT AND SECRETARY CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<PAGE> 2
LANIER WORLDWIDE, INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation or to the
Transfer Agent and Registrar named on the face of this Certificate.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT .........Custodian ...,,,,,,.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act...................,,,,,,.......
in common (State)
UNIF TRF MIN ACT ..........Custodian (until age......)
(Cust)
..................under Uniform Transfers
(Minor)
to Minors Act.......................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________________
X _________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed
By ____________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
Until the Separation Time (as defined in the Rights Agreement referred to
below), this Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Stockholder Protection Rights Agreement, filed
with the United States Securities and Exchange Commission in the Corporation's
Registration Statement on Form 10 relating to the Common Stock and the Rights
(as such may be amended from time to time, the "Rights Agreement"), between the
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may become exercisable for securities or assets of the Corporation or
securities of another entity, may be exchanged for shares of Common Stock or
other securities or assets of the Corporation, may expire, may become void (if
they are "Beneficially Owned" by an "Acquiring Person" or an "Affiliate" or
"Associate" thereof, as such terms are defined in the Rights Agreement, or by
any transferee of any of the foregoing) or may be evidenced by separate
certificates and may no longer be evidenced by this Certificate. The Corporation
will mail or arrange for the mailing of a copy of the Rights Agreement to the
holder of this Certificate without charge after the receipt of a written request
therefor.
<PAGE> 1
Exhibit 10.1
FORM OF TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT dated as of [________ __, 1999],
by and between HARRIS CORPORATION, a Delaware corporation ("Harris"), and LANIER
WORLDWIDE, INC., a Delaware corporation ("Lanier").
RECITALS
A. Lanier is a first tier subsidiary of Harris.
B. Harris is the common parent of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), which currently files
consolidated Federal income Tax Returns.
C. Pursuant to the Agreement and Plan of Distribution dated
[_________ __, 1999] by and between Harris and Lanier (the "Distribution
Agreement"), Harris will distribute to the holders of its Common Stock
approximately 90% of the outstanding shares of the Common
Stock of Lanier (the "Distribution").
D. Harris and Lanier intend that the Distribution will qualify
as a distribution described in Section 355 of the Code and will not result in
the recognition of any taxable gain or income to Harris, Lanier or any
shareholder of Harris or Lanier (except to the extent of cash received for any
fractional share interest in Lanier stock and any deferred intercompany gain).
E. From and after Date of the Distribution, Lanier will cease
to be a member of the Harris affiliated group for Federal income tax purposes.
F. Harris and Lanier desire on behalf of themselves,
their subsidiaries and their successors to set
<PAGE> 2
forth their rights and obligations with respect to taxes due for periods before
and after the Distribution.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Article I
DEFINITIONS
For the purposes of this Agreement:
1.01 "AFFILIATE" shall mean any Person that
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with a specified Person.
1.02 "AGREEMENT" shall mean this Tax Disaffiliation Agreement
dated [________ __, 1999] between Harris and Lanier as the same may be amended
from time to time.
1.03 "APPLICABLE FEDERAL RATE" shall have the meaning set
forth in Section 1274(d) of the Code, compounded quarterly.
1.04 "CLAIM" shall have the meaning set forth in Section
5.03(a).
1.05 "CODE" shall have the meaning set forth in paragraph B of
the recitals.
1.06 "CONTROL" or "CONTROLLED" shall mean, with respect to any
Person, the presence of one of the following: (i) the legal, beneficial or
equitable ownership, directly or indirectly, of more than 50% (by vote or value)
of the capital or voting stock (or other ownership or voting interest, if not a
corporation) of such Person or (ii) the
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<PAGE> 3
ability, directly or indirectly, to direct the voting of a majority of the
directors of such Person's board of directors or, if the Person does not have a
board of directors, a majority of the positions on any similar body, whether
through appointment, voting agreement or otherwise.
1.07 "CONTROLLING PARTY" shall have the meaning set forth in
Section 5.01.
1.08 "CORPORATE RESTRUCTURING TRANSACTIONS" shall have the
meaning set forth in the Distribution Agreement.
1.09 "DATE OF DISTRIBUTION" shall mean the Distribution Date
specified in the Distribution Agreement.
1.10 "DISTRIBUTION" shall have the meaning set forth in
paragraph C of the recitals.
1.11 "DISTRIBUTION AGREEMENT" shall have the meaning set forth
in paragraph C of the recitals.
1.12 "FINAL DETERMINATION" shall mean with respect to any
issue (a) a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (b) a closing agreement whether or not
entered into under Section 7121 of the Code or any other binding settlement
agreement (whether or not with the Internal Revenue Service) entered into in
connection with or in contemplation of an administrative or judicial proceeding,
or (c) the completion of the highest level of administrative proceedings if a
judicial contest is not or is no longer available.
1.13 "FISCAL YEAR 1999" shall mean the period beginning July
4, 1998 and ending July 2, 1999.
1.14 "FISCAL YEAR 2000" shall mean the period beginning July
3, 1999 and ending July [1], 2000.
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<PAGE> 4
1.15 "FISCAL YEAR 2000 STUB PERIOD" shall mean the period
beginning July 3, 1999 and ending on or after the Date of Distribution.
1.16 "FORM 10" shall mean the registration statement
(including the related information statement) relating to the spinoff of Lanier
Worldwide, Inc. from Harris Corporation on Form 10, as made effective by the
Securities and Exchange Commission.
1.17 "HARRIS" shall have the meaning set forth in the preamble
to this Agreement.
1.18 "HARRIS GROUP" shall mean, for any period, Harris and its
then Subsidiaries other than members of the Lanier Group as hereinafter defined,
and shall also mean the historical activities of Harris previously carried on by
other Lanier Subsidiaries.
1.19 "HARRIS TAINTING ACT" shall mean (a) any breach of any
written representation or covenant relating to the qualification of the
Distribution as a distribution described in Section 355 of the Code which is
given by Harris in connection with the tax opinion of Sullivan & Cromwell
described on Page [*] of Form 10, or (b) any action or actions of or involving
any Person (other than Lanier or any Person that is an Affiliate of Lanier
immediately before or immediately after such action or actions), or any omission
or omissions of any Person (other than Lanier or any Person that is an Affiliate
of Lanier immediately before or immediately after such omission or omissions),
of an action or actions available to it, after the Date of the Distribution, if
such breach, action or omission described in (a) or (b) contributes to a Final
Determination that the Distribution results in the recognition of gain to Harris
by virtue of (i) the Distribution failing to qualify as a
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<PAGE> 5
distribution described in Section 355 of the Code, (ii) any stock or securities
of Lanier failing to qualify as "qualified property" within the meaning of
Section 355(c)(2) of the Code, or (iii) the application of Section 355(e) of the
Code to the Distribution.
1.20 "INDEMNITOR" shall have the meaning set forth in Section
5.02.
1.21 "IRS" shall have the meaning set forth in Section
5.03(a).
1.22 "LANIER" shall have the meaning set forth in the preamble
to this Agreement.
1.23 "LANIER GROUP" shall mean, for any period, Lanier and its
then Subsidiaries (if any), and shall also mean the historical activities of
Lanier previously carried on by other Harris Subsidiaries.
1.24 "LANIER TAINTING ACT" means (a) any breach of any written
representation or covenant relating to the qualification of the Distribution as
a distribution described in Section 355 of the Code which is given by Lanier in
connection with the tax opinion of Sullivan & Cromwell described on page [*] of
Form 10, or (b) any action or actions of or involving any Person (other than
Harris or any Person that is an Affiliate of Harris immediately before or
immediately after such action or actions), or any omission or omissions of any
Person (other than Harris or any Person that is an Affiliate of Harris
immediately before or immediately after such omission or omissions), of an
action or actions available to it, after the Date of Distribution, if such
breach, action or omission described in (a) or (b) contributes to a Final
Determination that the Distribution results in the recognition of gain to Harris
by virtue of (i) the Distribution failing to qualify as a
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<PAGE> 6
distribution described in Section 355 of the Code, (ii) any stock or securities
of Lanier failing to qualify as "qualified property" within the meaning of
Section 355(c)(2) of the Code, or (iii) the application of Section 355(e) of the
Code to the Distribution.
1.25 "PERIOD AFTER DISTRIBUTION" shall mean any taxable year
or other taxable period beginning on or after the Date of Distribution and, in
the case of any taxable year or other taxable period that begins before and ends
after the Date of Distribution, that part of the taxable year or other taxable
period that begins after the close of the Date of Distribution.
1.26 "PERIOD BEFORE DISTRIBUTION" shall mean any taxable year
or other taxable period that ends on or before the Date of Distribution and, in
the case of any taxable year or other taxable period that begins before and ends
after the Date of Distribution, that part of the taxable year or other taxable
period through the close of the Date of Distribution.
1.27 "PERSON" shall mean any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
1.28 "RESTRUCTURING TAXES" means any taxes resulting from the
Corporate Restructuring Transactions, including, but not limited to, any taxes
imposed pursuant to or as a result of Section 311 of the Code or Section 1.1502-
13 of the Treasury Regulations (and any applicable similar federal, state, local
or foreign taxes, together with related interest, penalties and additions to
tax), but excluding any taxes imposed as a result of a Final Determination that
the Distribution failed to meet the
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<PAGE> 7
requirements of Section 355 of the Code for nonrecognition of gain by Harris.
1.29 "SUBSIDIARY" shall mean a corporation, limited liability
company, partnership, joint venture or other business entity if 50% or more of
the outstanding equity or voting power of such entity is owned directly or
indirectly by the corporation with respect to which such term is used. In
determining whether a Subsidiary is a Subsidiary of Lanier or Harris for any
period, Lanier shall not be a Subsidiary of Harris and any Subsidiary of Lanier
and any Subsidiary of Harris which is engaged in a Lanier business shall be a
Subsidiary of Lanier, not Harris, for such period.
1.30 "TAX" or "TAXES" whether used in the form of a noun or
adjective, shall mean all forms of taxation, whenever created or imposed,
including, but not limited to, taxes on or measured by income, franchise, gross
receipts, sales, use, excise, payroll, personal property (tangible or
intangible), real property, ad-valorem, value-added, leasing, leasing use or
other taxes, levies, imposts, duties, charges or withholdings of any nature
whether imposed by a nation, locality, municipality, government, state,
federation, or other governmental body (a "Taxing Authority"). Whenever the term
"tax" or "taxes" is used (including, without limitation, in the context of any
duty to reimburse another party or indemnify for taxes or refunds or credits of
taxes) it shall include penalties, fines, additions to tax and interest thereon.
1.31 "TAXING AUTHORITY" shall have the meaning set forth in
Section 1.30.
1.32 "TAX RETURNS" shall mean all reports, returns,
information statements, questionnaires or other
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<PAGE> 8
documents required to be filed or that may be filed for any period with any
Taxing Authority (whether domestic or foreign) in connection with any tax or
taxes (whether domestic or foreign).
Article II
TAX RETURNS, TAX PAYMENTS AND TAX SHARING OBLIGATIONS
2.01 OBLIGATIONS TO FILE TAX RETURNS. Harris shall timely file
or cause to be filed all Tax Returns with respect to the Lanier Group that (a)
are required to be filed and are due before the Date of Distribution or (b) are
for either Fiscal Year 1999 or the Fiscal Year 2000 Stub Period, and are filed
on a consolidated, combined or unitary basis and include Lanier or any of its
Subsidiaries with Harris or any of its Subsidiaries. Lanier shall timely file or
cause to be timely filed any other Tax Return with respect to the Lanier Group.
2.02 OBLIGATION TO REMIT TAXES. Harris and Lanier shall each
remit or cause to be remitted any taxes due in respect of any tax for which it
is required to file a Tax Return and shall be entitled to reimbursement for such
payments only to the extent provided in Section 2.03.
2.03 TAX SHARING OBLIGATIONS AND PRIOR AGREEMENTS. (a) Other
than liabilities dealt with elsewhere in this Agreement, Lanier shall be liable
for and shall indemnify and hold the Harris Group harmless against (i) any tax
liability of the Lanier Group for any Period After Distribution, (ii) any tax
liability of the Lanier Group for both Fiscal Year 1999 and the taxable year or
period that begins before and ends on or after the Date of Distribution in
respect of the Period Before Distribution, both determined in accordance with
the Harris Group's
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<PAGE> 9
intergroup method of federal income tax allocation determined under sections
1.1502-33(d) and 1.1552-1 of the income tax regulations in a manner consistent
with past practice, or any other allocation methodology for taxes other than
Federal income tax in a manner consistent with past practice, (iii) any tax
liability resulting from a Final Determination with respect to an adjustment
attributable to any member of the Lanier Group for any Period Before
Distribution, and (iv) any amount determined to be Lanier's liability under
Section 2.04. Lanier shall be entitled to any refund of or credit for taxes of
the Lanier Group or amounts owed by Lanier or for which Lanier is responsible
under this Section 2.03(a). Any liability for taxes under this Section 2.03(a)
shall be measured by the Harris Group's actual liability for taxes after
applying tax benefits otherwise available to the Harris Group other than tax
benefits that the Harris Group in good faith determines would actually offset
tax liabilities of the Harris Group in other taxable years or periods. Any right
to refund under this Section 2.03(a) shall be measured by the actual refund or
credit of the Harris Group attributable to the adjustment without regard to
offsetting tax attributes or liabilities of the Harris Group.
(b) Other than liabilities dealt with elsewhere in this
Agreement, Harris shall be liable for and shall hold the Lanier Group harmless
against (i) any liability attributable to any member of the Harris Group for
taxes regardless of whether attributable to a Period Before Distribution or a
Period After Distribution, including any liability asserted against any member
of the Lanier Group under the provisions of Treas. Regs. ss. 1.1502-6(a) that
impose several liability on members of an affiliated group
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<PAGE> 10
of corporations that files consolidated returns, or similar provisions of any
foreign, state or local law, in respect of taxes of any member of the Harris
Group, and (ii) any amount determined to be Harris' liability under Section
2.04. Harris shall be entitled to any refund of or credit for taxes for any
periods that are attributable to the Harris Group or amounts owed by Harris or
for which Harris is responsible under this Section 2.03(b).
(c) Except as set forth in this Section 2.03 and in
consideration of the mutual indemnities and other obligations of this Agreement,
any and all prior tax sharing agreements or practices between any member of the
Harris Group and any member of the Lanier Group shall be terminated with respect
to the Lanier Group as of the Date of Distribution.
2.04 RESTRUCTURING TAXES; OTHER TAXES RELATING TO THE
DISTRIBUTION. (a) GENERALLY. Notwithstanding any other provision of this
Agreement to the contrary, Lanier shall pay, and shall indemnify and hold
harmless Harris and any member of the Harris Group from and against any and all
Restructuring Taxes and any reasonable expenses (including, but not limited to,
attorney's fees) incurred in defending any audit or examination with respect to
Restructuring Taxes. In the event of a Final Determination that the Distribution
failed to meet the requirements of Section 355 of the Code for nonrecognition of
gain by Harris (other than a Final Determination that the Distribution failed to
qualify for nonrecognition which determination would not have been made but for
a Harris Tainting Act or a Lanier Tainting Act), the liability of Harris and
Lanier for any Taxes arising from such Final Determination and any liability to
shareholders arising from such Final
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<PAGE> 11
Determination (together with any reasonable expense (including, but not limited
to, attorney's fees) incurred in defending against any liability) shall be borne
50 percent by Harris and 50 percent by Lanier. If a Harris Tainting Act and a
Lanier Tainting Act both contribute to such a Final Determination, any such
taxes or liability (together with any reasonable expense (including, but not
limited to, attorney's fees) incurred in defending against any liability) shall
be borne 50 percent by Harris and 50 percent by Lanier.
(b) INDEMNIFICATION FOR LANIER TAINTING ACTS. Lanier covenants
that neither Lanier nor any member of the Lanier Group shall commit or be party
to or the subject of any Lanier Tainting Act which would result in any tax or
liability described in the following sentence and payable by Harris. To the
extent that Harris would not have been liable for the following amounts but for
a Lanier Tainting Act, Lanier shall pay, and shall indemnify and hold harmless
Harris from and against, (i) any liability of Harris to any Taxing Authority,
Harris shareholders or Lanier shareholders (together with any reasonable
expenses (including, but not limited to, attorney's fees) incurred in defending
against any such liability) resulting from a Final Determination that the
Distribution failed to meet the requirements of Section 355 of the Code for
nonrecognition of gain by Harris, including, without limitation, by reason of
(x) any stock or securities of Lanier failing to qualify as "qualified property"
within the meaning of Section 355(c)(2) of the Code or (y) the application of
Section 355(e) of the Code to the Distribution, and (ii) any taxes and related
expenses payable by Harris by reason of the receipt of such payment.
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(c) INDEMNIFICATION FOR HARRIS TAINTING ACTS. Harris covenants
that neither Harris nor any member of the Harris Group shall commit or be party
to or the subject of any Harris Tainting Act which would result in any tax or
liability described in the following sentence and payable by Lanier. To the
extent that Lanier would not have been liable for the following amounts but for
a Harris Tainting Act, Harris shall pay, and shall indemnify and hold harmless
Lanier from and against, (i) any liability of Lanier to any Taxing Authority,
Harris shareholders or Lanier shareholders (together with any reasonable
expenses (including, but not limited to, attorney's fees) incurred in defending
against any such liability) resulting from a Final Determination that the
Distribution failed to meet the requirements of Section 355 of the Code for
nonrecognition of gain by Harris, including, without limitation, by reason of
(x) any stock or securities of Lanier failing to qualify as "qualified property"
within the meaning of Section 355(c)(2) of the Code or (y) the application of
Section 355(e) of the Code to the Distribution, and (ii) any taxes and related
expenses payable by Lanier by reason of the receipt of such payment.
2.05 PERIOD THAT INCLUDES THE DATE OF DISTRIBUTION. (a) To the
extent permitted by law or administrative practice, the taxable year of the
Lanier Group shall be treated as closing at the close of the Date of
Distribution.
(b) If it is necessary for purposes of this Agreement to
determine the income tax liability of any member of the Lanier Group for a
taxable year that begins on or before and ends after the Date of the
Distribution and is not treated under Section 2.05(a) as closing at the close of
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the Date of Distribution, the determination shall be made by assuming that such
member of the Lanier Group had a taxable year that ended at the close of the
Date of Distribution, except that exemptions, allowances or deductions that are
calculated on an annual basis shall be apportioned on a time basis.
Article III
CARRYBACKS, DISTRIBUTIONS AND ELECTIONS
3.01 CARRYBACKS. Any member of the Lanier Group shall be
entitled to carry back any net operating loss or other item from a Period After
Distribution to a Period Before Distribution, except to the extent that Harris
determines in good faith that such action will cause an actual increase in the
taxes for which the Harris Group is responsible or will cause an actual
reduction in the amount of any refund of taxes payable to the Harris Group. Any
refund of taxes resulting from any such carryback by a member of the Lanier
Group shall be payable to Lanier as provided in Section 2.03(a).
3.02 DISTRIBUTIONS AND ELECTIONS. (a) No member of the Lanier
Group shall make any tax election, pay or cause to be paid any distribution from
an Affiliate or take any other action that shall cause an actual increase in the
taxes for which the Harris Group is responsible or will cause an actual
reduction in the amount of any refund of taxes payable to the Harris Group.
(b) No member of the Harris Group shall make any tax election,
pay or cause to be paid any distribution from an Affiliate or take any other
action that shall cause an actual increase in the taxes for which the Lanier
Group is
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responsible or will cause an actual reduction in the amount of any refund of
taxes payable to the Lanier Group.
Article IV
PAYMENTS
4.01 FISCAL YEAR 2000 STUB PERIOD AND FISCAL YEAR 1999. (a)
Harris shall determine and Lanier shall pay the final amount owed, if any, under
clause (ii) of Section 2.03(a) for the Fiscal Year 2000 Stub Period as follows:
(i) within sixty (60) days from the Date of Distribution, Lanier shall provide
Harris with a Federal and State tax package (except that standard items such as
Internal Revenue Service Form 5471's, boycott information, FTC receipts and
Section 861 information may be provided within one hundred twenty (120) days
from the Date of Distribution) in the normal Harris format of its Fiscal Year
2000 Stub Period operating and nonoperating tax and financial results in
sufficient detail to enable Harris to compute Lanier's Fiscal Year 2000 Stub
Period tax liability; (ii) Harris will calculate in accordance with the
principles established in Section 2.03 and past practice an estimate of Lanier's
Fiscal Year 2000 Stub Period tax liability, offsetting such liability by the
amount, if any, determined to be owed to Lanier for Fiscal Year 1999 pursuant to
Section 4.01(b), to the extent payment has not already been received by Lanier
for such overpayment pursuant to Section 4.01(b), and submit the calculation to
Lanier within thirty (30) days after the date on which the Federal and State tax
package described in clause (i) of this Section 4.01(a) is provided to Harris;
(iii) Lanier shall have the right to object in writing to such calculation on or
before sixty (60) days after the date on which the Federal and State tax package
described in
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clause (i) of this Section 4.01(a) is provided to Harris, on the grounds that
there is substantial authority that such calculation is incorrect; PROVIDED that
if Lanier so objects, (i) Harris and Lanier shall promptly submit the dispute to
an independent accounting or law firm acceptable to both Harris and Lanier for
prompt resolution, whose decision shall be final and binding on Harris and
Lanier, and (ii) the party that such accounting or law firm determines has lost
the dispute shall pay all of the fees and expenses incurred in connection with
submitting such dispute; (iv) Lanier shall pay to Harris an amount equal to 80%
of the amount determined in clause (ii) of this Section 4.01(a) by March 15,
2000; (v) a determination of the final amount owed, if any, under clause (ii) of
this Section 4.01(a) shall be made when the Harris Group's Fiscal Year 2000 Tax
Returns are filed and shall be paid within thirty (30) days from the date Harris
notifies Lanier of any additional amounts due together with interest at a rate
equal to the Applicable Federal Rate from the date on which such Tax Return is
filed. Similarly, any refund owed Lanier over the amount previously determined
and paid under clause (ii) of this Section 4.01(a) shall be refunded by Harris
within the same thirty (30) day period together with interest at a rate equal to
the Applicable Federal Rate from the date on which Harris receives such refund;
and (vi) any claims resulting from carrybacks, tax audits or Final Determination
shall be handled in the same manner as provided in Articles V, VI, VII, and
VIII.
(b) Harris shall determine and Lanier shall pay the final
amount owed, if any, under clause (ii) of Section 2.03(a) for Fiscal Year 1999
as follows: (i) Lanier shall provide Harris with a Federal and State tax
package,
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<PAGE> 16
together with standard items such as Internal Revenue Service Form 5471's,
boycott information, FTC receipts and Section 861 information in the normal
Harris format and according to the normal Harris schedule of its Fiscal Year
1999 operating and nonoperating tax and financial results; (ii) Harris shall
prepare and file those Tax Returns in respect of Fiscal Year 1999 that it is
obligated to file pursuant to Section 2.01; (iii) Harris shall prepare a
reconciliation of the amounts Lanier has paid either directly or indirectly
through inter-company charges in respect of the Harris Fiscal Year 1999
consolidated federal Tax Return or any other Tax Return in respect of Fiscal
Year 1999 that Harris is required to file pursuant to Section 2.01 to the
calculation of the Lanier Group's final liability for Fiscal Year 1999 to be
determined from such Tax Returns in accordance with the principles established
in Section 2.03(a) and past practice, and shall provide such reconciliation to
Lanier within thirty (30) days before the due date for filing the relevant Tax
Return; (iv) Lanier shall have the right to object in writing to such
reconciliation in accordance with the principles established in Section
4.01(a)(iii) within fifteen (15) days of delivery of the reconciliation; (v) if
the reconciliation described in clause (iii) of this Section 4.01(b) indicates
that Lanier owes Harris money, Lanier shall pay the balance to Harris within
thirty (30) days of the delivery of such reconciliation together with interest
at a rate equal to the Applicable Federal Rate from the date on which such Tax
Return was filed. If the reconciliation shows that Harris owes Lanier money and
Lanier's overpayment cannot be applied to Lanier's Fiscal Year 2000 Stub Period
tax liabilities pursuant to Section 4.01(a)(ii), Harris shall pay such
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<PAGE> 17
balance to Lanier within five (5) days of Harris' receipt of such balance from
the relevant taxing authority to the extent that a refund is due from the
relevant taxing authority (with no interest) and concurrently with delivery of
the reconciliation to the extent that no refund is due from the relevant taxing
authority (together with interest at a rate equal to the Applicable Federal Rate
from the due date of the Tax Return); and (vi) any claims resulting from
carrybacks, tax audits or Final Determination shall be handled in the same
manner as provided in Articles V, VI, VII and VIII.
4.02 OTHER PAYMENTS. Other payments due to a party under
Section 2.03 shall be due not later than twenty (20) days after the receipt or
crediting of a refund or the receipt of notice of a Final Determination that the
indemnified party is liable for an indemnified cost, together with interest at a
rate equal to the Applicable Federal Rate from the date on which the
indemnifying party receives such receipt, credit or notice.
4.03 NOTICE. Harris and Lanier shall give each other prompt
written notice of any payment that may be due under this Agreement.
Article V
TAX AUDITS
5.01 GENERAL. Except as provided in Sections 5.02 and 6.02,
each of Lanier and Harris shall have sole responsibility for all audits or other
proceedings with respect to Tax Returns that it is required to file under
Section 2.01 (the "Controlling Party"). Except as provided in Section 5.03, the
Controlling Party shall have the sole right to contest the audit or proceeding
and to employ advisors of its choice.
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<PAGE> 18
5.02 INDEMNIFIED CLAIMS IN GENERAL. Harris or Lanier shall
promptly notify the other in writing prior to the issuance of an actual notice
of assessment by the relevant Taxing Authority (for example, if by the Internal
Revenue Service, prior to the issuance of a Form 5701 Notice of Proposed
Adjustment) of any proposed adjustment to a Tax Return that may result in
liability of the other party (the "Indemnitor") under this Agreement. If the
Indemnitor is not also the Controlling Party, the Controlling Party shall
provide the Indemnitor with information about the nature and amounts of the
proposed adjustments and shall permit the other party to participate in the
proceeding at its own expense, PROVIDED, HOWEVER, that the Controlling Party
shall not be required to indemnify the Indemnitor if the Controlling Party fails
to notify or provide such information to the Indemnitor, unless the Indemnitor
is materially prejudiced thereby. The Indemnitor shall pay all reasonable
expenses (including, but not limited to, legal and accounting fees) incurred by
the Controlling Party in connection with the assessment or adjustment within
seven (7) days after a written request by the Controlling Party.
5.03 CERTAIN FEDERAL INCOME TAX CLAIMS. (a) Any issues raised
by the Internal Revenue Service ("IRS") in any tax inquiry, audit, examination,
investigation, dispute, litigation or other proceeding which would result in
federal income tax liability to the Indemnitor which in the aggregate would
equal or exceed $1,000,000 in any taxable year are defined as a Claim (a
"Claim"). Except as provided in Section 5.03(d) and notwithstanding any other
provision of this Agreement that may be construed to the contrary, the
Controlling Party agrees to contest any Claim and not to settle any Claim
without prior written consent of the
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<PAGE> 19
Indemnitor, PROVIDED that (i) the Controlling Party shall provide notice to
Indemnitor pursuant to Section 5.02 of any Claim, (ii) within thirty (30) days
after notice by the Controlling Party to the Indemnitor of a Claim is received
by the Indemnitor, the Indemnitor shall request in writing that such Claim be
contested, (iii) within thirty (30) days after notice by the Controlling Party
to the Indemnitor of such Claim is received by the Indemnitor, the Indemnitor
shall have provided an opinion of independent tax counsel, selected by the
Indemnitor and reasonably acceptable to the Controlling Party, to the effect
that it is more likely than not that a Final Determination will be substantially
consistent with the Indemnitor's position relating to such Claim, (iv) the
Indemnitor agrees to pay on demand and pays all out-of-pocket costs, losses and
expenses (including, but not limited to, legal and accounting fees) paid or
incurred by the Controlling Party in connection with contesting such Claim,
except for a Claim where the expenses are shared pursuant to Section 2.04(a),
and (v) the Controlling Party, after reasonable consultation with the
Indemnitor, shall determine in its sole discretion the nature of all actions to
be taken to contest such Claim, including (1) whether any action to contest such
Claim shall initially be by way of judicial or administrative proceeding, or
both, (2) whether any such Claim shall be contested by resisting payment thereof
or by paying the same and seeking a refund thereof, and (3) the court or other
judicial body before which judicial action, if any, shall be commenced. To the
extent the Indemnitor is not participating, the Controlling Party shall keep the
Indemnitor and, upon request by the Indemnitor, its counsel informed as to the
progress of the contest.
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<PAGE> 20
(b) If the Indemnitor requests that the Controlling Party
accept a settlement of a Claim offered by the IRS and if such Claim may, in the
reasonable discretion of the Controlling Party, be settled without prejudicing
any claims the IRS may have with respect to matters other than the transactions
contemplated by the Distribution Agreement, the Controlling Party shall either
accept such settlement offer or agree with the Indemnitor that the Indemnitor's
liability with respect to such Claim shall be limited to the lesser of (i) an
amount calculated on the basis of such settlement offer plus interest owed to
the IRS on the date of eventual payment or (ii) the amount calculated on the
basis of a Final Determination.
(c) If the Controlling Party shall elect to pay the tax
claimed and seek a refund, the Indemnitor shall lend sufficient funds on an
interest-free basis to the Controlling Party, and with no net after-tax cost to
the Controlling Party, to cover any applicable indemnity obligations of the
Indemnitor. To the extent such refund claim is ultimately disallowed, the loan
or portion thereof equal to the amount of the refund claim so disallowed shall
be applied against the Indemnitor's obligation to make indemnity payments
pursuant to this Agreement. To the extent such refund claim is allowed, the
Controlling Party shall pay to the Indemnitor all amounts advanced to the
Controlling Party with respect to the indemnity obligation within ten (10) days
of the receipt of such refund (or if the Controlling Party would have received
such refund but for the existence of a counterclaim or other claim not
indemnified by the Indemnitor under this Agreement, within ten (10) days of the
final resolution of the contest), plus an amount equal to any interest received
(or that would have
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<PAGE> 21
been received) from the IRS that is properly attributable to such amount.
(d) Except as provided below, the Controlling Party shall not
settle a Claim that Indemnitor is entitled to require the Controlling Party to
contest under Section 5.03(a) without the prior written consent of the
Indemnitor. At any time, whether before or after commencing to take any action
pursuant to this Section 5.03 with respect to any Claim, the Controlling Party
may decline to take action with respect to such Claim and may settle such Claim
without the prior written consent of the Indemnitor by notifying the Indemnitor
in writing that the Indemnitor is released from its obligations to indemnify the
Controlling Party with respect to such Claim (which notification shall release
the Indemnitor from such obligations except to the extent the Indemnitor has
agreed in writing that it would be willing to have its liability calculated on
the basis of a settlement offer, as provided in Section 5.03(b), at that point
in the contest) and with respect to any Claim related to such Claim or based on
the outcome of such Claim. If the Controlling Party settles any Claim or
otherwise takes or declines to take any action pursuant to this paragraph, the
Controlling Party shall pay to the Indemnitor any amounts paid or advanced by
the Indemnitor with respect to such Claim (other than amounts payable by the
Indemnitor in connection with a settlement offer pursuant to Section 5.03(b)),
plus interest attributable to such amounts.
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Article VI
COOPERATION
6.01 GENERAL. Harris and Lanier shall cooperate with each
other in the filing of any Tax Returns and the conduct of any audit or other
proceeding and each shall execute and deliver such powers of attorney and make
available such other documents as are reasonably necessary to carry out the
intent of this Agreement. Each party agrees to notify the other party in writing
of any audit adjustments which do not result in tax liability but can be
reasonably expected to affect Tax Returns of the other party, or any of its
Subsidiaries, for a Period After Distribution. Each party agrees to treat the
Distribution for all income tax purposes as not causing the recognition of any
gain or loss.
6.02 COOPERATION WITH RESPECT TO TAX RETURN FILINGS,
EXAMINATIONS AND TAX RELATED CONTROVERSIES.
(a) HARRIS' OBLIGATIONS. In addition to any obligations
imposed pursuant to the Distribution Agreement, Harris and each other member of
the Harris Group shall fully cooperate with Lanier and its representatives, in a
prompt and timely manner, in connection with (i) the preparation and filing of
and (ii) any inquiry, audit, examination, investigation, dispute, or litigation
involving, any Tax Return filed or required to be filed by or for any member of
the Lanier Group for any taxable period beginning on or before the Distribution
Date. Such cooperation shall include, but not be limited to, (x) the execution
and delivery to Lanier by the appropriate Harris Group member of any power of
attorney required to allow Lanier and its counsel to represent Harris or such
other Harris Group member in any controversy which Lanier shall have the right
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to control pursuant to the terms of Section 5.01 of this Agreement, (y) making
available to Lanier, during normal business hours, and within sixty (60) days of
any written request therefor, all books, records and information, and the
assistance of all officers and employees, necessary or useful in connection with
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter, and (z) use of its best efforts in defending Lanier's interests in
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter for which Harris is the Controlling Party.
(b) LANIER'S OBLIGATIONS. Except as otherwise provided in this
Article VI, Lanier shall fully cooperate with Harris and its representatives, in
a prompt and timely manner, in connection with (i) the preparation and filing of
and (ii) any inquiry, audit, examination, investigation, dispute, or litigation
involving, any Tax Return filed or required to be filed by or for any member of
the Harris Group which includes Lanier or any other member of the Lanier Group.
Such cooperation shall include, but not be limited to, (x) the execution and
delivery to Harris by Lanier of any power of attorney required to allow Harris
and its counsel to participate on behalf of Harris or other Harris Group members
in any inquiry, audit or other administrative proceeding and to assume the
defense or prosecution, as the case may be, of any suit, action or proceeding
pursuant to the terms of and subject to the conditions set forth in Section 5.01
of this Agreement, (y) making available to Harris, during normal business hours,
and within sixty (60) days of any written request therefor, all books, records
and information, and the assistance of all officers and employees, necessary or
useful in
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<PAGE> 24
connection with any tax inquiry, audit, examination, investigation, dispute,
litigation or any other matter, and (z) the use of its best efforts in defending
Harris' interests in any tax inquiry, audit, examination, investigation,
dispute, litigation or other matter for which Lanier is the Controlling Party.
(c) REMEDY FOR FAILURE TO COMPLY. If Lanier reasonably
determines that Harris is not for any reason fulfilling its obligations under
Section 6.02(a), or if Harris reasonably determines that Lanier is not for any
reason fulfilling its obligations under Section 6.02(b), then Harris or Lanier,
as the case may be, shall have the right to appoint, at the expense of the
other, an independent entity such as a nationally-recognized public accounting
or law firm to assist the other in meeting its obligations under this Section
6.02. Such entity shall have complete access, during normal business hours to
all books, records and information, and the complete cooperation of all officers
and employees, of Harris or Lanier, as the case may be. The remedy provided in
this Section 6.02(c) shall not be deemed exclusive.
Article VII
RETENTION OF RECORDS; ACCESS
The Harris Group and the Lanier Group shall (a) in accordance
with their then current record retention policy, retain records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns in respect of taxes of the Harris
Group or the Lanier Group for any Period Before Distribution or for the audit of
such Tax Returns; and (b) give to the other reasonable access to such records,
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<PAGE> 25
documents, accounting data and other information (including computer data) and
to its personnel (insuring their cooperation) and premises, for the purpose of
the review or audit of such Tax Returns to the extent relevant to an obligation
or liability of a party under this Agreement. At any time after the Date of
Distribution that the Lanier Group proposes to destroy such material or
information, they shall first notify the Harris Group in writing and the Harris
Group shall be entitled to receive such materials or information proposed to be
destroyed.
Article VIII
DISPUTES
If Harris and Lanier cannot agree on any calculation of any
liabilities under this Agreement, such calculation shall be made by any
independent public accounting firm acceptable to both Harris and Lanier. The
decision of such firm shall be final and binding. The fees and expenses incurred
in connection with such calculation shall be borne by the party that such
independent public accounting firm determines has lost the dispute.
Article IX
TERMINATION OF LIABILITIES
Notwithstanding any other provision in this Agreement, any
liabilities determined under this Agreement shall not terminate any earlier than
the expiration of the applicable statute of limitation for such liability. All
other covenants under this Agreement shall survive indefinitely.
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<PAGE> 26
Article X
MISCELLANEOUS PROVISIONS
Sections 7.3, 7.4, 7.6, 7.7, 7.8, 7.9, 7.10, 7.14, 7.16, 7.17
and 7.18 of the Distribution Agreement shall apply in relevant part to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HARRIS CORPORATION
By
-------------------------------------
Name:
Title:
LANIER WORLDWIDE, INC.
By
-------------------------------------
Name:
Title:
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Exhibit 10.3
FORM OF TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated as of o, 1999 (this "AGREEMENT"),
between Harris Corporation, a Delaware corporation ("HARRIS"), and Lanier
Worldwide, Inc., a Delaware corporation ("LANIER").
W I T N E S S E T H:
WHEREAS, Harris and Lanier have entered into an Agreement and Plan of
Distribution, dated as of o, 1999 (the "DISTRIBUTION AGREEMENT"), pursuant to
which Harris will transfer certain assets to Lanier and have Lanier assume
certain liabilities of Harris, and Lanier will transfer certain assets to Harris
and have Harris assume certain liabilities of Lanier;
WHEREAS, in connection with the transactions contemplated by the
Distribution Agreement, Harris and Lanier wish to enter into this Agreement,
Lanier desires to cause Harris to provide the Services set forth on Schedule A
to Harris, and Harris is willing to provide such Services; and
WHEREAS, Harris desires to cause Lanier to provide the Services set
forth on Schedule B to Lanier, and Lanier is willing to provide such services;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and the mutual covenants contained herein, agree as follows:
SECTION 1. SPECIFIC DEFINITIONS.
As used in this Agreement, the following terms have the respective
meanings set forth below:
"APPLICABLE RATE" shall mean the rate of interest per annum announced
from time to time by Citibank, N.A. as its prime lending rate plus 4% per annum.
"BANKRUPTCY EVENT" with respect to a party shall mean the filing of an
involuntary petition in bankruptcy or similar proceeding against such party
seeking its reorganization, liquidation or the appointment of a receiver,
trustee or liquidator for it or for all or substantially all of its assets,
whereupon such petition shall not be dismissed within sixty (60) days after the
filing thereof, or if such party shall (i) apply for or consent in writing to
the appointment of a receiver, trustee or liquidator of all or substantially all
of its assets, (ii) file a voluntary petition or admit in writing its inability
to pay its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) file a petition or an answer seeking reorganization
or an arrangement with its creditors or take advantage of any insolvency
<PAGE> 2
law with respect to itself as debtor, or (v) file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization, insolvency proceedings or any similar proceedings;
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which banks in New York City, New York are authorized or obligated by law
or executive order to close.
"CHANGE IN CONTROL" of a party shall mean (i) a change in the
composition of the board of directors of such party (other than a change due to
the death or disability of a member of the board of directors) such that at the
end of any period of twelve (12) consecutive months a majority of the persons
constituting such board of directors were not directors at the start of such
period and were not elected by vote of a majority of the directors who were
directors at the start of such period), (ii) the sale or other disposition by
such party of all or substantially all of the assets of such party (other than a
bona fide pledge in connection with a financing), or (iii) a merger,
consolidation or other business combination involving such party, which results
in the stockholders of such party immediately prior to such event owning less
than 50% of the capital stock of the surviving entity;
"HARRIS SERVICES" shall mean those transitional services to be provided
by Harris to Lanier set forth on Schedule A hereto to assist Lanier in operating
Lanier's business.
"LANIER SERVICES" shall mean those transitional services to be provided
by Lanier to Harris set forth on Schedule B hereto to assist Harris in operating
Harris' business.
"LOSS" shall mean any damage, claim, loss, charge, action, suit,
proceeding, deficiency, tax, interest, penalty and reasonable costs and expenses
(including reasonable attorneys' fees).
"PERSON" shall mean any natural person, corporation, business trust,
limited liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"SERVICES" shall mean, collectively, the Harris Services and the Lanier
Services.
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<PAGE> 3
SECTION 2. SERVICES.
2.1 SERVICES. (a) Harris shall provide to Lanier each Harris Service
for the term set forth opposite the description of such Harris Service in
Schedule A. Additional services may be provided to Lanier by Harris if such
arrangement is agreed to in writing and executed by Harris and Lanier.
(b) Lanier shall provide to Harris each Lanier Service for the
term set forth opposite the description of such Lanier Service in Schedule B.
Additional services may be provided by Lanier to Harris if such arrangement is
agreed in writing and executed by Harris and Lanier.
2.2 STANDARD OF SERVICE. In performing the Services, Harris and Lanier
shall provide substantially the same level of service and use substantially the
same degree of care as their respective personnel provided and used in providing
such Services prior to the date hereof, subject in each case to any provisions
set forth on Schedule A or Schedule B with respect to each such Service.
SECTION 3. LICENSES AND PERMITS.
Each party warrants and covenants that all duties and obligations
(including with respect to Harris, all Harris Services and with respect to
Lanier, all Lanier Services) to be performed hereunder shall be performed in
compliance with all material applicable federal, state, provincial and local
laws, rules and regulations. Each party shall obtain and maintain all material
permits, approvals and licenses necessary or appropriate to perform its duties
and obligations (including with respect to Harris, the Harris Services and with
respect to Lanier, the Lanier Services) hereunder and shall at all times comply
with the terms and conditions of such permits, approvals and licenses.
SECTION 4. PAYMENT.
4.1 (a) In consideration for the provision of each of the Harris
Services, Lanier shall pay to Harris the fee set forth for such Harris Service
on Schedule A.
(b) In consideration for the provision of each of the Lanier
Services, Harris shall pay to Lanier the fee set forth for such Lanier Service
on Schedule B.
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4.2 (a) In addition to the fees payable in accordance with Section
4.1(a), Lanier shall reimburse Harris for all reasonable and necessary
out-of-pocket costs and expenses (including without limitation postage and other
delivery costs, telephone, telecopy and similar expenses) incurred by Harris
with respect to third parties in connection with the provision of Harris
Services to Lanier pursuant to the terms of this Agreement or paid by Harris on
behalf of Lanier.
(b) In addition to the fees payable in accordance with
Section 4.1(b), Harris shall reimburse Lanier for all reasonable and necessary
out-of-pocket costs and expenses (including without limitation postage and other
delivery costs, telephone, telecopy and similar expenses) incurred by Lanier
with respect to third parties in connection with the provision of Lanier
Services to Harris pursuant to the terms of this Agreement or paid by Lanier on
behalf of Harris.
4.3 (a) Harris will invoice Lanier in U.S. dollars: (i) as of the
last day of each calendar month for any fees payable by Lanier in accordance
with Section 4.1(a) for Harris Services listed on Schedule A provided pursuant
to the terms of this Agreement during such month; (ii) as of the last day of
each calendar month for any amounts payable by Lanier in accordance with Section
4.2(a) for any out-of-pocket costs and expenses incurred during the immediately
preceding month to the extent Harris has received an invoice from such Third
Party; and (iii) as of the last day of each calendar month for any taxes
(excluding income taxes) accrued with respect to the provision of Harris
Services to Lanier during such month. Harris shall deliver or cause to be
delivered to Lanier each such invoice within thirty (30) days following the last
day of the calendar month to which such invoice relates. Lanier shall pay each
such invoice received by electronic funds transfer as follows: in the case of
clauses (i) and (ii), within twenty (20) Business Days of the date on which such
invoice was received, and in the case of clause (iii), provided that Harris
delivers such invoice three (3) Business Days prior to the due date for such tax
payments, not later than one (1) Business Day prior to such due date.
(b) Lanier will invoice Harris in U.S. dollars: (i) as of the
last day of each calendar month for any fees payable by Harris in accordance
with Section 4.1(b) for Lanier Services listed on Schedule B provided pursuant
to the terms of this Agreement during such month; (ii) as of the last day of
each calendar month for any amounts payable by Harris in accordance with Section
4.2(b) for any out-of-pocket costs and expenses incurred during the immediately
preceding month to the extent Lanier has received an invoice from such Third
Party; and (iii) as of the last day of each calendar month for any taxes
(excluding income taxes) accrued with respect to the provision of Lanier
Services to Harris during such month. Lanier shall deliver or cause to be
delivered to Harris each such invoice within thirty (30) days following the last
day of the calendar month to which such invoice relates. Harris shall pay
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each such invoice received by electronic funds transfer: in the case of clauses
(i) and (ii), within twenty (20) Business Days of the date on which such invoice
was received, and in the case of clause (iii), provided that Lanier delivers
such invoice three (3) Business Days prior to the due date for such tax
payments, not later than one (1) Business Day prior to such due date.
4.4 Any amount not paid when due shall be subject to a late payment fee
computed daily at a rate equal to the Applicable Rate. Each party agrees to pay
the other party's reasonable attorneys' fees and other costs incurred in
collection of any amounts owed to such other party hereunder and not paid when
due. Notwithstanding anything to the contrary contained herein, in the event
either party fails to make a payment when due hereunder, and such failure
continues for a period of thirty (30) days following delivery of notice to such
non-paying party of such failure, the other party shall have the right to cease
provision of Services to such non-paying party until such overdue payment (and
any applicable late payment fee accrued with respect thereto) is paid in full.
Such right of the party providing services shall not in any manner limit or
prejudice any of such party's other rights or remedies in the event of the
non-paying party's failure to make payments when due hereunder, including
without limitation any rights or remedies pursuant to Section 7.
4.5 In the event of a termination of services pursuant to Section 7.1,
with respect to the calendar month in which such services cease to be provided,
the recipient of such services shall be obligated to pay a pro rata share of the
fee for such service set forth on Schedule A or B, as applicable, equal to the
product of (x) the fee set forth on Schedule A or B, as applicable, multiplied
by (y) a fraction, the numerator of which is the number of days in the calendar
month in which such services cease to be provided preceding and including the
last date on which such services are provided, and the denominator of which is
30.
SECTION 5. INDEMNIFICATION.
5.1 INDEMNIFICATION BY PRINCIPAL. (a) Lanier agrees to indemnify,
defend and hold Harris harmless from and against any Loss to which Harris may
become subject arising out of, by reason of or otherwise in connection with the
provision hereunder by Harris of Harris Services, other than Losses resulting
from Harris' gross negligence, willful misconduct or material breach of its
obligations pursuant to this Agreement. Notwithstanding any provision in this
Agreement to the contrary, Lanier shall not be liable under this Section 5.1 for
any consequential, special or punitive damages (including but not limited to
lost profits), except to the extent that such consequential, special or punitive
damages relate to a Loss resulting from a Third Party Claim (as defined below).
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(b) Harris agrees to indemnify, defend and hold Lanier harmless
from and against any Loss to which Lanier may become subject arising out of, by
reason of or otherwise in connection with the provision hereunder by Lanier of
Lanier Services, other than Losses resulting from Lanier's gross negligence,
willful misconduct or material breach of its obligations pursuant to this
Agreement. Notwithstanding any provision in this Agreement to the contrary,
Harris shall not be liable under this Section 5.1 for any consequential, special
or punitive damages (including but not limited to lost profits), except to the
extent that such consequential, special or punitive damages relate to a Loss
resulting from a Third Party Claim (as defined below).
5.2 INDEMNIFICATION BY PROVIDER. (a) Harris agrees to indemnify, defend
and hold Lanier harmless from and against any Loss to which Lanier may become
subject arising out of, reason of or otherwise in connection with the provision
hereunder by Harris of Harris Services to Lanier where such Losses resulted from
Harris' gross negligence, willful misconduct or material breach of its
obligations pursuant to this Agreement.
(b) Lanier agrees to indemnify, defend and hold Harris harmless
from and against any Loss to which Harris may become subject arising out of, by
reason of or otherwise in connection with the provision hereunder by Lanier of
Lanier Services to Harris where such Losses resulted from Lanier's gross
negligence, willful misconduct or material breach of its obligations pursuant to
this Agreement.
5.3 (a) THIRD PARTY CLAIMS. If a claim or demand is made against
Lanier or Harris (each, an "INDEMNITEE") by any Person who is not a party to
this Agreement (a "THIRD PARTY CLAIM") as to which such Indemnitee is entitled
to indemnification pursuant to this Agreement, such Indemnitee shall notify the
party which is or may be required pursuant to Section 5.1 or Section 5.2 hereof
to make such indemnification (the "INDEMNIFYING PARTY") in writing, and in
reasonable detail, of the Third Party Claim promptly (and in any event within 15
Business Days) after receipt by such Indemnitee of written notice of the Third
Party Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnitee failed to give such notice).
Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly
(and in any event within ten Business Days) after the Indemnitee's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in
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writing its obligation to indemnify the Indemnitee therefor, to assume the
defense thereof with counsel selected by the Indemnifying Party; provided that
such counsel is not reasonably objected to by the Indemnitee. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party shall, within 30 days (or sooner if the nature of the Third
Party Claim so requires), notify the Indemnitee of its intent to do so, and the
Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, that such Indemnitee shall have the right to employ
counsel to represent such Indemnitee if, in such Indemnitee's reasonable
judgment, a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim which would make representation of both
such parties by one counsel inappropriate, and in such event the fees and
expenses of such separate counsel shall be paid by such Indemnifying Party. If
the Indemnifying Party assumes such defense, the Indemnitee shall have the right
to participate in the defense thereof and to employ counsel, subject to the
proviso of the preceding sentence, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the Indemnifying Party has failed to assume the defense thereof (other
than during the period prior to the time the Indemnitee shall have given notice
of the Third Party Claim as provided above). If the Indemnifying Party so elects
to assume the defense of any Third Party Claim, all of the Indemnitees shall
cooperate with the Indemnifying Party in the defense or prosecution thereof,
including by providing or causing to be provided agreements, documents, books,
records, files and witnesses as soon as reasonably practicable after receiving
any request therefor from or on behalf of the Indemnifying Party.
If the Indemnifying Party acknowledges in writing responsibility under
this Section 5 for a Third Party Claim, then in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the Indemnifying Party's prior written consent;
PROVIDED, HOWEVER, that the Indemnitee shall have the right to settle,
compromise or discharge such Third Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases the Indemnifying Party from its
indemnification obligation hereunder with respect to such Third Party Claim and
such settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party. If the Indemnifying Party acknowledges in writing
liability for a Third Party Claim, the Indemnitee will agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and releases
the Indemnitee completely in connection with such Third Party Claim and that
would not otherwise adversely affect the Indemnitee. If an Indemnifying Party
elects not to assume the defense of a Third
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Party Claim, or fails to notify an Indemnitee of its election to do so as
provided herein, such Indemnitee may compromise, settle or defend such Third
Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the Indemnitee in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines, after conferring with its counsel,
cannot be separated from any related claim for money damages. If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(c) The remedies provided in this Section 5 shall be cumulative
and shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
5.4 INDEMNIFICATION PAYMENTS. (a) Indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or any
Loss is incurred. If the Indemnifying Party fails to make an indemnification
payment required by this Section 5 within 30 days after receipt of a bill
therefore or notice that a loss, liability, claim, damage or expense has been
incurred, the Indemnifying Party shall also be required to pay interest on the
amount of such indemnification payment, from the date of receipt of the bill or
notice of the Loss to, but not including the date of payment, at the Applicable
Rate.
(b) The amount of any claim by an Indemnitee under this
Agreement shall be reduced to reflect any actual tax savings received by any
Indemnitee that result from the Indemnifiable Losses that gave rise to such
indemnity.
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5.5 SURVIVAL. The parties' obligations under this Section 5 shall
survive the termination of this Agreement.
SECTION 6. CONFIDENTIALITY.
Each party shall keep confidential the Schedules to this Agreement and
all information received from the other party regarding the Services, including,
without limitation, any information received with respect to products of Harris
or Lanier, and to use such information only for the purposes set forth in this
Agreement unless otherwise agreed to in writing by the party from which such
information was received. The covenants in this Section 6 shall survive any
termination of this Agreement for a period of three (3) years from the date such
termination becomes effective.
SECTION 7. TERM.
7.1 DURATION. (a) Subject to Sections 5.5, 6, 7.2, 7.3 and 7.4, the
term of this Agreement shall commence on the date hereof and shall continue in
full force and effect with respect to each Service until the earlier of (i) the
first anniversary of the Distribution Date or (ii) the termination of such
Service in accordance with Section 7.1(b).
(b) Each party acknowledges that the purpose of this Agreement is
for Harris to provide the Harris Services to Lanier on an interim basis until
Lanier can perform the Harris Services for itself, and for Lanier to provide the
Lanier Services to Harris on an interim basis until Harris can perform the
Lanier Services for itself. Accordingly, each of Harris and Lanier shall use its
commercially reasonable efforts to make or obtain such approvals, permits and
licenses and implement such systems, as shall be necessary for it to provide the
appropriate services for itself as promptly as practicable. As Lanier becomes
self-sufficient or engages other sources to provide any Harris Service, Lanier
shall be entitled to release Harris from providing any or all of the Harris
Services hereunder by delivering a written notice thereof to Harris at least
twenty (20) Business Days prior to the effective date of release of such Harris
Service(s). At the end of such twenty (20) Business Day period (or such shorter
period as may be agreed by the parties), Harris shall discontinue the provision
of the Harris Services specified in such notice and any such Harris Services
shall be excluded from this Agreement, and Schedule A shall be deemed to be
amended accordingly. As Harris becomes self-sufficient or engages other sources
to provide any Lanier Service, Harris shall be entitled to release Lanier from
providing any or all of the Lanier Services hereunder by delivering a written
notice thereof to Lanier at least twenty (20) Business Days. At the end of such
twenty (20) Business Day period (or such shorter period as may be agreed by the
parties), Lanier shall
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discontinue the provision of the Lanier Services specified in such notice and
any such Lanier Services shall be excluded from this Agreement, and Schedule B
shall be deemed to be amended accordingly.
7.2 EARLY TERMINATION BY HARRIS. Harris may terminate this Agreement by
giving written notice to Lanier under the following circumstances:
(a) if Lanier shall default in the performance of any of its
material obligations under, or breach any of its warranties set forth in, this
Agreement, and such default or breach shall continue and not be remedied for a
period of five (5) Business Days with respect to any payment obligations
hereunder (including without limitation any payment obligations pursuant to
Section 4) or a period of thirty (30) days with respect to any other obligations
hereunder, after Harris has given written notice to Lanier specifying such
default or breach and requiring it to be remedied;
(b) if a Bankruptcy Event has occurred with respect to Lanier;
(c) upon the occurrence of a Change in Control of Lanier; or
(d) if Lanier should assign or subcontract, or attempt to assign or
subcontract, any interest in all or any part of this Agreement without the prior
written consent of Harris, except as set forth in Section 11.2.
7.3 EARLY TERMINATION BY LANIER. Lanier may terminate this Agreement by
giving written notice to Harris under the following circumstances:
(a) if Harris shall default in the performance of any of its
material obligations under, or breach any of its warranties set forth in, this
Agreement and such default or breach shall continue and not be remedied for a
period of thirty (30) days after Lanier has given written notice to Harris
specifying such default or breach and requiring it to be remedied;
(b) if a Bankruptcy Event has occurred with respect to Harris;
(c) upon the occurrence of a Change in Control of Harris; or
(d) if Harris should assign or subcontract, or attempt to assign
or subcontract, any interest in all or any part of this Agreement without prior
written consent of Lanier, except as set forth in Section 11.2.
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7.4 SUSPENSION DUE TO FORCE MAJEURE. In the event the performance by
any Lanier or Harris of their respective duties or obligations hereunder is
interrupted or interfered with by reason of any cause beyond its reasonable
control including, but not limited to, fire, storm, flood, earthquake,
explosion, war, strike or labor disruption, rebellion, insurrection, quarantine,
act of God, boycott, embargo, shortage or unavailability of supplies, riot, or
governmental law, regulation or edict (collectively, the "FORCE MAJEURE
EVENTS"), the party affected by such Force Majeure Event shall not be deemed to
be in default of this Agreement by reason of its nonperformance due to such
Force Majeure Event, but shall give notice to the other party of the Force
Majeure Event.
7.5 CONSEQUENCES ON TERMINATION. In the event this Agreement expires or
is terminated in accordance with this Section 7, then (a) all Services to be
provided will promptly cease, (b) each of Harris and Lanier shall promptly
return all confidential information received from the other party in connection
with this Agreement (including the return of all information received with
respect to the Services or products of Harris or Lanier, as the case may be),
without retaining a copy thereof, and (c) each of Harris and Lanier shall honor
all credits and make any accrued and unpaid payment to the other party as
required pursuant to the terms of this Agreement, and no rights already accrued
hereunder shall be affected.
SECTION 8. RECORDS. Each of the parties shall create and maintain full
and accurate books in connection with the provision of the Services, and all
other records relevant to this Agreement, and upon reasonable notice from the
other party shall make available for inspection and copy by such other party's
agents such records during reasonable business hours.
SECTION 9. DISPUTE RESOLUTION.
9.1 NEGOTIATION. In the event of a controversy, dispute or claim
arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including, without limitation, any claim based on contract,
tort, statute or constitution (but excluding any controversy, dispute or claim
arising out of any agreement relating to the use or lease of real property if
any Third Party is a party to such controversy, dispute or claim) (collectively,
"AGREEMENT DISPUTES"), the management of the parties shall negotiate in good
faith for a reasonable period of time to settle such Agreement Dispute, PROVIDED
such reasonable period shall not, unless otherwise agreed by the parties in
writing, exceed 30 days from the time the parties began such negotiations;
PROVIDED, FURTHER, that in the event of any mediation or arbitration in
accordance with Sections
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9.2 and 9.3 hereof, the parties shall not assert the defenses of statute of
limitations and laches arising for the period beginning after the date the
parties began negotiations hereunder, and any contractual time period or
deadline under this Agreement or any Ancillary Agreement to which such Agreement
Dispute relates shall not be deemed to have passed until such Agreement Dispute
has been resolved.
9.2 MEDIATION. If after such reasonable period such management are
unable to settle such Agreement Dispute (and in any event, unless otherwise
agreed in writing by the parties, after 60 days have elapsed from the time the
parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of less than $500,000, such Agreement Dispute
shall be determined, at the request of any party, by binding mediation conducted
in the City of Orlando, Florida or at another location which the parties
mutually select, before a retired judge sitting on the panel of Judicial
Arbitration & Mediation Services, Inc. The mediation process shall continue as
the exclusive method of resolving the Agreement Dispute (other than negotiation
between the parties) until the earlier of the Agreement Dispute being resolved
and the mediator finding in good faith that all settlement possibilities have
been exhausted and that the matter is not resolvable through mediation. If the
mediator makes such a finding, at the request of any party, the Agreement
Dispute shall then be determined by binding arbitration in accordance with
Section 9.3 hereof.
9.3 ARBITRATION. If after such reasonable period such management are
unable to settle such Agreement Dispute (and in any event, unless otherwise
agreed in writing by the parties, after 60 days have elapsed from the time the
parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of $500,000 or more, such Agreement Dispute shall
be determined, at the request of any party, by binding arbitration conducted in
the City of Orlando, Florida or at another location which the parties mutually
select, before and in accordance with the then-existing International
Arbitration Rules of the American Arbitration Association (the "RULES"). In any
dispute between the parties hereto, the numbers of arbitrators shall be three.
Any judgment or award rendered by the arbitrator shall be final, binding and
nonappealable (except upon grounds specified in 9 U.S.C. Section 10(a) as in
effect on the date hereof). If the parties are unable to agree on an arbitrator
or arbitrators, the arbitrator or arbitrators shall be selected in accordance
with the Rules. Any controversy concerning whether an Agreement Dispute is an
arbitrable Agreement Dispute, whether arbitration has been waived, whether an
assignee of this Agreement is bound to arbitrate, or as to the interpretation of
enforceability of this Section 9 shall be determined by the arbitrator or
arbitrators. In resolving any dispute, the parties intend that the arbitrator or
arbitrators apply the substantive laws of the State of New York, without regard
to the choice of law principles thereof. The parties intend that the provisions
to arbitrate set forth herein be valid, enforceable and irrevocable. The parties
agree to comply with any award made in any such arbitration proceedings that has
become final in accordance with the Rules and agree to
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enforcement of or entry of judgment upon such award, by any court of competent
jurisdiction, including (a) the state courts of the State of Florida, located in
the City of Orlando, or (b) the United States District Court for the Middle
District of Florida, in accordance with Section 11.4 hereof. The arbitrator or
arbitrators shall be entitled, if appropriate, to award any remedy in such
proceedings, including, without limitation, monetary damages, specific
performance and all other forms of legal and equitable relief; PROVIDED,
HOWEVER, the arbitrator or arbitrators shall not be entitled to award punitive
damages. Without limiting the provisions of the Rules, unless otherwise agreed
in writing by or among the parties or permitted by this Agreement, the
undersigned shall keep confidential all matters relating to the arbitration or
the award, provided such matters may be disclosed (i) to the extent reasonably
necessary in any proceeding brought to enforce the award or for entry of a
judgment upon the award and (ii) to the extent otherwise required by Law.
Nothing contained herein is intended to or shall be construed to prevent any
party, in accordance with Article 22(3) of the Rules or otherwise, from applying
to any court of competent jurisdiction for interim measures or other provisional
relief in connection with the subject matter of any Agreement Disputes.
9.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Section 9 with respect
to all matters not subject to such dispute, controversy or claim.
9.5 OTHER REMEDIES. Nothing in this Section 9 shall limit the right
that any party may otherwise have to seek to obtain (a) preliminary injunctive
relief in order to preserve the status quo pending the resolution of a dispute
or (b) temporary or permanent injunctive relief from any breach of any
provisions of this Agreement.
SECTION 10. NOTICES.
NOTICES. All notices and other communications hereunder shall be in
writing, shall reference this Agreement and shall be hand delivered or mailed by
registered or certified mail (return receipt requested) or sent by any means of
electronic message transmission with delivery confirmed (by voice or otherwise)
to the parties at the following addresses (or at such other addresses for a
party as shall be specified by like notice) and will be deemed given on the date
on which such notice is received:
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To Harris:
Harris Corporation
1025 West NASA Blvd.
Melbourne, Florida 32919
Attention: Corporate Secretary
Telephone: (407) 727-9163
Facsimile: (407) 727-9222
With a copy to:
Harris Corporation
1025 West NASA Blvd.
Melbourne, Florida 32919
Attention: Scott T. Mikuen
Telephone: (407) 727-9125
Facsimile: (407) 727-9234
To Lanier:
Lanier Worldwide, Inc.
2300 Parklake Drive, N.E.
Atlanta, Georgia 30345
Attention: General Counsel
Telephone: (770) 621-1063
Facsimile: (770) 621-1073
SECTION 11. MISCELLANEOUS.
11.1 WAIVERS, MODIFICATIONS, AMENDMENTS. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Lanier, on the one hand,
and Harris, on the other hand, or in the case of a waiver, by the party against
whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder 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 herein provided shall be cumulative and in addition to
other or further remedies provided by law or equity.
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11.2 ASSIGNMENTS. Neither Harris nor Lanier may, directly or
indirectly, assign or subcontract, or attempt to assign or subcontract, any of
its rights or obligations hereunder, in whole or in part, by operation of law or
otherwise, except with the prior written consent of the other party; IT BEING
UNDERSTOOD that such consent shall not be unreasonably withheld if Lanier or
Harris assigns the Agreement to one of its Affiliates with the financial and
other resources and expertise to perform all of the obligations of such party
hereunder. Any attempted assignment or delegation not in compliance with the
forgoing shall be null and void and of no effect.
11.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
11.4 CONSENT TO JURISDICTION. Without limiting the provisions of
Section 9 hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the state courts of the State of Florida, located in the
City of Orlando, and (b) the United States District Court for the Middle
District of Florida, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Middle District of Florida or
if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the state courts of the State of Florida, located in
the City of Orlando. Each of the parties further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in Florida with respect to any matters to which it
has submitted to jurisdiction in this Section 11.4. Each of the parties
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the state courts of the State of Florida, located in
the City of Orlando, or (ii) the United States District Court for the Middle
District of Florida, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
11.5 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person,
corporation, partnership or other entity or any circumstance, is invalid and
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such
-15-
<PAGE> 16
invalid or unenforceable provision and (b) the remainder of this Agreement and
the application of such provision to other persons, corporations, partnerships
or other entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
jurisdiction.
11.6 HEADINGS. The heading references herein are for convenience
purposes only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
11.7 ENTIRE AGREEMENT. This Agreement (including all Schedules hereto)
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters.
11.8 BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and their respective successors and permitted assigns, if any, and except
as provided herein, shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, if any.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
11.10 NO AGENCY OR PARTNERSHIP. Nothing in this Agreement will create,
or will be deemed to create, a partnership or the relationship of principal and
agent or of employer and employee between the parties.
11.11 PROVISIONS UNAFFECTED. Nothing contained in this Agreement shall
affect the rights and obligations of Harris and Lanier pursuant to the
Distribution Agreement.
-16-
<PAGE> 17
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
on behalf of the parties as of the date first herein above written.
HARRIS CORPORATION
By: _______________________
Name:
Title:
LANIER WORLDWIDE, INC.
By: _______________________
Name:
Title:
-17-
<PAGE> 1
Exhibit 10.8
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT SAVINGS PLAN
ARTICLE I - PURPOSE AND EFFECTIVE DATE
The Lanier Worldwide, Inc. Supplemental Executive Retirement Savings Plan (the
"Plan"), effective as of July 1, 1997, is intended to provide deferred
compensation to a "select group of management or highly compensated employees"
(as defined in section 201(2) of ERISA) who are eligible to participate in the
Plan pursuant to Section 3.1.
ARTICLE II - DEFINITIONS
Each capitalized term used herein shall have the meaning set forth in the Lanier
Worldwide, Inc. Savings Incentive Plan (the "SIP"), except as otherwise set
forth below.
2.1. ACCOUNT - means an account established on the books of the Corporation on
behalf of a Participant pursuant to Section 5.1.
2.2. CODE - means the Internal Revenue Code of 1986, as amended from time to
time.
2.3. COMMITTEE - means the Pension and Retirement Committee of the Board.
2.4. COMPENSATION - means "Compensation" as defined in the SIP, except that the
$150,000 (as adjusted) limitation described therein shall not apply.
2.5. CORPORATION - means Lanier Worldwide, Inc., a Delaware corporation, or any
successor corporation or entity.
2.6. ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.7. PARTICIPANT - means an individual who satisfies the requirements of Section
3.1 and files an election form with the Committee as described in Section 3.2.
2.8. PLAN - means this Lanier Worldwide, Inc. Supplemental Executive Retirement
Savings Plan, as amended from time to time.
2.9. SIP - means the Lanier Worldwide, Inc. Savings Incentive Plan, as amended
from time to time.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
<PAGE> 2
3.1. ELIGIBILITY. (a) IN GENERAL. Participants in the Plan shall consist of such
key management employees of the Corporation (i) who have been selected, or who
have been recommended by the Chief Executive Officer to be selected, to
participate in one of the Corporation's long-term incentive plans for the Plan
Year and (ii) who satisfy the conditions set forth in Section 3.1(b).
(b) ELIGIBILITY CONDITIONS. A key management employee satisfies the
conditions of this Section 3.1(b) if, as of June 1 immediately preceding the
beginning of the Plan Year (i) such employee's aggregate annual base salary and
target annual bonus for the Plan Year is projected to be equal to or exceed
$125,000 (as adjusted for cost-of-living in a manner to be determined by the
Committee in its sole discretion), and (ii) such employee is an active
participant in the SIP.
3.2. PARTICIPATION. An eligible employee shall become a Participant by
completing and filing with the Committee an election form in the time and manner
prescribed by the Committee. An election form filed with the Committee shall
remain in effect until the earlier of (i) the effective date of a subsequent
election form filed by the Participant, (ii) the first day of the Plan Year in
which the employee is not selected by the Committee to be a Participant in the
Plan, and (iii) the Participant's termination of employment with the Corporation
and its Affiliates.
ARTICLE IV - CONTRIBUTIONS
4.1. ELECTIVE CONTRIBUTIONS. A Participant's Account shall be credited in an
amount equal to the amount of Before-Tax Contributions and Matching
Contributions that would be allocated for a Plan Year to a Participant's account
under the SIP, but are not so allocated because of the limitations of section
401(a)(17), 401(k)(3), 401(m)(2)(A), 402(g) or 415 of the Code. Amounts shall be
credited to a Participant's Account as of the date such contributions would have
been allocated to the Participant's Before-Tax Account and Matching Account
under the SIP had such limitations of the Code not applied.
4.2. SPECIAL AWARD AMOUNTS. The Corporation, in its sole discretion, may grant a
special award to any Participant by crediting his Account with the amount of
such special award.
4.3. TRANSFERRED ACCOUNTS. The Committee, in its sole discretion, may provide
that a Participant's Account shall be credited with amounts credited to him
under a nonqualified deferred compensation plan maintained by his prior
employer.
ARTICLE V - ACCOUNTS AND INVESTMENTS
5.1. ESTABLISHMENT OF ACCOUNTS. An Account shall be established on the books of
the Corporation in the name of and on behalf of each Participant. A
Participant's Account shall be credited with (i) amounts described in Section
4.1, (ii) any special award granted to the
2
<PAGE> 3
Participant pursuant to Section 4.2, and (iii) the amount permitted to be
credited to the Participant's Account by the Committee pursuant to Section 4.3.
5.2. ACCOUNT INVESTMENTS. (a) INVESTMENT FUNDS. Amounts credited to a
Participant's Account under the Plan for a Plan Year shall be deemed to be
invested in the same investment funds, and in the same proportion, as designated
by the Participant for the investment of his SIP account. If a Participant does
not have a currently effective investment election under the SIP, his Account
shall be invested in the Summit Cash Reserves Fund, or such other investment
fund available under the SIP which is designated by the Committee hereunder. A
Participant's Account shall be credited with gains and losses of the SIP
investment funds in which such Account is deemed to be invested.
(b) TIMING. Deemed investment gains and losses shall be allocated to
Participants' Accounts at the same time gains and losses are allocated to
participants' accounts under the SIP.
(c) NO ACTUAL INVESTMENT REQUIRED. The Corporation shall not be
required to invest assets in the investment funds selected by Participants,
although the Corporation may decide to do so.
ARTICLE VI - VESTING AND DISTRIBUTIONS
6.1. VESTING. Amounts credited to a Participant's Account pursuant to Section
4.1 (as adjusted for gains and losses pursuant to Section 5.2) which relate to
Matching Contributions under the SIP shall become vested at the same time and to
the same extent as Matching Contributions become vested under the SIP. A
Participant shall be 100% vested in all other amounts credited to his Account.
6.2. TIME OF PAYMENT. A Participant shall begin to receive payments of his
vested Account balance as of the date selected by the Committee which occurs as
soon as administratively practicable after the beginning of the year following
the year in which such Participant terminates employment with the Corporation
and its Affiliates, unless the Participant elects to defer the receipt of such
payments to a later date by filing an election form with the Committee, in the
time and manner designated by the Committee, during the year in which the
Participant terminates such employment. In no event, however, may a Participant
who terminates employment with the Corporation and its Affiliates prior to his
attainment of age 55 defer the commencement of payments of his vested Account
balance to a date later than the last day of the month following the month in
which the Participant attains age 55.
6.3. FORM OF PAYMENT. (a) ELECTION. A Participant may elect the form of payment
of his Account by filing an election form with the Committee in the time and the
manner prescribed by the Committee. A Participant may change a prior election
regarding the form of payment at any time in the Plan Year prior to the Plan
Year in which payment of his vested Account balance would commence pursuant to
his original election.
3
<PAGE> 4
(b) AVAILABLE FORMS. A Participant may elect to receive payment of
his vested Account balance in any one of the following forms:
(1) a lump sum;
(2) annual installments over a five-year period; or
(3) annual installments over a ten-year period.
A Participant who has not filed an election shall receive the payment of his
Account in annual installments over ten years.
(c) DE MINIMIS LUMP SUM PAYMENTS. Notwithstanding any provision of the
Plan to the contrary, if a Participant's vested interest in his Account is less
than an amount eligible to be paid in installments, as determined by the
Committee in its sole discretion, then the Participant's vested interest in his
Account shall be paid in a lump sum.
6.4. DEATH. If a Participant shall die before the vested balance of his Account
is distributed, then the vested balance shall be paid in a lump sum to the
beneficiary or the beneficiaries designated by the Participant on the form and
manner prescribed by the Committee. A Participant may revoke or change his
beneficiary designation at any time by filing a new beneficiary designation form
with the Committee. If a Participant does not designate a beneficiary under the
Plan or if no designated beneficiary survives the Participant, then the vested
balance of his Account shall be distributed to the Beneficiary or Beneficiaries
entitled to his account under the SIP.
6.5. PAYMENT ON INCAPACITY. In the event the Committee determines that any
individual to whom a distribution is to be made is unable to care for his
affairs by reason of illness or other disability, the distribution shall be made
to the person who the Committee, in its sole discretion, determines to be
responsible for the incapacitated individual (unless prior claim thereto has
been made by a duly qualified guardian or other legal representative). Any such
payment made under this Section 6.5 shall constitute a complete discharge of the
Corporation's obligation to make any payment under the Plan.
6.6. OVERPAYMENTS OF INSTALLMENTS. In the event that a payment is made with
respect to a Participant's Account which exceeds the amount to which the
Participant is entitled, future payments shall be reduced in any manner which
the Committee, in its sole discretion, deems equitable.
6.7. WITHHOLDING FOR TAXES. For each calendar year in which a Participant's
Compensation is reduced pursuant to this Plan, the Corporation shall withhold
from the Participant's payments of compensation for such year any taxes imposed
upon the Participant pursuant to section 3121(v) of the Code in respect to the
amount by which the Participant's compensation is reduced. The Corporation shall
have the right to deduct any federal, state or local income, employment or other
taxes required by law to be withheld with respect to any payments to be made
under this Plan, and to withhold such amounts from any payment otherwise due the
Participant (or beneficiary).
4
<PAGE> 5
ARTICLE VII -- ADMINISTRATION
7.1. GENERAL. The Plan shall be administered by the Committee, except to the
extent that any of the Committee's powers, rights or responsibilities have been
delegated pursuant to Section 7.2. The Committee shall have the complete
authority to interpret and construe the terms of the Plan, including, but not
limited to, all questions of eligibility, the status and rights of Participants,
beneficiaries and other persons under the Plan, and the manner, time and amount
of payment of any distributions under the Plan. The Committee also shall have
the complete authority to adopt rules for carrying out the purposes of the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan. Any decision made by the Committee, and any
interpretation or construction of any provision of the Plan by the Committee,
shall be final and conclusive, and shall be binding on Participants,
beneficiaries and all other concerned parties. A Participant who has been
delegated the authority to make decisions with respect to the Plan may not
participate in any decision that may affect his rights or obligations under this
Plan, unless the decision affects all Participants.
7.2. DELEGATION OF AUTHORITY. Either the Board or the Committee may delegate any
of the Committee's responsibilities, powers or duties under the Plan to any
person or committee.
7.3. AGENTS. The Committee (or its delegate) may employ attorneys, advisors and
agents and may arrange for such clerical and other services as it may require in
carrying out the provisions of the Plan.
7.4. LIABILITY OF DELEGATE. No person to whom any responsibility, power or duty
under the Plan has been delegated shall be liable for any action or failure to
act under this Plan, except where such action or failure to act was due to gross
negligence or fraud.
ARTICLE VIII - GENERAL PROVISIONS
8.1. AMENDMENT AND TERMINATION. The Corporation may amend or terminate the Plan
at any time, in whole or in part, by written action of its Board of Directors.
In the event the Plan is terminated, all vested amounts credited to Accounts on
the effective date of the Plan termination shall be paid at such time and in
such manner as the Corporation shall determine, but no later than when the
payments would have been made had the Plan not been terminated.
8.2. ANTI-ALIENATION. No right or interest of any Participant or beneficiary in
the Plan shall be assignable or transferable in whole or in part, either
directly or by operation of law or otherwise, including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but
excluding devolution by death or mental incapacity. Any other purported
transfer, assignment, pledge or other encumbrance or attachment of any payments
or benefits under the Plan shall not be permitted or recognized and shall be
void.
8.3. UNFUNDED STATUS. The Corporation may, but is not required to, establish a
trust to fund the amounts credited to Accounts under this Plan, provided that
the assets in such trust are subject to
5
<PAGE> 6
the claims of the Corporation's general creditors in the event of insolvency.
Any payments under the Plan shall be made out of the general assets of the
Corporation, and Participants (and beneficiaries) shall have no interest
in any fund or specific asset of the Corporation. The rights of each Participant
(and beneficiary) to any payments under the Plan shall be solely those of any
unsecured creditor of the Corporation.
8.4. SEVERABILITY. If any provision of the Plan is found invalid or illegal by
any court having proper jurisdiction, the invalidity or illegality shall not
affect the other provisions of the Plan, and the Plan shall be construed and
enforced to reflect the Corporation's original intent in adopting the Plan,
consistent with applicable law.
8.5. NOT A CONTRACT OF EMPLOYMENT. The Plan shall not constitute a contract of
continuing employment or in any manner obligate the Corporation to continue the
employment of any employee.
8.6. SUCCESSORS AND ASSIGNS. The provisions of the Plan shall bind and inure the
Corporation and its successors and assigns, as well as each Participant and
beneficiary.
8.7. CONSTRUCTION. Terms expressed in the masculine gender shall be deemed to
include the feminine gender, the singular shall include the plural and the
plural shall include the singular, unless the context clearly indicates
otherwise. Headings used herein are for convenience of reference only, and are
not to be construed to alter the terms of the Plan.
8.8. GOVERNING LAW. To the extent not governed by ERISA, this Plan shall be
construed in accordance with the laws of the State of Delaware, without regard
to its principles of conflicts of laws.
IN WITNESS WHEREOF, Lanier Worldwide, Inc. does hereby adopt this
Plan, effective July 1, 1997.
Date: July 1, 1997 By: /s/ Wesley E. Cantrell
-------------------------
Wesley E. Cantrell
President and Chief Executive Officer
6
<PAGE> 7
AMENDMENT NUMBER ONE
TO THE
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT SAVINGS PLAN
WHEREAS, Lanier Worldwide, Inc. (the "Corporation") maintains for the
benefit of certain employees the Lanier Worldwide, Inc. Supplemental Executive
Retirement Savings Plan (the "SERP") to provide benefits to participants in
excess of the retirement benefits provided under the Lanier Worldwide, Inc.
Savings Incentive Plan;
WHEREAS, Section 8.1 of the SERP reserves to the Corporation the right to
amend the SERP by written action of the Board of Directors of the Corporation;
and
WHEREAS the Corporation desires to amend the SERP.
NOW, THEREFORE, pursuant to the power of amendment in Section 8.1 of the
SERP, Section 3.1(a) of the SERP is hereby amended effective as of July 1, 1999
to read as follows:
a) In General. Participants in the Plan shall consist of such key
management employees of the Corporation (i) (A) for Plan Years other than
the Plan Year beginning July 1, 1999, who have been selected, or who have
been recommended by the Chief Executive Officer to be selected, to
participate in one of the Corporation's long-term incentive plans for the
Plan Year, and (B) for the Plan Year beginning July 1, 1999, who
participated in one of the Corporation's long-term incentive plans on June
1, 1999, and (ii) who satisfy the conditions set forth in Section 3.1(b).
<PAGE> 1
Exhibit 10.9
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of July 1, 1997)
<PAGE> 2
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of ______________)
ARTICLE I - PURPOSE
The Lanier Worldwide, Inc. Supplemental Executive Retirement Plan (the
"SERP"), amended and restated as of July 1, 1997, is intended to provide
deferred compensation to a "select group of management or highly compensated
employees" (as defined in section 201(a) of ERISA) who are eligible to
participate in the Pension Plan pursuant to Article Three.
ARTICLE II - DEFINITIONS
Except as otherwise set forth below, each capitalized term used herein
shall have the meaning set forth in the Pension Plan.
2.1. CODE - means the Internal Revenue Code of 1986, as amended from time to
time.
2.2. COMMITTEE - means the Pension and Retirement Committee of the Board of
Directors of the Corporation.
2.3. CORPORATION - means Lanier Worldwide, Inc. and any successor to such
corporation.
2.4. ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.5 PARTICIPANT - means any individual who fulfills the eligibility requirements
contained in Article III hereof and whose beneficial interest in the SERP has
not been distributed in full.
2.6. PENSION PLAN - means the Lanier Worldwide, Inc. Pension Plan.
2.7. SERP - means this Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan as amended from time to time.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Any Participant in the Pension Plan who is a member of a select group
of management and highly compensated employees of the Corporation and whose
retirement benefits upon termination of employment are limited under the Pension
Plan by the provisions of section 401(a)(17) or 415 of the Code shall become a
Participant in the SERP automatically upon application of such limitations.
2
<PAGE> 3
ARTICLE IV - AMOUNT OF BENEFITS
The amount of the benefit payable hereunder shall be the excess of (a)
the amount of the retirement benefit that would have been payable under the
Pension Plan to such Participant but for the limitations contained in the
Pension Plan to effect compliance with sections 401(a)(17) and 415 of the Code,
less (b) the amount of the retirement benefit that is actually payable under the
provisions of the Pension Plan to such Participant.
ARTICLE V - BENEFIT PAYMENTS
The supplemental pension calculated under Article IV shall be paid to a
Participant or his Beneficiary, if applicable, in the same manner and form as
the payment of the retirement benefits of such Participant, or Beneficiary,
under the Pension Plan. Any factors or conditions applicable to a Participant's
or a Beneficiary's benefit under the Pension Plan shall be applicable to such
benefits under the SERP.
ARTICLE VI - SURVIVORS' BENEFITS
In the event a Participant dies before his interest under the SERP has
been distributed to him in full, any remaining interest shall be distributed to
his Beneficiary, who shall be the person designated as his Beneficiary under the
Pension Plan, in the form of a lump sum payment as soon as administratively
practicable after the Participant's death.
ARTICLE VII - ADMINISTRATION
7.1 GENERAL. The Plan shall be administered by the Committee, except to the
extent that any of the Committee's powers, rights or responsibilities have been
delegated pursuant to Section 7.2. The Committee shall have the complete
authority to interpret and construe the terms of the SERP, including, but not
limited to, the status and rights of Participants, Beneficiaries and other
persons under the SERP, and the manner, time and amount of payment of any
distributions under the SERP. The Committee also shall have the complete
authority to adopt rules for carrying out the purposes of the SERP and to make
all other determinations necessary or advisable for the administration of the
SERP. Any decision made by the Committee, and any interpretation or construction
of any provision of the SERP by the Committee, shall be final and conclusive,
and shall be binding on Participants, Beneficiaries and all other concerned
parties. A Participant who has been delegated the authority to make decisions
with respect to the SERP may not participate in any decision that may affect his
rights or obligations under this SERP, unless the decision affects all
Participants.
7.2. DELEGATION OF AUTHORITY. Either the Board of Directors of the Corporation
or the Committee may delegate any of the Committee's responsibilities, powers or
duties under the SERP to any person or committee.
3
<PAGE> 4
7.3. AGENTS. The Committee (or its delegate) may employ attorneys, advisors and
agents and may arrange for such clerical and other services as it may require in
carrying out the provisions of the SERP.
7.4. LIABILITY OF DELEGATE. No person to whom any responsibility, power or duty
under the SERP has been delegated shall be liable for any action or failure to
act under this SERP, except where such action or failure to act was due to gross
negligence or fraud.
ARTICLE VIII - GENERAL PROVISIONS
8.1 AMENDMENT AND TERMINATION. The Corporation may amend or terminate the SERP
at any time, in whole or in part, by written action of its Board of Directors.
8.2. ANTI-ALIENATION. No right or interest of any Participant or Beneficiary in
the SERP shall be assignable or transferable in whole or in part, either
directly or by operation of law or otherwise, including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but
excluding devolution by death or mental incapacity. Any other purported
transfer, assignment, pledge or other encumbrance or attachment of any payments
or benefits under the SERP shall not be permitted or recognized and shall be
void.
8.3. UNFUNDED STATUS. The Corporation may, but is not required to, establish a
trust to fund the amounts credited to Accounts under this SERP, provided that
the assets in such trust are subject to the claims of the Corporation's general
creditors in the event of insolvency. Any payments under the SERP shall be made
out of the general assets of the Corporation, and Participants (and
Beneficiaries) shall have no interest in any fund or specific asset of the
Corporation. The rights of each Participant (and Beneficiary) to any payments
under the SERP shall be solely those of any unsecured creditor of the
Corporation.
8.4. SEVERABILITY. If any provision of the SERP is found invalid or illegal by
any court having proper jurisdiction, the invalidity or illegality shall not
affect the other provisions of the SERP, and the SERP shall be construed and
enforced to reflect the Corporation's original intent in adopting the SERP,
consistent with applicable law.
8.5. NOT A CONTRACT OF EMPLOYMENT. The SERP shall not constitute a contract of
continuing employment or in any manner obligate the Corporation to continue the
employment of any employee.
8.6. SUCCESSORS AND ASSIGNS. The provisions of the SERP shall bind and inure the
Corporation and its successors and assigns, as well as each Participant and
Beneficiary.
8.7. CONSTRUCTION. Terms expressed in the masculine gender shall be deemed to
include the feminine gender, the singular shall include the plural and the
plural shall include the singular, unless the context clearly indicates
otherwise. Headings used herein are for convenience of reference only, and are
not to be construed to alter the terms of the SERP.
4
<PAGE> 5
8.8. GOVERNING LAW. To the extent not governed by ERISA, the SERP shall be
construed in accordance with the laws of the State of Georgia, without regard to
its principles of conflicts of laws.
5
<PAGE> 6
IN WITNESS WHEREOF, Lanier Worldwide, Inc. does hereby amend and
restate this SERP, effective July 1, 1997.
Date: July 1, 1997 By: /s/ Wesley E. Cantrell
------------------------ -------------------------------------
Wesley E. Cantrell
President and Chief Executive Officer
6
<PAGE> 7
AMENDMENT NUMBER ONE
to the
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Lanier Worldwide, Inc. a Delaware corporation (the
"CORPORATION"), heretofore has adopted and maintains the Lanier Worldwide, Inc.
Supplemental Executive Retirement Plan (as amended and restated as of July 1,
1997) (the "SERP"); and
WHEREAS, the Corporation desires to amend the SERP in certain respects;
NOW, THEREFORE, pursuant to the power of amendment contained in Section
8.1 of the SERP, the SERP is amended as follows:
1. Article II of the SERP is amended to add the following new Section
2.3 immediately after Section 2.2 thereof and to renumber the existing Sections
2.3 through 2.7 accordingly:
2.3 COMPENSATION - For each Participant, the term
"Compensation" includes remuneration described in paragraphs (a) and
(b) below, except for the remuneration described in paragraph (c)
below, which is excluded.
(a) The Participant's base salary and wages paid by the
Participant's Employer, and certain other amounts paid by the
Employer that are includible in the Participant's gross income,
including income attributable to the grant, vesting or exercise
of an option or performance share award under the Harris
Corporation Stock Incentive Plan, overtime payments, commission
payments, annual bonuses, regional and shift differentials,
vacation pay, compensation received while on an Authorized Leave
of Absence, and short-term disability payments.
(b) Elective deferrals made by an Employer on behalf of the
Participant that are not includible in the Participant's gross
income for federal income tax purposes for such period because
such deferrals either (i) are contributed to a cash or deferred
arrangement described in Section 401(k) of the Code or (ii) are
excluded under Section 125 of the Code.
(c) Any payment made under a severance pay plan or program,
any payment made in consideration of the Participant's release of
claims in favor of an Employer or an Affiliate, any foreign or
domestic assignment allowance, any contest payments, any expense
released reimbursements (including reimbursements commonly
referred to as "Runzheimer" payments), any signing bonuses, any
payment made under any long-term incentive plan (including, but
<PAGE> 8
not limited to, income attributable to the grant, vesting or
exercise of an option or performance share award under the Harris
Corporation Stock Incentive Plan, other than income attributable
to the exercise of options under the Harris Corporation Stock
Incentive Plan on or prior to December 31, 1997), the value of
life insurance includible in the Participant's gross income, and
any non-cash perquisites.
For purposes of the Plan and to the extent required by the
Uniformed Service Employment and Reemployment Rights Act of 1994, the
Participant's Compensation during a period of qualified military
service shall be deemed to equal the Compensation the Participant would
have received during the period of qualified military service but for
his absence due to qualified military service. If the Compensation the
Participant would have received during such period is not reasonably
certain, the Participant's Compensation for his period of qualified
military service shall be based on the Participant's Compensation
during the 12-month period (or, if shorter, the period of employment)
immediately preceding the qualified military service.
2. Article IV of the SERP is amended in its entirety to read as
follows:
The supplemental pension benefit payable hereunder to a
participant shall be equal to (a) the Accrued Benefit that would have
been payable under the Pension Plan but for the limitations contained
in the Pension Plan to effect compliance with Sections 401(a)(17) and
415 of the Code, except that the Participant's Compensation as defined
herein shall be used in determining his Accrued Benefit for purposes of
the SERP, rather than the Participant's "Compensation" as defined in
the Pension Plan, less (b) the amount of the Participant's Accrued
Benefit under the Pension Plan.
3. Section 8.1 of the SERP is amended to delete the word "written"
immediately preceding the phrase "action of its Board of Directors."
IN WITNESS WHEREOF, Lanier worldwide, Inc. has caused this instrument
to be executed on its behalf by its duly authorized officer on this ____ day of
__________, 1998.
LANIER WORLDWIDE, INC.
By: /s/ Wesley E. Cantrell
-------------------------------
Name: Wesley E. Cantrell
-----------------------------
Title: President and Chief
Executive Officer
----------------------------
2
<PAGE> 9
AMENDMENT NUMBER TWO
TO THE
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Lanier Worldwide, Inc., a Delaware corporation (the "Corporation"),
heretofore has adopted and maintains the Lanier Worldwide, Inc. Supplemental
Executive Retirement Plan (as amended and restated as of July 1, 1997) (the
"SERP");
WHEREAS, Section 8.1 of the SERP reserves to the Corporation the right to amend
the SERP; and
WHEREAS, the Corporation desires to amend the SERP in certain respects.
NOW, THEREFORE, pursuant to the power of amendment in Section 8.1 of the SERP,
Section 5.2(b) of the SERP is hereby amended in its entirety to read as follows
effective September 15, 1998:
(b) AVAILABLE FORMS. A Participant may elect to receive payment of his
supplemental pension in any one of the following forms:
(1) a lump sum; or
(2) annual installments over a five or ten year period.
A Participant who has not filed an election shall be deemed to
have elected to receive the payment of his supplemental
pension in the form of a lump sum.
In the event a Participant elects to receive payment of his
supplemental pension amount in the form of annual
installments, an account shall be established on the books of
the Corporation in the name of and on behalf of the
Participant. A Participant's account shall be credited with
his unpaid supplemental pension amount. As of the first
business day of each calendar quarter, such account will be
credited with an amount equal to the interest that would have
accrued over the preceding calendar quarter based on the
account balance as of such date and using a rate of interest
equal to the yield of the last-issued 3-year Treasury Notes
reported in the Wall Street Journal.
<PAGE> 10
THIRD AMENDMENT
to the
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of July 1, 1997)
WHEREAS, Lanier Worldwide, Inc. (the "Corporation") maintains for the benefit of
certain employees the Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan (the "Plan");
WHEREAS, Section 8.1 of the SERP reserves to the Corporation the right to amend
the Plan by written action of the Board of Directors of the Corporation; and
WHEREAS, the Corporation desires to amend the Plan in certain respects.
NOW, THEREFORE, pursuant to the power of amendment in Section 8.1 of the Plan,
Section 5.1 of the Plan is amended effective as of November 1, 1998 as follows:
5.1. TIME OF PAYMENT. A Participant shall begin to receive payments of
his supplemental pension calculated under Article IV as soon as
administratively practicable after such Participant begins receiving
pension benefits under the Pension Plan, unless the Participant elects
to defer the receipt of such payments to a later date by filing an
election form with the Committee, in the time and manner designated by
the Committee, prior to the calendar year in which the Participant
begins receipt of his pension benefits under the Pension Plan.
FURTHER RESOLVED, Section 5.2(a) is amended effective as of November 1, 1998 as
follows:
5.2. FORM OF PAYMENT. (a) ELECTION. A Participant may elect the form of
payment of his supplemental pension by filing an election form with the
Committee in the time and the manner prescribed by the Committee. A
Participant may change a prior election regarding the form of payment
at any time prior to the commencement of the calendar year in which
payment of his supplemental pension would commence pursuant to Section
5.1. For purposes of calculating a Participant's supplemental pension,
the applicable actuarial assumptions contained in the Pension Plan will
be used.
FURTHER RESOLVED, the second sentence of Section 5.2(b) is amended effective as
of November 1, 1998 as follows:
A Participant who has not filed an election shall be deemed to have
elected to receive the payment of his supplemental pension in annual
installments over three years.
<PAGE> 11
FIRST AMENDMENT
to the
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of July 1, 1997)
WHEREAS, Lanier Worldwide, Inc. (the "Corporation") maintains for the benefit of
certain employees the Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan (the "SERP") to provide benefits to participants in excess of the
retirement benefits provided under the Lanier Worldwide, Inc. Pension Equity
Plan (the "Pension Plan");
WHEREAS, Section 8.1 of the SERP reserves to the Corporation the right to amend
the SERP by written action of the Board of Directors of the Corporation; and
WHEREAS, the Corporation desires to amend the SERP in certain respects.
NOW, THEREFORE, pursuant to the power of amendment in Section 8.1 of the SERP,
Article V of the SERP is amended effective as of September 1, 1997 as follows:
ARTICLE V - BENEFIT PAYMENT
5.1. TIME OF PAYMENT. A Participant shall begin to receive payments of
his supplemental pension calculated under Article IV as of the date
selected by the Committee which occurs as soon as administratively
practicable after the beginning of the calendar year following the
calendar year in which such Participant begins receiving pension
benefits under the Pension Plan, unless the Participant elects to defer
the receipt of such payments to a later date by filing an election form
with the Committee, in the time and manner designated by the Committee,
prior to the calendar year in which the Participant begins receipt of
his pension benefits under the Pension Plan.
5.2. FORM OF PAYMENT. (a) ELECTION. A Participant may elect the form of
payment of his supplemental pension by filing an election form with the
Committee in the time and the manner prescribed by the Committee. A
Participant may change a prior election regarding the form of payment
at any time in the calendar year prior to the calendar year in which
payment of his supplemental pension would commence pursuant to his
original election. For purposes of calculating a Participant's
supplemental pension, the applicable actuarial assumptions contained in
the Pension Plan will be used.
(b) AVAILABLE FORMS. A Participant may elect to receive
payment of his supplemental pension in any one of the
following forms:
(1) a lump sum;
(2) annual installments over a period of three, five or ten
years;
(3) a single-life annuity payable during the life of the
Participant;
1
<PAGE> 12
(4) a 10-year period certain and continuous annuity as
described in the Pension Plan; or
(5) a 50% or 100% joint and survivor annuity as described in
the Pension Plan.
A Participant who has not filed an election shall be deemed to have
elected to receive the payment of his supplemental pension in annual
installments over ten years.
In the event a Participant elects to receive payment of his
supplemental pension amount in the form of annual installments, an
account shall be established on the books of the Corporation in the
name of and on behalf of the Participant. A Participant's account shall
be credited with his unpaid supplemental pension amount. As of the
first business day of each calendar quarter, such account will be
credited with an amount equal to the interest that would have accrued
over the preceding calendar quarter based on the account balance as of
such date and using a rate of interest equal to the yield of the
last-issued 30-year Treasury Notes reported in the Wall Street Journal
compounded quarterly on the basis of a 365-day year.
(c) DE MINIMIS LUMP SUM PAYMENTS. Notwithstanding any provision of the
Plan to the contrary, if the present value a Participant's supplemental
pension is less than an amount eligible to be paid in installments or
an annuity, as determined by the Committee in its sole discretion, then
the Participant's supplemental pension shall be paid in a lump sum.
5.3. PAYMENT ON INCAPACITY. In the event the Committee determines that
any individual to whom a distribution is to be made is unable to care
for his affairs by reason of illness or other disability, the
distribution shall be made to the person whom the Committee, in its
sole discretion, determines to be responsible for the incapacitated
individual (unless prior claim thereto has been made by a duly
qualified guardian or other legal representative). Any such payment
made under this Section 5.3 shall constitute a complete discharge of
the Corporation's obligation to make any payment under the Plan.
5.4. OVERPAYMENTS OF INSTALLMENTS. In the event that a payment is made
with respect to a Participant's supplemental pension which exceeds the
amount to which the Participant is entitled, future payments shall be
reduced in any manner which the Committee, in its sole discretion,
deems equitable.
5.5. WITHHOLDING FOR TAXES. The Corporation shall have the right to
deduct any federal, state or local income, employment or other taxes
required by law to be withheld with respect to any payments to be made
under the Plan, and to withhold such amounts from any payment otherwise
due the Participant (or beneficiary).
FURTHER RESOLVED, Section 8.1 of the Plan is hereby amended as follows:
2
<PAGE> 13
8.1 AMENDMENT AND TERMINATION. The Corporation may amend or terminate
the SERP at any time, in whole or in part, by written action of its
Board of Directors or the Pension/Compensation Committee of its Board
of Directors.
3
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Independent
Certified Public Accountants" and to the use of our report dated July 27, 1999
in the Registration Statement on Form 10 of Lanier Worldwide, Inc. dated
September 28, 1999.
/s/ Ernst & Young LLP
Orlando, Florida
September 27, 1999
